0000064803-19-000047.txt : 20191106 0000064803-19-000047.hdr.sgml : 20191106 20191106063758 ACCESSION NUMBER: 0000064803-19-000047 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20191106 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20191106 DATE AS OF CHANGE: 20191106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CVS HEALTH Corp CENTRAL INDEX KEY: 0000064803 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 050494040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01011 FILM NUMBER: 191195002 BUSINESS ADDRESS: STREET 1: ONE CVS DR. CITY: WOONSOCKET STATE: RI ZIP: 02895 BUSINESS PHONE: 4017651500 MAIL ADDRESS: STREET 1: ONE CVS DR. CITY: WOONSOCKET STATE: RI ZIP: 02895 FORMER COMPANY: FORMER CONFORMED NAME: CVS CAREMARK CORP DATE OF NAME CHANGE: 20070509 FORMER COMPANY: FORMER CONFORMED NAME: CVS/CAREMARK CORP DATE OF NAME CHANGE: 20070322 FORMER COMPANY: FORMER CONFORMED NAME: CVS CORP DATE OF NAME CHANGE: 19970128 8-K 1 form8-kq3x19.htm 8-K Document
false0000064803 0000064803 2019-11-06 2019-11-06


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
November 6, 2019
cvshealtha21.jpg
CVS HEALTH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
001-01011
05-0494040
(State or other jurisdiction of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
 
 
 

One CVS Drive, Woonsocket, Rhode Island        02895
(Address of principal executive offices)            (Zip Code)

Registrant’s telephone number, including area code:         (401) 765-1500
Former name or former address, if changed since last report:    N/A

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
CVS
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


 





Section 2 - Financial Information

Item 2.02 Results of Operations and Financial Condition.

On November 6, 2019, CVS Health Corporation issued a press release announcing results for the three months ended September 30, 2019. A copy of that press release is furnished herewith as Exhibit 99.1 and hereby incorporated in this Item 2.02 by reference.

The information in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) or otherwise subject to the liabilities of that Section, and shall not be or be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d)        Exhibits.

The exhibits to this Current Report on Form 8-K are as follows:

INDEX TO EXHIBITS

 
 
 
 
99.1
 
 
 
 
104
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
 
 
CVS HEALTH CORPORATION
 
 
 
Date: November 6, 2019
By:
/s/ Eva C. Boratto
 
 
Eva C. Boratto
 
 
Executive Vice President and Chief Financial Officer
 
 
 



EX-99.1 2 cvsex991q3-19.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1
Investor
Valerie Haertel
Media
T.J. Crawford
Contact:
Senior Vice President
Contact:
Vice President
 
Investor Relations
 
External Affairs
 
(401) 770-4050
 
(212) 457-0583

FOR IMMEDIATE RELEASE

CVS HEALTH REPORTS THIRD QUARTER RESULTS

2019 EPS GUIDANCE RAISED AND NARROWED,
REFLECTING STRONG EXECUTION OF STRATEGIC LONG-TERM PLAN

Third Quarter Year-over-Year Highlights:
Total revenues increased 36.5% to $64.8 billion
GAAP operating income increased 13.8% to $2.9 billion
Adjusted operating income (1) increased 48.9% to $3.9 billion
GAAP diluted earnings per share from continuing operations of $1.17
Adjusted EPS (2) of $1.84

Year-to-date Highlights:
Generated cash flow from operations of $10.2 billion

2019 Full Year Guidance:
Revised GAAP operating income guidance range to $11.77 billion to $11.95 billion from $11.82 billion to $12.02 billion
Raised and narrowed adjusted operating income (1) guidance range to $15.22 billion to $15.40 billion from $15.16 billion to $15.36 billion
Revised GAAP diluted EPS from continuing operations guidance range to $4.90 to $4.98 from $4.93 to $5.04
Raised and narrowed Adjusted EPS (2) guidance range to $6.97 to $7.05 from $6.89 to $7.00
Confirmed cash flow from operations guidance range of $10.1 billion to $10.6 billion

WOONSOCKET, RHODE ISLAND, November 6, 2019 - CVS Health Corporation (NYSE: CVS) today announced operating results for the three months ended September 30, 2019.

President and Chief Executive Officer Larry Merlo stated, “Our third quarter results build on the positive momentum we have seen across the company since the beginning of the year. All of our core businesses performed in line with or above expectations, reflecting strong operational execution. As a result, we delivered strong growth and generated robust operating cash flow, which enabled us to continue to delever while returning capital to our shareholders.”

Merlo continued, “Based on strong year-to-date performance, we are raising and narrowing our full-year 2019 Adjusted EPS guidance range to $6.97 to $7.05. As we approach the first anniversary of the Aetna acquisition, we are increasingly confident in the strength of our broad and differentiated assets as a combined company and our ability to deliver compelling value to our customers and the communities we serve. Looking ahead, we remain focused on successful execution of our strategic priorities and integration plans to unleash the full potential of our consumer-centric health care model and create value for all stakeholders.”






_____________________________________________ 
The Company presents both GAAP and non-GAAP financial measures in this press release to assist in the comparison of the Company’s past financial performance with its current financial performance. See “Non-GAAP Financial Information” on pages 11 through 12 and endnotes (1) through (4) on page 27 for explanations of non-GAAP financial measures presented in this press release. See pages 13 through 17 and 25 through 26 for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure.

