uestion 3. Normalize Earnings The following table presents the most recent incom
ID: 2824410 • Letter: U
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uestion 3. Normalize Earnings The following table presents the most recent income statement of Company ELA The footnote of the 10-K filing mentions that the company recorded the following one-time items impairment charge of $10m pre-tax (generally included in "other operating costs/expenses"), restructuring charge of $15m pre-tax; gains from selling a warehouse of $2m pre-tax Normalize the earnings accordingly and calculate the adjusted diluted EPS Income Statement FY 2017 1000 615 385 230 Sales COGS Gross Profit S,G&A; Restructuring Charges 140 35 Operating Income (EBIT) Interest Expense EBT 22.05 82.95 Taxes (21 %) NI Weighted Average Diluted Shares Diluted Earnings Per Share 30 2.77Explanation / Answer
Net Income 82.95
Add: Restructuring charges (net of tax) 12.75
(15*85%)
Add: Impairment charges (net of tax) 8.5
(10*85%)
Less: Gain from selling a warehpuse (net of tax) 1.7
(2*85%)
Normalized earnings 102.5
Weighted average diluted shares 30
Adjusted diluted EPS 3.42
(Normalized earnings/wtd avg diluted shares)
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