Full Press Release Details
| Investor | Joe Krocheski | Media | T.J. Crawford |
| Contact: | Vice President | Contact: | Vice President |
| Investor Relations | External Affairs | ||
| (860) 273-0896 | (212) 457-0583 |
CVS HEALTH REPORTS FIRST QUARTER RESULTS
2019 EPS GUIDANCE RAISED AND NARROWED
TO REFLECT STRONG PERFORMANCE YEAR-TO-DATE
First Quarter Year-over-Year Highlights:
2019 Full Year Guidance:
WOONSOCKET, RHODE ISLAND, May 1, 2019 - CVS Health Corporation (NYSE: CVS) today announced operating results for the three months ended March 31, 2019.
President and Chief Executive Officer Larry Merlo stated, "We generated strong first quarter results, providing positive momentum to start the year. Following the close of our Aetna acquisition in late November, our first full quarter of combined operations was a success in many ways. In the quarter we continued to advance our integration efforts while beginning to launch new innovations such as our HealthHUB concept stores. With our differentiated collection of health care assets we are uniquely positioned to lead the transformation of the U.S. health care system. We remain relentlessly focused on creating value for clients and customers while driving both near and longer-term returns for our shareholders."
_____________________________________________
Consolidated First Quarter Results
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| In millions, except per share amounts | 2019 | 2018 | Change | ||||||||
| Revenues | $ | 61,646 | $ | 45,743 | $ | 15,903 | |||||
| Operating income | 2,690 | 1,996 | 694 | ||||||||
| Adjusted operating income (1) | 3,595 | 2,293 | 1,302 | ||||||||
| Net income | 1,427 | 998 | 429 | ||||||||
| Diluted earnings per share | $ | 1.09 | $ | 0.98 | $ | 0.11 | |||||
| Adjusted EPS (2) | $ | 1.62 | $ | 1.48 | $ | 0.14 | |||||
| Enterprise prescriptions (5) (6) | 679.8 | 659.1 | 20.7 |
Pharmacy Services Segment
The Pharmacy Services segment provides a full range of pharmacy benefit management services to employers, health plans, government employee groups and government sponsored programs. The segment results for the three months ended March 31, 2019 and 2018 were as follows:
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| In millions | 2019 | 2018 | Change | ||||||||
| Total revenues | $ | 33,558 | $ | 32,546 | $ | 1,012 | |||||
| Operating income | 850 | 901 | (51 | ) | |||||||
| Adjusted operating income (1) | 947 | 987 | (40 | ) | |||||||
| Total pharmacy claims processed (6) | 481.8 | 468.8 | 13.0 | ||||||||
| Pharmacy network | 407.7 | 399.5 | 8.2 | ||||||||
| Mail choice | 74.1 | 69.3 | 4.8 |
See the supplemental information on page 17 for additional information regarding the performance of the Pharmacy Services 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 clinics and provides services to long-term care facilities. The segment results for the three months ended March 31, 2019 and 2018 were as follows:
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| In millions | 2019 | 2018 | Change | ||||||||
| Total revenues | $ | 21,115 | $ | 20,432 | $ | 683 | |||||
| Operating income | 1,238 | 1,624 | (386 | ) | |||||||
| Adjusted operating income (1) | 1,489 | 1,836 | (347 | ) | |||||||
| Prescriptions filled (6) | 346.8 | 328.8 | 18.0 |
See the supplemental information on page 18 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 (which occurred on November 28, 2018), the Health Care Benefits segment consisted solely of the Company's SilverScript PDP business. The segment results for the three months ended March 31, 2019 and 2018 were as follows:
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| In millions, except percentages | 2019 | 2018 | Change | ||||||||
| Total revenues | $ | 17,870 | $ | 1,318 | $ | 16,552 | |||||
| Operating income (loss) | 1,155 | (138 | ) | 1,293 | |||||||
| Adjusted operating income (loss) (1) | 1,562 | (137 | ) | 1,699 | |||||||
| Medical benefit ratio ("MBR") (a) | 84.0 | % | NM | ||||||||
| Medical membership as of March 31, 2019 | 22.8 |
_____________________________________________
See the supplemental information on page 19 for additional information regarding the performance of the Health Care Benefits segment.
