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 August 2, 2016 announcing fourth quarter and fiscal year results. |
Cardinal Health, Inc. | |||
(Registrant) | |||
Date: | August 2, 2016 | 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 August 2, 2016 announcing fourth quarter and fiscal year results. |
Media: | Ellen Barry | Investors: | Sally Curley | |
(614) 553-3858 | (614) 757-7115 | |||
ellen.barry@cardinalhealth.com | sally.curley@cardinalhealth.com |
• | Fourth-quarter revenue increases 14 percent to $31.4 billion; full-year revenue increases 19 percent to a record $121.5 billion |
• | Fourth-quarter GAAP1 operating earnings increase 11 percent to $620 million, and non-GAAP operating earnings increase 5 percent to $643 million |
• | Full-year GAAP operating earnings increase 14 percent to $2.5 billion, and non-GAAP operating earnings increase 17 percent to $2.9 billion |
Q4 FY16 | Q4 FY15 | Y/Y | FY16 | FY15 | Y/Y | ||||||||||||||
Revenue | $ | 31.4 | billion | $ | 27.5 | billion | 14% | $ | 121.5 | billion | $ | 102.5 | billion | 19% | |||||
GAAP Operating Earnings | $ | 620 | million | $ | 558 | million | 11% | $ | 2,459 | million | $ | 2,161 | million | 14% | |||||
Non-GAAP Operating Earnings | $ | 643 | million | $ | 611 | million | 5% | $ | 2,895 | million | $ | 2,472 | million | 17% | |||||
GAAP Earnings from Continuing Operations2 | $ | 333 | million | $ | 293 | million | 14% | $ | 1,427 | million | $ | 1,212 | million | 18% | |||||
Non-GAAP Earnings from Continuing Operations2 | $ | 372 | million | $ | 333 | million | 12% | $ | 1,732 | million | $ | 1,469 | million | 18% | |||||
GAAP Diluted EPS from Continuing Operations2 | $ | 1.02 | $ | 0.88 | 16% | $ | 4.32 | $ | 3.61 | 20% | |||||||||
Non-GAAP Diluted EPS from Continuing Operations2 | $ | 1.14 | $ | 1.00 | 14% | $ | 5.24 | $ | 4.38 | 20% |
Q4 FY16 | Q4 FY15 | Y/Y | FY16 | FY15 | Y/Y | ||||||||||||||
Revenue | $ | 28.2 | billion | $ | 24.7 | billion | 14% | $ | 109.1 | billion | $ | 91.1 | billion | 20% | |||||
Segment Profit | $ | 542 | million | $ | 535 | million | 1% | $ | 2.5 | billion | $ | 2.1 | billion | 19% |
Q4 FY16 | Q4 FY15 | Y/Y | FY16 | FY15 | Y/Y | ||||||||||||||
Revenue | $ | 3.2 | billion | $ | 2.9 | billion | 12% | $ | 12.4 | billion | $ | 11.4 | billion | 9% | |||||
Segment Profit | $ | 122 | million | $ | 103 | million | 19% | $ | 457 | million | $ | 433 | million | 6% |
• | Increased quarterly dividend by 16 percent to $0.4489 per share, or $1.80 on an annualized basis, and authorized new share repurchase program |
• | Appointed Pamela O. Kimmet Chief Human Resources Officer following the retirement of Carole Watkins |
• | Committed nearly $2 million in multi-year patient safety grants to help improve the effectiveness, efficiency and excellence of patient care |
• | Announced distribution agreement with Biosensors enabling Cordis to sell Biosensors' coronary stent portfolio in select countries in Europe, the Middle East, Africa, Australia and New Zealand |
• | Convened 26th annual Retail Business Conference, presenting a record-setting 9,300 attendees with the industry's largest lineup of continuing education opportunities, buying opportunities, and access to a broad array of Cardinal Health solutions to help diversify and improve their businesses |
• | Demonstrated Cardinal Health’s commitment to the community by: |
◦ | Recognizing the essential contributions of medical laboratory professionals to patient care with the Cardinal Health urEssential Award |
◦ | Donating 11 million yen to Save the Children Japan to assist with restoration efforts for those families affected by the earthquakes earlier this year |
