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CVS Health
84
Notes to Consolidated Financial Statements
12 | Segment Reporting
The Company currently has three reportable segments: Pharmacy Services, Retail Pharmacy and Corporate.
The Company evaluates its Pharmacy Services and Retail Pharmacy segment performance based on net revenue,
gross profit and operating profit before the effect of 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.
The following table is a reconciliation of the Company’s business segments to the consolidated financial statements:
Pharmacy Retail
Services Pharmacy Corporate Intersegment Consolidated
IN MILLIONS Segment
(1) (2)
Segment
(2)
Segment Eliminations
(2)
Totals
2014:
Net revenues
$ 88,440 $ 67,798 $ — $ (16,871) $ 139,367
Gross profit
4,771 21,277 — (681) 25,367
Operating profit
3,514 6,762 (796) (681) 8,799
Depreciation and amortization
630 1,205 96 — 1,931
Total assets
42,302 30,979 2,530 (1,559) 74,252
Goodwill
21,234 6,908 — — 28,142
Additions to property and equipment
308 1,745 83 — 2,136
2013:
Net revenues $ 76,208 $ 65,618 $ — $ (15,065) $ 126,761
Gross profit 4,237 20,112 — (566) 23,783
Operating profit 3,086 6,268 (751) (566) 8,037
Depreciation and amortization 560 1,217 93 — 1,870
Total assets 38,343 30,191 4,420 (1,428) 71,526
Goodwill 19,658 6,884 — — 26,542
Additions to property and equipment 313 1,610 61 — 1,984
2012:
Net revenues $ 73,444 $ 63,641 $ — $ (13,965) $ 123,120
Gross profit 3,808 19,091 — (411) 22,488
Operating profit 2,679 5,636 (694) (411) 7,210
Depreciation and amortization 517 1,153 83 — 1,753
Total assets 36,057 29,492 1,408 (736) 66,221
Goodwill 19,646 6,749 — — 26,395
Additions to property and equipment 422 1,555 53 — 2,030
(1) Net revenues of the Pharmacy Services Segment include approximately $8.1 billion, $7.9 billion and $8.4 billion of Retail co-payments
for the years ended December 31, 2014, 2013 and 2012, respectively.
(2) Intersegment eliminations relate to two types of transactions: (i) Intersegment revenues that occur when Pharmacy Services Segment
clients use Retail Pharmacy Segment stores to purchase covered products. When this occurs, both the Pharmacy Services and Retail
Pharmacy segments record the revenue on a standalone basis and (ii) Intersegment revenues, gross profit and operating profit that
occur when Pharmacy Services Segment clients, through the Company’s intersegment activities (such as the Maintenance Choice®
program), 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 record the revenue, gross profit and operating profit
on a standalone basis. The following amounts are eliminated in consolidation in connection with the item (ii) intersegment activity: net
revenues of $4.9 billion, $4.3 billion and $3.4 billion for the years ended December 31, 2014, 2013 and 2012, respectively; and gross
profit and operating profit of $681 million, $566 million and $411 million for the years ended December 31, 2014, 2013 and 2012,
respectively.