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As Of Filer Filing For·On·As Docs:Size 11/06/19 CVS Health Corp 10-Q 9/30/19 89:17M |
Document/Exhibit Description Pages Size 1: 10-Q Quarterly Report HTML 2.49M 2: EX-15.1 Letter re: Unaudited Interim Financial Info HTML 26K 3: EX-31.1 Certification -- §302 - SOA'02 HTML 32K 4: EX-31.2 Certification -- §302 - SOA'02 HTML 33K 5: EX-32.1 Certification -- §906 - SOA'02 HTML 27K 6: EX-32.2 Certification -- §906 - SOA'02 HTML 27K 40: R1 Cover Page HTML 78K 82: R2 Condensed Consolidated Statements of Operations HTML 135K (Unaudited) 57: R3 Condensed Consolidated Statements of Comprehensive HTML 56K Income (Unaudited) 31: R4 Condensed Consolidated Balance Sheets (Unaudited) HTML 144K 43: R5 Condensed Consolidated Balance Sheets (Unaudited) HTML 47K (Parenthetical) 85: R6 Condensed Consolidated Statements of Cash Flows HTML 137K (Unaudited) 60: R7 Condensed Consolidated Statements of Shareholders' HTML 114K Equity (Unaudited) 32: R8 Condensed Consolidated Statements of Shareholders' HTML 50K Equity (Parentheticals) 39: R9 Significant Accounting Policies HTML 390K 78: R10 Acquisition and Divestiture HTML 63K 71: R11 Investments HTML 277K 18: R12 Fair Value HTML 203K 50: R13 Leases HTML 168K 77: R14 Health Care Costs Payable HTML 45K 70: R15 Borrowings HTML 109K 17: R16 Shareholders' Equity HTML 32K 49: R17 Other Comprehensive Income (Loss) HTML 116K 79: R18 Earnings (Loss) Per Share HTML 70K 69: R19 Reinsurance HTML 29K 25: R20 Commitments and Contingencies HTML 92K 34: R21 Segment Reporting HTML 366K 81: R22 Significant Accounting Policies (Policies) HTML 150K 55: R23 Significant Accounting Policies (Tables) HTML 326K 23: R24 Acquisition and Divestiture (Tables) HTML 52K 33: R25 Investments (Tables) HTML 282K 80: R26 Fair Value (Tables) HTML 201K 54: R27 Leases (Tables) HTML 117K 22: R28 Health Care Costs Payable (Tables) HTML 41K 35: R29 Borrowings (Tables) HTML 105K 52: R30 Other Comprehensive Income (Loss) (Tables) HTML 116K 19: R31 Earnings (Loss) Per Share (Tables) HTML 67K 67: R32 Segment Reporting (Tables) HTML 370K 75: R33 Significant Accounting Policies - 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Document |
i Delaware | i 05-0494040 | |
(State
or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
i One CVS Drive, | i Woonsocket,
| i Rhode Island | i 02895 | |||
(Address
of principal executive offices) | (Zip Code) | |||||
Registrant’s telephone number, including area code: | i (401) | i 765-1500 | ||||
Former
name, former address and former fiscal year, if changed since last report: | N/A |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
i Common
Stock, par value $0.01 per share | i CVS | i New York Stock Exchange |
i Large
accelerated filer | ☑ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | i ☐ |
Emerging
growth company | i ☐ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Page | ||
Part I | Financial Information | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II | Other Information | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item
3 | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Part I. | Financial Information |
Item 1. | Financial Statements |
Page | |
Condensed
Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2019 and 2018 | |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2019 and 2018 | |
Condensed
Consolidated Balance Sheets (Unaudited) as of September 30, 2019 and December 31, 2018 | |
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2019 and 2018 | |
Condensed
Consolidated Statements of Shareholders’ Equity (Unaudited) for the three months ended September 30, 2019 and 2018, the three months ended June 30, 2019 and 2018 and the three months ended March 31, 2019 and 2018 | |
Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Report of the Independent Registered Public Accounting Firm |
Three Months Ended September 30, | Nine
Months Ended September 30, | ||||||||||||||
In millions, except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenues: | |||||||||||||||
Products | $ | i 47,149 | $ | i 46,334 | $ | i 136,023 | $ | i 136,035 | |||||||
Premiums | i 15,539 | i 627 | i 47,612 | i 2,684 | |||||||||||
Services | i 1,859 | i 308 | i 5,447 | i 951 | |||||||||||
Net
investment income | i 263 | i 221 | i 805 | i 485 | |||||||||||
Total
revenues | i 64,810 | i 47,490 | i 189,887 | i 140,155 | |||||||||||
Operating
costs: | |||||||||||||||
Cost of products sold | i 40,437 | i 39,502 | i 116,654 | i 115,883 | |||||||||||
Benefit
costs | i 12,850 | i 439 | i 39,396 | i 2,399 | |||||||||||
Goodwill
impairment | i — | i — | i — | i 3,921 | |||||||||||
Operating
expenses | i 8,595 | i 4,975 | i 24,887 | i 14,755 | |||||||||||
Total
operating costs | i 61,882 | i 44,916 | i 180,937 | i 136,958 | |||||||||||
Operating
income | i 2,928 | i 2,574 | i 8,950 | i 3,197 | |||||||||||
Interest
expense | i 747 | i 674 | i 2,301 | i 1,886 | |||||||||||
Loss
on early extinguishment of debt | i 79 | i — | i 79 | i — | |||||||||||
Other
expense (income) | ( i 31 | ) | i 1 | ( i 93 | ) | i 7 | |||||||||
Income
before income tax provision | i 2,133 | i 1,899 | i 6,663 | i 1,304 | |||||||||||
Income
tax provision | i 604 | i 509 | i 1,776 | i 1,478 | |||||||||||
Income
(loss) from continuing operations | i 1,529 | i 1,390 | i 4,887 | ( i 174 | ) | ||||||||||
Loss
from discontinued operations, net of tax | i — | i — | i — | ( i 1 | ) | ||||||||||
Net
income (loss) | i 1,529 | i 1,390 | i 4,887 | ( i 175 | ) | ||||||||||
Net
loss attributable to noncontrolling interests | i 1 | i — | i — | i — | |||||||||||
Net
income (loss) attributable to CVS Health | $ | i 1,530 | $ | i 1,390 | $ | i 4,887 | $ | ( i 175 | ) | ||||||
Basic
earnings (loss) per share: | |||||||||||||||
Income (loss) from continuing operations attributable to CVS Health | $ | i 1.17 | $ | i 1.36 | $ | i 3.76 | $ | ( i 0.17 | ) | ||||||
Loss
from discontinued operations attributable to CVS Health | $ | i — | $ | i — | $ | i — | $ | i — | |||||||
Net
income (loss) attributable to CVS Health | $ | i 1.17 | $ | i 1.36 | $ | i 3.76 | $ | ( i 0.17 | ) | ||||||
Weighted
average basic shares outstanding | i 1,302 | i 1,020 | i 1,300 | i 1,018 | |||||||||||
Diluted
earnings (loss) per share: | |||||||||||||||
Income (loss) from continuing operations attributable to CVS Health | $ | i 1.17 | $ | i 1.36 | $ | i 3.75 | $ | ( i 0.17 | ) | ||||||
Loss
from discontinued operations attributable to CVS Health | $ | i — | $ | i — | $ | i — | $ | i — | |||||||
Net
income (loss) attributable to CVS Health | $ | i 1.17 | $ | i 1.36 | $ | i 3.75 | $ | ( i 0.17 | ) | ||||||
Weighted
average diluted shares outstanding | i 1,305 | i 1,022 | i 1,303 | i 1,018 | |||||||||||
Dividends
declared per share | $ | i 0.50 | $ | i 0.50 | $ | i 1.50 | $ | i 1.50 |
Three
Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income (loss) | $ | i 1,529 | $ | i 1,390 | $ | i 4,887 | $ | ( i 175 | ) | ||||||
Other
comprehensive income (loss), net of tax: | |||||||||||||||
Net unrealized investment gains | i 136 | i — | i 721 | i — | |||||||||||
Foreign
currency translation adjustments | i 153 | ( i 8 | ) | i 157 | ( i 34 | ) | |||||||||
Net
cash flow hedges | ( i 23 | ) | ( i 4 | ) | ( i 30 | ) | i 335 | ||||||||
Other
comprehensive income (loss) | i 266 | ( i 12 | ) | i 848 | i 301 | ||||||||||
Comprehensive
income | i 1,795 | i 1,378 | i 5,735 | i 126 | |||||||||||
Comprehensive
loss attributable to noncontrolling interests | i 1 | i — | i — | i — | |||||||||||
Comprehensive
income attributable to CVS Health | $ | i 1,796 | $ | i 1,378 | $ | i 5,735 | $ | i 126 |
In
millions, except per share amounts | |||||||
Assets: | |||||||
Cash and cash equivalents | $ | i 5,193 | $ | i 4,059 | |||
Investments | i 2,334 | i 2,522 | |||||
Accounts
receivable, net | i 19,789 | i 17,631 | |||||
Inventories | i 16,028 | i 16,450 | |||||
Other
current assets | i 4,841 | i 4,581 | |||||
Total
current assets | i 48,185 | i 45,243 | |||||
Long-term
investments | i 17,342 | i 15,732 | |||||
Property
and equipment, net | i 11,651 | i 11,349 | |||||
Operating
lease right-of-use assets | i 20,757 | — | |||||
Goodwill | i 79,548 | i 78,678 | |||||
Intangible
assets, net | i 33,655 | i 36,524 | |||||
Separate
accounts assets | i 4,590 | i 3,884 | |||||
Other
assets | i 4,385 | i 5,046 | |||||
Total
assets | $ | i 220,113 | $ | i 196,456 | |||
Liabilities: | |||||||
Accounts
payable | $ | i 9,442 | $ | i 8,925 | |||
Pharmacy
claims and discounts payable | i 13,099 | i 11,365 | |||||
Health
care costs payable | i 7,014 | i 6,147 | |||||
Policyholders’
funds | i 2,938 | i 2,939 | |||||
Accrued
expenses | i 11,615 | i 10,711 | |||||
Other
insurance liabilities | i 1,790 | i 1,937 | |||||
Current
portion of operating lease liabilities | i 1,798 | — | |||||
Short-term debt | i 1,070 | i 720 | |||||
Current
portion of long-term debt | i 3,778 | i 1,265 | |||||
Total
current liabilities | i 52,544 | i 44,009 | |||||
Long-term
operating lease liabilities | i 18,826 | — | |||||
Long-term debt | i 64,206 | i 71,444 | |||||
Deferred
income taxes | i 7,279 | i 7,677 | |||||
Separate
accounts liabilities | i 4,590 | i 3,884 | |||||
Other
long-term insurance liabilities | i 7,557 | i 8,119 | |||||
Other
long-term liabilities | i 2,178 | i 2,780 | |||||
Total
liabilities | i 157,180 | i 137,913 | |||||
Shareholders’
equity: | |||||||
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding | i — | i — | |||||
Common
stock, par value $0.01: 3,200 shares authorized; 1,725 shares issued and 1,301 shares outstanding at September 30, 2019 and 1,720 shares issued and 1,295 shares outstanding at December 31, 2018 and capital surplus | i 45,854 | i 45,440 | |||||
Treasury
stock, at cost: 424 shares at September 30, 2019 and 425 shares at December 31, 2018 | ( i 28,207 | ) | ( i 28,228 | ) | |||
Retained
earnings | i 44,017 | i 40,911 | |||||
Accumulated
other comprehensive income | i 950 | i 102 | |||||
Total
CVS Health shareholders’ equity | i 62,614 | i 58,225 | |||||
Noncontrolling
interests | i 319 | i 318 | |||||
Total
shareholders’ equity | i 62,933 | i 58,543 | |||||
Total
liabilities and shareholders’ equity | $ | i 220,113 | $ | i 196,456 |
Nine
Months Ended September 30, | |||||||
In millions | 2019 | 2018 | |||||
Cash flows from operating activities: | |||||||
Cash receipts from customers | $ | i 184,519 | $ | i 132,275 | |||
Cash
paid for inventory and prescriptions dispensed by retail network pharmacies | ( i 109,958 | ) | ( i 107,920 | ) | |||
Insurance
benefits paid | ( i 38,812 | ) | ( i 2,400 | ) | |||
Cash
paid to other suppliers and employees | ( i 21,411 | ) | ( i 12,305 | ) | |||
Interest
and investment income received | i 756 | i 406 | |||||
Interest
paid | ( i 2,675 | ) | ( i 1,759 | ) | |||
Income
taxes paid | ( i 2,205 | ) | ( i 1,911 | ) | |||
Net
cash provided by operating activities | i 10,214 | i 6,386 | |||||
Cash
flows from investing activities: | |||||||
Proceeds from sales and maturities of investments | i 5,616 | i 43 | |||||
Purchases
of investments | ( i 6,011 | ) | ( i 97 | ) | |||
Purchases
of property and equipment | ( i 1,890 | ) | ( i 1,452 | ) | |||
Acquisitions
(net of cash acquired) | ( i 361 | ) | ( i 616 | ) | |||
Proceeds
from sale of subsidiary | i — | i 725 | |||||
Other | i 16 | i 11 | |||||
Net
cash used in investing activities | ( i 2,630 | ) | ( i 1,386 | ) | |||
Cash
flows from financing activities: | |||||||
Net borrowings (repayments) of short-term debt | i 350 | ( i 1,276 | ) | ||||
Proceeds
from issuance of long-term debt | i 3,458 | i 39,376 | |||||
Repayments
of long-term debt | ( i 8,350 | ) | ( i 2,266 | ) | |||
Derivative
settlements | ( i 25 | ) | i 446 | ||||
Dividends
paid | ( i 1,952 | ) | ( i 1,528 | ) | |||
Proceeds
from exercise of stock options | i 183 | i 214 | |||||
Payments
for taxes related to net share settlement of equity awards | ( i 85 | ) | ( i 39 | ) | |||
Other | i 11 | i — | |||||
Net
cash provided by (used in) financing activities | ( i 6,410 | ) | i 34,927 | ||||
Net
increase in cash, cash equivalents and restricted cash | i 1,174 | i 39,927 | |||||
Cash,
cash equivalents and restricted cash at the beginning of the period | i 4,295 | i 1,900 | |||||
Cash,
cash equivalents and restricted cash at the end of the period | $ | i 5,469 | $ | i 41,827 |
Nine Months Ended September 30, | |||||||
In millions | 2019 | 2018 | |||||
Reconciliation
of net income (loss) to net cash provided by operating activities: | |||||||
Net income (loss) | $ | i 4,887 | $ | ( i 175 | ) | ||
Adjustments
required to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | i 3,275 | i 1,911 | |||||
Goodwill
impairment | i — | i 3,921 | |||||
Stock-based
compensation | i 355 | i 172 | |||||
Loss
on sale of subsidiary | i 205 | i 86 | |||||
Loss
on early extinguishment of debt | i 79 | i — | |||||
Deferred
income taxes and other noncash items | ( i 38 | ) | i 210 | ||||
Change
in operating assets and liabilities, net of effects from acquisitions: | |||||||
Accounts receivable, net | ( i 2,312 | ) | ( i 1,725 | ) | |||
Inventories | i 413 | i 472 | |||||
Other
assets | ( i 374 | ) | ( i 3 | ) | |||
Accounts
payable and pharmacy claims and discounts payable | i 2,330 | i 1,839 | |||||
Health
care costs payable and other insurance liabilities | i 535 | i — | |||||
Other
liabilities | i 859 | ( i 322 | ) | ||||
Net
cash provided by operating activities | $ | i 10,214 | $ | i 6,386 |
Attributable
to CVS Health | ||||||||||||||||||||||||||
Number of shares outstanding | Common | Accumulated | Total | |||||||||||||||||||||||
Stock
and | Other | CVS Health | Total | |||||||||||||||||||||||
Common | Treasury | Capital | Treasury | Retained | Comprehensive | Shareholders’
| Noncontrolling | Shareholders’ | ||||||||||||||||||
In millions | Shares | Shares (1) | Surplus (2) | Stock (1) | Earnings | Income | Equity | Interests
| Equity | |||||||||||||||||
Balance at December 31, 2018 | i 1,720 | ( i 425 | ) | $ | i 45,440 | $ | ( i 28,228 | ) | $ | i 40,911 | $ | i 102 | $ | i 58,225 | $ | i 318 | $ | i 58,543 | ||||||||
Adoption
of new accounting standard (Note 1) | — | — | — | — | i 178 | — | i 178 | — | i 178 | |||||||||||||||||
Net
income | — | — | — | — | i 1,421 | — | i 1,421 | i 6 | i 1,427 | |||||||||||||||||
Other
comprehensive income | — | — | — | — | — | i 331 | i 331 | — | i 331 | |||||||||||||||||
Stock
option activity, stock awards and other | i 2 | — | i 175 | — | — | — | i 175 | — | i 175 | |||||||||||||||||
Purchase
of treasury shares, net of ESPP issuances | — | i 1 | — | i 7 | — | — | i 7 | — | i 7 | |||||||||||||||||
Common
stock dividends | — | — | — | — | ( i 651 | ) | — | ( i 651 | ) | — | ( i 651 | ) | ||||||||||||||
Other
decreases in noncontrolling interests | — | — | — | — | — | — | — | ( i 4 | ) | ( i 4 | ) | |||||||||||||||
Balance
at March 31, 2019 | i 1,722 | ( i 424 | ) | i 45,615 | ( i 28,221 | ) | i 41,859 | i 433 | i 59,686 | i 320 | i 60,006 | |||||||||||||||
Net
income (loss) | — | — | — | — | i 1,936 | — | i 1,936 | ( i 5 | ) | i 1,931 | ||||||||||||||||
Other
comprehensive income | — | — | — | — | — | i 251 | i 251 | — | i 251 | |||||||||||||||||
Stock
option activity, stock awards and other | i 2 | — | i 104 | — | — | — | i 104 | — | i 104 | |||||||||||||||||
Purchase
of treasury shares, net of ESPP issuances | — | ( i 1 | ) | — | ( i 36 | ) | — | — | ( i 36 | ) | — | ( i 36 | ) | |||||||||||||
Common
stock dividends | — | — | — | — | ( i 659 | ) | — | ( i 659 | ) | — | ( i 659 | ) | ||||||||||||||
Other
increases in noncontrolling interests | — | — | — | — | — | — | — | i 2 | i 2 | |||||||||||||||||
Balance
at June 30, 2019 | i 1,724 | ( i 425 | ) | i 45,719 | ( i 28,257 | ) | i 43,136 | i 684 | i 61,282 | i 317 | i 61,599 | |||||||||||||||
Net
income (loss) | — | — | — | — | i 1,530 | — | i 1,530 | ( i 1 | ) | i 1,529 | ||||||||||||||||
Other
comprehensive income (Note 9) | — | — | — | — | — | i 266 | i 266 | — | i 266 | |||||||||||||||||
Stock
option activity, stock awards and other | i 1 | — | i 135 | — | — | — | i 135 | — | i 135 | |||||||||||||||||
Purchase
of treasury shares, net of ESPP issuances | — | i 1 | — | i 50 | — | — | i 50 | — | i 50 | |||||||||||||||||
Common
stock dividends | — | — | — | — | ( i 649 | ) | — | ( i 649 | ) | — | ( i 649 | ) | ||||||||||||||
