Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 09, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | CVS HEALTH Corp | ||
Entity Central Index Key | 64,803 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 81,440,458,676 | ||
Entity Common Stock, Shares Outstanding | 1,014,532,157 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Consolidated Statements of Income | |||
Net revenues | $ 184,765 | $ 177,526 | $ 153,290 |
Cost of revenues | 156,220 | 148,669 | 126,762 |
Gross profit | 28,545 | 28,857 | 26,528 |
Operating expenses | 19,028 | 18,491 | 17,053 |
Operating profit | 9,517 | 10,366 | 9,475 |
Interest expense, net | 1,041 | 1,058 | 838 |
Loss on early extinguishment of debt | 643 | 0 | |
Other expense | 208 | 28 | 21 |
Income before income tax provision | 8,268 | 8,637 | 8,616 |
Income tax provision | 1,637 | 3,317 | 3,386 |
Income from continuing operations | 6,631 | 5,320 | 5,230 |
Income (loss) from discontinued operations, net of tax | (8) | (1) | 9 |
Net income | 6,623 | 5,319 | 5,239 |
Net income attributable to noncontrolling interest | (1) | (2) | (2) |
Net income attributable to CVS Health | $ 6,622 | $ 5,317 | $ 5,237 |
Basic earnings per share: | |||
Income from continuing operations attributable to CVS Health (in dollars per share) | $ 6.48 | $ 4.93 | $ 4.65 |
Income (loss) from discontinued operations attributable to CVS Health (in dollars per share) | (0.01) | 0.01 | |
Net income attributable to CVS Health (in dollars per share) | $ 6.47 | $ 4.93 | $ 4.66 |
Weighted average shares outstanding (in shares) | 1,020 | 1,073 | 1,118 |
Diluted earnings per share: | |||
Income from continuing operations attributable to CVS Health (in dollars per share) | $ 6.45 | $ 4.91 | $ 4.62 |
income (loss) from discontinued operations attributable to CVS Health (in dollars per share) | (0.01) | 0.01 | |
Net income attributable to CVS Health (in dollars per share) | $ 6.44 | $ 4.90 | $ 4.63 |
Weighted average shares outstanding (in shares) | 1,024 | 1,079 | 1,126 |
Dividends declared per share (in dollars per share) | $ 2 | $ 1.70 | $ 1.40 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Consolidated Statements of Comprehensive Income | |||
Net income | $ 6,623 | $ 5,319 | $ 5,239 |
Other comprehensive income: | |||
Foreign currency translation adjustments, net of tax | (2) | 38 | (100) |
Net cash flow hedges, net of tax | (10) | 2 | 2 |
Pension and other postretirement benefits, net of tax | 152 | 13 | (43) |
Total other comprehensive income (loss) | 140 | 53 | (141) |
Comprehensive income | 6,763 | 5,372 | 5,098 |
Comprehensive income attributable to noncontrolling interest | (1) | (2) | (2) |
Comprehensive income attributable to CVS Health | $ 6,762 | $ 5,370 | $ 5,096 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Assets: | ||
Cash and cash equivalents | $ 1,696 | $ 3,371 |
Short-term investments | 111 | 87 |
Accounts receivable, net | 13,181 | 12,164 |
Inventories | 15,296 | 14,760 |
Other current assets | 945 | 660 |
Total current assets | 31,229 | 31,042 |
Property and equipment, net | 10,292 | 10,175 |
Goodwill | 38,451 | 38,249 |
Intangible assets, net | 13,630 | 13,511 |
Other assets | 1,529 | 1,485 |
Total assets | 95,131 | 94,462 |
Liabilities: | ||
Accounts payable | 8,863 | 7,946 |
Claims and discounts payable | 10,355 | 9,451 |
Accrued expenses | 6,609 | 6,937 |
Short-term debt | 1,276 | 1,874 |
Current portion of long-term debt | 3,545 | 42 |
Total current liabilities | 30,648 | 26,250 |
Long-term debt | 22,181 | 25,615 |
Deferred income taxes | 2,996 | 4,214 |
Other long-term liabilities | 1,611 | 1,549 |
Shareholders' equity: | ||
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding | ||
Common stock, par value $0.01: 3,200 shares authorized; 1,712 shares issued and 1,014 shares outstanding at December 31, 2017 and 1,705 shares issued and 1,061 shares outstanding at December 31, 2016 | 17 | 17 |
Treasury stock, at cost: 697 shares at December 31, 2017 and 643 shares at December 31, 2016 | (37,765) | (33,452) |
Shares held in trust: 1 share at December 31, 2017 and December 31, 2016 | (31) | (31) |
Capital surplus | 32,079 | 31,618 |
Retained earnings | 43,556 | 38,983 |
Accumulated other comprehensive income (loss) | (165) | (305) |
Total CVS Health shareholders' equity | 37,691 | 36,830 |
Noncontrolling interest | 4 | 4 |
Total shareholders' equity | 37,695 | 36,834 |
Total liabilities and shareholders' equity | $ 95,131 | $ 94,462 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Consolidated Balance Sheets | ||
Preferred Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock, shares authorized (in shares) | 0.1 | 0.1 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
Preferred Stock, shares outstanding (in shares) | 0 | 0 |
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized (in shares) | 3,200 | 3,200 |
Common Stock, shares issued (in shares) | 1,712 | 1,705 |
Common Stock, shares outstanding (in shares) | 1,014 | 1,061 |
Treasury Stock, shares (in shares) | 697 | 643 |
Shares held in trust: 1 share at September 30, 2017 and December 31, 2016 (in shares) | 1 | 1 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | |||
Cash receipts from customers | $ 176,594 | $ 172,310 | $ 148,954 |
Cash paid for inventory and prescriptions dispensed by retail network pharmacies | (149,279) | (142,511) | (122,498) |
Cash paid to other suppliers and employees | (15,348) | (15,478) | (14,035) |
Interest received | 21 | 20 | 21 |
Interest paid | (1,072) | (1,140) | (629) |
Income taxes paid | (2,909) | (3,060) | (3,274) |
Net cash provided by operating activities | 8,007 | 10,141 | 8,539 |
Cash flows from investing activities: | |||
Purchases of property and equipment | (1,918) | (2,224) | (2,367) |
Proceeds from sale-leaseback transactions | 265 | 230 | 411 |
Proceeds from sale of property and equipment and other assets | 33 | 37 | 35 |
Acquisitions (net of cash acquired) and other investments | (1,287) | (539) | (11,475) |
Purchase of available-for-sale investments | (86) | (65) | (267) |
Maturity of available-for-sale investments | 61 | 91 | 243 |
Net cash used in investing activities | (2,932) | (2,470) | (13,420) |
Cash flows from financing activities: | |||
Increase (decrease) in short-term debt | (598) | 1,874 | (685) |
Proceeds from issuance of long-term debt | 3,455 | 14,805 | |
Repayments of long-term debt | (5,943) | (2,902) | |
Purchase of noncontrolling interest in subsidiary | (39) | ||
Payment of contingent consideration | (26) | (58) | |
Dividends paid | (2,049) | (1,840) | (1,576) |
Proceeds from exercise of stock options | 329 | 296 | 362 |
Payments for taxes related to net share settlement of equity awards | (71) | (72) | (63) |
Repurchase of common stock | (4,361) | (4,461) | (5,001) |
Other | (1) | (5) | (3) |
Net cash provided by (used in) financing activities | (6,751) | (6,761) | 4,879 |
Effect of exchange rate changes on cash and cash equivalents | 1 | 2 | (20) |
Net increase (decrease) in cash and cash equivalents | (1,675) | 912 | (22) |
Cash and cash equivalents at the beginning of the period | 3,371 | 2,459 | 2,481 |
Cash and cash equivalents at the end of the period | 1,696 | 3,371 | 2,459 |
Reconciliation of net income to net cash provided by operating activities: | |||
Net income | 6,623 | 5,319 | 5,239 |
Adjustments required to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 2,479 | 2,475 | 2,092 |
Goodwill impairment | 181 | ||
Losses on settlement of defined benefit pension plans | 187 | ||
Stock-based compensation | 234 | 222 | 230 |
Loss on early extinguishment of debt | 643 | 0 | |
Deferred income taxes | (1,334) | 18 | (252) |
Other noncash items | 53 | 135 | (14) |
Change in operating assets and liabilities, net of effects from acquisitions: | |||
Accounts receivable, net | (941) | (243) | (1,594) |
Inventories | (514) | (742) | (1,141) |
Other current assets | (341) | 35 | 355 |
Other assets | 3 | (43) | 2 |
Accounts payable and claims and discounts payable | 1,710 | 2,189 | 2,834 |
Accrued expenses | (371) | 131 | 892 |
Other long-term liabilities | 38 | 2 | (104) |
Net cash provided by operating activities | $ 8,007 | $ 10,141 | $ 8,539 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Millions | Common Stock | Treasury Stock | Shares Held in Trust | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Parent | Noncontrolling Interest | Total | |
Balance at beginning of year (in shares) at Dec. 31, 2014 | 1,691,000 | (550,000) | (1,000) | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Stock options exercised and issuance of stock awards | 8,000 | |||||||||
Purchase of treasury shares (in shares) | (48,000) | |||||||||
Employee stock purchase plan issuances (in shares) | 1,000 | |||||||||
Balance at end of year (in shares) at Dec. 31, 2015 | 1,699,000 | (597,000) | (1,000) | |||||||
Beginning of year at Dec. 31, 2014 | $ 17 | $ (24,078) | $ (31) | $ 30,418 | $ 31,849 | $ (217) | $ 5 | |||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Purchase of treasury shares | (4,856) | |||||||||
Employee stock purchase plan issuances | 48 | |||||||||
Stock option activity, stock awards and other | 533 | |||||||||
Excess tax benefit on stock options and stock awards | 142 | |||||||||
2015 accelerated share repurchase not settled until 2016 | (145) | |||||||||
Changes in inventory accounting principles | (4) | |||||||||
Net income attributable to CVS Health | 5,237 | 1 | [1] | |||||||
Common stock dividends | (1,576) | |||||||||
Foreign currency translation adjustments, net of tax | (100) | $ (100) | ||||||||
Net cash flow hedges, net of tax | 2 | 2 | ||||||||
Pension and other postretirement benefits, net of tax | (43) | (43) | ||||||||
Business combinations | 1 | |||||||||
Capital contributions | 2 | |||||||||
Net income attributable to redeemable noncontrolling interest | 1 | |||||||||
Distributions | (2) | |||||||||
End of year at Dec. 31, 2015 | $ 17 | $ (28,886) | $ (31) | 30,948 | 35,506 | (358) | $ 37,196 | 7 | 37,203 | |
Increase (Decrease) in Stockholders' Equity | ||||||||||
Stock options exercised and issuance of stock awards | 6,000 | |||||||||
Purchase of treasury shares (in shares) | (47,000) | |||||||||
Employee stock purchase plan issuances (in shares) | 1,000 | |||||||||
Balance at end of year (in shares) at Dec. 31, 2016 | 1,705,000 | (643,000) | (1,000) | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Purchase of treasury shares | $ (4,606) | |||||||||
Employee stock purchase plan issuances | 40 | |||||||||
Stock option activity, stock awards and other | 449 | |||||||||
Excess tax benefit on stock options and stock awards | 76 | |||||||||
2015 accelerated share repurchase not settled until 2016 | 145 | |||||||||
Net income attributable to CVS Health | 5,317 | 1 | [1] | |||||||
Common stock dividends | (1,840) | |||||||||
Foreign currency translation adjustments, net of tax | 38 | 38 | ||||||||
Net cash flow hedges, net of tax | 2 | 2 | ||||||||
Pension and other postretirement benefits, net of tax | 13 | 13 | ||||||||
Capital contributions | 1 | |||||||||
Net income attributable to redeemable noncontrolling interest | 1 | |||||||||
Distributions | (5) | |||||||||
End of year at Dec. 31, 2016 | $ 17 | $ (33,452) | $ (31) | 31,618 | 38,983 | (305) | 36,830 | 4 | $ 36,834 | |
Increase (Decrease) in Stockholders' Equity | ||||||||||
Stock options exercised and issuance of stock awards | 7,000 | 4,814 | ||||||||
Purchase of treasury shares (in shares) | (55,000) | |||||||||
Employee stock purchase plan issuances (in shares) | 1,000 | |||||||||
Balance at end of year (in shares) at Dec. 31, 2017 | 1,712,000 | (697,000) | (1,000) | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Purchase of treasury shares | $ (4,361) | |||||||||
Employee stock purchase plan issuances | 48 | |||||||||
Stock option activity, stock awards and other | 461 | |||||||||
Net income attributable to CVS Health | 6,622 | 1 | ||||||||
Common stock dividends | (2,049) | |||||||||
Foreign currency translation adjustments, net of tax | (2) | $ (2) | ||||||||
Net cash flow hedges, net of tax | (10) | (10) | ||||||||
Pension and other postretirement benefits, net of tax | 152 | 152 | ||||||||
Capital contributions | 1 | |||||||||
Distributions | (2) | |||||||||
End of year at Dec. 31, 2017 | $ 17 | $ (37,765) | $ (31) | $ 32,079 | $ 43,556 | $ (165) | $ 37,691 | $ 4 | $ 37,695 | |
[1] | Excludes $1 million attributable to redeemable noncontrolling interest in 2016 and 2015 (See Note 1 "Significant Accounting Policies") |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Significant Accounting Policies | |
Significant Accounting Policies | 1 Description of business - CVS Health Corporation and its subsidiaries (the “Company”) is the largest integrated pharmacy health care provider in the United States based upon revenues and prescriptions filled. The Company currently has three reportable business segments, Pharmacy Services, Retail/LTC and Corporate, which are described below. Pharmacy Services Segment (the “PSS”) - The PSS provides a full range of pharmacy benefit management services including plan design offerings and administration, formulary management, Medicare Part D services, mail order, specialty pharmacy and infusion services, retail pharmacy network management services, prescription management systems, clinical services, disease management services and medical spend management. The Company’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, Medicare Part D, Managed Medicaid plans, plans offered on the public and private exchanges, and other sponsors of health benefit plans and individuals throughout the United States. As a pharmacy benefits manager, the PSS manages the dispensing of pharmaceuticals through the Company’s mail order pharmacies and national network of more than 68,000 retail pharmacies, consisting of approximately 41,000 chain pharmacies and 27,000 independent pharmacies, to eligible members in the benefits plans maintained by the Company’s clients and utilizes its information systems to perform, among other things, safety checks, drug interaction screenings and brand to generic substitutions. The PSS’ specialty pharmacies support individuals that require complex and expensive drug therapies. The specialty pharmacy business includes mail order and retail specialty pharmacies that operate under the CVS Caremark ® , CarePlus CVS Pharmacy TM , Navarro ® Health Services and Advanced Care Scripts (“ACS Pharmacy”) names. The Company enhanced its provides specialty infusion services and enteral nutrition services through Coram LLC and its subsidiaries (collectively, “Coram”). In August 2015, the Company further expanded its specialty offerings with the acquisition of ACS Pharmacy which was part of the Omnicare, Inc. (“Omnicare”) acquisition. See Note 2 “Acquisitions.” The PSS also provides health management programs, which include integrated disease management for 18 conditions, through the Company’s AccordantCare rare disease management offering. In addition, through the Company’s SilverScript Insurance Company (“SilverScript”) subsidiary, the PSS is a national provider of drug benefits to eligible beneficiaries under the federal government’s Medicare Part D program. The PSS generates net revenues primarily by contracting with clients to provide prescription drugs to plan members. Prescription drugs are dispensed by the mail order pharmacies, specialty pharmacies and national network of retail pharmacies. Net revenues are also generated by providing additional services to clients, including administrative services such as claims processing and formulary management, as well as health care related services such as disease management. The PSS operates under the CVS Caremark ® Pharmacy Services, Caremark ® , CVS Caremark ® , CVS Specialty ® , AccordantCare, SilverScript ® , Wellpartner ® , Coram ® , CVS Specialty ® , NovoLogix ® , Navarro ® Health Services and ACS Pharmacy names. As of December 31, 2017, the PSS operates 23 retail specialty pharmacy stores, 18 specialty mail order pharmacies, four mail order dispensing pharmacies, and 83 branches for infusion and enteral services, including approximately 73 ambulatory infusion suites and three centers of excellence, located in 42 states, Puerto Rico and the District of Columbia. Retail/LTC Segment (the “RLS”) - The RLS sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, photo finishing services, seasonal merchandise, and greeting cards, through the Company’s CVS Pharmacy ® , CVS ® , CVS Pharmacy y más ® , Longs Drugs ® , Navarro Discount Pharmacy ® and Drogaria Onofre TM retail stores and online through CVS.com ® , Navarro.com TM and Onofre.com.br TM . The RLS also provides health care services through its MinuteClinic ® health care clinics. MinuteClinics are staffed by nurse practitioners and physician assistants who utilize nationally recognized protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions and deliver vaccinations. In 2015, the Company made two larger acquisitions which expanded the Retail/LTC Segment’s services. With the acquisition of Omnicare, the RLS began providing long-term care (“LTC”) operations, which is comprised of providing the distribution of pharmaceuticals, related pharmacy consulting and other ancillary services to chronic care facilities and other care settings, as well as commercialization services which are provided under the name RxCrossroads ® (“RxC”). With the December 2015 acquisition of the pharmacies and clinics of Target Corporation (“Target”), the Company added 1,672 pharmacies and approximately 79 clinics. As of December 31, 2017, our Retail/LTC Segment included 9,803 retail stores (of which 8,060 were our stores that operated a pharmacy and 1,695 were our pharmacies located within Target stores) located in 49 states, the District of Columbia, Puerto Rico and Brazil operating primarily under the CVS Pharmacy ® , CVS ® , CVS Pharmacy y más ® , Longs Drugs ® , Navarro Discount Pharmacy ® and Drogaria Onofre TM names, 37 onsite pharmacies primarily operating under the CarePlus CVS Pharmacy TM , CarePlus ® and CVS Pharmacy ® names, and 1,134 retail health care clinics operating under the MinuteClinic ® name (of which 1,129 were located in our retail pharmacy stores or Target stores), and our online retail websites, CVS.com ® , Navarro.com TM and Onofre.com.br TM . LTC operations are comprised of 145 spoke pharmacies that primarily handle new prescription orders, of which 30 are also hub pharmacies that use proprietary automation to support spoke pharmacies with refill prescriptions. LTC operates primarily under the Omnicare ® and NeighborCare ® names. Corporate Segment - The Corporate Segment provides management and administrative services to support the Company. The Corporate Segment consists of certain aspects of the Company’s executive management, corporate relations, legal, compliance, human resources, information technology and finance departments. Principles of consolidation - The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated. The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary. Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Fair value hierarchy - The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following: · Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. · Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk. Cash and cash equivalents - Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when purchased. The Company invests in short-term money market funds, commercial paper and time deposits, as well as other debt securities that are classified as cash equivalents within the accompanying consolidated balance sheets, as these funds are highly liquid and readily convertible to known amounts of cash. These investments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Restricted cash - As of December 31, 2017 and 2016, the Company had $190 million and $149 million, respectively, of restricted cash held in a trust in its insurance captive to satisfy collateral requirements associated with the assignment of certain insurance policies. Such amounts are included in other assets in the consolidated balance sheets. Additionally, as of December 31, 2017, the Company had $14 million of restricted cash held in escrow accounts in connection with certain recent acquisitions. Such amounts are included in other current assets in the consolidated balance sheets. All restricted cash is invested in time deposits which are classified within Level 1 of the fair value hierarchy. Short-term investments - The Company’s short-term investments consist of certificates of deposit with initial maturities of greater than three months when purchased that mature in less than one year from the balance sheet date. These investments, which were classified as available-for-sale within Level 1 of the fair value hierarchy, were carried at fair value, which approximated their historical cost at December 31, 2017 and 2016. Fair value of financial instruments - As of December 31, 2017, the Company’s financial instruments include cash and cash equivalents, short-term and long-term investments, accounts receivable, accounts payable and short-term debt approximate their fair value due to the nature of these financial instruments. The carrying amount and estimated fair value of total long-term debt was $25.7 billion and $26.8 billion, respectively, as of December 31, 2017. The fair value of the Company’s long-term debt was estimated based on quoted rates currently offered in active markets for the Company’s debt, which is considered Level 1 of the fair value hierarchy. Derivative financial instruments - The Company is exposed to interest rate risk and management considers it prudent to periodically reduce the Company’s exposure to cash flow variability resulting from interest rate fluctuations. In December 2017, the Company entered into several interest rate swap transactions. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of long-term debt in connection with the proposed acquisition of Aetna Inc. (“Aetna”). The interest rate swaps had notional amounts totaling $4.75 billion. At December 31, 2017, the fair value of these agreements were a $5 million asset recorded in other current assets and a $23 million liability recorded in accrued expenses. The fair value of these derivative financial instruments was determined using quoted prices in markets that are not active or inputs that are observable for the asset or liability and therefore they are classified as Level 2 in the fair value hierarchy. The Company has deferred gains and losses in accumulated other comprehensive income which are expected to be reclassified to interest expense over the life of the underlying forecasted debt. The hedges are expected to be highly effective; therefore, no ineffectiveness was recognized in earnings. There were no outstanding derivative financial instruments as of December 31, 2016. Foreign currency translation and transactions - For local currency functional currency, assets and liabilities are translated at end-of-period rates while revenues and expenses are translated at average rates in effect during the period. Equity is translated at historical rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive income (loss). For U.S. dollar functional currency locations, foreign currency assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates, except for nonmonetary balance sheet accounts, which are remeasured at historical exchange rates. Revenue and expense are remeasured at average exchange rates in effect during each period, except for those expenses related to the nonmonetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in income. Gains and losses arising from foreign currency transactions and the effects of remeasurements were not material for all periods presented. Accounts receivable - Accounts receivable are stated net of an allowance for doubtful accounts. The accounts receivable balance primarily includes amounts due from third party providers (e.g., pharmacy benefit managers, insurance companies, governmental agencies and long-term care facilities), clients, members and private pay customers, as well as vendors and manufacturers. Charges to bad debt are based on both historical write-offs and specifically identified receivables. The activity in the allowance for doubtful accounts receivable for the years ended December 31 is as follows: In millions 2017 2016 2015 Beginning balance $ 286 $ 161 $ 256 Additions charged to bad debt expense 177 221 216 Write-offs charged to allowance (156) (96) (311) Ending balance $ 307 $ 286 $ 161 Inventories - Inventories are stated at the lower of weighted average cost or market. Physical inventory counts are taken on a regular basis in each retail store and long-term care pharmacy and a continuous cycle count process is the primary procedure used to validate the inventory balances on hand in each distribution center and mail facility to ensure that the amounts reflected in the accompanying consolidated financial statements are properly stated. During the interim period between physical inventory counts, the Company accrues for anticipated physical inventory losses on a location-by-location basis based on historical results and current trends. Property and equipment - Property, equipment and improvements to leased premises are depreciated using the straight-line method over the estimated useful lives of the assets, or when applicable, the term of the lease, whichever is shorter. Estimated useful lives generally range from 10 to 40 years for buildings, building improvements and leasehold improvements and 3 to 10 years for fixtures, equipment and internally developed software. Repair and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated. Application development stage costs for significant internally developed software projects are capitalized and depreciated. The following are the components of property and equipment at December 31: In millions 2017 2016 Land $ 1,707 $ 1,734 Building and improvements 3,343 3,226 Fixtures and equipment 11,963 10,956 Leasehold improvements 4,793 4,494 Software 2,484 2,392 24,290 22,802 Accumulated depreciation and amortization (13,998) (12,627) Property and equipment, net $ 10,292 $ 10,175 The gross amount of property and equipment under capital leases was $588 million and $547 million as of December 31, 2017 and 2016, respectively. Accumulated amortization of property and equipment under capital lease was $140 million and $119 million as of December 31, 2017 and 2016, respectively. Amortization of property and equipment under capital lease is included within depreciation expense. Depreciation expense totaled $1.7 billion in both 2017 and 2016, and $1.5 billion in 2015. Goodwill and other indefinitely-lived assets - Goodwill and other indefinitely-lived assets are not amortized, but are subject to impairment reviews annually, or more frequently if necessary. See Note 3 “Goodwill and Other Intangibles” for additional information on goodwill and other indefinitely-lived assets. Intangible assets - Purchased customer contracts and relationships are amortized on a straight-line basis over their estimated useful lives between 9 and 20 years. Purchased customer lists are amortized on a straight-line basis over their estimated useful lives of up to 10 years. Purchased leases are amortized on a straight-line basis over the remaining life of the lease. See Note 3 “Goodwill and Other Intangibles” for additional information about intangible assets. Impairment of long-lived assets - The Company groups and evaluates fixed and finite-lived intangible assets for impairment at the lowest level at which individual cash flows can be identified, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the Company first compares the carrying amount of the asset group to the estimated future cash flows associated with the asset group (undiscounted and without interest charges). If the estimated future cash flows used in this analysis are less than the carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to the asset group’s estimated future cash flows (discounted and with interest charges). If required, an impairment loss is recorded for the portion of the asset group’s carrying value that exceeds the asset group’s estimated future cash flows (discounted and with interest charges). Redeemable noncontrolling interest - As a result of the acquisition of Omnicare in 2015, the Company obtained a 73% ownership interest in a limited liability company (“LLC”). Due to the change in control in Omnicare, the noncontrolling member of the LLC had the contractual right to put its membership interest to the Company at fair value. Consequently, the noncontrolling interest in the LLC was recorded as a redeemable noncontrolling interest at fair value. During 2016, the noncontrolling shareholder of the LLC exercised its option to sell its ownership interest and the Company purchased the noncontrolling interest in the LLC for approximately $39 million. Below is a summary of the changes in redeemable noncontrolling interest for the years ended December 31: In millions 2016 2015 Beginning balance $ 39 $ — Acquisition of noncontrolling interest — 39 Net income attributable to noncontrolling interest 1 1 Distributions (2) (1) Purchase of noncontrolling interest (39) — Reclassification to capital surplus in connection with purchase of noncontrolling interest 1 — Ending balance $ — $ 39 Revenue Recognition Pharmacy Services Segment The PSS sells prescription drugs directly through its mail service dispensing pharmacies and indirectly through its retail pharmacy network. The PSS recognizes revenue from prescription drugs sold by its mail service dispensing pharmacies and under retail pharmacy network contracts where it is the principal using the gross method at the contract prices negotiated with its clients. Net revenues include: (i) the portion of the price the client pays directly to the PSS, net of any volume-related or other discounts paid back to the client (see “Drug Discounts” below), (ii) the price paid to the PSS by client plan members for mail order prescriptions (“Mail Co-Payments”) and the price paid to retail network pharmacies by client plan members for retail prescriptions (“Retail Co-Payments”), and (iii) administrative fees for retail pharmacy network contracts where the PSS is not the principal as discussed below. Sales taxes are not included in revenue. Revenue is recognized when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. The following revenue recognition policies have been established for the PSS: · Revenues generated from prescription drugs sold by mail service dispensing pharmacies are recognized when the prescription is delivered. At the time of delivery, the PSS has performed substantially all of its obligations under its client contracts and does not experience a significant level of returns or reshipments. · Revenues generated from prescription drugs sold by third party pharmacies in the PSS’ retail pharmacy network and associated administrative fees are recognized at the PSS’ point-of-sale, which is when the claim is adjudicated by the PSS online claims processing system. The PSS determines whether it is the principal or agent for its retail pharmacy network transactions on a contract by contract basis. In the majority of its contracts, the PSS has determined it is the principal due to it: (i) being the primary obligor in the arrangement, (ii) having latitude in establishing the price, changing the product or performing part of the service, (iii) having discretion in supplier selection, (iv) having involvement in the determination of product or service specifications, and (v) having credit risk. The PSS’ obligations under its client contracts for which revenues are reported using the gross method are separate and distinct from its obligations to the third party pharmacies included in its retail pharmacy network contracts. Pursuant to these contracts, the PSS is contractually required to pay the third party pharmacies in its retail pharmacy network for products sold, regardless of whether the PSS is paid by its clients. The PSS’ responsibilities under its client contracts typically include validating eligibility and coverage levels, communicating the prescription price and the co-payments due to the third party retail pharmacy, identifying possible adverse drug interactions for the pharmacist to address with the prescriber prior to dispensing, suggesting generic alternatives where clinically appropriate and approving the prescription for dispensing. Although the PSS does not have credit risk with respect to Retail Co-Payments or inventory risk related to retail network claims, management believes that all of the other applicable indicators of gross revenue reporting are present. For contracts under which the PSS acts as an agent, revenue is recognized using the net method. Drug Discounts - The PSS deducts from its revenues any rebates, inclusive of discounts and fees, earned by its clients. Rebates are paid to clients in accordance with the terms of client contracts, which are normally based on fixed rebates per prescription for specific products dispensed or a percentage of manufacturer discounts received for specific products dispensed. The liability for rebates due to clients is included in “Claims and discounts payable” in the accompanying consolidated balance sheets. Medicare Part D - The PSS, through its SilverScript subsidiary, participates in the federal government’s Medicare Part D program as a Prescription Drug Plan (“PDP”). Net revenues include insurance premiums earned by the PDP, which are determined based on the PDP’s annual bid and related contractual arrangements with the Centers for Medicare and Medicaid Services (“CMS”). The insurance premiums include a direct premium paid by CMS and a beneficiary premium, which is the responsibility of the PDP member, but which is subsidized by CMS in the case of low-income members. Premiums collected in advance are initially deferred in accrued expenses and are then recognized in net revenues over the period in which members are entitled to receive benefits. In addition to these premiums, net revenues include co-payments, coverage gap benefits, deductibles and co-insurance (collectively, the “Member Co-Payments”) related to PDP members’ actual prescription claims. In certain cases, CMS subsidizes a portion of these Member Co-Payments and pays the PSS an estimated prospective Member Co-Payment subsidy amount each month. The prospective Member Co-Payment subsidy amounts received from CMS are also included in net revenues. SilverScript assumes no risk for these amounts. If the prospective Member Co-Payment subsidies received differ from the amounts based on actual prescription claims, the