WOONSOCKET, R.I., Nov. 2, 2022
/PRNewswire/ -- CVS Health Corporation (NYSE: CVS) today
announced operating results for the three months ended
September 30, 2022.
THIRD QUARTER RESULTS
- Total revenues increased to $81.2
billion, up 10.0% compared to prior year
- GAAP loss per share of $(2.60),
inclusive of $5.2 billion pre-tax
opioid litigation charges and a $2.5
billion pre-tax loss on assets held for sale related to the
Omnicare® long-term care business ("LTC business")
- Adjusted EPS of $2.09
KEY FINANCIAL DATA
|
Three Months
Ended
September
30,
|
In millions, except per share amounts
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
81,159
|
|
$
73,794
|
|
$ 7,365
|
Operating income
(loss)
|
(3,931)
|
|
3,061
|
|
(6,992)
|
Adjusted operating
income (1)
|
4,233
|
|
4,073
|
|
160
|
Diluted earnings (loss)
per share
|
$
(2.60)
|
|
$ 1.20
|
|
$
(3.80)
|
Adjusted EPS
(2)
|
$ 2.09
|
|
$ 1.97
|
|
$ 0.12
|
YEAR-TO-DATE RESULTS
- Total revenues increased to $238.6
billion, up 10.7% compared to prior year
- GAAP diluted EPS of $1.40
- Adjusted EPS of $6.71
- Generated cash flow from operations of $18.1 billion
- Repaid $4.1 billion of long-term
debt
2022 FULL-YEAR GUIDANCE
- Revised GAAP diluted EPS guidance range to $3.12 to $3.22 from
$7.23 to $7.43
- Raised Adjusted EPS guidance range to $8.55 to $8.65 from
$8.40 to $8.60
- Raised cash flow from operations guidance range to $13.5 billion to $14.5
billion from $12.5 billion to
$13.5 billion
CEO Commentary
"We delivered another outstanding quarter, and have raised
full-year guidance as a result. We continue to execute on our
strategy with a focus on expanding capabilities in health care
delivery, and the announced acquisition of Signify Health will
further strengthen our engagement with consumers."
-Karen S. Lynch, CVS Health
President and CEO
Q3 IN THE
SPOTLIGHT
|
On September 2, 2022,
the Company entered into a definitive agreement to acquire Signify
Health, Inc. ("Signify Health") for $30.50 per share in cash,
representing a total transaction value of approximately $8 billion.
The transaction is expected to close in the first half of
2023.
|
Appointed Dr. Jeffrey
R. Balser to serve on the Board of Directors, effective September
13, 2022, and appointed Dr. Amar Desai as President, Health Care
Delivery, effective October 17, 2022.
|
Repaid
$2.6 billion of long-term debt, while returning $726 million
to shareholders through dividends during the three months ended
September 30, 2022. Since the close of the acquisition of Aetna
Inc. in November 2018, the Company has repaid a net
$25.2 billion of long-term debt.
|
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 13 and
endnotes beginning on page 24 for explanations of non-GAAP
financial measures presented in this press release. See pages
15 through 16 and page 23 for reconciliations of
each non-GAAP financial measure used in this release to the most
directly comparable GAAP financial measure.
Consolidated Third Quarter Results
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
In millions, except per share amounts
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
81,159
|
|
$
73,794
|
|
$
7,365
|
|
$ 238,621
|
|
$ 215,507
|
|
$
23,114
|
Operating income
(loss)
|
(3,931)
|
|
3,061
|
|
(6,992)
|
|
4,128
|
|
10,964
|
|
(6,836)
|
Adjusted operating
income (1)
|
4,233
|
|
4,073
|
|
160
|
|
13,526
|
|
13,165
|
|
361
|
Net income
(loss)
|
(3,409)
|
|
1,587
|
|
(4,996)
|
|
1,865
|
|
6,602
|
|
(4,737)
|
Diluted earnings (loss)
per share
|
$ (2.60)
|
|
$ 1.20
|
|
$ (3.80)
|
|
$ 1.40
|
|
$ 4.98
|
|
$ (3.58)
|
Adjusted EPS
(2)
|
$ 2.09
|
|
$ 1.97
|
|
$ 0.12
|
|
$ 6.71
|
|
$ 6.43
|
|
$ 0.28
|
For the three months ended September 30,
2022 compared to the prior year:
- Total revenues increased 10.0% driven by growth across all
segments.
- During the three months ended September
30, 2022, the Company incurred an operating loss of
$3.9 billion compared to $3.1 billion of operating income in the prior
year. The difference was primarily driven by $5.2 billion in opioid litigation charges and a
$2.5 billion loss on assets held for
sale to write-down the Company's LTC business in the current year,
partially offset by the absence of a $431
million goodwill impairment charge on the remaining goodwill
of the LTC reporting unit recorded in the prior year.
- Adjusted operating income increased $160
million in the three months ended September 30, 2022 compared to the prior year.
The increase in adjusted operating income was primarily driven by
increases in the Health Care Benefits and Pharmacy Services
segments, largely offset by a decline in the Retail/LTC segment.
See pages 3 through 5 for additional discussion of adjusted
operating income performance of the Company's segments.
- Interest expense decreased $36
million, or 6.0%, due to lower debt in the three months
ended September 30, 2022.
- Due to the pre-tax loss in the three months ended September 30, 2022, the Company recorded an
income tax benefit of 23.5%, compared to an income tax expense of
26.0% for the three months ended September
30, 2021. The difference in the tax rate was primarily due
to certain nondeductible legal charges recorded in the three months
ended September 30, 2022.
Opioid Litigation Developments
During the third quarter, the Company entered into settlement
agreements with two states and a tribe to settle all opioid claims
against it. In October 2022, the
Company agreed in principle to a global settlement framework which,
if all conditions are satisfied and the non-monetary terms are
finalized, would result in the settlement of substantially all
opioid lawsuits and claims filed by other states, political
subdivisions and tribes against the Company to be paid over 10
years, beginning in 2023. In the third quarter of 2022, the Company
recorded a pre-tax charge of $5.2
billion related to the estimated liability for
opioid-related claims.
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
nine months ended September 30, 2022 and 2021 were as
follows:
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
In millions,
except percentages
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
22,511
|
|
$
20,479
|
|
$
2,032
|
|
$
68,376
|
|
$
61,487
|
|
$
6,889
|
Adjusted operating
income (1)
|
1,544
|
|
1,106
|
|
438
|
|
5,126
|
|
4,502
|
|
624
|
Medical benefit ratio
("MBR") (3)
|
83.5 %
|
|
85.8 %
|
|
(2.3) %
|
|
83.3 %
|
|
84.4 %
|
|
(1.1) %
|
Medical membership
(4)
|
|
|
|
|
|
|
24.3
|
|
23.7
|
|
0.6
|
- Total revenues increased 9.9% for the three months ended
September 30, 2022 compared to the
prior year driven by growth across all product lines.
