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 29, 2015 announcing second quarter results. |
Cardinal Health, Inc. | |||
(Registrant) | |||
Date: | January 29, 2015 | 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 29, 2015 announcing second quarter results. |
• | Revenue increased 15 percent to $25.5 billion |
• | Non-GAAP1 operating earnings increased 10 percent to $639 million |
• | Non-GAAP diluted earnings per share from continuing operations increased 33 percent to $1.20; excluding a tax charge in prior-year period, growth was 13 percent |
• | Fiscal 2015 outlook for non-GAAP diluted earnings per share from continuing operations raised to $4.28 to $4.38 from prior guidance range of $4.10 to $4.30 |
Q2 FY15 | Q2 FY14 | Y/Y | |||||||
Revenue | $ | 25.5 | billion | $ | 22.2 | billion | 15% | ||
Operating earnings | $ | 546 | million | $ | 519 | million | 5% | ||
Non-GAAP operating earnings | $ | 639 | million | $ | 579 | million | 10% | ||
Earnings from continuing operations | $ | 289 | million | $ | 275 | million | 5% | ||
Non-GAAP earnings from continuing operations | $ | 400 | million | $ | 313 | million | 28% | ||
Diluted EPS from continuing operations | $ | 0.86 | $ | 0.79 | 9% | ||||
Non-GAAP diluted EPS from continuing operations | $ | 1.20 | $ | 0.90 | 33% |
Q2 FY15 | Q2 FY14 | Y/Y | |||||||
Revenue | $ | 22.6 | billion | $ | 19.4 | billion | 16% | ||
Segment profit | $ | 542 | million | $ | 482 | million | 12% |
Q2 FY15 | Q2 FY14 | Y/Y | |||||||
Revenue | $ | 2.9 | billion | $ | 2.8 | billion | 4% | ||
Segment profit | $ | 115 | million | $ | 131 | million | (12)% |
• | Returned $438 million to shareholders through stock repurchases and dividends in the second quarter of fiscal year 2015 |
• | Redeemed approximately $1.2 billion of outstanding debt and issued senior notes for a comparable amount at lower interest rates and longer maturities |
• | Entered into a long-term strategic agreement with Henry Schein, the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners, to provide one of the most comprehensive service and product offerings to office-based medical practices |
• | Announced 15-year agreement with Bayer HealthCare for the contract manufacturing of Xofigo® (radium Ra 223 dichloride), an alpha-particle-emitting radioactive therapeutic agent for the treatment of patients with castration-resistant prostate cancer, symptomatic bone metastases and no known visceral metastatic disease |
• | Leerink Partners Global Healthcare Conference on Feb. 12 at 8:30 a.m. local time in New York |
• | RBC Capital Markets' 2015 Global Healthcare Conference on Feb. 24 at 8 a.m. local time in New York |
• | Cowen and Company 35th Annual Health Care Conference on March 3 at 8 a.m. local time in Boston |
• | Barclays Global Healthcare Conference on March 10 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) | 2015 | 2014 | % Change | |||||||
Revenue | $ | 25,537 | $ | 22,240 | 15 | % | ||||
Cost of products sold | 24,083 | 20,895 | 15 | % | ||||||
Gross margin | 1,454 | 1,345 | 8 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 815 | 766 | 6 | % | ||||||
Restructuring and employee severance | 7 | 10 | N.M. | |||||||
Amortization and other acquisition-related costs | 60 | 56 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets | (18 | ) | 9 | N.M. | ||||||
Litigation (recoveries)/charges, net | 44 | (15 | ) | N.M. | ||||||
Operating earnings | 546 | 519 | 5 | % | ||||||
Other income, net | (1 | ) | (6 | ) | N.M. | |||||
Interest expense, net | 36 | 33 | 10 | % | ||||||
Loss on extinguishment of debt | 60 | — | N.M. | |||||||
Earnings before income taxes and discontinued operations | 451 | 492 | (8 | )% | ||||||
