CVS 2004 Annual Report Download - page 39
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Please find page 39 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.The amortization expense for these intangible assets totaled
$95.9 million in 2004, $63.2 million in 2003 and $53.3 million
in 2002. The anticipated annual amortization expense for
these intangible assets is $124.7 million in 2005, $118.8 million
in 2006, $113.3 million in 2007, $104.7 million in 2008 and
$96.2 million in 2009.
4 ²
²Borrowing and credit agreements
Following is a summary of the Company’s borrowings as of the
respective balance sheet dates:
JAN. 1, JAN. 3,
In millions 2005 2004
Commercial paper $ 885.6 $ —
5.5% senior notes due 2004 — 300.0
5.625% senior notes due 2006 300.0 300.0
3.875 % senior notes due 2007 300.0 300.0
4.0% senior notes due 2009 650.0 —
4.875% senior notes due 2014 550.0 —
8.52% ESOP notes due 2008(1) 140.9 163.2
Mortgage notes payable 14.8 12.2
Capital lease obligations 0.8 0.9
2,842.1 1,076.3
Less:
Short-term debt (885.6) —
Current portion of long-term debt (30.6) (323.2)
$ 1,925.9 $ 753.1
(1) See Note 6 for further information about the Company’s ESOP Plan.
In connection with our commercial paper program, the
Company maintains 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, the Company
maintains 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 the Company’s
public debt ratings and require the Company to pay a quarterly
facility fee of 0.8%, regardless of usage. As of January 1, 2005,
the Company had no outstanding borrowings against the credit
facilities. The weighted average interest rate for short-term debt
was 1.8% as of January 1, 2005 and there were no outstanding
short-term borrowings as of January 3, 2004.
In September 2004, the Company 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 in part 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 of the Acquired Businesses.
To manage a portion of the risk associated with potential
changes in market interest rates, the Company entered into
Treasury-Lock Contracts (the “Contracts”) with total notional
amounts of $600 million. The Company settled these Contracts
during the third quarter of 2004 in conjunction with the
placement of the long-term financing at a loss of $32.8 million.
The Company accounts for derivatives in accordance with
SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities” as modified by SFAS No. 138, “Accounting
for Derivative Instruments and Certain Hedging Activities,”
which requires the resulting loss to be recorded in shareholders’
equity as a component of accumulated other comprehensive
loss. This unrealized loss will be amortized as a component of
interest expense, over the life of the related long-term financing.
As of January 1, 2005, the Company had no freestanding
derivatives in place.
The Credit Facilities and unsecured senior notes contain
customary restrictive financial and operating covenants. The
covenants do not materially affect the Company’s financial or
operating flexibility.
The aggregate maturities of long-term debt for each of the five
years subsequent to January 1, 2005 are $30.6 million in 2005,
$335.0 million in 2006, $341.7 million in 2007, $45.6 million in
2008 and $651.3 million in 2009.
5 ²
²Leases
The Company leases most of its retail locations and eight of
its distribution centers under non-cancelable operating leases,
whose initial terms typically range from 15 to 25 years, along
with options that permit renewals for additional periods. The
Company also leases certain equipment and other assets under
non-cancelable operating leases, whose initial terms typically
range from 3 to 10 years. The Company recently conformed its
accounting for operating leases and leasehold improvements to
the views expressed by the Office of the Chief Accountant of the
Securities and Exchange Commission to the American Institute
of Certified Public Accountants on February 7, 2005. As a result,
the Company recorded a $65.9 million non-cash pre-tax ($40.5
million after-tax) adjustment to total operating expenses, which
represents the cumulative effect of the adjustment for a period
of approximately 20 years (the “Lease Adjustment”). Since the
effect of the Lease Adjustment was not material to any previously
reported fiscal year, the cumulative effect was recorded in
the fourth quarter of 2004. Minimum rent is expensed on a
CVS Corporation 2004 Annual Report | 37