adjustments including deferred revenues, contingent consideration and inventory, recoveries
of acquisition-related expenses or post-closing expenses, bridge loan fees, gains or losses on business combinations, and divestitures of businesses that do not qualify as discontinued operations.
LIFO inventory-related adjustments LIFO inventory-related non-cash expense
or credit adjustments.
Gains from antitrust legal settlements Net cash proceeds representing the
Companys share of antitrust lawsuit settlements.
Restructuring, impairment, and related
charges Restructuring charges that are incurred for programs in which we change our operations, the scope of a business undertaken by our business units, or the manner in which that business is conducted as well as long-lived
asset impairments. Such charges may include employee severance, retention bonuses, facility closure or consolidation costs, lease or contract termination costs, asset impairments, accelerated depreciation and amortization, and other related
expenses. The restructuring programs may be implemented due to the sale or discontinuation of a product line, reorganization or management structure changes, headcount rationalization, realignment of operations or products, integration of acquired
businesses, and/or company-wide cost saving initiatives. The amount and/or frequency of these restructuring charges are not part of our underlying business, which include normal levels of reinvestment in the business. Any credit adjustments due to
subsequent changes in estimates are also excluded from adjusted results.
Claims and litigation
charges Adjustments to certain of the Companys reserves, including those related to estimated probable settlements for its controlled substance monitoring and reporting, and opioid-related claims, as well as any applicable
income items or credit adjustments due to subsequent changes in estimates. This does not include our legal fees to defend claims, which are expensed as incurred.
Other adjustments The Company evaluates the nature and significance of transactions qualitatively and
quantitatively on an individual basis and may include them in the determination of our adjusted results from time to time. While not all-inclusive, other adjustments may include: other asset impairments; gains
or losses from debt extinguishment; and other similar substantive and/or infrequent items as deemed appropriate.
The Company
evaluates the aforementioned Non-GAAP measures on a periodic basis and updates the definitions from time to time. The evaluation considers both the quantitative and qualitative aspects of the Companys
presentation of Non-GAAP adjusted results.
Income tax effects are calculated in accordance
with Accounting Standards Codification 740, Income Taxes, which is the same accounting principle used by the Company when presenting its GAAP financial results.
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Free Cash Flow (Non-GAAP): We define free cash flow as net cash provided
by (used in) operating activities less payments for property, plant, and equipment and capitalized software expenditures, as disclosed in our consolidated statements of cash flows in our Annual Report on Form
10-K. |
In addition, Adjusted Operating Profit for Incentive Compensation (Non-GAAP), Adjusted EPS for Incentive Compensation (Non-GAAP), and 3-Year Cumulative Adjusted EPS for Incentive Compensation (Non-GAAP) are measures that management utilizes to determine employee incentive compensation. These measures are further adjusted from certain non-GAAP measures defined above
for incentive compensation adjustments, net, including certain foreign currency gains or losses compared to plan, the effect of our equity method investment in Change Healthcare, and the impact from certain performance-based stock unit awards to
support our strategic growth initiatives. While not all-inclusive, incentive compensation adjustments, net may include other substantive and/or infrequent items as deemed appropriate by our Compensation
Committee.
The Company believes the presentation of Non-GAAP measures provides useful supplemental
information to investors with regard to its operating performance, as well as assists with the comparison of its past financial performance to the Companys future financial results. Moreover, the Company believes that the presentation of Non-GAAP measures assists investors ability to compare its financial results to those of other companies in the same industry. However, the Companys Non-GAAP
measures may be defined and calculated differently by other companies in the same industry.
The Company internally uses both GAAP and Non-GAAP financial measures in connection with its own financial planning and reporting processes. Management utilizes Non-GAAP financial measures when allocating resources,
deploying capital, as well as assessing business performance, and determining employee incentive compensation. The Company conducts its businesses internationally in local currencies, including Euro, British pound sterling, and Canadian dollars. As
a result, the comparability of our results reported in U.S. dollars can be affected by changes in foreign currency exchange rates. We believe free cash flow is important to management and useful to investors as a supplemental measure as it indicates
the cash flow available for working capital needs, re-investment opportunities, strategic acquisitions, dividend payments, or other strategic uses of cash. Nonetheless,
Non-GAAP adjusted results and related Non-GAAP measures disclosed by the Company should not be considered a substitute for, nor superior to, financial results and
measures as determined or calculated in accordance with GAAP.