Provision for income taxes | 162 | 217 | (25 | )% | ||||||
Earnings from continuing operations | 289 | 275 | 5 | % | ||||||
Earnings from discontinued operations, net of tax | — | 3 | N.M. | |||||||
Net earnings | $ | 289 | $ | 278 | 4 | % | ||||
Basic earnings per common share: | ||||||||||
Continuing operations | $ | 0.87 | $ | 0.80 | 9 | % | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net basic earnings per common share | $ | 0.87 | $ | 0.81 | 7 | % | ||||
Diluted earnings per common share: | ||||||||||
Continuing operations | $ | 0.86 | $ | 0.79 | 9 | % | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net diluted earnings per common share | $ | 0.86 | $ | 0.80 | 8 | % | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 331 | 342 | ||||||||
Diluted | 334 | 346 |
Year-to-Date | ||||||||||
(in millions, except per common share amounts) | 2015 | 2014 | % Change | |||||||
Revenue | $ | 49,607 | $ | 46,763 | 6 | % | ||||
Cost of products sold | 46,813 | 44,155 | 6 | % | ||||||
Gross margin | 2,794 | 2,608 | 7 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 1,590 | 1,497 | 6 | % | ||||||
Restructuring and employee severance | 26 | 20 | N.M. | |||||||
Amortization and other acquisition-related costs | 112 | 105 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets | (18 | ) | 9 | N.M. | ||||||
Litigation (recoveries)/charges, net | 72 | (13 | ) | N.M. | ||||||
Operating earnings | 1,012 | 990 | 2 | % | ||||||
Other income, net | (4 | ) | (10 | ) | N.M. | |||||
Interest expense, net | 70 | 66 | 6 | % | ||||||
Loss on extinguishment of debt | 60 | — | N.M. | |||||||
Earnings before income taxes and discontinued operations | 886 | 934 | (5 | )% | ||||||
Provision for income taxes | 331 | 320 | 4 | % | ||||||
Earnings from continuing operations | 555 | 614 | (10 | )% | ||||||
Earnings from discontinued operations, net of tax | — | 3 | N.M. | |||||||
Net earnings | $ | 555 | $ | 617 | (10 | )% | ||||
Basic earnings per common share: | ||||||||||
Continuing operations | $ | 1.66 | $ | 1.80 | (8 | )% | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net basic earnings per common share | $ | 1.66 | $ | 1.81 | (8 | )% | ||||
Diluted earnings per common share: | ||||||||||
Continuing operations | $ | 1.65 | $ | 1.78 | (7 | )% | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net diluted earnings per common share | $ | 1.65 | $ | 1.79 | (8 | )% | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 333 | 341 | ||||||||
Diluted | 337 | 345 |
(in millions) | December 31, 2014 | June 30, 2014 | |||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 2,881 | $ | 2,865 | |||
Trade receivables, net | 5,653 | 5,380 | |||||
Inventories, net | 9,408 | 8,266 | |||||
Prepaid expenses and other | 1,213 | 1,428 | |||||
Total current assets | 19,155 | 17,939 | |||||
Property and equipment, net | 1,415 | 1,459 | |||||
Goodwill and other intangibles, net | 5,876 | 5,870 | |||||
Other assets | 802 | 765 | |||||
Total assets | $ | 27,248 | $ | 26,033 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 13,602 | $ | 12,149 | |||
Current portion of long-term obligations and other short-term borrowings | 270 | 801 | |||||
Other accrued liabilities | 2,158 | 2,165 | |||||
Total current liabilities | 16,030 | 15,115 | |||||
Long-term obligations, less current portion | 3,706 | 3,171 | |||||
Deferred income taxes and other liabilities | 1,412 | 1,346 | |||||
Total shareholders’ equity | 6,100 | 6,401 | |||||
Total liabilities and shareholders’ equity | $ | 27,248 | $ | 26,033 |
Second Quarter | Year-to-Date | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Cash flows from operating activities: | |||||||||||||||
Net earnings | $ | 289 | $ | 278 | $ | 555 | $ | 617 | |||||||
