(1) Management uses non-IFRS operating earnings (adjusted EBIAT) as a measure to assess our operational performance related to our core operations. Non-IFRS adjusted EBIAT is defined as earnings before finance costs (consisting of interest and fees related to our credit facility, our accounts receivable sales program and a customer's supplier financing program), amortization of intangible assets (excluding computer software) and income taxes. Non-IFRS adjusted EBIAT also excludes, in periods where such charges have been recorded, employee stock-based compensation expense, restructuring and other charges, including acquisition-related transaction costs (net of recoveries), gains or losses related to the repurchase of our securities, impairment charges and refund interest income. Refund interest income represents the refund of interest on cash then held on account with tax authorities in connection with the resolution of certain previously disputed tax matters in the second half of 2016 (see notes 12 and 14 to our Interim Financial Statements).
(2) The adjustments for taxes, as applicable, represent the tax effects on our non-IFRS adjustments.
Our effective tax rate for the fourth quarter of 2016 was 29%. After excluding the tax effects of employee stock-based compensation expense of $10.4, amortization of intangible assets (excluding computer software) of $1.5, net restructuring, impairment and other charges of $25.8, and other tax charges related to restructured sites of $0.5, our non-IFRS adjusted effective tax rate for the fourth quarter of 2016 was 11%. Our effective tax rate for the full year 2016 was 15%. After excluding the tax effects of employee stock-based compensation expense of $33.0, amortization of intangible assets (excluding computer software) of $6.0, net restructuring, impairment and other charges of $25.5, and other tax charges related to restructured sites of $1.4, our non-IFRS adjusted effective tax rate for the full year 2016 was 11%.
Our effective tax rate for the fourth quarter of 2015 was 49%. After excluding the tax effects of employee stock-based compensation expense of $10.8, amortization of intangible assets (excluding computer software) of $1.5, and net restructuring, impairment and other charges of $14.3, our non-IFRS adjusted effective tax rate for the fourth quarter of 2015 was 23%. Our effective tax rate for the full year 2015 was 39%. After excluding the tax effects of employee stock-based compensation expense of $37.6, amortization of intangible assets (excluding computer software) of $6.0, net restructuring, impairment and other charges of $35.8, and other tax charges related to restructured sites of $1.2, our non-IFRS adjusted effective tax rate for the full year 2015 was 23%.
(3) Management uses non-IFRS free cash flow as a measure, in addition to IFRS cash flow provided by (used in) operations, to assess our operational cash flow performance. We believe non-IFRS free cash flow provides another level of transparency to our liquidity. Non-IFRS free cash flow is defined as cash provided by (used in) operations after the purchase of property, plant and equipment (net of proceeds from the sale of certain surplus equipment and property), deposits received on the anticipated sale of real property (see note 17 to our 2015 annual audited consolidated financial statements), finance lease payments, advances to (or repayments from) a solar supplier, and finance costs paid. Note that non-IFRS free cash flow, however, does not represent residual cash flow available to Celestica for discretionary expenditures.
(4) Management uses non-IFRS adjusted ROIC as a measure to assess the effectiveness of the invested capital we use to build products or provide services to our customers, by quantifying how well we generate earnings relative to the capital we have invested in our business. Our non-IFRS adjusted ROIC measure reflects non-IFRS operating earnings, working capital management and asset utilization. Non-IFRS adjusted ROIC is calculated by dividing non-IFRS adjusted EBIAT by average net invested capital. Net invested capital (calculated in the table below) consists of the following IFRS measures: total assets less cash, accounts payable, accrued and other current liabilities and provisions, and income taxes payable. We use a two-point average to calculate average net invested capital for the quarter and a five-point average to calculate average net invested capital for the year. A comparable measure under IFRS would be determined by dividing IFRS earnings before income taxes by net invested capital (which we have set forth in the charts above and below), however, this measure (which we have called IFRS ROIC), is not a measure defined under IFRS.
The following table sets forth, for the periods indicated, our calculation of IFRS ROIC and non-IFRS adjusted ROIC % (in millions, except IFRS ROIC and non-IFRS adjusted ROIC %):
Three months ended Year ended
December 31 December 31
------------------- -------------------
2015 2016 2015 2016
--------- --------- --------- ---------
IFRS earnings before income
taxes $ 23.8 $ 29.3 $ 109.1 $ 161.0
Multiplier 4 4 1 1
--------- --------- --------- ---------
Annualized IFRS earnings 161.0
before income taxes $ 95.2 $ 117.2 $ 109.1 $
--------- --------- --------- ---------
Average net invested
capital for the period $ 992.5 $1,083.8 $ 984.0 $1,062.3
IFRS ROIC % (1) 9.6% 10.8% 11.1% 15.2%
Three months ended Year ended
December 31 December 31
------------------- -------------------
2015 2016 2015 2016
--------- --------- --------- ---------
Non-IFRS operating earnings
(adjusted EBIAT) $ 53.0 $ 61.4 $ 194.8 $ 221.2
Multiplier 4 4 1 1
--------- --------- --------- ---------
Annualized non-IFRS
adjusted EBIAT $ 212.0 $ 245.6 $ 194.8 $ 221.2
--------- --------- --------- ---------
Average net invested
capital for the period $ 992.5 $1,083.8 $ 984.0 $1,062.3
Non-IFRS adjusted ROIC %
(1) 21.4% 22.7% 19.8% 20.8%
December September December
31 March 31 June 30 30 31
2015 2016 2016 2016 2016
-------- --------- --------- --------- ---------
Net invested capital
consists of:
Total assets $2,612.0 $2,621.9 $2,720.1 $2,813.7 $2,822.3
Less: cash 545.3 511.5 472.9 542.0 557.2
Less: accounts payable,
accrued and other current
liabilities, provisions
and income taxes payable 1,104.3 1,053.8 1,122.5 1,179.4 1,189.7
-------- --------- --------- --------- ---------
Net invested capital at
period end (1) $ 962.4 $1,056.6 $1,124.7 $1,092.3 $1,075.4
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December September December
31 March 31 June 30 30 31
2014 2015 2015 2015 2015
-------- --------- --------- --------- ---------
Net invested capital
consists of:
Total assets $2,583.6 $2,579.3 $2,624.7 $2,603.6 $2,612.0
Less: cash 565.0 569.2 496.8 495.7 545.3
Less: accounts payable,
accrued and other current
liabilities, provisions
and income taxes payable 1,054.3 1,044.8 1,122.3 1,085.3 1,104.3
-------- --------- --------- --------- ---------
Net invested capital at
period end (1) $ 964.3 $ 965.3 $1,005.6 $1,022.6 $ 962.4
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