WOONSOCKET, R.I., Aug. 3, 2022
/PRNewswire/ -- CVS Health Corporation (NYSE: CVS) today
announced operating results for the three months ended
June 30, 2022.
SECOND QUARTER HIGHLIGHTS
- Total revenues increased to $80.6
billion, up 11.0% compared to prior year
- GAAP diluted EPS of $2.23 and
Adjusted EPS of $2.40
KEY FINANCIAL DATA
|
Three Months Ended
June 30,
|
In millions, except per share amounts
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
80,636
|
|
$
72,616
|
|
$ 8,020
|
Operating
income
|
4,569
|
|
4,326
|
|
243
|
Adjusted operating
income (1)
|
4,810
|
|
4,887
|
|
(77)
|
Diluted earnings per
share
|
$ 2.23
|
|
$ 2.10
|
|
$ 0.13
|
Adjusted EPS
(2)
|
$ 2.40
|
|
$ 2.42
|
|
$ (0.02)
|
YEAR-TO-DATE HIGHLIGHTS
- Total revenues increased to $157.5
billion, up 11.1% compared to prior year
- GAAP diluted EPS of $3.97 and
Adjusted EPS of $4.62
- Generated cash flow from operations of $9.0 billion
- Repaid $1.5 billion of long-term
debt
2022 FULL-YEAR GUIDANCE
- Raised GAAP diluted EPS guidance range to $7.23 to $7.43 from
$6.93 to $7.13
- Raised Adjusted EPS guidance range to $8.40 to $8.60 from
$8.20 to $8.40
- Raised cash flow from operations guidance range to $12.5 billion to $13.5
billion from $12.0 billion to
$13.0 billion
CEO Commentary
"Despite a challenging economic environment, our differentiated
business model helped drive strong results this quarter, with
significant revenue growth across all of our business segments. The
continued success of our foundational businesses accelerated our
strategy to expand access to health services and help consumers
navigate to the best site of care. We remain a trusted community
health destination for millions of individuals with health products
and services that engage customers in all aspects of their health
wherever and whenever they need it."
-Karen S. Lynch, CVS Health
President and CEO
Q2 IN THE
SPOTLIGHT
|
|
Paid down
$1.5 billion of long-term debt, while returning $740 million
to shareholders through dividends during the three months ended
June 30, 2022. Since the close of the acquisition of Aetna Inc. in
November 2018, the Company has repaid a net $22.5 billion of
long-term debt.
|
Enrolled six million
active users on the Company's individualized Health Dashboard since
its launch earlier this year.
|
In June, CVS Health
became the first health care provider to directly integrate with
Carequality, the largest medical records exchange in the U.S.,
enabling the Company to improve care coordination and reduce the
administrative burden on physicians.
|
Expanded free health
screenings in underserved communities and support of community
health partners as part of the Company's commitment to advancing
health equity.
|
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 12 and
endnotes beginning on page 23 for explanations of non-GAAP
financial measures presented in this press release. See pages 14
through 15 and page 22 for reconciliations of each non-GAAP
financial measure used in this release to the most directly
comparable GAAP financial measure.
Consolidated Second Quarter Results
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In millions, except per share amounts
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
80,636
|
|
$
72,616
|
|
$
8,020
|
|
$ 157,462
|
|
$ 141,713
|
|
$
15,749
|
Operating
income
|
4,569
|
|
4,326
|
|
243
|
|
8,059
|
|
7,903
|
|
156
|
Adjusted operating
income (1)
|
4,810
|
|
4,887
|
|
(77)
|
|
9,293
|
|
9,092
|
|
201
|
Net income
|
2,961
|
|
2,791
|
|
170
|
|
5,274
|
|
5,015
|
|
259
|
Diluted earnings per
share
|
$ 2.23
|
|
$ 2.10
|
|
$ 0.13
|
|
$ 3.97
|
|
$ 3.78
|
|
$ 0.19
|
Adjusted EPS
(2)
|
$ 2.40
|
|
$ 2.42
|
|
$ (0.02)
|
|
$ 4.62
|
|
$ 4.46
|
|
$ 0.16
|
For the three months ended June 30,
2022 compared to the prior year:
- Total revenues increased 11.0% driven by growth across all
segments.
- Operating income increased 5.6% primarily due to a $225 million pre-tax gain on the sale of PayFlex
Holdings, Inc. ("PayFlex"), which was consummated on June 1, 2022, and a decrease in amortization of
intangible assets compared to prior year, partially offset by a
slight decrease in adjusted operating income.
- Adjusted operating income decreased $77
million in the three months ended June 30, 2022 compared to the prior year. The
decrease in adjusted operating income was primarily driven by
declines in the Retail/LTC and Corporate/Other segments, largely
offset by increases in the Health Care Benefits and Pharmacy
Services segments. See pages 3 through 5 and page 21 for additional
discussion of adjusted operating income performance of the
Company's segments.
- Interest expense decreased $53
million, or 8.3%, due to lower debt in the three months
ended June 30, 2022.
- The effective income tax rate increased to 26.5% compared to
25.3% in the prior year primarily due to basis differences on the
sale of PayFlex in the three months ended June 30, 2022.
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 and
six months ended June 30, 2022 and 2021 were as follows:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In millions, except
percentages
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
22,756
|
|
$
20,525
|
|
$
2,231
|
|
$
45,865
|
|
$
41,008
|
|
$
4,857
|
Adjusted operating
income (1)
|
1,831
|
|
1,614
|
|
217
|
|
3,582
|
|
3,396
|
|
186
|
Medical benefit ratio
("MBR") (3)
|
82.9 %
|
|
84.1 %
|
|
(1.2) %
|
|
83.2 %
|
|
83.6 %
|
|
(0.4) %
|
Medical membership
(4)
|
|
|
|
|
|
|
24.4
|
|
23.5
|
|
0.9
|
- Total revenues increased 10.9% for the three months ended
June 30, 2022 compared to the prior
year driven by growth across all product lines.
- Adjusted operating income increased 13.4% for the three months
ended June 30, 2022 compared to the
prior year primarily driven by strong underlying performance,
including higher favorable development of prior-periods' health
care cost estimates in the three months ended June 30, 2022 compared to the prior year, and
membership growth across all product lines. These increases were
partially offset by incremental investments to support growth in
the business and net realized capital losses.
- The MBR decreased to 82.9% in the three months ended
June 30, 2022 compared to 84.1% in the prior year reflective
of strong underlying performance, including higher favorable
development of prior-periods' health care cost estimates in the
three months ended June 30, 2022 compared to the prior
year.
- Medical membership as of June 30,
2022 of 24.4 million increased 922,000 members compared with
June 30, 2021, reflecting increases
across all product lines.
