FY20 SCORECARD

PERFORMANCE

Achieve financial success while investing for the long term.

NET SALES
($ MILLIONS)

+8%

EARNINGS BEFORE INCOME TAXES
($ MILLIONS)

+16%

earnings
($ MILLIONS)
 

+15%

EBIT MARGIN1
(AS A % OF NET SALES)
(NON-GAAP)

+110 bps

ECONOMIC PROFIT2
($ Millions)
(non-GAAP)

+16%

Diluted Net Earnings
Per Share
($)

+16%

Net Cash Provided
By Operations
($ MILLIONS)

+56%

FREE CASH FLOW3
(NON-GAAP)
($ MILLIONS)

+64%

See footnotes below for descriptions of these non-generally accepted accounting principles, or non-GAAP measures, the reasons management believes they are useful to investors, and reconciliations to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. The non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be read in connection with the company’s consolidated financial statements presented in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded.

  1. EBIT represents earnings before income taxes, interest income and interest expense. EBIT margin is the ratio of EBIT to net sales. The company’s management believes these measures provide useful additional information to investors to enhance their understanding about trends in the company’s operations and are useful for period-over-period comparisons.
    Reconciliation of EBIT
    Dollars in millions FY20 FY19 FY18
    Earnings before income taxes $1,185 $1,024 $1,054
    Interest income -2 -3 -6
    Interest expense 99 97 85
    EBIT — non-GAAP $1,282 $1,118 $1,133
    EBIT margin — non-GAAP 19.1% 18.0% 18.5%
    Net sales $6,721 $6,214 $6,124
  2.  
    Reconciliation of Economic Profit (i)
    Dollars in millions and all calculations
    based on rounded numbers
    FY20 FY19 FY18
    Earnings before income taxes $1,185 $1,024 $1,054
    Add back:
    Noncash U.S. GAAP restructuring and intangible asset
    impairment charges
    2 2 2
    Interest expense 99 97 85
    Earnings before income taxes, noncash U.S. GAAP
    restructuring and intangible asset impairment charges, and interest expense
    $1,286 $1,123 $1,141
    Less: Income taxes on earnings before income taxes,
    noncash U.S. GAAP restructuring and intangible asseh impairment charges and interest expense (ii)
    267 222 249
    Adjusted after-tax profit $1,019 $901 $892
    Average capital employed (iii) $3,478 $3,231 $2,977
    Less: Capital charge (iv) $313 $291 $268
    Economic profit (i) (adjusted after-tax profit less capital charge) $706 $610 $624
    1. Economic profit (EP) is defined by the company as earnings before income taxes, excluding noncash U.S. GAAP restructuring and intangible asset impairment charges, and interest expense; less income taxes (calculated utilizing the company’s effective tax rate), and less a capital charge (calculated as average capital employed multiplied by a cost of capital rate). EP is a key financial metric that the company’s management uses to evaluate business performance and allocate resources, and is a component in determining employee incentive compensation. The company’s management believes EP provides additional perspective to investors about financial returns generated by the business and represents profit generated over and above the cost of capital used by the business to generate that profit.
  1. The tax rate applied is the effective tax rate on net earnings, which was 20.8%, 19.8% and 21.8% in fiscal years 2020, 2019 and 2018, respectively.
  2. Total capital employed represents total assets less non-interest-bearing liabilities. Adjusted capital employed represents total capital employed adjusted to add back current year after tax noncash U.S. GAAP restructuring and intangible asset impairment charges. Average capital employed is the average of adjusted capital employed for the current year and total capital employed for the prior year, based on year-end balances. See below for details of the average capital employed calculation.
  3. Capital charge represents average capital employed multiplied by a cost of capital, which was 9% for all fiscal years presented. The calculation of capital charge includes the impact of rounding numbers.
Dollars in millions FY20 FY19 FY18
Total assets $6,213 $5,116 $5,060
Less:
Accounts payable and accrued liabilities (v) 1,327 1,033 1,000
Current operating lease liabilities 64
Income taxes payable 25 9
Long-term operating lease liabilities 278
Other liabilities (v) 755 774 778
Deferred income taxes 62 50 72
Non-interest-bearing liabilities 2,511 1,866 1,850
Total capital employed 3,702 3,250 3,210
After tax noncash U.S. GAAP restructuring
and intangible asset impairment charges
2 1 1
Adjusted capital employed $3,704 $3,251 $3,211
Average capital employed $3,478 $3,231 $2,977
  1. Accounts payable and accrued liabilities and Other Liabilities are adjusted to exclude interest-bearing liabilities.
  1.  
    Reconciliation of Free Cash Flow
    Dollars in millions FY20 FY19 FY18
    Net cash provided by operations (GAAP) $1,546 $992 $976
    Less: capital expenditures (254) (206) (194)
    Free cash flow (non-GAAP) 1,292 786 782
    Free cash flow as a percentage of net sales (non-GAAP) 19.2% 12.6% 12.8%
    Net sales $6,721 $6,214 $6,124
    The company’s management uses free cash flow and free cash flow as a percent of net sales to help assess the cash generation ability of the business and funds available for investing activities, such as acquisitions, investing in the business to drive growth, and financing activities, including debt payments, dividend payments and share repurchases. Free cash flow does not represent cash available only for discretionary expenditures, since the company has mandatory debt service requirements and other contractual and non-discretionary expenditures. In addition, free cash flow may not be the same as similar measures provided by other companies due to potential differences in methods of calculation and items being excluded.
NET SALES
($ MILLIONS)
FY20 $6,721
FY19 $6,241
FY18 $6,124
EARNINGS BEFORE INCOME TAXES
($ MILLIONS)
FY20 $1,185
FY19 $1,024
FY18 $1,054
EARNINGS
($ MILLIONS)
FY20 $939
FY19 $820
FY18 $823
EBIT MARGIN1
(AS A % OF NET SALES)
(NON-GAAP)
FY20 19.1%
FY19 18.0%
FY18 18.5%
ECONOMIC PROFIT2
($ MILLIONS)
(NON-GAAP)
FY20 $706
FY19 $610
FY18 $624
DILUTED NET EARNINGS PER SHARE
($)
FY20 $7.36
FY19 $6.32
FY18 $6.26
NET CASH PROVIDED BY OPERATIONS
($ MILLIONS)
FY20 $1,546
FY19 $992
FY18 $976
FREE CASH FLOW3
(NON-GAAP)
($ MILLIONS)
FY20 $1,292
FY19 $786
FY18 $782