Date of Report (Date of earliest event reported): |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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. | ☐ |
99.1 | ||
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
CVS HEALTH CORPORATION | ||
Date: May 6, 2020 | By: | /s/ Eva C. Boratto |
Eva C. Boratto | ||
Executive Vice President and Chief Financial Officer | ||
Investor | Valerie Haertel | Media | T.J. Crawford |
Contact: | Senior Vice President | Contact: | Vice President |
Investor Relations | External Affairs | ||
(401) 770-4050 | (212) 457-0583 |
• | Support for employees, clients and communities across the country |
• | Testing thousands every day in collaboration with federal, state and local officials |
• | Consumer-driven health care model increases access to goods and services |
• | Total revenues increased 8.3% to $66.8 billion |
• | GAAP operating income increased 28.6% to $3.5 billion |
• | Adjusted operating income (1) increased 14.4% to $4.1 billion |
• | GAAP diluted earnings per share of $1.53 |
• | Adjusted EPS (2) of $1.91 |
• | Generated cash flow from operations of $3.3 billion |
• | GAAP diluted EPS guidance range of $5.47 to $5.60 and Adjusted EPS (2) guidance range of $7.04 to $7.17 remain unchanged |
• | Cash flow from operations guidance range of $10.5 billion to $11.0 billion remains unchanged |
• | Given the likelihood of significant variability in the impact of COVID-19 on the Company’s financial statement line items and related ratios, 2020 additional detailed guidance not noted above is withdrawn |
Three Months Ended March 31, | |||||||||||
In millions, except per share amounts | 2020 | 2019 | Change | ||||||||
Total revenues | $ | 66,755 | $ | 61,646 | $ | 5,109 | |||||
Operating income | 3,458 | 2,690 | 768 | ||||||||
Adjusted operating income (1) | 4,113 | 3,595 | 518 | ||||||||
Net income | 2,012 | 1,427 | 585 | ||||||||
Diluted earnings per share | $ | 1.53 | $ | 1.09 | $ | 0.44 | |||||
Adjusted EPS (2) | $ | 1.91 | $ | 1.62 | $ | 0.29 | |||||
Enterprise prescriptions (3) (4) | 699.2 | 679.8 | 19.4 |
• | Total revenues increased 8.3% for the three months ended March 31, 2020 compared to the prior year primarily driven by strong underlying core growth across all segments. Revenues in the Retail/LTC and Pharmacy Services segments in the three months ended March 31, 2020 also increased as a result of the COVID-19 pandemic, which resulted in greater use of 90-day prescriptions and early refills of maintenance medications, as well as increased front store volume in the Retail/LTC segment. |
• | Operating income increased 28.6% for the three months ended March 31, 2020 compared to the prior year primarily due to the increase in adjusted operating income described below, the absence of the $135 million store rationalization charge recorded in the three months ended March 31, 2019 and a decrease in acquisition-related integration costs of $79 million in the three months ended March 31, 2020 compared to the prior period. |
• | Adjusted operating income increased 14.4% for the three months ended March 31, 2020 compared to the prior year. The increase in adjusted operating income was primarily due to increased volume across all segments, improved purchasing economics in the Pharmacy Services segment and the favorable impact of cost savings initiatives. These increases were partially offset by a decline in operating income in the Health Care Benefits segment, continued reimbursement pressure in the Retail/LTC segment and continued price compression in the Pharmacy Services segment. The COVID-19 pandemic increased adjusted operating income in the three months ended March 31, 2020 due to increased volume in the Retail/LTC segment, as well as reduced benefit costs due to the deferral of elective procedures and other discretionary utilization in the Health Care Benefits segment, partially offset by lower net investment income. |
• | Net income increased 41.0% for the three months ended March 31, 2020 compared to the prior year primarily due to the higher operating income described above and lower interest expense primarily due to lower average debt in the three months ended March 31, 2020, partially offset by higher income tax expense associated with the increase in pre-tax income and the reinstatement of the non-deductible Health Insurer Fee (“HIF”) for 2020. |