◦ | Contributing more than $85,000 in cash and health care products to aid those affected by the wildfires in Fort McMurray, Alberta, Canada |
• | Named on the 2016 “World's Most Admired Companies” list by Fortune |
• | Designated a 2016 Top Green Company in the U.S. by Newsweek |
• | Named to the Human Rights Campaign (HRC) "Best Places to Work for LGBT Equality" for fourth consecutive year based on ratings in HRC’s 2016 Corporate Equality Index |
• | Included in Becker’s Healthcare 150 Great Places to Work in Healthcare 2016 listing |
• | Named among the 2016 Best Companies for Leaders by Chief Executive |
• | Included in the Dow Jones Sustainability North American Company Index for the 10th year in a row |
• | Morgan Stanley Global Healthcare Conference on Sept. 14 at 9:20 a.m. Eastern in New York |
1 | GAAP refers to U.S. generally accepted accounting principles. This news release includes GAAP financial measures as well as non-GAAP financial measures, which are financial measures not calculated in accordance with GAAP. See "Use of non-GAAP Measures" following the attached schedules for definitions of the non-GAAP financial measures presented in this news release, and see the attached schedules for reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures. |
2 | Attributable to Cardinal Health, Inc. |
Fourth Quarter | ||||||||||
(in millions, except per common share amounts) | 2016 | 2015 | % Change | |||||||
Revenue | $ | 31,384 | $ | 27,547 | 14 | % | ||||
Cost of products sold | 29,719 | 26,089 | 14 | % | ||||||
Gross margin | 1,665 | 1,458 | 14 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general, and administrative expenses | 970 | 847 | 15 | % | ||||||
Restructuring and employee severance | 6 | 11 | N.M. | |||||||
Amortization and other acquisition-related costs | 132 | 91 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets | 3 | — | N.M. | |||||||
Litigation (recoveries)/charges, net | (66 | ) | (49 | ) | N.M. | |||||
Operating earnings | 620 | 558 | 11 | % | ||||||
Other (income)/expense, net | — | (1 | ) | N.M. | ||||||
Interest expense, net | 44 | 36 | 22 | % | ||||||
Earnings from continuing operations before income taxes | 576 | 523 | 10 | % | ||||||
Provision for income taxes | 241 | 230 | 5 | % | ||||||
Earnings from continuing operations | 335 | 293 | 14 | % | ||||||
Earnings from discontinued operations, net of tax | — | 2 | N.M. | |||||||
Net earnings | 335 | 295 | 14 | % | ||||||
Less: Net earnings attributable to noncontrolling interests | (2 | ) | — | N.M. | ||||||
Net earnings attributable to Cardinal Health, Inc. | $ | 333 | $ | 295 | 13 | % | ||||
Basic earnings per common share attributable to Cardinal Health, Inc.: | ||||||||||
Continuing operations | $ | 1.03 | $ | 0.89 | 16 | % | ||||
Discontinued operations | — | — | N.M. | |||||||
Net basic earnings per common share attributable to Cardinal Health, Inc. | $ | 1.03 | $ | 0.89 | 16 | % | ||||
Diluted earnings per common share attributable to Cardinal Health, Inc.: | ||||||||||
Continuing operations | $ | 1.02 | $ | 0.88 | 16 | % | ||||
Discontinued operations | — | — | N.M. | |||||||
Net diluted earnings per common share attributable to Cardinal Health, Inc. | $ | 1.02 | $ | 0.88 | 16 | % | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 324 | 330 | ||||||||
Diluted | 327 | 333 |
Fiscal year | ||||||||||
(in millions, except per common share amounts) | 2016 | 2015 | % Change | |||||||
Revenue | $ | 121,546 | $ | 102,531 | 19 | % | ||||
Cost of products sold | 115,003 | 96,819 | 19 | % | ||||||
