Mohawk Industries Reports Q4 Results

Mohawk Industries Reports Q4 ResultsGlobeNewswireFebruary 13, 2020

CALHOUN, Ga., Feb. 13, 2020 (GLOBE NEWSWIRE) -- Mohawk Industries, Inc. (NYSE: MHK) today announced 2019 fourth quarter net earnings of $265 million and diluted earnings per share (EPS) of $3.68, including a one-time tax benefit of $136 million. Adjusted net earnings were $162 million, and EPS was $2.25, excluding restructuring, acquisition and other charges. Net sales for the fourth quarter of 2019 were $2.4 billion, down 1.0% as reported and 1.7% on a constant currency and days basis. For the fourth quarter of 2018, net sales were $2.45 billion, net earnings were $229 million and EPS was $3.05, adjusted net earnings were $188 million, and EPS was $2.53, excluding restructuring, acquisition and other charges.

For the twelve months ending December 31, 2019, net earnings and EPS were $744 million and $10.30, including the one-time fourth quarter tax benefit. Net earnings excluding restructuring, acquisition and other charges were $725 million and EPS was $10.04. For the year, net sales were approximately $10 billion, flat versus prior year as reported or an increase of 2% on a constant currency and days basis. For the twelve-month period ending December 31, 2018, net sales were approximately $10 billion, net earnings were $862 million and EPS was $11.47; excluding restructuring, acquisition and other charges, net earnings and EPS were $922 million and $12.33.

Commenting on Mohawk Industries’ fourth quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, “Our fourth quarter results were as we expected, with sales flat to last year and very strong cash generation. Operating and free cash flow for the quarter were $440 million and $300 million, respectively.  For the full year, operating and free cash flow were about $1.4 billion and $870 million, respectively. Our leverage is approaching historical lows, which provides us with the flexibility to pursue additional opportunities. Under our stock repurchase program, we bought approximately $23 million in the fourth quarter, for a total of about $375 million since the inception of the buyback program.

“As we anticipated, our businesses remained challenged by soft demand, greater competition and reduced production volume. In the U.S., markets continued to be influenced by the strong dollar, the impact of LVT on other products and positive trends in housing that should be a tailwind. Competition has increased in our global markets, impacting our pricing and mix as we leverage investments in sales and marketing to drive growth. Many countries where we operate are stimulating their economies with lower interest rates to encourage greater consumer spending and economic growth this year. In the near term we still anticipate that most of our markets will have continued pressure in our product categories.

“Throughout the period, we implemented changes to increase sales and reduce costs. We have enhanced our LVT manufacturing in the U.S. and Europe and realigned our U.S. carpet operations. We have decreased our ceramic production and inventories and are taking out wood flooring plants in the U.S. and Europe. We are reducing the complexity of our operations, enhancing processes to reduce costs and increasing automation to improve efficiencies. We continue to improve the productivity and volume of our new LVT, U.S. countertop, Russian sheet vinyl and European carpet tile investments. Our acquisitions in Australia and Brazil are installing state-of-the-art equipment that will expand their product portfolios. We are introducing new design and performance innovations to enhance our market positions and broaden our customer base. To promote both new and existing products, we are making higher levels of sales and marketing investments.

“For the quarter, our Global Ceramic Segment sales were flat as reported and decreased 1.5% on a constant currency and days basis. The segment’s operating margin was 6% as reported, declining year over year primarily due to inflation and lower production rates partially offset by productivity. Most of the segment’s markets faced soft demand and excess industry capacity, that is compressing market prices and margins. Our U.S. ceramic business remained under pressure from LVT taking share and high industry inventories from ceramic purchases ahead of tariffs. To align our own inventory levels, we meaningfully reduced production in our North American ceramic plants, which increased our costs. To improve sales, we are rolling out multiple new products and adding sales representatives and design consultants in major markets. We have begun manufacturing our proprietary new click tile in multiple sizes and designs, and we have already received commitments from major customers. Our quartz countertop sales increased as we ramped up productivity at our new plant. In Mexico, we continued to gain market share by expanding our brands, distribution and product offering with larger sizes, porcelain products and a more comprehensive wall tile collection. In Brazil, we had good sales growth in the period and initiated a new porcelain line to create larger sizes for our premium collections. The southern European economies remain slow, impacting our primary ceramic markets and industry pricing. In Europe, we increased our volume and are expanding our activities in the commercial and outdoor channels. In Russia, we grew our sales in a soft market, and we are starting up additional porcelain production to make super large sizes as well as a new plant to produce coordinated premium sanitary ware.

