First Quarter Highlights
- Total revenues increased to $88.4
billion, up 3.7% compared to prior year
- GAAP diluted EPS of $0.88 and
Adjusted EPS of $1.31
- Generated cash flow from operations of $4.9 billion
2024 Full-Year Guidance
- Revised GAAP diluted EPS guidance to at least $5.64 from at least $7.06
- Revised Adjusted EPS guidance to at least $7.00 from at least $8.30
- Revised cash flow from operations guidance to at least
$10.5 billion from at least
$12.0 billion
CEO Commentary
"The current environment does not
diminish our opportunities, enthusiasm, or the long-term earnings
power of our company. We are confident we have a pathway to address
our near-term Medicare Advantage challenges. We remain committed to
our strategy and believe that we have the right assets in place to
deliver value to our customers, members, patients, and
shareholders." -Karen S. Lynch,
CVS Health President and CEO
WOONSOCKET, R.I., May 1, 2024
/PRNewswire/ -- CVS Health Corporation (NYSE: CVS) today announced
operating results for the three months ended March 31, 2024.
|
Financial Results
Summary
|
|
Three Months
Ended
March
31,
|
|
In millions, except per share amounts
|
2024
|
|
2023
|
|
Change
|
|
Total
revenues
|
$
88,437
|
|
$
85,278
|
|
$
3,159
|
|
Operating
income
|
2,271
|
|
3,446
|
|
(1,175)
|
|
Adjusted operating
income (1)
|
2,957
|
|
4,370
|
|
(1,413)
|
|
Diluted earnings per
share
|
$
0.88
|
|
$
1.65
|
|
$
(0.77)
|
|
Adjusted EPS
(2)
|
$
1.31
|
|
$
2.20
|
|
$
(0.89)
|
First quarter revenues of $88.4
billion increased by 3.7% compared to the prior year,
reflecting strong growth in the Health Care Benefits and Pharmacy
& Consumer Wellness segments, partially offset by a decline in
our Health Services segment.
First quarter GAAP diluted EPS of $0.88 decreased from $1.65 in the prior year and Adjusted EPS of
$1.31 decreased from $2.20 in the prior year, primarily due to a
decline in the Health Care Benefits segment's operating results,
reflecting utilization pressure in the Company's Medicare
business.
Recognizing the potential for continued elevated medical cost
trends in the remainder of 2024, the Company revised its full-year
2024 GAAP diluted EPS, Adjusted EPS and cash flow from operations
guidance to reflect the assumption that the majority of this
pressure will persist throughout 2024.
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" beginning on page 11 and
endnotes beginning on page 22 for explanations of non-GAAP
financial measures presented in this press release. See pages
13 through 14 and page 21 for reconciliations of
each non-GAAP financial measure used in this release to the most
directly comparable GAAP financial measure.
|
Consolidated first
quarter results
|
|
|
Three Months
Ended
March
31,
|
|
In millions, except per share amounts
|
|
2024
|
|
2023
|
|
Change
|
|
Total
revenues
|
|
$
88,437
|
|
$
85,278
|
|
$
3,159
|
|
Operating
income
|
|
2,271
|
|
3,446
|
|
(1,175)
|
|
Adjusted operating
income (1)
|
|
2,957
|
|
4,370
|
|
(1,413)
|
|
Net income
|
|
1,124
|
|
2,142
|
|
(1,018)
|
|
Diluted earnings per
share
|
|
$ 0.88
|
|
$ 1.65
|
|
$ (0.77)
|
|
Adjusted EPS
(2)
|
|
$ 1.31
|
|
$ 2.20
|
|
$ (0.89)
|
For the three months ended March 31,
2024 compared to the prior year:
- Total revenues increased 3.7% primarily driven by growth in the
Health Care Benefits and Pharmacy & Consumer Wellness segments,
partially offset by a decline in the Health Services segment.
- Operating income decreased 34.1% primarily due to the decrease
in adjusted operating income described below, partially offset by
the absence of a $349 million loss on
assets held for sale related to the write-down of the Company's
Omnicare® long-term care business ("LTC business")
recorded in the prior year.
- Adjusted operating income decreased 32.3% primarily driven by
declines in the Health Care Benefits and Health Services segments,
partially offset by an increase in the Pharmacy & Consumer
Wellness segment. See pages 3 through 5 for additional discussion
of the adjusted operating income performance of the Company's
segments.
- Interest expense increased $127
million, or 21.6%, due to higher debt in the three months
ended March 31, 2024, primarily
driven by long-term debt issued in February and June of 2023 to
fund the Company's acquisitions of Signify Health, Inc. ("Signify
Health") and Oak Street Health, Inc. ("Oak Street Health").
- The effective income tax rate increased to 28.9% compared to
25.6% primarily due to the impact of certain discrete tax items and
their proportion to lower pre-tax income recorded during the three
months ended March 31, 2024.
Health Care Benefits segment
The Health Care Benefits segment offers a full range of insured
and self-insured ("ASC") medical, pharmacy, dental and behavioral
health products and services. The segment results for the three
months ended March 31, 2024 and 2023 were as follows:
|
|
Three Months
Ended
March
31,
|
|
In millions,
except percentages
|
|
2024
|
|
2023
|
|
Change
|
|
Total
revenues
|
|
$
32,236
|
|
$
25,877
|
|
$
6,359
|
|
Adjusted operating
income (1)
|
|
732
|
|
1,824
|
|
(1,092)
|
|
Medical benefit ratio
("MBR") (3)
|
|
90.4 %
|
|
84.6 %
|
|
5.8 %
|
|
Medical membership
(4)
|
|
26.8
|
|
25.5
|
|
1.3
|
- Total revenues increased 24.6% for the three months ended
March 31, 2024 compared to the prior
year driven by growth in the Medicare and Commercial product
lines.
- Adjusted operating income decreased 59.9% for the three months
ended March 31, 2024 compared to the
prior year primarily driven by increased Medicare utilization, the
unfavorable impact of the previously disclosed decline in the
Company's 2024 Medicare Advantage star ratings, as well as an
unfavorable year-over-year impact of prior-year development. These
decreases were partially offset by increased volume due to growth
in the Medicare and Commercial product lines, an increase in net
investment income and improved fixed cost leverage across the
business due to membership growth.