• | The effective income tax rate was 27.6% for the three months ended March 31, 2020 compared to 26.4% for the three months ended March 31, 2019. The increase in the effective income tax rate was primarily due to the reinstatement of the non-deductible HIF for 2020. |
Three Months Ended March 31, | |||||||||||
In millions | 2020 | 2019 | Change | ||||||||
Total revenues | $ | 34,983 | $ | 33,558 | $ | 1,425 | |||||
Operating income | 1,114 | 850 | 264 | ||||||||
Adjusted operating income (1) | 1,181 | 947 | 234 | ||||||||
Total pharmacy claims processed (4) (5) | 541.4 | 481.8 | 59.6 | ||||||||
Pharmacy network (6) | 461.1 | 407.7 | 53.4 | ||||||||
Mail choice (7) | 80.3 | 74.1 | 6.2 |
• | Total revenues increased 4.2% for the three months ended March 31, 2020 compared to the prior year primarily due to growth in specialty pharmacy, brand inflation and increased total pharmacy claims volume, including greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic. The increase was partially offset by previously disclosed client losses, continued price compression and an increased generic dispensing rate. |
• | Total pharmacy claims processed increased 12.4% on a 30-day equivalent basis for the three months ended March 31, 2020 compared to the prior year primarily driven by increased claims under the Company’s agreement with IngenioRx, which began in the second quarter of 2019, and greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic. |
• | Operating income and adjusted operating income increased 31.1% and 24.7%, respectively, for the three months ended March 31, 2020 compared to the prior year primarily driven by growth in specialty pharmacy, improved purchasing economics and an increased generic dispensing rate, partially offset by previously disclosed client losses and continued price compression. The increase in operating income also was driven by lower amortization expense in the three months ended March 31, 2020. |
Three Months Ended March 31, | |||||||||||
In millions | 2020 | 2019 | Change | ||||||||
Total revenues | $ | 22,749 | $ | 21,115 | $ | 1,634 | |||||
Operating income | 1,780 | 1,238 | 542 | ||||||||
Adjusted operating income (1) | 1,902 | 1,489 | 413 | ||||||||
Prescriptions filled (4) (5) | 375.1 | 346.8 | 28.3 |
• | Total revenues increased 7.7% for the three months ended March 31, 2020 compared to the prior year primarily driven by increased prescription volume, higher front store revenues and brand inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate. Total revenues in the three months ended March 31, 2020 reflected the greater use of 90-day prescriptions, early refills of maintenance medications and increased front store volume as consumers prepared for the COVID-19 pandemic, as well as the impact of the additional day in 2020 due to the leap year. |
• | Front store revenues increased 8.5% in the three months ended March 31, 2020 compared to the prior year, including an 8.0% increase in same store sales. The growth was primarily due to strength in consumer health and general merchandise sales, which was primarily driven by COVID-19 related sales; the expansion of the CarePass® program; and the impact of the additional day in 2020 due to the leap year. |
• | Prescriptions filled grew 8.2% on a 30-day equivalent basis for the three months ended March 31, 2020 compared to the prior year, including a 9.8% increase in same store prescription volume. The growth was primarily driven by the continued adoption of patient care programs, greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for COVID-19, and the impact of the additional day in 2020 due to the leap year. |
• | Operating income and adjusted operating income increased 43.8% and 27.7%, respectively, for the three months ended March 31, 2020. The increase in both operating income and adjusted operating income was primarily due to the increased pharmacy and front store volume described above, improved generic drug purchasing, the impact of cost savings initiatives and the favorable resolution of certain legal matters in the three months ended March 31, 2020, partially offset by continued reimbursement pressure. The increase in operating income was also due to the absence of the $135 million store rationalization charge primarily related to operating lease right-of-use asset impairment charges in connection with the planned closure of underperforming retail pharmacy stores recorded in the three months ended March 31, 2019. |
