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Segment Reporting | 9 Months Ended
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Sep. 30, 2018
Segment Reporting |
Segment Reporting | Note 10 – Segment Reporting The Company has two operating segments, Pharmacy Services and Retail/LTC, as well as a Corporate segment. In conjunction with the Company’s implementation of a new enterprise resource planning system in the first quarter of 2018, the Company changed the manner in which certain shared functional costs are allocated to its reportable segments. Segment financial information for the three and nine months ended September 30, 2017, has been retrospectively adjusted to reflect this change to the cost allocation methodology as shown below:
|  | Three Months Ended September 30, 2017
|  | Pharmacy |  |  |  |  |  |  |  | Intersegment |  | Consolidated
In millions |  | Services |  | Retail/LTC |  | Corporate |  | Eliminations |  | Totals
Cost of revenues, as previously reported |  | $ | 31,251 |  | $ | 13,908 |  |  |  |  | $ | (6,104) |  | $ | 39,055
Adjustments |  |  | 13 |  |  | (4) |  |  |  |  |  | — |  |  | 9
Cost of revenues, as adjusted |  | $ | 31,264 |  | $ | 13,904 |  |  |  |  | $ | (6,104) |  | $ | 39,064
Gross profit, as previously reported |  | $ | 1,645 |  | $ | 5,685 |  |  |  |  | $ | (204) |  | $ | 7,126
Adjustments |  |  | (13) |  |  | 4 |  |  |  |  |  | — |  |  | (9)
Gross profit, as adjusted |  | $ | 1,632 |  | $ | 5,689 |  |  |  |  | $ | (204) |  | $ | 7,117
Operating expenses, as previously reported |  | $ | 292 |  | $ | 4,132 |  | $ | 220 |  | $ | (17) |  | $ | 4,627
Adjustments |  |  | 13 |  |  | (24) |  |  | 2 |  |  | — |  |  | (9)
Operating expenses, as adjusted |  | $ | 305 |  | $ | 4,108 |  | $ | 222 |  | $ | (17) |  | $ | 4,618
Operating profit (loss), as previously reported |  | $ | 1,353 |  | $ | 1,553 |  | $ | (220) |  | $ | (187) |  | $ | 2,499
Adjustments |  |  | (26) |  |  | 28 |  |  | (2) |  |  | — |  |  | —
Operating profit (loss), as adjusted |  | $ | 1,327 |  | $ | 1,581 |  | $ | (222) |  | $ | (187) |  | $ | 2,499
|  | Nine Months Ended September 30, 2017
|  | Pharmacy |  |  |  |  |  |  |  | Intersegment |  | Consolidated
In millions |  | Services |  | Retail/LTC |  | Corporate |  | Eliminations |  | Totals
Cost of revenues, as previously reported |  | $ | 92,234 |  | $ | 41,452 |  |  |  |  | $ | (17,947) |  | $ | 115,739
Adjustments |  |  | 39 |  |  | (12) |  |  |  |  |  | — |  |  | 27
Cost of revenues, as adjusted |  | $ | 92,273 |  | $ | 41,440 |  |  |  |  | $ | (17,947) |  | $ | 115,766
Gross profit, as previously reported |  | $ | 4,210 |  | $ | 17,036 |  |  |  |  | $ | (605) |  | $ | 20,641
Adjustments |  |  | (39) |  |  | 12 |  |  |  |  |  | — |  |  | (27)
Gross profit, as adjusted |  | $ | 4,171 |  | $ | 17,048 |  |  |  |  | $ | (605) |  | $ | 20,614
Operating expenses, as previously reported |  | $ | 938 |  | $ | 12,661 |  | $ | 686 |  | $ | (53) |  | $ | 14,232
Adjustments |  |  | 37 |  |  | (55) |  |  | (9) |  |  | — |  |  | (27)
Operating expenses, as adjusted |  | $ | 975 |  | $ | 12,606 |  | $ | 677 |  | $ | (53) |  | $ | 14,205
Operating profit (loss), as previously reported |  | $ | 3,272 |  | $ | 4,375 |  | $ | (686) |  | $ | (552) |  | $ | 6,409
Adjustments |  |  | (76) |  |  | 67 |  |  | 9 |  |  | — |  |  | —
Operating profit (loss), as adjusted |  | $ | 3,196 |  | $ | 4,442 |  | $ | (677) |  | $ | (552) |  | $ | 6,409
The following is a reconciliation of the Company’s segments to the accompanying condensed consolidated financial statements:
|  | Pharmacy |  |  |  |  |  |  |  | Intersegment |  | Consolidated
In millions |  | Services(1) |  | Retail/LTC |  | Corporate |  | Eliminations(2) |  | Totals
Three Months Ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
September 30, 2018: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  | $ | 33,763 |  | $ | 20,856 |  | $ | — |  | $ | (7,350) |  | $ | 47,269
Gross profit |  |  | 1,737 |  |  | 5,814 |  |  | — |  |  | (223) |  |  | 7,328
Operating profit (loss) (4)(6) |  |  | 1,345 |  |  | 1,491 |  |  | (287) |  |  | (196) |  |  | 2,353
