CVS 2009 Annual Report Download - page 72

Notes to Consolidated Financial Statements
Note 13 Segment Reporting
The Company currently has three segments: Pharmacy Services,
Retail Pharmacy and Corporate.
During the third quarter of 2009, the Company made changes
to its reportable segments to reflect changes that were made
to the way the Company’s management evaluates the perfor-
mance of operations, develops strategy and allocates resources.
This change involves the recording of certain administrative
expenses previously recorded within the Pharmacy Services
and Retail Pharmacy segments to a new Corporate segment.
The Corporate segment consists of costs primarily associated
with executive management, corporate relations, legal, compli-
ance, human resources, corporate information technology
and finance. This change had no impact on the Company’s
consolidated results of operations. The Company’s historical
segment disclosures have been revised to conform to the
current presentation.
During the third quarter of 2009, the Company also made a
change to its Pharmacy Services segment as it relates to the
Company’s intersegment activities (such as the Maintenance
Choice
®
program). This change impacts the gross profit and
operating profit lines within the Pharmacy Services segment.
Under the Maintenance Choice program, Pharmacy Services
clients can elect to pick-up their maintenance prescriptions
at Retail Pharmacy segment stores instead of receiving them
through the mail. When this occurs, both the Pharmacy Services
and Retail Pharmacy segments now record the revenue, gross
profit and operating profit on a standalone basis and corre-
sponding intersegment eliminations are made. This change had
no impact on the Company’s consolidated results of operations.
The Company evaluates its Pharmacy Services and Retail
Pharmacy segment performance based on net revenue, gross
profit and operating profit before the effect of non-recurring
charges and gains and certain intersegment activities and
charges. The Company evaluates the performance of its
Corporate segment based on operating expenses before the
effect of discontinued operations and certain intersegment
activities and charges. See Note 1 for a description of the
Pharmacy Services, Retail Pharmacy and Corporate segments
and related significant accounting policies.
Company was damaged by the purchase of stock at allegedly
inflated prices under its share repurchase program. The
Company believes these lawsuits are without merit and the
Company plans to defend them vigorously.
The Company cannot predict the ultimate outcome of the
legal matters disclosed above. Management does not believe,
however, that the outcome of any of these legal matters will
have a material adverse effect on the Company’s operating
results or financial condition.
The Company is also a party to other legal proceedings and
inquiries arising in the normal course of its business, none
of which is expected to be material to the Company. The
Company can give no assurance, however, that our busi-
ness, financial condition and results of operations will not
be materially adversely affected, or that we will not be required
to materially change our business practices, based on: (i) future
enactment of new health care or other laws or regulations; (ii)
the interpretation or application of existing laws or regulations,
as they may relate to our business or the pharmacy services or
retail industry; (iii) pending or future federal or state govern-
mental investigations of our business or the pharmacy services
or retail industry; (iv) institution of government enforcement
actions against us; (v) adverse developments in any pending
qui tam lawsuit against us, whether sealed or unsealed, or
in any future qui tam lawsuit that may be filed against us; or
(vi) adverse developments in other pending or future legal
proceedings against us or affecting the pharmacy services or
retail industry.
CVS Caremark
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