Chapter 2 – Reading the Financial Statements

THE INCOME STATEMENT

Always measured over a period of time (e.g. year ended December 31)

The income statement measures profitability over a period of time.

Single-Step Income Stmt. Multi-Step Income Stmt.

(Lumps together all sources of Revenues & Gains, *(Identifying characteristics: Gross Profit,
less all expenses & losses.) Income from Operations)

Revenues $ xx
Interest Revenue xx Revenues $ xx
+ Gains from sale of assets xx Cost of Goods Sold ( xx)
Total Revenues & Gains $ xx Gross Profit $ xx
Less: Less Operating Exp:
Operating Expenses ( xx) Rent Expense (xx)
Losses from sale of assets ( xx) Wage Exp. (xx)
Interest Expense ( xx) Insurance Exp (xx)
Net Income $ xx Utilities Exp (xx) ($xx)
Income From Operations $xx
+ Gains xx
+ Interest Revenue xx
- Losses (xx)
- Interest Expense (xx)
Pre-Tax Income $ xx
- Tax Expense (xx)
Net Income xx

1
RATIO ANALYSIS
A ratio expresses the relationship between items of financial statement data, and can
shed light on company performance:
§ Intracompany comparisons – covers two years for the same company
§ Industry-average comparisons – based on average ratios for particular industries
§ Intercompany comparisons – comparisons with a competitor in the same industry.

An advantage of ratio analysis is when comparing two sets of financial statements that
otherwise wouldn’t be comparable. Either (a) the same company over time, or (b)
different companies at the same point in time.

INCOME STATEMENT ANALYSIS:

Net Margin – Ratio of Net Income to Revenues. What percentage of every $1 in sales
is converted to equity.

Example: Calculate the net margin for ABC Company.

Earnings per Share – Net income divided by weighted average number of shares
outstanding during the year.

Example: Calculate the earnings per share for ABC Company assuming 250,000 shares
outstanding throughout the year.

2
RATIO ANALYSIS
A ratio expresses the relationship between items of financial statement data, and can
shed light on company performance:
§ Intracompany comparisons – covers two years for the same company
§ Industry-average comparisons – based on average ratios for particular industries
§ Intercompany comparisons – comparisons with a competitor in the same industry.

An advantage of ratio analysis is when comparing two sets of financial statements that
otherwise wouldn’t be comparable. Either (a) the same company over time, or (b)
different companies at the same point in time.

INCOME STATEMENT ANALYSIS:

Net Margin – Ratio of Net Income to Revenues. What percentage of every $1 in sales
is converted to equity.

Example: Calculate the net margin for ABC Company.

60,400 8.5
708,255
Earnings per Share – Net income divided by weighted average number of shares
outstanding during the year.

Example: Calculate the earnings per share for ABC Company assuming 250,000 shares
outstanding throughout the year.

60,400 0.24 SHARE

250,000

2
THE BALANCE SHEET
Always measured as of a point in time (e.g. “as of December 31”)

The balance sheet measures:

1. Whether the company has enough assets to pay its debts, and
2. What claims by short-and long-term creditors exist on the company’s total assets.

3
SECTIONS OF A CLASSIFIED BALANCE SHEET

Current Assets - Assets that are expected to be converted to cash or used up in the
business within one year or one operating cycle, whichever is longer. Examples:

§ Cash and Cash Equivalents: Petty cash, foreign currency, savings and checking
accounts, but also some financial assets that convert to cash within 90 days or less
(e.g. treasury bills, certificates of deposit, bank notes, commercial paper).

§ Short Term Investments: Financial assets (e.g. mutual funds, market securities,
certificates of deposit) that mature in less than a year.

§ Accounts Receivables: Money due to the company in the short term, often when
goods or services are sold to customers “on account”.

§ Notes Receivables*: Money due to the company, often backed by a formal written
agreement that defines payment schedule and interest.

§ Other Receivables: Can include loans to employees, interest receivables, tax

refunds, and other money owed to the company unrelated to the normal course of
business.

§ Inventory: Merchandising inventory available for resale, or manufacturing inventory

including raw materials, work in progress, and finished goods.

§ Prepaid Expenses: Upfront payment for goods or services due to the company.

