2021 Full Year Guidance: • Raised GAAP diluted EPS guidance range to $6.24 to $6.36 from $6.06 to $6.22 • Raised Adjusted EPS guidance range to $7.56 to $7.68 from $7.39 to $7.55 • Confirmed cash flow from operations guidance range of $12.0 billion to $12.5 billion WOONSOCKET, RHODE ISLAND, May 4, 2021 - CVS Health Corporation (NYSE: CVS ...
On May 4, 2021, CVS Health Corporation issued a press release announcing results for the three months ended March 31, 2021. A copy of that press release is furnished herewith as Exhibit 99.1 and hereby incorporated in this Item 2.02 by reference.
UNITED
STATES SECURITIES
AND
EXCHANGE
COMMISSION
Washington,
D.C.
20549
FORM
8-K
CURRENT
REPORT Pursuant
to
Section
13
OR
15(d)
of
The
Securities
Exchange
Act
of
1934
Date of Report (Date of earliest event reported):
May
4,
2021
Delaware (State or other jurisdiction of incorporation)
CVS
HEALTH
CORPORATION
(Exact name of registrant as specified in its charter)
001-01011 (Commission File Number)
05-0494040
(IRS Employer Identification No.)
One
CVS
Drive,
Woonsocket,
Rhode
Island
02895
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (401)
765-1500 Former name or former address, if changed since last report: N/A
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Common Stock, par value $0.01 per share
Trading Symbol(s) CVS
Name of each exchange on which registered New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Section
2
-
Financial
Information
Item
2.02
Results
of
Operations
and
Financial
Condition.
On May 4, 2021, CVS Health Corporation issued a press release announcing results for the three months ended March 31, 2021. A copy of that press release is furnished herewith as Exhibit 99.1 and hereby incorporated in this Item 2.02 by reference.
The information in this Current Report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (as amended, the "Exchange Act") or otherwise subject to the liabilities of that Section, and shall not be or be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Section
9
-
Financial
Statements
and
Exhibits
Item
9.01
Financial
Statements
and
Exhibits.
(d)
Exhibits.
The exhibits to this Current Report on Form 8-K are as follows:
INDEX
TO
EXHIBITS
99.1
Press
Release
of
CVS
Health
Corporation
dated
May
4,
2021
104
Cover
Page
Interactive
Data
File
-
the
cover
page
XBRL
tags
are
embedded
within
the
Inline
XBRL
document.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 4, 2021
CVS
HEALTH
CORPORATION
By: /s/ Eva C. Boratto Eva C. Boratto Executive Vice President and Chief Financial Officer
Investor Katie Durant Contact: Senior Director
Investor Relations (401) 770-6442
Media T.J. Crawford Contact: Vice President
External Affairs (212) 457-0583
Exhibit
99.1
FOR
IMMEDIATE
RELEASE
CVS
HEALTH
REPORTS
STRONG
FIRST
QUARTER
RESULTS RAISES
2021
FULL
YEAR
EPS
AND
CONFIRMS
CASH
FLOW
FROM
OPERATIONS
GUIDANCE
RANGES
First
Quarter
Highlights: · Total
revenues
increased
to
$69.1
billion,
up
3.5%
compared
to
prior
year · GAAP
diluted
EPS
of
$1.68,
up
9.8%
compared
to
prior
year · Adjusted
EPS
of
$2.04,
up
6.8%
compared
to
prior
year · Generated
cash
flow
from
operations
of
$2.9
billion
2021
Full
Year
Guidance: · Raised
GAAP
diluted
EPS
guidance
range
to
$6.24
to
$6.36
from
$6.06
to
$6.22 · Raised
Adjusted
EPS
guidance
range
to
$7.56
to
$7.68
from
$7.39
to
$7.55 · Confirmed
cash
flow
from
operations
guidance
range
of
$12.0
billion
to
$12.5
billion
WOONSOCKET, RHODE ISLAND, May 4, 2021 - CVS Health Corporation (NYSE: CVS) today announced operating results for the three months ended March 31, 2021.