- Medical membership as of June 30,
2022 of 24.4 million decreased 90,000 members compared with
March 31, 2022, primarily due to the
decrease of approximately 266,000 members in connection with the
divestiture of the Company's international health care business
domiciled in Thailand
("Thailand business") during the
second quarter of 2022. Excluding the impact of this divestiture,
membership increased across all product lines compared with
March 31, 2022.
- The segment experienced favorable development of prior-periods'
health care cost estimates in its Government Services and
Commercial businesses during the three months ended June 30, 2022, primarily attributable to first
quarter 2022 performance.
- Prior years' health care costs payable estimates developed
favorably by $666 million during the
six months ended June 30, 2022. 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 2022 operating results.
See the supplemental information on page 17 for additional
information regarding the performance of the Health Care Benefits
segment.
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 and six months ended June 30, 2022 and
2021 were as follows:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In millions
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
42,812
|
|
$
38,314
|
|
$
4,498
|
|
$
82,273
|
|
$
74,635
|
|
$
7,638
|
Adjusted operating
income (1)
|
1,855
|
|
1,755
|
|
100
|
|
3,491
|
|
3,262
|
|
229
|
Total pharmacy claims
processed (5) (6)
|
584.3
|
|
562.2
|
|
22.1
|
|
1,151.3
|
|
1,098.1
|
|
53.2
|
Pharmacy network
(7)
|
499.1
|
|
479.3
|
|
19.8
|
|
983.4
|
|
934.7
|
|
48.7
|
Mail choice
(8)
|
85.2
|
|
82.9
|
|
2.3
|
|
167.9
|
|
163.4
|
|
4.5
|
- Total revenues increased 11.7% for the three months ended
June 30, 2022 compared to the prior
year primarily driven by increased pharmacy claims volume, growth
in specialty pharmacy and brand inflation, partially offset by
continued client price improvements.
- Adjusted operating income increased 5.7% for the three months
ended June 30, 2022 compared to the
prior year primarily driven by improved purchasing economics,
including increased contributions from the products and services of
the Company's group purchasing organization. These increases were
partially offset by continued client price improvements, decreased
contributions from pharmacy and/or other administrative services
for 340B covered entities and
increased restructuring and business integration costs in the three
months ended June 30, 2022 compared
to the prior year.
- Total pharmacy claims processed increased 3.9% on a 30-day
equivalent basis for the three months ended June 30, 2022 compared to the prior year. The
increase was primarily driven by net new business, increased
utilization and the impact of an extended cough, cold and flu
season compared to the prior year, partially offset by decreased
COVID-19 vaccinations. Excluding the impact of COVID-19
vaccinations, total pharmacy claims processed increased 5.7% on a
30-day equivalent basis for the three months ended June 30, 2022 compared to the prior year.
See the supplemental information on page 19 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 health
and wellness products and general merchandise, provides health care
services through walk-in medical clinics, provides medical
diagnostic testing, administers vaccinations and provides pharmacy
services to long-term care facilities. The segment results for the
three and six months ended June 30, 2022 and 2021 were as
follows:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In millions
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
26,286
|
|
$
24,728
|
|
$
1,558
|
|
$
51,704
|
|
$
48,002
|
|
$
3,702
|
Adjusted operating
income (1)
|
1,862
|
|
2,049
|
|
(187)
|
|
3,467
|
|
3,443
|
|
24
|
Prescriptions filled
(5) (6)
|
400.8
|
|
394.4
|
|
6.4
|
|
795.4
|
|
769.8
|
|
25.6
|
- Total revenues increased 6.3% for the three months ended
June 30, 2022 compared to the prior
year primarily driven by increased prescription and front store
volume, including the sale of COVID-19 over-the-counter test kits
and the impact of an extended cough, cold and flu season compared
to the prior year, as well as pharmacy brand inflation. These
increases were partially offset by decreased COVID-19 vaccinations
and diagnostic testing, the impact of recent generic introductions
and continued pharmacy reimbursement pressure.
- Adjusted operating income decreased 9.1% for the three months
ended June 30, 2022 compared to the
prior year primarily driven by continued pharmacy reimbursement
pressure, decreased COVID-19 vaccinations, increased investments in
the segment's operations and capabilities and the absence of a
$125 million gain from an anti-trust
legal settlement recorded in the three months ended June 30, 2021. These decreases were partially
offset by the increased prescription and front store volume
described above, improved generic drug purchasing and the favorable
impact of business initiatives in the three months ended
June 30, 2022.
- Prescriptions filled increased 1.6% on a 30-day equivalent
basis for the three months ended June 30,
2022 compared to the prior year primarily driven by
increased utilization and the impact of an extended cough, cold and
flu season compared to the prior year, partially offset by
decreased COVID-19 vaccinations. Excluding the impact of COVID-19
vaccinations, prescriptions filled increased 4.6% on a 30-day
equivalent basis for the three months ended June 30, 2022 compared to the prior year.
See the supplemental information on page 20 for additional
information regarding the performance of the Retail/LTC
segment.
2022 Full-Year Guidance
The Company raised its full-year 2022 GAAP diluted EPS guidance
range to $7.23 to $7.43 from $6.93 to
$7.13 and raised its full-year 2022
Adjusted EPS guidance range to $8.40
to $8.60 from $8.20 to $8.40. The
Company also raised its full-year 2022 cash flow from operations
guidance range to $12.5 billion to
$13.5 billion from $12.0 billion to $13.0
billion.
The adjustments between full-year 2022 GAAP diluted EPS and
Adjusted EPS include amortization of intangible assets, the gain on
the divestiture of PayFlex, a legal settlement, a loss on assets
held for sale, the corresponding income tax benefit or expense
related to the items excluded from adjusted income attributable to
CVS Health and the impact of certain discrete tax items concluded
in the first quarter of 2022.
Teleconference and Webcast
The Company will be holding a conference call today for
investors at 8:00 a.m. (Eastern Time)
to discuss its second quarter results. An audio webcast of the call
will be broadcast simultaneously for all interested parties through
the Investor Relations section of the CVS Health website at
http://investors.cvshealth.com. This webcast will be archived and
available on the website for a one-year period following the
conference call.
About CVS Health
CVS Health is the leading health solutions company, delivering
care like no one else can. We reach more people and improve the
health of communities across America through our local presence,
digital channels and over 300,000 dedicated colleagues – including
more than 40,000 physicians, pharmacists, nurses and nurse
practitioners. Wherever and whenever people need us, we help them
with their health – whether that's managing chronic diseases,
staying compliant with their medications or accessing affordable
health and wellness services in the most convenient ways. We help
people navigate the health care system – and their personal health
care – by improving access, lowering costs and being a trusted
partner for every meaningful moment of health. And we do it all
with heart, each and every day. Follow @CVSHealth on social
media.
