The non-GAAP financial data includes reconciliation adjustments regarding non-GAAP gross profit, operating income, net income and diluted EPS. In arriving at non-GAAP presentations, companies generally factor out items such as those that have a non-recurring impact on the income statements, various non-cash items, significant effects of retroactive tax legislation and changes in accounting guidance and other items which, in management's judgment, are items that are considered to be outside of the review of core operating results.
In the Company's non-GAAP presentation, the Company made the following adjustments, in each or some of the applicable periods: (1) added back amortization of purchased intangible assets, (2) added back significant reorganization, restructuring and other related expenses, (3) added back impairment of investments, including impairment of auction rate securities, (4) subtracted gain from changes in holdings, including revaluation of the previously held shares at the acquisition date when a business combination is achieved in stages (step-up), (5) added back impairment loss from discontinued operations, (6) excluded the impact of the cessation of a program with a foreign customer and (7) excluded the income tax effects of the foregoing.
These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations, as determined in accordance with GAAP, and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Investors should consider non-GAAP financial measures in addition to, and not as replacements for or superior to, measures of financial performance prepared in accordance with GAAP.
Reconciliation of GAAP to Non-GAAP (Unaudited) Supplemental Financial Data: (U.S. Dollars in millions) Nine Months Three Months Ended Ended Year Ended September 30 September 30 December 31 2012 2011 2012 2011 2011 GAAP gross profit 576.8 590.3 191.4 204.1 732.0 Adjustments: Amortization of purchased intangible assets 15.6 23.0 5.2 7.5 30.9 Cessation of program (*) - - - - 72.8 Non-GAAP gross profit 592.4 613.3 196.6 211.6 835.7 Percent of revenues 29.0% 31.0% 29.0% 31.9% 29.7% GAAP operating income 132.8 149.8 49.0 56.2 115.7 Adjustments: Amortization of intangible assets 36.2 42.7 12.0 14.1 57.3 Cessation of program (*) - - - - 72.8 Non-GAAP operating income 169.0 192.5 61.0 70.3 245.8 Percent of revenues 8.3% 9.7% 9.0% 10.6% 8.7% GAAP net income attributable to Elbit Systems' shareholders 110.7 103.3 39.5 36.5 90.3 Adjustments: Amortization of intangible assets 36.2 42.7 12.0 14.1 57.3 Cessation of program (*) - - - - 72.8 Impairment of investments - 0.5 - - 0.5 Gain from changes in holdings (2.3) - - - - Loss from discontinued operations, net 0.3 9.3 0.1 9.0 9.4 Related tax benefits (6.5) (9.8) (2.2) (3.2) (23.7) Non-GAAP net income attributable to Elbit Systems' shareholders 138.4 146.0 49.4 56.4 206.6 Percent of revenues 6.8% 7.4% 7.3% 8.5% 7.3% Non-GAAP diluted net EPS 3.26 3.38 1.18 1.31 4.80
(*) Adjustment of expenses related to cessation of program, which resulted in write-off of inventories and other related costs.
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