- The MBR increased to 90.4% in the three months ended
March 31, 2024 compared to 84.6% in
the prior year driven by increased Medicare utilization, the
unfavorable impact of the Company's 2024 Medicare Advantage star
ratings, the unfavorable year-over-year impact of prior-year
development, as well as the impact of an additional day in 2024 due
to the leap year.
- Medical membership as of March 31,
2024 of 26.8 million increased 1.1 million members compared
with December 31, 2023, reflecting
increases in the Medicare and Commercial product lines, including
an increase of 493,000 members related to the individual exchange
business within the Commercial product line. These increases were
partially offset by a decline in the Medicaid product line.
- Prior years' health care costs payable estimates developed
favorably by $473 million during the
three months ended March 31, 2024.
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 2024 operating results.
- Days claims payable were 44.5 days as of March 31, 2024, a decrease of 1.4 days compared
to December 31, 2023. The decrease
was primarily driven by the impact of membership growth, higher
pharmacy trends, as well as the number of days in each
quarter.
See the supplemental information on page 16 for additional
information regarding the performance of the Health Care Benefits
segment.
Health Services segment
The Health Services segment provides a full range of pharmacy
benefit management ("PBM") solutions, delivers health care services
in its medical clinics, virtually, and in the home, and offers
provider enablement solutions. The segment results for the three
months ended March 31, 2024 and 2023 were as follows:
|
|
Three Months
Ended
March
31,
|
|
In millions
|
|
2024
|
|
2023
|
|
Change
|
|
Total
revenues
|
|
$
40,285
|
|
$
44,591
|
|
$
(4,306)
|
|
Adjusted operating
income (1)
|
|
1,363
|
|
1,680
|
|
(317)
|
|
Pharmacy claims
processed (5) (6)
|
|
462.9
|
|
587.3
|
|
(124.4)
|
- Total revenues decreased 9.7% for the three months ended
March 31, 2024 compared to the prior
year primarily driven by the previously announced loss of a large
client during the three months ended March
31, 2024 and continued pharmacy client price improvements.
These decreases were partially offset by pharmacy drug mix, growth
in specialty pharmacy and the acquisitions of Oak Street Health and
Signify Health.
- Adjusted operating income decreased 18.9% for the three months
ended March 31, 2024 compared to the
prior year primarily driven by continued pharmacy client price
improvements, lower contributions from 340B, the previously announced loss of a large
client during the three months ended March
31, 2024 and the inclusion of the Oak Street Health
operating results in the three months ended March 31, 2024. These decreases were partially
offset by improved purchasing economics, including increased
contributions from the products and services of the Company's group
purchasing organization, as well as contributions from Signify
Health in the three months ended March 31,
2024.
- Pharmacy claims processed decreased 21.2% on a 30-day
equivalent basis for the three months ended March 31, 2024 compared to the prior year,
reflecting the previously announced loss of a large client during
the three months ended March 31,
2024.
See the supplemental information on page 17 for additional
information regarding the performance of the Health Services
segment.
Pharmacy & Consumer Wellness segment
The Pharmacy & Consumer Wellness segment dispenses
prescriptions in its retail pharmacies and through its infusion
operations, provides ancillary pharmacy services including pharmacy
patient care programs, diagnostic testing and vaccination
administration, and sells a wide assortment of health and wellness
products and general merchandise. The segment also provides
pharmacy services to long-term care facilities and pharmacy
fulfillment services to support the Health Services segment's
specialty and mail order pharmacy offerings. The segment results
for the three months ended March 31, 2024 and 2023 were as
follows:
|
|
Three Months
Ended
March
31,
|
|
In millions
|
|
2024
|
|
2023
|
|
Change
|
|
Total
revenues
|
|
$
28,725
|
|
$
27,922
|
|
$ 803
|
|
Adjusted operating
income (1)
|
|
1,177
|
|
1,134
|
|
43
|
|
Prescriptions filled
(5) (6)
|
|
417.6
|
|
404.8
|
|
12.8
|
- Total revenues increased 2.9% for the three months ended
March 31, 2024 compared to the prior
year primarily driven by increased prescription volume, including
increased contributions from vaccinations, as well as pharmacy drug
mix. These increases were partially offset by the impact of recent
generic introductions, continued pharmacy reimbursement pressure
and decreased front store volume, reflecting the impact of a
decrease in store count and lower contributions from coronavirus
disease 2019 ("COVID-19") over-the-counter test kits.
- Adjusted operating income increased 3.8% for the three months
ended March 31, 2024, compared to the
prior year primarily driven by increased prescription volume,
including increased contributions from vaccinations, improved drug
purchasing and decreased operating expenses, including the
favorable impact of the decrease in store count, during the three
months ended March 31, 2024. These
increases were partially offset by continued pharmacy reimbursement
pressure.
- Prescriptions filled increased 3.2% on a 30-day equivalent
basis for the three months ended March 31,
2024 compared to the prior year primarily driven by
increased utilization.
See the supplemental information on page 18 for additional
information regarding the performance of the Pharmacy &
Consumer Wellness segment.
2024 Full-year guidance
The Company revised its full-year 2024 GAAP diluted EPS guidance
to at least $5.64 from at least
$7.06 and its full-year 2024 Adjusted
EPS guidance to at least $7.00 from
at least $8.30. The Company also
revised its full-year 2024 cash flow from operations guidance to at
least $10.5 billion from at least
$12.0 billion.
The Company's guidance revision reflects the assumption that the
majority of utilization pressure observed in the Health Care
Benefits segment during the first quarter will persist throughout
2024. Additional details of the guidance revision can be found in
the Q1 2024 Earnings Presentation that can be found on the Investor
Relations section of the CVS Health website at
http://investors.cvshealth.com.
The adjustments between full-year 2024 GAAP diluted EPS and
Adjusted EPS include amortization of intangible assets, net
realized capital losses, acquisition-related integration costs,
opioid litigation charges and the corresponding income tax benefit
or expense related to the items excluded from adjusted income
attributable to CVS Health.
Teleconference and webcast
The Company will be holding a conference call today for
investors at 8:00 a.m. (Eastern Time)
to discuss its first 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 CVS Health
CVS Health is the leading health solutions company, delivering
care like no one else can. We reach more people and improve the
health of communities across America through our local presence,
digital channels and over 300,000 dedicated colleagues – including
more than 40,000 physicians, pharmacists, nurses and nurse
practitioners. Wherever and whenever people need us, we help them
with their health – whether that's managing chronic diseases,
staying compliant with their medications or accessing affordable
health and wellness services in the most convenient ways. We help
people navigate the health care system – and their personal health
care – by improving access, lowering costs and being a trusted
partner for every meaningful moment of health. And we do it all
with heart, each and every day. Follow @CVSHealth on social
media.
