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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
FOR THE YEAR ENDED DECEMBER 31, 2001
------------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934
[_] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
Commission File Number: 001-01011
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
401(K) PROFIT SHARING PLAN OF CVS CORPORATION
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
CVS CORPORATION
ONE CVS DRIVE
WOONSOCKET, RI 02895
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REQUIRED INFORMATION
THE 401(K) PROFIT SHARING PLAN OF CVS CORPORATION (THE PLAN) IS SUBJECT TO THE
REQUIREMENTS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF (ERISA). ATTACHED
HERETO IS A COPY OF THE MOST RECENT FINANCIAL STATEMENTS AND SCHEDULES OF THE
PLAN PREPARED IN ACCORDANCE WITH THE FINANCIAL REPORTING REQUIREMENTS OF ERISA.
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401(K) PROFIT SHARING PLAN OF CVS CORPORATION
FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 2001 AND 2000
CONTENTS
Page
----
INDEPENDENT AUDITOR'S REPORT ......................................................................... 2
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits ........................................ 3
Statements of Changes in Net Assets Available for Plan Benefits ............................. 4
Notes to financial statements ............................................................... 5
SUPPLEMENTARY SCHEDULE:
Schedule of Assets Held for Investment Purposes at End of Year .............................. 12
SIGNATURE ............................................................................................ 15
EXHIBIT INDEX ........................................................................................ 15
Exhibit 23 - Consent of Independent Accountants ............................................. 16
1
INDEPENDENT AUDITORS' REPORT
The Administrative Committee of the 401K Profit Sharing Plan
CVS Corporation:
We have audited the accompanying statements of net assets available for plan
benefits of the 401K Profit Sharing Plan of CVS Corporation (the Plan) as of
December 31, 2001 and 2000, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2001 and 2000, and the changes in net assets available for plan
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
at end of year is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG LLP
June 14, 2002
2
401K PROFIT SHARING PLAN OF CVS CORPORATION
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000
2001 2000
----------------- ----------------
Assets:
Investments:
Guaranteed Insurance Contracts $ 205,877,671 176,656,187
Equities 312,270,274 433,440,391
Investments in pooled funds 461,178,542 425,859,590
Loans to participants 36,764,062 33,888,185
----------------- ----------------
1,016,090,549 1,069,844,353
----------------- ----------------
Receivables:
Interest 1,421,152 1,402,444
Dividends 1,177,884 1,891,770
Employer contributions 1,814,905 2,339,014
Employee contributions 6,260,270 8,016,077
----------------- ----------------
10,674,211 13,649,305
----------------- ----------------
Total assets 1,026,764,760 1,083,493,658
----------------- ----------------
Liabilities:
Accrued expenses and other liabilities 4,945,217 5,963,379
----------------- ----------------
Net assets available for plan benefits $ 1,021,819,543 1,077,530,279
================= ================
See accompanying notes to financial statements.
3
401K PROFIT SHARING PLAN OF CVS CORPORATION
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 2001 and 2000
2001 2000
------------------ ------------------
Additions:
Interest income $ 13,843,248 14,590,526
Dividend income 12,410,444 9,907,883
Employer contributions 27,511,936 22,800,468
Employee contributions 107,101,765 101,689,666
Realized gains (losses) (21,767,039) 42,145,527
Unrealized gains (losses) (124,142,192) (15,139,872)
Net forfeitures 229,418 97,536
------------------ ------------------
Total additions 15,187,580 176,091,734
------------------ ------------------
Deductions:
Benefits paid to participants 64,180,924 76,796,270
Administrative expenses 6,044,456 6,356,219
Other deductions 672,936 1,005,362
------------------ ------------------
Total deductions 70,898,316 84,157,851
------------------ ------------------
Net increase (decrease) for the year (55,710,736) 91,933,883
Net assets beginning of the year 1,077,530,279 985,596,396
------------------ ------------------
Net assets end of the year $ 1,021,819,543 1,077,530,279
================== ==================
See accompanying notes to financial statements.
4
401K PROFIT SHARING PLAN OF CVS CORPORATION
Notes to Financial Statements
December 31, 2001 and 2000
(1) Plan Description
The following description of the 401K Profit Sharing Plan of CVS
Corporation (the Plan) provides only general information. Participants
should refer to the Plan document for a more complete description of the
Plan's provisions.