- Adjusted operating income increased 39.6% for the three months
ended September 30, 2022 compared to
the prior year primarily driven by the net favorable impact of
COVID-19 compared to the prior year and strong underlying
performance, including higher favorable development of
prior-periods' health care cost estimates in the three months ended
September 30, 2022 compared to the
prior year. These increases were partially offset by incremental
investments to support growth in the business and net realized
capital losses.
- The MBR decreased to 83.5% in the three months ended
September 30, 2022 compared to 85.8%
in the prior year reflective of the net favorable impact of
COVID-19 compared to the prior year and strong underlying
performance, including higher favorable development of
prior-periods' health care cost estimates in the three months ended
September 30, 2022 compared to the
prior year.
- Medical membership as of September 30,
2022 of 24.3 million increased 590,000 members compared with
September 30, 2021, reflecting
increases in Medicare and Commercial membership, partially offset
by a decline in Medicaid membership. The decline in Medicaid
membership reflects the expected loss of a large customer during
the three months ended September 30,
2022.
- Medical membership as of September 30,
2022 of 24.3 million decreased 145,000 members compared with
June 30, 2022, reflecting a decline
in Medicaid membership, as a result of the expected loss of a large
customer, partially offset by increases in Medicare and Commercial
membership.
- The segment experienced favorable development of prior-periods'
health care cost estimates in its Government Services and
Commercial businesses during the three months ended September 30, 2022, primarily attributable to
second quarter 2022 performance.
- Prior years' health care costs payable estimates developed
favorably by $670 million during the
nine months ended September 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 18 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 nine months ended September 30, 2022
and 2021 were as follows:
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
In millions
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
43,216
|
|
$
39,046
|
|
$
4,170
|
|
$ 125,489
|
|
$ 113,681
|
|
$
11,808
|
Adjusted operating
income (1)
|
1,877
|
|
1,773
|
|
104
|
|
5,368
|
|
5,035
|
|
333
|
Total pharmacy claims
processed (5) (6)
|
584.9
|
|
564.4
|
|
20.5
|
|
1,736.2
|
|
1,662.5
|
|
73.7
|
Pharmacy network
(7)
|
502.3
|
|
481.1
|
|
21.2
|
|
1,485.7
|
|
1,415.8
|
|
69.9
|
Mail choice
(8)
|
82.6
|
|
83.3
|
|
(0.7)
|
|
250.5
|
|
246.7
|
|
3.8
|
- Total revenues increased 10.7% for the three months ended
September 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 5.9% for the three months
ended September 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, partially offset by
continued client price improvements.
- Total pharmacy claims processed increased 3.6% on a 30-day
equivalent basis for the three months ended September 30, 2022 compared to the prior year.
The increase was primarily driven by net new business and increased
utilization, partially offset by a decrease in COVID-19
vaccinations. Excluding the impact of COVID-19 vaccinations, total
pharmacy claims processed increased 4.5% on a 30-day equivalent
basis for the three months ended September
30, 2022 compared to the prior year.
See the supplemental information on page 20 for additional
information regarding the performance of the Pharmacy Services
segment.
Retail/LTC Segment
The Retail/LTC segment fulfills prescriptions for medications,
provides patient care programs, sells a wide assortment of 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 nine months ended September 30, 2022 and 2021 were
as follows:
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
In millions
|
2022
|
|
2021
|
|
Change
|
|
2022
|
|
2021
|
|
Change
|
Total
revenues
|
$
26,706
|
|
$
24,992
|
|
$
1,714
|
|
$
78,410
|
|
$
72,994
|
|
$
5,416
|
Adjusted operating
income (1)
|
1,398
|
|
1,723
|
|
(325)
|
|
4,865
|
|
5,166
|
|
(301)
|
Prescriptions filled
(5) (6)
|
405.3
|
|
398.0
|
|
7.3
|
|
1,200.7
|
|
1,167.8
|
|
32.9
|
- Total revenues increased 6.9% for the three months ended
September 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, as well as pharmacy drug mix and brand inflation. These
increases were partially offset by decreased COVID-19 diagnostic
testing and vaccinations, the impact of recent generic
introductions and continued pharmacy reimbursement pressure.
- Adjusted operating income decreased 18.9% for the three months
ended September 30, 2022 compared to
the prior year primarily driven by decreased COVID-19 diagnostic
testing and vaccinations, continued pharmacy reimbursement
pressure, as well as increased investments in the segment's
operations and capabilities. 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 September 30, 2022.
- Prescriptions filled increased 1.8% on a 30-day equivalent
basis for the three months ended September
30, 2022 compared to the prior year primarily driven by
increased utilization, partially offset by a decrease in COVID-19
vaccinations. Excluding the impact of COVID-19 vaccinations,
prescriptions filled increased 3.6% on a 30-day equivalent basis
for the three months ended September 30,
2022 compared to the prior year.
See the supplemental information on page 21 for additional
information regarding the performance of the Retail/LTC
segment.
2022 Full-Year Guidance
The Company revised its full-year 2022 GAAP diluted EPS guidance
range to $3.12 to $3.22 from $7.23 to
$7.43 and raised its full-year 2022
Adjusted EPS guidance range to $8.55
to $8.65 from $8.40 to $8.60. The
Company also raised its full-year 2022 cash flow from operations
guidance range to $13.5 billion to
$14.5 billion from $12.5 billion to $13.5
billion.
The adjustments between full-year 2022 GAAP diluted EPS and
Adjusted EPS include amortization of intangible assets, opioid
litigation charges, losses on assets held for sale, the gain on the
divestiture of PayFlex Holdings, Inc. ("PayFlex"), 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 third 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.
In addition, on November 9, 2022,
CVS Health's Executive Vice President and Chief Financial Officer,
Shawn Guertin, will participate in a
fireside chat with investors at the 31st Annual Credit Suisse
Healthcare Conference at approximately 11:35
a.m. (Eastern Time).
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 "Q3 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.