1



Consolidated Third Quarter Results
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
In millions, except per share amounts
2019
    
2018
    
Change
 
2019
    
2018
    
Change
Total revenues 
$
64,810

 
$
47,490

 
$
17,320

 
$
189,887

 
$
140,155

 
$
49,732

Operating income
2,928

 
2,574

 
354

 
8,950

 
3,197

 
5,753

Adjusted operating income (1)
3,947

 
2,650

 
1,297

 
11,573

 
7,542

 
4,031

Net income (loss)
1,529

 
1,390

 
139

 
4,887

 
(175
)
 
5,062

Diluted earnings (loss) per share from continuing operations
$
1.17

 
$
1.36

 
$
(0.19
)
 
$
3.75

 
$
(0.17
)
 
$
3.92

Adjusted EPS (2)
$
1.84

 
$
1.73

 
$
0.11

 
$
5.35

 
$
4.89

 
$
0.46

Enterprise prescriptions (5) (6)
686.6

 
657.0

 
29.6

 
2,049.5

 
1,973.6

 
75.9


Total revenues and adjusted revenues (3) increased 36.5% and 37.1%, respectively, for the three months ended September 30, 2019 compared to the prior year. Revenue growth was primarily driven by the impact of the acquisition (the “Aetna Acquisition”) of Aetna Inc. (“Aetna”), which the Company acquired on November 28, 2018 (the “Aetna Acquisition Date”), as well as increased volume and brand name drug price inflation in both the Pharmacy Services and Retail/LTC segments. The revenue increase was partially offset by continued price compression in the Pharmacy Services segment, reimbursement pressure in the Retail/LTC segment and an increased generic dispensing rate.
Operating expenses and adjusted operating expenses (4) increased 72.8% and 61.5%, respectively, for the three months ended September 30, 2019 compared to the prior year. The increase in both operating expenses and adjusted operating expenses was primarily driven by the impact of the Aetna Acquisition. The increase in operating expenses also was due to (i) an increase in intangible asset amortization primarily related to the Aetna Acquisition, (ii) a $205 million pre-tax loss on the sale of the Company’s Brazilian subsidiary, Drogaria Onofre Ltda. (“Onofre”), which occurred on July 1, 2019 and (iii) a $96 million store rationalization charge recorded in the three months ended September 30, 2019 primarily related to operating lease right-of-use asset impairment charges in connection with the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020.
Operating income and adjusted operating income increased 13.8% and 48.9%, respectively, for the three months ended September 30, 2019 compared to the prior year. The increase in both operating income and adjusted operating income was primarily due to the impact of the Aetna Acquisition as well as increased claims volume and improved purchasing economics in the Pharmacy Services segment. These increases were partially offset by continued reimbursement pressure in the Retail/LTC segment and continued price compression in the Pharmacy Services segment. The increase in operating income was also partially offset by (i) an increase in intangible asset amortization primarily related to the Aetna Acquisition, (ii) the $205 million pre-tax loss on the sale of Onofre recorded in the three months ended September 30, 2019, (iii) the $96 million store rationalization charge recorded in the three months ended September 30, 2019 and (iv) the absence of $209 million in interest income on the proceeds from the financing for the Aetna Acquisition recorded in the three months ended September 30, 2018.
Net income increased 10.0% for the three months ended September 30, 2019 compared to the prior year primarily due to the higher operating income described above, partially offset by (i) higher interest expense primarily due to the assumption of Aetna’s debt as of the Aetna Acquisition Date, (ii) the loss on early extinguishment of debt of $79 million related to the Company’s repayment of $4.0 billion of its outstanding senior notes pursuant to its tender offers for such senior notes in August 2019 and (iii) higher income tax expense associated with the increase in pre-tax income.
The effective income tax rate was 28.3% for the three months ended September 30, 2019 compared to 26.8% for the three months ended September 30, 2018. The increase in the effective income tax rate was primarily due to the impact of the sale of Onofre in the three months ended September 30, 2019.


2



Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management services to employers, health plans, government employee groups and government sponsored programs. The segment results for the three and nine months ended September 30, 2019 and 2018 were as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
In millions
2019
    
2018
    
Change
 
2019
    
2018
    
Change
Total revenues
$
36,018

 
$
33,864

 
$
2,154

 
$
104,418

 
$
99,837

 
$
4,581

Operating income
1,340

 
1,275

 
65

 
3,387

 
3,268

 
119

Adjusted operating income (1)
1,439

 
1,362

 
77

 
3,682

 
3,530

 
152

Total pharmacy claims processed (6)
509.5

 
466.3

 
43.2

 
1,480.3

 
1,405.2

 
75.1

Pharmacy network (7)
430.2

 
394.5

 
35.7

 
1,250.0

 
1,192.2

 
57.8

Mail choice (8)
79.3

 
71.8

 
7.5

 
230.3

 
213.0

 
17.3

    
Total revenues increased 6.4% for the three months ended September 30, 2019 compared to the prior year primarily due to brand name drug price inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate.
Total pharmacy claims processed increased 9.3% on a 30-day equivalent basis for the three months ended September 30, 2019 compared to the prior year primarily driven by net new business and the continued adoption of Maintenance Choice® offerings.
Operating income and adjusted operating income increased 5.1% and 5.7%, respectively, for the three months ended September 30, 2019 compared to the prior year primarily driven by increased claims volume, the addition of Aetna’s mail order and specialty pharmacy operations and improved purchasing economics, partially offset by continued price compression. The increase in operating income also was partially offset by increased intangible asset amortization related to Aetna’s mail order and specialty pharmacy operations.

