CVS 2011 Annual Report Download - page 38

Management’s Discussion and Analysis of Financial Condition
and Results of Operations
CVS CAREMARK 36 2011 ANNUAL REPORT
equates to an annual dividend rate of $0.65 per share. On
January 11, 2011, our Board of Directors authorized a 43%
increase in our quarterly common stock dividend to $0.125
per share. This increase equated to an annual dividend rate
of $0.50 per share. In January 2010, our Board of Directors
authorized a 15% increase in our quarterly common stock
dividend to $0.0875 per share. This increase equated to an
annual dividend rate of $0.35 per share.
Off-Balance Sheet Arrangements
In connection with executing operating leases, we provide
a guarantee of the lease payments. We also finance a por-
tion of our new store development through sale-leaseback
transactions, which involve selling stores to unrelated par-
ties 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,
and we do not provide any guarantees, other than a guar-
antee of the lease payments, in connection with the trans-
actions. In accordance with generally accepted accounting
principles, our operating leases are not reflected on our
consolidated balance sheets.
Between 1991 and 1997, the Company sold or spun off a
number of subsidiaries, including Bob’s Stores, Linens ’n
Things, Marshalls, Kay-Bee Toys, This End Up and Footstar.
In many cases, when a former subsidiary leased a store,
the Company provided a guarantee of the store’s lease
obligations. When the subsidiaries were disposed of, the
Company’s guarantees remained in place, although each
initial purchaser has indemnified the Company for any lease
obligations the Company was required to satisfy. If any of
the purchasers or any of the former subsidiaries were to
become insolvent and failed to make the required payments
under a store lease, the Company could be required to sat-
isfy these obligations.
As of December 31, 2011, the Company guaranteed
approximately 75 such store leases (excluding the lease
guarantees related to Linens ‘n Things), with the maximum
remaining lease term extending through 2022. Management
believes the ultimate disposition of any of the remaining lease
guarantees will not have a material adverse effect on the
Company’s consolidated financial condition or future cash
flows. Please see “Income (loss) from discontinued opera-
tions” previously mentioned in this document for further infor-
mation regarding our guarantee of certain Linens ’n Things’
store lease obligations.
Following is a summary of our significant contractual obligations as of December 31, 2011:
Payments Due by Period
in millions Total 2012 2013 to 2014 2015 to 2016 Thereafter
Operating leases $ 27,625 $ 2,230 $ 4,079 $ 3,686 $ 17,630
Leases from discontinued operations 130 25 43 35 27
Long-term debt 9,096 53 551 1,250 7,242
Interest payments on long-term debt (1) 6,998 547 1,023 933 4,495
Other long-term liabilities reflected in our
consolidated balance sheet 455 44 96 96 219
Capital lease obligations 337 20 40 40 237
$ 44,641 $ 2,919 $ 5,832 $ 6,040 $ 29,850
(1) Interest payments on long-term debt are calculated on outstanding balances and interest rates in effect on December 31, 2011.
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