Appendix 3: Business Operating Income definition

Business Operating income (BOI)

Sanofi reports segment results on the basis of “Business Operating income”.   Business Operating income is a non-GAAP financial performance indicator.  This indicator is used internally by Sanofi’s chief operating decision maker to measure the performance of each operating segment and to allocate resources. 

Business operating income is derived from Operating income, adjusted as follows:

• the amounts reported in the line items Restructuring costs and similar items, Fair value remeasurement of contingent consideration and Other gains and losses, and litigation are eliminated;
• amortization and impairment losses charged against intangible assets (other than software and other rights of an industrial or operational nature) are eliminated;
• the share of profits/losses from investments accounted for using the equity method is added;
• net income attributable to non-controlling interests is deducted;
• other acquisition-related effects (primarily the workdown of acquired inventories remeasured at fair value at the acquisition date, and the impact of acquisitions on investments accounted for using the equity method) are eliminated;
• restructuring costs relating to investments accounted for using the equity method are eliminated.

Appendix 4: Free Cash Flow definition

Free Cash Flow

Free Cash Flow is a non-GAAP financial performance indicator which is reviewed by our management, and which we believe provides useful information to measure the net cash generated from the Company’s operations that is available for strategic investments¹ (net of divestments¹), for debt repayment, and for capital return to shareholders. Free cash Flow is determined from the Business Net Income adjusted for depreciation, amortization and impairment, share of profit/loss in associates and joint ventures net of dividends received, gains & losses on disposals, net change in provisions including pensions and other post-employment benefits, deferred taxes, share-based expense and other non-cash items. It comprises net changes in working capital, capital expenditures and other asset acquisitions² net of disposal proceeds², and payments related to restructuring and similar items.  Free cash flow is not defined by IFRS and it is not a substitute measure for the IFRS aggregate net cash flows in operating activities.