Cautionary Statement Concerning Forward-Looking
Statements
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements made by or on behalf of
CVS Health Corporation. Statements in this press release that are
forward-looking include, but are not limited to, Ms. Lynch's
quotation, the information under the headings "2022 Full-Year
Guidance" and "Q2 In The Spotlight" 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 due to the risks and uncertainties related to the
COVID-19 pandemic, including the potential emergence of additional
variants, vaccine and testing protocols, government testing
initiatives, the geographies impacted by and the severity and
duration of the pandemic, the pandemic's impact on the U.S. and
global economies and consumer behavior and health care utilization
patterns, and the timing, scope and impact of stimulus legislation
and other federal, state and local governmental responses to the
pandemic, as well as the risks and uncertainties described in our
Securities and Exchange Commission ("SEC") filings, including those
set forth in the Risk Factors section and under the heading
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K, our Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
2022 and our Current Reports on Form 8-K.
You are cautioned not to place undue reliance on CVS Health's
forward-looking statements. CVS Health's forward-looking statements
are and will be based upon management's then-current views and
assumptions regarding future events and operating performance, and
are applicable only as of the dates of such statements. CVS Health
does not assume any duty to update or revise forward-looking
statements, whether as a result of new information, future events,
uncertainties or otherwise.
- Tables Follow -
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
In millions, except per share amounts
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$ 56,794
|
|
$ 50,525
|
|
$
109,316
|
|
$ 97,912
|
Premiums
|
21,260
|
|
18,983
|
|
42,891
|
|
37,943
|
Services
|
2,436
|
|
2,819
|
|
4,941
|
|
5,272
|
Net investment
income
|
146
|
|
289
|
|
314
|
|
586
|
Total
revenues
|
80,636
|
|
72,616
|
|
157,462
|
|
141,713
|
Operating
costs:
|
|
|
|
|
|
|
|
Cost of products
sold
|
49,290
|
|
43,520
|
|
94,799
|
|
84,414
|
Benefit
costs
|
17,606
|
|
15,901
|
|
35,557
|
|
31,605
|
Operating
expenses
|
9,171
|
|
8,869
|
|
19,047
|
|
17,791
|
Total operating
costs
|
76,067
|
|
68,290
|
|
149,403
|
|
133,810
|
Operating
income
|
4,569
|
|
4,326
|
|
8,059
|
|
7,903
|
Interest
expense
|
583
|
|
636
|
|
1,169
|
|
1,293
|
Other income
|
(43)
|
|
(45)
|
|
(85)
|
|
(95)
|
Income before income
tax provision
|
4,029
|
|
3,735
|
|
6,975
|
|
6,705
|
Income tax
provision
|
1,068
|
|
944
|
|
1,701
|
|
1,690
|
Net income
|
2,961
|
|
2,791
|
|
5,274
|
|
5,015
|
Net income attributable
to noncontrolling interests
|
(10)
|
|
(8)
|
|
(11)
|
|
(9)
|
Net income attributable
to CVS Health
|
$
2,951
|
|
$
2,783
|
|
$
5,263
|
|
$
5,006
|
|
|
|
|
|
|
|
|
Net income per share
attributable to CVS Health:
|
|
|
|
|
|
|
|
Basic
|
$
2.25
|
|
$
2.11
|
|
$
4.01
|
|
$
3.80
|
Diluted
|
$
2.23
|
|
$
2.10
|
|
$
3.97
|
|
$
3.78
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
1,313
|
|
1,319
|
|
1,312
|
|
1,316
|
Diluted
|
1,321
|
|
1,327
|
|
1,325
|
|
1,325
|
Dividends declared per
share
|
$
0.55
|
|
$
0.50
|
|
$
1.10
|
|
$
1.00
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
|
In millions
|
June 30,
2022
|
|
December 31,
2021
|
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
12,116
|
|
$
9,408
|
Investments
|
2,877
|
|
3,117
|
Accounts receivable,
net
|
27,233
|
|
24,431
|
Inventories
|
17,375
|
|
17,760
|
Other current
assets
|
2,541
|
|
5,292
|
Total current
assets
|
62,142
|
|
60,008
|
Long-term
investments
|
21,124
|
|
23,025
|
Property and
equipment, net
|
12,764
|
|
12,896
|
Operating lease
right-of-use assets
|
18,562
|
|
19,122
|
Goodwill
|
78,560
|
|
79,121
|
Intangible assets,
net
|
28,135
|
|
29,026
|
Separate accounts
assets
|
4,140
|
|
5,087
|
Other
assets
|
4,852
|
|
4,714
|
Total assets
|
$
230,279
|
|
$
232,999
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts
payable
|
$
13,238
|
|
$
12,544
|
Pharmacy claims and
discounts payable
|
18,393
|
|
17,330
|
Health care costs
payable
|
10,400
|
|
8,808
|
Policyholders'
funds
|
1,628
|
|
4,301
|
Accrued
expenses
|
17,728
|
|
17,670
|
Other insurance
liabilities
|
1,197
|
|
1,303
|
Current portion of
operating lease liabilities
|
1,854
|
|
1,646
|
Current portion of
long-term debt
|
4,019
|
|
4,205
|
Total current
liabilities
|
68,457
|
|
67,807
|
Long-term operating
lease liabilities
|
17,502
|
|
18,177
|
Long-term
debt
|
50,797
|
|
51,971
|
Deferred income
taxes
|
5,450
|
|
6,270
|
Separate accounts
liabilities
|
4,140
|
|
5,087
|
Other long-term
insurance liabilities
|
6,287
|
|
6,402
|
Other long-term
liabilities
|
2,140
|
|
1,904
|
Total
liabilities
|
154,773
|
|
157,618
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
—
|
Common stock and
capital surplus
|
47,874
|
|
47,377
|
Treasury
stock
|
(30,412)
|
|
(28,173)
|
Retained
earnings
|
58,710
|
|
54,906
|
Accumulated other
comprehensive income (loss)
|
(988)
|
|
965
|
Total CVS Health
shareholders' equity
|
75,184
|
|
75,075
|
Noncontrolling
interests
|
322
|
|
306
|
Total shareholders'
equity
|
75,506
|
|
75,381
|
Total liabilities and
shareholders' equity
|
$
230,279
|
|
$
232,999
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Six Months Ended
June 30,
|
In millions
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
|
Cash receipts from
customers
|
$ 151,769
|
|
$ 136,621
|
Cash paid for
inventory and prescriptions dispensed by retail network
pharmacies
|
(90,887)
|
|
(79,316)
|
Insurance benefits
paid
|
(33,920)
|
|
(31,245)
|
Cash paid to other
suppliers and employees
|
(15,119)
|
|
(14,900)
|
Interest and
investment income received
|
200
|
|
394
|
Interest
paid
|
(1,150)
|
|
(1,263)
|
Income taxes
paid
|
(1,887)
|
|
(1,552)
|
Net cash provided by
operating activities
|
9,006
|
|
8,739
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Proceeds from sales
and maturities of investments
|
4,360
|
|
3,947
|
Purchases of
investments
|
(5,010)
|
|
(5,570)
|
Purchases of property
and equipment
|
(1,459)
|
|
(1,315)
|
Acquisitions (net of
cash acquired)
|
(125)
|
|
(108)
|
Proceeds from sale of
subsidiaries (net of cash and restricted cash sold of
$2,807)
|
(1,943)
|
|
—
|
Other
|
54
|
|
72
|
Net cash used in
investing activities
|
(4,123)
|
|
(2,974)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Repayments of
long-term debt
|
(1,529)
|
|
(5,423)
|
Repurchase of common
stock
|
(2,000)
|
|
—
|
Dividends
paid
|
(1,462)
|
|
(1,306)
|
Proceeds from exercise
of stock options
|
348
|
|
330
|
Payments for taxes
related to net share settlement of equity awards
|
(329)
|
|
(159)
|
Other
|
(139)
|
|
46
|
