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Leases
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
Leases Leases
The Company leases most of its retail stores, mail order facilities and primary care centers, as well as certain distribution centers and corporate offices under operating or finance leases, typically with initial terms of 15 to 25 years. The Company also leases certain equipment and other assets under operating or finance leases, typically with initial terms of 3 to 10 years.

In addition, the Company leases pharmacy space at the stores of another retail chain for which the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings. For these pharmacy lease arrangements, the Company concluded that for accounting purposes the lease term was the remaining estimated economic life of the buildings. Consequently, most of these individual pharmacy leases are finance leases.

The following table is a summary of the components of net lease cost for the years ended December 31, 2023, 2022 and 2021:
In millions202320222021
Operating lease cost$2,532 $2,579 $2,633 
Finance lease cost:
Amortization of right-of-use assets84 79 62 
Interest on lease liabilities73 68 62 
Total finance lease costs157 147 124 
Short-term lease costs22 27 25 
Variable lease costs635 610 604 
Less: sublease income(63)(61)(59)
Net lease cost$3,283 $3,302 $3,327 

Supplemental cash flow information related to leases for the years ended December 31, 2023, 2022 and 2021 was as follows:
In millions202320222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases$2,756 $2,689 $2,714 
Operating cash flows paid for interest portion of finance leases73 68 62 
Financing cash flows paid for principal portion of finance leases70 62 50 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases1,132 591 1,254 
Finance leases(4)232 278 
Supplemental balance sheet information related to leases as of December 31, 2023 and 2022 is as follows:
In millions, except remaining lease term and discount rate20232022
Operating leases:
Operating lease right-of-use assets (1)
$17,252$17,928
Current portion of operating lease liabilities$1,741$1,699
Long-term operating lease liabilities16,03416,839
Total operating lease liabilities (2)
$17,775$18,538
Finance leases:
Property and equipment, gross$1,604$1,608
Accumulated depreciation(375)(284)
Property and equipment, net$1,229$1,324
Current portion of long-term debt$66$59
Long-term debt1,3251,406
Total finance lease liabilities$1,391$1,465
Weighted average remaining lease term (in years)
Operating leases11.412.2
Finance leases17.319.4
Weighted average discount rate
Operating leases4.5 %4.4 %
Finance leases5.0 %4.9 %
_____________________________________________
(1)Includes operating lease right-of-use assets of $56 million which were accounted for as assets held for sale and were included in assets held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.
(2)Includes current portion of operating lease liabilities of $21 million and long-term operating lease liabilities of $39 million which were accounted for as liabilities held for sale and were included in liabilities held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.

The following table summarizes the maturity of lease liabilities under finance and operating leases as of December 31, 2023:
In millionsFinance
Leases
Operating
Leases (1)
Total
2024$143 $2,716 $2,859 
2025138 2,559 2,697 
2026130 2,369 2,499 
2027127 2,181 2,308 
2028124 2,024 2,148 
Thereafter1,446 11,004 12,450 
Total lease payments (2)
2,108 22,853 24,961 
Less: imputed interest(717)(5,078)(5,795)
Total lease liabilities$1,391 $17,775 $19,166 
_____________________________________________
(1)Future operating lease payments have not been reduced by minimum sublease rentals of $289 million due in the future under noncancelable subleases.
(2)The Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $2.1 billion are not reflected in this table since the estimated economic life of the buildings is shorter than the contractual term of the pharmacy lease arrangement.
Office Real Estate Optimization Charges
During the fourth quarter of 2022, the Company undertook an initiative to evaluate its corporate office real estate space in response to its new flexible work arrangement. As part of this initiative, the Company evaluated its current real estate space and changes in employee work arrangement requirements to ensure it had the appropriate space to support the business. As a result of this assessment, the Company determined that it would vacate and abandon certain leased corporate office spaces. Accordingly, in the three months ended December 31, 2022, the Company recorded office real estate optimization charges of $117 million, primarily consisting of $71 million related to operating lease right-of-use assets and $44 million related to property and equipment. During the year ended December 31, 2023, the Company recorded an incremental $46 million of office real estate optimization charges associated with this initiative, primarily consisting of $20 million related to operating lease right-of-use assets and $18 million related to property and equipment. The office real estate optimization charges were recorded within the Health Care Benefits, Corporate/Other and Health Services segments.

