CVS 2008 Annual Report Download - page 34

30 CVS CAREMARK
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Net cash provided by fi nancing activities was $929.3 million in
2008, compared to net cash provided by fi nancing activities of
$377.9 million in 2007 and net cash used in fi nancing activities
of $2.9 billion in 2006. Net cash provided by fi nancing activities
during 2008 was primarily due to increased short-term and
long-term borrowings used to fund the Longs Acquisition
and retire $353 million of debt assumed as part of the Longs
Acquisition. Net cash provided by fi nancing activities during
2007 was primarily due to the increase in long-term borrowings
used to fund the special cash dividend paid to Caremark
shareholders in connection with the Caremark Merger and was
offset, in part, by the repayment of short-term borrowings and the
repurchase of common shares. Net cash provided by fi nancing
activities during 2006 was primarily due to the fi nancing of the
Albertson’s Acquisition. This increase was offset, in part, by the
repayment of the $300 million, 5.625% unsecured senior notes,
which matured during the fi rst quarter of 2006. During 2008, we
paid common stock dividends totaling $369.7 million, or $0.258
per common share.
We believe that our current cash on hand and cash provided by
operations, together with our ability to obtain additional short-term
and long-term fi nancing, will be suffi cient to cover our working
capital needs, capital expenditures, debt service requirements
and dividend requirements for at least the next twelve months
and the foreseeable future.
Share repurchase programs. On May 7, 2008, our Board of
Directors authorized, effective May 21, 2008, a share repurchase
program for up to $2.0 billion of outstanding common stock.
The specifi c timing and amount of repurchases will vary based
on market conditions and other factors. From May 21, 2008
through December 31, 2008, we repurchased 0.6 million
shares of common stock for $23.0 million. As a result of the
Longs Acquisition, we elected to delay the completion of our
share repurchase program. The Company currently intends to
complete its share repurchase program in the second half of
2009. We will continue to evaluate alternatives for optimizing
our capital structure on an ongoing basis.
On May 9, 2007, our Board of Directors authorized a share
repurchase program for up to $5.0 billion of our outstanding
common stock. The share repurchase program was completed
during 2007 through a $2.5 billion fi xed dollar accelerated share
repurchase agreement (the “May ASR agreement”), under which
fi nal settlement occurred in October 2007 and resulted in the
repurchase of 67.5 million shares of common stock; an open
market repurchase program, which concluded in November
2007 and resulted in 5.3 million shares of common stock being
repurchased for $211.9 million; and a $2.3 billion dollar fi xed
accelerated share repurchase agreement (the “November ASR
agreement”), which resulted in an initial 51.6 million shares
of common stock being purchased and placed into treasury
stock as of December 29, 2007. The fi nal settlement under
the November ASR agreement occurred on March 28, 2008
and resulted in us receiving an additional 5.7 million shares
of common stock, which were placed into treasury stock as
of March 29, 2008.
In connection with the Caremark Merger, on March 28, 2007,
we commenced a tender offer to purchase up to 150 million
common shares, or about 10%, of our outstanding common
stock at a price of $35.00 per share. The offer to purchase
shares expired on April 24, 2007 and resulted in approximately
10.3 million shares being tendered. The shares were placed
into our treasury account.
Short-term borrowings. We had $2.5 billion of commercial
paper outstanding at a weighted average interest rate of 6.08%
as of December 31, 2008. In connection with our commercial
paper program, we maintain a $675 million, fi ve-year unsecured
back-up credit facility, which expires on June 11, 2009, a
$675 million, fi ve-year unsecured back-up credit facility, which
expires on June 2, 2010, a $1.4 billion, fi ve-year unsecured
back-up credit facility, which expires on May 12, 2011 and a
$1.3 billion, fi ve-year unsecured back-up credit facility, which
expires on March 12, 2012. On September 12, 2008, we
entered into a $1.2 billion unsecured back-up credit facility,
which expires on September 11, 2009, to serve as a bridge
facility to fi nance a portion of the Longs Acquisition. The credit
facilities allow for borrowings at various rates that are depen-
dent, in part, on our public debt rating. As of December 31,
2008, we had $500 million of borrowings outstanding against
the bridge facility at an interest rate of 1.72%. There were no
borrowings outstanding under the other credit facilities.
Long-term borrowings. On September 10, 2008, we issued
$350 million of fl oating rate senior notes due September 10, 2010
(the “2008 Notes”). The 2008 Notes pay interest quarterly and
may be redeemed at any time, in whole or in part at a defi ned
redemption price plus accrued interest. The net proceeds from the
2008 Notes were used to fund a portion of the Longs Acquisition.