Form 8-K |
Ohio | 1-11373 | 31-0958666 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
7000 Cardinal Place, Dublin, Ohio 43017 | ||
(Address of principal executive offices) (Zip Code) | ||
(614) 757-5000 | ||
(Registrant's telephone number, including area code) | ||
Exhibit Number | Exhibit Description |
99.1 | News release issued by the Company on January 30, 2014 announcing second-quarter results. |
Cardinal Health, Inc. | |||
(Registrant) | |||
Date: | January 30, 2014 | By: | /s/ Stuart G. Laws |
Stuart G. Laws | |||
Senior Vice President and Chief Accounting Officer |
Exhibit Number | Exhibit Description |
99.1 | News release issued by the Company on January 30, 2014 announcing second-quarter results. |
• | Non-GAAP operating earnings1 increased 10 percent to $579 million,, or 2 percent to $519 million on a GAAP basis |
• | Non-GAAP diluted earnings per share from continuing operations decreased 3 percent to $0.90, or 10 percent to $0.79 on a GAAP basis, including a tax charge of $0.16 |
• | Fiscal 2014 outlook for non-GAAP diluted earnings per share from continuing operations raised to $3.75 - $3.85, reflecting strength of operating earnings performance |
Q2 FY14 | Q2 FY13 | Y/Y | |||||||
Revenue | $ | 22.2 | billion | $ | 25.2 | billion | (12)% | ||
Operating earnings | $ | 519 | million | $ | 506 | million | 2% | ||
Non-GAAP operating earnings | $ | 579 | million | $ | 525 | million | 10% | ||
Earnings from continuing operations | $ | 275 | million | $ | 303 | million | (9)% | ||
Non-GAAP earnings from continuing operations | $ | 313 | million | $ | 317 | million | (1)% | ||
Diluted EPS from continuing operations | $ | 0.79 | $ | 0.88 | (10)% | ||||
Non-GAAP diluted EPS from continuing operations | $ | 0.90 | $ | 0.93 | (3)% |
Q2 FY14 | Q2 FY13 | Y/Y | |||||||
Revenue | $ | 19.4 | billion | $ | 22.7 | billion | (15)% | ||
Segment profit | $ | 482 | million | $ | 441 | million | 9% |
Q2 FY14 | Q2 FY13 | Y/Y | |||||||
Revenue | $ | 2.8 | billion | $ | 2.5 | billion | 13% | ||
Segment profit | $ | 131 | million | $ | 94 | million | 40% |
• | Secured three-year extension of pharmaceutical distribution service agreements with CVS Caremark through June 2019 |
• | Introduced new central fill service to help hospitals and integrated delivery networks expand the reach of their outpatient pharmacies |
• | Expanded home health capabilities via two tuck-in acquisitions in the urology, incontinence and ostomy areas |
• | Finalized two additional tuck-in acquisitions in China which expand the company's geographic presence and capabilities |
• | Raymond James 35th Annual Institutional Investors Conference on March 4 at 9:50 a.m. local time in Orlando, Fla. |
• | Barclays Global Healthcare Conference on March 13 at 8:30 a.m. local time in Miami |
1 | See the attached tables for definitions of the non-GAAP financial measures presented in this news release and reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures. |
Second Quarter | ||||||||||
(in millions, except per common share amounts) | 2014 | 2013 | % Change | |||||||
Revenue | $ | 22,240 | $ | 25,232 | (12 | )% | ||||
Cost of products sold | 20,895 | 24,008 | (13 | )% | ||||||
Gross margin | 1,345 | 1,224 | 10 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 766 | 699 | 10 | % | ||||||
