Full Press Release Details
| Investor | Valerie Haertel | Media | T.J. Crawford |
| Contact: | Senior Vice President | Contact: | Vice President |
| Investor Relations | External Affairs | ||
| (401) 770-4050 | (212) 457-0583 |
CVS HEALTH REPORTS FIRST QUARTER RESULTS, PROVIDES UPDATE ON COVID-19 RESPONSE
2020 FULL YEAR EPS GUIDANCE REMAINS UNCHANGED
Swift and Decisive Response to COVID-19:
First Quarter Year-over-Year Highlights:
2020 Full Year Guidance:
WOONSOCKET, RHODE ISLAND, May 6, 2020 - CVS Health Corporation (NYSE: CVS) today announced operating results for the three months ended March 31, 2020.
CVS Health President and CEO Larry J. Merlo stated, "We have a presence in communities across the country and interact with one in three Americans every year. We have a leading consumer brand with a diversified portfolio of essential health care businesses.
"When facing any health crisis, including this pandemic, we're uniquely positioned to understand consumer and patient needs and how to address them. This includes increasing access to medicine and virtual care, and testing thousands for the virus every day to ready our country to reopen safely. We're utilizing our innovation-driven health care model, scale and unique capabilities to benefit consumers across the health care system, and none of this could be done without the tireless dedication of our colleagues."
A summary of the Company's response to the COVID-19 pandemic is included on page six.
_____________________________________________
The Company presents both GAAP and non-GAAP financial measures in this press release to assist in the comparison of the Company's past financial performance with its current financial performance. See "Non-GAAP Financial Information" on page 12 and endnotes (1) and (2) on page 22 for explanations of non-GAAP financial measures presented in this press release. See pages 13 through 14 and page 21 for reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure.
Consolidated First Quarter Results
| Three Months Ended March 31, | |||||||||||
| In millions, except per share amounts | 2020 | 2019 | Change | ||||||||
| Total revenues | $ | 66,755 | $ | 61,646 | $ | 5,109 | |||||
| Operating income | 3,458 | 2,690 | 768 | ||||||||
| Adjusted operating income (1) | 4,113 | 3,595 | 518 | ||||||||
| Net income | 2,012 | 1,427 | 585 | ||||||||
| Diluted earnings per share | $ | 1.53 | $ | 1.09 | $ | 0.44 | |||||
| Adjusted EPS (2) | $ | 1.91 | $ | 1.62 | $ | 0.29 | |||||
| Enterprise prescriptions (3) (4) | 699.2 | 679.8 | 19.4 |
Pharmacy Services Segment
The Pharmacy Services segment provides a full range of pharmacy benefit management solutions to employers, health plans, government employee groups and government sponsored programs. The segment results for the three months ended March 31, 2020 and 2019 were as follows:
| Three Months Ended March 31, | |||||||||||
| In millions | 2020 | 2019 | Change | ||||||||
| Total revenues | $ | 34,983 | $ | 33,558 | $ | 1,425 | |||||
| Operating income | 1,114 | 850 | 264 | ||||||||
| Adjusted operating income (1) | 1,181 | 947 | 234 | ||||||||
| Total pharmacy claims processed (4) (5) | 541.4 | 481.8 | 59.6 | ||||||||
| Pharmacy network (6) | 461.1 | 407.7 | 53.4 | ||||||||
| Mail choice (7) | 80.3 | 74.1 | 6.2 |
See the supplemental information on page 16 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 medical clinics and provides services to long-term care facilities. The segment results for the three months ended March 31, 2020 and 2019 were as follows:
| Three Months Ended March 31, | |||||||||||
| In millions | 2020 | 2019 | Change | ||||||||
| Total revenues | $ | 22,749 | $ | 21,115 | $ | 1,634 | |||||
| Operating income | 1,780 | 1,238 | 542 | ||||||||
| Adjusted operating income (1) | 1,902 | 1,489 | 413 | ||||||||
| Prescriptions filled (4) (5) | 375.1 | 346.8 | 28.3 |
See the supplemental information on page 17 for additional information regarding the performance of the Retail/LTC segment.