2019 Full Year Guidance
The Company revised its full year 2019 consolidated GAAP operating income guidance range to $11.8 billion to $12.0 billion from $11.7 billion to $12.1 billion and narrowed and raised the mid-point of the guidance range for full year adjusted operating income to $15.0 billion to $15.2 billion from $14.8 billion to $15.2 billion. The Company also narrowed the GAAP diluted EPS guidance range to $4.90 to $5.05 from $4.88 to $5.08, and raised the Adjusted EPS guidance range to $6.75 to $6.90 from $6.68 to $6.88.
The Company also provided guidance for the second quarter of 2019. GAAP diluted EPS is projected to be in the range of $1.20 to $1.24, and Adjusted EPS is projected to be in the range of $1.68 to $1.72.
The adjustments between GAAP operating income and GAAP diluted EPS and adjusted operating income and Adjusted EPS include adding back amortization of intangible assets, integration costs related to the Aetna Acquisition, and a store rationalization charge.
Teleconference and Webcast
The Company will be holding a conference call today for investors at 8:00 a.m. (Eastern time) to discuss its first quarter results. An audio webcast of the call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Health website at http://investors.cvshealth.com. This webcast will be archived and available on the website for a one-year period following the conference call.
CVS Health is the nation's premier health innovation company helping people on their path to better health. Whether in one of its pharmacies or through its health services and plans, CVS Health is pioneering a bold new approach to total health by making quality care more affordable, accessible, simple and seamless. CVS Health is community-based and locally focused, engaging consumers with the care they need when and where they need it. The Company has more than 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 94 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services. CVS Health also serves an estimated 38 million people through traditional, voluntary and consumer-directed health insurance products and related services, including rapidly expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan. The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs. Find more information about how CVS Health is shaping the future of health at https://www.cvshealth.com.
Cautionary Statement Regarding 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 headings "2019 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 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.
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.
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Operations
| Three Months Ended | |||||||
| March 31, | |||||||
| In millions, except per share amounts | 2019 | 2018 | |||||
| Revenues: | |||||||
| Products | $ | 43,343 | $ | 44,049 | |||
| Premiums | 16,282 | 1,306 | |||||
| Services | 1,772 | 338 | |||||
| Net investment income | 249 | 50 | |||||
| Total revenues | 61,646 | 45,743 | |||||
| Operating costs: | |||||||
| Cost of products sold | 37,247 | 37,505 | |||||
| Benefit costs | 13,459 | 1,329 | |||||
| Operating expenses | 8,250 | 4,913 | |||||
| Total operating costs | 58,956 | 43,747 | |||||
| Operating income | 2,690 | 1,996 | |||||
| Interest expense | 782 | 523 | |||||
| Other expense (income) | (31 | ) | 3 | ||||
| Income before income tax provision | 1,939 | 1,470 | |||||
| Income tax provision | 512 | 472 | |||||
| Net income | 1,427 | 998 | |||||
