<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration No. 333-31449
14,500,000 Shares
CVS LOGO
CVS Corporation
Common Stock
(par value $.01 per share)
------------------
All of the shares of Common Stock, par value $.01 per share (the "Common Stock")
of CVS Corporation, a Delaware corporation ("CVS" or the "Company"), offered
hereby are being sold by the Selling Stockholders named herein under "Selling
Stockholders". The Company will not receive any proceeds from the sale of shares
by the Selling Stockholders and the Company will bear certain expenses relating
to the registration and sale of the shares. Of the 14,500,000 shares of Common
Stock being offered, 12,300,000 shares are initially being offered in the United
States and Canada (the "U.S. Shares") by the U.S. Underwriters (the "U.S.
Offering") and 2,200,000 shares are initially being concurrently offered outside
the United States and Canada by the Managers (the "International Offering" and,
together with the U.S. Offering, the "Offering"). The offering price and
underwriting discounts and commissions of the U.S. Offering and the
International Offering are identical. The Selling Stockholders received the
shares offered hereby in connection with the merger of CVS and Revco D.S. Inc.
("Revco") which was consummated on May 29, 1997 (the "Merger").
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol "CVS." The last reported sale price of the Common Stock on the NYSE
Composite Tape on July 23, 1997 was $54 per share. See "Price Range of Common
Stock and Dividend Policy."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds
Price to Discounts and to Selling
Public Commissions Stockholders(1)
--------------- --------------- ---------------
<S> <C> <C> <C>
Per Share..................................... $54.00 $1.62 $52.38
Total(2)...................................... $783,000,000 $23,490,000 $759,510,000
</TABLE>
- - ---------------
(1) Before deduction of expenses payable by the Selling Stockholders estimated
at $50,000. The Company will pay expenses related to the Offering estimated
at $650,000.
(2) The Selling Stockholders have granted the U.S. Underwriters and the Managers
an option, exercisable by Credit Suisse First Boston Corporation for 30 days
from the date of this Prospectus, to purchase a maximum of 1,341,755
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $855,454,770,
Underwriting Discounts and Commissions will be $25,663,643 and Proceeds to
Selling Stockholders will be $829,791,127. See "Selling Stockholders."
The U.S. Shares are offered by the several U.S. Underwriters when, as and
if delivered to and accepted by the U.S. Underwriters and subject to their right
to reject orders in whole or in part. It is expected that the U.S. Shares will
be ready for delivery on or about July 29, 1997, against payment in immediately
available funds.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN
WITTER
SALOMON BROTHERS INC
Prospectus dated July 23, 1997.
<PAGE> 2
[MAP OF CVS STORE LOCATIONS AS OF JUNE 30, 1997]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference:
SEC FILINGS (FILE NO. 1-1011)
(i) CVS' Annual Report on
Form 10-K.............. Year ended December 31,
1996 (amended by Form
10-K/A filed April 17,
1997)
(ii) CVS' Quarterly Report
on Form 10-Q........... Quarter ended March 31,
1997
(iii) CVS' Current Reports on
Form 8-K............... Filed on October 28, 1996,
February 7, 1997, March 26,
1997, May 30, 1997, July
16, 1997 and July 17, 1997
(iv) The description of the
Common Stock set forth
in CVS' Registration
Statement on Form
8-B.................... Filed on November 4, 1996
(v) The supplemental
consolidated financial
statements of CVS and
related supplemental
schedule and
Management's Discussion
and Analysis of
Financial Condition and
Results of Operations
contained in CVS'
Current Report on Form
8-K..................... Filed July 17, 1997
(amended by
Form 8-K/A filed July 23,
1997)
All documents filed with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the date of this Prospectus and prior to the termination of the
offering shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents. Any statement
contained in any document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge to
each person, including any beneficial owner, to whom this Prospectus is
delivered, upon written or oral request of such person, a copy of any and all of
the documents that have been or may be incorporated by reference herein (other
than exhibits to such documents which are not specifically incorporated by
reference into such documents). Such requests should be directed to Attention:
Nancy R. Christal, Vice President, Investor Relations, CVS Corporation, 670
White Plains Road, Suite 210, Scarsdale, New York 10583, (800) 201-0938.
3
<PAGE> 4
THE COMPANY
GENERAL
CVS is a leader in the chain drug store industry in the United States. As
of June 30, 1997, the Company operated 3,924 stores in 24 states and the
District of Columbia in the Northeast, Mid-Atlantic, Midwest and Southeast
regions, making CVS the largest drug store chain in the nation in terms of store
count. The Company's stores are well positioned, operating in 48 of the top 100
markets in the country. CVS commands the number one or two share position in
approximately 80% of these markets. In addition, CVS is among the industry
leaders in terms of store productivity and operating profit margin.
A primary focus of the Company's operations is its pharmacy business, which
has grown at double digit rates during the past several years and which
represented approximately 51% of 1996 sales as restated for the Merger. In 1996,
after giving effect to the Merger, CVS dispensed over 7% of all prescriptions in
the United States making it the largest drug store chain in terms of
prescriptions filled and pharmacy sales. The Company believes that its pharmacy
operations will continue to represent a growing portion of its sales and
profitability due to (a) the demographic trend toward an aging population, (b)
the continued development of new pharmaceutical products and services, (c) the
continued shift towards managed care and (d) the Company's innovative solutions
approach to attracting and providing services to managed care programs.
In addition to prescription drugs and services, the Company offers a broad
selection of general merchandise, presented in a well-organized fashion, in
stores that are designed to be warm, inviting and easy to shop. Merchandise
categories include, among other things, over-the-counter drugs, greeting cards,
film and photofinishing services, beauty and cosmetics, seasonal merchandise and
convenience foods.
On February 6, 1997, CVS signed a definitive merger agreement (the "Merger
Agreement") to merge with Revco in a stock-for-stock merger valued at
approximately $2.9 billion. CVS also assumed approximately $900 million of Revco
debt as part of the transaction. See "Recent Developments -- Retirement of Revco
Debt Following the Merger." Under the terms of the Merger Agreement, on May 29,
1997, CVS merged with Revco in an exchange of stock that qualified as a pooling
of interests transaction. For each share of Revco common stock held, Revco
shareholders received 0.8842 shares of CVS Common Stock. Unless the context
otherwise indicates, references hereinafter to CVS and the Company refer to CVS
and its subsidiaries, including Revco.
The Company's principal executive offices are located at One CVS Drive,
Woonsocket, Rhode Island 02895, telephone (401) 765-1500.
GROWTH STRATEGIES
The Company focuses on a number of initiatives as part of its strategy to
achieve continued growth and build shareholder value. These initiatives are
directed toward driving top-line revenue growth, improving operating
efficiencies and achieving appropriate returns on capital deployed, and include
the following:
Aggressive Store Development
CVS believes there is substantial opportunity to increase the Company's
sales and earnings through an aggressive store development program primarily in
existing markets. The Company anticipates opening approximately 250 new or
relocated stores in 1997 (of which 97 new and 44 relocated stores had been
opened as of June 28, 1997) and approximately 300 new or relocated stores in
1998. Management anticipates that almost all of the planned store openings will
be based on CVS' 10,125 square foot freestanding store prototype, which includes
a drive-through pharmacy. The Company has targeted square footage growth of
between 4% and 5% annually. See "-- Cautionary Statement Concerning
Forward-Looking Statements."