Restructuring and employee severance | 10 | 1 | N.M. | |||||||
Amortization and other acquisition-related costs | 56 | 25 | N.M. | |||||||
Impairments and loss on disposal of assets | 9 | 5 | N.M. | |||||||
Litigation (recoveries)/charges, net | (15 | ) | (12 | ) | N.M. | |||||
Operating earnings | 519 | 506 | 2 | % | ||||||
Other income, net | (6 | ) | (4 | ) | N.M. | |||||
Interest expense, net | 33 | 27 | 23 | % | ||||||
Earnings before income taxes and discontinued operations | 492 | 483 | 2 | % | ||||||
Provision for income taxes | 217 | 180 | 20 | % | ||||||
Earnings from continuing operations | 275 | 303 | (9 | )% | ||||||
Earnings from discontinued operations, net of tax | 3 | — | N.M. | |||||||
Net earnings | $ | 278 | $ | 303 | (8 | )% | ||||
Basic earnings per common share: | ||||||||||
Continuing operations | $ | 0.80 | $ | 0.89 | (10 | )% | ||||
Discontinued operations | 0.01 | — | N.M. | |||||||
Net basic earnings per common share | $ | 0.81 | $ | 0.89 | (9 | )% | ||||
Diluted earnings per common share: | ||||||||||
Continuing operations | $ | 0.79 | $ | 0.88 | (10 | )% | ||||
Discontinued operations | 0.01 | — | N.M. | |||||||
Net diluted earnings per common share | $ | 0.80 | $ | 0.88 | (9 | )% | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 342 | 340 | ||||||||
Diluted | 346 | 343 |
Year-to-Date | ||||||||||
(in millions, except per common share amounts) | 2014 | 2013 | % Change | |||||||
Revenue | $ | 46,763 | $ | 51,121 | (9 | )% | ||||
Cost of products sold | 44,155 | 48,739 | (9 | )% | ||||||
Gross margin | 2,608 | 2,382 | 9 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 1,497 | 1,388 | 8 | % | ||||||
Restructuring and employee severance | 20 | 6 | N.M. | |||||||
Amortization and other acquisition-related costs | 105 | 53 | N.M. | |||||||
Impairments and loss on disposal of assets | 9 | 6 | N.M. | |||||||
Litigation (recoveries)/charges, net | (13 | ) | (34 | ) | N.M. | |||||
Operating earnings | 990 | 963 | 3 | % | ||||||
Other income, net | (10 | ) | (12 | ) | N.M. | |||||
Interest expense, net | 66 | 53 | 25 | % | ||||||
Earnings before income taxes and discontinued operations | 934 | 922 | 1 | % | ||||||
Provision for income taxes | 320 | 347 | (8 | )% | ||||||
Earnings from continuing operations | 614 | 575 | 7 | % | ||||||
Earnings from discontinued operations, net of tax | 3 | — | N.M. | |||||||
Net earnings | $ | 617 | $ | 575 | 7 | % | ||||
Basic earnings per common share: | ||||||||||
Continuing operations | $ | 1.80 | $ | 1.69 | 7 | % | ||||
Discontinued operations | 0.01 | — | N.M. | |||||||
Net basic earnings per common share | $ | 1.81 | $ | 1.69 | 7 | % | ||||
Diluted earnings per common share: | ||||||||||
Continuing operations | $ | 1.78 | $ | 1.67 | 7 | % | ||||
Discontinued operations | 0.01 | — | N.M. | |||||||
Net diluted earnings per common share | $ | 1.79 | $ | 1.67 | 7 | % | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 341 | 340 | ||||||||
Diluted | 345 | 344 |
(in millions) | December 31, 2013 | June 30, 2013 | |||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 2,741 | $ | 1,901 | |||
Trade receivables, net | 4,876 | 6,304 | |||||
Inventories, net | 8,478 | 8,373 | |||||
Prepaid expenses and other | 1,153 | 1,192 | |||||
Total current assets | 17,248 | 17,770 | |||||
