Pershing Square Activist Presentation Deck
Cash Net Income Reconciliation:
Major Non-Cash Expense Adjustments
Valeant removes certain non-cash expenses to better match Net
Income with recurring Free Cash Flow
► Inventory Step-Up ($436mm adjustment, 2013)
■ GAAP requires purchasers to write-up the value of an acquired
company's inventory to estimated fair value
■ For Valeant, this write-up is often large because Valeant tends to
acquire very high gross margin companies
■ Large inventory write-ups significantly reduce the GAAP gross margin
Valeant reports when the written-up inventory is sold
■ We believe that removing the effect of this write up provides a better
measure of recurring gross profits
Non-Cash expenses Valeant does not remove
■ Unlike many companies that report Non-GAAP financials, Valeant does
not add back Stock-Based Compensation
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