Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Error Corrections and Prior Period Adjustments

Segment financial information for the three and six months ended June 30, 2018, has been retrospectively adjusted to reflect these changes as shown below:




	Three Months Ended June 30, 2018
	Pharmacy			Retail/			Health Care		Corporate/			Intersegment			Consolidated
In millions	Services			LTC			Benefits		Other			Eliminations			Totals
Revenues, as previously reported	$	33,251		$	20,672		$	—	$	210		$	(7,211	)	$	46,922
Adjustments	176			—			764		—			(940		)	—
Revenues, as adjusted	$	33,427		$	20,672		$	764	$	210		$	(8,151	)	$	46,922

Cost of products sold ⁽¹⁾	$	31,121		$	14,760		$	—	$	—		$	(7,005	)	$	38,876
Adjustments	852			—			—		—			(852		)	—
Cost of products sold, as adjusted	$	31,973		$	14,760		$	—	$	—		$	(7,857	)	$	38,876

Benefit costs ⁽¹⁾	$	631		$	—		$	—	$	—		$	—		$	631
Adjustments	(631		)	—			631		—			—			—
Benefit costs, as adjusted	$	—		$	—		$	631	$	—		$	—		$	631

Operating expenses, as previously reported	$	407		$	4,216		$	—	$	263		$	(19	)	$	4,867
Adjustments	(45		)	—			133		—			(88		)	—
Operating expenses, as adjusted	$	362		$	4,216		$	133	$	263		$	(107	)	$	4,867

Operating income (loss), as previously reported	$	1,092		$	(2,225	)	$	—	$	(53	)	$	(187	)	$	(1,373	)
Adjustments	—			—			—		—			—			—
Operating income (loss), as adjusted	1,092			(2,225		)	—		(53		)	(187		)	(1,373		)
Segment measure adjustments	89			4,046			—		(163		)	—			3,972
Adjusted operating income (loss)	$	1,181		$	1,821		$	—	$	(216	)	$	(187	)	$	2,599

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(1)	The total of cost of products sold and benefit costs were previously reported as cost of revenues.



	Six Months Ended June 30, 2018
	Pharmacy			Retail/			Health Care			Corporate/			Intersegment			Consolidated
In millions	Services			LTC			Benefits			Other			Eliminations			Totals
Revenues, as previously reported	$	65,471		$	41,104		$	—		$	258		$	(14,168	)	$	92,665
Adjustments	502			—			2,082			—			(2,584		)	—
Revenues, as adjusted	$	65,973		$	41,104		$	2,082		$	258		$	(16,752	)	$	92,665

Cost of products sold ⁽¹⁾	$	60,872		$	29,276		$	—		$	—		$	(13,767	)	$	76,381
Adjustments	2,408			—			—			—			(2,408		)	—
Cost of products sold, as adjusted	$	63,280		$	29,276		$	—		$	—		$	(16,175	)	$	76,381

Benefit costs ⁽¹⁾	$	1,960		$	—		$	—		$	—		$	—		$	1,960
Adjustments	(1,960		)	—			1,960			—			—			—
Benefit costs, as adjusted	$	—		$	—		$	1,960		$	—		$	—		$	1,960

Operating expenses, as previously reported	$	784		$	8,508		$	—		$	527		$	(39	)	$	9,780
Adjustments	(84		)	—			260			—			(176		)	—
Operating expenses, as adjusted	$	700		$	8,508		$	260		$	527		$	(215	)	$	9,780

Operating income (loss), as previously reported	$	1,855		$	(601	)	$	—		$	(269	)	$	(362	)	$	623
Adjustments	138			—			(138		)	—			—			—
Operating income (loss), as adjusted	1,993			(601		)	(138		)	(269		)	(362		)	623
Segment measure adjustments	175			4,258			1			(165		)	—			4,269
Adjusted operating income (loss)	$	2,168		$	3,657		$	(137	)	$	(434	)	$	(362	)	$	4,892

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(1)

The total of cost of products sold and benefit costs were previously reported as cost of revenues.

