CASH & INVESTMENT QUARTERLY

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1 CASH & INVESTMENT QUARTERLY Key Metrics: + Aggregate Cash Grew 7%: The S&P 5 (ex-financials) cash and marketable securities balance grew 6.6% year-over-year to a balance of $1.34 trillion at the end of Q1. However, cash declined sequentially by 4.7%, primarily as a result of Verizon Communications closing its acquisition of the remaining stake of Verizon Wireless. This marked the first sequential decline since Q Free Cash Flow Grew 9%: Cash flows from operations amounted to $282. billion in Q1, which marked an increase of 7.4% year-over-year. Free cash flow to equity increased by 8.7%. + Capital Expenditures Grew 6%: Capital expenditures ( CapEx ) accelerated growth to 6.2% in Q1. In the past four quarters, growth had not exceeded 1.5%. Analysts project that the 214 growth rate for CapEx will be 6.7%, but also predict it will turn negative in 215 (-1.2%) + Net Debt Issuance Positive for Fifteenth Straight Quarter: Cash inflows from net debt issuance were positive for the fifteenth straight quarter. Inflows of $74.1 billion were the second highest quarterly amount over that period. + Net Shareholder Distributions Grow 46%: Shareholder distributions in the form of dividends and net repurchase of stock ($193.8 billion) increased 45.8% year-over-year in Q1. Individually, gross share repurchases grew over 5% in Q1. Quarterly Cash & Short-Term Investments S&P 5 (Ex-Financials) Michael Amenta, CFA, Research Analyst mamenta@factset.com Media Questions/Requests media_request@factset.com S&P 5 ex-financials June 24, ,4, 1,3, 1,2, 1,1, 1,, 9, 8, 7, 6, '5 '6 '7 '8 '9 '1 '11 '12 '13 '14 Cash & Short-Term Investments (Ex-Financials) (Right) U.S. Recessions EBITDA / Net Debt (Hidden) Cash as a % of Debt (Left) Cash & Investments Quarterly is one part of three reports (Buyback Quarterly and Dividend Quarterly) analyzing cash and discretionary spending within US large-cap companies. The other reports can be found at or within the FactSet Market News application of your FactSet workstation. All data published in this report is available on FactSet. Please contact media_request@factset.com or FACTSET for more information. FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 1

2 Cash Falls Sequentially for the First Time in 7 Quarters Cash & short-term investment balances ( cash ) in the S&P 5 (ex-financials) rose by 6.6% year-overyear and settled at a balance of $1.34 trillion at the end of Q1. However, cash declined sequentially (- 4.7%) for the first time since Q This decline was primarily the result of Verizon Communications closing its acquisition of the remaining stake of Verizon Wireless. This contributed to a decline of more than $5 billion in the balance of cash & short term investments quarter-over-quarter. Ex-Verizon, cash only fell 1.1% sequentially. It s also important to note that cash is more susceptible to fall sequentially in the first quarter. Operating cash flows in Q1 are consistently below levels of the prior three quarters, especially compared to the holiday fourth quarter. Operating cash flows ( OCF ) in Q1 were 26% lower than Q4, which was in line with the sequential percentage decline at the turn of 213. In addition, cash has sequentially declined in only ten quarters of the past forty, but six of those declines were in the first quarter. Overall, S&P 5 companies generated $282. billion in operating cash flow in Q1, which represented year-over-year growth of 7.4%. Nine of ten sectors grew OCF in Q1, with the sector showing the lone decline (this was primarily due to Safeway s sale of Canada Safeway). The sector, on the other hand, led in growth of OCF (+28.7%), and showed strong free cash flow growth (+31.6%) as a result of improved inflows from Johnson & Johnson, Cigna, and Bristol-Myers Squibb. After subtracting fixed capital expenditures, aggregate free cash flow grew faster than OCF (+8.7%) in Q1. A low baseline in free cash flow from the and sectors helped them grow by a higher yearover-year rate (31.7% and 34.5%) than the sector. Sectors with Largest Cash Balances Drive Growth Only two of nine sectors grew cash by at least double-digit rates year-over-year, as compared to six in Q However, growth was also supported by the sector, which grew cash year-over-year (+2.9%) for the first time in eight quarters. In addition, the fastest growing sectors and also had the highest cash balances. The sector, which represents 16% of aggregate cash, grew cash by 15.%, and the sector, which comprises 37% of the total balance, grew cash by 1.8%. The top six companies by year-over-year, dollar-value growth in cash (which each grew their cash balance by at least $4.5 billion) were in either the or sectors. In, the improved cash flows at Johnson & Johnson and Bristol-Myers most impacted the growth in cash, but debt issuance at Gilead Sciences was also supportive. Net debt issuance was significant across the sector though, and the sector issued more net debt than any other group. Individually, three of the top five net issuers of debt were in the sector, including Thermo Fisher Scientific, Gilead Sciences, and McKesson Corporation. In the sector, Microsoft and Google helped boost cash with debt issuance in prior periods, and strong free cash flows throughout the trailing twelve months. On the other end of the spectrum, the and s sectors showed declines in cash of 17.6% and 4.7%, but together these sectors only amount to 4% of the total cash balance. In these two groups, Verizon s purchase of Verizon Wireless impacted the balance, but it was Freeport-McMoRan Copper & Gold that showed the largest cash decline year-over-year. Most of this decline was a result of the acquisition of McMoRan Exploration and Plains Exploration & Production last summer, but a supplemental $1 billion dividend in June 213 also had a significant impact. Capital Spending Trends Rebound Fixed capital expenditures ( CapEx ) grew at the highest rate since Q3 212 (6.2%) and amounted to $146.6 billion in Q1. In the prior four quarters, the high water mark for growth in CapEx was 1.3% and FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 2