Certain risks and uncertainties related to CVS Health's proposed
acquisition of Signify Health include, but are not limited to, the
occurrence of any event, change or other circumstance that could
give rise to the right of CVS Health or Signify Health or both of
them to terminate the merger agreement, including circumstances
requiring a party to pay the other party a termination fee pursuant
to the merger agreement; failure to obtain applicable regulatory
approval in a timely manner or otherwise; the risk that the
acquisition may not close in the anticipated timeframe or at all
due to one or more of the other closing conditions to the
transaction not being satisfied or waived; risks related to the
ability of CVS Health to successfully integrate the businesses and
achieve the expected synergies and operating efficiencies within
the expected timeframes or at all and the possibility that such
integration may be more difficult, time consuming or costly than
expected; risks related to disruption of management time from
ongoing business operations due to the proposed transaction; the
risk that any announcements relating to the proposed transaction
could have adverse effects on the market price of CVS Health's
common stock, credit ratings or operating results; the risk that
the proposed transaction and its announcement could have an adverse
effect on the ability of CVS Health to retain customers and
maintain relationships with each of its business partners,
suppliers and customers and on its operating results and businesses
generally; the risk of litigation and/or regulatory actions related
to the proposed acquisition; and other business effects, including
the effects of industry, market, economic, political or regulatory
conditions. Certain additional risks and uncertainties are
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
September 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
September
30,
|
|
Nine Months
Ended
September
30,
|
In millions, except per share amounts
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenues:
|
|
|
|
|
|
|
|
Products
|
$ 57,643
|
|
$ 51,853
|
|
$
166,959
|
|
$
149,765
|
Premiums
|
21,003
|
|
18,984
|
|
63,894
|
|
56,927
|
Services
|
2,312
|
|
2,711
|
|
7,253
|
|
7,983
|
Net investment
income
|
201
|
|
246
|
|
515
|
|
832
|
Total
revenues
|
81,159
|
|
73,794
|
|
238,621
|
|
215,507
|
Operating
costs:
|
|
|
|
|
|
|
|
Cost of products
sold
|
50,365
|
|
45,011
|
|
145,164
|
|
129,425
|
Benefit
costs
|
17,419
|
|
16,081
|
|
52,976
|
|
47,686
|
Opioid litigation
charges
|
5,220
|
|
—
|
|
5,704
|
|
—
|
Loss on assets held
for sale
|
2,480
|
|
—
|
|
2,521
|
|
—
|
Goodwill
impairment
|
—
|
|
431
|
|
—
|
|
431
|
Operating
expenses
|
9,606
|
|
9,210
|
|
28,128
|
|
27,001
|
Total operating
costs
|
85,090
|
|
70,733
|
|
234,493
|
|
204,543
|
Operating income
(loss)
|
(3,931)
|
|
3,061
|
|
4,128
|
|
10,964
|
Interest
expense
|
566
|
|
602
|
|
1,735
|
|
1,895
|
Loss on early
extinguishment of debt
|
—
|
|
363
|
|
—
|
|
363
|
Other income
|
(41)
|
|
(49)
|
|
(126)
|
|
(144)
|
Income (loss) before
income tax provision
|
(4,456)
|
|
2,145
|
|
2,519
|
|
8,850
|
Income tax provision
(benefit)
|
(1,047)
|
|
558
|
|
654
|
|
2,248
|
Net income
(loss)
|
(3,409)
|
|
1,587
|
|
1,865
|
|
6,602
|
Net (income) loss
attributable to noncontrolling interests
|
(7)
|
|
11
|
|
(18)
|
|
2
|
Net income (loss)
attributable to CVS Health
|
$ (3,416)
|
|
$
1,598
|
|
$
1,847
|
|
$
6,604
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to CVS Health:
|
|
|
|
|
|
|
|
Basic
|
$
(2.60)
|
|
$
1.21
|
|
$
1.41
|
|
$
5.01
|
Diluted
|
$
(2.60)
|
|
$
1.20
|
|
$
1.40
|
|
$
4.98
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
1,315
|
|
1,321
|
|
1,313
|
|
1,318
|
Diluted
|
1,315
|
|
1,329
|
|
1,324
|
|
1,326
|
Dividends declared per
share
|
$
0.55
|
|
$
0.50
|
|
$
1.65
|
|
$
1.50
|
CVS HEALTH
CORPORATION
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
|
In millions
|
September
30,
2022
|
|
December 31,
2021
|
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
17,197
|
|
$
9,408
|
Investments
|
2,792
|
|
3,117
|
Accounts receivable,
net
|
26,317
|
|
24,431
|
Inventories
|
18,058
|
|
17,760
|
Assets held for
sale
|
1,498
|
|
—
|
Other current
assets
|
2,479
|
|
5,292
|
Total current
assets
|
68,341
|
|
60,008
|
Long-term
investments
|
20,565
|
|
23,025
|
Property and
equipment, net
|
12,626
|
|
12,896
|
Operating lease
right-of-use assets
|
18,270
|
|
19,122
|
Goodwill
|
78,086
|
|
79,121
|
Intangible assets,
net
|
25,157
|
|
29,026
|
Separate accounts
assets
|
3,318
|
|
5,087
|
Other
assets
|
4,849
|
|
4,714
|
Total assets
|
$
231,212
|
|
$
232,999
|
|
|
|
|
Liabilities:
|
|
|
|
Accounts
payable
|
$
13,925
|
|
$
12,544
|
Pharmacy claims and
discounts payable
|
19,161
|
|
17,330
|
Health care costs
payable
|
10,351
|
|
8,808
|
Policyholders'
funds
|
1,642
|
|
4,301
|
Accrued
expenses
|
19,423
|
|
17,670
|
Other insurance
liabilities
|
4,561
|
|
1,303
|
Current portion of
operating lease liabilities
|
1,687
|
|
1,646
|
Current portion of
long-term debt
|
1,363
|
|
4,205
|
Liabilities held for
sale
|
296
|
|
—
|
Total current
liabilities
|
72,409
|
|
67,807
|
Long-term operating
lease liabilities
|
17,174
|
|
18,177
|
Long-term
debt
|
50,848
|
|
51,971
|
Deferred income
taxes
|
3,508
|
|
6,270
|
Separate accounts
liabilities
|
3,318
|
|
5,087
|
Other long-term
insurance liabilities
|
6,175
|
|
6,402
|
Other long-term
liabilities
|
6,769
|
|
1,904
|
Total
liabilities
|
160,201
|
|
157,618
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Preferred
stock
|
—
|
|
—
|
Common stock and
capital surplus
|
48,047
|
|
47,377
|
Treasury
stock
|
(30,326)
|
|
(28,173)
|
Retained
earnings
|
54,571
|
|
54,906
|
Accumulated other
comprehensive income (loss)
|
(1,609)
|
|
965
|
Total CVS Health
shareholders' equity
|
70,683
|
|
75,075
|
Noncontrolling
interests
|
328
|
|
306
|
Total shareholders'
equity
|
71,011
|
|
75,381
|
Total liabilities and
shareholders' equity
|
$
231,212
|
|
$
232,999
|
CVS HEALTH
CORPORATION
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Nine Months
Ended
September
30,
|
In millions
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
|
Cash receipts from
customers
|
$ 235,395
|
|
$ 209,104
|
Cash paid for
inventory and prescriptions dispensed by retail network
pharmacies
|
(138,785)
|
|
(122,129)
|
Insurance benefits
paid
|
(51,434)
|
|
(46,965)
|
Cash paid to other
suppliers and employees
|
(22,368)
|
|
(21,840)
|
Interest and
investment income received
|
327
|
|
582
|
Interest
paid
|
(1,936)
|
|
(2,095)
|
Income taxes
paid
|
(3,070)
|
|
(2,397)
|
Net cash provided by
operating activities
|
18,129
|
|
14,260
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Proceeds from sales
and maturities of investments
