SAN FRANCISCO--(BUSINESS WIRE)--McKesson Corporation (NYSE:MCK) today reported that revenues for the second quarter ended September 30, 2014 were $44.8 billion, up 36% compared to $33 billion a year ago. On the basis of U.S. generally accepted accounting principles (“GAAP”), second-quarter earnings per diluted share from continuing operations was $2.05 compared to $1.82 a year ago.
Second-quarter Adjusted Earnings per diluted share from continuing operations was $2.79, up 21% compared to $2.30 a year ago.
“McKesson delivered another quarter of solid results reflecting strong execution across our business. We are very pleased with our performance for the first half of Fiscal 2015,” said John H. Hammergren, chairman and chief executive officer. “We continue to expect Adjusted Earnings per diluted share from continuing operations of $10.50 to $10.90 for the fiscal year ending March 31, 2015.”
For the first half of the fiscal year, McKesson generated cash from operations of $165 million, and ended the quarter with cash and cash equivalents of $3.8 billion. During the first half of the fiscal year, McKesson paid $115 million in dividends, had internal capital spending of $272 million, and spent $31 million on acquisitions.
Segment Results
Distribution Solutions revenues were $44 billion, up 37% for the quarter on a reported and constant currency basis, mainly driven by the contribution from our acquisition of Celesio and market growth.
North America pharmaceutical distribution and services revenues, which include results from U.S. Pharmaceutical, McKesson Canada and McKesson Specialty Health, were up 14% as reported and 15% on a constant currency basis for the quarter, reflecting continued demand for two recently launched drugs for the treatment of Hepatitis C, market growth and our mix of business.
International pharmaceutical distribution and services revenues were $7.3 billion, an increase of 4% on the underlying results of Celesio on a constant currency basis.
Medical-Surgical distribution and services revenues were up 4% for the quarter, driven by market growth.
In the second quarter, Distribution Solutions GAAP operating profit was $793 million and GAAP operating margin was 1.80%. Second-quarter adjusted operating profit was $1,063 million and the adjusted operating margin was 2.42%.
Technology Solutions revenues were $770 million, down 6% in the second quarter compared to the prior year, driven by anticipated revenue softness from the Horizon clinical software platform and the planned elimination of a product line, partially offset by growth in other technology businesses. GAAP operating profit was $125 million for the second quarter and GAAP operating margin was 16.23%. Adjusted operating profit was $139 million for the second quarter and adjusted operating margin was 18.05%.
Fiscal Year 2015 Outlook
McKesson expects Adjusted Earnings per diluted share from continuing operations between $10.50 and $10.90 for the fiscal year ending March 31, 2015, based on an updated exchange rate of $1.31 per Euro, which excludes the following GAAP items:
- Amortization of acquisition-related intangible assets of $1.32 per diluted share.
- Acquisition expenses and related adjustments of 57 cents per diluted share.
- LIFO inventory-related charges of 97 cents to $1.07 per diluted share.
Adjusted Earnings
McKesson separately reports financial results on the basis of Adjusted Earnings. Adjusted Earnings is a non-GAAP financial measure defined as GAAP income from continuing operations, excluding amortization of acquisition-related intangible assets, acquisition expenses and related adjustments, certain litigation reserve adjustments, and Last-In-First-Out (“LIFO”) inventory-related adjustments. A reconciliation of McKesson’s financial results determined in accordance with GAAP to Adjusted Earnings is provided in Schedules 2, 3 and 4 of the financial statement tables included with this release.
Risk Factors
Except for historical information contained in this press release, matters discussed may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These statements may be identified by their use of forward-looking terminology such as “believes”, “expects”, “anticipates”, “may”, “will”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates” or the negative of these words or other comparable terminology. The discussion of financial trends, strategy, plans or intentions may also include forward-looking statements. It is not possible to predict or identify all such risks and uncertainties; however, the most significant of these risks and uncertainties are described in the company’s Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission and include, but are not limited to: changes in the U.S. healthcare industry and regulatory environment; changes in the Canadian healthcare industry and regulatory environment; changes in the European regulatory environment with respect to privacy and data protection regulations; managing foreign expansion, including the related operating, economic, political and regulatory risks; the company’s ability to successfully identify, consummate, finance and integrate acquisitions; material adverse resolution of pending legal proceedings; exposure to European economic conditions, including recent austerity measures taken by certain European governments; competition; substantial defaults in payment or a material reduction in purchases by, or the loss of, a large customer or group purchasing organization; the loss of government contracts as a result of compliance or funding challenges; public health issues in the U.S. or abroad; malfunction, failure or breach of sophisticated internal information systems to perform as designed; the adequacy of insurance to cover property loss or liability claims; the company’s failure to attract and retain customers for its software products and solutions due to integration and implementation challenges, or due to an inability to keep pace with technological advances; the company’s proprietary products and services may not be adequately protected, and its products and solutions may be found to infringe on the rights of others; system errors or failure of our technology products and solutions to conform to specifications; disaster or other event causing interruption of customer access to data residing in our service centers; the delay or extension of our sales or implementation cycles for external software products; changes in circumstances that could impair our goodwill or intangible assets; new or revised tax legislation or challenges to our tax positions; general economic conditions, including changes in the financial markets that may affect the availability and cost of credit to the company, its customers or suppliers; changes in accounting principles generally accepted in the United States of America; and withdrawal from participation in multiemployer pension plans or if such plans are reported to have underfunded liabilities. The reader should not place undue reliance on forward-looking statements, which speak only as of the date they are first made. Except to the extent required by law, the company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.
The company has scheduled a conference call for 5:00 PM ET. The dial-in number for individuals wishing to participate on the call is 719-234-7317. Erin Lampert, senior vice president, Investor Relations, is the leader of the call, and the password to join the call is ‘McKesson’. A replay of this conference call will be available for five calendar days. The dial-in number for individuals wishing to listen to the replay is 719-457-0820 and the pass code is 2208902. A webcast of the conference call will also be available live and archived on the company’s Investor Relations website at http://investor.mckesson.com.