(a) Background
The Plan is a defined contribution plan established as of January
1, 1989. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA), as amended. The
general administration of the Plan and the responsibility for
carrying out the provisions of the Plan are maintained by a
committee (the Plan Committee) of not less than three persons
appointed by the board of directors (the board of directors) of
CVS Corporation (CVS). In accordance with the provisions of the
Plan, the Plan Committee has appointed an Administrator, Buck
Consultants (the Administrator), and a Trustee, Bank of New York
(the Trustee). The Administrator maintains participant account
records and instructs the Trustee to execute transactions such as
benefit payments to participants. The Trustee holds the assets of
the Plan and executes transactions at the direction of the Plan
Committee and the Administrator. The Trustee also reports to the
Plan's management regarding investments and changes in those
investments.
(b) Eligibility
Employees are eligible to participate in the Plan upon attainment
of age 21 and on the earliest of:
. The first payroll period of the first month after completion
of 90 continuous days of service as a full-time employee, or
. Completion of 12 months of service beginning on the
employee's enrollment date with at least 1,000 hours worked,
or
. Completion of at least 1,000 hours of service in the course
of one calendar year.
(c) Contributions
Effective January 1, 1990, participants may elect to have CVS
contribute to their accounts from 1% to 15% of the compensation
that would otherwise be due them, in multiples of 1%, pursuant to
a salary reduction agreement. Each participant's total elective
deferrals for any calendar year may not exceed 15% of annual
compensation or the maximum allowed by the Internal Revenue Code
(the Code), whichever is less, as specified in the Plan document.
The maximum elective deferrals allowed by the Code were $10,500
for 2001 and $10,500 for 2000.
5
401K PROFIT SHARING PLAN OF CVS CORPORATION
Notes to Financial Statements
December 31, 2001 and 2000
Effective January 1, 1990, CVS made additional matching
contributions to participants' accounts. The amount of such
contributions was determined as follows: (1) for a participant who
had completed at least three years of credited service, CVS'
matching contribution was 50% of the participant's elective
deferrals, limited to elective deferrals of up to 4% of the
participant's salary, or (2) for a participant who had completed
less than three years of credited service, CVS' contribution was
25% of the participant's elective deferrals, limited to elective
deferrals of up to 4% of the participant's salary.
Effective April 1, 2000, the Plan has amended the matching
contribution to 50% of the first 5% of pre-tax compensation
contributed. The match is paid in cash to the Plan account on a
monthly basis.
(d) Investment Options
Upon enrollment in the Plan or at select intervals thereafter, a
participant may elect to direct contributions or investment
balances within the investments listed below. The following is a
brief explanation of each fund's investment objectives:
Core Equity Fund (Vanguard Index 500 Portfolio Fund)
This fund's objective is to replicate the total return of the
Standard and Poor's 500 Index, which represents about 75% of the
U.S. stock market value.
Diversified Bond (PIMCO Total Return Admin Fund)
This fund is a core bond fund that seeks to outperform the Lehman
Brothers Aggregate Bond Index on a consistent basis while
maintaining an overall risk similar to the Index.
International Equity Fund (Templeton International Fund)
This fund's investment objective is long-term capital growth
through participation in stock markets outside the U.S. The fund
invests primarily in the common stock of companies based in more
developed countries, but may also include investments in
developing countries.
Small Cap Growth Fund (Invesco Small Company Growth Fund)
This fund seeks long-term growth of capital and dividend income
through participation in the stock market. The fund invests
primarily in stocks of relatively small companies.
6
401K PROFIT SHARING PLAN OF CVS CORPORATION
Notes to Financial Statements
December 31, 2001 and 2000
Global Equity (Janus Worldwide Fund)
This fund seeks long-term growth of capital by investing in a
diversified portfolio of foreign and domestic companies. The fund
tries to outperform the Morgan Stanley Capital International
(MSCI) World Index, which measures the performance of U.S. and
international stock markets.
Small Cap Value (Galaxy Small Cap Value Fund)
This fund seeks long-term growth by investing primarily in stocks
of small to medium-sized companies that are believed to either
offer superior earnings growth or appear to be undervalued. This
fund is benchmarked by the Russell 2000 Index.
Growth and Income Fund (J & W Seligman Large Cap Value Fund)
This fund seeks long-term capital growth and dividend income by
investing primarily in the common stock of U.S. based, well
established medium to large size companies.