Earnings from discontinued operations, net of tax | — | (3 | ) | — | (3 | ) | |||||||||
Earnings from continuing operations | 289 | 275 | 555 | 614 | |||||||||||
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 112 | 117 | 220 | 234 | |||||||||||
Loss on extinguishment of debt | 60 | — | 60 | — | |||||||||||
Gain on sale of other investments | — | — | (5 | ) | — | ||||||||||
Impairments and (gain)/loss on disposal of assets | (18 | ) | 9 | (18 | ) | 9 | |||||||||
Share-based compensation | 28 | 24 | 53 | 48 | |||||||||||
Provision for bad debts | 14 | 17 | 26 | 29 | |||||||||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||||||||||
Decrease/(increase) in trade receivables | — | 25 | (291 | ) | 1,420 | ||||||||||
Increase in inventories | (1,336 | ) | (1,198 | ) | (1,137 | ) | (100 | ) | |||||||
Increase/(decrease) in accounts payable | 1,595 | 764 | 1,438 | (1,088 | ) | ||||||||||
Other accrued liabilities and operating items, net | 209 | 4 | 113 | (178 | ) | ||||||||||
Net cash provided by operating activities | 953 | 37 | 1,014 | 988 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Acquisition of subsidiaries, net of cash acquired | (25 | ) | (25 | ) | (86 | ) | (50 | ) | |||||||
Additions to property and equipment | (47 | ) | (64 | ) | (83 | ) | (90 | ) | |||||||
Purchase of available-for-sale securities and other investments | (32 | ) | — | (107 | ) | — | |||||||||
Proceeds from sale of available-for-sale securities and other investments | 16 | — | 107 | — | |||||||||||
Proceeds from maturities of available-for-sale securities | 16 | — | 16 | — | |||||||||||
Proceeds from divestitures and disposal of held for sale assets | 53 | — | 53 | — | |||||||||||
Net cash used in investing activities | (19 | ) | (89 | ) | (100 | ) | (140 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Net change in short-term borrowings | (58 | ) | 53 | (18 | ) | 73 | |||||||||
Reduction of long-term obligations | (1,220 | ) | (1 | ) | (1,220 | ) | (1 | ) | |||||||
Proceeds from long-term obligations, net of issuance costs | 1,182 | — | 1,182 | — | |||||||||||
Net proceeds from issuance of common shares | 10 | 37 | 35 | 139 | |||||||||||
Tax proceeds from share-based compensation | 4 | 54 | 42 | 39 | |||||||||||
Dividends on common shares | (114 | ) | (103 | ) | (233 | ) | (208 | ) | |||||||
Purchase of treasury shares | (326 | ) | — | (686 | ) | (50 | ) | ||||||||
Net cash provided by/(used in) financing activities | (522 | ) | 40 | (898 | ) | (8 | ) | ||||||||
Net increase/(decrease) in cash and equivalents | 412 | (12 | ) | 16 | 840 | ||||||||||
Cash and equivalents at beginning of period | 2,469 | 2,753 | 2,865 | 1,901 | |||||||||||
Cash and equivalents at end of period | $ | 2,881 | $ | 2,741 | $ | 2,881 | $ | 2,741 |
Non-GAAP | |||||||||||||||
Second Quarter | Second Quarter | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Revenue | |||||||||||||||
Amount | $ | 25,537 | $ | 22,240 | |||||||||||
Growth rate | 15 | % | (12 | )% | |||||||||||
Operating earnings | |||||||||||||||
Amount | $ | 546 | $ | 519 | $ | 639 | $ | 579 | |||||||
Growth rate | 5 | % | 2 | % | 10 | % | 10 | % | |||||||
Earnings from continuing operations | |||||||||||||||
Amount | $ | 289 | $ | 275 | $ | 400 | $ | 313 | |||||||
Growth rate | 5 | % | (9 | )% | 28 | % | (1 | )% | |||||||
Return on equity | 18.7 | % | 17.2 | % | 25.9 | % | 19.6 | % | |||||||
Effective tax rate from continuing operations1 | 36.0 | % | 44.1 | % | 33.8 | % | 43.3 | % | |||||||
Debt to total capital | 39 | % | 37 | % | |||||||||||
Net debt to total capital | 15 | % | 15 | % |
Non-GAAP | |||||||||||||||
Year-to-Date | Year-to-Date | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Revenue | |||||||||||||||