“During the quarter, our Flooring North America Segment’s sales decreased 4% as reported and 5% on a constant days basis with an operating margin of 3% as reported and 7% excluding restructuring and other charges. Operating income for the segment declined primarily due to lower volume, price and mix. We have executed many initiatives to align the business with the present conditions, including closing three plants, consolidating high cost operations and reducing wood manufacturing. The effects of these actions will increase and flow through inventory with full cost benefit in the third quarter of 2020.  In the quarter, our residential carpet sales performed best in the new home construction and multi-family channels. We are leveraging our strengths in design and fiber technology to deliver differentiated new collections in both premium and value carpet categories. To create greater value for our commercial customers and improve our cost, we invested in new design capabilities, proprietary carpet tile backings and material manufacturing. We have increased the production and speeds of our LVT operations, and ongoing initiatives will further improve formulations and throughput. During the period, U.S. tariffs on click LVT were removed, and the market has adjusted pricing to reflect this change. To expand our price points and highlight our unique visuals and features, we are introducing new rigid and flexible LVT collections for both residential and commercial markets. The virus in China is postponing the start-up of some production and could potentially disrupt some LVT service, depending on when product shipments resume. Sales of our water-proof laminate products are expanding, and we anticipate continued growth due to their realistic appearance, durability and ease of installation. To support higher laminate sales, we are upgrading our HDF board production to expand capacity and improve our costs.

“For the quarter, our Flooring Rest of the World Segment’s sales increased 3% as reported and 4% on a constant currency and days basis. The segment’s operating margin was 13% as reported and 14% excluding restructuring and other charges, due to volume growth, reduced start-up cost and lower inflation partially offset by price and mix. Across the segment, our investments in product innovation, cost improvements, acquisitions and new businesses strengthened our results. We are outperforming the European laminate market, and sales of our new Signature collection are ramping up quickly due to an enhanced level of sophistication. We announced the consolidation of wood manufacturing to our facility in Malaysia, which will improve our costs and increase our flexibility to better satisfy our customers. Our LVT sales grew as our manufacturing productivity significantly improved. Our new rigid collections are being well received and our next generation of flexible LVT provides our most realistic wood and stone visuals. Our panels and insulation businesses had good results in a more competitive environment. In Australia and New Zealand, our soft and hard surface sales grew in a difficult environment and we are launching many new carpet collections to enhance our offering.

“Market conditions remain challenging across most of our businesses and geographies. In response, we are adjusting our business strategies, enhancing our product offering and restructuring operations. We are increasing our investments in sales and marketing, expanding our commercial participation and enhancing both our premium and value collections. To broaden our distribution into new channels and geographies, we are bringing many new product innovations and categories to market. Our new LVT, countertop, sheet vinyl and carpet tile plants are improving their productivity as we invest to expand our customer base and sales volume. As our LVT manufacturing capacity grows with higher speeds and efficiencies, we are enhancing design and features and increasing sales of our rigid and flexible offerings. We are limiting the traditional inventory build that we typically do in the first quarter, as we manage our production with market demand. Taking all of this into account, our EPS guidance for the first quarter of 2020 is $1.90 to $2.00, excluding any one-time charges.

“LVT growth in the U.S., exchange rates and excess global capacity continue as headwinds for our businesses. We are executing specific initiatives to adapt to shifting consumer preferences, changing markets and competitive pressures. For the full year of 2020, we expect that our actions to increase sales and distribution, reduce costs and enhance utilization of our new plants will deliver improved year-over-year results, with our performance accelerating during the second half of the year. Our balance sheet should continue to improve with ongoing strong cash generation, and we remain focused on delivering long-term value to our shareholders.”