Management expects that relocations of existing in-line strip center stores
to freestanding locations will account for approximately 50% of store openings
over the next several years. As a result of their more convenient locations and
larger size, relocated stores have historically realized significant improvement
in customer count and revenues, driven largely by increased sales of higher
margin front store merchandise.
4
<PAGE> 5
Management believes that relocations offer a significant future growth
opportunity as currently less than 20% of the Company's stores are in
freestanding locations.
Finally, the Company believes that achieving a critical mass in terms of
store count and locating stores in desirable geographic markets is essential to
competing effectively in the context of the current managed care environment
described more fully below. As a result, management believes that the Company's
store development program is an important element of its ability to maintain its
leadership position in the chain drug store industry.
Integrated Health Care Provider
CVS believes that the growth of its pharmacy business will continue to be
driven by the shift toward managed care plans as a means of controlling
healthcare costs. In 1996, third party pharmacy sales represented approximately
76% of the Company's total pharmacy sales as restated for the Merger. The growth
of managed care has substantially increased the use of prescription drugs, as
managed care providers have (i) made the cost of prescription drugs more
affordable to a greater number of people and (ii) supported prescription drug
therapy as an alternative to more expensive surgery or other forms of treatment.
The Company is committed to being an important part of an integrated healthcare
system that brings together industry participants as partners in an effort to
provide patients with the highest level of service at the lowest possible cost.
As a result, the Company has made investments in store development, technology,
infrastructure and strategic business units to enhance its healthcare
partnerships and allow it to benefit from the growth of managed care.
The Company's advanced client server RX2000 pharmacy computer system,
coupled with one of the industry's largest pharmacy data warehouses, enables CVS
to provide its managed care partners with a high level of information to
evaluate treatment outcomes, thereby increasing their ability to improve patient
care and contain costs. CVS' data warehouse currently maintains information on
20 million patients and 170 million prescriptions, and will be greatly enhanced
when CVS completes the integration of Revco's pharmacy computer system. In
addition, the Company's proprietary Clinical Information Management System
("CIMS") enables CVS' pharmacists to communicate directly with physicians in an
effort to identify and recommend less expensive generic drug substitutes for
patients. Through CIMS, CVS' pharmacists have access to patient histories from
prescription data, medical claims and survey responses.
PharmaCare, the Company's pharmacy benefits management company ("PBM"), was
established in 1994 and offers managed care providers a wide array of
prescription benefits management services, including plan design, claims
processing, generic substitution, formulary management and innovative risk
sharing arrangements. PharmaCare currently manages these services for 1.7
million lives through a network of approximately 40,000 pharmacies nationwide.
The Merger provides PharmaCare with the ability to enhance its service offering
through Revco's advanced mail service facility which provides service to 6.5
million lives.
Effective Execution at Retail
The Company's front-store merchandising strategies are designed to improve
customer satisfaction, selection and convenience, and establish CVS stores as a
destination for a growing number of front-store merchandise categories. CVS'
10,125 square-foot free-standing prototype stores have enabled the Company to
improve store layout, convenience and selection (through the addition of product
categories and the enhancement of assortments within product categories). In
addition, over the past several years, the Company has made significant
investments in systems and technology to more effectively respond to customer
needs, manage inventory and control costs.
Through its point-of-sale scanning technology, CVS has developed an
advanced retail data warehouse of information that has enabled the Company to
adopt a category management approach to front-end merchandising. Through
category management, CVS works in partnership with major suppliers to refine and
tailor assortments within product categories to the specific purchasing
preferences of customers within each market. Category management enables the
Company to analyze the impact of pricing, promotion and mix on a category's
sales and profitability and develop tactical merchandising plans for each
category by market.
5
<PAGE> 6
Among CVS' key destination categories are over-the-counter drugs, greeting
cards, film and photofinishing services, beauty and cosmetics and convenience
foods.
The Company believes that effective category management increases customer
satisfaction and that its category management approach has been a primary factor
in its strong front-store comparable sales gains and improved gross margins. In
addition, the Company believes that its ability to satisfy customers through
category management will be enhanced through its recent implementation of supply
chain management. Supply chain management is designed to more effectively link
CVS' stores and distribution centers with suppliers to speed the delivery of
merchandise to CVS stores in a manner that both reduces out-of-stock positions
and lowers CVS' investment in inventory. The Company expects to see tangible
benefits of its supply chain management project beginning in 1998.
CVS' ability to satisfy customers through advanced merchandising and
product replenishment is supported by the Company's emphasis on maintaining
friendly and helpful associates in CVS stores and throughout the entire CVS
organization. CVS measures customer service continuously in order to identify
and correct service problems quickly. Each CVS store receives a formal customer
evaluation twice a year based upon the Company's mystery shopper program,
customer letters and calls and market research.
EXPECTED BENEFITS OF THE MERGER
The Merger brought together two leading drug store chains that each had
strong operating records. See "Selected Historical Consolidated Financial and
Operating Data." Importantly, the Merger met each of CVS' three criteria for
strategic acquisitions: (i) acquisitions should be accretive to earnings before
one-time charges, (ii) acquisitions should enable CVS to achieve a leadership
position in new markets and (iii) there should exist upside potential to improve
the operations and profitability of an acquired business.
CVS expects that the Merger will be accretive to earnings (before one-time
charges) in the first full year of combined operations, and expects to realize
cost savings of approximately $100 million annually beginning in 1998. The
Company expects to achieve these savings principally through the closing of
Revco's headquarters, economies of scale in advertising, distribution and other
areas, and spreading its investment in information technology over a broader
store base. See "-- Cautionary Statement Concerning Forward-Looking Statements."
The combination added approximately 2,500 new stores in ten new states to
CVS' existing store base and enabled the Company to enter new, high growth
contiguous geographic markets in the Southeast and Midwest, which management
believes will enhance the Company's ability to sustain its long-term growth. The
Company, as of June 30, 1997, had 3,924 stores in 24 states and the District of
Columbia. The Company's stores are well positioned, operating in 48 of the top
100 markets in the country. CVS holds the number one or two share position in
approximately 80% of these markets.
Finally, management believes that the Merger offers significant upside
potential, through the opportunity for CVS to narrow the gap between the
performance level of Revco stores and that of CVS stores. For example, Revco's
sales per square foot have been significantly lower than CVS'. In addition, for
the first half of 1997, Revco's prescriptions filled per store were
approximately 20% lower than CVS' and the increase in Revco's front store
comparable store sales was approximately 400 basis points lower than CVS'. Since
CVS and Revco operate in different markets in terms of population density and
per capita income, the Company does not expect to bring Revco stores up to the
performance level of CVS stores. Management believes however, that it can narrow
the gap significantly. The Merger should also provide significant opportunities
to attract and maintain managed care business. In particular, management
believes that the Merger provides an opportunity to make the Company's
infrastructure more cost efficient due to higher volumes. In addition,
management believes the Company's expanded geographic reach will strengthen its
ability to offer more competitive services to managed care providers.
Management believes that the compatibility of the companies, given their
similarity in store size as well as merchandising strategy, should facilitate
integration of the CVS and Revco businesses.