| Net income attributable to noncontrolling interests | (6 | ) | - | ||||
| Net income attributable to CVS Health | $ | 1,421 | $ | 998 | |||
| Net income per share attributable to CVS Health: | |||||||
| Basic | $ | 1.09 | $ | 0.98 | |||
| Diluted | $ | 1.09 | $ | 0.98 | |||
| Weighted average shares outstanding: | |||||||
| Basic | 1,298 | 1,016 | |||||
| Diluted | 1,302 | 1,019 | |||||
| Dividends declared per share | $ | 0.50 | $ | 0.50 |
CVS HEALTH CORPORATION
Condensed Consolidated Balance Sheets
| March 31, | December 31, | ||||||
| In millions | 2019 | 2018 | |||||
| Assets: | |||||||
| Cash and cash equivalents | $ | 5,896 | $ | 4,059 | |||
| Investments | 2,426 | 2,522 | |||||
| Accounts receivable, net | 19,509 | 17,631 | |||||
| Inventories | 15,448 | 16,450 | |||||
| Other current assets | 4,578 | 4,581 | |||||
| Total current assets | 47,857 | 45,243 | |||||
| Long-term investments | 16,410 | 15,732 | |||||
| Property and equipment, net | 11,348 | 11,349 | |||||
| Operating lease right-of-use assets | 20,992 | - | |||||
| Goodwill | 79,075 | 78,678 | |||||
| Intangible assets, net | 35,147 | 36,524 | |||||
| Separate accounts assets | 4,074 | 3,884 | |||||
| Other assets | 4,865 | 5,046 | |||||
| Total assets | $ | 219,768 | $ | 196,456 | |||
| Liabilities: | |||||||
| Accounts payable | $ | 8,290 | $ | 8,925 | |||
| Pharmacy claims and discounts payable | 11,827 | 11,365 | |||||
| Health care costs payable | 6,701 | 6,147 | |||||
| Policyholders' funds | 2,732 | 2,939 | |||||
| Accrued expenses | 10,443 | 10,711 | |||||
| Other insurance liabilities | 1,937 | 1,937 | |||||
| Current portion of operating lease liabilities | 1,803 | - | |||||
| Short-term debt | 3,005 | 720 | |||||
| Current portion of long-term debt | 3,893 | 1,265 | |||||
| Total current liabilities | 50,631 | 44,009 | |||||
| Long-term operating lease liabilities | 18,961 | - | |||||
| Long-term debt | 67,888 | 71,444 | |||||
| Deferred income taxes | 7,540 | 7,677 | |||||
| Separate accounts liabilities | 4,074 | 3,884 | |||||
| Other long-term insurance liabilities | 8,052 | 8,119 | |||||
| Other long-term liabilities | 2,616 | 2,780 | |||||
| Total liabilities | 159,762 | 137,913 | |||||
| Shareholders' equity: | |||||||
| Preferred stock | - | - | |||||
| Common stock and capital surplus | 45,615 | 45,440 | |||||
| Treasury stock | (28,221 | ) | (28,228 | ) | |||
| Retained earnings | 41,859 | 40,911 | |||||
| Accumulated other comprehensive income | 433 | 102 | |||||
| Total CVS Health shareholders' equity | 59,686 | 58,225 | |||||
| Noncontrolling interests | 320 | 318 | |||||
| Total shareholders' equity | 60,006 | 58,543 | |||||
| Total liabilities and shareholders' equity | $ | 219,768 | $ | 196,456 |
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
| Three Months Ended | |||||||
| March 31, | |||||||
| In millions | 2019 | 2018 | |||||
| Cash flows from operating activities: | |||||||
| Cash receipts from customers | $ | 58,873 | $ | 43,369 | |||
| Cash paid for inventory and prescriptions dispensed by retail network pharmacies | (35,645 | ) | (35,102 | ) | |||
| Insurance benefits paid | (12,951 | ) | (1,093 | ) | |||
| Cash paid to other suppliers and employees | (7,403 | ) | (4,271 | ) | |||
| Interest and investment income received | 250 | 50 | |||||
| Interest paid | (1,123 | ) | (545 | ) | |||
| Income taxes paid | (53 | ) | (53 | ) | |||
| Net cash provided by operating activities | 1,948 | 2,355 | |||||
| Cash flows from investing activities: | |||||||
| Proceeds from sales and maturities of investments | 1,986 | 10 | |||||
