Johnson and Johnson 2011 Annual Report Download - page 74

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Reconciliation of Non-GAAP Financial Measures
72 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The tables below are provided to reconcile certain financial disclosures in the Letter to Shareholders, page 1.
’11 vs. ’10 ’10 vs. ’09
(Dollars in Millions Except Per Share Data) 2011 2010 2009 % Change % Change
Earnings before provision for taxes on income — as reported $12,361 16,947 15,755 (27.1)% 7.6
Net litigation settlements loss (gain) 1,710 (966) (386)
Product liability expenses 1,600 569 —
Restructuring expense 656 —1,186
DePuy ASR™ Hip recall program 521 280 —
Adjustment to the value of the currency option and costs related to planned acquisition of Synthes, Inc. 491 ——
In-process research and development 14 ——
Earnings before provision for taxes on income — as adjusted $17,353 16,830 16,555 3.1% 1.7
Net Earnings — as reported $ 9,672 13,334 12,266 (27.5)% 8.7
Net litigation settlements loss (gain) 1,466 (698) (212)
Product liability expenses 1,279 404 —
Restructuring expense 536 —852
DePuy ASR™ Hip recall program 426 239 —
Adjustment to the value of the currency option and costs related to planned acquisition of Synthes, Inc. 477 ——
In-process research and development 11 ——
Net Earnings — as adjusted $13,867 13,279 12,906 4.4% 2.9
Diluted Net Earnings per share — as reported $ 3.49 4.78 4.40 (27.0)% 8.6
Net litigation settlements loss (gain) 0.53 (0.25) (0.08)
Product liability expenses 0.46 0.14 —
Restructuring expense 0.19 —0.31
DePuy ASR™ Hip recall program 0.16 0.09 —
Adjustment to the value of the currency option and costs related to planned acquisition of Synthes, Inc. 0.17 ——
In-process research and development ———
Diluted Net Earnings per share — as adjusted $ 5.00 4.76 4.63 5.0% 2.8
’11 vs. ’10 ’10 vs. ’09
(Dollars in Millions) 2011 2010 2009 % Change % Change
Net cash flows from operating activities $14,298 16,385 16,571
Additions to property, plant and equipment (2,893) (2,384) (2,365)
Free Cash Flow $11,405 14,001 14,206 (18.5)% (1.4)
The Company provides earnings before provision for taxes on income, net earnings, net earnings per share (diluted) and net cash flows
from operating activities on an adjusted basis because management believes that these measures provide useful information to investors.
Among other things, these measures may assist investors in evaluating the Company’s results of operations period over period. In various
periods, these measures may exclude such items as significant costs associated with acquisitions, restructuring, litigation, and changes in
applicable laws and regulations (including significant accounting or tax matters). These special items may be highly variable, difficult to
predict, and of a size that sometimes has substantial impact on the Company’s reported results of operations for a period. Management
uses these measures internally for planning, forecasting and evaluating the performances of the Company’s businesses, including allocating
resources and evaluating results relative to employee performance compensation targets. Unlike earnings before provision for taxes on
income, net earnings, net earnings per share (diluted) and net cash flows from operating activities prepared in accordance with GAAP,
adjusted earnings before provision for taxes on income, adjusted net earnings, adjusted net earnings per share (diluted) and free cash flow
may not be comparable with the calculation of similar measures for other companies. These non-GAAP financial measures are presented
solely to permit investors to more fully understand how management assesses the performance of the Company. The limitations of using
these non-GAAP financial measures as performance measures are that they provide a view of the Company’s results of operations without
including all events during a period, such as the effects of an acquisition, restructuring, litigation, and changes in applicable laws and
regulations (including significant accounting or tax matters) and do not provide a comparable view of the Company’s performance to other
companies in the health care industry. Investors should consider non-GAAP financial measures in addition to, and not as replacements for,
or superior to, measures of financial performance prepared in accordance with GAAP.