Large Cap Growth Fund (Columbus Circle Core Equity Fund)
This investment objective is long-term capital growth. The fund
invests primarily in the common stock of established large
companies that are based in the U.S. Companies are typically in
industry sectors that are growing faster than the broad stock
market.
Lifestyle Conservative Fund (various managers)
This fund is for people who will need access to their money in
less than five years. Approximately 70% of the fund is invested in
fixed-income or low-risk investments. The remaining 30% is
invested in stock-oriented mutual funds or moderate-risk
investments.
Lifestyle Moderate Fund (various managers)
This fund is for less conservative investors who can keep their
money invested for at least five years. Because stocks make up
approximately 60% of the fund's mix, the fund has more exposure to
the fluctuations in the stock market than the Conservative fund.
The remaining 40% is invested in bonds.
Lifestyle Aggressive Fund (various managers)
This fund is for those individuals who can keep their money
invested for at least ten years or those who are willing to accept
a greater level of risk in return for greater possible reward.
Therefore, 80% of the fund is invested in stocks and the remaining
20% is invested in fixed-income securities.
7
401K PROFIT SHARING PLAN OF CVS CORPORATION
Notes to Financial Statements
December 31, 2001 and 2000
CVS Corporation Common Stock Fund
This fund was established as a result of the transfer of assets
from the Revco D.S., Inc. 401K Plan during 1997. The Plan may, at
the discretion of the Plan Committee, offer a company stock fund
as one of the available investment funds for employee and employer
contributions. The fund holds CVS common stock.
GIC Fund (managed by State Street Bank & Trust Co.)
This fund seeks to preserve capital, while generating a steady
rate of return higher than money market funds. The fund's
investments consist of highly-rated insurance company and bank
investment contracts.
(e) Vesting
Participants become fully vested in their accounts upon the
completion of five years of credited service. Participants whose
account balances have been transferred into the Plan from other
defined contribution plans maintain at least the degree of vesting
in the account they had at the time of the transfer.
Notwithstanding the foregoing, participants are fully vested in,
and have a nonforfeitable right to, (1) their accounts upon death
or disability, and (2) any elective deferrals described in note
l(c).
(f) Payment of Benefits
Upon termination of service, the Administrator directs the Trustee
to pay participants their benefits in an immediate lump-sum or a
deferred lump-sum, if certain criteria are met.
(g) Forfeitures
Upon participants' termination date, the unvested portion of their
accounts are forfeited. If a former participant resumes employment
and eligibility in the Plan within five years of termination, any
amounts previously forfeited are restored to the participant's
account, but remain subject to the vesting provisions of the Plan.
Forfeitures during any plan year are applied as follows: (1) to
restore amounts previously forfeited by participants but required
to be reinstated upon resumption of employment; (2) to pay
administrative expenses of the Plan; or (3) to reduce future
matching and employer contributions. If forfeitures for any year
are insufficient to restore the required forfeitures, CVS
contributes the balance required for that purpose. Forfeitures for
2001 and 2000 were approximately $2,426,816 and $2,944,956,
respectively. Forfeitures restored to participants upon resumption
of employment for 2001 and 2000 were approximately $122,141 and
$87,327, respectively.
8
401K PROFIT SHARING PLAN OF CVS CORPORATION
Notes to Financial Statements
December 31, 2001 and 2000
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared on the
accrual basis. Purchases and sales of securities are recorded on a
trade-date basis.
(b) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, and changes
therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
(c) Benefits Paid
Benefits are recorded when paid.
(d) Investments
The valuation of the investments held at December 31, 2001 and
2000, is based on the fair value of the underlying funds as
determined by the Trustee, except for the investment contracts
which are valued at contract value with an insurance company. The
value fluctuates in response to various factors including, but not
limited to, the price of the shares in the underlying funds,
dividends paid, earnings and losses, and the mix of assets in the
respective fund. The fair value for the Guaranteed Insurance
Contracts at December 31, 2001 is $214,672,747. The average yield
for 2001 was 6.36%.
(e) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133). SFAS No. 133 requires that an entity
recognize all derivatives and measure those instruments at fair
value.
SFAS No. 133 is effective for fiscal years beginning after June
15, 2000. Pursuant to SFAS No. 137, the Plan adopted SFAS No. 133
effective January 1, 2001. The impact of SFAS No. 133 is not
material to the Plan financial statements.