Property and equipment, net | 1,407 | 1,489 | |||||
Goodwill and other intangibles, net | 5,556 | 5,574 | |||||
Other assets | 798 | 986 | |||||
Total assets | $ | 25,009 | $ | 25,819 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 11,221 | $ | 12,295 | |||
Current portion of long-term obligations and other short-term borrowings | 255 | 168 | |||||
Other accrued liabilities | 1,886 | 2,127 | |||||
Total current liabilities | 13,362 | 14,590 | |||||
Long-term obligations, less current portion | 3,679 | 3,686 | |||||
Deferred income taxes and other liabilities | 1,379 | 1,568 | |||||
Total shareholders’ equity | 6,589 | 5,975 | |||||
Total liabilities and shareholders’ equity | $ | 25,009 | $ | 25,819 |
Second Quarter | Year-to-Date | ||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Cash flows from operating activities: | |||||||||||||||
Net earnings | $ | 278 | $ | 303 | $ | 617 | $ | 575 | |||||||
Earnings from discontinued operations, net of tax | (3 | ) | — | (3 | ) | — | |||||||||
Earnings from continuing operations | 275 | 303 | 614 | 575 | |||||||||||
Adjustments to reconcile earnings from continuing operations to net cash provided by/(used in) operating activities: | |||||||||||||||
Depreciation and amortization | 117 | 88 | 234 | 176 | |||||||||||
Impairments and loss on disposal of assets | 9 | 5 | 9 | 6 | |||||||||||
Share-based compensation | 24 | 22 | 48 | 46 | |||||||||||
Provision for bad debts | 17 | 8 | 29 | 9 | |||||||||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||||||||||
Decrease in trade receivables | 25 | 299 | 1,420 | 228 | |||||||||||
Increase in inventories | (1,198 | ) | (329 | ) | (100 | ) | (536 | ) | |||||||
Increase/(decrease) in accounts payable | 764 | (433 | ) | (1,088 | ) | 31 | |||||||||
Other accrued liabilities and operating items, net | 4 | (93 | ) | (178 | ) | (97 | ) | ||||||||
Net cash provided by/(used in) operating activities | 37 | (130 | ) | 988 | 438 | ||||||||||
Cash flows from investing activities: | |||||||||||||||
Acquisition of subsidiaries, net of cash acquired | (25 | ) | (26 | ) | (50 | ) | (126 | ) | |||||||
Additions to property and equipment | (64 | ) | (36 | ) | (90 | ) | (62 | ) | |||||||
Proceeds from maturities of held-to-maturity securities | — | 48 | — | 71 | |||||||||||
Net cash used in investing activities | (89 | ) | (14 | ) | (140 | ) | (117 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Net change in short-term borrowings | 53 | 27 | 73 | 17 | |||||||||||
Reduction of long-term obligations | (1 | ) | (2 | ) | (1 | ) | (6 | ) | |||||||
Net proceeds from issuance of common shares | 37 | 25 | 139 | 26 | |||||||||||
Tax proceeds/(disbursements) from share-based compensation | 54 | (10 | ) | 39 | (12 | ) | |||||||||
Dividends on common shares | (103 | ) | (81 | ) | (208 | ) | (165 | ) | |||||||
Purchase of treasury shares | — | — | (50 | ) | (200 | ) | |||||||||
Net cash provided by/(used in) financing activities | 40 | (41 | ) | (8 | ) | (340 | ) | ||||||||
Net increase/(decrease) in cash and equivalents | (12 | ) | (185 | ) | 840 | (19 | ) | ||||||||
Cash and equivalents at beginning of period | 2,753 | 2,440 | 1,901 | 2,274 | |||||||||||
Cash and equivalents at end of period | $ | 2,741 | $ | 2,255 | $ | 2,741 | $ | 2,255 |
Non-GAAP | |||||||||||||||