"We delivered strong first quarter results and improved our outlook for the year," said CVS Health President and CEO Karen S. Lynch. "We continue to execute on our strategy while simultaneously managing through a pandemic, helping the country on the road to recovery. Our unmatched assets and strength of our brand are driving results as we work toward improving care delivery and driving growth."
_____________________________________________
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 21 for explanations of non-GAAP financial measures presented in this press release. See pages 12, 13 and 20 for reconciliations of each non-GAAP financial measure used in this release to the most directly comparable GAAP financial measure.
1
Consolidated
First
Quarter
Results
In millions, except per share amounts
Total revenues Operating income Adjusted operating income (1) Net income Diluted earnings per share Adjusted EPS (2) Enterprise prescriptions (3) (4)
Three
Months
Ended
March
31,
2021
2020
Change
$ 69,097 $ 66,755 $ 2,342
3,577
3,458
119
4,205
4,113
92
2,224
2,012
212
$ 1.68 $ 1.53 $ 0.15
$ 2.04 $ 1.91 $ 0.13
738.4
746.6
(8.2)
· Total revenues increased 3.5% for the three months ended March 31, 2021 compared to the prior year driven by growth across all segments.
· Operating income and adjusted operating income increased 3.4% and 2.2%, respectively, for the three months ended March 31, 2021 compared to the prior year. The increase in both operating income and adjusted operating income was primarily due to growth in the Pharmacy Services and Health Care Benefits segments, partially offset by declines in the Retail/LTC segment.
· Interest expense decreased 10.4% for the three months ended March 31, 2021 compared to the prior year primarily due to lower debt in the three months ended March 31, 2021.
· The effective income tax rate was 25.1% for the three months ended March 31, 2021 compared to 27.6% for the three months ended March 31, 2020. The decrease in the effective income tax rate was primarily due to the repeal of the non-deductible health insurer fee ("HIF") for 2021.
2
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, 2021 and 2020 were as follows:
In millions, except percentages
Total revenues Adjusted operating income (1) Medical benefit ratio ("MBR") (5) Medical membership (6)
Three
Months
Ended
March
31,
2021
2020
Change
$
20,483 $
19,198 $
1,285
1,782
1,491
291
83.2 %
82.4 %
0.8 %
23.6
23.5
0.1
· Total revenues increased 6.7% for the three months ended March 31, 2021 compared to the prior year primarily driven by growth in the Government Services business, partially offset by the unfavorable impact of the repeal of the HIF for 2021.
· Adjusted operating income increased 19.5% for the three months ended March 31, 2021 compared to the prior year. The increase in adjusted operating income was primarily driven by improved performance in the Government Services business and the impact of cost savings initiatives.
· The MBR increased 80 basis points for the three months ended March 31, 2021 compared to the prior year primarily driven by the repeal of the HIF for 2021 and lower Medicare risk adjustment revenue. These increases were partially offset by improved performance in the Company's Medicaid products and favorable development of prior-years' health care cost estimates.
· Medical membership as of March 31, 2021 of 23.6 million increased 214,000 members compared with December 31, 2020, primarily reflecting increases in Medicare and Medicaid products, partially offset by a decline in Commercial products.
· The segment experienced favorable development of prior-years' health care cost estimates in its Commercial and Government Services businesses during the three months ended March 31, 2021, primarily attributable to fourth quarter 2020 performance.
· Prior years' health care costs payable estimates developed favorably by $652 million during the three months ended March 31, 2021. 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 2021 operating results.
See the supplemental information on page 15 for additional information regarding the performance of the Health Care Benefits segment.