Other
increases in noncontrolling interests | — | — | — | — | — | — | — | i 3 | i 3 | |||||||||||||||||
Balance
at September 30, 2019 | i 1,725 | ( i 424 | ) | $ | i 45,854 | $ | ( i 28,207 | ) | $ | i 44,017 | $ | i 950 | $ | i 62,614 | $ | i 319 | $ | i 62,933 |
(1) | Treasury
shares includes i 1 million shares held in trust and treasury stock includes $ i 29 million related to
shares held in trust as of September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018. |
(2) | Common stock and capital surplus includes the par value of common stock of $ i 17
million as of September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018. |
Attributable
to CVS Health | ||||||||||||||||||||||||||
Number of shares outstanding | Common | Accumulated | Total | |||||||||||||||||||||||
Stock
and | Other | CVS Health | Total | |||||||||||||||||||||||
Common | Treasury | Capital | Treasury | Retained | Comprehensive | Shareholders’
| Noncontrolling | Shareholders’ | ||||||||||||||||||
In millions | Shares | Shares (1) | Surplus (2) | Stock (1) | Earnings | Income (Loss) | Equity | Interests
| Equity | |||||||||||||||||
Balance at December 31, 2017 | i 1,712 | ( i 698 | ) | $ | i 32,096 | $ | ( i 37,796 | ) | $ | i 43,556 | $ | ( i 165 | ) | $ | i 37,691 | $ | i 4 | $ | i 37,695 | |||||||
Adoption
of new accounting standards (3) | — | — | — | — | ( i 6 | ) | ( i 7 | ) | ( i 13 | ) | — | ( i 13 | ) | |||||||||||||
Net
income | — | — | — | — | i 998 | — | i 998 | — | i 998 | |||||||||||||||||
Other
comprehensive income | — | — | — | — | — | i 344 | i 344 | — | i 344 | |||||||||||||||||
Stock
option activity, stock awards and other | i 2 | — | i 112 | — | — | — | i 112 | — | i 112 | |||||||||||||||||
Purchase
of treasury shares, net of ESPP issuances | — | — | — | i 49 | — | — | i 49 | — | i 49 | |||||||||||||||||
Common
stock dividends | — | — | — | — | ( i 508 | ) | — | ( i 508 | ) | — | ( i 508 | ) | ||||||||||||||
Balance
at March 31, 2018 | i 1,714 | ( i 698 | ) | i 32,208 | ( i 37,747 | ) | i 44,040 | i 172 | i 38,673 | i 4 | i 38,677 | |||||||||||||||
Net
loss | — | — | — | — | ( i 2,563 | ) | — | ( i 2,563 | ) | — | ( i 2,563 | ) | ||||||||||||||
Other
comprehensive loss | — | — | — | — | — | ( i 31 | ) | ( i 31 | ) | — | ( i 31 | ) | ||||||||||||||
Stock
option activity, stock awards and other | i 2 | — | i 73 | — | — | — | i 73 | — | i 73 | |||||||||||||||||
Purchase
of treasury shares, net of ESPP issuances | — | ( i 1 | ) | — | ( i 33 | ) | — | — | ( i 33 | ) | — | ( i 33 | ) | |||||||||||||
Common
stock dividends | — | — | — | — | ( i 512 | ) | — | ( i 512 | ) | — | ( i 512 | ) | ||||||||||||||
Balance
at June 30, 2018 | i 1,716 | ( i 699 | ) | i 32,281 | ( i 37,780 | ) | i 40,965 | i 141 | i 35,607 | i 4 | i 35,611 | |||||||||||||||
Net
income | — | — | — | — | i 1,390 | — | i 1,390 | — | i 1,390 | |||||||||||||||||
Other
comprehensive loss (Note 9) | — | — | — | — | — | ( i 12 | ) | ( i 12 | ) | — | ( i 12 | ) | ||||||||||||||
Stock
option activity, stock awards and other | i 1 | — | i 96 | — | — | — | i 96 | — | i 96 | |||||||||||||||||
Purchase
of treasury shares, net of ESPP issuances | — | i 1 | — | i 49 | — | — | i 49 | — | i 49 | |||||||||||||||||
Common
stock dividends | — | — | — | — | ( i 512 | ) | — | ( i 512 | ) | — | ( i 512 | ) | ||||||||||||||
Balance
at September 30, 2018 | i 1,717 | ( i 698 | ) | $ | i 32,377 | $ | ( i 37,731 | ) | $ | i 41,843 | $ | i 129 | $ | i 36,618 | $ | i 4 | $ | i 36,622 |
(1) | Treasury
shares include i 1 million shares held in trust as of September 30, 2018, June 30, 2018, March 31, 2018 and December 31, 2017. Treasury stock includes $ i 29
million related to shares held in trust as of September 30, 2018 and $ i 31 million related to shares held in trust as of June 30, 2018, March 31, 2018 and December 31, 2017. |
(2) | Common
stock and capital surplus includes the par value of common stock of $ i 17 million as of September 30, 2018, June 30, 2018, March 31, 2018 and December 31, 2017. |
(3) | Reflects
the adoption of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which resulted in a reduction to retained earnings of $ i 13 million and the adoption of ASU 2018-02, Income
Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which resulted in a reduction to accumulated other comprehensive income of $ i 7 million and an increase to retained earnings of $ i 7
million, each during the three months ended March 31, 2018. |
1. | i Significant
Accounting Policies |
• | Management and administrative expenses to support the overall operations of the Company, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments and acquisition-related transaction and integration costs; and |
• | Products
for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products. |
In millions | |||||||
Cash
and cash equivalents | $ | i 5,193 | $ | i 4,059 | |||
Restricted
cash (included in other current assets) | i 6 | i 6 | |||||
Restricted
cash (included in other assets) | i 270 | i 230 | |||||
Total
cash, cash equivalents and restricted cash in the statements of cash flows | $ | i 5,469 | $ | i 4,295 |
In millions | |||||||
Trade receivables | $ | i 6,413 | $ | i 6,497 | |||
Vendor
and manufacturer receivables | i 9,029 | i 7,315 | |||||
Premium
receivables | i 2,340 | i 2,259 | |||||
Other
receivables | i 2,007 | i 1,560 | |||||
Total
accounts receivable, net | $ | i 19,789 | $ | i 17,631 |
• | Revenues generated from prescription drugs sold by mail service dispensing pharmacies are recognized when the prescription drug is delivered to the client plan member. At the time of delivery, the Company has performed substantially |
• | Revenues generated from prescription drugs sold by third-party pharmacies in the Company’s retail pharmacy network and associated administrative fees are recognized at the Company’s point-of-sale, which is when the claim is adjudicated by the Company’s online claims processing system and the Company has transferred control of the prescription drug and performed all
of its performance obligations. |
• | ASC fees are received in exchange for performing certain claim processing and member services for ASC members. ASC fee revenue is recognized over the period the service is provided. Some of the
Company’s administrative services contracts include guarantees with respect to certain functions, such as customer service response time, claim processing accuracy and claim processing turnaround time, as well as certain guarantees that a plan sponsor’s benefit claim experience will fall within a certain range. With any of these guarantees, the Company is financially at risk if the conditions of the arrangements are not met, although the maximum amount at risk is typically limited to a percentage of the fees otherwise payable to the Company by the customer involved. Each period the Company estimates its obligations under the terms
of these guarantees and records its estimate as an offset to services revenues. |
• | Workers’ compensation administrative services consist of fee-based managed care services. Workers’ compensation administrative services revenue is recognized once the service is provided. |
In
millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Three
Months Ended September 30, 2019 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | i 35,872 | $ | i 16,687 | $ | i — | $ | i — | $ | ( i 10,007 | ) | $ | i 42,552 | ||||||||||
Front
Store | i — | i 4,614 | i — | i — | i — | i 4,614 | |||||||||||||||||
Premiums | i — | i — | i 15,507 | i 32 | i — | i 15,539 | |||||||||||||||||
Net
investment income | i — | i — | i 146 | i 117 | i — | i 263 | |||||||||||||||||
Other | i 146 | i 165 | i 1,528 | i 3 | i — | i 1,842 | |||||||||||||||||
Total | $ | i 36,018 | $ | i 21,466 | $ | i 17,181 | $ | i 152 | $ | ( i 10,007 | ) | $ | i 64,810 | ||||||||||
Pharmacy
Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | i 22,469 | |||||||||||||||||||||
Mail
choice (2) | i 13,403 | ||||||||||||||||||||||
Other | i 146 | ||||||||||||||||||||||
Total | $ | i 36,018 | |||||||||||||||||||||
Three
Months Ended September 30, 2018 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | i 33,733 | $ | i 16,123 | $ | i — | $ | i — | $ | ( i 8,088 | ) | $ | i 41,768 | ||||||||||
Front
Store | i — | i 4,557 | i — | i — | i — | i 4,557 | |||||||||||||||||
Premiums | i — | i — | i 627 | i — | i — | i 627 | |||||||||||||||||
Net
investment income | i — | i — | i 4 | i 217 | i — | i 221 | |||||||||||||||||
Other | i 131 | i 176 | i 10 | i — | i — | i 317 | |||||||||||||||||
Total | $ | i 33,864 | $ | i 20,856 | $ | i 641 | $ | i 217 | $ | ( i 8,088 | ) | $ | i 47,490 | ||||||||||
Pharmacy
Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | i 21,921 | |||||||||||||||||||||
Mail
choice (2) | i 11,812 | ||||||||||||||||||||||
Other | i 131 | ||||||||||||||||||||||
Total | $ | i 33,864 |
(1) | Pharmacy
Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. |
(2) | Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a CVS Pharmacy retail store, as well as prescriptions filled at the
Company’s retail pharmacies under the Maintenance Choice program, which 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. |
In
millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Nine
Months Ended September 30, 2019 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | i 103,983 | $ | i 49,197 | $ | i — | $ | i — | $ | ( i 31,436 | ) | $ | i 121,744 | ||||||||||
Front
Store | i — | i 14,288 | i — | i — | i — | i 14,288 | |||||||||||||||||
Premiums | i — | i — | i 47,543 | i 69 | i — | i 47,612 | |||||||||||||||||
Net
investment income | i — | i — | i 458 | i 347 | i — | i 805 | |||||||||||||||||
Other | i 435 | i 543 | i 4,453 | i 7 | i — | i 5,438 | |||||||||||||||||
Total | $ | i 104,418 | $ | i 64,028 | $ | i 52,454 | $ | i 423 | $ | ( i 31,436 | ) | $ | i 189,887 | ||||||||||
Pharmacy
Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | i 66,071 | |||||||||||||||||||||
Mail
choice (2) | i 37,912 | ||||||||||||||||||||||
Other | i 435 | ||||||||||||||||||||||
Total | $ | i 104,418 | |||||||||||||||||||||
Nine
Months Ended September 30, 2018 | |||||||||||||||||||||||
Major goods/services lines: | |||||||||||||||||||||||
Pharmacy | $ | i 99,432 | $ | i 47,428 | $ | i — | $ | i — | $ | ( i 24,840 | ) | $ | i 122,020 | ||||||||||
Front
Store | i — | i 13,990 | i — | i — | i — | i 13,990 | |||||||||||||||||
Premiums | i — | i — | i 2,684 | i — | i — | i 2,684 | |||||||||||||||||
Net
investment income | i — | i — | i 10 | i 475 | i — | i 485 | |||||||||||||||||
Other | i 405 | i 542 | i 29 | i — | i — | i 976 | |||||||||||||||||
Total | $ | i 99,837 | $ | i 61,960 | $ | i 2,723 | $ | i 475 | $ | ( i 24,840 | ) | $ | i 140,155 | ||||||||||
Pharmacy
Services distribution channel: | |||||||||||||||||||||||
Pharmacy network (1) | $ | i 64,625 | |||||||||||||||||||||
Mail
choice (2) | i 34,807 | ||||||||||||||||||||||
Other | i 405 | ||||||||||||||||||||||
Total | $ | i 99,837 |
(1) | Pharmacy
Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice® activity, which is included within the mail choice category. |
(2) | Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a CVS Pharmacy retail store, as well as prescriptions filled at the
Company’s retail pharmacies under the Maintenance Choice program, which 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. |
In millions | |||||||
Trade receivables (included in accounts receivable, net) | $ | i 6,413 | $ | i 6,497 | |||
Contract
liabilities (included in accrued expenses) | i 72 | i 67 |
In millions | |||
Balance
at December 31, 2018 | $ | i 67 | |
Loyalty program earnings and gift card issuances | i 269 | ||
Redemption
and breakage | ( i 264 | ) | |
Balance at September 30, 2019 | $ | i 72 |
Impact
of Change in Accounting Policy | ||||||||||||
In millions | As Reported December 31, 2018 | Adjustments | As Adjusted January 1, 2019 | |||||||||
Condensed Consolidated Balance Sheets: | ||||||||||||
Other
current assets | $ | i 4,581 | $ | ( i 48 | ) | $ | i 4,533 | |||||
Total
current assets | i 45,243 | ( i 48 | ) | i 45,195 | ||||||||
Property
and equipment, net | i 11,349 | i 11 | i 11,360 | |||||||||
Operating
lease right-of-use assets | i — | i 20,987 | i 20,987 | |||||||||
Intangible
assets, net | i 36,524 | ( i 217 | ) | i 36,307 | ||||||||
Other
assets | i 5,046 | ( i 521 | ) | i 4,525 | ||||||||
Total
assets | i 196,456 | i 20,212 | i 216,668 | |||||||||
Accrued
expenses | i 10,711 | ( i 52 | ) | i 10,659 | ||||||||
Current
portion of operating lease liabilities | i — | i 1,803 | i 1,803 | |||||||||
Current
portion of long-term debt | i 1,265 | i 2 | i 1,267 | |||||||||
Total
current liabilities | i 44,009 | i 1,753 | i 45,762 | |||||||||
Long-term
operating lease liabilities | i — | i 18,832 | i 18,832 | |||||||||
Long-term
debt | i 71,444 | ( i 96 | ) | i 71,348 | ||||||||
Deferred
income taxes | i 7,677 | i 63 | i 7,740 | |||||||||
Other
long-term liabilities | i 2,780 | ( i 518 | ) | i 2,262 | ||||||||
Total
liabilities | i 137,913 | i 20,034 | i 157,947 | |||||||||
Retained
earnings | i 40,911 | i 178 | i 41,089 | |||||||||
Total
CVS Health shareholders’ equity | i 58,225 | i 178 | i 58,403 | |||||||||
Total
shareholders’ equity | i 58,543 | i 178 | i 58,721 |
2. | i Acquisition
and Divestiture |
In
millions | |||
Cash and cash equivalents | $ | i 6,565 | |
Accounts
receivable | i 4,094 | ||
Other current assets | i 3,894 | ||
Investments
(current and long-term) | i 17,984 | ||
Goodwill | i 47,554 | ||
Intangible
assets | i 22,571 | ||
Other long-term assets | i 8,249 | ||
Total
assets acquired | i 110,911 | ||
Health care costs payable | i 5,302 | ||
Other
current liabilities | i 10,069 | ||
Debt (current and long-term) | i 8,098 | ||
Deferred
income taxes | i 4,278 | ||
Other long-term liabilities | i 13,078 | ||
Total
liabilities assumed | i 40,825 | ||
Noncontrolling interests | i 320 | ||
Total
consideration transferred | $ | i 69,766 |
In
millions, except per share amounts | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | |||||
Total revenues | $ | i 60,865 | $ | i 180,164 | |||
Income
from continuing operations attributable to CVS Health | i 1,864 | i 1,731 | |||||
Basic
earnings per share from continuing operations attributable to CVS Health | $ | i 1.44 | $ | i 1.34 | |||
Diluted
earnings per share from continuing operations attributable to CVS Health | $ | i 1.43 | $ | i 1.33 |
• | Elimination of intercompany transactions between CVS Health and Aetna; |
• | Elimination
of estimated foregone interest income associated with (i) cash assumed to have been used to partially fund the Aetna Acquisition and (ii) adjusting the amortized cost of Aetna’s investment portfolio to fair value as of the completion of the Aetna Acquisition; |
• | Elimination of historical intangible asset, deferred acquisition cost and capitalized software amortization expense and addition of amortization expense based on the current preliminary values of identified intangible assets; |
• | Additional interest expense from (i)
the long-term debt issued to partially fund the Aetna Acquisition and (ii) the amortization of the fair value adjustment to assumed long-term debt. |
• | Additional depreciation expense related to the adjustment of Aetna’s property and equipment to fair value; |
• | Adjustments to align CVS Health’s and Aetna’s accounting policies; |
• | Elimination
of transaction related costs; and |
• | Tax effects of the adjustments noted above. |
3. | i Investments |
In millions | Current | Long-term | Total | Current | Long-term | Total | |||||||||||||||||
Debt
securities available for sale | $ | i 2,175 | $ | i 14,583 | $ | i 16,758 | $ | i 2,359 | $ | i 12,896 | $ | i 15,255 | |||||||||||
Mortgage
loans | i 159 | i 1,131 | i 1,290 | i 145 | i 1,216 | i 1,361 | |||||||||||||||||
Other
investments | i — | i 1,628 | i 1,628 | i 18 | i 1,620 | i 1,638 | |||||||||||||||||
Total
investments | $ | i 2,334 | $ | i 17,342 | $ | i 19,676 | $ | i 2,522 | $ | i 15,732 | $ | i 18,254 |
In
millions | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
Debt
securities: | |||||||||||||||
U.S. government securities | $ | i 1,743 | $ | i 83 | $ | i — | $ | i 1,826 | |||||||
States,
municipalities and political subdivisions | i 2,240 | i 114 | ( i 1 | ) | i 2,353 | ||||||||||
U.S.
