Notes to Consolidated Financial Statements

Index 2000 - A Year of Great Achievement Financial Highlights To our Shareholders Positioned for Growth Front-End Business New Store Growth Program CVS Procare CVS.com Community Involvement Store Count by State Management's Discussion and Analysis... Management's Responsibility for Financial Reporting Independent Auditor's Report Consolidated Statements of Operations Consolidated Balance Sheets Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements.    Significant Accounting Policies    Borrowing and Credit Agreements    Leases    Employee Stock Ownership Plan    Stock Incentive Plans    Pension Plans and Other Postretirement Benefits    Income Taxes    Commitments & Contingencies    Business Segments    Business Combinations    Reconciliation of Earnings Per Common Share    Quarterly Financial Information (Unaudited) Five-Year Financial Summary Corporate Information

8. Commitments & Contingencies

In connection with certain business dispositions completed between 1991 and 1997, the Company continues to guarantee lease obligations for approximately 1,300 former stores. The Company is indemnified for these obligations by the respective purchasers. Assuming that each respective purchaser became insolvent, an event which the Company believes to be highly unlikely, management estimates that it could settle these obligations for approximately $876 million as of December 30, 2000.

In the opinion of management, the ultimate disposition of these guarantees will not have a material adverse effect on the Company's consolidated financial condition, results of operations or future cash flows.

As of December 30, 2000, the Company had outstanding commitments to purchase $335 million of merchandise inventory for use in the normal course of business. The Company currently expects to satisfy these purchase commitments by 2003.

The Company is also a defendant in various lawsuits arising in the ordinary course of business. In the opinion of management and the Company's outside counsel, the ultimate disposition of these lawsuits, exclusive of potential insurance recoveries, will not have a material adverse effect on the Company's consolidated financial condition, results of operations or future cash flows.

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