13. Segment information
We report segments on the basis of services offered and have determined we have two reportable segments: PBM and Other Business Operations. During 2013, we determined our acute infusion therapies line of business which was acquired in the Merger and previously included within our PBM segment was no longer core to our future operations and committed to a plan to dispose of this business. During 2012, we determined that various portions of UBC, our European operations and EAV acquired in the Merger that were previously included within our Other Business Operations segment were no longer core to our future operations and committed to a plan to dispose of these businesses. In accordance with applicable accounting guidance, the results of operations for these businesses are reported as discontinued operations for all periods presented in the accompanying information. During the second quarter of 2012, we reorganized our international retail network pharmacy administration business (which was substantially shut down as of December 31, 2012) from our PBM segment into our Other Business Operations segment. During the third quarter of 2011, we reorganized our FreedomFP line of business from our Other Business Operations segment into our PBM segment.
Operating income is the measure used by our chief operating decision maker to assess the performance of each of our operating segments. The following table presents information about our reportable segments, including a reconciliation of operating income from continuing operations to income before income taxes from continuing operations for the respective years ended December 31.
|
| | | | | | | | | | | |
(in millions) | PBM | | Other Business Operations | | Total |
2013 | | | | | |
Product revenues: | | | | | |
Network revenues(1) | $ | 63,244.4 |
| | $ | — |
| | $ | 63,244.4 |
|
Home delivery and specialty revenues(2) | 37,621.2 |
| | — |
| | 37,621.2 |
|
Other revenues | — |
| | 2,001.9 |
| | 2,001.9 |
|
Service revenues | 1,020.1 |
| | 211.2 |
| | 1,231.3 |
|
Total revenues | 101,885.7 |
| | 2,213.1 |
| | 104,098.8 |
|
Depreciation and amortization expense | 2,419.1 |
| | 27.9 |
| | 2,447.0 |
|
Operating income | 3,502.0 |
| | 49.7 |
| | 3,551.7 |
|
Equity income from joint venture | | | | | 32.8 |
|
Interest income | | | | | 41.9 |
|
Interest expense and other | | | | | (596.1 | ) |
Income before income taxes | | | | | 3,030.3 |
|
Capital expenditures | 411.2 |
| | 11.8 |
| | 423.0 |
|
2012 | | | | | |
Product revenues: | | | | | |
Network revenues(1) | $ | 57,765.5 |
| | $ | — |
| | $ | 57,765.5 |
|
Home delivery and specialty revenues(2) | 32,860.9 |
| | — |
| | 32,860.9 |
|
Other revenues | — |
| | 2,118.7 |
| | 2,118.7 |
|
Service revenues | 805.8 |
| | 163.4 |
| | 969.2 |
|
Total revenues | 91,432.2 |
| | 2,282.1 |
| | 93,714.3 |
|
Depreciation and amortization expense | 1,833.3 |
| | 38.1 |
| | 1,871.4 |
|
Operating income | 2,815.1 |
| | (21.2 | ) | | 2,793.9 |
|
Equity income from joint venture | | | | | 14.9 |
|
Interest income | | | | | 10.6 |
|
Interest expense and other | | | | | (619.0 | ) |
Income before income taxes | | | | | 2,200.4 |
|
Capital expenditures | 148.5 |
| | 11.7 |
| | 160.2 |
|
2011 | | | | | |
Product revenues: | | | | | |
Network revenues(1) | $ | 30,007.3 |
| | $ | — |
| | $ | 30,007.3 |
|
Home delivery and specialty revenues(2) | 14,547.4 |
| | — |
| | 14,547.4 |
|
Other revenues | — |
| | 1,279.3 |
| | 1,279.3 |
|
Service revenues | 273.0 |
| | 21.3 |
| | 294.3 |
|
Total revenues | 44,827.7 |
| | 1,300.6 |
| | 46,128.3 |
|
Depreciation and amortization expense | 245.2 |
| | 8.2 |
| | 253.4 |
|
Operating income | 2,302.6 |
| | 11.8 |
| | 2,314.4 |
|
Interest income | | | | | 12.4 |
|
Interest expense and other | | | | | (299.7 | ) |
Income before income taxes | | | | | 2,027.1 |
|
Capital expenditures | 140.0 |
| | 4.4 |
| | 144.4 |
|
| |
(1) | Includes retail pharmacy co-payments of $12,620.3, $11,668.6 and $5,786.6 for the years ended December 31, 2013, 2012 and 2011, respectively. |
| |
(2) | Includes home delivery, specialty and other including: (a) drugs distributed through patient assistance programs and (b) drugs we distribute to other PBMs’ clients under limited distribution contracts with pharmaceutical manufacturers, and (c) FreedomFP claims. |
The following table presents the balance sheet information about our reportable segments, including the discontinued operations of our acute infusion therapies line of business, the businesses within UBC that were sold, EAV and our European operations:
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| | | | | | | | | | | | | | | |
(in millions) | PBM | | Other Business Operations | | Discontinued Operations | | Total |
As of December 31, 2013 | | | | | | | |
Total assets | $ | 52,599.1 |
| | $ | 918.1 |
| | $ | 31.0 |
| | $ | 53,548.2 |
|
Investment in equity method investees | $ | 30.2 |
| | $ | — |
| | $ | — |
| | $ | 30.2 |
|
As of December 31, 2012 | | | | | | | |
Total assets | $ | 54,510.8 |
| | $ | 3,021.2 |
| | $ | 579.2 |
| | $ | 58,111.2 |
|
Investment in equity method investees | $ | 11.9 |
| | $ | — |
| | $ | — |
| | $ | 11.9 |
|
PBM product revenues consist of revenues from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks, revenues from the dispensing of prescription drugs from our home delivery pharmacies and revenues from the sale of certain fertility and specialty drugs. Other Business Operations product revenues consist of specialty distribution activities and development of scientific evidence to guide the safe, effective and affordable use of medicines. PBM service revenues include administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, informed decision counseling services and specialty pharmacy services. Other Business Operations service revenues include revenues related to data analytics and research associated with our UBC business as well as from healthcare card administration through September 14, 2012, the date of disposal of CYC.
The following table shows the percentage of total revenue represented by our top five clients and clients representing 10% or greater of our consolidated revenue for each respective period:
|
| | | | | | | | |
| December 31, |
| 2013 | | 2012 | | 2011 |
WellPoint | 12.2 | % | | 13.7 | % | | 29.5 | % |
Department of Defense (“DoD”) | 10.2 | % | | 10.6 | % | | 20.9 | % |
Other | 16.0 | % | | 15.0 | % | | 6.3 | % |
Top five clients | 38.4 | % | | 39.3 | % | | 56.7 | % |
None of our other clients accounted for 10% or more of our consolidated revenues during the years ended December 31, 2013, 2012 or 2011.
Revenues earned by our continuing operations international businesses totaled $98.6 million, $77.1 million and $62.4 million for the years ended December 31, 2013, 2012 and 2011, respectively. All other continuing operations revenues were earned in the United States. Long-lived assets of our continuing operations international businesses (consisting primarily of fixed assets) totaled $58.6 million and $32.6 million as of December 31, 2013 and 2012, respectively. All other continuing operations long-lived assets are domiciled in the United States.