3 the other three quarters failed to show at least 1% growth in CapEx. In Q1, however, six of the nine sectors under comparison grew CapEx, with five accelerating growth from Q4. Going forward, all nine sectors under consideration are expected to show growth, and the overall index is projected to grow CapEx by 6.7% for 214. This is in stark contrast to the projection at the start of the year, when growth was expected to be 1.5%. Since then, all nine sectors have shown significant improvement in growth projections for the year. At the beginning of the year, the sector was expected to lead all groups with 8.6% growth, and the sector was expected to lag with a decline of 3.2%. Now, the sector is projected to be the growth leader at 13.3%, and the Telecom sector is projected to have the lowest growth at 1.1% (up from -3.1% on January 1). But, improvement in CapEx growth projections is not out of the ordinary. Growth has also risen significantly from initial projections in the last two years, and it s possible that the current projection of a 1.2% decline for 215 will be revised upwards during the year. Net Shareholder Distributions Grow 46%; Net Debt Issuance for 15 th Straight Quarter Shareholder distributions in the form of dividends and net repurchase of stock ($193.8 billion) increased 45.8% year-over-year. On a trailing twelve month basis, gross repurchases grew more than 34% and dividends per share grew 13%. On the security-level, Apple led the index for capital distributions in Q1 for the fourth consecutive quarter. Its dividend nearly matches that of Exxon Mobil, but Apple has easily set the record for the most share buybacks in recent periods. This has contributed to the company having more than twice the total shareholder distribution as the next highest company: IBM. Net Share Repurchases + Dividends Net Share Repurchases and Dividends U.S. Recessions 2, 18, 16, 14, 12, 1, 8, 6, 4, '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 FactSet Research Systems On the other hand, net debt issuance supported cash balances for the fifteenth straight quarter. In addition, inflows of $74.1 billion in Q1 were the second highest quarterly amount over this stretch. Aside from accelerated issuance in the sector, Verizon Communications again helped to boost aggregate debt issuance, as it raised billions to fund redemption of existing, higher coupon debt. FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 3

4 Cash & Short-Term Investments: Within this report, cash, cash & equivalents, and cash & short-term investments are used interchangeably. Also, companies in the Financials sector have been excluded throughout this report. All aforementioned and forthcoming values are in millions, unless otherwise designated. Data is generally organized by adjusted calendar quarters. Adjusted calendar quarters are mapped with Q1 capturing fiscal periods ending in February, March, and April. Cash to Debt Ratio Most Recent Quarter Cash to Debt Ratio 1-Year Average S&P (Ex-Fins) Sector Average 1-Year Sector Average Top 1 Companies by Cash and Short-Term Investments (ex-financials and Managed ) Company Sector Cash (Qtr) 1 Year Growth Cash to Debt 1 Yr Total Return Microsoft Corporation $88, % 389.9% 3.% General Electric Company $87,47 (3.3%) 22.9% 18.% Google Inc. $59, % 951.1% 3.3% Cisco Systems, Inc. $5, % 241.6% 4.% Apple Inc. $41,35 5.7% 243.8% 57.5% Oracle Corporation $37, % 153.9% 38.3% Ford Motor Company $36, % 31.2% 15.7% Pfizer Inc. $33,881 (4.1%) 91.6% 7.% General Motors Company $29,43 5.4% 77.9% 15.8% Johnson & Johnson $29, % 17.% 29.5% S&P 5 (Ex-Financials)* - $1,344, % 39.4% 25.4% *Total return provided for the S&P 5 is for the entire 5 index (does not exclude the Financials sector). FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 4

