Why is WellPoint (Elevance Health) updating its 2013 EPS guidance?

WellPoint is updating its 2013 EPS guidance primarily due to two significant events: the early retirement of approximately $1.1 billion in outstanding debt and a favorable tax election made subsequent to the AMERIGROUP Corporation acquisition. These events have offsetting impacts on reported GAAP earnings per share.

How does this affect the company's overall 2013 earnings outlook?

While the GAAP EPS guidance is lowered by $0.11 to at least $7.89 due to the debt retirement expense and tax benefits, the adjusted EPS guidance remains unchanged at a minimum of $8.00 for the full year 2013. This indicates that the core operational performance is still expected to meet prior adjusted earnings targets.

ELV 8-K: Regulation FD — Aug 13, 2013

Q: What is the financial impact of the debt repurchase?

The early repurchase of approximately $1.1 billion in outstanding notes is expected to result in an after-tax expense of approximately $97 million during the third quarter of 2013. This translates to a $0.32 reduction in GAAP EPS for the full year.

Q: What is the financial impact of the tax election?

A favorable tax election related to the AMERIGROUP acquisition is expected to provide net tax benefits of approximately $65 million, resulting in a positive impact of $0.21 per share on the company's full-year 2013 GAAP EPS.

Summary

Elevance Health, Inc. (then WellPoint, Inc.) filed this Form 8-K on August 13, 2013, to disclose an update to its full-year 2013 earnings per share (EPS) guidance. The company announced its expectation to repurchase approximately $1.1 billion of outstanding notes during the third quarter of 2013. This early debt retirement is projected to incur an after-tax expense of approximately $97 million, while a favorable tax election related to the AMERIGROUP Corporation acquisition is expected to provide net tax benefits of approximately $65 million.

Key Highlights

1WellPoint (now Elevance Health) announced an update to its 2013 full-year EPS guidance.
2The company expects to complete the repurchase of approximately $1.1 billion in outstanding notes during Q3 2013.
3The early retirement of debt is anticipated to result in an after-tax expense of approximately $97 million.
4A favorable tax election post-AMERIGROUP acquisition is expected to yield net tax benefits of approximately $65 million.
5GAAP EPS guidance for full year 2013 is reduced by $0.11 to at least $7.89, reflecting these items.
6Adjusted EPS guidance remains at least $8.00 for full year 2013, excluding specified items.
7The company also issued a press release regarding early results and pricing for its 'Dutch Auction' cash tender offers for certain notes.

Elevance Health, Inc. 8-K Report, Regulation FD Disclosure (Aug 13, 2013)

Summary

Key Highlights

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