Three Months Ended March 31, | |||||||||||
In millions, except percentages | 2020 | 2019 | Change | ||||||||
Total revenues | $ | 19,198 | $ | 17,870 | $ | 1,328 | |||||
Operating income | 1,095 | 1,155 | (60 | ) | |||||||
Adjusted operating income (1) | 1,491 | 1,562 | (71 | ) | |||||||
Medical benefit ratio (“MBR”) (8) | 82.4 | % | 84.0 | % | (1.6 | )% | |||||
Medical membership (9) | 23.5 | 22.8 | 0.7 |
• | Total revenues increased 7.4% for the three months ended March 31, 2020 compared to the prior year primarily driven by membership growth in the Health Care Benefits segment’s Government products and the favorable impact of the reinstatement of the HIF for 2020. These increases were partially offset by the absence of the financial results of Aetna’s standalone Medicare Part D prescription drug plans, which the Company retained through 2019, membership declines in the segment’s Commercial insured products, as well as a decline in net investment income due to lower interest rates and the capital markets volatility associated with the COVID-19 pandemic. |
• | Operating income and adjusted operating income decreased 5.2% and 4.5%, respectively, for the three months ended March 31, 2020, compared to the prior year. The decrease was primarily driven by membership declines in the segment’s Commercial insured products including the migration of Commercial customers from insured to ASC products, higher Medicaid benefit costs in certain states and incremental operating expenses to onboard additional Medicaid members. This decrease was partially offset by membership growth in the segment’s Government products and increased integration synergies. The COVID-19 pandemic had a modest impact on operating income and adjusted operating income in the three months ended March 31, 2020, as the reduction in benefit costs primarily related to the deferral of elective procedures and other discretionary utilization was largely offset by lower net investment income due to lower interest rates and the capital markets volatility associated with the COVID-19 pandemic. |
• | The Health Care Benefits segment’s MBR decreased 160 basis points for the three months ended March 31, 2020 compared to the prior year primarily due to the reinstatement of the HIF for 2020. |
• | Medical membership as of March 31, 2020 of 23.5 million increased compared with December 31, 2019, primarily reflecting increases in Medicare and Medicaid products, partially offset by a decline in Commercial insured products. |
• | The Health Care Benefits segment experienced favorable development of prior-years’ health care cost estimates in its Commercial and Government businesses during the three months ended March 31, 2020, primarily attributable to fourth quarter 2019 performance. |
• | Prior years’ health care costs payable estimates developed favorably by $464 million during the three months ended March 31, 2020. 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 2020 operating results. |
• | Within retail stores distributed personal protective equipment and installed protective panels at pharmacy counters and front store checkout stations |
• | Implemented social distancing practices and enhanced cleaning protocols |
• | Provided enhanced benefits including bonuses to frontline employees, extended paid sick leave to part-time employees and provided paid time off to employees who test positive for COVID-19 or are quarantined due to exposure |
• | Provided enhanced resources including dependent care support through employee assistance programs |
• | Waived copays for COVID-19 related diagnostic testing for all insured members |
• | For Commercial and Medicare Advantage members, waived out-of-pocket costs for COVID-19 related inpatient admissions and covered all telehealth visits with in-network providers through early June |
• | Extended maintenance prescriptions and waived early refill limits to support medication adherence |