Amount | $ | 49,607 | $ | 46,763 | |||||||||||
Growth rate2 | 6 | % | (9 | )% | |||||||||||
Operating earnings | |||||||||||||||
Amount | $ | 1,012 | $ | 990 | $ | 1,204 | $ | 1,111 | |||||||
Growth rate | 2 | % | 3 | % | 8 | % | 12 | % | |||||||
Earnings from continuing operations | |||||||||||||||
Amount | $ | 555 | $ | 614 | $ | 740 | $ | 691 | |||||||
Growth rate | (10 | )% | 7 | % | 7 | % | 16 | % | |||||||
Return on equity | 17.8 | % | 19.6 | % | 23.7 | % | 22.1 | % | |||||||
Effective tax rate from continuing operations | 37.4 | % | 34.2 | % | 35.0 | % | 34.4 | % |
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. |
2 | Revenue from Walgreens was $3.3 billion for the six months ended December 31, 2013. Excluding the impact of the Walgreens contract expiration, the fiscal 2015 year-to-date revenue growth rate would have been 14 percent. |
Second Quarter | Second Quarter | |||||||||||||||
(in millions) | 2015 | 2014 | (in millions) | 2015 | 2014 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 22,627 | $ | 19,443 | Amount | $ | 2,914 | $ | 2,799 | |||||||
Growth rate | 16 | % | (15 | )% | Growth rate | 4 | % | 13 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 542 | $ | 482 | Amount | $ | 115 | $ | 131 | |||||||
Growth rate | 12 | % | 9 | % | Growth rate | (12 | )% | 40 | % | |||||||
Segment profit margin | 2.39 | % | 2.48 | % | Segment profit margin | 3.96 | % | 4.69 | % |
Year-to-Date | Year-to-Date | |||||||||||||||
(in millions) | 2015 | 2014 | (in millions) | 2015 | 2014 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 43,836 | $ | 41,256 | Amount | $ | 5,766 | $ | 5,511 | |||||||
Growth rate1 | 6 | % | (11 | )% | Growth rate | 5 | % | 13 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 992 | $ | 916 | Amount | $ | 229 | $ | 238 | |||||||
Growth rate | 8 | % | 9 | % | Growth rate | (4 | )% | 41 | % | |||||||
Segment profit margin | 2.26 | % | 2.22 | % | Segment profit margin | 3.96 | % | 4.31 | % |
1 | Revenue from Walgreens was $3.3 billion for the six months ended December 31, 2013. Excluding the impact of the Walgreens contract expiration, the fiscal 2015 year-to-date Pharmaceutical segment revenue growth rate would have been 16 percent. |
Second Quarter 2015 | |||||||||||||||||||||
Operating | Earnings Before | Provision | Earnings | Earnings from | Diluted EPS | Diluted EPS | |||||||||||||||
Earnings | Income Taxes | for | from | Continuing | from | from Continuing | |||||||||||||||
(in millions, except per common share amounts) | Operating | Growth | and Discontinued | Income | Continuing | Operations | Continuing | Operations | |||||||||||||
Earnings | Rate | Operations | Taxes | Operations | Growth Rate | Operations | Growth Rate1 | ||||||||||||||
GAAP | $ | 546 | 5 | % | $ | 451 | $ | 162 | $ | 289 | 5 | % | $ | 0.86 | 9 | % | |||||
Restructuring and employee severance | 7 | 7 | 3 | 4 | 0.01 | ||||||||||||||||
Amortization and other acquisition-related costs | 60 | 60 | 22 | 38 | 0.11 | ||||||||||||||||
Impairments and (gain)/loss on disposal of assets | (18 | ) | (18 | ) | (10 | ) | (8 | ) | (0.03 | ) | |||||||||||
Litigation (recoveries)/charges, net | 44 | 44 | 4 | 40 | 0.12 | ||||||||||||||||
Loss on extinguishment of debt | — | 60 | 23 | 37 | 0.11 | ||||||||||||||||
Non-GAAP | $ | 639 | 10 | % | $ | 604 | $ | 204 | $ | 400 | 28 | % | $ | 1.20 | 33 | % | |||||
Second Quarter 2014 | |||||||||||||||||||||
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 (gain)/loss on disposal of assets | 9 | 9 | 3 | 6 | 0.02 | ||||||||||||||||
Litigation (recoveries)/charges, net | (15 | ) | (15 | ) | (5 | ) | (10 | ) | (0.03 | ) | |||||||||||