6
<PAGE> 7
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Prospectus contains and incorporates by reference certain
forward-looking statements that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future results of
operations, cost savings and synergies of CVS following the Merger and
concerning the ability of CVS to elevate the performance level of Revco stores
following the Merger and those preceded by, followed by or that otherwise
include the words "believes", "expects", "anticipates", "intends", "estimates"
or similar expressions. For those statements, CVS claims the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors, in addition to
those discussed elsewhere in this document and in the documents which are
incorporated by reference, could affect the future results of CVS and could
cause those results to differ materially from those expressed in the
forward-looking statements: materially adverse changes in economic conditions
generally in the markets served by CVS; future regulatory and legislative
actions affecting the industry; competition from other drugstore chains, from
alternative distribution channels such as supermarkets, membership clubs, other
retailers and mail order companies and from other third party plans; and the
continued efforts of HMOs, managed care organizations, PBM companies and other
third party payors to reduce prescription drug costs. The forward looking
statements referred to above are also subject to uncertainties and assumptions
relating to the operations and results of operations of CVS following the
Merger, including: risks relating to CVS' ability to combine the businesses of
two major corporations and maintain current operating performance levels during
the integration period and the challenges inherent in diverting CVS' management
focus and resources from other strategic opportunities and from operational
matters for an extended period of time; CVS' ability to secure suitable new
store locations on favorable lease terms; CVS' ability to attract, hire and
retain suitable pharmacists and management personnel; relationships with
suppliers and CVS' ability to continue to purchase inventory on favorable terms;
and the impact of inflation.
7
<PAGE> 8
RECENT DEVELOPMENTS
SECOND QUARTER EARNINGS
Net sales for the second quarter of 1997 increased 18.2% to $3.2 billion
from sales of $2.7 billion for the second quarter last year. Same store sales,
including CVS' and Revco's results, rose 9.0%. Pharmacy same store sales rose
16.8% for the combined company. Pharmacy sales represented 54% of total sales
for the quarter. Same store sales for CVS alone rose 8.6% in the second quarter,
while Revco same store sales rose 9.5%.
Operating profit, before consideration of the 1997 Second Quarter One-Time
Charge (as defined herein), increased 17.2% to $180.7 million from $154.2
million in the comparable period last year, which excludes the 1996 One-Time
Charge (as defined herein). Earnings from continuing operations, excluding the
1997 Second Quarter One-Time Charge, increased 20.5% to $92.8 million, or $.52
per share, from $77.0 million, or $.44 per share, during the comparable period
in 1996 excluding: (i) the one-time $12.8 million charge pre-tax, $6.5 million
after-tax, or $.04 per share, resulting from the failed acquisition of Revco by
Rite Aid Corporation (the "1996 One-Time Charge") and (ii) a $44.1 million, or
$.27 per share, after-tax gain from the sale of certain shares of TJX Companies,
Inc. After consideration of the after-tax impact of the 1997 Second Quarter
One-Time Charge, the net loss from continuing operations was $230.8 million, or
$1.37 per share.
During the second quarter of 1997, the Company recorded one-time merger
related charges for the following: (i) $411.7 million pre-tax, $278.6 million
after-tax, or $1.63 per share, for merger fees, employee severance associated
with the closing of Revco's headquarters and exit costs associated with certain
store closings and the Revco headquarters; and (ii) $75.0 million pre-tax, $45.0
million after-tax, or $0.26 per share, for inventory markdowns on non-compatible
Revco merchandise. These charges totaling $486.7 million pre-tax, $323.6 million
after-tax, or $1.89 per share, are collectively referred to as the "1997 Second
Quarter One-Time Charge." In addition, the Company recorded an after-tax charge
of $17.1 million, or $.10 per share, related to the early extinguishment of
certain Revco debt assumed as a result of the Merger, as discussed below. This
charge has been classified as an extraordinary item on the Company's
Consolidated Condensed Statement of Operations.
RETIREMENT OF REVCO DEBT FOLLOWING THE MERGER
As a result of the Merger, CVS assumed approximately $900 million of Revco
debt, consisting of approximately $600 million of bank debt and approximately
$300 million of high coupon long-term debt. On May 30, 1997, the Company repaid
the $600 million of debt outstanding under Revco's revolving credit facility,
which was subsequently terminated (the "Bank Debt Repayment"). On June 30, 1997,
the Company redeemed $144,948,000 aggregate principal amount of Revco's 10 1/8%
Senior Notes due June 1, 2002 (the "Debt Redemption") at 105% of the principal
amount thereof plus accrued interest. In addition, on June 25, 1997, the Company
commenced an offer (the "Debt Tender Offer") to purchase for cash $140,000,000
aggregate principal amount of Revco's 9 1/8% Senior Notes due 2000 (the "9 1/8%
Notes"). The Debt Tender Offer expired on July 2, 1997 and $118,798,000
aggregate principal amount of the 9 1/8% Notes was repurchased at an average
price of 104.72% principal amount plus accrued interest. The Company expects to
redeem the remaining 9 1/8% Notes outstanding by January 15, 1998, the first
redemption date, at 103% of principal amount plus accrued interest. The Bank
Debt Repayment, Debt Redemption and Debt Tender Offer were financed with cash on
hand and borrowings under the CVS Corporation Commercial Paper Program and will
reduce the Company's future interest expense.
8
<PAGE> 9
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the NYSE under the symbol "CVS". The table
below sets forth, for the calendar quarters indicated, the reported high and low
sale prices of the Common Stock as reported on the NYSE Composite Transaction
Tape and the cash dividends declared by the Company per share of Common Stock.
In October 1996, CVS distributed 100% of the common stock of Footstar, Inc.
("Footstar"), formerly a wholly owned subsidiary of CVS, in the form of a stock
dividend, to its stockholders. The stock prices shown in the table are actual
trading prices of CVS Common Stock and do not reflect any adjustment for the
trading value of Footstar when it commenced trading on the NYSE on October 16,
1996.
<TABLE>
<CAPTION>
MARKET PRICE CASH
------------- DIVIDENDS
HIGH LOW DECLARED
--- --- ---------
<S> <C> <C> <C>
1995
First Quarter.................................................. $37 1/2 $30 5/8 $0.38
Second Quarter................................................. 39 7/8 33 5/8 0.38
Third Quarter.................................................. 37 1/4 32 3/4 0.38
Fourth Quarter................................................. 37 1/8 28 5/8 0.38
1996
First Quarter.................................................. $36 3/8 $27 1/4 $0.11
Second Quarter................................................. 44 1/2 35 1/4 0.11
Third Quarter.................................................. 46 36 5/8 0.11
Fourth Quarter................................................. 44 3/4 36 3/8 0.11
1997
First Quarter.................................................. $48 $39 $0.11
Second Quarter................................................. 53 3/4 44 1/4 0.11
Third Quarter (through July 23, 1997).......................... 55 7/16 50 7/8 0.11
</TABLE>
On July 23, 1997, the last reported sale price of the Common Stock was $54.
As of June 30, 1997, there were approximately 10,475 holders of record of the
Common Stock.
Future dividends on the Common Stock will depend upon the Company's results
of operations, financial condition, capital expenditure program and other
factors, some of which are beyond the Company's control. There can be no
assurance as to whether or when the Company's Board of Directors will change the
current policy regarding dividends.
USE OF PROCEEDS
CVS will not receive any proceeds from the sale of shares by the Selling
Stockholders.
