In addition to disclosing financial results in accordance with U.S. GAAP, this document contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance.
Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated using an appropriate tax rate for each adjustment. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.
Amortization of acquisition-related intangible assets consists of amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection with business combinations. Charges related to the amortization of these intangibles are recorded within both cost of sales and MG&A in our U.S. GAAP financial statements. Amortization charges are recorded over the estimated useful life of the related acquired intangible asset, and thus are generally recorded over multiple years.
We exclude amortization charges for our acquisition- related intangible assets for purposes of calculating certain non-GAAP measures because these charges are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. These adjustments facilitate a useful evaluation of our current operating performance and comparison to our past operating performance and provide investors with additional means to evaluate cost and expense trends.
Restructuring charges are costs associated with a formal restructuring plan and are primarily related to employee severance and benefit arrangements. Other charges include asset impairments, pension charges, and costs associated with restructuring activity.
We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures because these costs do not reflect our current operating performance. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate expense trends.
Gains or losses are recognized at the close of a divestiture.
We exclude gains or losses resulting from divestitures for purposes of calculating certain non-GAAP measures because they do not reflect our current operating performance. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results.
We made adjustments to the original estimate of income tax expense resulting from Tax Reform.
We exclude adjustments to the provisional tax estimate for purposes of calculating certain non-GAAP measures because they are the result of regulatory change and do not reflect our current operating performance. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results.
We made adjustments to the original estimate of income tax expense resulting from Tax Reform.
We exclude adjustments to the provisional tax estimate for purposes of calculating certain non-GAAP measures because they are the result of regulatory change and do not reflect our current operating performance. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results.
We reference a non-GAAP financial measure of free cash flow, which is used by management when assessing our sources of liquidity, capital resources, and quality of earnings. Free cash flow is operating cash flow adjusted to exclude additions to property, plant and equipment. We also reference a ratio of free cash flow to non-GAAP net income.
This non-GAAP financial measure is helpful in understanding our capital requirements and provides an additional means to evaluate the cash flow trends of our business. We excluded additions to held for sale NAND property, plant and equipment because the additions are not representative of our long-term capital requirements and we expect these assets to be sold. The ratio of free cash flow to non-GAAP net income is helpful in comparing the results and trends of our adjusted cash flow to income.
Following are the reconciliations of our most comparable U.S. GAAP measures to our non-GAAP measures presented:
Years Ended (In Millions, Except Per Share Amounts) | Dec 26, 2020 | Dec 28, 2019 | Dec 29, 2018 |
---|---|---|---|
Operating income | $23,678 | $22,035 | $23,316 |
Acquisition-related adjustments | 1,416 | 1,324 | 1,305 |
Restructuring and other charges | 198 | 393 | (72) |
Non-GAAP operating income | $25,292 | $23,752 | $24,549 |
Operating margin | 30.4% | 30.6% | 32.9% |
Acquisition-related adjustments | 1.8% | 1.8% | 1.8% |
Restructuring and other charges | 0.3% | 0.5% | (0.1)% |
Non-GAAP operating margin | 32.5% | 33.0% | 34.7% |
Net income | $20,899 | $21,048 | $21,053 |
Acquisition-related adjustments | 1,416 | 1,324 | 1,305 |
Restructuring and other charges | 198 | 393 | (72) |
(Gains) losses from divestiture | (6) | (690) | (494) |
Ongoing mark-to-market on marketable equity securities | 133 | (277) | 129 |
Tax Reform | -- | -- | (294) |
Income tax effects | (209) | (14) | (102) |
Non-GAAP net income | $22,431 | $21,784 | $21,525 |
Earnings per share - diluted | $4.94 | $4.71 | $4.48 |
Acquisition-related adjustments | 0.33 | 0.29 | 0.28 |
Restructuring and other charges | 0.05 | 0.09 | (0.02) |
(Gains) losses from divestiture | -- | (0.16) | (0.11) |
Ongoing mark-to-market on marketable equity securities | 0.03 | (0.06) | 0.03 |
Tax Reform | -- | -- | (0.06) |
Income tax effects | (0.05) | -- | (0.02) |
Non-GAAP earnings per share - diluted | $5.30 | $4.87 | $4.58 |
Years Ended (In Millions) | Dec 26, 2020 | Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 |
---|---|---|---|---|---|
Net cash provided by operating activities | $35,384 | $33,145 | $29,432 | $22,110 | $21,808 |
Additions to property, plant and equipment | (14,259) | (16,213) | (15,181) | (11,778) | (9,625) |
Free cash flow | $21,125 | $16,932 | $14,251 | $10,332 | $12,183 |
Net cash used for investing activities | $(20,796) | $(14,405) | $(11,239) | $(15,762) | $(25,817) |
Net cash provided by (used for) financing activities | $(12,917) | $(17,565) | $(18,607) | $(8,475) | $(5,739) |