Loss on extinguishment of debt | — | — | — | — | — | ||||||||||||||||
Non-GAAP | $ | 579 | 10 | % | $ | 552 | $ | 239 | $ | 313 | (1 | )% | $ | 0.90 | (3 | )% |
Year-to-Date 2015 | |||||||||||||||||||||
Operating | Earnings Before | Provision | Earnings | Earnings from | Diluted EPS | Diluted EPS | |||||||||||||||
Earnings | Income Taxes | for | from | Continuing | from | from Continuing | |||||||||||||||
(in millions, except per common share amounts) | Operating | Growth | and Discontinued | Income | Continuing | Operations | Continuing | Operations | |||||||||||||
Earnings | Rate | Operations | Taxes | Operations | Growth Rate | Operations | Growth Rate | ||||||||||||||
GAAP | $ | 1,012 | 2 | % | $ | 886 | $ | 331 | $ | 555 | (10 | )% | $ | 1.65 | (7 | )% | |||||
Restructuring and employee severance | 26 | 26 | 9 | 17 | 0.05 | ||||||||||||||||
Amortization and other acquisition-related costs | 112 | 112 | 41 | 71 | 0.21 | ||||||||||||||||
Impairments and (gain)/loss on disposal of assets | (18 | ) | (18 | ) | (10 | ) | (8 | ) | (0.02 | ) | |||||||||||
Litigation (recoveries)/charges, net | 72 | 72 | 4 | 68 | 0.20 | ||||||||||||||||
Loss on extinguishment of debt | — | 60 | 23 | 37 | 0.11 | ||||||||||||||||
Non-GAAP | $ | 1,204 | 8 | % | $ | 1,138 | $ | 399 | $ | 740 | 7 | % | $ | 2.19 | 10 | % | |||||
Year-to-Date 2014 | |||||||||||||||||||||
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 (gain)/loss on disposal of assets | 9 | 9 | 3 | 6 | 0.02 | ||||||||||||||||
Litigation (recoveries)/charges, net | (13 | ) | (13 | ) | (5 | ) | (8 | ) | (0.02 | ) | |||||||||||
Loss on extinguishment of debt | — | — | — | — | — | ||||||||||||||||
Non-GAAP | $ | 1,111 | 12 | % | $ | 1,055 | $ | 363 | $ | 691 | 16 | % | $ | 2.00 | 15 | % |
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. The fiscal 2015 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 (10) percent and 13 percent, respectively. |
Second Quarter | |||||||||||||||
(in millions) | 2015 | 2014 | |||||||||||||
GAAP return on equity | 18.7 | % | 17.2 | % | |||||||||||
Non-GAAP return on equity | |||||||||||||||
Net earnings | $ | 289 | $ | 278 | |||||||||||
Restructuring and employee severance, net of tax, in continuing operations | 4 | 6 | |||||||||||||
Amortization and other acquisition-related costs, net of tax, in continuing operations | 38 | 36 | |||||||||||||
Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations | (8 | ) | 6 | ||||||||||||
Litigation (recoveries)/charges, net, net of tax, in continuing operations | 40 | (10 | ) | ||||||||||||
Loss on extinguishment of debt, net of tax, in continuing operations | 37 | — | |||||||||||||
Adjusted net earnings | $ | 400 | $ | 316 | |||||||||||
Annualized | $ | 1,600 | $ | 1,264 | |||||||||||
Second | First | Second | First | ||||||||||||
Quarter | Quarter | Quarter | Quarter | ||||||||||||
2015 | 2015 | 2014 | 2014 | ||||||||||||
Total shareholders' equity | $ | 6,100 | $ | 6,256 | $ | 6,589 | $ | 6,297 | |||||||
Divided by average shareholders' equity | $ | 6,178 | $ | 6,443 | |||||||||||
Non-GAAP return on equity | 25.9 | % | 19.6 | % |
Year-to-Date | |||||||||||||||||||||||
(in millions) | 2015 | 2014 | |||||||||||||||||||||
GAAP return on equity | 17.8 | % | 19.6 | % | |||||||||||||||||||
Non-GAAP return on equity | |||||||||||||||||||||||
Net earnings | $ | 555 | $ | 617 | |||||||||||||||||||
Restructuring and employee severance, net of tax, in continuing operations | 17 | 13 | |||||||||||||||||||||
Amortization and other acquisition-related costs, net of tax, in continuing operations | 71 | 67 | |||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations | (8 | ) | 6 | ||||||||||||||||||||