Health Care Benefits Segment
The Health Care Benefits segment offers a full range of insured and self-insured ("ASC") medical, pharmacy, dental and behavioral health products and services. The segment results for the three months ended March 31, 2020 and 2019 were as follows:
| Three Months Ended March 31, | |||||||||||
| In millions, except percentages | 2020 | 2019 | Change | ||||||||
| Total revenues | $ | 19,198 | $ | 17,870 | $ | 1,328 | |||||
| Operating income | 1,095 | 1,155 | (60 | ) | |||||||
| Adjusted operating income (1) | 1,491 | 1,562 | (71 | ) | |||||||
| Medical benefit ratio ("MBR") (8) | 82.4 | % | 84.0 | % | (1.6 | )% | |||||
| Medical membership (9) | 23.5 | 22.8 | 0.7 |
See the supplemental information on page 18 for additional information regarding the performance of the Health Care Benefits segment.
CVS Health is uniquely positioned to help the country through the COVID-19 pandemic. The Company has focused its resources on the wellbeing and safety of employees, consumers and the communities it serves. Key actions taken to date include:
Consumers and members
Charitable contributions
2020 Full Year Guidance
While acknowledging the inherent and unprecedented uncertainty surrounding the ongoing COVID-19 pandemic and its impact, the Company's full year 2020 GAAP diluted EPS guidance range of $5.47 to $5.60, its full year 2020 Adjusted EPS guidance range of $7.04 to $7.17 and its full year 2020 cash flow from operations guidance range of $10.5 billion to $11.0 billion remain unchanged.
Given the likelihood of significant variability in the impact of COVID-19 on its financial statement line items (and related ratios), the Company is withdrawing all other previously issued 2020 additional detailed guidance.
The adjustments between GAAP diluted EPS and Adjusted EPS include adding back amortization of intangible assets and integration costs related to the Company's acquisition (the "Aetna Acquisition") of Aetna Inc. ("Aetna").
Teleconference and Webcast
The Company will be holding a conference call today for investors at 8:00 a.m. (Eastern Time) to discuss its first quarter results. An audio webcast of the call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Health website at http://investors.cvshealth.com. This webcast will be archived and available on the website for a one-year period following the conference call.
CVS Health employees are united around a common goal of becoming the most consumer-centric health company in the world. We're evolving based on changing consumer needs and meeting people where they are, whether that's in the community at one of our nearly 10,000 local touchpoints, in the home, or in the palm of their hand. Our newest offerings - from HealthHUB locations that are redefining what a pharmacy can be, to innovative programs that help manage chronic conditions - are designed to create a higher-quality, simpler and more affordable experience. Learn more about how we're transforming health at www.cvshealth.com.
Cautionary Statement Concerning Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. Statements in this press release that are forward-looking include Mr. Merlo's quotation, the information under the heading "2020 Full Year Guidance" and the information included in the endnotes and reconciliations. By their nature, all forward-looking statements are not guarantees of future performance or results and are subject to risks and uncertainties that are difficult to predict and/or quantify. Actual results may differ materially from those contemplated by the forward-looking statements due to the risks and uncertainties related to the COVID-19 pandemic, 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 March 31, 2020 and our recently filed 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.
