Feb 16, 2021 SOURCE: PR NewsWire
CVS Health Reports Fourth Quarter And Full-Year 2020 Results And Provides 2021 Full Year Guidance
WOONSOCKET, R.I., Feb. 16, 2021 /PRNewswire/ --
Full Year and Fourth Quarter Highlights:
-- Full year total revenues increased to $268.7 billion, up 4.6% compared
to prior year
-- Full year and fourth quarter GAAP diluted earnings per share from
continuing operations of $5.47 and $0.75
-- Full year and fourth quarter Adjusted EPS of $7.50 and $1.30
-- Generated full year cash flow from operations of $15.9 billion
-- Results reflect COVID-19 impacts and related investments
2021 Full Year Guidance:
-- GAAP diluted EPS from continuing operations in the range of $6.06 to
$6.22
-- Adjusted EPS in the range of $7.39 to $7.55
-- Cash flow from operations in the range of $12.0 billion to $12.5 billion
CVS Health Corporation (NYSE: CVS) today announced operating results for the three months and year ended December 31, 2020.
CVS Health President and CEO Karen S. Lynch stated, "The COVID-19 pandemic presented unique challenges to our business and to the entire health care industry. We utilized the full depth and breadth of our capabilities and our presence in local communities across the country, to play a leadership role in COVID-19 testing and vaccine administration. Our ability to deliver 2020 full-year results above expectations is a testament to the strength of our strategy and the flexibility of our diversified health services model.
"We are proud to be a trusted health partner to more than 100 million customers through our Pharmacy and Health Care businesses and to be able to support millions of Americans in our local communities, many in underserved and remote areas. We are grateful for the dedication of our nearly 300,000 colleagues, many serving on the frontlines, who demonstrated an unwavering commitment to our fellow Americans.
"Our goal is to make health care more accessible, more affordable and simpler. In order to do this, we will accelerate the pace of our progress through targeted investments in key areas that will drive our consumer-focused strategy. We believe that solving consumer health needs will deliver better health outcomes and lower costs while creating future economic benefit for CVS Health and its shareholders."
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 pages 12 through 13 and
endnotes on page 25 for explanations of non-GAAP financial
measures presented in this press release. See pages 14 through 17
and page 24 for reconciliations of each non-GAAP financial measure
to the most directly comparable GAAP financial measure.
Consolidated Fourth Quarter and Full Year Results
Three Months Ended
Year Ended
December 31,
December 31,
In millions, except per share amounts 2020 2019 Change 2020 2019 Change
---
Total revenues $
69,554 $
66,889 $
2,665 $
268,706 $
256,776 $
11,930
Operating income 2,524 3,037 (513) 13,911 11,987 1,924
Adjusted operating income (1) 2,945 3,766 (821) 16,008 15,339 669
Net income 975 1,744 (769) 7,192 6,631 561
Diluted earnings per share from continuing operations $
0.75 $
1.33 $
(0.58) $
5.47 $
5.08 $
0.39
Adjusted EPS (2) $
1.30 $
1.73 $
(0.43) $
7.50 $
7.08 $
0.42
Enterprise prescriptions (3) (4) 742.1 734.0 8.1 2,906.7 2,802.9 103.8
-- Total revenues increased 4.0% and 4.6% for the three months and year
ended December 31, 2020, respectively, compared to the prior year
primarily driven by growth in the Health Care Benefits and Retail/LTC
segments.
-- Operating income and adjusted operating income decreased 16.9% and
21.8%, respectively, for the three months ended December 31, 2020
compared to the prior year. The decrease in both operating income and
adjusted operating income was primarily due to the impact of the
COVID-19 pandemic in the Health Care Benefits and Retail/LTC segments,
as well as continued reimbursement pressure in the Retail/LTC segment,
partially offset by improved purchasing economics in the Pharmacy
Services segment and the favorable impact of enterprise-wide cost
savings initiatives in 2020. The decrease in operating income was also
partially offset by pre-tax income of $307 million associated with the
receipt of amounts owed to the Company under the Patient Protection and
Affordable Care Act and the Health Care and Education Reconciliation Act
of 2010 (collectively, the "ACA") risk corridor program that was
previously fully reserved for as payment was uncertain.
-- Operating income and adjusted operating income increased 16.1% and 4.4%,
respectively, for the year ended December 31, 2020 compared to the prior
year. The increase in both operating income and adjusted operating
income was primarily due to the net impact of the COVID-19 pandemic,
improved purchasing economics in the Pharmacy Services segment and the
favorable impact of enterprise-wide cost savings initiatives in 2020,
partially offset by continued reimbursement pressure in the Retail/LTC
segment. The impact of the COVID-19 pandemic resulted in increases in
both operating income and adjusted operating income in the Health Care
Benefits segment, which were partially offset by declines in the
Retail/LTC segment as further described later in our segment discussion.
The increase in operating income was also driven by (i) pre-tax income
of $307 million associated with the receipt of amounts owed to the
Company under the ACA risk corridor program, (ii) a $269 million pre-tax
gain on the sale of the Company's Coventry Health Care Workers'
Compensation business ("Workers' Compensation business") and (iii) the
absence of $231 million of store rationalization charges and a $205
million pre-tax loss on the sale of the Company's Brazilian subsidiary,
Drogaria Onofre Ltda. ("Onofre"), both recorded in the year ended
December 31, 2019.
-- Net income decreased 44.1% for the three months ended December 31, 2020
compared to the prior year primarily due to the lower operating income
described above and a loss on early extinguishment of debt of $674
million in the three months ended December 31, 2020, partially offset by
lower income tax expense primarily driven by the decrease in pre-tax
income. Net income increased 8.5% for the year ended December 31, 2020
compared to the prior year primarily due to the higher operating income
described above and lower interest expense primarily due to lower
average debt in 2020, partially offset by an increase in the loss on
early extinguishment of debt to $1.4 billion in 2020, compared to $79
million in 2019 and higher income tax expense primarily driven by the
increase in pre-tax income.
-- The effective income tax rate was 19.7% for the three months ended
December 31, 2020 compared to 25.3% for the three months ended December
31, 2019. The decrease in the effective income tax rate was primarily
attributable to the timing of the realization of certain tax items
during the third and fourth quarters of 2020, partially offset by the
reinstatement of the non-deductible health insurer fee ("HIF") for 2020.
The effective income tax rate remained consistent at 26.3% for each of
the years ended December 31, 2020 and December 31, 2019, with the impact
of the non-deductible HIF offset by the favorable resolution of certain
tax matters in the year ended December 31, 2020.
