8-K
SANMINA CORP (SANM)
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(November 10, 2020)
Date of Report (Date of earliest event reported)
SANMINA CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 000-21272 | 77-0228183 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification |
| No.) |
2700 North First Street
San Jose, California 95134
(Address of principal executive offices, including zip code)
(408) 964-3500
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | SANM | NASDAQ Global Select Market |
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On November 10, 2020, Sanmina Corporation (the “Company”) issued the press release attached as Exhibit 99.1 announcing unaudited financial results for its fiscal quarter and year ended October 3, 2020.
The information set forth in this Item 2.02, including the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. In addition, the information in this Item 2.02 shall not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
| Exhibit No | Description |
|---|---|
| Exhibit 99.1 | Press<br> Release issued by Sanmina Corporation on November 10, 2020 |
| 104 | Cover<br> Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
| SANMINA<br> CORPORATION | ||
|---|---|---|
| By: | /s/ Kurt Adzema | |
| Kurt Adzema | ||
| Executive Vice<br> President and Chief Financial Officer | ||
| Date: November<br> 10, 2020 |
3
Exhibit99.1
FINANCIALNEWS
SANMINAREPORTS Fourth quarter and FULL fiscal 2020 financial results
San Jose, CA – November 10, 2020. Sanmina Corporation (“Sanmina” or the “Company”) (NASDAQ: SANM), a leading integrated manufacturing solutions company, today reported financial results for the fourth quarter and fiscal year ended October 3, 2020.
Fourth Quarter Fiscal 2020 Financial Highlights
| § | Revenue: $1.87 billion, exceeding outlook |
|---|---|
| § | GAAP operating margin: 4.4 percent |
| --- | --- |
| § | GAAP diluted EPS: $0.75 |
| --- | --- |
| § | Non-GAAP^(1)^operating margin: 5.1 percent |
| --- | --- |
| § | Non-GAAP diluted EPS: $1.10, exceeding outlook |
| --- | --- |
FiscalYear 2020 Financial Highlights
| § | Revenue: $6.96 billion |
|---|---|
| § | GAAP diluted EPS: $1.97 |
| --- | --- |
| § | Non-GAAP diluted EPS: $3.05 |
| --- | --- |
AdditionalHighlights
| § | Q4 non-GAAP pre-tax ROIC: 28.3 percent |
|---|---|
| § | Cash flow from operations: Q4 $80 million and FY’20<br>$301 million |
| --- | --- |
| § | Free cash flow: Q4 $69 million and FY’20 $236 million |
| --- | --- |
| § | Shares repurchases: Q4 3 million for $78 million and<br>FY’20 6.4 million for $166 million |
| --- | --- |
| § | Ending cash and cash equivalents: $481 million |
| --- | --- |
^(1)^Non-GAAP financial measures exclude charges or gains relating to: stock-based compensation expenses; restructuring costs (including employee severance and benefits costs and charges related to excess facilities and assets); acquisition and integration costs (consisting of costs associated with the acquisition and integration of acquired businesses into our operations); impairment charges for goodwill and other assets; amortization expense; and other unusual or infrequent items (e.g. charges or benefits associated with distressed customers, expenses, charges and recoveries relating to certain legal matters, gains and losses on sales of assets and redemptions of debt, deferred tax and discrete tax items). See Schedule 1 below for more information regarding our use of non-GAAP financial measures, including the economic substance behind each exclusion, the manner in which management uses non-GAAP measures to conduct and evaluate the business, the material limitations associated with using such measures and the manner in which management compensates for such limitations. A reconciliation of the non-GAAP financial information contained in this release to their most directly comparable GAAP measures is included in the financial statements furnished with this release.
“We delivered strong financial results for the fourth quarter. Revenue was up 13.3 percent over the prior quarter, operating margin expanded, EPS exceeded outlook and we generated solid free cash flow. Our performance in the quarter is a testament that our strategy is working,” stated Jure Sola, Chairman and Chief Executive Officer of Sanmina Corporation.
“Fiscal 2020 was a challenging year. The team did a phenomenal job adapting and I am proud of our people for all that we have accomplished.”