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Operations
| Three Months Ended March 31, | |||||||
| In millions, except per share amounts | 2020 | 2019 | |||||
| Revenues: | |||||||
| Products | $ | 47,003 | $ | 43,343 | |||
| Premiums | 17,640 | 16,282 | |||||
| Services | 1,950 | 1,772 | |||||
| Net investment income | 162 | 249 | |||||
| Total revenues | 66,755 | 61,646 | |||||
| Operating costs: | |||||||
| Cost of products sold | 40,347 | 37,247 | |||||
| Benefit costs | 14,387 | 13,459 | |||||
| Operating expenses | 8,563 | 8,250 | |||||
| Total operating costs | 63,297 | 58,956 | |||||
| Operating income | 3,458 | 2,690 | |||||
| Interest expense | 733 | 782 | |||||
| Other income | (54 | ) | (31 | ) | |||
| Income before income tax provision | 2,779 | 1,939 | |||||
| Income tax provision | 767 | 512 | |||||
| Net income | 2,012 | 1,427 | |||||
| Net income attributable to noncontrolling interests | (5 | ) | (6 | ) | |||
| Net income attributable to CVS Health | $ | 2,007 | $ | 1,421 | |||
| Net income per share attributable to CVS Health: | |||||||
| Basic | $ | 1.54 | $ | 1.09 | |||
| Diluted | $ | 1.53 | $ | 1.09 | |||
| Weighted average shares outstanding: | |||||||
| Basic | 1,306 | 1,298 | |||||
| Diluted | 1,312 | 1,302 | |||||
| Dividends declared per share | $ | 0.50 | $ | 0.50 |
CVS HEALTH CORPORATION
Condensed Consolidated Balance Sheets
| In millions | March 31, 2020 | December 31, 2019 | |||||
| Assets: | |||||||
| Cash and cash equivalents | $ | 10,081 | $ | 5,683 | |||
| Investments | 2,632 | 2,373 | |||||
| Accounts receivable, net | 23,037 | 19,617 | |||||
| Inventories | 16,976 | 17,516 | |||||
| Other current assets | 6,232 | 5,113 | |||||
| Total current assets | 58,958 | 50,302 | |||||
| Long-term investments | 16,840 | 17,314 | |||||
| Property and equipment, net | 12,146 | 12,044 | |||||
| Operating lease right-of-use assets | 20,672 | 20,860 | |||||
| Goodwill | 79,993 | 79,749 | |||||
| Intangible assets, net | 32,727 | 33,121 | |||||
| Separate accounts assets | 4,555 | 4,459 | |||||
| Other assets | 4,748 | 4,600 | |||||
| Total assets | $ | 230,639 | $ | 222,449 | |||
| Liabilities: | |||||||
| Accounts payable | $ | 10,223 | $ | 10,492 | |||
| Pharmacy claims and discounts payable | 15,449 | 13,601 | |||||
| Health care costs payable | 7,585 | 6,879 | |||||
| Policyholders' funds | 3,110 | 2,991 | |||||
| Accrued expenses | 13,574 | 12,133 | |||||
| Other insurance liabilities | 1,774 | 1,830 | |||||
| Current portion of operating lease liabilities | 1,762 | 1,596 | |||||
| Short-term debt | 255 | - | |||||
| Current portion of long-term debt | 5,828 | 3,781 | |||||
| Total current liabilities | 59,560 | 53,303 | |||||
| Long-term operating lease liabilities | 18,739 | 18,926 | |||||
| Long-term debt | 65,735 | 64,699 | |||||
| Deferred income taxes | 7,121 | 7,294 | |||||
| Separate accounts liabilities | 4,555 | 4,459 | |||||
| Other long-term insurance liabilities | 7,338 | 7,436 | |||||
| Other long-term liabilities | 2,117 | 2,162 | |||||
| Total liabilities | 165,165 | 158,279 | |||||
| Shareholders' equity: | |||||||
| Preferred stock | - | - | |||||
| Common stock and capital surplus | 46,180 | 45,972 | |||||
| Treasury stock | (28,182 | ) | (28,235 | ) | |||
| Retained earnings | 46,455 | 45,108 | |||||
| Accumulated other comprehensive income | 687 | 1,019 | |||||
| Total CVS Health shareholders' equity | 65,140 | 63,864 | |||||
| Noncontrolling interests | 334 | 306 | |||||
| Total shareholders' equity | 65,474 | 64,170 | |||||
| Total liabilities and shareholders' equity | $ | 230,639 | $ | 222,449 |