difference is recorded in either accounts receivable or accrued expenses. The PSS accounts for CMS obligations and Member Co-Payments (including the amounts subsidized by CMS) using the gross method consistent with its revenue recognition policies for Mail Co-Payments and Retail Co-Payments (discussed previously in this document). Retail/LTC Segment Retail Pharmacy - The retail drugstores recognize revenue at the time the customer takes possession of the merchandise. Customer returns are not material. Revenue generated from the performance of services in the RLS’ health care clinics is recognized at the time the services are performed. Sales taxes are not included in revenue. Long-term Care - Revenue is recognized when products are delivered or services are rendered or provided to the customer, prices are fixed and determinable, and collection is reasonably assured. A significant portion of the revenues from sales of pharmaceutical and medical products are reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs. Payments for services rendered to patients covered by these programs are generally less than billed charges. The Company monitors its revenues and receivables from these reimbursement sources, as well as other third party insurance payors, and record an estimated contractual allowance for sales and receivable balances at the revenue recognition date, to properly account for anticipated differences between billed and reimbursed amounts. Accordingly, the total net sales and receivables reported in the Company’s consolidated financial statements are recorded at the amount expected to be ultimately received from these payors. Since billing functions for a portion of the Company’s revenue systems are largely computerized, enabling on-line adjudication at the time of sale to record net revenues, the Company’s exposure in connection with estimating contractual allowance adjustments is limited primarily to unbilled and initially rejected Medicare, Medicaid and third party claims (typically approved for reimbursement once additional information is provided to the payor). For the remaining portion of the Company’s revenue systems, the contractual allowance is estimated for all billed, unbilled and initially rejected Medicare, Medicaid and third party claims. The Company evaluates several criteria in developing the estimated contractual allowances on a monthly basis, including historical trends based on actual claims paid, current contract and reimbursement terms, and changes in customer base and payor/product mix. Contractual allowance estimates are adjusted to actual amounts as cash is received and claims are settled, and the aggregate impact of these resulting adjustments was not significant to our results of operations for any of the periods presented. Patient co-payments associated with Medicare Part D, certain state Medicaid programs, Medicare Part B and certain third party payors are typically not collected at the time products are delivered or services are rendered, but are billed to the individuals as part of our normal billing procedures and subject to our normal accounts receivable collections procedures. Health Care Clinics - For services provided by our health care clinics, revenue recognition occurs for completed services provided to patients, with adjustments taken for third party payor contractual obligations and patient direct bill historical collection rates. Loyalty Program - The Company’s customer loyalty program, ExtraCare ® , is comprised of two components, ExtraSavings TM and ExtraBucks ® Rewards. ExtraSavings coupons redeemed by customers are recorded as a reduction of revenue when redeemed. ExtraBucks Rewards are accrued as a charge to cost of revenues when earned, net of estimated breakage. The Company determines breakage based on historical redemption patterns. See Note 13 “Segment Reporting” for additional information about the revenues of the Company’s business segments. Cost of revenues Pharmacy Services Segment - The PSS’ cost of revenues includes: (i) the cost of prescription drugs sold during the reporting period directly through its mail service dispensing pharmacies and indirectly through its retail pharmacy network, (ii) shipping and handling costs, and (iii) the operating costs of its mail service dispensing pharmacies and client service operations and related information technology support costs including depreciation and amortization. The cost of prescription drugs sold component of cost of revenues includes: (i) the cost of the prescription drugs purchased from manufacturers or distributors and shipped to members in clients’ benefit plans from the PSS’ mail service dispensing pharmacies, net of any volume-related or other discounts (see “Vendor allowances and purchase discounts” below) and (ii) the cost of prescription drugs sold (including Retail Co-Payments) through the PSS’ retail pharmacy network under contracts where it is the principal, net of any volume-related or other discounts. Retail/LTC Segment - The RLS’ cost of revenues includes: the cost of merchandise sold during the reporting period and the related purchasing costs, warehousing and delivery costs (including depreciation and amortization) and actual and estimated inventory losses. See Note 13 “Segment Reporting” for additional information about the cost of revenues of the Company’s business segments. Vendor allowances and purchase discounts The Company accounts for vendor allowances and purchase discounts as follows: Pharmacy Services Segment - The PSS receives purchase discounts on products purchased. The PSS’ contractual arrangements with vendors, including manufacturers, wholesalers and retail pharmacies, normally provide for the PSS to receive purchase discounts from established list prices in one, or a combination, of the following forms: (i) a direct discount at the time of purchase, (ii) a discount for the prompt payment of invoices, or (iii) when products are purchased indirectly from a manufacturer (e.g., through a wholesaler or retail pharmacy), a discount (or rebate) paid subsequent to dispensing. These rebates are recognized when prescriptions are dispensed and are generally calculated and billed to manufacturers within 30 days of the end of each completed quarter. Historically, the effect of adjustments resulting from the reconciliation of rebates recognized to the amounts billed and collected has not been material to the PSS’ results of operations. The PSS accounts for the effect of any such differences as a change in accounting estimate in the period the reconciliation is completed. The PSS also receives additional discounts under its wholesaler contracts if it exceeds contractually defined annual purchase volumes. In addition, the PSS receives fees from pharmaceutical manufacturers for administrative services. Purchase discounts and administrative service fees are recorded as a reduction of “Cost of revenues”. Retail/LTC Segment - Vendor allowances received by the RLS reduce the carrying cost of inventory and are recognized in cost of revenues when the related inventory is sold, unles |
Acquisitions
Acquisitions | 12 Months Ended |
Dec. 31, 2017 | |
Acquisitions | |
Acquisitions | 2 Proposed Aetna Acquisition On December 3, 2017, the Company entered into a definitive merger agreement to acquire all of the outstanding shares of Aetna for a combination of cash and stock. Under the terms of the merger agreement, Aetna shareholders will receive $145.00 per share in cash and 0.8378 CVS Health shares for each Aetna share. The transaction values Aetna at approximately $207 per share or approximately $69 billion based on the Company’s 5-day volume weighted average price ending December 1, 2017 of $74.21 per share. Including the assumption of Aetna’s debt, the total value of the transaction is approximately $77 billion. The final purchase price will be determined based on the Company’s stock price on the date of closing of the transaction. The proposed acquisition remains subject to approval by CVS Health and Aetna shareholders and customary closing conditions, including the expiration of the waiting period under the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approvals of state departments of insurance and U.S. and international regulators. If the transaction is not completed, the Company could be liable to Aetna for a termination fee of $2.1 billion in connection with the merger agreement, depending on the reasons leading to such termination. During the year ended December 31, 2017, the Company recorded $34 million of transaction-related costs in operating expenses in connection with the proposed acquisition. Wellpartner Acquisition On November 30, 2017, the Company acquired Wellpartner, Inc. (“Wellpartner”) for approximately $380 million. The purchase price is subject to a working capital adjustment. Wellpartner is a provider of specialty pharmacy services which provides products and services under the Section 340B drug discount program, which is a U.S. federal government program that requires drug manufacturers participating in the Medicaid program to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices. Wellpartner has two specialty pharmacies, one in Oregon, and the other, Bluegrass Pharmacy of Lexington, LLC (“Bluegrass Pharmacy”), is located in Kentucky. The fair value of the assets acquired and liabilities assumed were $532 million and $152 million, respectively, which included identifiable intangible assets of $233 million and goodwill of $182 million that were recorded in the PSS. The allocation of the purchase price is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared, accordingly, the allocation may change. The Company has classified the assets of Bluegrass Pharmacy as held for sale, and has reported Bluegrass Pharmacy as a discontinued operation. The assets held for sale and the operating results of Bluegrass Pharmacy as of and for the month ended December 31, 2017 are immaterial. Target Pharmacy Acquisition On December 16, 2015, the Company acquired the pharmacy and clinic businesses of Target for approximately $1.9 billion, plus contingent consideration of up to $60 million based on future prescription growth over a three year period through 2019. The Company acquired Target’s 1,672 pharmacies which operate in 47 states and will operate them through a store-within-a-store format, branded as CVS Pharmacy. The Company also acquired 79 Target clinic locations which were rebranded as MinuteClinic. The Company acquired the Target pharmacy and clinic businesses primarily to expand the geographic reach of its retail pharmacy business. The fair values of the assets acquired at the date of acquisition were approximately as follows: In millions Accounts receivable $ 2 Inventories 467 Property and equipment 9 Intangible assets 490 Goodwill 900 Total cash consideration $ 1,868 Intangible assets acquired include customer relationships with an estimated useful life of 13 years. The goodwill represents future economic benefits expected to arise from the Company’s expanded geographic presence in the retail pharmacy market, the assembled workforce acquired, expected purchasing and revenue synergies, as well as operating efficiencies and cost savings. The goodwill is deductible for income tax purposes. As of December 31, 2017 and 2016, no liability for any potential contingent consideration has been recorded based on projections for future prescription growth over the relevant period. In connection with the closing of the transaction, the Company and Target entered into pharmacy and clinic operating and master lease agreements. See Note 7 “Leases” of the consolidated financial statements for disclosures of the Company’s leasing arrangements. During the year ended December 31, 2015, the Company incurred transaction costs of approximately $26 million associated with the acquisition that were recorded within operating expenses. The results of the Target pharmacies and clinics are included in the Company’s Retail/LTC Segment beginning on December 16, 2015. Pro forma financial information for this acquisition is not presented as such results are immaterial to the Company’s consolidated financial statements. Omnicare Acquisition On August 18, 2015, the Company acquired 100% of the outstanding common shares and voting interests of Omnicare, for $98 per share for a total of $9.6 billion and assumed long-term debt with a fair value of approximately $3.1 billion. Omnicare is a leading health care services company that specializes in the management of complex pharmaceutical care. Omnicare’s LTC business is the nation’s largest provider of pharmaceuticals, related pharmacy consulting and other ancillary services to chronic care facilities and other care settings. In addition, Omnicare has a specialty pharmacy business operating primarily under the name of ACS Pharmacy, and provides commercialization services under the name of RxCrossroads ® . The Company includes LTC and the commercialization services business in the Retail/LTC Segment, and includes the specialty pharmacy business in its Pharmacy Services Segment. The Company acquired Omnicare to expand its operations in dispensing prescription drugs to assisted-living and long-term care facilities, and to broaden its presence in the specialty pharmacy business as the Company seeks to serve a greater percentage of the growing senior patient population in the United States. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition: In Millions Current assets (including cash of $298) $ 1,657 Property and equipment 313 Goodwill 9,139 Intangible assets 3,962 Other noncurrent assets 63 Current liabilities (773) Long-term debt (3,110) Deferred income tax liabilities (1,498) Other noncurrent liabilities (69) Redeemable noncontrolling interest (39) Total consideration $ 9,645 The goodwill represents future economic benefits expected to arise from the Company’s expanded presence in the pharmaceutical care market, the assembled workforce acquired, expected purchasing and revenue synergies, as well as operating efficiencies and cost savings. Goodwill of $8.7 billion was allocated to the Retail/LTC Segment and the remaining goodwill of $0.4 billion was allocated to the Pharmacy Services Segment. Approximately $0.4 billion of the goodwill is deductible for income tax purposes. Intangible assets acquired include customer relationships and trade names of $3.9 billion and $74 million, respectively, with estimated weighted average useful lives of 19.1 and 2.9 years, respectively, and 18.8 years in total. During the year ended December 31, 2015, the Company incurred transaction costs of $70 million associated with the acquisition of Omnicare that were recorded within operating expenses. The Company’s consolidated results of operations for the year ended December 31, 2015, include $2.6 billion of net revenues and net income of $61 million associated with the operating results of Omnicare from August 18, 2015 to December 31, 2015. These Omnicare operating results include severance costs and accelerated stock-based compensation. The following unaudited pro forma information presents a summary of the Company’s combined results of operations for the year ended December 31, 2015 as if the Omnicare acquisition and the related financing transactions had occurred on January 1, 2015. The following pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses. (In millions, except per share data) Total revenues $ 156,798 Income from continuing operations 5,277 Basic earnings per share from continuing operations 4.70 Diluted earnings per share from continuing operations 4.66 Pro forma income from continuing operations for the year ended December 31, 2015, excludes $135 million related to severance costs, accelerated stock-based compensation and transaction costs incurred in connection with the Omnicare acquisition. |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Other Intangibles | |
Goodwill and Other Intangibles | 3 Goodwill and other indefinitely-lived assets are not amortized, but are subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate an impairment may exist. When evaluating goodwill for potential impairment, the Company compares the fair value of its reporting units to their respective carrying amounts. The Company estimates the fair value of its reporting units using a combination of a discounted cash flow method and a market multiple method. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess. During 2017, the Company began pursuing various strategic alternatives for its RxC reporting unit. In connection with this effort, the Company performed an interim goodwill impairment test in the second quarter of 2017. The results of the impairment test determined that the fair value of the RxC reporting unit was lower than the carrying value, resulting in a $135 million goodwill impairment charge within operating expenses during the second quarter of 2017. During the third quarter of 2017, the Company performed its required annual impairment tests of its reporting units and concluded there was no impairment of goodwill. On January 2, 2018, the Company sold RxC to McKesson Corporation for $725 million. The transaction is subject to a working capital adjustment. The TCJA enacted on December 22, 2017 reduces the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018 (see Note 11 “Income Taxes”). As a result, the RxC deferred income tax liabilities were reduced by $47 million and an income tax benefit of $47 million was recorded in the 2017 income statement. The reduction in the deferred income tax liabilities increased the carrying value of the RxC reporting unit by $47 million which triggered an additional goodwill impairment in the RxC reporting unit of $46 million during the fourth quarter of 2017. The Company has cumulative goodwill impairments of $181 million as of December 31, 2017. Below is a summary of the changes in the carrying amount of goodwill by segment for the years ended December 31, 2017 and 2016: Pharmacy In millions Services Retail/LTC Total Balance, December 31, 2015 $ 21,685 $ 16,421 $ 38,106 Acquisitions — 126 126 Foreign currency translation adjustments — 17 17 Other (1) (48) 48 — Balance, December 31, 2016 21,637 16,612 38,249 Acquisitions 182 203 385 Foreign currency translation adjustments — (2) (2) Impairments — (181) (181) Balance, December 31, 2017 $ 21,819 $ 16,632 $ 38,451 (1) “Other” represents immaterial purchase accounting adjustments for acquisitions. Indefinitely-lived intangible assets are tested for impairment by comparing the estimated fair value of the asset to its carrying value. The Company estimates the fair value of its indefinitely-lived trademark using the relief from royalty method under the income approach. If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized and the asset is written down to its estimated fair value. During the third quarter of 2017, the Company performed its annual impairment test of the indefinitely-lived trademark and concluded there was no impairment as of the testing date. The following table is a summary of the Company’s intangible assets as of December 31: 2017 2016 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying In millions Amount Amortization Amount Amount Amortization Amount Trademark (indefinitely-lived) $ 6,398 $ — $ 6,398 $ 6,398 $ — $ 6,398 Customer contracts and relationships and covenants not to compete 12,341 (5,536) 6,805 11,485 (4,802) 6,683 Favorable leases and other 1,190 (763) 427 1,123 (693) 430 $ 19,929 $ (6,299) $ 13,630 $ 19,006 $ (5,495) $ 13,511 The Company amortizes intangible assets with finite lives over the estimated useful lives of the respective assets, which have a weighted average useful life of 15.4 years. The weighted average useful life of the Company’s customer contracts and relationships and covenants not to compete is 15.3 years. The weighted average life of the Company’s favorable leases and other intangible assets is 16.2 years. Amortization expense for intangible assets totaled $817 million, $ 795 million and $ 611 million in 2017, 2016 and 2015, respectively. The anticipated annual amortization expense for these intangible assets for the next five years is as follows: In millions 2018 $ 817 2019 771 2020 600 2021 539 2022 494 |
Share Repurchase Programs
Share Repurchase Programs | 12 Months Ended |
Dec. 31, 2017 | |
Share Repurchase Programs | |
Share Repurchase Programs | 4 The following share repurchase programs were authorized by the Company’s Board of Directors: In billions Remaining as of Authorization Date Authorized December 31, 2017 November 2, 2016 (“2016 Repurchase Program”) $ 15.0 $ 13.9 December 15, 2014 (“2014 Repurchase Program”) 10.0 — December 17, 2013 (“2013 Repurchase Program”) 6.0 — The share Repurchase Programs, each of which was effective immediately, permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions. The 2016 Repurchase Program can be modified or terminated by the Board of Directors at any time. Pursuant to the authorization under the 2014 Repurchase Program, in August 2016, the Company entered into two fixed dollar ASRs with Barclays Bank PLC (“Barclays”) for a total of $3.6 billion. Upon payment of the $3.6 billion purchase price in January 2017, the Company received a number of shares of its common stock equal to 80% of the $3.6 billion notional amount of the ASRs or approximately 36.1 million shares, which were placed into treasury stock in January 2017. The ASRs were accounted for as an initial treasury stock transaction for $2.9 billion and a forward contract for $0.7 billion. In April 2017, the Company received 9.9 million shares of common stock, representing the remaining 20% of the $3.6 billion notional amount of the ASRs, thereby concluding the ASRs. The remaining 9.9 million shares of common stock delivered to the Company by Barclays were placed into treasury stock and the forward contract was reclassified from capital surplus to treasury stock in April 2017. Pursuant to the authorization under the 2014 Repurchase Program, in December 2015, the Company entered into a $725 million fixed dollar ASR with Barclays. Upon payment of the $725 million purchase price in December 2015, the Company received a number of shares of its common stock equal to 80% of the $725 million notional amount of the ASR or approximately 6.2 million shares. The initial 6.2 million shares of common stock delivered to the Company by Barclays were placed into treasury stock in December 2015. The ASR was accounted for as an initial treasury stock transaction of $580 million and a forward contract of $145 million. The forward contract was classified as an equity instrument and was recorded within capital surplus on the consolidated balance sheet. In January 2016, the Company received 1.4 million shares of common stock, representing the remaining 20% of the $725 million notional amount of the ASR, thereby concluding the ASR. The remaining 1.4 million shares of common stock delivered to the Company by Barclays were placed into treasury stock in January 2016 and the forward contract was reclassified from capital surplus to treasury stock. Pursuant to the authorization under the 2013 Repurchase Programs, in January 2015, the Company entered into a $2.0 billion fixed dollar ASR agreement with J.P. Morgan Chase Bank (“JP Morgan”). Upon payment of the $2.0 billion purchase price in January 2015, the Company received a number of shares of its common stock equal to 80% of the $2.0 billion notional amount of the ASR agreement or approximately 16.8 million shares, which were placed into treasury stock in January 2015. In May 2015, the Company received approximately 3.1 million shares of common stock, representing the remaining 20% of the $2.0 billion notional amount of the ASR, thereby concluding the ASR. The remaining 3.1 million shares of common stock delivered to the Company by JP Morgan were placed into treasury stock in May 2015. The ASR was accounted for as an initial treasury stock transaction of $1.6 billion and a forward contract of $0.4 billion. The forward contract was classified as an equity instrument and was initially recorded within capital surplus on the consolidated balance sheet and was reclassified to treasury stock upon the settlement of the ASR in May 2015. In the ASR transactions described above, the initial repurchase of the shares and delivery of the remainder of the shares to conclude the ASR, resulted in an immediate reduction of the outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share. During the year ended December 31, 2017, the Company repurchased an aggregate of 55.4 million shares of common stock for approximately $4.4 billion under the 2014 and 2016 Repurchase Programs. As of December 31, 2017, there remained an aggregate of approximately $13.9 billion available for future repurchases under the 2016 Repurchase Program and the 2014 and 2013 Repurchase Programs were complete. During the year ended December 31, 2016, the Company repurchased an aggregate of 47.5 million shares of common stock for approximately $4.5 billion under the 2014 Repurchase Program. During the year ended December 31, 2015, the Company repurchased an aggregate of 48.0 million shares of common stock for approximately $5.0 billion under the 2013 and 2014 Repurchase Programs. |
Borrowing and Credit Agreements
Borrowing and Credit Agreements | 12 Months Ended |
Dec. 31, 2017 | |
Borrowings and Credit Agreements | |
Borrowing and Credit Agreements | 5 The following table is a summary of the Company’s borrowings as of December 31: In millions 2017 2016 Short-term debt Commercial paper $ 1,276 $ 1,874 Long-term debt 1.9% senior notes due 2018 2,250 2,250 2.25% senior notes due 2018 1,250 1,250 2.25% senior notes due 2019 850 850 2.8% senior notes due 2020 2,750 2,750 2.125% senior notes due 2021 1,750 1,750 4.125% senior notes due 2021 550 550 2.75% senior notes due 2022 1,250 1,250 3.5% senior notes due 2022 1,500 1,500 4.75% senior notes due 2022 399 399 4% senior notes due 2023 1,250 1,250 3.375% senior notes due 2024 650 650 5% senior notes due 2024 299 299 3.875% senior notes due 2025 2,828 2,828 2.875% senior notes due 2026 1,750 1,750 6.25% senior notes due 2027 372 372 3.25% senior exchange debentures due 2035 1 1 4.875% senior notes due 2035 652 652 6.125% senior notes due 2039 447 447 5.75% senior notes due 2041 133 133 5.3% senior notes due 2043 750 750 5.125% senior notes due 2045 3,500 3,500 Capital lease obligations 670 648 Other 43 23 Total debt principal 27,170 27,726 Debt premiums 28 33 Debt discounts and deferred financing costs (196) (228) 27,002 27,531 Less: Short-term debt (commercial paper) (1,276) (1,874) Current portion of long-term debt (3,545) (42) Long-term debt $ 22,181 $ 25,615 The Company had approximately $1.3 billion of commercial paper outstanding at a weighted average interest rate of 2.0% as of December 31, 2017. The Company had approximately $1.9 billion of commercial paper outstanding at a weighted average interest rate of 1.22% as of December 31, 2016. In connection with its commercial paper program, the Company maintains a $1.0 billion 364-day unsecured back-up credit facility, which expires on May 17, 2018, a $1.25 billion, five-year unsecured back-up credit facility, which expires on July 24, 2019, a $1.25 billion, five-year unsecured back-up credit facility, which expires on July 1, 2020, and a $1.0 billion, five-year unsecured back-up credit facility, which expires on May 18, 2022. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.02%, regardless of usage. As of December 31, 2017 and 2016, there were no borrowings outstanding under the back-up credit facilities. On December 3, 2017, in connection with the proposed acquisition of Aetna, the Company entered into a $49.0 billion unsecured bridge loan facility. The Company paid approximately $221 million in fees upon entering into the agreement. The fees were capitalized in other current assets and will be amortized as interest expense over the period the bridge facility is outstanding. The bridge loan facility was reduced to $44.0 billion on December 15, 2017 upon the Company entering into a $5.0 billion term loan agreement. The Company recorded $56 million of amortization of the bridge loan facility fees during the three months and year ended December 31, 2017, which was recorded in interest expense. On December 15, 2017, in connection with the proposed acquisition of Aetna, the Company entered into a $5.0 billion unsecured term loan agreement. The term loan facility under the term loan agreement consists of a $3.0 billion three-year tranche and a $2.0 billion five-year tranche. The term loan facility allows for borrowings at various rates that are dependent, in part, on the Company’s debt ratings and require the Company to pay a weighted average quarterly commitment fee, regardless of usage. On January 3, 2017, the Company entered into a $2.5 billion revolving credit facility. The credit facility allows for borrowings at various rates that are dependent, in part, on the Company’s debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. The Company terminated the credit facility in May 2017. On May 16, 2016, the Company issued $1.75 billion aggregate principal amount of 2.125% unsecured senior notes due June 1, 2021 and $1.75 billion aggregate principal amount of 2.875% unsecured senior notes due June 1, 2026 (collectively, the “2016 Notes”) for total proceeds of approximately $3.5 billion, net of discounts and underwriting fees. The 2016 Notes pay interest semi-annually and may be redeemed, in whole at any time, or in part from time to time, at the Company’s option at a defined redemption price plus accrued and unpaid interest to the redemption date. The net proceeds of the 2016 Notes were used for general corporate purposes and to repay certain corporate debt. On May 16, 2016, the Company announced tender offers for (1) any and all of its 5.75% Senior Notes due 2017, its 6.60% Senior Notes due 2019 and its 4.75% Senior Notes due 2020 (collectively, the “Any and All Notes”) and (2) up to $1.5 billion aggregate principal amount of its 6.25% Senior Notes due 2027, its 6.125% Senior Notes due 2039, its 5.75% Senior Notes due 2041, the 5.00% Senior Notes due 2024 issued by its wholly-owned subsidiary, Omnicare, Inc. (“Omnicare”), the 4.75% Senior Notes due 2022 issued by Omnicare, its 4.875% Senior Notes due 2035 and its 3.875% Senior Notes due 2025 (collectively, the “Maximum Tender Offer Notes” and together with the Any and All Notes, the “Notes”). On May 31, 2016, the Company increased the aggregate principal amount of the tender offers for the Maximum Tender Offer Notes to $2.25 billion. The Company purchased approximately $835 million aggregate principal amount of the Any and All Notes and $2.25 billion aggregate principal amount of the Maximum Tender Offer Notes pursuant to the tender offers, which expired on June 13, 2016. The Company paid a premium of $486 million in excess of the debt principal in connection with the purchase of the Notes, wrote off $50 million of unamortized deferred financing costs and incurred $6 million in fees, for a total loss on the early extinguishment of debt of $542 million which was recorded in income from continuing operations in the consolidated statement of income for the year ended December 31, 2016. On June 27, 2016, the Company notified the holders of the remaining Any and All Notes that the Company was exercising its option to redeem the outstanding Any and All Notes pursuant to the terms of the Any and All Notes and the Indenture dated as of August 15, 2006, between the Company and The Bank of New York Mellon Trust Company, N.A. Approximately $1.1 billion aggregate principal amount of Any and All Notes was redeemed on July 27, 2016. The Company paid a premium of $97 million in excess of the debt principal and wrote off $4 million of unamortized deferred financing costs, for a total loss on early extinguishment of debt of $101 million during the year ended December 31, 2016. The Company recorded a total loss on the early extinguishment of debt of $643 million which was recorded in the income from continuing operations in the consolidated statement of income for the year ended December 31, 2016. On May 20, 2015, in connection with the acquisition of Omnicare, the Company entered into a $13 billion unsecured bridge loan facility. The Company paid approximately $52 million in fees in connection with the facility. The fees were capitalized and amortized as interest expense over the period the bridge facility was outstanding. The bridge loan facility expired on July 20, 2015 upon the Company’s issuance of unsecured senior notes with an aggregate principal of $15 billion as discussed below. The bridge loan facility fees became fully amortized in July 2015. On July 20, 2015, the Company issued an aggregate of $2.25 billion of 1.9% unsecured senior notes due 2018 (“2018 Notes”), an aggregate of $2.75 billion of 2.8% unsecured senior notes due 2020 (“2020 Notes”), an aggregate of $1.5 billion of 3.5% unsecured senior notes due 2022 (“2022 Notes”), an aggregate of $3 billion of 3.875% unsecured senior notes due 2025 (“2025 Notes”), an aggregate of $2 billion of 4.875% unsecured senior notes due 2035 (“2035 Notes”), and an aggregate of $3.5 billion of 5.125% unsecured senior notes due 2045 (“2045 Notes” and, together with the 2018 Notes, 2020 Notes, 2022 Notes, 2025 Notes and 2035 Notes, the “Notes”) for total proceeds of approximately $14.8 billion, net of discounts and underwriting fees. The Notes pay interest semi-annually and contain redemption terms which allow or require the Company to redeem the Notes at a defined redemption price plus accrued and unpaid interest at the redemption date. The net proceeds of the Notes were used to fund the Omnicare acquisition and the acquisition of the pharmacies and clinics of Target. The remaining proceeds were used for general corporate purposes. Upon the closing of the Omnicare acquisition in August 2015, the Company assumed the long-term debt of Omnicare that had a fair value of approximately $3.1 billion, $2.0 billion of which was previously convertible into Omnicare shares that holders were able to redeem subsequent to the acquisition. During the period from August 18, 2015 to December 31, 2015, all but $5 million of the $2.0 billion of previously convertible debt was redeemed and repaid and approximately $0.4 billion in Omnicare term debt assumed was repaid for total repayments of Omnicare debt of approximately $2.4 billion in 2015. The remaining principal of the Omnicare debt assumed was comprised of senior unsecured notes with an aggregate principal amount of $700 million ($400 million of 4.75% senior notes due 2022 and $300 million of 5% senior notes due 2024). In September 2015, the Company commenced exchange offers for the 4.75% senior notes due 2022 and the 5% senior notes due 2024 to exchange all validly tendered and accepted notes issued by Omnicare for notes to be issued by the Company. This offer expired on October 20, 2015 and the aggregate principal amounts of $388 million of the 4.75% senior notes due 2022 and $296 million of the 5% senior notes due 2024 were validly tendered and exchanged for notes issued by the Company. The Company recorded this exchange transaction as a modification of the original debt instruments. Consequently, no gain or loss on extinguishment was recognized in the Company’s consolidated income statement as a result of this exchange transaction and the issuance costs of the new debt were expensed as incurred. The back-up credit facilities and unsecured senior notes contain customary restrictive financial and operating covenants. The covenants do not materially affect the Company’s financial or operating flexibility. As of December 31, 2017, the Company is in compliance with all debt covenants. The following is a summary of the Company’s required principal debt repayments due during each of the next five years and thereafter, as of December 31, 2017: In millions 2018 $ 4,821 2019 873 2020 2,775 2021 2,327 2022 3,178 Thereafter 13,196 Total $ 27,170 |