3
Pharmacy
Services
Segment
The Pharmacy Services segment provides a full range of pharmacy benefit management solutions to employers, health plans, government employee groups and government sponsored programs. The segment results for the three months ended March 31, 2021 and 2020 were as follows:
In millions
Total revenues Adjusted operating income (1) Total pharmacy claims processed (4) (7)
Pharmacy network (8) Mail choice (9)
Three
Months
Ended
March
31,
2021
2020
Change
$ 36,321 $ 34,983 $ 1,338
1,507
1,181
326
535.9
541.4
(5.5)
455.4
461.1
(5.7)
80.5
80.3
0.2
· Total revenues increased 3.8% for the three months ended March 31, 2021 compared to the prior year primarily driven by net new business, growth in specialty pharmacy, product mix and brand inflation, partially offset by continued price compression and a weak cough, cold and flu season.
· Adjusted operating income increased 27.6% for the three months ended March 31, 2021 compared to the prior year primarily driven by improved purchasing economics and growth in specialty pharmacy, partially offset by continued price compression.
· Total pharmacy claims processed decreased 1.0% on a 30-day equivalent basis for the three months ended March 31, 2021 compared to the prior year primarily driven by a weak cough, cold and flu season, partially offset by net new business in the three months ended March 31, 2021.
See the supplemental information on page 17 for additional information regarding the performance of the Pharmacy Services segment.
4
Retail/LTC
Segment
The Retail/LTC segment fulfills prescriptions for medications, provides patient care programs, sells a wide assortment of health and wellness products and general merchandise, provides health care services through walk-in medical clinics, provides medical diagnostic testing, administers vaccinations and provides services to long-term care facilities. The segment results for the three months ended March 31, 2021 and 2020 were as follows:
In millions
Total revenues Adjusted operating income (1) Prescriptions filled (4) (7)
Three
Months
Ended
March
31,
2021
2020
Change
$ 23,274 $ 22,749 $
525
1,394
1,902
(508)
375.4
375.1
0.3
· Total revenues increased 2.3% for the three months ended March 31, 2021 compared to the prior year primarily driven by increased COVID-19 diagnostic testing and vaccinations and brand inflation. These increases were partially offset by lower front store revenues, primarily due to the acceleration of demand in March 2020 as consumers prepared for the COVID-19 pandemic and a weak cough, cold and flu season; continued reimbursement pressure and the impact of recent generic introductions.
· Adjusted operating income decreased 26.7% for the three months ended March 31, 2021 compared to the prior year primarily driven by continued reimbursement pressure and the lower front store volume described above. These decreases were partially offset by increased COVID-19 diagnostic testing in the three months ended March 31, 2021.
· Prescriptions filled remained relatively consistent on a 30-day equivalent basis for the three months ended March 31, 2021 compared to the prior year, with COVID-19 vaccinations and the continued adoption of patient care programs largely offset by the impact of a weak cough, cold and flu season, the acceleration of demand in March 2020 as consumers prepared for the COVID-19 pandemic and decreased long-term care prescription volume.
See the supplemental information on page 18 for additional information regarding the performance of the Retail/LTC segment.
5
2021
Full
Year
Guidance
The Company raised its full year 2021 GAAP diluted EPS guidance range to $6.24 to $6.36 from $6.06 to $6.22 and its full year 2021 Adjusted EPS guidance range to $7.56 to $7.68 from $7.39 to $7.55
and confirmed its full year 2021 cash flow from operations guidance range of $12.0 billion to $12.5 billion.
The adjustments between GAAP diluted EPS and Adjusted EPS include, as applicable, adding back amortization of intangible assets, as well as integration costs related to the Company's acquisition (the "Aetna Acquisition") of Aetna Inc. ("Aetna").
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
We are a diversified health services company with more than 300,000 employees united around a common purpose of helping people on their path to better health. In an increasingly connected and digital world, we are meeting people wherever they are and changing health care to meet their needs. Built on a foundation of unmatched community presence, our diversified model makes us an integral part of people's everyday health. From our innovative new services at HealthHUBTM locations, to transformative programs that help manage chronic conditions, we are making health care more accessible, more affordable and simply better. Learn more about how we're transforming health at www.cvshealth.com.