See the supplemental information on page 21 for additional information regarding the performance of the Pharmacy Services segment.

3



Retail/LTC Segment

The Retail/LTC segment fulfills prescriptions for medications, provides patient care programs, sells a wide-assortment of general merchandise, provides health care services through walk-in clinics and provides services to long-term care facilities. The segment results for the three and nine months ended September 30, 2019 and 2018 were as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
In millions
2019
    
2018
    
Change
 
2019
    
2018
    
Change
Total revenues
$
21,466

 
$
20,856

 
$
610

 
$
64,028

 
$
61,960

 
$
2,068

Operating income
1,095

 
1,491

 
(396
)
 
3,884

 
890

 
2,994

Adjusted operating income (1)
1,516

 
1,622

 
(106
)
 
4,674

 
5,279

 
(605
)
Prescriptions filled (6)
352.3

 
331.2

 
21.1

 
1,048.2

 
989.7

 
58.5

        
Total revenues increased 2.9% for the three months ended September 30, 2019 compared to the prior year. The increase was primarily driven by increased prescription volume and brand name drug price inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate.
Front store revenues represent approximately 21.5% of total Retail/LTC segment revenues. Front store revenues increased in the three months ended September 30, 2019 compared to the prior year primarily driven by increases in health and beauty product sales, which benefited from continued strength in cough and cold products.
Total prescription volume grew 6.4% on a 30-day equivalent basis for the three months ended September 30, 2019 compared to the prior year. The growth was driven primarily by the continued adoption of patient care programs.
Operating income and adjusted operating income decreased 26.6% and 6.5%, respectively, for the three months ended September 30, 2019. Operating income and adjusted operating income were both negatively impacted by continued reimbursement pressure, partially offset by increased prescription volume and improved front store margin. The decrease in operating income also was driven by the $205 million pre-tax loss on the sale of Onofre and the $96 million store rationalization charge, each recorded in the three months ended September 30, 2019.

See the supplemental information on page 22 for additional information regarding the performance of the Retail/LTC segment.


4



Health Care Benefits Segment

The Health Care Benefits segment provides a full range of insured and self-insured (“ASC”) medical, pharmacy, dental and behavioral health products and services. For periods prior to the Aetna Acquisition Date, the Health Care Benefits segment consisted solely of the Company’s SilverScript® Medicare Part D prescription drug plan (“PDP”) business. The segment results for the three and nine months ended September 30, 2019 and 2018 were as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
In millions, except percentages
2019
    
2018
    
Change
 
2019
    
2018
    
Change
Total revenues
$
17,181

 
$
641

 
$
16,540

 
$
52,454

 
$
2,723

 
$
49,731

Operating income (loss)
1,036

 
74

 
962

 
3,253

 
(64
)
 
3,317

Adjusted operating income (loss) (1)
1,423

 
75

 
1,348

 
4,423

 
(62
)
 
4,485

Medical benefit ratio (“MBR”) (a)
83.3
%
 
NM

 
 
 
83.7
%
 
NM

 
 
Medical membership as of September 30, 2019
 
 
 
 

 
22.8

 
 
 
 
_____________________________________________ 
(a)
The Health Care Benefits segment for the three and nine months ended September 30, 2018 consisted solely of the Company’s SilverScript PDP business. Accordingly, the MBRs for the three and nine months ended September 30, 2018 are not meaningful (“NM”) and are not directly comparable to the MBRs for the three and nine months ended September 30, 2019.
            
Total revenues increased $16.5 billion for the three months ended September 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition.
Operating income and adjusted operating income increased $962 million and $1.3 billion, respectively, for the three months ended September 30, 2019, compared to the prior year primarily driven by the Aetna Acquisition. The increase in operating income was partially offset by an increase in intangible asset amortization related to the Aetna Acquisition.
Medical membership as of September 30, 2019 of 22.8 million remained consistent compared with June 30, 2019, reflecting increases in Medicare and Medicaid products, offset by declines in Commercial products.
The Health Care Benefits segment experienced favorable development of prior-periods’ health care cost estimates in its Commercial and Government businesses, primarily attributable to second quarter 2019 performance.
Prior years’ health care costs payable estimates developed favorably by $511 million during the nine months ended September 30, 2019. This development is reported on a basis consistent with the prior years’ development reported in the health care costs payable table in the Company’s annual audited financial statements and does not directly correspond to an increase in 2019 operating results.

See the supplemental information on page 23 for additional information regarding the performance of the Health Care Benefits segment.


5



2019 Full Year Guidance

The Company revised its full year 2019 GAAP operating income guidance range to $11.77 billion to $11.95 billion from $11.82 billion to $12.02 billion and raised and narrowed its guidance range for full year 2019 adjusted operating income to $15.22 billion to $15.40 billion from $15.16 billion to $15.36 billion. The Company revised its full year 2019 GAAP diluted EPS from continuing operations guidance range to $4.90 to $4.98 from $4.93 to $5.04, and raised and narrowed its full year 2019 Adjusted EPS guidance range to $6.97 to $7.05 from $6.89 to $7.00.