| Purchases of investments | (2,047 | ) | (33 | ) | |||
| Purchases of property and equipment | (716 | ) | (482 | ) | |||
| Acquisitions (net of cash acquired) | (124 | ) | (353 | ) | |||
| Proceeds from sale of subsidiary | - | 725 | |||||
| Other | 10 | 2 | |||||
| Net cash used in investing activities | (891 | ) | (131 | ) | |||
| Cash flows from financing activities: | |||||||
| Net borrowings (repayments) of short-term debt | 2,285 | (1,276 | ) | ||||
| Proceeds from issuance of long-term debt | - | 39,376 | |||||
| Repayments of long-term debt | (882 | ) | (1 | ) | |||
| Derivative settlements | - | 446 | |||||
| Dividends paid | (649 | ) | (508 | ) | |||
| Proceeds from exercise of stock options | 101 | 107 | |||||
| Payments for taxes related to net share settlement of equity awards | (44 | ) | (4 | ) | |||
| Other | 5 | - | |||||
| Net cash provided by financing activities | 816 | 38,140 | |||||
| Net increase in cash, cash equivalents and restricted cash | 1,873 | 40,364 | |||||
| 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 | $ | 6,168 | $ | 42,264 |
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
| Three Months Ended | |||||||
| March 31, | |||||||
| In millions | 2019 | 2018 | |||||
| Reconciliation of net income to net cash provided by operating activities: | |||||||
| Net income | $ | 1,427 | $ | 998 | |||
| Adjustments required to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 1,111 | 644 | |||||
| Stock-based compensation | 114 | 55 | |||||
| Deferred income taxes and other noncash items | 153 | 62 | |||||
| Change in operating assets and liabilities, net of effects from acquisitions: | |||||||
| Accounts receivable, net | (1,989 | ) | (857 | ) | |||
| Inventories | 1,001 | 464 | |||||
| Other assets | (389 | ) | (57 | ) | |||
| Accounts payable and pharmacy claims and discounts payable | (22 | ) | (178 | ) | |||
| Health care costs payable and other insurance liabilities | 553 | 236 | |||||
| Other liabilities | (11 | ) | 988 | ||||
| Net cash provided by operating activities | $ | 1,948 | $ | 2,355 |
Non-GAAP Financial Information
Non-GAAP financial measures such as adjusted operating income, adjusted earnings per share (EPS), adjusted net income attributable to CVS Health, adjusted revenues and adjusted operating expenses exclude from the relevant GAAP metrics, as applicable:
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 uses non-GAAP measures, including those described above, to analyze underlying business performance and trends. The Company believes that providing these non-GAAP 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 adjusted operating income, Adjusted EPS, adjusted net income attributable to CVS Health, adjusted revenues and adjusted operating expenses may not be comparable to similarly titled measurements reported by other companies.
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 12 through 14 and 21 through 22 in this press release.
Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
Adjusted Operating Income
The following are reconciliations of operating income to adjusted operating income:
| Three Months Ended March 31, 2019 | |||||||||||||||||||||||
| Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
| In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
| Operating income (GAAP measure) | $ | 850 | $ | 1,238 | $ | 1,155 | $ | (381 | ) | $ | (172 | ) | $ | 2,690 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Amortization of intangible assets | 97 | 116 | 407 | 2 | - | 622 | |||||||||||||||||