Cautionary
Statement
Concerning
Forward-Looking
Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. Statements in this press release that are forward-looking include, but are not limited to, Ms. Lynch's quotation, the information under the heading "2021 Full Year Guidance" and the information included in the endnotes and reconciliations. 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 for a number of reasons as described in our Securities and Exchange Commission ("SEC") filings, including those set forth in the Risk Factors section and under the heading "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021.
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 -
6
CVS
HEALTH
CORPORATION Condensed
Consolidated
Statements
of
Operations
(Unaudited)
In millions, except per share amounts
Revenues: Products Premiums Services Net investment income
Total revenues Operating costs:
Cost of products sold Benefit costs Operating expenses Total operating costs Operating income Interest expense Other income Income before income tax provision Income tax provision Net income Net income attributable to noncontrolling interests Net income attributable to CVS Health
Net income per share attributable to CVS Health: Basic Diluted
Weighted average shares outstanding: Basic Diluted
Dividends declared per share
Three
Months
Ended
March
31,
2021
2020
$ 47,387 $ 47,003
18,960
17,640
2,453
1,950
297
162
69,097
66,755
40,894
40,347
15,704
14,387
8,922
8,563
65,520
63,297
3,577
3,458
657
733
(50)
(54)
2,970
2,779
746
767
2,224
2,012
(1)
(5)
$
2,223 $
2,007
$
1.69 $
1.54
$
1.68 $
1.53
1,313
1,306
1,322
1,312
$
0.50 $
0.50
7
CVS
HEALTH
CORPORATION Condensed
Consolidated
Balance
Sheets
(Unaudited)
In millions
Assets: Cash and cash equivalents Investments Accounts receivable, net Inventories Other current assets Total current assets Long-term investments Property and equipment, net Operating lease right-of-use assets Goodwill Intangible assets, net Separate accounts assets Other assets
Total assets
Liabilities: Accounts payable Pharmacy claims and discounts payable Health care costs payable Policyholders' funds Accrued expenses Other insurance liabilities Current portion of operating lease liabilities Short-term debt Current portion of long-term debt Total current liabilities Long-term operating lease liabilities Long-term debt Deferred income taxes Separate accounts liabilities Other long-term insurance liabilities Other long-term liabilities
Total liabilities
Shareholders' equity: Preferred stock Common stock and capital surplus Treasury stock Retained earnings Accumulated other comprehensive income Total CVS Health shareholders' equity Noncontrolling interests
Total shareholders' equity Total liabilities and shareholders' equity
8
March
31,
2021
December
31,
2020
$
5,598 $
7,854
3,190
3,000
23,855
21,742
17,618
18,496
5,458
5,277
55,719
56,369
21,025
20,812
12,611
12,606
20,542
20,729
79,552
79,552
30,639
31,142
4,692
4,881
4,826
4,624
$
229,606 $
230,715
$
10,804 $
11,138
16,282
15,795
8,272
7,936
4,440
4,270
14,312
14,243
1,534
1,557
1,786
1,638
252
--
2,422
5,440
60,104
62,017
18,587
18,757
59,270
59,207
6,610
6,794
4,692
4,881
6,870
7,007
2,309
2,351
158,442
161,014
--
--
46,727
46,513
(28,102)
(28,178)
51,203
49,640
1,022
1,414
70,850
69,389
314
312
71,164
69,701
$
229,606 $
230,715
CVS
HEALTH
CORPORATION Condensed
Consolidated
Statements
of
Cash
Flows
(Unaudited)
In millions
Cash flows from operating activities: Cash receipts from customers Cash paid for inventory and prescriptions dispensed by retail network pharmacies Insurance benefits paid Cash paid to other suppliers and employees Interest and investment income received Interest paid Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities: Proceeds from sales and maturities of investments Purchases of investments Purchases of property and equipment Acquisitions (net of cash acquired) Other
Net cash used in investing activities
Cash flows from financing activities: Net borrowings of short-term debt Proceeds from issuance of long-term debt Repayments of long-term debt Dividends paid Proceeds from exercise of stock options Payments for taxes related to net share settlement of equity awards Other
Net cash provided by (used in) financing activities Net increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at the beginning of the period Cash, cash equivalents and restricted cash at the end of the period