Store Closures
Store Closures | 12 Months Ended |
Dec. 31, 2017 | |
Store Closures | |
Store Closures | 6 In December 2016, the Company announced an enterprise streamlining initiative designed to reduce costs and enhance operating efficiencies to allow the Company to be more competitive in the current health care environment. In connection with the enterprise streamlining initiative, the Company announced its intention to rationalize the number of retail stores by closing approximately 70 underperforming stores during the year ending December 31, 2017. During the year ended December 31, 2017, the Company closed 71 retail stores and recorded charges of $215 million within operating expenses in the Retail/LTC Segment. The charges are primarily comprised of provisions for the present value of noncancelable lease obligations. The noncancelable lease obligations associated with stores closed during the year ended December 31, 2017 extend through the year 2039. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2017 | |
Leases | |
Leases | 7 Leases The Company leases most of its retail and mail order locations, 13 of its distribution centers and certain corporate offices under noncancelable operating leases, typically with initial terms of 15 to 25 years and with options that permit renewals for additional periods. The Company also leases certain equipment and other assets under noncancelable operating leases, typically with initial terms of 3 to 10 years. In December 2015, in connection with the acquisition of the pharmacy and clinic businesses of Target, the Company entered into lease agreements with Target for the pharmacy and clinic space within Target stores. Given that the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings being leased, the Company concluded for accounting purposes that the lease term was the remaining economic life of the buildings. Consequently, most of the individual pharmacy leases are capital leases. Approximately $0.3 billion of capital lease obligations were recorded in connection with this transaction. Minimum rent on operating leases is expensed on a straight-line basis over the term of the lease. In addition to minimum rental payments, certain leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed when incurred. The following table is a summary of the Company’s net rental expense for operating leases for the years ended December 31: In millions 2017 2016 2015 Minimum rentals $ 2,455 $ 2,418 $ 2,317 Contingent rentals 29 35 34 2,484 2,453 2,351 Less: sublease income (24) (24) (22) $ 2,460 $ 2,429 $ 2,329 The following table is a summary of the future minimum lease payments under capital and operating leases as of December 31, 2017: Capital Operating In millions Leases Leases (1) 2018 $ 74 $ 2,493 2019 74 2,361 2020 74 2,201 2021 73 2,072 2022 73 1,934 Thereafter 974 16,090 Total future lease payments (2) 1,342 $ 27,151 Less: imputed interest (672) Present value of capital lease obligations $ 670 (1) Future operating lease payments have not been reduced by minimum sublease rentals of $171 million due in the future under noncancelable subleases. (2) The Company leases pharmacy and clinic space from Target. Amounts related to such capital and operating leases are reflected above. Amounts due in excess of the remaining estimated economic life of the buildings of approximately $1.9 billion are not reflected herein since the estimated economic life of the buildings is shorter than the contractual term of the lease arrangement. The Company finances a portion of its store development program through sale-leaseback transactions. The properties are generally sold at net book value, which generally approximates fair value, and the resulting leases generally qualify and are accounted for as operating leases. The operating leases that resulted from these transactions are included in the above table. The Company does not have any retained or contingent interests in the stores and does not provide any guarantees, other than a guarantee of lease payments, in connection with the sale-leaseback transactions. Proceeds from sale-leaseback transactions totaled $265 million in 2017, $230 million in 2016 and $411 million in 2015. |
Medicare Part D
Medicare Part D | 12 Months Ended |
Dec. 31, 2017 | |
Medicare Part D | |
Medicare Part D | 8 Medicare Part D The Company offers Medicare Part D benefits through SilverScript, which has contracted with CMS to be a PDP and, pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, must be a risk-bearing entity regulated under state insurance laws or similar statutes. SilverScript is a licensed domestic insurance company under the applicable laws and regulations. Pursuant to these laws and regulations, SilverScript must file quarterly and annual reports with the National Association of Insurance Commissioners (“NAIC”) and certain state regulators, must maintain certain minimum amounts of capital and surplus under a formula established by the NAIC and must, in certain circumstances, request and receive the approval of certain state regulators before making dividend payments or other capital distributions to the Company. The Company does not believe these limitations on dividends and distributions materially impact its financial position. The Company has recorded estimates of various assets and liabilities arising from its participation in the Medicare Part D program based on information in its claims management and enrollment systems. Significant estimates arising from its participation in this program include: (i) estimates of low-income cost subsidy, reinsurance amounts, and coverage gap discount amounts ultimately payable to or receivable from CMS based on a detailed claims reconciliation that will occur in the following year; (ii) an estimate of amounts receivable from or payable to CMS under a risk-sharing feature of the Medicare Part D program design, referred to as the risk corridor and (iii) estimates for claims that have been reported and are in the process of being paid or contested and for our estimate of claims that have been incurred but have not yet been reported. |
Pension Plans and Other Postret
Pension Plans and Other Postretirement Benefits | 12 Months Ended |
Dec. 31, 2017 | |
Pension Plans and Other Postretirement Benefits | |
Pension Plans and Other Postretirement Benefits | 9 Defined Contribution Plans The Company sponsors several voluntary 401(k) savings plans that cover all employees who meet plan eligibility requirements. The Company makes matching contributions consistent with the provisions of the plans. At the participant’s option, account balances, including the Company’s matching contribution, can be transferred without restriction among various investment options, including the Company’s common stock fund under one of the defined contribution plans. The Company also maintains a nonqualified, unfunded deferred compensation plan for certain key employees. This plan provides participants the opportunity to defer portions of their eligible compensation and receive matching contributions equivalent to what they could have received under the CVS Health 401(k) Plan absent certain restrictions and limitations under the Internal Revenue Code. The Company’s contributions under the above defined contribution plans were $314 million, $295 million and $251 million in 2017, 2016 and 2015, respectively. Defined Benefit Pension Plans As of December 31, 2016 and 2015, the Company sponsored seven defined benefit pension plans, all of which are closed to new participants. Two of the plans are tax-qualified plans that are funded based on actuarial calculations and applicable federal laws and regulations. The other five plans are unfunded nonqualified supplemental retirement plans. In 2015, the Company terminated its largest tax-qualified plan and in 2017, the Company terminated the other tax-qualified plan. During the year ended December 31, 2017, the Company settled the pension obligations of its two tax-qualified plans by irrevocably transferring pension liabilities to an insurance company through the purchase of group annuity contracts and through lump sum distributions. These purchases, funded with pension plan assets, resulted in pre-tax settlement losses of $187 million in the year ended December 31, 2017, related to the recognition of accumulated deferred actuarial losses. The settlement losses are included in other expense in the consolidated statement of income. The following tables outline the change in benefit obligations and plan assets over the comparable periods: In millions 2017 2016 Change in benefit obligation: Benefit obligation at beginning of year $ 844 $ 844 Interest cost 20 27 Actuarial loss (gain) (31) 13 Benefit payments (35) (37) Settlements (667) (3) Benefit obligation at end of year $ 131 $ 844 In millions 2017 2016 Change in plan assets: Fair value of plan assets at the beginning of the year $ 624 $ 613 Actual return on plan assets 32 26 Employer contributions 46 25 Benefit payments (35) (37) Settlements (667) (3) Fair value of plan assets at the end of the year — 624 Funded status $ (131) $ (220) The components of net periodic benefit costs for the years ended December 31 are shown below: In millions 2017 2016 2015 Components of net periodic benefit cost: Interest cost $ 20 $ 27 $ 31 Expected return on plan assets (20) (32) (33) Amortization of net loss 21 32 21 Settlement losses 187 — — Net periodic pension cost $ 208 $ 27 $ 19 Pension Plan Assumptions The Company uses a series of actuarial assumptions to determine the benefit obligations and the net benefit costs. The discount rate is determined by examining the current yields observed on the measurement date of fixed-interest, high quality investments expected to be available during the period to maturity of the related benefits on a plan by plan basis. In 2016, the discount rate for the qualified plan that had been terminated was determined by examining the current assumed lump sum and annuity purchase rates. The expected long-term rate of return on plan assets is determined by using the plan’s target allocation and historical returns for each asset class on a plan by plan basis. Certain of the Company’s pension plans use assumptions on expected compensation increases of plan participants. These increases are determined by an actuarial analysis of the plan participants, their expected compensation increases, and the duration of their earnings period until retirement. Each of these assumptions is reviewed as plan characteristics change and on an annual basis with input from senior pension and financial executives and the Company’s external actuarial consultants. The discount rate for determining plan benefit obligations was 3.5% in 2017 and 4.0% in 2016 for all plans, except the terminated qualified plan. The discount rate for the terminated qualified plan was 3.09% in 2016. The expected long-term rate of return for the plans ranged from 4.0% to 5.5% in 2017 and 2016. The rate of compensation increases for certain of the plans with active participants ranged from 4.0% to 6.0% in 2017 and 2016. Return on Plan Assets The Company’s investment strategy for its two qualified pension plans was liability management driven. The asset allocation targets were to hold fixed income investments based upon this strategy. The following tables show the fair value allocation of plan assets by asset category as of December 31, 2016. Fair value of plan assets at December 31, 2016 Level 1 Level 2 Level 3 Total Cash and money market funds $ 8 $ — $ — $ 8 Fixed income funds 3 580 — 583 Equity mutual funds 33 — — 33 Total assets at fair value $ 44 $ 580 $ — $ 624 As of December 31, 2016, the Company’s qualified defined benefit pension plan assets consisted of 5% equity, 94% fixed income and 1% money market securities of which 7% were classified as Level 1 and 93% as Level 2 in the fair value hierarchy. The Company had no investments in Level 3 alternative investments during the year ended December 31, 2016. As of December 31, 2017, the assets in the Company’s qualified defined benefit pension plans had been fully liquidated through the purchase of group annuity contracts and through lump sum distributions. Cash Flows The Company contributed $46 million, $25 million and $22 million to the pension plans during 2017, 2016 and 2015, respectively. The Company plans to make approximately $21 million in contributions to the pension plans during 2018. These contributions include contributions made to certain nonqualified benefit plans for which there is no funding requirement. The Company estimates the following future benefit payments which are calculated using the same actuarial assumptions used to measure the benefit obligation as of December 31, 2017: In millions 2018 $ 21 2019 14 2020 12 2021 23 2022 8 Thereafter 31 Multiemployer Pension Plans The Company also contributes to a number of multiemployer pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer pension plans in the following aspects: (i) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, and (iii) if the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. None of the multiemployer pension plans in which the Company participates are individually significant to the Company. Total Company contributions to multiemployer pension plans were $17 million in 2017, $15 million in 2016 and $14 million in 2015. Other Postretirement Benefits The Company provides postretirement health care and life insurance benefits to certain retirees who meet eligibility requirements. The Company’s funding policy is generally to pay covered expenses as they are incurred. For retiree medical plan accounting, the Company reviews external data and its own historical trends for health care costs to determine the health care cost trend rates. As of December 31, 2017 and 2016, the Company’s other postretirement benefits had an accumulated postretirement benefit obligation of $25 million and $24 million, respectively. Net periodic benefit costs related to these other postretirement benefits were $1 million in both 2017 and 2016, and $2 million in 2015. Pursuant to various collective bargaining agreements, the Company also contributes to multiemployer health and welfare plans that cover certain union-represented employees. The plans provide postretirement health care and life insurance benefits to certain employees who meet eligibility requirements. Total Company contributions to multiemployer health and welfare plans were $58 million, $52 million and $60 million in 2017, 2016 and 2015, respectively. |
Stock Incentive Plans
Stock Incentive Plans | 12 Months Ended |
Dec. 31, 2017 | |
Stock Incentive Plans | |
Stock Incentive Plans | 10 Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the stock award (generally three to five years) using the straight-line method. The following table is a summary of stock-based compensation for each of the respective periods: In millions 2017 2016 2015 Stock options (1) $ 65 $ 79 $ 90 Restricted stock awards (2) 169 143 140 Total stock-based compensation $ 234 $ 222 $ 230 (1) Includes the Employee Stock Purchase Plan (the “ESPP”) (2) Stock-based compensation for the year ended December 31, 2015 includes $38 million associated with accelerated vesting of restricted stock replacement awards issued to Omnicare executives who were terminated subsequent to the acquisition. The ESPP provides for the purchase of up to 30 million shares of common stock. Under the ESPP, beginning in 2016, eligible employees could purchase common stock at the end of each six month offering period at a purchase price equal to 90% of the lower of the fair market value on the first day or the last day of the offering period. Prior to 2016, the purchase price was equal to 85% of the lower of the fair market value on the first day or the last day of the offering period. During 2017, approximately one million shares of common stock were purchased under the provisions of the ESPP at an average price of $71.66 per share. As of December 31, 2017, approximately 11 million shares of common stock were available for issuance under the ESPP. The fair value of stock-based compensation associated with the ESPP is estimated on the date of grant (the first day of the six month offering period) using the Black-Scholes option pricing model. The following table is a summary of the assumptions used to value the ESPP awards for each of the respective periods: 2017 2016 2015 Dividend yield (1) 1.24 % 0.88 % 0.71 % Expected volatility (2) 22.70 % 20.64 % 13.92 % Risk-free interest rate (3) 0.86 % 0.45 % 0.11 % Expected life (in years) (4) 0.5 0.5 0.5 Weighted-average grant date fair value $ 13.01 $ 14.98 $ 18.72 (1) The dividend yield is calculated based on semi-annual dividends paid and the fair market value of the Company’s stock at the grant date. (2) The expected volatility is based on the historical volatility of the Company’s daily stock market prices over the previous six month period. (3) The risk-free interest rate is based on the Treasury constant maturity interest rate whose term is consistent with the expected term of ESPP options (i.e., six months). (4) The expected life is based on the semi-annual purchase period. The terms of the Company’s Incentive Compensation Plan (“ICP”) provide for grants of annual incentive and long-term performance awards to executive officers and other officers and employees of the Company or any subsidiary of the Company. Payment of such annual incentive and long-term performance awards will be in cash, stock, other awards or other property, at the discretion of the Management Planning and Development Committee of the Company’s Board of Directors. The ICP allows for a maximum of 74 million shares to be reserved and available for grants. The ICP is the only compensation plan under which the Company grants stock options, restricted stock and other stock-based awards to its employees, with the exception of the Company’s ESPP. As of December 31, 2017, there were approximately 32 million shares available for future grants under the ICP. The Company’s restricted awards are considered nonvested share awards and require no payment from the employee. Compensation cost is recorded based on the market price of the Company’s common stock on the grant date and is recognized on a straight-line basis over the requisite service period. As of December 31, 2017, there was $350 million of total unrecognized compensation cost related to the restricted stock units that are expected to vest. These costs are expected to be recognized over a weighted-average period of 2.25 years. The total fair value of restricted shares vested during 2017, 2016 and 2015 was $175 million, $218 million and $164 million, respectively. The following table is a summary of the restricted stock unit and restricted share award activity for the year ended December 31, 2017. Weighted Average Grant Date Units in thousands Units Fair Value Nonvested at beginning of year 4,876 $ 55.56 Granted 2,873 $ 78.35 Vested (2,340) $ 78.92 Forfeited (395) $ 89.21 Nonvested at end of year 5,014 $ 86.92 All grants under the ICP are awarded at fair value on the date of grant. The fair value of stock options is estimated using the Black-Scholes option pricing model and stock-based compensation is recognized on a straight-line basis over the requisite service period. Stock options granted generally become exercisable over a four-year period from the grant date. Stock options generally expire seven years after the grant date. Cash received from stock options exercised, which includes the ESPP, totaled $329 million, $296 million and $362 million during 2017, 2016 and 2015, respectively. Payments for taxes for net share settlement of equity awards totaled $71 million in 2017, $72 million in 2016 and $63 million in 2015, respectively. The total intrinsic value of stock options exercised was $176 million, $244 million and $394 million in 2017, 2016 and 2015, respectively. The total fair value of stock options vested during 2017, 2016 and 2015 was $341 million, $298 million and $334 million, respectively. The fair value of each stock option is estimated using the Black-Scholes option pricing model based on the following assumptions at the time of grant: 2017 2016 2015 Dividend yield (1) 2.56 % 1.62 % 1.37 % Expected volatility (2) 18.39 % 17.22 % 18.07 % Risk-free interest rate (3) 1.77 % 1.24 % 1.24 % Expected life (in years) (4) 4.1 4.2 4.2 Weighted-average grant date fair value $ 9.43 $ 13.00 $ 14.01 (1) The dividend yield is based on annual dividends paid and the fair market value of the Company’s stock at the grant date. (2) The expected volatility is estimated using the Company’s historical volatility over a period equal to the expected life of each option grant after adjustments for infrequent events such as stock splits. (3) The risk-free interest rate is selected based on yields from U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the options being valued. (4) The expected life represents the number of years the options are expected to be outstanding from grant date based on historical option holder exercise experience. As of December 31, 2017, unrecognized compensation expense related to unvested options totaled $57 million, which the Company expects to be recognized over a weighted-average period of 1.76 years. After considering anticipated forfeitures, the Company expects approximately 9 million of the unvested stock options to vest over the requisite service period. The following table is a summary of the Company’s stock option activity for the year ended December 31, 2017: Weighted Average Weighted Remaining Aggregate Average Contractual Intrinsic Shares in thousands Shares Exercise Price Term Value Outstanding at December 31, 2016 23,275 $ 68.60 Granted 3,513 $ 78.05 Exercised (4,814) $ 43.07 Forfeited (889) $ 94.25 Expired (555) $ 60.00 Outstanding at December 31, 2017 20,530 $ 75.32 3.62 $ 180,318,054 Exercisable at December 31, 2017 11,365 $ 61.37 2.30 $ 179,628,690 Vested at December 31, 2017 and expected to vest in the future 20,114 $ 75.00 3.57 $ 180,299,134 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes | |
Income Taxes | 11 The income tax provision for continuing operations consisted of the following for the years ended December 31: In millions 2017 2016 2015 Current: Federal $ 2,594 $ 2,803 $ 3,065 State 464 511 555 3,058 3,314 3,620 Deferred: Federal (1,435) 5 (180) State 14 (2) (54) (1,421) 3 (234) Total $ 1,637 $ 3,317 $ 3,386 On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “TCJA”). Among numerous changes to existing tax laws, the TCJA permanently reduces the federal corporate income tax rate from 35% to 21% effective on January 1, 2018. The effects on deferred tax balances of changes in tax rates are required to be taken into consideration in the period in which the changes are enacted, regardless of when they are effective. As the result of the reduction of the corporate income tax rate under the TCJA, the Company estimated the revaluation of its net deferred tax liabilities and recorded a provisional income tax benefit of approximately $1.5 billion for year ended December 31, 2017. The Company has not completed all of its processes to determine the TCJA’s final impact. The final impact may differ from this provisional amount due to, among other things, changes in interpretations and assumptions the Company has made thus far and the issuance of additional regulatory or other guidance. The accounting is expected to be completed by the time the 2017 federal corporate income tax return is filed in 2018. The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for continuing operations for the years ended December 31: 2017 2016 2015 Statutory income tax rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal tax benefit 4.1 4.1 4.0 Provisional effect of the Tax Cuts and Jobs Act (18.3) — — Other (1.0) (0.7) 0.3 Effective income tax rate 19.8 % 38.4 % 39.3 % The Company has $3.0 billion and $4.2 billion of net deferred income tax liabilities as of December 31, 2017 and 2016, respectively. The following table is a summary of the components of the Company’s deferred income tax assets and liabilities as of December 31: In millions 2017 2016 Deferred income tax assets: Lease and rents $ 291 $ 375 Inventory 31 57 Employee benefits 246 400 Allowance for doubtful accounts 187 301 Retirement benefits 40 65 Net operating loss and capital loss carryforwards 101 125 Deferred income 93 144 Other 18 336 Valuation allowance (77) (135) Total deferred income tax assets 930 1,668 Deferred income tax liabilities: Depreciation and amortization (3,926) (5,882) Total deferred income tax liabilities (3,926) (5,882) Net deferred income tax liabilities $ (2,996) $ (4,214) The Company assesses positive and negative evidence to determine whether it is more likely than not some portion of a deferred tax asset would not be realized. When it would not, a valuation allowance is established for such portion of a deferred tax asset. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: In millions 2017 2016 2015 Beginning balance $ 307 $ 338 $ 188 Additions based on tax positions related to the current year 62 68 57 Additions based on tax positions related to prior years 32 70 122 Reductions for tax positions of prior years (28) (100) (11) Expiration of statutes of limitation (10) (22) (13) Settlements (19) (47) (5) Ending balance $ 344 $ 307 $ 338 The Company and most of its subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and local jurisdictions. The Company is a participant in the Compliance Assurance Process (“CAP”), which is a program made available by the Internal Revenue Service (“IRS”) to certain qualifying large taxpayers, under which participants work collaboratively with the IRS to identify and resolve potential tax issues through open, cooperative and transparent interaction prior to the annual filing of their federal income tax return. The IRS is currently examining the Company’s 2016 and 2017 consolidated U.S. federal income tax returns. The Company and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2017, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s results of operations, financial condition or liquidity. Substantially all material state and local income tax matters have been concluded for fiscal years through 2011. Certain state exams are expected to/likely to be concluded and certain state statutes will lapse in 2018, but the change in the balance of our uncertain tax positions will be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for various years. An estimate of the range of the possible change cannot be made at this time. The Company records interest expense related to unrecognized tax benefits and penalties in income tax expense. The Company accrued interest expense of approximately $11 million in 2017, $10 million in 2016 and $5 million in 2015. The Company had approximately $34 million and $30 million accrued for interest and penalties as of December 31, 2017 and 2016, respectively. There are no material uncertain tax positions as of December 31, 2017 the ultimate deductibility of which is highly certain but for which there is uncertainty about the timing. As of December 31, 2017, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is approximately $317 million, after considering the federal benefit of state income taxes. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 12 Lease Guarantees Between 1995 and 1997, the Company sold or spun off a number of subsidiaries, including Bob’s Stores, Linens ‘n Things, and Marshalls. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the store’s lease obligations. When the subsidiaries were disposed of and accounted for as discontinued operations, the Company’s guarantees remained in place, although each initial purchaser has agreed to indemnify the Company for any lease obligations the Company was required to satisfy. If any of the purchasers or any of the former subsidiaries were to become insolvent and failed to make the required payments under a store lease, the Company could be required to satisfy these obligations. As of December 31, 2017, the Company guaranteed approximately 85 such store leases (excluding the lease guarantees related to Linens ‘n Things, which have been recorded as a liability on the consolidated balance sheet), with the maximum remaining lease term extending through 2029. Legal Matters The Company is a party to legal proceedings, investigations and claims in the ordinary course of its business, including the matters described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. None of the Company’s accruals for outstanding legal matters are material individually or in the aggregate to the Company’s financial position. Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters described below, and is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts already accrued for these matters. · Indiana State District Council of Laborers and HOD Carriers Pension and Welfare Fund v. Omnicare, Inc., et al. (U.S. District Court for the Eastern District of Kentucky). In February 2006, two substantially similar putative class action lawsuits were filed and subsequently consolidated. The consolidated complaint was filed against Omnicare, three of its officers and two of its directors and purported to be brought on behalf of all open-market purchasers of Omnicare common stock from August 3, 2005 through July 27, 2006, as well as all purchasers who bought shares of Omnicare common stock in Omnicare’s public offering in December 2005. The complaint alleged violations of the Securities Exchange Act of 1934 and Section 11 of the Securities Act of 1933 and sought, among other things, compensatory damages and injunctive relief. After dismissals and appeals to the United States Court of Appeals for the Sixth Circuit, the United States Supreme Court remanded the case to the district court. In October 2016, Omnicare filed an answer to plaintiffs’ third amended complaint, and discovery commenced. In August 2017, the plaintiffs moved for class certification, which Omnicare has opposed. · FTC and Multi-State Investigation. In March 2010, the Company learned that various State Attorneys General offices and certain other government agencies were conducting a multi-state investigation of certain of the Company’s business practices similar to those being investigated at that time by the U.S. Federal Trade Commission (“FTC”). Twenty-eight states, the District of Columbia and the County of Los Angeles are known to be participating in this investigation. The prior FTC investigation, which commenced in August 2009, was officially concluded in May 2012 when the consent order entered into between the FTC and the Company became final. The Company has cooperated with the multi-state investigation. · United States ex rel. Jack Chin v. Walgreen Company, et al. (U.S. District Court for the Central District of California). In March 2010, the Company received a subpoena from the U.S. Department of Health and Human Services, Office of the Inspector General requesting information about programs under which the Company has offered customers remuneration conditioned upon the transfer of prescriptions for drugs or medications to the Company’s pharmacies in the form of gift cards, cash, non-prescription merchandise or discounts or coupons for non-prescription merchandise. In October 2016, the U.S. District Court for the Central District of California unsealed a qui tam complaint, filed in April 2009 against CVS Pharmacy and other retail pharmacies, alleging that the Company violated the federal False Claims Act, and the False Claims Acts of several states, by offering such programs. The complaint was served on the Company in January 2017. In December 2017, the same court unsealed a second qui tam complaint filed by the same relator in September 2017. The complaint is based on the same factual allegations but asserts a legal theory the Court did not permit him to add to the original case. The federal government has declined intervention in both cases. The Company is defending both lawsuits. · United States ex rel. Anthony R. Spay v. CVS Caremark Corporation, et al. (U.S. District Court for the Eastern District of Pennsylvania). In January 2012, the court unsealed a first amended qui tam complaint filed in August 2011 by an individual relator, Anthony Spay, who is described in the complaint as having once been employed by a firm providing pharmacy prescription benefit audit and recovery services. The complaint seeks monetary damages and alleges that CVS Caremark’s processing of Medicare claims on behalf of one of its clients violated the federal False Claims Act. The United States declined to intervene in the lawsuit. In September 2015, the Court granted CVS Caremark’s motion for summary judgment in its entirety, and entered judgment in favor of CVS Caremark and against Spay. Spay appealed. In December 2017, the United States Court of Appeals for the Third Circuit affirmed the court’s judgment in favor of CVS Caremark. · State of Texas ex rel. Myron Winkelman and Stephani Martinson, et al. v. CVS Health Corporation, (Travis County Texas District Court). In February 2012, the Attorney General of the State of Texas issued Civil Investigative Demands and has issued a series of subsequent requests for documents and information in connection with its investigation concerning the CVS Health Savings Pass program and other pricing practices with respect to claims for reimbursement from the Texas Medicaid program. In January 2017, the court unsealed a first amended petition. The amended petition alleges the Company violated the Texas Medicaid Fraud Prevention Act by submitting false claims for reimbursement to Texas Medicaid by, among other things, failing to use the price available to members of the CVS Health Savings Pass program as the usual and customary price. The amended petition was unsealed following the Company’s filing of CVS Pharmacy, Inc. v. Charles Smith, et al. (Travis County District Court), a declaratory judgment action against the State of Texas in December 2016 seeking a declaration that the prices charged to members of the CVS Health Savings Pass program do not constitute usual and customary prices under the Medicaid regulation. The State of Texas is also pursuing temporary injunctive relief. · Subpoena Concerning PBM Administrative Fees. In March 2014, the Company received a subpoena from the United States Attorney’s Office for the District of Rhode Island, requesting documents and information concerning bona fide service fees and rebates received from pharmaceutical manufacturers in connection with certain drugs utilized under Medicare Part D, as well as the reporting of those fees and rebates to Part D plan sponsors. The Company has been cooperating with the government and providing documents and information in response to the subpoena. · Corcoran et al. v. CVS Health Corporation (U.S. District Court for the Northern District of California) and Podgorny et al. v. CVS Health Corporation (U.S. District Court for the Northern District of Illinois). These putative class actions were filed against the Company in July and September 2015. The cases were consolidated in United States District Court in the Northern District of California. Plaintiffs seek damages and injunctive relief on behalf of a class of consumers who purchased certain prescription drugs under the consumer protection statutes and common laws of certain states. Several third-party payors filed similar putative class actions on behalf of payors captioned Sheet Metal Workers Local No. 20 Welfare and Benefit Fund v. CVS Health Corp. and Plumbers Welfare Fund, Local 130 v. CVS Health Corporation (both pending in the U.S. District Court for the District of Rhode Island) in February and August 2016. In all of these cases the plaintiffs allege the Company overcharged for certain prescription drugs by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. In the consumer case (Corcoran), the Court granted summary judgment to CVS on plaintiffs’ claims in their entirety and certified certain subclasses in September 2017. The plaintiffs have filed a notice of appeal to the Ninth Circuit. The Company continues to defend these actions. · Omnicare DEA Subpoena. In September 2015, Omnicare was served with an administrative subpoena by the U.S. Drug Enforcement Administration (“DEA”). The subpoena seeks documents related to controlled substance policies, procedures, and practices at eight pharmacy locations from May 2012 to the present. In September 2017, the DEA expanded the investigation to include an additional pharmacy. The Company has been cooperating and providing documents in response to this administrative subpoena. · Omnicare Cycle Fill Civil Investigative Demand. In October 2015, Omnicare received a Civil Investigative Demand from the United States Attorney’s Office for the Southern District of New York requesting information and documents concerning Omnicare’s cycle fill process for assisted living facilities. The Company has been cooperating with the government and providing documents and information in response to the Civil Investigative Demand. In July 2017, Omnicare also received a subpoena from the California Department of Insurance requesting documents on similar subject matter. · PBM Pricing Civil Investigative Demand. In October 2015, the Company received from the U.S. Department of Justice (the “DOJ”) a Civil Investigative Demand requesting documents and information in connection with a federal False Claims Act investigation concerning allegations that the Company submitted, or caused to be submitted, to the Medicare Part D program prescription drug event data that misrepresented true prices paid by the Company’s PBM to pharmacies for drugs dispensed to Part D beneficiaries with prescription benefits administered by the Company’s PBM. The Company has been cooperating with the government and providing documents and information in response to the Civil Investigative Demand. · United States ex rel. Sally Schimelpfenig and John Segura v. Dr. Reddy's Laboratories Limited and Dr. Reddy's Laboratories, Inc. (U.S. District Court for the Eastern District of Pennsylvania). In November 2015, the court unsealed a second amended qui tam complaint filed in September 2015. The DOJ declined to intervene in this action. The relators allege that the Company, Walgreens, Wal-Mart, and Dr. Reddy’s Laboratories violated the federal and various state False Claims Acts by dispensing prescriptions in unit dose packaging supplied by Dr. Reddy’s that was not compliant with the Consumer Product Safety Improvement Act and the Poison Preventive Packaging Act and thereby allegedly rendering the drugs misbranded under the Food, Drug and Cosmetic Act. In March 2017, the Court granted the Company's motion to dismiss with leave to file an amended complaint. In June 2017, the Company moved to dismiss relators’ third amended complaint. · Barchock et al. v. CVS Health Corporation, et al. (U.S. District Court for the District of Rhode Island). In February 2016, a class action lawsuit was filed against the Company, the Benefit Plans Committee of the Company, and Galliard Capital Management, Inc., by Mary Barchock, Thomas Wasecko, and Stacy Weller, purportedly on behalf of the 401(k) Plan and the Employee Stock Ownership Plan of the Company (the “Plan”), and participants in the Plan. The complaint alleged that the defendants breached fiduciary duties owed to the plaintiffs and the Plan by investing too much of the Plan’s Stable Value Fund in short-term money market funds and cash management accounts. The court recently granted the Company’s motion to dismiss the plaintiffs’ amended complaint. In May 2017, plaintiffs appealed that ruling in the United States Court of Appeals for the First Circuit. · State of California ex rel. Matthew Omlansky v. CVS Caremark Corporation (Superior Court of the State of California, County of Sacramento). In April 2016, the court unsealed a first amended qui tam complaint filed in July 2013. The government has declined intervention in this case. The relator alleges that the Company submitted false claims for payment to California Medicaid in connection with reimbursement for drugs available through the CVS Health Savings Pass program as well as certain other generic drugs. The case has been stayed pending the relator’s appeal of the judgment against him in a similar case against another retailer. · Retail DEA Matters. The Company has been also undergoing several audits by the DEA Administrator and is in discussions with the DEA and the U.S. Attorney’s Offices in several locations concerning allegations that the Company has violated certain requirements of the Controlled Substance Act. · National Opioid Litigation . In December 2017, the United States Judicial Panel on Multidistrict Litigation ordered consolidated numerous cases filed against various defendants by plaintiffs such as counties, cities, hospitals, Indian tribes, and third-party payors, alleging claims generally concerning the impacts of widespread opioid abuse. The consolidated multidistrict litigation is In re National Prescription Opiate Litigation (MDL No. 2804), pending in the U.S. District Court for the Northern District of Ohio. This multidistrict litigation presumptively includes relevant federal court cases that name the Company, including actions filed by several counties in West Virginia; actions filed by several counties and cities in Michigan; actions filed by hospitals in Florida and Mississippi; and an action filed by the St. Croix Chippewa Indians of Wisconsin. Similar cases that name the Company in some capacity have been filed in state courts, including cases filed by Shelby County, Tennessee, Shelby County (Tennessee) v. Purdue Pharma, L.P., et al. (Shelby County Circuit Court, No. CT-004500-17), and several counties in West Virginia, Brooke County (West Virginia) et al. v. Purdue Pharma, L.P., et al. (Marshall County Circuit Court, Nos. 17-C-248 – 17-C-255). The Company is defending all such matters. · Cherokee Nation Opioid Litigation . In April 2017, the Company was named as a defendant in an action filed on behalf of the Cherokee Nation in the District Court of Cherokee Nation (the “Cherokee Action”) asserting various causes of action allegedly arising from the widespread abuse of opioids. In June 2017, the Company filed a motion to dismiss the Cherokee Action. The Cherokee Nation has since filed an amended petition in the Cherokee Action. Also in June 2017, the six defendants in the Cherokee Action collectively filed a complaint in the U.S. District Court for the Northern District of Oklahoma, McKesson , et al. v. Hembree , et al., seeking a declaration and preliminary injunction prohibiting the District Court of Cherokee Nation from exercising jurisdiction over the Cherokee Action. In January 2018, the U.S. District Court granted the preliminary injunction motion and issued an order enjoining the Cherokee Nation Attorney General and the judicial officers of the Cherokee Nation District Court from taking any action with respect to the Cherokee Action pending resolution of the federal court case. · State of Mississippi v. CVS Health Corporation, et al. (Chancery Court of DeSoto County, Mississippi, Third Judicial District). In July 2016, the Company was served with a complaint filed on behalf of the State of Mississippi alleging that CVS retail pharmacies in Mississippi submitted false claims for reimbursement to Mississippi Medicaid by not submitting the price available to members of the CVS Health Savings Pass program as the pharmacy’s usual and customary price. The Company has responded to the complaint, filed a counterclaim, and moved to transfer the case to circuit court. The motion to transfer was granted, which the State has appealed, and the motion to dismiss remains pending. · Part B Insulin Products Civil Investigative Demand. In December 2016, the Company received a Civil Investigative Demand from the U.S. Attorney’s Office for the Northern District of New York, requesting documents and information in connection with a False Claims Act investigation concerning whether the Company’s retail pharmacies improperly submitted certain insulin claims to Medicare Part D rather than Part B. The Company has cooperated with the government and provided documents and information in response to the Civil Investigative Demand. · Cold Chain Logistics Civil Investigative Demand . In September 2016, the Company received from the DOJ a Civil Investigative Demand in connection with an investigation as to whether the Company’s handling of certain temperature-sensitive pharmaceuticals violates the federal Food, Drug and Cosmetic Act and the False Claims Act. The Company has been cooperating with the government and providing documents and information in response to the Civil Investigative Demand. · Amburgey, et al. v. CaremarkPCS Health, L.L.C. (U.S. District Court for the Central District of California). In March 2017, the Company was served with a complaint challenging the policies and procedures used by CVS Specialty pharmacies to ship temperature-sensitive medications. The case is similar to a matter already pending against the Company in the Superior Court of California (Los Angeles County), Bertram v. Immunex Corp. , et al., which was filed in October 2014. In November 2017, the plaintiffs voluntarily dismissed the Amburgey case without prejudice. The Company continues to defend the Bertram matter. · Barnett, et al. v. Novo Nordisk Inc ., et al. and Boss , et al. v. CVS Health Corporation , et al., and Christensen, et al., v. Novo Nordisk Inc. et al., (all pending in the U.S. District Court for the District of New Jersey). These putative class actions were filed against the Company and other PBMs and manufacturers of insulin in March and April 2017. Plaintiffs in all cases allege that the PBMs and manufacturers have engaged in a conspiracy whereby the PBMs sell access to their formularies by demanding the highest rebates, which in turn causes increased list prices for insulin. The primary claims are antitrust claims, claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), violations of state unfair competition and consumer protection laws and in Boss , claims pursuant to the Employee Retirement Income Security Act (“ERISA”). In December 2017, the attorney appointed as interim lead counsel in Barnet, Boss and Christensen filed a consolidated amended class action complaint in a related action, In re Insulin Pricing Litigation , against only the drug manufacturers, and not against the PBMs. · Insulin Products Investigation. In April 2017, the Company received a Civil Investigative Demand from the Attorney General of Washington, seeking documents and information regarding pricing and rebates for insulin products in connection with a pending investigation into unfair and deceptive acts or practice regarding insulin pricing. We have been notified by the Office of the Attorney General of Washington that information provided in response to the Civil Investigative Demand will be shared with the Attorneys General of California, Florida, Minnesota, New Mexico and the District of Columbia. In July 2017, the Company received a Civil Investigative Demand from the Attorney General of Minnesota, seeking documents and information regarding pricing and rebates for insulin and epinephrine products in connection with a pending investigation into unfair and deceptive acts or practices regarding insulin and epinephrine pricing. · Bewley, et al. v. CVS Health Corporation , et al. and Prescott , et al. v. CVS Health Corporation , et al. (both pending in the U.S. District Court for the Western District of Washington). These putative class actions were filed in May 2017 against the Company and other pharmacy benefit managers and manufacturers of glucagon kits (Bewley) and diabetes test strips (Prescott). Both cases allege that, by contracting for rebates with the manufacturers of these diabetes products, the Company and other PBMs caused list prices for these products to increase, thereby harming certain consumers. The primary claims are made under federal antitrust laws, RICO, state unfair competition and consumer protection laws, and ERISA. These cases have both been transferred to the United States District Court for the District of New Jersey on defendants’ motions. The Company is defending these lawsuits. · Klein , et al. v. Prime Therapeutics , et al. (U.S. District Court for the District of Minnesota). In June 2017, a putative class action complaint was filed against the Company and other pharmacy benefit managers on behalf of ERISA plan members who purchased and paid for EpiPen or EpiPen Jr. Plaintiffs allege that the pharmacy benefit managers are ERISA fiduciaries to plan members and have violated ERISA by allegedly causing higher inflated prices for EpiPen through the process of negotiating increased rebates from EpiPen manufacturer, Mylan. The Company is defending this lawsuit. · Medicare Part D Civil Investigative Demand . In May 2017, the United States Attorney’s Office for the Southern District of New York issued a Civil Investigative Demand to the Company concerning possible false claims submitted to Medicare in connection with reimbursements for prescription drugs under the Medicare Part D program. The Company has been cooperating with the government and providing documents and information in response to the Civil Investigative Demand. · Shareholder Matters. In August and September 2017, four complaints were filed by putative derivative plaintiffs against certain officers and directors of the Company. Three of those actions, Sherman v. Merlo, et al., Feghali v. Merlo, et al., and Banchalter v. Merlo, et al., were filed in the U.S. District Court for the District of Rhode Island. A fourth, Boron v. Bracken, et al., was filed in Rhode Island Superior Court. These matters assert a variety of causes of action, including breach of fiduciary duty, waste of corporate assets, unjust enrichment, civil conspiracy and violation of Section 14(a) of the Exchange Act, and are premised on the allegation that the defendants approved business plans that exposed the Company to various litigations and investigations. The three federal matters have been stayed pending resolution of certain of the underlying matters, and the Company has filed a motion to stay the state court action. · MSP Recovery Claims Series, LLC , et al. v. CVS Health Corporation , et al. (U.S. District Court for the Western District of Texas). In September 2017, a putative class action complaint was filed against the company, Express Scripts, Inc., and the manufacturers of insulin on behalf of assignees of claims of Medicare Advantage Organizations. Plaintiffs assert that the PBMs and manufacturers have engaged in a conspiracy whereby the PBMs sell access to their formularies by demanding the highest rebates, which in turn causes increased list prices for insulin. The plaintiffs assert claims on behalf of two putative classes: (1) all Medicare C payors and (2) all Medicare D payors. The complaint asserts claims under RICO, and for common law fraud and unjust enrichment. The Company is also a party to other legal proceedings, government investigations, inquiries and audits, and has received and is cooperating with subpoenas or similar process from various governmental agencies requesting information, all arising in the normal course of its business, none of which is expected to be material to the Company. The Company can give no assurance, however, that its business, financial condition and results of operations will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations as they may relate to the Company’s business, the pharmacy services, specialty pharmacy, retail pharmacy, long-term care pharmacy or retail clinic industries or to the health care industry generally; (iii) pending or future federal or state governmental investigations of the Company’s business or the pharmacy services, specialty pharmacy, retail pharmacy, long-term care pharmacy or retail clinic industry or of the health care industry generally; (iv) pending or future government enforcement actions against the Company; (v) adverse developments in any pending qui tam lawsuit against the Company, whether sealed or unsealed, or in any future qui tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting the pharmacy services, specialty pharmacy, retail pharmacy, long-term care pharmacy or retail clinic industry or the health care industry generally. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2017 | |
Segment Reporting | |
Segment Reporting | 13 The Company currently has three reportable segments: Pharmacy Services, Retail/LTC and Corporate. The Retail/LTC Segment includes the operating results of the Company’s Retail Pharmacy and LTC/RxCrossroads operating segments as the operations and economics characteristics are similar. The Company’s segments maintain separate financial information for which operating results are evaluated on a regular basis by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company evaluates its Pharmacy Services and Retail/LTC segments’ performance based on net revenue, gross profit and operating profit before the effect of nonrecurring charges and gains and certain intersegment activities. The Company evaluates the performance of its Corporate Segment based on operating expenses before the effect of nonrecurring charges and gains and certain intersegment activities. The chief operating decision maker does not use total assets by segment to make decisions regarding resources, therefore the total asset disclosure by segment has not been included. See Note 1 “Significant Accounting Policies” for a description of the Pharmacy Services, Retail/LTC and Corporate segments and related significant accounting policies. In 2017, 2016 and 2015, approximately 12.3%, 11.7% and 10.0%, respectively, of the Company’s consolidated net revenues were from Aetna, a Pharmacy Services Segment client. More than 99% of the Company’s consolidated net revenues are earned in, and long-lived assets are located in the United States. The following table is a reconciliation of the Company’s business segments to the consolidated financial statements: Pharmacy Services Retail/LTC Corporate Intersegment Consolidated In millions Segment (1)(2) Segment (2) Segment Eliminations (2) Totals 2017: Net revenues $ 130,596 $ 79,398 $ — $ (25,229) $ 184,765 Gross profit (3) 6,040 23,317 — (812) 28,545 Operating profit (loss) (4)(5) 4,755 6,469 (966) (741) 9,517 Depreciation and amortization 712 1,651 117 — 2,480 Additions to property and equipment 311 1,398 340 — 2,049 2016: Net revenues 119,963 81,100 — (23,537) $ 177,526 Gross profit (3) 5,901 23,738 — (782) 28,857 Operating profit (loss) (4)(5)(6)(7) 4,676 7,302 (891) (721) 10,366 Depreciation and amortization 714 1,642 119 — 2,475 Additions to property and equipment 295 1,732 252 — 2,279 2015: Net revenues 100,363 72,007 — (19,080) $ 153,290 Gross profit 5,227 21,992 — (691) 26,528 Operating profit (loss) (4)(5)(7) 3,992 7,146 (1,035) (628) 9,475 Depreciation and amortization 654 1,336 102 — 2,092 Additions to property and equipment 359 1,883 125 — 2,367 (1) Net revenues of the Pharmacy Services Segment include approximately $10.8 billion, $10.5 billion and $8.9 billion of Retail Co-Payments for 2017, 2016 and 2015, respectively. See Note 1 “Significant Accounting Policies” to the consolidated financial statements for additional information about Retail Co-Payments. (2) Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services Segment and the Retail/LTC Segment. These occur in the following ways: when members of Pharmacy Services Segment clients (“members”) fill prescriptions at the Company’s retail pharmacies to purchase covered products, when members enrolled in programs such as Maintenance Choice ® elect to pick up maintenance prescriptions at one of the Company’s retail pharmacies instead of receiving them through the mail, or when members have prescriptions filled at the Company’s long-term care pharmacies. When these occur, both the Pharmacy Services and Retail/LTC segments record the revenues, gross profit and operating profit on a standalone basis. (3) The Retail/LTC Segment gross profit for the years ended December 31, 2017 and 2016 includes $2 million and $46 million, respectively of acquisition-related integration costs. The integration costs in 2017 are related to the acquisition of Omnicare and the integration costs in 2016 are related to the acquisitions of Omnicare and the pharmacies and clinics of Target. (4) The Retail/LTC Segment operating profit for the year ended December 31, 2017 includes $215 million of charges associated with store closures and $181 million of goodwill impairment charges related to its RxCrossroads reporting unit. The Retail/LTC Segment operating profit for the year ended December 31, 2016 includes a $34 million asset impairment charge in connection with planned store closures in 2017 related to the Company’s enterprise streamlining initiative. The Retail/LTC Segment operating profit for the years ended December 31, 2017, 2016 and 2015, include $34 million, $281 million and $64 million, respectively, of acquisition-related integration costs. The integration costs in 2017 are related to the acquisition of Omnicare and the integration costs in 2016 are related to the acquisitions of Omnicare and the pharmacies and clinics of Target. (5) The Corporate Segment operating loss for the year ended December 31, 2017 includes a $3 million reduction in integration costs for a change in estimate related to the acquisition of Omnicare. In addition, the Corporate Segment operating loss for the year ended December 31, 2017 includes $34 million in acquisition-related transaction costs related to the proposed Aetna acquisition and $9 million of transaction costs related to the divestiture of RxCrossroads. For the year ended December 31, 2016, the Corporate Segment operating loss includes $10 million of integration costs related to the acquisitions of Omnicare and the pharmacies and clinics of Target. For the year ended December 31, 2015, the Corporate Segment operating loss includes $156 million of acquisition-related transaction and integration costs related to the acquisitions of Omnicare and the pharmacies and clinics of Target. The Corporate Segment operating loss for 2015 also includes a $90 million charge related to a legacy lawsuit challenging the 1999 legal settlement by MedPartners of various securities class actions and a related derivative claim. (6) The Pharmacy Services Segment operating profit for the year ended December 31, 2016 includes the reversal of an accrual of $88 million in connection with a legal settlement. (7) Amounts revised to reflect the adoption of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , which increased consolidated operating profit by $28 and $21 million for the years ended December 31, 2016 and 2015, respectively. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2017 | |
Earnings Per Share | |
Earnings Per Share | 14 The following is a reconciliation of basic and diluted earnings per share from continuing operations for the years ended December 31: In millions, except per share amounts 2017 2016 2015 Numerator for earnings per share calculation: Income from continuing operations $ 6,631 $ 5,320 $ 5,230 Income allocated to participating securities (24) (27) (26) Net income attributable to noncontrolling interest (1) (2) (2) Income from continuing operations attributable to CVS Health $ 6,606 $ 5,291 $ 5,202 Denominator for earnings per share calculation: Weighted average shares, basic 1,020 1,073 1,118 Effect of dilutive securities 4 6 8 Weighted average shares, diluted 1,024 1,079 1,126 Earnings per share from continuing operations: Basic $ 6.48 $ 4.93 $ 4.65 Diluted $ 6.45 $ 4.91 $ 4.62 |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Information (Unaudited) | |
Quarterly Financial Information (Unaudited) | 15 First Second Third Fourth In millions, except per share amounts Quarter Quarter Quarter Quarter Year 2017: Net revenues $ 44,514 $ 45,685 $ 46,181 $ 48,385 $ 184,765 Gross profit 6,580 6,935 7,126 7,904 28,545 Operating profit 1,793 2,117 2,499 3,108 9,517 Income from continuing operations 962 1,097 1,285 3,287 6,631 Income (loss) from discontinued operations, net of tax (9) 1 — — (8) Net income attributable to CVS Health 952 1,098 1,285 3,287 6,622 Basic earnings per share: Income from continuing operations attributable to CVS Health $ 0.93 $ 1.07 $ 1.26 $ 3.23 $ 6.48 Income (loss) from discontinued operations attributable to CVS Health $ (0.01) $ — $ — $ — $ (0.01) Net income attributable to CVS Health $ 0.92 $ 1.07 $ 1.26 $ 3.23 $ 6.47 Diluted earnings per share: Income from continuing operations attributable to CVS Health $ 0.92 $ 1.07 $ 1.26 $ 3.22 $ 6.45 Income (loss) from discontinued operations attributable to CVS Health $ (0.01) $ — $ — $ — $ (0.01) Net income attributable to CVS Health $ 0.92 $ 1.07 $ 1.26 $ 3.22 $ 6.44 Dividends per share $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 2.00 Stock price: (New York Stock Exchange) High $ 83.92 $ 82.79 $ 83.31 $ 80.91 $ 83.92 Low $ 74.80 $ 75.95 $ 75.35 $ 66.80 $ 66.80 First Second Third Fourth In millions, except per share amounts Quarter Quarter Quarter Quarter Year 2016: Net revenues $ 43,215 $ 43,725 $ 44,615 $ 45,971 $ 177,526 Gross profit 6,744 7,015 7,492 7,606 28,857 Operating profit 2,185 2,357 2,824 3,000 10,366 Income from continuing operations 1,147 924 1,542 1,707 5,320 Loss from discontinued operations, net of tax — — (1) — (1) Net income attributable to CVS Health 1,146 924 1,540 1,707 5,317 Basic earnings per share: Income from continuing operations attributable to CVS Health $ 1.04 $ 0.86 $ 1.44 $ 1.60 $ 4.93 Income (loss) from discontinued operations attributable to CVS Health $ — $ — $ — $ — $ — Net income attributable to CVS Health $ 1.04 $ 0.86 $ 1.44 $ 1.60 $ 4.93 Diluted earnings per share: Income from continuing operations attributable to CVS Health $ 1.04 $ 0.86 $ 1.43 $ 1.59 $ 4.91 Income (loss) from discontinued operations attributable to CVS Health $ — $ — $ — $ — $ — Net income attributable to CVS Health $ 1.04 $ 0.86 $ 1.43 $ 1.59 $ 4.90 Dividends per share $ 0.425 $ 0.425 $ 0.425 $ 0.425 $ 1.70 Stock price: (New York Stock Exchange) High $ 104.05 $ 106.10 $ 98.06 $ 88.80 $ 106.10 Low $ 89.65 $ 93.21 $ 88.99 $ 73.53 $ 73.53 |
Significant Accounting Polici23
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Significant Accounting Policies | |
Principles of Consolidation | Principles of consolidation - The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated. The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary. Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company. |
Use of Estimates | Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
Fair Value Hierarchy | Fair value hierarchy - The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following: · Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk. |
Cash and Cash Equivalents | Cash and cash equivalents - Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when purchased. The Company invests in short-term money market funds, commercial paper and time deposits, as well as other debt securities that are classified as cash equivalents within the accompanying consolidated balance sheets, as these funds are highly liquid and readily convertible to known amounts of cash. These investments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. |
Restricted Cash | Restricted cash - As of December 31, 2017 and 2016, the Company had $190 million and $149 million, respectively, of restricted cash held in a trust in its insurance captive to satisfy collateral requirements associated with the assignment of certain insurance policies. Such amounts are included in other assets in the consolidated balance sheets. Additionally, as of December 31, 2017, the Company had $14 million of restricted cash held in escrow accounts in connection with certain recent acquisitions. Such amounts are included in other current assets in the consolidated balance sheets. All restricted cash is invested in time deposits which are classified within Level 1 of the fair value hierarchy. |
Short-term Investments | Short-term investments - The Company’s short-term investments consist of certificates of deposit with initial maturities of greater than three months when purchased that mature in less than one year from the balance sheet date. These investments, which were classified as available-for-sale within Level 1 of the fair value hierarchy, were carried at fair value, which approximated their historical cost at December 31, 2017 and 2016. |
Fair Value of Financial Instruments | Fair value of financial instruments - As of December 31, 2017, the Company’s financial instruments include cash and cash equivalents, short-term and long-term investments, accounts receivable, accounts payable and short-term debt approximate their fair value due to the nature of these financial instruments. The carrying amount and estimated fair value of total long-term debt was $25.7 billion and $26.8 billion, respectively, as of December 31, 2017. The fair value of the Company’s long-term debt was estimated based on quoted rates currently offered in active markets for the Company’s debt, which is considered Level 1 of the fair value hierarchy. |
Derivative Financial Instruments | Derivative financial instruments - The Company is exposed to interest rate risk and management considers it prudent to periodically reduce the Company’s exposure to cash flow variability resulting from interest rate fluctuations. In December 2017, the Company entered into several interest rate swap transactions. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of long-term debt in connection with the proposed acquisition of Aetna Inc. (“Aetna”). The interest rate swaps had notional amounts totaling $4.75 billion. At December 31, 2017, the fair value of these agreements were a $5 million asset recorded in other current assets and a $23 million liability recorded in accrued expenses. The fair value of these derivative financial instruments was determined using quoted prices in markets that are not active or inputs that are observable for the asset or liability and therefore they are classified as Level 2 in the fair value hierarchy. The Company has deferred gains and losses in accumulated other comprehensive income which are expected to be reclassified to interest expense over the life of the underlying forecasted debt. The hedges are expected to be highly effective; therefore, no ineffectiveness was recognized in earnings. There were no outstanding derivative financial instruments as of December 31, 2016. |
Foreign Currency Translation and Transactions | Foreign currency translation and transactions - For local currency functional currency, assets and liabilities are translated at end-of-period rates while revenues and expenses are translated at average rates in effect during the period. Equity is translated at historical rates and the resulting cumulative translation adjustments are included as a component of accumulated other comprehensive income (loss). For U.S. dollar functional currency locations, foreign currency assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates, except for nonmonetary balance sheet accounts, which are remeasured at historical exchange rates. Revenue and expense are remeasured at average exchange rates in effect during each period, except for those expenses related to the nonmonetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in income. Gains and losses arising from foreign currency transactions and the effects of remeasurements were not material for all periods presented. |
