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<FILENAME>a2041427z10-k.txt
<DESCRIPTION>FORM 10-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2000
COMMISSION FILE NUMBER 001-01011
CVS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 05-0494040
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE CVS DRIVE 02895
WOONSOCKET, RHODE ISLAND -----
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(Address of principal executive offices)
(401) 765-1500
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:
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COMMON STOCK, PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
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Title of each class Name of each exchange on which registered
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant was approximately $23,208,276,572 as of March
9, 2001, based on the closing price of the common stock on the New York Stock
Exchange. For purposes of this calculation, only executive officers and
directors are deemed to be the affiliates of the registrant. This amount
excludes the value of 4,982,970 shares of Series One ESOP Convertible Preference
Stock.
As of March 9, 2001, the registrant had 392,925,516 shares of common stock
issued and outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Filings made by companies with the Securities and Exchange Commission sometimes
"incorporate information by reference." This means that the company is referring
you to information that was previously filed with the SEC, and this information
is considered to be part of the filing you are reading. The following materials
are incorporated by reference into this Form 10-K:
o Information contained on pages 18 through 38 of our 2000 Annual Report to
Stockholders is incorporated by reference in response to Item 7 and 8 of
Part II.
o Portions of our Proxy Statement for the 2001 Annual Meeting of Stockholders
are incorporated by reference in response to Items 10 through 13 of Part
III.
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TABLE OF CONTENTS
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PART I
Item 1: Business...................................................................................... 2
Item 2: Properties.................................................................................... 7
Item 3: Legal Proceedings............................................................................. 8
Item 4: Submission of Matters to a Vote of Security Holders........................................... 8
Executive Officers of the Registrant .................................................................... 8
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters......................... 9
Item 6: Selected Financial Data....................................................................... 10
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations......... 10
Item 7A: Quantitative and Qualitative Disclosures About Market Risk.................................... 11
Item 8: Financial Statements and Supplementary Data................................................... 11
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 11
PART III
Item 10: Directors and Executive Officers of the Registrant............................................ 11
Item 11: Executive Compensation........................................................................ 11
Item 12: Security Ownership of Certain Beneficial Owners and Management................................ 11
Item 13: Certain Relationships and Related Transactions................................................ 11
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................. 12
Independent Auditors' Report............................................................................. 15
Schedule II - Valuation and Qualifying Accounts.......................................................... 16
Signatures .............................................................................................. 17
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PART I
ITEM 1. -- BUSINESS
OVERVIEW ~ CVS Corporation is a leader in the retail drugstore industry in the
United States with net sales of $20.1 billion in fiscal 2000. We are the largest
retail drugstore chain in the nation based on store count and hold the number
one market share in 34 of the top 100 U.S. drugstore markets, more than any
other retail drugstore chain. We also filled more prescriptions than any other
retail drugstore chain in America during fiscal 2000. Our current operations are
grouped into four businesses: Retail Pharmacy, Pharmacy Benefit Management
("PBM"), Specialty Pharmacy and Internet Pharmacy.
RETAIL PHARMACY ~ As of December 30, 2000, the Retail Pharmacy business
included 4,087 retail drugstores, located in 24 states and the District
of Columbia, operating under the CVS or CVS/pharmacy name. CVS/pharmacy
stores sell prescription drugs and a wide assortment of general
merchandise, including over-the-counter drugs, greeting cards, film and
photofinishing services, beauty products and cosmetics, seasonal
merchandise and convenience foods. Existing stores generally range in
size from approximately 8,000 to 12,000 square feet, although most new
stores are based on our standard 10,880 square foot freestanding
buildings, which typically include a drive-thru pharmacy. The Retail
Pharmacy is our only reportable segment as it represented approximately
97% of consolidated net sales and operating profit in fiscal 2000.
PHARMACY BENEFIT MANAGEMENT ~ The PBM business provides a full range of
prescription benefit management services to managed care and other
organizations. These services include plan design and administration,
formulary management, mail order pharmacy services, claims processing and
generic substitution. The PBM business operates under the PharmaCare
Management Services name. One feature that sets PharmaCare apart from
other prescription benefit management providers is its proprietary
Clinical Information Management System. CIMS is a unique communication
system designed to help PharmaCare's clients manage pharmaceutical
utilization by facilitating clinical communications between the payer,
patient, physician and pharmacist. The improved communication enables
physicians to direct utilization to the more clinically effective
therapy. PharmaCare currently manages more than 9 million lives and ranks
as one of the top ten PBMs in the nation.
SPECIALTY PHARMACY ~ As of December 30, 2000, the Specialty Pharmacy
business includes mail order facilities and 46 retail pharmacies, located
in seventeen states and the District of Columbia, operating under the CVS
ProCare name. CVS ProCare is the leading player in the highly fragmented
$14 billion market for patients requiring complex and expensive drug
therapies for long-term health conditions, including treatments for
HIV/AIDS, organ transplants, infertility, and conditions such as multiple
sclerosis and growth hormone deficiency. With its September 2000
acquisition of Stadtlander Pharmacy of Pittsburgh Pennsylvania, a
subsidiary of Bergen Brunswig Corporation, CVS ProCare established itself
as the leading specialty mail order pharmacy, and the only one offering
integrated retail and mail order services. Stores are typically 1,500
square feet and include a limited general merchandise offering targeted
to this specific patient population.
INTERNET PHARMACY ~ The Internet Pharmacy business includes a mail order
facility and a complete online retail pharmacy, operating under the
CVS.com name. CVS.com enables customers to order prescriptions and
general merchandise over the internet for in-store pickup or mail
delivery and receive the latest health news and general health
information.
CVS Corporation is a Delaware corporation. Our Store Support Center (corporate
office) is located at One CVS Drive, Woonsocket, Rhode Island 02895, telephone
(401) 765-1500.