• | Addressing mental and emotional health impacts through Aetna’s employee assistance program, Resources For Living ® |
• | Proactively reaching out to Aetna members most at risk for COVID-19 to inform them about protection measures, where to get information about the virus and where to get tested |
• | Through Aetna’s Healing Better program, members diagnosed with COVID-19 receive a care package to support the healing process |
• | CVS Pharmacy waived fees associated with home delivery for prescriptions and accompanying front store products |
• | Enabled Aetna-contracted healthcare providers to focus on patient care by streamlining processes, including: |
◦ | Changed prior authorization requirements for post-acute hospitals and long-term acute hospitals nationally to help hospitals make room for more patients |
◦ | Streamlined provider credentialing process so there can be more health care professionals caring for patients |
◦ | Committed to timely and accurate payment of claims, and |
◦ | Enhanced telemedicine policies to enable more providers to visit patients virtually |
• | Opened large-scale COVID-19 testing sites across five states in collaboration with federal, state and local officials |
• | Establishing additional testing sites; targeting up to 1,000 locations across the country by the end of May |
• | In partnership with hospitals and providers, expanded Coram infusion services to help transition eligible IV-therapy patients to home-based care, freeing up hospital capacity |
• | Well positioned to provide medication therapies and vaccines, when available, at our retail pharmacy locations nationwide |
• | Investing nearly $50 million through our Company and foundations to support key priorities, including addressing food insecurity among vulnerable populations, access to telehealth for the underserved, personal protective equipment and mental health support for front-line workers and investments in community resilience funds |
Three Months Ended March 31, | |||||||
In millions, except per share amounts | 2020 | 2019 | |||||
Revenues: | |||||||
Products | $ | 47,003 | $ | 43,343 | |||
Premiums | 17,640 | 16,282 | |||||
Services | 1,950 | 1,772 | |||||
Net investment income | 162 | 249 | |||||
Total revenues | 66,755 | 61,646 | |||||
Operating costs: | |||||||
Cost of products sold | 40,347 | 37,247 | |||||
Benefit costs | 14,387 | 13,459 | |||||
Operating expenses | 8,563 | 8,250 | |||||
Total operating costs | 63,297 | 58,956 | |||||
Operating income | 3,458 | 2,690 | |||||
Interest expense | 733 | 782 | |||||
Other income | (54 | ) | (31 | ) | |||
Income before income tax provision | 2,779 | 1,939 | |||||
Income tax provision | 767 | 512 | |||||
Net income | 2,012 | 1,427 | |||||
Net income attributable to noncontrolling interests | (5 | ) | (6 | ) | |||
Net income attributable to CVS Health | $ | 2,007 | $ | 1,421 | |||
Net income per share attributable to CVS Health: | |||||||
Basic | $ | 1.54 | $ | 1.09 | |||
Diluted | $ | 1.53 | $ | 1.09 | |||
Weighted average shares outstanding: | |||||||
Basic | 1,306 | 1,298 | |||||
Diluted | 1,312 | 1,302 | |||||
Dividends declared per share | $ | 0.50 | $ | 0.50 |
In millions | March 31, 2020 | December 31, 2019 | |||||
Assets: | |||||||
Cash and cash equivalents | $ | 10,081 | $ | 5,683 | |||
Investments | 2,632 | 2,373 | |||||
Accounts receivable, net | 23,037 | 19,617 | |||||
Inventories | 16,976 | 17,516 | |||||
Other current assets | 6,232 | 5,113 | |||||
Total current assets | 58,958 | 50,302 | |||||
Long-term investments | 16,840 | 17,314 | |||||
Property and equipment, net | 12,146 | 12,044 | |||||
Operating lease right-of-use assets | 20,672 | 20,860 | |||||
Goodwill | 79,993 | 79,749 | |||||
Intangible assets, net | 32,727 | 33,121 | |||||
Separate accounts assets | 4,555 | 4,459 | |||||
Other assets | 4,748 | 4,600 | |||||
Total assets | $ | 230,639 | $ | 222,449 | |||
Liabilities: | |||||||
Accounts payable | $ | 10,223 | $ | 10,492 | |||
Pharmacy claims and discounts payable | 15,449 | 13,601 | |||||
Health care costs payable | 7,585 | 6,879 | |||||
Policyholders’ funds | 3,110 | 2,991 | |||||
Accrued expenses | 13,574 | 12,133 | |||||
Other insurance liabilities | 1,774 | 1,830 | |||||
Current portion of operating lease liabilities | 1,762 | 1,596 | |||||
Short-term debt | 255 | — | |||||