Net cash used in
financing activities
|
(5,111)
|
|
(6,512)
|
Net decrease in cash,
cash equivalents and restricted cash
|
(228)
|
|
(747)
|
Cash, cash equivalents
and restricted cash at the beginning of the period
|
12,691
|
|
11,043
|
Cash, cash equivalents
and restricted cash at the end of the period
|
$
12,463
|
|
$
10,296
|
CVS HEALTH
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited)
|
|
|
Six Months Ended
June 30,
|
In millions
|
2022
|
|
2021
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
Net income
|
$
5,274
|
|
$
5,015
|
Adjustments required
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
2,142
|
|
2,263
|
Stock-based
compensation
|
236
|
|
232
|
Gain on sale of
subsidiary
|
(225)
|
|
—
|
Deferred income taxes
and other noncash items
|
(281)
|
|
(370)
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
Accounts receivable,
net
|
(2,687)
|
|
(2,384)
|
Inventories
|
469
|
|
1,517
|
Other
assets
|
(325)
|
|
(219)
|
Accounts payable and
pharmacy claims and discounts payable
|
2,033
|
|
1,702
|
Health care costs
payable and other insurance liabilities
|
1,467
|
|
104
|
Other
liabilities
|
903
|
|
879
|
Net cash provided by
operating activities
|
$
9,006
|
|
$
8,739
|
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.
The Company's Non-GAAP adjusted effective income tax rate
excludes from the relevant GAAP metric the corresponding tax
benefit or expense related to the 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 and certain discrete tax items.
For the periods covered in this press release, the following
items are excluded from the non-GAAP financial measures described
above, as applicable, because the Company believes they neither
relate to the ordinary course of the Company's business nor reflect
the Company's underlying business performance:
- The Company's acquisition activities have resulted in the
recognition of intangible assets as required under the acquisition
method of accounting which consist primarily of trademarks,
customer contracts/relationships, covenants not to compete,
technology, provider networks and value of business acquired.
Definite-lived intangible assets are amortized over their estimated
useful lives and are tested for impairment when events indicate
that the carrying value may not be recoverable. The amortization of
intangible assets is reflected in the unaudited condensed
consolidated statements of operations in operating expenses within
each segment. Although intangible assets contribute to the
Company's revenue generation, the amortization of intangible assets
does not directly relate to the underwriting of the Company's
insurance products, the services performed for the Company's
customers or the sale of the Company's products or services.
Additionally, intangible asset amortization expense typically
fluctuates based on the size and timing of the Company's
acquisition activity. Accordingly, the Company believes excluding
the amortization of intangible assets enhances the Company's and
investors' ability to compare the Company's past financial
performance with its current performance and to analyze underlying
business performance and trends. Intangible asset amortization
excluded from the related non-GAAP financial measure represents the
entire amount recorded within the Company's GAAP financial
statements, and the revenue generated by the associated intangible
assets has not been excluded from the related non-GAAP financial
measure. Intangible asset amortization is excluded from the related
non-GAAP financial measure because the amortization, unlike the
related revenue, is not affected by operations of any particular
period unless an intangible asset becomes impaired or the estimated
useful life of an intangible asset is revised.
- During the three and six months ended June 30, 2022, the gain on divestiture of
subsidiary represents the pre-tax gain on the sale of PayFlex,
which the Company sold on June 1,
2022, for approximately $775 million. The gain on
divestiture is reflected as a reduction in operating expenses in
the Company's unaudited condensed consolidated statements of
operations within the Health Care Benefits segment.
- During the six months ended June 30,
2022, the legal settlement relates to the agreement with the
State of Florida, entered into in
March 2022, to resolve opioid claims
dating back more than a decade. Under this agreement, CVS Health
Corporation settled all opioid claims against it and its
subsidiaries by the State of
Florida for $484 million,
inclusive of certain legal fees, to be paid over a period of 18
years. The legal settlement is reflected in the unaudited condensed
consolidated statement of operations in operating expenses within
the Corporate/Other segment.
- During the six months ended June 30,
2022, the loss on assets held for sale relates to the
Commercial Business reporting unit within the Health Care Benefits
segment. In March 2022, the Company
reached an agreement to sell its Thailand business, which was included in the
Commercial Business reporting unit. At that time, a portion of the
Commercial Business goodwill was specifically allocated to the
Thailand business. The net assets
of the Thailand business were
accounted for as assets held for sale at March 31, 2022. The carrying value of the
Thailand business was determined
to be greater than its fair value and a loss on assets held for
sale was recorded during the first quarter of 2022. The sale closed
in the second quarter of 2022, and the ultimate loss on the sale
was not material. The loss on assets held for sale is reflected in
the unaudited condensed consolidated statement of operations in
operating expenses within the Health Care Benefits segment.
- During the three and six months ended June 30, 2021, acquisition-related integration
costs relate to the acquisition of Aetna Inc. The
acquisition-related integration costs are reflected in the
unaudited condensed consolidated statements of operations in
operating expenses within the Corporate/Other segment.
- In June 2021, the Company
received $61 million related to a
purchase price working capital adjustment for an acquisition
completed during the first quarter of 2020. The resolution of this
matter occurred subsequent to the acquisition accounting
measurement period and is reflected in the Company's unaudited
condensed consolidated statements of operations for the three and
six months ended June 30, 2021 as a
reduction of operating expenses within the Health Care Benefits
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. During the six months ended
June 30, 2022, the Company's adjusted income tax provision
also excludes the impact of certain discrete tax items concluded in
the first quarter of 2022.
See endnotes (1) and (2) on page 23 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 14 through 15 and page 22.