(3) Loans to Participants
Under the terms of the Plan, participants may obtain bona fide loans from
the Plan, utilizing funds accumulated in their accounts. The minimum
amount which may be borrowed is $1,000. Participants can borrow up to 50%
of their vested account balance but not more than $50,000 less their
highest outstanding loan balance during the previous twelve months.
The loans are repaid to the Plan through after-tax payroll deductions.
The term of the loan is selected at the discretion of the participant,
but may not exceed five years for a general loan and twenty-five years
for a home purchase loan.
9
401K PROFIT SHARING PLAN OF CVS CORPORATION
Notes to Financial Statements
December 31, 2001 and 2000
(4) Investment Policy
At December 31, 2001 and 2000, most of the Plan's assets were allocated
among the investment options discussed in note 1(d) based on employees'
elections. The investment options are administered by independent
investment managers. Employee asset allocations that are awaiting
processing are temporarily invested in commingled funds held by a
bank-administered trust fund. These commingled funds are also used to
account for and administer participants' loans. The loan repayments and
interest earned are allocated to each of the investment funds based upon
the participants' contribution election percentages.
Net unrealized appreciation (depreciation) represents the net difference
between the fair value of the investment and its historical cost basis if
purchased during the plan year or the change in its fair value during the
plan year. During 2001 and 2000, the Plan's investments (including
investments bought, sold, and held during the year) experienced net
appreciation (depreciation) as follows:
2001 2000
----------------------------------------- -----------------------------------------
Realized Unrealized Realized Unrealized
------------------- ------------------- ------------------ -------------------
Mutual Funds $ (21,767,039) (124,142,192) 42,145,527 (15,139,872)
The following represents total investments segregated by investment type.
Investments that represent 5% or more of the fair value of the Plan's
assets are marked by an asterisk(*).
2001 2000
-------------------- --------------------
Mutual Funds:
Vanguard Index Trust 500 Portfolio Fund $ 174,313,105* 192,762,764*
PIMCO Total Return Admin Fund 78,622,760* 46,642,010
Templeton International Fund 45,857,937 44,346,304
Invesco Small Company Growth Fund 15,194,070 9,467,967
Janus Worldwide Fund 43,217,252 60,636,400*
Galaxy Small Cap Value Fund 86,826,351* 52,795,467
J & W Seligman Large Cap Value Fund 124,884,350* 147,163,424*
Columbus Circle Core Equity Fund 159,864,139* 229,052,514*
CVS Corporation Common Stock Fund 44,305,793 76,108,952*
Commingled Fund 363,059 324,179
-------------------- --------------------
773,448,816 859,299,981
Loans to participants 36,764,062 33,888,185
Guaranteed Insurance Contracts 205,877,671* 176,656,187*
-------------------- --------------------
$ 1,016,090,549 1,069,844,353
==================== ====================
10
401K PROFIT SHARING PLAN OF CVS CORPORATION
Notes to Financial Statements
December 31, 2001 and 2000
(5) Plan Termination
Although it has not expressed any intent to do so, CVS has the right
under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. If CVS terminated
the Plan, all participants in the Plan would become fully vested.
(6) Federal Income Taxes
The Plan is qualified pursuant to Section 401(a) of the Code, and the
trust established under the Plan to hold the Plan's assets is exempt from
Federal income taxes pursuant to Section 501(a) of the Code; accordingly,
the trust's net investment income is exempt from income taxes. The Plan
has obtained a favorable tax determination letter from the Internal
Revenue Service and the Plan's sponsor believes that the Plan, as
amended, continues to qualify and operate as designed.
