Invacare 2007 Annual Report Download - page 5

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INVACARE CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET EARNINGS (LOSS) PER SHARE
TO ADJUSTED EARNINGS PER SHARE (1)
(In thousands, except per share data)
Twelve Months Ended
December 31,
2007 2006
Net earnings (loss) per share – assuming dilution * ............................... $ 0.04 $ (10.00)
Weighted average shares outstanding- assuming dilution * ......................... 31,927 31,789
Net earnings (loss) ......................................................... $ 1,190 $(317,774)
Income taxes ............................................................. 13,300 8,250
Earnings (loss) before income taxes ........................................... 14,490 (309,524)
Restructuring charges ....................................................... 11,408 21,250
Debt finance charges, interest and fees associated with debt refinancing ............... 13,408 3,745
Incremental accounts receivable reserve ........................................ — 26,775
Asset write-down related to goodwill and other intangible assets ..................... — 300,417
Adjusted earnings before income taxes ......................................... 39,306 42,663
Income taxes (benefit) ...................................................... (3,599) 4,910
Adjusted net earnings ....................................................... $42,905 $ 37,753
Weighted average shares outstanding- assuming dilution ........................... 31,927 32,061
Adjusted earnings per share – assuming dilution(1) ................................ $ 1.34 $ 1.18
Adjusted net earnings ....................................................... $42,905 $ 37,753
Net tax benefit, primarily attributable to new German tax laws(2) ..................... (7,220) —
Adjusted net earnings, excluding net tax benefit .................................. $35,685 $ 37,753
Weighted average shares outstanding – assuming dilution .......................... 31,927 32,061
Adjusted earnings per share – assuming dilution, excluding net tax benefit(1) (2) ......... $ 1.12 $ 1.18
(1) Adjusted Earnings per share (EPS) is a non-GAAP financial measure which is defined as net earnings
excluding the impact of restructuring charges, debt finance charges, interest and fees associated with the
Company’s debt refinancing, incremental accounts receivable reserve, asset write-downs related to goodwill and
other intangible assets and tax valuation reserves divided by weighted average shares outstanding – assuming
dilution. It should be noted that the Company’s definition of Adjusted EPS may not be comparable to similar
measures disclosed by other companies because not all companies and analysts calculate Adjusted EPS in the
same manner. We believe that these types of exclusions are also recognized by the industry in which we operate
as relevant in computing Adjusted EPS as a supplementary non-GAAP financial measure widely used by
financial analysts and others in our industry to meaningfully evaluate a company’s operating performance.
(2) The company benefited from a one-time net tax benefit recorded in the third and fourth quarters of $7,220,000
($0.22 per share benefit), primarily attributable to German tax laws, which reduced the company’s tax rate and
German net deferred tax credits.
(3) Free Cash Flow is a non-GAAP financial measure that is comprised of net cash provided by operating
activities, excluding net cash impact related to restructuring activities less purchases of property and equipment,
net of proceeds from sales of property and equipment. Management believes that this financial measure provides
meaningful information for evaluating the overall financial performance of the Company and its ability to repay
debt or make future investments (including, for example, acquisitions).
* Net earnings (loss) per share – assuming dilution calculated for twelve-months ended December 31, 2006
utilizing weighted average shares outstanding – basic as a result of the Company’s net loss.