mckesson corporation j.p. morgan healthcare...
TRANSCRIPT
McKesson Corporation
J.P. Morgan Healthcare Conference
John Hammergren
Chairman and
Chief Executive Officer
January 13, 2015
Forward-Looking Statements
Some of the information in this presentation is not historical in nature and may constitute forward-looking statements, which
are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements
may be identified by the 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. These
forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those
projected, anticipated or implied by such statements. Although it is not possible to predict or identify all such risks and
uncertainties, they may include, but are not limited to, those described in the Company’s annual, quarterly and current reports
(i.e., Form 10-K, Form 10-Q and Form 8-K) as filed or furnished with the Securities and Exchange Commission (SEC). You
are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date such
statements were first made. To the degree financial information is included in this presentation, it is in summary form only and
must be considered in the context of the full details provided in the Company’s most recent annual, quarterly
or current report as filed or furnished with the SEC. The Company’s SEC reports are available at www.mckesson.com under
the “Investors” tab. 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.
GAAP / Non-GAAP Reconciliation
In an effort to provide additional and useful information regarding the Company’s financial results and other financial
information as determined by generally accepted accounting principles (GAAP), certain materials presented during this
event include non-GAAP information. The rationale for management’s use of non-GAAP information, a reconciliation of that
information to GAAP, and other related information is available in the supplemental material attached as an appendix to
this presentation and posted to www.mckesson.com under the “Investors” tab.
2
1 Approximated as of December 2, 2014; 2 Approximates reported revenues of McKesson and Celesio AG for the twelve months ended September 30, 2014 (USD); 3 As of December 2, 2014.
McKesson At-A-Glance Driving Better Health for Over 180 Years
Founded in
1833
85,000 Employees1
Worldwide
2 Core Segments
Distribution Solutions
Technology Solutions
>$170B
Combined Revenues
20 Countries3
Operates in Over
>12K Owned or Banner
Pharmacies1
Serves Pharmacies and Hospitals
Globally Daily1
120K
2
3
Demand for Healthcare is
Growing
Demographic Trends • Aging Population
• Increase in Chronic Conditions
Rising Healthcare
Global Healthcare Industry in Transformation
Regulatory Environment
Convergence & Consolidation
`
The Age of the
Consumer
Costs
4
A Vision for Better Health…
Better Business
Better Care
Better Connectivity
Payers
Pharmaceutical
Manufacturers
Retail
Pharmacy
Alternate Care Physicians
Hospitals
Regulatory Agencies/
Government
Consumer
We make healthcare
businesses run better
We connect healthcare stakeholders
We enable better
clinical outcomes
5
…Delivering Solutions and Value Globally
Market Leading Positions
• U.S. and Canada – Pharmaceutical Distribution and Services
• Specialty Distribution and Services
• Medical-Surgical Distribution
• European Retail Pharmacy, Distribution and Service Operations
• Technology – connectivity and payer-provider solutions
OneStopSM
6
Healthcare Services Leader in North America
7
US Pharmaceutical: Operational Excellence…
Best-in-class network quality, efficiency and speed
Operational Excellence
Order Accuracy
Manufacturer Services
A Broad Value Proposition
1 As of March 31, 2014
21% CAGR Since FY031
OneStopSM
Generics
99.98 %
8
…Creating Value for Our Customers