corporate securities | i 7,076 | i 568 | ( i 7 | ) | i 7,637 | ||||||||||
Foreign
securities | i 2,095 | i 194 | i — | i 2,289 | |||||||||||
Residential
mortgage-backed securities | i 529 | i 25 | i — | i 554 | |||||||||||
Commercial
mortgage-backed securities | i 645 | i 56 | i — | i 701 | |||||||||||
Other
asset-backed securities | i 1,348 | i 15 | ( i 5 | ) | i 1,358 | ||||||||||
Redeemable
preferred securities | i 32 | i 8 | i — | i 40 | |||||||||||
Total
debt securities (1) | $ | i 15,708 | $ | i 1,063 | $ | ( i 13 | ) | $ | i 16,758 | ||||||
Debt securities: | |||||||||||||||
U.S.
government securities | $ | i 1,662 | $ | i 26 | $ | i — | $ | i 1,688 | |||||||
States,
municipalities and political subdivisions | i 2,370 | i 30 | ( i 1 | ) | i 2,399 | ||||||||||
U.S.
corporate securities | i 6,444 | i 61 | ( i 16 | ) | i 6,489 | ||||||||||
Foreign
securities | i 2,355 | i 31 | ( i 3 | ) | i 2,383 | ||||||||||
Residential
mortgage-backed securities | i 567 | i 10 | i — | i 577 | |||||||||||
Commercial
mortgage-backed securities | i 594 | i 11 | i — | i 605 | |||||||||||
Other
asset-backed securities | i 1,097 | i 3 | ( i 15 | ) | i 1,085 | ||||||||||
Redeemable
preferred securities | i 30 | i — | ( i 1 | ) | i 29 | ||||||||||
Total
debt securities (1) | $ | i 15,119 | $ | i 172 | $ | ( i 36 | ) | $ | i 15,255 |
(1) | Investment
risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At September 30, 2019, debt securities with a fair value of $ i 973 million,
gross unrealized capital gains of $ i 85 million and no gross unrealized capital losses and at December 31, 2018, debt securities with a fair value of $ i 916
million, gross unrealized capital gains of $ i 12 million and gross unrealized capital losses of $ i 2
million were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive income. |
In millions | Amortized Cost | Fair Value | |||||
Due
to mature: | |||||||
Less than one year | $ | i 1,017 | $ | i 1,022 | |||
One
year through five years | i 5,378 | i 5,568 | |||||
After
five years through ten years | i 3,098 | i 3,316 | |||||
Greater
than ten years | i 3,693 | i 4,239 | |||||
Residential
mortgage-backed securities | i 529 | i 554 | |||||
Commercial
mortgage-backed securities | i 645 | i 701 | |||||
Other
asset-backed securities | i 1,348 | i 1,358 | |||||
Total | $ | i 15,708 | $ | i 16,758 |
In
millions, except number of securities | Number of Securities | Fair Value | Unrealized Losses | |||||||
Debt
securities: | ||||||||||
U.S. government securities | i 8 | $ | i 41 | $ | i — | |||||
States,
municipalities and political subdivisions | i 38 | i 53 | i 1 | |||||||
U.S.
corporate securities | i 217 | i 254 | i 7 | |||||||
Foreign
securities | i 27 | i 39 | i — | |||||||
Residential
mortgage-backed securities | i 31 | i 17 | i — | |||||||
Other
asset-backed securities | i 327 | i 386 | i 5 | |||||||
Total
debt securities | i 648 | $ | i 790 | $ | i 13 | |||||
Debt securities: | ||||||||||
U.S.
government securities | i 8 | $ | i 26 | $ | i — | |||||
States,
municipalities and political subdivisions | i 54 | i 86 | i 1 | |||||||
U.S.
corporate securities | i 1,399 | i 1,431 | i 16 | |||||||
Foreign
securities | i 243 | i 314 | i 3 | |||||||
Residential
mortgage-backed securities | i 45 | i 1 | i — | |||||||
Other
asset-backed securities | i 516 | i 528 | i 15 | |||||||
Redeemable
preferred securities | i 14 | i 23 | i 1 | |||||||
Total
debt securities | i 2,279 | $ | i 2,409 | $ | i 36 |
Supporting experience-rated
products | Supporting remaining products | Total | |||||||||||||||||||||
In millions | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
Due
to mature: | |||||||||||||||||||||||
Less than one year | $ | i — | $ | i — | $ | i 3 | $ | i — | $ | i 3 | $ | i — | |||||||||||
One
year through five years | i 1 | i — | i 137 | i 2 | i 138 | i 2 | |||||||||||||||||
After
five years through ten years | i 8 | i — | i 128 | i 4 | i 136 | i 4 | |||||||||||||||||
Greater
than ten years | i 11 | i — | i 99 | i 2 | i 110 | i 2 | |||||||||||||||||
Residential
mortgage-backed securities | i — | i — | i 17 | i — | i 17 | i — | |||||||||||||||||
Other
asset-backed securities | i 10 | i — | i 376 | i 5 | i 386 | i 5 | |||||||||||||||||
Total | $ | i 30 | $ | i — | $ | i 760 | $ | i 13 | $ | i 790 | $ | i 13 |
In millions | Three Months Ended September 30, 2019 | Nine
Months Ended September 30, 2019 | |||||
New mortgage loans | $ | i 12 | $ | i 90 | |||
Mortgage
loans fully repaid | i 56 | i 127 | |||||
Mortgage
loans foreclosed | i — | i — |
• | Category 1 - Represents
loans of superior quality. |
• | Categories 2 to 4 - Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes. |
• | Categories 5 and 6 - Represent loans where credit risk is not substantial, but these loans warrant management’s close attention. |
• | Category
7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded. |
In millions, except credit ratings indicator | |||||||
1 | $ | i 44 | $ | i 42 | |||
2
to 4 | i 1,234 | i 1,301 | |||||
5
and 6 | i 12 | i 18 | |||||
7 | i — | i — | |||||
Total | $ | i 1,290 | $ | i 1,361 |
Three
Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Debt securities | $ | i 145 | $ | i 2 | $ | i 437 | $ | i 5 | |||||||
Mortgage
loans | i 19 | i — | i 54 | i — | |||||||||||
Other
investments | i 60 | i 219 | i 163 | i 480 | |||||||||||
Gross
investment income | i 224 | i 221 | i 654 | i 485 | |||||||||||
Investment
expenses | ( i 10 | ) | i — | ( i 28 | ) | i — | |||||||||
Net
investment income (excluding net realized capital gains or losses) | i 214 | i 221 | i 626 | i 485 | |||||||||||
Net
realized capital gains (1) | i 49 | i — | i 179 | i — | |||||||||||
Net
investment income (2) | $ | i 263 | $ | i 221 | $ | i 805 | $ | i 485 |
(1) | Other-than-temporary
impairment (“OTTI”) losses on debt securities recognized in the unaudited condensed consolidated statements of operations were $ i 9 million and $ i 22
million, respectively, for the three and nine months ended September 30, 2019. There were no OTTI losses on debt securities for the three and nine months ended September 30, 2018. |
(2) | Net investment income includes $ i 10
million and $ i 33 million for the three and nine months ended September 30, 2019, respectively, related to investments supporting experience-rated products. The Company had no investments supporting experience-rated products during the
three and nine months ended September 30, 2018. |
In millions | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||
Proceeds
from sales | $ | i 1,325 | $ | i 4,087 | |||
Gross
realized capital gains | i 55 | i 127 | |||||
Gross
realized capital losses | i 9 | i 13 |
4. | i Fair
Value |
• | Level
1 – Unadjusted quoted prices for identical assets or liabilities in active markets. |
• | Level 2 – Valuation inputs other than Level 1 that are based on observable market data. These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets. |
• | Level 3 – Developed from unobservable data,
reflecting the Company’s assumptions. |
In millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Debt securities: | |||||||||||||||
U.S.
government securities | $ | i 1,746 | $ | i 80 | $ | i — | $ | i 1,826 | |||||||
States,
municipalities and political subdivisions | i — | i 2,353 | i — | i 2,353 | |||||||||||
U.S.
corporate securities | i — | i 7,596 | i 41 | i 7,637 | |||||||||||
Foreign
securities | i — | i 2,284 | i 5 | i 2,289 | |||||||||||
Residential
mortgage-backed securities | i — | i 554 | i — | i 554 | |||||||||||
Commercial
mortgage-backed securities | i — | i 701 | i — | i 701 | |||||||||||
Other
asset-backed securities | i — | i 1,358 | i — | i 1,358 | |||||||||||
Redeemable
preferred securities | i — | i 28 | i 12 | i 40 | |||||||||||
Total
debt securities | i 1,746 | i 14,954 | i 58 | i 16,758 | |||||||||||
Equity
securities | i 32 | i — | i 36 | i 68 | |||||||||||
Total | $ | i 1,778 | $ | i 14,954 | $ | i 94 | $ | i 16,826 | |||||||
Debt securities: | |||||||||||||||
U.S.
government securities | $ | i 1,597 | $ | i 91 | $ | i — | $ | i 1,688 | |||||||
States,
municipalities and political subdivisions | i — | i 2,399 | i — | i 2,399 | |||||||||||
U.S.