Second Quarter | Second Quarter | ||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenue | |||||||||||||||
Amount | $ | 22,240 | $ | 25,232 | |||||||||||
Growth rate | (12 | )% | (7 | )% | |||||||||||
Operating earnings | |||||||||||||||
Amount | $ | 519 | $ | 506 | $ | 579 | $ | 525 | |||||||
Growth rate | 2 | % | 13 | % | 10 | % | 11 | % | |||||||
Earnings from continuing operations | |||||||||||||||
Amount | $ | 275 | $ | 303 | $ | 313 | $ | 317 | |||||||
Growth rate | (9 | )% | 15 | % | (1 | )% | 13 | % |
Non-GAAP | |||||||||||||||
Year-to-Date | Year-to-Date | ||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenue | |||||||||||||||
Amount | $ | 46,763 | $ | 51,121 | |||||||||||
Growth rate | (9 | )% | (5 | )% | |||||||||||
Operating earnings | |||||||||||||||
Amount | $ | 990 | $ | 963 | $ | 1,111 | $ | 995 | |||||||
Growth rate | 3 | % | 12 | % | 12 | % | 8 | % | |||||||
Earnings from continuing operations | |||||||||||||||
Amount | $ | 614 | $ | 575 | $ | 691 | $ | 598 | |||||||
Growth rate | 7 | % | 15 | % | 16 | % | 11 | % |
Second Quarter | Second Quarter | |||||||||||||||
(in millions) | 2014 | 2013 | (in millions) | 2014 | 2013 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 19,443 | $ | 22,747 | Amount | $ | 2,799 | $ | 2,487 | |||||||
Growth rate | (15 | )% | (8 | )% | Growth rate | 13 | % | 3 | % | |||||||
Mix | 87 | % | 90 | % | Mix | 13 | % | 10 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 482 | $ | 441 | Amount | $ | 131 | $ | 94 | |||||||
Growth rate | 9 | % | 12 | % | Growth rate | 40 | % | 11 | % | |||||||
Mix | 79 | % | 83 | % | Mix | 21 | % | 17 | % | |||||||
Segment profit margin | 2.48 | % | 1.94 | % | Segment profit margin | 4.69 | % | 3.76 | % |
Year-to-Date | Year-to-Date | |||||||||||||||
(in millions) | 2014 | 2013 | (in millions) | 2014 | 2013 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 41,256 | $ | 46,244 | Amount | $ | 5,511 | $ | 4,879 | |||||||
Growth rate | (11 | )% | (6 | )% | Growth rate | 13 | % | 2 | % | |||||||
Mix | 88 | % | 90 | % | Mix | 12 | % | 10 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 916 | $ | 841 | Amount | $ | 238 | $ | 168 | |||||||
Growth rate | 9 | % | 11 | % | Growth rate | 41 | % | 3 | % | |||||||
Mix | 79 | % | 83 | % | Mix | 21 | % | 17 | % | |||||||
Segment profit margin | 2.22 | % | 1.82 | % | Segment profit margin | 4.31 | % | 3.44 | % |
Second Quarter | Year-to-Date | ||||||||||||||
(in millions, except per common share amounts) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Restructuring and employee severance | $ | (10 | ) | $ | (1 | ) | $ | (20 | ) | $ | (6 | ) | |||
Tax benefit | 4 | 1 | 7 | 2 | |||||||||||
Restructuring and employee severance, net of tax | $ | (6 | ) | $ | — | $ | (13 | ) | $ | (4 | ) | ||||
Decrease to diluted EPS from continuing operations | $ | (0.02 | ) | $ | — | $ | (0.04 | ) | $ | (0.01 | ) | ||||
Amortization and Other Acquisition-Related Costs | |||||||||||||||
Amortization of acquisition-related intangible assets | $ | (46 | ) | $ | (22 | ) | $ | (91 | ) | $ | (43 | ) | |||
Tax benefit | 17 | 8 | 33 | 15 | |||||||||||
Amortization of acquisition-related intangible assets, net of tax | $ | (29 | ) | $ | (14 | ) | $ | (58 | ) | $ | (28 | ) | |||
Decrease to diluted EPS from continuing operations | $ | (0.08 | ) | $ | (0.04 | ) | $ | (0.17 | ) | $ | (0.08 | ) | |||