Current portion of long-term debt | 5,828 | 3,781 | |||||
Total current liabilities | 59,560 | 53,303 | |||||
Long-term operating lease liabilities | 18,739 | 18,926 | |||||
Long-term debt | 65,735 | 64,699 | |||||
Deferred income taxes | 7,121 | 7,294 | |||||
Separate accounts liabilities | 4,555 | 4,459 | |||||
Other long-term insurance liabilities | 7,338 | 7,436 | |||||
Other long-term liabilities | 2,117 | 2,162 | |||||
Total liabilities | 165,165 | 158,279 | |||||
Shareholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock and capital surplus | 46,180 | 45,972 | |||||
Treasury stock | (28,182 | ) | (28,235 | ) | |||
Retained earnings | 46,455 | 45,108 | |||||
Accumulated other comprehensive income | 687 | 1,019 | |||||
Total CVS Health shareholders’ equity | 65,140 | 63,864 | |||||
Noncontrolling interests | 334 | 306 | |||||
Total shareholders’ equity | 65,474 | 64,170 | |||||
Total liabilities and shareholders’ equity | $ | 230,639 | $ | 222,449 |
Three Months Ended March 31, | |||||||
In millions | 2020 | 2019 | |||||
Cash flows from operating activities: | |||||||
Cash receipts from customers | $ | 63,751 | $ | 58,873 | |||
Cash paid for inventory and prescriptions dispensed by retail network pharmacies | (36,969 | ) | (35,645 | ) | |||
Insurance benefits paid | (14,303 | ) | (12,951 | ) | |||
Cash paid to other suppliers and employees | (8,187 | ) | (7,403 | ) | |||
Interest and investment income received | 206 | 250 | |||||
Interest paid | (1,128 | ) | (1,123 | ) | |||
Income taxes paid | (65 | ) | (53 | ) | |||
Net cash provided by operating activities | 3,305 | 1,948 | |||||
Cash flows from investing activities: | |||||||
Proceeds from sales and maturities of investments | 1,288 | 1,986 | |||||
Purchases of investments | (1,535 | ) | (2,047 | ) | |||
Purchases of property and equipment | (742 | ) | (716 | ) | |||
Acquisitions (net of cash acquired) | (613 | ) | (124 | ) | |||
Other | 5 | 10 | |||||
Net cash used in investing activities | (1,597 | ) | (891 | ) | |||
Cash flows from financing activities: | |||||||
Net borrowings of short-term debt | 255 | 2,285 | |||||
Proceeds from issuance of long-term debt | 3,946 | — | |||||
Repayments of long-term debt | (1,008 | ) | (882 | ) | |||
Dividends paid | (652 | ) | (649 | ) | |||
Proceeds from exercise of stock options | 154 | 101 | |||||
Payments for taxes related to net share settlement of equity awards | (16 | ) | (44 | ) | |||
Other | (4 | ) | 5 | ||||
Net cash provided by financing activities | 2,675 | 816 | |||||
Net increase in cash, cash equivalents and restricted cash | 4,383 | 1,873 | |||||
Cash, cash equivalents and restricted cash at the beginning of the period | 5,954 | 4,295 | |||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 10,337 | $ | 6,168 |
Three Months Ended March 31, | |||||||
In millions | 2020 | 2019 | |||||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 2,012 | $ | 1,427 | |||
Adjustments required to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 1,086 | 1,111 | |||||
Stock-based compensation | 96 | 114 | |||||
Deferred income taxes and other noncash items | (35 | ) | 153 | ||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||
Accounts receivable, net | (2,715 | ) | (1,989 | ) | |||
Inventories | 541 | 1,001 | |||||
Other assets | (1,119 | ) | (389 | ) | |||
Accounts payable and pharmacy claims and discounts payable | 1,928 | (22 | ) | ||||
Health care costs payable and other insurance liabilities | 139 | 553 | |||||
Other liabilities | 1,372 | (11 | ) | ||||
Net cash provided by operating activities | $ | 3,305 | $ | 1,948 |
• | 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 unaudited GAAP condensed 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. |
• | During the three months ended March 31, 2020 and 2019, acquisition-related integration costs relate to the Aetna Acquisition. The acquisition-related integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Corporate/Other segment. |
• | During the three months ended March 31, 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 statement of operations in operating expenses within the Retail/LTC segment. |
• | The corresponding tax benefit or expense related to the items excluded from adjusted income 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. |