|
5,535
|
|
5,559
|
Purchases of
investments
|
(6,439)
|
|
(7,417)
|
Purchases of property
and equipment
|
(2,039)
|
|
(1,923)
|
Acquisitions (net of
cash acquired)
|
(131)
|
|
(135)
|
Proceeds from sale of
subsidiaries (net of cash and restricted cash sold of $2,808 and
$0)
|
(1,928)
|
|
—
|
Other
|
74
|
|
95
|
Net cash used in
investing activities
|
(4,928)
|
|
(3,821)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
—
|
|
987
|
Repayments of
long-term debt
|
(4,195)
|
|
(7,823)
|
Repurchase of common
stock
|
(2,000)
|
|
—
|
Dividends
paid
|
(2,188)
|
|
(1,965)
|
Proceeds from exercise
of stock options
|
510
|
|
440
|
Payments for taxes
related to net share settlement of equity awards
|
(337)
|
|
(161)
|
Other
|
(119)
|
|
80
|
Net cash used in
financing activities
|
(8,329)
|
|
(8,442)
|
Net increase in cash,
cash equivalents and restricted cash
|
4,872
|
|
1,997
|
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
|
$
17,563
|
|
$
13,040
|
CVS HEALTH
CORPORATION
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Nine Months
Ended
September
30,
|
In millions
|
2022
|
|
2021
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
Net income
|
$
1,865
|
|
$
6,602
|
Adjustments required
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
3,198
|
|
3,397
|
Loss on assets held
for sale
|
2,521
|
|
—
|
Goodwill
impairment
|
—
|
|
431
|
Stock-based
compensation
|
341
|
|
346
|
Gain on sale of
subsidiary
|
(225)
|
|
—
|
Loss on early
extinguishment of debt
|
—
|
|
363
|
Deferred income taxes
and other noncash items
|
(2,250)
|
|
(645)
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
Accounts receivable,
net
|
(2,009)
|
|
(3,504)
|
Inventories
|
(415)
|
|
1,097
|
Other
assets
|
(311)
|
|
(88)
|
Accounts payable and
pharmacy claims and discounts payable
|
3,350
|
|
3,973
|
Health care costs
payable and other insurance liabilities
|
4,687
|
|
348
|
Other
liabilities
|
7,377
|
|
1,940
|
Net cash provided by
operating activities
|
$ 18,129
|
|
$ 14,260
|
Non-GAAP Financial Information
The Company uses non-GAAP financial measures to analyze
underlying business performance and trends. The Company believes
that providing these non-GAAP financial measures enhances the
Company's and investors' ability to compare the Company's past
financial performance with its current performance. These non-GAAP
financial measures are provided as supplemental information to the
financial measures presented in this press release that are
calculated and presented in accordance with GAAP. Non-GAAP
financial measures should not be considered a substitute for, or
superior to, financial measures determined or calculated in
accordance with GAAP. The Company's definitions of its non-GAAP
financial measures may not be comparable to similarly titled
measures reported by other companies.
Non-GAAP financial measures such as consolidated adjusted
operating income, adjusted earnings per share (EPS) and adjusted
income attributable to CVS Health exclude from the relevant GAAP
metrics, as applicable: amortization of intangible assets and other
items, if any, that neither relate to the ordinary course of the
Company's business nor reflect the Company's underlying business
performance.
For the periods covered in this press release, the following
items are excluded from the non-GAAP financial measures described
above, as applicable, because the Company believes they neither
relate to the ordinary course of the Company's business nor reflect
the Company's underlying business performance:
- The Company's acquisition activities have resulted in the
recognition of intangible assets as required under the acquisition
method of accounting which consist primarily of trademarks,
customer contracts/relationships, covenants not to compete,
technology, provider networks and value of business acquired.
Definite-lived intangible assets are amortized over their estimated
useful lives and are tested for impairment when events indicate
that the carrying value may not be recoverable. The amortization of
intangible assets is reflected in the 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 nine months ended September 30, 2022 the opioid litigation charges
relate to agreements to resolve substantially all opioid claims
against the Company by certain states and governmental entities.
The opioid litigation charges are reflected within the
Corporate/Other segment.
- During the three and nine months ended September 30, 2022, the loss on assets held for
sale relates to the LTC reporting unit within the Retail/LTC
segment. The Company continually evaluates its portfolio for
nonstrategic assets. The Company determined that its LTC business
was no longer a strategic asset and during the third quarter of
2022 committed to a plan to sell the LTC business. As of
September 30, 2022, the LTC business
met the criteria for held-for-sale accounting and the net assets
were accounted for as assets held for sale. The carrying value of
the LTC business was determined to be greater than its fair value
and a loss on assets held for sale was recorded during the third
quarter of 2022. During the nine months ended September 30, 2022, the loss on assets held for
sale also relates to the Commercial Business reporting unit within
the Health Care Benefits segment. In March
2022, the Company reached an agreement to sell its
international health care business domiciled in Thailand ("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.
- During the nine months ended September
30, 2022, the gain on divestiture of subsidiary represents
the pre-tax gain on the sale of PayFlex, which the Company sold in
June 2022, for approximately
$775 million. The gain on divestiture
is reflected as a reduction in operating expenses in the Company's
unaudited condensed consolidated statement of operations within the
Health Care Benefits segment.
- During the three and nine months ended September 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.
- During the three and nine months ended September 30, 2021, the goodwill impairment
charge relates to an impairment of the remaining goodwill of the
LTC reporting unit within the Retail/LTC segment.
- During the three and nine months ended September 30, 2021, the loss on early
extinguishment of debt relates to the Company's repayment of
approximately $2.0 billion of its
outstanding senior notes in August
2021 pursuant to its tender offers for such senior
notes.
- 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 statement of operations for the nine months
ended September 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 nine months ended
September 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 24 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 15 through 16 and page
23.
