Roger Farah Named Executive Chairman of the Board
Company provides preliminary guidance for third quarter 2024
GAAP diluted Earnings per Share (EPS) of $0.03 to $0.08 and
Adjusted EPS of $1.05 to $1.10
WOONSOCKET, R.I., Oct. 18,
2024 /PRNewswire/ -- CVS Health (NYSE: CVS) today
announced that David Joyner was
appointed President and Chief Executive Officer, effective
October 17, replacing Karen Lynch, who stepped down from her position
in agreement with the company's Board of Directors. Joyner also
joined the Board of Directors. In addition, current Chairman of the
Board, Roger Farah, will now be
Executive Chairman.
Joyner was most recently executive vice president, CVS Health,
and president, CVS Caremark. He led the pharmacy services business,
which provides solutions to employers, health plans and government
entities and serves approximately 90 million members through
Caremark, CVS Specialty, and other areas.
Joyner has 37 years of health care and pharmacy benefit
management experience, and has also served on the boards of several
private equity-backed health care companies. He began his career at
Aetna as an employee benefit representative before joining Caremark
Prescription Services as a regional sales manager. He then served
as executive vice president of sales and account services at CVS
Caremark and executive vice president of sales and marketing at CVS
Health.
"The Board believes this is the right time to make a change, and
we are confident that David is the right person to lead our company
for the benefit of all stakeholders, including customers,
employees, patients, and shareholders," said Farah. "CVS Health is
responsible for improving health for millions of people across the
U.S., and our integrated businesses work together to deliver on our
purpose and mission every day. To build on our position of
strength, we believe David and his deep understanding of our
integrated business can help us more directly address the
challenges our industry faces, more rapidly advance the operational
improvements our company requires, and fully realize the value we
can uniquely create."
"There is no greater honor than to lead a company whose mission
and purpose are completely focused on improving health," said
Joyner. "I came back to CVS Health in 2023 because I believed I
could give more to the company, and I take this opportunity today
for the same reason. I am proud to continue working side by side
with our 300,000 colleagues who are building a world of health
around every consumer. Every day, CVS Health expands access, drives
greater affordability, and achieves better health outcomes for more
than 186 million people. Aligned with our management team and our
Board, I believe in the future of our company and I am committed to
delivering our best every day to everyone we serve."
Farah added: "The Board also recognizes the many contributions
Karen made to our company, both during her tenure at Aetna and then
as President and CEO of CVS Health. We are grateful for her
consistent, customer-focused leadership, especially during the
COVID-19 pandemic when our pharmacies provided needed tests and
vaccines. We also appreciate her work to advance CVS Health's
modernization and transformation to become a diversified,
connected, technology-driven health care company, allowing us to do
even more for the people we are privileged to serve."
In connection with today's announcement, the Company is also
providing preliminary guidance for third quarter 2024 GAAP
diluted EPS of $0.03 to
$0.08 and Adjusted EPS of
$1.05 to $1.10. Results for the third quarter include
charges to record premium deficiency reserves (PDRs), primarily
related to the company's Medicare and Individual Exchange
businesses inside its Health Care Benefits segment, of
approximately $1.1 billion, which
lowered third quarter 2024 Adjusted EPS by $0.63. The PDRs are expected to be
substantially released during the fourth quarter of 2024,
benefiting results in that period. The Company's GAAP results
also include a restructuring charge of approximately $1.2 billion, related to incremental store
closures in 2025, as well as cost reduction actions discussed on
the second quarter 2024 earnings call.
In the third quarter of 2024, the Company has continued to
experience medical cost trends in excess of those projected in its
prior outlook. The Medical Benefit Ratio ("MBR") for the
third quarter is currently expected to be approximately 95.2%,
which includes a 220-basis point impact from the PDRs. The
Company's other segments performed consistent with prior
projections in the quarter. In light of continued elevated
medical cost pressures in the Health Care Benefits segment,
investors should no longer rely on the Company's previous guidance
provided on its second quarter 2024 earnings call on August 7, 2024. The Company plans to
further update investors on its third quarter 2024 earnings call,
currently scheduled for November 6, 2024, after the company
has completed its standard quarterly close processes.
The Company's preliminary financial results are based on the
Company's current estimate of its results for the quarter ended
September 30, 2024, and remain
subject to change based on the completion of closing and review
procedures and the execution of the Company's internal control over
financial reporting.
Non-GAAP Financial Measures
This press release includes projected Adjusted EPS, which
represents a non-GAAP financial measure. The Company uses non-GAAP
financial measures to analyze underlying business performance and
trends. The Company believes that providing non-GAAP financial
measures enhances the Company's and investors' ability to compare
the Company's past financial performance with its current
performance. Non-GAAP financial measures should not be considered a
substitute for, or superior to, financial measures determined or
calculated in accordance with GAAP. The Company's definitions of
its non-GAAP financial measures may not be comparable to similarly
titled measures reported by other companies. The most directly
comparable GAAP measure is projected GAAP diluted EPS.
