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Segment Reporting | 6 Months Ended
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Jun. 30, 2019
Segment Reporting [Abstract] |
Segment Reporting | Segment Reporting The Company has three operating segments, Pharmacy Services, Retail/LTC and Health Care Benefits, as well as a Corporate/Other segment. The Company’s segments maintain separate financial information, and the CODM evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income. Effective for the first quarter of 2019, adjusted operating income is defined as operating income (loss) (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. Segment financial information for the three and six months ended June 30, 2018 has been retrospectively adjusted to conform with the current period presentation. See the reconciliation of consolidated operating income (loss) (GAAP measure) to adjusted operating income below for further context regarding the items excluded from operating income (loss) in determining adjusted operating income. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. Effective for the first quarter of 2019, the Company realigned the composition of its segments to correspond with changes to its operating model and reflect how the CODM reviews information and manages the business. See Note 1 ‘‘Significant Accounting Policies’’ for further discussion. 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 |
_____________________________________________
(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 |
_____________________________________________
(1) | The total of cost of products sold and benefit costs were previously reported as cost of revenues.
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 |
_____________________________________________
(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.
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 |
_____________________________________________
(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.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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