CVS 2010 Annual Report Download - page 26

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Management’s Discussion and Analysis of
Financial Condition and Results of Operations
SUMMARY OF OUR CONSOLIDATED FINANCIAL RESULTS
Fiscal Year
in millions, except per common share amounts 2010 2009 2008
Net revenues $ 96,413 $ 98,729 $ 87,472
Gross profit 20,257 20,380 18,290
Operating expenses 14,092 13,942 12,244
Operating profit 6,165 6,438 6,046
Interest expense, net 536 525 509
Income before income tax provision 5,629 5,913 5,537
Income tax provision 2,190 2,205 2,193
Income from continuing operations 3,439 3,708 3,344
Loss from discontinued operations, net of income tax benefit (15) (12) (132)
Net income 3,424 3,696 3,212
Net loss attributable to noncontrolling interest 3 – –
Preference dividend, net of income tax benefit – – (14)
Net income attributable to CVS Caremark $ 3,427 $ 3,696 $ 3,198
Diluted earnings per common share:
Income from continuing operations attributable to CVS Caremark $ 2.50 $ 2.56 $ 2.27
Loss from discontinued operations attributable to CVS Caremark (0.01) (0.01) (0.09)
Net income attributable to CVS Caremark $ 2.49 $ 2.55 $ 2.18
Net revenues decreased $2.3 billion in 2010 and increased $11.3 billion in 2009. As you review our performance in this area, we
believe you should consider the following important information:
• During 2010, net revenues in our Retail Pharmacy segment increased by 3.6% which was offset by a decline in our Pharmacy
Services segment of 6.4%, compared to the prior year. The increase in our generic dispensing rates in both of our operating
segments had an adverse effect on net revenue in 2010 as compared to 2009, as well as in 2009 as compared to 2008.
• Three fewer days in the 2009 fiscal year negatively impacted net revenues by $671 million, compared to 2008.
• During 2009, the Longs Acquisition increased net revenues by $6.6 billion, compared to 2008. The results for 2008 includes
net revenues from the Longs Drug Stores and RxAmerica from the acquisition date (October 20, 2008) forward.
Please see the Segment Analysis later in this document for additional information about our net revenues.
Gross profit decreased $0.1 billion in 2010, to $20.3 billion or 21.0% of net revenues, as compared to 2009. Gross profit increased
$2.1 billion in 2009 to $20.4 billion or 20.6% of net revenues, as compared to 2008. As you review our performance in this area,
we believe you should consider the following important information:
• During 2010, gross profit in our Retail Pharmacy segment increased by 2.7% offset by declines in our Pharmacy Services
segment of 12.6%, compared to the prior year.
• During 2009, the Longs Acquisition increased gross profit dollars by $1.1 billion, but negatively impacted our gross profit rate
compared to 2008.
• Three fewer days in the 2009 fiscal year, negatively impacted gross profit by $146 million, compared to 2008.
• The results for 2008 include gross profit from the Longs Drug Stores and RxAmerica from the acquisition date (October 20,
2008) forward.
• In addition, for the three years 2008 through 2010, our gross profit continued to benefit from the increased utilization of
generic drugs (which normally yield a higher gross profit rate than equivalent brand name drugs) in both the Pharmacy
Services and Retail Pharmacy segments.
Please see the Segment Analysis later in this document for additional information about our gross profit.
– 22 –
CVS Caremark 2010 Annual Report