On the balance sheet, current assets are listed in the order in which they are expected
to be converted into cash (order of liquidity).

§ Some companies use a period longer than one year to classify assets and liabilities
as current because they have an operating cycle longer than one year. The
operating cycle of a company is the average time required to go from cash to cash in
producing revenue-buy inventory, sell it, and collect the cash from the customers.

4
Long Term Assets: Assets that cannot be expected to convert to cash within one year
or operating cycle. Examples:

§ Long-Term Investments – Investments in stocks, bonds that mature in over a year,

and significant ownership stakes in other companies and subsidiaries.

§ Plant, Property, and Equipment – Long lived tangible assets including land,
buildings, machinery, and equipment. Sometimes called ‘fixed assets’.

§ Intangible Assets – Long lived intangible assets including patents, trademarks,

copyrights, and contractual agreements.

Current Liabilities – Obligations that are to be paid within one year or operating cycle,
whichever is longer. Examples:

§ Accounts Payable – Money owed to suppliers and service providers, often when
goods or services are purchased “on account”.

§ Notes Payable* – Money owed to suppliers and service providers, often backed by
a formal written agreement that defines payment schedule and interest.

§ Other Payables – Can include wages owed to employees, taxes, and bank loans.

§ Unearned Revenue – Cash received from customers for which goods and services
have not yet been delivered.

Within the current liabilities section, companies usually list notes payable first, followed
by accounts payable, and then the remaining items in the order of their magnitude.

Debt Financing: Bonds vs Notes

§ Borrowing money is the most common method to raise financial capital. The money
is repaid at a specified future date – the maturity date – with agreed upon interest.

§ Bank loans are the most common method of debt financing. The written contract --
the “note” -- defines the terms of loan. The amount of the loan is limited by whatever
the bank is willing to lend. Repayment is made to the bank.

§ Bonds are used to borrow more than what any one bank is willing to lend. The debt
is divided into smaller pieces (similar to how stock divides corporate ownership into
smaller pieces). Investors can buy/sell bonds over the market, and repayment is
made to whoever holds the bond on the maturity date.

5
Long Term Liabilities: Obligations not expected to settle within one year or operating
cycle. Examples:

§ Long-Term Notes Payable – Bank loans (e.g. mortgage)

§ Lease Liabilities – Amounts owed under a lease agreement.

§ Bonds Payable – Money borrowed from the issuance of bonds.

Equity Financing

§ Shareholders are the ultimate ‘owners’ of the corporation. They hold a residual
claim to the corporation’s assets, which means they claim the value of assets after
all liabilities would be satisfied.

§ Specifically for a corporation, ownership is divided into shares (more generally called
stock). Each share entitles the holder to one vote on corporate matters:
Shareholders elect a Board of Directors (BOD) to represent their best interest. The
BOD hires the Chief Executive Officer (CEO) to run the corporation.

§ Shares never mature. If an owner wishes to liquidate their investment, they can sell
their shares on the market; the corporation will exist into perpetuity.

Stockholder’s Equity – Also called “Shareholder’s Equity,” or “Owner’s Equity,” is the

residual claim to the company’s assets after all liabilities would be satisfied. Examples:

§ Capital Stock – The amount invested by owners at the time the shares were issued.

Example: If Acme Corp. issues shares to new investors at the beginning of the year
for $1 million, and the market value of those shares increases to $2 million by the
end of the year, the balance sheet will list those shares at __________________.

Chapter 11 discusses different types of capital stock; in the meantime, we’ll work
exclusively with ‘common stock’.

§ Retained Earnings – The residual amount of firm profits after all expenses have
been paid that accrue to the benefit of the shareholders.

The Board of Directors can return a portion of shareholders’ investment by declaring

a dividend. Dividends are paid out of retained earnings.

6
BALANCE SHEET ANALYSIS

Liquidity - The ability to pay obligations expected to come due within the next year or
operating cycle. Two measures of liquidity include:

Working capital is a measure of the business’ short-term ability to pay its

obligations.
§ Positive working capital (Current Assets > Current Liabilities) indicates a greater
likelihood for paying liabilities.
§ Negative working capital (Current Liabilities > Current Assets) indicates that a
company might not be able to pay short-term creditors and may be forced into
bankruptcy.

