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Segment Reporting
9 Months Ended
Sep. 30, 2011
Segment Reporting 
Segment Reporting

Note 5 – Segment Reporting

 

The Company has three segments: Pharmacy Services, Retail Pharmacy and Corporate. The Company’s segments maintain separate financial information for which operating results are evaluated on a regular basis by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company evaluates its Pharmacy Services and Retail Pharmacy segments’ performance based on net revenue, gross profit and operating profit before the effect of nonrecurring charges and gains and certain intersegment activities. The Company evaluates the performance of its Corporate segment based on operating expenses before the effect of nonrecurring charges and gains and certain intersegment activities.

 

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) services including mail order pharmacy services, specialty pharmacy services, plan design consultation and administration, formulary management and claims processing. The Company’s customers are primarily employers, insurance companies, unions, government employee groups, managed care organizations, other sponsors of health benefit plans and individuals throughout the United States. In addition, through our SilverScript Insurance Company, Accendo Insurance Company, and Pennsylvania Life Insurance Company subsidiaries, we are a national provider of drug benefits to eligible beneficiaries under the Federal Government’s Medicare Part D program. The Pharmacy Services business operates under the CVS Caremark® Pharmacy Services, Caremark®, CVS Caremark®, CarePlus CVS/pharmacy®, CarePlus™, RxAmerica®, Memberhealth®, MHRx® and Accordant® names. As of September 30, 2011, the Pharmacy Services segment operated 31 retail specialty pharmacy stores, 13 specialty mail order pharmacies and four mail service pharmacies located in 23 states, Puerto Rico and the District of Columbia.

 

The Retail Pharmacy segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products and cosmetics, photo finishing, seasonal merchandise, greeting cards and convenience foods through our CVS/pharmacy® and Longs Drug® retail stores, our CarePlus™ and CarePlus CVS/pharmacy® onsite stores and apothecaries, and online through CVS.com®. As of September 30, 2011, the Retail Pharmacy segment included 7,304 retail drugstores, of which 7,247 operated a pharmacy, the online retail website, CVS.com, 32 retail apothecary pharmacies and 645 retail health care clinics. The retail drugstores are located in 41 states, Puerto Rico and the District of Columbia. The retail health care clinics operate under the MinuteClinic® name, of which 635 are located within CVS/pharmacy stores. MinuteClinics utilize nationally recognized medical protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions and deliver vaccinations. The clinics are staffed by board-certified nurse practitioners and physician assistants who provide access to affordable care without appointment.

 

The Corporate segment provides management and administrative services to support the Company. The Corporate segment consists of certain aspects of our executive management, corporate relations, legal, compliance, human resources, corporate information technology and finance departments.

 

In millions

 

 

Pharmacy
Services
Segment(1)

 

 

 

Retail
Pharmacy
Segment

 

 

 

Corporate
Segment

 

 

 

Intersegment
Eliminations(2)

 

 

 

Consolidated
Totals

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

 

$

14,798

 

 

 

$

14,693

 

 

 

$

¾

 

 

 

$

(2,817)

 

 

 

$

26,674

 

Gross profit

 

 

914

 

 

 

4,306

 

 

 

¾

 

 

 

(42)

 

 

 

5,178

 

Operating profit (loss)

 

 

657

 

 

 

1,123

 

 

 

(154)

 

 

 

(42)

 

 

 

1,584

 

September 30, 2010(3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

 

11,762

 

 

 

14,159

 

 

 

¾

 

 

 

(2,210)

 

 

 

23,711

 

Gross profit

 

 

873

 

 

 

4,181

 

 

 

¾

 

 

 

(39)

 

 

 

5,015

 

Operating profit (loss)

 

 

646

 

 

 

1,039

 

 

 

(168)

 

 

 

(39)

 

 

 

1,478

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

 

43,000

 

 

 

44,106

 

 

 

¾

 

 

 

(8,323)

 

 

 

78,783

 

Gross profit

 

 

2,263

 

 

 

12,860

 

 

 

¾

 

 

 

(117)

 

 

 

15,006

 

Operating profit (loss)

 

 

1,496

 

 

 

3,459

 

 

 

(465)

 

 

 

(117)

 

 

 

4,373

 

September 30, 2010(3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

 

35,151

 

 

 

42,448

 

 

 

¾

 

 

 

(6,410)

 

 

 

71,189

 

Gross profit

 

 

2,460

 

 

 

12,397

 

 

 

¾

 

 

 

(92)

 

 

 

14,765

 

Operating profit (loss)

 

 

1,763

 

 

 

3,164

 

 

 

(459)

 

 

 

(92)

 

 

 

4,376

 

Total assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011

 

 

35,817

 

 

 

28,774

 

 

 

1,203

 

 

 

(543)

 

 

 

65,251

 

December 31, 2010

 

 

32,254

 

 

 

28,927

 

 

 

1,439

 

 

 

(451)

 

 

 

62,169

 

Goodwill:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011

 

 

19,705

 

 

 

6,801

 

 

 

¾

 

 

 

¾

 

 

 

26,506

 

December 31, 2010

 

 

18,868

 

 

 

6,801

 

 

 

¾

 

 

 

¾

 

 

 

25,669

 

 

(1)          Net revenues of the Pharmacy Services segment include approximately $1.9 billion and $1.6 billion of retail co-payments for the three months ended September 30, 2011 and 2010, respectively, as well as $6.0 billion and $5.0 billion of retail co-payments for the nine months ended September 30, 2011 and 2010, respectively.

(2)          Intersegment eliminations relate to two types of transactions: (i) Intersegment revenues that occur when Pharmacy Services segment customers 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 customers, 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. As a result, both the Pharmacy Services and the Retail Pharmacy segments include the following results associated with this activity: net revenues of $657 million and $489 million for the three months ended September 30, 2011 and 2010, respectively, and $1.8 billion and $1.3 billion for the nine months ended September 30, 2011 and 2010, respectively; gross profit and operating profit of $42 million and $39 million for the three months ended September 30, 2011 and 2010, respectively, and $117 million and $92 million for the nine months ended September 30, 2011 and 2010, respectively.

(3)          The results of the Pharmacy Services segment for the three and nine months ended September 30, 2010 have been revised to reflect the results of TheraCom as discontinued operations. See Note 3 to the condensed consolidated financial statements.