Pharmacy Services Segment
The Pharmacy Services segment provides a full range of pharmacy benefit management solutions to employers, health plans, government employee groups and government sponsored programs. The segment results for the three months and years ended December 31, 2020 and 2019 were as follows:
Three Months Ended
Year Ended
December 31,
December 31,
In millions 2020 2019 Change 2020 2019 Change
---
Total revenues $
36,355 $
37,073 $
(718) $
141,938 $
141,491 $
447
Operating
income 1,505 1,348 157 5,454 4,735 719
Adjusted
operating
income (1) 1,561 1,447 114 5,688 5,129 559
Total pharmacy
claims
processed (4)
(5) 537.9 533.9 4.0 2,112.9 2,014.2 98.7
Pharmacy
network (6) 456.2 454.0 2.2 1,790.1 1,704.0 86.1
Mail choice (7) 81.7 79.9 1.8 322.8 310.2 12.6
-- Total revenues decreased 1.9% for the three months ended December 31,
2020 compared to the prior year primarily driven by continued price
compression and changes in net new business mix, partially offset by
growth in specialty pharmacy and brand inflation. Total revenues
increased 0.3% for the year ended December 31, 2020 compared to the
prior year primarily driven by growth in specialty pharmacy and brand
inflation, partially offset by continued price compression and changes
in net new business mix.
-- Total pharmacy claims processed increased 0.7% and 4.9%, on a 30-day
equivalent basis, for the three months and year ended December 31, 2020,
respectively, compared to the prior year primarily driven by net new
business.
-- Operating income and adjusted operating income increased 11.6% and 7.9%,
respectively, for the three months ended December 31, 2020 compared to
the prior year. Operating income and adjusted operating income increased
15.2% and 10.9%, respectively, for the year ended December 31, 2020
compared to the prior year. The increase in operating income and
adjusted operating income in both periods was primarily driven by
improved purchasing economics and growth in specialty pharmacy,
partially offset by continued price compression. The increase in
operating income in both periods also was driven by lower amortization
expense in the three months and year ended December 31, 2020.
-- See the supplemental information on page 19 for additional information
regarding the performance of the Pharmacy Services segment.
See the supplemental information on page 19 for additional information regarding the performance of the Pharmacy Services segment.
Retail/LTC Segment
The Retail/LTC segment fulfills prescriptions for medications, provides patient care programs, sells a wide assortment of health and wellness products and general merchandise, provides health care services through walk-in medical clinics, provides medical diagnostic testing and provides services to long-term care facilities. The segment results for the three months and years ended December 31, 2020 and 2019 were as follows:
Three Months Ended
Year Ended
December 31,
December 31,
In millions 2020 2019 Change 2020 2019 Change
---
Total revenues $
24,062 $
22,580 $
1,482 $
91,198 $
86,608 $
4,590
Operating income 1,644 1,909 (265) 5,640 5,793 (153)
Adjusted
operating income
(1) 1,775 2,031 (256) 6,146 6,705 (559)
Prescriptions
filled (4) (5) 376.3 369.0 7.3 1,465.2 1,417.2 48.0
-- Total revenues increased 6.6% and 5.3% for the three months and year
ended December 31, 2020, respectively, compared to the prior year
primarily driven by increased prescription volume, COVID-19 diagnostic
testing and brand inflation, partially offset by continued reimbursement
pressure and the impact of recent generic introductions.
-- Front store revenues decreased 1.6% for the three months ended December
31, 2020 compared to the prior year primarily due to decreased customer
traffic and reduced volume in cough and cold product sales largely as a
result of the COVID-19 pandemic. Front store revenues increased 1.2% for
the year ended December 31, 2020 compared to the prior year primarily
due to increases in consumer health and general merchandise sales.
-- Total prescription volume grew 2.0% and 3.4%, on a 30-day equivalent
basis, for the three months and year ended December 31, 2020,
respectively, compared to the prior year primarily driven by the
continued adoption of patient care programs. The increase was partially
offset by reduced new therapy prescriptions, including lower seasonal
flu prescriptions, as a result of the COVID-19 pandemic as well as
decreased long-term care prescription volume.
-- Operating income and adjusted operating income decreased 13.9% and
12.6%, respectively, for the three months ended December 31, 2020
compared to the prior year. Operating income and adjusted operating
income decreased 2.6% and 8.3%, respectively, for the year ended
December 31, 2020 compared to the prior year. The decrease in operating
income and adjusted operating income in both periods was primarily due
to continued reimbursement pressure and the net impact of the COVID-19
pandemic, partially offset by the increased pharmacy volume described
above and improved generic drug purchasing. The COVID-19 pandemic
resulted in reduced operating income and adjusted operating income in
both periods as a result of decreased customer traffic in the segment's
retail pharmacies and MinuteClinic(®) locations and incremental
operating expenses associated with the Company's COVID-19 pandemic
response efforts, partially offset by COVID-19 diagnostic testing. The
decrease in operating income in the year ended December 31, 2020 also
was partially offset by the absence of the $231 million of store
rationalization charges and the $205 million pre-tax loss on the sale of
Onofre, both recorded in the year ended December 31, 2019.
See the supplemental information on page 20 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 and years ended December 31, 2020 and 2019 were as follows:
Three Months Ended
Year Ended
December 31,
December 31,
In millions, except
percentages 2020 2019 Change 2020 2019 Change
---
Total revenues $
19,103 $
17,150 $
1,953 $
75,467 $
69,604 $
5,863
Operating income 56 386 (330) 5,166 3,639 1,527
Adjusted operating
income (1) 153 779 (626) 6,188 5,202 986
Medical benefit 86.7 85.7 1.0 80.9 84.2 (3.3)
ratio ("MBR") (8) % % % % % %
Medical membership
(9) 23.4 22.9 0.5
-- Total revenues increased 11.4% and 8.4%, respectively, for the three
months and year ended December 31, 2020 compared to the prior year
primarily driven by membership growth in the Health Care Benefits
segment's Government products, the favorable impact of the reinstatement
of the HIF for 2020 and the receipt of $313 million owed to the Company
under the ACA's risk corridor program. These increases were partially
offset by the divestitures of Aetna's standalone Medicare Part D
prescription drug plans (which the Company retained the financial
results of through 2019) and Workers' Compensation business, membership
declines in the segment's Commercial products and planned COVID-19
related investments benefiting customers in the three months and year
ended December 31, 2020.
-- Operating income and adjusted operating income decreased 85.5% and
80.4%, respectively, for the three months ended December 31, 2020
compared to the prior year. The decrease in both operating income and
adjusted operating income was primarily driven by COVID-19 related
investments, testing and treatment costs, as well as the divestitures of
Aetna's standalone Medicare Part D prescription drug plans ("PDPs") and
Workers' Compensation business. Operating income also includes pre-tax
income of $307 million associated with the receipt of amounts owed to
the Company under the ACA's risk corridor program in the three months
ended December 31, 2020.