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:
|
|
|
Three Months Ended June 30,
2022
|
In millions
|
Health Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
1,754
|
|
$
1,814
|
|
$ 1,740
|
|
$
(556)
|
|
$
(183)
|
|
$
4,569
|
Amortization of
intangible assets
|
302
|
|
41
|
|
122
|
|
1
|
|
—
|
|
466
|
Gain on divestiture of
subsidiary
|
(225)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(225)
|
Adjusted operating
income (loss) (1)
|
$
1,831
|
|
$
1,855
|
|
$ 1,862
|
|
$
(555)
|
|
$
(183)
|
|
$
4,810
|
|
Three Months Ended June 30,
2021
|
In millions
|
Health Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
1,273
|
|
$
1,705
|
|
$ 1,919
|
|
$
(409)
|
|
$
(162)
|
|
$
4,326
|
Amortization of
intangible assets
|
402
|
|
50
|
|
130
|
|
—
|
|
—
|
|
582
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
—
|
|
40
|
|
—
|
|
40
|
Acquisition purchase
price adjustment outside of measurement period
|
(61)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(61)
|
Adjusted operating
income (loss) (1)
|
$
1,614
|
|
$
1,755
|
|
$ 2,049
|
|
$
(369)
|
|
$
(162)
|
|
$
4,887
|
|
Six Months Ended June 30, 2022
|
In millions
|
Health Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
3,163
|
|
$
3,406
|
|
$ 3,223
|
|
$
(1,346)
|
|
$
(387)
|
|
$
8,059
|
Amortization of
intangible assets
|
603
|
|
85
|
|
244
|
|
2
|
|
—
|
|
934
|
Gain on divestiture of
subsidiary
|
(225)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(225)
|
Legal
settlement
|
—
|
|
—
|
|
—
|
|
484
|
|
—
|
|
484
|
Loss on assets held
for sale
|
41
|
|
—
|
|
—
|
|
—
|
|
—
|
|
41
|
Adjusted operating
income (loss) (1)
|
$
3,582
|
|
$
3,491
|
|
$ 3,467
|
|
$
(860)
|
|
$
(387)
|
|
$
9,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
In millions
|
Health Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
2,653
|
|
$
3,157
|
|
$ 3,184
|
|
$
(754)
|
|
$
(337)
|
|
$
7,903
|
Amortization of
intangible assets
|
804
|
|
105
|
|
259
|
|
1
|
|
—
|
|
1,169
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
—
|
|
81
|
|
—
|
|
81
|
Acquisition purchase
price adjustment outside of measurement period
|
(61)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(61)
|
Adjusted operating
income (loss) (1)
|
$
3,396
|
|
$
3,262
|
|
$ 3,443
|
|
$
(672)
|
|
$
(337)
|
|
$
9,092
|
Adjusted Earnings
Per Share
|
(Unaudited)
|
|
The following
are reconciliations of
net income attributable to CVS Health to adjusted income attributable
to CVS Health and
calculations of GAAP diluted EPS and Adjusted EPS:
|
|
|
Three Months Ended
June 30, 2022
|
|
Three Months Ended
June 30, 2021
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income attributable
to CVS Health (GAAP measure)
|
$ 2,951
|
|
$
2.23
|
|
$ 2,783
|
|
$
2.10
|
Amortization of
intangible assets
|
466
|
|
0.35
|
|
582
|
|
0.44
|
Gain on divestiture of
subsidiary
|
(225)
|
|
(0.17)
|
|
—
|
|
—
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
40
|
|
0.03
|
Acquisition purchase
price adjustment outside of measurement period
|
—
|
|
—
|
|
(61)
|
|
(0.05)
|
Tax impact of non-GAAP
adjustments
|
(17)
|
|
(0.01)
|
|
(138)
|
|
(0.10)
|
Adjusted income
attributable to CVS Health (2)
|
$ 3,175
|
|
$
2.40
|
|
$ 3,206
|
|
$
2.42
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,321
|
|
|
|
1,327
|
|
Six Months Ended
June 30, 2022
|
|
Six Months Ended
June 30, 2021
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income attributable
to CVS Health (GAAP measure)
|
$ 5,263
|
|
$
3.97
|
|
$ 5,006
|
|
$
3.78
|
Amortization of
intangible assets
|
934
|
|
0.71
|
|
1,169
|
|
0.88
|
Gain on divestiture of
subsidiary
|
(225)
|
|
(0.17)
|
|
—
|
|
—
|
Legal
settlement
|
484
|
|
0.36
|
|
—
|
|
—
|
Loss on assets held
for sale
|
41
|
|
0.03
|
|
—
|
|
—
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
81
|
|
0.06
|
Acquisition purchase
price adjustment outside of measurement period
|
—
|
|
—
|
|
(61)
|
|
(0.05)
|
Tax impact of non-GAAP
adjustments
|
(380)
|
|
(0.28)
|
|
(292)
|
|
(0.21)
|
Adjusted income
attributable to CVS Health (2)
|
$ 6,117
|
|
$
4.62
|
|
$ 5,903
|
|
$
4.46
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,325
|
|
|
|
1,325
|
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 (b)
|
|
Consolidated
Totals
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$ 22,756
|
|
$
42,812
|
|
$ 26,286
|
|
$
110
|
|
$
(11,328)
|
|
$ 80,636
|
Adjusted operating
income (loss) (1)
|
1,831
|
|
1,855
|
|
1,862
|
|
(555)
|
|
(183)
|
|
4,810
|
June 30,
2021
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
20,525
|
|
38,314
|
|
24,728
|
|
182
|
|
(11,133)
|
|
72,616
|
Adjusted operating
income (loss) (1)
|
1,614
|
|
1,755
|
|
2,049
|
|
(369)
|
|
(162)
|
|
4,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$ 45,865
|
|
$
82,273
|
|
$ 51,704
|
|
$
236
|
|
$
(22,616)
|
|
$ 157,462
|
Adjusted operating
income (loss) (1)
|
3,582
|
|
3,491
|
|
3,467
|
|
(860)
|
|
(387)
|
|
9,293
|
June 30,
2021
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
41,008
|
|
74,635
|
|
48,002
|
|
317
|
|
(22,249)
|
|
141,713
|
Adjusted operating
income (loss) (1)
|
3,396
|
|
3,262
|
|
3,443
|
|
(672)
|
|
(337)
|
|
9,092
|
|
|
|
|
|
(a)
|
Total revenues of the
Pharmacy Services segment include approximately $3.1 billion and
$2.8 billion of retail co-payments for the three months ended June
30, 2022 and 2021, respectively, and $6.9 billion and $6.2 billion
of retail co-payments for the six months ended June 30, 2022 and
2021, respectively.
|
(b)
|
Intersegment revenue
eliminations relate to intersegment revenue generating activities
that occur between the Health Care Benefits segment, the Pharmacy
Services segment, and/or the Retail/LTC segment. Intersegment
adjusted operating income eliminations occur when members of
Pharmacy Services Segment clients ("PSS members") enrolled in
Maintenance Choice® elect to pick up maintenance
prescriptions at one of the Company's retail pharmacies instead of
receiving them through the mail. When this occurs, both the
Pharmacy Services and Retail/LTC segments record the adjusted
operating income on a stand-alone basis.