Scale and supply chain excellence
Partnering with
Independent Pharmacy
More than 3,5001 stores
1,600+ new stores since 2008
Expanding Relationships with
Institutional Pharmacy Creating
Value for Retail
Pharmacy
1 As of October 31, 2014
9
Canada: Innovation and Market Leadership
Best-in-class network Quality, efficiency and speed
Banner Programs Generic Rx
Specialty Pharmacies & Distribution
85+
>1,700 stores in all 10 provinces and 2 territories
Medicine Shoppe Canada
16 Distribution Centers
7 Specialty Pharmacies
As of March 31, 2014
Infusion Clinics
10
Specialty Health: Positioned for Continued Growth
We touch all aspects of Specialty patient care…
A Broad Value Proposition
• Oncology and Multi-Specialty Distribution and Practice Management
• One of the largest community-based Oncology
networks in the U.S. • Advanced technology
solutions for patients, providers and manufacturers
Pharmacies
Physicians
Hospitals
Government
Payers
Pharma & Biotech Patients
11
Medical-Surgical: A Leader in Alternate Site
1,400
Optimizing distribution
network Executing on supplier
and sourcing opportunities
Investments to drive growth
Focus on
the customer while furthering PSS integration
Combined sales force of more than Reps
Revenues
14% CAGR FY08 – FY14
12
As of March 31, 2014
Technology Solutions: Powering Connectivity
McKesson’s Unique Value Proposition – 360° View
• Expertise working with payers, hospitals, physicians, pharmacies
• Scaled leadership positions
• Comprehensive portfolio
13
A Valuable Generics Channel Partner with Global Scale
Global Sourcing Expertise
2002 2007 2012 2014
NorthStar Program Launch Sivem Launched /
PSS Acquisition
Cypress Acquisition NorthStar / Sivem
Collaboration in Canada
14
• Global procurement team
• Experienced executive
leadership teams
• Shared values and goals
to create opportunities
for customers, business
partners and shareholders
Celesio: Executing Acquisition Synergies A Platform for International Expansion
Annual Synergies
$275M – $325M
by FY19
15
Priorities Post Operating Control
Celesio: Acquisition Milestones
FY15
Operating Control Secured
Begin Execution on Synergies
Annual Synergies
$275M - $325M by FY19
• Our current ownership remains 76%
• We continue to consolidate Celesio’s results
• Minority shareholders will receive an annual dividend of €0.83 per share
• Minority shareholders have a put right at €22.99 per share
FY16 FY17 FY18 FY19
16
In Business for Better Health
Pharmaceutical Distribution
Technology
Specialty
Medical Surgical Supplies
Global Reach
17
20% Adjusted EPS Growth
36% Growth Total Revenues
$89B Total Revenues
Strong Performance: First Half of FY15
For the six months ended September 30, 2014. Percentage growth expressed on a year over year basis relative to the six month period ended September 30, 2013. Reflects non-GAAP
information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company’s website under the “Investors” tab.
26% Growth Adjusted Operating Profit
48% Adjusted
Gross Profit Expansion
18
$101 $106 $108 $112 $122 $122 $138
FY08 FY09 FY10 FY11 FY12 FY13 FY14
We Have a Track Record of Steady
Revenue Growth… ($ Billions)
19
$3.45 $4.27 $4.70 $5.19
$6.35 $6.45
$8.56
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
…That We Have Leveraged into Higher
Adjusted EPS Growth
Reflects non-GAAP information calculated on an Adjusted Earnings basis. A reconciliation to GAAP is available in the appendix to this presentation and on the Company’s website under the
“Investors” tab.
FY15 Guidance $10.50 - $10.90
20
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
FY08* FY09 FY10 FY11 FY12 FY13 FY14
Our Operating Cash Flows Have
Steadily Increased
*FY08 excludes $962 million Securities Litigation payment.