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 (loss) (GAAP
measure) to consolidated adjusted operating income, as well as
reconciliations of segment GAAP operating income (loss) to segment
adjusted operating income:
|
|
|
Three Months Ended
September 30, 2022
|
In millions
|
Health
Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
1,244
|
|
$
1,836
|
|
$
(1,205)
|
|
$ (5,637)
|
|
$
(169)
|
|
$
(3,931)
|
Amortization of
intangible assets
|
300
|
|
41
|
|
123
|
|
—
|
|
—
|
|
464
|
Opioid litigation
charges
|
—
|
|
—
|
|
—
|
|
5,220
|
|
—
|
|
5,220
|
Loss on assets held
for sale
|
—
|
|
—
|
|
2,480
|
|
—
|
|
—
|
|
2,480
|
Adjusted operating
income (loss) (1)
|
$
1,544
|
|
$
1,877
|
|
$ 1,398
|
|
$
(417)
|
|
$
(169)
|
|
$
4,233
|
|
Three Months Ended
September 30, 2021
|
In millions
|
Health
Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
716
|
|
$
1,730
|
|
$ 1,165
|
|
$
(364)
|
|
$
(186)
|
|
$
3,061
|
Amortization of
intangible assets
|
390
|
|
43
|
|
127
|
|
1
|
|
—
|
|
561
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
—
|
|
20
|
|
—
|
|
20
|
Goodwill
impairment
|
—
|
|
—
|
|
431
|
|
—
|
|
—
|
|
431
|
Adjusted operating
income (loss) (1)
|
$
1,106
|
|
$
1,773
|
|
$ 1,723
|
|
$
(343)
|
|
$
(186)
|
|
$
4,073
|
|
Nine Months Ended
September 30, 2022
|
In millions
|
Health
Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
4,407
|
|
$
5,242
|
|
$ 2,018
|
|
$ (6,983)
|
|
$
(556)
|
|
$
4,128
|
Amortization of
intangible assets
|
903
|
|
126
|
|
367
|
|
2
|
|
—
|
|
1,398
|
Opioid litigation
charges
|
—
|
|
—
|
|
—
|
|
5,704
|
|
—
|
|
5,704
|
Loss on assets held
for sale
|
41
|
|
—
|
|
2,480
|
|
—
|
|
—
|
|
2,521
|
Gain on divestiture of
subsidiary
|
(225)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(225)
|
Adjusted operating
income (loss) (1)
|
$
5,126
|
|
$
5,368
|
|
$ 4,865
|
|
$
(1,277)
|
|
$
(556)
|
|
$
13,526
|
|
Nine Months Ended
September 30, 2021
|
In millions
|
Health
Care
Benefits
|
|
Pharmacy
Services
|
|
Retail/
LTC
|
|
Corporate/
Other
|
|
Intersegment
Eliminations
|
|
Consolidated
Totals
|
Operating income (loss)
(GAAP measure)
|
$
3,369
|
|
$
4,887
|
|
$ 4,349
|
|
$ (1,118)
|
|
$
(523)
|
|
$
10,964
|
Amortization of
intangible assets
|
1,194
|
|
148
|
|
386
|
|
2
|
|
—
|
|
1,730
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
—
|
|
101
|
|
—
|
|
101
|
Goodwill
impairment
|
—
|
|
—
|
|
431
|
|
—
|
|
—
|
|
431
|
Acquisition purchase
price adjustment outside of measurement period
|
(61)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(61)
|
Adjusted operating
income (loss) (1)
|
$
4,502
|
|
$
5,035
|
|
$ 5,166
|
|
$
(1,015)
|
|
$
(523)
|
|
$
13,165
|
Adjusted Earnings
Per Share
(Unaudited)
|
|
The following are
reconciliations of net income (loss) attributable to CVS Health to
adjusted income attributable to CVS Health and calculations of GAAP
diluted earnings (loss) and Adjusted EPS:
|
|
|
Three Months
Ended
September 30,
2022
|
|
Three Months
Ended
September 30,
2021
|
In millions, except per share amounts
|
Total
Company
|
|
Per
Common
Share
|
|
Total
Company
|
|
Per
Common
Share
|
Net income (loss)
attributable to CVS Health (GAAP measure)
|
$
(3,416)
|
|
$ (2.60)
|
|
$ 1,598
|
|
$
1.20
|
Amortization of
intangible assets
|
464
|
|
0.36
|
|
561
|
|
0.42
|
Opioid litigation
charges
|
5,220
|
|
3.95
|
|
—
|
|
—
|
Loss on assets held
for sale
|
2,480
|
|
1.88
|
|
—
|
|
—
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
20
|
|
0.02
|
Goodwill
impairment
|
—
|
|
—
|
|
431
|
|
0.33
|
Loss on early
extinguishment of debt
|
—
|
|
—
|
|
363
|
|
0.27
|
Tax impact of non-GAAP
adjustments
|
(1,985)
|
|
(1.50)
|
|
(350)
|
|
(0.27)
|
Adjusted income
attributable to CVS Health (2)
|
$ 2,763
|
|
$
2.09
|
|
$ 2,623
|
|
$
1.97
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding (GAAP) (2)
|
|
|
1,315
|
|
|
|
1,329
|
Adjusted weighted
average diluted shares outstanding (non-GAAP)
(2)
|
|
|
1,323
|
|
|
|
1,329
|
|
Nine Months
Ended
September 30,
2022
|
|
Nine Months
Ended
September 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)
|
$ 1,847
|
|
$
1.40
|
|
$ 6,604
|
|
$
4.98
|
Amortization of
intangible assets
|
1,398
|
|
1.06
|
|
1,730
|
|
1.30
|
Opioid litigation
charges
|
5,704
|
|
4.31
|
|
—
|
|
—
|
Loss on assets held
for sale
|
2,521
|
|
1.90
|
|
—
|
|
—
|
Gain on divestiture of
subsidiary
|
(225)
|
|
(0.17)
|
|
—
|
|
—
|
Acquisition-related
integration costs
|
—
|
|
—
|
|
101
|
|
0.08
|
Goodwill
impairment
|
—
|
|
—
|
|
431
|
|
0.33
|
Acquisition purchase
price adjustment outside of measurement period
|
—
|
|
—
|
|
(61)
|
|
(0.05)
|
Loss on early
extinguishment of debt
|
—
|
|
—
|
|
363
|
|
0.27
|
Tax impact of non-GAAP
adjustments
|
(2,365)
|
|
(1.79)
|
|
(642)
|
|
(0.48)
|
Adjusted income
attributable to CVS Health (2)
|
$ 8,880
|
|
$
6.71
|
|
$ 8,526
|
|
$
6.43
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding (GAAP) (2)
|
|
|
1,324
|
|
|
|
1,326
|
Adjusted weighted
average diluted shares outstanding (non-GAAP)
(2)
|
|
|
1,324
|
|
|
|
1,326
|
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 (loss) (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
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$ 22,511
|
|
$
43,216
|
|
$ 26,706
|
|
$
142
|
|
$
(11,416)
|
|
$ 81,159
|
Adjusted operating
income (loss) (1)
|
1,544
|
|
1,877
|
|
1,398
|
|
(417)
|
|
(169)
|
|
4,233
|
September 30,
2021