-- Operating income and adjusted operating income increased 42.0% and
19.0%, respectively, for the year ended December 31, 2020 compared to
the prior year. The increase in both operating income and adjusted
operating income was primarily driven by the impact of the COVID-19
pandemic, partially offset by the divestitures of Aetna's standalone
PDPs and Workers' Compensation business. The COVID-19 pandemic resulted
in reduced benefit costs due to the deferral of elective procedures and
other discretionary utilization, partially offset by COVID-19 related
investments, testing and treatment costs. Operating income also includes
pre-tax income of $307 million associated with the receipt of amounts
owed to the Company under the ACA's risk corridor program and the $269
million pre-tax gain on the sale of the Workers' Compensation business
in the year ended December 31, 2020.
-- The Health Care Benefits segment's MBR increased 100 basis points and
decreased 330 basis points in the three months and year ended December
31, 2020, respectively, compared to the prior year. The increase in the
three months ended December 31, 2020 was primarily driven by the
COVID-19 related investments, testing and treatment costs described
above, partially offset by the receipt of amounts owed to the Company
under the ACA's risk corridor program in 2020 and the reinstatement of
the HIF for 2020. The decrease for the year ended December 31, 2020 was
primarily due to the full year impact of the COVID-19 pandemic described
above, the reinstatement of the HIF for 2020 and the receipt of amounts
owed to the Company under the ACA's risk corridor program in 2020. The
receipt of the ACA risk corridor payment reduced our MBR by 160 and 40
basis points during the three months and year ended December 31, 2020,
respectively.
-- Medical membership as of December 31, 2020 of 23.4 million increased
compared with September 30, 2020, primarily reflecting increases in
Medicaid and Medicare products, partially offset by a decline in
Commercial products.
-- The Health Care Benefits segment experienced favorable development of
prior-periods' health care cost estimates during the three months ended
December 31, 2020 driven by favorable development in its Government
business, primarily attributable to third quarter 2020 performance,
partially offset by unfavorable development in its Commercial business,
largely driven by higher than expected costs related to the COVID-19
pandemic for the third quarter of 2020 as well as provider settlement
activity.
-- Prior years' health care costs payable estimates developed favorably by
$429 million during the year ended December 31, 2020. 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 2020 operating results.
See the supplemental information on page 21 for additional information regarding the performance of the Health Care Benefits segment.
COVID-19 Response
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. The following are key actions taken to date:
Employees
-- Providing regular supply of personal protective equipment and adding
safety features to retail stores.
-- Provided enhanced benefits, including bonuses to frontline employees,
dependent care, paid sick leave for part-time employees and paid time
off to employees who test positive or are quarantined due to exposure.
-- Hired over 15,000 clinicians and pharmacy technicians in the fourth
quarter as part of our readiness investments.
Consumers and members
-- Extended waivers for out-of-pocket costs for inpatient hospital
admissions for treatment or health complications associated with
COVID-19 for Commercial members through January 31, 2021 and Medicare
Advantage members through March 31, 2021.
-- Extended waivers for cost-sharing for in-network telemedicine visits by
Commercial members for outpatient behavioral and mental health
counseling services through January 31, 2021.
-- Extended waivers for Individual Medicare Advantage member out-of-pocket
costs for all in-network primary care visits and outpatient behavioral
health counseling telehealth services through the end of the public
health emergency.
-- Extended waivers for cost-sharing for covered in-network telemedicine
visits for medical and behavioral health services for Aetna Student
Health plan members through January 31, 2021.
-- Sent care packages to members diagnosed with COVID-19 through Aetna's
Healing Better program and Caring for You kits to Medicare members
enrolled on or before August 1, 2020.
-- Proactively reached out to over one million most at-risk members for
COVID-19.
-- Opened crisis response line for members experiencing anxiety related to
COVID-19 and expanded 24/7 access to Aetna Nurse Medical line for Aetna
and Caremark members.
-- Expanded telehealth options ("E-Clinic") offered by MinuteClinic to help
patients access safe, affordable and convenient non-emergency care.
-- Extended maintenance prescriptions and waived early refill limits to
support medication adherence.
-- Waived fees associated with prescription home delivery and associated
front store products.
Plan Sponsors
-- Launched Return Ready, a comprehensive configurable and integrated
end-to-end COVID-19 testing solution to assist employers and
universities with the return of their employees, students and staff.
-- Provided assistance through premium credits.
Providers
-- Waived advance approvals, streamlined credentialing process, relaxed
telemedicine policies and removed prior authorization requirements.
Offering flexible plan designs to help reduce financial burdens.
Communities
-- Administered approximately 15 million COVID-19 tests nationwide to date
at more than 4,800 CVS Pharmacy locations with over 50% located in
communities with significant need for support according to the CDC
Social Vulnerability Index. Testing at these sites is available to
children 10 years and older.
-- Administered more than three million COVID-19 vaccines in over 40,000
long-term care facilities across the country.
-- Selected as national partner of the Federal Pharmacy Program and began
initial rollout of in-store vaccinations at CVS Pharmacy locations in 11
states.
-- In coordination with the U.S. Department of Health and Human Services
("HHS"), opened 11 testing sites serving communities disproportionately
impacted by COVID-19.
-- Launched critical diagnostic testing for the vulnerable senior
population in long-term care facilities in partnership with three
states.
-- Expanded Coram infusion services to help transition eligible IV-therapy
patients to home-based care. Selected by U.S. Department of Health &
Human Services, as part of a pilot, to administer recently authorized
COVID-19 therapy to eligible patients in long-term care facilities and
at home. And, collaborating with Cancer Treatment Centers of America to
provide in-home chemotherapy for eligible, fully insured patients.
-- Investing more than $50 million directly and through the Company's
foundations to address food insecurity, lack of access to telehealth
services for the underserved, personal protective equipment, mental
health support for front-line workers and community resilience.
-- Donating nearly $40 million in products to community organizations
around the country.
-- Served over one million meals to vulnerable populations.
-- Returned all $43 million in funds received from the Coronavirus Aid,
Relief, and Economic Security Act provider relief fund to HHS.
2021 Full Year Guidance
The Company's full year 2021 GAAP diluted EPS from continuing operations is projected to be in the range of $6.06 to $6.22, and full year 2021 Adjusted EPS is projected to be in the range of $7.39 to $7.55. The Company's full year 2021 cash flow from operations is projected to be in the range of $12.0 billion to $12.5 billion.
The adjustments between GAAP diluted EPS from continuing operations and Adjusted EPS include, as applicable, adding back amortization of intangible assets, as well as 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 fourth quarter and full year results and provide 2021 full year guidance. An audio webcast of the call will be broadcast simultaneously for all interested parties through the Investor Relations section of the CVS Health website at http://investors.cvshealth.com. This webcast will be archived and available on the website for a one-year period following the conference call.