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
| Three Months Ended March 31, | |||||||
| In millions | 2020 | 2019 | |||||
| Cash flows from operating activities: | |||||||
| Cash receipts from customers | $ | 63,751 | $ | 58,873 | |||
| Cash paid for inventory and prescriptions dispensed by retail network pharmacies | (36,969 | ) | (35,645 | ) | |||
| Insurance benefits paid | (14,303 | ) | (12,951 | ) | |||
| Cash paid to other suppliers and employees | (8,187 | ) | (7,403 | ) | |||
| Interest and investment income received | 206 | 250 | |||||
| Interest paid | (1,128 | ) | (1,123 | ) | |||
| Income taxes paid | (65 | ) | (53 | ) | |||
| Net cash provided by operating activities | 3,305 | 1,948 | |||||
| Cash flows from investing activities: | |||||||
| Proceeds from sales and maturities of investments | 1,288 | 1,986 | |||||
| Purchases of investments | (1,535 | ) | (2,047 | ) | |||
| Purchases of property and equipment | (742 | ) | (716 | ) | |||
| Acquisitions (net of cash acquired) | (613 | ) | (124 | ) | |||
| Other | 5 | 10 | |||||
| Net cash used in investing activities | (1,597 | ) | (891 | ) | |||
| Cash flows from financing activities: | |||||||
| Net borrowings of short-term debt | 255 | 2,285 | |||||
| Proceeds from issuance of long-term debt | 3,946 | - | |||||
| Repayments of long-term debt | (1,008 | ) | (882 | ) | |||
| Dividends paid | (652 | ) | (649 | ) | |||
| Proceeds from exercise of stock options | 154 | 101 | |||||
| Payments for taxes related to net share settlement of equity awards | (16 | ) | (44 | ) | |||
| Other | (4 | ) | 5 | ||||
| Net cash provided by financing activities | 2,675 | 816 | |||||
| Net increase in cash, cash equivalents and restricted cash | 4,383 | 1,873 | |||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 5,954 | 4,295 | |||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | 10,337 | $ | 6,168 |
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
| Three Months Ended March 31, | |||||||
| In millions | 2020 | 2019 | |||||
| Reconciliation of net income to net cash provided by operating activities: | |||||||
| Net income | $ | 2,012 | $ | 1,427 | |||
| Adjustments required to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 1,086 | 1,111 | |||||
| Stock-based compensation | 96 | 114 | |||||
| Deferred income taxes and other noncash items | (35 | ) | 153 | ||||
| Change in operating assets and liabilities, net of effects from acquisitions: | |||||||
| Accounts receivable, net | (2,715 | ) | (1,989 | ) | |||
| Inventories | 541 | 1,001 | |||||
| Other assets | (1,119 | ) | (389 | ) | |||
| Accounts payable and pharmacy claims and discounts payable | 1,928 | (22 | ) | ||||
| Health care costs payable and other insurance liabilities | 139 | 553 | |||||
| Other liabilities | 1,372 | (11 | ) | ||||
| Net cash provided by operating activities | $ | 3,305 | $ | 1,948 |
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 adjusted operating income, adjusted earnings per share (EPS) and adjusted income attributable to CVS Health exclude from the relevant GAAP metrics, as applicable: amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance.
For the periods covered in this press release, the following items are excluded from the non-GAAP financial measures described above, as applicable, because the Company believes they neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance:
See endnotes (1) and (2) on page 22 for definitions of non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure are presented on pages 13 through 14 and page 21.
Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
Adjusted Operating Income
The following are reconciliations of operating income to adjusted operating income:
| Three Months Ended March 31, 2020 | |||||||||||||||||||||||
| In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
| Operating income (loss) (GAAP measure) | $ | 1,114 | $ | 1,780 | $ | 1,095 | $ | (355 | ) | $ | (176 | ) | $ | 3,458 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Amortization of intangible assets | 67 | 122 | 396 | 1 | - | 586 | |||||||||||||||||
| Acquisition-related integration costs | - | - | - | 69 | - | 69 | |||||||||||||||||
| Adjusted operating income (loss) (1) | $ | 1,181 | $ | 1,902 | $ | 1,491 | $ | (285 | ) | $ | (176 | ) | $ | 4,113 |
| Three Months Ended March 31, 2019 | |||||||||||||||||||||||
| In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
| Operating income (loss) (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 (loss) (1) | $ | 947 | $ | 1,489 | $ | 1,562 | $ | (231 | ) | $ | (172 | ) | $ | 3,595 |
Adjusted Earnings Per Share
The following are reconciliations of net income attributable to CVS Health to adjusted income attributable to CVS Health and calculations of GAAP diluted EPS and Adjusted EPS:
| Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | ||||||||||||||
| In millions, except per share amounts | Total Company | Per Common Share | Total Company | Per Common Share | |||||||||||
| Net income (GAAP measure) | $ | 2,012 | $ | 1,427 | |||||||||||
| Net income attributable to noncontrolling interests (GAAP measure) | (5 | ) | (6 | ) | |||||||||||
| Income allocable to participating securities (GAAP measure) | - | (2 | ) | ||||||||||||
| Net income attributable to CVS Health (GAAP measure) | 2,007 | $ | 1.53 | 1,419 | $ | 1.09 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||
| Amortization of intangible assets | 586 | 0.45 | 622 | 0.48 | |||||||||||
| Acquisition-related integration costs | 69 | 0.05 | 148 | 0.11 | |||||||||||
| Store rationalization charge | - | - | 135 | 0.10 | |||||||||||
| Income tax benefit | (160 | ) | (0.12 | ) | (219 | ) | (0.16 | ) | |||||||
| Adjusted income attributable to CVS Health (2) | $ | 2,502 | $ | 1.91 | $ | 2,105 | $ | 1.62 | |||||||
| Weighted average diluted shares outstanding | 1,312 | 1,302 |
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, 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 | Pharmacy Services (a) | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations (b) | Consolidated Totals | |||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2020 | |||||||||||||||||||||||
| Total revenues | $ | 34,983 | $ | 22,749 | $ | 19,198 | $ | 90 | $ | (10,265 | ) | $ | 66,755 | ||||||||||
| Operating income (loss) | 1,114 | 1,780 | 1,095 | (355 | ) | (176 | ) | 3,458 | |||||||||||||||
| Adjusted operating income (loss) (1) | 1,181 | 1,902 | 1,491 | (285 | ) | (176 | ) | 4,113 | |||||||||||||||
| 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 |
_____________________________________________
Supplemental Information
Pharmacy Services Segment
The following table summarizes the Pharmacy Services segment's performance for the respective periods:
| Three Months Ended March 31, | Change | |||||||||||||
| In millions, except percentages | 2020 | 2019 | $ | % | ||||||||||
| Revenues: | ||||||||||||||
| Products | $ | 34,746 | $ | 33,450 | $ | 1,296 | 3.9 | % | ||||||
| Services | 237 | 108 | 129 | 119.4 | % | |||||||||
| Total revenues | 34,983 | 33,558 | 1,425 | 4.2 | % | |||||||||
| Cost of products sold | 33,503 | 32,339 | 1,164 | 3.6 | % | |||||||||
| Operating expenses | 366 | 369 | (3 | ) | (0.8 | )% | ||||||||
| Operating expenses as a % of total revenues | 1.0 | % | 1.1 | % | ||||||||||
