CVS HEALTH Corp false 0000064803 0000064803 2024-10-17 2024-10-17

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 17, 2024

 

 

 

LOGO

CVS HEALTH CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-01011   05-0494040
(State or Other Jurisdiction
of Incorporation)		  

(Commission

File Number)

   (I.R.S. Employer
Identification No.)

One CVS Drive

Woonsocket, Rhode Island 02895

(Address of Principal Executive Offices, and Zip Code)

(401) 765-1500

Registrant’s Telephone Number, Including Area Code

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

 

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:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading
Symbol(s)

  

Name of each exchange

on which registered

Common Stock, par value $0.01 per share   CVS   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 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. ☐

 

 

 

Item 2.02

Results of Operations and Financial Condition.

The information set forth under Item 7.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.02.

 

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On October 18, 2024, CVS Health Corporation (the “Company”) announced that the Board of Directors (the “Board”) of the Company appointed J. David Joyner as President and Chief Executive Officer of the Company, effective as of October 17, 2024. Karen S. Lynch ceased to serve as President and Chief Executive Officer of the Company and resigned as a member of the Board on the same day. In connection with Mr. Joyner’s appointment as President and Chief Executive Officer of the Company, the Board appointed Mr. Joyner as a member of the Board and the Executive Committee of the Board.

Effective October 17, 2024, the Board has also appointed current Chairman Roger N. Farah as Executive Chairman of the Board.

Immediately prior to his appointment as President and Chief Executive Officer, Mr. Joyner, age 60, served as the Executive Vice President and President of Pharmacy Services of the Company since January 2023. Mr. Joyner previously served as the Company’s Executive Vice President – Sales and Account Services, CVS Caremark from March 2011 through December 2019. Mr. Joyner has served as a Strategic Business Advisor to gWell, Inc., a wellness technology company, since July 2021, an Advisor to Podimetrics Inc., a health care company focused on the identification and treatment of diabetic foot ulcers, since September 2020, and as a member of the Advisory Council to the Rawls College of Business of Texas Tech University since July 2020. Mr. Joyner formerly served as an Advisor to EQRx, a biopharmaceutical company that aimed to develop and sell lower-cost versions of existing drugs, from November 2020 until January 2023, and as a Special Advisor to BCBS Association, a national federation of independent and locally operated Blue Cross and Blue Shield companies, from February 2022 through October 2022. He also was a member of the boards of directors of HomeFree Pharmacy Services from June 2021 until January 2023 and of Panther Specialty Pharmacy from July 2022 until January 2023. Mr. Joyner holds a bachelor’s degree in finance from The Rawls College of Business at Texas Tech University. Mr. Joyner has no family relationship to the Company nor to any of its directors or executive officers, and there are no transactions in which Mr. Joyner has an interest requiring disclosure under Item 404(a) of Regulation S-K. There is no arrangement or understanding between Mr. Joyner and any other person pursuant to which Mr. Joyner was appointed as an officer or a director of the Company.

In connection with Ms. Lynch’s departure, she will be eligible to receive the separation benefits applicable upon a “qualifying event” (not in connection with a change in control) under her amended and restated employment agreement with the Company, dated November 5, 2020, although with respect to her outstanding equity awards, the partial vesting provisions applicable thereto have been eliminated, such that Ms. Lynch remains eligible to vest in all such awards in full (subject to the achievement of performance metrics with respect to any performance stock unit awards). The receipt of such benefits is contingent upon Ms. Lynch’s execution of a customary release of claims in favor of the Company and compliance with restrictive covenants. In connection with her departure, the Company and Ms. Lynch entered into a letter agreement (the “Lynch Letter Agreement”) setting forth the foregoing benefits and the agreement with Ms. Lynch to provide advisory services to the Company for a term of six months following her departure. In consideration of the advisory services, during the term, Ms. Lynch will receive a monthly advisory fee of $375,000 and continued Company-provided security services. The Company and Ms. Lynch have agreed to amend her restrictive covenant agreement to extend the non-competition and non-solicitation provisions to a period of thirty (30) months from the date of her departure.

The foregoing summary of the Lynch Letter Agreement is only a summary and is qualified in its entirety by the full text of the Lynch Letter Agreement, a copy of which will be filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2024.

 

Item 7.01.

Regulation FD Disclosure.

On October 18, 2024, the Company issued a press release announcing the appointment of Mr. Joyner as President and Chief Executive Officer of the Company and the departure of Ms. Lynch, which also included certain preliminary third quarter 2024 results. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 and this Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in Item 2.02 and this Item 7.01 shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
Number

   

Description

99.1    Press Release, dated October 18, 2024 (furnished under Item 7.01).
104    Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

 

-2-

SIGNATURE

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 thereunto duly authorized.

 

Date: October 18, 2024   CVS HEALTH CORPORATION
    By:  

/s/ Kristina V. Fink

    Name:   Kristina V. Fink
    Title:   Senior Vice President, Chief Governance Officer and Corporate Secretary

 

-3-

Exhibit 99.1

PRESS RELEASE

CVS Health Appoints David Joyner President and Chief Executive Officer

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, RI (October 18, 2024) – 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.

v3.24.3
Document and Entity Information
Oct. 17, 2024
Cover [Abstract]  
Entity Registrant Name CVS HEALTH Corp
Amendment Flag false
Entity Central Index Key 0000064803
Document Type 8-K
Document Period End Date Oct. 17, 2024
Entity Incorporation State Country Code DE
Entity File Number 001-01011
Entity Tax Identification Number 05-0494040
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
Security 12b Title Common Stock, par value $0.01 per share
Trading Symbol CVS
Security Exchange Name NYSE
Entity Emerging Growth Company false
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