Shareholders are encouraged to review SEC filings and more information about McKesson, which are located on the company’s website.
About McKesson
McKesson Corporation, currently ranked 15th on the FORTUNE 500, is a healthcare services and information technology company dedicated to making the business of healthcare run better. We partner with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in every setting. McKesson helps its customers improve their financial, operational, and clinical performance with solutions that include pharmaceutical and medical-surgical supply management, healthcare information technology, and business and clinical services. For more information, visit http://www.mckesson.com.
|
Schedule 1 |
||||||||||||||||||||||||
| McKESSON CORPORATION | ||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||||||||||
| Quarter Ended September 30, | Six Months Ended September 30, | |||||||||||||||||||||||
| 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||||||||
| Revenues | $ | 44,758 | $ | 32,985 | 36 | % | $ | 88,816 | $ | 65,224 | 36 | % | ||||||||||||
| Cost of sales (1) (2) | (41,835 | ) | (30,964 | ) | 35 | (83,096 | ) | (61,273 | ) | 36 | ||||||||||||||
| Gross profit | 2,923 | 2,021 | 45 | 5,720 | 3,951 | 45 | ||||||||||||||||||
| Operating expenses | (2,135 | ) | (1,300 | ) | 64 | (4,244 | ) | (2,560 | ) | 66 | ||||||||||||||
| Litigation charges | - | (35 | ) | - | - | (50 | ) | - | ||||||||||||||||
| Total operating expenses | (2,135 | ) | (1,335 | ) | 60 | (4,244 | ) | (2,610 | ) | 63 | ||||||||||||||
| Operating income | 788 | 686 | 15 | 1,476 | 1,341 | 10 | ||||||||||||||||||
| Other income, net | 24 | 9 | 167 | 44 | 15 | 193 | ||||||||||||||||||
| Interest expense | (99 | ) | (59 | ) | 68 | (200 | ) | (118 | ) | 69 | ||||||||||||||
| Income from continuing operations before income taxes | 713 |
|
636 | 12 |
|
1,320 | 1,238 | 7 | ||||||||||||||||
| Income tax expense | (222 | ) | (213 | ) | 4 | (404 | ) | (387 | ) | 4 | ||||||||||||||
| Income from continuing operations after tax | 491 | 423 | 16 | 916 | 851 | 8 | ||||||||||||||||||
| Loss from discontinued operations, net of tax (3) | (14 | ) | (19 | ) | (26 | ) | (28 | ) | (23 | ) | 22 | |||||||||||||
| Net income | 477 | 404 | 18 | 888 | 828 | 7 | ||||||||||||||||||
| Net income attributable to noncontrolling interests (4) | (8 | ) | - | - | (16 | ) | - | - | ||||||||||||||||
| Net income attributable to McKesson Corporation | $ | 469 | $ | 404 | 16 | $ | 872 | $ | 828 | 5 | ||||||||||||||
| Earnings (loss) per common share attributable to McKesson Corporation (5) | ||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||
| Continuing operations | $ | 2.05 | $ | 1.82 | 13 | % | $ | 3.83 | $ | 3.66 | 5 | % | ||||||||||||
| Discontinued operations | (0.06 | ) | (0.08 | ) | (25 | ) | (0.12 | ) | (0.10 | ) | 20 | |||||||||||||
| Total | $ | 1.99 | $ | 1.74 | 14 | $ | 3.71 | $ | 3.56 | 4 | ||||||||||||||
| Basic | ||||||||||||||||||||||||
| Continuing operations | $ | 2.08 | $ | 1.85 | 12 | % | $ | 3.89 | $ | 3.73 | 4 | % | ||||||||||||
| Discontinued operations | (0.06 | ) | (0.09 | ) | (33 | ) | (0.12 | ) | (0.10 | ) | 20 | |||||||||||||
| Total | $ | 2.02 | $ | 1.76 | 15 | $ | 3.77 | $ | 3.63 | 4 | ||||||||||||||
| Weighted average common shares | ||||||||||||||||||||||||
| Diluted | 235 | 233 | 1 | % | 235 | 232 | 1 | % | ||||||||||||||||
| Basic | 232 | 229 | 1 | 231 | 228 | 1 | ||||||||||||||||||
| (1) | Technology Solutions segment results for the first six months of fiscal year 2015 reflect a non-cash pre-tax charge of $34 million ($27 million after-tax) primarily relating to depreciation and amortization expense due to the reclassification of the workforce business within our International Technology business from discontinued operations to continuing operations. The charge was primarily recorded in cost of sales. | |
| (2) | Cost of sales for the second quarter and first six months of fiscal year 2015 includes charges of $94 million and $192 million related to our last-in-first-out ("LIFO") method of accounting for inventories. Cost of sales for the second quarter and first six months of fiscal year 2014 includes $44 million of LIFO charges. The amounts were all recorded in our Distribution Solution segment. | |
| (3) | Primarily represents the software business within our International Technology business in our Technology Solutions segment, which was sold during the second quarter of fiscal year 2015. Fiscal year 2014 also reflects our Hospital Automation business in our Technology Solutions segment, which was sold in the third quarter of fiscal year 2014. The amounts are fully attributable to McKesson Corporation. | |
| (4) | Primarily represents the noncontrolling shareholders' portion of net income from Celesio, our majority-owned subsidiary, acquired in the fourth quarter of fiscal year 2014. | |
| (5) | Certain computations may reflect rounding adjustments. |
|
Schedule 2A |
|||||||||||||||||||||||||||||||
| McKESSON CORPORATION | |||||||||||||||||||||||||||||||
| RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) | |||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||
| (in millions, except per share amounts) | |||||||||||||||||||||||||||||||
