CVS 2000 Annual Report Download - page 33

The Company applies APB Opinion No. 25 to account for its stock
incentive plans. Accordingly, no compensation cost has been
recognized for stock options granted. Had compensation cost
been recognized based on the fair value of stock options granted
consistent with SFAS No. 123, net earnings and net earnings per
common share (“EPS”) would approximate the pro forma amounts
shown below:
The fair value of each stock option grant was estimated using
the Black-Scholes Option Pricing Model with the following
assumptions:
1999 Employee Stock Purchase Plan
The 1999 Employee Stock Purchase Plan provides for the granting
of up to 7,400,000 shares of common stock. Under the plan,
eligible employees may purchase common stock at the end of
each six month offering period, at a purchase price equal to 85%
of the lower of the fair market value on the first day or the last
day of the offering period.
Employees pay for the shares ratably over each offering
period through payroll deductions. As of December 30, 2000,
approximately 875,000 shares of common stock have been
issued under the plan.
Pension Plans and Other
Postretirement Benefits
The Company sponsors a noncontributory
defined benefit pension plan that covers
certain full-time employees of Revco who are not covered by
collective bargaining agreements. On September 20, 1997, the
Company suspended future benefit accruals under this plan.
Benefits paid to retirees are based upon age at retirement, years
of credited service and average compensation during the five
year period ending September 20, 1997. The plan is funded
based on actuarial calculations and applicable federal regulations.
Pursuant to various labor agreements, the Company is also
required to make contributions to certain union-administered
pension and health and welfare plans that totaled $9.3 million,
$8.4 million and $7.5 million in 2000, 1999 and 1998, respectively.
The Company also has nonqualified supplemental executive
retirement plans in place for certain key employees for whom it
has purchased cost recovery variable life insurance.
Defined Contribution Plans
The Company sponsors a voluntary 401(k) Savings Plan that
covers substantially all employees who meet plan eligibility
requirements.The Company makes matching contributions
consistent with the provisions of the plan.The Company also
maintains a nonqualified, unfunded Deferred Compensation
Plan for certain key employees.This plan provides participants
the opportunity to defer portions of their compensation and
receive matching contributions that they would have otherwise
received under the 401(k) Savings Plan if not for certain restrictions
and limitations under the Internal Revenue Code.The Company’s
contributions under the above defined contribution plans
totaled $23.0 million, $17.0 million and $26.4 million in 2000,
1999 and 1998, respectively. The Company also sponsors an
Employee Stock Ownership Plan. See Note 4 for further information
about this plan.
Other Postretirement Benefits
The Company provides postretirement healthcare and life
insurance benefits to retirees who meet eligibility requirements.
The Company’s funding policy is generally to pay covered
expenses as they are incurred.
Fiscal Year
In millions, except per share amounts 2000 1999 1998
Net earnings:
As reported $ 746.0 $ 635.1 $ 384.5
Pro forma 717.7 614.7 359.0
Basic EPS:
As reported $ 1.87 $ 1.59 $ 0.96
Pro forma 1.80 1.53 0.89
Diluted EPS:
As reported $ 1.83 $ 1.55 $ 0.95
Pro forma 1.76 1.50 0.88
Fiscal Year
2000 1999 1998
Dividend yield 0.40% 0.58% 0.40%
Expected volatility 27.92% 25.86% 22.49%
Risk-free interest rate 6.25% 6.50% 5.75%
Expected life 6.5 6.0 7.0
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2000 Annual Report