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, but are not limited to, the information
under the headings "2024 Full-Year Guidance", "CEO Commentary" and
"Financial Results Summary" and the information included in the
reconciliations and endnotes. By their nature, all forward-looking
statements are not guarantees of future performance or results and
are subject to risks and uncertainties that are difficult to
predict and/or quantify. Actual results may differ materially from
those contemplated by the forward-looking statements due to the
risks and uncertainties described in our Securities and Exchange
Commission ("SEC") filings, including those set forth in the Risk
Factors section and under the heading "Cautionary Statement
Concerning Forward-Looking Statements" in our most recently filed
Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for
the quarterly period ended March 31,
2024 and our Current Reports on Form 8-K.
You are cautioned not to place undue reliance on CVS Health's
forward-looking statements. CVS Health's 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,
uncertainties or otherwise.
- Tables Follow -
|
CVS HEALTH
CORPORATION
Condensed Consolidated Statements of
Operations
(Unaudited)
|
|
|
|
Three Months
Ended
March
31,
|
|
In millions, except per share amounts
|
|
2024
|
|
2023
|
|
Revenues:
|
|
|
|
|
|
Products
|
|
$ 53,724
|
|
$ 58,147
|
|
Premiums
|
|
30,391
|
|
24,352
|
|
Services
|
|
3,868
|
|
2,445
|
|
Net investment
income
|
|
454
|
|
334
|
|
Total
revenues
|
|
88,437
|
|
85,278
|
|
Operating
costs:
|
|
|
|
|
|
Cost of products
sold
|
|
48,073
|
|
51,455
|
|
Health care
costs
|
|
27,803
|
|
20,448
|
|
Loss on assets held
for sale
|
|
—
|
|
349
|
|
Operating
expenses
|
|
10,290
|
|
9,580
|
|
Total operating
costs
|
|
86,166
|
|
81,832
|
|
Operating
income
|
|
2,271
|
|
3,446
|
|
Interest
expense
|
|
716
|
|
589
|
|
Other income
|
|
(25)
|
|
(22)
|
|
Income before income
tax provision
|
|
1,580
|
|
2,879
|
|
Income tax
provision
|
|
456
|
|
737
|
|
Net income
|
|
1,124
|
|
2,142
|
|
Net income attributable
to noncontrolling interests
|
|
(11)
|
|
(6)
|
|
Net income attributable
to CVS Health
|
|
$
1,113
|
|
$
2,136
|
|
|
|
|
|
|
Net income per share
attributable to CVS Health:
|
|
|
|
|
|
Basic
|
|
$
0.88
|
|
$
1.66
|
|
Diluted
|
|
$
0.88
|
|
$
1.65
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
Basic
|
|
1,260
|
|
1,283
|
|
Diluted
|
|
1,267
|
|
1,291
|
|
Dividends declared per
share
|
|
$
0.665
|
|
$
0.605
|
|
CVS HEALTH
CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
|
|
|
In millions
|
March 31,
2024
|
|
December 31,
2023
|
|
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
9,801
|
|
$
8,196
|
|
Investments
|
3,288
|
|
3,259
|
|
Accounts receivable,
net
|
32,217
|
|
35,227
|
|
Inventories
|
16,346
|
|
18,025
|
|
Other current
assets
|
5,821
|
|
3,151
|
|
Total current
assets
|
67,473
|
|
67,858
|
|
Long-term
investments
|
24,074
|
|
23,019
|
|
Property and
equipment, net
|
13,037
|
|
13,183
|
|
Operating lease
right-of-use assets
|
17,045
|
|
17,252
|
|
Goodwill
|
91,272
|
|
91,272
|
|
Intangible assets,
net
|
28,770
|
|
29,234
|
|
Separate accounts
assets
|
3,271
|
|
3,250
|
|
Other
assets
|
4,801
|
|
4,660
|
|
Total assets
|
$
249,743
|
|
$
249,728
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts
payable
|
$
13,717
|
|
$
14,897
|
|
Pharmacy claims and
discounts payable
|
22,289
|
|
22,874
|
|
Health care costs
payable
|
14,368
|
|
12,049
|
|
Policyholders'
funds
|
1,081
|
|
1,326
|
|
Accrued
expenses
|
22,350
|
|
22,189
|
|
Other insurance
liabilities
|
1,158
|
|
1,141
|
|
Current portion of
operating lease liabilities
|
1,906
|
|
1,741
|
|
Short-term
debt
|
2,719
|
|
200
|
|
Current portion of
long-term debt
|
3,731
|
|
2,772
|
|
Total current
liabilities
|
83,319
|
|
79,189
|
|
Long-term operating
lease liabilities
|
15,742
|
|
16,034
|
|
Long-term
debt
|
57,694
|
|
58,638
|
|
Deferred income
taxes
|
4,184
|
|
4,311
|
|
Separate accounts
liabilities
|
3,271
|
|
3,250
|
|
Other long-term
insurance liabilities
|
5,178
|
|
5,459
|
|
Other long-term
liabilities
|
6,205
|
|
6,211
|
|
Total
liabilities
|
175,593
|
|
173,092
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Preferred
stock
|
—
|
|
—
|
|
Common stock and
capital surplus
|
49,209
|
|
48,992
|
|
Treasury
stock
|
(36,773)
|
|
(33,838)
|
|
Retained
earnings
|
61,873
|
|
61,604
|
|
Accumulated other
comprehensive loss
|
(341)
|
|
(297)
|
|
Total CVS Health
shareholders' equity
|
73,968
|
|
76,461
|
|
Noncontrolling
interests
|
182
|
|
175
|
|
Total shareholders'
equity
|
74,150
|
|
76,636
|
|
Total liabilities and
shareholders' equity
|
$
249,743
|
|
$
249,728
|
|
CVS HEALTH
CORPORATION
Condensed Consolidated Statements of Cash
Flows
(Unaudited)
|
|
|
Three Months
Ended
March
31,
|
|
In millions
|
2024
|
|
2023
|
|
Cash flows from
operating activities:
|
|
|
|
|
Cash receipts from
customers
|
$
84,997
|
|
$
87,798
|
|
Cash paid for
inventory, prescriptions dispensed and health services
rendered
|
(44,824)
|
|
(50,223)
|
|
Insurance benefits
paid
|
(24,894)
|
|
(19,757)
|
|
Cash paid to other
suppliers and employees
|
(9,677)
|
|
(9,958)
|
|
Interest and
investment income received
|
407
|
|
426
|
|
Interest
paid
|
(1,043)
|
|
(773)
|
|
Income taxes
paid
|
(63)
|
|
(75)
|
|
Net cash provided by
operating activities
|
4,903
|
|
7,438
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Proceeds from sales
and maturities of investments
|
2,153
|
|
1,891
|
|
Purchases of
investments
|
(3,545)
|
|
(2,358)
|
|