Other acquisition-related costs | $ | (10 | ) | $ | (4 | ) | $ | (13 | ) | $ | (10 | ) | |||
Tax benefit | 4 | 1 | 5 | 3 | |||||||||||
Other acquisition-related costs, net of tax | $ | (6 | ) | $ | (3 | ) | $ | (8 | ) | $ | (7 | ) | |||
Decrease to diluted EPS from continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) | |||
Total amortization and other acquisition-related costs1 | $ | (56 | ) | $ | (25 | ) | $ | (105 | ) | $ | (53 | ) | |||
Tax benefit1 | 20 | 9 | 38 | 19 | |||||||||||
Total amortization and other acquisition-related costs, net of tax1 | $ | (36 | ) | $ | (16 | ) | $ | (67 | ) | $ | (34 | ) | |||
Decrease to diluted EPS from continuing operations1 | $ | (0.10 | ) | $ | (0.05 | ) | $ | (0.19 | ) | $ | (0.10 | ) | |||
Impairments and loss on disposal of assets | $ | (9 | ) | $ | (5 | ) | $ | (9 | ) | $ | (6 | ) | |||
Tax benefit | 3 | — | 3 | 1 | |||||||||||
Impairments and loss on disposal of assets, net of tax | $ | (6 | ) | $ | (5 | ) | $ | (6 | ) | $ | (5 | ) | |||
Decrease to diluted EPS from continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) | |||
Litigation recoveries/(charges), net | $ | 15 | $ | 12 | $ | 13 | $ | 34 | |||||||
Tax expense | (5 | ) | (5 | ) | (5 | ) | (14 | ) | |||||||
Litigation recoveries/(charges), net, net of tax | $ | 10 | $ | 7 | $ | 8 | $ | 20 | |||||||
Increase to diluted EPS from continuing operations | $ | 0.03 | $ | 0.02 | $ | 0.02 | $ | 0.06 | |||||||
Weighted-average number of diluted shares outstanding | 346 | 343 | 345 | 344 |
1 | The sum of the components may not equal the total due to rounding. |
Second Quarter | Year-to-Date | ||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||
Days sales outstanding | 19.7 | 22.0 | |||||||||
Days inventory on hand | 29.7 | 27.0 | |||||||||
Days payable outstanding | 39.3 | 37.8 | |||||||||
Net working capital days1 | 10.1 | 11.3 | |||||||||
Debt to total capital | 37 | % | 31 | % | |||||||
Net debt to capital | 15 | % | 9 | % | |||||||
Return on equity | 17.2 | % | 18.9 | % | 19.6 | % | 18.1 | % | |||
Non-GAAP return on equity | 19.6 | % | 19.8 | % | 22.1 | % | 18.8 | % | |||
Effective tax rate from continuing operations2 | 44.1 | % | 37.2 | % | 34.2 | % | 37.6 | % | |||
Non-GAAP effective tax rate from continuing operations2 | 43.3 | % | 36.8 | % | 34.4 | % | 37.3 | % |
1 | The sum of the components may not equal the total due to rounding. |
2 | The $56 million remeasurement of unrecognized tax benefits unfavorably impacted, for fiscal 2014 second quarter, both the effective tax rate from continuing operations and non-GAAP effective tax rate from continuing operations by 11.3 and 10.1 percentage points, respectively. The fiscal 2014 second quarter non-GAAP effective tax rate from continuing operations, excluding the impact of the tax remeasurement, would have been 33.2 percent. |
Second Quarter 2014 | |||||||||||||||||||||
Operating | Earnings Before | Provision | Earnings | Earnings from | Diluted EPS | Diluted EPS | |||||||||||||||
Earnings | Income Taxes | for | from | Continuing | from | from Continuing | |||||||||||||||
Operating | Growth | and Discontinued | Income | Continuing | Operations | Continuing | Operations | ||||||||||||||
(in millions, except per common share amounts) | Earnings | Rate | Operations | Taxes | Operations | Growth Rate | Operations | Growth Rate1 | |||||||||||||