Current ratio is a measure of short-term ability to pay obligations; calculated by

dividing current assets by current liabilities.

Example: Calculate the current ratio for ABC Company:

Solvency - The ability of a company to pay interest as it comes due and to repay the
balance of debt due at its maturity. Solvency ratios include:

Debt to Assets Ratio measures the percentage of assets financed by creditors. The
higher the percentage of debt financing, the riskier the company; Computed by
dividing total debt (both current and long-term liabilities) by total assets.

Example: Calculate the debt-to-assets ratio for ABC Company:

7
BALANCE SHEET ANALYSIS

Liquidity - The ability to pay obligations expected to come due within the next year or
operating cycle. Two measures of liquidity include:

Working capital is a measure of the business’ short-term ability to pay its

obligations.
§ Positive working capital (Current Assets > Current Liabilities) indicates a greater
likelihood for paying liabilities.
§ Negative working capital (Current Liabilities > Current Assets) indicates that a
company might not be able to pay short-term creditors and may be forced into
bankruptcy.

Current ratio is a measure of short-term ability to pay obligations; calculated by

dividing current assets by current liabilities.

Example: Calculate the current ratio for ABC Company:

194,310 6.4
30,360

Solvency - The ability of a company to pay interest as it comes due and to repay the
balance of debt due at its maturity. Solvency ratios include:

Debt to Assets Ratio measures the percentage of assets financed by creditors. The
higher the percentage of debt financing, the riskier the company; Computed by
dividing total debt (both current and long-term liabilities) by total assets.

Example: Calculate the debt-to-assets ratio for ABC Company:

50,360
0.20
246,560

7
THE STATEMENT OF RETAINED EARNINGS

The Statement of Retained Earnings is used when there are no changes in the
company’s capital stock during the period; Otherwise, a Statement of Stockholders’
Equity is prepared instead.

Beginning RE $XX
+ Net Income XX
- Dividends (XX)
Ending RE $XX

Dividends return a portion of the firm’s profits to shareholders; they are declared and
paid out of a company’s retained earnings.

8
Example: Green Bay Corporation began business in July 2021 as a commercial fishing
operation and passenger service between islands. The following amounts are from the
records of Green Bay Corporation at the end of its first year of operations:

Accounts Receivable $18,500 Salary and wage expense 18,230

Boats 80,000 Rent Expense 4,000
Common Stock 40,000 Passenger Service Revenue 12,560
Cash 7,730 Retained Earnings ???
Dividends 5,400 Notes Payable 60,000
Fishing Revenue 21,300

Prepare the Income Statement, Statement of Retained Earnings, and Balance Sheet.

9
Example: Green Bay Corporation began business in July 2021 as a commercial fishing
operation and passenger service between islands. The following amounts are from the
records of Green Bay Corporation at the end of its first year of operations:

Accounts Receivable $18,500 Salary and wage expense 18,230

Boats 80,000 Rent Expense 4,000
Common Stock 40,000 Passenger Service Revenue 12,560
Cash 7,730 Retained Earnings ???
Dividends 5,400 Notes Payable 60,000
Fishing Revenue 21,300

Prepare the Income Statement, Statement of Retained Earnings, and Balance Sheet.

INCOME STATEMENT
MONTH ENDED JULY 31,2021

FISHINGREVENUE 21,300
PASSENGERREVENUE 12,560
WAGE EXPENSE 218,2307
RENT EXPENSE 4,0007
NET Income 11,630

STATEMENT OF RETAINED EARN

MONTH ENDED JULY 31,2021

BEG BAL
NET INC 11,630
on
END BAL

9
 BALANCE SHEET
AS OF JULY 31 2021

CASH 7,730
AIR 18,500
BOATS 80,000
TOTAL ASSETS 106,230

NOTEPAYABLE 60,000
Common Stock 40,000
RETAINED EARN 6,230
IAB EQUITY 106,230

10
Example: The following information is available from the records of Blue Hen
Landscape Design Inc. at the end of the 2021 calendar year:

Accounts Payable $6,000 Office Equipment $8,500

Accounts receivable 4,500 Rent expense 6,500
Common stock 4,000 Retained earnings,
Cash 13,000 Beginning of year 9,000
Dividends 1,000 Salary Expense 12,000
Landscaping Revenues 29,000 Supplies 500
Insurance Expense $2,000

Prepare the financial statements for the period then ended.