Purchases of property
and equipment
|
(705)
|
|
(984)
|
|
Acquisitions (net of
cash and restricted cash acquired)
|
(25)
|
|
(7,094)
|
|
Other
|
28
|
|
31
|
|
Net cash used in
investing activities
|
(2,094)
|
|
(8,514)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Commercial paper
borrowings (repayments), net
|
2,519
|
|
—
|
|
Proceeds from issuance
of long-term debt
|
—
|
|
5,951
|
|
Repayments of
long-term debt
|
(18)
|
|
(362)
|
|
Repurchase of common
stock
|
(3,027)
|
|
(2,018)
|
|
Dividends
paid
|
(840)
|
|
(779)
|
|
Proceeds from exercise
of stock options
|
203
|
|
96
|
|
Payments for taxes
related to net share settlement of equity awards
|
(31)
|
|
(34)
|
|
Other
|
(33)
|
|
(128)
|
|
Net cash provided by
(used in) financing activities
|
(1,227)
|
|
2,726
|
|
Net increase in cash,
cash equivalents and restricted cash
|
1,582
|
|
1,650
|
|
Cash, cash equivalents
and restricted cash at the beginning of the period
|
8,525
|
|
13,305
|
|
Cash, cash equivalents
and restricted cash at the end of the period
|
$
10,107
|
|
$
14,955
|
|
CVS HEALTH
CORPORATION
Condensed Consolidated Statements of Cash
Flows
(Unaudited)
|
|
|
Three Months
Ended
March
31,
|
|
In millions
|
2024
|
|
2023
|
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
|
Net income
|
$
1,124
|
|
$
2,142
|
|
Adjustments required
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
1,138
|
|
1,001
|
|
Stock-based
compensation
|
137
|
|
103
|
|
Deferred income taxes
and other noncash items
|
(217)
|
|
155
|
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
Accounts receivable,
net
|
3,008
|
|
(751)
|
|
Inventories
|
1,660
|
|
828
|
|
Other
assets
|
(2,836)
|
|
(1,255)
|
|
Accounts payable and
pharmacy claims and discounts payable
|
(1,410)
|
|
(1,203)
|
|
Health care costs
payable and other insurance liabilities
|
2,253
|
|
4,382
|
|
Other
liabilities
|
46
|
|
2,036
|
|
Net cash provided by
operating activities
|
$
4,903
|
|
$
7,438
|
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
measures reported by other companies.
Non-GAAP financial measures such as consolidated adjusted
operating income, adjusted earnings per share ("EPS") and adjusted
income attributable to CVS Health exclude from the relevant GAAP
metrics, as applicable: amortization of intangible assets, net
realized capital gains or losses 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 unaudited 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.
- The Company's net realized capital gains and losses arise from
various types of transactions, primarily in the course of managing
a portfolio of assets that support the payment of insurance
liabilities. Net realized capital gains and losses are reflected in
the unaudited condensed consolidated statements of operations in
net investment income (loss) within each segment. These capital
gains and losses are the result of investment decisions, market
conditions and other economic developments that are unrelated to
the performance of the Company's business, and the amount and
timing of these capital gains and losses do 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. Accordingly, the Company believes excluding
net realized capital gains and losses 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.
- During the three months ended March 31,
2024, the acquisition-related integration costs relate to
the acquisitions of Signify Health and Oak Street Health. During
the three months ended March 31,
2023, the acquisition-related transaction and integration
costs relate to the acquisitions of Signify Health and Oak Street
Health. The acquisition-related transaction and integration costs
are reflected in the Company's unaudited condensed consolidated
statements of operations in operating expenses within the
Corporate/Other segment.
- During the three months ended March 31,
2024, the opioid litigation charge relates to a change in
the Company's accrual related to ongoing opioid litigation
matters.
- During the three months ended March 31,
2023, the office real estate optimization charges primarily
relate to the abandonment of leased real estate and the related
right-of-use assets and property and equipment in connection with
the planned reduction of corporate office real estate space in
response to the Company's new flexible work arrangement. The office
real estate optimization charges are reflected in the Company's
unaudited condensed consolidated statements of operations in
operating expenses within the Health Care Benefits, Health Services
and Corporate/Other segments.
- During the three months ended March 31,
2023, the loss on assets held for sale relates to the LTC
reporting unit within the Pharmacy & Consumer Wellness segment.
During 2022, the Company determined that its LTC business was no
longer a strategic asset and committed to a plan to sell it, at
which time the LTC business met the criteria for held-for-sale
accounting and its net assets were accounted for as assets held for
sale. During the first quarter of 2023, a loss on assets held for
sale was recorded to write down the carrying value of the LTC
business to the Company's best estimate of the ultimate selling
price which reflected its estimated fair value less costs to sell.
As of the third quarter of 2023, the Company determined the LTC
business no longer met the criteria for held-for-sale accounting
and accordingly the net assets associated with the LTC business
were reclassified to held and used at their respective fair
values.
- 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.
