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37
Cooperative reimbursements are lower in 2004 and 2003 than in prior years as $91.3 and $60.9 million of
vendor consideration which would have previously been classified as cooperative reimbursements were
classified as a reduction of cost of sales due to the adoption of Emerging Issues Task Force (“EITF”) Issue
No. 02-16, “Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of
the Vendor’s Products)” (“EITF 02-16”) on January 1, 2003.
Stock-Based Compensation
At December 31, 2004, we had several stock-based employee compensation plans, which are described more
fully in Note 10. In accordance with Statement of Financial Accounting Standards No. 123, “Accounting for
Stock-Based Compensation” (“SFAS 123”), we account for our stock-based compensation programs
according to the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees” (“APB 25”). Accordingly, compensation expense is recognized to the extent of employee or
director services rendered based on the intrinsic value of compensatory options or shares granted under the
plans. The following table illustrates the effect on net income and earnings per share if we had applied the fair
value recognition provisions of SFAS 123 to stock-based employee compensation for the years ended
December 31, 2004, 2003 and 2002, respectively (in thousands, except per share amounts):
2004 2003 2002
Net income, as reported $ 241,445 $ 175,186 $ 185,249
Add stock-based employee compensation
expense included in reported net income,
net of related tax effects 190 344 649
Deduct total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (26,795) (24,709) (26,123)
Pro forma net income $ 214,840 $ 150,821 $ 159,775
Basic earnings per share, as reported $ 2.90 $ 2.10 $ 2.18
Diluted earnings per share, as reported $ 2.79 $ 2.03 $ 2.10
Pro forma basic earnings per share $ 2.58 $ 1.81 $ 1.88
Pro forma diluted earnings per share $ 2.47 $ 1.75 $ 1.81
Fair Value of Financial Instruments
We estimate that the fair market value of all of our financial instruments at December 31, 2004 and 2003
are not materially different from the aggregate carrying value due to the short-term nature of these
instruments or the nature of the underlying securities.
Treasury Shares
We intend to hold repurchased shares in treasury for general corporate purposes, including issuances under
various employee stock option plans. We account for the treasury shares using the cost method.
Foreign Currency Translation
Our functional currency is the U.S. dollar. The functional currency of our Canadian subsidiary is the local
currency, the Canadian dollar. Assets and liabilities of this subsidiary are translated at the spot rate in