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72 CVS Health
Notes to Consolidated Financial Statements
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
will be rebranded as MinuteClinic. The Company acquired the Target pharmacy and clinic businesses primarily to
expand the geographic reach of its retail pharmacy business.
The estimated fair values of the assets acquired at the date of acquisition were approximately as follows:
IN MILLIONS
Accounts receivable $ 2
Inventories 472
Property and equipment 9
Intangible assets 490
Goodwill 916
Total cash consideration $ 1,889
The assessment of fair value is preliminary and is based on information that was available to management at the time
the consolidated financial statements were prepared. Accordingly, such amounts may change. As of December 31,
2015, the most significant open item was the inventory related purchase price adjustment. 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. No liability for any potential contingent consider-
ation has been recorded based on current projections for future prescription growth over the relevant period.
In January 2016, the Company received approximately $21 million from Target as final settlement of the inventory
valuation. This amount will be recorded as a reduction of the purchase price in the first quarter of 2016.
In connection with the closing of the transaction, the Company and Target entered into pharmacy and clinic operat-
ing and master lease agreements. See Note 7 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.
Coram Acquisition
On January 16, 2014, the Company acquired 100% of the voting interests of Coram LLC and its subsidiaries (collectively,
“Coram”), the specialty infusion services and enteral nutrition business unit of Apria Healthcare Group Inc. (“Apria”), for
cash consideration of approximately $2.1 billion, plus contingent consideration of approximately $0.1 billion. The pur-
chase price was also subject to a working capital adjustment, which resulted in the Company receiving $9 million from
Apria. Coram is one of the nation’s largest providers of comprehensive infusion services, caring for approximately 240,000
patients annually. Coram has approximately 4,600 employees, including approximately 600 nurses and 250 dietitians,
operating primarily through 83 branch locations and six centers of excellence for patient intake.
The contingent consideration is based on the Company’s future realization of Coram’s tax net operating loss
carryforwards (“NOLs”) as of the date of the acquisition. The Company will pay the seller the first $60 million in tax
savings realized from the future utilization of the Coram NOLs, plus 50% of any additional future tax savings from
the remaining NOLs. The fair value of the contingent consideration liability associated with the future realization of
the Coram NOLs was determined using Level 3 inputs based on the present value of contingent payments expected
to be made based on the Company’s estimate of the amount and timing of Coram NOLs that will ultimately be