“As we look to fiscal 2021, we remain focused on delivering mission critical products, technologies and services to our customers, coupled with operational excellence and financial discipline. Our strong foundation and experienced management team positions us well for any economic environment,” concluded Sola.
FirstQuarter Fiscal 2021 Outlook
The following outlook is for the first fiscal quarter ending January 2, 2021. These statements are forward-looking and actual results may differ materially.
| § | Revenue<br>between $1.70 billion to $1.80 billion |
|---|---|
| § | GAAP<br> diluted earnings per share between $0.65 to $0.75 |
| --- | --- |
| § | Non-GAAP<br> diluted earnings per share between $0.75 to $0.85 |
| --- | --- |
The outlook above constitutes forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in these statements as a result of a number of factors, mostly notably the ongoing impacts of the COVID-19 pandemic, which have reduced demand from our customers, caused supply chain interruptions and created health risks for our employees and which could result in restrictions on where we can build products, the levels of staffing at our plants and the types of products we can build for our customers. Other factors that could cause our results to differ from our outlook include adverse changes to the key markets we target; significant uncertainties that can cause our future sales and net income to be variable; reliance on a small number of customers for a substantial portion of our sales; risks arising from our international operations; and the other factors set forth in the Company's annual and quarterly reports filed with the Securities Exchange Commission (“SEC”).
The Company is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the Investor Relations section of our website whether as a result of new information, future events or otherwise, unless otherwise required by law.
CompanyConference Call Information
Sanmina will hold a conference call to review its financial results for the fourth quarter on Tuesday, November 10, 2020 at 5:00 p.m. ET (2:00 p.m. PT). The access numbers are: domestic 866-891-4420 and international 201-383-2868. The conference will also be webcast live over the Internet. You can log on to the live webcast at www.sanmina.com. Additional information in the form of a slide presentation is available on Sanmina’s website at www.sanmina.com. A replay of the conference call will be available for 48-hours. The access numbers are: domestic 855-859-2056 and international 404-537-3406, access code is 9564278*.*
AboutSanmina
Sanmina Corporation, a Fortune 500 company, is a leading integrated manufacturing solutions provider serving the fastest growing segments of the global Electronics Manufacturing Services (EMS) market. Recognized as a technology leader, Sanmina provides end-to-end manufacturing solutions, delivering superior quality and support to Original Equipment Manufacturers (OEMs) primarily in the communications networks, cloud computing, industrial, defense, medical and automotive. Sanmina has facilities strategically located in key regions throughout the world. More information about the Company is available at www.sanmina.com.
SanminaContact
Paige Melching
SVP, Marketing and Investor Communications
408-964-3610
| Press Release Financials | SANMINA | |||
|---|---|---|---|---|
| **** | 2700 North First Street | |||
| **** | San Jose, CA 95134 | |||
| **** | Tel: 408-964-3610 | |||
| Condensed Consolidated Balance Sheets | ||||
| (in thousands) | ||||
| (GAAP) | ||||
| October 3, | September 28, | |||
| --- | --- | --- | --- | --- |
| 2020 | 2019 | |||
| (Unaudited) | ||||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 480,526 | $ | 454,741 |
| Accounts receivable, net | 1,043,334 | 1,128,379 | ||
| Contract assets | 396,583 | 396,300 | ||
| Inventories | 861,281 | 900,557 | ||
| Prepaid expenses and other current assets | 37,718 | 40,952 | ||
| Total current assets | 2,819,442 | 2,920,929 | ||