|
|
Change | ||||||||||||||||||||||||||||||
| Quarter Ended September 30, 2014 | Vs. Prior Quarter | ||||||||||||||||||||||||||||||
|
As Reported |
Amortization |
Acquisition |
Litigation |
LIFO-Related |
Adjusted |
As Reported |
Adjusted |
||||||||||||||||||||||||
| Revenues | $ | 44,758 | $ | - | $ | - | $ | - | $ | - | $ | 44,758 | 36 | % | 36 | % | |||||||||||||||
| Gross profit | $ | 2,923 | $ | 3 | $ | - | $ | - | $ | 94 | $ | 3,020 | 45 | 46 | |||||||||||||||||
| Operating expenses | (2,135 | ) | 129 | 62 | - | - | (1,944 | ) | 60 | 59 | |||||||||||||||||||||
| Other income, net | 24 | (1 | ) | - | - | - | 23 | 167 | 156 | ||||||||||||||||||||||
| Interest expense | (99 | ) | - | - | - | - | (99 | ) | 68 | 68 | |||||||||||||||||||||
|
Income from continuing operations before income taxes |
713 | 131 | 62 | - | 94 | 1,000 | 12 | 25 | |||||||||||||||||||||||
| Income tax expense | (222 | ) | (39 | ) | (22 | ) | - | (37 | ) | (320 | ) | 4 | 22 | ||||||||||||||||||
| Income from continuing operations after tax | 491 | 92 | 40 | - | 57 | 680 | 16 | 27 | |||||||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to noncontrolling interests (1) |
(8 | ) | (12 | ) | (2 | ) | - | - | (22 | ) | - | - | |||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to McKesson Corporation |
$ | 483 | $ | 80 | $ | 38 | $ | - | $ | 57 | $ | 658 | 14 | 23 | |||||||||||||||||
|
Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (2) |
$ | 2.05 | $ | 0.33 | $ | 0.16 | $ | - | $ | 0.25 | $ | 2.79 | 13 | % | 21 | % | |||||||||||||||
| Diluted weighted average common shares | 235 | 235 | 235 | - | 235 | 235 | 1 | % | 1 | % | |||||||||||||||||||||
| Quarter Ended September 30, 2013 | |||||||||||||||||||||||||||||||
|
As Reported |
Amortization |
Acquisition |
Litigation |
LIFO-Related |
Adjusted |
||||||||||||||||||||||||||
| Revenues | $ | 32,985 |
|
$ | - | $ | - | $ | - | $ | - | $ | 32,985 | ||||||||||||||||||
| Gross profit | $ | 2,021 |
|
$ | 5 | $ | - |
|
$ | - | $ | 44 | $ | 2,070 | |||||||||||||||||
| Operating expenses | (1,335 | ) | 65 | 13 | 35 | - | (1,222 | ) | |||||||||||||||||||||||
| Other income, net | 9 | - | - | - | - | 9 | |||||||||||||||||||||||||
| Interest expense | (59 | ) | - | - | - | - | (59 | ) | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
|
Income from continuing operations before income taxes |
636 | 70 | 13 | 35 | 44 | 798 | |||||||||||||||||||||||||
| Income tax expense | (213 | ) | (25 | ) | (5 | ) | (2 | ) | (17 | ) | (262 | ) | |||||||||||||||||||
| Income from continuing operations after tax | 423 | 45 | 8 | 33 | 27 | 536 | |||||||||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to noncontrolling interests |
- | - | - | - | - | - | |||||||||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to McKesson Corporation |
$ | 423 | $ | 45 | $ | 8 | $ | 33 | $ | 27 | $ | 536 | |||||||||||||||||||
|
Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (2) |
$ | 1.82 | $ | 0.19 | $ | 0.03 | $ | 0.14 | $ | 0.12 | $ | 2.30 | |||||||||||||||||||
| Diluted weighted average common shares | 233 | 233 | 233 | 233 | 233 | 233 | |||||||||||||||||||||||||
| (1) | Primarily represents the noncontrolling shareholders' portion of income from continuing operations from Celesio, our majority-owned subsidiary, acquired in the fourth quarter of fiscal year 2014. | |
| (2) | Certain computations may reflect rounding adjustments. | |
| Refer to the definitions related to Adjusted Earnings (Non-GAAP) financial information. | ||
|
Schedule 2B |
|||||||||||||||||||||||||||||||||||||
| McKESSON CORPORATION | |||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP) | |||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||
| Change | |||||||||||||||||||||||||||||||||||||
| Six Months Ended September 30, 2014 | Vs. Prior Period | ||||||||||||||||||||||||||||||||||||
|
As Reported |
Amortization |
Acquisition |
Litigation |
LIFO-Related |
Adjusted |
As Reported |
Adjusted |
||||||||||||||||||||||||||||||
| Revenues | $ | 88,816 | $ | - | $ | - | $ | - | $ | - | $ | 88,816 | 36 | % | 36 | % | |||||||||||||||||||||
| Gross profit (1) | $ | 5,720 | $ | 5 | $ | - | $ | - | $ | 192 | $ | 5,917 | 45 | 48 | |||||||||||||||||||||||
| Operating expenses | (4,244 | ) | 256 | 111 | - | - | (3,877 | ) | 63 | 61 | |||||||||||||||||||||||||||
| Other income, net | 44 | - | - | - | - | 44 | 193 | 193 | |||||||||||||||||||||||||||||
| Interest expense | (200 | ) | - | - | - | - | (200 | ) | 69 | 69 | |||||||||||||||||||||||||||
|
Income from continuing operations before income taxes |
1,320 | 261 | 111 | - | 192 | 1,884 | 7 | 26 | |||||||||||||||||||||||||||||
| Income tax expense | (404 | ) | (80 | ) | (37 | ) | - | (75 | ) | (596 | ) | 4 | 26 | ||||||||||||||||||||||||
| Income from continuing operations after tax | 916 | 181 | 74 | - | 117 | 1,288 | 8 | 26 | |||||||||||||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to noncontrolling interests (2) |
(16 | ) | (23 | ) | (6 | ) | - | - | (45 | ) | - | - | |||||||||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to McKesson Corporation |
$ | 900 | $ | 158 | $ | 68 | $ | - | $ | 117 | $ | 1,243 | 6 | 21 | |||||||||||||||||||||||
|
Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (3) |