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CVS/PHARMACY STORES
OPERATING STRATEGY ~ Our operating strategy is to provide a broad assortment of
high-quality merchandise at competitive prices using a retail format that
emphasizes service, innovation and convenience. One of the keys to our strategy
is technology, which allows us to constantly improve service and explore ways to
provide more personalized product offerings and services. We believe our
continuing to be the first to market with new products and services, using
innovative marketing, introducing more products which are unique to CVS and
adjusting our mix of merchandise to match customer needs and preferences is very
important in our ability to maintain customer satisfaction.
CUSTOMERS ~ During fiscal 2000, we served an average of 2.5 million customers
per day. Since our sales are to numerous customers, including managed care
organizations, the loss of any one customer would not have a material effect on
the business. No single customer, including managed care organizations, accounts
for more than ten percent of our total sales.
PRODUCTS ~ A typical CVS/pharmacy store sells prescription drugs and a wide
assortment of high-quality, nationally advertised brand name and private label
merchandise. General merchandise categories include over-the-counter drugs,
greeting cards, film and photofinishing services, beauty products and cosmetics,
seasonal merchandise and convenience foods.
We centrally purchase most of our merchandise, including prescription drugs,
directly from numerous manufacturers and distributors. This purchasing strategy
allows us to take advantage of the promotional and volume discount programs that
certain manufacturers and distributors offer to retailers. During fiscal 2000,
approximately 85% of the merchandise we purchased was received by our
distribution centers for redistribution to our stores, while the balance was
shipped directly to the stores. We believe that competitive sources are readily
available for substantially all of the products we carry and the loss of any one
supplier would not have a material effect on the business.
To complement the national brand name products we offer, we also carry a full
range of high-quality private label products that are only available through
CVS. We carried over 1,500 CVS brand products, which accounted for approximately
12% of our front store sales during fiscal 2000. Due to the success of our
private label program, we will continue to assess opportunities to expand our
range of private label product offerings.
OPERATIONS ~ As of December 30, 2000, we operated 4,087 CVS and CVS/pharmacy
stores, approximately a fourth of which operated on an extended hour or 24-hour
basis. Store operations are divided into two areas, pharmacy and front store:
PHARMACY ~ Retail pharmacy sales increased 18.2% to $12.6 billion,
representing 63% of total sales in fiscal 2000, compared to 59% in
fiscal 1999 and 58% in fiscal 1998. During fiscal 2000, we filled 297
million prescriptions, or approximately 11% of the U.S. retail market,
which was more than any other retailer. We believe that our pharmacy
operations will continue to represent a critical part of our business
and strategy due to our ability to attract and retain managed care
customers, favorable industry trends and our on-going program of
purchasing patient prescription files from independent pharmacies.
The growth in managed care has substantially increased the use of
prescription drugs. Managed care providers have made the cost of
prescription drugs more affordable to a greater number of people and
supported prescription drug therapy as an alternative to more expensive
forms of treatment, such as surgery. Payments by third party managed
care providers under prescription drug plans represented 89% of our
total pharmacy sales in fiscal 2000, compared to 87% in fiscal 1999 and
84% in fiscal 1998.
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In a typical third party payment plan, we contract with a third party
payer (such as an insurance company, a prescription benefit management
company, a governmental agency, a private employer, a health
maintenance organization or other managed care provider) that agrees to
pay for all or a portion of a customer's eligible prescription
purchases in exchange for reduced prescription rates. Although third
party payment plans provide a high volume of prescription drug sales,
these sales typically generate lower gross margins than other sales due
to the cost containment efforts of third party payers and the
increasing competition among pharmacies for this business. To address
this trend, we have dropped and/or renegotiated a number of third party
programs that fell below our minimum profitability standards. These
continuing efforts have resulted in a stabilization of third party
rates. However, in the event this trend were to continue and we elect
to drop additional programs and/or decide not to participate in future
programs that fall below our minimum profitability standards, we may
not be able to sustain our current rate of sales growth.
The U.S. retail pharmacy market is estimated to exceed $143 billion in
sales for 2000. The pharmacy market is expected to continue to be among
the fastest growing segments in the retail sector as it continues to
benefit from favorable industry trends. These trends include an aging
American population consuming a greater number of prescription drugs,
pharmaceuticals being used more often as the first line of defense for
managing illness and the introduction and aggressive marketing of
several successful new drugs. Each of these trends is contributing to a
strong prescription drug industry, which we believe will continue to
fuel the future growth of our pharmacy sales.
Our pharmacy business also benefits from a program, in which we
purchase prescription files from independent pharmacies. During fiscal
2000, we purchased patient prescription files from over 300 independent
pharmacies. We believe that these prescription files are productive
investments. In many cases, the independent pharmacist will join CVS,
thereby providing continuity in the pharmacist-patient relationship.
FRONT STORE ~ Front store sales, which are generally higher margin than
pharmacy sales, increased to $7.2 billion, representing 37% of total
sales in fiscal 2000, compared to 41% in fiscal 1999 and 42% in fiscal
1998. We believe that effective management of the mix of merchandise in
our stores has been a primary factor in our front store sales gains and
will continue to fuel front store sales growth and increase customer
satisfaction. We intend to continue our front store growth by
continuing to be the first to market with new products and services,
using innovative marketing, introducing more products which are unique
to CVS and adjusting our mix of merchandise to match customer needs and
preferences. Examples of this are our aggressive expansion of unique
photo services, which has resulted in CVS becoming a leader in one-hour
and online photo services and one of Kodak's largest online customers.
After thorough testing in certain markets, we are currently beginning
the chain wide rollout of our new relationship marketing program, the
ExtraCare Card. Through the ExtraCare Card, we will offer special
promotions and incentives to our best customers to reward their
patronage and encourage increased loyalty.
