CVS 2011 Annual Report Download - page 61

CVS CAREMARK 59 2011 ANNUAL REPORT
is still evaluating which of the two alternatives it will apply
in reporting comprehensive income. Neither alternative is
expected to have a material impact on the Company’s con-
solidated results of operations and neither alternative will
have an impact on the Company’s financial condition or
cash flows.
In September 2011, the FASB issued ASU 2011-08, Testing
Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08
allows entities to use a qualitative approach to determine
whether it is more likely than not that the fair value of a report-
ing unit is less than its carrying value. If after performing the
qualitative assessment an entity determines it is not more
likely than not that the fair value of a reporting unit is less than
its carrying amount, then performing the two-step goodwill
impairment test is unnecessary. However, if an entity con-
cludes otherwise, then it is required to perform the first step
of the two-step goodwill impairment test. ASU 2011-08 is
effective for annual and interim goodwill impairment tests per-
formed for fiscal years beginning after December 15, 2011.
The Company does not expect the adoption of ASU 2011-08
will have a material impact on the Company’s consolidated
results of operations, financial condition or cash flows.
In September 2011, the FASB issued ASU 2011-09,
Disclosures about an Employer’s Participation in a
Multiemployer Plan (“ASU 2011-09”). ASU 2011-09 requires
additional quantitative and qualitative disclosures of entities
who participate in multiemployer pension and other postre-
tirement plans. ASU 2011-09 is effective for annual periods
ending after December 15, 2011 and should be applied retro-
spectively. The adoption of ASU 2011-09 did not have a mate-
rial impact on the Company’s financial statement disclosures.
2 BUSINESS COMBINATION
On April 29, 2011, the Company acquired the Medicare pre-
scription drug business of Universal American Corp. (the “UAM
Medicare Part D Business”) for approximately $1.3 billion. The
UAM Medicare Part D Business offers prescription drug
plan benefits to Medicare beneficiaries throughout the United
States through its Community CCRSM prescription drug plan.
The fair value of assets acquired and liabilities assumed were
$2.4 billion and $1.1 billion, respectively, which included
identifiable intangible assets of approximately $0.4 billion
and goodwill of approximately $1.0 billion that were recorded
in the PSS. The allocation of the purchase price is prelimi-
nary and is based on information that was available to man-
agement at the time the consolidated financial statements
were prepared, accordingly, the allocation may change. The
Company’s results of operations and cash flows include the
UAM Medicare Part D Business beginning on April 29, 2011.
3 DISCONTINUED OPERATIONS
On November 1, 2011, the Company sold its TheraCom,
L.L.C. (“TheraCom”) subsidiary to AmerisourceBergen
Corporation for $250 million, subject to a working capital
adjustment. TheraCom is a provider of commercialization
support services to the biotech and pharmaceutical indus-
try. As of December 31, 2010, TheraCom had approximately
$0.1 billion of current assets consisting primarily of accounts
receivable and $0.1 billion of current liabilities consisting pri-
marily of accounts payable. The sale of TheraCom resulted
in the derecognition of approximately $0.2 billion of nonde-
ductible goodwill. The TheraCom business had historically
been part of the Company’s Pharmacy Services segment. The
results of the TheraCom business are presented as discontin-
ued operations and have been excluded from both continuing
operations and segment results for all periods presented.
In connection with certain business dispositions completed
between 1991 and 1997, the Company retained guarantees
on store lease obligations for a number of former subsid-
iaries, including Linens ‘n Things which filed for bankruptcy
in 2008. The Company’s income (loss) from discontinued
operations includes lease-related costs which the Company
believes it will likely be required to satisfy pursuant to its
Linens ‘n Things lease guarantees.
Below is a summary of the results of discontinued operations:
Year Ended December 31,
in millions 2011 2010 2009
Net revenues of TheraCom $ 650 $ 635 $ 514
Income from operations of TheraCom $ 18 $ 28 $ 13
Gain on disposal of TheraCom 53 — —
Loss on disposal of Linens ‘n Things (7) (24) (19)
Income tax benefit (provision) (95) (2) 2
Income (loss) from discontinued operations, net of tax $ (31) $ 2 $ (4)
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