corporate securities | i — | i 6,422 | i 67 | i 6,489 | |||||||||||
Foreign
securities | i — | i 2,380 | i 3 | i 2,383 | |||||||||||
Residential
mortgage-backed securities | i — | i 577 | i — | i 577 | |||||||||||
Commercial
mortgage-backed securities | i — | i 605 | i — | i 605 | |||||||||||
Other
asset-backed securities | i — | i 1,085 | i — | i 1,085 | |||||||||||
Redeemable
preferred securities | i — | i 22 | i 7 | i 29 | |||||||||||
Total
debt securities | i 1,597 | i 13,581 | i 77 | i 15,255 | |||||||||||
Equity
securities | i 19 | i — | i 54 | i 73 | |||||||||||
Total | $ | i 1,616 | $ | i 13,581 | $ | i 131 | $ | i 15,328 |
Carrying Value | Estimated
Fair Value | ||||||||||||||||||
In millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
Assets: | |||||||||||||||||||
Mortgage
loans | $ | i 1,290 | $ | i — | $ | i — | $ | i 1,317 | $ | i 1,317 | |||||||||
Equity
securities (1) | i 142 | N/A | N/A | N/A | N/A | ||||||||||||||
Liabilities: | |||||||||||||||||||
Investment
contract liabilities: | |||||||||||||||||||
With a fixed maturity | i 5 | i — | i — | i 5 | i 5 | ||||||||||||||
Without
a fixed maturity | i 372 | i — | i — | i 385 | i 385 | ||||||||||||||
Long-term
debt | i 67,984 | i 72,823 | i — | i — | i 72,823 | ||||||||||||||
Assets: | |||||||||||||||||||
Mortgage
loans | $ | i 1,361 | $ | i — | $ | i — | $ | i 1,366 | $ | i 1,366 | |||||||||
Equity
securities (1) | i 140 | N/A | N/A | N/A | N/A | ||||||||||||||
Liabilities: | |||||||||||||||||||
Investment
contract liabilities: | |||||||||||||||||||
With a fixed maturity | i 5 | i — | i — | i 5 | i 5 | ||||||||||||||
Without
a fixed maturity | i 382 | i — | i — | i 357 | i 357 | ||||||||||||||
Long-term
debt | i 72,709 | i 71,252 | i — | i — | i 71,252 |
(1) | It
was not practical to estimate the fair value of these cost-method investments as it represents shares of unlisted companies. |
In millions | Level 1 | Level 2 | Level 3 | Total | Level
1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Debt securities | $ | i 1,207 | $ | i 2,609 | $ | i — | $ | i 3,816 | $ | i 782 | $ | i 2,500 | $ | i 4 | $ | i 3,286 | ||||||||||||||||
Equity
securities | i — | i 2 | i — | i 2 | i — | i 3 | i — | i 3 | ||||||||||||||||||||||||
Common/collective
trusts | i — | i 513 | i — | i 513 | i — | i 404 | i — | i 404 | ||||||||||||||||||||||||
Total
(1) | $ | i 1,207 | $ | i 3,124 | $ | i — | $ | i 4,331 | $ | i 782 | $ | i 2,907 | $ | i 4 | $ | i 3,693 |
(1) | Excludes
$ i 259 million and $ i 191 million
of cash and cash equivalents and accounts receivable at September 30, 2019 and December 31, 2018, respectively. |
5. | i i Leases / |
In millions | Three Months Ended September 30, 2019 | Nine
Months Ended September 30, 2019 | |||||
Operating lease cost | $ | i 681 | $ | i 2,044 | |||
Finance
lease cost: | |||||||
Amortization of right-of-use assets | i 9 | i 27 | |||||
Interest
on lease liabilities | i 11 | i 32 | |||||
Total
finance lease costs | i 20 | i 59 | |||||
Short-term
lease costs | i 5 | i 17 | |||||
Variable
lease costs | i 148 | i 434 | |||||
Less:
sublease income | i 13 | i 35 | |||||
Net
lease cost | $ | i 841 | $ | i 2,519 |
In millions | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows paid for operating leases | $ | i 2,023 | |
Operating
cash flows paid for interest portion of finance leases | i 32 | ||
Financing cash flows paid for principal portion of finance leases | i 19 | ||
Right-of-use
assets obtained in exchange for lease obligations: | |||
Operating leases | i 1,203 | ||
Finance leases | i 82 |
In millions, except lease term and discount rate | |||
Operating
leases: | |||
Operating lease right-of-use assets | $ | i 20,757 | |
Current
portion of operating lease liabilities | $ | i 1,798 | |
Long-term operating lease liabilities | i 18,826 | ||
Total
operating lease liabilities | $ | i 20,624 | |
Finance leases: (1) | |||
Property
and equipment, net | $ | i 560 | |
Current portion of long-term debt | $ | i 27 | |
Long-term
debt | i 591 | ||
Total finance lease liabilities | $ | i 618 | |
Weighted
average remaining lease term | |||
Operating leases | i 13.8 | ||
Finance leases | i 20.6 | ||
Weighted
average discount rate | |||
Operating leases | i 4.6 | % | |
Finance leases | i 7.3 | % |
(1) | Finance
lease right-of-use assets are included within property and equipment, net and the respective finance lease liabilities are included in current portion of long-term debt and long-term debt on the unaudited condensed consolidated balance sheets. |
In millions | Finance Leases | Operating Leases (1) | Total | ||||||||
2019
(remaining three months) | $ | i 18 | $ | i 679 | $ | i 697 | |||||
2020 | i 70 | i 2,688 | i 2,758 | ||||||||
2021 | i 68 | i 2,567 | i 2,635 | ||||||||
2022 | i 64 | i 2,408 | i 2,472 | ||||||||
2023 | i 62 | i 2,297 | i 2,359 | ||||||||
Thereafter | i 883 | i 17,165 | i 18,048 | ||||||||
Total
lease payments (2) | i 1,165 | i 27,804 | i 28,969 | ||||||||
Less:
imputed interest | ( i 547 | ) | ( i 7,180 | ) | ( i 7,727 | ) | |||||
Total
lease liabilities | $ | i 618 | $ | i 20,624 | $ | i 21,242 |
(1) | Future
operating lease payments have not been reduced by minimum sublease rentals of $ i 320 million due in the future under noncancelable subleases. |
(2) | The
Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $ i 2.3 billion are not reflected in this table since the estimated economic life of the buildings is shorter than the contractual term of the pharmacy lease arrangement. |
6. | i Health
Care Costs Payable |
In millions | |||
Health care costs payable, beginning of the period | $ | i 6,147 | |
Less:
Reinsurance recoverables | i 4 | ||
Health care costs payable, beginning of the period, net | i 6,143 | ||
Add:
Components of incurred health care costs | |||
Current year | i 39,657 | ||
Prior
years | ( i 511 | ) | |
Total incurred health care costs (1) | i 39,146 | ||
Less:
Claims paid | |||
Current year | i 33,032 | ||
Prior years | i 5,253 | ||
Total
claims paid | i 38,285 | ||
Add: Premium deficiency reserve | i 6 | ||
Health
care costs payable, end of period, net | i 7,010 | ||
Add: Reinsurance recoverables | i 4 | ||
Health
care costs payable, end of period | $ | i 7,014 |
(1) | Total
incurred health care costs during the nine months ended September 30, 2019 in the table above exclude (i) $ i 6 million related to a premium deficiency reserve for the 2019 coverage year related to the Company’s Medicaid products, (ii) $ i 31
million of benefit costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the unaudited condensed consolidated balance sheet and (iii) $ i 213 million of benefit costs recorded in the Corporate/Other segment
that are included in other insurance liabilities on the unaudited condensed consolidated balance sheet. |
7. | i Borrowings |
In millions | |||||||
Short-term debt | |||||||
Commercial paper | $ | i 1,070 | $ | i 720 | |||
Long-term
debt | |||||||
2.2% senior notes due March 2019 | i — | i 375 | |||||
2.25%
senior notes due August 2019 | i — | i 850 | |||||
3.125%
senior notes due March 2020 | i 723 | i 2,000 | |||||
Floating
rate notes due March 2020 | i 277 | i 1,000 | |||||
2.8%
senior notes due July 2020 | i 2,750 | i 2,750 | |||||
3.35%
senior notes due March 2021 | i 2,038 | i 3,000 | |||||
Floating
rate notes due March 2021 | i 1,000 | i 1,000 | |||||
4.125%
senior notes due May 2021 | i 222 | i 550 | |||||
2.125%
senior notes due June 2021 | i 1,750 | i 1,750 | |||||
4.125%
senior notes due June 2021 | i 203 | i 500 | |||||
5.45%
senior notes due June 2021 | i 187 | i 600 | |||||
3-year
tranche term loan due November 2021 | i — | i 3,000 | |||||
3.5%
senior notes due July 2022 | i 1,500 | i 1,500 | |||||
2.75%
senior notes due November 2022 | i 1,000 | i 1,000 | |||||
2.75%
senior notes due December 2022 | i 1,250 | i 1,250 | |||||
4.75%
senior notes due December 2022 | i 399 | i 399 | |||||
3.7%
senior notes due March 2023 | i 6,000 | i 6,000 | |||||
2.8%
senior notes due June 2023 | i 1,300 | i 1,300 | |||||
4%
senior notes due December 2023 | i 1,250 | i 1,250 | |||||
2.625%
senior notes due August 2024 | i 1,000 | i — | |||||
3.375%
senior notes due August 2024 | i 650 | i 650 | |||||
3.5%
senior notes due November 2024 | i 750 | i 750 | |||||
5%
senior notes due December 2024 | i 299 | i 299 | |||||
4.1%
senior notes due March 2025 | i 5,000 | i 5,000 | |||||
3.875%
senior notes due July 2025 | i 2,828 | i 2,828 | |||||
2.875%
senior notes due June 2026 | i 1,750 | i 1,750 | |||||
3%
senior notes due August 2026 | i 750 | i — | |||||
6.25%
senior notes due June 2027 | i 372 | i 372 | |||||
4.3%
senior notes due March 2028 | i 9,000 | i 9,000 | |||||
3.25%
senior notes due August 2029 | i 1,750 | i — | |||||
4.875%
senior notes due July 2035 | i 652 | i 652 | |||||
6.625%
senior notes due June 2036 | i 771 | i 771 | |||||
6.75%
senior notes due December 2037 | i 533 | i 533 | |||||
4.78%
senior notes due March 2038 | i 5,000 | i 5,000 | |||||
6.125%
senior notes due September 2039 | i 447 | i 447 | |||||
5.75%
senior notes due May 2041 | i 133 | i 133 | |||||
4.5%
senior notes due May 2042 | i 500 | i 500 | |||||
4.125%
senior notes due November 2042 | i 500 | i 500 | |||||
5.3%
senior notes due December 2043 | i 750 | i 750 | |||||
4.75%
senior notes due March 2044 | i 375 | i 375 | |||||
5.125%
senior notes due July 2045 | i 3,500 | i 3,500 | |||||
3.875%
senior notes due August 2047 | i 1,000 | i 1,000 | |||||
5.05%
senior notes due March 2048 | i 8,000 | i 8,000 | |||||
Finance
lease obligations | i 618 | i 642 | |||||
Other | i 1 | i 19 | |||||
Total
debt principal | i 69,848 | i 74,265 | |||||
Debt
premiums | i 267 | i 302 | |||||
Debt
discounts and deferred financing costs | ( i 1,061 | ) | ( i 1,138 | ) | |||
i 69,054 | i 73,429 | ||||||
Less: | |||||||
Short-term
debt (commercial paper) | ( i 1,070 | ) | ( i 720 | ) | |||
Current
portion of long-term debt | ( i 3,778 | ) | ( i 1,265 | ) | |||
Long-term
debt | $ | i 64,206 | $ | i 71,444 |
8. | i Shareholders’
Equity |
9. | i Other
Comprehensive Income (Loss) |
Three
Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net unrealized investment gains (losses): | |||||||||||||||
Beginning
of period balance | $ | i 682 | $ | i — | $ | i 97 | $ | i — | |||||||
Other
comprehensive income before reclassifications ($214, $0, $933 and $0 pretax) | i 192 | i — | i 799 | i — | |||||||||||
Amounts
reclassified from accumulated other comprehensive income ($(63), $0, $(93) and $0 pretax) (1) | ( i 56 | ) | i — | ( i 78 | ) | i — | |||||||||
Other
comprehensive income | i 136 | i — | i 721 | i — | |||||||||||
End
of period balance | i 818 | i — | i 818 | i — | |||||||||||
Foreign
currency translation adjustments: | |||||||||||||||
Beginning of period balance | ( i 154 | ) | ( i 155 | ) | ( i 158 | ) | ( i 129 | ) | |||||||
Other
comprehensive income (loss) before reclassifications | ( i 1 | ) | ( i 8 | ) | i 3 | ( i 34 | ) | ||||||||
Amounts
reclassified from accumulated other comprehensive loss (2) | i 154 | i — | i 154 | i — | |||||||||||
Other
comprehensive income (loss) | i 153 | ( i 8 | ) | i 157 | ( i 34 | ) | |||||||||
End
of period balance | ( i 1 | ) | ( i 163 | ) | ( i 1 | ) | ( i 163 | ) | |||||||
Net
cash flow hedges: | |||||||||||||||
Beginning of period balance | i 305 | i 321 | i 312 | ( i 15 | ) | ||||||||||
Adoption
of new accounting standard (3) | — | — | — | ( i 3 | ) | ||||||||||
Other
comprehensive income (loss) before reclassifications ($(25), $0, $(25) and $464 pretax) | ( i 18 | ) | i — | ( i 18 | ) | i 344 | |||||||||
Amounts
reclassified from accumulated other comprehensive income (loss) ($(7), $(5), $(16) and $(12) pretax) (4) | ( i 5 | ) | ( i 4 | ) | ( i 12 | ) | ( i 9 | ) | |||||||
Other
comprehensive income (loss) | ( i 23 | ) | ( i 4 | ) | ( i 30 | ) | i 335 | ||||||||
End
of period balance | i 282 | i 317 | i 282 | i 317 | |||||||||||
Pension
and OPEB plans: | |||||||||||||||
Beginning of period balance | ( i 149 | ) | ( i 25 | ) | ( i 149 | ) | ( i 21 | ) | |||||||
Adoption
of new accounting standard (3) | — | — | — | ( i 4 | ) | ||||||||||
End
of period balance | ( i 149 | ) | ( i 25 | ) | ( i 149 | ) | ( i 25 | ) | |||||||
Total
beginning of period accumulated other comprehensive income (loss) | i 684 | i 141 | i 102 | ( i 165 | ) | ||||||||||
Adoption
of new accounting standard (3) | — | — | — | ( i 7 | ) | ||||||||||
Total
other comprehensive income (loss) | i 266 | ( i 12 | ) | i 848 | i 301 | ||||||||||
Total
end of period accumulated other comprehensive income | $ | i 950 | $ | i 129 | $ | i 950 | $ | i 129 |
(1) | Amounts
reclassified from accumulated other comprehensive income for specifically identified debt securities are included in net investment income in the unaudited condensed consolidated statements of operations. |
(2) | Amounts reclassified from accumulated other comprehensive loss represent the elimination of the cumulative translation adjustment associated with the sale of Onofre, which was sold on July 1, 2019. The loss on the divestiture of Onofre is reflected in operating expenses in the unaudited condensed consolidated statements of operations. |
(3) | Reflects
the adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income during the nine months ended September 30, 2018. |
(4) | Amounts reclassified from accumulated other comprehensive income (loss) for specifically identified cash flow hedges are included in interest expense in the unaudited condensed consolidated statements of operations. The
Company expects to reclassify approximately $ i 15 million, net of tax, in net gains associated with its cash flow hedges into net income within the next 12 months. |
10. | i Earnings
(Loss) Per Share |
Three
Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
In millions, except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Numerator for earnings (loss) per share calculation: | |||||||||||||||
Income
(loss) from continuing operations | $ | i 1,529 | $ | i 1,390 | $ | i 4,887 | $ | ( i 174 | ) | ||||||
Income
from continuing operations allocated to participating securities | i — | ( i 1 | ) | ( i 3 | ) | ( i 3 | ) | ||||||||
Loss
from continuing operations attributable to noncontrolling interest | i 1 | i — | i — | i — | |||||||||||
Income
(loss) from continuing operations attributable to CVS Health | $ | i 1,530 | $ | i 1,389 | $ | i 4,884 | $ | ( i 177 | ) | ||||||
Denominator
for earnings (loss) per share calculation: | |||||||||||||||
Weighted average shares, basic | i 1,302 | i 1,020 | i 1,300 | i 1,018 | |||||||||||
Effect
of dilutive securities | i 3 | i 2 | i 3 | i — | |||||||||||
Weighted
average shares, diluted | i 1,305 | i 1,022 | i 1,303 | i 1,018 | |||||||||||
Earnings
(loss) per share from continuing operations: | |||||||||||||||
Basic | $ | i 1.17 | $ | i 1.36 | $ | i 3.76 | $ | ( i 0.17 | ) | ||||||
Diluted | $ | i 1.17 | $ | i 1.36 | $ | i 3.75 | $ | ( i 0.17 | ) |
11. | i Reinsurance |
12. | i Commitments
and Contingencies |
13. | i Segment
Reporting |
Three
Months Ended September 30, 2018 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Revenues,
as previously reported | $ | i 33,767 | $ | i 20,856 | $ | i — | $ | i 217 | $ | ( i 7,350 | ) | $ | i 47,490 | ||||||||||
Adjustments | i 97 | i — | i 641 | i — | ( i 738 | ) | i — | ||||||||||||||||
Revenues,
as adjusted | $ | i 33,864 | $ | i 20,856 | $ | i 641 | $ | i 217 | $ | ( i 8,088 | ) | $ | i 47,490 | ||||||||||
Cost
of products sold (1) | $ | i 31,587 | $ | i 15,042 | $ | i — | $ | i — | $ | ( i 7,127 | ) | $ | i 39,502 | ||||||||||
Adjustments | i 651 | i — | i — | i — | ( i 651 | ) | i — | ||||||||||||||||
Cost
of products sold, as adjusted | $ | i 32,238 | $ | i 15,042 | $ | i — | $ | i — | $ | ( i 7,778 | ) | $ | i 39,502 | ||||||||||
Benefit
costs (1) | $ | i 439 | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 439 | |||||||||||
Adjustments | ( i 439 | ) | i — | i 439 | i — | i — | i — | ||||||||||||||||
Benefit
costs, as adjusted | $ | i — | $ | i — | $ | i 439 | $ | i — | $ | i — | $ | i 439 | |||||||||||
Operating
expenses, as previously reported | $ | i 392 | $ | i 4,323 | $ | i — | $ | i 287 | $ | ( i 27 | ) | $ | i 4,975 | ||||||||||
Adjustments | ( i 41 | ) | i — | i 128 | i — | ( i 87 | ) | i — | |||||||||||||||
Operating
expenses, as adjusted | $ | i 351 | $ | i 4,323 | $ | i 128 | $ | i 287 | $ | ( i 114 | ) | $ | i 4,975 | ||||||||||
Operating
income (loss), as previously reported | $ | i 1,349 | $ | i 1,491 | $ | i — | $ | ( i 70 | ) | $ | ( i 196 | ) | $ | i 2,574 | |||||||||
Adjustments | ( i 74 | ) | i — | i 74 | i — | i — | i — | ||||||||||||||||
Operating
income (loss), as adjusted | i 1,275 | i 1,491 | i 74 | ( i 70 | ) | ( i 196 | ) | i 2,574 | |||||||||||||||
Segment
measure adjustments | i 87 | i 131 | i 1 | ( i 143 | ) | i — | i 76 | ||||||||||||||||
Adjusted
operating income (loss) | $ | i 1,362 | $ | i 1,622 | $ | i 75 | $ | ( i 213 | ) | $ | ( i 196 | ) | $ | i 2,650 |
(1) | The
total of cost of products sold and benefit costs previously were reported as cost of revenues. |
Nine
Months Ended September 30, 2018 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Revenues,
as previously reported | $ | i 99,238 | $ | i 61,960 | $ | i — | $ | i 475 | $ | ( i 21,518 | ) | $ | i 140,155 | ||||||||||
Adjustments | i 599 | i — | i 2,723 | i — | ( i 3,322 | ) | i — | ||||||||||||||||
Revenues,