7 Year Moving Average OCF ($ Billions)
21
$13.7
$7.8 $2.6
Acquisitions
Share
Repurchases
We Remain Committed to Our Historical
Portfolio Approach to Capital Deployment…
FY08 - FY14 ($ Billions)
$1.1 Dividends
Internal Capital
Spending
$25B of capital
deployed from
FY08 – FY14
22
• Making key capital investments internally
to support long-term growth
• Pursuing strategic acquisitions and
managing our portfolio of assets
• Maintaining investment grade ratings
• Maintaining our long-term
and balanced approach to
capital deployment to
create shareholder value
…And We are Well Positioned to Drive
Continued Growth
23
McKesson Drives Sustained Value Creation
Attractive Healthcare Markets
• Public policy agenda supports greater access
and improved efficiency
• Demographics drive long-term demand in
North America and globally
Strong operating
profit, cash flow
growth and a
portfolio approach
to capital
deployment
Well-Positioned Businesses with Margin Expansion Opportunities
• Leading positions
• Operational excellence
• Focus on higher-margin products and services
• Global sourcing expertise
Experienced and
tenured management
team with a steady
track record of
delivering results
24
(a) Certain computations may reflect rounding adjustments
As Reported
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
Adjusted
Earnings
(Non-GAAP)
Revenues 88,816$ -$ -$ -$ -$ 88,816$
Gross profit 5,720$ 5$ -$ -$ 192$ 5,917$
Operating expenses (4,244) 256 111 - - (3,877)
Other income, net 44 - - - - 44
Impairment of equity investment - - - - - -
Interest expenses (200) - - - - (200)
1,320 261 111 - 192 1,884
Income tax expense (404) (80) (37) - (75) (596)
916 181 74 - 117 1,288
(16) (23) (6) - - (45)
900$ 158$ 68$ -$ 117$ 1,243$
3.83$ 0.66$ 0.30$ -$ 0.50$ 5.29$
Diluted weighted average common shares235 235 235 - 235 235
As Recast
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
As Recast
Adjusted
Earnings
(Non-GAAP)
Revenues 137,756$ -$ -$ -$ -$ 137,756$
Gross profit 8,374$ 11$ 3$ -$ 311$ 8,699$
Operating expenses (5,947) 308 155 68 - (5,416)
Other income, net 33 - 14 - - 47
Impairment of equity investment - - - - - -
Interest expense (303) - 46 - - (257)
2,157 319 218 68 311 3,073
Income tax expense (752) (114) (69) (15) (121) (1,071)
1,405 205 149 53 190 2,002
5 (7) (2) - - (4)
1,410$ 198$ 147$ 53$ 190$ 1,998$
6.04$ 0.85$ 0.63$ 0.23$ 0.81$ 8.56$
Diluted weighted average common shares 233 233 233 233 233 233
Income (loss) from continuing operations, net
of tax, attributable to noncontrolling interests
Income from continuing operations, net of
tax, attributable to McKesson Corporation
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014
(unaudited)
Income from continuing operations, net of
tax, attributable to McKesson Corporation
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
(in millions, except per share amounts)
Year Ended March 31, 2014
Income from continuing operations before
income taxes
Income (loss) from continuing operations, net
of tax, attributable to noncontrolling interests
Six Months Ended September 30, 2014
Income from continuing operations before
income taxes
Income from continuing operations after
tax
Income from continuing operations after
tax
(a) Certain computations may reflect rounding adjustments
As Reported
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
Adjusted
Earnings
(Non-GAAP)