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
20,479
|
|
39,046
|
|
24,992
|
|
171
|
|
(10,894)
|
|
73,794
|
Adjusted operating
income (loss) (1)
|
1,106
|
|
1,773
|
|
1,723
|
|
(343)
|
|
(186)
|
|
4,073
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$ 68,376
|
|
$ 125,489
|
|
$ 78,410
|
|
$
378
|
|
$
(34,032)
|
|
$ 238,621
|
Adjusted operating
income (loss) (1)
|
5,126
|
|
5,368
|
|
4,865
|
|
(1,277)
|
|
(556)
|
|
13,526
|
September 30,
2021
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
61,487
|
|
113,681
|
|
72,994
|
|
488
|
|
(33,143)
|
|
215,507
|
Adjusted operating
income (loss) (1)
|
4,502
|
|
5,035
|
|
5,166
|
|
(1,015)
|
|
(523)
|
|
13,165
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Total revenues of the
Pharmacy Services segment include approximately $2.9 billion and
$2.8 billion of retail co-payments for the three months ended
September 30, 2022 and 2021, respectively, and $9.8 billion and
$9.0 billion of retail co-payments for the nine months ended
September 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
September
30,
|
|
Nine Months
Ended
September
30,
|
|
Three Months
Ended
September
30,
2022 vs
2021
|
|
Nine Months
Ended
September
30,
2022 vs
2021
|
In millions,
except percentages and basis points ("bps")
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
$ 20,989
|
|
$
18,959
|
|
$ 63,848
|
|
$ 56,869
|
|
$
2,030
|
|
10.7 %
|
|
$
6,979
|
|
12.3 %
|
Services
|
1,421
|
|
1,373
|
|
4,250
|
|
4,186
|
|
48
|
|
3.5 %
|
|
64
|
|
1.5 %
|
Net investment
income
|
101
|
|
147
|
|
278
|
|
432
|
|
(46)
|
|
(31.3) %
|
|
(154)
|
|
(35.6) %
|
Total
revenues
|
22,511
|
|
20,479
|
|
68,376
|
|
61,487
|
|
2,032
|
|
9.9 %
|
|
6,889
|
|
11.2 %
|
Benefit
costs
|
17,531
|
|
16,260
|
|
53,191
|
|
47,971
|
|
1,271
|
|
7.8 %
|
|
5,220
|
|
10.9 %
|
MBR (Benefit costs as
a % of premium revenues) (3)
|
83.5 %
|
|
85.8 %
|
|
83.3 %
|
|
84.4 %
|
|
(230)
|
|
bps
|
|
(110)
|
|
bps
|
Loss on assets held for
sale
|
$
—
|
|
$
—
|
|
$
41
|
|
$
—
|
|
$
—
|
|
— %
|
|
$
41
|
|
100.0 %
|
Operating
expenses
|
3,736
|
|
3,503
|
|
10,737
|
|
10,147
|
|
233
|
|
6.7 %
|
|
590
|
|
5.8 %
|
Operating expenses as
a % of total revenues
|
16.6 %
|
|
17.1 %
|
|
15.7 %
|
|
16.5 %
|
|
|
|
|
|
|
|
|
Operating
income
|
$
1,244
|
|
$ 716
|
|
$
4,407
|
|
$
3,369
|
|
$ 528
|
|
73.7 %
|
|
$
1,038
|
|
30.8 %
|
Operating income as a
% of total revenues
|
5.5 %
|
|
3.5 %
|
|
6.4 %
|
|
5.5 %
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,544
|
|
$
1,106
|
|
$
5,126
|
|
$
4,502
|
|
$ 438
|
|
39.6 %
|
|
$ 624
|
|
13.9 %
|
Adjusted operating
income as a % of total revenues
|
6.9 %
|
|
5.4 %
|
|
7.5 %
|
|
7.3 %
|
|
|
|
|
|
|
|
|
Premium revenues (by
business):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
|
$ 15,433
|
|
$
13,903
|
|
$ 47,379
|
|
$ 41,717
|
|
$
1,530
|
|
11.0 %
|
|
$
5,662
|
|
13.6 %
|
Commercial
|
5,556
|
|
5,056
|
|
16,469
|
|
15,152
|
|
500
|
|
9.9 %
|
|
1,317
|
|
8.7 %
|
The following table summarizes the Health Care Benefits
segment's medical membership for the respective periods:
|
September 30,
2022
|
|
June 30,
2022
|
|
December 31,
2021
|
|
September 30,
2021
|
In thousands
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
|
Insured
|
|
ASC
|
|
Total
|
Medical membership:
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
3,159
|
|
13,852
|
|
17,011
|
|
3,158
|
|
13,835
|
|
16,993
|
|
3,258
|
|
13,530
|
|
16,788
|
|
3,224
|
|
13,529
|
|
16,753
|
Medicare
Advantage
|
3,260
|
|
—
|
|
3,260
|
|
3,216
|
|
—
|
|
3,216
|
|
2,971
|
|
—
|
|
2,971
|
|
2,953
|
|
—
|
|
2,953
|
Medicare
Supplement
|
1,345
|
|
—
|
|
1,345
|
|
1,314
|
|
—
|
|
1,314
|
|
1,285
|
|
—
|
|
1,285
|
|
1,242
|
|
—
|
|
1,242
|
Medicaid
|
2,181
|
|
490
|
|
2,671
|
|
2,425
|
|
484
|
|
2,909
|
|
2,333
|
|
471
|
|
2,804
|
|
2,289
|
|
460
|
|
2,749
|
Total medical
membership
|
9,945
|
|
14,342
|
|
24,287
|
|
10,113
|
|
14,319
|
|
24,432
|
|
9,847
|
|
14,001
|
|
23,848
|
|
9,708
|
|
13,989
|
|
23,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
membership information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Prescription
Drug Plan (stand-alone)
|
6,090
|
|
|
|
|
|
6,051
|
|
|
|
|
|
5,777
|
|
|
|
|
|
5,740
|
Supplemental
Information
(Unaudited)
|
|
The following table
shows the components of the change in health care costs payable
during the nine months ended September 30, 2022 and
2021:
|
|
|
Nine Months
Ended
September
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
|
53,311
|
|
48,243
|
Prior years
(a)
|
(670)
|
|
(771)
|
Total incurred health
care costs (b)
|
52,641
|
|
47,472
|
Less: Claims
paid
|
|
|
|
Current
year
|
43,632
|
|
39,887
|
Prior years
|
7,468
|
|
6,639
|
Total claims
paid
|
51,100
|
|
46,526
|
Add: Premium
deficiency reserve
|
5
|
|
1
|
Health care costs
payable, end of period, net
|
10,346
|
|
8,873
|
Add: Reinsurance
recoverables
|
5
|
|
4
|
Health care costs
payable, end of period
|
$
10,351
|
|
$
8,877
|
|
|
|
|
|
|
|
|
|
|
|
(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 nine months ended September 30, 2022 and 2021 in
the table above exclude (i) $5 million and $1 million,
respectively, for premium deficiency reserves related to the
Company's Medicaid products, (ii) $56 million and $45 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)
$274 million and $168 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:
|
September 30,