About CVS Health
CVS Health is a different kind of health care company. We are a diversified health services company with nearly 300,000 employees united around a common purpose of helping people on their path to better health. In an increasingly connected and digital world, we are meeting people wherever they are and changing health care to meet their needs. Built on a foundation of unmatched community presence, our diversified model engages one in three Americans each year. From our innovative new services at HealthHUB(®) locations, to transformative programs that help manage chronic conditions, we are making health care more accessible, more affordable and simply better. 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 Ms. Lynch's quotation, the information under the heading "2021 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 geographies impacted and the severity and duration of the pandemic, the pandemic's impact on the U.S. and global economies and consumer behavior and health care utilization patterns, and the timing, scope and impact of stimulus legislation and other federal, state and local governmental responses to the pandemic, as well as the risks and uncertainties described in our Securities and Exchange Commission ("SEC") filings, including those set forth in the Risk Factors section and under the heading "Cautionary Statement Concerning Forward-Looking Statements" in our most recently filed Annual Report on Form 10-K and in our most recently filed Quarterly Report on Form 10-Q.
You are cautioned not to place undue reliance on CVS Health's forward-looking statements. 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
Year Ended
December 31,
December 31,
---
In millions, except per share amounts 2020 2019 2020 2019
--- ---
Revenues:
Products $
49,592 $
49,213 $
190,688 $
185,236
Premiums 17,615 15,510 69,364 63,122
Services 2,099 1,960 7,856 7,407
Net investment income 248 206 798 1,011
Total revenues 69,554 66,889 268,706 256,776
Operating costs:
Cost of products sold 42,452 42,065 163,981 158,719
Benefit costs 15,145 13,133 55,679 52,529
Operating expenses 9,433 8,654 35,135 33,541
Total operating costs 67,030 63,852 254,795 244,789
Operating income 2,524 3,037 13,911 11,987
Interest expense 678 734 2,907 3,035
Loss on early extinguishment of debt 674 1,440 79
Other income (53) (31) (206) (124)
Income before income tax provision 1,225 2,334 9,770 8,997
Income tax provision 241 590 2,569 2,366
Income from continuing operations 984 1,744 7,201 6,631
Loss from discontinued operations, net of tax (9) (9)
Net income 975 1,744 7,192 6,631
Net (income) loss attributable to noncontrolling interests (2) 3 (13) 3
Net income attributable to CVS Health $
973 $
1,747 $
7,179 $
6,634
Basic earnings per share:
Income from continuing operations attributable to CVS Health $
0.75 $
1.34 $
5.49 $
5.10
Loss from discontinued operations attributable to CVS Health $
(0.01)
$ $
(0.01)
$
Net income attributable to CVS Health $
0.74 $
1.34 $
5.48 $
5.10
Weighted average basic shares outstanding 1,311 1,303 1,309 1,301
Diluted earnings per share:
Income from continuing operations attributable to CVS Health $
0.75 $
1.33 $
5.47 $
5.08
Loss from discontinued operations attributable to CVS Health $
(0.01)
$ $
(0.01)
$
Net income attributable to CVS Health $
0.74 $
1.33 $
5.46 $
5.08
Weighted average diluted shares outstanding 1,317 1,310 1,314 1,305
Dividends declared per share $
0.50 $
0.50 $
2.00 $
2.00
CVS HEALTH CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
At December 31,
In millions 2020 2019
--- ---
Assets:
Cash and cash equivalents $
7,854 $
5,683
Investments 3,000 2,373
Accounts receivable, net 21,742 19,617
Inventories 18,496 17,516
Other current assets 5,277 5,113
Total current assets 56,369 50,302
Long-term investments 20,812 17,314
Property and equipment,
net 12,606 12,044
Operating lease right-of-
use assets 20,729 20,860
Goodwill 79,552 79,749
Intangible assets, net 31,142 33,121
Separate accounts assets 4,881 4,459
Other assets 4,624 4,600
Total assets $
230,715 $
222,449
Liabilities:
Accounts payable $
11,138 $
10,492
Pharmacy claims and
discounts payable 15,795 13,601
Health care costs payable 7,936 6,879
Policyholders' funds 4,270 2,991
Accrued expenses 14,243 12,133
Other insurance
liabilities 1,557 1,830
Current portion of
operating lease
liabilities 1,638 1,596
Current portion of long-
term debt 5,440 3,781
Total current liabilities 62,017 53,303
Long-term operating lease
liabilities 18,757 18,926
Long-term debt 59,207 64,699
Deferred income taxes 6,794 7,294
Separate accounts
liabilities 4,881 4,459
Other long-term insurance
liabilities 7,007 7,436
Other long-term
liabilities 2,351 2,162
Total liabilities 161,014 158,279
Shareholders' equity:
Preferred stock -
Common stock and capital
surplus 46,513 45,972
Treasury stock (28,178) (28,235)
Retained earnings 49,640 45,108
Accumulated other
comprehensive income 1,414 1,019
Total CVS Health
shareholders' equity 69,389 63,864
Noncontrolling interests 312 306
Total shareholders' equity 69,701 64,170
Total liabilities and
shareholders' equity $
230,715 $
222,449
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Year Ended
December 31,
In millions 2020 2019
--- ---
Cash flows from operating activities:
Cash receipts from
customers $
264,327 $
248,393
Cash paid for
inventory and
prescriptions
dispensed by retail
network pharmacies (158,636) (149,655)
Insurance benefits
paid (55,124) (52,242)
Cash paid to other
suppliers and
employees (29,763) (28,932)
Interest and
investment income
received 894 955
Interest paid (2,904) (2,954)
Income taxes paid (2,929) (2,717)
Net cash provided by
operating activities 15,865 12,848
Cash flows from investing activities:
Proceeds from sales
and maturities of
investments 6,467 7,049
Purchases of
investments (9,639) (7,534)
Purchases of property
and equipment (2,437) (2,457)
Proceeds from sale-
leaseback
transactions 101 5
Acquisitions (net of
cash acquired) (866) (444)
Proceeds from sale of
subsidiary 840
Other - 42
Net cash used in
investing activities (5,534) (3,339)
Cash flows from financing activities:
Net repayments of
short-term debt - (720)
Proceeds from
issuance of long-
term debt 9,958 3,736
Repayments of long-
term debt (15,631) (8,336)
Derivative
settlements (7) (25)
Dividends paid (2,624) (2,603)
Proceeds from
exercise of stock
options 264 210
Payments for taxes
related to net share
settlement of equity
awards (88) (112)
Other (27)
Net cash used in
financing activities (8,155) (7,850)
Net increase in cash,
cash equivalents and
restricted cash 2,176 1,659
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 $
8,130 $
5,954
CVS HEALTH CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Year Ended
December 31,
In millions 2020 2019
--- ---
Reconciliation of net income to net cash
provided by operating activities:
Net income $
7,192 $
6,631
Adjustments required to reconcile net income
to net cash provided by operating
activities:
Depreciation and
amortization 4,441 4,371
Stock-based compensation 400 453
(Gain) loss on sale of
subsidiaries (269) 205
Loss on early extinguishment
of debt 1,440 79
Deferred income taxes (570) (654)
Other noncash items 72 264
Change in operating assets and liabilities,
net of effects from acquisitions:
Accounts receivable, net (1,510) (2,158)
Inventories (973) (1,075)
Other assets 364 (614)
Accounts payable and
pharmacy claims and
discounts payable 2,769 3,550
Health care costs payable
and other insurance
liabilities (231) 320
Other liabilities 2,740 1,476
Net cash provided by
operating activities $
15,865 $
12,848
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 from continuing operations 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 Company's GAAP
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 months and years ended December 31, 2020 and 2019,
acquisition-related integration costs relate to the Aetna Acquisition.