Store Impairment Charges
The Company evaluates its retail store right-of-use and property and equipment assets for impairment at the retail store level, which is the lowest level at which cash flows can be identified. For retail stores where there is an indicator of impairment present, the Company first compares the carrying amount of the asset group to the estimated future cash flows associated with the asset group (undiscounted). If the estimated undiscounted future cash flows used in the analysis are less than the carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to its estimated fair value which is the greater of the asset group’s estimated future cash flows (discounted), or the consideration of what a market participant would pay to lease the assets, net of leasing costs. The Company’s estimate of fair value considers historical results, current operating trends, consolidated sales, profitability and cash flow results and forecasts. For assets which the Company has determined it will be able to sublease, the estimated future cash flows include the estimated sublease income, net of estimated leasing costs.

When the carrying value of an asset group exceeds its estimated fair value, an impairment loss is recorded to reduce the value of the asset group to its estimated fair value. As the impaired assets are measured at fair value on a nonrecurring basis primarily using unobservable inputs as of the measurement date, the assets are classified in Level 3 of the fair value hierarchy.

During the fourth quarter of 2021, the Company completed a strategic review of its retail business and announced the creation of new formats for its stores to continue to drive higher engagement with customers. As part of this review, the Company evaluated changes in population, consumer buying patterns and future health needs to ensure it has the right kinds of stores in the right locations for consumers and for the business. In connection with this initiative, on November 17, 2021, the Board of Directors of CVS Health Corporation (the “Board”) authorized the closing of approximately 900 retail stores, approximately 300 stores each year, between 2022 and 2024. As a result, management determined that there were indicators of impairment with respect to the impacted stores’ asset groups, including the associated operating lease right-of-use assets and property and equipment. A long-lived asset impairment test was performed during the fourth quarter of 2021 and the results of the impairment test indicated that the fair value of certain retail store asset groups was lower than their respective carrying values. Accordingly, in the three months ended December 31, 2021, the Company recorded a store impairment charge of approximately $1.4 billion, consisting of a write down of approximately $1.1 billion related to operating lease right-of-use assets and $261 million related to property and equipment, within the Pharmacy & Consumer Wellness segment. Subsequent to the impairment loss, the fair value of the associated operating lease right-of use assets and property and equipment were $356 million and $185 million, respectively.
Leases Leases
The Company leases most of its retail stores, mail order facilities and primary care centers, as well as certain distribution centers and corporate offices under operating or finance leases, typically with initial terms of 15 to 25 years. The Company also leases certain equipment and other assets under operating or finance leases, typically with initial terms of 3 to 10 years.

In addition, the Company leases pharmacy space at the stores of another retail chain for which the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings. For these pharmacy lease arrangements, the Company concluded that for accounting purposes the lease term was the remaining estimated economic life of the buildings. Consequently, most of these individual pharmacy leases are finance leases.

The following table is a summary of the components of net lease cost for the years ended December 31, 2023, 2022 and 2021:
In millions202320222021
Operating lease cost$2,532 $2,579 $2,633 
Finance lease cost:
Amortization of right-of-use assets84 79 62 
Interest on lease liabilities73 68 62 
Total finance lease costs157 147 124 
Short-term lease costs22 27 25 
Variable lease costs635 610 604 
Less: sublease income(63)(61)(59)
Net lease cost$3,283 $3,302 $3,327 

Supplemental cash flow information related to leases for the years ended December 31, 2023, 2022 and 2021 was as follows:
In millions202320222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases$2,756 $2,689 $2,714 
Operating cash flows paid for interest portion of finance leases73 68 62 
Financing cash flows paid for principal portion of finance leases70 62 50 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases1,132 591 1,254 
Finance leases(4)232 278 
Supplemental balance sheet information related to leases as of December 31, 2023 and 2022 is as follows:
In millions, except remaining lease term and discount rate20232022
Operating leases:
Operating lease right-of-use assets (1)
$17,252$17,928
Current portion of operating lease liabilities$1,741$1,699
Long-term operating lease liabilities16,03416,839
Total operating lease liabilities (2)
$17,775$18,538
Finance leases:
Property and equipment, gross$1,604$1,608
Accumulated depreciation(375)(284)
Property and equipment, net$1,229$1,324
Current portion of long-term debt$66$59
Long-term debt1,3251,406
Total finance lease liabilities$1,391$1,465
Weighted average remaining lease term (in years)
Operating leases11.412.2
Finance leases17.319.4
Weighted average discount rate
Operating leases4.5 %4.4 %
Finance leases5.0 %4.9 %
_____________________________________________
(1)Includes operating lease right-of-use assets of $56 million which were accounted for as assets held for sale and were included in assets held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.
(2)Includes current portion of operating lease liabilities of $21 million and long-term operating lease liabilities of $39 million which were accounted for as liabilities held for sale and were included in liabilities held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.