as adjusted | $ | i 99,837 | $ | i 61,960 | $ | i 2,723 | $ | i 475 | $ | ( i 24,840 | ) | $ | i 140,155 | ||||||||||
Cost
of products sold (1) | $ | i 92,459 | $ | i 44,318 | $ | i — | $ | i — | $ | ( i 20,894 | ) | $ | i 115,883 | ||||||||||
Adjustments | i 3,059 | i — | i — | i — | ( i 3,059 | ) | i — | ||||||||||||||||
Cost
of products sold, as adjusted | $ | i 95,518 | $ | i 44,318 | $ | i — | $ | i — | $ | ( i 23,953 | ) | $ | i 115,883 | ||||||||||
Benefit
costs (1) | $ | i 2,399 | $ | i — | $ | i — | $ | i — | $ | i — | $ | i 2,399 | |||||||||||
Adjustments | ( i 2,399 | ) | i — | i 2,399 | i — | i — | i — | ||||||||||||||||
Benefit
costs, as adjusted | $ | i — | $ | i — | $ | i 2,399 | $ | i — | $ | i — | $ | i 2,399 | |||||||||||
Operating
expenses, as previously reported | $ | i 1,176 | $ | i 12,831 | $ | i — | $ | i 814 | $ | ( i 66 | ) | $ | i 14,755 | ||||||||||
Adjustments | ( i 125 | ) | i — | i 388 | i — | ( i 263 | ) | i — | |||||||||||||||
Operating
expenses, as adjusted | $ | i 1,051 | $ | i 12,831 | $ | i 388 | $ | i 814 | $ | ( i 329 | ) | $ | i 14,755 | ||||||||||
Operating
income (loss), as previously reported | $ | i 3,204 | $ | i 890 | $ | i — | $ | ( i 339 | ) | $ | ( i 558 | ) | $ | i 3,197 | |||||||||
Adjustments | i 64 | i — | ( i 64 | ) | i — | i — | i — | ||||||||||||||||
Operating
income (loss), as adjusted | i 3,268 | i 890 | ( i 64 | ) | ( i 339 | ) | ( i 558 | ) | i 3,197 | ||||||||||||||
Segment
measure adjustments | i 262 | i 4,389 | i 2 | ( i 308 | ) | i — | i 4,345 | ||||||||||||||||
Adjusted
operating income (loss) | $ | i 3,530 | $ | i 5,279 | $ | ( i 62 | ) | $ | ( i 647 | ) | $ | ( i 558 | ) | $ | i 7,542 |
(1) | The
total of cost of products sold and benefit costs previously were reported as cost of revenues. |
In millions | Pharmacy Services (1) | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations (2) | Consolidated Totals | |||||||||||||||||
Three
Months Ended | |||||||||||||||||||||||
Revenues
from customers | $ | i 36,018 | $ | i 21,466 | $ | i 17,035 | $ | i 35 | $ | ( i 10,007 | ) | $ | i 64,547 | ||||||||||
Net
investment income | i — | i — | i 146 | i 117 | i — | i 263 | |||||||||||||||||
Total
revenues | i 36,018 | i 21,466 | i 17,181 | i 152 | ( i 10,007 | ) | i 64,810 | ||||||||||||||||
Adjusted
operating income (loss) | i 1,439 | i 1,516 | i 1,423 | ( i 252 | ) | ( i 179 | ) | i 3,947 | |||||||||||||||
Revenues from customers | $ | i 33,864 | $ | i 20,856 | $ | i 637 | $ | i — | $ | ( i 8,088 | ) | $ | i 47,269 | ||||||||||
Net
investment income | i — | i — | i 4 | i 217 | i — | i 221 | |||||||||||||||||
Total
revenues | i 33,864 | i 20,856 | i 641 | i 217 | ( i 8,088 | ) | i 47,490 | ||||||||||||||||
Adjusted
operating income (loss) | i 1,362 | i 1,622 | i 75 | ( i 213 | ) | ( i 196 | ) | i 2,650 | |||||||||||||||
Nine
Months Ended | |||||||||||||||||||||||
Revenues
from customers | $ | i 104,418 | $ | i 64,028 | $ | i 51,996 | $ | i 76 | $ | ( i 31,436 | ) | $ | i 189,082 | ||||||||||
Net
investment income | i — | i — | i 458 | i 347 | i — | i 805 | |||||||||||||||||
Total
revenues | i 104,418 | i 64,028 | i 52,454 | i 423 | ( i 31,436 | ) | i 189,887 | ||||||||||||||||
Adjusted
operating income (loss) | i 3,682 | i 4,674 | i 4,423 | ( i 685 | ) | ( i 521 | ) | i 11,573 | |||||||||||||||
Revenues from customers | $ | i 99,837 | $ | i 61,960 | $ | i 2,713 | $ | i — | $ | ( i 24,840 | ) | $ | i 139,670 | ||||||||||
Net
investment income | i — | i — | i 10 | i 475 | i — | i 485 | |||||||||||||||||
Total
revenues | i 99,837 | i 61,960 | i 2,723 | i 475 | ( i 24,840 | ) | i 140,155 | ||||||||||||||||
Adjusted
operating income (loss) | i 3,530 | i 5,279 | ( i 62 | ) | ( i 647 | ) | ( i 558 | ) | i 7,542 |
(1) | Total
revenues of the Pharmacy Services segment include approximately $ i 2.7 billion of retail co-payments for each of the three-month periods ended September 30, 2019 and 2018, and $ i 8.9
billion and $ i 8.8 billion of retail co-payments for the nine months ended September 30, 2019 and 2018, respectively. |
(2) | 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. |
Three Months Ended September 30, | Nine
Months Ended September 30, | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Operating income (GAAP measure) | $ | i 2,928 | $ | i 2,574 | $ | i 8,950 | $ | i 3,197 | |||||||
Amortization
of intangible assets (1) | i 607 | i 215 | i 1,822 | i 639 | |||||||||||
Acquisition-related
transaction and integration costs (2) | i 111 | i 70 | i 365 | i 152 | |||||||||||
Store
rationalization charges (3) | i 96 | i — | i 231 | i — | |||||||||||
Loss
on divestiture of subsidiary (4) | i 205 | i — | i 205 | i 86 | |||||||||||
Goodwill
impairment (5) | i — | i — | i — | i 3,921 | |||||||||||
Interest
income on financing for the Aetna Acquisition (6) | i — | ( i 209 | ) | i — | ( i 453 | ) | |||||||||
Adjusted
operating income | $ | i 3,947 | $ | i 2,650 | $ | i 11,573 | $ | i 7,542 |
(1) | 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 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. |
(2) | During
the three and nine months ended September 30, 2019 and 2018, acquisition-related transaction and integration costs relate to the Aetna Acquisition. During the nine months ended September 30, 2018, acquisition-related integration costs also relate to the acquisition of Omnicare, Inc. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses primarily within the Corporate/Other segment. |
(3) | During the
three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment. |
(4) | During
the three and nine months ended September 30, 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 unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment. During the nine months ended September 30, 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million and is reflected
in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment. |
(5) | During the nine months ended September 30, 2018, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment. |
(6) | During
the three and nine months ended September 30, 2018, the Company recorded interest income of $ i 209 million and $ i 453
million, respectively, on the proceeds of its unsecured senior notes issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment. |
• | Management
and administrative expenses to support the overall operations of the Company, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments and acquisition-related transaction and integration costs; and |
• | Products for which the Company no longer solicits or accepts new customers such as large case pensions and long-term care insurance products. |
Change | |||||||||||||||||||||||||||||
Three
Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2019 vs 2018 | Nine Months Ended September 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Products | $ | 47,149 | $ | 46,334 | $ | 136,023 | $ | 136,035 | $ | 815 | 1.8 | % | $ | (12 | ) | — | % | ||||||||||||
Premiums | 15,539 | 627 | 47,612 | 2,684 | 14,912 | 2,378.3 | % | 44,928 | 1,673.9 | % | |||||||||||||||||||
Services | 1,859 | 308 | 5,447 | 951 | 1,551 | 503.6 | % | 4,496 | 472.8 | % | |||||||||||||||||||
Net
investment income | 263 | 221 | 805 | 485 | 42 | 19.0 | % | 320 | 66.0 | % | |||||||||||||||||||
Total
revenues | 64,810 | 47,490 | 189,887 | 140,155 | 17,320 | 36.5 | % | 49,732 | 35.5 | % | |||||||||||||||||||
Operating
costs: | |||||||||||||||||||||||||||||
Cost
of products sold | 40,437 | 39,502 | 116,654 | 115,883 | 935 | 2.4 | % | 771 | 0.7 | % | |||||||||||||||||||
Benefit
costs | 12,850 | 439 | 39,396 | 2,399 | 12,411 | 2,827.1 | % | 36,997 | 1,542.2 | % | |||||||||||||||||||
Goodwill
impairment | — | — | — | 3,921 | — | — | % | (3,921 | ) | (100.0 | )% | ||||||||||||||||||
Operating
expenses | 8,595 | 4,975 | 24,887 | 14,755 | 3,620 | 72.8 | % | 10,132 | 68.7 | % | |||||||||||||||||||
Total
operating costs | 61,882 | 44,916 | 180,937 | 136,958 | 16,966 | 37.8 | % | 43,979 | 32.1 | % | |||||||||||||||||||
Operating
income | 2,928 | 2,574 | 8,950 | 3,197 | 354 | 13.8 | % | 5,753 | 179.9 | % | |||||||||||||||||||
Interest
expense | 747 | 674 | 2,301 | 1,886 | 73 | 10.8 | % | 415 | 22.0 | % | |||||||||||||||||||
Loss
on early extinguishment of debt | 79 | — | 79 | — | 79 | 100.0 | % | 79 | 100.0 | % | |||||||||||||||||||
Other
expense (income) | (31 | ) | 1 | (93 | ) | 7 | (32 | ) | (3,200.0 | )% | (100 | ) | (1,428.6 | )% | |||||||||||||||
Income
before income tax provision | 2,133 | 1,899 | 6,663 | 1,304 | 234 | 12.3 | % | 5,359 | 411.0 | % | |||||||||||||||||||
Income
tax provision | 604 | 509 | 1,776 | 1,478 | 95 | 18.7 | % | 298 | 20.2 | % | |||||||||||||||||||
Income
(loss) from continuing operations | 1,529 | 1,390 | 4,887 | (174 | ) | 139 | 10.0 | % | 5,061 | 2,908.6 | % | ||||||||||||||||||
Loss
from discontinued operations, net of tax | — | — | — | (1 | ) | — | — | % | 1 | (100.0 | )% | ||||||||||||||||||
Net
income (loss) | 1,529 | 1,390 | 4,887 | (175 | ) | 139 | 10.0 | % | 5,062 | 2,892.6 | % | ||||||||||||||||||
Net
loss attributable to noncontrolling interests | 1 | — | — | — | 1 | 100.0 | % | — | (100.0 | )% | |||||||||||||||||||
Net
income (loss) attributable to CVS Health | $ | 1,530 | $ | 1,390 | $ | 4,887 | $ | (175 | ) | $ | 140 | 10.1 | % | $ | 5,062 | 2,892.6 | % |
• | Total revenues increased $17.3 billion, or 36.5%, in the three months ended September 30, 2019 compared to the prior year. The increase in total revenues was primarily driven by the
impact of the Aetna Acquisition (primarily reflected in the Health Care Benefits segment) which occurred in November 2018, a 6.4% increase in Pharmacy Services segment revenue, and a 2.9% increase in Retail/LTC segment revenue. |
• | Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments. |
• | Operating
expenses increased $3.6 billion, or 72.8%, in the three months ended September 30, 2019 compared to the prior year. Operating expenses as a percentage of total revenues were 13.3% in the three months ended September 30, 2019, an increase of 280 basis points compared to the prior year. The increase in operating expenses was primarily driven by the impact of the Aetna Acquisition (including intangible asset amortization) and higher operating expenses in the Retail/LTC segment, including a $205 million pre-tax loss on the sale of the
Company’s Brazilian subsidiary, Drogaria Onofre Ltda. (“Onofre”), and a $96 million store rationalization charge, each recorded in the three months ended September 30, 2019. |
• | Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments. |
• | Operating
income increased $354 million, or 13.8%, in the three months ended September 30, 2019 compared to the prior year. The increase was primarily due to the impact of the Aetna Acquisition as well as increased claims volume and improved purchasing economics in the Pharmacy Services segment. These increases were partially offset by: |
• | Continued reimbursement pressure in the Retail/LTC segment; |
• | Continued
price compression in the Pharmacy Services segment; |
• | An increase in intangible asset amortization primarily related to the Aetna Acquisition; |
• | Higher operating expenses in the Retail/LTC segment, including the $205 million pre-tax loss on the sale of Onofre and the $96 million store rationalization charge, each recorded in the three months ended September 30,
2019; and |
• | The absence of $209 million in interest income on the proceeds from the financing for the Aetna Acquisition recorded in the three months ended September 30, 2018. |
• | Please see “Segment Analysis” later in this report for additional information about the operating income of the
Company’s segments. |
• | Interest expense increased $73 million in the three months ended September 30, 2019 compared to the prior year, primarily due to the assumption of Aetna’s debt as of the Aetna Acquisition Date. See “Liquidity and Capital Resources” later in this report for additional information. |
• | During the three months ended September 30, 2019, the loss on early extinguishment of debt relates to the Company’s repayment of $4.0 billion of its outstanding senior notes pursuant to its tender offers for such senior notes in August 2019, which resulted in a loss on early extinguishment of debt of $79 million. See Note 7 ‘‘Borrowings’’ to the unaudited condensed consolidated financial statements for additional information. |
• | The Company’s effective income tax rate was 28.3% in the three months ended September 30, 2019 compared to 26.8% for the prior year. The increase in the effective income tax rate was primarily due to the impact of the sale of Onofre in the three months ended September 30, 2019. |
• | Total revenues increased $49.7 billion, or 35.5%, in the nine months ended September 30, 2019 compared to the prior year. The increase in total revenues was primarily driven by the impact of
the Aetna Acquisition (primarily reflected in the Health Care Benefits segment) which occurred in November 2018, a 4.6% increase in Pharmacy Services segment revenue, and a 3.3% increase in Retail/LTC segment revenue. |
• | Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments. |
• | Operating expenses increased $10.1 billion, or 68.7%, in the nine months ended September 30, 2019 compared to the prior year. Operating expenses as a percentage of total revenues were 13.1% in the nine months ended September 30, 2019, an increase of 260 basis points compared to the prior year.
The increase in operating expenses is primarily due to the impact of the Aetna Acquisition (including intangible asset amortization), higher operating expenses in the Retail/LTC segment, including $231 million of store rationalization charges and the $205 million pre-tax loss on the sale of Onofre recorded in the nine months ended September 30, 2019, and an increase in acquisition-related integration costs. |
• | Please see “Segment Analysis” later in this report for additional information about the operating
expenses of the Company’s segments. |
• | Operating income increased $5.8 billion in the nine months ended September 30, 2019 compared to the prior year. The increase was primarily due to the absence of the $3.9 billion pre-tax goodwill impairment charge related to the LTC reporting unit within the Retail/LTC segment recorded
in the nine months ended September 30, 2018 and the impact of the Aetna Acquisition. The increase was partially offset by reimbursement pressure and higher operating expenses in the Retail/LTC segment and an increase in acquisition-related integration costs. |
• | Please see “Segment Analysis” later in this report for additional information about the operating income of the Company’s segments. |
• | Interest
expense increased $415 million in the nine months ended September 30, 2019 compared to the prior year, primarily due to the financing activity associated with the Aetna Acquisition and the assumption of Aetna’s debt as of the Aetna Acquisition Date. See “Liquidity and Capital Resources” later in this report for additional information. |
• | During the nine months ended September 30,
2019, the loss on early extinguishment of debt relates to the Company’s repayment of $4.0 billion of its outstanding senior notes pursuant to its tender offers for such senior notes in August 2019, which resulted in a loss on early extinguishment of debt of $79 million. See Note 7 ‘‘Borrowings’’ to the unaudited condensed consolidated financial statements for additional information. |
• | The
Company’s effective income tax rate was 26.7% in the nine months ended September 30, 2019 compared to 113.3% for the prior year. The decrease in the effective income tax rate was primarily due to the $3.9 billion goodwill impairment charge recognized in the nine months ended September 30, 2018, which was not deductible for income tax purposes. |
• | The Health Care Benefits segment’s operating income generally is lowest in the fourth quarter of the year primarily due to (i) the seasonality of benefit costs which generally increase during the year as Insured members progress through their annual deductibles and out-of-pocket expense limits and (ii) the seasonality of operating expenses which are generally the highest during the fourth quarter due to increased spending to support readiness for the start of the 2020 plan year in the Medicare business and marketing
associated with Medicare annual enrollment. |
• | Due to the timing of the closing of the Aetna Acquisition, the fourth quarter of 2018 does not include the full impact of common share dilution and interest expense resulting from the Aetna Acquisition. These differences affect year-over-year comparability of, among other things, earnings per share. |
• | The
Company believes that it is on track to achieve its 2020 target of approximately $800 million of synergies from the Aetna Acquisition. |
• | The ACA imposes a significant industry-wide fee known as the Health Insurer Fee (the “HIF”). The HIF is non-deductible for federal income tax purposes and is allocated to insurers based on the ratio of the amount of an insurer’s net premium revenues written during the preceding calendar year to the amount of health insurance premium for all U.S. health risk for certain lines of business during the preceding calendar year. The HIF was suspended for 2017, $14.3 billion for 2018 and suspended for 2019. As currently enacted, the HIF will be $15.5 billion for 2020 and increase in 2021 and annually thereafter.
