WOONSOCKET, R.I., Dec. 15, 2016 /PRNewswire/ -- CVS Health (NYSE:
CVS) held its annual Analyst Day in New
York City today, outlining strategies for how the company
will drive long-term growth and shareholder value. In his opening
remarks, CVS Health President and CEO Larry
Merlo stated, "By making care more affordable, accessible
and effective, we can deliver value to all health care
stakeholders, allowing us to be a partner of choice as they look to
achieve their health care goals. Despite all the changes happening
in health care, success will ultimately be determined by how
effective you are at executing on these three objectives. And we
remain confident that CVS Health is well-positioned to deliver on
all three."
"We continue to have the most extensive suite of enterprise
assets," continued Merlo. "On a standalone basis, each one would be
market leading. Yet what really sets them apart is our ability,
largely through technology, to integrate pharmacy care from the
payor, to the provider, to the patient." Borrowing a colloquial
phrase widely used in telecommunications to refer to the final leg
of delivering services to customers, Merlo declared, "We own the
last mile of service in the delivery of health care. If you think
about all of our enterprise assets, each one delivers care directly
to the health care consumer. And keep in mind that retail pharmacy
is quite often the front door to health care, with the highest
frequency of patient interaction. The face-to-face interactions
between patients and our 30,000 pharmacists and clinicians provide
us with an unmatched ability to help change consumer behavior and
drive better health outcomes at a lower cost. With increasing
consumerism and what we call the "retailization" of health care,
improving clinical outcomes and patient satisfaction is of
significant value to our health care partners."
Also at the meeting, Dave Denton,
executive vice president and chief financial officer, reviewed the
company's expectations for 2016 and 2017 while also discussing the
company's long-term growth targets and plans to maximize
shareholder value.
"Over the past three years, our strong earnings growth, solid
working capital management, disciplined capital investments and
sound debt management have enabled us to generate a significant
amount of cash that has been made available for enhancing
shareholder value, and we have done just that. We have a proven
track record of success in meeting our long-term growth targets and
we are targeting, on average, 10% growth in Adjusted EPS
longer-term. We also expect $7 billion to $8
billion of cash to be available annually for enhancing
shareholder value."
"Given the recent changes in the marketplace and our outlook for
2017, we have put a plan in place to return to more robust levels
of growth," Denton added. "One element of this plan relates to our
multi-year enterprise streamlining initiative, which aims to
further improve productivity and to solidify the company's low-cost
provider status. We expect to deliver approximately $700 to $750 million in annual savings across the
enterprise by 2021, with cumulative savings of nearly $3 billion over the next five years. This will
also free up capital for strategic investments that can help drive
the continued growth and success of the enterprise," Denton
concluded.
2016 and 2017 Guidance
GAAP diluted EPS from continuing operations for 2016 and 2017
has been updated to reflect an estimated $35
million asset impairment charge and an estimated
$230 million lease obligation charge,
respectively, for store rationalization related to the enterprise
streamlining initiative. GAAP diluted EPS is now expected to be in
the range of $4.82 to $4.88 in 2016
and $5.02 to $5.18 in 2017. The
company reaffirmed its previous Adjusted EPS outlook for both 2016
and 2017. The company expects to deliver Adjusted EPS of
$5.77 to $5.83 in 2016 and
$5.77 to $5.93 in 2017. The Adjusted
EPS guidance assumes the completion of $5
billion in share repurchases during 2017. The company
reaffirmed its previous cash flow outlook for 2016, and expects to
deliver cash flow from operations of $9.1
billion to $9.3 billion and free cash flow of $6.8 billion to $7.0 billion this year. In 2017,
the company expects to deliver cash flow from operations of
$7.7 billion to $8.6 billion and free
cash flow of $6.0 billion to $6.4
billion.
The company also announced that its Board of Directors has
approved an 18 percent increase in the annual dividend in 2017, an
increase that translates to $2.00 per
share, up 30 cents per share over
2016. This is the company's fourteenth consecutive year with a
dividend increase. In addition, as stated on the company's third
quarter earnings call, with a new $15
billion share repurchase authorization, the company now has
more than $18 billion authorized to
be used for share repurchases over the next few years.