The adjustments between GAAP operating income and GAAP diluted EPS from continuing operations and adjusted operating income and Adjusted EPS include, as applicable, adding back amortization of intangible assets, integration costs related to the Aetna Acquisition, store rationalization charges, gains/losses on divestitures and losses on early extinguishment of debt.

Teleconference and Webcast

The Company will be holding a conference call today for investors at 8:00 a.m. (Eastern time) to discuss its third quarter results. An audio webcast of the call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Health website at http://investors.cvshealth.com. This webcast will be archived and available on the website for a one-year period following the conference call.

About the Company

CVS Health is the nation’s premier health innovation company helping people on their path to better health. Whether in one of its pharmacies or through its health services and plans, CVS Health is pioneering a bold new approach to total health by making quality care more affordable, accessible, simple and seamless. CVS Health is community-based and locally focused, engaging consumers with the care they need when and where they need it. The Company has approximately 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 102 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services. CVS Health also serves an estimated 38 million people through traditional, voluntary and consumer-directed health insurance products and related services, including rapidly expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan. The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs. Find more information about how CVS Health is shaping the future of health at https://www.cvshealth.com.

Cautionary Statement Concerning Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. Statements in this press release that are forward-looking include the information under the heading “2019 Full Year Guidance” and the related endnotes and reconciliations and the information in Mr. Merlo’s quoted statement. By their nature, all forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons as described in our Securities and Exchange Commission (“SEC”) filings, including those set forth in the Risk Factors section and under the section entitled “Cautionary Statement Concerning Forward-Looking Statements” in our most recently filed Annual Report on Form 10-K and in our most recently filed Quarterly Report on Form 10-Q.

You are cautioned not to place undue reliance on CVS Health’s forward looking statements. These forward-looking statements are and will be based upon management’s then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements. CVS Health does not assume any duty to update or revise forward-looking statements, whether as a result of new information, future events or otherwise, as of any future date.

- Tables Follow -


6



CVS HEALTH CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
In millions, except per share amounts
2019
    
2018
 
2019
    
2018
Revenues:
 
 
 
 
 
 
 
Products
$
47,149

 
$
46,334

 
$
136,023

 
$
136,035

Premiums
15,539

 
627

 
47,612

 
2,684

Services
1,859

 
308

 
5,447

 
951

Net investment income
263

 
221

 
805

 
485

Total revenues
64,810

 
47,490

 
189,887

 
140,155

Operating costs:
 
 
 
 
 
 
 
Cost of products sold
40,437

 
39,502

 
116,654

 
115,883

Benefit costs
12,850

 
439

 
39,396

 
2,399

Goodwill impairment

 

 

 
3,921

Operating expenses
8,595

 
4,975

 
24,887

 
14,755

Total operating costs
61,882

 
44,916

 
180,937

 
136,958

Operating income
2,928

 
2,574

 
8,950

 
3,197

Interest expense
747

 
674

 
2,301

 
1,886

Loss on early extinguishment of debt
79

 

 
79

 

Other expense (income)
(31
)
 
1

 
(93
)
 
7

Income before income tax provision
2,133

 
1,899

 
6,663

 
1,304

Income tax provision
604

 
509

 
1,776

 
1,478

Income (loss) from continuing operations
1,529

 
1,390

 
4,887

 
(174
)
Loss from discontinued operations, net of tax

 

 

 
(1
)
Net income (loss)
1,529

 
1,390

 
4,887

 
(175
)
Net loss attributable to noncontrolling interests
1

 

 

 

Net income (loss) attributable to CVS Health
$
1,530

 
$
1,390

 
$
4,887

 
$
(175
)
 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to CVS Health
$
1.17

 
$
1.36

 
$
3.76

 
$
(0.17
)
Loss from discontinued operations attributable to CVS Health
$

 
$

 
$

 
$

Net income (loss) attributable to CVS Health
$
1.17

 
$
1.36

 
$
3.76

 
$
(0.17
)
  Weighted average basic shares outstanding
1,302

 
1,020

 
1,300

 
1,018

Diluted earnings (loss) per share:
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to CVS Health
$
1.17

 
$
1.36

 
$
3.75

 
$
(0.17
)
Loss from discontinued operations attributable to CVS Health
$

 
$

 
$

 
$

Net income (loss) attributable to CVS Health
$
1.17

 
$
1.36

 
$
3.75

 
$
(0.17
)
  Weighted average diluted shares outstanding
1,305

 
1,022

 
1,303

 
1,018

Dividends declared per share
$
0.50

 
$
0.50

 
$
1.50

 
$
1.50



7



CVS HEALTH CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
In millions
September 30, 2019
 
December 31, 2018
Assets:
 
 
 
Cash and cash equivalents
$
5,193

 
$
4,059

Investments
2,334

 
2,522

Accounts receivable, net
19,789

 
17,631

Inventories
16,028

 
16,450

Other current assets
4,841

 
4,581

Total current assets
48,185

 
45,243

Long-term investments
17,342

 
15,732

Property and equipment, net
11,651

 
11,349

Operating lease right-of-use assets
20,757

 

Goodwill
79,548

 
78,678

Intangible assets, net
33,655

 
36,524

Separate accounts assets
4,590

 
3,884

Other assets
4,385

 
5,046

Total assets
$
220,113

 
$
196,456

 
 
 
 
Liabilities:
 
 
 