In October 2018, Aetna and CVS paid an aggregate of approximately $1.0 billion representing their aggregate share of the 2018 HIF. The Company’s 2019 financial results do not reflect any expense for the HIF since the HIF was suspended for 2019, and the Company expects its 2020 effective income tax rate to increase compared to 2019 due to the non-deductibility of the 2020 HIF. While the Company seeks to price its products to cover the increased selling, general and administrative and income tax expenses associated with the HIF, it may be particularly challenging for the Company to include all of its portion of the 2020 HIF in its premium rates
beginning with 2019 medical customer renewals that have member months in 2020 because of the temporary suspension of the HIF for 2019. |
• | Changes to the Company’s business environment may continue for the next several years as elected and other government officials at the national and state levels continue to propose and enact significant modifications to public policy and existing laws and regulations that govern the Company’s businesses. |
In millions | Pharmacy Services
(1) | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations (2) | Consolidated Totals | |||||||||||||||||
Three
Months Ended | |||||||||||||||||||||||
Total
revenues | $ | 36,018 | $ | 21,466 | $ | 17,181 | $ | 152 | $ | (10,007 | ) | $ | 64,810 | ||||||||||
Adjusted
operating income (loss) | 1,439 | 1,516 | 1,423 | (252 | ) | (179 | ) | 3,947 | |||||||||||||||
Total revenues | 33,864 | 20,856 | 641 | 217 | (8,088 | ) | 47,490 | ||||||||||||||||
Adjusted
operating income (loss) | 1,362 | 1,622 | 75 | (213 | ) | (196 | ) | 2,650 | |||||||||||||||
Nine
Months Ended | |||||||||||||||||||||||
Total
revenues | $ | 104,418 | $ | 64,028 | $ | 52,454 | $ | 423 | $ | (31,436 | ) | $ | 189,887 | ||||||||||
Adjusted
operating income (loss) | 3,682 | 4,674 | 4,423 | (685 | ) | (521 | ) | 11,573 | |||||||||||||||
Total revenues | 99,837 | 61,960 | 2,723 | 475 | (24,840 | ) | 140,155 | ||||||||||||||||
Adjusted
operating income (loss) | 3,530 | 5,279 | (62 | ) | (647 | ) | (558 | ) | 7,542 |
(1) | Total
revenues of the Pharmacy Services segment include approximately $2.7 billion of retail co-payments for each of the three-month periods ended September 30, 2019 and 2018, and $8.9 billion and $8.8 billion of retail co-payments for the nine months ended September 30, 2019 and 2018, respectively. |
(2) | 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. |
Three
Months Ended September 30, 2019 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Operating
income (loss) (GAAP measure) | $ | 1,340 | $ | 1,095 | $ | 1,036 | $ | (364 | ) | $ | (179 | ) | $ | 2,928 | |||||||||
Non-GAAP
adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 99 | 120 | 387 | 1 | — | 607 | |||||||||||||||||
Acquisition-related
integration costs (2) | — | — | — | 111 | — | 111 | |||||||||||||||||
Store
rationalization charge (3) | — | 96 | — | — | — | 96 | |||||||||||||||||
Loss
on divestiture of subsidiary (4) | — | 205 | — | — | — | 205 | |||||||||||||||||
Adjusted
operating income (loss) | $ | 1,439 | $ | 1,516 | $ | 1,423 | $ | (252 | ) | $ | (179 | ) | $ | 3,947 |
Three
Months Ended September 30, 2018 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Operating
income (loss) (GAAP measure) | $ | 1,275 | $ | 1,491 | $ | 74 | $ | (70 | ) | $ | (196 | ) | $ | 2,574 | |||||||||
Non-GAAP
adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 87 | 127 | 1 | — | — | 215 | |||||||||||||||||
Acquisition-related
transaction and integration costs (2) | — | 4 | — | 66 | — | 70 | |||||||||||||||||
Interest
income on financing for the Aetna Acquisition (5) | — | — | — | (209 | ) | — | (209 | ) | |||||||||||||||
Adjusted
operating income (loss) | $ | 1,362 | $ | 1,622 | $ | 75 | $ | (213 | ) | $ | (196 | ) | $ | 2,650 |
Nine Months Ended September 30, 2019 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health
Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Operating income (loss) (GAAP measure) | $ | 3,387 | $ | 3,884 | $ | 3,253 | $ | (1,053 | ) | $ | (521 | ) | $ | 8,950 | |||||||||
Non-GAAP
adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 295 | 354 | 1,170 | 3 | — | 1,822 | |||||||||||||||||
Acquisition-related
integration costs (2) | — | — | — | 365 | — | 365 | |||||||||||||||||
Store
rationalization charges (3) | — | 231 | — | — | — | 231 | |||||||||||||||||
Loss
on divestiture of subsidiary (4) | — | 205 | — | — | — | 205 | |||||||||||||||||
Adjusted
operating income (loss) | $ | 3,682 | $ | 4,674 | $ | 4,423 | $ | (685 | ) | $ | (521 | ) | $ | 11,573 |
Nine
Months Ended September 30, 2018 | |||||||||||||||||||||||
In millions | Pharmacy Services | Retail/ LTC | Health Care Benefits | Corporate/ Other | Intersegment Eliminations | Consolidated Totals | |||||||||||||||||
Operating
income (loss) (GAAP measure) | $ | 3,268 | $ | 890 | $ | (64 | ) | $ | (339 | ) | $ | (558 | ) | $ | 3,197 | ||||||||
Non-GAAP
adjustments: | |||||||||||||||||||||||
Amortization of intangible assets (1) | 262 | 375 | 2 | — | — | 639 | |||||||||||||||||
Acquisition-related
transaction and integration costs (2) | — | 7 | — | 145 | — | 152 | |||||||||||||||||
Loss
on divestiture of subsidiary (4) | — | 86 | — | — | — | 86 | |||||||||||||||||
Goodwill
impairment (6) | — | 3,921 | — | — | — | 3,921 | |||||||||||||||||
Interest
income on financing for the Aetna Acquisition (5) | — | — | — | (453 | ) | — | (453 | ) | |||||||||||||||
Adjusted
operating income (loss) | $ | 3,530 | $ | 5,279 | $ | (62 | ) | $ | (647 | ) | $ | (558 | ) | $ | 7,542 |
(1) | 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 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. |
(2) | During
the three and nine months ended September 30, 2019 and 2018, acquisition-related transaction and integration costs relate to the Aetna Acquisition. During the nine months ended September 30, 2018, acquisition-related integration costs also relate to the acquisition of Omnicare, Inc (“Omnicare”). The acquisition-related transaction and integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses primarily within the Corporate/Other segment. |
(3) | During
the three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment. |
(4) | During
the three and nine months ended September 30, 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 unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment. During the nine months ended September 30, 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million and is reflected
in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment. |
(5) | During the three and nine months ended September 30, 2018, the Company recorded interest income of $209 million and $453 million, respectively, on the proceeds of its unsecured senior notes issued in March
2018 to partially fund the Aetna Acquisition (the “2018 Notes”). All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment. |
(6) | During the nine months ended September 30, 2018, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment. |
Change | |||||||||||||||||||||||||||||
Three
Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2019 vs 2018 | Nine Months Ended September 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions, except percentages | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Products | $ | 35,883 | $ | 33,746 | $ | 104,056 | $ | 99,493 | $ | 2,137 | 6.3 | % | $ | 4,563 | 4.6 | % | |||||||||||||
Services | 135 | 118 | 362 | 344 | 17 | 14.4 | % | 18 | 5.2 | % | |||||||||||||||||||
Total
revenues | 36,018 | 33,864 | 104,418 | 99,837 | 2,154 | 6.4 | % | 4,581 | 4.6 | % | |||||||||||||||||||
Cost
of products sold | 34,300 | 32,238 | 99,918 | 95,518 | 2,062 | 6.4 | % | 4,400 | 4.6 | % | |||||||||||||||||||
Operating
expenses | 378 | 351 | 1,113 | 1,051 | 27 | 7.7 | % | 62 | 5.9 | % | |||||||||||||||||||
Operating
expenses as a % of total revenues | 1.0 | % | 1.0 | % | 1.1 | % | 1.1 | % | |||||||||||||||||||||
Operating
income | $ | 1,340 | $ | 1,275 | $ | 3,387 | $ | 3,268 | $ | 65 | 5.1 | % | $ | 119 | 3.6 | % | |||||||||||||
Operating
income as a % of total revenues | 3.7 | % | 3.8 | % | 3.2 | % | 3.3 | % | |||||||||||||||||||||
Adjusted
operating income (1) | $ | 1,439 | $ | 1,362 | $ | 3,682 | $ | 3,530 | $ | 77 | 5.7 | % | $ | 152 | 4.3 | % | |||||||||||||
Adjusted
operating income as a % of total revenues | 4.0 | % | 4.0 | % | 3.5 | % | 3.5 | % | |||||||||||||||||||||
Revenues
(by distribution channel): | |||||||||||||||||||||||||||||
Pharmacy
network (2) | $ | 22,469 | $ | 21,921 | $ | 66,071 | $ | 64,625 | $ | 548 | 2.5 | % | $ | 1,446 | 2.2 | % | |||||||||||||
Mail
choice (3) | 13,403 | 11,812 | 37,912 | 34,807 | 1,591 | 13.5 | % | 3,105 | 8.9 | % | |||||||||||||||||||
Other
| 146 | 131 | 435 | 405 | 15 | 11.5 | % | 30 | 7.4 | % | |||||||||||||||||||
Pharmacy
claims processed: (4) | |||||||||||||||||||||||||||||
Total | 509.5 | 466.3 | 1,480.3 | 1,405.2 | 43.2 | 9.3 | % | 75.1 | 5.3 | % | |||||||||||||||||||
Pharmacy
network (2) | 430.2 | 394.5 | 1,250.0 | 1,192.2 | 35.7 | 9.0 | % | 57.8 | 4.8 | % | |||||||||||||||||||
Mail
choice (3) | 79.3 | 71.8 | 230.3 | 213.0 | 7.5 | 10.4 | % | 17.3 | 8.1 | % | |||||||||||||||||||
Generic
dispensing rate: (4) | |||||||||||||||||||||||||||||
Total | 88.1 | % | 87.2 | % | 88.3 | % | 87.5 | % | |||||||||||||||||||||
Pharmacy
network (2) | 88.7 | % | 87.8 | % | 88.9 | % | 88.1 | % | |||||||||||||||||||||
Mail
choice (3) | 85.3 | % | 83.9 | % | 85.1 | % | 84.0 | % | |||||||||||||||||||||
Mail
choice penetration rate (3) (4) | 15.6 | % | 15.4 | % | 15.6 | % | 15.2 | % |
(1) | See
“Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Pharmacy Services segment. |
(2) | Pharmacy network revenues, pharmacy claims processed and generic dispensing rate do not include Maintenance Choice® activity, which is included within the mail choice category. 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. 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. |
(3) | 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 retail, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program. |
(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. |
• | Total
revenues increased $2.2 billion, or 6.4%, to $36.0 billion for the three months ended September 30, 2019 compared to the prior year. The increase was primarily due to brand name drug price inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate. |
• | As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business: |
• | The
Company’s mail choice claims processed, on a 30-day equivalent basis, increased 10.4% to 79.3 million claims in the three months ended September 30, 2019 compared to 71.8 million claims in the prior year. The increase in mail choice claims was primarily driven by the continued adoption of Maintenance Choice offerings. |
• | During the three months ended September 30, 2019, the average revenue per mail choice claim, on a
30-day equivalent basis, increased by 2.7% compared to the prior year primarily due to growth in specialty pharmacy claims processed. |
• | The Company’s pharmacy network claims processed, on a 30-day equivalent basis, increased 9.0% to 430.2 million claims in the three months ended September 30, 2019, compared to 394.5 million claims in the prior year. The increase in the pharmacy network claim
volume was primarily due to net new business. |
• | During the three months ended September 30, 2019, the average revenue per pharmacy network claim processed, on a 30-day equivalent basis, decreased 5.9% compared to the prior year as a result of continued price compression. |
• | The Company’s total generic
dispensing rate increased to 88.1% in the three months ended September 30, 2019 compared to 87.2% in the prior year. The continued increase in the Company’s generic dispensing rate was primarily due to the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate. The Company believes its generic dispensing rate will continue to increase in future periods, albeit at a slower pace. This increase will be affected by, among other
things, the number of new brand and generic drug introductions and the Company’s success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate. |
• | Operating expenses in the Pharmacy Services segment include selling, general and administrative expenses; depreciation and amortization related to selling, general and administrative activities; and expenses related to specialty retail pharmacies, which include store and administrative payroll, employee benefits and occupancy costs. |
• | Operating
expenses increased $27 million, or 7.7%, in the three months ended September 30, 2019 compared to the prior year. The increase in operating expenses was primarily due to growth in the business, including operating expenses associated with Aetna’s mail order and specialty pharmacy operations (including intangible asset amortization) in the three months ended September 30, 2019. |
• | Operating expenses as a percentage of total revenues remained consistent at 1.0%
in each of the three-month periods ended September 30, 2019 and 2018. |
• | Operating income increased $65 million, or 5.1%, and adjusted operating income increased $77 million, or 5.7%, in the three months ended September 30,
2019 compared to the prior year. The increase in both operating income and adjusted operating income was primarily driven by increased claims volume, the addition of Aetna’s mail order and specialty pharmacy operations and improved purchasing economics, partially offset by continued price compression. The increase in operating income also was partially offset by increased intangible asset amortization related to Aetna’s mail order and specialty pharmacy operations. |
• | As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business: |
• | The
Company’s efforts to (i) retain existing clients, (ii) obtain new business and (iii) maintain or improve the rebates and/or discounts the Company receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on operating income. In particular, competitive pressures in the PBM industry have caused the Company and other PBMs to continue to share with clients a larger portion of rebates and/or discounts received from pharmaceutical manufacturers. In addition, marketplace dynamics and regulatory changes have limited the Company’s ability to offer plan sponsors pricing that includes retail network “differential” or “spread,” and the
Company expects these trends to continue. The “differential” or “spread” is any difference between the drug price charged to plan sponsors, including Medicare Part D plan sponsors, by a PBM and the price paid for the drug by the PBM to the dispensing provider. |
• | Total
revenues increased $4.6 billion, or 4.6%, to $104.4 billion for the nine months ended September 30, 2019 compared to the prior year. The increase was primarily due to brand name drug price inflation as well as increased total pharmacy claims volume, partially offset by continued price compression and an increased generic dispensing rate. |
• | As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about
the business: |
• | The Company’s mail choice claims processed, on a 30-day equivalent basis, increased 8.1% to 230.3 million claims in the nine months ended September 30, 2019 compared to 213.0 million claims in the prior year. The increase in mail choice claims was primarily driven by the continued adoption of Maintenance Choice offerings. |
• | During
the nine months ended September 30, 2019, the average revenue per mail choice claim, on a 30-day equivalent basis, increased by 0.7% compared to the prior year primarily due to growth in specialty pharmacy claims processed. |
• | The Company’s pharmacy network claims processed, on a 30-day equivalent basis, increased 4.8% to 1.3 billion claims in the nine months ended
September 30, 2019, compared to 1.2 billion claims in the prior year. The increase in the pharmacy network claim volume was primarily due to net new business. |
• | During the nine months ended September 30, 2019, the average revenue per pharmacy network claim processed, on a 30-day equivalent basis, decreased 2.5% compared to the prior year as a result of continued price compression. |
• | The
Company’s total generic dispensing rate increased to 88.3% in the nine months ended September 30, 2019 compared to 87.5% in the prior year. The continued increase in the Company’s generic dispensing rate was primarily due to the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate. |
• | Operating
expenses increased $62 million, or 5.9%, in the nine months ended September 30, 2019 compared to the prior year. The increase in operating expenses was primarily due to growth in the business, including operating expenses associated with Aetna’s mail order and specialty pharmacy operations (including intangible asset amortization) and investments related to the Company’s agreement with Anthem, Inc. during the nine months ended September 30, 2019. |
• | Operating
expenses as a percentage of total revenues remained consistent at 1.1% in each of the nine-month periods ended September 30, 2019 and 2018. |
• | Operating income increased $119 million, or 3.6%, and adjusted operating income increased $152
million, or 4.3%, in the nine months ended September 30, 2019 compared to the prior year. The increase in both operating income and adjusted operating income was primarily driven by increased claims volume, the addition of Aetna’s mail order and specialty pharmacy operations and improved purchasing economics, partially offset by continued price compression. The increase in operating income also was partially offset by increased intangible asset amortization related to Aetna’s mail order and specialty pharmacy operations. |
Change | |||||||||||||||||||||||||||||
Three
Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2019 vs 2018 | Nine Months Ended September 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions, except percentages | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Products | $ | 21,273 | $ | 20,676 | $ | 63,403 | $ | 61,382 | $ | 597 | 2.9 | % | $ | 2,021 | 3.3 | % | |||||||||||||
Services | 193 | 180 | 625 | 578 | 13 | 7.2 | % | 47 | 8.1 | % | |||||||||||||||||||
Total
revenues | 21,466 | 20,856 | 64,028 | 61,960 | 610 | 2.9 | % | 2,068 | 3.3 | % | |||||||||||||||||||
Cost
of products sold | 15,656 | 15,042 | 46,504 | 44,318 | 614 | 4.1 | % | 2,186 | 4.9 | % | |||||||||||||||||||
Goodwill
impairment | — | — | — | 3,921 | — | — | % | (3,921 | ) | (100.0 | )% | ||||||||||||||||||
Operating
expenses | 4,715 | 4,323 | 13,640 | 12,831 | 392 | 9.1 | % | 809 | 6.3 | % | |||||||||||||||||||
Operating
expenses as a % of total revenues | 22.0 | % | 20.7 | % | 21.3 | % | 20.7 | % | |||||||||||||||||||||
Operating
income | $ | 1,095 | $ | 1,491 | $ | 3,884 | $ | 890 | $ | (396 | ) | (26.6 | )% | $ | 2,994 | 336.4 | % | ||||||||||||
Operating
income as a % of total revenues | 5.1 | % | 7.1 | % | 6.1 | % | 1.4 | % | |||||||||||||||||||||
Adjusted
operating income (1) | $ | 1,516 | $ | 1,622 | $ | 4,674 | $ | 5,279 | $ | (106 | ) | (6.5 | )% | $ | (605 | ) | (11.5 | )% | |||||||||||
Adjusted
operating income as a % of total revenues | 7.1 | % | 7.8 | % | 7.3 | % | 8.5 | % | |||||||||||||||||||||
Revenues
(by major goods/service lines): | |||||||||||||||||||||||||||||
Pharmacy | $ | 16,687 | $ | 16,123 | $ | 49,197 | $ | 47,428 | $ | 564 | 3.5 | % | $ | 1,769 | 3.7 | % | |||||||||||||
Front