In other presentations, Jon
Roberts, president of CVS Caremark, addressed how CVS
Health's pharmacy benefit management business continues to be the
PBM of choice with another successful selling season and is
continually innovating to meet the latest health care challenges.
Alan Lotvin, executive vice
president of CVS Specialty, discussed how the unique integrated
PBM-specialty model is best-positioned to meet the diverse and
complex needs of patients, payors, and providers. Helena Foulkes, president of CVS Pharmacy,
outlined how the retail pharmacy business can be the best partner
for all PBMs and health plans by leveraging the company's
enterprise assets and offering a menu of bundled services that can
provide significant value to payors. She also highlighted growth
strategies for the front store, long-term care pharmacy and
MinuteClinic businesses.
Audio and Video Webcast
The company simultaneously broadcast an audio and video webcast
of the meeting through the Investor Relations section of the CVS
Health website at http://investors.cvshealth.com. This webcast and
supporting materials will be archived and available on the website
for a one-year period following the meeting.
About CVS Health
CVS Health is a pharmacy innovation company helping people on
their path to better health. Through its more than 9,600 retail
pharmacies, more than 1,100 walk-in medical clinics, a leading
pharmacy benefits manager with more than 80 million plan members, a
dedicated senior pharmacy care business serving more than one
million patients per year, and expanding specialty pharmacy
services, the company enables people, businesses and communities to
manage health in more affordable and effective ways. This unique
integrated model increases access to quality care, delivers better
health outcomes and lowers overall health care costs. Find more
information about how CVS Health is shaping the future of health at
https://www.cvshealth.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. By their nature, all
forward-looking statements involve risks and uncertainties. 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 filings, including those set
forth in the Risk Factors section and under the section entitled
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K and Quarterly Report
on Form 10-Q.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures,
namely Adjusted EPS and Free Cash Flow. In accordance with SEC
regulations, you can find the definitions of the Non-GAAP items
mentioned, as well as the reconciliations to comparable GAAP
measures, further in this press release.
Non-GAAP Financial Measures
The following provides reconciliations of certain non-GAAP
financial measures presented in this Form 8-K to the most directly
comparable financial measures calculated and presented in
accordance with GAAP. The Company uses the non-GAAP measures
"Adjusted EPS" and "Free Cash Flow" to assess and analyze
underlying business performance and trends. Management believes
that providing these non-GAAP measures enhances investors'
understanding of the Company's performance.
The Company defines Adjusted Earnings per Share, or Adjusted
EPS, as income from continuing operations excluding the impact of
the amortization of intangible assets, acquisition-related
integration costs, loss on early extinguishment of debt, charge in
connection with store rationalization, charge related to a disputed
1999 legal settlement and loss on settlement of defined benefit
pension plan divided by the Company's weighted average diluted
shares outstanding. The Company believes that this measure enhances
investors' ability to compare the Company's past financial
performance with its current performance.
The Company defines Free Cash Flow as net cash provided by
operating activities less net additions to properties and equipment
(i.e., additions to property and equipment plus proceeds from
sale-leaseback transactions). Management uses this non-GAAP
financial measure for internal comparisons and finds it useful in
assessing year-over-year cash flow performance.
These non-GAAP financial measures are provided as supplemental
information to the financial measures presented in this press
release that are calculated and presented in accordance with GAAP.
Adjusted EPS should be considered in addition to, rather than as a
substitute for, income before income tax provision as a measure of
our performance. Free Cash Flow should be considered in addition
to, rather than as a substitute for, net cash provided by operating
activities as a measure of our liquidity. The Company's definitions
of Adjusted EPS and Free Cash Flow may not be comparable to
similarly titled measurements reported by other companies.
The Company has not provided a reconciliation of the long-term
Adjusted EPS and cash available for enhancing shareholder value
targets announced today to GAAP EPS and net cash provided by
operating activities. The Company is unable to reasonably
estimate the GAAP items excluded from the multi-year, long-term
Adjusted EPS and cash available for enhancing shareholder value
targets.