Accounts payable
$
9,442

 
$
8,925

Pharmacy claims and discounts payable
13,099

 
11,365

Health care costs payable
7,014

 
6,147

Policyholders’ funds
2,938

 
2,939

Accrued expenses
11,615

 
10,711

Other insurance liabilities
1,790

 
1,937

Current portion of operating lease liabilities
1,798

 

Short-term debt
1,070

 
720

Current portion of long-term debt
3,778

 
1,265

Total current liabilities
52,544

 
44,009

Long-term operating lease liabilities
18,826

 

Long-term debt
64,206

 
71,444

Deferred income taxes
7,279

 
7,677

Separate accounts liabilities
4,590

 
3,884

Other long-term insurance liabilities
7,557

 
8,119

Other long-term liabilities
2,178

 
2,780

Total liabilities
157,180

 
137,913

 
 
 
 
Shareholders’ equity:
 
 
 
Preferred stock

 

Common stock and capital surplus
45,854

 
45,440

Treasury stock
(28,207
)
 
(28,228
)
Retained earnings
44,017

 
40,911

Accumulated other comprehensive income
950

 
102

Total CVS Health shareholders’ equity
62,614

 
58,225

Noncontrolling interests
319

 
318

Total shareholders’ equity
62,933

 
58,543

Total liabilities and shareholders’ equity
$
220,113

 
$
196,456



8



CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended
September 30,
In millions
2019
    
2018
Cash flows from operating activities:
 
 
 
Cash receipts from customers
$
184,519

 
$
132,275

Cash paid for inventory and prescriptions dispensed by retail network pharmacies
(109,958
)
 
(107,920
)
Insurance benefits paid
(38,812
)
 
(2,400
)
Cash paid to other suppliers and employees
(21,411
)
 
(12,305
)
Interest and investment income received
756

 
406

Interest paid
(2,675
)
 
(1,759
)
Income taxes paid
(2,205
)
 
(1,911
)
Net cash provided by operating activities
10,214

 
6,386

 
 
 
 
Cash flows from investing activities:
 
 
 
Proceeds from sales and maturities of investments
5,616

 
43

Purchases of investments
(6,011
)
 
(97
)
Purchases of property and equipment
(1,890
)
 
(1,452
)
Acquisitions (net of cash acquired)
(361
)
 
(616
)
Proceeds from sale of subsidiary

 
725

Other
16

 
11

Net cash used in investing activities
(2,630
)
 
(1,386
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Net borrowings (repayments) of short-term debt
350

 
(1,276
)
Proceeds from issuance of long-term debt
3,458

 
39,376

Repayments of long-term debt
(8,350
)
 
(2,266
)
Derivative settlements
(25
)
 
446

Dividends paid
(1,952
)
 
(1,528
)
Proceeds from exercise of stock options
183

 
214

Payments for taxes related to net share settlement of equity awards
(85
)
 
(39
)
Other
11

 

Net cash provided by (used in) financing activities
(6,410
)
 
34,927

Net increase in cash, cash equivalents and restricted cash
1,174

 
39,927

Cash, cash equivalents and restricted cash at the beginning of the period
4,295

 
1,900

Cash, cash equivalents and restricted cash at the end of the period
$
5,469

 
$
41,827



9



CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 
Nine Months Ended
September 30,
In millions
2019
    
2018
Reconciliation of net income (loss) to net cash provided by operating activities:
 
 
 
Net income (loss)
$
4,887

 
$
(175
)
Adjustments required to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
3,275

 
1,911

Goodwill impairment

 
3,921

Stock-based compensation
355

 
172

Loss on sale of subsidiary
205

 
86

Loss on early extinguishment of debt
79

 

Deferred income taxes and other noncash items
(38
)
 
210

Change in operating assets and liabilities, net of effects from acquisitions:
 
 
 
Accounts receivable, net
(2,312
)
 
(1,725
)
Inventories
413

 
472

Other assets
(374
)
 
(3
)
Accounts payable and pharmacy claims and discounts payable
2,330

 
1,839

Health care costs payable and other insurance liabilities
535

 

Other liabilities
859

 
(322
)
Net cash provided by operating activities
$
10,214

 
$
6,386



10



Non-GAAP Financial Information

The Company uses non-GAAP financial measures to analyze underlying business performance and trends. The Company believes that providing these non-GAAP financial measures enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance. These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. The Company’s definitions of its non-GAAP financial measures may not be comparable to similarly titled measurements reported by other companies.

Non-GAAP financial measures such as adjusted operating income, adjusted earnings per share (EPS), adjusted income from continuing operations attributable to CVS Health, adjusted revenues and adjusted operating expenses exclude from the relevant GAAP metrics, as applicable: 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.

For the periods covered in this press release, the following items are excluded from the non-GAAP financial measures described above, as applicable, because the Company believes they neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance:
The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets 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. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.
During the three and nine months ended September 30, 2019 and 2018, acquisition-related transaction and integration costs relate to the Aetna Acquisition. During the nine months ended September 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.
During the three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment.
During the three and nine months ended September 30, 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment. During the nine months ended September 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 statements of operations within the Retail/LTC segment.
During the three and nine months ended September 30, 2019, the loss on early extinguishment of debt relates to the Company’s repayment of $4.0 billion of its outstanding senior notes in August 2019 pursuant to its tender offers for such senior notes.