STORE DEVELOPMENT ~ The addition of new stores has played, and will continue to
play, a major role in our continued growth and success. Our store development
program focuses on three areas: entering new markets, adding stores within
existing markets and relocating stores to more convenient, freestanding sites.
During fiscal 2000, we opened 388 new stores, which included 35 CVS ProCare
stores and 230 relocations. During the last three years we opened over 1,200 new
and relocated stores, or over a quarter of our existing store base. We expect to
open approximately 300 new stores during fiscal 2001 about half of which are
expected to be relocations. During fiscal 2000, we entered four new markets:
Chicago, the 2nd largest U.S. drugstore market; Tampa, Florida, the 16th largest
U.S. drugstore market; Orlando, Florida, the 27th largest U.S. drugstore market
and Grand Rapids, Michigan, the 69th largest U.S. drugstore market. During
fiscal 2001, we plan to enter Fort Lauderdale, Florida, the 23rd largest U.S.
drugstore market and Las Vegas, Nevada, the 38th largest U.S. drugstore market.
Going forward, we expect to enter at least two to three new markets each year.
As we open new stores, we maintain our objective of securing a strong position
in each market that our stores serve. In fiscal 2000, we held the number one or
number two market position in approximately 75% of the 59 top 100 U.S. drugstore
markets we served. Our strong market positions provide us with several important
advantages, including an ability to save on advertising and distribution costs
and an ability to attract managed care providers, who want to provide their
members with convenient access to pharmacy services.
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A key part of our store development program is our relocation effort. Our
relocation program actively seeks to relocate many of our strip shopping center
locations to freestanding sites. Because of their more convenient locations and
larger size, relocated stores have typically realized significant improvements
in customer count and revenues, driven largely by increased sales of higher
margin front store merchandise. We believe our relocation program offers a
significant opportunity for future growth, as only 39% of our existing stores
were freestanding as of December 30, 2000. We currently expect to have
approximately 44% of our stores in freestanding locations by the end of fiscal
2001. Our long-term goal is to have approximately 80% of our stores located in
freestanding sites. We cannot, however, guarantee that future store relocations
will achieve similar results as those historically achieved.
We believe that continuing to grow our store base and locating stores in
desirable geographic markets are essential components to competing effectively
in the current managed care environment. As a result, we believe that our store
development program is an integral part of our ability to maintain our
leadership position in the retail drugstore industry.
WORKING CAPITAL PRACTICES ~ We generally finance our inventory and capital
expenditure requirements with internally generated funds and our commercial
paper program. We currently expect to continue to utilize our commercial
paper program during fiscal 2001 to support our working capital needs. In
addition, we may elect to use additional long-term borrowings and/or other
financing sources in the future to support our continued growth. Due to the
nature of the retail drugstore business, the majority of our non-pharmacy
sales are in cash, while third party insurance programs, which typically
settle in less than 30 days, represented 89% of our pharmacy sales in fiscal
2000. Our customer returns are not significant.
INFORMATION SYSTEMS ~ We have invested significantly in information systems to
enable us to deliver a high level of customer service while lowering costs and
increasing operating efficiency. Our client-server based systems permit rapid
and flexible system development to meet changing business needs, while our
scaleable technical architecture enables us to efficiently expand our network to
accommodate new stores.
PHARMACY SYSTEMS ~ The Rx2000 computer system enables our pharmacists to
fill prescriptions more efficiently, giving the pharmacists more time to
spend with customers. The system facilitates the management of third
party healthcare plans and enables us to provide managed care providers
with a level of information which we believe is unmatched by our
competitors. We also continue to make significant progress on our
Excellence in Pharmacy Innovation and Care ("EPIC") program. EPIC is a
multiyear project that is reengineering the way our pharmacies
communicate and fill prescriptions. The project includes integrated
workflow improvements, proprietary systems technology and automated
pill-counting machines in high volume stores. We expect EPIC to improve
quality assurance and customer service, while reducing labor costs. We
were one of the first in the industry to introduce Drug Utilization
Review technology that checks for harmful interactions between
prescription drugs, other-the-counter products, vitamins and herbal
remedies. We were also one of the first in the industry to install a
chain wide automatic prescription refill system, called Rapid Rx Refill,
which enables customers to order prescription refills 24 hours a day
using a touch-tone telephone. Together, these initiatives are expected to
continue to enhance pharmacy productivity, increase capacity, lower costs
and improve service by lowering customer wait times and enabling
pharmacists to spend more time with customers.
FRONT STORE SYSTEMS ~ Our point-of-sale scanning technology has enabled
us to develop an advanced retail database of information. We use this
information to quickly analyze data on a store-by-store basis to develop
targeted marketing and merchandising strategies. We can also analyze the
impact of pricing, promotion and mix on a category's sales and
profitability, enabling us to develop tactical merchandising plans for
each category by market. We believe that effective category management
increases customer satisfaction and that our category management approach
has been a primary factor in front store comparable sales gains. Our
supply chain initiatives, including our Promotional Forecasting and
Allocation system and an improved store-level Assisted Inventory
Management system, will more effectively link our stores and distribution
centers with suppliers to speed the delivery of merchandise to our stores
in a manner that both reduces out-of-stock positions and lowers our
investment in inventory. We have already begun to experience tangible
benefits from our supply chain initiatives and we expect to continue to
do so.
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ASSOCIATE DEVELOPMENT ~ As of December 30, 2000, we employed approximately
99,000 associates, about 48,000 of whom are part-time employees working less
than 30 hours per week. To deliver the highest levels of service to our
customers and partners, we devote considerable time and attention to our people
and service standards. We emphasize attracting and training friendly and helpful
associates to work in our stores and throughout our organization. Our
pharmacists consistently rank among the best in the industry on measurements of
trust, relationship building and accessibility. This high level of service and
expertise has played a key role in the growth of our company.
