UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): | November
18, 2021 ( |
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: | ( |
Former name or former address, if changed since last report: | N/A |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | |
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. | ☐ |
Section 2 - Financial Information
Item 2.06 | Material Impairments |
CVS Health Corporation (“CVS Health”), as part of its strategic review of its retail business, has announced the creation of new formats for its stores to continue to drive higher engagement with customers. As part of this review, CVS Health has been evaluating changes in population, consumer buying patterns and future health needs to ensure it has the right kinds of stores in the right locations for consumers and for the business. In connection with this initiative, the Board of Directors of CVS Health, on November 17, 2021, authorized the closing of approximately 900 stores over the next three years. It is expected that approximately 300 stores will be closed each year. A large percentage of the CVS Health colleagues employed at the impacted stores are expected to be offered roles in other locations or different opportunities. The aggregate number of stores that will be closed, the number that will be closed in each year and the time period over which the store closures will occur may change.
CVS Health currently estimates that it expects to incur total impairment charges of approximately $1.0 billion to $1.2 billion, and expects to record these charges as an impairment of operating lease right-of-use assets and property and equipment in the three months and year ending December 31, 2021. The amount of this expected impairment is an estimate, and the amount and timing of actual charges may vary due to a variety of factors. These costs incurred in connection with the store closings largely relate to the asset impairment charges which are non-cash in nature.
Section 7 - Regulation FD
Item 7.01 Regulation FD Disclosure
On November 18, 2021, CVS Health issued a press release announcing the steps it is taking to support its health care strategy, certain management changes in its retail segment and its plan for store closures described in Item 2.06 of this Current Report on Form 8-K. In addition, CVS Health updated its full year 2021 guidance. The press release is furnished herewith as Exhibit 99.1 and hereby incorporated in this Item 7.01 by reference.
The information in Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) or otherwise subject to the liabilities of that Section, and shall not be or be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
The exhibits to this Current Report on Form 8-K are as follows:
INDEX TO EXHIBITS
Exhibit | Description | |
99.1 | Press Release of CVS Health Corporation dated November 18, 2021 | |
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CVS HEALTH CORPORATION | ||
Date: November 18, 2021 | By: | /s/ Shawn M. Guertin |
Shawn M. Guertin | ||
Executive Vice President and Chief Financial Officer
| ||
Exhibit 99.1
CVS Health Announces Steps to Accelerate Omnichannel Health Strategy
Prem Shah to become company’s first Chief Pharmacy Officer
Shah and Michelle Peluso named Co-Presidents of retail business effective January 1, 2022
New retail footprint strategy aligned to evolving consumer needs
WOONSOCKET, R.I., Nov. 18, 2021 — CVS Health (NYSE: CVS) today announced several steps to support its strategy of making health care more affordable, accessible, and convenient for consumers.
Prem Shah has been named to the newly created role of Chief Pharmacy Officer and will oversee the omnichannel pharmacy strategy, effective immediately. On January 1, 2022, Shah and Michelle Peluso will become Co-Presidents of CVS Health’s retail business, with Peluso overseeing front-store strategy and operations. Shah joined CVS Health in 2013 and is currently Executive Vice President, Specialty Pharmacy and Product Innovation. Peluso joined CVS Health in 2021 as Executive Vice President and Chief Customer Officer.
“Prem and Michelle are ideally suited for their new roles and will be instrumental to CVS Health as we continue to execute against our strategy of delivering an integrated health care experience centered around the consumer,” said Karen S. Lynch, President and CEO of CVS Health.
Shah will report directly to Lynch in his new role, and Peluso will continue to report directly to Lynch.
In connection with the changes announced today, Neela Montgomery, currently Executive Vice President and President, CVS Retail/Pharmacy, has decided to leave the company. Montgomery will remain in her role until the end of 2021, ensuring a smooth transition of responsibilities.
Lynch added, “We appreciate Neela’s contributions during an incredibly challenging and dynamic period when our retail stores played a critical role in the country’s fight against COVID-19. We value the leadership she has provided during a time of evolution in our business and wish her continued success.”
As part of the company’s strategic review of its retail business, CVS Health will also create new store formats to drive higher engagement with consumers. Three distinct models will serve as community health destinations:
· | Sites dedicated to offering primary care services; |
· | An enhanced version of HealthHUB locations with products and services designed for everyday health and wellness needs; and |
· | Traditional CVS Pharmacy stores that provide prescription services and health, wellness, personal care and other convenient retail offerings. |
The company has been evaluating changes in population, consumer buying patterns and future health needs to ensure it has the right kinds of stores in the right locations for consumers and for the business. As part of this initiative, CVS Health will reduce store density in certain locations and close approximately 300 stores a year for the next three years. The company is committed to offering impacted colleagues roles in other locations or different opportunities as part of its overall workforce strategy. These changes will begin in the Spring of 2022.
“Our retail stores are fundamental to our strategy and who we are as a company,” said Lynch. “We remain focused on the competitive advantage provided by our presence in thousands of communities across the country, which complements our rapidly expanding digital presence.”