| Operating income | $ | 1,114 | $ | 850 | $ | 264 | 31.1 | % | ||||||
| Operating income as a % of total revenues | 3.2 | % | 2.5 | % | ||||||||||
| Adjusted operating income (1) | $ | 1,181 | $ | 947 | $ | 234 | 24.7 | % | ||||||
| Adjusted operating income as a % of total revenues | 3.4 | % | 2.8 | % | ||||||||||
| Revenues (by distribution channel): | ||||||||||||||
| Pharmacy network (6) (13) | $ | 21,100 | $ | 21,532 | $ | (432 | ) | (2.0 | )% | |||||
| Mail choice (7) (13) | 13,674 | 11,881 | 1,793 | 15.1 | % | |||||||||
| Other | 209 | 145 | 64 | 44.1 | % | |||||||||
| Pharmacy claims processed: (4) (5) | ||||||||||||||
| Total | 541.4 | 481.8 | 59.6 | 12.4 | % | |||||||||
| Pharmacy network (6) | 461.1 | 407.7 | 53.4 | 13.1 | % | |||||||||
| Mail choice (7) | 80.3 | 74.1 | 6.2 | 8.4 | % | |||||||||
| Generic dispensing rate: (4) (10) | ||||||||||||||
| Total | 89.0 | % | 88.3 | % | ||||||||||
| Pharmacy network (6) | 89.5 | % | 88.9 | % | ||||||||||
| Mail choice (7) | 85.7 | % | 84.8 | % |
Supplemental Information
The following table summarizes the Retail/LTC segment's performance for the respective periods:
| Three Months Ended March 31, | Change | |||||||||||||
| In millions, except percentages | 2020 | 2019 | $ | % | ||||||||||
| Revenues: | ||||||||||||||
| Products | $ | 22,522 | $ | 20,900 | $ | 1,622 | 7.8 | % | ||||||
| Services | 227 | 215 | 12 | 5.6 | % | |||||||||
| Total revenues | 22,749 | 21,115 | 1,634 | 7.7 | % | |||||||||
| Cost of products sold | 16,578 | 15,297 | 1,281 | 8.4 | % | |||||||||
| Operating expenses | 4,391 | 4,580 | (189 | ) | (4.1 | )% | ||||||||
| Operating expenses as a % of total revenues | 19.3 | % | 21.7 | % | ||||||||||
| Operating income | $ | 1,780 | $ | 1,238 | $ | 542 | 43.8 | % | ||||||
| Operating income as a % of total revenues | 7.8 | % | 5.9 | % | ||||||||||
| Adjusted operating income (1) | $ | 1,902 | $ | 1,489 | $ | 413 | 27.7 | % | ||||||
| Adjusted operating income as a % of total revenues | 8.4 | % | 7.1 | % | ||||||||||
| Revenues (by major goods/service lines): | ||||||||||||||
| Pharmacy | $ | 17,355 | $ | 16,118 | $ | 1,237 | 7.7 | % | ||||||
| Front Store | 5,208 | 4,799 | 409 | 8.5 | % | |||||||||
| Other | 186 | 198 | (12 | ) | (6.1 | )% | ||||||||
| Prescriptions filled (4) (5) | 375.1 | 346.8 | 28.3 | 8.2 | % | |||||||||
| Same store sales increase: (11) | ||||||||||||||
| Total | 9.0 | % | 3.8 | % | ||||||||||
| Pharmacy | 9.3 | % | 4.9 | % | ||||||||||
| Front Store | 8.0 | % | 0.4 | % | ||||||||||
| Prescription volume (4) | 9.8 | % | 6.7 | % | ||||||||||
| Generic dispensing rate (4) (10) | 89.3 | % | 88.7 | % |
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, | Change | |||||||||||||
| In millions, except percentages and basis points ("bps") | 2020 | 2019 | $ | % | ||||||||||
| Revenues: | ||||||||||||||
| Premiums | $ | 17,621 | $ | 16,259 | $ | 1,362 | 8.4 | % | ||||||
| Services | 1,484 | 1,447 | 37 | 2.6 | % | |||||||||
| Net investment income | 93 | 164 | (71 | ) | (43.3 | )% | ||||||||
| Total revenues | 19,198 | 17,870 | 1,328 | 7.4 | % | |||||||||
| Benefit costs | 14,516 | 13,655 | 861 | 6.3 | % | |||||||||
| MBR (Benefit costs as a % of premium revenues) (8) | 82.4 | % | 84.0 | % | (160) | bps | ||||||||
| Operating expenses | $ | 3,587 | $ | 3,060 | $ | 527 | 17.2 | % | ||||||
| Operating expenses as a % of total revenues | 18.7 | % | 17.1 | % | ||||||||||
| Operating income | $ | 1,095 | $ | 1,155 | $ | (60 | ) | (5.2 | )% | |||||
| Operating income as a % of total revenues | 5.7 | % | 6.5 | % | ||||||||||
| Adjusted operating income (1) | $ | 1,491 | $ | 1,562 | $ | (71 | ) | (4.5 | )% | |||||
| Adjusted operating income as a % of total revenues | 7.8 | % | 8.7 | % |