| Acquisition-related integration costs | - | - | - | 148 | - | 148 | |||||||||||||||||
| Store rationalization charge | - | 135 | - | - | - | 135 | |||||||||||||||||
| Adjusted operating income (1) | $ | 947 | $ | 1,489 | $ | 1,562 | $ | (231 | ) | $ | (172 | ) | $ | 3,595 |
| Three Months Ended March 31, 2018 | |||||||||||||||||||||||
| Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
| In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
| Operating income (GAAP measure) | $ | 901 | $ | 1,624 | $ | (138 | ) | $ | (216 | ) | $ | (175 | ) | $ | 1,996 | ||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Amortization of intangible assets | 86 | 123 | 1 | - | - | 210 | |||||||||||||||||
| Acquisition-related transaction and integration costs | - | 3 | - | 40 | - | 43 | |||||||||||||||||
| Loss on divestiture of subsidiary | - | 86 | - | - | - | 86 | |||||||||||||||||
| Interest income on financing for the Aetna Acquisition | - | - | - | (42 | ) | - | (42 | ) | |||||||||||||||
| Adjusted operating income (1) | $ | 987 | $ | 1,836 | $ | (137 | ) | $ | (218 | ) | $ | (175 | ) | $ | 2,293 |
Adjusted Earnings Per Share
The following is a reconciliation of net income to adjusted net income attributable to CVS Health and a calculation of GAAP diluted EPS and Adjusted EPS:
| Three Months Ended | Three Months Ended | ||||||||||||||
| March 31, 2019 | March 31, 2018 | ||||||||||||||
| In millions, except per share amounts | Total Company | Per Common Share | Total Company | Per Common Share | |||||||||||
| Net income (GAAP measure) | $ | 1,427 | $ | 998 | |||||||||||
| Net income attributable to noncontrolling interests (GAAP measure) | (6 | ) | - | ||||||||||||
| Income allocable to participating securities (GAAP measure) | (2 | ) | (2 | ) | |||||||||||
| Net income attributable to CVS Health (GAAP measure) | 1,419 | $ | 1.09 | 996 | $ | 0.98 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||
| Amortization of intangible assets | 622 | 0.48 | 210 | 0.21 | |||||||||||
| Acquisition-related transaction and integration costs | 148 | 0.11 | 43 | 0.04 | |||||||||||
| Store rationalization charge | 135 | 0.10 | - | - | |||||||||||
| Loss on divestiture of subsidiary | - | - | 86 | 0.08 | |||||||||||
| Net interest expense on financing for the Aetna Acquisition | - | - | 231 | 0.23 | |||||||||||
| Income tax benefit | (219 | ) | (0.16 | ) | (61 | ) | (0.06 | ) | |||||||
| Income allocable to participating securities, net of tax (a) | - | - | (1 | ) | - | ||||||||||
| Adjusted net income attributable to CVS Health (2) | $ | 2,105 | $ | 1.62 | $ | 1,504 | $ | 1.48 | |||||||
| Weighted average diluted shares outstanding | 1,302 | 1,019 |
_____________________________________________
(a) Represents the corresponding impact to income allocable to participating securities, net of tax, related to the items above excluded from net income attributable to CVS Health in determining adjusted net income attributable to CVS Health and calculating Adjusted EPS above.
Adjusted Revenues and Adjusted Operating Expenses
The following is a reconciliation of total revenues to adjusted revenues:
| Three Months Ended | |||||||
| March 31, | |||||||
| In millions | 2019 | 2018 | |||||
| Total revenues (GAAP measure) | $ | 61,646 | $ | 45,743 | |||
| Non-GAAP adjustment: | |||||||
| Interest income on financing for the Aetna Acquisition | - | (42 | ) | ||||
| Adjusted revenues (3) | $ | 61,646 | $ | 45,701 |
The following is a reconciliation of operating expenses to adjusted operating expenses:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| In millions | 2019 | 2018 | ||||||