|
Supplemental
Information
|
(Unaudited)
|
|
Health Care Benefits
Segment
|
|
The following table
summarizes the Health Care Benefits segment's performance for the
respective periods:
|
|
|
|
|
|
Change
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Three Months Ended
June 30,
2022 vs 2021
|
|
Six Months Ended
June 30,
2022 vs 2021
|
In millions, except percentages and basis points
("bps")
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
$ 21,245
|
|
$
18,968
|
|
$ 42,859
|
|
$ 37,910
|
|
$
2,277
|
|
12.0 %
|
|
$
4,949
|
|
13.1 %
|
Services
|
1,423
|
|
1,420
|
|
2,829
|
|
2,813
|
|
3
|
|
0.2 %
|
|
16
|
|
0.6 %
|
Net investment
income
|
88
|
|
137
|
|
177
|
|
285
|
|
(49)
|
|
(35.8) %
|
|
(108)
|
|
(37.9) %
|
Total
revenues
|
22,756
|
|
20,525
|
|
45,865
|
|
41,008
|
|
2,231
|
|
10.9 %
|
|
4,857
|
|
11.8 %
|
Benefit
costs
|
17,611
|
|
15,954
|
|
35,660
|
|
31,711
|
|
1,657
|
|
10.4 %
|
|
3,949
|
|
12.5 %
|
MBR (Benefit costs as
a % of premium revenues) (3)
|
82.9 %
|
|
84.1 %
|
|
83.2 %
|
|
83.6 %
|
|
(120)
|
bps
|
|
(40)
|
bps
|
Operating
expenses
|
$
3,391
|
|
$
3,298
|
|
$
7,042
|
|
$
6,644
|
|
$
93
|
|
2.8 %
|
|
$ 398
|
|
6.0 %
|
Operating expenses as
a % of total revenues
|
14.9 %
|
|
16.1 %
|
|
15.4 %
|
|
16.2 %
|
|
|
|
|
|
|
|
|
Operating
income
|
$
1,754
|
|
$
1,273
|
|
$
3,163
|
|
$
2,653
|
|
$ 481
|
|
37.8 %
|
|
$ 510
|
|
19.2 %
|
Operating income as a
% of total revenues
|
7.7 %
|
|
6.2 %
|
|
6.9 %
|
|
6.5 %
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,831
|
|
$
1,614
|
|
$
3,582
|
|
$
3,396
|
|
$ 217
|
|
13.4 %
|
|
$ 186
|
|
5.5 %
|
Adjusted operating
income as a % of total revenues
|
8.0 %
|
|
7.9 %
|
|
7.8 %
|
|
8.3 %
|
|
|
|
|
|
|
|
|
Premium revenues (by
business):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
|
$ 15,751
|
|
$
13,897
|
|
$ 31,946
|
|
$ 27,814
|
|
$
1,854
|
|
13.3 %
|
|
$
4,132
|
|
14.9 %
|
Commercial
|
5,494
|
|
5,071
|
|
10,913
|
|
10,096
|
|
423
|
|
8.3 %
|
|
817
|
|
8.1 %
|
The following table
summarizes the Health Care Benefits segment's medical membership
for the respective periods:
|
|
|
June 30, 2022
|
|
March 31, 2022
|
|
December 31, 2021
|
|
June 30, 2021
|
In thousands
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
Medical membership:
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
3,158
|
|
13,835
|
|
16,993
|
|
3,285
|
|
13,924
|
|
17,209
|
|
3,258
|
|
13,530
|
|
16,788
|
|
3,183
|
|
13,541
|
|
16,724
|
Medicare
Advantage
|
3,216
|
|
—
|
|
3,216
|
|
3,169
|
|
—
|
|
3,169
|
|
2,971
|
|
—
|
|
2,971
|
|
2,911
|
|
—
|
|
2,911
|
Medicare
Supplement
|
1,314
|
|
—
|
|
1,314
|
|
1,292
|
|
—
|
|
1,292
|
|
1,285
|
|
—
|
|
1,285
|
|
1,193
|
|
—
|
|
1,193
|
Medicaid
|
2,425
|
|
484
|
|
2,909
|
|
2,375
|
|
477
|
|
2,852
|
|
2,333
|
|
471
|
|
2,804
|
|
2,231
|
|
451
|
|
2,682
|
Total medical
membership
|
10,113
|
|
14,319
|
|
24,432
|
|
10,121
|
|
14,401
|
|
24,522
|
|
9,847
|
|
14,001
|
|
23,848
|
|
9,518
|
|
13,992
|
|
23,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental membership
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Prescription
Drug Plan (standalone)
|
6,051
|
|
|
|
|
|
6,022
|
|
|
|
|
|
5,777
|
|
|
|
|
|
5,704
|
Supplemental
Information
|
(Unaudited)
|
|
The following table
shows the components of the change in health care costs payable
during the six months ended June 30, 2022 and 2021:
|
|
|
Six Months Ended
June 30,
|
In millions
|
2022
|
|
2021
|
Health care costs
payable, beginning of period
|
$
8,808
|
|
$
7,936
|
Less: Reinsurance
recoverables
|
8
|
|
10
|
Health care costs
payable, beginning of period, net
|
8,800
|
|
7,926
|
Add: Components of
incurred health care costs
|
|
|
|
Current
year
|
35,960
|
|
32,183
|
Prior years
(a)
|
(666)
|
|
(709)
|
Total incurred health
care costs (b)
|
35,294
|
|
31,474
|
Less: Claims
paid
|
|
|
|
Current
year
|
26,971
|
|
24,600
|
Prior years
|
6,732
|
|
6,409
|
Total claims
paid
|
33,703
|
|
31,009
|
Add: Premium
deficiency reserve
|
5
|
|
5
|
Health care costs
payable, end of period, net
|
10,396
|
|
8,396
|
Add: Reinsurance
recoverables
|
4
|
|
18
|
Health care costs
payable, end of period
|
$
10,400
|
|
$
8,414
|
|
|
|
|
|
(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 six months ended June 30, 2022 and 2021 in the
table above exclude (i) $5 million and $5 million, respectively,
for premium deficiency reserves related to the Company's Medicaid
products, (ii) $37 million and $27 million, respectively, of
benefit costs recorded in the Health Care Benefits segment that are
included in other insurance liabilities on the unaudited
condensed consolidated balance sheets and (iii) $221 million and
$99 million, respectively, of benefit costs recorded in the
Corporate/Other segment that are included in other insurance
liabilities on the unaudited condensed consolidated balance
sheets.
