- Direct costs associated with acquisitions of $2.8 million in the nine months ended September 30, 2012, principally for pre-acquisition due diligence and outside legal costs. The Company does not expect to incur additional direct costs associated with completed acquisitions.
- The impact on gross profit of the fair value adjustment to inventory associated with Embla and Nicolet purchase accounting that was $626,000 during the nine months ended September 30, 2012. The Company expects to write off the remaining approximately $135,000 of inventory fair value adjustment associated with Nicolet purchase accounting in the fourth quarter of 2012.
- During the three months ended September 30, 2012, the impact on marketing and selling expense of recording the fair value of backlog associated with Nicolet purchase accounting of $720,000. The Company does not expect additional charges associated with the fair value of Nicolet backlog.
- During the first half of the year, the incremental accelerated depreciation of previously capitalized software costs of $902,000 due to the Company’s implementation in 2012 of the North American phase of a world-wide enterprise resource planning platform.
The Company’s non-GAAP guidance includes the impact of employee share based compensation. All non-GAAP earnings per share amounts are on a diluted basis.
Use of Non-GAAP Financial Measures
The Company's non-GAAP results for the three and nine months ended September 30, 2012 exclude amortization expense associated with certain acquisition-related intangible assets, restructuring and severance charges, direct costs associated with acquisitions, the impact of inventory and backlog fair value adjustments recorded through purchase accounting, and the accelerated write off of capitalized software as more fully detailed below.
The Company believes that the presentation of results excluding these charges provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results. Therefore, the Company believes these non-GAAP financial measures facilitate comparison of operating results across reporting periods. A reconciliation between the Company's results of operations on a GAAP and non-GAAP basis for the periods reported is included as part of the condensed consolidated statements of operations at the end of this release.