Revenues 122,196$ -$ -$ -$ -$ 122,196$
Gross profit 6,881$ 13$ -$ -$ 13$ 6,907$
Operating expenses (4,534) 196 (10) 72 - (4,276)
Other income, net 34 - - - - 34
Impairment of equity investment (191) - - - - (191)
Interest expense (240) - 11 - - (229)
1,950 209 1 72 13 2,245
Income tax expense (587) (76) (6) (27) (5) (701)
1,363 133 (5) 45 8 1,544
- - - - - -
1,363$ 133$ (5)$ 45$ 8$ 1,544$
5.69$ 0.56$ (0.02)$ 0.19$ 0.03$ 6.45$
Diluted weighted average common shares 239 239 239 239 239 239
As Reported
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
Adjusted
Earnings
(Non-GAAP)
Revenues 122,453$ -$ -$ -$ -$ 122,453$
Gross profit 6,435$ 17$ -$ -$ 11$ 6,463$
Operating expenses (4,289) 167 26 149 - (3,947)
Other income, net 20 - - - - 20
Impairment of equity investment - - - - - -
Interest expense (251) - - - - (251)
1,915 184 26 149 11 2,285
Income tax expense (521) (71) (10) (89) (4) (695)
1,394 113 16 60 7 1,590
- - - - - -
1,394$ 113$ 16$ 60$ 7$ 1,590$
5.56$ 0.45$ 0.07$ 0.24$ 0.03$ 6.35$
Diluted weighted average common shares 251 251 251 251 251 251
Income from continuing operations, net of tax,
attributable to noncontrolling interests
Income from continuing operations, net of
tax, attributable to McKesson Corporation
(in millions, except per share amounts)
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
Year Ended March 31, 2012
Income from continuing operations before
income taxes
Income from continuing operations after
tax
Income from continuing operations, net of tax,
attributable to noncontrolling interests
Income from continuing operations, net of
tax, attributable to McKesson Corporation
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
Year Ended March 31, 2013
Income from continuing operations before
income taxes
Income from continuing operations after
tax
(unaudited)
FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
(a) Certain computations may reflect rounding adjustments
As Reported
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
Adjusted
Earnings
(Non-GAAP)
Revenues 111,804$ -$ -$ -$ -$ 111,804$
Gross profit 5,828$ 16$ -$ -$ 3$ 5,847$
Operating expenses (4,041) 115 43 213 - (3,670)
Other income, net 35 - (16) - - 19
Impairment of equity investment - - - - - -
Interest expense (222) - 25 - - (197)
1,600 131 52 213 3 1,999
Income tax expense (503) (51) (16) (64) (1) (635)
1,097 80 36 149 2 1,364
- - - - - -
1,097$ 80$ 36$ 149$ 2$ 1,364$
4.17$ 0.30$ 0.14$ 0.57$ 0.01$ 5.19$
Diluted weighted average common shares 263 263 263 263 263 263
As Reported
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
Adjusted
Earnings
(Non-GAAP)
Revenues 108,425$ -$ -$ -$ -$ 108,425$
Gross profit 5,527$ 21$ -$ -$ 8$ 5,556$
Operating expenses (3,558) 97 - (20) - (3,481)
Other income, net 43 - - - - 43
Impairment of equity investment - - - - - -
Interest expense (187) - - - - (187)
1,825 118 - (20) 8 1,931
Income tax expense (605) (46) 8 (3) (646)
1,220 72 - (12) 5 1,285
- - - - - -
1,220$ 72$ -$ (12)$ 5$ 1,285$
4.46$ 0.26$ -$ (0.04)$ 0.02$ 4.70$
Diluted weighted average common shares 273 273 - 273 273 273
Income from continuing operations, net of
tax, attributable to McKesson Corporation
Year Ended March 31, 2011
Income from continuing operations before
income taxes
Income from continuing operations after
tax
Income from continuing operations, net of tax,
attributable to noncontrolling interests