9
<PAGE> 10
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
29, 1997 (i) as restated for the Merger under the pooling of interests method of
accounting and (ii) as adjusted to give effect to the Bank Debt Repayment, Debt
Redemption and Debt Tender Offer. The Bank Debt Repayment, Debt Redemption and
Debt Tender Offer were financed with cash on hand as well as from borrowings
under the CVS Corporation Commercial Paper Program. The table should be read in
conjunction with CVS' supplemental consolidated financial statements and notes
thereto and supplemental Management's Discussion and Analysis of Financial
Condition and Results of Operations incorporated by reference herein.
<TABLE>
<CAPTION>
MARCH 29, 1997
-----------------------------
RESTATED AS ADJUSTED
------------ ------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Short-term debt:
Commercial paper.............................................. $ -- $ 537.1
------------ ------------
Total short-term debt...................................... $ -- $ 537.1
------------ ------------
Long-term debt:
Revolving credit facility..................................... $ 588.7 $ --
Guaranteed 8.52% ESOP note.................................... 292.1 292.1
9.125% Senior Notes due 2000.................................. 140.0 21.1
10.125% Senior Notes due 2002................................. 144.9 --
Other......................................................... 11.8 11.8
------------ ------------
Total long-term debt....................................... $ 1,177.5 $ 325.0
------------ ------------
Shareholders' equity:
Preference stock, $1 par value; 50 million shares authorized;
5.5 million shares issued and outstanding.................. $ 296.3 $ 296.3
Common stock, $.01 par value; 300 million shares authorized;
172.9 million shares issued and outstanding................ 1.7 1.7
Treasury stock at cost, 5.8 million shares.................... (271.2) (271.2)
Guaranteed ESOP obligation.................................... (292.1) (292.1)
Capital surplus............................................... 900.1 900.1
Retained earnings............................................. 1,658.8 1,658.8
Other......................................................... (2.4) (2.4)
------------ ------------
Total shareholders' equity................................. $ 2,291.2 $ 2,291.2
------------ ------------
Total capitalization....................................... $ 3,468.7 $ 3,153.3
=========== ===========
</TABLE>
10
<PAGE> 11
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN MILLIONS, EXCEPT OPERATING DATA)
The following tables set forth selected historical consolidated financial
and operating data for CVS and Revco as separate entities prior to the Merger.
The selected historical consolidated financial and operating data for CVS has
been derived from the consolidated financial statements of CVS. The historical
consolidated financial statements of CVS as of and for the three years ended
December 31, 1996 are incorporated herein by reference to CVS' Annual Report on
Form 10-K for the year ended December 31, 1996, as amended by Form 10-K/A filed
April 17, 1997. The historical consolidated financial statements of CVS for the
three years ended December 31, 1996 have been audited by KPMG Peat Marwick LLP,
independent accountants whose audit report is also incorporated herein by
reference. The selected historical consolidated financial and operating data for
CVS should be read in conjunction with the historical consolidated financial
statements and related notes thereto incorporated by reference herein. The
selected historical consolidated financial and operating data for Revco has been
derived from the consolidated financial statements of Revco contained in filings
by Revco with the Commission. The consolidated financial statements of Revco as
of and for the three fiscal years ended June 1, 1996 have been audited by Arthur
Andersen LLP. On May 29, 1997, CVS was merged with Revco. The selected
historical consolidated financial and operating data of CVS and Revco contained
herein is not necessarily indicative of future results of CVS and its
subsidiaries, including Revco, following the Merger. For selected financial data
for CVS and its subsidiaries, including Revco, as restated for the Merger in
accordance with the pooling of interests method of accounting, see "Selected
Supplemental Consolidated Financial Data."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, ---------------------------
-------------------------------------------------------- MARCH 30, MARCH 29,
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CVS
Historical Consolidated Statement of
Operations Data:
Net sales............................ $3,632.1 $3,948.2 $4,330.1 $4,865.0 $5,528.1 $1,258.4 $ 1,515.0
Gross profit......................... 976.8 1,054.1 1,241.9 1,358.6 1,550.0 362.0 431.3
Operating profit(1).................. 134.4 177.1 183.8 8.6 299.6 71.4 94.6
Income (loss) from continuing
operations(1)...................... 65.7 91.9 90.3 (26.5) 239.6 40.6 58.4
Historical Consolidated Operating Data:
Percentage increase in comparable
store sales(2)..................... 6.1% 5.7% 6.1% 8.8% 10.9% 9.1% 15.5%
Operating profit margin(3)........... 5.3% 4.5% 4.2% 4.6% 5.4% 5.7% 6.3%
Number of stores (at period end)..... 1,221 1,284 1,328 1,366 1,408 1,367 1,424
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTY-SIX WEEKS ENDED
-------------------------------------------------------- ---------------------------
MAY 30, MAY 29, MAY 28, JUNE 3, JUNE 1, FEBRUARY 10, FEBRUARY 8,
1992(6) 1993 1994 1995 1996 1996 1997(5)
-------- -------- -------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVCO
Historical Consolidated Statement of
Operations Data:
Net sales............................ $2,086.3 $2,242.1 $2,504.0 $4,431.9 $5,087.7 $3,457.0 $ 3,944.6
Gross profit......................... 625.2 673.8 762.0 1,331.8 1,494.2 1,012.3 1,134.1
Operating profit(4).................. 45.8 76.0 100.5 175.7 206.2 128.3 118.7
Income (loss) from continuing
operations(4)(6)................... (337.6) 14.2 38.7 61.1 76.2 44.6 41.8
Historical Consolidated Operating Data:
Percentage increase in comparable
store sales(2)..................... 9.3% 6.3% 8.5% 9.4% 8.0% 8.3% 7.3%
Operating profit margin(3)........... 2.2% 3.4% 4.0% 4.0% 4.3% 3.7% 3.8%
Number of stores (at period end)..... 1,143 1,190 1,248 2,118 2,184 2,184 2,593
</TABLE>
11
<PAGE> 12
- - ---------------
(1) CVS' operating profit was reduced by $59.4 million in 1992 and $215.0
million in 1995 due to realignment charges, restructuring charges and a
change in accounting estimate. These charges also reduced income from
continuing operations by $35.1 million in 1992 and $126.8 million in 1995.
(2) Comparable store sales data is calculated based on the change in sales
commencing after a new store has been opened twelve months. The first twelve
months a store is open are not included in the comparable store calculation.
Relocations are included in comparable store sales.
(3) Operating profit margin is computed by dividing operating profit, after
adding back the adjustments identified in Note 1 for CVS and in Note 4 for
Revco, by each company's sales for such period.
(4) In 1996, non-recurring charges for Revco reduced operating profit by $12.6
million and income from continuing operations by $6.5 million. For the
thirty-six weeks ended February 8, 1997, non-recurring charges for Revco
related to the restructuring of Big B, Inc. ("Big B") reduced operating
profit by $31.0 million and income from continuing operations by $18.6
million.
(5) On November 15, 1996, Revco acquired Big B, for a purchase price of $423.2
million, including the assumption of $49.3 million of debt. Such acquisition
was accounted for under the purchase method of accounting.
(6) In 1992, Revco implemented "Fresh Start Reporting" upon emerging from
Chapter 11 bankruptcy. A charge of $356.9 million was recorded to adjust
Revco's assets to fair value and to record certain other charges associated
with the reorganization.