The following table summarizes the Health Care Benefits segment's medical membership for the respective periods:
| March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||||||||||||||||
| In thousands | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | |||||||||||||||||
| Medical membership: (9) | ||||||||||||||||||||||||||
| Commercial | 3,372 | 14,206 | 17,578 | 3,591 | 14,159 | 17,750 | 3,611 | 14,302 | 17,913 | |||||||||||||||||
| Medicare Advantage | 2,584 | - | 2,584 | 2,321 | - | 2,321 | 2,231 | - | 2,231 | |||||||||||||||||
| Medicare Supplement | 913 | - | 913 | 881 | - | 881 | 804 | - | 804 | |||||||||||||||||
| Medicaid | 1,835 | 552 | 2,387 | 1,398 | 558 | 1,956 | 1,315 | 571 | 1,886 | |||||||||||||||||
| Total medical membership | 8,704 | 14,758 | 23,462 | 8,191 | 14,717 | 22,908 | 7,961 | 14,873 | 22,834 | |||||||||||||||||
| Supplemental membership information: | ||||||||||||||||||||||||||
| Medicare Prescription Drug Plan (standalone) (a) | 5,624 | 5,994 | 6,044 |
_____________________________________________
Supplemental Information
The following table shows the components of the change in health care costs payable during the three months ended March 31, 2020 and 2019:
| Three Months Ended March 31, | |||||||
| In millions | 2020 | 2019 | |||||
| Health care costs payable, beginning of period | $ | 6,879 | $ | 6,147 | |||
| Less: Reinsurance recoverables | 5 | 4 | |||||
| Health care costs payable, beginning of period, net | 6,874 | 6,143 | |||||
| Acquisition | 412 | - | |||||
| Add: Components of incurred health care costs | |||||||
| Current year | 14,764 | 13,804 | |||||
| Prior years (a) | (464 | ) | (446 | ) | |||
| Total incurred health care costs (b) | 14,300 | 13,358 | |||||
| Less: Claims paid | |||||||
| Current year | 8,773 | 8,004 | |||||
| Prior years | 5,242 | 4,812 | |||||
| Total claims paid | 14,015 | 12,816 | |||||
| Add: Premium deficiency reserve | 10 | 11 | |||||
| Health care costs payable, end of period, net | 7,581 | 6,696 | |||||
| Add: Reinsurance recoverables | 4 | 5 | |||||
| Health care costs payable, end of period | $ | 7,585 | $ | 6,701 |
_____________________________________________
The following table summarizes the Health Care Benefits segment's days claims payable for the respective periods:
| March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||
| Days Claims Payable (12) | 48 | 48 | 45 |
Supplemental Information
Corporate/Other Segment
The following table summarizes the Corporate/Other segment's performance for the respective periods:
| Three Months Ended March 31, | Change | |||||||||||||
| In millions, except percentages | 2020 | 2019 | $ | % | ||||||||||
| Revenues: | ||||||||||||||
| Premiums | $ | 19 | $ | 23 | $ | (4 | ) | (17.4 | )% | |||||
| Services | 2 | 2 | - | - | % | |||||||||
| Net investment income | 69 | 85 | (16 | ) | (18.8 | )% | ||||||||
| Total revenues | 90 | 110 | (20 | ) | (18.2 | )% | ||||||||
| Benefit costs | 68 | 79 | (11 | ) | (13.9 | )% | ||||||||
| Operating expenses | 377 | 412 | (35 | ) | (8.5 | )% | ||||||||
| Operating loss | (355 | ) | (381 | ) | 26 | 6.8 | % | |||||||
| Adjusted operating loss (1) | (285 | ) | (231 | ) | (54 | ) | (23.4 | )% |
Adjusted Earnings Per Share Guidance
The following reconciliations of projected net income 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 due to the risks and uncertainties related to the COVID-19 pandemic, 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 SEC filings, including those set forth in the Risk Factors section and under the heading "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 and our recently filed Current Reports on Form 8-K. 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, 2020 | |||||||||||||||