INTELLECTUAL PROPERTY AND LICENSES ~ We have registered or applied for
registration of a variety of trade names, service marks and trademarks for use
in our business. We regard our intellectual property as having significant value
and as being an important factor in the marketing of the Company and our stores.
We are not aware of any facts that could negatively impact our continuing use of
any of our intellectual property.
Our pharmacies and pharmacists must be licensed by the appropriate state boards
of pharmacy. Our pharmacies and distribution centers are also registered with
the Federal Drug Enforcement Administration. Because of these licensing and
registration requirements, we must comply with various statutes, rules and
regulations, a violation of which could result in a suspension or revocation of
these licenses or registrations.
COMPETITION ~ The retail drugstore business is highly competitive. We believe
that we compete principally on the basis of: (i) store location and convenience,
(ii) customer service and satisfaction, (iii) product selection and variety and
(iv) price. In each of the markets we serve, there are a number of independent
and other retail drugstore chains, supermarkets, convenience stores and discount
merchandisers. With respect to some products, we also compete with mail order
providers and internet pharmacies.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS ~ Certain statements
we make in this Annual Report on Form 10-K (as well as in other public filings,
our 2000 Annual Report and Letter to Our Shareholders, our web site, press
releases and oral statements made by Company management and/or representatives),
constitute forward-looking statements, which are subject to risks and
uncertainties. Forward-looking statements include information concerning:
o our belief concerning future sales and net earnings growth;
o our belief concerning the growth and profitability of CVS ProCare;
o our belief concerning the growth of our free cash flow;
o our ability to continue to reduce selling, general and administrative
expenses as a percentage of net sales;
o our belief that we have sufficient cash flows to support working
capital needs, capital expenditures and debt service requirements;
o our planned store development, including store openings, number of
freestanding locations, new market entries and capital expenditures;
o our belief that we can continue to improve sales and operating
performance by relocating existing in-line stores to freestanding
locations;
o our belief concerning the profitability of CVS.com;
o our belief that we can continue to reduce inventory levels and improve
inventory turnover; and
o our future results of operations, including sales and earnings per
common share growth and cost savings and synergies following the Revco
and Arbor mergers.
In addition, statements that include the words "believes", "expects",
"anticipates", "intends", "estimates" or similar expressions are forward-looking
statements. For all of these statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
You should understand that the following important factors, in addition to those
discussed elsewhere in this report and in the documents which are incorporated
by reference (and in our other public filings, press releases and oral
statements made by Company management and/or representatives), could cause
actual results to differ materially from those expressed in the forward-looking
statements:
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WHAT FACTORS COULD AFFECT THE OUTCOME OF OUR FORWARD-LOOKING STATEMENTS?
INDUSTRY AND MARKET FACTORS
o changes in economic conditions generally or in the markets served by
CVS;
o future federal and/or state regulatory and legislative actions
affecting CVS and/or the chain drugstore industry;
o consumer preferences and spending patterns;
o competition from other drugstore chains, from alternative distribution
channels such as supermarkets, membership clubs, mail order companies
and internet companies (e-commerce) and from other third party plans;
o the continued efforts of health maintenance organizations, managed
care organizations, pharmacy benefit management companies and other
third party payers to reduce prescription drug costs; and
o changes in accounting policies and practices, including taxation
requirements.
OPERATING FACTORS
o our ability to continue to implement new computer systems and
technologies;
o our ability to continue to secure suitable new store locations at
favorable lease terms;
o the creditworthiness of the purchasers of former businesses whose
store leases are guaranteed by CVS;
o our ability to continue to purchase inventory on favorable terms;
o adverse determinations with respect to litigation or other claims;
o our ability to attract, hire and retain suitable pharmacists and
management personnel; and
o our ability to establish effective advertising, marketing and
promotional programs (including pricing strategies) in the different
geographic markets in which we operate.
ITEM 2. -- PROPERTIES
We lease most of our stores under long-term leases that vary as to rental
amounts, expiration dates, renewal options and other rental provisions. We do
not think that any individual store lease is significant in relation to our
overall business. For additional information on the amount of our rental
obligations for our leases, we refer you to the caption Leases on page 29 of
"Notes to Consolidated Financial Statements" in our Annual Report to
Stockholders for the fiscal year ended December 30, 2000.
Following is a breakdown by state of our 4,133 retail and specialty pharmacy
store locations as of December 30, 2000:
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Alabama* 137 Maine 19 Oregon* 1
California* 9 Maryland* 172 Pennsylvania* 342
Connecticut 125 Massachusetts* 324 Rhode Island* 55
Delaware 2 Michigan 240 South Carolina* 177
District of Columbia* 50 Minnesota* 1 Tennessee* 141
Florida* 31 Missouri* 1 Texas* 4
Georgia* 280 New Hampshire 29 Vermont 2
Hawaii* 1 New Jersey 209 Virginia 244
Illinois 73 New York* 404 Washington* 1
Indiana 274 North Carolina 275 West Virginia 55
Kentucky 67 Ohio 388
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* State store totals include CVS ProCare stores, which totaled 46 stores
located in 17 States and the District of Columbia as of December 30, 2000.
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As of December 30, 2000, we owned approximately two percent of our 4,133 retail
and specialty pharmacy drugstores. Net selling space for our retail and
specialty pharmacy drugstores increased from 30.3 million square feet as of
January 1, 2000, to 30.8 million square feet as of December 30, 2000.
Our stores are supported by ten company-owned distribution centers, which are
located in Rhode Island, New Jersey, Virginia, Indiana, Alabama, Pennsylvania,
Tennessee, North Carolina, South Carolina and Michigan. These distribution
centers contain an aggregate of approximately 5,400,000 square feet. In
addition, we lease additional space near our distribution centers to handle
certain distribution needs. We also lease approximately 199,000 square feet in
mail order service facilities located in Ohio and Pennsylvania.