12
<PAGE> 13
SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected consolidated financial data for CVS
and its subsidiaries, as restated for the Merger in accordance with the pooling
of interests method of accounting. The selected supplemental consolidated
financial data has been derived from the supplemental consolidated financial
statements of CVS contained in the Company's Current Report on Form 8-K filed on
July 17, 1997 and incorporated herein by reference. The audited supplemental
consolidated financial statements of the Company for the three years ended
December 31, 1996 have been audited by KPMG Peat Marwick LLP, independent public
accountants, whose audit report, based on their audits and the report of Arthur
Andersen LLP, is also incorporated herein by reference. The supplemental
consolidated financial data of the Company as of and for the quarters ended
March 31, 1997 and 1996 include all adjustments consisting only of normal
recurring adjustments necessary for a fair presentation of the operating results
and financial position as of and for such unaudited periods. Such results are
not necessarily indicative of results of the full year. In addition, the
selected supplemental consolidated financial data of CVS contained herein is not
necessarily indicative of future results of CVS and its subsidiaries, including
Revco, following the Merger. In particular, pursuant to an agreement with the
Federal Trade Commission, the Company is required to divest 120 Revco stores,
primarily in the Richmond, Virginia area, of which 114 stores have been divested
as of June 30, 1997. The selected supplemental consolidated financial data
should be read in conjunction with the supplemental consolidated financial
statements and related notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, -----------------------
----------------------------------- MARCH 30, MARCH 29,
1994(1) 1995 1996(3) 1996 1997
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Supplemental Consolidated Statement
of Operations Data:
Net sales.......................... $8,762.0 $9,763.4 $10,944.8 $2,558.2 $3,160.8
Gross margin....................... 2,500.0 2,746.9 3,052.1 736.0 900.1
Operating expenses................. 2,123.7 2,516.2(2) 2,511.3(4) 590.9 739.0 (5)
Operating profit................... 376.3 230.7(2) 540.8(4) 145.1 161.1 (5)
Interest expense, net.............. (85.9) (114.5) (75.7) (19.6) (12.9)
Earnings from continuing operations
before income taxes and
extraordinary item.............. 290.4 116.2(2) 592.1(4) 128.2 148.2 (5)
Net earnings (loss)................ $ 375.7 $ (572.8) $ 176.6 $ 46.0 $ 82.7
======= ======= ======== ======= =======
Preferred dividends, net........... (17.0) (17.0) (14.5) (3.3) (3.5)
Net earnings (loss) available to
common shareholders............. $ 358.7 $ (589.8) $ 162.1 42.7 79.2
======= ======= ======== ======= =======
Net earnings (loss) per common
share........................... $ 2.20 $ (3.59) $ 0.98 $ 0.26 $ 0.47
Dividends per common share......... $ 1.52 $ 1.52 $ 0.44 $ 0.11 $ 0.11
Weighted average common shares
outstanding..................... 163.1 164.4 166.7 165.2 169.3
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------- MARCH 29,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Supplemental Consolidated Balance Sheet Data:
Net working capital........................................ $ 1,317.7 $ 1,406.1 $1,525.8
Total assets............................................... 6,335.6 5,693.7 5,632.4
Total debt................................................. 1,079.6 1,184.3 1,177.5
Shareholders' equity....................................... 2,392.8 2,196.4 2,291.2
</TABLE>
13
<PAGE> 14
- - ---------------
(1) Prior to the Merger, Revco's fiscal year ended on the Saturday closest to
May 31. In recording the business combination, Revco's consolidated
financial statements for the fiscal years ended June 1, 1996 and June 3,
1995 have been restated to a year ended December 31, to conform with CVS'
fiscal years. As permitted by the rules and regulations of the Commission,
Revco's fiscal year ended June 3, 1995 has been combined with CVS' fiscal
year ended December 31, 1994. As a result, the supplemental consolidated
statements of shareholders' equity incorporated herein by reference include
an adjustment in 1995 to reduce the Company's combined retained earnings for
the net earnings of Revco for the five months ended June 3, 1995. Revco's
unaudited results of operations for the five months ended June 3, 1995
included net sales of $2.0 billion and earnings from continuing operations
of $44 million.
(2) Operating profit was reduced by $215.0 million in 1995 due to realignment
charges, restructuring charges and a change in accounting estimate by CVS.
These charges also reduced earnings from continuing operations before income
taxes and extraordinary items by $126.8 million in 1995.
(3) On November 15, 1996 Revco acquired Big B for a purchase price of $423.2
million including the assumption of $49.3 million of debt. Such acquisition
was accounted for under the purchase method of accounting.
(4) In 1996 operating profit was reduced by $12.6 million as a result of
non-recurring charges at Revco. Such charges also reduced earnings from
continuing operations before income taxes and extraordinary items by $6.5
million in 1996.
(5) For the three months ended March 29, 1997 there were non-recurring charges
related to the restructuring of Big B of $31.0 million pre-tax or $18.6
million after tax.
14
<PAGE> 15
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership (as defined in Rule 13d-3 of the Exchange Act) of Common Stock for
each Selling Stockholder as of July 14, 1997, and as adjusted to reflect the
sale of the Common Stock offered hereby.
<TABLE>
<CAPTION>
SHARES TO
BE SOLD IN
THE
OFFERING
---------- SHARES OF COMMON STOCK
SHARES OF COMMON STOCK TO BE BENEFICIALLY
BENEFICIALLY OWNED OWNED
BEFORE THE OFFERING AFTER THE OFFERING(2)
------------------------ -----------------------
NAME OF SELLING STOCKHOLDER NUMBER(1) PERCENTAGE NUMBER PERCENTAGE
- - -------------------------------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Zell/Chilmark Fund L.P................ 11,528,002(3) 6.8% 10,551,611 976,391 *
General Motors Employees Domestic
Group Pension Trust(4).............. 1,860,113 1.1 1,702,566 157,547 *
City of Los Angeles Fire and Police
Pension Systems(4).................. 1,051,800 * 962,715 89,085 *
Hughes Retirement Plans Trust(4)...... 820,072 * 750,614 69,458 *
Navy Exchange Service Command
Retirement Trust(4)................. 275,870 * 252,505 23,365 *
Western Union Telegraph Company
Pension Plan(4)..................... 215,757 * 197,483 18,274 *
Magten Asset Management Corp.......... 90,141(5) * 82,506 7,635 *
-
---------- ---- ---------- ---------
15,841,755 9.3% 14,500,000 1,341,755 *
========== ==== ========== ========= -
</TABLE>
- - ---------------
* Less than 1%.
(1) The shares of Common Stock shown were issued to the Selling Stockholders in
connection with the Merger.
(2) Assumes there is no exercise of the over-allotment option which the Selling
Stockholders have granted to the Underwriters with respect to 1,341,755
shares of Common Stock.
(3) Does not include 57,041 shares of Common Stock to be distributed to two
limited partners of Zell/Chilmark Fund L.P. immediately prior to the
Offering.
(4) Each of these amounts represents shares of Common Stock held in accounts
managed for the Selling Stockholder by Magten Asset Management Corp.
("Magten") and, accordingly, does not represent any other shares of Common
Stock held by or for the account of the Selling Stockholder.
(5) Includes shares of Common Stock held in accounts (i) managed by Magten on
behalf of various pension and/or profit sharing accounts of Magten or (ii)
beneficially owned or otherwise controlled by Mr. Talton R. Embry, the
Chairman and a director of Magten, as an individual or as a trustee. Does
not include 79,616 shares of Common Stock held in accounts managed by
Magten, which accounts are not participating in the Offering.