ABOUT MOHAWK INDUSTRIES

Mohawk Industries is the leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. Mohawk’s vertically integrated manufacturing and distribution processes provide competitive advantages in the production of carpet, rugs, ceramic tile, laminate, wood, stone and vinyl flooring. Our industry leading innovation has yielded products and technologies that differentiate our brands in the marketplace and satisfy all remodeling and new construction requirements. Our brands are among the most recognized in the industry and include American Olean, Daltile, Durkan, Eliane, Feltex, Godfrey Hirst, IVC, Karastan, Marazzi, Mohawk, Mohawk Group, Pergo, Quick-Step and Unilin. During the past decade, Mohawk has transformed its business from an American carpet manufacturer into the world’s largest flooring company with operations in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia and the United States.

Certain of the statements in the immediately preceding paragraphs, particularly anticipating future performance, business prospects, growth and operating strategies and similar matters and those that include the words “could,” “should,” “believes,” “anticipates,” “expects,” and “estimates,” or similar expressions constitute “forward-looking statements.” For those statements, Mohawk claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; inflation and deflation in raw material prices and other input costs; inflation and deflation in consumer markets; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company’s products; impairment charges; integration of acquisitions; international operations; introduction of new products; rationalization of operations; taxes and tax reform, product and other claims; litigation; and other risks identified in Mohawk’s SEC reports and public announcements.

Conference call Friday, February 14, 2020, at 11:00 AM Eastern Time
The telephone number is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 3678629. A replay will be available until March 14, 2020, by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 3678629.



MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES        
(Unaudited)        
Condensed Consolidated Statement of Operations DataThree Months Ended  Twelve Months Ended
(Amounts in thousands, except per share data) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018
         
Net sales $2,424,512  2,448,618   9,970,672  9,983,634 
Cost of sales  1,801,705  1,802,228   7,294,629  7,145,564 
  Gross profit  622,807  646,390   2,676,043  2,838,070 
Selling, general and administrative expenses  467,993  433,014   1,848,819  1,742,744 
Operating income  154,814  213,376   827,224  1,095,326 
Interest expense  10,962  14,411   41,272  38,827 
Other (income) expense, net  (9,522) 504   36,407  7,298 
  Earnings before income taxes  153,374  198,461   749,545  1,049,201 
Income tax expense  (111,299) (31,582)  4,974  184,346 
  Net earnings including noncontrolling interest  264,673  230,043   744,571  864,855 
Net income attributable to noncontrolling interest  6  704   360  3,151 
Net earnings attributable to Mohawk Industries, Inc. $264,667  229,339   744,211  861,704 
         
Basic earnings per share attributable to Mohawk Industries, Inc.        
Basic earnings per share attributable to Mohawk Industries, Inc. $3.69  3.07   10.34  11.53 
Weighted-average common shares outstanding - basic  71,640  73,856   71,986  74,413 
         
Diluted earnings per share attributable to Mohawk Industries, Inc.        
Diluted earnings per share attributable to Mohawk Industries, Inc. $3.68  3.05   10.30  11.47 
Weighted-average common shares outstanding - diluted  71,954  74,183   72,264  74,773 
         
         
         
Other Financial Information        
(Amounts in thousands)        
Net cash provided by operating activities $440,675  286,859   1,418,761  1,181,344 
Depreciation and amortization $153,759  139,092   576,452  521,765 
Capital expenditures $139,849  151,161   545,462  794,110 
         
Condensed Consolidated Balance Sheet Data        
(Amounts in thousands)        
      December 31, 2019 December 31, 2018
ASSETS        
Current assets:        
  Cash and cash equivalents     $134,785  119,050 
  Receivables, net      1,526,619  1,606,159 
  Inventories      2,282,328  2,287,615 
  Prepaid expenses and other current assets      485,725  496,472 
    Total current assets      4,429,457  4,509,296 
Property, plant and equipment, net      4,698,917  4,699,902 
Right of use operating lease assets      323,003  - 
Goodwill      2,570,027  2,520,966 
Intangible assets, net      928,879  961,810 
Deferred income taxes and other non-current assets      436,397  407,149 
  Total assets     $13,386,680  13,099,123 
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Current portion of long-term debt and commercial paper     $1,051,498  1,742,373 
Accounts payable and accrued expenses      1,559,140  1,523,866 
Current operating lease liabilities      101,945  - 
  Total current liabilities      2,712,583  3,266,239 
Long-term debt, less current portion      1,518,388  1,515,601 
Non-current operating lease liabilities      228,155  - 
Deferred income taxes and other long-term liabilities      801,106  877,224 
  Total liabilities      5,260,232  5,659,064 
Total stockholders' equity      8,126,448  7,440,059 
  Total liabilities and stockholders' equity     $13,386,680  13,099,123 
         