Gross margin | 6,543 | 5,712 | 15 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general, and administrative expenses | 3,648 | 3,240 | 13 | % | ||||||
Restructuring and employee severance | 25 | 44 | N.M. | |||||||
Amortization and other acquisition-related costs | 459 | 281 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets | 21 | (19 | ) | N.M. | ||||||
Litigation (recoveries)/charges, net | (69 | ) | 5 | N.M. | ||||||
Operating earnings | 2,459 | 2,161 | 14 | % | ||||||
Other (income)/expense, net | 5 | (7 | ) | N.M. | ||||||
Interest expense, net | 178 | 141 | 26 | % | ||||||
Loss on extinguishment of debt | — | 60 | N.M. | |||||||
Earnings from continuing operations before income taxes | 2,276 | 1,967 | 16 | % | ||||||
Provision for income taxes | 845 | 755 | 12 | % | ||||||
Earnings from continuing operations | 1,431 | 1,212 | 18 | % | ||||||
Earnings from discontinued operations, net of tax | — | 3 | N.M. | |||||||
Net earnings | 1,431 | 1,215 | 18 | % | ||||||
Less: Net earnings attributable to noncontrolling interests | (4 | ) | — | N.M. | ||||||
Net earnings attributable to Cardinal Health, Inc. | $ | 1,427 | $ | 1,215 | 18 | % | ||||
Basic earnings per common share attributable to Cardinal Health, Inc.: | ||||||||||
Continuing operations | $ | 4.36 | $ | 3.65 | 19 | % | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net basic earnings per common share attributable to Cardinal Health, Inc. | $ | 4.36 | $ | 3.66 | 19 | % | ||||
Diluted earnings per common share attributable to Cardinal Health, Inc.: | ||||||||||
Continuing operations | $ | 4.32 | $ | 3.61 | 20 | % | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net diluted earnings per common share attributable to Cardinal Health, Inc. | $ | 4.32 | $ | 3.62 | 19 | % | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 327 | 332 | ||||||||
Diluted | 330 | 335 |
June 30 | |||||||
(in millions) | 2016 | 2015 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 2,356 | $ | 4,616 | |||
Trade receivables, net | 7,405 | 6,523 | |||||
Inventories, net | 10,615 | 9,211 | |||||
Prepaid expenses and other | 1,580 | 1,402 | |||||
Total current assets | 21,956 | 21,752 | |||||
Property and equipment, net | 1,796 | 1,506 | |||||
Goodwill and other intangibles, net | 9,426 | 6,018 | |||||
Other assets | 944 | 866 | |||||
Total assets | $ | 34,122 | $ | 30,142 | |||
Liabilities, Redeemable Noncontrolling Interests, and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 17,306 | $ | 14,368 | |||
Current portion of long-term obligations and other short-term borrowings | 587 | 281 | |||||
Other accrued liabilities | 1,808 | 2,594 | |||||
Total current liabilities | 19,701 | 17,243 | |||||
Long-term obligations, less current portion | 4,952 | 5,211 | |||||
Deferred income taxes and other liabilities | 2,781 | 1,432 | |||||
Redeemable noncontrolling interests | 117 | — | |||||
Total Cardinal Health, Inc. shareholders' equity | 6,554 | 6,256 | |||||
Noncontrolling interests | 17 | — | |||||
Total shareholders’ equity | 6,571 | 6,256 | |||||
Total liabilities, redeemable noncontrolling interests, and shareholders’ equity | $ | 34,122 | $ | 30,142 |
Fourth Quarter | Fiscal year | ||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Cash flows from operating activities: | |||||||||||||||
Net earnings | $ | 335 | $ | 295 | $ | 1,431 | $ | 1,215 | |||||||
Earnings from discontinued operations, net of tax | — | (2 | ) | — | (3 | ) | |||||||||
Net earnings from continuing operations | $ | 335 | $ | 293 | $ | 1,431 | $ | 1,212 | |||||||
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 176 | 115 | 641 | 451 | |||||||||||