11
401K PROFIT SHARING PLAN OF CVS CORPORATION
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 2001
Par value/ Identity
number of Of Current
Fund shares issue Description Cost value
--------------------------- ----------------------------------------------- -------------------------- ------------ --------------
Loans to
participants 36,764,062 Loans to participants* Prime plus 1% at loan
request date $ -- $ 36,764,062
-------------
Commingled 358,562 Bank of New York* Collective Short-Term
Investment
Fund Non-Discretionary 358,562 358,562
198 AT&T Corp Com Common Stock -- 3,592
63 AT&T Wireless Svsc Inc. Common Stock -- 905
-------------
Commingled Subtotal 363,059
-------------
Lifestyle 507,663 Vanguard Institutional Index Trust 500 Mutual Fund
Conservative Portfolio Fund 5,716,539 5,324,494
718,339 PIMCO Total Return Admin Fund Mutual Fund 7,476,651 7,513,830
Various GICs held at
13,178,596 State Street Bank State Street;
due 9/15/05 13,178,596 13,178,596
-------------
Lifestyle Conservative
Subtotal 26,016,920
-------------
Lifestyle 94,486 Vanguard Institutional Index Trust 500 Mutual Fund 10,725,843 9,910,592
Moderate Portfolio Fund
2,164,208 PIMCO Total Return Admin Fund Mutual Fund 22,426,234 22,637,614
727,502 Templeton International Fund Mutual Fund 7,024,169 6,729,398
539,166 Galaxy Small Cap Value Fund Mutual Fund 7,339,564 7,823,302
7,335,845 State Street Bank Various GIC held at State
Street; due 9/15/05 7,335,845 7,335,845
-------------
Lifestyle Moderate
Subtotal 54,436,751
-------------
12
401K PROFIT SHARING PLAN OF CVS CORPORATION
Schedule of Assets Held for Investment Purposes at End of Year (Continued)
December 31, 2001
Par value/ Identity
number of of Current
Fund shares issue Description Cost value
------------------------- ---------- --------------------------------------- ----------- ------------- -------------
Lifestyle Aggressive 67,299 Vanguard Institutional Index Trust 500
Portfolio Fund Mutual Fund $ 7,581,469 7,059,042
1,526,591 PIMCO Funds Return Admin Fund Mutual Fund 15,769,666 15,968,140
1,152,147 Templeton International Fund Mutual Fund 11,180,689 10,657,356
1,713,596 Galaxy Small Cap Value Fund Mutual Fund 23,390,247 24,864,281
------------
Lifestyle Aggressive Subtotal 58,548,819
------------
International Equity Fund 3,077,966 Templeton International Fund Mutual Fund 29,847,385 28,471,183
------------
Core Equity Fund 1,449,318 Vanguard Institutional Index Trust 500
Portfolio Fund Mutual Fund 162,401,905 152,018,975
------------
Growth & Income Fund 8,922,418 J & W Seligman Large Cap Value Mutual Fund 116,715,997 124,884,350
------------
Large Cap Growth Fund 13,026,547 Columbus Circle Core Equity Fund Mutual Fund 146,709,153 159,864,139
------------
Small Cap Growth Fund 1,251,571 Invesco Small Company Growth Fund Mutual Fund 17,523,935 15,194,070
------------
Diversified Bond Fund 3,107,378 PIMCO Total Return Admin Fund Mutual Fund 32,919,479 32,503,177
------------
Small Cap Value Fund 3,731,135 Galaxy Small Cap Value Fund Mutual Fund 52,709,471 54,138,769
------------
Global Equity Fund 985,795 Janus Worldwide Fund Mutual Fund 64,943,559 43,217,252
------------
Investment Contract Fund 185,363,230 State Street Bank Various GICs held
at State Street
due;
09/15/05 185,363,230 185,363,230
-------------
13
401K PROFIT SHARING PLAN OF CVS CORPORATION
Schedule of Assets Held for Investment Purposes at End of Year (Continued)
December 31, 2001
Par value/ Identity
number of of Current
Fund shares issue Description Cost value
------------------- ----------- ------------------------------------ ------------------ ---------- ---------------
CVS Stock Fund 1,436,784 CVS Corporation Common Stock Fund* Common Stock 28,760,055 42,528,806
1,776,987 Bank of New York* Collective short
term investment
fund non-
discretionary 1,776,987 1,776,987
-------------
44,305,793
-------------
$ 1,016,090,549
=============
*Party-in-interest
See accompanying independent auditor's report.
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee
(or other persons who administer the employee benefit plan) have duly caused
this annual report to be signed on its behalf by the undersigned thereunto duly
authorized.
401(K) PROFIT SHARING PLAN OF CVS
CORPORATION
Date: June 28, 2002 By: /s/ David B. Rickard
--------------------
David B. Rickard
Executive Vice President, Chief
Financial Officer and Chief
Administrative Officer
EXHIBIT INDEX
Exhibit Description
------- -----------
23 Consent of Independent Accounts
15