Segment Information Three Months Ended As of or for the Twelve Months Ended
(Amounts in thousands) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018
         
Net sales:        
  Global Ceramic $858,337  861,238   3,631,142  3,552,856 
  Flooring NA  936,387  973,680   3,843,714  4,029,148 
  Flooring ROW  629,788  613,700   2,495,816  2,401,630 
  Intersegment sales  -  -   -  - 
    Consolidated net sales $2,424,512  2,448,618   9,970,672  9,983,634 
         
Operating income (loss):        
  Global Ceramic $53,172  76,005   340,058  442,898 
  Flooring NA  27,011  79,158   167,385  347,937 
  Flooring ROW  83,036  72,467   359,428  345,801 
  Corporate and intersegment eliminations  (8,405) (14,254)  (39,647) (41,310)
    Consolidated operating income $154,814  213,376   827,224  1,095,326 
         
Assets:        
  Global Ceramic     $5,419,896  5,194,030 
  Flooring NA      3,823,654  3,938,639 
  Flooring ROW      3,925,246  3,666,617 
  Corporate and intersegment eliminations      217,884  299,837 
    Consolidated assets     $13,386,680  13,099,123 



Reconciliation of Net Earnings Attributable to Mohawk Industries, Inc. to Adjusted Net Earnings Attributable to Mohawk Industries, Inc. and Adjusted Diluted Earnings Per Share Attributable to Mohawk Industries, Inc.
(Amounts in thousands, except per share data)           
    Three Months Ended Twelve Months Ended  
    December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018  
Net earnings attributable to Mohawk Industries, Inc. $264,667  229,339  744,211  861,704   
Adjusting items:            
Restructuring, acquisition and integration-related and other costs  49,802  20,412  99,679  78,449   
Acquisitions purchase accounting , including inventory step-up  222  6,721  3,938  15,359   
Acquisition interest expense    -  4,322  -  4,322   
Deferred loan cost write off    601  -  601  -   
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China(1)  (5,226) -  59,946  -   
Release of indemnification asset   603  2,857  (57) 4,606   
Income taxes - reversal of uncertain tax position  (603) (2,857) 56  (4,606)  
European tax restructuring(2)    (136,194) -  (136,194) -   
Income taxes    (12,183) (73,282) (46,842) (37,817)  
Adjusted net earnings attributable to Mohawk Industries, Inc. $161,689  187,512  725,338  922,017   
             
Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $2.25  2.53  10.04  12.33   
Weighted-average common shares outstanding - diluted  71,954  74,183  72,264  74,773   
             
(1) In September, the US commerce department imposed a 104% countervailing duty on top of the 25% general tariffs on all ceramic produced in China. As a consequence, ceramic purchases from China will dramatically decline and Mohawk took a $60 million write off to our investment in a Chinese manufacturer and distributor, of which $5 million was recovered in Q4 2019.
(2) The Company implemented select operational, administrative and financial restructurings that centralized certain business processes and intangible assets in various European jurisdictions into a new entity. The restructurings resulted in a current tax liability of $136 million, calculated by measuring the fair value of intangible assets transferred. The Company offset the tax liability with the utilization of $136 million of deferred tax assets from accumulated net operating loss carry forwards. The restructurings also resulted in the Company recording a $136 million deferred tax asset, and a corresponding deferred tax benefit, related to the tax basis of the intangible assets transferred.
             