The acquisition-related integration costs are reflected in the Company's
condensed consolidated statements of operations in operating expenses
within the Corporate/Other segment.
-- During the year ended December 31, 2020, the gain on divestiture of
subsidiary represents the pre-tax gain on the sale of the Workers'
Compensation business, which the Company sold on July 31, 2020 for
approximately $850 million. The gain on divestiture was finalized in the
three months ended December 31, 2020 and is reflected as a reduction in
operating expenses in the Company's condensed consolidated statements of
operations within the Health Care Benefits segment in the year ended
December 31, 2020. During the year ended December 31, 2019, the loss on
divestiture of subsidiary represents the pre-tax loss on the sale of
Onofre, which occurred on July 1, 2019. The loss on divestiture
primarily relates to the elimination of the cumulative translation
adjustment from accumulated other comprehensive income and is reflected
in operating expenses in the Company's condensed consolidated statements
of operations within the Retail/LTC segment.
-- During the three months and year ended December 31, 2020, the Company
received $313 million owed to it under the ACA's risk corridor program
that was previously fully reserved for as payment was uncertain. After
considering offsetting items such as the ACA's minimum medical loss
ratio ("MLR") rebate requirements and premium taxes, the Company
recognized pre-tax income of $307 million in the Company's condensed
consolidated statements of operations within the Health Care Benefits
segment. The portion of the ACA risk corridor payment attributable to
noncontrolling interest was $12 million related to third party ownership
interests in the Company's consolidated operating entities.
-- During the year ended December 31, 2019, the store rationalization
charges relate to the planned closure of 46 underperforming retail
pharmacy stores in the second quarter of 2019 and the planned closure of
22 underperforming retail pharmacy stores in the first quarter of 2020.
The store rationalization charges primarily relate to operating lease
right-of-use asset impairment charges and are reflected in the Company's
condensed consolidated statements of operations in operating expenses
within the Retail/LTC segment.
-- During the three months and year ended December 31, 2020, the loss on
early extinguishment of debt relates to the Company's repayment of $4.5
billion of its outstanding senior notes in December 2020 pursuant to its
tender offers for such senior notes. During the year ended December 31,
2020, the loss on early extinguishment of debt also relates to the
Company's repayment of $6.0 billion of its outstanding senior notes in
August 2020 pursuant to its tender offers for such senior notes. During
the year ended December 31, 2019, the loss on early extinguishment of
debt relates to the Company's repayment of $4.0 billion of its
outstanding senior notes in August 2019 pursuant to its tender offers
for such senior notes.
-- The corresponding tax benefit or expense related to the items excluded
from adjusted income from continuing operations attributable to CVS
Health and Adjusted EPS above. The nature of each non-GAAP adjustment is
evaluated to determine whether a discrete adjustment should be made to
the adjusted income tax provision. During the three months ended
December 31, 2020, the Company realized certain tax losses that were
able to be used to offset a portion of the taxable gain related to the
July 2020 sale of the Workers' Compensation business, which reduced
total tax expense for the three months and year ended December 31, 2020.
See endnotes (1) and (2) on page 25 for definitions of non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure are presented on pages 14 through 17 and page 24.
Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
Adjusted Operating Income
(Unaudited)
The following are reconciliations of operating income to adjusted operating income:
Three Months Ended December 31, 2020
In millions Pharmacy Retail/ Health Care Corporate/ Intersegment Consolidated
Services LTC Benefits Other Eliminations Totals
--- ---
Operating income (loss)
(GAAP measure) $
1,505 $
1,644 $
56 $
(512) $
(169) $
2,524
Non-GAAP adjustments:
Amortization of
intangible assets 56 131 402 1 590
Acquisition-related
integration costs - 136 136
Adjustment to gain on
divestiture of
subsidiary - 2 2
Receipt of fully
reserved ACA risk
corridor receivable - (307) (307)
Adjusted operating
income (loss) (1) $
1,561 $
1,775 $
153 $
(375) $
(169) $
2,945
Three Months Ended December 31, 2019
In millions Pharmacy Retail/ Health Care Corporate/ Intersegment Consolidated
Services LTC Benefits Other Eliminations Totals
--- ---
Operating income (loss)
(GAAP measure) $
1,348 $
1,909 $
386 $
(430) $
(176) $
3,037
Non-GAAP adjustments:
Amortization of
intangible assets 99 122 393 614
Acquisition-related
integration costs - 115 115
Adjusted operating
income (loss) (1) $
1,447 $
2,031 $
779 $
(315) $
(176) $
3,766
Year Ended December 31, 2020
In millions Pharmacy Retail/ Health Care Corporate/ Intersegment Consolidated
Services LTC Benefits Other Eliminations Totals
--- ---
Operating income (loss)
(GAAP measure) $
5,454 $
5,640 $
5,166 $
(1,641) $
(708) $
13,911
Non-GAAP adjustments:
Amortization of
intangible assets 234 506 1,598 3 2,341
Acquisition-related
integration costs - 332 332
Gain on divestiture of
subsidiary - (269) (269)
Receipt of fully
reserved ACA risk
corridor receivable - (307) (307)
Adjusted operating
income (loss) (1) $
5,688 $
6,146 $
6,188 $
(1,306) $
(708) $
16,008
Year Ended December 31, 2019
In millions Pharmacy Retail/ Health Care Corporate/ Intersegment Consolidated
Services LTC Benefits Other Eliminations Totals
--- ---
Operating income (loss)
(GAAP measure) $
4,735 $
5,793 $
3,639 $
(1,483) $
(697) $
11,987
Non-GAAP adjustments:
Amortization of
intangible assets 394 476 1,563 3 2,436
Acquisition-related
integration costs - 480 480
Loss on divestiture of
subsidiary - 205 205
Store rationalization
charges - 231 231
Adjusted operating
income (loss) (1) $
5,129 $
6,705 $
5,202 $
(1,000) $
(697) $
15,339
Adjusted Earnings Per Share
(Unaudited)
The following are reconciliations of income from continuing operations attributable to CVS Health to adjusted income from continuing operations attributable to CVS Health and calculations of GAAP diluted EPS from continuing operations and
Adjusted EPS:
Three Months Ended Three Months Ended
December 31, 2020 December 31, 2019
In millions, except per share amounts Total Per Total Per
Company Common Company Common
Share Share
--- ---
Income from continuing operations (GAAP measure) $
984 $
1,744
Net (income) loss attributable to noncontrolling interests (GAAP measure) (2) 3
Income allocable to participating securities (GAAP measure) - (1)
Income from continuing operations attributable to CVS Health (GAAP
measure) 982 $
0.75 1,746 $
1.33
Non-GAAP adjustments:
Amortization of intangible assets 590 0.45 614 0.47
Acquisition-related integration costs 136 0.10 115 0.09
Adjustment to gain on divestiture of subsidiary 2
Receipt of fully reserved ACA risk corridor receivable (307) (0.23)
Loss on early extinguishment of debt 674 0.51
Tax impact of non-GAAP adjustments (380) (0.29) (204) (0.16)
Receipt of fully reserved ACA risk corridor receivable attributable to
noncontrolling interest, net of tax 12 0.01
Income allocable to participating securities, net of tax (a) - (1)
Adjusted income from continuing operations attributable to CVS Health (2) $
1,709 $
1.30 $
2,270 $
1.73
Weighted average diluted shares outstanding 1,317 1,310
_____________________________________________
(a) Represents the corresponding impact to income allocable to participating securities, net
of tax, related to the items above excluded from income from continuing operations
attributable to CVS Health in determining adjusted income from continuing operations
attributable to CVS Health and calculating Adjusted EPS above.
