CVS 2002 Annual Report Download - page 22

adopted SFAS No. 148 effective in 2002. The adoption did not have
a material impact on our consolidated results of operations or
financial position.
In January 2003, FASB Interpretation No. 46, “Consolidation of
Variable Interest Entities” was issued. This interpretation requires a
company to consolidate variable interest entities (“VIE”) if the
enterprise is a primary beneficiary (holds a majority of the variable
interest) of the VIE and the VIE possesses specific characteristics. It
also requires additional disclosures for parties involved with VIEs.
The provisions of this interpretation are effective in 2003.
Accordingly, we will adopt FASB Interpretation No. 46 effective fiscal
2003 and are evaluating the effect such adoption may have on our
consolidated results of operations and financial position.
Cautionary Statement Concerning Forward-
Looking Statements
The Private Securities Litigation Reform Act of 1995 (the “Reform
Act”) provides a safe harbor for forward-looking statements made by
or on behalf of CVS Corporation. The Company and its
representatives may, from time to time, make written or verbal
forward-looking statements, including statements contained in the
Company’s filings with the Securities and Exchange Commission and
in its reports to stockholders. Generally, the inclusion of the words
“believe,” “expect,” “intend,” “estimate,” “project,” “anticipate,” “will,”
and similar expressions identify statements that constitute forward-
looking statements. All statements addressing operating performance
of CVS Corporation or any subsidiary, events, or developments that
the Company expects or anticipates will occur in the future,
including statements relating to sales growth, earnings or earnings
per common share growth, free cash flow, debt rating, inventory
levels, inventory turn and loss rates, store development, relocations,
and new market entries, as well as statements expressing optimism or
pessimism about future operating results or events, are forward-
looking statements within the meaning of the Reform Act. The
forward-looking statements are and will be based upon
management’s then-current views and assumptions regarding future
events and operating performance, and are applicable only as of the
dates of such statements. The Company undertakes no obligation to
update or revise any forward-looking statements, whether as a result
of new information, future events, or otherwise. By their nature, all
forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those contemplated by the
forward-looking statements for a number of reasons, including but
not limited to:
•The continued efforts of health maintenance organizations,
managed care organizations, pharmacy benefit management
companies, governmental entities and other third party
payers to reduce prescription drug costs and pharmacy
reimbursement rates;
•Increased competition from other drugstore chains, from
alternative distribution channels such as pharmacy benefit
managers and other mail order companies, supermarkets,
discount retailers, membership clubs, and internet companies
as well as changes in consumer preferences or loyalties;
•The frequency and rate of introduction of successful new
prescription drugs;
•Our ability to generate sufficient cash flows to support capital
expansion and general operating activities;
•Interest rate fluctuations and changes in capital market
conditions or other events affecting our ability to obtain
necessary financing on favorable terms;
•Our ability to establish effective advertising, marketing and
promotional programs (including pricing strategies and price
reduction programs implemented in response to competitive
pressures and/or to drive demand);
•Our ability to continue to secure suitable new store locations
under acceptable lease terms;
•Our ability to enter new markets successfully;
•Our ability to attract, hire and retain suitable pharmacists and
management personnel;
•Our ability to achieve cost efficiencies and other benefits
from various operational initiatives and technological
enhancements;
•Litigation risks as well as changes in laws and regulations,
including changes in accounting standards and taxation
requirements (including tax rate changes, new tax laws and
revised tax law interpretations);
•The creditworthiness of the purchasers of businesses formerly
owned by CVS and whose leases are guaranteed by CVS;
•Fluctuations in inventory cost, availability and loss levels and
our ability to maintain relationships with suppliers on
favorable terms;
•Our ability to implement successfully and to manage new
computer systems and technologies;
•The strength of the economy in general or in the markets
served by CVS, including changes in consumer purchasing
power and/or spending patterns; and
•Other risks and uncertainties detailed from time to time in
our filings with the Securities and Exchange Commission.
The foregoing list is not exhaustive. There can be no assurance
that the Company has correctly identified and appropriately
assessed all of the factors affecting its business. Additional risks
and uncertainties not presently known to the Company or that it
currently believes to be immaterial also may adversely impact the
Company. Should any risks and uncertainties develop into actual
events, these developments could have material adverse effects on
the Company’s business, financial condition, and results of
operations. For these reasons, you are cautioned not to place
undue reliance on the Company’s forward-looking statements.
Management’s Discussion and Analysis of
Financial Condition and Results of Operation
20 CVS Corporation