Sunbeam 2006 Annual Report Download - page 28

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(a) For 2006,the Company’s operating earnings and earnings before interest, taxes and depreciation and amortization (“EBITDA”) (see item (h) below) of
$300.6million and $367.0million, respectively, were reduced by the following amounts: purchase accounting adjustments for $10.4million of the elimination
of manufacturer’s profit in inventory, $23.0million of stock-based compensation costs related to stock options and restricted shares of the Company’s common
stock, and $36.8million of reorganization and acquisition-related integration cost (see item (g) below).
(b) For 2005,the Company’s operating earnings and EBITDA of $186 million and $243.6million, respectively, were reduced by the following amounts: pur-
chase accounting adjustments for $22.4million of the elimination of manufacturer’s profit in inventory, $2.5million of write offs of inventory related to reorgan-
ization and acquisition-related integration initiatives, $62.4million of stock-based compensation costs related to stock options and restricted shares of Company
common stock to employees and the early adoption of Statement of Financial Accounting Standards No. 123 (revised 2004)“Share Based Payment,” and $29.1
million of reorganization and acquisition-related integration costs (see item (g) below).
(c) The results of AHI are included from January 24,2005;Holmes from July 18 2005;USPC from June 28,2004;Lehigh from September 2,2003;
Diamond Brands from February 1,2003;and Tilia from April 1,2002;which are the respective dates of acquisition.
(d) 2004 includes stock-based compensation costs of $32.2million related to restricted shares. As a result, the Company’s operating earnings and EBITDA (see
item (h) below) of $96 million and $115.2million, respectively, were each reduced by such amount.
(e) 2003 includes stock-based compensation costs of $21.8million related to restricted shares of the Company’s common stock to employees. As a result, the
Company’s operating earnings and EBITDA (see item (h) below) of $71.5million and $86.5million, respectively, were each reduced by such amount.
(f) 2002 includes a net release of a $4.4million tax valuation allowance. As a result, the Company’s net income of $36.3million included the benefit of this
release.
(g) Reorganization and acquisition-related integration costs were comprised of costs such as costs to evaluate strategic options, discharge of deferred compensation
obligations, separation costs for former officers, corporate restructuring costs, costs to exit facilities and leases, reduction of long-term performance based compensa-
tion, litigation charges and items related to our divested thermoforming operations.
(h) EBITDA, a non-GAAP financial measure, is presented in this Annual Report on Form 10-K because the Company’s credit facility and senior subordinated
notes contain financial and other covenants which are based on or refer to the Company’s EBITDA. In this regard, GAAP refers to generally accepted accounting
principles in the United States. Additionally, EBITDAis a basis upon which our management assesses financial performance and the Company believes it is fre-
quently used by securities analysts, investors and other interested parties in measuring the operating performance and creditworthiness of companies with comparable
market capitalization to the Company, many of which present EBITDAwhen reporting their results. Furthermore, EBITDA is one of the factors used to determine
the total amount of bonuses available to be awarded to executive officers and other employees. EBITDA is widely used by the Company to evaluate potential acqui-
sition candidates. While EBITDAis frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to
other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. Because of these limitations, EBITDAshould not be
considered a primary measure of the Company’s performance and should be reviewed in conjunction with, and not as substitute for, financial measurements pre-
pared in accordance with GAAP that are presented in this Annual Report on Form 10-K. A reconciliation of the calculation of EBITDA, is presented below:
Reconciliation of non-GAAP Measure:
For the Years Ended December 31,
(in millions) 2006 2005 2004 2003 2002
Net income $106.0$60.7$42.4$31.8$36.3
Income tax provision 82.035.026.020.516.2
Interest expense, net 112.684.227.619.212.6
Loss on early extinguishment of debt — 6.1———
Depreciation and amortization 66.457.619.215.010.0
EBITDA $367.0$243.6$115.2$86.5$75.1
(i) For the year ended December 31,2002,cash flows from operations included $38.6million of income tax refunds resulting primarily from the 2001 loss on
divestiture of assets.
(j) Working capital is defined as current assets (including cash and cash equivalents) less current liabilities.
Selected Financial Data
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