Year Ended Year Ended
December 31, 2020 December 31, 2019
In millions, except per share amounts Total Per Total Per
Company Common Company Common
Share Share
---
Income from continuing operations (GAAP measure) $
7,201 $
6,631
Net (income) loss attributable to noncontrolling interests (GAAP measure) (13) 3
Income allocable to participating securities (GAAP measure) (5)
Income from continuing operations attributable to CVS Health (GAAP
measure) 7,188 $
5.47 6,629 $
5.08
Non-GAAP adjustments:
Amortization of intangible assets 2,341 1.78 2,436 1.87
Acquisition-related integration costs 332 0.25 480 0.37
(Gain) loss on divestiture of subsidiary (269) (0.20) 205 0.16
Receipt of fully reserved ACA risk corridor receivable (307) (0.23)
Store rationalization charges 231 0.17
Loss on early extinguishment of debt 1,440 1.09 79 0.06
Tax impact of non-GAAP adjustments (877) (0.67) (815) (0.63)
Receipt of fully reserved ACA risk corridor receivable attributable to
noncontrolling interest, net of tax 12 0.01
Income allocable to participating securities, net of tax (a) (1)
Adjusted income from continuing operations attributable to CVS Health (2) $
9,860 $
7.50 $
9,244 $
7.08
Weighted average diluted shares outstanding 1,314 1,305
_____________________________________________
(a) Represents the corresponding impact to income allocable to participating securities, net
of tax, related to the items above excluded from income from continuing operations
attributable to CVS Health in determining adjusted income from continuing operations
attributable to CVS Health and calculating Adjusted EPS above.
Supplemental Information
(Unaudited)
The Company's segments maintain separate financial information, and the Company's chief operating decision maker (the "CODM") evaluates the segments' operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM
evaluates the performance of the Company's segments based on adjusted operating income, which is defined as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company's business nor
reflect the Company's underlying business performance as further described in endnote (1). The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company's ability to compare past financial performance with current performance and analyze
underlying business performance and trends.
The following is a reconciliation of financial measures of the Company's segments to the consolidated totals:
In millions Pharmacy Retail/ Health Care Corporate/ Intersegment Consolidated
Services (a) LTC Benefits Other Eliminations (b) Totals
--- ---
Three Months Ended
December 31, 2020
Total revenues $
36,355 $
24,062 $
19,103 $
134 $
(10,100) $
69,554
Operating
income (loss) 1,505 1,644 56 (512) (169) 2,524
Adjusted
operating
income (loss)
(1) 1,561 1,775 153 (375) (169) 2,945
December 31, 2019
Total revenues 37,073 22,580 17,150 89 (10,003) 66,889
Operating
income (loss) 1,348 1,909 386 (430) (176) 3,037
Adjusted
operating
income (loss)
(1) 1,447 2,031 779 (315) (176) 3,766
Year Ended
December 31, 2020
Total revenues $
141,938 $
91,198 $
75,467 $
426 $
(40,323) $
268,706
Operating
income (loss) 5,454 5,640 5,166 (1,641) (708) 13,911
Adjusted
operating
income (loss)
(1) 5,688 6,146 6,188 (1,306) (708) 16,008
December 31, 2019
Total revenues 141,491 86,608 69,604 512 (41,439) 256,776
Operating
income (loss) 4,735 5,793 3,639 (1,483) (697) 11,987
Adjusted
operating
income (loss)
(1) 5,129 6,705 5,202 (1,000) (697) 15,339
_____________________________________________
(a) Total revenues of the Pharmacy Services segment include approximately $2.4 billion and
$2.6 billion of retail co-payments for the three months ended December 31, 2020 and
2019, respectively, and $10.9 billion and $11.5 billion of retail co-payments for the
years ended December 31, 2020 and 2019, respectively.
(b) Intersegment eliminations relate to intersegment revenue generating activities that
occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health
Care Benefits segment.