We own our corporate headquarters located in Woonsocket, Rhode Island, which
contains an aggregate of approximately 552,000 square feet. We also lease
approximately 352,000 square feet in office buildings in Rhode Island,
Massachusetts and Washington state.
In addition, in connection with certain business dispositions completed between
1991 and 1997, we continue to guarantee lease obligations for approximately
1,300 former stores. We are indemnified for these guarantee obligations by the
respective purchasers. These guarantees generally remain in effect for the
initial lease term and any extension thereof pursuant to a renewal option
provided for in the lease prior to the time of the disposition. For
additional information, we refer you to the caption Commitments & Contingencies
on page 33 of "Notes to Consolidated Financial Statements" in our Annual
Report to Stockholders for the fiscal year ended December 30, 2000.
We believe that at the end of existing lease terms, our current leased space can
be either re-leased or replaced by alternate space for lease or purchase that is
readily available.
ITEM 3. -- LEGAL PROCEEDINGS
We have litigation arising from the normal course of business. In the opinion of
management and our independent counsel, we do not believe that any existing
claims or litigation will have a material adverse effect on our consolidated
financial condition, results of operations or future cash flows.
ITEM 4. -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 30, 2000.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is included as an unnumbered item in Part I of this Report and set
forth the name, age and biographical information for each of our executive
officers as of December 30, 2000. In each case the officer's term of office
extends to the date of the board of directors meeting following the next annual
meeting of stockholders of the Company. Previous positions and responsibilities
held by each of the executive officers over the past five years are indicated
below:
ROSEMARY MEDE, age 54, Senior Vice President--Human Resources of CVS
Corporation since April 2000 and Senior Vice President--Human Resources of CVS
Pharmacy, Inc. since October 1997; Vice President/General Manager of Business
Services, Becton Dickinson & Co. from December 1995 to September 1997.
LARRY J. MERLO, age 45, Executive Vice President--Stores of CVS Corporation
since April 2000 and Executive Vice President--Stores of CVS Pharmacy, Inc.
since March 1998; Senior Vice President--Stores of CVS Pharmacy, Inc. from
January 1994 to March 1998.
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DAVID B. RICKARD, age 54, Executive Vice President and Chief Financial
Officer of CVS Corporation and CVS Pharmacy, Inc. since September 1999; Senior
Vice President and Chief Financial Officer of RJR Nabisco Holdings Corporation
from March 1997 through August 1999; Executive Vice President, International
Distillers and Vintners Americas, November 1996 through March 1997; Finance
Director, International Distillers and Vintners, August 1995 to November 1996.
THOMAS M. RYAN, age 48, Chairman of the Board and Chief Executive Officer of
CVS Corporation and CVS Pharmacy, Inc. since April 1999 and President of CVS
Corporation and CVS Pharmacy, Inc. since May 2000; Chief Executive Officer and
President of CVS Corporation from May 1998 to April 1999; Vice Chairman of the
Board and Chief Operating Officer of CVS Corporation from October 1996 to May
1998; Chief Executive Officer and President of CVS Pharmacy, Inc. from January
1994 to April 1999; director of FleetBoston Financial Corporation and Reebok
International Ltd.
DOUGLAS A. SGARRO, age 41, Senior Vice President--Administration and Chief
Legal Officer of CVS Corporation since April 2000 and Senior Vice
President--Administration and Chief Legal Officer of CVS Pharmacy, Inc. since
September 1997; President of CVS Realty Co., a real estate development company
and a division of CVS Pharmacy, Inc., since October 1999; partner in the New
York City office of the law firm of Brown & Wood LLP from January 1993 to August
1997; director of Frontline Capital Group since June 2000; director of Rhode
Island Economic Development Corporation (state instrumentality charged with
promoting economic development in Rhode Island) since March 2000.
LARRY D. SOLBERG, age 53, Senior Vice President--Finance and Controller of
CVS Corporation since April 2000 and Senior Vice President--Finance and
Controller of CVS Pharmacy, Inc. since March 1996; Vice President and Controller
of CVS Pharmacy, Inc. from October 1994 to March 1996.
LARRY J. ZIGERELLI, age 42, Executive Vice President--Marketing of CVS
Corporation and CVS Pharmacy, Inc. since April 2000; Executive Vice President,
Corporate Development of CVS Pharmacy, Inc. from February 1999 to March 2000;
Vice President and General Manager, Food and Beverage--Latin America, The
Procter & Gamble Company ("Procter & Gamble") from June 1998 until January 1999;
Vice President and General Manager, Puerto Rico and the Caribbean, Procter &
Gamble from October 1994 to May 1998.
PART II
ITEM 5. -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since October 16, 1996, our common stock has been listed on the New York Stock
Exchange under the symbol "CVS." The table below sets forth the low and high
sales prices of our common stock on the New York Stock Exchange Composite Tape
as reported in THE WALL STREET JOURNAL and the quarterly cash dividends declared
per share of common stock during the periods indicated.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000:
High $ 40.63 $ 46.75 $ 46.31 $ 59.94 $ 59.94
Low 28.00 35.88 34.38 44.31 28.00
-----------------------------------------------------------------------------------------------------------------------
Dividends per common share(1) 0.0575 0.0575 0.0575 0.0575 0.2300
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
1999:
High $ 56.44 $ 52.06 $ 53.00 $ 45.75 $ 56.44
Low 45.50 40.50 37.75 30.31 30.31
-----------------------------------------------------------------------------------------------------------------------
Dividends per common share(1) 0.0575 0.0575 0.0575 0.0575 0.2300
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Future dividend payments will depend on the Company's earnings, capital
requirements, financial condition and other factors considered relevant by
the Board of Directors.
As of March 9, 2001, there were approximately 12,100 registered shareholders
according to the records maintained by our transfer agent.