11
Example: The following information is available from the records of Blue Hen
Landscape Design Inc. at the end of the 2021 calendar year:

Accounts Payable $6,000 Office Equipment $8,500

Accounts receivable 4,500 Rent expense 6,500
Common stock 4,000 Retained earnings,
Cash 13,000 Beginning of year 9,000
Dividends 1,000 Salary Expense 12,000
Landscaping Revenues 29,000 Supplies 500
Insurance Expense $2,000

Prepare the financial statements for the period then ended.

INCOME STATEMENT
YEAR ENDED DEC 31 2021
LANDSCAPINGREV 829,000
INSURANCE EXP 2,0007
RENT EXP 6,5007
SALARY EXP 12,0007
NET INCOME 8,500

STATEMENT OFRETAINED EARN

YEAR ENDED DEC 31 2021
BEG BAL 9,000
NET INC 8,500
DIY 21,0007
END BAL 16,500

11
 BALANCE SHEET
AS OF DEC 31 2021

CASH 13,000
AIR 4,500
SUPPLIES 500
EQUIPMENT 8,500
TOTAL ASSETS 26.500
2

Alp 6,000
Common Stock 4,000
RETAINED EARN 16,500
IAB EQUITY 26,500

12
Example Set of Financial Statements

ABC Company
Income Statement
For the Year Ended December 31, 2012

Sales Revenue 708,255

Cost of Goods Sold 525,305
Gross Profit $182,950
Less Operating Expenses:
Salary Expense 78,025
Advertising Expense 17,500
Insurance Expense 9,800
Rent Expense 13,355
Depreciation Expense 3,420
Amortization Expense 450 122,550
Net Income $ 60,400

ABC Company
Retained Earnings Statement
For the Year Ending December 31, 2012

Retained Earnings, January 1, 2012 $128,800

Net Income for the year 60,400
Less: Dividends 18,000 42,400
Retained Earnings, December 31, 2012 $171,200

13
 ABC Company
Balance Sheet
As of December 31, 2012

Assets
Current Assets:
Cash 52,950
Accounts Receivable 76,080
Inventory 62,150
Office Supplies 480
Prepaid Insurance 2,650
Total Current Assets $194,310

Property, Plant, and Equipment:

Land 20,000
Building 22,100
Equipment 15,570
Less: Accumulated Depreciation (10,420)
Property, Plant, and Equip., net 47,250
Patent 5,000 52,250
Total Assets $246,560

Liabilities

Current Liabilities:
Accounts Payable 22,420
Note Payable (short-term) 4,000
Salaries Payable 2,140
Unearned Revenue 1,800
Total Current Liabilities $30,360
Long-term Liabilities:
Note Payable (long-term) 8,000
Bonds Payable 12,000 20,000
Total Liabilities $50,360

Stockholders’ Equity

Common Stock 25,000

Retained Earnings 171,200 196,200
Total Liabilities and
Stockholders’ Equity $246,560

14
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to_________
Commission file number: 001-01011

CVS HEALTH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 05-0494040
(State or other jurisdiction of incorporation or organization) (I.R.S. 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

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☑ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public ☑
accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No

The aggregate market value of the registrant’s common stock held by non-affiliates was approximately $84,719,366,378 as of June 30, 2020, based
on the closing price of the common stock on the New York Stock Exchange. For purposes of this calculation, only executive officers and directors
are deemed to be affiliates of the registrant.
As of February 8, 2021, the registrant had 1,311,354,926 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE

The following materials are incorporated by reference into this Form 10-K:
Information contained in the definitive proxy statement for CVS Health Corporation’s 2021 Annual Meeting of Stockholders, to be filed with
the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2020 (the “Proxy Statement”),
is incorporated by reference in Parts III and IV to the extent described therein.
 TABLE OF CONTENTS

Page

Part I
Item 1: usiness 2
Item 1A: Risk Factors 32
Item 1 : Unresolved Staff Comments 61
Item 2: Properties 61
Item 3: Legal Proceedings 61
Item 4: Mine Safety Disclosures 62
Information about our Executive Officers 63

