CVS 2011 Annual Report Download - page 37

CVS CAREMARK 35 2011 ANNUAL REPORT
Long-term borrowings – In connection with our acquisi-
tion of the UAM Medicare Part D Business in April 2011, we
assumed $110 million of long-term debt in the form of Trust
Preferred Securities that mature through 2037. During the
year ended December 31, 2011, we repaid $60 million of
the Trust Preferred Securities at par and intend to repay the
remaining $50 million at par in 2012.
On May 12, 2011, we issued $550 million of 4.125% unse-
cured senior notes due May 15, 2021 and issued $950 mil-
lion of 5.75% unsecured senior notes due May 15, 2041
(collectively, the “2011 Notes”) for total proceeds of approxi-
mately $1.5 billion, net of discounts and underwriting fees.
The 2011 Notes pay interest semi-annually and may be
redeemed, in whole at any time, or in part from time to time,
at our option at a defined redemption price plus accrued and
unpaid interest to the redemption date. The net proceeds of
the 2011 Notes were used to repay commercial paper bor-
rowings and certain other corporate debt, and were used for
general corporate purposes.
On December 8, 2011, we repurchased $958 million of
the principal amount of our Enhanced Capital Advantaged
Preferred Securities (“ECAPS”) at par. The fees and write-off
of deferred issuance costs associated with the early extin-
guishment of the ECAPS were de minimis. The remaining
$42 million of outstanding ECAPS are due in 2062 and bear
interest at 6.302% per year until June 1, 2012, at which time
they will pay interest based on a floating rate. The ECAPS
pay interest semi-annually and may be redeemed at any
time, in whole or in part at a defined redemption price plus
accrued interest.
On May 13, 2010, we issued $550 million of 3.25% unse-
cured senior notes due May 18, 2015 and issued $450 million
of 4.75% unsecured senior notes due May 18, 2020 (col-
lectively, the “2010 Notes”) for total proceeds of $991 mil-
lion, which was net of discounts and underwriting fees. The
2010 Notes pay interest semi-annually and may be redeemed,
in whole at any time, or in part from time to time, at the
Company’s option at a defined redemption price plus accrued
and unpaid interest to the redemption date. The net pro-
ceeds of the 2010 Notes were used to repay a portion of the
Company’s outstanding commercial paper borrowings, certain
other corporate debt and for general corporate purposes.
On March 10, 2009, we issued $1.0 billion of 6.60% unse-
cured senior notes due March 15, 2019 (the “March 2009
Notes”). The March 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 the bridge credit facility, a portion of our out-
standing commercial paper borrowings and for general
corporate purposes.
On July 1, 2009, we issued $300 million of unsecured float-
ing rate senior notes due January 30, 2011 (the “2009
Floating Rate Notes”). The 2009 Floating Rate Notes pay
interest quarterly. The net proceeds from the 2009 Floating
Rate Notes were used for general corporate purposes.
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 outstand-
ing commercial paper borrowings, $650 million of unsecured
senior notes and for general corporate purposes.
Our backup credit facility, unsecured senior notes and
Enhanced Capital Advantaged Preferred Securities (see Note
6 to the Consolidated Financial Statements) contain custom-
ary restrictive financial and operating covenants.
These covenants do not include a requirement for the
acceleration of our debt maturities in the event of a down-
grade in our credit rating. We do not believe the restrictions
contained in these covenants materially affect our financial
or operating flexibility.
As of December 31, 2011 and 2010 we had no outstanding
derivative financial instruments.
Debt Ratings – As of December 31, 2011, our long-term
debt was rated “Baa2” by Moody’s with a stable outlook and
“BBB+” by Standard & Poor’s with a stable outlook, and our
commercial paper program was rated “P-2” by Moody’s and
“A-2” by Standard & Poor’s. In assessing our credit strength,
we believe that both Moody’s and Standard & Poor’s consid-
ered, among other things, our capital structure and financial
policies as well as our consolidated balance sheet, our histori-
cal acquisition activity and other financial information. Although
we currently believe our long-term debt ratings will remain
investment grade, we cannot guarantee the future actions of
Moody’s and/or Standard & Poor’s. Our debt ratings have a
direct impact on our future borrowing costs, access to capital
markets and new store operating lease costs.
Quarterly Dividend Increase – In December 2011, our Board
of Directors authorized a 30% increase in our quarterly com-
mon stock dividend to $0.1625 per share. This increase
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