|
The following table
summarizes the Health Care Benefits segment's days claims payable
for the respective periods:
|
|
|
June 30, 2022
|
|
March 31, 2022
|
|
December 31, 2021
|
|
June 30, 2021
|
Days Claims Payable
(9)
|
54.3
|
|
51.7
|
|
49.1
|
|
48.4
|
Supplemental
Information
|
(Unaudited)
|
|
Pharmacy Services
Segment
|
|
The following table
summarizes the Pharmacy Services segment's performance for the
respective periods:
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Three Months Ended
June 30,
2022 vs 2021
|
|
Six Months Ended
June 30,
2022 vs 2021
|
In millions, except
percentages
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
$
42,554
|
|
$
38,010
|
|
$
81,718
|
|
$
74,077
|
|
$
4,544
|
|
12.0 %
|
|
$
7,641
|
|
10.3 %
|
Services
|
258
|
|
304
|
|
555
|
|
558
|
|
(46)
|
|
(15.1) %
|
|
(3)
|
|
(0.5) %
|
Total
revenues
|
42,812
|
|
38,314
|
|
82,273
|
|
74,635
|
|
4,498
|
|
11.7 %
|
|
7,638
|
|
10.2 %
|
Cost of products
sold
|
40,540
|
|
36,266
|
|
78,030
|
|
70,789
|
|
4,274
|
|
11.8 %
|
|
7,241
|
|
10.2 %
|
Gross profit
(10)
|
2,272
|
|
2,048
|
|
4,243
|
|
3,846
|
|
224
|
|
10.9 %
|
|
397
|
|
10.3 %
|
Gross margin (Gross
profit as a % of total revenues) (10)
|
5.3 %
|
|
5.3 %
|
|
5.2 %
|
|
5.2 %
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$ 458
|
|
$ 343
|
|
$ 837
|
|
$ 689
|
|
$ 115
|
|
33.5 %
|
|
$ 148
|
|
21.5 %
|
Operating expenses as
a % of total revenues
|
1.1 %
|
|
0.9 %
|
|
1.0 %
|
|
0.9 %
|
|
|
|
|
|
|
|
|
Operating
income
|
$
1,814
|
|
$
1,705
|
|
$
3,406
|
|
$
3,157
|
|
$ 109
|
|
6.4 %
|
|
$ 249
|
|
7.9 %
|
Operating income as a
% of total revenues
|
4.2 %
|
|
4.5 %
|
|
4.1 %
|
|
4.2 %
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,855
|
|
$
1,755
|
|
$
3,491
|
|
$
3,262
|
|
$ 100
|
|
5.7 %
|
|
$ 229
|
|
7.0 %
|
Adjusted operating
income as a % of total revenues
|
4.3 %
|
|
4.6 %
|
|
4.2 %
|
|
4.4 %
|
|
|
|
|
|
|
|
|
Revenues (by
distribution channel):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy network
(7)
|
$
24,537
|
|
$
22,918
|
|
$
47,361
|
|
$
44,811
|
|
$
1,619
|
|
7.1 %
|
|
$
2,550
|
|
5.7 %
|
Mail choice
(8)
|
18,030
|
|
15,235
|
|
34,404
|
|
29,483
|
|
2,795
|
|
18.3 %
|
|
4,921
|
|
16.7 %
|
Other
|
245
|
|
161
|
|
508
|
|
341
|
|
84
|
|
52.2 %
|
|
167
|
|
49.0 %
|
Pharmacy claims
processed: (5) (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(a)
|
584.3
|
|
562.2
|
|
1,151.3
|
|
1,098.1
|
|
22.1
|
|
3.9 %
|
|
53.2
|
|
4.8 %
|
Pharmacy network
(7)
|
499.1
|
|
479.3
|
|
983.4
|
|
934.7
|
|
19.8
|
|
4.1 %
|
|
48.7
|
|
5.2 %
|
Mail choice
(8)
|
85.2
|
|
82.9
|
|
167.9
|
|
163.4
|
|
2.3
|
|
2.8 %
|
|
4.5
|
|
2.8 %
|
Generic dispensing
rate: (6) (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(b)
|
88.0 %
|
|
86.7 %
|
|
87.9 %
|
|
87.4 %
|
|
|
|
|
|
|
|
|
Pharmacy network
(7)
|
88.4 %
|
|
86.9 %
|
|
88.3 %
|
|
87.7 %
|
|
|
|
|
|
|
|
|
Mail choice
(8)
|
85.7 %
|
|
85.5 %
|
|
85.6 %
|
|
85.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Excluding the impact of
COVID-19 vaccinations, total pharmacy claims processed increased
5.7% and 5.6% on a 30-day equivalent basis for the three and six
months ended June 30, 2022, respectively, compared to the prior
year.
|
(b)
|
Excluding the impact of
COVID-19 vaccinations, the Pharmacy Services segment's total
generic dispensing rate was 88.8% and 89.0% in the three months
ended June 30, 2022 and 2021, respectively, and 88.8% and 89.0% in
the six months ended June 30, 2022 and 2021,
respectively.
|
Supplemental
Information
|
(Unaudited)
|
|
Retail/LTC Segment
|
|
The following table
summarizes the Retail/LTC segment's performance for the respective
periods:
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Three Months Ended
June 30,
2022 vs 2021
|
|
Six Months Ended
June 30,
2022 vs 2021
|
In millions, except
percentages
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
$
25,528
|
|
$
23,609
|
|
$
50,133
|
|
$
46,003
|
|
$
1,919
|
|
8.1 %
|
|
$
4,130
|
|
9.0 %
|
Services
|
776
|
|
1,119
|
|
1,605
|
|
1,953
|
|
(343)
|
|
(30.7) %
|
|
(348)
|
|
(17.8) %
|
Net investment income
(loss)
|
(18)
|
|
—
|
|
(34)
|
|
46
|
|
(18)
|
|
(100.0) %
|
|
(80)
|
|
(173.9) %
|
Total
revenues
|
26,286
|
|
24,728
|
|
51,704
|
|
48,002
|
|
1,558
|
|
6.3 %
|
|
3,702
|
|
7.7 %
|
Cost of products
sold
|
19,554
|
|
17,952
|
|
38,319
|
|
34,994
|
|
1,602
|
|
8.9 %
|
|
3,325
|
|
9.5 %
|
Gross profit
(10)
|
6,732
|
|
6,776
|
|
13,385
|
|
13,008
|
|
(44)
|
|
(0.6) %
|
|
377
|
|
2.9 %
|
Gross margin (Gross
profit as a % of total revenues) (10)
|
25.6 %
|
|
27.4 %
|
|
25.9 %
|
|
27.1 %
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
4,992
|
|
$
4,857
|
|
$
10,162
|
|
$
9,824
|
|
$ 135
|
|
2.8 %
|
|
$ 338
|
|
3.4 %
|
Operating expenses as
a % of total revenues
|
19.0 %
|
|
19.6 %
|
|
19.7 %
|
|
20.5 %
|
|
|
|
|
|
|
|
|
Operating
income
|
$
1,740
|
|
$
1,919
|
|
$
3,223
|
|
$
3,184
|
|
$ (179)
|
|
(9.3) %
|
|
$
39
|
|
1.2 %
|
Operating income as a
% of total revenues
|
6.6 %
|
|
7.8 %
|
|
6.2 %
|
|
6.6 %
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,862
|
|
$
2,049
|
|
$
3,467
|
|
$
3,443
|
|
$ (187)
|
|
(9.1) %
|
|
$
24
|
|
0.7 %
|
Adjusted operating
income as a % of total revenues
|
7.1 %
|
|
8.3 %
|
|
6.7 %
|
|
7.2 %
|
|
|
|
|
|
|
|
|
Revenues (by major
goods/service lines):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy
|
$
20,017
|
|
$
18,873
|
|
$
39,549
|
|
$
36,758
|
|
$
1,144
|
|
6.1 %
|
|
$
2,791
|
|
7.6 %
|
Front Store
|
5,736
|
|
5,254
|
|
11,049
|
|
9,896
|
|
482
|
|
9.2 %
|
|
1,153
|
|
11.7 %
|
Other
|
551
|
|
601
|
|
1,140
|
|
1,302
|
|
