CVS 2000 Annual Report Download - page 22

Liquidity & Capital Resources
Liquidity ~ We generally finance our working capital and capital
expenditure requirements with internally generated funds and
our commercial paper program. In addition, we may elect to use
additional long-term borrowings and/or other financing sources
in the future to support our continued growth.
Our commercial paper program is supported by a $670 million,
five-year unsecured revolving credit facility, which expires on
May 30, 2002 and a $995 million unsecured revolving credit
facility, which expires on May 25, 2001. We can also obtain short-
term financing through various uncommitted lines of credit. As
of December 30, 2000, we had $589.6 million of commercial
paper outstanding at a weighted average interest rate of 6.9%.
Our credit facilities and unsecured senior notes contain customary
restrictive financial and operating covenants.We do not believe
that the restrictions contained in these covenants materially
affect our financial or operating flexibility.
On March 6, 2000, the Board of Directors approved a common
stock repurchase program, which allows the Company to
acquire up to $1 billion of its common stock. During 2000, we
repurchased 4.7 million shares of common stock at an aggregate
cost of $163.2 million.
On September 18, 2000, the Company completed the acquisition
of certain assets of Stadtlander Pharmacy of Pittsburgh,
Pennsylvania, a subsidiary of Bergen Brunswig Corporation, for
$124 million in cash plus the assumption of certain liabilities. The
results of operations of Stadtlander have been included in the
consolidated financial statements since this date.
Capital Resources ~ Although there can be no assurance and
assuming market interest rates remain favorable, we currently
believe that we will continue to have access to capital at attractive
interest rates in 2001. We further believe that our cash on hand
and cash provided by operations, together with our ability to
obtain additional short-term and long-term financing, will be
sufficient to cover our future working capital needs, capital
expenditures and debt service requirements for at least the next
12 months.
Net Cash Provided by Operations ~ Net cash provided by
operations increased to $780.2 million in 2000.This compares
to $726.3 million in 1999 and $292.4 million in 1998. The
improvement in net cash provided by operations was primarily
the result of higher net earnings. As of December 30, 2000, the
future cash payments associated with various restructuring
programs totaled $105.2 million, which primarily consists of
continuing lease obligations extending through 2020.
Capital Expenditures ~ Our capital expenditures, before the
effect of the sale-leaseback transactions discussed below,
totaled $695.3 million in 2000. This compared to $722.7 million,
in 1999 and $502.3 million in 1998. During 2000, we opened
158 new stores, relocated 230 existing stores and closed 123
stores.This includes 34 new ProCare stores and 1 relocation.We
also entered three new major markets in 2000 including
Chicago, Illinois, Tampa and Orlando, Florida. As of December
30, 2000, we operated 4,133 retail and specialty pharmacy
stores in 31 states and the District of Columbia.This compares to
4,098 stores as of January 1, 2000.The Company finances a
portion of its store development program through sale-leaseback
transactions. Proceeds from sale-leaseback transactions totaled
$299.3 million in 2000 and $229.2 million in 1999.The properties
were sold at net book value and the resulting leases are being
accounted for as operating leases.
Recent Accounting Pronouncements
Effective fiscal 2001, we adopted Statement of Financial
Accounting Standards No. 133,“Accounting for Derivative
Instruments and Hedging Activities,” as amended by SFAS 138,
“Accounting for Certain Derivative Instruments and Certain
Hedging Activities—an amendment to FASB Statement No. 133.”
These statements, which established the accounting and
financial reporting requirements for derivative instruments,
require companies to recognize derivatives as either assets or
liabilities on the balance sheet and measure those instruments
at fair value.The adoption of this standard did not have a
material effect on our consolidated financial statements.
During the fourth quarter of 2000, we adopted the Staff Accounting
Bulletin 101,“Revenue Recognition in Financial Statements.”
This bulletin summarizes the application of generally accepted
accounting principles to revenue recognition in financial
statements.The adoption of this standard did not have a material
effect on our consolidated financial statements.
Cautionary Statement Concerning
Forward-Looking Statements
We have made forward-looking statements in this Annual Report
that are subject to risks and uncertainties that could cause actual
results to differ materially. For these statements, we claim the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
We strongly recommend that you become familiar with the specific
risks and uncertainties that we have outlined for you under the
caption “Cautionary Statement Concerning Forward-Looking
Statements” in our Annual Report on Form 10-K for the fiscal
year ended December 30, 2000.
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
20
CVS Corporation