GAAP | $ | 519 | 2 | % | $ | 492 | $ | 217 | $ | 275 | (9 | )% | $ | 0.79 | (10 | )% | |||||
Restructuring and employee severance | 10 | 10 | 4 | 6 | 0.02 | ||||||||||||||||
Amortization and other acquisition-related costs | 56 | 56 | 20 | 36 | 0.10 | ||||||||||||||||
Impairments and loss on disposal of assets | 9 | 9 | 3 | 6 | 0.02 | ||||||||||||||||
Litigation (recoveries)/charges, net | (15 | ) | (15 | ) | (5 | ) | (10 | ) | (0.03 | ) | |||||||||||
Non-GAAP | $ | 579 | 10 | % | $ | 552 | $ | 239 | $ | 313 | (1 | )% | $ | 0.90 | (3 | )% | |||||
Second Quarter 2013 | |||||||||||||||||||||
GAAP | $ | 506 | 13 | % | $ | 483 | $ | 180 | $ | 303 | 15 | % | $ | 0.88 | 16 | % | |||||
Restructuring and employee severance | 1 | 1 | 1 | — | — | ||||||||||||||||
Amortization and other acquisition-related costs | 25 | 25 | 9 | 16 | 0.05 | ||||||||||||||||
Impairments and loss on disposal of assets | 5 | 5 | — | 5 | 0.01 | ||||||||||||||||
Litigation (recoveries)/charges, net | (12 | ) | (12 | ) | (5 | ) | (7 | ) | (0.02 | ) | |||||||||||
Non-GAAP | $ | 525 | 11 | % | $ | 502 | $ | 185 | $ | 317 | 13 | % | $ | 0.93 | 15 | % |
Year-to-Date 2014 | |||||||||||||||||||||
Operating | Earnings Before | Provision | Earnings | Earnings from | Diluted EPS | Diluted EPS | |||||||||||||||
Earnings | Income Taxes | for | from | Continuing | from | from Continuing | |||||||||||||||
Operating | Growth | and Discontinued | Income | Continuing | Operations | Continuing | Operations | ||||||||||||||
(in millions, except per common share amounts) | Earnings | Rate | Operations | Taxes | Operations | Growth Rate | Operations | Growth Rate | |||||||||||||
GAAP | $ | 990 | 3 | % | $ | 934 | $ | 320 | $ | 614 | 7 | % | $ | 1.78 | 7 | % | |||||
Restructuring and employee severance | 20 | 20 | 7 | 13 | 0.04 | ||||||||||||||||
Amortization and other acquisition-related costs | 105 | 105 | 38 | 67 | 0.19 | ||||||||||||||||
Impairments and loss on disposal of assets | 9 | 9 | 3 | 6 | 0.02 | ||||||||||||||||
Litigation (recoveries)/charges, net | (13 | ) | (13 | ) | (5 | ) | (8 | ) | (0.02 | ) | |||||||||||
Non-GAAP | $ | 1,111 | 12 | % | $ | 1,055 | $ | 363 | $ | 691 | 16 | % | $ | 2.00 | 15 | % | |||||
Year-to-Date 2013 | |||||||||||||||||||||
GAAP | $ | 963 | 12 | % | $ | 922 | $ | 347 | $ | 575 | 15 | % | $ | 1.67 | 16 | % | |||||
Restructuring and employee severance | 6 | 6 | 2 | 4 | 0.01 | ||||||||||||||||
Amortization and other acquisition-related costs | 53 | 53 | 19 | 34 | 0.10 | ||||||||||||||||
Impairments and loss on disposal of assets | 6 | 6 | 1 | 5 | 0.01 | ||||||||||||||||
Litigation (recoveries)/charges, net | (34 | ) | (34 | ) | (14 | ) | (20 | ) | (0.06 | ) | |||||||||||
Non-GAAP | $ | 995 | 8 | % | $ | 953 | $ | 355 | $ | 598 | 11 | % | $ | 1.74 | 13 | % |
1 | The $56 million remeasurement of unrecognized tax benefits reduced, for fiscal 2014 second quarter, both diluted EPS from continuing operations and non-GAAP diluted EPS from continuing operations by $0.16. The fiscal 2014 second quarter growth rates for diluted EPS from continuing operations and non-GAAP diluted EPS from continuing operations, excluding the impact of the tax remeasurement, would have been 8 percent and 14 percent, respectively. |
Second Quarter | |||||||||||||||
