Catamaran Corp - 10-K filing on 2015-03-02

Segment Information

12 Months Ended

Dec. 31, 2014

(a) Reportable Segments

The Company manages its business in two segments: PBM and HCIT. The Company evaluates segment performance and allocates resources based upon revenue and gross profit. Selling, general and administrative expenses, depreciation and amortization, interest and other income and interest expense are reported as corporate expenses as these are managed on a consolidated basis by the Company. The Merger with Catalyst or the acquisition of Restat did not change the Company's conclusion on its reporting segments.

PBM Segment

The Company provides comprehensive PBM services to customers, which include managed care organizations, local governments, unions, corporations, HMOs, employers, workers’ compensation plans, third-party health care plan administrators, and federal and state government programs through its network of licensed pharmacies throughout the United States. The PBM services include electronic point-of-sale pharmacy claims management, retail pharmacy network management, mail and specialty pharmacy claims management, Medicare Part D services, benefit design consultation, preferred drug management programs, drug review and analysis, consulting services, data access and reporting and information analysis.

Revenue primarily consists of sales of prescription drugs, together with any associated administrative fees, to customers and participants, through the Company’s nationwide network of participating pharmacies and the Company's own mail and specialty pharmacies. Revenue and costs related to the sales of prescription drugs are recognized when the claims are adjudicated and the prescription drugs are shipped. Claims are adjudicated at the point-of-sale using an on-line processing system. Revenue and cost primarily consists of sales of prescription drugs to customers and participants.

HCIT Segment

The Company also provides HCIT solutions and services to providers, payors and other participants in the pharmaceutical supply chain in North America. The Company’s product offerings include a wide range of software products for managing prescription drug programs and for drug prescribing and dispensing. The Company’s solutions are available on a license basis with on-going maintenance and support or on a transaction fee basis using an ASP model. The Company’s payor customers include managed care organizations, Blue Cross Blue Shield organizations, government agencies, employers and intermediaries such as pharmacy benefit managers. The Company’s provider customers include independent, regional chain, institutional, and mail-order pharmacies. The solutions offered by the Company’s services assist both payors and providers in managing the complexity and reducing the cost of their prescription drug programs and dispensing activities. The Company’s profitability from HCIT depends primarily on revenue derived from transaction processing services, software license sales, hardware sales, maintenance, and professional services.

Financial information by segment (in thousands):



Year Ended December 31, 2014	PBM		HCIT		Corporate		Total
Revenue	$	21,429,983	$	151,907	$	—	$	21,581,890
Cost of revenue	20,155,768		66,069		—		20,221,837
Gross profit	1,274,215		85,838		—		1,360,053
Corporate expenses	—		—		852,145		852,145
Income before income taxes	—		—		—		507,908
Income tax expense	—		—		—		134,186
Net income	—		—		—		373,722
Less net income attributable to non-controlling interest	—		—		—		56,429
Net income attributable to the Company	—		—		—		317,293
Goodwill	4,704,974		19,665		—		4,724,639
Total assets	$	9,103,603	$	220,582	$	—	$	9,324,185



Year Ended December 31, 2013	PBM		HCIT		Corporate		Total
Revenue	$	14,632,104	$	147,990	$	—	$	14,780,094
Cost of revenue	13,583,941		70,508		—		13,654,449
Gross profit	1,048,163		77,482		—		1,125,645
Corporate expenses	—		—		723,503		723,503
Income before income taxes	—		—		—		402,142
Income tax expense	—		—		—		103,403
Net income	—		—		—		298,739
Less net income attributable to non-controlling interest	—		—		—		36,569
Net income attributable to the Company	—		—		—		262,170
Goodwill	4,700,610		19,665		—		4,720,275
Total assets	$	7,634,033	$	361,730	$	—	$	7,995,763



Year Ended December 31, 2012	PBM		HCIT		Corporate		Total
Revenue	$	9,785,084	$	155,036	$	—	$	9,940,120
Cost of revenue	9,141,029		65,715		—		9,206,744
Gross profit	644,055		89,321		—		733,376
Corporate expenses	—		—		543,039		543,039
Income before income taxes	—		—		—		190,337
Income tax expense	—		—		—		69,316
Net income	—		—		—		121,021
Less net income attributable to non-controlling interest	—		—		—		4,363
Net income attributable to the Company	—		—		—		116,658
Goodwill	4,458,373		19,665		—		4,478,038
Total assets	$	7,159,098	$	226,029			$	7,385,127

(b) Geographic Information

Revenues of the Company are primarily earned in the United States. The Company’s Canadian operations represented less than 0.2% of the Company’s consolidated revenue for the years ended December 31, 2014, 2013 and 2012.

During the year ended December 31, 2014, one customer accounted for 34% of total revenue. During the year ended December 31, 2013, one customer accounted for 23% of total revenue. During the year ended December 31, 2012, one customer accounted for 31% of total revenue. In 2014, 2013 and 2012, this major customer was included in the PBM segment.

At December 31, 2014, one customer accounted for 17% of the total accounts receivable balance. At December 31, 2013, one customer accounted for 15% of the total accounts receivable balance.