CVS 2004 Annual Report Download - page 23
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Please find page 23 of the 2004 CVS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Following is a summary of our store development activity for the
respective years:
2004 2003 2002
Total stores
(beginning of year) 4,179 4,087 4,191
New and acquired stores 1,397 150 174
Closed stores (201) (58) (278)
Total stores (end of year) 5,375 4,179 4,087
Relocated stores(1) 96 125 92
(1) Relocated stores are not included in new or closed store totals.
Net cash provided by financing activities increased to $1,798.2
million in 2004. This compares to net cash used in financing
activities of $72.5 million in 2003 and $4.9 million in 2002.
The increase in net cash provided by financing activities during
2004 was primarily due to the financing of the acquisition
of the Acquired Businesses, including the issuance of the Notes
(defined below), during the third quarter of 2004. The increase
was offset, in part, by the repayment of the $300 million 5.5%
unsecured senior notes, which matured during the first quarter
of 2004. Our net debt (i.e., our total debt less our cash and cash
equivalents), increased to $2,449.8 million, compared to $233.1
million in 2003 and $412.7 million in 2002. During 2004, we
paid common stock dividends totaling $105.6 million or $0.265
percommon share. In January 2005, our Board of Directors
authorized a 9% increase in our common stock dividend to
$0.290 per share for 2005.
We believe that our current cash on hand, cash provided by
operations and sale-leaseback transactions, together with our
ability to obtain additional short-term and long-term financing,
will be sufficient to cover our working capital needs, capital
expenditures, debt service and dividend requirements for at
least the next several years.
We had $885.6 million of commercial paper outstanding at a
weighted average interest rate of 1.8% as of January 1, 2005. In
connection with our commercial paper program, we maintain a
$650 million, five-year unsecured back-up credit facility, which
expires on May 21, 2006, and a $675 million, 364-day unsecured
back-up credit facility, which expires on June 10, 2005. In
addition, we maintain a $675 million, five-year unsecured
backup credit facility, which expires on June 11, 2009. The credit
facilities allow for borrowings at various rates depending on our
public debt rating. As of January 1, 2005, we had no outstanding
borrowings against the credit facilities.
On September 14, 2004, we issued $650 million of 4.0%
unsecured senior notes due September 15, 2009 and $550
million of 4.875% unsecured senior notes due September 15,
2014 (collectively the “Notes”). The Notes pay interest
semi-annually and may be redeemed at any time, in whole or
inpart at a defined redemption price plus accrued interest. Net
proceeds from the Notes were used to repay a portion of the
outstanding commercial paper issued to finance the acquisition
ofthe Acquired Businesses. To manage a portion of the risk
associated with potential changes in market interest rates, during
the second quarter of 2004 we entered into Treasury-Lock
Contracts (the “Contracts”) with total notional amounts of $600
million. The Contracts settled in conjunction with the placement
of the long-term financing. As of January 1, 2005, we had no
freestanding derivatives in place.
Our credit facilities and unsecured senior notes contain customary
restrictive financial and operating covenants. These covenants
do not include a requirement for the acceleration of our debt
maturities in the event of a downgrade in our credit rating. We
do not believe that the restrictions contained in these covenants
materially affect our financial or operating flexibility.
Our liquidity is based, in part, on maintaining investment-grade
debt ratings. As of January 1, 2005, our long-term debt was
rated “A3” by Moody’s and “A-” by Standard & Poor’s, and our
commercial paper program was rated “P-2” by Moody’s and
“A-2” by Standard & Poor’s, each on a stable outlook. In assessing
our credit strength, we believe that both Moody’s and Standard
&Poor’s considered, among other things, our capital structure
and financial policies as well as our consolidated balance sheet,
the acquisition ofthe Acquired Businesses and other financial
information. Our debt ratings have a direct impact on our
future borrowing costs, access to capital markets and new
store operating lease costs.
OFF-BALANCE SHEET ARRANGEMENTS
Other than inconnection with executing operating leases,
we do not participate in transactions that generate relationships
with unconsolidated entities or financial partnerships, including
variable interest entities, nor do we have or guarantee any
off-balance sheet debt. We finance a portion of our new
store development through sale-leaseback transactions, which
involves selling stores to unrelated parties at net book value and
then leasing the stores back under leases that qualify and are
accounted for as operating leases. We do not have any retained
or contingent interests in the stores nor do we provide any
guarantees, other than a corporate level guarantee of the lease
payments, in connection with the sale-leasebacks. In accordance
with generally accepted accounting principles, our operating
leases are not reflected in our consolidated balance sheet.
Between 1991 and 1997, we sold or spun off a number of
subsidiaries, including Bob’s Stores, Linens ’n Things, Marshalls,
Kay-Bee Toys, Wilsons, This End Up and Footstar. In many
cases, when a former subsidiary leased a store, we provided a
corporate level guarantee of the store’s lease obligations. When
the subsidiaries were disposed of, the guarantees remained in
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