In connection with the Merger, the Company and the Selling Stockholders
among others entered into a Registration Rights Agreement dated as of May 29,
1997 (the "Registration Rights Agreement"), a copy of which is included as an
exhibit to the Registration Statement of which this Prospectus is a part.
Pursuant to the Registration Rights Agreement, CVS agreed to use its reasonable
best efforts to cause a registration statement relating to the shares acquired
by the Selling Stockholders in the Merger (the "Shelf Registration Statement")
to be declared effective within 15 days after the first public release by CVS of
the combined financial results of CVS and Revco and generally to keep such Shelf
Registration Statement continuously effective until the earliest of 12 months
(subject to certain extensions) after the date such Shelf Registration Statement
is declared effective, such time as all securities covered by the Registration
Rights Agreement have been sold or disposed of thereunder and such time as all
securities subject to the Registration Rights Agreement shall cease to be so
subject. Pursuant to a letter agreement dated as of June 24, 1997, the Company
and Zell/Chilmark Fund L.P., on behalf of itself and the other parties to the
Registration Rights Agreement, agreed that in lieu of the Shelf Registration
Statement a registration statement relating to an underwritten offering would be
filed on or about July 17, 1997. Subject to any restrictions contained in the
Underwriting Agreement, the parties to the Registration Rights Agreement may
also request that the Company promptly file a Shelf Registration Statement with
the Commission and use its reasonable best efforts to have such Shelf
Registration Statement declared effective as soon as practicable thereafter. CVS
has
15
<PAGE> 16
agreed to pay any and all expenses incidental to performance of or compliance
with any registration of shares of Common Stock received by the Selling
Stockholders and the other parties to the Registration Rights Agreement in
connection with the Merger, including, without limitation, (i) the fees,
disbursements and expenses of CVS' counsel and accountants (including in
connection with the delivery of opinions and/or comfort letters); (ii) all
expenses, including filing fees, in connection with the preparation, printing
and filing of the registration statement; (iii) the cost of printing or
producing any agreements among underwriters, underwriting agreements, and blue
sky or legal investment memoranda; (iv) the filing fees incidental to securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the securities to be disposed of; (v) transfer agents'
and registrars' fees and expenses in connection with such offering; (vi) all
security engraving and security printing expenses; (vii) all fees and expenses
payable in connection with the listing of the shares on any securities exchange
or automated interdealer quotation system on which the Common Stock is then
listed; and (viii) all reasonable fees and expenses of one legal counsel for the
Selling Stockholders, which legal counsel shall be selected by Selling
Stockholders owning a majority of the shares offered hereby; provided that
registration expenses shall exclude (x) all underwriting discounts and
commissions, selling or placement agent or broker fees and commissions, and
transfer taxes, if any, in connection with the sale of any securities, (y) the
fees and expenses of counsel for any Selling Stockholders (other than pursuant
to clause (viii)) and (z) all out-of-pocket costs and expenses of CVS incurred
in connection with the marketing of the shares in connection with any
underwritten offering.
16
<PAGE> 17
DESCRIPTION OF CAPITAL STOCK
The summary of the terms of the capital stock of CVS set forth below does
not purport to be complete and is qualified by reference to the certificate of
incorporation and bylaws of CVS (the "CVS Charter" and the "CVS Bylaws",
respectively).
AUTHORIZED CAPITAL STOCK
Under the CVS Charter, CVS' authorized capital stock consists of
300,000,000 shares of Common Stock, par value $.01 per share, 120,619 shares of
Cumulative Preferred Stock, par value $0.01 per share (the "CVS Preferred
Stock"), and 50,000,000 shares of Preference Stock, par value $1 per share (the
"CVS Preference Stock") (the CVS Preferred Stock and CVS Preference Stock being
referred to herein collectively as "Preferred Stock").
COMMON STOCK
As of July 14, 1997, there were 169,857,535 shares of Common Stock
outstanding (excluding treasury shares). The holders of Common Stock are
entitled to receive ratably, from funds legally available for the payment
thereof, dividends when and as declared by resolution of the Board of Directors,
subject to any preferential dividend rights granted to the holders of any
outstanding Preferred Stock. In the event of liquidation, each share of Common
Stock is entitled to share pro rata in any distribution of CVS' assets after
payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share of Common Stock held of record on the
applicable record date on all matters submitted to a vote of stockholders,
including the election of directors. In addition, holders of Series One ESOP
Convertible Preference Stock, $1 par value, of CVS ("CVS ESOP Preference Stock")
are entitled to vote on all matters submitted to a vote of holders of Common
Stock, voting together with the Common Stock as a single class. Each share of
CVS ESOP Preference Stock is entitled to the number of votes equal to the number
of shares of Common Stock into which such share of CVS ESOP Preference Stock
could be converted on the record date for the applicable meeting, which is
currently 1.2 votes (subject to adjustment in the case of certain dilutive
events).
Holders of Common Stock have no cumulative voting rights or preemptive
rights to purchase or subscribe for any stock or other securities and there are
no conversion rights or redemption rights or sinking fund provisions with
respect to the Common Stock. The outstanding shares of Common Stock are duly
authorized, validly issued, fully paid and nonassessable.
CVS PREFERRED STOCK AND CVS PREFERENCE STOCK
Upon consummation of the Merger, (i) approximately 5.38 million shares of
CVS ESOP Preference Stock were issued and outstanding and (ii) no other shares
of Preferred Stock were issued or outstanding. Under the CVS Charter, the Board
of Directors has the authority, without further stockholder approval but subject
to certain limitations set forth in the CVS Charter, to create one or more
series of Preferred Stock, to issue shares of Preferred Stock in such series up
to the maximum number of shares of the relevant class of Preferred Stock
authorized, and to determine the preferences, rights, privileges and
restrictions of any such series, including the dividend rights, voting rights,
rights and terms of redemption, liquidation preferences, the number of shares
constituting any such series and the designation of such series. Pursuant to
this authority, the Board of Directors could create and issue a series of
preferred stock with rights, privileges or restrictions, and adopt a stockholder
rights plan, having the effect of discriminating against an existing or
prospective holder of such securities as a result of such security holder
beneficially owning or commencing a tender offer for a substantial amount of
Common Stock. One of the effects of authorized but unissued and unreserved
shares of capital stock may be to render more difficult or discourage an attempt
by a potential acquiror to obtain control of CVS by means of a merger, tender
offer, proxy contest or otherwise, and thereby protect the continuity of CVS'
management. The issuance of such shares of capital stock may have the effect of
delaying, deferring or preventing a change in control of CVS without any further
action by the stockholders of CVS. CVS has no present intention to adopt a
shareholder rights plan, but could do so without shareholder approval at any
future time.
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Services, LLC is the transfer agent and registrar
for the Common Stock.
17
<PAGE> 18
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated July 23, 1997 (the "Underwriting Agreement"), the underwriters
named below (the "U.S. Underwriters") have severally but not jointly agreed to
purchase from the Selling Stockholders the following respective numbers of U.S.
Shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER U.S. SHARES
------------------------------------------------------------------------- -----------
<S> <C>
Credit Suisse First Boston Corporation................................... 2,460,000
Donaldson, Lufkin & Jenrette Securities Corporation...................... 2,460,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ 2,460,000
Morgan Stanley & Co. Incorporated........................................ 2,460,000
Salomon Brothers Inc..................................................... 2,460,000
----------
Total.......................................................... 12,300,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all of the U.S. Shares offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased. The Underwriting Agreement provides that, in the event of
a default by a U.S. Underwriter, in certain circumstances the purchase
commitments of the non-defaulting U.S. Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have entered into a Subscription
Agreement (the "Subscription Agreement") with the managers of the International
Offering (the "Managers") providing for the concurrent offer and sale of the
International Shares outside the United States and Canada. The closing of the
U.S. Offering is a condition to the closing of the International Offering and
vice versa.
The Selling Stockholders have granted to the U.S. Underwriters and the
Managers an option, exercisable by Credit Suisse First Boston Corporation,
expiring at the close of business on the 30th day after the date of this
Prospectus, to purchase up to 1,341,755 additional shares at the public offering
price less the underwriting discounts and commissions, all as set forth on the
cover page of this Prospectus. Such option may be exercised only to cover
over-allotments in the sale of the shares of Common Stock. To the extent such
option is exercised, each U.S. Underwriter and each Manager will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Common Stock being sold to the U.S.
Underwriters and the Managers as the number of U.S. Shares set forth next to
such U.S. Underwriter's name in the preceding table and as the number of
International Shares set forth next to such Manager's name in the corresponding
table in the Prospectus relating to the International Offering bears to the sum
of the total number of shares of Common Stock in such tables.
The Company and the Selling Stockholders have been advised by Credit Suisse
First Boston Corporation on behalf of the U.S. Underwriters that the U.S.
Underwriters propose to offer the U.S. Shares in the United States to the public
and in Canada on a private placement basis to certain institutions initially at
the public offering price set forth on the cover page of this Prospectus and,
through the Underwriters, to certain dealers at such price less a concession of
$1.00 per share, and the U.S. Underwriters and such dealers may allow a discount
of $0.10 per share on sales to certain other dealers. After the initial public
offering, the public offering price and concession and discount to dealers may
be changed by the Underwriters. The offering price and the aggregate
underwriting discounts and commissions per share and per share commission and
discount to dealers for the U.S. Offering and the concurrent International
Offering will be identical. Pursuant to an Agreement between the U.S.
Underwriters and Managers (the "Intersyndicate Agreement") relating to the
Offering, changes in the offering price, commission and reallowance to dealers
will be made only upon the mutual agreement of Credit Suisse First Boston
Corporation, on behalf of the U.S. Underwriters, and Credit Suisse First Boston
(Europe) Limited ("CSFBL"), on behalf of the Managers.
18
<PAGE> 19
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the shares of Common Stock to any person outside the United States
and Canada or to any other dealer who does not so agree. Each of the Managers
has agreed that, as part of the distribution of the International Shares and
subject to certain exceptions, it has not offered or sold and may not offer or
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the shares of Common Stock to any person in the United
States and Canada or to any other dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the Underwriters and the Managers pursuant to the Intersyndicate
Agreement. As used herein, "United States" means the United States of America
(including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction, "Canada" means Canada,
its provinces, territories, possessions and other areas subject to its
jurisdiction, and an offer or sale shall be in the United States or Canada if it
is made to (i) any individual resident in the United States or Canada or (ii)
any corporation, partnership, pension, profit-sharing or other trust or other
entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price less such amount agreed upon by Credit Suisse First Boston
Corporation, on behalf of the U.S. Underwriters, and CSFBL, on behalf of the
Managers, but not exceeding the selling concession applicable to such shares. To
the extent that there are sales between the U.S. Underwriters and the Managers
pursuant to the Intersyndicate Agreement, the number of shares of Common Stock
initially available for sale by the U.S. Underwriters or by the Managers may be
more or less than the amount appearing on the cover page of this Prospectus.
Neither the U.S. Underwriters nor the Managers are obligated to purchase from
the other any unsold shares of Common Stock.
The Company and the Selling Stockholders have agreed that during the period
beginning from the date of the Prospectus (as defined in the Underwriting
Agreement) and continuing to and including the date 90 days after the date of
the Prospectus not to offer, sell, contract to sell, grant any option to
purchase, establish a put equivalent position (as defined in Rule 1a-1(h) under
the Exchange Act), pledge or otherwise dispose of, directly or indirectly, or
file or cause the filing with the Commission of a registration statement under
the Securities Act of 1933, as amended, relating to, any shares of Common Stock,
or any securities that are substantially similar to the shares of Common Stock,
including but not limited to any securities that are convertible into or
exercisable or exchangeable for, or that represent the right to receive, shares
of Common Stock or any substantially similar securities or, in the case of the
Company publicly disclose the intention to make any such offer, sale, pledge or
disposal, without the prior written consent of Credit Suisse First Boston
Corporation, except (i) for private sales or similar transfers or distributions
so long as the purchaser thereof enters into a corresponding lockup agreement
with Credit Suisse First Boston Corporation for the then unexpired portion of
the 90-day period and (ii) in the case of the Company, for grants of employee
stock options or restricted stock pursuant to the terms of a plan in effect on
the date hereof, issuance of Common Stock pursuant to the exercise of such
options or the exercise of any other employee stock options outstanding on the
date hereof.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or contribute to payments which the U.S.
Underwriters may be required to make in respect thereof.
Credit Suisse First Boston Corporation, on behalf of the U.S. Underwriters
and the Managers, may engage in over-allotment, stabilizing transactions,
syndicate-covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate-covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriter to reclaim a selling
19
<PAGE> 20
concession from a syndicate member when the shares of Common Stock originally
sold by such syndicate member are purchased in a syndicate-covering transaction
to cover syndicate short positions. Such stabilizing transactions,
syndicate-covering transactions and penalty bids may cause the price of the
Common Stock to be higher than it would be in the absence of such transactions.
These transactions may be effected on the New York Stock Exchange or otherwise
and, if commenced, may be discontinued at any time.
Certain of the U.S. Underwriters and the Managers and their affiliates have
provided from time to time, and expect to provide in the future, various
investment banking and commercial banking services for the Company and the
Selling Stockholders, for which such U.S. Underwriters and Managers have
received and will receive customary fees and commissions.
20
<PAGE> 21
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Stockholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent and (iii) such purchaser has reviewed
the text above under "Resale Restrictions."
RIGHT OF ACTION FOR ONTARIO PURCHASERS
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the Company's directors and officers as well as the experts and the
Selling Stockholders named herein may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the Company or such persons. All or a substantial
portion of the assets of the Company and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the Company or such persons in Canada or to enforce a judgment obtained in
Canadian courts against the Company of such persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to the Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Stock should consult their own legal and tax
advisers with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by such purchasers under relevant Canadian
legislation.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership, or a foreign
estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant to Non-U.S. Holders in light of their particular
circumstances (including tax consequences applicable to pass-through entities)
and does not address any tax consequences arising under the laws of any state,
local or foreign jurisdiction. Prospective holders should consult their tax
advisors with respect to the particular tax consequences to them of owning and
disposing of Common Stock, including the consequences under the laws of any
state, local or foreign jurisdiction.
Proposed United States Treasury Regulations were issued in April 1996 (the
"Proposed Regulations") which, if adopted, would affect the United States
taxation of dividends paid to a Non-U.S. Holder on Common Stock. The Proposed
Regulations are generally proposed to be effective with respect to dividends
paid after December 31, 1997, subject to certain transition rules. It is not
clear whether the Proposed Regulations would be finalized in the current form.