September 30, 2017: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  |  | 32,896 |  |  | 19,593 |  |  | — |  |  | (6,308) |  |  | 46,181
Gross profit (5) |  |  | 1,632 |  |  | 5,689 |  |  | — |  |  | (204) |  |  | 7,117
Operating profit (loss) (3)(4)(6) |  |  | 1,327 |  |  | 1,581 |  |  | (222) |  |  | (187) |  |  | 2,499
Nine Months Ended |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
September 30, 2018: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  | $ | 99,228 |  | $ | 61,960 |  | $ | — |  | $ | (21,518) |  | $ | 139,670
Gross profit |  |  | 4,370 |  |  | 17,642 |  |  | — |  |  | (624) |  |  | 21,388
Operating profit (loss) (3)(4)(6) |  |  | 3,194 |  |  | 890 |  |  | (814) |  |  | (558) |  |  | 2,712
September 30, 2017: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  |  | 96,444 |  |  | 58,488 |  |  | — |  |  | (18,552) |  |  | 136,380
Gross profit (5) |  |  | 4,171 |  |  | 17,048 |  |  | — |  |  | (605) |  |  | 20,614
Operating profit (loss) (3)(4)(6) |  |  | 3,196 |  |  | 4,442 |  |  | (677) |  |  | (552) |  |  | 6,409
| (1) |  | Net revenues of the Pharmacy Services Segment include approximately $2.7 billion and $2.6 billion of retail co‑payments for the three months ended September 30, 2018 and 2017, respectively, as well as $8.8 billion and $8.4 billion of retail co‑payments for the nine months ended September 30, 2018 and 2017, respectively.
| (2) |  | Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services Segment and the Retail/LTC Segment. These occur in the following ways: when members of Pharmacy Services Segment clients (“members”) fill prescriptions at the Company’s retail pharmacies to purchase covered products, when members enrolled in programs such as Maintenance Choice® elect to pick up maintenance prescriptions at one of the Company’s retail pharmacies instead of receiving them through the mail, or when members have prescriptions filled at the Company’s long-term care pharmacies. When these occur, both the Pharmacy Services and Retail/LTC segments record the revenues, gross profit and operating profit on a stand-alone basis.
| (3) |  | The Retail/LTC Segment operating profit for the nine months ended September 30, 2018 and 2017 include goodwill impairment charges of $3.9 billion related to the LTC reporting unit and $135 million related to the RxCrossroads reporting unit, respectively. See “Note 3 – Goodwill and Intangible Assets” to the condensed consolidated financial statements. The Retail/LTC Segment operating profit for the nine months ended September 30, 2018 also includes an $86 million loss on the divestiture of the RxCrossroads subsidiary. The Retail/LTC Segment operating profit for the three and nine months ended September 30, 2017 also includes $6 million and $211 million, respectively, of charges associated with store closures.
| (4) |  | The Corporate Segment operating loss for the three and nine months ended September 30, 2018 include $66 million and $145 million, respectively, in acquisition-related transaction and integration costs related to the proposed acquisition of Aetna. The Corporate Segment operating loss for the three and nine months ended September 30, 2017 include $3 million reduction in integration costs for a change in estimate related to the acquisition of Omnicare.
| (5) |  | The Retail/LTC Segment gross profit for the three and nine months ended September 30, 2017 include $2 million and $7 million, respectively, of acquisition-related integration costs related to the acquisition of Omnicare.
| (6) |  | The Retail/LTC Segment operating profit for the three months ended September 30, 2018 and 2017 include $4 million and $9 million, respectively, of acquisition-related integration costs. The Retail/LTC Segment operating profit for the nine months ended September 30, 2018 and 2017 include $7 million and $34 million, respectively, of acquisition-related integration costs. The integration costs are related to the acquisition of Omnicare.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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