See endnotes (1) and (2) on page 22 for definitions of
non-GAAP financial measures. Reconciliations of each non-GAAP
financial measure to the most directly comparable GAAP financial
measure are presented on pages 13 through 14 and page 21.
|
Reconciliations of Non-GAAP Financial
Measures to the Most Directly Comparable GAAP Financial
Measures
|
|
|
Adjusted Operating
Income
(Unaudited)
|
|
|
The following
are reconciliations of
consolidated operating income (GAAP measure) to consolidated
adjusted operating income, as well
as reconciliations of
segment GAAP operating income (loss) to segment adjusted operating
income (loss):
|
|
|
Three Months Ended
March 31, 2024
|
|
In millions
|
Health
Care
Benefits
|
|
Health
Services
|
|
Pharmacy
&
Consumer
Wellness
|
|
Corporate/
Other
|
|
Consolidated
Totals
|
|
Operating income (loss)
(GAAP measure)
|
$
428
|
|
$
1,213
|
|
$
1,113
|
|
$
(483)
|
|
$
2,271
|
|
Amortization of
intangible assets
|
294
|
|
150
|
|
64
|
|
—
|
|
508
|
|
Net realized capital
losses
|
10
|
|
—
|
|
—
|
|
8
|
|
18
|
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
—
|
|
60
|
|
60
|
|
Opioid litigation
charge
|
—
|
|
—
|
|
—
|
|
100
|
|
100
|
|
Adjusted operating
income (loss) (1)
|
$
732
|
|
$
1,363
|
|
$
1,177
|
|
$
(315)
|
|
$
2,957
|
|
|
Three Months Ended
March 31, 2023
|
|
In millions
|
Health
Care
Benefits
|
|
Health
Services
|
|
Pharmacy
&
Consumer
Wellness
|
|
Corporate/
Other
|
|
Consolidated
Totals
|
|
Operating income (loss)
(GAAP measure)
|
$
1,408
|
|
$
1,638
|
|
$
717
|
|
$
(317)
|
|
$
3,446
|
|
Amortization of
intangible assets
|
295
|
|
41
|
|
65
|
|
1
|
|
402
|
|
Net realized capital
losses
|
99
|
|
—
|
|
3
|
|
3
|
|
105
|
|
Acquisition-related
transaction and
integration
costs
|
—
|
|
—
|
|
—
|
|
43
|
|
43
|
|
Office real estate
optimization charges
|
22
|
|
1
|
|
—
|
|
2
|
|
25
|
|
Loss on assets held
for sale
|
—
|
|
—
|
|
349
|
|
—
|
|
349
|
|
Adjusted operating
income (loss) (1)
|
$
1,824
|
|
$
1,680
|
|
$
1,134
|
|
$
(268)
|
|
$
4,370
|
|
Adjusted Earnings
Per Share
(Unaudited)
|
|
|
The following
are reconciliations of
net income attributable to CVS Health to adjusted income attributable
to CVS Health and
calculations of GAAP diluted EPS and Adjusted EPS:
|
|
|
Three Months
Ended
March 31,
2024
|
|
Three Months
Ended
March 31,
2023
|
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
|
Net income attributable
to CVS Health (GAAP measure)
|
$ 1,113
|
|
$
0.88
|
|
$ 2,136
|
|
$
1.65
|
|
Amortization of
intangible assets
|
508
|
|
0.40
|
|
402
|
|
0.31
|
|
Net realized capital
losses
|
18
|
|
0.01
|
|
105
|
|
0.08
|
|
Acquisition-related
transaction and integration costs
|
60
|
|
0.05
|
|
43
|
|
0.03
|
|
Opioid litigation
charge
|
100
|
|
0.08
|
|
—
|
|
—
|
|
Office real estate
optimization charges
|
—
|
|
—
|
|
25
|
|
0.02
|
|
Loss on assets held
for sale
|
—
|
|
—
|
|
349
|
|
0.27
|
|
Tax impact of non-GAAP
adjustments
|
(142)
|
|
(0.11)
|
|
(221)
|
|
(0.16)
|
|
Adjusted income
attributable to CVS Health (2)
|
$ 1,657
|
|
$
1.31
|
|
$ 2,839
|
|
$
2.20
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,267
|
|
|
|
1,291
|
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.
Adjusted operating income is defined as operating income (GAAP
measure) excluding the impact of amortization of intangible assets,
net realized capital gains or losses 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). The CODM uses adjusted operating income
as its principal measure of segment performance as it enhances the
CODM's ability to compare past financial performance with current
performance and analyze underlying business performance and
trends.
The following is a reconciliation of financial measures of the
Company's segments to the consolidated totals:
|
In millions
|
Health
Care
Benefits
|
|
Health
Services
(a)
|
|
Pharmacy
&
Consumer
Wellness
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
(b)
|
|
Consolidated
Totals
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2024
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$ 32,236
|
|
$
40,285
|
|
$
28,725
|
|
$
115
|
|
$
(12,924)
|
|
$ 88,437
|
|
Adjusted operating
income (loss) (1)
|
732
|
|
1,363
|
|
1,177
|
|
(315)
|
|
—
|
|
2,957
|
|
March 31,
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$ 25,877
|
|
$
44,591
|
|
$
27,922
|
|
$
188
|
|
$
(13,300)
|
|
$ 85,278
|
|
Adjusted
operating
income (loss)
(1)
|
1,824
|
|
1,680
|
|
1,134
|
|
(268)
|
|
—
|
|
4,370
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Total revenues of the
Health Services segment include approximately $3.4 billion and $4.1
billion of retail co-payments for the three months ended March 31,
2024 and 2023, respectively.
|
|
(b)
|
Intersegment revenue
eliminations relate to intersegment revenue generating activities
that occur between the Health Care Benefits segment, the Health
Services segment, and/or the Pharmacy & Consumer Wellness
segment.