Store | 4,614 | 4,557 | 14,288 | 13,990 | 57 | 1.3 | % | 298 | 2.1 | % | |||||||||||||||||||
Other | 165 | 176 | 543 | 542 | (11 | ) | (6.3 | )% | 1 | 0.2 | % | ||||||||||||||||||
Prescriptions
filled (2) | 352.3 | 331.2 | 1,048.2 | 989.7 | 21.1 | 6.4 | % | 58.5 | 5.9 | % | |||||||||||||||||||
Revenues
increase: | |||||||||||||||||||||||||||||
Total | 2.9 | % | 6.4 | % | 3.3 | % | 5.9 | % | |||||||||||||||||||||
Pharmacy | 3.5 | % | 8.4 | % | 3.7 | % | 8.0 | % | |||||||||||||||||||||
Front
Store | 1.3 | % | 2.0 | % | 2.1 | % | 1.5 | % | |||||||||||||||||||||
Total
prescription volume increase (2) | 6.4 | % | 8.9 | % | 5.9 | % | 8.9 | % | |||||||||||||||||||||
Same
store sales increase: (3) | |||||||||||||||||||||||||||||
Total | 3.6 | % | 6.7 | % | 3.9 | % | 6.2 | % | |||||||||||||||||||||
Pharmacy | 4.5 | % | 8.7 | % | 4.7 | % | 8.1 | % | |||||||||||||||||||||
Front
Store | 0.6 | % | 0.8 | % | 1.3 | % | 0.5 | % | |||||||||||||||||||||
Prescription
volume (2) | 7.8 | % | 9.2 | % | 7.3 | % | 9.1 | % | |||||||||||||||||||||
Generic
dispensing rate (2) | 88.2 | % | 87.3 | % | 88.7 | % | 87.8 | % |
(1) | See
“Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Retail/LTC segment. |
(2) | 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. |
(3) | Same store sales and prescription volume exclude revenues from MinuteClinic, and revenue
and prescriptions from stores in Brazil and LTC operations. |
• | Total revenues increased $610 million, or 2.9%,
to $21.5 billion in the three months ended September 30, 2019 compared to the prior year. The increase was primarily driven by increased prescription volume and brand name drug price inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate. |
• | As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business: |
• | Front
store same store sales increased 0.6% in the three months ended September 30, 2019 compared to the prior year. The increase in front store sales in 2019 was primarily driven by increases in health and beauty product sales, which benefited from continued strength in cough and cold products. |
• | Pharmacy same store sales increased 4.5% in the three months ended September 30, 2019 compared to the prior year. The increase was
driven by the 7.8% increase in pharmacy same store prescription volumes on a 30-day equivalent basis driven primarily by continued adoption of patient care programs. |
• | Pharmacy revenue continues to be adversely affected by the conversion of brand name drugs to equivalent generic drugs, which typically have a lower selling price. The generic dispensing rate grew to 88.2% in the three months ended September 30, 2019 compared to 87.3% in the prior year. Pharmacy revenue growth also has been negatively affected by continued
reimbursement pressure. |
• | Pharmacy revenue growth also has been adversely affected by industry challenges in the LTC business, such as continuing lower occupancy rates at skilled nursing facilities, as well as the deteriorating financial health of many skilled nursing facilities. |
• | Pharmacy revenue in 2019 continued to benefit from the Company’s ability to attract and retain managed care customers
and the increased use of pharmaceuticals by an aging population as the first line of defense for health care. |
• | Operating expenses in the Retail/LTC segment include store payroll, store employee benefits, store occupancy costs, selling expenses, advertising expenses, depreciation and amortization expense and certain administrative expenses. |
• | Operating expenses increased $392 million,
or 9.1%, in the three months ended September 30, 2019 compared to the prior year, primarily due to the following: |
• |
• | The $96 million store rationalization
charge recorded in the three months ended September 30, 2019 primarily related to operating lease right-of-use asset impairment charges in connection with the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020; and |
• | The increased prescription volume described previously. |
• | Operating expenses as
a percentage of total revenues increased to 22.0% in the three months ended September 30, 2019 compared to 20.7% in the prior year. The increase in operating expenses as a percentage of total revenues was primarily driven by the increases in operating expenses described above. |
• | Operating income decreased $396 million, or 26.6%,
and adjusted operating income decreased $106 million, or 6.5%, in the three months ended September 30, 2019 compared to the prior year. Operating income and adjusted operating income were both negatively impacted by continued reimbursement pressure, partially offset by increased prescription volume and improved front store margin. The decrease in operating income also was driven by the $205 million pre-tax loss on the sale of Onofre and the $96 million store rationalization charge, each recorded in the three months ended September 30, 2019. |
• | As
you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business: |
• | The Company’s pharmacy operating income has been adversely affected by the efforts of managed care organizations, PBMs and governmental and other third-party payors to reduce their prescription drug costs, including the use of restrictive networks, as well as changes in the mix of business within the pharmacy portion of the Retail/LTC Segment. If the reimbursement pressure accelerates, the Company may not be able grow revenues, and its operating
income could be adversely affected. |
• | The increased use of generic drugs has positively impacted the Company’s operating income but has resulted in third-party payors augmenting their efforts to reduce reimbursement payments to retail pharmacies for prescriptions. This trend, which the Company expects to continue, reduces the benefit the Company realizes from brand to generic drug conversions. |
• | Total revenues increased $2.1 billion, or 3.3%, to $64.0 billion in the nine months ended September 30,
2019 compared to the prior year. The increase was primarily driven by increased prescription volume and brand name drug price inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate. |
• | As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business: |
• | Front store same store sales increased 1.3% in the nine
months ended September 30, 2019 compared to the prior year. The increase in front store sales in 2019 was primarily driven by increases in health and beauty product sales, which benefited from continued strength in cough and cold products. |
• | Pharmacy same store sales increased 4.7% in the nine months ended September 30, 2019 compared to the prior year. The increase was driven by the 7.3%
increase in pharmacy same store prescription volumes on a 30-day equivalent basis driven mainly by (i) continued adoption of patient care programs, (ii) collaborations with PBMs and (iii) the Company’s preferred status in a number of Medicare Part D networks. |
• | Pharmacy revenue continues to be adversely affected by the conversion of brand name drugs to equivalent generic drugs, which typically have a lower selling price. The generic dispensing rate grew to 88.7% in the nine months ended September 30, 2019
compared to 87.8% in the prior year. Pharmacy revenue growth also has been negatively affected by continued reimbursement pressure. |
• | Operating expenses increased $809 million, or 6.3%, in the nine months ended September 30, 2019 compared to the prior year, primarily due to the following: |
• | Store
rationalization charges of $231 million recorded in the nine months ended September 30, 2019 primarily related to operating lease right-of-use asset impairment charges in connection with the planned closure of underperforming retail pharmacy stores in the second quarter of 2019 and the first quarter of 2020; |
• |
• | The
investment of a portion of the savings from the TCJA in wages and benefits; and |
• | The increased prescription volume described previously, partially offset by: |
• | The absence of the $86 million pre-tax loss on the sale of the Company’s RxCrossroads subsidiary recorded in the nine months ended September 30,
2018. |
• | Operating expenses as a percentage of total revenues increased to 21.3% in the nine months ended September 30, 2019 compared to 20.7% in the prior year. The increase in operating expenses as a percentage of total revenues was primarily driven by the increases in operating expenses described above. |
• | Operating
income increased $3.0 billion, or 336.4%, and adjusted operating income decreased $605 million, or 11.5%, in the nine months ended September 30, 2019 compared to the prior year. The increase in operating income was primarily due to the absence of the $3.9 billion pre-tax goodwill impairment charge related to the LTC reporting unit and the $86 million pre-tax loss on the sale of the Company’s RxCrossroads subsidiary recorded in the nine months ended
September 30, 2018, partially offset by the $231 million of store rationalization charges and the $205 million pre-tax loss on the sale of Onofre recorded in the nine months ended September 30, 2019. Operating income and adjusted operating income were both negatively impacted by continued reimbursement pressure and increased operating expenses primarily driven by the investment of a portion of the savings from the TCJA in wages and benefits, partially offset by increased prescription volume and improved front store margin. |
Change | |||||||||||||||||||||||||||||
Three
Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, 2019 vs 2018 | Nine Months Ended September 30, 2019 vs 2018 | ||||||||||||||||||||||||||
In millions, except percentages | 2019 | 2018 | 2019 | 2018 | $ | % | $ | % | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Premiums | $ | 15,507 | $ | 627 | $ | 47,543 | $ | 2,684 | $ | 14,880 | 2,373.2 | % | $ | 44,859 | 1,671.3 | % | |||||||||||||
Services | 1,528 | 10 | 4,453 | 29 | 1,518 | 15,180.0 | % | 4,424 | 15,255.2 | % | |||||||||||||||||||
Net
investment income | 146 | 4 | 458 | 10 | 142 | 3,550.0 | % | 448 | 4,480.0 | % | |||||||||||||||||||
Total
revenues | 17,181 | 641 | 52,454 | 2,723 | 16,540 | 2,580.3 | % | 49,731 | 1,826.3 | % | |||||||||||||||||||
Benefit
costs | 12,914 | 439 | 39,815 | 2,399 | 12,475 | 2,841.7 | % | 37,416 | 1,559.6 | % | |||||||||||||||||||
MBR
(Benefit costs as a % of premium revenues) (1) | 83.3 | % | NM | 83.7 | % | NM | |||||||||||||||||||||||
Operating
expenses | $ | 3,231 | $ | 128 | $ | 9,386 | $ | 388 | $ | 3,103 | 2,424.2 | % | $ | 8,998 | 2,319.1 | % | |||||||||||||
Operating
expenses as a % of total revenues | 18.8 | % | 20.0 | % | 17.9 | % | 14.2 | % | |||||||||||||||||||||
Operating
income (loss) | $ | 1,036 | $ | 74 | $ | 3,253 | $ | (64 | ) | $ | 962 | 1,300.0 | % | $ | 3,317 | 5,182.8 | % | ||||||||||||
Operating
income (loss) as a % of total revenues (2) | 6.0 | % | 11.5 | % | 6.2 | % | NM | ||||||||||||||||||||||
Adjusted
operating income (loss) (2) (3) | $ | 1,423 | $ | 75 | $ | 4,423 | $ | (62 | ) | $ | 1,348 | NM | $ | 4,485 | NM | ||||||||||||||
Adjusted
operating income (loss) as a % of total revenues (2) | 8.3 | % | 11.7 | % | 8.4 | % | NM |
(1) | The
Health Care Benefits segment for the three and nine months ended September 30, 2018 consisted solely of the Company’s SilverScript PDP business. Accordingly, the MBRs for the three and nine months ended September 30, 2018 are not meaningful (“NM”) and are not directly comparable to the MBRs for the three and nine months ended September 30, 2019. |
(2) | Percentages
are not meaningful. |
(3) | See “Segment Analysis” above in this report for a reconciliation of operating income (loss) (GAAP measure) to adjusted operating income (loss) for the Health Care Benefits segment. |
• | Total
revenues increased $16.5 billion for the three months ended September 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition. |
• | Operating expenses in the Health Care Benefits segment include selling, general and administrative expenses and depreciation and amortization expenses. |
• | Operating
expenses increased $3.1 billion in the three months ended September 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition (including the amortization of intangible assets). |
• | Operating income and adjusted operating income increased $962 million and $1.3 billion, respectively, in the three months ended September 30,
2019 compared to the prior year. The increases were primarily driven by the Aetna Acquisition. The increase in operating income was partially offset by an increase in intangible asset amortization related to the Aetna Acquisition. |
• | Total
revenues increased $49.7 billion for the nine months ended September 30, 2019 compared to the prior year primarily driven by the Aetna Acquisition. |
• | Operating expenses increased $9.0 billion in the nine months ended September 30, 2019 compared to the prior year
primarily driven by the Aetna Acquisition (including the amortization of intangible assets). |
• | Operating income and adjusted operating income increased $3.3 billion and $4.5 billion, respectively, in the nine months ended September 30, 2019 compared to the prior year. The increases were primarily driven by the Aetna Acquisition. The increase in operating income
was partially offset by an increase in intangible asset amortization related to the Aetna Acquisition. Operating loss and adjusted operating loss for the nine months ended September 30, 2018 reflect the seasonality of earnings for the Company’s SilverScript PDP business. The quarterly earnings of the Company’s SilverScript PDP business generally increase as the year progresses. |
In thousands | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | |||||||||||||||||
Medical
membership: | ||||||||||||||||||||||||||
Commercial | 3,560 | 14,159 | 17,719 | 3,571 | 14,276 | 17,847 | 3,871 | 13,888 | 17,759 | |||||||||||||||||
Medicare
Advantage | 2,304 | — | 2,304 | 2,264 | — | 2,264 | 1,758 | — | 1,758 | |||||||||||||||||
Medicare
Supplement | 842 | — | 842 | 819 | — | 819 | 793 | — | 793 | |||||||||||||||||
Medicaid | 1,382 | 562 | 1,944 | 1,344 | 562 | 1,906 | 1,128 | 663 | 1,791 | |||||||||||||||||
Total
medical membership | 8,088 | 14,721 | 22,809 | 7,998 | 14,838 | 22,836 | 7,550 | 14,551 | 22,101 | |||||||||||||||||
Supplemental
membership information: | ||||||||||||||||||||||||||
Medicare
Prescription Drug Plan (standalone) (1) | 5,998 | 6,004 | 6,134 |
(1) | Represents
the Company’s SilverScript PDP membership only. Excludes 2.5 million, 2.5 million and 2.3 million members as of September 30, 2019, June 30, 2019, and December 31, 2018, respectively, related to Aetna’s standalone PDPs that were sold effective December 31, 2018. The Company will retain the financial results of the divested plans through 2019 through a reinsurance agreement. |
• | Total
revenues decreased $65 million in the three months ended September 30, 2019 compared to the prior year. |
• | In 2019, revenues relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products, that were acquired in the Aetna Acquisition. Revenues in the three months ended September 30, 2019 include $32
million of realized capital gains, primarily related to the sale of debt securities and other invested assets. In 2018, revenues relate to interest income on the proceeds from the $40 billion of 2018 Notes issued to partially fund the Aetna Acquisition. |
• | Operating expenses within the Corporate/Other segment include certain aspects of costs related to executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments and acquisition-related transaction and integration costs. After the Aetna Acquisition Date, such operating expenses also include
operating costs to support the large case pensions and long-term care insurance products acquired in the Aetna Acquisition. |
• | Operating expenses increased $229 million in the three months ended September 30, 2019 compared to the prior year. The increase was primarily driven by incremental operating expenses associated with the Company’s investments in transformation and modernization and an increase in acquisition-related integration costs of $45 million in the three months ended
September 30, 2019 compared to the prior period. |
• | Total revenues decreased $52 million in the nine months ended
September 30, 2019 compared to the prior year. |
• | In 2019, revenues relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products, that were acquired in the Aetna Acquisition. Revenues in the nine months ended September 30, 2019 include $107 million of realized capital gains, primarily related to
the sale of debt securities and other invested assets. In 2018, revenues relate to interest income on the proceeds from the $40 billion of 2018 Notes issued to partially fund the Aetna Acquisition. |
• | Operating expenses increased $662 million in the nine months ended September 30, 2019 compared to the prior year. The increase was primarily driven by incremental operating expenses associated with the
Company’s investments in transformation and modernization and an increase in acquisition-related integration costs of $220 million in the nine months ended September 30, 2019 compared to the prior period. |
Nine
Months Ended September 30, | Change | |||||||||||||
In millions | 2019 | 2018 | $ | % | ||||||||||
Net cash provided by operating activities | $ | 10,214 | $ | 6,386 | $ | 3,828 | 59.9 | % | ||||||
Net
cash used in investing activities | (2,630 | ) | (1,386 | ) | (1,244 | ) | 89.8 | % | ||||||
Net cash provided by (used in) financing activities | (6,410 | ) | 34,927 | (41,337 | ) | (118.4 | )% | |||||||
Net
increase in cash, cash equivalents and restricted cash | $ | 1,174 | $ | 39,927 | $ | (38,753 | ) | 97.1 | % |
• | Net cash provided by operating activities increased by $3.8 billion in the nine months ended September 30, 2019 compared to the prior year due primarily to the Aetna Acquisition as well as improved performance in the Pharmacy Services and Retail/LTC segments. |
• | Net cash used
in investing activities increased by $1.2 billion in the nine months ended September 30, 2019 compared to the prior year due primarily to the nine months ended September 30, 2018 reflecting $725 million in proceeds from the sale of RxCrossroads and increased purchases of property and equipment in the nine months ended September 30, 2019 compared to the prior year. |
• | Net
cash used in financing activities was $6.4 billion in the nine months ended September 30, 2019 compared to net cash provided by financing activities of $34.9 billion in the prior year. The decrease in cash provided by financing activities primarily related to long-term borrowings during 2018 to partially fund the Aetna Acquisition, as well as debt repayments during 2019 including (i) the repayment of $4.0 billion of its outstanding senior notes pursuant to tender offers for such outstanding senior notes, (ii) $3.0 billion in repayments of the term loan used to partially fund the Aetna Acquisition and (iii) the repayment of $1.2
billion aggregate principal amount of senior notes upon maturity. The decrease was partially offset by the issuance of $3.5 billion of senior notes during the nine months ended September 30, 2019. |
In millions | |||
3.125% senior notes due March 2020 | $ | 2,000 | |
Floating rate notes due March 2020 | 1,000 | ||
3.35%
senior notes due March 2021 | 3,000 | ||
Floating rate notes due March 2021 | 1,000 | ||
3.7% senior notes due March 2023 | 6,000 | ||
4.1% senior notes due March 2025 | 5,000 | ||
4.3%
senior notes due March 2028 | 9,000 | ||
4.78% senior notes due March 2038 | 5,000 | ||