Adjusted Earnings Per Share Guidance
(Unaudited)
The following reconciliation of estimated income before income
tax provision to estimated adjusted earnings per share contains
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 Securities
and Exchange Commission filings, including those set forth in the
Risk Factors section and under the section entitled "Cautionary
Statement Concerning Forward-Looking Statements" in our most
recently filed Annual Report on Form 10-K and Quarterly Report on
Form 10-Q. See also "Non-GAAP Financial Measures" above for more
information on how we calculate Adjusted EPS.
In millions, except per share amounts
|
|
Year
Ending
December 31, 2016
|
|
Year Ending
December 31, 2017
|
|
|
|
|
|
|
|
|
|
Income before income
tax provision(1)
|
|
$
|
8,553
|
|
|
$
|
8,654
|
|
|
$
|
8,564
|
|
|
$
|
8,862
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
798
|
|
|
798
|
|
|
825
|
|
|
825
|
|
Acquisition-related
integration costs(1)
|
|
207
|
|
|
207
|
|
|
—
|
|
|
—
|
|
Loss on early
extinguishment of debt
|
|
643
|
|
|
643
|
|
|
—
|
|
|
—
|
|
Charge in connection
with store rationalization(2)
|
|
35
|
|
|
35
|
|
|
230
|
|
|
230
|
|
Charge related to a
disputed 1999 legal settlement
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
Loss on settlement of
defined benefit pension plan
|
|
—
|
|
|
—
|
|
|
220
|
|
|
220
|
|
Adjusted income
before income tax provision
|
|
10,239
|
|
|
10,340
|
|
|
9,839
|
|
|
10,137
|
|
Adjusted income tax
provision
|
|
3,973
|
|
|
4,012
|
|
|
3,827
|
|
|
3,953
|
|
Adjusted income from
continuing operations
|
|
6,266
|
|
|
6,328
|
|
|
6,012
|
|
|
6,184
|
|
Net income
attributable to noncontrolling interest
|
|
(2)
|
|
|
(2)
|
|
|
(2)
|
|
|
(2)
|
|
Adjusted income
allocable to participating securities
|
|
(32)
|
|
|
(32)
|
|
|
(25)
|
|
|
(25)
|
|
Adjusted income from
continuing operations attributable to CVS Health
|
|
$
|
6,232
|
|
|
$
|
6,294
|
|
|
$
|
5,985
|
|
|
$
|
6,157
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted shares outstanding
|
|
1,080
|
|
|
1,080
|
|
|
1,038
|
|
|
1,038
|
|
Adjusted earnings per
share
|
|
$
|
5.77
|
|
|
$
|
5.83
|
|
|
$
|
5.77
|
|
|
$
|
5.93
|
|
(1)
|
2016 guidance
includes integration costs for the acquisitions of Omnicare and the
pharmacies and clinics of Target for the nine months ended
September 30, 2016 and excludes estimated integration costs for the
period from October 1, 2016 to December 31, 2016. 2017 guidance
excludes estimated integration costs for the acquisition of
Omnicare.
|
(2)
|
The 2016 and 2017
charge in connection with store rationalization represent an
estimated asset impairment charge and an estimated lease obligation
charge, respectively, in connection with planned store closures
related to our enterprise streamlining initiative.
|
Free Cash Flow Guidance
(Unaudited)
The following reconciliation of net cash provided by operating
activities to free cash flow contains 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 Securities and Exchange Commission filings, including those set
forth in the Risk Factors section and under the section entitled
"Cautionary Statement Concerning Forward-Looking Statements" in our
most recently filed Annual Report on Form 10-K and Quarterly Report
on Form 10-Q. See also "Non-GAAP Financial Measures" above for more
information on how we calculate Free Cash Flow.
In millions
|
|
Year Ending
December 31, 2016
|
|
Year
Ending
December 31, 2017
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
9,075
|
|
|
$
|
9,270
|
|
|
$
|
7,700
|
|
|
$
|
8,600
|
|
Subtract: Additions
to property and equipment
|
|
(2,550)
|
|
|
(2,500)
|
|
|
(2,000)
|
|
|
(2,400)
|
|
Add: Proceeds from
sale-leaseback transactions
|
|
275
|
|
|
230
|
|
|
300
|
|
|
200
|
|
Free cash
flow
|
|
$
|
6,800
|
|
|
$
|
7,000
|
|
|
$
|
6,000
|
|
|
$
|
6,400
|
|
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SOURCE CVS Health