9
<PAGE>
ITEM 6. -- SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with "Item
8. -- Financial Statements and Supplementary Data" and "Item 7. -- Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data of CVS Corporation as of and for the
periods indicated in the five-year period ended December 30, 2000 have been
derived from the audited consolidated financial statements of CVS Corporation,
which consolidated financial statements have been audited by KPMG LLP.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR
2000 1999 1998 1997 1996
IN MILLIONS, EXCEPT PER SHARE AMOUNTS (52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 20,087.5 $ 18,098.3 $ 15,273.6 $ 13,749.6 $ 11,831.6
Gross margin(1) 5,361.7 4,861.4 4,129.2 3,718.3 3,300.9
Selling, general & administrative 3,742.4 3,448.0 2,949.0 2,776.0 2,490.8
Depreciation and amortization 296.6 277.9 249.7 238.2 205.4
Merger, restructuring and other
nonrecurring charges -- -- 178.6 422.4 12.8
-----------------------------------------------------------------------------------------------------------------------
Operating profit(2) 1,322.7 1,135.5 751.9 281.7 591.9
Other expense (income), net 79.3 59.1 60.9 44.1 (51.5)
Income tax provision 497.4 441.3 306.5 149.2 271.0
-----------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations
before extraordinary item(3) $ 746.0 $ 635.1 $ 384.5 $ 88.4 $ 372.4
-----------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA:
Earnings from continuing operations
before extraordinary item:(3)
Basic $ 1.87 $ 1.59 $ 0.96 $ 0.20 $ 0.98
Diluted 1.83 1.55 0.95 0.19 0.95
Cash dividends per common share 0.230 0.230 0.225 0.220 0.220
-----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET AND OTHER DATA:
Total assets $ 7,949.5 $ 7,275.4 $ 6,686.2 $ 5,920.5 $ 6,014.9
Long-term debt 536.8 558.5 275.7 290.4 1,204.8
Total shareholders' equity 4,304.6 3,679.7 3,110.6 2,626.5 2,413.8
Number of stores (at end of period) 4,133 4,098 4,122 4,094 4,204
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Gross margin includes the pre-tax effect of the following nonrecurring
charges: (i) in 1998, $10.0 million ($5.9 million after-tax) related to the
markdown of noncompatible Arbor merchandise and (ii) in 1997, $75.0 million
($49.9 million after-tax) related to the markdown of noncompatible Revco
merchandise.
(2) Operating profit includes the pre-tax effect of the charges discussed in
Note (1) above and the following merger, restructuring and other
nonrecurring charges and gain: (i) in 2000, $19.2 million ($11.5 million
after-tax) nonrecurring gain in total operating expenses, which represented
a partial payment of our share of the settlement proceeds from a class
action lawsuit against certain manufacturers of brand name prescription
drugs, (ii) in 1998, $147.3 million ($101.3 million after-tax) charge
related to the merger of CVS and Arbor and $31.3 million ($18.4 million
after-tax) of nonrecurring costs incurred in connection with eliminating
Arbor's information technology systems and Revco's noncompatible store
merchandise fixtures, (iii) in 1997, $337.1 million ($229.8 million
after-tax) charge related to the merger of CVS and Revco, $54.3 million
($32.0 million after-tax) of nonrecurring costs incurred in connection with
eliminating Revco's information technology systems and noncompatible store
merchandise fixtures and $31.0 million ($19.1 million after-tax) charge
related to the restructuring of Big B, Inc., (iv) in 1996, $12.8 million
($6.5 million after-tax) charge related to the write-off of costs incurred
in connection with the failed merger of Rite Aid Corporation and Revco.
(3) Earnings from continuing operations before extraordinary item and earnings
per common share from continuing operations before extraordinary item
include the after-tax effect of the charges and gain discussed in Notes (1)
and (2) above and a $121.4 million ($72.1 million after-tax) gain realized
during 1996 upon the sale of equity securities received as partial proceeds
from the sale of Marshalls during 1995.
ITEM 7. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We refer you to the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in our Annual Report to Stockholders for
the fiscal year ended December 30, 2000 on pages 18 through 20.
10
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have not entered into any transactions using derivative financial instruments
or derivative commodity instruments and we believe that our exposure to market
risk associated with other financial instruments (such as fixed and variable
rate borrowings), are not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
We refer you to the "Consolidated Statements of Operations," "Consolidated
Balance Sheets," "Consolidated Statements of Shareholders' Equity,"
"Consolidated Statements of Cash Flows," "Notes to Consolidated Financial
Statements" and "Independent Auditors' Report" contained in our Annual Report to
Stockholders for the fiscal year ended December 30, 2000 on pages 21 through 38.
ITEM 9. -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No events have occurred which would require disclosure under this Item.
PART III
ITEM 10. -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We refer you to our Proxy Statement for the 2001 Annual Meeting of Stockholders
in Item 1 under the captions "Biographies of our Board Nominees," "Committees of
the Board of CVS," and in Item 4 under "Section 16(a) Beneficial Ownership
Reporting Compliance." Biographical information on our executive officers is
contained in Item I of this Annual Report on Form 10-K.
ITEM 11. -- EXECUTIVE COMPENSATION
We refer you to our Proxy Statement for the 2001 Annual Meeting of Stockholders
in Item 1 under the captions "Director Compensation," "Compensation Committee
Interlocks and Insider Participation," "Compensation Committee Report on
Executive Compensation," "Summary Compensation Table," "Stock Options," "Stock
Performance Graph" and "Certain Executive Arrangements."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We refer you to our Proxy Statement for the 2001 Annual Meeting of Stockholders
in Item 1 under the captions "Share Ownership of Directors and Certain Executive
Officers" and "Share Ownership of Principal Stockholders."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We refer you to our Proxy Statement for the 2001 Annual Meeting of Stockholders
in Item 1 under the caption "Transactions with Directors and Officers."