| Low | High | ||||||||||||||
| In millions, except per share amounts | Total Company | Per Common Share | Total Company | Per Common Share | |||||||||||
| Net income (GAAP measure) | $ | 7,210 | $ | 7,385 | |||||||||||
| Net loss attributable to noncontrolling interests (GAAP measure) | 5 | 5 | |||||||||||||
| Net income attributable to CVS Health (GAAP measure) | 7,215 | $ | 5.47 | 7,390 | $ | 5.60 | |||||||||
| Non-GAAP adjustments: | |||||||||||||||
| Amortization of intangible assets | 2,320 | 1.76 | 2,320 | 1.76 | |||||||||||
| Acquisition-related integration costs | 450 | 0.34 | 450 | 0.34 | |||||||||||
| Income tax benefit | (690 | ) | (0.53 | ) | (690 | ) | (0.53 | ) | |||||||
| Adjusted income attributable to CVS Health (2) | $ | 9,295 | $ | 7.04 | $ | 9,470 | $ | 7.17 | |||||||
| Weighted average diluted shares outstanding | 1,320 | 1,320 |
(1) The Company defines adjusted operating income as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance, such as acquisition-related integration costs, store rationalization charges, and any other items specifically identified herein. See "Non-GAAP Financial Information" earlier in this press release for additional information regarding the items excluded from operating income.
(2) The Company defines adjusted income attributable to CVS Health as net income attributable to CVS Health (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance, such as acquisition-related integration costs, store rationalization charges, the corresponding income tax benefit or expense related to the items excluded from adjusted income attributable to CVS Health, the corresponding impact to income allocable to participating securities, net of tax, related to the items excluded from net income attributable to CVS Health in determining adjusted income attributable to CVS Health, and any other items specifically identified herein. GAAP diluted EPS and Adjusted EPS, respectively, are calculated by dividing net income attributable to CVS Health and adjusted income attributable to CVS Health by the Company's weighted average diluted shares outstanding. See "Non-GAAP Financial Information" earlier in this press release for additional information regarding the items excluded from net income attributable to CVS Health and GAAP diluted EPS.
(3) Enterprise prescriptions include prescriptions dispensed through the Company's retail pharmacies, long-term care pharmacies, and mail order pharmacies as well as prescription claims managed through our pharmacy benefits manager, with an elimination for managed prescription claims filled through CVS Health dispensing channels. Management uses this metric to analyze the total prescription volume across the Company including variances between actual prescriptions and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of prescription volume on total revenues and operating results.
(4) Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.
(5) Total pharmacy claims processed represents the number of prescription claims processed through our pharmacy benefits manager and dispensed by either our retail network pharmacies or our own mail and specialty pharmacies. Prescriptions filled represents the number of prescriptions dispensed through the Retail/LTC segment's pharmacies. Management uses these metrics to understand variances between actual claims processed and prescriptions dispensed, respectively, and expected amounts as well as trends in period-over-period results. These metrics provide management and investors with information useful in understanding the impact of pharmacy claim volume and prescription volume, respectively, on segment revenues and operating results.