The discussion below is not intended to be a complete discussion of the
provisions of the Proposed Regulations, and prospective investors are urged to
consult their tax advisors with respect to the effect the Proposed Regulations
would have if adopted.
DIVIDENDS
Subject to the discussion below, dividends, if any, paid to a Non-U.S.
Holder of Common Stock generally will be subject to withholding tax at a rate of
30% of the gross amount of the dividend or such lower rate as may be specified
by an applicable income tax treaty. For purposes of determining whether tax is
to be withheld at a 30% rate or at a reduced rate as specified by an income tax
treaty, in accordance with existing United States Treasury Regulations, the
Company ordinarily will presume that dividends paid to an address in a foreign
country are paid to a resident of such country absent knowledge that such
presumption is not warranted.
Under the Proposed Regulations, in the case of dividends paid after
December 31, 1997 (December 31, 1999, in the case of dividends paid to accounts
in existence on or before the date that is 60 days after the Proposed
Regulations are published as final regulations), to obtain a reduced rate of
withholding under a treaty, a Non-U.S. Holder would generally be required to
provide an Internal Revenue Service Form W-8 to the Company or its Paying Agent
certifying such Non-U.S. Holder's entitlement to benefits under a treaty. The
Proposed Regulations would also provide special rules to determine whether, for
purposes of determining the applicability of a tax treaty, dividends paid to a
Non-U.S. Holder that is an entity should be treated as paid to the entity or
those holding an interest in that entity.
There will be no withholding tax on dividends paid to a Non-U.S. Holder
that are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States or, if a tax treaty applies, are attributable
to a U.S. permanent establishment maintained by the Non-U.S. Holder, if, in each
case, a Form 4224 stating that the dividends are so connected is filed with the
Company or its Paying Agent. Instead, such dividends will be subject to regular
U.S. income tax at the graduated rate in the same manner as if the Non-U.S.
Holder were a U.S. resident. In addition to such graduated tax, a non-U.S.
corporation receiving effectively connected dividends or, if a tax treaty
applies, dividends attributable to a U.S. permanent establishment of the
Non-U.S. Holder, may be subject to a "branch profits tax" which is imposed,
under certain circumstances, at a rate of 30% (or such lower rate as may be
specified by an applicable treaty) of the non-U.S. corporation's effectively
connected earnings and profits, subject to certain adjustments.
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<PAGE> 23
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
(and no tax will generally be withheld) with respect to gain realized on a sale
or other disposition of Common Stock unless (i) the gain is effectively
connected with a trade or business of such holder in the United States, or, if a
tax treaty applies, attributable to a U.S. permanent establishment of the
Non-U.S. Holder, (ii) in the case of certain Non-U.S. Holders who are
non-resident alien individuals and hold the Common Stock as a capital asset,
such individuals are present in the United States for 183 or more days in the
taxable year of the disposition, (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code regarding the taxation of U.S.
expatriates, or (iv) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes and the Non-U.S. Holder owned
directly or pursuant to certain attribution rules more than 5% of the Company's
Common Stock (assuming the Common Stock is regularly traded on an established
securities market) at any time within the shorter of the five-year period
preceding such disposition or such holder's holding period. The Company is not,
and does not anticipate becoming, a U.S. real property holding corporation.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Generally, the Company must report to the U.S. Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence.
Dividends paid to a Non-U.S. Holder that are subject to the 30% or reduced
treaty rate of withholding tax previously discussed will be exempt from the U.S.
backup withholding tax. Otherwise, dividends may be subject to backup
withholding imposed at a rate of 31% if the Non-U.S. Holder fails to establish
that it is entitled to an exemption or to provide a correct taxpayer
identification number and certain other information to the Company or its Paying
Agent.
Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of Common Stock paid to or through a U.S. office of a broker unless
the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds if the payment
is made outside the United States through a non-U.S. office of a non-U.S.
broker. However, U.S. information reporting requirements (but not backup
withholding) will apply to a payment of disposition proceeds outside the United
States if the payment is made through an office outside the United States of a
broker that is (i) a U.S. person, (ii) a foreign person which derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States or (iii) a "controlled foreign corporation" for
U.S. federal income tax purposes, unless the broker maintains documentary
evidence that the holder is a Non-U.S. Holder and that certain conditions are
met, or that the holder otherwise is entitled to an exemption.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-United States Holder would be subject to
backup withholding and information reporting unless the Company receives
certification from the holder of non-U.S. status.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who at the time of death is treated as the
owner of, or has made certain lifetime transfers of, an interest in the Common
Stock will be required to include the value thereof in his gross estate for U.S.
federal estate tax purposes, and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.
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<PAGE> 24
LEGAL MATTERS
The validity of the Common Stock will be passed upon by Davis Polk &
Wardwell, counsel to CVS. Certain legal matters relating to the Offering will be
passed upon for the Selling Stockholders by Rosenberg & Liebentritt, P.C. and
Seward & Kissell and for the Underwriters by Dewey Ballantine. Ms. Sheli
Rosenberg, a director of CVS and an affiliate of Zell/Chilmark Fund, L.P., is a
principal of Rosenberg & Liebentritt, P.C.
EXPERTS
The historical consolidated financial statements of CVS Corporation and its
subsidiaries as of December 31, 1996 and 1995 and for the three years ended
December 31, 1996 and the related consolidated financial statement schedule have
been incorporated by reference in this Registration Statement in reliance upon
the reports of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and given upon the authority of said firm as
experts in accounting and auditing. The supplemental consolidated financial
statements of CVS Corporation and its subsidiaries, including Revco, as of
December 31, 1996 and 1995 and for the three years ended December 31, 1996 and
the related supplemental financial statement schedule have been incorporated by
reference in this Registration Statement in reliance upon the reports of KPMG
Peat Marwick LLP, based on their audits and the reports of other independent
public accountants, namely Arthur Andersen LLP, each of which reports are
incorporated by reference herein, in reliance upon the authority of said firms
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, New York, New York 10048. Copies of such material
can also be obtained at prescribed rates from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549-1004. The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of that site is
http://www.sec.gov. The Company's Common Stock is listed on the New York Stock
Exchange, Inc. and reports and other information concerning the Company can also
be inspected at the office of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and in each instance where such contract or other
document has been filed as an exhibit to the Registration Statement, reference
is made to the exhibit so filed, each such statement being qualified in all
respects by such reference. For further information with respect to the Company
and the securities offered hereby, reference is made to the Registration
Statement and exhibits thereto. The information so omitted, including exhibits,
may be obtained from the Commission at its principal office in Washington, D.C.
upon the payment of the prescribed fees, or may be inspected without charge at
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549-1004.
24
<PAGE> 25
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NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 4
Recent Developments................... 8
Price Range of Common Stock and
Dividend Policy..................... 9
Use of Proceeds....................... 9
Capitalization........................ 10
Selected Historical Consolidated
Financial and Operating Data........ 11
Selected Supplemental Consolidated
Financial Data...................... 13
Selling Stockholders.................. 15
Description of Capital Stock.......... 17
Underwriting.......................... 18
Notice to Canadian Residents.......... 21
Certain U.S. Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 22
Legal Matters......................... 24
Experts............................... 24
Available Information................. 24
</TABLE>
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- - ------------------------------------------------------
LOGO
14,500,000 Shares
Common Stock
($.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
- - ------------------------------------------------------