Three
Months
Ended
March
31,
2021
2020
$
66,487 $
63,751
(39,171)
(36,969)
(15,456)
(14,303)
(8,270)
(8,187)
222
206
(876)
(1,128)
(44)
(65)
2,892
3,305
2,177 (3,131)
(829) (84) -- (1,867)
1,288 (1,535)
(742) (613)
5 (1,597)
252
255
--
3,946
(3,049)
(1,008)
(656)
(652)
212
154
(3)
(16)
--
(4)
(3,244)
2,675
(2,219)
4,383
8,130
5,954
$
5,911 $
10,337
9
CVS
HEALTH
CORPORATION Condensed
Consolidated
Statements
of
Cash
Flows
(Unaudited)
In millions
Reconciliation of net income to net cash provided by operating activities: Net income Adjustments required to reconcile net income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Deferred income taxes and other noncash items Change in operating assets and liabilities, net of effects from acquisitions: Accounts receivable, net Inventories Other assets Accounts payable and pharmacy claims and discounts payable Health care costs payable and other insurance liabilities Other liabilities
Net cash provided by operating activities
Three
Months
Ended
March
31,
2021
2020
$
2,224 $
2,012
1,126 87
(166)
1,086 96 (35)
(2,093)
(2,715)
879
541
(223)
(1,119)
576
1,928
294
139
188
1,372
$
2,892 $
3,305
10
Non-GAAP
Financial
Information
The Company uses non-GAAP financial measures to analyze underlying business performance and trends. The Company believes that providing these non-GAAP financial measures enhances the Company's and investors' ability to compare the Company's past financial performance with its current performance. These non-GAAP financial measures are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. The Company's definitions of its non-GAAP financial measures may not be comparable to similarly titled 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 and other items, if any, that neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance.
For the periods covered in this press release, the following items are excluded from the non-GAAP financial measures described above, as applicable, because the Company believes they neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance: · The Company's acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of
accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company's 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, 2021 and 2020, 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. · 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 21 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 12, 13 and 20.
11
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 to segment adjusted operating income:
In millions
Operating income (loss) (GAAP measure) Amortization of intangible assets Acquisition-related integration costs
Adjusted operating income (loss) (1)
Health
Care
Benefits
$ 1,380 402 --
$ 1,782
Three
Months
Ended
March
31,
2021
Pharmacy
Services
Retail/
LTC
Corporate/
Other
Intersegment
Eliminations
$ 1,452 $ 1,265 $
(345) $
(175)
55
129
1
--
--
--
41
--
$ 1,507 $ 1,394 $
(303) $
(175)
Consolidated
Totals
$
3,577
587
41
$
4,205
In millions
Operating income (loss) (GAAP measure) Amortization of intangible assets Acquisition-related integration costs
Adjusted operating income (loss) (1)
Health
Care
Benefits
$ 1,095 396 --
$ 1,491
Three
Months
Ended
March
31,
2020
Pharmacy
Services
Retail/
LTC
Corporate/
Other
Intersegment
Eliminations
$ 1,114 $ 1,780 $
(355) $
(176)
67
122
1
--
--
--
69
--
$ 1,181 $ 1,902 $
(285) $
(176)
Consolidated
Totals
$
3,458
586
69
$
4,113
12
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:
In millions, except per share amounts
Net income attributable to CVS Health (GAAP measure) Amortization of intangible assets Acquisition-related integration costs Tax impact of non-GAAP adjustments
Adjusted income attributable to CVS Health (2)
Weighted average diluted shares outstanding
Three
Months
Ended
March
31,
2021
Three
Months
Ended
March
31,
2020
Total
Company
Per
Common
Share
Total
Company
Per
Common
Share
$ 2,223 $
1.68 $ 2,007 $
1.53
587
0.44
586
0.45
41
0.03
69
0.05
(154)
(0.11)
(160)
(0.12)
$ 2,697 $
2.04 $ 2,502 $
1.91
1,322
1,312
13
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, which is defined as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance as further described in endnote (1). The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company's ability to compare past financial performance with current performance and analyze underlying business performance and trends.