Accounts Receivable | Accounts receivable - Accounts receivable are stated net of an allowance for doubtful accounts. The accounts receivable balance primarily includes amounts due from third party providers (e.g., pharmacy benefit managers, insurance companies, governmental agencies and long-term care facilities), clients, members and private pay customers, as well as vendors and manufacturers. Charges to bad debt are based on both historical write-offs and specifically identified receivables. The activity in the allowance for doubtful accounts receivable for the years ended December 31 is as follows: In millions 2017 2016 2015 Beginning balance $ 286 $ 161 $ 256 Additions charged to bad debt expense 177 221 216 Write-offs charged to allowance (156) (96) (311) Ending balance $ 307 $ 286 $ 161 |
Inventories | Inventories - Inventories are stated at the lower of weighted average cost or market. Physical inventory counts are taken on a regular basis in each retail store and long-term care pharmacy and a continuous cycle count process is the primary procedure used to validate the inventory balances on hand in each distribution center and mail facility to ensure that the amounts reflected in the accompanying consolidated financial statements are properly stated. During the interim period between physical inventory counts, the Company accrues for anticipated physical inventory losses on a location-by-location basis based on historical results and current trends. |
Property and Equipment | Property and equipment - Property, equipment and improvements to leased premises are depreciated using the straight-line method over the estimated useful lives of the assets, or when applicable, the term of the lease, whichever is shorter. Estimated useful lives generally range from 10 to 40 years for buildings, building improvements and leasehold improvements and 3 to 10 years for fixtures, equipment and internally developed software. Repair and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated. Application development stage costs for significant internally developed software projects are capitalized and depreciated. The following are the components of property and equipment at December 31: In millions 2017 2016 Land $ 1,707 $ 1,734 Building and improvements 3,343 3,226 Fixtures and equipment 11,963 10,956 Leasehold improvements 4,793 4,494 Software 2,484 2,392 24,290 22,802 Accumulated depreciation and amortization (13,998) (12,627) Property and equipment, net $ 10,292 $ 10,175 The gross amount of property and equipment under capital leases was $588 million and $547 million as of December 31, 2017 and 2016, respectively. Accumulated amortization of property and equipment under capital lease was $140 million and $119 million as of December 31, 2017 and 2016, respectively. Amortization of property and equipment under capital lease is included within depreciation expense. Depreciation expense totaled $1.7 billion in both 2017 and 2016, and $1.5 billion in 2015. |
Goodwill and Other Indefinitely-lived Assets | Goodwill and other indefinitely-lived assets - Goodwill and other indefinitely-lived assets are not amortized, but are subject to impairment reviews annually, or more frequently if necessary. See Note 3 “Goodwill and Other Intangibles” for additional information on goodwill and other indefinitely-lived assets. |
Intangible Assets | Intangible assets - Purchased customer contracts and relationships are amortized on a straight-line basis over their estimated useful lives between 9 and 20 years. Purchased customer lists are amortized on a straight-line basis over their estimated useful lives of up to 10 years. Purchased leases are amortized on a straight-line basis over the remaining life of the lease. See Note 3 “Goodwill and Other Intangibles” for additional information about intangible assets. |
Impairment of Long-lived Assets | Impairment of long-lived assets - The Company groups and evaluates fixed and finite-lived intangible assets for impairment at the lowest level at which individual cash flows can be identified, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the Company first compares the carrying amount of the asset group to the estimated future cash flows associated with the asset group (undiscounted and without interest charges). If the estimated future cash flows used in this analysis are less than the carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to the asset group’s estimated future cash flows (discounted and with interest charges). If required, an impairment loss is recorded for the portion of the asset group’s carrying value that exceeds the asset group’s estimated future cash flows (discounted and with interest charges). |
Redeemable Noncontrolling Interest | Redeemable noncontrolling interest - As a result of the acquisition of Omnicare in 2015, the Company obtained a 73% ownership interest in a limited liability company (“LLC”). Due to the change in control in Omnicare, the noncontrolling member of the LLC had the contractual right to put its membership interest to the Company at fair value. Consequently, the noncontrolling interest in the LLC was recorded as a redeemable noncontrolling interest at fair value. During 2016, the noncontrolling shareholder of the LLC exercised its option to sell its ownership interest and the Company purchased the noncontrolling interest in the LLC for approximately $39 million. Below is a summary of the changes in redeemable noncontrolling interest for the years ended December 31: In millions 2016 2015 Beginning balance $ 39 $ — Acquisition of noncontrolling interest — 39 Net income attributable to noncontrolling interest 1 1 Distributions (2) (1) Purchase of noncontrolling interest (39) — Reclassification to capital surplus in connection with purchase of noncontrolling interest 1 — Ending balance $ — $ 39 |
Revenue Recognition | Revenue Recognition Pharmacy Services Segment The PSS sells prescription drugs directly through its mail service dispensing pharmacies and indirectly through its retail pharmacy network. The PSS recognizes revenue from prescription drugs sold by its mail service dispensing pharmacies and under retail pharmacy network contracts where it is the principal using the gross method at the contract prices negotiated with its clients. Net revenues include: (i) the portion of the price the client pays directly to the PSS, net of any volume-related or other discounts paid back to the client (see “Drug Discounts” below), (ii) the price paid to the PSS by client plan members for mail order prescriptions (“Mail Co-Payments”) and the price paid to retail network pharmacies by client plan members for retail prescriptions (“Retail Co-Payments”), and (iii) administrative fees for retail pharmacy network contracts where the PSS is not the principal as discussed below. Sales taxes are not included in revenue. Revenue is recognized when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. The following revenue recognition policies have been established for the PSS: · Revenues generated from prescription drugs sold by mail service dispensing pharmacies are recognized when the prescription is delivered. At the time of delivery, the PSS has performed substantially all of its obligations under its client contracts and does not experience a significant level of returns or reshipments. · Revenues generated from prescription drugs sold by third party pharmacies in the PSS’ retail pharmacy network and associated administrative fees are recognized at the PSS’ point-of-sale, which is when the claim is adjudicated by the PSS online claims processing system. The PSS determines whether it is the principal or agent for its retail pharmacy network transactions on a contract by contract basis. In the majority of its contracts, the PSS has determined it is the principal due to it: (i) being the primary obligor in the arrangement, (ii) having latitude in establishing the price, changing the product or performing part of the service, (iii) having discretion in supplier selection, (iv) having involvement in the determination of product or service specifications, and (v) having credit risk. The PSS’ obligations under its client contracts for which revenues are reported using the gross method are separate and distinct from its obligations to the third party pharmacies included in its retail pharmacy network contracts. Pursuant to these contracts, the PSS is contractually required to pay the third party pharmacies in its retail pharmacy network for products sold, regardless of whether the PSS is paid by its clients. The PSS’ responsibilities under its client contracts typically include validating eligibility and coverage levels, communicating the prescription price and the co-payments due to the third party retail pharmacy, identifying possible adverse drug interactions for the pharmacist to address with the prescriber prior to dispensing, suggesting generic alternatives where clinically appropriate and approving the prescription for dispensing. Although the PSS does not have credit risk with respect to Retail Co-Payments or inventory risk related to retail network claims, management believes that all of the other applicable indicators of gross revenue reporting are present. For contracts under which the PSS acts as an agent, revenue is recognized using the net method. Drug Discounts - The PSS deducts from its revenues any rebates, inclusive of discounts and fees, earned by its clients. Rebates are paid to clients in accordance with the terms of client contracts, which are normally based on fixed rebates per prescription for specific products dispensed or a percentage of manufacturer discounts received for specific products dispensed. The liability for rebates due to clients is included in “Claims and discounts payable” in the accompanying consolidated balance sheets. Medicare Part D - The PSS, through its SilverScript subsidiary, participates in the federal government’s Medicare Part D program as a Prescription Drug Plan (“PDP”). Net revenues include insurance premiums earned by the PDP, which are determined based on the PDP’s annual bid and related contractual arrangements with the Centers for Medicare and Medicaid Services (“CMS”). The insurance premiums include a direct premium paid by CMS and a beneficiary premium, which is the responsibility of the PDP member, but which is subsidized by CMS in the case of low-income members. Premiums collected in advance are initially deferred in accrued expenses and are then recognized in net revenues over the period in which members are entitled to receive benefits. In addition to these premiums, net revenues include co-payments, coverage gap benefits, deductibles and co-insurance (collectively, the “Member Co-Payments”) related to PDP members’ actual prescription claims. In certain cases, CMS subsidizes a portion of these Member Co-Payments and pays the PSS an estimated prospective Member Co-Payment subsidy amount each month. The prospective Member Co-Payment subsidy amounts received from CMS are also included in net revenues. SilverScript assumes no risk for these amounts. If the prospective Member Co-Payment subsidies received differ from the amounts based on actual prescription claims, the difference is recorded in either accounts receivable or accrued expenses. The PSS accounts for CMS obligations and Member Co-Payments (including the amounts subsidized by CMS) using the gross method consistent with its revenue recognition policies for Mail Co-Payments and Retail Co-Payments (discussed previously in this document). Retail/LTC Segment Retail Pharmacy - The retail drugstores recognize revenue at the time the customer takes possession of the merchandise. Customer returns are not material. Revenue generated from the performance of services in the RLS’ health care clinics is recognized at the time the services are performed. Sales taxes are not included in revenue. Long-term Care - Revenue is recognized when products are delivered or services are rendered or provided to the customer, prices are fixed and determinable, and collection is reasonably assured. A significant portion of the revenues from sales of pharmaceutical and medical products are reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs. Payments for services rendered to patients covered by these programs are generally less than billed charges. The Company monitors its revenues and receivables from these reimbursement sources, as well as other third party insurance payors, and record an estimated contractual allowance for sales and receivable balances at the revenue recognition date, to properly account for anticipated differences between billed and reimbursed amounts. Accordingly, the total net sales and receivables reported in the Company’s consolidated financial statements are recorded at the amount expected to be ultimately received from these payors. Since billing functions for a portion of the Company’s revenue systems are largely computerized, enabling on-line adjudication at the time of sale to record net revenues, the Company’s exposure in connection with estimating contractual allowance adjustments is limited primarily to unbilled and initially rejected Medicare, Medicaid and third party claims (typically approved for reimbursement once additional information is provided to the payor). For the remaining portion of the Company’s revenue systems, the contractual allowance is estimated for all billed, unbilled and initially rejected Medicare, Medicaid and third party claims. The Company evaluates several criteria in developing the estimated contractual allowances on a monthly basis, including historical trends based on actual claims paid, current contract and reimbursement terms, and changes in customer base and payor/product mix. Contractual allowance estimates are adjusted to actual amounts as cash is received and claims are settled, and the aggregate impact of these resulting adjustments was not significant to our results of operations for any of the periods presented. Patient co-payments associated with Medicare Part D, certain state Medicaid programs, Medicare Part B and certain third party payors are typically not collected at the time products are delivered or services are rendered, but are billed to the individuals as part of our normal billing procedures and subject to our normal accounts receivable collections procedures. Health Care Clinics - For services provided by our health care clinics, revenue recognition occurs for completed services provided to patients, with adjustments taken for third party payor contractual obligations and patient direct bill historical collection rates. Loyalty Program - The Company’s customer loyalty program, ExtraCare ® , is comprised of two components, ExtraSavings TM and ExtraBucks ® Rewards. ExtraSavings coupons redeemed by customers are recorded as a reduction of revenue when redeemed. ExtraBucks Rewards are accrued as a charge to cost of revenues when earned, net of estimated breakage. The Company determines breakage based on historical redemption patterns. See Note 13 “Segment Reporting” for additional information about the revenues of the Company’s business segments. |
Cost of Revenues | Cost of revenues Pharmacy Services Segment - The PSS’ cost of revenues includes: (i) the cost of prescription drugs sold during the reporting period directly through its mail service dispensing pharmacies and indirectly through its retail pharmacy network, (ii) shipping and handling costs, and (iii) the operating costs of its mail service dispensing pharmacies and client service operations and related information technology support costs including depreciation and amortization. The cost of prescription drugs sold component of cost of revenues includes: (i) the cost of the prescription drugs purchased from manufacturers or distributors and shipped to members in clients’ benefit plans from the PSS’ mail service dispensing pharmacies, net of any volume-related or other discounts (see “Vendor allowances and purchase discounts” below) and (ii) the cost of prescription drugs sold (including Retail Co-Payments) through the PSS’ retail pharmacy network under contracts where it is the principal, net of any volume-related or other discounts. Retail/LTC Segment - The RLS’ cost of revenues includes: the cost of merchandise sold during the reporting period and the related purchasing costs, warehousing and delivery costs (including depreciation and amortization) and actual and estimated inventory losses. See Note 13 “Segment Reporting” for additional information about the cost of revenues of the Company’s business segments. |
Vendor Allowances and Purchase Discounts | Vendor allowances and purchase discounts The Company accounts for vendor allowances and purchase discounts as follows: Pharmacy Services Segment - The PSS receives purchase discounts on products purchased. The PSS’ contractual arrangements with vendors, including manufacturers, wholesalers and retail pharmacies, normally provide for the PSS to receive purchase discounts from established list prices in one, or a combination, of the following forms: (i) a direct discount at the time of purchase, (ii) a discount for the prompt payment of invoices, or (iii) when products are purchased indirectly from a manufacturer (e.g., through a wholesaler or retail pharmacy), a discount (or rebate) paid subsequent to dispensing. These rebates are recognized when prescriptions are dispensed and are generally calculated and billed to manufacturers within 30 days of the end of each completed quarter. Historically, the effect of adjustments resulting from the reconciliation of rebates recognized to the amounts billed and collected has not been material to the PSS’ results of operations. The PSS accounts for the effect of any such differences as a change in accounting estimate in the period the reconciliation is completed. The PSS also receives additional discounts under its wholesaler contracts if it exceeds contractually defined annual purchase volumes. In addition, the PSS receives fees from pharmaceutical manufacturers for administrative services. Purchase discounts and administrative service fees are recorded as a reduction of “Cost of revenues”. Retail/LTC Segment - Vendor allowances received by the RLS reduce the carrying cost of inventory and are recognized in cost of revenues when the related inventory is sold, unless they are specifically identified as a reimbursement of incremental costs for promotional programs and/or other services provided. Amounts that are directly linked to advertising commitments are recognized as a reduction of advertising expense (included in operating expenses) when the related advertising commitment is satisfied. Any such allowances received in excess of the actual cost incurred also reduce the carrying cost of inventory. The total value of any upfront payments received from vendors that are linked to purchase commitments is initially deferred. The deferred amounts are then amortized to reduce cost of revenues over the life of the contract based upon purchase volume. The total value of any upfront payments received from vendors that are not linked to purchase commitments is also initially deferred. The deferred amounts are then amortized to reduce cost of revenues on a straight-line basis over the life of the related contract. The total amortization of these upfront payments was not material to the accompanying consolidated financial statements. |
Insurance | Insurance - The Company is self-insured for certain losses related to general liability, workers’ compensation and auto liability. The Company obtains third party insurance coverage to limit exposure from these claims. The Company is also self-insured for certain losses related to health and medical liabilities. The Company’s self-insurance accruals, which include reported claims and claims incurred but not reported, are calculated using standard insurance industry actuarial assumptions and the Company’s historical claims experience. |
Facility Opening and Closing Costs | Facility opening and closing costs - New facility opening costs, other than capital expenditures, are charged directly to expense when incurred. When the Company closes a facility, the present value of estimated unrecoverable costs, including the remaining lease obligation less estimated sublease income and the book value of abandoned property and equipment, are charged to expense. The long-term portion of the lease obligations associated with facility closings was $306 million and $181 million in 2017 and 2016, respectively. |
Advertising Costs | Advertising costs - Advertising costs are expensed when the related advertising takes place. Advertising costs, net of vendor funding (included in operating expenses), were $2 30 million, $216 million and $221 million in 2017, 2016 and 2015, respectively. |
Interest Expense, Net | Interest expense, net - The following are the components of net interest expense for the years ended December 31: In millions 2017 2016 2015 Interest expense $ 1,062 $ 1,078 $ 859 Interest income (21) (20) (21) Interest expense, net $ 1,041 $ 1,058 $ 838 Capitalized interest totaled $ 8 million, $13 million and $12 million in 2017, 2016 and 2015, respectively. |
Shares Held in Trust | Shares held in trust - The Company maintains grantor trusts, which held approximately one million shares of its common stock at December 31, 2017 and 2016, respectively. These shares are designated for use under various employee compensation plans. Since the Company holds these shares, they are excluded from the computation of basic and diluted shares outstanding. |
Accumulated Other Comprehensive Income | Accumulated other comprehensive income - Accumulated other comprehensive income (loss) consists of changes in the net actuarial gains and losses associated with pension and other postretirement benefit plans, net losses on cash flow hedge derivative instruments associated with forecasted debt issuances, and foreign currency translation adjustments. The amount included in accumulated other comprehensive loss related to the Company’s pension and postretirement plans was $ 34 million pre-tax ($21 million after-tax) as of December 31, 2017 and $284 million pre-tax ($173 million after-tax) as of December 31, 2016. The net impact on cash flow hedges totaled $24 million pre-tax ($15 million after-tax) and $9 million pre-tax ($5 million after-tax) as of December 31, 2017 and 2016, respectively. Cumulative foreign currency translation adjustments at December 31, 2017 and 2016 were $129 million and $127 million, respectively. Changes in accumulated other comprehensive income (loss) by component are shown below: Year Ended December 31, 2017 (1) Pension and Losses on Other Foreign Cash Flow Postretirement In millions Currency Hedges Benefits Total Balance, December 31, 2016 $ (127) $ (5) $ (173) $ (305) Other comprehensive loss before reclassifications (2) (11) — (13) Amounts reclassified from accumulated other comprehensive income (2) — 1 152 153 Net other comprehensive income (loss) (2) (10) 152 140 Balance, December 31, 2017 $ (129) $ (15) $ (21) $ (165) Year Ended December 31, 2016 (1) Pension and Losses on Other Foreign Cash Flow Postretirement Currency Hedges Benefits Total Balance, December 31, 2015 $ (165) $ (7) $ (186) $ (358) Other comprehensive income before reclassifications 38 — — 38 Amounts reclassified from accumulated other comprehensive income (2) — 2 13 15 Net other comprehensive income 38 2 13 53 Balance, December 31, 2016 $ (127) $ (5) $ (173) $ (305) (1) All amounts are net of tax. The amounts reclassified from accumulated other comprehensive income for cash flow hedges are recorded within interest expense, net on the consolidated statement of income. The amounts reclassified from accumulated other comprehensive income for pension and other postretirement benefits are included in other expense on the consolidated statement of income. |
Stock-based Compensation | Stock-based compensation - Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable requisite service period of the stock award (generally 3 to 5 years) using the straight-line method. |
Variable Interest Entity | Variable interest entity - In 2014, the Company and Cardinal Health, Inc. (“Cardinal”) established Red Oak Sourcing, LLC (“Red Oak”), a generic pharmaceutical sourcing entity in which the Company and Cardinal each own 50%. The Red Oak arrangement has an initial term of ten years. Under this arrangement, the Company and Cardinal contributed their sourcing and supply chain expertise to Red Oak and agreed to source and negotiate generic pharmaceutical supply contracts for both companies through Red Oak; however, Red Oak does not own or hold inventory on behalf of either company. No physical assets (e.g., property and equipment) were contributed to Red Oak by either company and minimal funding was provided to capitalize Red Oak. The Company has determined that it is the primary beneficiary of this variable interest entity because it has the ability to direct the activities of Red Oak. Consequently, the Company consolidates Red Oak in its consolidated financial statements within the Retail/LTC Segment. Cardinal is required to pay the Company 39 quarterly payments beginning in October 2014. As milestones are met, the quarterly payments increase. The Company received approximately $183 million, $163 million and $122 million from Cardinal during the years ended December 31, 2017, 2016 and 2015, respectively. The payments reduce the Company’s carrying value of inventory and are recognized in cost of revenues when the related inventory is sold. Revenues associated with Red Oak expenses reimbursed by Cardinal for the years ended December 31, 2017, 2016 and 2015, as well as amounts due to or due from Cardinal at December 31, 2017 and 2016 were immaterial. |
Related Party Transactions | Related party transactions - The Company has an equity method investment in SureScripts, LLC (“SureScripts”), which operates a clinical health information network. The Pharmacy Services and Retail/LTC segments utilize this clinical health information network in providing services to its client plan members and retail customers. The Company expensed fees of approximately $35 million, $39 million and $50 million in the years ended December 31, 2017, 2016 and 2015, respectively, for the use of this network. The Company’s investment in and equity in earnings of SureScripts for all periods presented is immaterial. The Company has an equity method investment in Heartland Healthcare Services (“Heartland”). Heartland operates several long-term care pharmacies in four states. Heartland paid the Company approximately $139 million, $140 million and $25 million for pharmaceutical inventory purchases during the years ended December 31, 2017, 2016 and 2015, respectively. Additionally, the Company performs certain collection functions for Heartland and then passes those customer cash collections to Heartland. The Company’s investment in and equity in earnings of Heartland as of and for the years ended December 31, 2016 and 2015 is immaterial. In 2016, the Company made charitable contributions of $32 million to the CVS Foundation (the “Foundation”) to fund future giving. The Foundation is an unconsolidated non-profit entity managed by employees of the Company that focuses on health, education and community involvement programs. The charitable contributions were recorded as operating expenses in the Company’s consolidated statement of income for the year ended December 31, 2016. |
Income Taxes | Income taxes - The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year or years in which the differences are expected to reverse. The effect of a change in the tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. On December 22, 2017, the President signed into law the “Tax Cuts and Jobs Act” (the “TCJA”). Among numerous changes to existing tax laws, the TCJA permanently reduces the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The effects on deferred tax balances of changes in tax rates are required to be taken into consideration in the period in which the changes are enacted, regardless of when they are effective. As the result of the reduction of the corporate income tax rate under the TCJA, the Company estimated the revaluation of its net deferred tax liabilities and recorded a provisional noncash income tax benefit of approximately $1.5 billion for year ended December 31, 2017. The Company has not completed all of its processes to determine the TCJA’s final impact. The final impact may differ from this provisional amount due to, among other things, changes in interpretations and assumptions the Company has made thus far and the issuance of additional regulatory or other guidance. The accounting is expected to be completed by the time the 2017 federal income tax return is filed in 2018. The Company recognizes net deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. To the extent that the Company does not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. The Company records uncertain tax positions on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. Interest and/or penalties related to uncertain tax positions are recognized in income tax expense. |
Discontinued Operations | Discontinued operations - In connection with certain business dispositions completed between 1991 and 1997, the Company retained guarantees on store lease obligations for a number of former subsidiaries, including Bob’s Stores and Linens ‘n Things which filed for bankruptcy in 2016 and 2008, respectively. Additionally, the Company’s recently acquired Bluegrass Pharmacy is considered held for sale and is included in discontinued operations (see Note 2 “Acquisitions” for additional information). The Company’s loss from discontinued operations in 2017 and 2016 primarily includes lease-related costs which the Company believes it will likely be required to satisfy pursuant to its lease guarantees. The Company’s income from discontinued operations in 2015 of $9 million, net of tax, was related to the release of certain store lease guarantees due to a settlement with a landlord. See Note 12 “Commitments and Contingencies” of the consolidated financial statements. Below is a summary of the results of discontinued operations for the years ended December 31: In millions 2017 2016 2015 Income (loss) from discontinued operations $ (13) $ (2) $ 15 Income tax benefit (expense) 5 1 (6) Income (loss) from discontinued operations, net of tax $ (8) $ (1) $ 9 |
Earnings Per Common Share | Earnings per common share - Earnings per share is computed using the two-class method. Options to purchase 10.4 million, 6.7 million and 2.7 million shares of common stock were outstanding as of December 31, 2017, 2016 and 2015, respectively, but were not included in the calculation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. |