Projected GAAP diluted EPS and projected Adjusted EPS,
respectively, are calculated by dividing projected net income
attributable to CVS Health and projected adjusted income
attributable to CVS Health by the Company's projected weighted
average diluted shares outstanding. The Company defines adjusted
income attributable to CVS Health as net income attributable to CVS
Health (GAAP measure) excluding the impact of amortization of
intangible assets, net realized capital gains or losses and other
items, if any, that neither relate to the ordinary course of the
Company's business nor reflect the Company's underlying business
performance, such as acquisition-related integration costs,
restructuring charges, office real estate optimization charges, as
well as the corresponding tax benefit or expense related to the
items excluded from adjusted income attributable to CVS Health.
The following are reconciliations of projected net income
attributable to CVS Health to adjusted income attributable to CVS
Health and projected GAAP diluted EPS to Adjusted EPS:
|
Three Months Ended
September 30, 2024
|
|
Low
|
High
|
In millions,
except per share amounts
|
Total
Company
|
Per Common
Share
|
Total
Company
|
Per Common
Share
|
Net income attributable
to CVS Health (GAAP measure)
|
$
40
|
$
0.03
|
$
103
|
$
0.08
|
Amortization of
intangible assets
|
507
|
0.40
|
507
|
0.40
|
Net realized capital
gains
|
(19)
|
(0.02)
|
(19)
|
(0.02)
|
Acquisition-related
integration costs (1)
|
41
|
0.03
|
41
|
0.03
|
Restructuring charges
(2)
|
1,169
|
0.93
|
1,169
|
0.93
|
Office real estate
optimization charges (3)
|
17
|
0.01
|
17
|
0.01
|
Tax impact of non-GAAP
adjustments (4)
|
(433)
|
(0.33)
|
(433)
|
(0.33)
|
Adjusted income
attributable to CVS Health
|
$
1,322
|
$
1.05
|
$
1,385
|
$
1.10
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
1,259
|
|
1,259
|
|
|
(1)
|
During the three months
ended September 30, 2024, the acquisition-related integration costs
relate to the acquisitions of Signify Health and Oak Street
Health.
|
(2)
|
During the three months
ended September 30, 2024, the restructuring charges are primarily
comprised of a store impairment charge, other asset impairment and
related charges associated with the discontinuation of certain
non-core assets, as well as corporate workforce optimization costs,
including severance and employee-related costs. During the third
quarter of 2024, the Company developed an enterprise-wide
restructuring plan intended to streamline and simplify the
organization, improve efficiency and reduce costs. In connection
with this restructuring plan, the Company completed a strategic
review of its retail business and determined that it would close
271 additional retail stores, and, accordingly, it recorded a store
impairment charge to write down the associated operating lease
right-of-use assets and property and equipment. In addition, during
the third quarter of 2024, the Company also conducted a review of
its various strategic assets and determined that it would
discontinue the use of certain non-core assets, at which time
impairment losses were recorded to write down the carrying value of
these assets to the Company's best estimate of their fair
value.
|
(3)
|
During the three months
ended September 30, 2024, the office real estate optimization
charges primarily relate to the abandonment of leased real estate
and the related right-of-use assets and property and equipment in
connection with the Company's continuous evaluation of corporate
office real estate space in response to its ongoing flexible work
arrangement.
|
(4)
|
Represents the
corresponding tax benefit or expense related to the items excluded
from Adjusted EPS above. The nature of each non-GAAP adjustment is
evaluated to determine whether a discrete adjustment should be made
to the adjusted income tax provision.
|
Cautionary Statement Concerning Forward-Looking
Statements
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements made by or on behalf of
CVS Health Corporation. Statements in this press release that are
forward-looking include, but are not limited to, references to CVS
Health's estimates for certain financial metrics for the three
months ended September 30, 2024
presented in this press release, all of which are preliminary. By
their nature, all forward-looking statements are not guarantees of
future performance or results and are subject to risks and
uncertainties that are difficult to predict and/or quantify. Actual
results may differ materially from those contemplated by the
forward-looking statements due to the risks and uncertainties
described in our Securities and Exchange Commission filings,
including those set forth in the Risk Factors section and under the
heading "Cautionary Statement Concerning Forward-Looking
Statements" in our most recently filed Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
You are cautioned not to place undue reliance on CVS Health's
forward-looking statements. CVS Health's forward-looking statements
are and will be based upon management's then-current views and
assumptions regarding preliminary financial estimates and
projections, future events and operating performance, and are
applicable only as of the dates of such statements. CVS Health does
not assume any duty to update or revise forward-looking statements,
whether as a result of new information, future events,
uncertainties or otherwise.
About CVS Health
CVS Health® is the leading health solutions company, delivering
care like no one else can. We reach more people and improve the
health of communities across America through our local presence,
digital channels and over 300,000 dedicated colleagues — including
more than 40,000 physicians, pharmacists, nurses and nurse
practitioners. Wherever and whenever people need us, we help them
with their health — whether that's managing chronic diseases,
staying compliant with their medications or accessing affordable
health and wellness services in the most convenient ways. We help
people navigate the health care system — and their personal health
care — by improving access, lowering costs and being a trusted
partner for every meaningful moment of health. And we do it all
with heart, each and every day. Follow @CVSHealth on social
media.
Media contact
Ethan
Slavin
860-273-6095
Ethan.Slavin@CVSHealth.com
Investor contact
Larry McGrath
800-201-0938
InvestorInfo@CVSHealth.com
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SOURCE CVS Health