11
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. DOCUMENTS FILED AS PART OF THIS REPORT:
1. FINANCIAL STATEMENTS:
The following financial statements are incorporated by reference from pages
21 through 38 of our Annual Report to Stockholders for the fiscal year
ended December 30, 2000, as provided in Item 8. hereof:
<TABLE>
<S> <C>
Management's Responsibility for Financial Reporting........................................... 21
Independent Auditor's Report.................................................................. 21
Consolidated Statements of Operations for the fiscal years ended December 30, 2000,
January 1, 2000 and December 26, 1998................................................... 22
Consolidated Balance Sheets as of December 30, 2000 and January 1, 2000....................... 23
Consolidated Statements of Shareholders' Equity for the fiscal years ended
December 30, 2000, January 1, 2000 and December 26, 1998................................ 24
Consolidated Statements of Cash Flows for the fiscal years ended December 30, 2000
January 1, 2000 and December 26, 1998................................................... 25
Notes to Consolidated Financial Statements.................................................... 26 - 38
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is filed on page 16 of this
report: Schedule II -- Valuation and Qualifying Accounts. All other
financial statement schedules are omitted because they are not applicable
or the information is included in the financial statements or related
notes.
B. REPORTS ON FORM 8-K
There were no Current Reports on Form 8-K filed during the fourth quarter of
fiscal 2000.
C. EXHIBITS
Exhibits marked with an asterisk (*) are hereby incorporated by reference to
exhibits or appendices previously filed by the Registrant as indicated in
brackets following the description of the exhibit.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
3.1* Amended and Restated Certificate of Incorporation of the Registrant [incorporated by reference
to Exhibit 3.1 of CVS Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996].
3.1A* Certificate of Amendment to the Amended and Restated Certificate of Incorporation, effective
May 13, 1998 [incorporated by reference to Exhibit 4.1A to Registrant's Registration Statement
No. 333-52055 on Form S-3/A dated May 18, 1998].
3.2* By-laws of the Registrant, as amended and restated [incorporated by reference to Exhibit 3.2 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998].
4 Pursuant to Regulation S-K, Item 601(b)(4)(iii)(A), no instrument which defines the rights of
holders of long-term debt of the Registrant and its subsidiaries is filed with this report. The
Registrant hereby agrees to furnish a copy of any such instrument to the Securities and
Exchange Commission upon request.
4.1* Specimen common stock certificate [incorporated by reference to Exhibit 4.1 to the Registration
Statement of the Registrant on Form 8-B dated November 4, 1996].
4.2* Indenture, dated as of February 11, 1999, between CVS Corporation and The Bank of New York
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
[incorporated by reference to Exhibit 4.1 to Registrant's Registration Statement No. 333-78253
on Form S-4 dated May 11, 1999].
10.1* Stock Purchase Agreement dated as of October 14, 1995 between The TJX Companies, Inc. and
Melville Corporation, as amended November 17, 1995 [incorporated by reference to Exhibits 2.1
and 2.2 to Melville's Current Report on Form 8-K dated December 4, 1995].
10.2* Stock Purchase Agreement dated as of March 25, 1996 between Melville Corporation and
Consolidated Stores Corporation, as amended May 3, 1996 [incorporated by reference to
Exhibits 2.1 and 2.2 to Melville's Current Report on Form 8-K dated May 5, 1996].
10.3* Distribution Agreement dated as of September 24, 1996 among Melville Corporation, Footstar,
Inc. and Footstar Center, Inc. [incorporated by reference to Exhibit 99.1 to Melville's Current
Report on Form 8-K dated October 28, 1996].
10.4* Tax Disaffiliation Agreement dated as of September 24, 1996 among Melville Corporation,
Footstar, Inc. and certain subsidiaries named therein [incorporated by reference to Exhibit
99.2 to Melville's Current Report on Form 8-K dated October 28, 1996].
10.5* Agreement and Plan of Merger dated as of February 6, 1997, as amended as of March 19, 1997,
among the Registrant, Revco D.S., Inc. and North Acquisition, Corp. [incorporated by reference
to Annex A to the Registrant's Registration Statement No. 333-24163 on Form S-4 filed
March 28, 1997].
10.6* Agreement and Plan of Merger dated as of February 8, 1998, as amended as of March 2, 1998,
among the Registrant, Arbor Drugs, Inc. and Red Acquisition, Inc. [incorporated by reference to
Exhibit 2 to the Registrant's Registration Statement No. 333-47193 on Form S-4 filed
March 2, 1998].
10.7* Stockholder Agreement dated as of December 2, 1996 between the Registrant, Nashua Hollis CVS,
Inc. and Linens `n Things, Inc. [incorporated by reference to Exhibit 10(i)(6) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997].
10.8* Tax Disaffiliation Agreement dated as of December 2, 1996 between the Registrant and Linens `n
Things, Inc. and certain of their respective affiliates [incorporated by reference to Exhibit
10(i)(7) to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997].
10.9* Five Year Credit Agreement dated as of May 23, 1997 by and among the Registrant, the Lenders
party thereto, Fleet National Bank, as Documentation Agent, JP Morgan Securities, Inc., as
Syndication Agent; and The Bank of New York, as Administrative Agent [incorporated by reference
to Exhibit 10(i)(8) to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997].
10.10* Note Purchase Agreement dated June 7, 1989 by and among Melville Corporation and Subsidiaries
Employee Stock Ownership Plan, as Issuer, Melville Corporation, as Guarantor, and the
Purchasers listed therein [incorporated by reference to Exhibit 10(i)(9) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997].
10.11* 1973 Stock Option Plan [incorporated by reference to Exhibit (10)(iii)(A)(i) to Melville
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987].
10.12* 1987 Stock Option Plan [incorporated by reference to Exhibit (10)(iii)(A)(iii) to Melville
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1987].
