Cardinal Health 2015 Annual Report Download - page 60

Notes to Financial Statements
59 Cardinal Health | Fiscal 2015 Form 10-K
as discussed further in Note 2, and intend to use the remainder of
the net proceeds from the offering and cash on hand to consummate
the pending Cordis acquisition, as discussed further in Note 2. In the
event that the principal closing of the Cordis acquisition has not
occurred on or prior to March 31, 2016, or the Cordis Purchase
Agreement is terminated, we will be required to redeem all
outstanding 1.95% Notes due 2018 and 4.9% Notes due 2045 at a
redemption price equal to 101% of the aggregate principal amount,
plus accrued and unpaid interest.
In November 2014, we sold $450 million aggregate principal amount
of 2.4% Notes that mature on November 15, 2019, $400 million
aggregate principal amount of 3.5% Notes that mature on
November 15, 2024 and $350 million aggregate principal amount of
4.5% Notes that mature on November 15, 2044.
In December 2014, we used the net proceeds from the November
2014 offering, together with cash on hand, to redeem all of the
outstanding 4.0% Notes due 2015, 5.8% Notes due 2016,
5.85% Notes due 2017 and 6.0% Notes due 2017 at a redemption
price equal to 100% of the principal amount and any accrued but
unpaid interest, plus the applicable make-whole premium. As a result
of the redemption, we incurred a loss on the extinguishment of debt
of $60 million ($37 million, net of tax), which included a make-whole
premium of $80 million, write-off of $2 million of unamortized debt
issuance costs, and an offsetting $22 million fair value adjustment to
the respective debt related to previously terminated interest rate
swaps.
In June 2013, we used cash on hand to repay $300 million of our
5.5% Notes that were due on June 15, 2013.
In February 2013, we sold $400 million aggregate principal amount
of 1.7% Notes that mature on March 15, 2018, $550 million aggregate
principal amount of 3.2% Notes that mature on March 15, 2023 and
$350 million aggregate principal amount of 4.6% Notes that mature
on March 15, 2043. We used the proceeds to fund a portion of the
purchase price of AssuraMed, Inc. in fiscal 2013.
The 1.7% Notes due 2018, 1.9% Notes due 2017, 1.95% Notes due
2018, 2.4% Notes due 2019, 3.2% Notes due 2022, 3.2% Notes due
2023, 3.5% Notes due 2024, 3.75% Notes due 2025, 4.5% Notes
due 2044, 4.6% Notes due 2043, 4.625% Notes due 2020, and 4.9%
Notes due 2045 require us to offer to purchase the notes at 101% of
the principal amount plus accrued and unpaid interest if we undergo
a change of control, as defined in the notes, and if the notes receive
specified ratings below investment grade by each of Standard &
Poor's Ratings Services, Moody's Investors Service, Inc. and Fitch
Ratings.
Other Financing Arrangements
In connection with the binding offer to purchase the Cordis business
discussed in Note 2, we entered into a $1.0 billion 364-day senior
unsecured bridge term loan in March 2015. We incurred fees of $4
million related to this bridge loan, which are included in interest
expense, net in the consolidated statements of earnings. No amounts
were drawn under this bridge loan and we terminated the bridge loan
in June 2015.
In addition to cash and cash equivalents at June 30, 2015 and 2014,
our sources of liquidity include a $1.5 billion revolving credit facility
and commercial paper program of up to $1.5 billion, backed by the
revolving credit facility. The revolving credit facility exists largely to
support issuances of commercial paper as well as other short-term
borrowings for general corporate purposes. We had no outstanding
balance under the revolving credit facility at June 30, 2015 and 2014,
respectively. Commercial paper outstanding under our commercial
paper program ranged from approximately zero to $100 million during
fiscal 2015. We had no outstanding borrowings from the commercial
paper program at June 30, 2015 and 2014.
On November 3, 2014, we renewed our committed receivables sales
facility program through Cardinal Health Funding, LLC ("CHF") until
November 3, 2017 and increased the size of the facility from $700
million to $950 million. CHF was organized for the sole purpose of
buying receivables and selling undivided interests in those
receivables to third-party purchasers. Although consolidated in
accordance with GAAP, CHF is a separate legal entity from Cardinal
Health and from our subsidiary that sells receivables to CHF. CHF is
designed to be a special purpose, bankruptcy-remote entity whose
assets are available solely to satisfy the claims of its creditors. We
had no outstanding balance under the committed receivable sales
facility program at June 30, 2015 and 2014, except for standby letters
of credit of $41 million at both June 30, 2015 and 2014.
Our revolving credit facility and committed receivables sales facility
program require us to maintain a consolidated interest coverage ratio,
as of any fiscal quarter end, of at least 4-to-1 and a consolidated
leverage ratio of no more than 3.25-to-1. As of June 30, 2015, we
were in compliance with these financial covenants.
We also maintain other short-term credit facilities and an unsecured
line of credit that allowed for borrowings up to $439 million and $369
million at June 30, 2015 and 2014, respectively. The $312 million and
$319 million balance of other obligations at June 30, 2015 and 2014,
respectively, consisted of short-term borrowings and capital leases.
8. Income Taxes
Earnings before income taxes and discontinued operations are:
(in millions) 2015 2014 2013
U.S. Operations $ 1,733 $ 1,665 $ 651
Non-U.S. Operations 234 133 237
Earnings before income taxes and
discontinued operations $ 1,967 $ 1,798 $ 888