(in millions) | 2014 | 2013 | |||||||||||||
GAAP return on equity | 17.2 | % | 18.9 | % | |||||||||||
Non-GAAP return on equity | |||||||||||||||
Net earnings | $ | 278 | $ | 303 | |||||||||||
Restructuring and employee severance, net of tax, in continuing operations | 6 | — | |||||||||||||
Amortization and other acquisition-related costs, net of tax, in continuing operations | 36 | 16 | |||||||||||||
Impairments and loss on disposal of assets, net of tax, in continuing operations | 6 | 5 | |||||||||||||
Litigation (recoveries)/charges, net, net of tax, in continuing operations | (10 | ) | (7 | ) | |||||||||||
Adjusted net earnings | $ | 316 | $ | 317 | |||||||||||
Annualized | $ | 1,264 | $ | 1,268 | |||||||||||
Second | First | Second | First | ||||||||||||
Quarter | Quarter | Quarter | Quarter | ||||||||||||
2014 | 2014 | 2013 | 2013 | ||||||||||||
Total shareholders' equity | $ | 6,589 | $ | 6,297 | $ | 6,542 | $ | 6,281 | |||||||
Divided by average shareholders' equity | $ | 6,443 | $ | 6,411 | |||||||||||
Non-GAAP return on equity | 19.6 | % | 19.8 | % |
Year-to-Date | |||||||||||||||||||||||
(in millions) | 2014 | 2013 | |||||||||||||||||||||
GAAP return on equity | 19.6 | % | 18.1 | % | |||||||||||||||||||
Non-GAAP return on equity | |||||||||||||||||||||||
Net earnings | $ | 617 | $ | 575 | |||||||||||||||||||
Restructuring and employee severance, net of tax, in continuing operations | 13 | 4 | |||||||||||||||||||||
Amortization and other acquisition-related costs, net of tax, in continuing operations | 67 | 34 | |||||||||||||||||||||
Impairments and loss on disposal of assets, net of tax, in continuing operations | 6 | 5 | |||||||||||||||||||||
Litigation (recoveries)/charges, net, net of tax, in continuing operations | (8 | ) | (20 | ) | |||||||||||||||||||
Adjusted net earnings | $ | 695 | $ | 598 | |||||||||||||||||||
Annualized | $ | 1,390 | $ | 1,196 | |||||||||||||||||||
Second | First | Fourth | Second | First | Fourth | ||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||||
2014 | 2014 | 2013 | 2013 | 2013 | 2013 | ||||||||||||||||||
Total shareholders' equity | $ | 6,589 | $ | 6,297 | $ | 5,975 | $ | 6,542 | $ | 6,281 | $ | 6,244 | |||||||||||
Divided by average shareholders' equity | $ | 6,287 | $ | 6,355 | |||||||||||||||||||
Non-GAAP return on equity | 22.1 | % | 18.8 | % |
Second Quarter | Year-to-Date | ||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
GAAP effective tax rate from continuing operations1 | 44.1 | % | 37.2 | % | 34.2 | % | 37.6 | % | |||||||
Non-GAAP effective tax rate from continuing operations | |||||||||||||||
Earnings before income taxes and discontinued operations | $ | 492 | $ | 483 | $ | 934 | $ | 922 | |||||||
Restructuring and employee severance | 10 | 1 | 20 | 6 | |||||||||||
Amortization and other acquisition-related costs | 56 | 25 | 105 | 53 | |||||||||||
Impairments and loss on disposal of assets | 9 | 5 | 9 | 6 | |||||||||||
Litigation (recoveries)/charges, net | (15 | ) | (12 | ) | (13 | ) | (34 | ) | |||||||
Adjusted earnings before income taxes and discontinued operations | $ | 552 | $ | 502 | $ | 1,055 | $ | 953 | |||||||
Provision for income taxes | $ | 217 | $ | 180 | $ | 320 | $ | 347 | |||||||
Restructuring and employee severance tax benefit | 4 | 1 | 7 | 2 | |||||||||||