New Accounting Pronouncements | New accounting pronouncements recently adopted - In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, Inventory , which amends Accounting Standard Codification (“ASC”) Topic 330. This ASU simplifies current accounting treatments by requiring entities to measure most inventories at “the lower of cost and net realizable value” rather than using lower of cost or market. This guidance does not apply to inventories measured using the last-in, first-out method or the retail inventory method. The Company adopted this standard effective January 1, 2017. The adoption of this new guidance did not have any impact on the Company’s consolidated results of operations, financial position or cash flows. In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting , which amends the accounting for certain aspects of shared-based payments to employees in ASC Topic 718, Compensation - Stock Compensation . The new guidance eliminates the accounting for any excess tax benefits and deficiencies through equity, and requires all excess tax benefits and deficiencies related to employee share-based compensation arrangements to be recorded in the income statement. This aspect of the guidance is required to be applied prospectively. The guidance also requires the presentation of excess tax benefits on the statement of cash flows as an operating activity rather than a financing activity, a change which may be applied prospectively or retrospectively. The guidance further provides an accounting policy election to account for forfeitures as they occur rather than utilizing the estimated amount of forfeitures at the time of issuance. The Company adopted this guidance effective January 1, 2017. The primary impact of adopting this guidance was the recognition of excess tax benefits in the income statement instead of recognizing them in equity. This income statement guidance was adopted on a prospective basis. As a result, a discrete tax benefit of $53 million was recognized in the income tax provision in the year ended December 31, 2017. The Company elected to retrospectively adopt the guidance on the presentation of excess tax benefits in the statement of cash flows. The following is a reconciliation of the effect of the resulting reclassification of the excess tax benefits on the Company’s consolidated statements of cash flows for the years ended December 31, 2016 and 2015: As Previously In millions Reported Adjustments As Revised Year Ended December 31, 2016: Cash paid to other suppliers and employees $ (15,550) $ 72 $ (15,478) Net cash provided by operating activities 10,069 72 10,141 Excess tax benefits from stock-based compensation 72 (72) — Net cash used in financing activities (6,689) (72) (6,761) Reconciliation of net income to net cash provided by operating activities: Accrued expenses 59 72 131 Year Ended December 31, 2015: Cash paid to other suppliers and employees (14,162) 127 (14,035) Net cash provided by operating activities 8,412 127 8,539 Excess tax benefits from stock-based compensation 127 (127) — Net cash provided by financing activities 5,006 (127) 4,879 Reconciliation of net income to net cash provided by operating activities: Accrued expenses 765 127 892 The Company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. None of the other provisions in this guidance had a material impact on the Company’s consolidated financial statements. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , which amends ASC Topic 715, Compensation – Retirement Benefits . ASU 2017-07 requires entities to disaggregate the current service cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement and present the other components of net benefit cost elsewhere in the income statement and outside of operating income. Only the service cost component of net benefit cost is eligible for capitalization. The guidance is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of any annual periods for which an entity’s financial statements have not been issued. Entities are required to retrospectively apply the requirement for a separate presentation in the income statement of service costs and other components of net benefit cost and prospectively adopt the requirement to limit the capitalization of benefit costs to the service component. The Company adopted the income statement presentation aspects of this new guidance on a retrospective basis effective January 1, 2017. Nearly all of the Company’s net benefit costs for the Company’s defined benefit pension and postretirement plans do not contain a service cost component as most of these defined benefit plans have been frozen for an extended period of time. The following is a reconciliation of the effect of the reclassification of the net benefit cost from operating expenses to other expense in the Company’s consolidated statements of income for the years ended December 31 2016 and 2015: As Previously In millions Reported Adjustments As Revised Year Ended December 31, 2016: Operating expenses $ 18,519 $ (28) $ 18,491 Operating profit 10,338 28 10,366 Other expense — 28 28 Year Ended December 31, 2015: Operating expenses 17,074 (21) 17,053 Operating profit 9,454 21 9,475 Other expense — 21 21 In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which amends ASC Topic 350, Intangibles – Goodwill and Other . This ASU requires the Company to perform its annual, or applicable interim, goodwill impairment test by comparing the fair value of each reporting unit with its carrying amount. An impairment charge must be recognized at the amount by which the carrying amount exceeds the fair value of the reporting unit; however, the charge recognized should not exceed the total amount of goodwill allocated to that reporting unit. Income tax effects resulting from any tax deductible goodwill should be considered when measuring a goodwill impairment charge, if applicable. The guidance in ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company elected to early adopt this standard as of January 1, 2017. At the date of adoption of this new guidance, the guidance did not have any impact on the Company’s consolidated results of operations, financial position or cash flows. In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities , which amends ASC Topic 815, Derivative and Hedging . ASU 2017-12 expands an entity’s ability to hedge nonfinancial and financial risk components and reduces complexity in fair value hedges of interest rate risk. It eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. ASU 2017-12 also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. The guidance is effective for fiscal years beginning after December 15, 2018, and interims periods with those years. Early adoption is permitted. The guidance with respect to cash flow and net investment hedge relationships existing on the date of adoption must be applied on a modified retrospective basis, and the new presentation and disclosure requirements must be applied on a prospective basis. The Company elected to early adopt this standard as of October 1, 2017. As the date of adoption of this new guidance, the guidance did not have any impact on the Company’s consolidated results of operations, financial position or cash flows since the Company did not have any outstanding derivative instruments at that time. New accounting pronouncements not yet adopted - In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In March 2016, the FASB issued ASU 2016-08, “ Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net) ,” which amends the principal-versus-agent implementation guidance and in April 2016 the FASB issued ASU 2016-10, “ Identifying Performance Obligations and Licensing ,” which amends the guidance in those areas in the new revenue recognition standard. The new revenue standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning January 1, 2018. The Company does not expect that the implementation of the new standard will have a material effect on the Company's consolidated results of operations, cash flows or financial position. The new standard will however require more extensive revenue-related disclosures. The Company has identified one difference in its Retail/LTC Segment related to the accounting for its ExtraBucks Rewards customer loyalty program, which is currently accounted for under a cost deferral method. Under the new standard, this program will be accounted for under a revenue deferral method. On January 1, 2018, the Company adopted the new revenue standard on a modified retrospective basis and recorded an after-tax transition adjustment to reduce retained earnings as of January 1, 2018 by approximately $13 million. In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) : Recognition and Measurement of financial Assets and Financial Liabilities . This ASU requires equity investments, except those under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. This simplifies the impairment assessment of equity investments previously held at cost. Separate presentation of financial assets and liabilities by measurement category is required. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted for fiscal years or interim periods that have not yet been issued as of the beginning of the fiscal year of adoption. Entities are required to apply the guidance retrospectively, with the exception of the amendments related to equity investments without readily determinable fair values, which must be applied on a prospective basis. The Company is evaluating the effect of adopting this guidance but does not expect the adoption to have a material impact on the Company’s consolidated results of operations. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Lessees will be required to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance leases. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue recognition standard. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company believes that the new standard will have a material impact on its consolidated balance sheet. The Company is currently evaluating the effect that implementation of this standard will have on the Company’s consolidated results of operations, cash flows, financial position and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments . ASU 2016-15 is intended to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows and to eliminate the diversity in practice related to such classifications. The guidance in ASU 2016-15 is required for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is evaluating the effect of adopting this guidance but does not expect the adoption will have a material impact on the Company’s consolidated cash flows. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows , which amends ASC Topic 230. This ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer be required to present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. Entities will also have to disclose the nature of their restricted cash and restricted cash equivalent balances. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted. Entities are required to apply the guidance retrospectively. The Company is evaluating the effect of adopting this guidance but does not expect the adoption will have a material impact on the Company’s consolidated cash flows. |
Significant Accounting Polici24
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Significant Accounting Policies | |
Activity in allowance for doubtful trade accounts receivable | The activity in the allowance for doubtful accounts receivable for the years ended December 31 is as follows: In millions 2017 2016 2015 Beginning balance $ 286 $ 161 $ 256 Additions charged to bad debt expense 177 221 216 Write-offs charged to allowance (156) (96) (311) Ending balance $ 307 $ 286 $ 161 |
Components of property and equipment | The following are the components of property and equipment at December 31: In millions 2017 2016 Land $ 1,707 $ 1,734 Building and improvements 3,343 3,226 Fixtures and equipment 11,963 10,956 Leasehold improvements 4,793 4,494 Software 2,484 2,392 24,290 22,802 Accumulated depreciation and amortization (13,998) (12,627) Property and equipment, net $ 10,292 $ 10,175 |
Reconciliation of the changes in the redeemable noncontrolling interest | Below is a summary of the changes in redeemable noncontrolling interest for the years ended December 31: In millions 2016 2015 Beginning balance $ 39 $ — Acquisition of noncontrolling interest — 39 Net income attributable to noncontrolling interest 1 1 Distributions (2) (1) Purchase of noncontrolling interest (39) — Reclassification to capital surplus in connection with purchase of noncontrolling interest 1 — Ending balance $ — $ 39 |
Interest Income and Interest Expense | The following are the components of net interest expense for the years ended December 31: In millions 2017 2016 2015 Interest expense $ 1,062 $ 1,078 $ 859 Interest income (21) (20) (21) Interest expense, net $ 1,041 $ 1,058 $ 838 |
Schedule of Accumulated Other Comprehensive Income (Loss) by Component | Changes in accumulated other comprehensive income (loss) by component are shown below: Year Ended December 31, 2017 (1) Pension and Losses on Other Foreign Cash Flow Postretirement In millions Currency Hedges Benefits Total Balance, December 31, 2016 $ (127) $ (5) $ (173) $ (305) Other comprehensive loss before reclassifications (2) (11) — (13) Amounts reclassified from accumulated other comprehensive income (2) — 1 152 153 Net other comprehensive income (loss) (2) (10) 152 140 Balance, December 31, 2017 $ (129) $ (15) $ (21) $ (165) Year Ended December 31, 2016 (1) Pension and Losses on Other Foreign Cash Flow Postretirement Currency Hedges Benefits Total Balance, December 31, 2015 $ (165) $ (7) $ (186) $ (358) Other comprehensive income before reclassifications 38 — — 38 Amounts reclassified from accumulated other comprehensive income (2) — 2 13 15 Net other comprehensive income 38 2 13 53 Balance, December 31, 2016 $ (127) $ (5) $ (173) $ (305) (1) All amounts are net of tax. The amounts reclassified from accumulated other comprehensive income for cash flow hedges are recorded within interest expense, net on the consolidated statement of income. The amounts reclassified from accumulated other comprehensive income for pension and other postretirement benefits are included in other expense on the consolidated statement of income. |
Discontinued Operations Results | Below is a summary of the results of discontinued operations for the years ended December 31: In millions 2017 2016 2015 Income (loss) from discontinued operations $ (13) $ (2) $ 15 Income tax benefit (expense) 5 1 (6) Income (loss) from discontinued operations, net of tax $ (8) $ (1) $ 9 |
Reconciliation of condensed consolidated statement of cash flows | As Previously In millions Reported Adjustments As Revised Year Ended December 31, 2016: Cash paid to other suppliers and employees $ (15,550) $ 72 $ (15,478) Net cash provided by operating activities 10,069 72 10,141 Excess tax benefits from stock-based compensation 72 (72) — Net cash used in financing activities (6,689) (72) (6,761) Reconciliation of net income to net cash provided by operating activities: Accrued expenses 59 72 131 Year Ended December 31, 2015: Cash paid to other suppliers and employees (14,162) 127 (14,035) Net cash provided by operating activities 8,412 127 8,539 Excess tax benefits from stock-based compensation 127 (127) — Net cash provided by financing activities 5,006 (127) 4,879 Reconciliation of net income to net cash provided by operating activities: Accrued expenses 765 127 892 |
Reconciliation of condensed consolidated statement of income | As Previously In millions Reported Adjustments As Revised Year Ended December 31, 2016: Operating expenses $ 18,519 $ (28) $ 18,491 Operating profit 10,338 28 10,366 Other expense — 28 28 Year Ended December 31, 2015: Operating expenses 17,074 (21) 17,053 Operating profit 9,454 21 9,475 Other expense — 21 21 |
Acquisitions (Table)
Acquisitions (Table) | 12 Months Ended |
Dec. 31, 2017 | |
Omnicare, Inc. | |
Business Acquisition | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition: In Millions Current assets (including cash of $298) $ 1,657 Property and equipment 313 Goodwill 9,139 Intangible assets 3,962 Other noncurrent assets 63 Current liabilities (773) Long-term debt (3,110) Deferred income tax liabilities (1,498) Other noncurrent liabilities (69) Redeemable noncontrolling interest (39) Total consideration $ 9,645 |
Business Acquisition, Pro Forma Information | (In millions, except per share data) Total revenues $ 156,798 Income from continuing operations 5,277 Basic earnings per share from continuing operations 4.70 Diluted earnings per share from continuing operations 4.66 |
Target Pharmacy Acquisition | |
Business Acquisition | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The fair values of the assets acquired at the date of acquisition were approximately as follows: In millions Accounts receivable $ 2 Inventories 467 Property and equipment 9 Intangible assets 490 Goodwill 900 Total cash consideration $ 1,868 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Other Intangibles | |
Goodwill by Segment | Below is a summary of the changes in the carrying amount of goodwill by segment for the years ended December 31, 2017 and 2016: Pharmacy In millions Services Retail/LTC Total Balance, December 31, 2015 $ 21,685 $ 16,421 $ 38,106 Acquisitions — 126 126 Foreign currency translation adjustments — 17 17 Other (1) (48) 48 — Balance, December 31, 2016 21,637 16,612 38,249 Acquisitions 182 203 385 Foreign currency translation adjustments — (2) (2) Impairments — (181) (181) Balance, December 31, 2017 $ 21,819 $ 16,632 $ 38,451 (1) “Other” represents immaterial purchase accounting adjustments for acquisitions. |
Summary of the Company's intangible assets | The following table is a summary of the Company’s intangible assets as of December 31: 2017 2016 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying In millions Amount Amortization Amount Amount Amortization Amount Trademark (indefinitely-lived) $ 6,398 $ — $ 6,398 $ 6,398 $ — $ 6,398 Customer contracts and relationships and covenants not to compete 12,341 (5,536) 6,805 11,485 (4,802) 6,683 Favorable leases and other 1,190 (763) 427 1,123 (693) 430 $ 19,929 $ (6,299) $ 13,630 $ 19,006 $ (5,495) $ 13,511 |
Anticipated Annual Amortization for Intangible Assets | The anticipated annual amortization expense for these intangible assets for the next five years is as follows: In millions 2018 $ 817 2019 771 2020 600 2021 539 2022 494 |
Share Repurchase Programs (Tabl
Share Repurchase Programs (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Share Repurchase Programs | |
Share Repurchase Programs | The following share repurchase programs were authorized by the Company’s Board of Directors: In billions Remaining as of Authorization Date Authorized December 31, 2017 November 2, 2016 (“2016 Repurchase Program”) $ 15.0 $ 13.9 December 15, 2014 (“2014 Repurchase Program”) 10.0 — December 17, 2013 (“2013 Repurchase Program”) 6.0 — |
Borrowing and Credit Agreemen28
Borrowing and Credit Agreements (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Borrowings and Credit Agreements | |
Summary of the Company's borrowings | The following table is a summary of the Company’s borrowings as of December 31: In millions 2017 2016 Short-term debt Commercial paper $ 1,276 $ 1,874 Long-term debt 1.9% senior notes due 2018 2,250 2,250 2.25% senior notes due 2018 1,250 1,250 2.25% senior notes due 2019 850 850 2.8% senior notes due 2020 2,750 2,750 2.125% senior notes due 2021 1,750 1,750 4.125% senior notes due 2021 550 550 2.75% senior notes due 2022 1,250 1,250 3.5% senior notes due 2022 1,500 1,500 4.75% senior notes due 2022 399 399 4% senior notes due 2023 1,250 1,250 3.375% senior notes due 2024 650 650 5% senior notes due 2024 299 299 3.875% senior notes due 2025 2,828 2,828 2.875% senior notes due 2026 1,750 1,750 6.25% senior notes due 2027 372 372 3.25% senior exchange debentures due 2035 1 1 4.875% senior notes due 2035 652 652 6.125% senior notes due 2039 447 447 5.75% senior notes due 2041 133 133 5.3% senior notes due 2043 750 750 5.125% senior notes due 2045 3,500 3,500 Capital lease obligations 670 648 Other 43 23 Total debt principal 27,170 27,726 Debt premiums 28 33 Debt discounts and deferred financing costs (196) (228) 27,002 27,531 Less: Short-term debt (commercial paper) (1,276) (1,874) Current portion of long-term debt (3,545) (42) Long-term debt $ 22,181 $ 25,615 |
Schedule of Maturities of Long-term Debt | The following is a summary of the Company’s required principal debt repayments due during each of the next five years and thereafter, as of December 31, 2017: In millions 2018 $ 4,821 2019 873 2020 2,775 2021 2,327 2022 3,178 Thereafter 13,196 Total $ 27,170 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Leases | |
Summary of net rental expense for operating leases | The following table is a summary of the Company’s net rental expense for operating leases for the years ended December 31: In millions 2017 2016 2015 Minimum rentals $ 2,455 $ 2,418 $ 2,317 Contingent rentals 29 35 34 2,484 2,453 2,351 Less: sublease income (24) (24) (22) $ 2,460 $ 2,429 $ 2,329 |
Summary of future minimum lease payments under capital and operating leases | The following table is a summary of the future minimum lease payments under capital and operating leases as of December 31, 2017: Capital Operating In millions Leases Leases (1) 2018 $ 74 $ 2,493 2019 74 2,361 2020 74 2,201 2021 73 2,072 2022 73 1,934 Thereafter 974 16,090 Total future lease payments (2) 1,342 $ 27,151 Less: imputed interest (672) Present value of capital lease obligations $ 670 (1) Future operating lease payments have not been reduced by minimum sublease rentals of $171 million due in the future under noncancelable subleases. (2) The Company leases pharmacy and clinic space from Target. Amounts related to such capital and operating leases are reflected above. Amounts due in excess of the remaining estimated economic life of the buildings of approximately $1.9 billion are not reflected herein since the estimated economic life of the buildings is shorter than the contractual term of the lease arrangement. |
Pension Plans and Other Postr30
Pension Plans and Other Postretirement Benefits (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Pension Plans and Other Postretirement Benefits | |
Schedule of Changes in Projected Benefit Obligation | The following tables outline the change in benefit obligations and plan assets over the comparable periods: In millions 2017 2016 Change in benefit obligation: Benefit obligation at beginning of year $ 844 $ 844 Interest cost 20 27 Actuarial loss (gain) (31) 13 Benefit payments (35) (37) Settlements (667) (3) Benefit obligation at end of year $ 131 $ 844 |
Schedule of Changes in Fair Value of Plan Assets | In millions 2017 2016 Change in plan assets: Fair value of plan assets at the beginning of the year $ 624 $ 613 Actual return on plan assets 32 26 Employer contributions 46 25 Benefit payments (35) (37) Settlements (667) (3) Fair value of plan assets at the end of the year — 624 Funded status $ (131) $ (220) |
Schedule of Net Benefit Costs | The components of net periodic benefit costs for the years ended December 31 are shown below: In millions 2017 2016 2015 Components of net periodic benefit cost: Interest cost $ 20 $ 27 $ 31 Expected return on plan assets (20) (32) (33) Amortization of net loss 21 32 21 Settlement losses 187 — — Net periodic pension cost $ 208 $ 27 $ 19 |
Schedule of Allocation of Plan Assets | The following tables show the fair value allocation of plan assets by asset category as of December 31, 2016. Fair value of plan assets at December 31, 2016 Level 1 Level 2 Level 3 Total Cash and money market funds $ 8 $ — $ — $ 8 Fixed income funds 3 580 — 583 Equity mutual funds 33 — — 33 Total assets at fair value $ 44 $ 580 $ — $ 624 |
Schedule of Expected Benefit Payments | The Company estimates the following future benefit payments which are calculated using the same actuarial assumptions used to measure the benefit obligation as of December 31, 2017: In millions 2018 $ 21 2019 14 2020 12 2021 23 2022 8 Thereafter 31 |
Stock Incentive Plans (Tables)
Stock Incentive Plans (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Stock Incentive Plans | |
Schedule of share-based compensation, activity | The following table is a summary of stock-based compensation for each of the respective periods: In millions 2017 2016 2015 Stock options (1) $ 65 $ 79 $ 90 Restricted stock awards (2) 169 143 140 Total stock-based compensation $ 234 $ 222 $ 230 (1) Includes the Employee Stock Purchase Plan (the “ESPP”) (2) Stock-based compensation for the year ended December 31, 2015 includes $38 million associated with accelerated vesting of restricted stock replacement awards issued to Omnicare executives who were terminated subsequent to the acquisition. |
Summary of the assumptions used to value the ESPP awards | The following table is a summary of the assumptions used to value the ESPP awards for each of the respective periods: 2017 2016 2015 Dividend yield (1) 1.24 % 0.88 % 0.71 % Expected volatility (2) 22.70 % 20.64 % 13.92 % Risk-free interest rate (3) 0.86 % 0.45 % 0.11 % Expected life (in years) (4) 0.5 0.5 0.5 Weighted-average grant date fair value $ 13.01 $ 14.98 $ 18.72 (1) The dividend yield is calculated based on semi-annual dividends paid and the fair market value of the Company’s stock at the grant date. (2) The expected volatility is based on the historical volatility of the Company’s daily stock market prices over the previous six month period. (3) The risk-free interest rate is based on the Treasury constant maturity interest rate whose term is consistent with the expected term of ESPP options (i.e., six months). (4) The expected life is based on the semi-annual purchase period. |
Summary of the restricted stock unit and restricted share award activity | The following table is a summary of the restricted stock unit and restricted share award activity for the year ended December 31, 2017. Weighted Average Grant Date Units in thousands Units Fair Value Nonvested at beginning of year 4,876 $ 55.56 Granted 2,873 $ 78.35 Vested (2,340) $ 78.92 Forfeited (395) $ 89.21 Nonvested at end of year 5,014 $ 86.92 |
Black-Scholes option pricing model, assumptions | The fair value of each stock option is estimated using the Black-Scholes option pricing model based on the following assumptions at the time of grant: 2017 2016 2015 Dividend yield (1) 2.56 % 1.62 % 1.37 % Expected volatility (2) 18.39 % 17.22 % 18.07 % Risk-free interest rate (3) 1.77 % 1.24 % 1.24 % Expected life (in years) (4) 4.1 4.2 4.2 Weighted-average grant date fair value $ 9.43 $ 13.00 $ 14.01 (1) The dividend yield is based on annual dividends paid and the fair market value of the Company’s stock at the grant date. (2) The expected volatility is estimated using the Company’s historical volatility over a period equal to the expected life of each option grant after adjustments for infrequent events such as stock splits. (3) The risk-free interest rate is selected based on yields from U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the options being valued. (4) The expected life represents the number of years the options are expected to be outstanding from grant date based on historical option holder exercise experience. |
Summary of the Company's stock option activity | The following table is a summary of the Company’s stock option activity for the year ended December 31, 2017: Weighted Average Weighted Remaining Aggregate Average Contractual Intrinsic Shares in thousands Shares Exercise Price Term Value Outstanding at December 31, 2016 23,275 $ 68.60 Granted 3,513 $ 78.05 Exercised (4,814) $ 43.07 Forfeited (889) $ 94.25 Expired (555) $ 60.00 Outstanding at December 31, 2017 20,530 $ 75.32 3.62 $ 180,318,054 Exercisable at December 31, 2017 11,365 $ 61.37 2.30 $ 179,628,690 Vested at December 31, 2017 and expected to vest in the future 20,114 $ 75.00 3.57 $ 180,299,134 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes | |
Schedule of income tax provision for continuing operations | The income tax provision for continuing operations consisted of the following for the years ended December 31: In millions 2017 2016 2015 Current: Federal $ 2,594 $ 2,803 $ 3,065 State 464 511 555 3,058 3,314 3,620 Deferred: Federal (1,435) 5 (180) State 14 (2) (54) (1,421) 3 (234) Total $ 1,637 $ 3,317 $ 3,386 |
Reconciliation of the statutory income tax rate to the Company's effective income tax rate for continuing operations | On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “TCJA”). Among numerous changes to existing tax laws, the TCJA permanently reduces the federal corporate income tax rate from 35% to 21% effective on January 1, 2018. The effects on deferred tax balances of changes in tax rates are required to be taken into consideration in the period in which the changes are enacted, regardless of when they are effective. As the result of the reduction of the corporate income tax rate under the TCJA, the Company estimated the revaluation of its net deferred tax liabilities and recorded a provisional income tax benefit of approximately $1.5 billion for year ended December 31, 2017. The Company has not completed all of its processes to determine the TCJA’s final impact. The final impact may differ from this provisional amount due to, among other things, changes in interpretations and assumptions the Company has made thus far and the issuance of additional regulatory or other guidance. The accounting is expected to be completed by the time the 2017 federal corporate income tax return is filed in 2018. The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for continuing operations for the years ended December 31: 2017 2016 2015 Statutory income tax rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal tax benefit 4.1 4.1 4.0 Provisional effect of the Tax Cuts and Jobs Act (18.3) — — Other (1.0) (0.7) 0.3 Effective income tax rate 19.8 % 38.4 % 39.3 % |
Summary of the significant components of the Company's deferred tax assets and liabilities | The following table is a summary of the components of the Company’s deferred income tax assets and liabilities as of December 31: In millions 2017 2016 Deferred income tax assets: Lease and rents $ 291 $ 375 Inventory 31 57 Employee benefits 246 400 Allowance for doubtful accounts 187 301 Retirement benefits 40 65 Net operating loss and capital loss carryforwards 101 125 Deferred income 93 144 Other 18 336 Valuation allowance (77) (135) Total deferred income tax assets 930 1,668 Deferred income tax liabilities: Depreciation and amortization (3,926) (5,882) Total deferred income tax liabilities (3,926) (5,882) Net deferred income tax liabilities $ (2,996) $ (4,214) |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: In millions 2017 2016 2015 Beginning balance $ 307 $ 338 $ 188 Additions based on tax positions related to the current year 62 68 57 Additions based on tax positions related to prior years 32 70 122 Reductions for tax positions of prior years (28) (100) (11) Expiration of statutes of limitation (10) (22) (13) Settlements (19) (47) (5) Ending balance $ 344 $ 307 $ 338 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Segment Reporting | |
Reconciliation of the Company's business segments to the consolidated financial statements | The following table is a reconciliation of the Company’s business segments to the consolidated financial statements: Pharmacy Services Retail/LTC Corporate Intersegment Consolidated In millions Segment (1)(2) Segment (2) Segment Eliminations (2) Totals 2017: Net revenues $ 130,596 $ 79,398 $ — $ (25,229) $ 184,765 Gross profit (3) 6,040 23,317 — (812) 28,545 Operating profit (loss) (4)(5) 4,755 6,469 (966) (741) 9,517 Depreciation and amortization 712 1,651 117 — 2,480 Additions to property and equipment 311 1,398 340 — 2,049 2016: Net revenues 119,963 81,100 — (23,537) $ 177,526 Gross profit (3) 5,901 23,738 — (782) 28,857 Operating profit (loss) (4)(5)(6)(7) 4,676 7,302 (891) (721) 10,366 Depreciation and amortization 714 1,642 119 — 2,475 Additions to property and equipment 295 1,732 252 — 2,279 2015: Net revenues 100,363 72,007 — (19,080) $ 153,290 Gross profit 5,227 21,992 — (691) 26,528 Operating profit (loss) (4)(5)(7) 3,992 7,146 (1,035) (628) 9,475 Depreciation and amortization 654 1,336 102 — 2,092 Additions to property and equipment 359 1,883 125 — 2,367 (1) Net revenues of the Pharmacy Services Segment include approximately $10.8 billion, $10.5 billion and $8.9 billion of Retail Co-Payments for 2017, 2016 and 2015, respectively. See Note 1 “Significant Accounting Policies” to the consolidated financial statements for additional information about Retail Co-Payments. (2) Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services Segment and the Retail/LTC Segment. These occur in the following ways: when members of Pharmacy Services Segment clients (“members”) fill prescriptions at the Company’s retail pharmacies to purchase covered products, when members enrolled in programs such as Maintenance Choice ® elect to pick up maintenance prescriptions at one of the Company’s retail pharmacies instead of receiving them through the mail, or when members have prescriptions filled at the Company’s long-term care pharmacies. When these occur, both the Pharmacy Services and Retail/LTC segments record the revenues, gross profit and operating profit on a standalone basis. (3) The Retail/LTC Segment gross profit for the years ended December 31, 2017 and 2016 includes $2 million and $46 million, respectively of acquisition-related integration costs. The integration costs in 2017 are related to the acquisition of Omnicare and the integration costs in 2016 are related to the acquisitions of Omnicare and the pharmacies and clinics of Target. (4) The Retail/LTC Segment operating profit for the year ended December 31, 2017 includes $215 million of charges associated with store closures and $181 million of goodwill impairment charges related to its RxCrossroads reporting unit. The Retail/LTC Segment operating profit for the year ended December 31, 2016 includes a $34 million asset impairment charge in connection with planned store closures in 2017 related to the Company’s enterprise streamlining initiative. The Retail/LTC Segment operating profit for the years ended December 31, 2017, 2016 and 2015, include $34 million, $281 million and $64 million, respectively, of acquisition-related integration costs. The integration costs in 2017 are related to the acquisition of Omnicare and the integration costs in 2016 are related to the acquisitions of Omnicare and the pharmacies and clinics of Target. (5) The Corporate Segment operating loss for the year ended December 31, 2017 includes a $3 million reduction in integration costs for a change in estimate related to the acquisition of Omnicare. In addition, the Corporate Segment operating loss for the year ended December 31, 2017 includes $34 million in acquisition-related transaction costs related to the proposed Aetna acquisition and $9 million of transaction costs related to the divestiture of RxCrossroads. For the year ended December 31, 2016, the Corporate Segment operating loss includes $10 million of integration costs related to the acquisitions of Omnicare and the pharmacies and clinics of Target. For the year ended December 31, 2015, the Corporate Segment operating loss includes $156 million of acquisition-related transaction and integration costs related to the acquisitions of Omnicare and the pharmacies and clinics of Target. The Corporate Segment operating loss for 2015 also includes a $90 million charge related to a legacy lawsuit challenging the 1999 legal settlement by MedPartners of various securities class actions and a related derivative claim. (6) The Pharmacy Services Segment operating profit for the year ended December 31, 2016 includes the reversal of an accrual of $88 million in connection with a legal settlement. Amounts revised to reflect the adoption of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , which increased consolidated operating profit by $28 and $21 million for the years ended December 31, 2016 and 2015, respectively |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Earnings Per Share | |
Reconciliation of basic and diluted earnings per common share | The following is a reconciliation of basic and diluted earnings per share from continuing operations for the years ended December 31: In millions, except per share amounts 2017 2016 2015 Numerator for earnings per share calculation: Income from continuing operations $ 6,631 $ 5,320 $ 5,230 Income allocated to participating securities (24) (27) (26) Net income attributable to noncontrolling interest (1) (2) (2) Income from continuing operations attributable to CVS Health $ 6,606 $ 5,291 $ 5,202 Denominator for earnings per share calculation: Weighted average shares, basic 1,020 1,073 1,118 Effect of dilutive securities 4 6 8 Weighted average shares, diluted 1,024 1,079 1,126 Earnings per share from continuing operations: Basic $ 6.48 $ 4.93 $ 4.65 Diluted $ 6.45 $ 4.91 $ 4.62 |
Quarterly Financial Informati35
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Information (Unaudited) | |
Quarterly Financial Information (Unaudited) | First Second Third Fourth In millions, except per share amounts Quarter Quarter Quarter Quarter Year 2017: Net revenues $ 44,514 $ 45,685 $ 46,181 $ 48,385 $ 184,765 Gross profit 6,580 6,935 7,126 7,904 28,545 Operating profit 1,793 2,117 2,499 3,108 9,517 Income from continuing operations 962 1,097 1,285 3,287 6,631 Income (loss) from discontinued operations, net of tax (9) 1 — — (8) Net income attributable to CVS Health 952 1,098 1,285 3,287 6,622 Basic earnings per share: Income from continuing operations attributable to CVS Health $ 0.93 $ 1.07 $ 1.26 $ 3.23 $ 6.48 Income (loss) from discontinued operations attributable to CVS Health $ (0.01) $ — $ — $ — $ (0.01) Net income attributable to CVS Health $ 0.92 $ 1.07 $ 1.26 $ 3.23 $ 6.47 Diluted earnings per share: Income from continuing operations attributable to CVS Health $ 0.92 $ 1.07 $ 1.26 $ 3.22 $ 6.45 Income (loss) from discontinued operations attributable to CVS Health $ (0.01) $ — $ — $ — $ (0.01) Net income attributable to CVS Health $ 0.92 $ 1.07 $ 1.26 $ 3.22 $ 6.44 Dividends per share $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 2.00 Stock price: (New York Stock Exchange) High $ 83.92 $ 82.79 $ 83.31 $ 80.91 $ 83.92 Low $ 74.80 $ 75.95 $ 75.35 $ 66.80 $ 66.80 First Second Third Fourth In millions, except per share amounts Quarter Quarter Quarter Quarter Year 2016: Net revenues $ 43,215 $ 43,725 $ 44,615 $ 45,971 $ 177,526 Gross profit 6,744 7,015 7,492 7,606 28,857 Operating profit 2,185 2,357 2,824 3,000 10,366 Income from continuing operations 1,147 924 1,542 1,707 5,320 Loss from discontinued operations, net of tax — — (1) — (1) Net income attributable to CVS Health 1,146 924 1,540 1,707 5,317 Basic earnings per share: Income from continuing operations attributable to CVS Health $ 1.04 $ 0.86 $ 1.44 $ 1.60 $ 4.93 Income (loss) from discontinued operations attributable to CVS Health $ — $ — $ — $ — $ — Net income attributable to CVS Health $ 1.04 $ 0.86 $ 1.44 $ 1.60 $ 4.93 Diluted earnings per share: Income from continuing operations attributable to CVS Health $ 1.04 $ 0.86 $ 1.43 $ 1.59 $ 4.91 Income (loss) from discontinued operations attributable to CVS Health $ — $ — $ — $ — $ — Net income attributable to CVS Health $ 1.04 $ 0.86 $ 1.43 $ 1.59 $ 4.90 Dividends per share $ 0.425 $ 0.425 $ 0.425 $ 0.425 $ 1.70 Stock price: (New York Stock Exchange) High $ 104.05 $ 106.10 $ 98.06 $ 88.80 $ 106.10 Low $ 89.65 $ 93.21 $ 88.99 $ 73.53 $ 73.53 |