The following is a reconciliation of financial measures of the Company's segments to the consolidated totals:
In millions
Health
Care
Benefits
Pharmacy Services
(a)
Retail/
LTC
Corporate/
Other
Intersegment Eliminations
Consolidated
Totals
Three
Months
Ended
March 31, 2021
Total revenues
$ 20,483 $ 36,321 $ 23,274 $
135 $
(11,116) $
69,097
Adjusted operating income (loss) (1)
1,782
1,507
1,394
(303)
(175)
4,205
March 31, 2020
Total revenues
19,198
34,983 22,749
90
(10,265)
66,755
Adjusted operating income (loss) (1)
1,491
1,181
1,902
(285)
(176)
4,113
_____________________________________________
(a) Total revenues of the Pharmacy Services segment include approximately $3.4 billion of retail co-payments in each of the three-month periods ended March 31, 2021 and 2020.
14
Supplemental
Information (Unaudited)
Health
Care
Benefits
Segment
The following table summarizes the Health Care Benefits segment's performance for the respective periods:
In millions, except percentages and basis points ("bps")
Revenues: Premiums Services Net investment income Total revenues
Benefit costs MBR (Benefit costs as a % of premium revenues) (5)
Operating expenses Operating expenses as a % of total revenues
Operating income Operating income as a % of total revenues
Adjusted operating income (1) Adjusted operating income as a % of total revenues
Premium revenues (by business): Government Commercial
Three
Months
Ended
March
31,
2021
2020
Change
$
%
$
18,942 $
17,621 $ 1,321
7.5 %
1,393
1,484
(91)
(6.1)%
148
93
55
59.1 %
20,483
19,198
1,285
6.7 %
15,757
14,516
1,241
8.5 %
83.2 %
82.4 %
80 bps
$
3,346 $
3,587 $ (241)
(6.7)%
16.3 %
18.7 %
$
1,380 $
1,095 $ 285
26.0 %
6.7 %
5.7 %
$
1,782 $
1,491 $ 291
19.5 %
8.7 %
7.8 %
$
13,917 $
12,469 $ 1,448
11.6 %
5,025
5,152
(127)
(2.5)%
The following table summarizes the Health Care Benefits segment's medical membership for the respective periods:
In thousands
Medical membership: (6) Commercial Medicare Advantage Medicare Supplement Medicaid
Total medical membership
March
31,
2021
Insured
ASC
Total
December
31,
2020
Insured
ASC
Total
March
31,
2020
Insured
ASC
Total
3,201 2,874 1,146 2,184 9,405
13,584 -- -- 637
14,221
16,785 2,874 1,146 2,821 23,626
3,258 2,705 1,082 2,100 9,145
13,644 -- -- 623
14,267
16,902 2,705 1,082 2,723 23,412
3,372 2,584
913 1,835 8,704
14,206 -- -- 552
14,758
17,578 2,584
913 2,387 23,462
Supplemental
membership
information: Medicare Prescription Drug Plan (standalone)
5,694
5,490
5,624
15
Supplemental
Information (Unaudited)
The following table shows the components of the change in health care costs payable during the three months ended March 31, 2021 and 2020:
Three
Months
Ended
March
31,
In millions
2021
2020
Health care costs payable, beginning of period
$
7,936 $
6,879
Less: Reinsurance recoverables
10
5
Health care costs payable, beginning of period, net
7,926
6,874
Acquisition
--
412
Add: Components of incurred health care costs
Current year Prior years (a)
16,291 (652)
14,764 (464)
Total incurred health care costs (b)
15,639
14,300
Less: Claims paid
Current year
9,538
8,773
Prior years
5,767
5,242
Total claims paid
15,305
14,015
Add: Premium deficiency reserve
7
10
Health care costs payable, end of period, net
8,267
7,581
Add: Reinsurance recoverables
5
4
Health care costs payable, end of period
$
8,272 $
7,585
_____________________________________________
(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, 2021 and 2020 in the table above exclude (i) $7 million and $10 million, respectively, related to a
premium deficiency reserve related to the Company's Medicaid products, (ii) $13 million and $9 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) $45 million and $68 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.