11



During the nine months ended September 30, 2018, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment.
During the three and nine months ended September 30, 2018, the Company recorded interest expense of $436 million and $1.2 billion, respectively, related to bridge financing costs and interest expense on the $40 billion of its unsecured senior notes issued on March 9, 2018 (“2018 Notes”). The interest expense was reduced by related interest income of $209 million and $453 million, during the three and nine months ended September 30, 2018, respectively, on the proceeds of the 2018 Notes. All amounts are for the periods prior to the close of the Aetna Acquisition and were recorded within the Corporate/Other segment.
The corresponding tax benefit or expense related to the items excluded from adjusted income from continuing operations attributable to CVS Health and Adjusted EPS above. The nature of each non-GAAP adjustment is evaluated to determine whether a discrete adjustment should be made to the adjusted income tax provision.

See endnotes (1) through (4) for definitions of non-GAAP financial measures. Reconciliations of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure are presented on pages 13 through 17 and 25 through 26.

12



Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

Adjusted Operating Income
(Unaudited)

The following are reconciliations of operating income to adjusted operating income:
 
Three Months Ended September 30, 2019
In millions
Pharmacy 
Services
 
Retail/
LTC
 
Health Care
Benefits
 
Corporate/
Other
 
Intersegment
Eliminations
 
Consolidated
Totals
Operating income (loss) (GAAP measure)
$
1,340

 
$
1,095

 
$
1,036

 
$
(364
)
 
$
(179
)
 
$
2,928

Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
99

 
120

 
387

 
1

 

 
607

Acquisition-related integration costs

 

 

 
111

 

 
111

Store rationalization charge

 
96

 

 

 

 
96

Loss on divestiture of subsidiary

 
205

 

 

 

 
205

Adjusted operating income (loss) (1)
$
1,439

 
$
1,516

 
$
1,423

 
$
(252
)
 
$
(179
)
 
$
3,947

 
Three Months Ended September 30, 2018
In millions
Pharmacy 
Services
 
Retail/
LTC
 
Health Care
Benefits
 
Corporate/
Other
 
Intersegment
Eliminations
 
Consolidated
Totals
Operating income (loss) (GAAP measure)
$
1,275

 
$
1,491

 
$
74

 
$
(70
)
 
$
(196
)
 
$
2,574

Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
87

 
127

 
1

 

 

 
215

Acquisition-related transaction and integration costs

 
4

 

 
66

 

 
70

Interest income on financing for the Aetna Acquisition

 

 

 
(209
)
 

 
(209
)
Adjusted operating income (loss) (1)
$
1,362

 
$
1,622

 
$
75

 
$
(213
)
 
$
(196
)
 
$
2,650


13



 
Nine Months Ended September 30, 2019
In millions
Pharmacy 
Services
 
Retail/
LTC
 
Health Care
Benefits
 
Corporate/
Other
 
Intersegment
Eliminations
 
Consolidated
Totals
Operating income (loss) (GAAP measure)
$
3,387

 
$
3,884

 
$
3,253

 
$
(1,053
)
 
$
(521
)
 
$
8,950

Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
295

 
354

 
1,170

 
3

 

 
1,822

Acquisition-related integration costs

 

 

 
365

 

 
365

Store rationalization charges

 
231

 

 

 

 
231

Loss on divestiture of subsidiary

 
205

 

 

 

 
205

Adjusted operating income (loss) (1)
$
3,682

 
$
4,674

 
$
4,423

 
$
(685
)
 
$
(521
)
 
$
11,573

 
Nine Months Ended September 30, 2018
In millions
Pharmacy 
Services
 
Retail/
LTC
 
Health Care
Benefits
 
Corporate/
Other
 
Intersegment
Eliminations
 
Consolidated
Totals
Operating income (loss) (GAAP measure)
$
3,268

 
$
890

 
$
(64
)
 
$
(339
)
 
$
(558
)
 
$
3,197

Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
262

 
375

 
2

 

 

 
639

Acquisition-related transaction and integration costs

 
7

 

 
145

 

 
152

Loss on divestiture of subsidiary

 
86

 

 

 

 
86

Goodwill impairment

 
3,921

 

 

 

 
3,921

Interest income on financing for the Aetna Acquisition

 

 

 
(453
)
 

 
(453
)
Adjusted operating income (loss) (1)
$
3,530

 
$
5,279

 
$
(62
)
 
$
(647
)
 
$
(558
)
 
$
7,542



14



Adjusted Earnings Per Share
(Unaudited)

The following are reconciliations of income (loss) from continuing operations attributable to CVS Health to adjusted income from continuing operations attributable to CVS Health and calculations of GAAP diluted EPS from continuing operations and Adjusted EPS:

 
Three Months Ended
September 30, 2019
 
Three Months Ended
September 30, 2018
In millions, except per share amounts
Total Company
 
Per Common Share
 
Total Company
 
Per Common Share
Income from continuing operations (GAAP measure)
$
1,529

 
 
 
$
1,390

 
 
Net loss attributable to noncontrolling interests (GAAP measure)
1

 
 
 

 
 
Income allocable to participating securities (GAAP measure)

 
 
 
(1
)
 
 
Income from continuing operations attributable to CVS Health (GAAP measure)
1,530

 
$
1.17

 
1,389

 
$
1.36

Non-GAAP adjustments:
 
 
 
 
 
 
 
Amortization of intangible assets
607

 
0.46

 
215

 
0.21

Acquisition-related transaction and integration costs
111

 
0.09

 
70

 
0.07

Store rationalization charge
96

 
0.07

 

 

