Acquisition purchase price adjustments outside of measurement period

  
The following is a reconciliation of consolidated operating income to adjusted operating income for the years ended December 31, 2021, 2020 and 2019:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| In millions | 2021 |  | 2020 |  | 2019 |
| Operating income (GAAP measure) | $ | 13,193  |  |  | $ | 13,911  |  |  | $ | 11,987  |  |
| Amortization of intangible assets (1) | 2,259  |  |  | 2,341  |  |  | 2,436  |  |
| Acquisition-related integration costs (2) | 132  |  |  | 332  |  |  | 480  |  |
| Store impairments (3) | 1,358  |  |  | —  |  |  | 231  |  |
| Goodwill impairment (4) | 431  |  |  | —  |  |  | —  |  |
| Acquisition purchase price adjustment outside of measurement period (5) | (61) |  |  | —  |  |  | —  |  |
| (Gain) loss on divestiture of subsidiary (6) | —  |  |  | (269) |  |  | 205  |  |
| Receipt of fully reserved ACA risk corridor receivable (7) | —  |  |  | (307) |  |  | —  |  |
| Adjusted operating income | $ | 17,312  |  |  | $ | 16,008  |  |  | $ | 15,339  |  |

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(1)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 GAAP consolidated 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. (2)In 2021, 2020 and 2019, acquisition-related integration costs relate to the Aetna Acquisition. The acquisition-related integration costs are reflected in the Company’s GAAP consolidated statements of operations in operating expenses within the Corporate/Other segment. (3)During the year ended December 31, 2021, the store impairment charge relates to the write down of operating lease right-of-use assets and property and equipment in connection with the planned closure of approximately 900 retail stores between 2022 and 2024. During the year ended December 31, 2019, the store impairment charges related to the write down of operating lease right-of-use assets in connection with the planned closure of 68 underperforming retail pharmacy stores in 2019 and 2020. The store impairment charges are reflected in the Company’s GAAP consolidated statements of operations within the Retail/LTC segment. (4)During the year ended December 31, 2021, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment. (5)In June 2021, the Company received $61 million related to a purchase price working capital adjustment for an acquisition completed during the first quarter of 2020. The resolution of this matter occurred subsequent to the acquisition accounting measurement period and is reflected in the Company’s GAAP consolidated statement of operations for the year ended December 31, 2021 as a reduction of operating expenses within the Health Care Benefits segment. (6)In 2020, the gain on divestiture of subsidiary represents the pre-tax gain on the sale of the Workers’ Compensation business, which the Company sold on July 31, 2020 for approximately $850 million. The gain on divestiture is reflected as a reduction of operating expenses in the Company’s GAAP consolidated statement of operations within the Health Care Benefits segment. In 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 the Company’s GAAP consolidated statement of operations in operating expenses within the Retail/LTC segment. (7)In 2020, the Company received $313 million owed to it under the ACA’s risk corridor program that was previously fully reserved for as payment was uncertain. After considering offsetting items such as the ACA’s minimum MLR rebate requirements and premium taxes, the Company recognized pre-tax income of $307 million in the Company’s GAAP consolidated statement of operations within the Health Care Benefits segment.  
  
  
  
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