Three Months Ended March 31, 2020 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Operating income (loss) (GAAP measure) | $ | 1,114 | $ | 1,780 | $ | 1,095 | $ | (355 | ) | $ | (176 | ) | $ | 3,458 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets | 67 | 122 | 396 | 1 | — | 586 | |||||||||||||||||
Acquisition-related integration costs | — | — | — | 69 | — | 69 | |||||||||||||||||
Adjusted operating income (loss) (1) | $ | 1,181 | $ | 1,902 | $ | 1,491 | $ | (285 | ) | $ | (176 | ) | $ | 4,113 |
Three Months Ended March 31, 2019 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Operating income (loss) (GAAP measure) | $ | 850 | $ | 1,238 | $ | 1,155 | $ | (381 | ) | $ | (172 | ) | $ | 2,690 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets | 97 | 116 | 407 | 2 | — | 622 | |||||||||||||||||
Acquisition-related integration costs | — | — | — | 148 | — | 148 | |||||||||||||||||
Store rationalization charge | — | 135 | — | — | — | 135 | |||||||||||||||||
Adjusted operating income (loss) (1) | $ | 947 | $ | 1,489 | $ | 1,562 | $ | (231 | ) | $ | (172 | ) | $ | 3,595 |
Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | ||||||||||||||
In millions, except per share amounts | Total Company | Per Common Share | Total Company | Per Common Share | |||||||||||
Net income (GAAP measure) | $ | 2,012 | $ | 1,427 | |||||||||||
Net income attributable to noncontrolling interests (GAAP measure) | (5 | ) | (6 | ) | |||||||||||
Income allocable to participating securities (GAAP measure) | — | (2 | ) | ||||||||||||
Net income attributable to CVS Health (GAAP measure) | 2,007 | $ | 1.53 | 1,419 | $ | 1.09 | |||||||||
Non-GAAP adjustments: | |||||||||||||||
Amortization of intangible assets | 586 | 0.45 | 622 | 0.48 | |||||||||||
Acquisition-related integration costs | 69 | 0.05 | 148 | 0.11 | |||||||||||
Store rationalization charge | — | — | 135 | 0.10 | |||||||||||
Income tax benefit | (160 | ) | (0.12 | ) | (219 | ) | (0.16 | ) | |||||||
Adjusted income attributable to CVS Health (2) | $ | 2,502 | $ | 1.91 | $ | 2,105 | $ | 1.62 | |||||||
Weighted average diluted shares outstanding | 1,312 | 1,302 |
In millions | Pharmacy Services (a) | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations (b) | Consolidated Totals | |||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
March 31, 2020 | |||||||||||||||||||||||
Total revenues | $ | 34,983 | $ | 22,749 | $ | 19,198 | $ | 90 | $ | (10,265 | ) | $ | 66,755 | ||||||||||
Operating income (loss) | 1,114 | 1,780 | 1,095 | (355 | ) | (176 | ) | 3,458 | |||||||||||||||
Adjusted operating income (loss) (1) | 1,181 | 1,902 | 1,491 | (285 | ) | (176 | ) | 4,113 | |||||||||||||||
March 31, 2019 | |||||||||||||||||||||||
Total revenues | 33,558 | 21,115 | 17,870 | 110 | (11,007 | ) | 61,646 | ||||||||||||||||
Operating income (loss) | 850 | 1,238 | 1,155 | (381 | ) | (172 | ) | 2,690 | |||||||||||||||
Adjusted operating income (loss) (1) | 947 | 1,489 | 1,562 | (231 | ) | (172 | ) | 3,595 |
(a) | Total revenues of the Pharmacy Services segment include approximately $3.4 billion and $3.3 billion of retail co-payments for the three months ended March 31, 2020 and 2019, respectively. |
(b) | 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. |
Three Months Ended March 31, | Change | |||||||||||||
In millions, except percentages | 2020 | 2019 | $ | % | ||||||||||
Revenues: | ||||||||||||||
Products | $ | 34,746 | $ | 33,450 | $ | 1,296 | 3.9 | % | ||||||
Services | 237 | 108 | 129 | 119.4 | % | |||||||||
Total revenues | 34,983 | 33,558 | 1,425 | 4.2 | % | |||||||||
Cost of products sold | 33,503 | 32,339 | 1,164 | 3.6 | % | |||||||||
Operating expenses | 366 | 369 | (3 | ) | (0.8 | )% | ||||||||
Operating expenses as a % of total revenues | 1.0 | % | 1.1 | % | ||||||||||
Operating income | $ | 1,114 | $ | 850 | $ | 264 | 31.1 | % | ||||||
Operating income as a % of total revenues | 3.2 | % | 2.5 | % | ||||||||||
Adjusted operating income (1) | $ | 1,181 | $ | 947 | $ | 234 | 24.7 | % | ||||||
Adjusted operating income as a % of total revenues | 3.4 | % | 2.8 | % | ||||||||||
Revenues (by distribution channel): | ||||||||||||||
Pharmacy network (6) (13) | $ | 21,100 | $ | 21,532 | $ | (432 | ) | (2.0 | )% | |||||