Litigation (recoveries)/charges, net, net of tax, in continuing operations | 68 | (8 | ) | ||||||||||||||||||||
Loss on extinguishment of debt, net of tax, in continuing operations | 37 | — | |||||||||||||||||||||
Adjusted net earnings | $ | 740 | $ | 695 | |||||||||||||||||||
Annualized | $ | 1,480 | $ | 1,390 | |||||||||||||||||||
Second | First | Fourth | Second | First | Fourth | ||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||||
2015 | 2015 | 2014 | 2014 | 2014 | 2013 | ||||||||||||||||||
Total shareholders' equity | $ | 6,100 | $ | 6,256 | $ | 6,401 | $ | 6,589 | $ | 6,297 | $ | 5,975 | |||||||||||
Divided by average shareholders' equity | $ | 6,252 | $ | 6,287 | |||||||||||||||||||
Non-GAAP return on equity | 23.7 | % | 22.1 | % |
Second Quarter | Year-to-Date | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
GAAP effective tax rate from continuing operations1 | 36.0 | % | 44.1 | % | 37.4 | % | 34.2 | % | |||||||
Non-GAAP effective tax rate from continuing operations | |||||||||||||||
Earnings before income taxes and discontinued operations | $ | 451 | $ | 492 | $ | 886 | $ | 934 | |||||||
Restructuring and employee severance | 7 | 10 | 26 | 20 | |||||||||||
Amortization and other acquisition-related costs | 60 | 56 | 112 | 105 | |||||||||||
Impairments and (gain)/loss on disposal of assets | (18 | ) | 9 | (18 | ) | 9 | |||||||||
Litigation (recoveries)/charges, net | 44 | (15 | ) | 72 | (13 | ) | |||||||||
Loss on extinguishment of debt | 60 | — | 60 | — | |||||||||||
Adjusted earnings before income taxes and discontinued operations | $ | 604 | $ | 552 | $ | 1,138 | $ | 1,055 | |||||||
Provision for income taxes | $ | 162 | $ | 217 | $ | 331 | $ | 320 | |||||||
Restructuring and employee severance tax benefit | 3 | 4 | 9 | 7 | |||||||||||
Amortization and other acquisition-related costs tax benefit | 22 | 20 | 41 | 38 | |||||||||||
Impairments and (gain)/loss on disposal of assets tax benefit/(expense) | (10 | ) | 3 | (10 | ) | 3 | |||||||||
Litigation (recoveries)/charges, net tax benefit/(expense) | 4 | (5 | ) | 4 | (5 | ) | |||||||||
Loss on extinguishment of debt tax benefit | 23 | — | 23 | — | |||||||||||
Adjusted provision for income taxes | $ | 204 | $ | 239 | $ | 399 | $ | 363 | |||||||
Non-GAAP effective tax rate from continuing operations1 | 33.8 | % | 43.3 | % | 35.0 | % | 34.4 | % | |||||||
Second Quarter | |||||||||||||||
2015 | 2014 | ||||||||||||||
Debt to total capital | 39 | % | 37 | % | |||||||||||
Net debt to capital | |||||||||||||||
Current portion of long-term obligations and other short-term borrowings | $ | 270 | $ | 255 | |||||||||||
Long-term obligations, less current portion | 3,706 | 3,679 | |||||||||||||
Debt | $ | 3,976 | $ | 3,934 | |||||||||||
Cash and equivalents | (2,881 | ) | (2,741 | ) | |||||||||||
Net debt | $ | 1,095 | $ | 1,193 | |||||||||||
Total shareholders' equity | 6,100 | 6,589 | |||||||||||||
Capital | $ | 7,195 | $ | 7,782 | |||||||||||
Net debt to capital | 15 | % | 15 | % |
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. |
1 | Programs by which 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 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 (gains)/losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and (gain)/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. |
5 | The inventories of the Company's core pharmaceutical distribution facilities in the Pharmaceutical segment are valued at the lower of cost, using the LIFO method, or market. These charges or credits are included in cost of products sold, and represent changes in the Company's LIFO inventory reserve. |
6 | Charges related to the make-whole premium on the redemption of notes. |
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