Loss on divestiture of subsidiary
205

 
0.16

 

 

Loss on early extinguishment of debt
79

 
0.06

 

 

Net interest expense on financing for the Aetna Acquisition

 

 
227

 
0.22

Income tax benefit
(220
)
 
(0.17
)
 
(132
)
 
(0.13
)
Income allocable to participating securities, net of tax (a)
(1
)
 

 
(1
)
 

Adjusted income from continuing operations attributable to CVS Health (2)
$
2,407

 
$
1.84

 
$
1,768

 
$
1.73

 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding
 
 
1,305

 
 
 
1,022

_____________________________________________ 
(a)
Represents the corresponding impact to income allocable to participating securities, net of tax, related to the items above excluded from income from continuing operations attributable to CVS Health in determining adjusted income from continuing operations attributable to CVS Health and calculating Adjusted EPS above.

15




 
Nine Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2018
In millions, except per share amounts
Total Company
 
Per Common Share
 
Total Company
 
Per Common Share
Income (loss) from continuing operations (GAAP measure)
$
4,887

 
 
 
$
(174
)
 
 
Net loss attributable to noncontrolling interests (GAAP measure)

 
 
 

 
 
Income allocable to participating securities (GAAP measure)
(3
)
 
 
 
(3
)
 
 
Income (loss) from continuing operations attributable to CVS Health (GAAP measure)
4,884

 
$
3.75

 
(177
)
 
$
(0.17
)
Non-GAAP adjustments:
 
 
 
 
 
 
 
Amortization of intangible assets
1,822

 
1.40

 
639

 
0.63

Acquisition-related transaction and integration costs
365

 
0.28

 
152

 
0.15

Store rationalization charges
231

 
0.17

 

 

Loss on divestiture of subsidiary
205

 
0.16

 
86

 
0.08

Loss on early extinguishment of debt
79

 
0.06

 

 

Goodwill impairment

 

 
3,921

 
3.84

Net interest expense on financing for the Aetna Acquisition

 

 
697

 
0.68

Income tax benefit
(611
)
 
(0.47
)
 
(320
)
 
(0.31
)
Income allocable to participating securities, net of tax (a)
(2
)
 

 
(7
)
 
(0.01
)
Adjusted income from continuing operations attributable to CVS Health (2)
$
6,973

 
$
5.35

 
$
4,991

 
$
4.89

 
 
 
 
 
 
 
 
Weighted average diluted shares outstanding (GAAP) (2)
 
 
1,303

 
 
 
1,018

Adjusted weighted average diluted shares outstanding (non-GAAP) (2)
 
 
1,303

 
 
 
1,020

_____________________________________________ 
(a)
Represents the corresponding impact to income allocable to participating securities, net of tax, related to the items above excluded from income (loss) from continuing operations attributable to CVS Health in determining adjusted income from continuing operations attributable to CVS Health and calculating Adjusted EPS above.

16



Adjusted Revenues and Adjusted Operating Expenses
(Unaudited)

The following is a reconciliation of total revenues to adjusted revenues:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
In millions
2019
    
2018
 
2019
    
2018
Total revenues (GAAP measure)
$
64,810

 
$
47,490

 
$
189,887

 
$
140,155

Non-GAAP adjustment:
 
 
 
 
 
 
 
Interest income on financing for the Aetna Acquisition

 
(209
)
 

 
(453
)
Adjusted revenues (3)
$
64,810

 
$
47,281

 
$
189,887

 
$
139,702


The following is a reconciliation of operating expenses to adjusted operating expenses:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
In millions
2019
    
2018
 
2019
    
2018
Operating expenses (GAAP measure)
$
8,595

 
$
4,975

 
$
24,887

 
$
14,755

Non-GAAP adjustments:
 
 
 
 
 
 
 
Amortization of intangible assets
(607
)
 
(215
)
 
(1,822
)
 
(639
)
Acquisition-related transaction and integration costs
(111
)
 
(70
)
 
(365
)
 
(152
)
Store rationalization charges
(96
)
 

 
(231
)
 

Loss on divestiture of subsidiary
(205
)
 

 
(205
)
 
(86
)
Adjusted operating expenses (4)
$
7,576

 
$
4,690

 
$
22,264

 
$
13,878



17



Supplemental Information
(Unaudited)

The Company’s segments maintain separate financial information, and the Company’s chief operating decision maker (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 (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 as further described in endnote (1). Segment financial information for the three and nine months ended September 30, 2018 has been retrospectively adjusted to conform with the current period presentation. 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.

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. As a result of this realignment, the Company’s SilverScript PDP moved from the Pharmacy Services segment to the Health Care Benefits segment. In addition, the Company moved Aetna’s mail order and specialty pharmacy operations from the Health Care Benefits segment to the Pharmacy Services segment. Segment financial information for the three and nine months ended September 30, 2018, has been retrospectively adjusted to reflect these changes as shown below:
 
Three Months Ended September 30, 2018
In millions
Pharmacy 
Services
 
Retail/
LTC
 
Health Care
Benefits
 
Corporate/
Other
 
Intersegment
Eliminations
 
Consolidated
Totals
Revenues, as previously reported
$
33,767

 
$
20,856

 
$

 
$
217

 
$
(7,350
)
 
$
47,490

Adjustments
97

 

 
641

 

 
(738
)
 

Revenues, as adjusted
$
33,864

 
$
20,856

 
$
641

 
$
217

 
$
(8,088
)
 
$
47,490

 
 
 
 
 
 
 
 
 
 
 
 
Cost of products sold (a)
$
31,587

 
$
15,042

 
$

 
$

 
$
(7,127
)
 
$
39,502

Adjustments
651

 

 

 

 
(651
)
 

Cost of products sold, as adjusted
$
32,238

 
$
15,042

 
$

 
$

 
$
(7,778
)
 
$
39,502

 
 
 
 
 
 
 
 
 
 
 
 
Benefit costs (a)
$
439

 
$

 
$

 
$

 
$

 
$
439

Adjustments
(439
)
 

 
439

 

 

 

Benefit costs, as adjusted
$

 
$

 
$
439

 
$

 
$

 
$
439

 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses, as previously reported
$
392

 
$
4,323

 
$

 
$
287

 
$
(27
)
 
$
4,975

Adjustments
(41
)
 

 
128

 

 
(87
)
 

Operating expenses, as adjusted
$
351

 
$
4,323

 
$
128

 
$
287

 
$
(114
)
 
$
4,975

 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss), as previously reported
$
1,349

 
$
1,491

 
$

 
$
(70
)
 
$
(196
)
 
$
2,574

Adjustments
(74
)
 

 
74

 

 

 

Operating income (loss), as adjusted
1,275

 
1,491

 
74

 
(70
)
 
(196
)
 
2,574

Segment measure adjustments
87

 
131

 
1

 
(143
)
 

 
76

Adjusted operating income (loss)
$
1,362

 
$
1,622

 
$
75

 
$
(213
)
 
$
(196
)
 
$
2,650

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


18



 
Nine Months Ended September 30, 2018
In millions
Pharmacy 
Services
 
Retail/
LTC
 
Health Care
Benefits
 
Corporate/
Other
 
Intersegment
Eliminations
 
Consolidated
Totals
Revenues, as previously reported
$
99,238

 
$
61,960

 
$

 
$
475

 
$
(21,518
)
 
$
140,155

Adjustments
599

 

 
2,723

 

 
(3,322
)
 

Revenues, as adjusted
$
99,837

 
$
61,960

 
$
2,723

 
$
475

 
$
(24,840
)
 
$
140,155

 
 
 
 
 
 
 
 
 
 
 
 
Cost of products sold (a)
$
92,459

 
$
44,318

 
$

 
$

 
$
(20,894
)
 
$
115,883

Adjustments
3,059

 

 

 

 
(3,059
)
 

Cost of products sold, as adjusted
$
95,518

 
$
44,318

 
$

 
$

 
$
(23,953
)
 
$
115,883

 
 
 
 
 
 
 
 
 
 
 
 
Benefit costs (a)
$
2,399

 
$

 
$

 
$

 
$

 
$
2,399

Adjustments
(2,399
)
 

 
2,399

 

 

 

Benefit costs, as adjusted
$

 
$

 
$
2,399

 
$

 
$

 
$
2,399

 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses, as previously reported
$
1,176

 
$
12,831

 
$

 
$
814

 
$
(66
)
 
$
14,755

Adjustments
(125
)
 

 
388

 

 
(263
)
 

Operating expenses, as adjusted
$
1,051

 
$
12,831

 
$
388

 
$
814

 
$
(329
)
 
$
14,755

 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss), as previously reported
$
3,204

 
$
890

 
$

 
$
(339
)
 
$
(558
)
 
$
3,197

Adjustments
64

 

 
(64
)
 

 

 

Operating income (loss), as adjusted
3,268

 
890

 
(64
)
 
(339
)
 
(558
)
 
3,197

Segment measure adjustments
262

 
4,389

 
2

 
(308
)
 

 
4,345

Adjusted operating income (loss)
$
3,530

 
$
5,279

 
$
(62
)
 
$
(647
)
 
$
(558
)
 
$
7,542

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


19



The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:
In millions
Pharmacy 
Services
(a)
 
Retail/
LTC
 
Health Care
Benefits
 
Corporate/
Other
 
Intersegment
Eliminations
(b)
 
Consolidated
Totals
Three Months Ended
 
 
 
 
 
 
 
 
 
 
 
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
36,018

 
$
21,466

 
$
17,181

 
$
152

 
$
(10,007
)
 
$
64,810

Operating income (loss)
1,340

 
1,095

 
1,036

 
(364
)
 
(179
)
 
2,928

Adjusted operating income (loss) (1)
1,439

 
1,516

 
1,423

 
(252
)
 
(179
)
 
3,947

September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Total revenues
33,864

 
20,856

 
641

 
217

 
(8,088
)
 
47,490

Operating income (loss)
1,275

 
1,491

 
74

 
(70
)
 
(196
)
 
2,574

Adjusted operating income (loss) (1)
1,362

 
1,622

 
75

 
(213
)
 
(196
)
 
2,650

 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
 
 
 
 
 
 
 
 
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
104,418

 
$
64,028

 
$
52,454

 
$
423

 
$
(31,436
)
 
$
189,887

Operating income (loss)
3,387

 
3,884

 
3,253

 
(1,053
)
 
(521
)
 
8,950

Adjusted operating income (loss) (1)
3,682

 
4,674

 
4,423

 
(685
)
 
(521
)
 
11,573

September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Total revenues
99,837

 
61,960

 
2,723

 
475

 
(24,840
)
 
140,155