$ | 3.83 | $ | 0.66 | $ | 0.30 | $ | - | $ | 0.50 | $ | 5.29 | 5 | % | 20 | % | |||||||||||||||||||||
| Diluted weighted average common shares | 235 | 235 | 235 | - | 235 | 235 | 1 | % | 1 | % | |||||||||||||||||||||||||||
| Six Months Ended September 30, 2013 | |||||||||||||||||||||||||||||||||||||
|
As Reported |
Amortization |
Acquisition |
Litigation |
LIFO-Related |
Adjusted |
||||||||||||||||||||||||||||||||
| Revenues | $ | 65,224 |
|
$ | - | $ | - | $ | - | $ | - | $ | 65,224 | ||||||||||||||||||||||||
| Gross profit | $ | 3,951 |
|
$ | 11 | $ | - |
|
$ | - | $ | 44 | $ | 4,006 | |||||||||||||||||||||||
| Operating expenses | (2,610 | ) | 130 | 26 | 50 | - | (2,404 | ) | |||||||||||||||||||||||||||||
| Other income, net | 15 | - | - | - | - | 15 | |||||||||||||||||||||||||||||||
| Interest expense | (118 | ) | - | - | - | - | (118 | ) | |||||||||||||||||||||||||||||
|
Income from continuing operations before income taxes |
1,238 | 141 | 26 | 50 | 44 | 1,499 | |||||||||||||||||||||||||||||||
| Income tax expense | (387 | ) | (52 | ) | (10 | ) | (8 | ) | (17 | ) | (474 | ) | |||||||||||||||||||||||||
| Income from continuing operations after tax | 851 | 89 | 16 | 42 | 27 | 1,025 | |||||||||||||||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to noncontrolling interests |
- | - | - | - | - | - | |||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
|
Income from continuing operations, net of tax, attributable to McKesson Corporation |
$ | 851 | $ | 89 | $ | 16 | $ | 42 | $ | 27 | $ | 1,025 | |||||||||||||||||||||||||
|
Diluted earnings per common share from continuing operations, net of tax, attributable to McKesson Corporation (3) |
$ | 3.66 | $ | 0.38 | $ | 0.07 | $ | 0.18 | $ | 0.12 | $ | 4.41 | |||||||||||||||||||||||||
| Diluted weighted average common shares | 232 | 232 | 232 | 232 | 232 | 232 | |||||||||||||||||||||||||||||||
| (1) | Technology Solutions segment results for the first six months of fiscal year 2015 reflect a non-cash pre-tax charge of $34 million ($27 million after-tax) primarily relating to depreciation and amortization expense due to the reclassification of the workforce business within our International Technology business from discontinued operations to continuing operations. The charge was primarily recorded in cost of sales. | |
| (2) | Primarily represents the noncontrolling shareholders' portion of income from continuing operations from Celesio, our majority-owned subsidiary, acquired in the fourth quarter of fiscal year 2014. | |
| (3) | Certain computations may reflect rounding adjustments. | |
| Refer to the definitions related to Adjusted Earnings (Non-GAAP) financial information. | ||
|
Schedule 3A |
|||||||||||||||||||||||||||||||||||||
| McKESSON CORPORATION | |||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) | |||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||
|
Quarter Ended September 30, 2014 |
Quarter Ended September 30, 2013 |
Change |
|||||||||||||||||||||||||||||||||||
|
As Reported |
Adjustments |
Adjusted |
As Reported |
Adjustments |
Adjusted |
As Reported |
Adjusted |
||||||||||||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||||||||||||||||
| Distribution Solutions | |||||||||||||||||||||||||||||||||||||
|
North America pharmaceutical distribution & services |
$ | 35,148 | $ | - | $ | 35,148 | $ | 30,702 | $ | - | $ | 30,702 | 14 | % | 14 | % | |||||||||||||||||||||
|
International pharmaceutical distribution & services |
7,312 | - | 7,312 | - | - | - | - | - | |||||||||||||||||||||||||||||
|
Medical-Surgical distribution & services |
1,528 | - | 1,528 | 1,467 | - | 1,467 | 4 | 4 | |||||||||||||||||||||||||||||
| Total Distribution Solutions | 43,988 | - | 43,988 | 32,169 | - | 32,169 | 37 | 37 | |||||||||||||||||||||||||||||
|
Technology Solutions - Products and Services |
770 | - | 770 | 816 | - | 816 | (6 | ) | (6 | ) | |||||||||||||||||||||||||||
| Revenues | $ | 44,758 | $ | - | $ | 44,758 | $ | 32,985 | $ | - | $ | 32,985 | 36 | 36 | |||||||||||||||||||||||
| GROSS PROFIT |
|
||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 2,540 | $ | 94 | $ | 2,634 | $ | 1,624 | $ | 44 | $ | 1,668 | 56 | 58 | |||||||||||||||||||||||
| Technology Solutions | 383 | 3 | 386 | 397 | 5 | 402 | (4 | ) | (4 | ) | |||||||||||||||||||||||||||
| Gross profit | $ | 2,923 | $ | 97 | $ | 3,020 | $ | 2,021 | $ | 49 | $ | 2,070 | 45 | 46 | |||||||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | (1,766 | ) | $ | 177 | $ | (1,589 | ) | $ | (945 | ) | $ | 98 | $ | (847 | ) | 87 | 88 | |||||||||||||||||||
| Technology Solutions | (260 | ) | 11 | (249 | ) | (277 | ) | 14 | (263 | ) | (6 | ) | (5 | ) | |||||||||||||||||||||||
| Corporate | (109 | ) | 3 | (106 | ) | (113 | ) | 1 | (112 | ) | (4 | ) | (5 | ) | |||||||||||||||||||||||
| Operating expenses | $ | (2,135 | ) | $ | 191 | $ | (1,944 | ) | $ | (1,335 | ) | $ | 113 | $ | (1,222 | ) | 60 | 59 | |||||||||||||||||||
| OTHER INCOME, NET | |||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 19 | $ | (1 | ) | $ | 18 | $ | 6 | $ | - | $ | 6 | 217 | 200 | ||||||||||||||||||||||
| Technology Solutions | 2 | - | 2 | - | - | - | - | - | |||||||||||||||||||||||||||||
| Corporate | 3 | - | 3 | 3 | - | 3 | - | - | |||||||||||||||||||||||||||||
| Other income, net | $ | 24 | $ | (1 | ) | $ | 23 | $ | 9 | $ | - | $ | 9 | 167 | 156 | ||||||||||||||||||||||
| OPERATING PROFIT | |||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 793 | $ | 270 | $ | 1,063 | $ | 685 | $ | 142 | $ | 827 | 16 | 29 | |||||||||||||||||||||||
| Technology Solutions | 125 | 14 | 139 | 120 | 19 | 139 | 4 | - | |||||||||||||||||||||||||||||
| Operating profit | 918 | 284 | 1,202 | 805 | 161 | 966 | 14 | 24 | |||||||||||||||||||||||||||||
| Corporate | (106 | ) | 3 | (103 | ) | (110 | ) | 1 | (109 | ) | (4 | ) | (6 | ) | |||||||||||||||||||||||
| Interest Expense | (99 | ) | - | (99 | ) | (59 | ) | - | (59 | ) | 68 | 68 | |||||||||||||||||||||||||
|
Income from continuing operations before income taxes (1) |
$ | 713 | $ | 287 | $ | 1,000 | $ | 636 | $ | 162 | $ | 798 | 12 | 25 | |||||||||||||||||||||||
| STATISTICS | |||||||||||||||||||||||||||||||||||||
| Operating profit as a % of revenues | |||||||||||||||||||||||||||||||||||||
| Distribution Solutions | 1.80 | % | 2.42 | % | 2.13 | % | 2.57 | % | (33 | ) |
bp |
(15 | ) | bp | |||||||||||||||||||||||
| Technology Solutions | 16.23 | 18.05 | 14.71 | 17.03 | 152 | 102 | |||||||||||||||||||||||||||||||
| (1) | For the fiscal year 2015, the amount is prior to attributing income from continuing operations from Celesio to the shareholders of noncontrolling interests. | |
| Refer to the definitions related to Adjusted Earnings (Non-GAAP) financial information. | ||
|
Schedule 3B |
||||||||||||||||||||||||||||||||||||
| McKESSON CORPORATION | ||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) | ||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||
| Six Months Ended September 30, 2014 | Six Months Ended September 30, 2013 | Change | ||||||||||||||||||||||||||||||||||
|
As Reported |
Adjustments |
Adjusted |
As Reported |
Adjustments |
Adjusted |
As Reported |
Adjusted |
|||||||||||||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||||||||||||||
| Distribution Solutions | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
North America pharmaceutical distribution & services |
$ | 69,452 | $ |
- |
$ | 69,452 | $ | 60,748 | $ | - | $ | 60,748 | 14 | % | 14 | % | ||||||||||||||||||||
|
International pharmaceutical distribution & services |
14,919 | - | 14,919 | - | - | - | - | - | ||||||||||||||||||||||||||||
|
Medical-Surgical distribution & services |
2,907 | - | 2,907 | 2,824 | - | 2,824 | 3 | 3 | ||||||||||||||||||||||||||||
| Total Distribution Solutions | 87,278 | - | 87,278 | 63,572 | - | 63,572 | 37 | 37 | ||||||||||||||||||||||||||||
|
Technology Solutions - Products and Services |
1,538 | - | 1,538 | 1,652 | - | 1,652 | (7 | ) | (7 | ) | ||||||||||||||||||||||||||
| Revenues | $ | 88,816 | $ | - | $ | 88,816 | $ | 65,224 | $ | - | $ | 65,224 | 36 | 36 | ||||||||||||||||||||||
| GROSS PROFIT |
|
|||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 4,998 | $ | 192 | $ | 5,190 | $ | 3,144 | $ | 44 | $ | 3,188 | 59 | 63 | ||||||||||||||||||||||
| Technology Solutions (1) | 722 | 5 | 727 | 807 | 11 | 818 | (11 | ) | (11 | ) | ||||||||||||||||||||||||||
| Gross profit | $ | 5,720 | $ | 197 | $ | 5,917 | $ | 3,951 | $ | 55 | $ | 4,006 | 45 | 48 | ||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | (3,494 | ) | $ | 336 | $ | (3,158 | ) | $ | (1,850 | ) | $ | 179 | $ | (1,671 | ) | 89 | 89 | ||||||||||||||||||
| Technology Solutions | (531 | ) | 21 | (510 | ) | (560 | ) | 26 | (534 | ) | (5 | ) | (4 | ) | ||||||||||||||||||||||
| Corporate | (219 | ) | 10 | (209 | ) | (200 | ) | 1 | (199 | ) | 10 | 5 | ||||||||||||||||||||||||
| Operating expenses | $ | (4,244 | ) | $ | 367 | $ | (3,877 | ) | $ | (2,610 | ) | $ | 206 | $ | (2,404 | ) | 63 | 61 | ||||||||||||||||||
| OTHER INCOME, NET | ||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 37 | $ | - | $ | 37 | $ | 10 | $ | - | $ | 10 | 270 | 270 | ||||||||||||||||||||||
| Technology Solutions | 2 | - | 2 | - | - | - | - | - | ||||||||||||||||||||||||||||
| Corporate | 5 | - | 5 | 5 | - | 5 | - | - | ||||||||||||||||||||||||||||
| Other income, net | $ | 44 | $ | - | $ | 44 | $ | 15 | $ | - | $ | 15 | 193 | 193 | ||||||||||||||||||||||
| OPERATING PROFIT | ||||||||||||||||||||||||||||||||||||
| Distribution Solutions | $ | 1,541 | $ | 528 | $ | 2,069 | $ | 1,304 | $ | 223 | $ | 1,527 | 18 | 35 | ||||||||||||||||||||||
| Technology Solutions | 193 | 26 | 219 | 247 | 37 | 284 | (22 | ) | (23 | ) | ||||||||||||||||||||||||||
| Operating profit | 1,734 | 554 | 2,288 | 1,551 | 260 | 1,811 | 12 | 26 | ||||||||||||||||||||||||||||
| Corporate | (214 | ) | 10 | (204 | ) | (195 | ) | 1 | (194 | ) | 10 | 5 | ||||||||||||||||||||||||
| Interest Expense | (200 | ) | - | (200 | ) | (118 | ) | - | (118 | ) | 69 | 69 | ||||||||||||||||||||||||
|
Income from continuing operations before income taxes (2) |
$ | 1,320 | $ | 564 | $ | 1,884 | $ | 1,238 | $ | 261 | $ | 1,499 | 7 | 26 | ||||||||||||||||||||||
| STATISTICS | ||||||||||||||||||||||||||||||||||||
| Operating profit as a % of revenues | ||||||||||||||||||||||||||||||||||||
|
Distribution Solutions |
1.77 | % | 2.37 | % | 2.05 | % | 2.40 | % | (28 | ) | bp | (3 | ) | bp | ||||||||||||||||||||||
|
Technology Solutions |
12.55 | 14.24 | 14.95 | 17.19 | (240 | ) | (295 | ) | ||||||||||||||||||||||||||||
| (1) | Technology Solutions segment results for the first six months of fiscal year 2015 reflect a non-cash pre-tax charge of $34 million ($27 million after-tax) primarily relating to depreciation and amortization expense due to the reclassification of the workforce business within our International Technology business from discontinued operations to continuing operations. The charge was primarily recorded in cost of sales. | |
| (2) | For the fiscal year 2015, the amount is prior to attributing income from continuing operations from Celesio to the shareholders of noncontrolling interests. | |
| Refer to the definitions related to Adjusted Earnings (Non-GAAP) financial information. | ||
|
Schedule 4A |
|||||||||||||||||||||||||||||||||||||||
| McKESSON CORPORATION | |||||||||||||||||||||||||||||||||||||||
| RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE | |||||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||
| Quarter Ended September 30, 2014 | Quarter Ended September 30, 2013 | ||||||||||||||||||||||||||||||||||||||
|
Distribution |
Technology |
Corporate & |
Total |
Distribution |
Technology |
Corporate & |
Total | ||||||||||||||||||||||||||||||||
|
As Reported (GAAP): |
|||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 43,988 | $ | 770 | $ | - | $ | 44,758 | $ | 32,169 | $ | 816 | $ | - | $ | 32,985 | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 2,540 | $ | 383 | $ | - | $ | 2,923 | $ | 1,624 | $ | 397 | $ | - | $ | 2,021 | |||||||||||||||||||||||
| Operating expenses | (1,766 | ) | (260 | ) | (109 | ) | (2,135 | ) | (945 | ) | (277 | ) | (113 | ) | (1,335 | ) | |||||||||||||||||||||||
| Other income, net | 19 | 2 | 3 | 24 | 6 | - | 3 | 9 | |||||||||||||||||||||||||||||||
|
Income from continuing operations before interest expenses and income taxes |
793 | 125 | (106 | ) | 812 | 685 | 120 | (110 | ) | 695 | |||||||||||||||||||||||||||||
| Interest expense | - | - | (99 | ) | (99 | ) | - | - | (59 | ) | (59 | ) | |||||||||||||||||||||||||||
|
Income from continuing operations before income taxes (1) |
$ | 793 | $ | 125 | $ | (205 | ) | $ | 713 | $ | 685 | $ | 120 | $ | (169 | ) | $ | 636 | |||||||||||||||||||||
|
Pre-Tax Adjustments: |
|||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | - | $ | 3 | $ | - | $ | 3 | $ | - | $ | 5 | $ | - | $ | 5 | |||||||||||||||||||||||
| Operating expenses | 119 | 10 | - | 129 | 53 | 12 | - | 65 | |||||||||||||||||||||||||||||||
| Other income, net | (1 | ) | - | - | (1 | ) | - | - | - | - | |||||||||||||||||||||||||||||
| Amortization of acquisition-related intangibles | 118 | 13 | - | 131 | 53 | 17 | - | 70 | |||||||||||||||||||||||||||||||
| Gross profit | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Operating expenses | 58 | 1 | 3 | 62 | 10 | 2 | 1 | 13 | |||||||||||||||||||||||||||||||
| Other income, net | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Interest expense | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Acquisition expenses and related adjustments | 58 | 1 | 3 | 62 | 10 | 2 | 1 | 13 | |||||||||||||||||||||||||||||||
|
Operating expenses - Litigation reserve adjustments |
- | - | - | - | 35 | - | - | 35 | |||||||||||||||||||||||||||||||
| Gross profit - LIFO-related adjustments | 94 | - | - | 94 | 44 | - | - | 44 | |||||||||||||||||||||||||||||||
| Total pre-tax adjustments | $ | 270 | $ | 14 | $ | 3 | $ | 287 | $ | 142 | $ | 19 | $ | 1 | $ | 162 | |||||||||||||||||||||||
|
Adjusted Earnings (Non-GAAP): |
|||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 43,988 | $ | 770 | $ | - | $ | 44,758 | $ | 32,169 | $ | 816 | $ | - | $ | 32,985 | |||||||||||||||||||||||
| Gross profit | $ | 2,634 | $ | 386 | $ | - | $ | 3,020 | $ | 1,668 | $ | 402 | $ | - | $ | 2,070 | |||||||||||||||||||||||
| Operating expenses | (1,589 | ) | (249 | ) | (106 | ) | (1,944 | ) | (847 | ) | (263 | ) | (112 | ) | (1,222 | ) | |||||||||||||||||||||||
| Other income, net | 18 | 2 | 3 | 23 | 6 | - | 3 | 9 | |||||||||||||||||||||||||||||||
|
Income from continuing operations before interest expenses and income taxes |
1,063 | 139 | (103 | ) | 1,099 | 827 | 139 | (109 | ) | 857 | |||||||||||||||||||||||||||||
| Interest expense | - | - | (99 | ) | (99 | ) | - | - | (59 | ) | (59 | ) | |||||||||||||||||||||||||||
|
Income from continuing operations before income taxes (1) |
$ | 1,063 | $ | 139 | $ | (202 | ) | $ | 1,000 | $ | 827 | $ | 139 | $ | (168 | ) | $ | 798 | |||||||||||||||||||||
| (1) | For the fiscal year 2015, the amount is prior to attributing income from continuing operations from Celesio to the shareholders of noncontrolling interests. | |
| Refer to the definitions related to Adjusted Earnings (Non-GAAP) financial information. | ||
|
Schedule 4B |
|||||||||||||||||||||||||||||||||
| McKESSON CORPORATION | |||||||||||||||||||||||||||||||||
| RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP) - BY ADJUSTMENT TYPE | |||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||
| Six Months Ended September 30, 2014 | Six Months Ended September 30, 2013 | ||||||||||||||||||||||||||||||||
|
Distribution |
Technology |
Corporate & |
Total |
Distribution |
Technology |