Summarized Financial Information Of Segments

The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:




	Pharmacy		Retail/		Health Care			Corporate/			Intersegment			Consolidated
In millions	Services⁽¹⁾		LTC		Benefits			Other			Eliminations⁽²⁾			Totals
Three Months Ended
June 30, 2019
Revenues from customers	$	34,842	$	21,447	$	17,255		$	16		$	(10,422	)	$	63,138
Net investment income	—		—		148			145			—			293
Total revenues	34,842		21,447		17,403			161			(10,422		)	63,431
Adjusted operating income (loss)	1,296		1,669		1,438			(202		)	(170		)	4,031

June 30, 2018
Revenues from customers	$	33,427	$	20,672	$	760		$	—		$	(8,151	)	$	46,708
Net investment income	—		—		4			210			—			214
Total revenues	33,427		20,672		764			210			(8,151		)	46,922
Adjusted operating income (loss)	1,181		1,821		—			(216		)	(187		)	2,599

Six Months Ended
June 30, 2019
Revenues from customers	$	68,400	$	42,562	$	34,961		$	41		$	(21,429	)	$	124,535
Net investment income	—		—		312			230			—			542
Total revenues	68,400		42,562		35,273			271			(21,429		)	125,077
Adjusted operating income (loss)	2,243		3,158		3,000			(433		)	(342		)	7,626

June 30, 2018
Revenues from customers	$	65,973	$	41,104	$	2,076		$	—		$	(16,752	)	$	92,401
Net investment income	—		—		6			258			—			264
Total revenues	65,973		41,104		2,082			258			(16,752		)	92,665
Adjusted operating income (loss)	2,168		3,657		(137		)	(434		)	(362		)	4,892

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(1)	Revenues of the Pharmacy Services segment include approximately $2.9 billion and $2.8 billion of retail co-payments for the three months ended June 30, 2019 and 2018, respectively, as well as $6.2 billion and $6.1 billion of retail co-payments for the six months ended June 30, 2019 and 2018, respectively.

(2)

Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment.

Reconciliation of Operating Earnings to Net Income

The following is a reconciliation of consolidated operating income (loss) to adjusted operating income for the three and six months ended June 30, 2019 and 2018:




	Three Months Ended					Six Months Ended
	June 30,					June 30,
In millions	2019		2018			2019		2018
Operating income (loss) (GAAP measure)	$	3,332	$	(1,373	)	$	6,022	$	623
Amortization of intangible assets ⁽¹⁾	593		214			1,215		424
Acquisition-related transaction and integration costs ⁽²⁾	106		39			254		82
Store rationalization charge ⁽³⁾	—		—			135		—
Goodwill impairment ⁽⁴⁾	—		3,921			—		3,921
Loss on divestiture of subsidiary ⁽⁵⁾	—		—			—		86
Interest income on financing for the Aetna Acquisition ⁽⁶⁾	—		(202		)	—		(244		)
Adjusted operating income	$	4,031	$	2,599		$	7,626	$	4,892

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(1)

Intangible assets relate to the Company’s acquisition activities and are amortized over their useful lives. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. The amortization of intangible assets is not directly related to the core performance of the Company’s business operations since this amortization does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Subsequent to the applicable acquisition date, the Company’s revenues and results of operations include the results of each of the Company’s acquisitions, which are supported by these intangible assets.

(2)

During the three and six months ended June 30, 2019 and 2018, acquisition-related transaction and integration costs relate to the Aetna Acquisition. During the six months ended June 30, 2018, acquisition-related integration costs also relate to the acquisition of Omnicare, Inc. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses primarily within the Corporate/Other segment.

(3)

During the six months ended June 30, 2019, the store rationalization charge primarily relates to operating lease right-of-use asset impairment charges in connection with the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charge is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment.


(4)	During the three and six months ended June 30, 2018, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment.


(5)	During the six months ended June 30, 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statement of operations within the Retail/LTC segment.

(6)

During the three and six months ended June 30, 2018, the Company recorded interest income of $202 million and $244 million, respectively on the proceeds of its unsecured senior notes issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment.