WOONSOCKET, R.I., Feb. 12,
2020 /PRNewswire/ --
Fourth Quarter Highlights:
- Total revenues increased 22.9% to $66.9 billion
- GAAP operating income increased to $3.0 billion
- Adjusted operating income (1) increased 1.3% to
$3.8 billion
- GAAP diluted earnings per share from continuing operations
of $1.33
- Adjusted EPS (2) of $1.73
Full Year Highlights:
- Total revenues increased 32.0% to $256.8 billion
- GAAP operating income increased to $12.0 billion
- Adjusted operating income (1) increased 36.2% to
$15.3 billion
- GAAP diluted earnings per share from continuing operations
of $5.08
- Adjusted EPS (2) of $7.08
- Generated cash flow from operations of $12.8 billion
- Net repayments of long-term debt of $4.7 billion
2020 Full Year Guidance:
- GAAP operating income in the range of $12.8 billion to $13.0
billion
- Adjusted operating income (1) in the range of
$15.5 billion to $15.8 billion
- GAAP diluted EPS from continuing operations in the range of
$5.47 to $5.60
- Adjusted EPS (2) in the range of $7.04 to $7.17
- Cash flow from operations in the range of $10.5 billion to $11.0
billion
CVS Health Corporation (NYSE: CVS) today announced operating
results for the three months and year ended December 31,
2019.
"As we work to transform the way health care is delivered to
millions of Americans, we are driving continued business
performance and generating positive momentum across the enterprise.
Our fourth quarter and full-year financial results reflect strong
financial and operational execution and a successful first year of
integrating the Aetna business. We're using our unmatched
capabilities to create a higher-quality, simpler and more
affordable health care experience, which benefits patients, clients
and consumers and positions the company for continued success,"
said President and Chief Executive Officer Larry Merlo.
Merlo continued, "As a result of the significant progress we
made in 2019, and meeting or exceeding our expectations for the
year, we raised our outlook for 2020. Client, patient and consumer
reception to our innovative product and service offerings,
including our HealthHUB® locations, has been positive.
We are confident that we're on the right path to delivering
significant value for all our stakeholders, which is a testament to
the efforts of the nearly 300,000 CVS Health employees who work
tirelessly to deliver these results while staying true to our
purpose of helping people on their path to better health."
___________________________
|
|
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" on pages 11 through 12 and endnotes (1)
through (4) on page 26 for explanations of non-GAAP financial
measures presented in this press release. See pages 13 through 17
and 24 through 25 for reconciliations of each non-GAAP financial
measure to the most directly comparable GAAP financial
measure.
|
Consolidated Fourth Quarter and Full Year Results
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
In millions, except per share amounts
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
Total
revenues
|
$
|
66,889
|
|
$
|
54,424
|
|
$
|
12,465
|
|
$
|
256,776
|
|
$
|
194,579
|
|
$
|
62,197
|
Operating
income
|
3,037
|
|
824
|
|
2,213
|
|
11,987
|
|
4,021
|
|
7,966
|
Adjusted operating
income (1)
|
3,766
|
|
3,719
|
|
47
|
|
15,339
|
|
11,261
|
|
4,078
|
Net income
(loss)
|
1,744
|
|
(421)
|
|
2,165
|
|
6,631
|
|
(596)
|
|
7,227
|
Diluted earnings
(loss) per share from continuing operations
|
$
|
1.33
|
|
$
|
(0.37)
|
|
$
|
1.70
|
|
$
|
5.08
|
|
$
|
(0.57)
|
|
$
|
5.65
|
Adjusted EPS
(2)
|
$
|
1.73
|
|
$
|
2.14
|
|
$
|
(0.41)
|
|
$
|
7.08
|
|
$
|
7.08
|
|
$
|
—
|
Enterprise
prescriptions (5) (6)
|
708.2
|
|
685.2
|
|
23.0
|
|
2,757.7
|
|
2,658.0
|
|
99.7
|
- Total revenues and adjusted revenues (3) increased
22.9% and 23.1%, respectively, for the three months ended
December 31, 2019 compared to the
prior year. Total revenues and adjusted revenues increased 32.0%
and 32.3%, respectively, for the year ended December 31, 2019 compared to the prior year.
Revenue growth in both periods was primarily due to the impact of
the acquisition (the "Aetna Acquisition") of Aetna Inc. ("Aetna"),
which the Company acquired on November 28,
2018 (the "Aetna Acquisition Date"), as well as increased
volume and brand inflation in both the Pharmacy Services and
Retail/LTC segments. The revenue increase in both periods was
partially offset by continued price compression in the Pharmacy
Services segment, continued reimbursement pressure in the
Retail/LTC segment and an increased generic dispensing rate.
- Operating expenses increased 30.9% and 57.0% for the three
months and year ended December 31,
2019, respectively, compared to the prior year primarily due
to the impact of the Aetna Acquisition, including increased
intangible asset amortization. The increase for the year ended
December 31, 2019 was also due to the
$231 million of store rationalization
charges and the $205 million pre-tax
loss on the sale of the Company's Brazilian subsidiary, Drogaria
Onofre Ltda. ("Onofre"), both recorded in the year ended
December 31, 2019. The increase for
the three months ended December 31,
2019 was partially offset by lower acquisition-related
transaction and integration costs.
- Adjusted operating expenses (4) increased 35.2% and
52.9% for the three months and year ended December 31, 2019, respectively, compared to the
prior year primarily due to the addition of Aetna.
- Operating income increased $2.2
billion and $8.0 billion for
the three months and year ended December 31,
2019, respectively, compared to the prior year. The increase
in both periods was primarily due to the increase in adjusted
operating income described below and the absence of the goodwill
impairment charges recorded within the Retail/LTC segment in 2018,
partially offset by an increase in intangible asset amortization
primarily related to the Aetna Acquisition. The increase for the
three months ended December 31, 2019
was also due to lower acquisition-related transaction and
integration costs. The increase for the year ended December 31, 2019 was partially offset by the
absence of $536 million in interest
income on the proceeds from the financing for the Aetna Acquisition
recorded in the year ended December 31,
2018 and the year ended December 31,
2019 reflecting $231 million
of store rationalization charges and the $205 million pre-tax loss on the sale of
Onofre.
- Adjusted operating income increased 1.3% and 36.2% for the
three months and year ended December 31,
2019, respectively, compared to the prior year. The increase
in both periods was primarily due to the Aetna Acquisition as well
as increased volume and improved purchasing economics in the
Pharmacy Services and Retail/LTC segments, partially offset by
continued reimbursement pressure in the Retail/LTC segment and
continued price compression in the Pharmacy Services segment.
- Net income increased $2.2 billion
and $7.2 billion for the three months
and year ended December 31, 2019,
respectively, compared to the prior year primarily due to the
higher operating income described above, partially offset by higher
income tax expense associated with the increase in pre-tax income.
The increase for the year ended December 31,
2019 was also partially offset by higher interest expense
primarily due to financing activity associated with the Aetna
Acquisition and the assumption of Aetna's debt as of the Aetna
Acquisition Date.
- The effective income tax rate was 25.3% and 26.3% for the three
months and year ended December 31,
2019, respectively, compared to 513.7% and 142.4% for the
three months and year ended December 31,
2018, respectively. The decrease in the effective income tax
rate for both periods was primarily due to the absence of the
goodwill impairment charges recognized during 2018, the majority of
which were not deductible for income tax purposes.
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 and year ended December 31, 2019
and 2018 were as follows:
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
In millions
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
Total
revenues
|
$
|
37,073
|
|
$
|
34,899
|
|
$
|
2,174
|
|
$
|
141,491
|
|
$
|
134,736
|
|
$
|
6,755
|
Operating
income
|
1,348
|
|
1,339
|
|
9
|
|
4,735
|
|
4,607
|
|
128
|
Adjusted operating
income (1)
|
1,447
|
|
1,425
|
|
22
|
|
5,129
|
|
4,955
|
|
174
|
Total pharmacy claims
processed (6)
|
533.9
|
|
484.6
|
|
49.3
|
|
2,014.2
|
|
1,889.8
|
|
124.4
|
Pharmacy network
(7)
|
454.0
|
|
409.2
|
|
44.8
|
|
1,704.0
|
|
1,601.4
|
|
102.6
|
Mail choice
(8)
|
79.9
|
|
75.4
|
|
4.5
|
|
310.2
|
|
288.4
|
|
21.8
|
- Total revenues increased 6.2% and 5.0% for the three months and
year ended December 31, 2019,
respectively, compared to the prior year primarily due to brand
inflation as well as increased total pharmacy claims volume,
partially offset by continued price compression and an increased
generic dispensing rate.
- Total pharmacy claims processed increased 10.2% and 6.6%, on a
30-day equivalent basis, for the three months and year ended
December 31, 2019, respectively,
compared to the prior year primarily driven by net new business and
the continued adoption of Maintenance Choice®
offerings.
- Operating income and adjusted operating income increased 0.7%
and 1.5%, respectively, for the three months ended December 31, 2019 compared to the prior year.
Operating income and adjusted operating income increased 2.8% and
3.5%, respectively, for the year ended December 31, 2019 compared to the prior year. The
increase in operating income and adjusted operating income in both
periods was primarily driven by increased claims volume, the
addition of Aetna's mail order and specialty pharmacy operations
and improved purchasing economics, partially offset by continued
price compression. The increase in operating income in both periods
also was partially offset by increased intangible asset
amortization related to Aetna's mail order and specialty pharmacy
operations.
See the supplemental information on page 20 for additional
information regarding the performance of the Pharmacy Services
segment.
Retail/LTC Segment
The Retail/LTC segment fulfills prescriptions for medications,
provides patient care programs, sells a wide assortment of general
merchandise, provides health care services through walk-in medical
clinics and provides services to long-term care facilities. The
segment results for the three months and year ended
December 31, 2019 and 2018 were as follows:
|
Three Months
Ended December
31,
|
|
Year
Ended December
31,
|
In millions
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
Total
revenues
|
$
|
22,580
|
|
$
|
22,029
|
|
$
|
551
|
|
$
|
86,608
|
|
$
|
83,989
|
|
$
|
2,619
|
Operating income
(loss)
|
1,909
|
|
(270)
|
|
2,179
|
|
5,793
|
|
620
|
|
5,173
|
Adjusted operating
income (1)
|
2,031
|
|
2,124
|
|
(93)
|
|
6,705
|
|
7,403
|
|
(698)
|
Prescriptions filled
(6)
|
369.0
|
|
349.4
|
|
19.6
|
|
1,417.2
|
|
1,339.1
|
|
78.1
|
- Total revenues increased 2.5% and 3.1% for the three months and
year ended December 31, 2019,
respectively, compared to the prior year primarily driven by
increased prescription volume and brand inflation, partially offset
by continued reimbursement pressure and an increased generic
dispensing rate.
- Front store revenues represented approximately 22.7% and 22.4%
of total Retail/LTC segment revenues in the three months and year
ended December 31, 2019,
respectively. Front store revenues increased in the three months
and year ended December 31, 2019
compared to the prior year primarily driven by increases in health
and beauty product sales.
- Total prescription volume grew 5.6% and 5.8%, on a 30-day
equivalent basis, for the three months and year ended December 31, 2019, respectively, compared to the
prior year. The growth was driven primarily by (i) continued
adoption of patient care programs, (ii) collaborations with PBMs
and (iii) the Company's preferred status in a number of Medicare
Part D networks.
- Operating income increased $2.2
billion and $5.2 billion for
the three months and year ended December 31,
2019, respectively, compared to the prior year. The increase
was primarily due to the absence of the $2.2
billion and $6.1 billion of
pre-tax goodwill impairment charges related to the LTC reporting
unit recorded in the three months and year ended December 31, 2018, respectively, partially offset
by the decrease in adjusted operating income described below. The
increase for the year ended December 31,
2019 was also partially offset by the $231 million of store rationalization charges
primarily related to operating lease right-of-use asset impairment
charges in connection with the planned closure of underperforming
retail pharmacy stores and the $205
million pre-tax loss on the sale of Onofre, both recorded in
the year ended December 31,
2019.
- Adjusted operating income decreased 4.4% and 9.4% for the three
months and year ended December 31,
2019, respectively, compared to the prior year. The decrease
was primarily due to continued reimbursement pressure, partially
offset by increased prescription volume, an increased generic
dispensing rate and improved purchasing economics. The decrease for
the year ended December 31, 2019 was
also due to increased operating expenses primarily driven by the
investment of a portion of the savings from tax reform in wages and
benefits.
See the supplemental information on page 21 for additional
information regarding the performance of the Retail/LTC
segment.
Health Care Benefits Segment
The Health Care Benefits segment provides a full range of
insured and self-insured ("ASC") medical, pharmacy, dental and
behavioral health products and services. For periods prior to the
Aetna Acquisition Date, the Health Care Benefits segment was
comprised of the Company's SilverScript® Medicare
Part D prescription drug plan ("PDP") business. The segment
results for the three months and year ended December 31, 2019
and 2018 were as follows:
|
Three Months Ended December
31,
|
|
Year Ended December 31,
|
In millions, except
percentages
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Total
revenues
|
$
|
17,150
|
|
|
$
|
6,239
|
|
|
$
|
10,911
|
|
|
$
|
69,604
|
|
|
$
|
8,962
|
|
|
$
|
60,642
|
|
Operating
income
|
386
|
|
|
432
|
|
|
(46)
|
|
|
3,639
|
|
|
368
|
|
|
3,271
|
|
Adjusted operating
income (1)
|
779
|
|
|
590
|
|
|
189
|
|
|
5,202
|
|
|
528
|
|
|
4,674
|
|
Medical benefit ratio
("MBR") (a)
|
85.7
|
%
|
|
NM
|
|
|
|
|
84.2
|
%
|
|
NM
|
|
|
|
|
Medical
membership
|
|
|
|
|
|
|
22.9
|
|
|
22.1
|
|
|
0.8
|
|
______________________________
|
(a)
|
The Health Care
Benefits segment was comprised of the Company's SilverScript PDP
business for periods prior to the Aetna Acquisition Date.
Accordingly, the MBRs for the three months and year ended
December 31, 2018 are not meaningful ("NM") and are not
directly comparable to the MBRs for the three months and year ended
December 31, 2019.
|
- Total revenues increased $10.9
billion and $60.6 billion,
respectively, for the three months and year ended December 31, 2019 compared to the prior year
primarily due to the Aetna Acquisition.
- Operating income decreased $46
million and increased $3.3
billion for the three months and year ended December 31, 2019, respectively, compared to the
prior year primarily due to the Aetna Acquisition. Operating income
in both periods reflects increased intangible asset amortization
related to the Aetna Acquisition, which more than offset the
increases in adjusted operating income described below for the
three months ended December 31,
2019.
- Adjusted operating income increased $189
million and $4.7 billion for
the three months and year ended December 31,
2019, respectively, compared to the prior year primarily due
to the Aetna Acquisition.
- Medical membership as of December 31,
2019 of 22.9 million increased compared with September 30, 2019, reflecting increases in
Medicare, Medicaid and Commercial products.
- The Health Care Benefits segment experienced favorable
development of prior-periods' health care cost estimates in its
Commercial and Government businesses in the three months ended
December 31, 2019, primarily
attributable to third quarter 2019 performance.
- Prior years' health care costs payable estimates developed
favorably by $524 million during the
year ended December 31, 2019. 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 financial statements and does not directly
correspond to an increase in 2019 operating results.
See the supplemental information on page 22 for additional
information regarding the performance of the Health Care Benefits
segment.
2020 Full Year Guidance
The Company's full year 2020 consolidated GAAP operating income
is projected to be in the range of $12.8
billion to $13.0 billion and
full year 2020 adjusted operating income is projected to be in the
range of $15.5 billion to
$15.8 billion. Full year 2020 GAAP
diluted EPS from continuing operations is projected to be in the
range of $5.47 to $5.60, and full year 2020 Adjusted EPS is
projected to be in the range of $7.04
to $7.17.
The adjustments between GAAP operating income and GAAP diluted
EPS from continuing operations and adjusted operating income and
Adjusted EPS include, as applicable, adding back amortization of
intangible assets and integration costs related to the Aetna
Acquisition.
Teleconference and Webcast
The Company will be holding a conference call today for
investors at 8:00 a.m. (Eastern Time)
to discuss its fourth quarter and full year 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 employees are united around a common goal of becoming
the most consumer-centric health company in the world. We're
evolving based on changing consumer needs and meeting people where
they are, whether that's in the community at one of our nearly
10,000 local touchpoints, in the home, or in the palm of their
hand. Our newest offerings - from HealthHUB® locations
that are redefining what a pharmacy can be, to innovative programs
that help manage chronic conditions - are designed to create a
higher-quality, simpler and more affordable experience. Learn more
about how we're transforming health at
http://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 the information under the heading "2020
Full Year Guidance" and the related endnotes and reconciliations
and the information in Mr. Merlo's quoted statement. By their
nature, all forward-looking statements involve risks and
uncertainties. 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 section entitled "Cautionary Statement
Concerning Forward-Looking Statements" in our most recently filed
Annual Report on Form 10-K and in our most recently filed Quarterly
Report on Form 10-Q.
You are cautioned not to place undue reliance on CVS Health's
forward looking statements. These 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
or otherwise, as of any future date.
- Tables Follow -
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
Three Months Ended December
31,
|
|
Year Ended December 31,
|
In millions, except per share amounts
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$
|
49,213
|
|
$
|
47,875
|
|
$
|
185,236
|
|
$
|
183,910
|
Premiums
|
15,510
|
|
5,500
|
|
63,122
|
|
8,184
|
Services
|
1,960
|
|
874
|
|
7,407
|
|
1,825
|
Net investment
income
|
206
|
|
175
|
|
1,011
|
|
660
|
Total
revenues
|
66,889
|
|
54,424
|
|
256,776
|
|
194,579
|
Operating
costs:
|
|
|
|
|
|
|
|
Cost of products
sold
|
42,065
|
|
40,564
|
|
158,719
|
|
156,447
|
Benefit
costs
|
13,133
|
|
4,195
|
|
52,529
|
|
6,594
|
Goodwill
impairments
|
—
|
|
2,228
|
|
—
|
|
6,149
|
Operating
expenses
|
8,654
|
|
6,613
|
|
33,541
|
|
21,368
|
Total operating
costs
|
63,852
|
|
53,600
|
|
244,789
|
|
190,558
|
Operating
income
|
3,037
|
|
824
|
|
11,987
|
|
4,021
|
Interest
expense
|
734
|
|
733
|
|
3,035
|
|
2,619
|
Loss on early
extinguishment of debt
|
—
|
|
—
|
|
79
|
|
—
|
Other
income
|
(31)
|
|
(11)
|
|
(124)
|
|
(4)
|
Income before income
tax provision
|
2,334
|
|
102
|
|
8,997
|
|
1,406
|
Income tax
provision
|
590
|
|
524
|
|
2,366
|
|
2,002
|
Income (loss) from
continuing operations
|
1,744
|
|
(422)
|
|
6,631
|
|
(596)
|
Income from
discontinued operations, net of tax
|
—
|
|
1
|
|
—
|
|
—
|
Net income
(loss)
|
1,744
|
|
(421)
|
|
6,631
|
|
(596)
|
Net loss attributable
to noncontrolling interests
|
3
|
|
2
|
|
3
|
|
2
|
Net income (loss)
attributable to CVS Health
|
$
|
1,747
|
|
$
|
(419)
|
|
$
|
6,634
|
|
$
|
(594)
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share:
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations attributable to CVS Health
|
$
|
1.34
|
|
$
|
(0.37)
|
|
$
|
5.10
|
|
$
|
(0.57)
|
Income from
discontinued operations attributable to CVS Health
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Net income (loss)
attributable to CVS Health
|
$
|
1.34
|
|
$
|
(0.37)
|
|
$
|
5.10
|
|
$
|
(0.57)
|
Weighted
average basic shares outstanding
|
1,303
|
|
1,121
|
|
1,301
|
|
1,044
|
Diluted earnings
(loss) per share:
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations attributable to CVS Health
|
$
|
1.33
|
|
$
|
(0.37)
|
|
$
|
5.08
|
|
$
|
(0.57)
|
Income from
discontinued operations attributable to CVS Health
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Net income (loss)
attributable to CVS Health
|
$
|
1.33
|
|
$
|
(0.37)
|
|
$
|
5.08
|
|
$
|
(0.57)
|
Weighted
average diluted shares outstanding
|
1,310
|
|
1,121
|
|
1,305
|
|
1,044
|
Dividends declared
per share
|
$
|
0.50
|
|
$
|
0.50
|
|
$
|
2.00
|
|
$
|
2.00
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
|
At December
31,
|
In millions
|
2019
|
|
2018
|
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
5,683
|
|
$
|
4,059
|
Investments
|
2,373
|
|
2,522
|
Accounts receivable,
net
|
19,617
|
|
17,631
|
Inventories
|
17,516
|
|
16,450
|
Other current
assets
|
5,113
|
|
4,581
|
Total current
assets
|
50,302
|
|
45,243
|
Long-term
investments
|
17,314
|
|
15,732
|
Property and
equipment, net
|
12,044
|
|
11,349
|
Operating lease
right-of-use assets
|
20,860
|
|
—
|
Goodwill
|
79,749
|
|
78,678
|
Intangible assets,
net
|
33,121
|
|
36,524
|
Separate accounts
assets
|
4,459
|
|
3,884
|
Other
assets
|
4,600
|
|
5,046
|
Total
assets
|
$
|
222,449
|
|
$
|
196,456
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
10,492
|
|
$
|
8,925
|
Pharmacy claims and
discounts payable
|
13,601
|
|
11,365
|
Health care costs
payable
|
6,879
|
|
6,147
|
Policyholders'
funds
|
2,991
|
|
2,939
|
Accrued
expenses
|
12,133
|
|
10,711
|
Other insurance
liabilities
|
1,830
|
|
1,937
|
Current portion of
operating lease liabilities
|
1,596
|
|
—
|
Short-term
debt
|
—
|
|
720
|
Current portion of
long-term debt
|
3,781
|
|
1,265
|
Total current
liabilities
|
53,303
|
|
44,009
|
Long-term operating
lease liabilities
|
18,926
|
|
—
|
Long-term
debt
|
64,699
|
|
71,444
|
Deferred income
taxes
|
7,294
|
|
7,677
|
Separate accounts
liabilities
|
4,459
|
|
3,884
|
Other long-term
insurance liabilities
|
7,436
|
|
8,119
|
Other long-term
liabilities
|
2,162
|
|
2,780
|
Total
liabilities
|
158,279
|
|
137,913
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
—
|
Common stock and
capital surplus
|
45,972
|
|
45,440
|
Treasury
stock
|
(28,235)
|
|
(28,228)
|
Retained
earnings
|
45,108
|
|
40,911
|
Accumulated other
comprehensive income
|
1,019
|
|
102
|
Total CVS Health
shareholders' equity
|
63,864
|
|
58,225
|
Noncontrolling
interests
|
306
|
|
318
|
Total shareholders'
equity
|
64,170
|
|
58,543
|
Total liabilities and
shareholders' equity
|
$
|
222,449
|
|
$
|
196,456
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Year Ended December 31,
|
In millions
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
Cash receipts from
customers
|
$
|
248,393
|
|
$
|
186,519
|
Cash paid for
inventory and prescriptions dispensed by retail network
pharmacies
|
(149,655)
|
|
(148,981)
|
Insurance benefits
paid
|
(52,242)
|
|
(6,897)
|
Cash paid to other
suppliers and employees
|
(28,932)
|
|
(17,234)
|
Interest and
investment income received
|
955
|
|
644
|
Interest
paid
|
(2,954)
|
|
(2,803)
|
Income taxes
paid
|
(2,717)
|
|
(2,383)
|
Net cash provided by
operating activities
|
12,848
|
|
8,865
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Proceeds from sales
and maturities of investments
|
7,049
|
|
817
|
Purchases of
investments
|
(7,534)
|
|
(692)
|
Purchases of property
and equipment
|
(2,457)
|
|
(2,037)
|
Proceeds from
sale-leaseback transaction
|
5
|
|
—
|
Acquisitions (net of
cash acquired)
|
(444)
|
|
(42,226)
|
Proceeds from sale of
subsidiary and other assets
|
—
|
|
832
|
Other
|
42
|
|
21
|
Net cash used in
investing activities
|
(3,339)
|
|
(43,285)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Net repayments of
short-term debt
|
(720)
|
|
(556)
|
Proceeds from
issuance of long-term debt
|
3,736
|
|
44,343
|
Repayments of
long-term debt
|
(8,336)
|
|
(5,522)
|
Derivative
settlements
|
(25)
|
|
446
|
Dividends
paid
|
(2,603)
|
|
(2,038)
|
Proceeds from
exercise of stock options
|
210
|
|
242
|
Payments for taxes
related to net share settlement of equity awards
|
(112)
|
|
(97)
|
Other
|
—
|
|
1
|
Net cash provided by
(used in) financing activities
|
(7,850)
|
|
36,819
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
—
|
|
(4)
|
Net increase in cash,
cash equivalents and restricted cash
|
1,659
|
|
2,395
|
Cash, cash
equivalents and restricted cash at the beginning of the
period
|
4,295
|
|
1,900
|
Cash, cash
equivalents and restricted cash at the end of the period
|
$
|
5,954
|
|
$
|
4,295
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Year Ended December 31,
|
In millions
|
2019
|
|
2018
|
Reconciliation of net
income (loss) to net cash provided by operating
activities:
|
|
|
|
Net income
(loss)
|
$
|
6,631
|
|
$
|
(596)
|
Adjustments required
to reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
4,371
|
|
2,718
|
Goodwill
impairments
|
—
|
|
6,149
|
Stock-based
compensation
|
453
|
|
280
|
Loss on sale of
subsidiary
|
205
|
|
86
|
Loss on early
extinguishment of debt
|
79
|
|
—
|
Deferred income
taxes
|
(654)
|
|
87
|
Other noncash
items
|
264
|
|
253
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
Accounts receivable,
net
|
(2,158)
|
|
(1,139)
|
Inventories
|
(1,075)
|
|
(1,153)
|
Other
assets
|
(614)
|
|
(3)
|
Accounts payable and
pharmacy claims and discounts payable
|
3,550
|
|
2,329
|
Health care costs
payable and other insurance liabilities
|
320
|
|
(311)
|
Other
liabilities
|
1,476
|
|
165
|
Net cash provided by
operating activities
|
$
|
12,848
|
|
$
|
8,865
|
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
measurements reported by other companies.
Non-GAAP financial measures such as adjusted operating income,
adjusted earnings per share (EPS), adjusted income from continuing
operations attributable to CVS Health, adjusted revenues and
adjusted operating expenses 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 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 and year ended December 31, 2019 and 2018, acquisition-related
transaction and integration costs relate to the Aetna Acquisition.
During the year ended December 31,
2018, acquisition-related integration costs also relate to
the acquisition of Omnicare, Inc. The acquisition-related
transaction and integration costs are reflected in the Company's
condensed consolidated statements of operations in operating
expenses primarily within the Corporate/Other segment.
- During the year ended December 31,
2019, the store rationalization charges relate to the
planned closure of 46 underperforming retail pharmacy stores during
the second quarter of 2019 and the planned closure of 22
underperforming retail pharmacy stores during the first quarter of
2020. The store rationalization charges primarily relate to
operating lease right-of-use asset impairment charges and are
reflected in the Company's condensed consolidated statements of
operations in operating expenses within the Retail/LTC
segment.
- During the year ended December 31,
2019, the loss on divestiture of subsidiary represents the
pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily
relates to the elimination of the cumulative translation adjustment
from accumulated other comprehensive income. During the year ended
December 31, 2018, the loss on
divestiture of subsidiary represents the pre-tax loss on the sale
of the Company's RxCrossroads subsidiary for $725 million on January 2,
2018. The losses on divestiture of subsidiary are reflected
in the Company's condensed consolidated statements of operations in
operating expenses within the Retail/LTC segment.
- During the year ended December 31,
2019, the loss on early extinguishment of debt relates to
the Company's repayment of $4.0
billion of its outstanding senior notes in August 2019 pursuant to its tender offers for
such senior notes.
- During the three months and year ended December 31, 2018, the goodwill impairment
charges relate to the LTC reporting unit within the Retail/LTC
segment.
- During the three months and year ended December 31, 2018, impairment of long-lived
assets primarily relates to the impairment of property and
equipment within the Retail/LTC segment and is reflected in
operating expenses in the Company's condensed consolidated
statements of operations.
- During the three months and year ended December 31, 2018, the Company recorded interest
expense of $280 million and
$1.4 billion, respectively, related
to (i) bridge financing costs, (ii) interest expense on the
$40 billion of unsecured senior notes
issued on March 9, 2018 (the "2018
Notes") and (iii) interest expense on the $5
billion term loan facility. The interest expense was reduced
by related interest income of $83
million and $536 million,
during the three months and year ended December 31, 2018, respectively, on the proceeds
of the 2018 Notes. All amounts are for the periods prior to the
close of the Aetna Acquisition and were recorded within the
Corporate/Other segment.
- The corresponding tax benefit or expense related to the items
excluded from adjusted income from continuing operations
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) through (4) for definitions of non-GAAP
financial measures. Reconciliations of each of these non-GAAP
financial measures to the most directly comparable GAAP financial
measure are presented on pages 13 through 17 and 24 through 25.
Reconciliations of
Non-GAAP Financial Measures to the Most Directly Comparable GAAP
Financial Measures
|
|
Adjusted Operating
Income
|
(Unaudited)
|
|
The following are
reconciliations of operating income to adjusted operating
income:
|
|
|
Three Months Ended
December 31, 2019
|
In millions
|
Pharmacy Services
|
|
Retail/ LTC
|
|
Health Care Benefits
|
|
Corporate/ Other
|
|
Intersegment Eliminations
|
|
Consolidated Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
1,348
|
|
$
|
1,909
|
|
$
|
386
|
|
$
|
(430)
|
|
$
|
(176)
|
|
$
|
3,037
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
99
|
|
122
|
|
393
|
|
—
|
|
—
|
|
614
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
—
|
|
115
|
|
—
|
|
115
|
Adjusted operating
income (loss) (1)
|
$
|
1,447
|
|
$
|
2,031
|
|
$
|
779
|
|
$
|
(315)
|
|
$
|
(176)
|
|
$
|
3,766
|
|
|
|
Three Months Ended
December 31, 2018
|
In millions
|
Pharmacy Services
|
|
Retail/ LTC
|
|
Health Care Benefits
|
|
Corporate/ Other
|
|
Intersegment Eliminations
|
|
Consolidated Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
1,339
|
|
$
|
(270)
|
|
$
|
432
|
|
$
|
(466)
|
|
$
|
(211)
|
|
$
|
824
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
86
|
|
123
|
|
158
|
|
—
|
|
—
|
|
367
|
Acquisition-related
transaction and integration costs
|
—
|
|
—
|
|
—
|
|
340
|
|
—
|
|
340
|
Goodwill
impairment
|
—
|
|
2,228
|
|
—
|
|
—
|
|
—
|
|
2,228
|
Impairment of
long-lived assets
|
—
|
|
43
|
|
—
|
|
—
|
|
—
|
|
43
|
Interest income on
financing for the Aetna Acquisition
|
—
|
|
—
|
|
—
|
|
(83)
|
|
—
|
|
(83)
|
Adjusted operating
income (loss) (1)
|
$
|
1,425
|
|
$
|
2,124
|
|
$
|
590
|
|
$
|
(209)
|
|
$
|
(211)
|
|
$
|
3,719
|
|
Year Ended
December 31, 2019
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health
Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
4,735
|
|
$
|
5,793
|
|
$
|
3,639
|
|
$
|
(1,483)
|
|
$
|
(697)
|
|
$
|
11,987
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
394
|
|
476
|
|
1,563
|
|
3
|
|
—
|
|
2,436
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
—
|
|
480
|
|
—
|
|
480
|
Store rationalization
charges
|
—
|
|
231
|
|
—
|
|
—
|
|
—
|
|
231
|
Loss on divestiture
of subsidiary
|
—
|
|
205
|
|
—
|
|
—
|
|
—
|
|
205
|
Adjusted operating
income (loss) (1)
|
$
|
5,129
|
|
$
|
6,705
|
|
$
|
5,202
|
|
$
|
(1,000)
|
|
$
|
(697)
|
|
$
|
15,339
|
|
|
|
Year Ended
December 31, 2018
|
In millions
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Health
Care
Benefits
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income
(loss) (GAAP measure)
|
$
|
4,607
|
|
$
|
620
|
|
$
|
368
|
|
$
|
(805)
|
|
$
|
(769)
|
|
$
|
4,021
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
348
|
|
498
|
|
160
|
|
—
|
|
—
|
|
1,006
|
Acquisition-related
transaction and integration costs
|
—
|
|
7
|
|
—
|
|
485
|
|
—
|
|
492
|
Loss on divestiture of
subsidiary
|
—
|
|
86
|
|
—
|
|
—
|
|
—
|
|
86
|
Goodwill
impairments
|
—
|
|
6,149
|
|
—
|
|
—
|
|
—
|
|
6,149
|
Impairment of
long-lived assets
|
—
|
|
43
|
|
—
|
|
—
|
|
—
|
|
43
|
Interest income on
financing for the Aetna Acquisition
|
—
|
|
—
|
|
—
|
|
(536)
|
|
—
|
|
(536)
|
Adjusted operating
income (loss) (1)
|
$
|
4,955
|
|
$
|
7,403
|
|
$
|
528
|
|
$
|
(856)
|
|
$
|
(769)
|
|
$
|
11,261
|
Adjusted Earnings
Per Share
|
(Unaudited)
|
|
The following are
reconciliations of income (loss) from continuing operations
attributable to CVS Health to adjusted income from continuing
operations attributable to CVS Health and calculations of GAAP
diluted EPS from continuing operations and Adjusted EPS:
|
|
|
Three Months
Ended
December 31, 2019
|
|
Three Months
Ended
December 31, 2018
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Income (loss) from
continuing operations (GAAP measure)
|
$
|
1,744
|
|
|
|
$
|
(422)
|
|
|
Net loss attributable
to noncontrolling interests (GAAP measure)
|
3
|
|
|
|
2
|
|
|
Income allocable to
participating securities (GAAP measure)
|
(1)
|
|
|
|
—
|
|
|
Income (loss) from
continuing operations attributable to CVS Health (GAAP
measure)
|
1,746
|
|
$
|
1.33
|
|
(420)
|
|
$
|
(0.37)
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
614
|
|
0.47
|
|
367
|
|
0.32
|
Acquisition-related
transaction and integration costs
|
115
|
|
0.09
|
|
340
|
|
0.30
|
Goodwill
impairment
|
—
|
|
—
|
|
2,228
|
|
1.98
|
Impairment of
long-lived assets
|
—
|
|
—
|
|
43
|
|
0.04
|
Net interest expense
on financing for the Aetna Acquisition
|
—
|
|
—
|
|
197
|
|
0.17
|
Income tax
benefit
|
(204)
|
|
(0.16)
|
|
(338)
|
|
(0.30)
|
Income allocable to
participating securities, net of tax (a)
|
(1)
|
|
—
|
|
(2)
|
|
—
|
Adjusted income from
continuing operations attributable to CVS Health
(2)
|
$
|
2,270
|
|
$
|
1.73
|
|
$
|
2,415
|
|
$
|
2.14
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding (GAAP) (2)
|
|
|
1,310
|
|
|
|
1,121
|
Adjusted weighted
average diluted shares outstanding (non-GAAP)
(2)
|
|
|
1,310
|
|
|
|
1,126
|
__________________________________
|
(a)
|
Represents the
corresponding impact to income allocable to participating
securities, net of tax, related to the items in the table above
excluded from income (loss) from continuing operations attributable
to CVS Health in determining adjusted income from continuing
operations attributable to CVS Health and calculating Adjusted EPS
in the table above.
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Income (loss) from
continuing operations (GAAP measure)
|
$
|
6,631
|
|
|
|
$
|
(596)
|
|
|
Net loss attributable
to noncontrolling interests (GAAP measure)
|
3
|
|
|
|
2
|
|
|
Income allocable to
participating securities (GAAP measure)
|
(5)
|
|
|
|
(3)
|
|
|
Income (loss) from
continuing operations attributable to CVS Health (GAAP
measure)
|
6,629
|
|
$
|
5.08
|
|
(597)
|
|
$
|
(0.57)
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
2,436
|
|
1.87
|
|
1,006
|
|
0.96
|
Acquisition-related
transaction and integration costs
|
480
|
|
0.37
|
|
492
|
|
0.47
|
Store rationalization
charges
|
231
|
|
0.17
|
|
—
|
|
—
|
Loss on divestiture
of subsidiary
|
205
|
|
0.16
|
|
86
|
|
0.08
|
Loss on early
extinguishment of debt
|
79
|
|
0.06
|
|
—
|
|
—
|
Goodwill
impairments
|
—
|
|
—
|
|
6,149
|
|
5.87
|
Impairment of
long-lived assets
|
—
|
|
—
|
|
43
|
|
0.04
|
Net interest expense
on financing for the Aetna Acquisition
|
—
|
|
—
|
|
894
|
|
0.86
|
Income tax
benefit
|
(815)
|
|
(0.63)
|
|
(658)
|
|
(0.62)
|
Income allocable to
participating securities, net of tax (a)
|
(1)
|
|
—
|
|
(9)
|
|
(0.01)
|
Adjusted income from
continuing operations attributable to CVS Health
(2)
|
$
|
9,244
|
|
$
|
7.08
|
|
$
|
7,406
|
|
$
|
7.08
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding (GAAP) (2)
|
|
|
1,305
|
|
|
|
1,044
|
Adjusted weighted
average diluted shares outstanding (non-GAAP)
(2)
|
|
|
1,305
|
|
|
|
1,047
|
________________________________
|
(a)
|
Represents the
corresponding impact to income allocable to participating
securities, net of tax, related to the items in the table above
excluded from income (loss) from continuing operations attributable
to CVS Health in determining adjusted income from continuing
operations attributable to CVS Health and calculating Adjusted EPS
in the table above.
|
Adjusted Revenues
and Adjusted Operating Expenses
|
(Unaudited)
|
|
The following is a
reconciliation of total revenues to adjusted revenues:
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Total revenues (GAAP
measure)
|
$
|
66,889
|
|
$
|
54,424
|
|
$
|
256,776
|
|
$
|
194,579
|
Non-GAAP
adjustment:
|
|
|
|
|
|
|
|
Interest income on
financing for the Aetna Acquisition
|
—
|
|
(83)
|
|
—
|
|
(536)
|
Adjusted revenues
(3)
|
$
|
66,889
|
|
$
|
54,341
|
|
$
|
256,776
|
|
$
|
194,043
|
|
The following is a
reconciliation of operating expenses to adjusted operating
expenses:
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Operating expenses
(GAAP measure)
|
$
|
8,654
|
|
$
|
6,613
|
|
$
|
33,541
|
|
$
|
21,368
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
(614)
|
|
(367)
|
|
(2,436)
|
|
(1,006)
|
Acquisition-related
transaction and integration costs
|
(115)
|
|
(340)
|
|
(480)
|
|
(492)
|
Store rationalization
charges
|
—
|
|
—
|
|
(231)
|
|
—
|
Loss on divestiture
of subsidiary
|
—
|
|
—
|
|
(205)
|
|
(86)
|
Impairment of
long-lived assets
|
—
|
|
(43)
|
|
—
|
|
(43)
|
Adjusted operating
expenses (4)
|
$
|
7,925
|
|
$
|
5,863
|
|
$
|
30,189
|
|
$
|
19,741
|
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.
Effective for the first quarter of 2019, adjusted operating income
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). Segment financial information
for the three months and year ended December 31, 2018 has been
retrospectively adjusted to conform with the current period
presentation. 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.
Effective for the first quarter of 2019, the Company realigned
the composition of its segments to correspond with changes to its
operating model and reflect how the CODM reviews information and
manages the business. As a result of this realignment, the
Company's SilverScript PDP moved from the Pharmacy Services segment
to the Health Care Benefits segment. In addition, the Company moved
Aetna's mail order and specialty pharmacy operations from the
Health Care Benefits segment to the Pharmacy Services segment.
Segment financial information for the year ended December 31, 2018 was retrospectively adjusted to
reflect these changes as reported in Exhibit 99.2 to the Company's
Current Report on Form 8-K filed with the SEC on August 8, 2019. Segment financial information for
the three months ended December 31, 2018, has been
retrospectively adjusted to reflect these changes as shown
below:
|
Three Months Ended
December 31, 2018
|
In millions
|
Pharmacy Services
|
|
Retail/ LTC
|
|
Health Care Benefits
|
|
Corporate/ Other
|
|
Intersegment Eliminations
|
|
Consolidated Totals
|
Revenues, as
previously reported
|
$
|
34,890
|
|
$
|
22,029
|
|
$
|
5,549
|
|
$
|
131
|
|
$
|
(8,175)
|
|
$
|
54,424
|
Adjustments
|
9
|
|
—
|
|
690
|
|
—
|
|
(699)
|
|
—
|
Revenues, as
adjusted
|
$
|
34,899
|
|
$
|
22,029
|
|
$
|
6,239
|
|
$
|
131
|
|
$
|
(8,874)
|
|
$
|
54,424
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
(a)
|
$
|
32,648
|
|
$
|
15,588
|
|
$
|
147
|
|
$
|
—
|
|
$
|
(7,819)
|
|
$
|
40,564
|
Adjustments
|
611
|
|
—
|
|
—
|
|
—
|
|
(611)
|
|
—
|
Cost of products
sold, as adjusted
|
$
|
33,259
|
|
$
|
15,588
|
|
$
|
147
|
|
$
|
—
|
|
$
|
(8,430)
|
|
$
|
40,564
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit costs
(a)
|
$
|
406
|
|
$
|
—
|
|
$
|
3,873
|
|
$
|
22
|
|
$
|
(106)
|
|
$
|
4,195
|
Adjustments
|
(406)
|
|
—
|
|
406
|
|
—
|
|
—
|
|
—
|
Benefit costs, as
adjusted
|
$
|
—
|
|
$
|
—
|
|
$
|
4,279
|
|
$
|
22
|
|
$
|
(106)
|
|
$
|
4,195
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
as previously reported
|
$
|
341
|
|
$
|
4,483
|
|
$
|
1,253
|
|
$
|
575
|
|
$
|
(39)
|
|
$
|
6,613
|
Adjustments
|
(40)
|
|
—
|
|
128
|
|
—
|
|
(88)
|
|
—
|
Operating expenses,
as adjusted
|
$
|
301
|
|
$
|
4,483
|
|
$
|
1,381
|
|
$
|
575
|
|
$
|
(127)
|
|
$
|
6,613
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss), as previously reported
|
$
|
1,495
|
|
$
|
(270)
|
|
$
|
276
|
|
$
|
(466)
|
|
$
|
(211)
|
|
$
|
824
|
Adjustments
|
(156)
|
|
—
|
|
156
|
|
—
|
|
—
|
|
—
|
Operating income
(loss), as adjusted
|
1,339
|
|
(270)
|
|
432
|
|
(466)
|
|
(211)
|
|
824
|
Segment measure
adjustments
|
86
|
|
2,394
|
|
158
|
|
257
|
|
—
|
|
2,895
|
Adjusted operating
income (loss)
|
$
|
1,425
|
|
$
|
2,124
|
|
$
|
590
|
|
$
|
(209)
|
|
$
|
(211)
|
|
$
|
3,719
|
______________________
|
(a)
|
The total of cost of
products sold and benefit costs previously were reported as cost of
revenues.
|
The following is a
reconciliation of financial measures of the Company's segments to
the consolidated totals:
|
|
In millions
|
Pharmacy Services (a)
|
|
Retail/ LTC
|
|
Health Care Benefits
|
|
Corporate/ Other
|
|
Intersegment Eliminations (b)
|
|
Consolidated Totals
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
37,073
|
|
$
|
22,580
|
|
$
|
17,150
|
|
$
|
89
|
|
$
|
(10,003)
|
|
$
|
66,889
|
Operating income
(loss)
|
1,348
|
|
1,909
|
|
386
|
|
(430)
|
|
(176)
|
|
3,037
|
Adjusted operating
income (loss) (1)
|
1,447
|
|
2,031
|
|
779
|
|
(315)
|
|
(176)
|
|
3,766
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
34,899
|
|
22,029
|
|
6,239
|
|
131
|
|
(8,874)
|
|
54,424
|
Operating income
(loss)
|
1,339
|
|
(270)
|
|
432
|
|
(466)
|
|
(211)
|
|
824
|
Adjusted operating
income (loss) (1)
|
1,425
|
|
2,124
|
|
590
|
|
(209)
|
|
(211)
|
|
3,719
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
141,491
|
|
$
|
86,608
|
|
$
|
69,604
|
|
$
|
512
|
|
$
|
(41,439)
|
|
$
|
256,776
|
Operating income
(loss)
|
4,735
|
|
5,793
|
|
3,639
|
|
(1,483)
|
|
(697)
|
|
11,987
|
Adjusted operating
income (loss) (1)
|
5,129
|
|
6,705
|
|
5,202
|
|
(1,000)
|
|
(697)
|
|
15,339
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
134,736
|
|
83,989
|
|
8,962
|
|
606
|
|
(33,714)
|
|
194,579
|
Operating income
(loss)
|
4,607
|
|
620
|
|
368
|
|
(805)
|
|
(769)
|
|
4,021
|
Adjusted operating
income (loss) (1)
|
4,955
|
|
7,403
|
|
528
|
|
(856)
|
|
(769)
|
|
11,261
|
_____________________________
|
(a)
|
Total revenues of the
Pharmacy Services segment include approximately $2.6 billion of
retail co-payments for each of the three-month periods ended
December 31, 2019 and 2018, and $11.5 billion and $11.4
billion of retail co-payments for the years ended December 31, 2019
and 2018, respectively.
|
(b)
|
Intersegment
eliminations relate to intersegment revenue generating
activities that occur between the Pharmacy Services segment, the
Retail/LTC segment and/or the Health Care Benefits
segment.
|
Supplemental
Information
|
(Unaudited)
|
|
Pharmacy Services
Segment
|
|
The following table
summarizes the Pharmacy Services segment's performance for the
respective periods:
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
In millions, except
percentages
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$
|
36,890
|
|
|
$
|
34,792
|
|
|
$
|
140,946
|
|
|
$
|
134,285
|
|
Services
|
183
|
|
|
107
|
|
|
545
|
|
|
451
|
|
Total
revenues
|
37,073
|
|
|
34,899
|
|
|
141,491
|
|
|
134,736
|
|
Cost of products
sold
|
35,327
|
|
|
33,259
|
|
|
135,245
|
|
|
128,777
|
|
Operating
expenses
|
398
|
|
|
301
|
|
|
1,511
|
|
|
1,352
|
|
Operating expenses as
a % of total revenues
|
1.1
|
%
|
|
0.9
|
%
|
|
1.1
|
%
|
|
1.0
|
%
|
Operating
income
|
$
|
1,348
|
|
|
$
|
1,339
|
|
|
$
|
4,735
|
|
|
$
|
4,607
|
|
Operating income as a
% of total revenues
|
3.6
|
%
|
|
3.8
|
%
|
|
3.3
|
%
|
|
3.4
|
%
|
Adjusted operating
income (1)
|
$
|
1,447
|
|
|
$
|
1,425
|
|
|
$
|
5,129
|
|
|
$
|
4,955
|
|
Adjusted operating
income as a % of total revenues
|
3.9
|
%
|
|
4.1
|
%
|
|
3.6
|
%
|
|
3.7
|
%
|
Revenues (by
distribution channel):
|
|
|
|
|
|
|
|
Pharmacy network
(7) (10)
|
$
|
22,838
|
|
|
$
|
22,609
|
|
|
$
|
88,755
|
|
|
$
|
87,167
|
|
Mail choice (8)
(10)
|
14,075
|
|
|
12,175
|
|
|
52,141
|
|
|
47,049
|
|
Other
|
160
|
|
|
115
|
|
|
595
|
|
|
520
|
|
Pharmacy claims
processed: (6)
|
|
|
|
|
|
|
|
Total
|
533.9
|
|
|
484.6
|
|
|
2,014.2
|
|
|
1,889.8
|
|
Pharmacy network
(7)
|
454.0
|
|
|
409.2
|
|
|
1,704.0
|
|
|
1,601.4
|
|
Mail choice
(8)
|
79.9
|
|
|
75.4
|
|
|
310.2
|
|
|
288.4
|
|
Generic dispensing
rate: (6)
|
|
|
|
|
|
|
|
Total
|
87.8
|
%
|
|
86.9
|
%
|
|
88.2
|
%
|
|
87.3
|
%
|
Pharmacy network
(7)
|
88.3
|
%
|
|
87.5
|
%
|
|
88.7
|
%
|
|
87.9
|
%
|
Mail choice
(8)
|
85.2
|
%
|
|
83.6
|
%
|
|
85.1
|
%
|
|
83.9
|
%
|
Mail choice
penetration rate (6) (8)
|
15.0
|
%
|
|
15.6
|
%
|
|
15.4
|
%
|
|
15.3
|
%
|
Supplemental
Information
|
(Unaudited)
|
|
Retail/LTC
Segment
|
|
The following table
summarizes the Retail/LTC segment's performance for the respective
periods:
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
In millions, except
percentages
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$
|
22,326
|
|
|
$
|
21,793
|
|
|
$
|
85,729
|
|
|
$
|
83,175
|
|
Services
|
254
|
|
|
236
|
|
|
879
|
|
|
814
|
|
Total
revenues
|
22,580
|
|
|
22,029
|
|
|
86,608
|
|
|
83,989
|
|
Cost of products
sold
|
16,184
|
|
|
15,588
|
|
|
62,688
|
|
|
59,906
|
|
Goodwill
impairments
|
—
|
|
|
2,228
|
|
|
—
|
|
|
6,149
|
|
Operating
expenses
|
4,487
|
|
|
4,483
|
|
|
18,127
|
|
|
17,314
|
|
Operating expenses as
a % of total revenues
|
19.9
|
%
|
|
20.4
|
%
|
|
20.9
|
%
|
|
20.6
|
%
|
Operating income
(loss)
|
$
|
1,909
|
|
|
$
|
(270)
|
|
|
$
|
5,793
|
|
|
$
|
620
|
|
Operating income
(loss) as a % of total revenues
|
8.5
|
%
|
|
(1.2)
|
%
|
|
6.7
|
%
|
|
0.7
|
%
|
Adjusted operating
income (1)
|
$
|
2,031
|
|
|
$
|
2,124
|
|
|
$
|
6,705
|
|
|
$
|
7,403
|
|
Adjusted operating
income as a % of total revenues
|
9.0
|
%
|
|
9.6
|
%
|
|
7.7
|
%
|
|
8.8
|
%
|
Revenues (by major
goods/service lines):
|
|
|
|
|
|
|
|
Pharmacy
|
$
|
17,245
|
|
|
$
|
16,751
|
|
|
$
|
66,442
|
|
|
$
|
64,179
|
|
Front
Store
|
5,134
|
|
|
5,066
|
|
|
19,422
|
|
|
19,055
|
|
Other
|
201
|
|
|
212
|
|
|
744
|
|
|
755
|
|
Prescriptions filled
(6)
|
369.0
|
|
|
349.4
|
|
|
1,417.2
|
|
|
1,339.1
|
|
Revenues
increase:
|
|
|
|
|
|
|
|
Total
|
2.5
|
%
|
|
5.4
|
%
|
|
3.1
|
%
|
|
5.8
|
%
|
Pharmacy
|
2.9
|
%
|
|
7.2
|
%
|
|
3.5
|
%
|
|
7.8
|
%
|
Front
Store
|
1.3
|
%
|
|
1.7
|
%
|
|
1.9
|
%
|
|
1.5
|
%
|
Total prescription
volume increase (6)
|
5.6
|
%
|
|
8.6
|
%
|
|
5.8
|
%
|
|
8.8
|
%
|
Same store sales
increase: (9)
|
|
|
|
|
|
|
|
Total
|
3.2
|
%
|
|
5.7
|
%
|
|
3.7
|
%
|
|
6.0
|
%
|
Pharmacy
|
4.1
|
%
|
|
7.4
|
%
|
|
4.5
|
%
|
|
7.9
|
%
|
Front
Store
|
0.7
|
%
|
|
0.5
|
%
|
|
1.1
|
%
|
|
0.5
|
%
|
Prescription volume
(6)
|
6.9
|
%
|
|
9.1
|
%
|
|
7.2
|
%
|
|
9.1
|
%
|
Generic dispensing
rate (6)
|
87.5
|
%
|
|
86.7
|
%
|
|
88.3
|
%
|
|
87.5
|
%
|
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 December 31,
|
|
Year Ended December 31,
|
In millions, except
percentages
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$
|
—
|
|
|
$
|
164
|
|
|
$
|
—
|
|
|
$
|
164
|
|
Premiums
|
15,488
|
|
|
5,496
|
|
|
63,031
|
|
|
8,180
|
|
Services
|
1,521
|
|
|
531
|
|
|
5,974
|
|
|
560
|
|
Net investment
income
|
141
|
|
|
48
|
|
|
599
|
|
|
58
|
|
Total
revenues
|
17,150
|
|
|
6,239
|
|
|
69,604
|
|
|
8,962
|
|
Cost of products
sold
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
Benefit
costs
|
13,277
|
|
|
4,279
|
|
|
53,092
|
|
|
6,678
|
|
MBR (Benefit costs as
a % of premium revenues) (a)
|
85.7
|
%
|
|
NM
|
|
|
84.2
|
%
|
|
NM
|
|
Operating
expenses
|
$
|
3,487
|
|
|
$
|
1,381
|
|
|
$
|
12,873
|
|
|
$
|
1,769
|
|
Operating expenses as
a % of total revenues
|
20.3
|
%
|
|
22.1
|
%
|
|
18.5
|
%
|
|
19.7
|
%
|
Operating
income
|
$
|
386
|
|
|
$
|
432
|
|
|
$
|
3,639
|
|
|
$
|
368
|
|
Operating income as a
% of total revenues
|
2.3
|
%
|
|
6.9
|
%
|
|
5.2
|
%
|
|
4.1
|
%
|
Adjusted operating
income (1)
|
$
|
779
|
|
|
$
|
590
|
|
|
$
|
5,202
|
|
|
$
|
528
|
|
Adjusted operating
income as a % of total revenues
|
4.5
|
%
|
|
9.5
|
%
|
|
7.5
|
%
|
|
5.9
|
%
|
_________________________
|
(a)
|
The Health Care
Benefits segment consisted solely of the Company's SilverScript PDP
business for periods prior to the Aetna Acquisition Date.
Accordingly, the MBRs for the three months and year ended
December 31, 2018 are not meaningful ("NM") and are not
directly comparable to the MBRs for the three months and year ended
December 31, 2019.
|
The following table
summarizes the Health Care Benefits segment's medical membership
for the respective periods:
|
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
In thousands
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
Medical
membership:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
3,591
|
|
14,159
|
|
17,750
|
|
3,560
|
|
14,159
|
|
17,719
|
|
3,871
|
|
13,888
|
|
17,759
|
Medicare
Advantage
|
2,321
|
|
—
|
|
2,321
|
|
2,304
|
|
—
|
|
2,304
|
|
1,758
|
|
—
|
|
1,758
|
Medicare
Supplement
|
881
|
|
—
|
|
881
|
|
842
|
|
—
|
|
842
|
|
793
|
|
—
|
|
793
|
Medicaid
|
1,398
|
|
558
|
|
1,956
|
|
1,382
|
|
562
|
|
1,944
|
|
1,128
|
|
663
|
|
1,791
|
Total medical
membership
|
8,191
|
|
14,717
|
|
22,908
|
|
8,088
|
|
14,721
|
|
22,809
|
|
7,550
|
|
14,551
|
|
22,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
membership information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Prescription
Drug Plan (standalone) (a)
|
|
5,994
|
|
|
|
|
|
5,998
|
|
|
|
|
|
6,134
|
_______________________________
|
(a)
|
Represents the
Company's SilverScript PDP membership only. Excludes 2.5 million,
2.5 million and 2.3 million members as of December 31, 2019,
September 30, 2019 and December 31, 2018, respectively,
related to Aetna's standalone PDPs that were sold effective
December 31, 2018. The Company retained the financial results of
the divested plans through 2019 through a reinsurance agreement.
