Caremark 2001 Annual Report Download

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CVS Corporation2001 Annual Report

Table of contents

  • Page 1
    2001 Annual Report CVS Corporation

  • Page 2
    ... year with 4, 191 sto res. • 43 o f o ur new sto res in 2001 were in new CVS markets with sub stantial g ro wth po te ntial, inc luding Miami, Tampa, Orlando , Ft. Lauderdale, Chic ago , Dallas, Ho usto n, and Las Veg as. • We ro lle d o ut o ur EPIC pharmac y system and wo rkflo w impro vements...

  • Page 3
    ... 327 248 1 1 3 Indiana Kentuc ky Maine Maryland Massac husetts Mic hig an Minneso ta Misso uri Nevada 29 219 414 274 375 1 347 54 175 New Hampshire New Jersey New Yo rk No rth Caro lina Ohio Orego n Pennsylvania Rho de Island So uth Caro lina 140 11 2 245 1 50 55 Tennessee Texas Vermo nt Virg...

  • Page 4
    ... daily lives. Nevertheless, we experienc ed so me spec ific areas o f disappo intment in 2001. We have taken ac tio n to c o rrec t the iso lated po c kets o f pro blems that were within o ur c o ntro l. Tho se fac to rs no t within o ur c o ntro l- inc luding the absenc e o f majo r new drug appro...

  • Page 5
    ... business review, whic h resulted in a plan to streamline o peratio ns. As a result, we will c lo se 229 sto res as well as o ne distributio n c enter. We will also c o nso lidate the o peratio ns o f o ur pharmac y benefit management c o mpany, PharmaCare, with o ur spec ialty pharmac y business...

  • Page 6
    ... e 1998. Ac c o rding to IMS Health there are 55 new drug s with blo c kbuster po tential in the Fo o d & Drug Administratio n ' s appro val pipeline expec ted to reac h the market between 2002 and 2005. Eac h o f tho se drug s is believed to have an annual sales po tential o f $500 millio n o r mo...

  • Page 7
    ... health and safety o f o ur c usto mers. Our pharmac ists and c usto mers also apprec iate CVS' Rapid Refill system - o ur 24- ho ur servic e that enables c usto mers to renew presc riptio ns auto matic ally by telepho ne - whic h no w ac c o unts fo r 50% o f all refills. Custo mers c an sc hedule...

  • Page 8
    ...re time sho pping and inc rease their rate o f purc hases in sto res spo rting the new desig n. One-hour phot o labs, digit al imaging services and phot o processing make t he phot o cat egory one of CVS' st rongest lines of business. Our private label business c o ntinues to sho w stro ng g ro wth...

  • Page 9
    ... c o nvenienc e fo r o ur c usto mers. With o ur c o ntinued stro ng market share in key c atego ries and o ur plans to drive new g ro wth, we lo o k fo rward to healthy fro nt- sto re g ro wth fo r the fo reseeable future. We have intensified o ur fo c us o n quick, personal, court eous service.

  • Page 10
    .... In 2002, we plan to o pen appro ximately 75 mo re new- market sto res in the territo ries we ' ve CVS Corporation 8 We cont inue t o find out st anding opport unit ies for growt h in exist ing market s. Our new locat ion near Cit icorp Cent er in New York Cit y is expect ed t o be a high volume...

  • Page 11
    ... ac quisitio n o f Revc o . The c lo sing o f these lo w- vo lume sto res will elevate the quality o f o ur sto re base and sho uld help to impro ve o ur same- sto re sales perfo rmanc e. 9 new markets, suc h as Flo rida, Chic ago and Texas, are exceeding o ur expec tatio ns. 2001 Annual Report

  • Page 12
    ... 2000 ac quisitio n o f ClaimsPro . ProCare, t he # 1 specialt y pharmacy business in America, provides specially t rained pharmacy st aff, convenient locat ions near medical cent ers, and home delivery service t o pat ient s wit h int ensive drug t herapies. The similarities in the o peratio ns...

  • Page 13
    ... to re ading during visits with the ir pediatric ians. The CVS I nnovat ions Grant s Program pro vides funding to public K- 12 sc ho o ls in many o f o ur markets, suppo rting inno vative initiatives pro po sed by educ ato rs. The CVS Charit y Golf Classic, an annual to urnament fo r PGA pro s, has...

