44 Understanding the Numbers
Comparing the items included in operating income to those excluded re-
veals a reasonable degree of f lexibility and judgment in the classification of
many of these items. In any event, operating income may not be a very reliable
measure of ongoing operating performance given the wide range of nonrecur-
ring items that are included in its determination.
Nonrecurring Items Excluded from Operating Income
Unlike the multistep format, the single-step income statement omits a subtotal
representing operating income. The task of identifying core or operating in-
come is therefore more difficult. Nonrecurring items of revenue or gain and
EXHIBIT 2.6 Nonrecurring items of revenue, gain, expense, and loss
included in operating income.
Company Nonrecurring Item
Expenses and Losses
Air T Inc. (2000) Start-up/merger expense
Akorn Inc. (1999) Relocation costs
Amazon.Com Inc. (1999) Stock-based compensation
Argosy Gaming Company (1995) Flood costs
Avado Brands Inc. (1999) Asset revaluation charges
Brooktrout Technologies Inc. (1998) Merger related charges
Burlington Resources Inc. (1999) Impairment of oil and gas properties
Cisco Systems Inc. (1999) Charges for purchased R&D
Colonial Commercial Corporation (1999) Costs of an abandoned acquisition
Dean Foods Company (1999) Plant closure costs
Delta Air Lines Inc. (2000) Asset write-downs and other special charges
Detection Systems Inc. (2000) Shareholder class action litigation charge
Escalon Medical Corporation (2000) Write-down of patents and goodwill
Gerber Scientific Inc. (2000) Write-downs of inventory and receivables
Holly Corporation (2000) Voluntary early retirement costs
JLG Industries Inc. (2000) Restructuring charges
Osmonics Inc. (1993) Embezzlement loss
Saucony Inc. (1999) Write-down of impaired real estate
Silicon Valley Group Inc. (1999) Inventory write-downs
Veeco Instruments Inc. (1999) Loss on sale of leak detection business
Wegener Corporation (1999) Write-down of capitalized software
Revenues and GainsAlberto-Culver Company (2000) Gain on sale of European trademark
The Fairchild Corporation (2000) Gains on the sale of subsidiaries
H.J. Heinz Company (1995) Gain on sale of confectionery business
Luf kin Industries Inc. (1999) LIFO-liquidation benefit
National Steel Corporation (1999) Benefit from property-tax settlement
Praxair Inc. (1999) Hedge gain in Brazil and income-hedge gain
Tyco International Ltd. (2000) Reversal of restructuring accrual
SOURCES: Companies’ annual reports. The year following each company name designates the annual re-
port from which each example was drawn.