Mail choice (7) (13) | 13,674 | 11,881 | 1,793 | 15.1 | % | |||||||||
Other | 209 | 145 | 64 | 44.1 | % | |||||||||
Pharmacy claims processed: (4) (5) | ||||||||||||||
Total | 541.4 | 481.8 | 59.6 | 12.4 | % | |||||||||
Pharmacy network (6) | 461.1 | 407.7 | 53.4 | 13.1 | % | |||||||||
Mail choice (7) | 80.3 | 74.1 | 6.2 | 8.4 | % | |||||||||
Generic dispensing rate: (4) (10) | ||||||||||||||
Total | 89.0 | % | 88.3 | % | ||||||||||
Pharmacy network (6) | 89.5 | % | 88.9 | % | ||||||||||
Mail choice (7) | 85.7 | % | 84.8 | % |
Three Months Ended March 31, | Change | |||||||||||||
In millions, except percentages | 2020 | 2019 | $ | % | ||||||||||
Revenues: | ||||||||||||||
Products | $ | 22,522 | $ | 20,900 | $ | 1,622 | 7.8 | % | ||||||
Services | 227 | 215 | 12 | 5.6 | % | |||||||||
Total revenues | 22,749 | 21,115 | 1,634 | 7.7 | % | |||||||||
Cost of products sold | 16,578 | 15,297 | 1,281 | 8.4 | % | |||||||||
Operating expenses | 4,391 | 4,580 | (189 | ) | (4.1 | )% | ||||||||
Operating expenses as a % of total revenues | 19.3 | % | 21.7 | % | ||||||||||
Operating income | $ | 1,780 | $ | 1,238 | $ | 542 | 43.8 | % | ||||||
Operating income as a % of total revenues | 7.8 | % | 5.9 | % | ||||||||||
Adjusted operating income (1) | $ | 1,902 | $ | 1,489 | $ | 413 | 27.7 | % | ||||||
Adjusted operating income as a % of total revenues | 8.4 | % | 7.1 | % | ||||||||||
Revenues (by major goods/service lines): | ||||||||||||||
Pharmacy | $ | 17,355 | $ | 16,118 | $ | 1,237 | 7.7 | % | ||||||
Front Store | 5,208 | 4,799 | 409 | 8.5 | % | |||||||||
Other | 186 | 198 | (12 | ) | (6.1 | )% | ||||||||
Prescriptions filled (4) (5) | 375.1 | 346.8 | 28.3 | 8.2 | % | |||||||||
Same store sales increase: (11) | ||||||||||||||
Total | 9.0 | % | 3.8 | % | ||||||||||
Pharmacy | 9.3 | % | 4.9 | % | ||||||||||
Front Store | 8.0 | % | 0.4 | % | ||||||||||
Prescription volume (4) | 9.8 | % | 6.7 | % | ||||||||||
Generic dispensing rate (4) (10) | 89.3 | % | 88.7 | % |
Three Months Ended March 31, | Change | |||||||||||||
In millions, except percentages and basis points (“bps”) | 2020 | 2019 | $ | % | ||||||||||
Revenues: | ||||||||||||||
Premiums | $ | 17,621 | $ | 16,259 | $ | 1,362 | 8.4 | % | ||||||
Services | 1,484 | 1,447 | 37 | 2.6 | % | |||||||||
Net investment income | 93 | 164 | (71 | ) | (43.3 | )% | ||||||||
Total revenues | 19,198 | 17,870 | 1,328 | 7.4 | % | |||||||||
Benefit costs | 14,516 | 13,655 | 861 | 6.3 | % | |||||||||
MBR (Benefit costs as a % of premium revenues) (8) | 82.4 | % | 84.0 | % | (160) | bps | ||||||||
Operating expenses | $ | 3,587 | $ | 3,060 | $ | 527 | 17.2 | % | ||||||
Operating expenses as a % of total revenues | 18.7 | % | 17.1 | % | ||||||||||
Operating income | $ | 1,095 | $ | 1,155 | $ | (60 | ) | (5.2 | )% | |||||
Operating income as a % of total revenues | 5.7 | % | 6.5 | % | ||||||||||
Adjusted operating income (1) | $ | 1,491 | $ | 1,562 | $ | (71 | ) | (4.5 | )% | |||||
Adjusted operating income as a % of total revenues | 7.8 | % | 8.7 | % |
March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||||||||||||||||
In thousands | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | |||||||||||||||||
Medical membership: (9) | ||||||||||||||||||||||||||
Commercial | 3,372 | 14,206 | 17,578 | 3,591 | 14,159 | 17,750 | 3,611 | 14,302 | 17,913 | |||||||||||||||||
Medicare Advantage | 2,584 | — | 2,584 | 2,321 | — | 2,321 | 2,231 | — | 2,231 | |||||||||||||||||
Medicare Supplement | 913 | — | 913 | 881 | — | 881 | 804 | — | 804 | |||||||||||||||||
Medicaid | 1,835 | 552 | 2,387 | 1,398 | 558 | 1,956 | 1,315 | 571 | 1,886 | |||||||||||||||||
Total medical membership | 8,704 | 14,758 | 23,462 | 8,191 | 14,717 | 22,908 | 7,961 | 14,873 | 22,834 | |||||||||||||||||
Supplemental membership information: | ||||||||||||||||||||||||||
Medicare Prescription Drug Plan (standalone) (a) | 5,624 | 5,994 | 6,044 |
(a) | Represents the Company’s SilverScript PDP membership only. Excludes 2.5 million and 2.4 million members as of December 31, 2019 and March 31, 2019, respectively, related to Aetna’s standalone PDPs that were sold effective December 31, 2018. The Company retained the financial results of the divested plans through 2019 through a reinsurance agreement. Subsequent to 2019, the Company no longer retains the financial results of the divested plans. |