The following table summarizes the Health Care Benefits segment's days claims payable for the respective periods:
Days Claims Payable (10)
March
31,
2021 48
December
31,
2020 48
March
31,
2020 48
16
Supplemental
Information (Unaudited)
Pharmacy
Services
Segment
The following table summarizes the Pharmacy Services segment's performance for the respective periods:
In millions, except percentages
Revenues: Products Services
Total revenues Cost of products sold Gross profit (11)
Gross margin (Gross profit as a % of total revenues) (11)
Operating expenses Operating expenses as a % of total revenues
Operating income Operating income as a % of total revenues
Adjusted operating income (1) Adjusted operating income as a % of total revenues
Revenues (by distribution channel): Pharmacy network (8) Mail choice (9) Other
Pharmacy claims processed: (4) (7) Total Pharmacy network (8) Mail choice (9)
Generic dispensing rate: (4) (12) Total Pharmacy network (8) Mail choice (9)
Three
Months
Ended
March
31,
2021
2020
$
36,067 $
34,746 $
254
237
36,321 34,523 1,798
34,983 33,503 1,480
5.0 %
4.2 %
$
346 $
366 $
1.0 %
1.0 %
$
1,452 $
1,114 $
4.0 %
3.2 %
$
1,507 $
1,181 $
4.1 %
3.4 %
$
21,893 $
21,100 $
14,248
13,674
180
209
535.9 455.4 80.5
541.4 461.1 80.3
88.1 % 88.5 % 85.7 %
89.0 % 89.5 % 85.7 %
Change
$
%
1,321 17
1,338 1,020
318
3.8 % 7.2 % 3.8 % 3.0 % 21.5 %
(20)
(5.5)%
338
30.3 %
326
27.6 %
793
3.8 %
574
4.2 %
(29)
(13.9)%
(5.5)
(1.0)%
(5.7)
(1.2)%
0.2
0.2 %
17
Supplemental
Information (Unaudited)
Retail/LTC
Segment
The following table summarizes the Retail/LTC segment's performance for the respective periods:
In millions, except percentages
Revenues: Products Services Net investment income Total revenues
Cost of products sold Gross profit (11)
Gross margin (Gross profit as a % of total revenues) (11)
Operating expenses Operating expenses as a % of total revenues
Operating income Operating income as a % of total revenues
Adjusted operating income (1) Adjusted operating income as a % of total revenues
Revenues (by major goods/service lines): Pharmacy Front Store Other Net investment income
Prescriptions filled (4) (7) Same store sales increase (decrease): (13)
Total Pharmacy Front Store Prescription volume (4) Generic dispensing rate (4) (12)
Three
Months
Ended
March
31,
2021
2020
$
22,394 $
22,522 $
834
227
46
--
23,274 17,042 6,232
22,749 16,578 6,171
26.8 %
27.1 %
$
4,967 $
4,391 $
21.3 %
19.3 %
$
1,265 $
1,780 $
5.4 %
7.8 %
$
1,394 $
1,902 $
6.0 %
8.4 %
$
17,885 $
17,355 $
4,642
5,208
701
186
46
--
375.4
375.1
0.4 % 4.1 % (11.4) % 1.0 % 87.4 %
9.0 % 9.3 % 8.0 % 9.8 % 89.3 %
Change
$
%
(128) 607 46 525 464 61
(0.6)% 267.4 % 100.0 %
2.3 % 2.8 % 1.0 %
576 (515) (508)
13.1 % (28.9)% (26.7)%
530 (566) 515
46 0.3
3.1 % (10.9)% 276.9 % 100.0 %
0.1 %
18
Supplemental
Information (Unaudited)
Corporate/Other
Segment
The following table summarizes the Corporate/Other segment's performance for the respective periods:
In millions, except percentages
Revenues: Premiums Services Net investment income Total revenues
Cost of products sold Benefit costs Operating expenses Operating loss Adjusted operating loss (1)
Three
Months
Ended
March
31,
2021
2020
$
18 $
19 $
14
2
103
69
135
90
8
--
45
68
427
377
(345)
(355)
(303)
(285)
Change
$
%
(1)
(5.3)%
12
600.0 %
34
49.3 %
45
50.0 %
8
100.0 %
(23)
(33.8)%
50
13.3 %
10
2.8 %
(18)
(6.3)%
19
Adjusted
Earnings
Per
Share
Guidance (Unaudited)
The following reconciliations 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 Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021. 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.