5 Operating and Free Cash Flows Quarterly Operating and Free Cash Flow Year-over-Year % Growth '5 '6 '7 '8 '9 '1 '11 '12 '13 Operating Cash Flow Free Cash Flow U.S. Recessions Operating and Free Cash Flow Most Recent Quarter 7, 6, 5, 4, 3, 2, 1, Operating Cash Flow Free Cash Flow Sector Average - OCF Sector Average - FCF FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 5

6 Investing Cash Flows: Quarterly Fixed Capital Expenditures Cash Outflows from Fixed Capital Expenditures Most Recent Quarter -1, -2, -3, -4, -5, Fixed CapEx 1-Year Average S&P Sector Average 1-Year Sector Average Top 1 Companies by Fixed Capital Expenditures Most Recent Quarter CapEx Qtrly CapEx to Company CapEx (Most Growth Sales (TTM Sector Recent Qtr) (YoY%) basis) 1 Yr Total Return Chevron Corporation $8, % 18.4% 15.7% Exxon Mobil Corporation $7,328 (2.2%) 8.5% 19.9% AT&T Inc. Telecom $5, % 17.5% 8.2% Verizon Communications Telecom $4, % 14.1% 4.9% ConocoPhillips $3, % 28.5% 48.4% General Electric Company $3,361 (7.8%) 9.2% 18.% Apache Corporation $2,76 (3.4%) 69.7% 2.7% Intel Corporation $2, % 21.2% 29.7% Anadarko Petroleum $2, % 54.9% 34.3% General Motors Company $2,379 (1.6%) 6.3% 15.8% FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 6

7 Investing Cash Flows: Fixed Capital Expenditures to Sales Fixed capital expenditures represent funds used to acquire fixed assets other than those associated with acquisitions. This includes, but is not restricted to, additions and investments in property, plant, machinery and equipment. Fixed Capital Expenditures to Sales S&P 5 and ex- (Ten Years, Tailing Twelve-Month Basis) '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 CapEx/Sales (TTM) 1-Yr Avg CapEx/Sales (ex-) 1-Yr Avg (ex-) U.S. Recessions Fixed Capital Expenditures to Sales Trailing Twelve-Month Basis Fixed CapEx to Sales (TTM basis) 1-Year Average S&P Sector Average 1-Year Sector Average FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 7

8 Financing Cash Flows: Shareholder Distributions Dividends paid represent the total common and preferred dividends paid to shareholders. Net proceeds from the purchase of stock is the proceeds from sale/issuance of stock (sale of treasury shares, proceeds from stock options, etc.) minus funds used to decrease the outstanding share of common or preferred stock (purchase of treasury shares, repurchase or retirement of stock, etc.) Additional analysis on gross buybacks and dividends can be found within the Buyback Quarterly and Dividend Quarterly reports. Cash Flows from Stock and Dividends Most Recent Quarter -1, -2, -3, -4, -5, -6, Dividends Paid + Net Purch of Stock 1-Year Avg S&P Sector Avg 1-Year Sector Avg Top 1 Companies by Shareholder Distributions Most Recent Quarter Divs & Net Net Stock Company Stock Divs Paid Redemp. Sector Redemp (MRQ) (MRQ) Combined Yield* Apple Inc. $2,425 $2,661 $17, % IBM $8,886 $99 $7, % Exxon Mobil Corporation $6,59 $2,732 $3, % Microsoft Corporation $4,26 $2,322 $1,74 3.6% AT&T Inc. Telecom $3,622 $2,398 $1, % General Electric Company $3,56 $2,223 $1, % Chevron Corporation $3,85 $1,895 $1,19 5.1% Cisco Systems, Inc. $3,79 $974 $2,15 6.6% Boeing Company $2,931 $54 $2, % Walt Disney Company $2,843 $1,58 $1, % *Combined yield is the sum of dividend yield and share yield. Share yield is the trailing twelve month percent reduction in shares and operates under the assumption that the price to earnings multiple remains constant (i.e. the percent reduction in shares translates to an equivalent percent increase in EPS, which is assumed to translate to a percent increase in price). FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 8