| Operating expenses (GAAP measure) | $ | 8,250 | - | $ | 4,913 | |||
| Non-GAAP adjustments: | ||||||||
| Amortization of intangible assets | (622 | ) | (210 | ) | ||||
| Acquisition-related transaction and integration costs | (148 | ) | (43 | ) | ||||
| Store rationalization charge | (135 | ) | - | |||||
| Loss on divestiture of subsidiary | - | (86 | ) | |||||
| Adjusted operating expenses (4) | $ | 7,345 | $ | 4,574 |
Supplemental Information
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 ended March 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 how the CODM 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 three months ended March 31, 2018, has been retrospectively adjusted to reflect these changes as shown below:
| Three Months Ended March 31, 2018 | |||||||||||||||||||||||
| Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
| In millions | Services | LTC | Benefits | Other | Eliminations | Totals | |||||||||||||||||
| Revenues, as previously reported | $ | 32,220 | $ | 20,432 | $ | - | $ | 48 | $ | (6,957 | ) | $ | 45,743 | ||||||||||
| Adjustments | 326 | - | 1,318 | - | (1,644 | ) | - | ||||||||||||||||
| Revenues, as adjusted | $ | 32,546 | $ | 20,432 | $ | 1,318 | $ | 48 | $ | (8,601 | ) | $ | 45,743 | ||||||||||
| Cost of products sold (a) | $ | 29,751 | $ | 14,516 | $ | - | $ | - | $ | (6,762 | ) | $ | 37,505 | ||||||||||
| Adjustments | 1,556 | - | - | - | (1,556 | ) | - | ||||||||||||||||
| Cost of products sold, as adjusted | $ | 31,307 | $ | 14,516 | $ | - | $ | - | (8,318 | ) | $ | 37,505 | |||||||||||
| Benefit costs (a) | $ | 1,329 | $ | - | $ | - | $ | - | $ | - | $ | 1,329 | |||||||||||
| Adjustments | (1,329 | ) | - | 1,329 | - | - | - | ||||||||||||||||
| Benefit costs, as adjusted | $ | - | $ | - | $ | 1,329 | $ | - | $ | - | $ | 1,329 | |||||||||||
| Operating expenses, as previously reported | $ | 377 | $ | 4,292 | $ | - | $ | 264 | $ | (20 | ) | $ | 4,913 | ||||||||||
| Adjustments | (39 | ) | - | 127 | - | (88 | ) | - | |||||||||||||||
| Operating expenses, as adjusted | $ | 338 | $ | 4,292 | $ | 127 | $ | 264 | $ | (108 | ) | $ | 4,913 | ||||||||||
| Operating income (loss), as previously reported | $ | 763 | $ | 1,624 | $ | - | $ | (216 | ) | $ | (175 | ) | $ | 1,996 | |||||||||
| Adjustments | 138 | - | (138 | ) | - | - | - | ||||||||||||||||
| Operating income (loss), as adjusted | 901 | 1,624 | (138 | ) | (216 | ) | (175 | ) | 1,996 | ||||||||||||||
| Adjustments | 86 | 212 | 1 | (2 | ) | - | 297 | ||||||||||||||||
| Adjusted operating income (loss) | $ | 987 | $ | 1,836 | $ | (137 | ) | $ | (218 | ) | $ | (175 | ) | $ | 2,293 |
_____________________________________________
(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:
| Pharmacy | Retail/ | Health Care | Corporate/ | Intersegment | Consolidated | ||||||||||||||||||
| In millions | Services (a) | LTC | Benefits | Other | Eliminations (b) | Totals | |||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2019 | |||||||||||||||||||||||
| Total revenues | $ | 33,558 | $ | 21,115 | $ | 17,870 | $ | 110 | $ | (11,007 | ) | $ | 61,646 | ||||||||||
| Operating income (loss) | 850 | 1,238 | 1,155 | (381 | ) | (172 | ) | 2,690 | |||||||||||||||
| Adjusted operating income (loss) (1) | 947 | 1,489 | 1,562 | (231 | ) | (172 | ) | 3,595 | |||||||||||||||
| March 31, 2018 | |||||||||||||||||||||||
| Total revenues | 32,546 | 20,432 | 1,318 | 48 | (8,601 | ) | 45,743 | ||||||||||||||||
| Operating income (loss) | 901 | 1,624 | (138 | ) | (216 | ) | (175 | ) | 1,996 | ||||||||||||||
