Sunbeam 2007 Annual Report Download - page 50

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• 2005 includes: purchase accounting adjustments for $22.4 million of the elimination of manufacturer’s
profit in inventory charged to cost of sales, which is the purchase accounting fair value adjustment to
inventory associated with acquisitions, $2.5 million of write offs of inventory related to reorganization
and acquisition-related integration initiatives, $62.4 million of stock-based compensation costs related
to stock options and restricted shares of Company common stock 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 (c) below).
• 2004 includes: stock-based compensation costs of $32.2 million related to restricted shares.
• 2003 includes: stock-based compensation costs of $21.8 million related to restricted shares.
(b) The results of Diamond Brands, Lehigh, USPC, American Household, Holmes, Pure Fishing and K2 are
included from their dates of acquisition of February 1, 2003, September 2, 2003, June 28, 2004, January 24,
2005, July 18, 2005, April 6, 2007 and August 8, 2007, respectively.
(c) Reorganization and acquisition-related integration costs include costs associated with exit or disposal
activities, which do not meet the criteria of discontinued operations, including costs of employee and lease
terminations, facility closing or other exit activities. Additionally, these costs include expenses directly
related to integrating and reorganizing acquired businesses and include items such as employee retention,
recruiting costs, certain moving costs, certain duplicative costs during integration and asset impairments.
(d) Segment Earnings represents earnings before interest, taxes and depreciation and amortization, excluding
reorganization and acquisition-related integration costs, the elimination of manufacturer’s profit in
inventory, fair value inventory adjustments, non-cash stock-based compensation costs, and loss on early
extinguishment of debt. This non-GAAP financial measure, is presented in this Annual Report on Form
10-K because it is a basis upon which the Company’s management has assessed its financial performance in
the years presented. Additionally, the Company uses non-GAAP financial measures because the Company’s
credit agreement provides for certain adjustments in calculations used for determining whether the
Company is in compliance with certain credit agreement covenants, including, but not limited to,
adjustments relating to non-cash purchase accounting adjustments, certain reorganization and acquisition-
related integration costs, non-cash stock-based compensation costs and loss on early extinguishment of debt.
Segment Earnings should 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 prepared in accordance
with GAAP that are presented in this Annual Report on Form 10-K. A reconciliation of the calculation of
Segment Earnings is presented below:
Reconciliation of non-GAAP Measure (in millions):
For the Years Ended December 31,
2007 2006 2005 2004 2003
Net income ............................... $ 28.1 $106.0 $ 60.7 $ 42.4 $ 31.8
Income tax provision ....................... 38.5 82.0 35.0 26.0 20.5
Interest expense, net ........................ 149.7 112.6 84.2 27.6 19.2
Loss on early extinguishment of debt .......... 15.7 — 6.1 — —
Operating earnings ..................... 232.0 300.6 186.0 96.0 71.5
Adjustments to reconcile to Segment Earnings:
Depreciation and amortization ................ 96.4 66.4 57.6 19.2 15.0
Fair value adjustment to inventory ............. 118.9 10.4 22.4 — —
Reorganization costs ....................... 49.6 36.8 29.1 — —
Other integration-related costs ................ 4.6 4.5 — — —
Stock-based compensation ................... 64.0 23.0 62.4 32.2 21.8
Impairment/write-off of assets ................ — 0.3 2.5 — —
Segment Earnings ...................... $565.5 $442.0 $360.0 $147.4 $108.3
(e) Working capital is defined as current assets (including cash and cash equivalents) less current liabilities.
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