|
|
Supplemental
Information
(Unaudited)
|
|
|
Health Care Benefits
segment
|
|
|
The following table
summarizes the Health Care Benefits segment's performance for the
respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
|
In millions,
except percentages and basis points ("bps")
|
2024
|
|
2023
|
|
$
|
|
%
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Premiums
|
$
30,379
|
|
$
24,339
|
|
$
6,040
|
|
24.8 %
|
|
Services
|
1,504
|
|
1,374
|
|
130
|
|
9.5 %
|
|
Net investment
income
|
353
|
|
164
|
|
189
|
|
115.2 %
|
|
Total
revenues
|
32,236
|
|
25,877
|
|
6,359
|
|
24.6 %
|
|
Health care
costs
|
27,458
|
|
20,595
|
|
6,863
|
|
33.3 %
|
|
MBR (Health care costs
as a % of premium revenues) (3)
|
90.4 %
|
|
84.6 %
|
|
580
|
bps
|
|
Operating
expenses
|
$ 4,350
|
|
$ 3,874
|
|
$ 476
|
|
12.3 %
|
|
Operating expenses as
a % of total revenues
|
13.5 %
|
|
15.0 %
|
|
|
|
|
|
Operating
income
|
$
428
|
|
$ 1,408
|
|
$
(980)
|
|
(69.6) %
|
|
Operating income as a
% of total revenues
|
1.3 %
|
|
5.4 %
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
732
|
|
$ 1,824
|
|
$
(1,092)
|
|
(59.9) %
|
|
Adjusted operating
income as a % of total revenues
|
2.3 %
|
|
7.0 %
|
|
|
|
|
|
Premium revenues (by
business):
|
|
|
|
|
|
|
|
|
Government
|
$
21,716
|
|
$
17,528
|
|
$
4,188
|
|
23.9 %
|
|
Commercial
|
8,663
|
|
6,811
|
|
1,852
|
|
27.2 %
|
|
The following table
summarizes the Health Care Benefits segment's medical membership
for the respective periods:
|
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
In thousands
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Medical membership:
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
4,735
|
|
14,111
|
|
18,846
|
|
4,252
|
|
14,087
|
|
18,339
|
|
3,949
|
|
14,039
|
|
17,988
|
|
Medicare
Advantage
|
4,205
|
|
—
|
|
4,205
|
|
3,460
|
|
—
|
|
3,460
|
|
3,387
|
|
—
|
|
3,387
|
|
Medicare
Supplement
|
1,300
|
|
—
|
|
1,300
|
|
1,343
|
|
—
|
|
1,343
|
|
1,344
|
|
—
|
|
1,344
|
|
Medicaid
|
1,972
|
|
447
|
|
2,419
|
|
2,073
|
|
444
|
|
2,517
|
|
2,293
|
|
501
|
|
2,794
|
|
Total medical
membership
|
12,212
|
|
14,558
|
|
26,770
|
|
11,128
|
|
14,531
|
|
25,659
|
|
10,973
|
|
14,540
|
|
25,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
membership information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Prescription
Drug Plan (stand-alone)
|
4,947
|
|
|
|
|
|
6,081
|
|
|
|
|
|
6,112
|
|
The following table
summarizes the Health Care Benefits segment's days claims payable
for the respective periods:
|
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
Days Claims Payable
(7)
|
44.5
|
|
45.9
|
|
48.1
|
|
Supplemental
Information
(Unaudited)
|
|
|
Health Services
segment
|
|
|
The following table
summarizes the Health Services segment's performance for the
respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
|
In millions,
except percentages
|
2024
|
|
2023
|
|
$
|
|
%
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Products
|
$
37,717
|
|
$
43,671
|
|
$ (5,954)
|
|
(13.6) %
|
|
Services
|
2,568
|
|
920
|
|
1,648
|
|
179.1 %
|
|
Total
revenues
|
40,285
|
|
44,591
|
|
(4,306)
|
|
(9.7) %
|
|
Cost of products
sold
|
37,532
|
|
42,416
|
|
(4,884)
|
|
(11.5) %
|
|
Health care
costs
|
701
|
|
—
|
|
701
|
|
100.0 %
|
|
Gross profit
(8)
|
2,052
|
|
2,175
|
|
(123)
|
|
(5.7) %
|
|
Gross margin (Gross
profit as a % of total revenues) (8)
|
5.1 %
|
|
4.9 %
|
|
|
|
|
|
Operating
expenses
|
$
839
|
|
$
537
|
|
$ 302
|
|
56.2 %
|
|
Operating expenses as
a % of total revenues
|
2.1 %
|
|
1.2 %
|
|
|
|
|
|
Operating
income
|
$ 1,213
|
|
$ 1,638
|
|
$ (425)
|
|
(25.9) %
|
|
Operating income as a
% of total revenues
|
3.0 %
|
|
3.7 %
|
|
|
|
|
|
Adjusted operating
income (1)
|
$ 1,363
|
|
$ 1,680
|
|
$ (317)
|
|
(18.9) %
|
|
Adjusted operating
income as a % of total revenues
|
3.4 %
|
|
3.8 %
|
|
|
|
|
|
Revenues (by
distribution channel):
|
|
|
|
|
|
|
|
|
Pharmacy network
(9)
|
$
20,464
|
|
$
27,592
|
|
$
(7,128)
|
|
(25.8) %
|
|
Mail & specialty
(10)
|
17,262
|
|
16,145
|
|
1,117
|
|
6.9 %
|
|
Other
|
2,559
|
|
854
|
|
1,705
|
|
199.6 %
|
|
Pharmacy claims
processed (5) (6)
|
462.9
|
|
587.3
|
|
(124.4)
|
|
(21.2) %
|
|
Generic dispensing rate
(6) (11)
|
88.3 %
|
|
88.4 %
|
|
|
|
|
|
Supplemental
Information
(Unaudited)
|
|
|
Pharmacy &
Consumer Wellness segment
|
|
|
The following table
summarizes the Pharmacy & Consumer Wellness segment's
performance for the respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
|
In millions,
except percentages
|
2024
|
|
2023
|
|
$
|
|
%
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Products
|
$
28,120
|
|
$
27,258
|
|
$ 862
|
|
3.2 %
|
|
Services
|
605
|
|
667
|
|
(62)
|
|
(9.3) %
|
|
Net investment income
(loss)
|
—
|
|
(3)
|
|
3
|
|
100.0 %
|
|
Total
revenues
|
28,725
|
|
27,922
|
|
803
|
|
2.9 %
|
|
Cost of products
sold
|
22,760
|
|
21,876
|
|
884
|
|
4.0 %
|
|
Gross profit
(8)
|
5,965
|
|
6,046
|
|
(81)
|
|
(1.3) %
|
|
Gross margin (Gross
profit as a % of total revenues) (8)
|
20.8 %
|
|
21.7 %
|
|
|
|
|
|
Loss on assets held for