10.13* 1989 Directors Stock Option Plan [incorporated by reference to Exhibit B to Melville
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1988].
10.14* Melville Corporation Omnibus Stock Incentive Plan [incorporated by reference to Exhibit B to
Melville Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1989
and Exhibit A to Melville's definitive Proxy Statement dated March 7, 1995].
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.15* Profit Incentive Plan of Melville Corporation [incorporated by reference to Exhibit A to
Melville Corporation's definitive Proxy Statement dated March 14, 1994].
10.16* Supplemental Retirement Plan for Select Senior Management of Melville Corporation I as amended
through July 1995 [incorporated by reference to Exhibit 10(iii)(A)(vii) to Melville's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995].
10.17* Supplemental Retirement Plan for Select Senior Management of Melville Corporation II as amended
through July 1995 [incorporated by reference to Exhibit 10(iii)(A)(viii) to Melville's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995].
10.18* Income Continuation Policy for Select Senior Executives of Melville Corporation as amended
through May 12, 1988 [incorporated by reference to Exhibit 10 (viii) to Melville's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994].
10.19* CVS Corporation 1996 Directors Stock Plan, as amended and restated [incorporated by reference
to Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
January 1, 2000].
10.20* Form of Employment Agreements between the Registrant and the Registrant's executive officers
[incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1996].
10.21* Deferred Stock Compensation Plan [incorporated by reference to Exhibit 10(iii)(A)(xi) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997].
10.22* 1997 Incentive Compensation Plan [incorporated by reference to Annex F to Amendment No. 1 to
the Registrant's Registration Statement No. 333-24163 on Form S-4/A filed April 17, 1997].
10.23* Deferred Compensation Plan [incorporated by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 27, 1998].
10.24* Partnership Equity Program [incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 27, 1998].
10.25* Form of Collateral Assignment and Executive Life Insurance Agreement between Registrant and the
Registrant's executive officers [incorporated by reference to Exhibit 10.11(xv) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998].
10.26* Consulting Agreement between CVS Corporation and Eugene Applebaum [incorporated by reference to
Exhibit 99(d) to Registrant's Registration Statement No. 333-47193 on Form S-4 filed
March 2, 1998].
10.27* Description of the Long-Term Performance Share Plan [incorporated by reference to Exhibit 10.27
to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 2000].
10.28* Description of the Executive Retention Program [incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 1, 2000].
10.29* 364-day Credit Agreement dated as of May 26, 2000 by and among the Registrant, the lenders
party hereto, Fleet National Bank, as Syndication Agent, Credit Suisse First Boston, as
Documentation Agent and The Bank of New York, as Administrative Agent [incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended July 1, 2000].
13 Portions of the 2000 Annual Report to Shareholders of CVS Corporation which are specifically
designated in this Form 10-K as being incorporated by reference.
21 Subsidiaries of the Registrant
23 Consent of KPMG LLP
</TABLE>
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
CVS Corporation:
Under date of February 1, 2001, we reported on the consolidated balance sheets
of CVS Corporation and subsidiaries as of December 30, 2000 and January 1, 2000,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the fifty-two week period ended December 30, 2000, the
fifty-three week period ended January 1, 2000 and the fifty-two week period
ended December 26, 1998. These consolidated financial statements and our report
thereon are incorporated by reference in the December 30, 2000 Annual Report on
Form 10-K of CVS Corporation. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the
consolidated financial statement schedule as listed in the accompanying index.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
------------
KPMG LLP
Providence, Rhode Island
February 1, 2001
15
<PAGE>
CVS CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS WRITE-OFFS BALANCE
BEGINNING OF CHARGED TO BAD CHARGED TO AT
IN MILLIONS YEAR DEBT EXPENSE ALLOWANCE END OF YEAR
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACCOUNTS RECEIVABLE -- ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Fiscal Year Ended December 30, 2000 $ 41.1 $ 29.2 $ 22.4 $ 47.9
-----------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended January 1, 2000 39.8 22.8 21.5 41.1
-----------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended December 26, 1998 39.2 22.4 21.8 39.8
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
CVS CORPORATION
Date: March 19, 2001 By: /s/ DAVID B. RICKARD
------------------------
David B. Rickard
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ EUGENE APPLEBAUM Director March 19, 2001
--------------------
Eugene Applebaum
/s/ W. DON CORNWELL Director March 19, 2001
-------------------
W. Don Cornwell
/s/ THOMAS P. GERRITY Director March 19, 2001
---------------------
Thomas P. Gerrity
/s/ STANLEY P. GOLDSTEIN Director March 19, 2001
------------------------
Stanley P. Goldstein
/s/ MARIAN L. HEARD Director March 19, 2001
-------------------
Marian L. Heard
/s/ WILLIAM H. JOYCE Director March 19, 2001
--------------------
William H. Joyce
/s/ TERRY R. LAUTENBACH Director March 19, 2001
-----------------------
Terry R. Lautenbach
/s/ TERRENCE MURRAY Director March 19, 2001
-------------------
Terrence Murray
/s/ DAVID B. RICKARD Executive Vice President and Chief Financial Officer March 19, 2001
-------------------- (Principal Financial Officer)
David B. Rickard
/s/ SHELI Z. ROSENBERG Director March 19, 2001
----------------------
Sheli Z. Rosenberg
/s/ THOMAS M. RYAN Chairman of the Board and Chief Executive Officer March 19, 2001
------------------ (Principal Executive Officer)
Thomas M. Ryan
/s/ IVAN G. SEIDENBERG Director March 19, 2001
----------------------
Ivan G. Seidenberg
/s/ LARRY D. SOLBERG Vice President and Controller March 19, 2001
-------------------- (Principal Accounting Officer)
Larry D. Solberg
</TABLE>
17
</TEXT>
</DOCUMENT>