CVS 2014 Annual Report Download - page 66

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CVS Health
64
Notes to 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-insur-
ance 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 $207 million and $246 million in 2014 and 2013, respectively.
Advertising costs — Advertising costs are expensed when the related advertising takes place. Advertising costs,
net of vendor funding (included in operating expenses), were $212 million, $177 million and $221 million in 2014,
2013 and 2012, respectively.
Interest expense, net — Interest expense, net of capitalized interest, was $615 million, $517 million and $561 mil-
lion, and interest income was $15 million, $8 million and $4 million in 2014, 2013 and 2012, respectively. Capitalized
interest totaled $19 million, $25 million and $29 million in 2014, 2013 and 2012, respectively.
Shares held in trust — The Company maintains grantor trusts, which held approximately 1 million shares of its
common stock at December 31, 2014 and 2013, 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 (loss) consists of
changes in the net actuarial gains and losses associated with pension and other postretirement benefit plans, 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 $234 million pre-tax ($143 million after-tax) as of
December 31, 2014 and $172 million pre-tax ($106 million after-tax) as of December 31, 2013. The net impact on
cash flow hedges totaled $16 million pre-tax ($9 million after-tax) and $22 million pre-tax ($13 million after-tax) as
of December 31, 2014 and 2013, respectively. Cumulative foreign currency translation adjustments at December 31,
2014 and 2013 were $65 million and $30 million, respectively.