sale
|
$
—
|
|
$ 349
|
|
$
(349)
|
|
(100.0) %
|
|
Operating
expenses
|
4,852
|
|
4,980
|
|
(128)
|
|
(2.6) %
|
|
Operating expenses as
a % of total revenues
|
16.9 %
|
|
17.8 %
|
|
|
|
|
|
Operating
income
|
$ 1,113
|
|
$
717
|
|
$ 396
|
|
55.2 %
|
|
Operating income as a
% of total revenues
|
3.9 %
|
|
2.6 %
|
|
|
|
|
|
Adjusted operating
income (1)
|
$ 1,177
|
|
$ 1,134
|
|
$
43
|
|
3.8 %
|
|
Adjusted operating
income as a % of total revenues
|
4.1 %
|
|
4.1 %
|
|
|
|
|
|
Revenues (by major
goods/service lines):
|
|
|
|
|
|
|
|
|
Pharmacy
|
$
22,784
|
|
$
21,780
|
|
$
1,004
|
|
4.6 %
|
|
Front Store
|
5,370
|
|
5,597
|
|
(227)
|
|
(4.1) %
|
|
Other
|
571
|
|
548
|
|
23
|
|
4.2 %
|
|
Net investment income
(loss)
|
—
|
|
(3)
|
|
3
|
|
100.0 %
|
|
Prescriptions filled
(5) (6)
|
417.6
|
|
404.8
|
|
12.8
|
|
3.2 %
|
|
Same store sales
increase (decrease): (12)
|
|
|
|
|
|
|
|
|
Total
|
5.3 %
|
|
11.6 %
|
|
|
|
|
|
Pharmacy
|
7.3 %
|
|
12.7 %
|
|
|
|
|
|
Front Store
|
(2.2) %
|
|
7.7 %
|
|
|
|
|
|
Prescription volume
(6)
|
5.8 %
|
|
5.0 %
|
|
|
|
|
|
Generic dispensing rate
(6) (11)
|
90.1 %
|
|
89.4 %
|
|
|
|
|
|
Supplemental
Information
(Unaudited)
|
|
|
Corporate/Other
segment
|
|
|
The following table
summarizes the Corporate/Other segment's performance for the
respective periods:
|
|
|
Three Months
Ended
March
31,
|
|
Change
|
|
In millions,
except percentages
|
2024
|
|
2023
|
|
$
|
|
%
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Premiums
|
$
12
|
|
$
13
|
|
$
(1)
|
|
(7.7) %
|
|
Services
|
2
|
|
2
|
|
—
|
|
— %
|
|
Net investment
income
|
101
|
|
173
|
|
(72)
|
|
(41.6) %
|
|
Total
revenues
|
115
|
|
188
|
|
(73)
|
|
(38.8) %
|
|
Cost of products
sold
|
—
|
|
1
|
|
(1)
|
|
(100.0) %
|
|
Health care
costs
|
47
|
|
52
|
|
(5)
|
|
(9.6) %
|
|
Operating
expenses
|
551
|
|
452
|
|
99
|
|
21.9 %
|
|
Operating
loss
|
(483)
|
|
(317)
|
|
(166)
|
|
(52.4) %
|
|
Adjusted operating loss
(1)
|
(315)
|
|
(268)
|
|
(47)
|
|
(17.5) %
|
|
Supplemental
Information
(Unaudited)
|
|
|
The following table
shows the components of the change in the consolidated health care
costs payable during the three months ended March 31, 2024 and
2023:
|
|
|
Three Months
Ended
March
31,
|
|
In millions
|
2024
|
|
2023
|
|
Health care costs
payable, beginning of the period
|
$
12,049
|
|
$
10,142
|
|
Less: Reinsurance
recoverables
|
5
|
|
5
|
|
Less: Impact of
discount rate on long-duration insurance reserves
(a)
|
(23)
|
|
8
|
|
Health care costs
payable, beginning of the period, net
|
12,067
|
|
10,129
|
|
Add: Components of
incurred health care costs
|
|
|
|
|
Current
year
|
28,212
|
|
21,068
|
|
Prior years
(b)
|
(479)
|
|
(693)
|
|
Total incurred health
care costs (c)
|
27,733
|
|
20,375
|
|
Less: Claims
paid
|
|
|
|
|
Current
year
|
16,263
|
|
11,957
|
|
Prior years
|
9,150
|
|
7,645
|
|
Total claims
paid
|
25,413
|
|
19,602
|
|
Health care costs
payable, end of the period, net
|
14,387
|
|
10,902
|
|
Add: Reinsurance
recoverables
|
4
|
|
5
|
|
Add: Impact of
discount rate on long-duration insurance reserves
(a)
|
(23)
|
|
(12)
|
|
Health care costs
payable, end of the period
|
$
14,368
|
|
$
10,895
|
|
|
|
(a)
|
Reflects the difference
between the current discount rate and the locked-in discount rate
on long-duration insurance reserves which is recorded within
accumulated other comprehensive loss on the unaudited condensed
consolidated balance sheets.
|
|
(b)
|
Negative amounts
reported for incurred health care costs related to prior years
result from claims being settled for amounts less than originally
estimated.
|
|
(c)
|
Total incurred health
care costs for the three months ended March 31, 2024 and 2023 in
the table above exclude $23 million and $22 million, respectively,
of health care costs recorded in the Health Care Benefits segment
that are included in other insurance liabilities on the unaudited
condensed consolidated balance sheets and $47 million and $51
million, respectively, of health care costs recorded in the
Corporate/Other segment that are included in other insurance
liabilities on the unaudited condensed consolidated balance
sheets.
|
Adjusted Earnings Per Share
Guidance
(Unaudited)
The following reconciliation of projected net income
attributable to CVS Health to projected adjusted income
attributable to CVS Health and calculations of projected GAAP
diluted EPS and projected Adjusted EPS contain forward-looking
information. All forward-looking information involves risks and
uncertainties. Actual results may differ materially from those
contemplated by the forward-looking information for a number of
reasons as described in our SEC filings, including those set forth
in the Risk Factors section and under the heading "Cautionary
Statement Concerning Forward-Looking Statements" in our most
recently filed Annual Report on Form 10-K and our most recently
filed Quarterly Report on Form 10-Q. See "Non-GAAP Financial
Information" earlier in this press release and endnote (2) later in
this press release for more information on how we calculate
Adjusted EPS.
