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Acquisition and Divestiture | 9 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Acquisition and Divestiture | Acquisition and Divestiture Acquisition of Aetna On the Aetna Acquisition Date, the Company acquired 100% of the outstanding shares and voting interests of Aetna for a combination of cash and stock. Under the terms of the merger agreement, Aetna shareholders received $145.00 in cash and 0.8378 CVS Health shares for each Aetna share. The transaction valued Aetna at approximately $212 per share or approximately $70 billion. Including the assumption of Aetna’s debt, the total value of the transaction was approximately $78 billion. The Company financed the cash portion of the purchase price through a combination of cash on hand and by issuing approximately $45 billion of new debt, including senior notes and term loans. Aetna is a leading health care benefits company that offers a broad range of traditional, voluntary, and consumer-directed health insurance products and related services. The Company acquired Aetna to help improve the consumer health care experience by combining Aetna’s health care benefits products and services with CVS Health’s approximately 9,900 retail locations, approximately 1,100 walk-in medical clinics and integrated pharmacy capabilities with the goal of becoming the new, trusted front door to health care. The transaction has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values at the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
In millions |
Cash and cash equivalents | $ | 6,565 |
Accounts receivable | 4,094 |
Other current assets | 3,894 |
Investments (current and long-term) | 17,984 |
Goodwill | 47,554 |
Intangible assets | 22,571 |
Other long-term assets | 8,249 |
Total assets acquired | 110,911 |
Health care costs payable | 5,302 |
Other current liabilities | 10,069 |
Debt (current and long-term) | 8,098 |
Deferred income taxes | 4,278 |
Other long-term liabilities | 13,078 |
Total liabilities assumed | 40,825 |
Noncontrolling interests | 320 |
Total consideration transferred | $ | 69,766 |
The assessment of fair value is preliminary and is based on information that was available to management at the time the unaudited condensed consolidated financial statements were prepared. The most significant open item relates to the accounting for income taxes as management is awaiting additional information to complete its assessment. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. Measurement period adjustments to assets acquired and liabilities assumed during the nine months ended September 30, 2019 primarily related to additional information received related to certain valuations and contingencies and the related impact on the accounting for income taxes and goodwill. There were no material income statement measurement period adjustments recorded during the three and nine months ended September 30, 2019. Unaudited pro forma financial information The following unaudited pro forma information presents a summary of the Company’s combined operating results for the three and nine months ended September 30, 2018 as if the Aetna acquisition and the related financing transactions had occurred on January 1, 2017. The following pro forma financial information is not necessarily indicative of the Company’s operating results as they would have been had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, basic shares outstanding and dilutive equivalents, cost savings from operating efficiencies, potential synergies and the impact of incremental costs incurred in integrating the businesses.
In millions, except per share amounts | Three Months Ended September 30, 2018 |  | Nine Months Ended September 30, 2018
Total revenues | $ | 60,865 |  |  | $ | 180,164 |
Income from continuing operations attributable to CVS Health | 1,864 |  |  | 1,731 |
Basic earnings per share from continuing operations attributable to CVS Health | $ | 1.44 |  |  | $ | 1.34 |
Diluted earnings per share from continuing operations attributable to CVS Health | $ | 1.43 |  |  | $ | 1.33 |
The pro forma results for the three and nine months ended September 30, 2018 include adjustments related to the following purchase accounting and acquisition-related items:
• | Elimination of intercompany transactions between CVS Health and Aetna;
• | Elimination of estimated foregone interest income associated with (i) cash assumed to have been used to partially fund the Aetna Acquisition and (ii) adjusting the amortized cost of Aetna’s investment portfolio to fair value as of the completion of the Aetna Acquisition;
• | Elimination of historical intangible asset, deferred acquisition cost and capitalized software amortization expense and addition of amortization expense based on the current preliminary values of identified intangible assets;
• | Additional interest expense from (i) the long-term debt issued to partially fund the Aetna Acquisition and (ii) the amortization of the fair value adjustment to assumed long-term debt.
• | Additional depreciation expense related to the adjustment of Aetna’s property and equipment to fair value;
• | Adjustments to align CVS Health’s and Aetna’s accounting policies;
• | Elimination of transaction related costs; and
• | Tax effects of the adjustments noted above.
Divestiture of Brazilian Subsidiary On July 1, 2019, the Company sold its Brazilian subsidiary, Drogaria Onofre Ltda. (“Onofre”) for an immaterial amount. Onofre operates 50 retail pharmacy stores, the results of which have historically been reported within the Retail/LTC segment. The Company recorded a loss on the divestiture of $205 million in the three months ended September 30, 2019, which primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited condensed consolidated statements of operations within the Retail/LTC segment.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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