CVS 2007 Annual Report Download - page 57

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53 I 2007 Annual Report
The carrying amount of goodwill was $23.9 billion and
$3.2 billion as of December 29, 2007 and December 30, 2006,
respectively. During 2007, gross goodwill increased primarily in
the Pharmacy Services Segment due to the Caremark Merger.
There was no impairment of goodwill during 2007.
The carrying amount of indefinitely-lived assets was $6.4 billion
as of December 29, 2007. The Company had no indefinitely-lived
assets as of December 30, 2006. The increase in the Company’s
indefinitely-lived assets during 2007 was due to the recognition of
trademarks associated with the Caremark Merger.
Intangible assets with finite useful lives are amortized over their
estimated useful lives. The increase in the gross carrying amount
of the Company’s amortizable intangible assets during 2007 was
primarily due to the Caremark Merger and adjustments related
to the Standalone Drug Business. The amortization expense for
intangible assets totaled $344.1 million in 2007, $161.2 million
in 2006 and $128.6 million in 2005. The anticipated annual
amortization expense for these intangible assets is $387.2 million
in 2008, $373.8 million in 2009, $361.5 million in 2010,
$352.7 million in 2011 and $334.5 million in 2012.
Following is a summary of the Company’s intangible assets as of the respective balance sheet dates:
Dec. 29, 2007 Dec. 30, 2006
Gross Gross
Carrying Accumulated Carrying Accumulated
In millions Amount Amortization Amount Amortization
Trademarks (indefinitely-lived) $ 6,398.0 $ – $ – $ –
Customer contracts and relationships and Covenants
not to compete 4,444.1 (876.9) 1,457.6 (563.4)
Favorable leases and Other 623.0 (158.6) 552.2 (128.2)
$ 11,465.1 $ (1,035.5) $ 2,009.8 $ (691.6)
Share Repurchase Program
In connection with the Caremark Merger, on March 28, 2007, the
Company commenced a tender offer to purchase up to 150 mil-
lion common shares, or about 10%, of its outstanding common
stock at a price of $35.00 per share. The tender offer expired on
April 24, 2007 and resulted in approximately 10.3 million shares
being tendered. The shares were placed into the Company’s
treasury account.
On May 9, 2007, the Board of Directors of the Company
authorized a share repurchase program for up to $5.0 billion
of the Company’s outstanding common stock.
On May 13, 2007, the Company entered into a $2.5 billion fixed
dollar accelerated share repurchase (the “May ASR”) agreement
with Lehman Brothers, Inc. (“Lehman”). The May ASR agreement
contained provisions that established the minimum and maximum
number of shares to be repurchased during the term of the May
ASR agreement. Pursuant to the terms of the May ASR agreement,
on May 14, 2007, the Company paid $2.5 billion to Lehman in
exchange for Lehman delivering 45.6 million shares of common
stock to the Company, which were placed into its treasury account
upon delivery. On June 7, 2007, upon establishment of the mini-
mum number of shares to be repurchased, Lehman delivered an
additional 16.1 million shares of common stock to the Company.
The May ASR program concluded on October 5, 2007 and
resulted in the Company receiving an additional 5.8 million
shares of common stock during the fourth quarter of 2007.
As of December 29, 2007 the aggregate 67.5 million shares of
common stock received pursuant to the $2.5 billion May ASR
agreement had been placed into the Company’s treasury account.
On October 8, 2007, the Company commenced an open market
repurchase program. The program concluded on November 2,
2007 and resulted in 5.3 million shares of common stock being
repurchased for $211.9 million. The shares were placed into the
Company’s treasury account upon delivery.
On November 6, 2007, the Company entered into a $2.3 billion
fixed dollar accelerated share repurchase agreement (the “November
ASR”) with Lehman. The November ASR agreement contained
provisions that established the minimum and maximum number
of shares to be repurchased during the term of the November
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