Subsequent to 2019, the Company will no longer retain the financial
results of the divested plans.
|
Supplemental
Information
|
(Unaudited)
|
|
The following table
shows the components of the change in health care costs payable
during the years ended December 31, 2019 and 2018:
|
|
In millions
|
2019
|
|
2018
|
Health care costs
payable, beginning of period
|
$
|
6,147
|
|
$
|
5
|
Less: Reinsurance
recoverables
|
4
|
|
—
|
Health care costs
payable, beginning of period, net
|
6,143
|
|
5
|
Acquisitions,
net
|
—
|
|
5,357
|
Reclassification from
pharmacy claims and discounts payable (a)
|
—
|
|
776
|
Add: Components of
incurred health care costs
|
|
|
|
Current
year
|
52,723
|
|
6,594
|
Prior years
(b)
|
(524)
|
|
(42)
|
Total incurred health
care costs (c)
|
52,199
|
|
6,552
|
Less: Claims
paid
|
|
|
|
Current
year
|
46,158
|
|
6,303
|
Prior
years
|
5,314
|
|
260
|
Total claims
paid
|
51,472
|
|
6,563
|
Add: Premium
deficiency reserve
|
4
|
|
16
|
Health care costs
payable, end of period, net
|
6,874
|
|
6,143
|
Add: Reinsurance
recoverables
|
5
|
|
4
|
Health care costs
payable, end of period
|
$
|
6,879
|
|
$
|
6,147
|
_________________________
|
(a)
|
As of the Aetna
Acquisition Date, the Company reclassified $776 million of the
Pharmacy Services segment's unpaid retail pharmacy claims to third
parties from pharmacy claims and discounts payable to health care
costs payable as the third party liability was incurred to support
the Health Care Benefits segment's insured members.
|
(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 year ended December 31, 2019 and 2018 in
the table above exclude (i) $4 million and $16 million,
respectively, related to a premium deficiency reserve related to
the Company's Medicaid products, (ii) $41 million and $4 million,
respectively, of benefit costs recorded in the Health Care Benefits
segment that are included in other insurance liabilities on the
condensed consolidated balance sheets and (iii) $285 million and
$22 million, respectively, of benefit costs recorded in the
Corporate/Other segment that are included in other insurance
liabilities on the condensed consolidated balance
sheets.
|
|
Days Claims
Payable
|
|
December 31,
2019
|
|
September 30,
2019
|
|
June 30,
2019
|
|
March 31,
2019
|
Days Claims Payable
(a)
|
48
|
|
51
|
|
48
|
|
45
|
|
|
|
|
|
|
|
|
______________________________
|
(a)
|
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
each respective quarter. Days claims payable is not directly
comparable to the legacy Aetna metric due to the addition of
approximately 6.0 million SilverScript standalone Medicare PDP
members to the Health Care Benefits segment in each period
presented as a result of the segment realignment in the first
quarter of 2019.
|
Adjusted Operating Income
Guidance
(Unaudited)
The following reconciliation of projected operating income to
projected adjusted operating income contains 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 section entitled
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K and in our most
recently filed Quarterly Report on Form 10-Q. See the discussion at
"Non-GAAP Financial Information" earlier in this press release and
endnote (1) later in this press release for more information on how
we calculate adjusted operating income.
|
Year Ending
December 31, 2020
|
In millions
|
Low
|
|
High
|
Operating income
(GAAP measure)
|
$
|
12,760
|
|
$
|
12,990
|
Non-GAAP
adjustments:
|
|
|
|
Amortization of
intangible assets
|
2,320
|
|
2,320
|
Acquisition-related
integration costs
|
450
|
|
450
|
Adjusted operating
income (1)
|
$
|
15,530
|
|
$
|
15,760
|
Adjusted Earnings Per Share
Guidance
(Unaudited)
The following reconciliations of projected income from
continuing operations to projected adjusted income from continuing
operations attributable to CVS Health and calculation of projected
GAAP diluted EPS from continuing operations 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 section entitled "Cautionary Statement Concerning
Forward-Looking Statements" in our most recently filed Annual
Report on Form 10-K and in our most recently filed Quarterly Report
on Form 10-Q. See the discussion at "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, 2020
|
|
Low
|
|
High
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Income from
continuing operations (GAAP measure)
|
$
|
7,210
|
|
|
|
$
|
7,385
|
|
|
Net loss attributable
to noncontrolling interests (GAAP measure)
|
5
|
|
|
|
5
|
|
|
Income from
continuing operations attributable to CVS Health (GAAP
measure)
|
7,215
|
|
$
|
5.47
|
|
7,390
|
|
$
|
5.60
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
2,320
|
|
1.76
|
|
2,320
|
|
1.76
|
Acquisition-related
integration costs
|
450
|
|
0.34
|
|
450
|
|
0.34
|
Income tax
benefit
|
(690)
|
|
(0.53)
|
|
(690)
|
|
(0.53)
|
Adjusted income from
continuing operations attributable to CVS Health
(2)
|
$
|
9,295
|
|
$
|
7.04
|
|
$
|
9,470
|
|
$
|
7.17
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,320
|
|
|
|
1,320
|
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 transaction and integration costs, store
rationalization charges, gains/losses on divestitures, goodwill
impairments, impairment of long-lived assets, interest income on
financings associated with proposed acquisitions (for periods prior
to the acquisition), and any other items specifically identified
herein. See "Non-GAAP Financial Information" earlier in this
press release for additional information regarding the items
excluded from operating income.
(2) The Company defines adjusted income from
continuing operations attributable to CVS Health as income (loss)
from continuing operations 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 transaction and
integration costs, store rationalization charges, gains/losses on
divestitures, losses on early extinguishment of debt, goodwill
impairments, impairment of long-lived assets, net interest expense
on financings associated with proposed acquisitions (for periods
prior to the acquisition), the corresponding income tax benefit or
expense related to the items excluded from adjusted income from
continuing operations attributable to CVS Health, the corresponding
impact to income allocable to participating securities, net of tax,
related to the items excluded from income (loss) from continuing
operations attributable to CVS Health in determining adjusted
income from continuing operations attributable to CVS Health, and
any other items specifically identified herein. GAAP diluted EPS
from continuing operations and Adjusted EPS, respectively, are
calculated by dividing income (loss) from continuing operations
attributable to CVS Health and adjusted income from continuing
operations attributable to CVS Health by the Company's weighted
average diluted shares outstanding.
Adjusted EPS for the three months and year ended
December 31, 2018 is calculated utilizing adjusted weighted
average diluted shares outstanding, which include 5 million and 3
million potential common equivalent shares, respectively, as the
impact of these shares was dilutive. The potential common
equivalent shares were excluded from the calculation of GAAP loss
per share from continuing operations for the three months and year
ended December 31, 2018, as these shares would have had an
anti-dilutive effect as a result of the GAAP net loss incurred. See
"Non-GAAP Financial Information" earlier in this press release
for additional information regarding the items excluded from income
from continuing operations attributable to CVS Health and GAAP
diluted EPS.
(3) The Company defines adjusted revenues as
total revenues (GAAP measure) excluding the impact of certain items
that neither relate to the ordinary course of the Company's
business nor reflect the Company's underlying business performance,
such as interest income on financings associated with proposed
acquisitions (for periods prior to the acquisition) and any other
items specifically identified herein. See "Non-GAAP Financial
Information" earlier in this press release for additional
information regarding the items excluded from total revenues.
(4) The Company defines adjusted operating
expenses as operating expenses (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 transaction and integration costs, store
rationalization charges, gains/losses on divestitures, impairment
of long-lived assets and any other items specifically identified
herein. See "Non-GAAP Financial Information" earlier in this
press release for additional information regarding the items
excluded from operating expenses.
(5) 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.
(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) Pharmacy network revenues, pharmacy claims
processed and generic dispensing rate do not include Maintenance
Choice® activity, which is included within the mail
choice category. Pharmacy network is defined as claims filled at
retail and specialty retail pharmacies, including the Company's
retail pharmacies and long-term care pharmacies, but excluding
Maintenance Choice activity. 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.
(8) 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.
(9) Same store sales and prescription volume
exclude revenues from MinuteClinic®, and revenues and
prescriptions from stores in Brazil and LTC operations.
(10) Certain prior year amounts have been
reclassified for consistency with the current period
presentation.
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SOURCE CVS Health Corporation