CVS 2009 Annual Report Download - page 38

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
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 fixed dollar accelerated
share repurchase agreement (the “May ASR agreement”),
under which final settlement occurred in October 2007 and
resulted in the repurchase of approximately 67.5 million shares
of common stock; an open market repurchase program, which
concluded in November 2007 and resulted in approximately
5.3 million shares of common stock being repurchased for
approximately $212 million; and a $2.3 billion dollar fixed
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 final 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 $315 million of commercial
paper outstanding at a weighted average interest rate of 0.31%
as of December 31, 2009. In connection with our commercial
paper program, we maintain a $675 million, five-year unse-
cured back-up credit facility, which expires on June 2, 2010,
a $1.4 billion, five-year unsecured back-up credit facility,
which expires on May 12, 2011, and a $1.3 billion, five-year
unsecured back-up credit facility, which expires on March 12,
2012. The credit facilities allow for borrowings at various rates
that are dependent, in part, on our public debt rating. There
were no borrowings outstanding under the back-up credit
facilities. We intend to renew our back-up credit facility
which expires in June 2010.
Long-term borrowings. On September 8, 2009, we issued
$1.5 billion of 6.125% unsecured senior notes due September 15,
2039 (the “September 2009 Notes”). The September 2009 Notes
pay interest semi-annually and may be redeemed, in whole or
in part, at a defined redemption price plus accrued interest. The
net proceeds were used to repay a portion of our outstanding
commercial paper borrowings, $650 million of unsecured senior
notes and for general corporate purposes.
Net cash used in financing activities was approximately
$3.2 billion in 2009, compared to net cash provided by financ-
ing activities of $929 million in 2008 and net cash provided by
financing activities of $378 million in 2007. Net cash used in
financing activities during 2009 was primarily due to approxi-
mately $2.5 billion of share repurchases associated with the
share repurchase programs described later in this document, the
net reduction of approximately $2.2 billion of our outstanding
commercial paper borrowings, the repayment of $500 million
of borrowings outstanding under our bridge credit facility used
to finance the Longs Acquisition and the payment of $439 million
of dividends on our common stock. This was partially offset by
the net increase in long-term debt of approximately $2.1 billion
and proceeds from the exercise of stock options of $250 million.
Net cash provided by financing 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 financing 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.
Share repurchase programs. On November 4, 2009, our
Board of Directors authorized, effective immediately, a share
repurchase program for up to $2.0 billion of our outstanding
common stock (the “2009 Repurchase Program”). The share
repurchase program expires in December 2011 and permits us
to effect repurchases from time to time through a combination
of open market repurchases, privately negotiated transactions
and/or accelerated share repurchase programs. From Novem-
ber 4, 2009 through December 31, 2009, we repurchased
16.1 million shares of common stock for approximately
$500 million pursuant to the 2009 Repurchase Program. The
2009 Repurchase Program may be modified, extended or
terminated by our Board of Directors at any time.
On May 7, 2008, our Board of Directors authorized, effective
May 21, 2008, a share repurchase program for up to $2.0 billion
of our outstanding common stock (the “2008 Repurchase
Program”). From May 21, 2008 through December 31, 2008, we
repurchased approximately 0.6 million shares of common stock
for $23 million under the 2008 Repurchase Program. During
the year-ended December 31, 2009, we repurchased approxi-
mately 57.0 million shares of common stock for approximately
$2.0 billion completing the 2008 Repurchase Program.
CVS Caremark
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