CVS 2001 Annual Report Download - page 26

CVS Corporation
24
Leases
The Co mpany leases mo st o f its retail lo c atio ns and five
of its distribution centers under no ncancelable o perating leases,
who se initial terms are typically 22 years, alo ng with o ptio ns that
permit renewals fo r additio nal perio ds. The Co mpany also leases
certain equipment and o ther assets under noncancelable
o perating leases, who se initial terms typic ally range from 3 to 10
years. Minimum rent is expensed o n a straight-line basis o ver the
term o f the lease. In additio n to minimum rental payments,
certain leases require additio nal payments based o n sales vo lume,
as well as reimbursements fo r real estate taxes, maintenance
and insurance.
Fo llo wing is a summary o f the Co mpany’s net rental expense fo r
o perating leases fo r the respective years:
Fo llo wing is a summary o f the future minimum lease payments
under capital and o perating leases as o f December 29, 2001:
The Co mpany finances a po rtion of its store develo pment program
through sale- leaseback transactio ns. Typically, the pro perties are
so ld at net bo o k value and the resulting leases qualify and are
acco unted fo r as o perating leases. Pro ceeds fro m sale-leaseback
transactio ns to taled $323.3 millio n in 2001 and $299.3 millio n in
2000. During 2001, the Co mpany co mpleted a sale- leasebac k
transactio n invo lving five o f o ur distributio n centers. The
distributio n centers were so ld at fair market value resulting in a
$35.5 millio n gain, which was deferred and is being amo rtized to
offset rent expense o ver the life of the new o perating leases. The
o perating leases that resulted fro m these transactio ns are
inc luded in the above table.
Borrowing and Credit Agreement s
Fo llo wing is a summary o f the Co mpany’s bo rrowings as o f
the respective balance sheet dates:
In c o nnection with o ur co mmercial paper pro gram the Co mpany
maintains a $650 millio n, five-year unsecured back-up credit
facility, which expires o n May 30, 2006 and a $650 million,
364- day unsecured back-up credit facility, whic h expires o n May
30, 2002. The credit facilities allo w fo r bo rro wings at vario us
rates depending o n o ur public debt ratings and require the
Co mpany to pay a quarterly fac ility fee o f 0.08% , regardless o f
usage. As o f December 29, 2001, the Co mpany had no t bo rrowed
against the c redit facilities. Interest paid to taled $75.2 millio n
in 2001, $98.3 millio n in 2000 and $69.0 millio n in 1999. The
weighed average interest rate for sho rt-term debt was 2.1% as
of Dec ember 29, 2001 and 6.9% as of December 30, 2000.
In March 2001, the Co mpany issued $300 million of 5.625%
unsecured senio r notes. The notes are due March 15, 2006 and
pay interest semi- annually. The Co mpany may redeem these no tes
at any time, in who le o r in part, at a defined redemptio n price
plus accrued interest. Net pro ceeds from the no tes were used to
repay o utstanding co mmercial paper.
The Credit Facilities and unsecured senio r no tes c o ntain
custo mary restrictive financ ial and operating c o venants. The
co venants do no t materially affect the Co mpany’s financial o r
o perating flexibility.
The aggregate maturities of lo ng-term debt fo r each o f the five
years subsequent to December 29, 2001 are $26.4 millio n in
2002, $32.2 millio n in 2003, $323.4 millio n in 2004, $28.1
millio n in 2005 and $334.5 millio n in 2006.
Notes to Consolidated Financial Statements
4
3
Capital Operating
In millions Le ases Leases
2002 $ 0.2 $ 756.4
2003 0.2 712.5
2004 0.2 671.9
2005 0.2 623.2
2006 0.2 559.4
Thereafter 0.7 5,507.5
1.7 $ 8,830.9
Less: imputed interest ( 0.7)
Present value of capital lease o bligatio ns $ 1. 0
In millions 200 1 2000 1999
Minimum rentals $ 758 .2 $ 684.9 $ 572.4
Co ntingent rentals 67.6 66.3 64.8
825 .8 751.2 637.2
Less: sublease inco me ( 9.1) ( 9.2) ( 1 3. 2)
$ 816 .7 $ 742.0 $ 624.0
December 2 9 , Dec embe r 30,
In millions 200 1 2000
Co mmercial paper $ 235 .8 $ 589.6
8.52% ESOP notes due 2008 ( 1 ) 219.9 240.6
5.5% senio r no tes due 2004 300.0 300.0
5.625% senio r no tes due 2006 300.0 —
Mo rtg age no tes payable 15.9 16.6
Capital lease o blig atio ns 1.0 1.2
1,072.6 1,148.0
Less:
Sho rt-term debt (235.8) ( 589. 6)
Current po rtion of lo ng-term debt ( 26.4) ( 2 1. 6)
$ 810 .4 $ 536.8
( 1) See No te 5 fo r further info rmatio n about the Co mpany’s ESOP Plan.