             
             
Reconciliation of Total Debt to Net Debt           
(Amounts in thousands)            
    December 31, 2019        
Current portion of long-term debt and commercial paper $1,051,498         
Long-term debt, less current portion   1,518,388         
Less: Cash and cash equivalents    134,785         
Net Debt   $2,435,101         
             
Reconciliation of Operating Income to Adjusted EBITDA          
(Amounts in thousands)           Trailing Twelve
    Three Months Ended Months Ended
    March 30, 2019 June 29, 2019 September 28, 2019 December 31, 2019 December 31, 2019
Operating income   $165,330  266,860  240,220  154,814  827,224 
Other (expense)/income    3,736  3,048  (52,713) 9,522  (36,407)
Net (income) loss attributable to noncontrolling interest  10  (213) (151) (6) (360)
Depreciation and amortization   137,291  140,482  144,920  153,759  576,452 
EBITDA    306,367  410,177  332,276  318,089  1,366,909 
Restructuring, acquisition and integration-related and other costs  39,495  8,840  1,542  49,802  99,679 
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China  -  -  65,172  (5,226) 59,946 
Acquisitions purchase accounting, including inventory step-up  2,552  1,164  -  222  3,938 
Release of indemnification asset   -  -  (659) 603  (56)
 Adjusted EBITDA   $348,414  420,181  398,331  363,490  1,530,416 
             
Net Debt to Adjusted EBITDA           1.6 
             
             
             
             
Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and on Constant Shipping Days Excluding Acquisition Volume        
(Amounts in thousands)            
    Three Months Ended Twelve Months Ended  
    December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018  
Net sales   $2,424,512  2,448,618  9,970,672  9,983,634   
Adjustment to net sales on constant shipping days  (36,469) -  713  -   
Adjustment to net sales on a constant exchange rate  18,721  -  178,290  -   
Net sales on a constant exchange rate and constant shipping days  2,406,764  2,448,618  10,149,675  9,983,634   
Less: impact of acquisition volume   (34,597) -  (359,949) -   
Net sales on a constant exchange rate and constant shipping days excluding acquisition volume $2,372,167  2,448,618  9,789,726  9,983,634   
             
             
             
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days Excluding Acquisition Volume      
(Amounts in thousands)            
    Three Months Ended      
Global Ceramic   December 31, 2019 December 31, 2018      
Net sales   $858,337  861,238       
Adjustment to net sales on constant shipping days  (11,889) -       
Adjustment to segment net sales on a constant exchange rate  1,969  -       
Segment net sales on a constant exchange rate and constant shipping days  848,417  861,238       
Less: impact of acquisition volume   (20,728) -       
Segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume $827,689  861,238       
             
             
Reconciliation of Segment Net Sales to Segment Net Sales on Constant shipping Days          
(Amounts in thousands)            
    Three Months Ended      
Flooring NA   December 31, 2019 December 31, 2018      
Net sales   $936,387 -973,680       
Adjustment to net sales on constant shipping days  (14,631)--       
Segment net sales on constant shipping days $921,756 -973,680       
             
             
             
Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days Excluding Acquisition Volume      
(Amounts in thousands)            
    Three Months Ended      
Flooring ROW   December 31, 2019 December 31, 2018      
Net sales   $629,788  613,700       
Adjustment to net sales on constant shipping days  (9,948) -       
Adjustment to segment net sales on a constant exchange rate  16,752  -       
Segment net sales on a constant exchange rate and constant shipping days  636,592  613,700       
Less: impact of acquisition volume   (13,869) -       
Segment net sales on a constant exchange rate and constant shipping days excluding acquisition volume $622,723  613,700       
             
             
             
Reconciliation of Selling, General and Administrative Expenses to Adjusted Selling, General and Administrative Expenses        
(Amounts in thousands)            
    Three Months Ended      
    December 31, 2019 December 31, 2018      
Selling, general and administrative expenses  $467,993  433,014       
Adjustments to selling, general and administrative expenses:          
Restructuring, acquisition and integration-related and other costs  (4,651) (10,268)      
Release of indemnification asset   (2) -       
  Adjusted selling, general and administrative expenses $463,340  422,746       
             
             
             
Reconciliation of Operating Income to Adjusted Operating Income          
(Amounts in thousands)            
    Three Months Ended Twelve Months Ended  
    December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018  
Operating income   $154,814  213,376  827,224  1,095,326   
Adjustments to operating income:           
Restructuring, acquisition and integration-related and other costs  49,802  20,613  106,954  78,650   
Release of indemnification asset   2  -  247  -   
Acquisitions purchase accounting, including inventory step-up  222  6,721  3,938  15,359   
Adjusted operating income   $204,840  240,710  938,363  1,189,335   
             
             
             