Amortization and other acquisition-related costs tax benefit | 20 | 9 | 38 | 19 | |||||||||||
Impairments and loss on disposal of assets tax benefit | 3 | — | 3 | 1 | |||||||||||
Litigation (recoveries)/charges, net tax expense | (5 | ) | (5 | ) | (5 | ) | (14 | ) | |||||||
Adjusted provision for income taxes | $ | 239 | $ | 185 | $ | 363 | $ | 355 | |||||||
Non-GAAP effective tax rate from continuing operations1 | 43.3 | % | 36.8 | % | 34.4 | % | 37.3 | % | |||||||
Second Quarter | |||||||||||||||
2014 | 2013 | ||||||||||||||
Debt to total capital | 37 | % | 31 | % | |||||||||||
Net debt to capital | |||||||||||||||
Current portion of long-term obligations and other short-term borrowings | $ | 255 | $ | 474 | |||||||||||
Long-term obligations, less current portion | 3,679 | 2,423 | |||||||||||||
Debt | $ | 3,934 | $ | 2,897 | |||||||||||
Cash and equivalents | (2,741 | ) | (2,255 | ) | |||||||||||
Net debt | $ | 1,193 | $ | 642 | |||||||||||
Total shareholders' equity | 6,589 | 6,542 | |||||||||||||
Capital | $ | 7,782 | $ | 7,184 | |||||||||||
Net debt to capital | 15 | % | 9 | % |
1 | The $56 million remeasurement of unrecognized tax benefits unfavorably impacted, for fiscal 2014 second quarter, both the effective tax rate from continuing operations and non-GAAP effective tax rate from continuing operations by 11.3 and 10.1 percentage points, respectively. The fiscal 2014 second quarter non-GAAP effective tax rate from continuing operations, excluding the impact of the tax remeasurement, would have been 33.2 percent. |
Second Quarter | |||||||
(in millions) | 2014 | 2013 | |||||
Days sales outstanding | 19.7 | 22.0 | |||||
Days inventory on hand | |||||||
Inventories, net | $ | 8,478 | $ | 8,452 | |||
Cost of products sold | $ | 20,895 | $ | 24,008 | |||
Chargeback billings | 4,803 | 4,113 | |||||
Adjusted cost of products sold | $ | 25,698 | $ | 28,121 | |||
Adjusted cost of products sold divided by 90 days | $ | 286 | $ | 312 | |||
Days inventory on hand | 29.7 | 27.0 | |||||
Days payable outstanding | |||||||
Accounts payable | $ | 11,221 | $ | 11,796 | |||
Cost of products sold | $ | 20,895 | $ | 24,008 | |||
Chargeback billings | 4,803 | 4,113 | |||||
Adjusted cost of products sold | $ | 25,698 | $ | 28,121 | |||
Adjusted cost of products sold divided by 90 days | $ | 286 | $ | 312 | |||
Days payable outstanding | 39.3 | 37.8 | |||||
Net working capital days1 | 10.1 | 11.3 |
1 | The sum of the components may not equal the total due to rounding. |
1 | Programs whereby the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, employee severance (including rationalizing headcount or other significant changes in personnel) and realigning operations (including substantial realignment of the management structure of a business unit in response to changing market conditions). |
2 | Costs that consist primarily of amortization of acquisition-related intangible assets, transaction costs, integration costs and changes in the fair value of contingent consideration obligations. |
3 | Asset impairments and losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and loss on disposal of assets within the condensed consolidated statements of earnings. |
4 | Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters. |
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