Significant Accounting Polici36
Significant Accounting Policies - Description of Business (Details) | Dec. 16, 2015stateclinicpharmacy | Dec. 31, 2017segmentstateclinicpharmacystoreitem | Dec. 31, 2015item |
Segment reporting information | |||
Number of reportable segments | segment | 3 | ||
Pharmacy Services Segment | |||
Segment reporting information | |||
Number of pharmacies (more than 68,000) | 68,000 | ||
Number of chain pharmacies | 41,000 | ||
Number of independent pharmacies | 27,000 | ||
Number of conditions for integrated disease management | item | 18 | ||
Centers of excellence for infusion and enteral services | item | 3 | ||
Number of states pharmacies operated | state | 42 | ||
Pharmacy Services Segment | Specialty stores | |||
Segment reporting information | |||
Number of pharmacies (more than 68,000) | 23 | ||
Pharmacy Services Segment | Specialty mail order | |||
Segment reporting information | |||
Number of pharmacies (more than 68,000) | 18 | ||
Pharmacy Services Segment | Mail service | |||
Segment reporting information | |||
Number of pharmacies (more than 68,000) | 4 | ||
Pharmacy Services Segment | Infusion and Enteral Branches | |||
Segment reporting information | |||
Number of infusion and enteral branches | item | 83 | ||
Pharmacy Services Segment | Ambulatory Infusion Suites | |||
Segment reporting information | |||
Number of infusion and enteral branches | item | 73 | ||
Retail/LTC Segment | |||
Segment reporting information | |||
Number of states pharmacies operated | state | 49 | ||
Number of large business acquisitions | item | 2 | ||
Number of drugstores | store | 9,803 | ||
Number of on-site pharmacies | 37 | ||
Number of LTC spoke pharmacies | store | 145 | ||
Number of LTC hub pharmacies | store | 30 | ||
Retail/LTC Segment | MinuteClinic | |||
Segment reporting information | |||
Number of drugstores | clinic | 1,134 | ||
Retail/LTC Segment | Minute Clinic Within C V S Pharmacy Stores | |||
Segment reporting information | |||
Number of drugstores | clinic | 1,129 | ||
Retail/LTC Segment | Pharmacy | |||
Segment reporting information | |||
Number of drugstores | store | 8,060 | ||
Target Pharmacy Acquisition | |||
Segment reporting information | |||
Number of states pharmacies operated | state | 47 | ||
Number of pharmacies acquired | 1,672 | ||
Number of clinics acquired | clinic | 79 | ||
Target Pharmacy Acquisition | Retail/LTC Segment | |||
Segment reporting information | |||
Number of pharmacies acquired | 1,672 | 1,695 | |
Number of clinics acquired | clinic | 79 |
Significant Accounting Polici37
Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Significant Accounting Policies | ||
Restricted cash for insurance captive | $ 190 | $ 149 |
Restricted cash in connection with certain acquisitions | 14 | |
Carrying amount of long-term debt | 25,700 | |
Estimated fair value of long-term debt | $ 26,800 |
Significant Accounting Polici38
Significant Accounting Policies - Derivative Financial Instruments (Details) - Cash Flow Hedges - Designated as Hedging - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Derivative Financial Instruments | ||
Notional amount | $ 4,750 | $ 0 |
Ineffective amount | 0 | |
Other Current Assets | ||
Derivative Financial Instruments | ||
Derivative asset fair value | 5 | |
Accrued Liabilities | ||
Derivative Financial Instruments | ||
Derivative liability fair value | $ 23 |
Significant Accounting Polici39
Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Allowance for Doubtful Accounts Receivable | |||
Beginning balance | $ 286 | $ 161 | $ 256 |
Additions charged to bad debt expense | 177 | 221 | 216 |
Write-offs charged to allowance | (156) | (96) | (311) |
Ending balance | $ 307 | $ 286 | $ 161 |
Significant Accounting Polici40
Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment | |||
Property and equipment, gross | $ 24,290 | $ 22,802 | |
Accumulated depreciation and amortization | (13,998) | (12,627) | |
Property and equipment, net | 10,292 | 10,175 | |
Property and equipment under capital leases | 588 | 547 | |
Capital leases, accumulated depreciation | 140 | 119 | |
Depreciation expense | 1,700 | 1,700 | $ 1,500 |
Land | |||
Property, Plant and Equipment | |||
Property and equipment, gross | 1,707 | 1,734 | |
Furniture and Fixtures | |||
Property, Plant and Equipment | |||
Property and equipment, gross | 11,963 | 10,956 | |
Leasehold Improvements | |||
Property, Plant and Equipment | |||
Property and equipment, gross | 4,793 | 4,494 | |
Building and Building Improvements | |||
Property, Plant and Equipment | |||
Property and equipment, gross | 3,343 | 3,226 | |
Software | |||
Property, Plant and Equipment | |||
Property and equipment, gross | $ 2,484 | $ 2,392 | |
Minimum | Building | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 10 years | ||
Minimum | Building Improvements | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 10 years | ||
Minimum | Furniture and Fixtures | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 3 years | ||
Minimum | Leasehold Improvements | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 10 years | ||
Minimum | Equipment | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 3 years | ||
Minimum | Software and Software Development Costs | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 3 years | ||
Maximum | Building | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 40 years | ||
Maximum | Building Improvements | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 40 years | ||
Maximum | Furniture and Fixtures | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 10 years | ||
Maximum | Leasehold Improvements | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 40 years | ||
Maximum | Equipment | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 10 years | ||
Maximum | Software and Software Development Costs | |||
Property, Plant and Equipment | |||
Estimated useful life (in years) | 10 years |
Significant Accounting Polici41
Significant Accounting Policies - Intangible Assets (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Purchased Customer Contracts and Relationships | Minimum | |
Finite-Lived Intangible Assets | |
Finite-Lived intangible asset, useful life (in years) | 9 years |
Purchased Customer Contracts and Relationships | Maximum | |
Finite-Lived Intangible Assets | |
Finite-Lived intangible asset, useful life (in years) | 20 years |
Customer Lists | |
Finite-Lived Intangible Assets | |
Finite-Lived intangible asset, useful life (in years) | 10 years |
Significant Accounting Polici42
Significant Accounting Policies - Redeemable Noncontrolling Interest and Revenue Recognition (Details) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Aug. 31, 2015 | Aug. 18, 2015 | |
Redeemable Noncontrolling Interest | |||||
Number of components | item | 2 | ||||
Redeemable Noncontrolling Interest Rollforward | |||||
Beginning balance | $ 4 | ||||
Ending balance | $ 4 | $ 4 | |||
Omnicare, Inc. | |||||
Redeemable Noncontrolling Interest | |||||
Percentage of voting interests acquired | 73.00% | 100.00% | |||
Redeemable Noncontrolling Interest Rollforward | |||||
Beginning balance | 39 | ||||
Acquisition of noncontrolling interest | $ 39 | ||||
Net income attributable to noncontrolling interest | 1 | 1 | |||
Distributions | (2) | (1) | |||
Purchase of noncontrolling interest | (39) | ||||
Reclassification to capital surplus in connection with purchase of noncontrolling interest | $ 1 | ||||
Ending balance | $ 39 |
Significant Accounting Polici43
Significant Accounting Policies - Facility Opening, Advertising Costs, Interest Expense, and Shares Held in Trust (Details) - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Significant Accounting Policies | |||
Billing duration (in days) | 30 days | ||
Long-term portion of lease obligations associated with facility closings | $ 306 | $ 181 | |
Advertising costs, net of vendor funding | 230 | 216 | $ 221 |
Interest expense, net of capitalized interest | 1,062 | 1,078 | 859 |
Interest income | (21) | (20) | (21) |
Interest expense), net | 1,041 | 1,058 | 838 |
Capitalized interest | $ 8 | $ 13 | $ 12 |
Shares held in employee trust (in shares) | 1 | 1 |
Significant Accounting Polici44
Significant Accounting Policies - Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
AOCI Attributable to Parent Rollforward | ||
Stockholders' equity attributable to parent, beginning balance | $ 36,830 | |
Stockholders' equity attributable to parent, ending balance | 37,691 | $ 36,830 |
AOCI related to pension and postretirement plans, pre-tax | 34 | 284 |
AOCI related to pension and postretirement plans, after-tax | 21 | 173 |
Net impact on cash flow hedges, pre-tax | 24 | 9 |
Net impact on cash flow hedges, after-tax | 15 | 5 |
Foreign currency translation adjustment, net of tax | 129 | 127 |
Foreign Currency | ||
AOCI Attributable to Parent Rollforward | ||
Stockholders' equity attributable to parent, beginning balance | (127) | (165) |
Other comprehensive income before reclassifications | (2) | 38 |
Net other comprehensive income | (2) | 38 |
Stockholders' equity attributable to parent, ending balance | (129) | (127) |
Losses on Cash Flow Hedges | ||
AOCI Attributable to Parent Rollforward | ||
Stockholders' equity attributable to parent, beginning balance | (5) | (7) |
Other comprehensive income before reclassifications | (11) | |
Amounts reclassified from accumulated other comprehensive income | 1 | 2 |
Net other comprehensive income | (10) | 2 |
Stockholders' equity attributable to parent, ending balance | (15) | (5) |
Pension and Other Postretirement Benefits | ||
AOCI Attributable to Parent Rollforward | ||
Stockholders' equity attributable to parent, beginning balance | (173) | (186) |
Amounts reclassified from accumulated other comprehensive income | 152 | 13 |
Net other comprehensive income | 152 | 13 |
Stockholders' equity attributable to parent, ending balance | (21) | (173) |
Accumulated Other Comprehensive Income (Loss) | ||
AOCI Attributable to Parent Rollforward | ||
Stockholders' equity attributable to parent, beginning balance | (305) | (358) |
Other comprehensive income before reclassifications | (13) | 38 |
Amounts reclassified from accumulated other comprehensive income | 153 | 15 |
Net other comprehensive income | 140 | 53 |
Stockholders' equity attributable to parent, ending balance | $ (165) | $ (305) |
Significant Accounting Polici45
Significant Accounting Policies - Stock-based Compensation (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Minimum | |
Compensation | |
Requisite service period of the stock award (in years) | 3 years |
Maximum | |
Compensation | |
Requisite service period of the stock award (in years) | 5 years |
Significant Accounting Polici46
Significant Accounting Policies - Variable Interest Entity (Details) - Variable Interest Entity, Primary Beneficiary - Terms Of Generic Sourcing Venture $ in Millions | 1 Months Ended | 12 Months Ended | |||
Jul. 31, 2014 | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Oct. 31, 2014payment | |
Variable Interest Entity | |||||
Ownership percentage by noncontrolling owners | 50.00% | ||||
Ownership percentage by parent | 50.00% | ||||
Initial contractual term (in years) | 10 years | ||||
Number of quarterly payments due (in quarterly payments) | payment | 39 | ||||
Increase in contractual obligation payment received | $ | $ 183 | $ 163 | $ 122 |
Significant Accounting Polici47
Significant Accounting Policies - Related Party Transactions (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017USD ($)state | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Related Party Transaction | |||
Expenses from transactions with related party | $ 35 | $ 39 | $ 50 |
Charitable contribution to the CVS foundation | 32 | ||
Equity Method Investee | |||
Related Party Transaction | |||
Other revenues from transactions with related party | $ 139 | $ 140 | $ 25 |
Heartland Healthcare Services | |||
Related Party Transaction | |||
Number of states in which entity operates | state | 4 |
Significant Accounting Polici48
Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Significant Accounting Policies | ||||
Statutory income tax rate | 21.00% | 35.00% | 35.00% | 35.00% |
Total deferred income tax provision | $ (1,421) | $ 3 | $ (234) |
Significant Accounting Polici49
Significant Accounting Policies - Discontinued Operations and Earnings per Common Share (Details) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | ||||
Jun. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Significant Accounting Policies | ||||||
Income (loss) from discontinued operations | $ (13) | $ (2) | $ 15 | |||
Income tax expense | 5 | 1 | (6) | |||
Income (loss) from discontinued operations, net of tax | $ 1 | $ (9) | $ (1) | $ (8) | $ (1) | $ 9 |
Antidilutive securities excluded from computation of earnings per share (in shares) | 10.4 | 6.7 | 2.7 |
Significant Accounting Polici50
Significant Accounting Policies - New Accounting Pronouncements (Details) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Jan. 01, 2018USD ($) | |
New Accounting Pronouncements or Change in Accounting Principle | ||||||||||||
Income tax provision | $ 1,637 | $ 3,317 | $ 3,386 | |||||||||
Consolidated Statements of Cash Flows | ||||||||||||
Cash paid to other suppliers and employees | (15,348) | (15,478) | (14,035) | |||||||||
Net cash provided by operating activities | 8,007 | 10,141 | 8,539 | |||||||||
Net cash used in financing activities | (6,751) | (6,761) | 4,879 | |||||||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||||||
Accrued expenses | (371) | 131 | 892 | |||||||||
Consolidated Statements of Income | ||||||||||||
Operating expenses | 19,028 | 18,491 | 17,053 | |||||||||
Operating profit | $ 3,108 | $ 2,499 | $ 2,117 | $ 1,793 | $ 3,000 | $ 2,824 | $ 2,357 | $ 2,185 | 9,517 | 10,366 | 9,475 | |
Other expense | 208 | 28 | 21 | |||||||||
ASU 2016-09 | Previously Reported | ||||||||||||
New Accounting Pronouncements or Change in Accounting Principle | ||||||||||||
Income tax provision | $ (53) | |||||||||||
Consolidated Statements of Cash Flows | ||||||||||||
Cash paid to other suppliers and employees | (15,550) | (14,162) | ||||||||||
Net cash provided by operating activities | 10,069 | 8,412 | ||||||||||
Excess tax benefits from stock-based compensation | 72 | 127 | ||||||||||
Net cash used in financing activities | (6,689) | 5,006 | ||||||||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||||||
Accrued expenses | 59 | 765 | ||||||||||
ASU 2016-09 | Adjustment | ||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||
Cash paid to other suppliers and employees | 72 | 127 | ||||||||||
Net cash provided by operating activities | 72 | 127 | ||||||||||
Excess tax benefits from stock-based compensation | (72) | (127) | ||||||||||
Net cash used in financing activities | (72) | (127) | ||||||||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||||||
Accrued expenses | 72 | 127 | ||||||||||
ASU 2017-07 | Previously Reported | ||||||||||||
Consolidated Statements of Income | ||||||||||||
Operating expenses | 18,519 | 17,074 | ||||||||||
Operating profit | 10,338 | 9,454 | ||||||||||
ASU 2017-07 | Adjustment | ||||||||||||
Consolidated Statements of Income | ||||||||||||
Operating expenses | (28) | (21) | ||||||||||
Operating profit | 28 | 21 | ||||||||||
Other expense | $ 28 | $ 21 | ||||||||||
ASU 2014-09 | ||||||||||||
Consolidated Statements of Income | ||||||||||||
Retained earnings adjustment | $ 13 | |||||||||||
ASU 2014-09 | Retail/LTC Segment | ||||||||||||
Consolidated Statements of Income | ||||||||||||
Number of differences related to revenue accounting for ExtraBucks Rewards customer loyalty program | item | 1 |
Acquisitions - Aetna Acquisitio
Acquisitions - Aetna Acquisition (Details) $ / shares in Units, $ in Millions | Dec. 03, 2017USD ($)$ / sharesshares | Dec. 31, 2017USD ($)state |
Retail/LTC Segment | ||
Business Acquisition | ||
Number of states pharmacies operated | state | 49 | |
Aetna Acquisition | ||
Business Acquisition | ||
Cash consideration for shares acquired (dollars per share) | $ / shares | $ 145 | |
Shares exchanged for each share acquired (in shares) | shares | 0.8378 | |
The assigned value per share of acquiree (dollars per share) | $ / shares | $ 207 | |
Assigned value of acquiree | $ 69,000 | |
Weighted average share price analysis | 5 days | |
Consideration transferred | $ 77,000 | |
Potential termination fees | $ 2,100 | |
Acquisition related costs | $ 34 | |
Aetna | Aetna Acquisition | ||
Business Acquisition | ||
Share price (dollars per share) | $ / shares | $ 74.21 |
Acquisitions - Wellpartner Acqu
Acquisitions - Wellpartner Acquisition (Details) $ in Millions | Nov. 30, 2017USD ($)pharmacy | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Assets Acquired: | ||||
Goodwill | $ 38,451 | $ 38,249 | $ 38,106 | |
Wellpartner Acquisition | ||||
Business Acquisition | ||||
Consideration transferred | $ 380 | |||
Number of pharmacies acquired | pharmacy | 2 | |||
Assets Acquired: | ||||
Assets | $ 532 | |||
Intangible assets | 233 | |||
Goodwill | 182 | |||
Liabilities | $ 152 | |||
Oregon | Wellpartner Acquisition | ||||
Business Acquisition | ||||
Number of pharmacies acquired | pharmacy | 1 |
Acquisitions - Target Pharmacy
Acquisitions - Target Pharmacy Acquisition (Details) | Dec. 16, 2015USD ($)stateclinicpharmacy | Dec. 31, 2015USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
Assets Acquired: | ||||
Goodwill | $ 38,106,000,000 | $ 38,451,000,000 | $ 38,249,000,000 | |
Target Pharmacy Acquisition | ||||
Business Acquisition | ||||
Consideration transferred | $ 1,900,000,000 | |||
Contingent consideration, liability | $ 60,000,000 | $ 0 | $ 0 | |
Contingent consideration, liability term (in years) | 3 years | |||
Number of pharmacies acquired | pharmacy | 1,672 | |||
Number of states pharmacies operated | state | 47 | |||
Number of clinics acquired | clinic | 79 | |||
Assets Acquired: | ||||
Accounts receivable | $ 2,000,000 | |||
Inventories | 467,000,000 | |||
Property and equipment | 9,000,000 | |||
Intangible assets | 490,000,000 | |||
Goodwill | 900,000,000 | |||
Total consideration | $ 1,868,000,000 | |||
Acquisition related costs | $ 26,000,000 | |||
Target Pharmacy Acquisition | Customer Relationships | ||||
Assets Acquired: | ||||
Finite-Lived intangible asset, useful life (in years) | 13 years |
Acquisitions - Omnicare Acquisi
Acquisitions - Omnicare Acquisition (Details) - USD ($) $ / shares in Units, $ in Millions | Aug. 18, 2015 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Aug. 31, 2015 |
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Goodwill | $ 38,451 | $ 38,249 | $ 38,106 | $ 38,451 | $ 38,249 | $ 38,106 | ||||||||
Goodwill | 385 | 126 | ||||||||||||
Net revenues | 48,385 | $ 46,181 | $ 45,685 | $ 44,514 | 45,971 | $ 44,615 | $ 43,725 | $ 43,215 | 184,765 | 177,526 | 153,290 | |||
Net income | 6,623 | 5,319 | 5,239 | |||||||||||
Retail/LTC Segment | ||||||||||||||
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Goodwill | 16,632 | 16,612 | 16,421 | 16,632 | 16,612 | 16,421 | ||||||||
Goodwill | 203 | 126 | ||||||||||||
Pharmacy Services Segment | ||||||||||||||
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Goodwill | $ 21,819 | $ 21,637 | 21,685 | 21,819 | $ 21,637 | 21,685 | ||||||||
Goodwill | $ 182 | |||||||||||||
Omnicare, Inc. | ||||||||||||||
Business Acquisition | ||||||||||||||
Percentage of voting interests acquired | 100.00% | 73.00% | ||||||||||||
Business acquisition, share price (in dollars per share) | $ 98 | |||||||||||||
Consideration transferred | $ 9,600 | |||||||||||||
Consideration transferred, liabilities incurred | 3,100 | |||||||||||||
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Current assets (including cash of $298) | 1,657 | |||||||||||||
Cash | 298 | |||||||||||||
Property and equipment | 313 | |||||||||||||
Goodwill | 9,139 | |||||||||||||
Intangible assets | 3,962 | |||||||||||||
Other noncurrent assets | 63 | |||||||||||||
Current liabilities | (773) | |||||||||||||
Long-term debt | (3,110) | |||||||||||||
Deferred income tax liabilities | (1,498) | |||||||||||||
Other noncurrent liabilities | (69) | |||||||||||||
Redeemable noncontrolling interest | (39) | |||||||||||||
Total consideration | 9,645 | |||||||||||||
Goodwill, expected tax deductible | $ 400 | |||||||||||||
Weighted average useful life (in years) | 18 years 9 months 18 days | |||||||||||||
Acquisition related costs | 70 | |||||||||||||
Net revenues | 2,600 | |||||||||||||
Net income | $ 61 | |||||||||||||
Business Acquisition, Pro Forma Information: | ||||||||||||||
Total revenues | 156,798 | |||||||||||||
Income from continuing operations | $ 5,277 | |||||||||||||
Basic earnings per share from continuing operations (in dollars per share) | $ 4.70 | |||||||||||||
Diluted earnings per share from continuing operations (in dollars per share) | $ 4.66 | |||||||||||||
Restructuring costs | $ 135 | |||||||||||||
Omnicare, Inc. | Retail/LTC Segment | ||||||||||||||
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Goodwill | $ 8,700 | |||||||||||||
Omnicare, Inc. | Pharmacy Services Segment | ||||||||||||||
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Goodwill | 400 | |||||||||||||
Omnicare, Inc. | Customer Relationships | ||||||||||||||
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Intangible assets | $ 3,900 | |||||||||||||
Weighted average useful life (in years) | 19 years 1 month 6 days | |||||||||||||
Omnicare, Inc. | Trade Names | ||||||||||||||
Fair Values of Assets Acquired and Liabilities Assumed: | ||||||||||||||
Intangible assets | $ 74 | |||||||||||||
Weighted average useful life (in years) | 2 years 10 months 24 days |
Goodwill and Other Intangible55
Goodwill and Other Intangibles - Goodwill and Disposal (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Jan. 02, 2018 |
Goodwill | ||||||||
Goodwill, impairment loss | $ 0 | $ 181 | ||||||
Cumulative goodwill impairments | $ 181 | $ 181 | ||||||
Statutory income tax rate | 21.00% | 35.00% | 35.00% | 35.00% | ||||
Income tax provision | $ 1,637 | $ 3,317 | $ 3,386 | |||||
Goodwill [Roll Forward] | ||||||||
Goodwill, beginning balance | $ 38,451 | 38,249 | 38,106 | |||||
Acquisitions | 385 | 126 | ||||||
Foreign currency translation adjustments | (2) | 17 | ||||||
Impairment | $ 0 | (181) | ||||||
Goodwill, ending balance | 38,451 | 38,451 | 38,249 | 38,106 | ||||
Pharmacy Services Segment | ||||||||
Goodwill [Roll Forward] | ||||||||
Goodwill, beginning balance | 21,819 | 21,637 | 21,685 | |||||
Acquisitions | 182 | |||||||
Other | (48) | |||||||
Goodwill, ending balance | 21,819 | 21,819 | 21,637 | 21,685 | ||||
Retail/LTC Segment | ||||||||
Goodwill | ||||||||
Goodwill, impairment loss | 181 | |||||||
Goodwill [Roll Forward] | ||||||||
Goodwill, beginning balance | $ 16,632 | 16,612 | 16,421 | |||||
Acquisitions | 203 | 126 | ||||||
Foreign currency translation adjustments | (2) | 17 | ||||||
Impairment | (181) | |||||||
Other | 48 | |||||||
Goodwill, ending balance | 16,632 | 16,632 | $ 16,612 | $ 16,421 | ||||
Rx Crossroads Member | ||||||||
Goodwill | ||||||||
Goodwill, impairment loss | 46 | $ 135 | ||||||
Deferred tax liability decrease | 47 | |||||||
Income tax provision | $ 47 | |||||||
Adjustment to goodwill related to Tax Cuts and Jobs Act | 47 | |||||||
Goodwill [Roll Forward] | ||||||||
Impairment | $ (46) | $ (135) | ||||||
Disposal group | ||||||||
Consideration | $ 725 |
Goodwill and Other Intangible56
Goodwill and Other Intangibles - Intangible Assets (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Intangible assets | ||||
Amortization expense related to finite-lived intangible assets | $ 817,000,000 | $ 795,000,000 | $ 611,000,000 | |
Anticipated annual amortization expenses | ||||
2,018 | 817,000,000 | |||
2,019 | 771,000,000 | |||
2,020 | 600,000,000 | |||
2,021 | 539,000,000 | |||
2,022 | 494,000,000 | |||
Finite-Lived Intangible Assets | ||||
Intangible assets, accumulated amortization | (6,299,000,000) | (5,495,000,000) | ||
Intangible assets, gross carrying amount | 19,929,000,000 | 19,006,000,000 | ||
Intangible assets, net carrying amount | $ 13,630,000,000 | 13,511,000,000 | ||
Weighted Average | ||||
Intangible assets | ||||
Finite-Lived intangible asset, useful life (in years) | 15 years 4 months 24 days | |||
Customer contracts and relationships and covenants not to compete | ||||
Finite-Lived Intangible Assets | ||||
Gross Carrying Amount | $ 12,341,000,000 | 11,485,000,000 | ||
Intangible assets, accumulated amortization | (5,536,000,000) | (4,802,000,000) | ||
Net Carrying Amount | $ 6,805,000,000 | 6,683,000,000 | ||
Customer contracts and relationships and covenants not to compete | Weighted Average | ||||
Intangible assets | ||||
Finite-Lived intangible asset, useful life (in years) | 15 years 3 months 18 days | |||
Favorable leases and other | ||||
Finite-Lived Intangible Assets | ||||
Gross Carrying Amount | $ 1,190,000,000 | 1,123,000,000 | ||
Intangible assets, accumulated amortization | (763,000,000) | (693,000,000) | ||
Net Carrying Amount | $ 427,000,000 | 430,000,000 | ||
Favorable leases and other | Weighted Average | ||||
Intangible assets | ||||
Finite-Lived intangible asset, useful life (in years) | 16 years 2 months 12 days | |||
Trademarks (indefinitely-lived) | ||||
Intangible assets | ||||
Impairment of intangible assets, indefinite-lived | $ 0 | |||
Finite-Lived Intangible Assets | ||||
Indefinite-lived intangible assets | $ 6,398,000,000 | $ 6,398,000,000 |
Share Repurchase Programs (Deta
Share Repurchase Programs (Details) shares in Millions, $ in Millions | Aug. 29, 2016USD ($)agreement | Jan. 28, 2016shares | Dec. 11, 2015USD ($) | May 01, 2015shares | Jan. 02, 2015USD ($) | Apr. 30, 2017shares | Dec. 31, 2017USD ($)shares | Dec. 31, 2016USD ($)shares | Dec. 31, 2015USD ($)shares | Jan. 31, 2017shares | Nov. 02, 2016USD ($) | Dec. 14, 2015shares | Jan. 05, 2015shares | Dec. 15, 2014USD ($) | Dec. 17, 2013USD ($) |
2016 Repurchase Program | |||||||||||||||
Share repurchases | |||||||||||||||
Share repurchase program, authorized amount | $ 15,000 | ||||||||||||||
Amount available for repurchases | $ 13,900 | ||||||||||||||
2014 Repurchase Program | |||||||||||||||
Share repurchases | |||||||||||||||
Share repurchase program, authorized amount | $ 10,000 | ||||||||||||||
Repurchase of common stock (in shares) | shares | 47.5 | ||||||||||||||
Repurchase of common stock | $ 4,500 | ||||||||||||||
2014 Repurchase Program | August 29, 2016 | |||||||||||||||
Share repurchases | |||||||||||||||
Number of agreements | agreement | 2 | ||||||||||||||
Amount under ASR agreement | $ 3,600 | ||||||||||||||
ASR, shares received as a percent of notional amount | 80.00% | ||||||||||||||
Shares repurchased under ASR agreement (in shares) | shares | 36.1 | ||||||||||||||
ASR, shares to be received at end of program as a percent of notional amount | 20.00% | ||||||||||||||
ASR, maximum number of shares (in shares) | shares | 9.9 | ||||||||||||||
Transfer of shares to treasury stock value | 2,900 | ||||||||||||||
2014 Repurchase Program | December 11, 2015 | |||||||||||||||
Share repurchases | |||||||||||||||
Amount under ASR agreement | $ 725 | ||||||||||||||
ASR, shares received as a percent of notional amount | 80.00% | ||||||||||||||
Shares repurchased under ASR agreement (in shares) | shares | 6.2 | ||||||||||||||
ASR, shares to be received at end of program as a percent of notional amount | 20.00% | ||||||||||||||
ASR, maximum number of shares (in shares) | shares | 1.4 | ||||||||||||||
Transfer of shares to treasury stock value | 580 | ||||||||||||||
2014 Repurchase Program | Forward contract | August 29, 2016 | |||||||||||||||
Share repurchases | |||||||||||||||
Derivative, Notional Amount | $ 700 | ||||||||||||||
2014 Repurchase Program | Forward contract | December 11, 2015 | |||||||||||||||
Share repurchases | |||||||||||||||
Derivative, Notional Amount | $ 145 | ||||||||||||||
Share Repurchase Program 2016 and 2014 | |||||||||||||||
Share repurchases | |||||||||||||||
Repurchase of common stock (in shares) | shares | 55.4 | ||||||||||||||
Repurchase of common stock | $ 4,400 | ||||||||||||||
2013 Repurchase Program | |||||||||||||||
Share repurchases | |||||||||||||||
Share repurchase program, authorized amount | $ 6,000 | ||||||||||||||
2013 Repurchase Program | January 02, 2015 | |||||||||||||||
Share repurchases | |||||||||||||||
Amount under ASR agreement | $ 2,000 | ||||||||||||||
ASR, shares received as a percent of notional amount | 80.00% | ||||||||||||||
Shares repurchased under ASR agreement (in shares) | shares | 16.8 | ||||||||||||||
ASR, shares to be received at end of program as a percent of notional amount | 20.00% | ||||||||||||||
ASR, maximum number of shares (in shares) | shares | 3.1 | ||||||||||||||
Transfer of shares to treasury stock value | 1,600 | ||||||||||||||
2013 Repurchase Program | Forward contract | January 02, 2015 | |||||||||||||||
Share repurchases | |||||||||||||||
Derivative, Notional Amount | $ 400 | ||||||||||||||
2014 and 2013 Repurchase Programs | |||||||||||||||
Share repurchases | |||||||||||||||
Repurchase of common stock (in shares) | shares | 48 | ||||||||||||||
Repurchase of common stock | $ 5,000 |
Borrowing and Credit Agreemen58
Borrowing and Credit Agreements - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Borrowings and Credit Agreements | ||
Total debt principal | $ 27,170 | $ 27,726 |
Debt premiums | 28 | 33 |
Debt discounts and deferred financing costs | (196) | (228) |
Long-term debt, net of premiums, discounts and deferred costs | 27,002 | 27,531 |
Short-term debt (commercial paper) | (1,276) | (1,874) |
Current portion of long-term debt | (3,545) | (42) |
Long-term debt | 22,181 | 25,615 |
1.9% senior notes due 2018 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 2,250 | 2,250 |
Interest rate, stated percentage | 1.90% | |
2.25% senior notes due 2018 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1,250 | 1,250 |
Interest rate, stated percentage | 2.25% | |
2.25% senior notes due 2019 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 850 | 850 |
Interest rate, stated percentage | 2.25% | |
2.8% senior notes due 2020 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 2,750 | 2,750 |
Interest rate, stated percentage | 2.80% | |
2.125% senior notes due 2021 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1,750 | 1,750 |
Interest rate, stated percentage | 2.125% | |
4.125% senior notes due 2021 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 550 | 550 |
Interest rate, stated percentage | 4.125% | |
2.75% senior notes due 2022 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1,250 | 1,250 |
Interest rate, stated percentage | 2.75% | |
3.5% senior notes due 2022 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1,500 | 1,500 |
Interest rate, stated percentage | 3.50% | |
4.75% senior notes due 2022 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 399 | 399 |
Interest rate, stated percentage | 4.75% | |
4% senior notes due 2023 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1,250 | 1,250 |
Interest rate, stated percentage | 4.00% | |
3.375% senior notes due 2024 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 650 | 650 |
Interest rate, stated percentage | 3.375% | |
5% senior notes due 2024 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 299 | 299 |
Interest rate, stated percentage | 5.00% | |
3.875% senior notes due 2025 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 2,828 | 2,828 |
Interest rate, stated percentage | 3.875% | |
2.875% senior notes due 2026 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1,750 | 1,750 |
Interest rate, stated percentage | 2.875% | |
6.25% senior notes due 2027 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 372 | 372 |
Interest rate, stated percentage | 6.25% | |
3.25% senior exchange debentures due 2035 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1 | 1 |
Interest rate, stated percentage | 3.25% | |
4.875% senior notes due 2035 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 652 | 652 |
Interest rate, stated percentage | 4.875% | |
6.125% senior notes due 2039 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 447 | 447 |
Interest rate, stated percentage | 6.125% | |
5.75% senior notes due 2041 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 133 | 133 |
Interest rate, stated percentage | 5.75% | |
5.3% senior notes due 2043 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 750 | 750 |
Interest rate, stated percentage | 5.30% | |
5.125% senior notes due 2045 | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 3,500 | 3,500 |
Interest rate, stated percentage | 5.125% | |
Capital lease obligation | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 670 | 648 |
Other | ||
Borrowings and Credit Agreements | ||
Total debt principal | 43 | 23 |
Commercial Paper | ||
Borrowings and Credit Agreements | ||
Total debt principal | $ 1,276 | $ 1,874 |
Borrowing and Credit Agreemen59
Borrowing and Credit Agreements - Additional Information (Details) - USD ($) | Dec. 15, 2017 | Dec. 03, 2017 | Jan. 03, 2017 | Jul. 27, 2016 | May 31, 2016 | May 16, 2016 | Jul. 20, 2015 | May 20, 2015 | Aug. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Jun. 13, 2016 | Oct. 20, 2015 | Sep. 15, 2015 |
Borrowings and Credit Agreements | |||||||||||||||||
Loss on early extinguishment of debt | $ 643,000,000 | $ 0 | |||||||||||||||
Carrying amount of long-term debt | $ 25,700,000,000 | $ 25,700,000,000 | |||||||||||||||
Omnicare, Inc. | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Notes assumed | $ 3,100,000,000 | ||||||||||||||||
Convertible debt | $ 5,000,000 | 5,000,000 | |||||||||||||||
Repayments of debt | $ 2,400,000,000 | ||||||||||||||||
Carrying amount of long-term debt | 700,000,000 | ||||||||||||||||