Loss on extinguishment of debt | — | — | — | 60 | |||||||||||
Gain on sale of other investments | — | — | — | (5 | ) | ||||||||||
Impairments and (gain)/loss on disposal of assets, net | 4 | — | 21 | (19 | ) | ||||||||||
Share-based compensation | 29 | 30 | 111 | 110 | |||||||||||
Provision for deferred income taxes | 87 | 219 | 87 | 219 | |||||||||||
Provision for bad debts | 22 | 10 | 73 | 52 | |||||||||||
Change in fair value of contingent consideration obligation | — | 8 | (16 | ) | 8 | ||||||||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||||||||||
Increase in trade receivables | (145 | ) | (152 | ) | (866 | ) | (870 | ) | |||||||
Decrease/(increase) in inventories | 278 | 71 | (1,179 | ) | (779 | ) | |||||||||
Increase/(decrease) in accounts payable | (24 | ) | 291 | 2,815 | 1,948 | ||||||||||
Other accrued liabilities and operating items, net | (121 | ) | (17 | ) | (147 | ) | 153 | ||||||||
Net cash provided by operating activities | 641 | 868 | 2,971 | 2,540 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Acquisition of subsidiaries, net of cash acquired | (231 | ) | (184 | ) | (3,614 | ) | (503 | ) | |||||||
Additions to property and equipment | (181 | ) | (161 | ) | (465 | ) | (300 | ) | |||||||
Purchase of available-for-sale securities and other investments | (50 | ) | (208 | ) | (200 | ) | (342 | ) | |||||||
Proceeds from sale of available-for-sale securities and other investments | 37 | 77 | 136 | 206 | |||||||||||
Proceeds from maturities of available-for-sale securities | 13 | 13 | 50 | 37 | |||||||||||
Proceeds from divestitures and disposal of property and equipment and held for sale assets | 13 | — | 13 | 53 | |||||||||||
Net cash used in investing activities | (399 | ) | (463 | ) | (4,080 | ) | (849 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Payment of contingent consideration obligation | (2 | ) | (4 | ) | (25 | ) | (7 | ) | |||||||
Net change in short-term borrowings | (8 | ) | (3 | ) | 26 | (12 | ) | ||||||||
Net purchase of noncontrolling interests | — | — | (10 | ) | — | ||||||||||
Reduction of long-term obligations | (1 | ) | — | (6 | ) | (1,221 | ) | ||||||||
Proceeds from long-term obligations, net of issuance costs | — | 1,490 | — | 2,672 | |||||||||||
Net proceeds/(tax withholdings) from share-based compensation | 9 | 13 | 6 | 72 | |||||||||||
Excess tax benefits/(deficits) from share-based compensation | — | (4 | ) | 33 | 52 | ||||||||||
Dividends on common shares | (126 | ) | (114 | ) | (512 | ) | (460 | ) | |||||||
Purchase of treasury shares | (351 | ) | (350 | ) | (651 | ) | (1,036 | ) | |||||||
Net cash provided by/(used in) financing activities | (479 | ) | 1,028 | (1,139 | ) | 60 | |||||||||
Effect of exchange rate changes on cash and equivalents | (5 | ) | — | (12 | ) | — | |||||||||
Net increase/(decrease) in cash and equivalents | (242 | ) | 1,433 | (2,260 | ) | 1,751 | |||||||||
Cash and equivalents at beginning of period | 2,598 | 3,183 | 4,616 | 2,865 | |||||||||||
Cash and equivalents at end of period | $ | 2,356 | $ | 4,616 | $ | 2,356 | $ | 4,616 |
Fourth Quarter | Fourth Quarter | |||||||||||||||
(in millions) | 2016 | 2015 | (in millions) | 2016 | 2015 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 28,177 | $ | 24,676 | Amount | $ | 3,210 | $ | 2,855 | |||||||
Growth rate | 14 | % | 23 | % | Growth rate | 12 | % | 2 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 542 | $ | 535 | Amount | $ | 122 | $ | 103 | |||||||
Growth rate | 1 | % | 42 | % | Growth rate | 19 | % | 7 | % | |||||||
Segment profit margin | 1.93 | % | 2.17 | % | Segment profit margin | 3.81 | % | 3.59 | % |