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income          
(Amounts in thousands)            
    Three Months Ended      
Global Ceramic   December 31, 2019 December 31, 2018      
Operating income   $53,172  76,005       
Adjustments to segment operating income:           
Restructuring, acquisition and integration-related and other costs  1,204  4,162       
Acquisitions purchase accounting, including inventory step-up  -  6,721       
Adjusted segment operating income  $54,376  86,888       
             
             
             
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income           
(Amounts in thousands)            
    Three Months Ended      
Flooring NA    December 31, 2019 December 31, 2018      
Operating income   $27,011  79,158       
Adjustments to segment operating income:           
Restructuring, acquisition and integration-related and other costs  42,149  7,159       
  Adjusted segment operating income  $69,160  86,317       
             
             
             
Reconciliation of Segment Operating Income to Adjusted Segment Operating Income           
(Amounts in thousands)            
    Three Months Ended      
Flooring ROW    December 31, 2019 December 31, 2018      
Operating income   $83,036  72,467       
Adjustments to segment operating income:           
Restructuring, acquisition and integration-related and other costs  6,235  5,949       
Acquisitions purchase accounting, including inventory step-up  222  -       
Adjusted segment operating income  $89,493  78,416       
             
             
             
Reconciliation of Earnings Including Noncontrolling Interests Before Income Taxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes      
(Amounts in thousands)            
    Three Months Ended Twelve Months Ended  
    December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018  
Earnings before income taxes   $153,374  198,461  749,545  1,049,201   
Noncontrolling interests    (6) (704) (360) (3,151)  
Adjustments to earnings including noncontrolling interests before income taxes:          
Restructuring, acquisition and integration-related and other costs  49,802  20,412  99,679  78,449   
Acquisitions purchase accounting, including inventory step-up  222  6,721  3,938  15,359   
Impairment of net investment in a manufacturer and distributor of Ceramic tile in China  (5,226) -  59,946  -   
Release of indemnification asset   603  2,857  (57) 4,606   
Acquisition interest expense    -  4,322  -  4,322   
Deferred loan cost write off    601  -  601  -   
 Adjusted earnings including noncontrolling interests before income taxes $199,370  232,069  913,292  1,148,786   
             
             
             
             
Reconciliation of Income Tax Expense to Adjusted Income Tax Expense           
(Amounts in thousands)            
    Three Months Ended Twelve Months Ended  
    December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018  
Income tax expense   $(111,299) (31,582) 4,974  184,346   
European tax restructuring    136,194  -  136,194  -   
Income taxes - reversal of uncertain tax position  603  2,857  (56) 4,606   
Income tax effect of adjusting items   12,183  73,282  46,842  37,817   
  Adjusted income tax expense   $37,681  44,557  187,954  226,769   
             
Adjusted income tax rate    18.9% 19.2% 20.6% 19.7%  
             
             
             
             
             
The Company supplements its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, with certain non-GAAP financial measures. As required by the Securities and Exchange Commission rules, the tables above present a reconciliation of the Company's non-GAAP financial measures to the most directly comparable US GAAP measure. Each of the non-GAAP measures set forth above should be considered in addition to the comparable US GAAP measure, and may not be comparable to similarly titled measures reported by other companies. The Company believes these non-GAAP measures, when reconciled to the corresponding US GAAP measure, help its investors as follows: Non-GAAP revenue measures that assist in identifying growth trends and in comparisons of revenue with prior and future periods and non-GAAP profitability measures that assist in understanding the long-term profitability trends of the Company's business and in comparisons of its profits with prior and future periods.  
             
The Company excludes certain items from its non-GAAP revenue measures because these items can vary dramatically between periods and can obscure underlying business trends. Items excluded from the Company's non-GAAP revenue measures include: foreign currency transactions and translation and the impact of acquisitions.  
             
The Company excludes certain items from its non-GAAP profitability measures because these items may not be indicative of, or are unrelated to, the Company's core operating performance. Items excluded from the Company's non-GAAP profitability measures include: restructuring, acquisition and integration-related and other costs, acquisition purchase accounting, including inventory step-up, release of indemnification assets and the reversal of uncertain tax positions.  

 

Contact:         Glenn Landau, Chief Financial Officer (706) 624-2025

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