Part II
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of 64
Equity Securities
Item 6: Reserved 65
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations 66
Item 7A: uantitative and ualitative Disclosures About Market Risk 97
Item 8: Financial Statements and Supplementary Data 100
Item 9: Changes in and Disagreements ith Accountants on Accounting and Financial Disclosure 176
Item 9A: Controls and Procedures 176
Item 9 : Other Information 177

Part III
Item 10: Directors, Executive Officers and Corporate overnance 177
Item 11: Executive Compensation 177
Item 12: Security Ownership of Certain eneficial Owners and Management and Related Stockholder Matters 177
Item 13: Certain Relationships and Related Transactions, and Director Independence 178
Item 14: Principal Accountant Fees and Services 178

Part IV
Item 15: Exhibits and Financial Statement Schedules 179
Item 16: Form 10-K Summary 183
Signatures 184
 Consolidated Statements of Operations

For the Years Ended December 31,

I 2020 2019 2018
Revenues:
Products $ 190,688 $ 185,236 $ 183,910
Premiums 69,364 63,122 8,184
Services 7,856 7,407 1,825
Net investment income 798 1,011 660
Total revenues 268,706 256,776 194,579
Operating costs:
Cost of products sold 163,981 158,719 156,447
enefit costs 55,679 52,529 6,594
oodwill impairments 6,149
Operating expenses 35,135 33,541 21,368
Total operating costs 254,795 244,789 190,558
Operating income 13,911 11,987 4,021
Interest expense 2,907 3,035 2,619
Loss on early extinguishment of debt 1,440 79
Other income (206) (124) (4)
Income before income tax provision 9,770 8,997 1,406
Income tax provision 2,569 2,366 2,002
Income (loss) from continuing operations 7,201 6,631 (596)
Loss from discontinued operations, net of tax (9)
Net income (loss) 7,192 6,631 (596)
Net (income) loss attributable to noncontrolling interests (13) 3 2
Net income (loss) attributable to CVS Health $ 7,179 $ 6,634 $ (594)

asic earnings (loss) per share:

Income (loss) from continuing operations attributable to CVS Health $ 5.49 $ 5.10 $ (0.57)
Loss from discontinued operations attributable to CVS Health $ (0.01) $ $
Net income (loss) attributable to CVS Health $ 5.48 $ 5.10 $ (0.57)
eighted average basic shares outstanding 1,309 1,301 1,044
Diluted earnings (loss) per share:
Income (loss) from continuing operations attributable to CVS Health $ 5.47 $ 5.08 $ (0.57)
Loss from discontinued operations attributable to CVS Health $ (0.01) $ $
Net income (loss) attributable to CVS Health $ 5.46 $ 5.08 $ (0.57)
eighted average diluted shares outstanding 1,314 1,305 1,044
Dividends declared per share $ 2.00 $ 2.00 $ 2.00

See accompanying notes to consolidated financial statements.

101
 Consolidated Balance Sheets

At December 31,
I 2020 2019
Assets:
Cash and cash equivalents $ 7,854 $ 5,683
Investments 3,000 2,373
Accounts receivable, net 21,742 19,617
Inventories 18,496 17,516
Other current assets 5,277 5,113
Total current assets 56,369 50,302
Long-term investments 20,812 17,314
Property and equipment, net 12,606 12,044
Operating lease right-of-use assets 20,729 20,860
oodwill 79,552 79,749
Intangible assets, net 31,142 33,121
Separate accounts assets 4,881 4,459
Other assets 4,624 4,600
Total assets $ 230,715 $ 222,449

Liabilities:
Accounts payable $ 11,138 $ 10,492
Pharmacy claims and discounts payable 15,795 13,601
Health care costs payable 7,936 6,879
Policyholders’ funds 4,270 2,991
Accrued expenses 14,243 12,133
Other insurance liabilities 1,557 1,830
Current portion of operating lease liabilities 1,638 1,596
Current portion of long-term debt 5,440 3,781
Total current liabilities 62,017 53,303
Long-term operating lease liabilities 18,757 18,926
Long-term debt 59,207 64,699
Deferred income taxes 6,794 7,294
Separate accounts liabilities 4,881 4,459
Other long-term insurance liabilities 7,007 7,436
Other long-term liabilities 2,351 2,162
Total liabilities 161,014 158,279
Commitments and contingencies (Note 16)