In millions, except per share amounts
Net income attributable to CVS Health (GAAP measure) Amortization of intangible assets Acquisition-related integration costs Tax impact of non-GAAP adjustments
Adjusted income attributable to CVS Health (2)
Weighted average diluted shares outstanding
Year
Ending
December
31,
2021
Low
High
Total
Company
Per
Common
Share
Total
Company
Per
Common
Share
$ 8,295 $
6.24 $ 8,455 $
6.36
2,300
1.73
2,300
1.73
130
0.10
130
0.10
(675)
(0.51)
(675)
(0.51)
$ 10,050 $
7.56 $ 10,210 $
7.68
1,330
1,330
20
Endnotes
(1) The Company defines adjusted operating income as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance, such as acquisition-related integration costs. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company's ability to compare past financial performance with current performance and analyze underlying business performance and trends. 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) Adjusted EPS is calculated by dividing 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 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 integration costs and 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) Enterprise prescriptions include prescriptions dispensed through the Company's retail pharmacies, long-term care pharmacies, and mail order pharmacies as well as prescription claims managed through our pharmacy benefits manager, with an elimination for managed prescription claims filled through CVS Health dispensing channels. Management uses this metric to analyze the total prescription volume across the Company including variances between actual prescriptions 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 prescription volume on total revenues and operating results.
(4) 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.
(5) Medical benefit ratio is calculated as benefit costs divided by premium revenues and represents the percentage of premium revenues spent on medical benefits for the Company'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-overperiod results. MBR provides management and investors with information useful in assessing the operating results of the Company's insured Health Care Benefits products.
(6) Medical membership represents the number of members covered by the Company'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 segment total revenues and operating results.
(7) Total pharmacy claims processed represents the number of prescription claims processed through our pharmacy benefits manager and dispensed by either our retail network pharmacies or our own mail and specialty pharmacies. Prescriptions filled represents the number of prescriptions dispensed through the Retail/LTC segment's pharmacies. 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.
(8) Pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company's retail pharmacies and longterm care pharmacies, but excluding Maintenance Choice activity, which is included within the
21
mail choice category. Maintenance Choice 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.
(9) Mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company's retail pharmacies under the Maintenance Choice program.
(10) Days claims payable is calculated by dividing the health care costs payable at the end of each quarter by the average health care costs per day during such quarter. Management and investors use this metric as an indicator of the adequacy of the Company's health care costs payable liability at the end of each quarter and as an indicator of changes in such adequacy over time.
(11) Gross profit is calculated as the segment's total revenues less its cost of products sold. 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 Pharmacy Services and Retail/LTC segments.
(12) Generic dispensing rate is calculated by dividing the segment's generic drug prescriptions processed or filled by its total prescriptions processed or 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.
(13) 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, expressed as a percentage that indicates the increase or decrease relative to the comparable prior period. Same store metrics exclude revenues from MinuteClinic® and revenues and prescriptions from LTC 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.
22
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