Supplemental Information
(Unaudited)
Pharmacy Services Segment
The following table summarizes the Pharmacy Services segment's performance for the respective periods:
Change
Three Months Ended
Year Ended Three Months Ended Year Ended
December 31, December 31, December 31, December 31,
2020 vs 2019 2020 vs 2019
---
In millions, except
percentages 2020 2019 2020 2019
$ %
$ %
--- ---
Revenues:
Products $
36,148 $
36,890 $
140,950 $
140,946 $
(742) (2.0)
% $
4 %
Services 207 183 988 545 24 13.1 443 81.3
% %
---
Total revenues 36,355 37,073 141,938 141,491 (718) (1.9) 447 0.3
% %
Cost of products 34,462 35,327 135,045 135,245 (865) (2.4) (200) (0.1)
sold
% %
Gross profit (10) 1,893 1,746 6,893 6,246 147 8.4 647 10.4
% %
Gross margin (Gross
profit as a % of total % % % %
revenues) (10) 5.2 4.7 4.9 4.4
Operating expenses $
388 $
398 $
1,439 $
1,511 $
(10) (2.5) $
(72) (4.8)
% %
Operating expenses as a 1.1 1.1 1.0 1.1
% of total revenues % % % %
Operating income $
1,505 $
1,348 $
5,454 $
4,735 $
157 11.6 $
719 15.2
% %
Operating income as a % 4.1 3.6 3.8 3.3
of total revenues % % % %
Adjusted operating $
1,561 $
1,447 $
5,688 $
5,129 $
114 7.9 $
559 10.9
income (1)
% %
Adjusted operating
income as a % of total % % % %
revenues 4.3 3.9 4.0 3.6
Revenues (by distribution channel):
Pharmacy network $
21,936 $
22,838 $
85,045 $
88,755 $
(902) (3.9) $
(3,710) (4.2)
(6)
% %
Mail choice (7) 14,256 14,075 56,071 52,141 181 1.3 3,930 7.5
% %
Other 163 160 822 595 3 1.9 227 38.2
% %
Pharmacy claims processed: (4) (5)
Total 537.9 533.9 2,112.9 2,014.2 4.0 0.7 98.7 4.9
% %
Pharmacy network 456.2 454.0 1,790.1 1,704.0 2.2 0.5 86.1 5.1
(6)
% %
Mail choice (7) 81.7 79.9 322.8 310.2 1.8 2.3 12.6 4.1
% %
Generic dispensing rate: (4) (11)
Total 87.5 87.8 88.2 88.2
% % % %
Pharmacy network 87.9 88.3 88.7 88.7
(6) % % % %
Mail choice (7) 85.2 85.2 85.3 85.1
% % % %
Supplemental Information
(Unaudited)
Retail/LTC Segment
The following table summarizes the Retail/LTC segment's performance for the respective periods:
Change
Three Months Ended
Year Ended Three Months Ended Year Ended
December 31,
December 31, December 31, December 31,
2020 vs 2019 2020 vs 2019
---
In millions, except
percentages 2020 2019 2020 2019
$ %
$ %
--- ---
Revenues:
Products $
23,522 $
22,326 $
89,944 $
85,729 $
1,196 5.4 $
4,215 4.9
%
%
Services 540 254 1,254 879 286 112.6 375 42.7
% %
---
Total revenues 24,062 22,580 91,198 86,608 1,482 6.6 4,590 5.3
%
%
Cost of products 17,587 16,184 67,284 62,688 1,403 8.7 4,596 7.3
sold %
%
Gross profit (10) 6,475 6,396 23,914 23,920 79 1.2
% (6) %
Gross margin (Gross profit as 26.9 28.3 26.2 27.6
a % of total revenues) (10) % % % %
Operating expenses $
4,831 $
4,487 $
18,274 $
18,127 $
344 7.7 $
147 0.8
%
%
Operating expenses as a % of 20.1 19.9 20.0 20.9
total revenues % % % %
Operating income $
1,644 $
1,909 $
5,640 $
5,793 $
(265) (13.9) $
(153) (2.6)
%
%
Operating income as a % of 6.8 8.5 6.2 6.7
total revenues % % % %
Adjusted operating $
1,775 $
2,031 $
6,146 $
6,705 $
(256) (12.6) $
(559) (8.3)
income (1) %
%
Adjusted operating income as a 7.4 9.0 6.7 7.7
% of total revenues % % % %
Revenues (by major goods/service
lines):
Pharmacy $
18,343 $
17,245 $
70,176 $
66,442 $
1,098 6.4 $
3,734 5.6
%
%
Front Store 5,054 5,134 19,655 19,422 (80) (1.6) 233 1.2
% %
Other 665 201 1,367 744 464 230.8 623 83.7
% %
Prescriptions 376.3 369.0 1,465.2 1,417.2 7.3 2.0 48.0 3.4
filled (4) (5) %
%
Same store sales increase
(decrease): (12)
Total 5.3 3.2
% % 5.6
% 3.7
%
Pharmacy 7.5 4.1
% % 7.0
% 4.5
%
Front Store (1.8) 0.7
% % 0.9
% 1.1
%
Prescription volume 2.9 6.9
(4) % % 4.7
% 7.2
%
Generic dispensing 87.0 87.5 88.3 88.3
rate (4) (11) % % % %
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
Year Ended Three Months Ended Year Ended
December 31,
December 31, December 31, December 31,
2020 vs 2019 2020 vs 2019
In millions, except
percentages and
basis points
("bps") 2020 2019 2020 2019
$ %
$ %
--- ---
Revenues:
Premiums $
17,602 $
15,488 $
69,301 $
63,031 $
2,114 13.6 $
6,270 9.9
% %
Services 1,359 1,521 5,683 5,974 (162) (10.7) (291) (4.9)
%
%
Net investment 142 141 483 599 1 0.7 (116) (19.4)
income % %
---
Total revenues 19,103 17,150 75,467 69,604 1,953 11.4 5,863 8.4
% %
Benefit costs 15,267 13,277 56,083 53,092 1,990 15.0 2,991 5.6
% %
MBR (Benefit costs as a % of 86.7 85.7 80.9 84.2
premium revenues) (8) % % % % 100 bps (330) bps
Operating expenses $
3,780 $
3,487 $
14,218 $
12,873 $
293 8.4 $
1,345 10.4
% %
Operating expenses as a % of 19.8 20.3 18.8 18.5
total revenues % % % %
Operating income $
56 $
386 $
5,166 $
3,639 $
(330) (85.5) $
1,527 42.0
% %
Operating income as a % of 0.3 2.3 6.8 5.2
total revenues % % % %
Adjusted operating $
153 $
779 $
6,188 $
5,202 $
(626) (80.4) $
986 19.0
income (1) % %
Adjusted operating income as a 0.8 4.5 8.2 7.5
% of total revenues % % % %
Premium revenues (by business):
Government $
12,302 $
10,220 $
48,928 $
41,818 $
2,082 20.4 $
7,110 17.0
% %
Commercial 5,300 5,268 20,373 21,213 32 0.6 (840) (4.0)
%
%
The following table summarizes the Health Care Benefits segment's medical membership for the respective periods:
December 31, 2020 September 30, 2020 December 31, 2019
---
In thousands Insured ASC Total Insured ASC Total Insured ASC Total
--- ---
Medical membership: (9)
Commercial 3,258 13,644 16,902 3,268 13,671 16,939 3,591 14,159 17,750
Medicare Advantage 2,705 2,705 2,689 2,689 2,321 2,321
Medicare Supplement 1,082 1,082 1,009 1,009 881 881
Medicaid 2,100 623 2,723 2,028 605 2,633 1,398 558 1,956
Total medical
membership 9,145 14,267 23,412 8,994 14,276 23,270 8,191 14,717 22,908
Supplemental membership information:
Medicare Prescription Drug Plan (standalone) (a) 5,490 5,540 5,994
_____________________________________________
(a) Represents the Company's SilverScript(R) PDP membership only. Excludes 2.5 million
members as of December 31, 2019 related to Aetna's standalone PDPs that were sold
effective December 31, 2018. The Company retained the financial results of the divested
plans through 2019 through a reinsurance agreement. Subsequent to 2019, the Company no
longer retains the financial results of the divested plans.