Corporate & |
Total | ||||||||||||||||||||||||||
|
As Reported (GAAP): |
|||||||||||||||||||||||||||||||||
| Revenues | $ | 87,278 | $ | 1,538 | $ | - | $ | 88,816 | $ | 63,572 | $ | 1,652 | $ | - | $ | 65,224 | |||||||||||||||||
| Gross profit (1) | $ | 4,998 | $ | 722 | $ | - | $ | 5,720 | $ | 3,144 | $ | 807 | $ | - | $ | 3,951 | |||||||||||||||||
| Operating expenses | (3,494 | ) | (531 | ) | (219 | ) | (4,244 | ) | (1,850 | ) | (560 | ) | (200 | ) | (2,610 | ) | |||||||||||||||||
| Other income, net | 37 | 2 | 5 | 44 | 10 | - | 5 | 15 | |||||||||||||||||||||||||
|
Income from continuing operations before interest expense and income taxes |
1,541 | 193 | (214 | ) | 1,520 | 1,304 | 247 | (195 | ) | 1,356 | |||||||||||||||||||||||
| Interest expense | - | - | (200 | ) | (200 | ) | - | - | (118 | ) | (118 | ) | |||||||||||||||||||||
|
Income from continuing operations before income taxes (2) |
$ | 1,541 | $ | 193 | $ | (414 | ) | $ | 1,320 | $ | 1,304 | $ | 247 | $ | (313 | ) | $ | 1,238 | |||||||||||||||
|
Pre-Tax Adjustments: |
|||||||||||||||||||||||||||||||||
| Gross profit | $ | - | $ | 5 | $ | - | $ | 5 | $ | - | $ | 11 | $ | - | $ | 11 | |||||||||||||||||
| Operating expenses | 236 | 20 | - | 256 | 107 | 23 | - | 130 | |||||||||||||||||||||||||
| Other income, net | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Amortization of acquisition-related intangibles | 236 | 25 | - | 261 | 107 | 34 | - | 141 | |||||||||||||||||||||||||
| Gross profit | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Operating expenses | 100 | 1 | 10 | 111 | 22 | 3 | 1 | 26 | |||||||||||||||||||||||||
| Other income, net | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Interest expense | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Acquisition expenses and related adjustments | 100 | 1 | 10 | 111 | 22 | 3 | 1 | 26 | |||||||||||||||||||||||||
|
Operating expenses - Litigation reserve adjustments |
- | - | - | - | 50 | - | - | 50 | |||||||||||||||||||||||||
| Gross profit - LIFO-related adjustments | 192 | - | - | 192 | 44 | - | - | 44 | |||||||||||||||||||||||||
| Total pre-tax adjustments | $ | 528 | $ | 26 | $ | 10 | $ | 564 | $ | 223 | $ | 37 | $ | 1 | $ | 261 | |||||||||||||||||
|
Adjusted Earnings (Non-GAAP): |
|||||||||||||||||||||||||||||||||
| Revenues | $ | 87,278 | $ | 1,538 | $ | - | $ | 88,816 | $ | 63,572 | $ | 1,652 | $ | - | $ | 65,224 | |||||||||||||||||
| Gross profit (1) | $ | 5,190 | $ | 727 | $ | - | $ | 5,917 | $ | 3,188 | $ | 818 | $ | - | $ | 4,006 | |||||||||||||||||
|
Operating expenses |
(3,158 | ) | (510 | ) | (209 | ) | (3,877 | ) | (1,671 | ) | (534 | ) | (199 | ) | (2,404 | ) | |||||||||||||||||
| Other income, net | 37 | 2 | 5 | 44 | 10 | - | 5 | 15 | |||||||||||||||||||||||||
|
Income from continuing operations before interest expense and income taxes |
2,069 | 219 | (204 | ) | 2,084 | 1,527 | 284 | (194 | ) | 1,617 | |||||||||||||||||||||||
| Interest expense | - | - | (200 | ) | (200 | ) | - | - | (118 | ) | (118 | ) | |||||||||||||||||||||
|
Income from continuing operations before income taxes (2) |
$ | 2,069 | $ | 219 | $ | (404 | ) | $ | 1,884 | $ | 1,527 | $ | 284 | $ | (312 | ) | $ | 1,499 | |||||||||||||||
| (1) | Technology Solutions segment results for the first six months of fiscal year 2015 reflect a non-cash pre-tax charge of $34 million ($27 million after-tax) primarily relating to depreciation and amortization expense due to the reclassification of the workforce business within our International Technology business from discontinued operations to continuing operations. The charge was primarily recorded in cost of sales. | |
| (2) | For the fiscal year 2015, the amount is prior to attributing income from continuing operations from Celesio to the shareholders of noncontrolling interests. | |
| Refer to the definitions related to Adjusted Earnings (Non-GAAP) financial information. | ||
|
Schedule 5 |
|||||||
| McKESSON CORPORATION | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| (unaudited) | |||||||
| (in millions) | |||||||
| September 30, | March 31, | ||||||
|
2014 |
2014 |
||||||
| ASSETS | |||||||
| Current Assets | |||||||
| Cash and cash equivalents | $ | 3,804 | $ | 4,193 | |||
| Receivables, net | 15,391 | 14,193 | |||||
| Inventories, net | 14,063 | 13,308 | |||||
| Prepaid expenses and other | 621 | 879 | |||||
|
Total Current Assets |
33,879 | 32,573 | |||||
| Property, Plant and Equipment, Net | 2,174 | 2,222 | |||||
| Goodwill | 10,095 | 9,927 | |||||
| Intangible Assets, Net | 4,099 | 5,022 | |||||
| Other Assets | 1,985 | 2,015 | |||||
| Total Assets | $ | 52,232 | $ | 51,759 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current Liabilities | |||||||
| Drafts and accounts payable | $ | 22,656 | $ | 21,429 | |||
| Short-term borrowings | 525 | 346 | |||||
| Deferred revenue | 1,003 | 1,236 | |||||
| Deferred tax liabilities | 1,734 | 1,588 | |||||
| Current portion of long-term debt | 427 | 1,424 | |||||
| Other accrued liabilities | 2,992 | 3,478 | |||||
| Total Current Liabilities | 29,337 | 29,501 | |||||
| Long-Term Debt | 9,620 | 8,949 | |||||
| Other Noncurrent Liabilities | 2,749 | 2,991 | |||||
| McKesson Corporation Stockholders' Equity |
8,931 |
8,522 | |||||
