Non-GAAP Financial Information
The noted references in the shareholder letter to operating income and net income per diluted share were each adjusted for certain charges, credits and losses that we believe impact the comparability of our results of operations. These charges, credits and losses arise out of the company’s efficiency enhancement initiatives, the company’s acquisitions of other companies, certain income tax related matters, the prepayment of debt and the write-down of investments. This financial information has not been prepared in accordance with generally accepted accounting principles (GAAP). The following table sets forth reconciliations of operating income, net income and net income per diluted share, prepared in accordance with GAAP, to operating income, net income and net income per diluted share, each as adjusted.
We believe that such non-GAAP financial information may be useful to investors to assist in assessing and understanding our operating performance and the underlying trends in our business because management considers the charges, credits and losses referred to above to be outside our core operating results. This non-GAAP financial information is among the primary indicators management uses as a basis for evaluating our financial and operating performance. In addition, our board of directors may use this non-GAAP financial information in evaluating management performance and setting management compensation.
The presentation of this non-GAAP financial information is not meant to be considered in isolation or as a substitute for, or alternative to, operating income, net income and net income per diluted share determined in accordance with GAAP. Analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.
IN THOUSANDS EXCEPT PER SHARE DATA| Year ended December 31, | 2007 | 2006 | 2005 |
| Operating income, as reported | $686,905 | $606,225 | $480,258 |
| Restructuring charges | 11,745 | 11,829 | 12,716 |
| Pre-acquisition warranty claim | – | 2,837 | – |
| Pre-acquisition environmental matters | – | 1,449 | – |
| Acquisition indemnification credit | – | – | (1,672) |
| Operating income, as adjusted | $698,650 | $622,340 | $491,302 |
| Net income, as reported | $470,792 | $388,331 | $253,609 |
| Restructuring and integration charges | 7,036 | 8,977 | 7,310 |
| Deferred tax adjustment | (6,024) | – | – |
| Pre-acquisition warranty claim | – | 1,861 | – |
| Pre-acquisition environmental matters | – | 867 | – |
| Impact of settlement of tax matters | |||
| Income taxes: | |||
| 2005 and prior | – | (40,426) | – |
| Interest (net of taxes): | |||
| 2005 and prior | – | (2,431) | – |
| Loss on prepayment of debt | – | 1,558 | 2,596 |
| Write-down of investment | – | – | 3,019 |
| Acquisition indemnification credit | – | – | (1,267) |
| Net income, as adjusted | $408,804 | $358,737 | $265,267 |
| Net income per diluted share, as reported | $3.28 | $3.16 | $2.09 |
| Restructuring charges | .06 | .07 | .05 |
| Deferred tax adjustment | (.05) | – | – |
| Pre-acquisition warranty claim | – | .02 | – |
| Pre-acquisition environmental matters | – | .01 | – |
| Impact of settlement of tax matters | |||
| Income taxes: | |||
| 2005 and prior | – | (.33) | – |
| Interest (net of taxes): | |||
| 2005 and prior | – | (.02) | – |
| Loss on prepayment of debt | – | .01 | .01 |
| Write-down of investment | – | – | .03 |
| Acquisition indemnification credit | – | – | – |
| Net income per diluted share, as adjusted | 3.29 | $2.92 | $2.18 |