  • Page 14
    ...wth has benefited fro m o ur ability to attrac t and retain managed c are c usto mers and favo rable industry trends. These trends inc lude an ag ing Americ an po pulatio n c o nsuming a g reater number o f presc riptio n drug s, the inc reased use o f pharmac eutic als as the first line o f defense...

  • Page 15
    ... and elevated physic al invento ry lo sses. To address the physic al invento ry lo ss trend, we initiated a number o f pro g rams, inc luding , but no t limited to , mo ving hig h- c o st merc handise behind the c o unter o r g lass and impro ving o ur emplo yee bac kg ro und sc reening and testing...

  • Page 16
    ..., to fund emplo yee benefit plans. During 2001, we re purc hased 3. 4 millio n shares at an ag g reg ate c o st o f $129. 0 millio n. Sinc e inc eptio n o f the pro g ram, we re purc hased 8. 1 millio n shares at an ag g reg ate c o st o f $292. 2 millio n. CVS Corporation g ain ( o r $0. 56 per...

  • Page 17
    ...ag reement to be a c ritic al c o mpo nent o f o ur future financ ing and/ o r real estate develo pment strateg ies. The fo llo wing table summarizes o ur future c ash o utflo ws resulting fro m financ ial c o ntrac ts and c o mmitments as o f Dec ember 29, 2001: Payments Due by Perio d In millio ns...

  • Page 18
    ... e dividends, net o f inc o me tax benefit Net earning...ed earnings per common share: Net earning s $ 1 .0 0 4 0 8 .3 $ 1. 83 408. 0 $ 1. 55 408. 9 16 Weig hted average c o mmo n shares o utstanding Dividends declared per common share See ac c o mpanying no tes to c o nso lidated financ...

  • Page 19
    ...o r o utstanding Preferenc e sto c k, series o ne ESOP c o nvertible, par value $1. 00: autho rized 50, 000.... 6 $ 7, 949. 5 Tot al shareholders' equit y Tot al liabilit ies and shareholders' equit y See ac c o mpanying no tes to c o nso lidated financ ial statements. 2001 Annual Report 1, 001. 4

  • Page 20
    ... 7 ( 257. 0) 18 Reduc tio n o f g uaranteed ESOP Oblig atio n End o f year Capit al surplus: Beg inning o f year Co nversio n o f preferenc e sto c k Sto c k o ptio ns exerc ised and awards under sto c k plans Other End o f year 1 ,4 9 3 .8 ( 1 .2 ) 4 2 .8 4 .2 1 ,5 3 9 .6 1, 371. 7 ( 0. 7) 120...

  • Page 21
    ... invest ing act ivit ies Cash f lows f rom f inancing act ivit ies: Additio ns to ( reduc tio ns in) lo ng - term debt Pro c eeds fro m exerc ise o f sto c k o ptio ns Dividends paid Purc hase o f treasury shares...See ac c o mpanying no tes to c o nso lidated financ ial statements. 2001 Annual Report

  • Page 22
    ... ric al results and c urrent trends. its subsidiaries ( " CVS" o r the " Co mpany " ) is princ ipally in the retail drug sto re business. As o f Dec ember 29, 2001, the Co mpany o perated 4, 191 retail and spec ialty pharmac y drug sto res and vario us mail o rder fac ilities lo c ated in 33 states...

  • Page 23
    ... mer lists are amo rtized o n a straig ht- line basis o ver their estimated useful lives. Purc hased leases are amo rtized o n a straig ht- line basis o ver the remaining life o f the lease. I nsurance ~ The Co mpany is self- insured fo r general liability, wo rkers ' c o mpensatio n and auto mo...

  • Page 24
    ...urth quarter o f 2001, management appro ved an Ac tio n Plan, whic h resulted fro m a c o mprehensive business review desig ned to streamline o peratio ns and enhanc e o perating effic ienc ies. Fo llo wing is a summary o f the spec ific initiatives c o ntained in the Ac tio n Plan: New Account ing...