| Noncontrolling Interests |
1,595 |
1,796 | |||||
| Total Equity | 10,526 | 10,318 | |||||
| Total Liabilities and Equity | $ | 52,232 | $ | 51,759 | |||
|
Schedule 6 |
|||||||||
| McKESSON CORPORATION | |||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (unaudited) | |||||||||
| (in millions) | |||||||||
|
Six Months Ended September 30, |
|||||||||
|
2014 |
2013 |
||||||||
| OPERATING ACTIVITIES | |||||||||
| Net income | $ | 888 | $ | 828 | |||||
| Adjustments to reconcile to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 543 | 332 | |||||||
| Deferred taxes | 110 | 151 | |||||||
| Share-based compensation expense | 82 | 73 | |||||||
| LIFO charges | 192 | 44 | |||||||
| Other non-cash items | 18 | 18 | |||||||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||||
| Receivables | (1,535 | ) | (393 | ) | |||||
| Inventories | (1,161 | ) | (235 | ) | |||||
| Drafts and accounts payable | 1,502 | 344 | |||||||
| Deferred revenue | (251 | ) | (232 | ) | |||||
| Taxes |
(66 |
) | 3 | ||||||
| Litigation charges | - | 50 | |||||||
| Litigation settlement payments | - | (20 | ) | ||||||
| Other |
(157 |
) | (150 | ) | |||||
| Net cash provided by operating activities | 165 | 813 | |||||||
| INVESTING ACTIVITIES | |||||||||
| Property acquisitions | (191 | ) | (133 | ) | |||||
| Capitalized software expenditures | (81 | ) | (66 | ) | |||||
| Acquisitions, less cash and cash equivalents acquired | (31 | ) | (116 | ) | |||||
| Other | (4 | ) | 41 | ||||||
| Net cash used in investing activities | (307 | ) | (274 | ) | |||||
| FINANCING ACTIVITIES | |||||||||
| Proceeds from short-term borrowings | 1,790 | 150 | |||||||
| Repayments of short-term borrowings | (1,572 | ) | (150 | ) | |||||
| Proceeds from issuances of long-term debt | 7 | - | |||||||
| Repayments of long-term debt | (233 | ) | - | ||||||
| Common stock transactions: | |||||||||
| Issuances | 66 | 119 | |||||||
| Share repurchases, including shares surrendered for tax withholding | (105 | ) | (128 | ) | |||||
| Dividends paid | (115 | ) | (99 | ) | |||||
| Other |
(6 |
) | 71 | ||||||
| Net cash used in financing activities |
(168 |
) | (37 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents |
(79 |
) | 2 | ||||||
| Net increase (decrease) in cash and cash equivalents | (389 | ) | 504 | ||||||
| Cash and cash equivalents at beginning of period | 4,193 | 2,456 | |||||||
| Cash and cash equivalents at end of period | $ | 3,804 | $ | 2,960 | |||||
|
Definitions related to Adjusted Earnings (Non-GAAP) Financial Information |
| Adjusted Earnings represents income from continuing operations, excluding the effects of the following items from the Company’s GAAP financial results, including the related income tax effects: |
|
Amortization of acquisition-related intangibles - Amortization expense of acquired intangible assets purchased in connection with acquisitions by the Company. |
|
Acquisition expenses and related adjustments - Transaction and integration expenses that are directly related to acquisitions by the Company. Examples include transaction closing costs, professional service fees, restructuring or severance charges, retention payments, employee relocation expenses, facility or other exit-related expenses, recoveries of acquisition-related expenses or post-closing expenses, bridge loan fees, gains or losses related to foreign currency contracts, and gains or losses on business combinations. |
|
Litigation reserve adjustments - Adjustments to the Company’s reserves, including accrued interest, for estimated probable losses for its Average Wholesale Price litigation matter, as such term is defined in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014. |
|
LIFO-related adjustments - Last-In-First-Out ("LIFO") inventory-related adjustments. |
| Income taxes on Adjusted Earnings are calculated in accordance with Accounting Standards Codification ("ASC") 740, “Income Taxes,” which is the same accounting principle used by the Company when presenting its GAAP financial results. |
| The Company believes the presentation of non-GAAP measures such as Adjusted Earnings provides useful supplemental information to investors with regard to its core operating performance, as well as assists with the comparison of its past financial performance to the Company’s future financial results. Moreover, the Company believes that the presentation of Adjusted Earnings assists investors’ ability to compare its financial results to those of other companies in the same industry. However, the Company's Adjusted Earnings measure may be defined and calculated differently by other companies in the same industry. |
| The Company internally uses non-GAAP financial measures such as Adjusted Earnings in connection with its own financial planning and reporting processes. Specifically, Adjusted Earnings serves as one of the measures management utilizes when allocating resources, deploying capital and assessing business performance and employee incentive compensation. Nonetheless, non-GAAP financial results and related measures disclosed by the Company should not be considered a substitute for, nor superior to, financial results and measures as determined or calculated in accordance with GAAP. |
