CVS 2015 Annual Report Download - page 40

Management’s Discussion and Analysis
of Financial Condition and Results of Operations
38 CVS Health
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 proceeds of the
2014 Notes were used for general corporate purposes and to repay certain corporate debt.
On August 7, 2014, the Company announced tender offers for any and all of the 6.25% Senior Notes due 2027, and
up to a maximum amount of the 6.125% Senior Notes due 2039, the 5.75% Senior Notes due 2041 and the 5.75%
Senior Notes due 2017, for up to an aggregate principal amount of $1.5 billion. On August 21, 2014, the Company
increased the aggregate principal amount of the tender offers to $2.0 billion and completed the repurchase for the
maximum amount on September 4, 2014. The Company paid a premium of $490 million in excess of the debt
principal in connection with the tender offers, wrote off $26 million of unamortized deferred financing costs and
incurred $5 million in fees, for a total loss on the early extinguishment of debt of $521 million. The loss was recorded
in income from continuing operations in the condensed consolidated statement of income for the year ended
December 31, 2014.
During the year ended December 31, 2014, the Company repurchased the remaining $41 million of outstanding
Enhanced Capital Advantage Preferred Securities (“ECAPS”) at par. The fees and write-off of deferred issuance
costs associated with the early extinguishment of the ECAPS were immaterial.
On December 2, 2013, the Company issued $750 million of 1.2% unsecured senior notes due December 5, 2016;
$1.25 billion of 2.25% unsecured senior notes due December 5, 2018; $1.25 billion of 4% unsecured senior notes
due December 5, 2023; and $750 million of 5.3% unsecured senior notes due December 5, 2043 (the “2013 Notes”)
for total proceeds of approximately $4.0 billion, net of discounts and underwriting fees. The 2013 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 proceeds of the 2013
Notes were used to repay commercial paper outstanding at the time of issuance and to fund the acquisition of
Coram in January 2014. The remainder was used for general corporate purposes.
Our backup credit facilities and unsecured senior notes (see Note 6, “Borrowings and Credit Agreements” to the
consolidated financial statements) contain customary 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, 2015 and 2014, we had no outstanding derivative financial instruments.
Debt Ratings As of December 31, 2015, our long-term debt was rated “Baa1” 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 considered, among other things, our capital structure and financial policies as well as our consolidated balance
sheet, our historical 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 2015, our Board of Directors authorized a 21% increase in our quarterly
common stock dividend to $0.425 per share effective in 2016. This increase equates to an annual dividend rate of
$1.70 per share. In December 2014, our Board of Directors authorized a 27% increase in our quarterly common
stock dividend to $0.35 per share. This increase equated to an annual dividend rate of $1.40 per share. In December
2013, our Board of directors authorized a 22% increase in our quarterly common stock dividend to $0.275 per
share. This increase equated to an annual dividend rate of $1.10 per share.