In connection with the planned store closures, the company expects to record an impairment charge in the fourth quarter of 2021 of between $1.0 billion and $1.2 billion or between $0.56 and $0.67 of diluted earnings per share related to the write down of operating lease right-of-use assets and property and equipment. As a result of the planned store closures, the company has revised its full year 2021 GAAP EPS guidance range to $5.46 to $5.67 from $6.13 to $6.23. These impairment charges are excluded from the company’s calculation of Adjusted EPS. The company expects the impact to Adjusted EPS to be immaterial in 2021 and 2022, and modestly accretive in 2023 and thereafter. The company confirms its full year 2021 Adjusted EPS guidance range of $7.90 to $8.00 and confirms its full year 2021 cash flow from operations guidance range of $13.0 billion to $13.5 billion.
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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. Learn more at www.cvshealth.com.
Cautionary Statement Concerning Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. Statements in this press release that are forward-looking include references to CVS Health Corporation’s omnichannel pharmacy strategy leadership changes in its retail segment, changes to its retail footprint and its full year 2021 guidance, including the information included in the reconciliations. By their nature, all forward-looking statements are not guarantees of future performance or results and are subject to risks and uncertainties that are difficult to predict and/or quantify. Actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons as described in our Securities and Exchange Commission (“SEC”) filings, including those set forth in the Risk Factors section and under the heading “Cautionary Statement Concerning Forward-Looking Statements” in our most recently filed Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021.
You are cautioned not to place undue reliance on CVS Health’s forward-looking statements. CVS Health’s forward-looking statements are and will be based upon management’s then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements. CVS Health does not assume any duty to update or revise forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise.
Non-GAAP Measures
The press release includes Adjusted EPS, a non-GAAP financial measure that the company uses to describe its performance. 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 are provided as supplemental information to the financial measures presented in this press release that are calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP. The Company’s definitions of its non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies.
Adjusted EPS is calculated by dividing adjusted income attributable to CVS Health by the Company’s 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 and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance, such as acquisition-related integration costs, store impairments, goodwill impairments, acquisition purchase price adjustments outside of the acquisition accounting measurement period, gains/losses on divestitures, losses on early extinguishment of debt and the corresponding income tax benefit or expense related to the items excluded from adjusted income attributable to CVS Health. The adjustments between GAAP diluted EPS and Adjusted EPS include, as applicable, adding back amortization of intangible assets, integration costs related to the Company’s acquisition of Aetna Inc., the LTC goodwill impairment, an acquisition purchase price adjustment outside of the acquisition accounting measurement period, a loss on early extinguishment of debt and the store impairments described in this press release.
The following reconciliations of projected net income attributable to CVS Health to projected adjusted income attributable to CVS Health and calculations of projected GAAP diluted EPS and projected Adjusted EPS contain forward-looking information. All forward-looking information involves risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking information for a number of reasons as described in our SEC filings, including those set forth in the Risk Factors section and under the heading “Cautionary Statement Concerning Forward-Looking Statements” in our most recently filed Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021.
Year Ending December 31, 2021 | ||||||||||||||||
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) | $ | 7,258 | $ | 5.46 | $ | 7,537 | $ | 5.67 | ||||||||
Amortization of intangible assets | 2,260 | 1.70 | 2,260 | 1.70 | ||||||||||||
Acquisition-related integration costs | 160 | 0.12 | 160 | 0.12 | ||||||||||||
Store impairments | 1,200 | 0.90 | 1,000 | 0.75 | ||||||||||||
Goodwill impairment | 431 | 0.33 | 431 | 0.33 | ||||||||||||
Acquisition purchase price adjustment outside of measurement period | (61 | ) | (0.05 | ) | (61 | ) | (0.05 | ) | ||||||||
Loss on early extinguishment of debt | 363 | 0.27 | 363 | 0.27 | ||||||||||||
Tax impact of non-GAAP adjustments | (1,101 | ) | (0.83 | ) | (1,050 | ) | (0.79 | ) | ||||||||
Adjusted income attributable to CVS Health | $ | 10,510 | $ | 7.90 | $ | 10,640 | $ | 8.00 | ||||||||
Weighted average diluted shares outstanding | 1,330 | 1,330 |
Media contact
T.J. Crawford
212-457-0583
CrawfordT2@CVSHealth.com
Investor contact
Susie Lisa, CFA
401-770-4050
Susan.Lisa@CVSHealth.com
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Cover |
Nov. 17, 2021 |
---|---|
Cover [Abstract] | |
Document Type | 8-K |
Amendment Flag | false |
Document Period End Date | Nov. 17, 2021 |
Entity File Number | 001-01011 |
Entity Registrant Name | CVS HEALTH CORPORATION |
Entity Central Index Key | 0000064803 |
Entity Tax Identification Number | 05-0494040 |
Entity Incorporation, State or Country Code | DE |
Entity Address, Address Line One | One CVS Drive |
Entity Address, City or Town | Woonsocket |
Entity Address, State or Province | RI |
Entity Address, Postal Zip Code | 02895 |
City Area Code | 401 |
Local Phone Number | 765-1500 |
Written Communications | false |
Soliciting Material | false |
Pre-commencement Tender Offer | false |
Pre-commencement Issuer Tender Offer | false |
Title of 12(b) Security | Common Stock, par value $0.01 per share |
Trading Symbol | CVS |
Security Exchange Name | NYSE |
Entity Emerging Growth Company | false |
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