Shareholders’ equity:
Preferred stock, par value $0.01: 0.1 shares authorized none issued or outstanding
Common stock, par value $0.01: 3,200 shares authorized 1,733 shares issued and 1,310
shares outstanding at December 31, 2020 and 1,727 shares issued and 1,302 shares
outstanding at December 31, 2019 and capital surplus 46,513 45,972
Treasury stock, at cost: 423 and 425 shares at December 31, 2020 and 2019 (28,178) (28,235)
Retained earnings 49,640 45,108
Accumulated other comprehensive income 1,414 1,019
Total CVS Health shareholders’ equity 69,389 63,864
Noncontrolling interests 312 306
Total shareholders’ equity 69,701 64,170
Total liabilities and shareholders’ equity $ 230,715 $ 222,449

See accompanying notes to consolidated financial statements.

103
 Consolidated Statements of Shareholders E uity
Attributable to CVS Health
Number of shares
outstanding Common Accumulated Total
Stock and Other CVS Health Total
Common Treasury Capital Treasury Retained Comprehensive Shareholders Noncontrolling Shareholders
I Shares Shares (1) Surplus (2) Stock (1) Earnings Income (Loss) E uity Interests E uity
Balance at December 31,
2017 1,712 (698) 32,096 (37,796) 43,556 (165) 37,691 4 37,695
Adoption of new accounting
standards (3) (6) (7) (13) (13)
Net loss (594) (594) (2) (596)
Other comprehensive
income (Note 13) 274 274 274
Common shares issued to
acquire Aetna 274 12,923 9,561 22,484 22,484
Stock option activity, stock
awards and other 8 421 421 421
Purchase of treasury shares,
net of ESPP issuances (1) 7 7 7
Common stock dividends (2,045) (2,045) (2,045)
Acquisition of
noncontrolling interests 329 329
Other decreases in
noncontrolling interests (13) (13)
Balance at December 31,
2018 1,720 (425) 45,440 (28,228) 40,911 102 58,225 318 58,543
Adoption of new accounting
standard (4) 178 178 178
Net income (loss) 6,634 6,634 (3) 6,631
Other comprehensive
income (Note 13) 917 917 917
Stock option activity, stock
awards and other 7 2 532 532 532
Purchase of treasury shares,
net of ESPP issuances (2) (7) (7) (7)
Common stock dividends (2,615) (2,615) (2,615)
Other decreases in
noncontrolling interests (9) (9)
Balance at December 31,
2019 1,727 (425) 45,972 (28,235) 45,108 1,019 63,864 306 64,170
Adoption of new accounting
standard (Note 1) (3) (3) (3)
Net income 7,179 7,179 13 7,192
Other comprehensive
income (Note 13) 395 395 395
Stock option activity, stock
awards and other 6 541 541 541
ESPP issuances, net of
purchase of treasury shares 2 57 57 57
Common stock dividends (2,644) (2,644) (2,644)
Other decreases in
noncontrolling interests (7) (7)
Balance at December 31,
2020 1,733 (423) 46,513 (28,178) 49,640 1,414 69,389 312 69,701

(1) Treasury shares include 1 million shares held in trust for each of the years ended December 31, 2020, 2019 and 2018. Treasury stock includes $29 million
related to shares held in trust for each of the years ended December 31, 2020, 2019 and 2018. See Note 1 Significant Accounting Policies’’ for additional
information.
(2) Common stock and capital surplus includes the par value of common stock of $17 million as of December 31, 2020, 2019 and 2018.
(3) Reflects the adoption of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which resulted in a reduction to
retained earnings of $13 million and the adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income, which resulted in a reduction to accumulated other comprehensive income of $7
million and an increase to retained earnings of $7 million, each during the year ended December 31, 2018.
(4) Reflects the adoption of ASU 2016-02, Leases (Topic 842), which resulted in an increase to retained earnings of $178 million during the year ended
December 31, 2019.
See accompanying notes to consolidated financial statements.

106