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CHANGE IN ACCOUNTING PRINCIPLE
6 Months Ended
Jun. 30, 2014
CHANGE IN ACCOUNTING PRINCIPLE  
CHANGE IN ACCOUNTING PRINCIPLE

2.     CHANGE IN ACCOUNTING PRINCIPLE

        Effective January 1, 2014, the Company changed its method of accounting for certain intellectual property litigation expenses related to the defense and enforcement of issued patents. Previously, the Company capitalized these legal costs if a favorable outcome in the patent defense was determined to be probable, and amortized the capitalized legal costs over the life of the related patent. As of December 31, 2013, the Company had remaining unamortized capitalized legal costs of $23.7 million, which, under the previous accounting method, would have been amortized through 2021. Under the new method of accounting, these legal costs are expensed in the period they are incurred. The Company has retrospectively adjusted the comparative financial statements of prior periods to apply this new method of accounting.

        The Company believes this change in accounting principle is preferable because (1) as more competitors enter the Company's key product markets and the threat of complex intellectual property litigation across multiple jurisdictions increases, it will become more difficult for the Company to accurately assess the probability of a favorable outcome in such litigation, and (2) it will enhance the comparability of the Company's financial results with those of its peer group because it is the predominant accounting practice in the Company's industry.

        The accompanying consolidated condensed financial statements and related notes have been adjusted to reflect the impact of this change retrospectively to all prior periods presented. The cumulative effect of the change in accounting principle was a decrease in retained earnings of $12.2 million as of January 1, 2013. The following tables present the effects of the retrospective application of the change in accounting principle (in millions):

 
  As of December 31, 2013  
Consolidated Condensed Balance Sheet
  As Reported   As Adjusted  

Other intangible assets, net

  $ 57.2   $ 33.5  

Deferred income taxes

    70.1     79.0  

Total assets

    2,724.7     2,709.9  

Retained earnings

    2,045.6     2,030.8  

Total stockholders' equity

    1,559.2     1,544.4  

Total liabilities and stockholders' equity

    2,724.7     2,709.9  


 

 
  Three Months Ended
June 30, 2013
  Six Months Ended
June 30, 2013
 
Consolidated Condensed Statement of
Operations
  As Reported   As Adjusted   As Reported   As Adjusted  

Cost of sales

  $ 125.0   $ 123.6   $ 247.2   $ 244.6  

Gross profit

    392.2     393.6     766.7     769.3  

Selling, general and administrative expenses(a)

    189.4     186.6     374.6     369.0  

Intellectual property litigation expense (income), net(a)

        5.5         (72.6 )

Special gain(a)

            (83.6 )    

Income before provision for income taxes

    121.8     120.5     313.9     311.1  

Provision for income taxes

    27.7     27.2     74.9     73.9  

Net income

    94.1     93.3     239.0     237.2  

Earnings per share:

   
 
   
 
   
 
   
 
 

Basic

  $ 0.84   $ 0.83   $ 2.11   $ 2.09  

Diluted

  $ 0.82   $ 0.81   $ 2.07   $ 2.05  

(a)
The above amounts also reflect certain reclassifications of previously reported amounts related to intellectual property litigation to conform to classifications used in the current year.

 
  Three Months Ended
June 30, 2013
  Six Months Ended
June 30, 2013
 
Consolidated Condensed Statement of
Comprehensive Income
  As Reported   As Adjusted   As Reported   As Adjusted  

Net income

  $ 94.1   $ 93.3   $ 239.0   $ 237.2  

Comprehensive income

    98.1     97.3     228.9     227.1  


 

 
  Six Months Ended
June 30, 2013
 
Consolidated Condensed Statement of Cash Flows
  As Reported   As Adjusted  

Net income

  $ 239.0   $ 237.2  

Adjustments to reconcile net income to cash provided by operating activities:

             

Depreciation and amortization

    31.4     28.8  

Other

    1.1     0.8  

Changes in operating assets and liabilities:

             

Prepaid expenses and other current assets

    26.2     25.2  

Other

    (5.4 )   0.3