  • Page 25
    ... millio n fo r the severanc e pay, healthc are c o ntinuatio n c o sts and o utplac ement servic e c o sts related to appro ximately 1, 500 managerial, administrative and sto re emplo yees in the Co mpany's Wo o nso c ket, Rho de Island c o rpo rate headquarters; Co lumbus, Mail Fac ility; Henderso...

  • Page 26
    ... terms typic ally range fro m 3 to 10 years. Minimum rent is expensed o n a straig ht- line basis o ver the term o f the lease. In additio n to minimum rental payments, c ertain leases require additio nal payments based o n sales vo lume, as well as reimbursements fo r real estate taxes, maintenanc...

  • Page 27
    ... po lic y is generally to pay c o vered expenses as they are inc urred. ESOP expense rec o g nized Dividends paid Cash c o ntributio ns Interest payments ESOP shares allo c ated $ 2 2 .1 1 9 .1 2 2 .1 2 0 .5 0 .4 $ 18. 8 19. 5 18. 8 21. 9 0. 3 $ 16. 6 20. 1 16. 6 23. 1 0. 3 2001 Annual Report

  • Page 28
    ...fo r the defined benefit and o ther po stretirement benefit plans fo r the respec tive years: Defined Benefit Plans In millio ns Other Po stretirement Benefits 1999 2001 2000 2001 2000 1999 Servic e c o st Interest c o st o n benefit o blig atio n Expec ted return o n plan assets Amo rtizatio...

  • Page 29
    ...using the Blac k- Sc ho les Optio n Pric ing Mo del with the fo llo wing assumptio ns: 2001 2000 1999 Dividend yield Expec ted vo latility Risk- free interest rate Expec ted life 0 .7 7 % 2 9 .7 9 % 5 .0 0 % 7 .0 0. 40% 27. 92% 6. 25% 6. 5 0. 58% 25. 86% 6. 50% 6. 0 2001 Annual Report $ 17. 92

  • Page 30
    ...urse o f its business, no ne o f whic h is expec ted to be material to the Co mpany. Statuto ry inc o me tax rate 3 5 .0 % 3 .4 1 .0 3 9 .4 2 .4 4 1 .8 % 35. 0% 4. 1 0. 9 40. 0 - 40. 0% 35. 0% 4. 8 1. 2 41. 0 - 41. 0% CVS Corporation State inc o me taxes, net o f federal tax benefit Go o dwill...

  • Page 31
    ...perates two business seg ments, The PBM seg ment pro vides a full range o f presc riptio n benefit management servic es to managed c are pro viders and o ther o rg anizatio ns. These servic es inc lude plan desig n and administratio n, fo rmulary management, mail o rder pharmac y servic es, c laims...

  • Page 32
    ...: Net earning s $ 1 .0 2 $ 1. 87 $ 1. 59 CVS Corporation Dilut ed earnings per common share: Net earning s $ 1 .0 0 $ 1. 83 $ 1. 55 30 12 2001: Quart erly Financial I nformat ion ( Unaudit ed) First Quarter Sec o nd Quarter Third Quarter Fo urth Quarter Fisc al Year Do llars in...

  • Page 33
    ... n drug s whic h was o ffset by the Co mpany ' s c o ntributio n o f $46. 8 millio n o f these settlement pro c eeds to the CVS Charitable Trust, Inc. to fund future c haritable g iving , ( ii) in 2000, $19. 2 millio n ( $11. 5 millio n after- tax) no nrec urring g ain representing partial payment...

  • Page 34
    ... rs, meets perio dic ally with management, internal audito rs and the independent audito rs to review matters relating to the Co mpany ' s financ ial repo rting , the adequac y o f internal ac c o unting c o ntro ls and the sc o pe and results o f audit wo rk. The internal audito rs and independent...

  • Page 35
    ... Co mpany ( 1) Member o f the Audit Co mmittee. ( 2) Member o f the Management Planning and Develo pment Co mmittee. ( 3) Member o f No minating and Co rpo rate Go vernanc e Co mmittee. info rmatio n, are available via the Internet at ht t p:/ / www.cvs.com. Design: The Peo ple Business Netwo rk

  • Page 36
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