2022
|
|
June 30,
2022
|
|
March 31,
2022
|
|
December 31,
2021
|
September 30,
2021
|
Days Claims Payable
(9)
|
54.9
|
|
54.3
|
|
51.7
|
|
49.1
|
51.1
|
Supplemental
Information
(Unaudited)
|
|
Pharmacy Services
Segment
|
|
The following table
summarizes the Pharmacy Services segment's performance for the
respective periods:
|
|
|
|
|
|
|
|
|
Change
|
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
Three Months
Ended
September
30,
2022 vs
2021
|
|
Nine Months
Ended
September
30,
2022 vs
2021
|
In millions,
except percentages
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
$
42,905
|
|
$
38,739
|
|
$
124,623
|
|
$
112,816
|
|
$
4,166
|
|
10.8 %
|
|
$ 11,807
|
|
10.5 %
|
Services
|
311
|
|
307
|
|
866
|
|
865
|
|
4
|
|
1.3 %
|
|
1
|
|
0.1 %
|
Total
revenues
|
43,216
|
|
39,046
|
|
125,489
|
|
113,681
|
|
4,170
|
|
10.7 %
|
|
11,808
|
|
10.4 %
|
Cost of products
sold
|
40,998
|
|
36,925
|
|
119,028
|
|
107,714
|
|
4,073
|
|
11.0 %
|
|
11,314
|
|
10.5 %
|
Gross profit
(10)
|
2,218
|
|
2,121
|
|
6,461
|
|
5,967
|
|
97
|
|
4.6 %
|
|
494
|
|
8.3 %
|
Gross margin (Gross
profit as a % of total revenues) (10)
|
5.1 %
|
|
5.4 %
|
|
5.1 %
|
|
5.2 %
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$ 382
|
|
$ 391
|
|
$
1,219
|
|
$
1,080
|
|
$
(9)
|
|
(2.3) %
|
|
$ 139
|
|
12.9 %
|
Operating expenses as
a % of total revenues
|
0.9 %
|
|
1.0 %
|
|
1.0 %
|
|
1.0 %
|
|
|
|
|
|
|
|
|
Operating
income
|
$
1,836
|
|
$
1,730
|
|
$
5,242
|
|
$
4,887
|
|
$ 106
|
|
6.1 %
|
|
$ 355
|
|
7.3 %
|
Operating income as a
% of total revenues
|
4.2 %
|
|
4.4 %
|
|
4.2 %
|
|
4.3 %
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,877
|
|
$
1,773
|
|
$
5,368
|
|
$
5,035
|
|
$ 104
|
|
5.9 %
|
|
$ 333
|
|
6.6 %
|
Adjusted operating
income as a % of total revenues
|
4.3 %
|
|
4.5 %
|
|
4.3 %
|
|
4.4 %
|
|
|
|
|
|
|
|
|
Revenues (by
distribution channel):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy network
(7)
|
$
25,012
|
|
$
23,665
|
|
$
72,373
|
|
$
68,476
|
|
$
1,347
|
|
5.7 %
|
|
$
3,897
|
|
5.7 %
|
Mail choice
(8)
|
17,935
|
|
15,202
|
|
52,339
|
|
44,685
|
|
2,733
|
|
18.0 %
|
|
7,654
|
|
17.1 %
|
Other
|
269
|
|
179
|
|
777
|
|
520
|
|
90
|
|
50.3 %
|
|
257
|
|
49.4 %
|
Pharmacy claims
processed: (5) (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(a)
|
584.9
|
|
564.4
|
|
1,736.2
|
|
1,662.5
|
|
20.5
|
|
3.6 %
|
|
73.7
|
|
4.4 %
|
Pharmacy network
(7)
|
502.3
|
|
481.1
|
|
1,485.7
|
|
1,415.8
|
|
21.2
|
|
4.4 %
|
|
69.9
|
|
4.9 %
|
Mail choice
(8)
|
82.6
|
|
83.3
|
|
250.5
|
|
246.7
|
|
(0.7)
|
|
(0.8) %
|
|
3.8
|
|
1.5 %
|
Generic dispensing
rate: (6) (11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(b)
|
87.5 %
|
|
87.1 %
|
|
87.7 %
|
|
87.3 %
|
|
|
|
|
|
|
|
|
Pharmacy network
(7)
|
87.8 %
|
|
87.4 %
|
|
88.1 %
|
|
87.6 %
|
|
|
|
|
|
|
|
|
Mail choice
(8)
|
85.4 %
|
|
85.5 %
|
|
85.5 %
|
|
85.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Excluding the impact of
COVID-19 vaccinations, total pharmacy claims processed increased
4.5% and 5.2% on a 30-day equivalent basis for the three and nine
months ended September 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 88.1% and 88.4% in the three months
ended September 30, 2022 and 2021, respectively, and 88.6% and
88.8% in the nine months ended September 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
September
30,
|
|
Nine Months
Ended
September
30,
|
|
Three Months
Ended
September
30,
2022 vs
2021
|
|
Nine Months
Ended
September
30,
2022 vs
2021
|
In millions,
except percentages
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
$
26,115
|
|
$
23,971
|
|
$
76,248
|
|
$
69,974
|
|
$
2,144
|
|
8.9 %
|
|
$
6,274
|
|
9.0 %
|
Services
|
601
|
|
1,054
|
|
2,206
|
|
3,007
|
|
(453)
|
|
(43.0) %
|
|
(801)
|
|
(26.6) %
|
Net investment income
(loss)
|
(10)
|
|
(33)
|
|
(44)
|
|
13
|
|
23
|
|
69.7 %
|
|
(57)
|
|
(438.5) %
|
Total
revenues
|
26,706
|
|
24,992
|
|
78,410
|
|
72,994
|
|
1,714
|
|
6.9 %
|
|
5,416
|
|
7.4 %
|
Cost of products
sold
|
20,272
|
|
18,381
|
|
58,591
|
|
53,375
|
|
1,891
|
|
10.3 %
|
|
5,216
|
|
9.8 %
|
Gross profit
(10)
|
6,434
|
|
6,611
|
|
19,819
|
|
19,619
|
|
(177)
|
|
(2.7) %
|
|
200
|
|
1.0 %
|
Gross margin (Gross
profit as a % of total revenues) (10)
|
24.1 %
|
|
26.5 %
|
|
25.3 %
|
|
26.9 %
|
|
|
|
|
|
|
|
|
Loss on assets held for
sale
|
$
2,480
|
|
$ —
|
|
$
2,480
|
|
$ —
|
|
$
2,480
|
|
100.0 %
|
|
$
2,480
|
|
100.0 %
|
Goodwill
impairment
|
—
|
|
431
|
|
—
|
|
431
|
|
(431)
|
|
(100.0) %
|
|
(431)
|
|
(100.0) %
|
Operating
expenses
|
5,159
|
|
5,015
|
|
15,321
|
|
14,839
|
|
144
|
|
2.9 %
|
|
482
|
|
3.2 %
|
Operating expenses as
a % of total revenues
|
19.3 %
|
|
20.1 %
|
|
19.5 %
|
|
20.3 %
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$ (1,205)
|
|
$
1,165
|
|
$
2,018
|
|
$
4,349
|
|
$
(2,370)
|
|
(203.4) %
|
|
$
(2,331)
|
|
(53.6) %
|
Operating income
(loss) as a % of total revenues
|
(4.5) %
|
|
4.7 %
|
|
2.6 %
|
|
6.0 %
|
|
|
|
|
|
|
|
|
Adjusted operating
income (1)
|
$
1,398
|
|
$
1,723
|
|
$
4,865
|
|
$
5,166
|
|
$ (325)
|
|
(18.9) %
|
|
$ (301)
|
|
(5.8) %
|
Adjusted operating
income as a % of total revenues
|
5.2 %
|
|
6.9 %
|
|
6.2 %
|
|
7.1 %
|
|
|
|
|
|
|
|
|
Revenues (by major
goods/service lines):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy
|
$
20,759
|
|
$
19,023
|
|
$
60,308
|
|
$
55,781
|
|
$
1,736
|
|
9.1 %
|
|
$