Supplemental Information
(Unaudited)
The following table shows the components of the change in health care costs payable during the years
ended December 31, 2020 and 2019:
Year Ended
December 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 414
Add: Components of incurred health
care costs
Current year 55,835 52,723
Prior years (a) (429) (524)
Total incurred health
care costs (b) 55,406 52,199
Less: Claims paid
Current year 48,770 46,158
Prior years 6,009 5,314
Total claims paid 54,779 51,472
Add: Premium
deficiency reserve 11 4
Health care costs
payable, end of
period, net 7,926 6,874
Add: Reinsurance
recoverables 10 5
Health care costs
payable, end of
period $
7,936 $
6,879
_____________________________________________
(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 years ended December 31, 2020 and 2019 in the
table above exclude (i) $11 million and $4 million, respectively, for a premium
deficiency reserve related to the Company's Medicaid products, (ii) $41 million of
benefit costs in each period recorded in the Health Care Benefits segment that are
included in other insurance liabilities on the Company's condensed consolidated balance
sheets and (iii) $221 million and $285 million, respectively, of benefit costs recorded
in the Corporate/Other segment that are included in other insurance liabilities on the
Company's condensed consolidated balance sheets.
The following table summarizes the Health Care Benefits segment's days claims payable for the respective periods:
December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019
---
Days
Claims
Payable
(13) 48 49 57 48 48
Supplemental Information
(Unaudited)
Corporate/Other Segment
The following table summarizes the Corporate/Other segment's performance for the respective periods:
Change
Three Months Ended Year Ended Three Months Ended Year Ended
December 31, December 31, December 31, December 31,
2020 vs 2019 2020 vs 2019
---
In millions, except
percentages 2020 2019 2020 2019
$ %
$ %
--- ---
Revenues:
Premiums $
13 $
22 $
63 $
91 $
(9) (40.9) $
(28) (30.8)
% %
Services 15 2 48 9 13 650.0 39 433.3
% %
Net investment 106 65 315 412 41 63.1 (97) (23.5)
income % %
Total revenues 134 89 426 512 45 50.6 (86) (16.8)
% %
Benefit costs 48 72 221 285 (24) (33.3) (64) (22.5)
% %
Operating expenses 598 447 1,846 1,710 151 33.8 136 8.0
% %
Operating loss (512) (430) (1,641) (1,483) (82) (19.1) (158) (10.7)
% %
Adjusted operating (375) (315) (1,306) (1,000) (60) (19.0) (306) (30.6)
loss (1) % %
Adjusted Earnings Per Share Guidance
(Unaudited)
The following reconciliations of projected income from continuing operations to projected adjusted income from continuing operations attributable to CVS Health and calculations of projected GAAP diluted EPS from continuing operations and
projected Adjusted EPS contain forward-looking information. All forward-looking information involves risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking information due to the risks and
uncertainties related to the COVID-19 pandemic, the geographies impacted and the severity and duration of the pandemic, the pandemic's impact on the U.S. and global economies and consumer behavior and health care utilization patterns, and the
timing, scope and impact of stimulus legislation and other federal, state and local governmental responses to the pandemic, as well as the risks and uncertainties described in our 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 in our most recently filed Quarterly Report on Form 10-Q. 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, 2021
Low
High
---
In millions, except per share amounts Total Per Total Per
Company Common Company Common
Share Share
--- ---
Income from continuing operations (GAAP measure) $
8,035 $
8,245
Net income attributable to noncontrolling interests (GAAP measure) (5) (5)
Income from continuing operations attributable to CVS Health (GAAP
measure) 8,030 $
6.06 8,240 $
6.22
Non-GAAP adjustments:
Amortization of intangible assets 2,300 1.74 2,300 1.74
Acquisition-related integration costs 130 0.10 130 0.10
Tax impact of non-GAAP adjustments (670) (0.51) (670) (0.51)
Adjusted income from continuing operations attributable to CVS Health (2) $
9,790 $
7.39 $
10,000 $
7.55
Weighted average diluted shares outstanding 1,325 1,325
Endnotes
(1) The Company defines adjusted operating income as
operating income (GAAP measure) excluding the
impact of amortization of intangible assets and
other items, if any, that neither relate to the
ordinary course of the Company's business nor
reflect the Company's underlying business
performance, such as acquisition-related
integration costs, gains/losses on divestitures,
income associated with the receipt of fully
reserved amounts owed to the Company under the ACA
risk corridor program, 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 from
continuing operations attributable to CVS Health as
income from continuing operations attributable to
CVS Health (GAAP measure) excluding the impact of
amortization of intangible assets and other items,
if any, that neither relate to the ordinary course
of the Company's business nor reflect the Company's
underlying business performance, such as
acquisition-related integration costs, gains/
losses on divestitures, income associated with the
receipt of fully reserved amounts owed to the
Company under the ACA risk corridor program, store
rationalization charges, losses on early
extinguishment of debt, the corresponding income
tax benefit or expense related to the items
excluded from adjusted income from continuing
operations attributable to CVS Health, the
corresponding impact to income allocable to
participating securities, net of tax, related to
the items excluded from income from continuing
operations attributable to CVS Health in
determining adjusted income from continuing
operations attributable to CVS Health, and any
other items specifically identified herein. GAAP
diluted EPS from continuing operations and Adjusted
EPS, respectively, are calculated by dividing
income from continuing operations attributable to
CVS Health and adjusted income from continuing
operations attributable to CVS Health by the
Company's weighted average diluted shares
outstanding. See "Non-GAAP Financial Information"
earlier in this press release for additional
information regarding the items excluded from
income from continuing operations attributable to
CVS Health and GAAP diluted EPS from continuing
operations.
(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 total
revenues and operating results.
(6) 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.
(7) Mail choice is defined as claims filled at a
Pharmacy Services mail order facility, which
includes specialty mail claims inclusive of
Specialty Connect(R) claims picked up at a retail
pharmacy, as well as prescriptions filled at the
Company's retail pharmacies under the Maintenance
Choice program.
(8) 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.
(9) 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.
(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, revenues and prescriptions from
LTC operations and, in 2019, revenues and
prescriptions from stores in Brazil. 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.
(13) 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.
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SOURCE CVS Health Corporation