Fiscal year | Fiscal year | |||||||||||||||
(in millions) | 2016 | 2015 | (in millions) | 2016 | 2015 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 109,131 | $ | 91,116 | Amount | $ | 12,430 | $ | 11,395 | |||||||
Growth rate | 20 | % | 14 | % | Growth rate | 9 | % | 4 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 2,488 | $ | 2,094 | Amount | $ | 457 | $ | 433 | |||||||
Growth rate | 19 | % | 20 | % | Growth rate1 | 6 | % | (3 | )% | |||||||
Segment profit margin | 2.28 | % | 2.30 | % | Segment profit margin | 3.68 | % | 3.80 | % |
1 | Segment profit includes a $43 million impact from the roll-out of the inventory fair value step up related to the Cordis acquisition for the fiscal year ended June 30, 2016. Excluding the impact of the inventory fair value step up, Medical segment profit growth would have been 15 percent for the fiscal year ended June 30, 2016. |
Net Earnings | ||||||||||||||||||||||||||
Gross | Operating | Earnings2 | Provision | Net Earnings | from | |||||||||||||||||||||
Margin | Earnings | Before | for | from | Continuing | Diluted | ||||||||||||||||||||
Gross | Growth | Operating | Growth | Income | Income | Continuing | Operations3 | Diluted | EPS3 | |||||||||||||||||
(in millions, except per common share amounts) | Margin | Rate | Earnings | Rate | Taxes | Taxes | Operations3 | Growth Rate | EPS3 | Growth Rate | ||||||||||||||||
Fourth Quarter 2016 | ||||||||||||||||||||||||||
GAAP | $ | 1,665 | 14 | % | $ | 620 | 11 | % | $ | 576 | $ | 241 | $ | 333 | 14 | % | $ | 1.02 | 16 | % | ||||||
LIFO charges/(credits) | (51 | ) | (51 | ) | (51 | ) | (20 | ) | (31 | ) | (0.10 | ) | ||||||||||||||
Restructuring and employee severance | — | 6 | 6 | 2 | 4 | 0.01 | ||||||||||||||||||||
Amortization and other acquisition-related costs | — | 132 | 132 | 28 | 104 | 0.32 | ||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets | — | 3 | 3 | — | 3 | 0.01 | ||||||||||||||||||||
Litigation (recoveries)/charges, net | — | (66 | ) | (66 | ) | (25 | ) | (41 | ) | (0.13 | ) | |||||||||||||||
Non-GAAP | $ | 1,614 | 11 | % | $ | 643 | 5 | % | $ | 599 | $ | 226 | $ | 372 | 12 | % | $ | 1.14 | 14 | % | ||||||
Fourth Quarter 2015 | ||||||||||||||||||||||||||
GAAP | $ | 1,458 | 16 | % | $ | 558 | 44 | % | $ | 523 | $ | 230 | $ | 293 | 25 | % | $ | 0.88 | 29 | % | ||||||
Restructuring and employee severance | — | 11 | 11 | 4 | 7 | 0.02 | ||||||||||||||||||||
Amortization and other acquisition-related costs | — | 91 | 91 | 31 | 60 | 0.18 | ||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets | — | — | — | — | — | — | ||||||||||||||||||||
Litigation (recoveries)/charges, net | — | (49 | ) | (49 | ) | (22 | ) | (27 | ) | (0.08 | ) | |||||||||||||||
Non-GAAP | $ | 1,458 | 16 | % | $ | 611 | 33 | % | $ | 577 | $ | 243 | $ | 333 | 17 | % | $ | 1.00 | 20 | % |
Net Earnings | ||||||||||||||||||||||||||
Gross | Operating | Earnings2 | Provision | Net Earnings | from | |||||||||||||||||||||
Margin | Earnings | Before | for | from | Continuing | Diluted | ||||||||||||||||||||
Gross | Growth | Operating | Growth | Income | Income | Continuing | Operations3 | Diluted | EPS3 | |||||||||||||||||
(in millions, except per common share amounts) | Margin | Rate | Earnings | Rate | Taxes | Taxes | Operations3 | Growth Rate | EPS3 | Growth Rate | ||||||||||||||||
Fiscal Year 2016 | ||||||||||||||||||||||||||
GAAP | $ | 6,543 | 15 | % | $ | 2,459 | 14 | % | $ | 2,276 | $ | 845 | $ | 1,427 | 18 | % | $ | 4.32 | 20 | % | ||||||
LIFO charges/(credits) | — | — | — | — | — | — | ||||||||||||||||||||
Restructuring and employee severance | — | 25 | 25 | 9 | 16 | 0.05 | ||||||||||||||||||||