(50)
|
|
(8.3) %
|
|
(162)
|
|
(12.4) %
|
Net investment income
(loss)
|
(18)
|
|
—
|
|
(34)
|
|
46
|
|
(18)
|
|
(100.0) %
|
|
(80)
|
|
(173.9) %
|
Prescriptions filled
(5) (6) (a)
|
400.8
|
|
394.4
|
|
795.4
|
|
769.8
|
|
6.4
|
|
1.6 %
|
|
25.6
|
|
3.3 %
|
Same store sales
increase (decrease): (12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
8.0 %
|
|
12.3 %
|
|
9.3 %
|
|
6.2 %
|
|
|
|
|
|
|
|
|
Pharmacy
|
7.6 %
|
|
12.4 %
|
|
8.8 %
|
|
8.2 %
|
|
|
|
|
|
|
|
|
Front Store
|
9.4 %
|
|
12.0 %
|
|
11.2 %
|
|
(0.4) %
|
|
|
|
|
|
|
|
|
Prescription volume
(6)
|
3.1 %
|
|
14.8 %
|
|
4.5 %
|
|
7.6 %
|
|
|
|
|
|
|
|
|
Generic dispensing rate
(6) (11) (b)
|
88.5 %
|
|
85.7 %
|
|
88.0 %
|
|
86.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Excluding the impact of
COVID-19 vaccinations, prescriptions filled increased 4.6% and 5.1%
on a 30-day equivalent basis for the three and six months ended
June 30, 2022, respectively, compared to the prior year.
|
(b)
|
Excluding the impact of
COVID-19 vaccinations, the Retail/LTC segment's total generic
dispensing rate was 89.9% and 89.5% in the three months ended
June 30, 2022 and 2021, respectively, and 89.9% and 89.6% in
the six months ended June 30, 2022 and 2021,
respectively.
|
Supplemental
Information
|
(Unaudited)
|
|
Corporate/Other
Segment
|
|
The following table
summarizes the Corporate/Other segment's performance for the
respective periods:
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
Three Months Ended
June 30,
2022 vs 2021
|
|
Six Months Ended
June 30,
2022 vs 2021
|
In millions, except
percentages
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
$
15
|
|
$
15
|
|
$
32
|
|
$
33
|
|
$
—
|
|
— %
|
|
$
(1)
|
|
(3.0) %
|
Services
|
19
|
|
15
|
|
33
|
|
29
|
|
4
|
|
26.7 %
|
|
4
|
|
13.8 %
|
Net investment
income
|
76
|
|
152
|
|
171
|
|
255
|
|
(76)
|
|
(50.0) %
|
|
(84)
|
|
(32.9) %
|
Total
revenues
|
110
|
|
182
|
|
236
|
|
317
|
|
(72)
|
|
(39.6) %
|
|
(81)
|
|
(25.6) %
|
Cost of products
sold
|
10
|
|
8
|
|
20
|
|
16
|
|
2
|
|
25.0 %
|
|
4
|
|
25.0 %
|
Benefit
costs
|
162
|
|
54
|
|
221
|
|
99
|
|
108
|
|
200.0 %
|
|
122
|
|
123.2 %
|
Operating
expenses
|
494
|
|
529
|
|
1,341
|
|
956
|
|
(35)
|
|
(6.6) %
|
|
385
|
|
40.3 %
|
Operating
loss
|
(556)
|
|
(409)
|
|
(1,346)
|
|
(754)
|
|
(147)
|
|
(35.9) %
|
|
(592)
|
|
(78.5) %
|
Adjusted operating loss
(1)
|
(555)
|
|
(369)
|
|
(860)
|
|
(672)
|
|
(186)
|
|
(50.4) %
|
|
(188)
|
|
(28.0) %
|
- Adjusted operating loss increased 50.4% for the three months
ended June 30, 2022 compared to the
prior year primarily driven by the strengthening of reserves in the
Company's long-term care insurance business and a decrease in net
investment income.
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 June 30, 2022. See
"Non-GAAP Financial Information" earlier in this press release and
endnote (2) later in this press release for more information on how
we calculate Adjusted EPS.
|
Year Ending December 31, 2022
|
|
Low
|
|
High
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income attributable
to CVS Health (GAAP measure)
|
$ 9,620
|
|
$ 7.23
|
|
$ 9,885
|
|
$ 7.43
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
1,870
|
|
1.41
|
|
1,870
|
|
1.41
|
Gain on divestiture of
subsidiary
|
(225)
|
|
(0.17)
|
|
(225)
|
|
(0.17)
|
Legal
settlement
|
484
|
|
0.36
|
|
484
|
|
0.36
|
Loss on assets held
for sale
|
41
|
|
0.03
|
|
41
|
|
0.03
|
Tax impact of non-GAAP
adjustments
|
(615)
|
|
(0.46)
|
|
(615)
|
|
(0.46)
|
Adjusted income
attributable to CVS Health (2)
|
$
11,175
|
|
$ 8.40
|
|
$
11,440
|
|
$ 8.60
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,330
|
|
|
|
1,330
|
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
gains/losses on divestitures, certain legal settlements, losses on
assets held for sale, acquisition-related integration costs and
acquisition purchase price adjustments outside of the acquisition
accounting measurement period. 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
gains/losses on divestitures, certain legal settlements, losses on
assets held for sale, acquisition-related integration costs,
acquisition purchase price adjustments outside of the acquisition
accounting measurement period 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) 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-over-period results. MBR
provides management and investors with information useful in
assessing the operating results of the Company's insured Health
Care Benefits products.
(4) 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.
(5) Total pharmacy claims processed represents
the number of prescription claims processed through the Company's
pharmacy benefits manager and dispensed by either its retail
network pharmacies or its 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.
(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 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, which is included within the
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.
(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) 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.
(10) 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.
(11) 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.
(12) Same store sales and prescription volume
represent the change in revenues and prescriptions filled in the
Company's retail pharmacy stores that have been operating for
greater than one year, 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.
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SOURCE CVS Health Corporation