9 Financing Cash Flows: Net Debt Issuance and Total Debt Net debt issued is the measure of aggregate, net funds from issuance (reduction) of debt and increases (decreases) in capitalized lease obligations. Also included are the increase in debt from acquisitions and the decrease in debt from the conversion of debentures into common stock. Debt Cash Flows Ten Years , 8, 6, 4, 2, -2, -4, '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 Net Cash Flows from Borrowing 1-Year US Treasury Rate U.S. Recessions Copyright 212 FactSet Research Systems Inc. All rights reserved. Total Debt by Sector Most Recent Quarter 7, 6, 5, 4, 3, 2, 1, Long-Term Debt 1-Year Average S&P Sector Average 1-Year Sector Average FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 9

10 Financing Cash Flows: Net Debt Issuance Net Debt Issuance Most Recent Quarter 18, 16, 14, 12, 1, 8, 6, 4, 2, Cash Flows from Net Debt Issuance 1-Year Average S&P Sector Average 1-Year Sector Average Top Five Companies by Net Debt Issuance and Reduction Most Recent Quarter Net Debt Company Net Debt Avg Total Issued/Avg Sector Issued Debt Debt 1 Yr Total Return Verizon Communications Telecom $9,253 $11,68 9.1% 4.9% Thermo Fisher Scientific $4,612 $13, % 44.1% Gilead Sciences, Inc. $4,543 $8, % 65.5% IBM $4,213 $41, % (4.8%) McKesson Corporation $3,781 $7, % 68.8% Wal-Mart Stores, Inc. ($1,184) $56,93 (2.1%) 5.7% Archer-Daniels-Midland ($1,216) $6,272 (19.4%) 38.8% EMC Corporation ($1,665) $6,327 (26.3%) 1.1% Hewlett-Packard ($2,12) $23,589 (8.5%) 46.% General Electric Company ($6,156) $381,81 (1.6%) 18.% FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 1

11 Debt by Type & Liquidity Available FactSet s Debt Capital Structure database uses financials and credit agreements as primary sources to capture revolving credit (balances and availability), term loans, notes/bonds, and other borrowings for each company as of a specific fiscal reporting date. Data is available on 1 debt items for over 2, companies worldwide. Subordinated (incl. Jr. Sub.) 1% Collateralized 3% Senior Secured 7% Convertible 1% Debt by Type Most Recent Quarter Preferred % Other 7% Senior Unsecured 81% Liquidity available measures cash on balance sheet plus the available funds (borrowing base less amount outstanding) from long-term and short-term credit facilities, including commercial paper, short-term and long-term revolvers (both secured and unsecured), and asset-backed facilities. $3,5, Liquidity Available Current vs. Year-Ago Quarter $3,, $2,5, $2,, $1,5, Cash on Balance Sheet ST Revolvers LT Revolvers $1,, $5, $ 214/1C 213/1C FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 11

12 Important Notice CASH & INVESTMENT QUARTERLY June 24, 214 The information contained in this report is provided as is and all representations, warranties, terms and conditions, oral or written, express or implied (by common law, statute or otherwise), in relation to the information are hereby excluded and disclaimed to the fullest extent permitted by law. In particular, FactSet and its affiliates disclaim implied warranties of merchantability and fitness for a particular purpose and make no warranty of accuracy, completeness or reliability of the information. This report is for information purposes and does not constitute a solicitation or an offer to buy or sell any securities mentioned within it. The information in this report is not investment advice. FactSet and its affiliates assume no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this report. About FactSet FactSet (NYSE:FDS) (Nasdaq:FDS) combines integrated financial information, analytical applications, and clientservice to enhance the workflow and productivity of the global investment community. The company, headquartered in Norwalk, Connecticut, was formed in 1978 and now conducts operations along with its affiliates from twenty-four locations worldwide, including Boston, New York, Chicago, San Mateo, London, Amsterdam, Frankfurt, Paris, Milan, Tokyo, Hong Kong, Mumbai, Dubai, and Sydney. About FactSet Fundamentals FactSet Fundamentals gives you access to current, comprehensive, and comparative information on securities worldwide. The comprehensive coverage available includes more than 69, companies from over 7 countries, with 2 years of historical data, and up to 2, data items on each company record. Comprised of annual and interim/quarterly data, detailed historical financial statement content, per share data, calculated ratios, pricing, and textual information, FactSet Fundamentals provides you with the information you need for a global investment perspective. About FactSet Alpha Testing Alpha Testing is FactSet s back testing tool. Alpha Testing lets you test ideas about which quantitative and qualitative factors drive returns. Use our robust and flexible interface to create custom models and communicate results. Alpha Testing is fully integrated into the FactSet workstation. Model scores can be used in real time portfolio contribution or for portfolio construction. FactSet.com Copyright 214 FactSet Research Systems Inc. All rights reserved. 12