|
Year
Ending
December 31,
2024
|
|
At
Least
|
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Net income attributable
to CVS Health (GAAP measure)
|
$
7,135
|
|
$
5.64
|
|
Non-GAAP
adjustments:
|
|
|
|
|
Amortization of
intangible assets
|
2,020
|
|
1.60
|
|
Net realized capital
losses
|
18
|
|
0.01
|
|
Acquisition-related
integration costs
|
230
|
|
0.18
|
|
Opioid litigation
charge
|
100
|
|
0.08
|
|
Tax impact of non-GAAP
adjustments
|
(649)
|
|
(0.51)
|
|
Adjusted income
attributable to CVS Health (2)
|
$
8,854
|
|
$
7.00
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,265
|
|
Endnotes
|
|
|
(1)
|
The Company defines
adjusted operating income as operating income (GAAP measure)
excluding the impact of amortization of intangible assets, net
realized capital gains or losses 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, such as
acquisition-related transaction and integration costs, opioid
litigation charges, office real estate optimization charges and
losses on assets held for sale. The CODM uses adjusted operating
income as its principal measure of segment performance as it
enhances the CODM's ability to compare past financial performance
with current performance and analyze underlying business
performance and trends. The consolidated measure is not determined
in accordance with GAAP and should not be considered a substitute
for, or superior to, the most directly comparable GAAP measure,
consolidated operating income. See "Non-GAAP Financial Information"
earlier in this press release for additional information regarding
the items excluded from consolidated operating income in
determining consolidated adjusted operating income.
|
|
|
|
(2)
|
GAAP diluted earnings
per share and Adjusted EPS, respectively, are calculated by
dividing net income attributable to CVS Health and adjusted income
attributable to CVS Health by the Company's weighted average
diluted shares outstanding. The Company defines adjusted income
attributable to CVS Health as net income attributable to CVS Health
(GAAP measure) excluding the impact of amortization of intangible
assets, net realized capital gains or losses 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,
such as acquisition-related transaction and integration costs,
opioid litigation charges, office real estate optimization charges,
losses on assets held for sale, as well as the corresponding income
tax benefit or expense related to the items excluded from adjusted
income attributable to CVS Health. See "Non-GAAP Financial
Information" earlier in this press release for additional
information regarding the items excluded from net income
attributable to CVS Health in determining adjusted income
attributable to CVS Health.
|
|
|
|
(3)
|
Medical benefit ratio
is calculated by dividing the Health Care Benefits segment's health
care costs by premium revenues and represents the percentage of
premium revenues spent on medical benefits for the segment's
insured members. Management uses MBR to assess the underlying
business performance and underwriting of its insurance products,
understand variances between actual results and expected results
and identify trends in period-over-period results. MBR provides
management and investors with information useful in assessing the
operating results of the segment's insured Health Care Benefits
products.
|
|
|
|
(4)
|
Medical membership
represents the number of members covered by the Health Care
Benefits segment's insured and ASC medical products and related
services at a specified point in time. Management uses this metric
to understand variances between actual medical membership and
expected amounts as well as trends in period-over-period results.
This metric provides management and investors with information
useful in understanding the impact of medical membership on the
Health Care Benefits segment's total revenues and operating
results.
|
|
|
|
(5)
|
Pharmacy claims
processed represents the number of prescription claims processed
through the Company's pharmacy benefits manager and dispensed by
either its retail network pharmacies or the Company's mail and
specialty pharmacies. Prescriptions filled represents the number of
prescriptions dispensed through the Pharmacy & Consumer
Wellness segment's retail and long-term care pharmacies and
infusion services operations. Management uses these metrics to
understand variances between actual claims processed and
prescriptions dispensed, respectively, and expected amounts as well
as trends in period-over-period results. These metrics provide
management and investors with information useful in understanding
the impact of pharmacy claim volume and prescription volume,
respectively, on segment total revenues and operating
results.
|
|
|
|
(6)
|
Includes an adjustment
to convert 90-day prescriptions to the equivalent of three 30-day
prescriptions. This adjustment reflects the fact that these
prescriptions include approximately three times the amount of
product days supplied compared to a normal
prescription.
|
|
|
|
(7)
|
Days claims payable is
calculated by dividing the Health Care Benefits segment's health
care costs payable at the end of each quarter by its average health
care costs per day during such quarter. Management and investors
use this metric as an indicator of the adequacy of the Health Care
Benefits segment's health care costs payable liability at the end
of each quarter and as an indicator of changes in such adequacy
over time.
|
|
|
|
(8)
|
Gross profit is
calculated as the segment's total revenues less its cost of
products sold, and, for the Health Services segment, health care
costs. Gross margin is calculated by dividing the segment's gross
profit by its total revenues and represents the percentage of total
revenues that remains after incurring direct costs associated with
the segment's products sold and services provided. Gross margin
provides investors with information that may be useful in assessing
the operating results of the Company's Health Services and Pharmacy
& Consumer Wellness segments.
|
|
|
|
(9)
|
Health Services
pharmacy network revenues relate to claims filled at retail and
specialty retail pharmacies, including the Company's retail
pharmacies and LTC pharmacies, as well as activity associated with
Maintenance Choice®, which permits eligible client plan
members to fill their maintenance prescriptions through mail order
delivery or at a CVS pharmacy retail store for the same price as
mail order.
|
|
|
|
(10)
|
Health Services mail
and specialty revenues relate to specialty mail claims inclusive of
Specialty Connect® claims picked up at a retail
pharmacy, as well as mail order and specialty claims fulfilled by
the Pharmacy & Consumer Wellness segment.
|
|
|
|
(11)
|
Generic dispensing rate
is calculated by dividing the segment's generic drug claims
processed or prescriptions filled by its total claims processed or
prescriptions filled. Management uses this metric to evaluate the
effectiveness of the business at encouraging the use of generic
drugs when they are available and clinically appropriate, which
aids in decreasing costs for client members and retail customers.
This metric provides management and investors with information
useful in understanding trends in segment total revenues and
operating results.
|
|
|
|
(12)
|
Same store sales and
prescription volume represent the change in revenues and
prescriptions filled in the Company's retail pharmacy stores that
have been operating for greater than one year and digital sales
initiated online or through mobile applications and fulfilled
through the Company's distribution centers, expressed as a
percentage that indicates the increase or decrease relative to the
comparable prior period. Same store metrics exclude revenues and
prescriptions from LTC and infusion services operations. Management
uses these metrics to evaluate the performance of existing stores
on a comparable basis and to inform future decisions regarding
existing stores and new locations. Same-store metrics provide
management and investors with information useful in
understanding the portion of current revenues and prescriptions
resulting from organic growth in existing locations versus the
portion resulting from opening new stores.
|
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SOURCE CVS Health Corporation