| Adjusted operating income (loss) (1) | 987 | 1,836 | (137 | ) | (218 | ) | (175 | ) | 2,293 |
_____________________________________________
Supplemental Information
Pharmacy Services Segment
The following table summarizes the Pharmacy Services segment's performance for the respective periods:
| Three Months Ended | |||||||
| March 31, | |||||||
| In millions, except percentages | 2019 | 2018 | |||||
| Revenues: | |||||||
| Products | $ | 33,450 | $ | 32,431 | |||
| Services | 108 | 115 | |||||
| Total revenues | 33,558 | 32,546 | |||||
| Cost of products sold | 32,339 | 31,307 | |||||
| Operating expenses | 369 | 338 | |||||
| Operating expenses as a % of revenues | 1.1 | % | 1.0 | % | |||
| Operating income | $ | 850 | $ | 901 | |||
| Operating income as a % of revenues | 2.5 | % | 2.8 | % | |||
| Adjusted operating income (1) | $ | 947 | $ | 987 | |||
| Adjusted operating income as a % of revenues | 2.8 | % | 3.0 | % | |||
| Revenues (by distribution channel): | |||||||
| Pharmacy network (7) | $ | 21,574 | $ | 21,198 | |||
| Mail choice (8) | 11,839 | 11,208 | |||||
| Other | 145 | 140 | |||||
| Pharmacy claims processed: (6) | |||||||
| Total | 481.8 | 468.8 | |||||
| Pharmacy network (7) | 407.7 | 399.5 | |||||
| Mail choice (8) | 74.1 | 69.3 | |||||
| Generic dispensing rate: (6) | |||||||
| Total | 88.3 | % | 87.6 | % | |||
| Pharmacy network (7) | 88.9 | % | 88.3 | % | |||
| Mail choice (8) | 84.8 | % | 83.9 | % | |||
| Mail choice penetration rate (6) | 15.4 | % | 14.8 | % |
Supplemental Information
The following table summarizes the Retail/LTC segment's performance for the respective periods:
| Three Months Ended | |||||||
| March 31, | |||||||
| In millions, except percentages | 2019 | 2018 | |||||
| Revenues: | |||||||
| Products | $ | 20,900 | $ | 20,219 | |||
| Services | 215 | 213 | |||||
| Total revenues | 21,115 | 20,432 | |||||
| Cost of products sold | 15,297 | 14,516 | |||||
| Operating expenses | 4,580 | 4,292 | |||||
| Operating expenses as a % of revenues | 21.7 | % | 21.0 | % | |||
| Operating income | $ | 1,238 | $ | 1,624 | |||
| Operating income as a % of revenues | 5.9 | % | 7.9 | % | |||
| Adjusted operating income (1) | $ | 1,489 | $ | 1,836 | |||
| Adjusted operating income as a % of revenues | 7.1 | % | 9.0 | % | |||
| Revenues (by major goods/service lines): | |||||||
| Pharmacy | $ | 16,118 | $ | 15,500 | |||
| Front Store | 4,799 | 4,726 | |||||
| Other | 198 | 206 | |||||
| Prescriptions filled (6) | 346.8 | 328.8 | |||||
| Revenues increase: | |||||||
| Total | 3.3 | % | 5.6 | % | |||
| Pharmacy | 4.0 | % | 7.4 | % | |||
| Front Store | 1.5 | % | 2.3 | % | |||
| Total prescription volume increase (6) | 5.5 | % | 8.5 | % | |||
| Same store sales increase: (9) | |||||||
| Total | 3.8 | % | 5.8 | % | |||
| Pharmacy | 4.9 | % | 7.3 | % | |||
| Front Store | 0.4 | % | 1.6 | % | |||
| Prescription volume (6) | 6.7 | % | 8.5 | % | |||
| Generic dispensing rate (6) | 88.7 | % | 88.1 | % |
Supplemental Information
Health Care Benefits Segment
The following table summarizes the Health Care Benefits segment's performance for the respective periods:
| Three Months Ended | |||||||
| March 31, | |||||||
| In millions, except percentages | 2019 | 2018 | |||||
| Revenues: | |||||||
| Premiums | $ | 16,259 | $ | 1,306 | |||
| Services | 1,447 | 10 | |||||
| Net investment income | 164 | 2 | |||||
| Total revenues | 17,870 | 1,318 | |||||
| Benefit costs | 13,655 | 1,329 | |||||
| MBR (Benefit costs as a % of premium revenues) (a) | 84.0 | % | NM | ||||