Commercial Paper | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Weighted average interest rate | 2.00% | 2.00% | 1.22% | ||||||||||||||
Bridge Loan. | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Plan assets | $ 13,000,000,000 | ||||||||||||||||
Loan processing fee | $ 52,000,000 | ||||||||||||||||
Senior notes 1.900% due in 2018, 2.800% due in 2020, 3.500% due in 2022, 4.875% due in 2035, and 5.125% due in 2045 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 15,000,000,000 | ||||||||||||||||
Term loan in connection with Aetna purchase | Aetna Acquisition | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 5,000,000,000 | ||||||||||||||||
Term Loan In Connection With Aetna Purchase Tranche One [Member] | Aetna Acquisition | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt term (in years) | 3 years | ||||||||||||||||
Debt instrument, face amount | $ 3,000,000,000 | ||||||||||||||||
Term Loan In Connection With Aetna Purchase Tranche Two [Member] | Aetna Acquisition | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt term (in years) | 5 years | ||||||||||||||||
Debt instrument, face amount | $ 2,000,000,000 | ||||||||||||||||
Unsecured Backup Credit Facilities | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Commitment fee percentage | 0.02% | ||||||||||||||||
Long-term line of credit | $ 0 | $ 0 | $ 0 | ||||||||||||||
Unsecured Backup Credit Facilities | Unsecured Backup Credit Facility Expiring May 17, 2018 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Maximum borrowing capacity | 1,000,000,000 | $ 1,000,000,000 | |||||||||||||||
Line of credit facility term (in years) | 364 days | ||||||||||||||||
Unsecured Backup Credit Facilities | Unsecured Backup Credit Facility Expiring July 24, 2019 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Maximum borrowing capacity | 1,250,000,000 | $ 1,250,000,000 | |||||||||||||||
Line of credit facility term (in years) | 5 years | ||||||||||||||||
Unsecured Backup Credit Facilities | Unsecured Backup Credit Facility Expiring July 1, 2020 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Maximum borrowing capacity | 1,250,000,000 | $ 1,250,000,000 | |||||||||||||||
Line of credit facility term (in years) | 5 years | ||||||||||||||||
Unsecured Backup Credit Facilities | Unsecured Backup Credit Facility Expiring May 18, 2022 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Maximum borrowing capacity | 1,000,000,000 | $ 1,000,000,000 | |||||||||||||||
Line of credit facility term (in years) | 5 years | ||||||||||||||||
Line of Credit | Revolving Credit Facility | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Maximum borrowing capacity | $ 2,500,000,000 | ||||||||||||||||
Commitment fee percentage | 0.03% | ||||||||||||||||
Unsecured Debt | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Proceeds from issuance of senior long-term debt | 14,800,000,000 | ||||||||||||||||
Unsecured Debt | Unsecured Bridge Loan | Aetna Acquisition | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt issuance fees paid | $ 221,000,000 | ||||||||||||||||
Amortization of loan facility fees | $ 56,000,000 | $ 56,000,000 | |||||||||||||||
Debt instrument, face amount | $ 44,000,000,000 | $ 49,000,000,000 | |||||||||||||||
Unsecured Debt | 2.125% senior notes due 2021 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 1,750,000,000 | ||||||||||||||||
Interest rate, stated percentage | 2.125% | ||||||||||||||||
Unsecured Debt | 2.875% senior notes due 2026 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 1,750,000,000 | ||||||||||||||||
Interest rate, stated percentage | 2.875% | ||||||||||||||||
Unsecured Debt | 2016 Notes | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Proceeds from issuance of debt | $ 3,500,000,000 | ||||||||||||||||
Unsecured Debt | 4.875% senior notes due 2035 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 2,000,000,000 | ||||||||||||||||
Interest rate, stated percentage | 4.875% | ||||||||||||||||
Unsecured Debt | 3.875% senior notes due 2025 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 3,000,000,000 | ||||||||||||||||
Interest rate, stated percentage | 3.875% | ||||||||||||||||
Unsecured Debt | 1.9% senior notes due 2018 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 2,250,000,000 | ||||||||||||||||
Interest rate, stated percentage | 1.90% | ||||||||||||||||
Unsecured Debt | 2.8% senior notes due 2020 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 2,750,000,000 | ||||||||||||||||
Interest rate, stated percentage | 2.80% | ||||||||||||||||
Unsecured Debt | 3.5% senior notes due 2022 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 1,500,000,000 | ||||||||||||||||
Interest rate, stated percentage | 3.50% | ||||||||||||||||
Unsecured Debt | 5.125% senior notes due 2045 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 3,500,000,000 | ||||||||||||||||
Interest rate, stated percentage | 5.125% | ||||||||||||||||
Senior Notes | 5.75% senior notes due 2017 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 5.75% | ||||||||||||||||
Senior Notes | 6.6% senior notes due 2019 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 6.60% | ||||||||||||||||
Senior Notes | 4.75% senior notes due 2020 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 4.75% | ||||||||||||||||
Senior Notes | Maximum Tender Offer Notes | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Authorized face amount to be repurchased | $ 2,250,000,000 | $ 1,500,000,000 | |||||||||||||||
Repurchased face amount | $ 2,250,000,000 | ||||||||||||||||
Senior Notes | 6.25% senior notes due 2027 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 6.25% | ||||||||||||||||
Senior Notes | 6.125% senior notes due 2039 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 6.125% | ||||||||||||||||
Senior Notes | 5.75% senior notes due 2041 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 5.75% | ||||||||||||||||
Senior Notes | 5% senior notes due 2024 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 296,000,000 | ||||||||||||||||
Interest rate, stated percentage | 5.00% | 5.00% | 5.00% | 5.00% | |||||||||||||
Senior Notes | 5% senior notes due 2024 | Omnicare, Inc. | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Carrying amount of long-term debt | 300,000,000 | ||||||||||||||||
Senior Notes | 4.750% senior notes due in 2022 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Debt instrument, face amount | $ 388,000,000 | ||||||||||||||||
Interest rate, stated percentage | 4.75% | 4.75% | 4.75% | 4.75% | |||||||||||||
Senior Notes | 4.750% senior notes due in 2022 | Omnicare, Inc. | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Carrying amount of long-term debt | 400,000,000 | ||||||||||||||||
Senior Notes | 4.875% senior notes due 2035 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 4.875% | ||||||||||||||||
Senior Notes | 3.875% senior notes due 2025 | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Interest rate, stated percentage | 3.875% | ||||||||||||||||
Senior Notes | Any and All Notes | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Repurchased face amount | $ 1,100,000,000 | $ 835,000,000 | |||||||||||||||
Redemption premium | 97,000,000 | ||||||||||||||||
Write off of deferred debt issuance cost | $ 4,000,000 | ||||||||||||||||
Loss on early extinguishment of debt | 101,000,000 | ||||||||||||||||
Senior Notes | The Notes | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Redemption premium | $ 486,000,000 | ||||||||||||||||
Write off of deferred debt issuance cost | 50,000,000 | ||||||||||||||||
Payments of debt extinguishment costs | $ 6,000,000 | ||||||||||||||||
Loss on early extinguishment of debt | $ 542,000,000 | ||||||||||||||||
Convertible Debt. | Omnicare, Inc. | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Notes assumed | $ 2,000,000,000 | ||||||||||||||||
Loans Payable | Omnicare, Inc. | |||||||||||||||||
Borrowings and Credit Agreements | |||||||||||||||||
Repayments of debt | $ 400,000,000 |
Borrowing and Credit Agreemen60
Borrowing and Credit Agreements - Debt Maturities (Details) - USD ($) $ in Millions | Dec. 31, 2017 | Dec. 31, 2016 |
Borrowings and Credit Agreements | ||
2,018 | $ 4,821 | |
2,019 | 873 | |
2,020 | 2,775 | |
2,021 | 2,327 | |
2,022 | 3,178 | |
Thereafter | 13,196 | |
Total debt | $ 27,170 | $ 27,726 |
Store Closures (Details)
Store Closures (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2017USD ($)store | |
Restructuring and Related Cost, Expected Cost | |
Number of proposed underperforming store closures | 70 |
Number of underperforming store closures | 71 |
Restructuring charges incurred | $ | $ 215 |
Leases - Additional Information
Leases - Additional Information (Details) $ in Billions | 12 Months Ended | |
Dec. 31, 2017Center | Dec. 31, 2015USD ($) | |
Leases | ||
Capital lease obligations | $ | $ 0.3 | |
Retail and mail order locations, distribution centers and corporate offices | ||
Leases | ||
Number of distribution centers leased | Center | 13 | |
Retail and mail order locations, distribution centers and corporate offices | Minimum | ||
Leases | ||
Non-cancelable operating leases, initial term (in years) | 15 years | |
Retail and mail order locations, distribution centers and corporate offices | Maximum | ||
Leases | ||
Non-cancelable operating leases, initial term (in years) | 25 years | |
Equipment and other assets | Minimum | ||
Leases | ||
Non-cancelable operating leases, initial term (in years) | 3 years | |
Equipment and other assets | Maximum | ||
Leases | ||
Non-cancelable operating leases, initial term (in years) | 10 years |
Leases - Schedule of Rent Expen
Leases - Schedule of Rent Expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Leases | |||
Minimum rentals | $ 2,455 | $ 2,418 | $ 2,317 |
Contingent rentals | 29 | 35 | 34 |
Gross lease rental expense | 2,484 | 2,453 | 2,351 |
Less: sublease income | (24) | (24) | (22) |
Net lease rental expense | $ 2,460 | $ 2,429 | $ 2,329 |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Lease Payments (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Capital Leases | |||
2,018 | $ 74 | ||
2,019 | 74 | ||
2,020 | 74 | ||
2,021 | 73 | ||
2,022 | 73 | ||
Thereafter | 974 | ||
Total future lease payments | 1,342 | ||
Less: imputed interest | (672) | ||
Present value of capital lease obligations | 670 | ||
Operating Leases | |||
2,018 | 2,493 | ||
2,019 | 2,361 | ||
2,020 | 2,201 | ||
2,021 | 2,072 | ||
2,022 | 1,934 | ||
Thereafter | 16,090 | ||
Total future lease payments | 27,151 | ||
Minimum sublease rentals due in future under non-cancelable subleases | 171 | ||
Obligation in excess of future minimum payments | 1,900 | ||
Proceeds from sale-leaseback transactions | $ 265 | $ 230 | $ 411 |
Pension Plans and Other Postr65
Pension Plans and Other Postretirement Benefits - General (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($)plan | Dec. 31, 2015USD ($)plan | |
Pension Plans and Other Postretirement Benefits | |||
Employer's contributions under defined contribution plans | $ 314 | $ 295 | $ 251 |
Number of defined benefit plans | plan | 7 | 7 | |
Settlement loss | 187 | ||
Pension Plans | |||
Pension Plans and Other Postretirement Benefits | |||
Settlement loss | 187 | ||
Tax Qualified Pension Plans, Defined Benefit | |||
Pension Plans and Other Postretirement Benefits | |||
Number of defined benefit plans | plan | 2 | 2 | |
Settlement loss | $ 187 | ||
Unfunded Nonqualified Supplemental Retirement Plans | |||
Pension Plans and Other Postretirement Benefits | |||
Number of defined benefit plans | plan | 5 | 5 |
Pension Plans and Other Postr66
Pension Plans and Other Postretirement Benefits - Change in Benefit Obligation (Details) - Pension Plans - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward] | |||
Benefit obligation at beginning of year | $ 844 | $ 844 | |
Interest cost | 20 | 27 | $ 31 |
Actuarial loss (gain) | (31) | 13 | |
Benefit payments | (35) | (37) | |
Settlements | (667) | (3) | |
Benefit obligation at end of year | $ 131 | $ 844 | $ 844 |
Pension Plans and Other Postr67
Pension Plans and Other Postretirement Benefits - Change in Plan Assets (Details) - Pension Plans - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Defined Benefit Plan, Change in Fair Value of Plan Assets | |||
Fair value of plan assets at the beginning of the year | $ 624 | $ 613 | |
Actual return on plan assets | 32 | 26 | |
Employer contributions | 46 | 25 | $ 22 |
Benefit payments | (35) | (37) | |
Settlements | (667) | (3) | |
Fair value of plan assets at the end of the year | 624 | $ 613 | |
Funded status | $ (131) | $ (220) |
Pension Plans and Other Postr68
Pension Plans and Other Postretirement Benefits - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Pension Plans and Other Postretirement Benefits | |||
Settlement loss | $ 187 | ||
Pension Plans | |||
Pension Plans and Other Postretirement Benefits | |||
Interest cost | 20 | $ 27 | $ 31 |
Expected return on plan assets | (20) | (32) | (33) |
Amortization of net loss | 21 | 32 | 21 |
Settlement loss | 187 | ||
Net periodic pension cost | $ 208 | $ 27 | $ 19 |
Pension Plans and Other Postr69
Pension Plans and Other Postretirement Benefits - Discount Rates (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Pension Plans | ||
Pension Plans and Other Postretirement Benefits | ||
Discount rate | 3.50% | 4.00% |
Pension Plans | Minimum | ||
Pension Plans and Other Postretirement Benefits | ||
Expected long-term rate of return on plan assets | 4.00% | |
Rate of compensation increase | 4.00% | 4.00% |
Pension Plans | Maximum | ||
Pension Plans and Other Postretirement Benefits | ||
Expected long-term rate of return on plan assets | 5.50% | |
Rate of compensation increase | 6.00% | 6.00% |
Tax Qualified Pension Plans, Defined Benefit | ||
Pension Plans and Other Postretirement Benefits | ||
Discount rate | 3.09% |
Pension Plans and Other Postr70
Pension Plans and Other Postretirement Benefits - Fair Value Allocation of Plan Assets (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Dec. 31, 2015 |
Level 1 | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | $ 44 | |
Cash and money market funds | Level 1 | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | 8 | |
Fixed income funds | Level 1 | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | 3 | |
Equity mutual funds | Level 1 | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | 33 | |
Pension Plans | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | $ 624 | $ 613 |
Pension Plans | Level 1 | ||
Pension Plans and Other Postretirement Benefits | ||
Actual plan asset allocations percent | 7.00% | |
Pension Plans | Level 2 | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | $ 580 | |
Actual plan asset allocations percent | 93.00% | |
Pension Plans | Level 3 | ||
Pension Plans and Other Postretirement Benefits | ||
Actual plan asset allocations percent | 0.00% | |
Pension Plans | Cash and money market funds | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | $ 8 | |
Actual plan asset allocations percent | 1.00% | |
Pension Plans | Fixed income funds | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | $ 583 | |
Actual plan asset allocations percent | 94.00% | |
Pension Plans | Fixed income funds | Level 2 | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | $ 580 | |
Pension Plans | Equity mutual funds | ||
Pension Plans and Other Postretirement Benefits | ||
Fair value of plan assets | $ 33 | |
Actual plan asset allocations percent | 5.00% |
Pension Plans and Other Postr71
Pension Plans and Other Postretirement Benefits - Expected Future Benefit Payments (Details) - Pension Plans - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Pension Plans and Other Postretirement Benefits | |||
Employer contributions | $ 46 | $ 25 | $ 22 |
Estimated future employer contributions in next fiscal year | 21 | ||
2,018 | 21 | ||
2,019 | 14 | ||
2,020 | 12 | ||
2,021 | 23 | ||
2,022 | 8 | ||
Thereafter | $ 31 |
Pension Plans and Other Postr72
Pension Plans and Other Postretirement Benefits - Multiemployer Pension Plans and Other Postretirement Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Multiemployer Plans, Pension | |||
Pension Plans and Other Postretirement Benefits | |||
Period contributions | $ 17 | $ 15 | $ 14 |
Other Postretirement Benefit Plan | |||
Pension Plans and Other Postretirement Benefits | |||
Period contributions | 58 | 52 | 60 |
Benefit obligation | 25 | 24 | |
Net periodic pension cost | $ 1 | $ 1 | $ 2 |
Stock Incentive Plans - Schedul
Stock Incentive Plans - Schedule of Stock-based Compensation (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Compensation | |||
Compensation expense related to share-based compensation | $ 234 | $ 222 | $ 230 |
Stock Options and ESPP | |||
Compensation | |||
Compensation expense related to share-based compensation | 65 | 79 | 90 |
Restricted Stock | |||
Compensation | |||
Compensation expense related to share-based compensation | $ 169 | $ 143 | 140 |
Restricted Stock | Executive Officer | |||
Compensation | |||
Compensation expense related to share-based compensation | $ 38 |
Stock Incentive Plans - Additio
Stock Incentive Plans - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Compensation | |||
Proceeds from exercise of stock options | $ 329 | $ 296 | $ 362 |
Payments for taxes related to net share settlement of equity awards | 71 | 72 | 63 |
Total intrinsic value of options exercised | 176 | 244 | 394 |
Restricted Stock | |||
Compensation | |||
Total fair value of restricted shares vested | 175 | 218 | 164 |
Restricted Stock Units (RSUs) | |||
Compensation | |||
Unrecognized compensation expense related to unvested options | $ 350 | ||
Unrecognized compensation expense related to unvested options, period of recognition (in years) | 2 years 3 months | ||
Options Granted, Beginning from 2011 | |||
Compensation | |||
Exercisable period (in years) | 4 years | ||
Expiration period for options granted (in years) | 7 years | ||
Employee Stock Option | |||
Compensation | |||
Unrecognized compensation expense related to unvested options | $ 57 | ||
Unrecognized compensation expense related to unvested options, period of recognition (in years) | 1 year 9 months 4 days | ||
Fair value of options vested | $ 341 | $ 298 | $ 334 |
Unvested options to vest over the requisite service period (in shares) | 9,000,000 | ||
Employee Stock Purchase Plan 2007 | |||
Compensation | |||
Maximum number of shares that can be purchased (in shares) | 30,000,000 | ||
Employee purchase price, percentage of fair market value of ordinary shares | 90.00% | 85.00% | |
Shares of common stock purchased for ESPP (in shares) | 1,000,000 | ||
Average price of shares of common stock purchased for ESPP (in dollars per share) | $ 71.66 | ||
Shares available for future grants under the ICP (in shares) | 11,000,000 | ||
Equity Incentive Plan 2010 | |||
Compensation | |||
Maximum number of shares that can be purchased (in shares) | 74,000,000 | ||
Shares available for future grants under the ICP (in shares) | 32,000,000 | ||
Minimum | |||
Compensation | |||
Requisite service period of the stock award (in years) | 3 years | ||
Maximum | |||
Compensation | |||
Requisite service period of the stock award (in years) | 5 years |
Stock Incentive Plans - Sched75
Stock Incentive Plans - Schedule of Valuation Assumptions of ESPP (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Employee Stock Purchase Plan | |||
Compensation | |||
Dividend yield | 1.24% | 0.88% | 0.71% |
Expected volatility | 22.70% | 20.64% | 13.92% |
Risk-free interest rate | 0.86% | 0.45% | 0.11% |
Expected life (in years) | 6 months | 6 months | 6 months |
Weighted-average grant date fair value (in dollars per share) | $ 13.01 | $ 14.98 | $ 18.72 |
Employee Stock Purchase Plan 2007 | |||
Compensation | |||
Offering period for stock purchase plan (in months) | 6 months |
Stock Incentive Plans - Sched76
Stock Incentive Plans - Schedule of Restricted Stock and RSU Activity (Details) - Restricted Unit and Restricted Share Award shares in Thousands | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Units | |
Nonvested at beginning of year (in shares) | shares | 4,876 |
Granted (in shares) | shares | 2,873 |
Vested (in shares) | shares | (2,340) |
Forfeited (in shares) | shares | (395) |
Nonvested at end of year (in shares) | shares | 5,014 |
Weighted Average Grant Date Fair Value | |
Nonvested at beginning of year (in dollars per share) | $ / shares | $ 55.56 |
Granted (in dollars per share) | $ / shares | 78.35 |
Vested (in dollars per share) | $ / shares | 78.92 |
Forfeited (in dollars per share) | $ / shares | 89.21 |
Nonvested at end of year (in dollars per share) | $ / shares | $ 86.92 |
Stock Incentive Plans - Fair Va
Stock Incentive Plans - Fair Value of Options Using Black-Scholes (Details) - Employee Stock Option - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Compensation | |||
Dividend yield | 2.56% | 1.62% | 1.37% |
Expected volatility | 18.39% | 17.22% | 18.07% |
Risk-free interest rate | 1.77% | 1.24% | 1.24% |
Expected life (in years) | 4 years 1 month 6 days | 4 years 2 months 12 days | 4 years 2 months 12 days |
Weighted-average grant date fair value (in dollars per share) | $ 9.43 | $ 13 | $ 14.01 |
Stock Incentive Plans - Sched78
Stock Incentive Plans - Schedule of Stock Option Activity (Details) $ / shares in Units, shares in Thousands | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Rollforward | |
Outstanding at the beginning of the period (in shares) | shares | 23,275 |
Granted (in shares) | shares | 3,513 |
Exercised (in shares) | shares | (4,814) |
Forfeited (in shares) | shares | (889) |
Expired (in shares) | shares | (555) |
Outstanding at the end of the period (in shares) | shares | 20,530 |
Options exercisable (in shares) | shares | 11,365 |
Options vested and expected to vest end of the period (in shares) | shares | 20,114 |
Rollforward | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 68.60 |
Granted (in dollars per share) | $ / shares | 78.05 |
Exercised (in dollars per share) | $ / shares | 43.07 |
Forfeited (in dollars per share) | $ / shares | 94.25 |
Expired (in dollars per share) | $ / shares | 60 |
Outstanding at the end of the period (in dollars per share) | $ / shares | 75.32 |
Exercisable at end of period (in dollars per share) | $ / shares | 61.37 |
Vested and expected to vest (in dollars per share) | $ / shares | $ 75 |
Rollforward | |
Weighted average remaining contractual term, options outstanding (in years) | 3 years 7 months 13 days |
Weighted average remaining contractual term, options exercisable (in years) | 2 years 3 months 18 days |
Weighted average remaining contractual term, options vested and expected to vest (in years) | 3 years 6 months 26 days |
Aggregate intrinsic value, options outstanding | $ | $ 180,318,054 |
Aggregate intrinsic value, options exercisable | $ | 179,628,690 |
Aggregate intrinsic value, options vested and expected to vest | $ | $ 180,299,134 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | Jan. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Current: | ||||
Federal | $ 2,594 | $ 2,803 | $ 3,065 | |
State | 464 | 511 | 555 | |
Total current income tax provision | 3,058 | 3,314 | 3,620 | |
Deferred: | ||||
Federal | (1,435) | 5 | (180) | |
State | 14 | (2) | (54) | |
Total deferred income tax provision | (1,421) | 3 | (234) | |
Total | $ 1,637 | $ 3,317 | $ 3,386 | |
Reconciliation of the statutory income tax rate to the Company's effective income tax rate | ||||
Statutory income tax rate | 21.00% | 35.00% | 35.00% | 35.00% |
State income taxes, net of federal tax benefit | 4.10% | 4.10% | 4.00% | |
Provisional effect of the Tax Cuts and Jobs Act | (18.30%) | |||
Other | (1.00%) | (0.70%) | 0.30% | |
Effective income tax rate | 19.80% | 38.40% | 39.30% | |
Deferred tax assets: | ||||
Lease and rents | $ 291 | $ 375 | ||
Inventory | 31 | 57 | ||
Employee benefits | 246 | 400 | ||
Allowance for doubtful accounts | 187 | 301 | ||
Retirement benefits | 40 | 65 | ||
Net operating loss and capital loss carryforwards | 101 | 125 | ||
Deferred income | 93 | 144 | ||
Other | 18 | 336 | ||
Valuation allowance | (77) | (135) | ||
Total deferred tax assets | 930 | 1,668 | ||
Deferred tax liabilities: | ||||
Depreciation and amortization | (3,926) | (5,882) | ||
Total deferred tax liabilities | (3,926) | (5,882) | ||
Net deferred tax liabilities | (2,996) | (4,214) | ||
Reconciliation of the beginning and ending amount of unrecognized tax benefits | ||||
Beginning balance | $ 344 | 307 | 338 | $ 188 |
Additions based on tax positions related to the current year | 62 | 68 | 57 | |
Additions based on tax positions related to prior years | 32 | 70 | 122 | |
Reductions for tax positions of prior years | (28) | (100) | (11) | |
Expiration of statutes of limitation | (10) | (22) | (13) | |
Settlements | (19) | (47) | (5) | |
Ending balance | 344 | 307 | 338 | |
Interest recognized related to unrecognized tax benefits | 11 | 10 | $ 5 | |
Accrued interest and penalties related to unrecognized tax benefits | 34 | $ 30 | ||
Unrecognized tax benefits that would impact effective tax rate | $ 317 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 1 Months Ended | 2 Months Ended | 12 Months Ended | |||
Jun. 30, 2017defendant | Sep. 30, 2015pharmacy | Mar. 31, 2010state | Feb. 28, 2006lawsuitdirectoritem | Sep. 30, 2017complaint | Dec. 31, 2017storeitem | |
Loss contingencies | ||||||
Number of store leases guaranteed | store | 85 | |||||
Number of material accruals for outstanding legal matters | 0 | |||||
Number of pharmacies indicated in subpoena | pharmacy | 8 | |||||
Number of legal proceedings, government investigations, inquiries and audits expected to be material | 0 | |||||
Omnicare, Inc. | ||||||
Loss contingencies | ||||||
New claims filed, number | lawsuit | 2 | |||||
Number of officers named in lawsuit | 3 | |||||
Number of directors named in lawsuit | director | 2 | |||||
Multi-state Investigation | ||||||
Loss contingencies | ||||||
Number of states participating in multi-state investigation | state | 28 | |||||
Cherokee Nation Opioid Litigation | ||||||
Loss contingencies | ||||||
Number of defendants | defendant | 6 | |||||
Shareholder Matters | ||||||
Loss contingencies | ||||||
Number of complaints | complaint | 4 | |||||
Number of complaints filed in Rhode Island | complaint | 3 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Millions | 3 Months Ended | 4 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2017USD ($)segment | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Segment reporting information | ||||||||||||
Number of segments | segment | 3 | |||||||||||
Net revenues | $ 48,385 | $ 46,181 | $ 45,685 | $ 44,514 | $ 45,971 | $ 44,615 | $ 43,725 | $ 43,215 | $ 184,765 | $ 177,526 | $ 153,290 | |
Gross profit | 7,904 | 7,126 | 6,935 | 6,580 | 7,606 | 7,492 | 7,015 | 6,744 | 28,545 | 28,857 | 26,528 | |
Operating profit | $ 3,108 | 2,499 | $ 2,117 | $ 1,793 | $ 3,000 | $ 2,824 | $ 2,357 | $ 2,185 | 9,517 | 10,366 | 9,475 | |
Depreciation and amortization | 2,480 | 2,475 | 2,092 | |||||||||
Additions to property and equipment | 2,049 | 2,279 | 2,367 | |||||||||
Restructuring charges incurred | 215 | |||||||||||
Goodwill, impairment loss | $ 0 | 181 | ||||||||||
ASU 2017-17 | ||||||||||||
Segment reporting information | ||||||||||||
Operating profit | 28 | 21 | ||||||||||
Pharmacy Services Segment | ||||||||||||
Segment reporting information | ||||||||||||
Depreciation and amortization | 712 | 714 | 654 | |||||||||
Additions to property and equipment | 311 | 295 | 359 | |||||||||
Pharmacy Services Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Litigation settlement, amount | 88 | |||||||||||
Retail/LTC Segment | ||||||||||||
Segment reporting information | ||||||||||||
Depreciation and amortization | 1,651 | 1,642 | 1,336 | |||||||||
Additions to property and equipment | 1,398 | 1,732 | 1,883 | |||||||||
Goodwill, impairment loss | 181 | |||||||||||
Retail/LTC Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | 64 | |||||||||||
Restructuring charges incurred | 215 | |||||||||||
Goodwill, impairment loss | 181 | |||||||||||
Asset impairment charges | 34 | |||||||||||
Corporate Segment | ||||||||||||
Segment reporting information | ||||||||||||
Depreciation and amortization | 117 | 119 | 102 | |||||||||
Additions to property and equipment | 340 | 252 | 125 | |||||||||
Corporate Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Payments for legal settlements | 90 | |||||||||||
Operating Segments | Pharmacy Services Segment | ||||||||||||
Segment reporting information | ||||||||||||
Net revenues | 130,596 | 119,963 | 100,363 | |||||||||
Gross profit | 6,040 | 5,901 | 5,227 | |||||||||
Operating profit | 4,755 | 4,676 | 3,992 | |||||||||
Net revenues, retail co-payments | 10,800 | 10,500 | 8,900 | |||||||||
Operating Segments | Retail/LTC Segment | ||||||||||||
Segment reporting information | ||||||||||||
Net revenues | 79,398 | 81,100 | 72,007 | |||||||||
Gross profit | 23,317 | 23,738 | 21,992 | |||||||||
Operating profit | 6,469 | 7,302 | 7,146 | |||||||||
Operating Segments | Corporate Segment | ||||||||||||
Segment reporting information | ||||||||||||
Operating profit | (966) | (891) | (1,035) | |||||||||
Intersegment Eliminations | ||||||||||||
Segment reporting information | ||||||||||||
Net revenues | (25,229) | (23,537) | (19,080) | |||||||||
Gross profit | (812) | (782) | (691) | |||||||||
Operating profit | (741) | (721) | (628) | |||||||||
Rx Crossroads Member | Corporate Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Transaction cost related to divestitures | 9 | |||||||||||
Omnicare Inc and Target Pharmacy Acquisition | Retail/LTC Segment | Gross Profit | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | 46 | |||||||||||
Omnicare Inc and Target Pharmacy Acquisition | Retail/LTC Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | 281 | |||||||||||
Omnicare Inc and Target Pharmacy Acquisition | Corporate Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | 156 | |||||||||||
Integration related costs | $ 10 | |||||||||||
Omnicare, Inc. | ||||||||||||
Segment reporting information | ||||||||||||
Net revenues | $ 2,600 | |||||||||||
Acquisition related costs | $ 70 | |||||||||||
Omnicare, Inc. | Retail/LTC Segment | Gross Profit | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | 2 | |||||||||||
Omnicare, Inc. | Retail/LTC Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | 34 | |||||||||||
Omnicare, Inc. | Corporate Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Integration related costs | 3 | |||||||||||
Aetna Acquisition | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | 34 | |||||||||||
Aetna Acquisition | Corporate Segment | Operating profit | ||||||||||||
Segment reporting information | ||||||||||||
Acquisition related costs | $ 34 | |||||||||||
Customer Concentration Risk | Aetna | Sales Revenue, Net | ||||||||||||
Segment reporting information | ||||||||||||
Concentration risk, percentage | 12.30% | 11.70% | 10.00% | |||||||||
Geographic Concentration Risk | United States | Sales Revenue, Net | ||||||||||||
Segment reporting information | ||||||||||||
Concentration risk, percentage | 99.00% | |||||||||||
Geographic Concentration Risk | United States | Long-lived Assets | ||||||||||||
Segment reporting information | ||||||||||||
Concentration risk, percentage | 99.00% |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Numerator for earnings per share calculation: | |||||||||||
Income from continuing operations | $ 3,287 | $ 1,285 | $ 1,097 | $ 962 | $ 1,707 | $ 1,542 | $ 924 | $ 1,147 | $ 6,631 | $ 5,320 | $ 5,230 |
Income allocated to participating securities | (24) | (27) | (26) | ||||||||
Net income attributable to noncontrolling interest | (1) | (2) | (2) | ||||||||
Income from continuing operations attributable to CVS Health | $ 6,606 | $ 5,291 | $ 5,202 | ||||||||
Denominator for earnings per share calculation: | |||||||||||
Weighted average shares, basic (in shares) | 1,020 | 1,073 | 1,118 | ||||||||
Effect of dilutive securities (in shares) | 4 | 6 | 8 | ||||||||
Weighted average shares, diluted (in shares) | 1,024 | 1,079 | 1,126 | ||||||||
Earnings per share from continuing operations: | |||||||||||
Earnings per share, basic (in dollars per share) | $ 3.23 | $ 1.26 | $ 1.07 | $ 0.93 | $ 1.60 | $ 1.44 | $ 0.86 | $ 1.04 | $ 6.48 | $ 4.93 | $ 4.65 |
Earnings per share, diluted (in dollars per share) | $ 3.22 | $ 1.26 | $ 1.07 | $ 0.92 | $ 1.59 | $ 1.43 | $ 0.86 | $ 1.04 | $ 6.45 | $ 4.91 | $ 4.62 |
Quarterly Financial Informati83
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Quarterly financial information | |||||||||||
Net revenues | $ 48,385 | $ 46,181 | $ 45,685 | $ 44,514 | $ 45,971 | $ 44,615 | $ 43,725 | $ 43,215 | $ 184,765 | $ 177,526 | $ 153,290 |
Gross profit | 7,904 | 7,126 | 6,935 | 6,580 | 7,606 | 7,492 | 7,015 | 6,744 | 28,545 | 28,857 | 26,528 |
Operating profit | 3,108 | 2,499 | 2,117 | 1,793 | 3,000 | 2,824 | 2,357 | 2,185 | 9,517 | 10,366 | 9,475 |
Income from continuing operations | 3,287 | 1,285 | 1,097 | 962 | 1,707 | 1,542 | 924 | 1,147 | 6,631 | 5,320 | 5,230 |
Income (loss) from discontinued operations, net of tax | 1 | (9) | (1) | (8) | (1) | 9 | |||||
Net income attributable to CVS Health | $ 3,287 | $ 1,285 | $ 1,098 | $ 952 | $ 1,707 | $ 1,540 | $ 924 | $ 1,146 | $ 6,622 | $ 5,317 | $ 5,237 |
Basic earnings per share: | |||||||||||
Income from continuing operations attributable to CVS Health (in dollars per share) | $ 3.23 | $ 1.26 | $ 1.07 | $ 0.93 | $ 1.60 | $ 1.44 | $ 0.86 | $ 1.04 | $ 6.48 | $ 4.93 | $ 4.65 |
Income (loss) from discontinued operations attributable to CVS Health (in dollars per share) | (0.01) | (0.01) | 0.01 | ||||||||
Net income attributable to CVS Health (in dollars per share) | 3.23 | 1.26 | 1.07 | 0.92 | 1.60 | 1.44 | 0.86 | 1.04 | 6.47 | 4.93 | 4.66 |
Diluted earnings per share: | |||||||||||
Income from continuing operations attributable to CVS Health (in dollars per share) | 3.22 | 1.26 | 1.07 | 0.92 | 1.59 | 1.43 | 0.86 | 1.04 | 6.45 | 4.91 | 4.62 |
Income (loss) from discontinued operations attributable to CVS Health (in dollars per share) | (0.01) | (0.01) | 0.01 | ||||||||
Net income attributable to CVS Health (in dollars per share) | 3.22 | 1.26 | 1.07 | 0.92 | 1.59 | 1.43 | 0.86 | 1.04 | 6.44 | 4.90 | 4.63 |
Dividends per share (in dollars per share) | 0.50 | 0.50 | 0.50 | 0.50 | 0.425 | 0.425 | 0.425 | 0.425 | 2 | 1.70 | $ 1.40 |
Maximum | |||||||||||
Diluted earnings per share: | |||||||||||
NYSE Stock Price (in dollars per share) | 80.91 | 83.31 | 82.79 | 83.92 | 88.80 | 98.06 | 106.10 | 104.05 | 83.92 | 106.10 | |
Minimum | |||||||||||
Diluted earnings per share: | |||||||||||
NYSE Stock Price (in dollars per share) | $ 66.80 | $ 75.35 | $ 75.95 | $ 74.80 | $ 73.53 | $ 88.99 | $ 93.21 | $ 89.65 | $ 66.80 | $ 73.53 |