5.05% senior notes due March 2048 | 8,000 | ||
Total debt principal | $ | 40,000 |
• | Risks to our brand and reputation, the Aetna Acquisition, data governance risks, effectiveness of our talent management and alignment of talent to our business needs, and potential changes in public policy, laws and regulations present overarching risks to our enterprise in 2019 and beyond. |
• | Our brand and reputation are two of our most important assets; negative public perception of the industries in which we operate, or of our industries’
or our practices, can adversely affect our businesses, results of operations, cash flows and prospects. |
• | Data governance failures can adversely affect our reputation, businesses and prospects. Our use and disclosure of members’, customers’ and other constituents’ sensitive information is subject to complex regulations at multiple levels. We would be adversely affected if we or our business associates or other vendors fail to adequately protect members’, customers’ or other constituents’ sensitive information. |
• | We
face significant competition in attracting and retaining talented employees. Further, managing succession for, and retention of, key executives is critical to our success, and our failure to do so could adversely affect our future performance. |
• | We are subject to potential changes in public policy, laws and regulations, including reform of the United States health care system, that can adversely affect the markets for our products and services and our businesses, operations, results of operations, cash flows and prospects. |
• | Our
enterprise strategy may not be an effective response to the changing dynamics in the industries in which we operate, or we may not be able to implement our strategy and related strategic projects. |
• | Efforts to reduce reimbursement levels and alter health care financing practices could adversely affect our businesses. |
• | Gross margins in the industries in which we operate may decline. |
• | Our
results of operations are affected by the health of the economy in general and in the geographies we serve. |
• | We operate in a highly competitive business environment. Competitive and economic pressures may limit our ability to increase pricing to reflect higher costs or may force us to accept lower margins. If customers elect to self-insure, reduce benefits or adversely renegotiate or amend their agreements with us, our revenues and results of operations will be adversely affected. We may not be able to obtain appropriate pricing on new or renewal business. |
• | We
may lose clients and/or fail to win new business. If we fail to compete effectively in the geographies and product areas in which we operate, including maintaining or increasing membership in our Health Care Benefits segment, our results of operations, financial condition and cash flows could be materially and adversely affected. |
• | We are exposed to risks relating to the solvency of our customers and of other insurers. |
• | We face risks relating to the market availability, pricing, suppliers and safety profiles of prescription
drugs that we purchase and sell. |
• | We face risks related to the frequency and rate of the introduction and pricing of generic drugs and brand name prescription drug products. |
• | Possible changes in industry pricing benchmarks and drug pricing generally can adversely affect our PBM business. |
• | Product
liability, product recall or personal injury issues could damage our reputation. |
• | We face challenges in growing our Medicare Advantage and Medicare Part D membership. |
• | We face challenges in growing our Medicaid membership, and expanding our Medicaid membership exposes us to additional risks. |
• | A
change in our Health Care Benefits product mix may adversely affect our profit margins. |
• | We may not be able to accurately forecast health care and other benefit costs, which could adversely affect our Health Care Benefits segment’s results of operations. There can be no assurance that the future health care and other benefit costs of our Insured Health Care Benefits products will not exceed our projections. |
• | A number of factors, many of which are beyond our control, contribute to rising health care and other benefit
costs. If we are unable to satisfactorily manage our health care and other benefit costs, our Health Care Benefits segment’s results of operations and competitiveness will be adversely affected. |
• | The reserves we hold for expected claims in our Insured Health Care Benefits products are based on estimates that involve an extensive degree of judgment and are inherently variable. Any reserve, including a premium deficiency reserve, may be insufficient. If actual claims exceed our estimates, our results of operations could be materially adversely affected, and our ability to take timely corrective actions to limit future costs may be limited. |
• | Extreme
events, or the threat of extreme events, could materially increase our health care (including behavioral health) costs. We cannot predict whether or when any such events will occur. |
• | Legislative and regulatory changes could create significant challenges to our Medicare Advantage and Medicare Part D revenues and results of operations, and proposed changes to these programs could create significant additional challenges. Entitlement program reform, if it occurs, could have a material adverse effect on our businesses, operations and/or results of operations. |
• | We
may not be able to obtain adequate premium rate increases in our Insured Health Care Benefits products, which would have an adverse effect on our revenues, MBRs and results of operations and could magnify the adverse impact of increases in health care and other benefit costs and of ACA assessments, fees and taxes. |
• | Minimum MLR rebate requirements limit the level of margin we can earn in our Insured Health Care Benefits products while leaving us exposed to higher than expected medical costs. Challenges to our minimum MLR rebate methodology and/or reports could adversely affect our results of operations. |
• | Our
business activities are highly regulated. Our Pharmacy Services, Medicare Advantage, Medicare Part D, Medicaid, dual eligible, dual eligible special needs plan, small group and certain other products are subject to particularly extensive and complex regulations. If we fail to comply with applicable laws and regulations, we could be subject to significant adverse regulatory actions or suffer brand and reputational harm which may have a material adverse effect on our businesses. Compliance with existing and future laws, regulations and/or judicial decisions may reduce our profitability and limit our growth. |
• | If our compliance
or other systems and processes fail or are deemed inadequate, we may suffer brand and reputational harm and become subject to regulatory actions or litigation which could adversely affect our businesses, results of operations, cash flows and/or financial condition. |
• | Our litigation and regulatory risk profile are changing as a result of the Aetna Acquisition and as we offer new products and services and expand in business areas beyond our historical core businesses of Retail/LTC and Pharmacy Services. |
• | We routinely
are subject to litigation and other adverse legal proceedings, including class actions and qui tam actions. Many of these proceedings seek substantial damages which may not be covered by insurance. These proceedings may be costly to defend, result in changes in our business practices, harm our brand and reputation and adversely affect our businesses and results of operations. |
• | We frequently are subject to regular and special governmental audits, investigations and reviews that could result in changes to our business practices and also could result in material refunds, fines, penalties, civil liabilities, criminal liabilities and other sanctions. |
• | We
are subject to retroactive adjustments to and/or withholding of certain premiums and fees, including as a result of CMS RADV audits. We generally rely on health care providers to appropriately code claim submissions and document their medical records. If these records do not appropriately support our risk adjusted premiums, we may be required to refund premium payments to CMS and/or pay fines and penalties under the False Claims Act. |
• | Programs funded in whole or in part by the U.S. federal government account for a significant portion of our revenues. The U.S. federal government and our other government customers may reduce funding for health care or other programs, cancel or decline to renew contracts
with us, or make changes that adversely affect the number of persons eligible for certain programs, the services provided to enrollees in such programs, our premiums and our administrative and health care and other benefit costs, any of which could have a material adverse effect on our businesses, results of operations and cash flows. In addition, an extended federal government shutdown or a delay by Congress in raising the federal government’s debt ceiling could lead to a delay, reduction, suspension or cancellation of federal government spending and a significant increase in interest rates that could, in turn, have a material adverse effect on our businesses, results of operations and cash flows. |
• | Our results of operations may be adversely
affected by changes in laws and policies governing employers and by union organizing activity. |
• | We must develop and maintain a relevant omni-channel experience for our retail customers. |
• | We must maintain and improve our relationships with our retail and specialty pharmacy customers and increase the demand for our products and services, including proprietary brands. If we fail to develop new products, differentiate our products from those of our competitors or demonstrate the value of our products to our customers
and members, our ability to retain or grow our customer base may be adversely affected. |
• | In order to be competitive in the increasingly consumer-oriented marketplace for our health care products and services, we will need to develop and deploy consumer-friendly products and services and make investments in consumer engagement, reduce our cost structure and compete successfully with new entrants into our businesses. If we are unsuccessful, our future growth and profitability may be adversely affected. |
• | Our results
of operations may be adversely affected if we are unable to contract with manufacturers, providers, suppliers and vendors on competitive terms and develop and maintain attractive networks with high quality providers. |
• | If our service providers fail to meet their contractual obligations to us or to comply with applicable laws or regulations, we may be exposed to brand and reputational harm, litigation or regulatory action. This risk is particularly high in our Medicare, Medicaid, dual eligible and dual eligible special needs plan programs. |
• | Continuing
consolidation and integration among providers and other suppliers may increase our medical and other covered benefits costs, make it difficult for us to compete in certain geographies and create new competitors. |
• | We may experience increased medical and other benefit costs, litigation risk and customer and member dissatisfaction when providers that do not have contracts with us render services to our Health Care Benefits members. |
• | Customers,
particularly large sophisticated customers, expect us to implement their contracts and onboard their employees and members efficiently and effectively. Failure to do so could adversely affect our reputation, businesses, results of operations, cash flows and prospects. If we or our vendors fail to provide our customers with quality service that meets their expectations, our ability to retain and grow our membership and customer base will be adversely affected. |
• | We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and disrupt our business operations. |
• | Our
and our vendors’ operations are subject to a variety of business continuity hazards and risks, any of which could interrupt our operations or otherwise adversely affect our performance and results of operations. |
• | We and our vendors have experienced cyber attacks. We can provide no assurance that we or our vendors will be able to detect, prevent or contain the effects of such attacks or other information security (including cybersecurity) risks or threats in the future. |
• | The failure or disruption of our information
technology systems or the failure of our information technology infrastructure to support our businesses could adversely affect our reputation, businesses, results of operations and cash flows. |
• | Our business success and results of operations depend in part on effective information technology systems and on continuing to develop and implement improvements in technology. Pursuing multiple initiatives simultaneously could make this continued development and implementation significantly more challenging. |
• | Sales
of our products and services are dependent on our ability to attract and motivate internal sales personnel and independent third-party brokers, consultants and agents. New distribution channels create new disintermediation risk. We may be subject to penalties or other regulatory actions as a result of the marketing practices of brokers and agents selling our products. |
• | We also face other risks that could adversely affect our businesses, results of operations, financial condition and/or cash flows, which include: |
• | Failure
of our corporate governance policies or procedures, for example significant financial decisions being made at an inappropriate level in our organization; |
• | Inappropriate application of accounting principles or a significant failure of internal control over financial reporting, which could lead to a restatement of our results of operations and/or a deterioration in the soundness and accuracy of our reported results of operations; and |
• | Failure to adequately manage our run-off businesses and/or our regulatory and financial
exposure to businesses we have sold, including Aetna’s divested standalone Medicare Part D, domestic group life insurance, group disability insurance and absence management businesses. |
• | Goodwill and other intangible assets could, in the future, become impaired. |
• | We would be adversely affected if we do not effectively deploy our capital. Downgrades or potential downgrades in our credit ratings, should they occur, could adversely affect our brand and reputation, businesses, cash flows, financial condition and results
of operations. |
• | Adverse conditions in the U.S. and global capital markets can significantly and adversely affect the value of our investments in debt and equity securities, mortgage loans, alternative investments and other investments, our results of operations and/or our financial condition. |
• | We have limited experience in the insurance and managed health care industry, which may hinder our ability to achieve our objectives as a combined company. |
• | The
Aetna Acquisition may not be accretive, and may be dilutive, to our earnings per share, which may adversely affect our stock price. |
• | We may fail to successfully combine the businesses and operations of CVS Health and Aetna to realize the anticipated benefits and cost savings of the Aetna Acquisition within the anticipated timeframe or at all, which could adversely affect our stock price. |
• | Our future results may be adversely impacted if we do not effectively manage our expanded operations following completion of the
Aetna Acquisition. |
• | We may have difficulty attracting, motivating and retaining executives and other key employees following completion of the Aetna Acquisition. |
• | The Aetna integration process could disrupt our ongoing businesses and/or operations. |
• | Our indebtedness following completion
of the Aetna Acquisition is substantially greater than our indebtedness on a stand-alone basis and greater than the combined indebtedness of CVS Health and Aetna existing prior to the announcement of the transaction. This increased level of indebtedness could adversely affect our business flexibility and increase our borrowing costs. |
• | We will continue to incur significant integration-related costs in connection with the Aetna Acquisition. |
• | We expect to continue to pursue acquisitions, joint ventures, strategic alliances
and other inorganic growth opportunities, which may be unsuccessful, cause us to assume unanticipated liabilities, disrupt our existing businesses, be dilutive or lead us to assume significant debt, among other things. |
• | We may be unable to successfully integrate companies we acquire. |
• | As a result of our expanded international operations, we face political, legal and compliance, operational, regulatory, economic and other risks that we do not face or are more significant than in our domestic operations. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item
4. | Controls and Procedures |
Part
II. | Other Information |
Item 1. | Legal Proceedings |
Item
1A. | Risk Factors |
Item
2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Fiscal Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
July
1, 2019 through July 31, 2019 | — | $ | — | — | $ | 13,869,392,446 | |||||||
August
1, 2019 through August 31, 2019 | — | $ | — | — | $ | 13,869,392,446 | |||||||
September
1, 2019 through September 30, 2019 | — | $ | — | — | $ | 13,869,392,446 | |||||||
— | — |
15 | Letter re: unaudited interim financial
information |
15.1 | |
31 | Rule 13a-14(a)/15d-14(a) Certifications |
31.1 | |
31.2 | |
32 | Section 1350 Certifications |
32.1 | |
32.2 | |
101 | |
101 | The
following materials from the CVS Health Corporation Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019 formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders’ Equity and (vi) the related Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
104 | |
104 | Cover
Page Interactive Data File - The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL (included as Exhibit 101). |
CVS HEALTH CORPORATION | ||
Date: | By: | /s/ Eva C. Boratto | |
Executive Vice President and Chief Financial Officer | |||
This ‘10-Q’ Filing | Date | Other Filings | ||
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8/15/29 | ||||
8/15/26 | ||||
8/15/24 | ||||
5/16/24 | ||||
5/17/23 | ||||
5/18/22 | ||||
12/15/20 | ||||
5/14/20 | 4, 8-K, DEF 14A | |||
4/1/20 | 4, 4/A | |||
1/15/20 | 4 | |||
12/15/19 | ||||
Filed on: | 11/6/19 | 4, 8-K | ||
10/29/19 | ||||
For Period end: | 9/30/19 | 4 | ||
9/4/19 | 8-K | |||
9/1/19 | ||||
8/31/19 | ||||
8/27/19 | UPLOAD | |||
8/15/19 | 8-K | |||
8/8/19 | 424B3, 8-K, FWP, UPLOAD | |||
8/1/19 | ||||
7/31/19 | ||||
7/1/19 | ||||
6/30/19 | 10-Q | |||
4/1/19 | 4, 4/A | |||
3/31/19 | 10-Q | |||
3/28/19 | ||||
2/28/19 | 10-K, 4, 4/A | |||
2/20/19 | 4, 8-K | |||
1/1/19 | ||||
12/31/18 | 10-K, 11-K | |||
11/30/18 | 3, 4, POS AM, S-8 | |||
11/28/18 | 3, 3/A, 4, 8-K, 8-K/A | |||
10/26/18 | 425, 8-K | |||
10/25/18 | ||||
10/15/18 | ||||
10/10/18 | 425, 8-K | |||
9/30/18 | 10-Q | |||
9/1/18 | ||||
6/30/18 | 10-Q | |||
3/31/18 | 10-Q | |||
3/9/18 | ||||
12/31/17 | 10-K, 11-K, 5 | |||
12/15/17 | 425, 8-K | |||
12/3/17 | 8-K | |||
1/1/17 | ||||
12/31/16 | 10-K, 11-K, 5 | |||
11/2/16 | 4 | |||
10/28/16 | ||||
2/9/16 | 10-K, 8-K | |||
8/25/15 | ||||
List all Filings |