Amortization and other acquisition-related costs | — | 459 | 459 | 143 | 316 | 0.96 | ||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets | — | 21 | 21 | 6 | 15 | 0.04 | ||||||||||||||||||||
Litigation (recoveries)/charges, net | — | (69 | ) | (69 | ) | (27 | ) | (42 | ) | (0.13 | ) | |||||||||||||||
Non-GAAP | $ | 6,543 | 15 | % | $ | 2,895 | 17 | % | $ | 2,711 | $ | 976 | $ | 1,732 | 18 | % | $ | 5.24 | 20 | % | ||||||
Fiscal Year 2015 | ||||||||||||||||||||||||||
GAAP | $ | 5,712 | 11 | % | $ | 2,161 | 15 | % | $ | 1,967 | $ | 755 | $ | 1,212 | 4 | % | $ | 3.61 | 7 | % | ||||||
Restructuring and employee severance | — | 44 | 44 | 15 | 29 | 0.09 | ||||||||||||||||||||
Amortization and other acquisition-related costs | — | 281 | 281 | 100 | 181 | 0.54 | ||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets | — | (19 | ) | (19 | ) | (10 | ) | (9 | ) | (0.03 | ) | |||||||||||||||
Litigation (recoveries)/charges, net | — | 5 | 5 | (14 | ) | 19 | 0.06 | |||||||||||||||||||
Loss on extinguishment of debt | — | — | 60 | 23 | 37 | 0.11 | ||||||||||||||||||||
Non-GAAP | $ | 5,712 | 11 | % | $ | 2,472 | 16 | % | $ | 2,339 | $ | 870 | $ | 1,469 | 11 | % | $ | 4.38 | 14 | % |
• | restructuring and employee severance costs, which include charges for programs in which we fundamentally change our operations and are excluded because they are not part of the operations of our underlying business, which includes normal levels of reinvestment in the business; |
• | amortization and other acquisition-related costs, which the Company began excluding amortization costs in fiscal 2013 primarily for consistency with the presentation of the financial results of our peer group companies. Additionally, these non-cash amounts are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions, so their exclusion allows for better comparison of forecasted, current and historical financial results. Other acquisition-related costs are excluded because they are directly related to an acquisition but do not meet the criteria to be recognized on the acquired entity’s initial balance sheet as part of the purchase price allocation; |
• | impairments and gains or loss on disposal of assets, which are excluded because they do not occur in or reflect the ordinary course of the Company’s business and their exclusion results in a metric that more meaningfully reflects the sustainability of our operating performance; |
• | litigations recoveries or charges, net, which also do not occur in or reflect the ordinary course of the Company’s business and are inherently unpredictable in timing and amount; |
• | LIFO charges and credits, which the Company began excluding in fiscal 2015 because the factors that drive LIFO charges or credits such as pharmaceutical manufacturer price appreciation/deflation and year-end inventory levels (which can be meaningfully influenced by customer buying behavior immediately preceding our year-end), are largely out of the Company’s control and cannot be accurately predicted. We also believe that exclusion of LIFO charges from non-GAAP metrics allows for better comparison of our financial results to our historical operations and to our peer group companies; |
• | loss on extinguishment of debt, which do not typically occur in the normal course of business and may obscure analysis of trends and financial performance. Additionally, the amount and frequency of these notable one-time charges is not consistent and is significantly impacted by the timing and size of debt financing transactions. |
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