The following table summarizes the maturity of lease liabilities under finance and operating leases as of December 31, 2023:
In millionsFinance
Leases
Operating
Leases (1)
Total
2024$143 $2,716 $2,859 
2025138 2,559 2,697 
2026130 2,369 2,499 
2027127 2,181 2,308 
2028124 2,024 2,148 
Thereafter1,446 11,004 12,450 
Total lease payments (2)
2,108 22,853 24,961 
Less: imputed interest(717)(5,078)(5,795)
Total lease liabilities$1,391 $17,775 $19,166 
_____________________________________________
(1)Future operating lease payments have not been reduced by minimum sublease rentals of $289 million due in the future under noncancelable subleases.
(2)The Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $2.1 billion are not reflected in this table since the estimated economic life of the buildings is shorter than the contractual term of the pharmacy lease arrangement.
Office Real Estate Optimization Charges
During the fourth quarter of 2022, the Company undertook an initiative to evaluate its corporate office real estate space in response to its new flexible work arrangement. As part of this initiative, the Company evaluated its current real estate space and changes in employee work arrangement requirements to ensure it had the appropriate space to support the business. As a result of this assessment, the Company determined that it would vacate and abandon certain leased corporate office spaces. Accordingly, in the three months ended December 31, 2022, the Company recorded office real estate optimization charges of $117 million, primarily consisting of $71 million related to operating lease right-of-use assets and $44 million related to property and equipment. During the year ended December 31, 2023, the Company recorded an incremental $46 million of office real estate optimization charges associated with this initiative, primarily consisting of $20 million related to operating lease right-of-use assets and $18 million related to property and equipment. The office real estate optimization charges were recorded within the Health Care Benefits, Corporate/Other and Health Services segments.

Store Impairment Charges
The Company evaluates its retail store right-of-use and property and equipment assets for impairment at the retail store level, which is the lowest level at which cash flows can be identified. For retail stores where there is an indicator of impairment present, the Company first compares the carrying amount of the asset group to the estimated future cash flows associated with the asset group (undiscounted). If the estimated undiscounted future cash flows used in the analysis are less than the carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to its estimated fair value which is the greater of the asset group’s estimated future cash flows (discounted), or the consideration of what a market participant would pay to lease the assets, net of leasing costs. The Company’s estimate of fair value considers historical results, current operating trends, consolidated sales, profitability and cash flow results and forecasts. For assets which the Company has determined it will be able to sublease, the estimated future cash flows include the estimated sublease income, net of estimated leasing costs.

When the carrying value of an asset group exceeds its estimated fair value, an impairment loss is recorded to reduce the value of the asset group to its estimated fair value. As the impaired assets are measured at fair value on a nonrecurring basis primarily using unobservable inputs as of the measurement date, the assets are classified in Level 3 of the fair value hierarchy.

During the fourth quarter of 2021, the Company completed a strategic review of its retail business and announced the creation of new formats for its stores to continue to drive higher engagement with customers. As part of this review, the Company evaluated changes in population, consumer buying patterns and future health needs to ensure it has the right kinds of stores in the right locations for consumers and for the business. In connection with this initiative, on November 17, 2021, the Board of Directors of CVS Health Corporation (the “Board”) authorized the closing of approximately 900 retail stores, approximately 300 stores each year, between 2022 and 2024. As a result, management determined that there were indicators of impairment with respect to the impacted stores’ asset groups, including the associated operating lease right-of-use assets and property and equipment. A long-lived asset impairment test was performed during the fourth quarter of 2021 and the results of the impairment test indicated that the fair value of certain retail store asset groups was lower than their respective carrying values. Accordingly, in the three months ended December 31, 2021, the Company recorded a store impairment charge of approximately $1.4 billion, consisting of a write down of approximately $1.1 billion related to operating lease right-of-use assets and $261 million related to property and equipment, within the Pharmacy & Consumer Wellness segment. Subsequent to the impairment loss, the fair value of the associated operating lease right-of use assets and property and equipment were $356 million and $185 million, respectively.