| Operating expenses | $ | 3,060 | $ | 127 | |||
| Operating expenses as a % of revenues | 17.1 | % | 9.6 | % | |||
| Operating income (loss) | $ | 1,155 | $ | (138 | ) | ||
| Operating income (loss) as a % of revenues | 6.5 | % | NM | ||||
| Adjusted operating income (loss) (1) | $ | 1,562 | $ | (137 | ) | ||
| Adjusted operating income (loss) as a % of revenues | 8.7 | % | NM |
_____________________________________________
The following table summarizes the Health Care Benefits segment's medical membership as of March 31, 2019 and December 31, 2018:
| March 31, 2019 | December 31, 2018 | ||||||||||||||||
| In thousands | Insured | ASC | Total | Insured | ASC | Total | |||||||||||
| Medical membership: | |||||||||||||||||
| Commercial | 3,611 | 14,302 | 17,913 | 3,871 | 13,888 | 17,759 | |||||||||||
| Medicare Advantage | 2,231 | - | 2,231 | 1,758 | - | 1,758 | |||||||||||
| Medicare Supplement | 804 | - | 804 | 793 | - | 793 | |||||||||||
| Medicaid | 1,315 | 571 | 1,886 | 1,128 | 663 | 1,791 | |||||||||||
| Total medical membership | 7,961 | 14,873 | 22,834 | 7,550 | 14,551 | 22,101 | |||||||||||
| Supplementary membership information: | |||||||||||||||||
| Medicare Prescription Drug Plan (standalone) (a) | 6,044 | 6,134 |
_____________________________________________
Supplemental Information
The following table shows the components of the change in health care costs payable during the three months ended March 31, 2019:
| In millions | |||
| Health care costs payable, beginning of period | $ | 6,147 | |
| Less: Reinsurance recoverables | 4 | ||
| Health care costs payable, beginning of period, net | 6,143 | ||
| Add: Components of incurred health care costs | |||
| Current year | 13,804 | ||
| Prior years (a) | (446 | ) | |
| Total incurred health care costs (b) | 13,358 | ||
| Less: Claims paid | |||
| Current year | 8,004 | ||
| Prior years | 4,812 | ||
| Total claims paid | 12,816 | ||
| Add: Premium deficiency reserve | 11 | ||
| Health care costs payable, end of period, net | 6,696 | ||
| Add: Reinsurance recoverables | 5 | ||
| Health care costs payable, end of period | $ | 6,701 |
_____________________________________________
| Days Claims Payable (Unaudited) | ||
| March 31, 2019 | ||
| Days Claims Payable (a) | 45 |
_____________________________________________
Adjusted Operating Income Guidance
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 Securities and Exchange Commission 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. See discussion at "Non-GAAP Financial Information" and endnote (1) later in this press release for more information on how we calculate adjusted operating income.
| Year Ending | |||||||
| December 31, 2019 | |||||||
| In millions | Low | High | |||||
| Operating income (GAAP measure) | $ | 11,765 | $ | 11,975 | |||
| Non-GAAP adjustments: | |||||||
| Amortization of intangible assets | 2,520 | 2,520 | |||||
| Acquisition-related integration costs | 550 | 550 | |||||
| Store rationalization charge | 135 | 135 | |||||
| Adjusted operating income (1) | $ | 14,970 | $ | 15,180 |
Adjusted Earnings Per Share Guidance
The following reconciliations of projected net income to projected adjusted net income attributable to CVS Health and calculation 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 Securities and Exchange Commission 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. See discussion at "Non-GAAP Financial Measures" and endnote (2) later in this press release for more information on how we calculate Adjusted EPS.