Issue link: http://catalog.e-digitaleditions.com/i/114936
The weighted-average basic and diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts. FINANCIAL CONDITION AND LIQUIDITY Operating Activities Operating cash flow was $1,657 in 2012, an increase of 15.6% from 2011. Operating cash flow resulted primarily from net earnings adjusted for non-cash items (depreciation and amortization, share-based compensation, sale of inventory "stepped up" to fair value at acquisition and deferred income taxes). The net of accounts receivable, inventory and accounts payable consumed $50 of operating cash flow in 2012. Inventory contributed $18 of operating cash flow as inventory days on hand decreased by 5 days due to lower inventory levels driven primarily by improved inventory management. Accounts receivable used $20 primarily to support business growth, while accounts receivable days sales outstanding decreased by 3 days due to timing of sales. Operating cash flow was $1,434 in 2011, a decrease of 7.3% from 2010. Operating cash flow resulted primarily from net earnings adjusted for non-cash items (depreciation and amortization, share-based compensation, sale of inventory "stepped up" to fair value at acquisition and deferred income taxes). The net of accounts receivable, inventory and accounts payable consumed $274 of operating cash flow in 2011. Inventory consumed $166 of operating cash flow primarily due to the building of inventory related to acquisitions and other business growth, increased stock levels in advance of new product introductions and higher inventory levels in support of anticipated 2012 sales growth. Inventory days on hand increased by 4 days due to the impact of the above. Accounts receivable used $143, primarily due to the building of accounts receivable related to acquisitions and other business growth. Accounts receivable days sales outstanding increased by 2 days due to timing of sales. Investing Activities Net investing activities consumed $736 of cash in 2012 and $2,135 in 2011, primarily due to acquisitions and capital spending. Acquisitions. Acquisitions used $154 of cash in 2012 and $2,066 in 2011. Cash used in 2012 was primarily for the acquisition of Surpass Medical for $99 as well as for milestone payments associated with previous acquisitions. Cash used in 2011 was primarily for the acquisitions of Neurovascular for $1,450; Orthovita for $316; Memometal for $150; and Concentric for $135. Capital Spending. We manage capital spending to support our business growth. Capital expenditures, primarily to support integration of acquisitions, capacity expansion, new product introductions, innovation and cost savings, were $210 in 2012 and $226 in 2011. Proceeds from Asset Sales. Proceeds from asset sales contributed $67 to cash in 2011, primarily due to the sale of certain assets related to the OP-1 product family. Financing Activities Dividend Payments. Dividends paid per common share increased 18.1% to $0.85 per share in 2012. Total dividend payments to common shareholders were $324 in 2012 and $279 in 2011. The increase in dividend payments resulted from increases in our quarterly dividend from $0.18 per share in 2011 to $0.2125 per share in 2012. Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and overall cost of capital. In September 2011 we sold $750 of unsecured notes due September 2016. The net proceeds from the offerings have been and will continue to be available for working capital and other general corporate purposes, including acquisitions, stock repurchases and other business opportunities. Total debt was $1,762 in 2012 and $1,768 in 2011. Share Repurchases. The total use of cash for share repurchases was $108 in 2012 and $622 in 2011. Liquidity Our cash, cash equivalents and marketable securities were $4,285 at December 31, 2012 and $3,418 at December 31, 2011 and our current assets exceeded current liabilities by $6,272 at December 31, 2012 and $5,367 at December 31, 2011. We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. We have also raised funds in the past in the capital markets and may continue to do so from time to time. We have strong short- and long-term debt ratings that we believe should enable us to refinance our debt as it becomes due. In August 2012 we refinanced our credit facility with a new $1,000 Unsecured Revolving Credit Facility due August 2017 (2012 Facility). The 2012 Facility replaced the previously outstanding $1,000 Unsecured Credit Facility that would have become due in August 2013. The 2012 Facility includes an increase option permitting us to increase the size of the facility up to an additional $500, a $500 multicurrency sublimit (with no sublimit for euro borrowings) and a $100 letter of credit sublimit. The 2012 Facility has an 15 Dollar amounts in millions except per share amounts or as otherwise specified