Income from continuing operations, net of
tax, attributable to McKesson Corporation
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
Year Ended March 31, 2010
Income from continuing operations before
income taxes
Income from continuing operations after
tax
Income from continuing operations, net of tax,
attributable to noncontrolling interests
(in millions, except per share amounts)
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014
(unaudited)
(a) Certain computations may reflect rounding adjustments
As Reported
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
Adjusted
Earnings
(Non-GAAP)
Revenues 106,376$ -$ -$ -$ -$ 106,376$
Gross profit 5,251$ 29$ -$ -$ 8$ 5,288$
Operating expenses (4,080) 97 - 493 - (3,490)
Other income, net 74 - - - - 74
Impairment of equity investment (63) - - - - (63)
Interest expense (144) - - - - (144)
1,038 126 - 493 8 1,665
Income tax expense (240) (49) (182) (3) (474)
798 77 - 311 5 1,191
- - - - - -
798$ 77$ -$ 311$ 5$ 1,191$
2.86$ 0.28$ -$ 1.11$ 0.02$ 4.27$
Diluted weighted average common shares 279 279 - 279 279 279
As Reported
(GAAP)
Amortization
of Acquisition-
Related
Intangibles
Acquisition
Expenses and
Related
Adjustments
Litigation
Reserve
Adjustments
LIFO-Related
Adjustments
Adjusted
Earnings
(Non-GAAP)
Revenues 101,454$ -$ -$ -$ -$ 101,454$
Gross profit 4,888$ 27$ -$ -$ (14)$ 4,901$
Operating expenses (3,427) 78 4 (5) - (3,350)
Other income, net 119 - - - - 119
Impairment of equity investment - - - - - -
Interest expense (142) - - - - (142)
1,438 105 4 (5) (14) 1,528
Income tax expense (466) (40) (2) 2 5 (501)
972 65 2 (3) (9) 1,027
- - - - - -
972$ 65$ 2$ (3)$ (9)$ 1,027$
3.26$ 0.22$ 0.01$ (0.01)$ (0.03)$ 3.45$
Diluted weighted average common shares 298 298 298 298 298 298
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
Diluted earnings per common share from
continuing operations, net of tax, attributable to
McKesson Corporation (a)
Year Ended March 31, 2008
Income from continuing operations before
income taxes
Income from continuing operations after
Income from continuing operations, net of tax,
attributable to noncontrolling interests
Income from continuing operations, net of
tax, attributable to McKesson Corporation
Year Ended March 31, 2009
Income from continuing operations before
income taxes
Income from continuing operations after
tax
Income from continuing operations, net of tax,
attributable to noncontrolling interests
Income from continuing operations, net of
tax, attributable to McKesson Corporation
(unaudited)
(in millions, except per share amounts)
RECONCILIATION OF GAAP OPERATING RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014
(a) Certain computations may reflect rounding adjustments
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
As Reported (GAAP):
Revenues 87,278$ 1,538$ -$ 88,816$ 134,426$ 3,330$ -$ 137,756$ 119,046$ 3,150$ -$ 122,196$ 119,424$ 3,029$ -$ 122,453$
Gross profit 4,998$ 722$ -$ 5,720$ 6,767$ 1,607$ -$ 8,374$ 5,435$ 1,446$ -$ 6,881$ 5,057$ 1,378$ -$ 6,435$
Operating expenses (3,494) (531) (219) (4,244) (4,335) (1,161) (451) (5,947) (3,068) (1,120) (346) (4,534) (2,854) (1,022) (413) (4,289)
Other income, net 37 2 5 44 29 2 2 33 19 4 11 34 16 4 - 20
- - - - - - - - (191) - - (191) - - - -
1,541 193 (214) 1,520 2,461 448 (449) 2,460 2,195 330 (335) 2,190 2,219 360 (413) 2,166
Interest expense - - (200) (200) - - (303) (303) - - (240) (240) - - (251) (251)
