CVS 2013 Annual Report Download - page 67

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2013 Annual Report
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 – 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 – 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 $246 million and $288 million in 2013 and 2012, respectively.
Advertising costs – Advertising costs are expensed when the related advertising takes place. Advertising costs,
net of vendor funding (included in operating expenses), were $177 million, $221 million and $211 million in 2013,
2012 and 2011, respectively.
Interest expense, net – Interest expense, net of capitalized interest, was $517 million, $561 million and $588 million,
and interest income was $8 million, $4 million and $4 million in 2013, 2012 and 2011, respectively. Capitalized interest
totaled $25 million, $29 million and $37 million in 2013, 2012 and 2011, respectively.
Shares held in trust – The Company maintains grantor trusts, which held approximately 1 million shares of its
common stock at December 31, 2013 and 2012, 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 loss – Accumulated other comprehensive loss consists of changes in the
net actuarial gains and losses associated with pension and other postretirement benefit plans, unrealized losses on
derivatives from cash flow hedges executed in previous years associated with the issuance of long-term debt, and
foreign currency translation adjustments. The amount included in accumulated other comprehensive loss related to
the Company’s pension and postretirement plans was $172 million pre-tax ($106 million after-tax) as of December 31,
2013 and $268 million pre-tax ($165 million after-tax) as of December 31, 2012. The net impact on cash flow hedges
totaled $22 million pre-tax ($13 million after-tax) and $26 million pre-tax ($16 million after-tax) as of December 31,
2013 and 2012, respectively. Cumulative foreign currency translation adjustments at December 31, 2013 were
$30 million.