Three Months Ended March 31, | |||||||
In millions | 2020 | 2019 | |||||
Health care costs payable, beginning of period | $ | 6,879 | $ | 6,147 | |||
Less: Reinsurance recoverables | 5 | 4 | |||||
Health care costs payable, beginning of period, net | 6,874 | 6,143 | |||||
Acquisition | 412 | — | |||||
Add: Components of incurred health care costs | |||||||
Current year | 14,764 | 13,804 | |||||
Prior years (a) | (464 | ) | (446 | ) | |||
Total incurred health care costs (b) | 14,300 | 13,358 | |||||
Less: Claims paid | |||||||
Current year | 8,773 | 8,004 | |||||
Prior years | 5,242 | 4,812 | |||||
Total claims paid | 14,015 | 12,816 | |||||
Add: Premium deficiency reserve | 10 | 11 | |||||
Health care costs payable, end of period, net | 7,581 | 6,696 | |||||
Add: Reinsurance recoverables | 4 | 5 | |||||
Health care costs payable, end of period | $ | 7,585 | $ | 6,701 |
(a) | Negative amounts reported for incurred health care costs related to prior years result from claims being settled for amounts less than originally estimated. |
(b) | Total incurred health care costs for the three months ended March 31, 2020 and 2019 in the table above exclude (i) $10 million and $11 million, respectively, related to a premium deficiency reserve related to the Company’s Medicaid products, (ii) $9 million and $10 million, respectively, of benefit costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets and (iii) $68 million and $80 million, respectively, of benefit costs recorded in the Corporate/Other segment that are included in other insurance liabilities on the Company’s unaudited condensed consolidated balance sheets. |
March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||
Days Claims Payable (12) | 48 | 48 | 45 |
Three Months Ended March 31, | Change | |||||||||||||
In millions, except percentages | 2020 | 2019 | $ | % | ||||||||||
Revenues: | ||||||||||||||
Premiums | $ | 19 | $ | 23 | $ | (4 | ) | (17.4 | )% | |||||
Services | 2 | 2 | — | — | % | |||||||||
Net investment income | 69 | 85 | (16 | ) | (18.8 | )% | ||||||||
Total revenues | 90 | 110 | (20 | ) | (18.2 | )% | ||||||||
Benefit costs | 68 | 79 | (11 | ) | (13.9 | )% | ||||||||
Operating expenses | 377 | 412 | (35 | ) | (8.5 | )% | ||||||||
Operating loss | (355 | ) | (381 | ) | 26 | 6.8 | % | |||||||
Adjusted operating loss (1) | (285 | ) | (231 | ) | (54 | ) | (23.4 | )% |
Year Ending December 31, 2020 | |||||||||||||||
Low | High | ||||||||||||||
In millions, except per share amounts | Total Company | Per Common Share | Total Company | Per Common Share | |||||||||||
Net income (GAAP measure) | $ | 7,210 | $ | 7,385 | |||||||||||
Net loss attributable to noncontrolling interests (GAAP measure) | 5 | 5 | |||||||||||||
Net income attributable to CVS Health (GAAP measure) | 7,215 | $ | 5.47 | 7,390 | $ | 5.60 | |||||||||
Non-GAAP adjustments: | |||||||||||||||
Amortization of intangible assets | 2,320 | 1.76 | 2,320 | 1.76 | |||||||||||
Acquisition-related integration costs | 450 | 0.34 | 450 | 0.34 | |||||||||||
Income tax benefit | (690 | ) | (0.53 | ) | (690 | ) | (0.53 | ) | |||||||
Adjusted income attributable to CVS Health (2) | $ | 9,295 | $ | 7.04 | $ | 9,470 | $ | 7.17 | |||||||
Weighted average diluted shares outstanding | 1,320 | 1,320 |
Cover Page |
May 06, 2020 |
---|---|
Cover page. | |
Document Type | 8-K |
Document Period End Date | May 06, 2020 |
Entity Registrant Name | CVS HEALTH CORP |
Entity Central Index Key | 0000064803 |
Amendment Flag | false |
Entity Incorporation, State or Country Code | DE |
Entity File Number | 001-01011 |
Entity Tax Identification Number | 05-0494040 |
Entity Address, Address Line One | One CVS Drive |
Entity Address, City or Town | Woonsocket |
Entity Address, State or Province | RI |
Entity Address, Postal Zip Code | 02895 |
City Area Code | 401 |
Local Phone Number | 765-1500 |
Written Communications | false |
Soliciting Material | false |
Pre-commencement Tender Offer | false |
Pre-commencement Issuer Tender Offer | false |
Title of 12(b) Security | Common Stock, par value $0.01 per share |
Trading Symbol | CVS |
Security Exchange Name | NYSE |
Entity Emerging Growth Company | false |
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