1,541$ 193$ (414)$ 1,320$ 2,461$ 448$ (752)$ 2,157$ 2,195$ 330$ (575)$ 1,950$ 2,219$ 360$ (664)$ 1,915$
Gross profit margin 5.73% 46.94% - 6.44% 5.03% 48.26% - 6.08% 4.57% 45.90% - 5.63% 4.23% 45.49% - 5.26%
Operating expenses as a % of revenues 4.00% 34.53% - 4.78% 3.22% 34.86% - 4.32% 2.58% 35.56% - 3.71% 2.39% 33.74% - 3.50%
Operating pre-tax profit as a % of revenues 1.77% 12.55% - 1.71% 1.83% 13.45% - 1.79% 1.84% 10.48% - 1.79% 1.86% 11.89% - 1.77%
Pre-Tax Adjustments:
Gross profit -$ 5$ -$ 5$ 1$ 10$ -$ 11$ 2$ 11$ -$ 13$ 1$ 16$ -$ 17$
Operating expenses 236 20 - 256 255 52 1 308 146 49 1 196 120 47 - 167
Amortization of acquisition-related intangibles 236 25 - 261 256 62 1 319 148 60 1 209 121 63 - 184
Gross profit - - - - - 3 - 3 - - - - - - - -
Operating expenses 100 1 10 111 119 15 21 155 47 7 (64) (10) 24 1 1 26
Other income, net - - - - - - 14 14 - - - - - - - -
Interest expense - - - - - - 46 46 - - 11 11 - - - -
Acquisition expenses and related adjustments 100 1 10 111 119 18 81 218 47 7 (53) 1 24 1 1 26
Operating expenses - Litigation reserve adjustments - - - - 68 - - 68 72 - - 72 149 - - 149
Gross profit - LIFO-related adjustments 192 - - 192 311 - - 311 13 - - 13 11 - - 11
Total pre-tax adjustments 528$ 26$ 10$ 564$ 754$ 80$ 82$ 916$ 280$ 67$ (52)$ 295$ 305$ 64$ 1$ 370$
Adjusted Earnings (Non-GAAP):
Revenues 87,278$ 1,538$ -$ 88,816$ 134,426$ 3,330$ -$ 137,756$ 119,046$ 3,150$ -$ 122,196$ 119,424$ 3,029$ -$ 122,453$
Gross profit 5,190$ 727$ -$ 5,917$ 7,079$ 1,620$ -$ 8,699$ 5,450$ 1,457$ -$ 6,907$ 5,069$ 1,394$ -$ 6,463$
Operating expenses (3,158) (510) (209) (3,877) (3,893) (1,094) (429) (5,416) (2,803) (1,064) (409) (4,276) (2,561) (974) (412) (3,947)
Other income, net 37 2 5 44 29 2 16 47 19 4 11 34 16 4 - 20
- - - - - - - - (191) - - (191) - - - -
2,069 219 (204) 2,084 3,215 528 (413) 3,330 2,475 397 (398) 2,474 2,524 424 (412) 2,536
Interest expense - - (200) (200) - - (257) (257) - - (229) (229) - - (251) (251)
2,069$ 219$ (404)$ 1,884$ 3,215$ 528$ (670)$ 3,073$ 2,475$ 397$ (627)$ 2,245$ 2,524$ 424$ (663)$ 2,285$
Gross profit margin 5.95% 47.27% - 6.66% 5.27% 48.65% - 6.31% 4.58% 46.25% - 5.65% 4.24% 46.02% - 5.28%
Operating expenses as a % of revenues 3.62% 33.16% - 4.37% 2.90% 32.85% - 3.93% 2.35% 33.78% - 3.50% 2.14% 32.16% - 3.22%
Operating pre-tax profit as a % of revenues 2.37% 14.24% - 2.35% 2.39% 15.86% - 2.42% 2.08% 12.60% - 2.02% 2.11% 14.00% - 2.07%
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014
(unaudited)
(in millions)
Income from continuing operations before income taxes
Year ended March 31, 2013 Year ended March 31, 2012Year ended March 31, 2014
Impairment of equity investment
Income from continuing operations before interest expense
Income from continuing operations before income taxes
Impairment of equity investment
Income from continuing operations before interest expense
Six Months Ended September 30, 2014
(a) Certain computations may reflect rounding adjustments
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
Distribution
Solutions
Technology
Solutions
Corporate &
Interest
Expense Total
As Reported (GAAP):
Revenues 108,889$ 2,915$ -$ 111,804$ 105,578$ 2,847$ -$ 108,425$ 103,568$ 2,808$ -$ 106,376$ 98,719$ 2,735$ -$ 101,454$
Gross profit 4,565$ 1,263$ -$ 5,828$ 4,219$ 1,308$ -$ 5,527$ 3,955$ 1,296$ -$ 5,251$ 3,586$ 1,302$ -$ 4,888$