4,527
|
|
8.1 %
|
Front Store
|
5,581
|
|
5,359
|
|
16,630
|
|
15,255
|
|
222
|
|
4.1 %
|
|
1,375
|
|
9.0 %
|
Other
|
376
|
|
643
|
|
1,516
|
|
1,945
|
|
(267)
|
|
(41.5) %
|
|
(429)
|
|
(22.1) %
|
Net investment income
(loss)
|
(10)
|
|
(33)
|
|
(44)
|
|
13
|
|
23
|
|
69.7 %
|
|
(57)
|
|
(438.5) %
|
Prescriptions filled
(5) (6) (a)
|
405.3
|
|
398.0
|
|
1,200.7
|
|
1,167.8
|
|
7.3
|
|
1.8 %
|
|
32.9
|
|
2.8 %
|
Same store sales
increase: (12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
9.9 %
|
|
9.6 %
|
|
9.5 %
|
|
7.3 %
|
|
|
|
|
|
|
|
|
Pharmacy
|
11.3 %
|
|
8.8 %
|
|
9.7 %
|
|
8.4 %
|
|
|
|
|
|
|
|
|
Front Store
|
5.1 %
|
|
12.3 %
|
|
9.0 %
|
|
3.7 %
|
|
|
|
|
|
|
|
|
Prescription volume
(6)
|
3.8 %
|
|
9.0 %
|
|
4.3 %
|
|
8.1 %
|
|
|
|
|
|
|
|
|
Generic dispensing rate
(6) (11) (b)
|
88.0 %
|
|
86.6 %
|
|
88.0 %
|
|
86.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Excluding the impact of
COVID-19 vaccinations, prescriptions filled increased 3.6% and 4.5%
on a 30-day equivalent basis for the three and nine months ended
September 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 88.9% and 89.1% in the three months ended
September 30, 2022 and 2021, respectively, and 89.5% and 89.4%
in the nine months ended September 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
September
30,
|
|
Nine Months
Ended
September
30,
|
|
Three Months
Ended
September
30,
2022 vs
2021
|
|
Nine Months
Ended
September
30,
2022 vs
2021
|
In millions,
except percentages
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
$
|
|
%
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
$
14
|
|
$
25
|
|
$
46
|
|
$
58
|
|
$
(11)
|
|
(44.0) %
|
|
$ (12)
|
|
(20.7) %
|
Services
|
18
|
|
14
|
|
51
|
|
43
|
|
4
|
|
28.6 %
|
|
8
|
|
18.6 %
|
Net investment
income
|
110
|
|
132
|
|
281
|
|
387
|
|
(22)
|
|
(16.7) %
|
|
(106)
|
|
(27.4) %
|
Total
revenues
|
142
|
|
171
|
|
378
|
|
488
|
|
(29)
|
|
(17.0) %
|
|
(110)
|
|
(22.5) %
|
Cost of products
sold
|
11
|
|
11
|
|
31
|
|
27
|
|
—
|
|
— %
|
|
4
|
|
14.8 %
|
Benefit
costs
|
53
|
|
69
|
|
274
|
|
168
|
|
(16)
|
|
(23.2) %
|
|
106
|
|
63.1 %
|
Opioid litigation
charges
|
5,220
|
|
—
|
|
5,704
|
|
—
|
|
5,220
|
|
100.0 %
|
|
5,704
|
|
100.0 %
|
Operating
expenses
|
495
|
|
455
|
|
1,352
|
|
1,411
|
|
40
|
|
8.8 %
|
|
(59)
|
|
(4.2) %
|
Operating
loss
|
(5,637)
|
|
(364)
|
|
(6,983)
|
|
(1,118)
|
|
(5,273)
|
|
(1,448.6) %
|
|
(5,865)
|
|
(524.6) %
|
Adjusted operating loss
(1)
|
(417)
|
|
(343)
|
|
(1,277)
|
|
(1,015)
|
|
(74)
|
|
(21.6) %
|
|
(262)
|
|
(25.8) %
|
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 September 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)
|
$ 4,142
|
|
$ 3.12
|
|
$ 4,277
|
|
$ 3.22
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
1,860
|
|
1.40
|
|
1,860
|
|
1.40
|
Opioid litigation
charges
|
5,704
|
|
4.30
|
|
5,704
|
|
4.30
|
Loss on assets held
for sale
|
2,521
|
|
1.90
|
|
2,521
|
|
1.90
|
Gain on divestiture of
subsidiary
|
(225)
|
|
(0.17)
|
|
(225)
|
|
(0.17)
|
Tax impact of non-GAAP
adjustments
|
(2,652)
|
|
(2.00)
|
|
(2,652)
|
|
(2.00)
|
Adjusted income
attributable to CVS Health (2)
|
$
11,350
|
|
$ 8.55
|
|
$
11,485
|
|
$ 8.65
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
|
1,327
|
|
|
|
1,327
|
Endnotes
(1) The Company defines adjusted operating
income as operating income (loss) (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 opioid litigation charges, losses on assets held for sale,
gains/losses on divestitures, acquisition-related integration
costs, goodwill impairments 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
(loss). See "Non-GAAP Financial Information" earlier in this press
release for additional information regarding the items excluded
from consolidated operating income (loss) in determining
consolidated adjusted operating income.
(2) The Company defines adjusted income
attributable to CVS Health as net income (loss) 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 opioid
litigation charges, losses on assets held for sale, gains/losses on
divestitures, acquisition-related integration costs, goodwill
impairments, acquisition purchase price adjustments outside of the
acquisition accounting measurement period, losses on early
extinguishment of debt, as well as the corresponding income tax
benefit or expense related to the items excluded from adjusted
income attributable to CVS Health and certain discrete tax items.
GAAP diluted earnings (loss) per share and Adjusted EPS,
respectively, are calculated by dividing net income (loss)
attributable to CVS Health and adjusted income attributable to CVS
Health by the Company's weighted average diluted shares
outstanding.
Adjusted EPS for the three months ended September 30, 2022 is calculated utilizing
adjusted weighted average diluted shares outstanding, which
includes 8 million potential common equivalent shares, as the
impact of these shares was dilutive. The potential common
equivalent shares were excluded from the calculation of GAAP loss
per share for the three months ended September 30, 2022, as these shares would have
had an anti-dilutive effect as a result of the GAAP net loss
incurred. See "Non-GAAP Financial Information" earlier in this
press release for additional information regarding the items
excluded from net income (loss) 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