Operating expenses (2,673) (1,000) (368) (4,041) (2,260) (967) (331) (3,558) (2,777) (994) (309) (4,080) (2,138) (1,011) (278) (3,427)
Other income (expense), net 5 3 27 35 29 5 9 43 43 6 25 74 35 9 75 119
- - - - - - - - (63) - - (63) - - - -
1,897 266 (341) 1,822 1,988 346 (322) 2,012 1,158 308 (284) 1,182 1,483 300 (203) 1,580
Interest expense (1) - (221) (222) (2) (2) (183) (187) 2 (4) (142) (144) 4 (4) (142) (142)
1,896$ 266$ (562)$ 1,600$ 1,986$ 344$ (505)$ 1,825$ 1,160$ 304$ (426)$ 1,038$ 1,487$ 296$ (345)$ 1,438$
Gross profit margin 4.19% 43.33% - 5.21% 4.00% 45.94% - 5.10% 3.82% 46.15% - 4.94% 3.63% 47.61% - 4.82%
Operating expenses as a % of revenues 2.45% 34.31% - 3.61% 2.14% 33.97% - 3.28% 2.68% 35.40% - 3.84% 2.17% 36.97% - 3.38%
Operating pre-tax profit as a % of revenues 1.74% 9.13% - 1.63% 1.88% 12.15% - 1.86% 1.12% 10.97% - 1.11% 1.50% 10.97% - 1.56%
Pre-Tax Adjustments:
Gross profit -$ 16$ -$ 16$ 1$ 20$ -$ 21$ 1$ 28$ -$ 29$ 1$ 26$ -$ 27$
Operating expenses 70 45 - 115 50 47 - 97 50 47 - 97 28 50 - 78
Amortization of acquisition-related intangibles 70 61 - 131 51 67 - 118 51 75 - 126 29 76 - 105
Gross profit - - - - - - - - - - - - - - - -
Operating expenses 41 - 2 43 - - - - - - - - 4 - - 4
Other income, net - - (16) (16) - - - - - - - - - - - -
Interest expense - - 25 25 - - - - - - - - - - - -
Acquisition expenses and related adjustments 41 - 11 52 - - - - - - - - 4 - - 4
Operating expenses - Litigation reserve adjustments 213 - - 213 - - (20) (20) 493 - - 493 - - (5) (5)
Gross profit - LIFO-related adjustments 3 - - 3 8 - - 8 8 - - 8 (14) - - (14)
Total pre-tax adjustments 327$ 61$ 11$ 399$ 59$ 67$ (20)$ 106$ 552$ 75$ -$ 627$ 19$ 76$ (5)$ 90$
Adjusted Earnings (Non-GAAP):
Revenues 108,889$ 2,915$ -$ 111,804$ 105,578$ 2,847$ -$ 108,425$ 103,568$ 2,808$ -$ 106,376$ 98,719$ 2,735$ -$ 101,454$
Gross profit 4,568$ 1,279$ -$ 5,847$ 4,228$ 1,328$ -$ 5,556$ 3,964$ 1,324$ -$ 5,288$ 3,573$ 1,328$ -$ 4,901$
Operating expenses (2,349) (955) (366) (3,670) (2,210) (920) (351) (3,481) (2,234) (947) (309) (3,490) (2,106) (961) (283) (3,350)
Other income, net 5 3 11 19 29 5 9 43 43 6 25 74 35 9 75 119
- - - - - - - - (63) - - (63) - - - -
2,224 327 (355) 2,196 2,047 413 (342) 2,118 1,710 383 (284) 1,809 1,502 376 (208) 1,670
Interest expense (1) - (196) (197) (2) (2) (183) (187) 2 (4) (142) (144) 4 (4) (142) (142)
2,223$ 327$ (551)$ 1,999$ 2,045$ 411$ (525)$ 1,931$ 1,712$ 379$ (426)$ 1,665$ 1,506$ 372$ (350)$ 1,528$
Gross profit margin 4.20% 43.88% - 5.23% 4.00% 46.65% - 5.12% 3.83% 47.15% - 4.97% 3.62% 48.56% - 4.83%
Operating expenses as a % of revenues 2.16% 32.76% - 3.28% 2.09% 32.31% - 3.21% 2.16% 33.73% - 3.28% 2.13% 35.14% - 3.30%
Operating pre-tax profit as a % of revenues 2.04% 11.22% - 1.96% 1.94% 14.51% - 1.95% 1.65% 13.64% - 1.70% 1.52% 13.75% - 1.65%
Income from continuing operations before income taxes
Year ended March 31, 2009 Year ended March 31, 2008Year ended March 31, 2010
Impairment of equity investment
Income from continuing operations before interest expense
Income from continuing operations before income taxes
Impairment of equity investment
Income from continuing operations before interest expense
Year ended March 31, 2011
RECONCILIATION OF GAAP SEGMENT FINANCIAL RESULTS TO ADJUSTED EARNINGS (NON-GAAP)
FOR FISCAL 2008 THROUGH SIX MONTHS ENDED SEPTEMBER 30, 2014
(unaudited)
(in millions)