| Property, plant and equipment, net | 559,242 | 630,647 | ||
| Deferred tax assets | 273,470 | 279,803 | ||
| Other | 120,502 | 74,134 | ||
| Total assets | $ | 3,772,656 | $ | 3,905,513 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 1,210,049 | $ | 1,336,914 |
| Accrued liabilities | 171,761 | 180,107 | ||
| Accrued payroll and related benefits | 122,029 | 127,647 | ||
| Short-term debt, including current portion of long-term debt | 18,750 | 38,354 | ||
| Total current liabilities | 1,522,589 | 1,683,022 | ||
| Long-term liabilities: | ||||
| Long-term debt | 329,249 | 346,971 | ||
| Other | 290,902 | 232,947 | ||
| Total long-term liabilities | 620,151 | 579,918 | ||
| Stockholders' equity | 1,629,916 | 1,642,573 | ||
| Total liabilities and stockholders' equity | $ | 3,772,656 | $ | 3,905,513 |
| Press Release Financials | SANMINA | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 2700 North First Street | |||||||||||||||
| **** | San Jose, CA 95134 | |||||||||||||||
| **** | Tel: 408-964-3610 | |||||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| (GAAP) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Oct. 3, | Sept. 28, | Oct. 3, | Sept. 28, | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net sales | $ | 1,874,958 | $ | 1,892,207 | $ | 6,960,370 | $ | 8,233,859 | ||||||||
| Cost of sales | 1,723,027 | 1,750,503 | 6,434,663 | 7,641,921 | ||||||||||||
| Gross profit | 151,931 | 141,704 | 525,707 | 591,938 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 56,209 | 66,050 | 240,931 | 260,032 | ||||||||||||
| Research and development | 6,416 | 6,244 | 22,564 | 27,552 | ||||||||||||
| Restructuring and other costs | 7,272 | 6,325 | 34,525 | 18,237 | ||||||||||||
| Total operating expenses | 69,897 | 78,619 | 298,020 | 305,821 | ||||||||||||
| Operating income | 82,034 | 63,085 | 227,687 | 286,117 | ||||||||||||
| Interest income | 830 | 223 | 2,322 | 1,111 | ||||||||||||
| Interest expense | (8,526 | ) | (6,421 | ) | (28,903 | ) | (30,763 | ) | ||||||||
| Other income (expense), net | 2,794 | (2,481 | ) | (348 | ) | (10,846 | ) | |||||||||
| Interest and other, net | (4,902 | ) | (8,679 | ) | (26,929 | ) | (40,498 | ) | ||||||||
| Income before income taxes | 77,132 | 54,406 | 200,758 | 245,619 | ||||||||||||
| Provision for income taxes | 25,526 | 34,649 | 61,045 | 104,104 | ||||||||||||
| Net income | $ | 51,606 | $ | 19,757 | $ | 139,713 | $ | 141,515 | ||||||||
| Basic income per share | $ | 0.77 | $ | 0.28 | $ | 2.02 | $ | 2.05 | ||||||||
| Diluted income per share | $ | 0.75 | $ | 0.27 | $ | 1.97 | $ | 1.97 | ||||||||
| Weighted-average shares used in computing per share amounts: | ||||||||||||||||
| Basic | 67,329 | 69,898 | 69,041 | 69,129 | ||||||||||||
| Diluted | 68,799 | 72,294 | 70,793 | 71,678 | ||||||||||||
| Press Release Financials | SANMINA | |||||||||||||||
| --- | --- | |||||||||||||||
| **** | 2700 North First Street | |||||||||||||||
| **** | San Jose, CA 95134 | |||||||||||||||
| **** | Tel: 408-964-3610 | |||||||||||||||
| Reconciliation of GAAP to Non-GAAP Measures | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| Oct. 3, | June 27, | Sept. 28, | Oct. 3, | Sept. 28, | ||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| GAAP Operating Income | $ | 82,034 | $ | 64,103 | $ | 63,085 | $ | 227,687 | $ | 286,117 | ||||||
| GAAP operating margin | 4.4 | % | 3.9 | % | 3.3 | % | 3.3 | % | 3.5 | % | ||||||
| Adjustments: | ||||||||||||||||
| Stock compensation expense (1) | 4,192 | 7,354 | 10,266 | 26,235 | 30,844 | |||||||||||
| Amortization of intangible assets | 817 | 63 | 190 | 1,133 | 1,206 | |||||||||||
| Distressed customer charges (2) | (531 | ) | 1,499 | (49 | ) | 968 | (1,752 | ) | ||||||||
| Legal and other (3) | 2,346 | - | - | 2,346 | - | |||||||||||
| Restructuring costs | 6,455 | 2,812 | 2,411 | 26,783 | 13,753 | |||||||||||
| Gain on sales of long-lived assets | (604 | ) | - | - | (604 | ) | - | |||||||||
| Goodwill and other asset impairments | - | - | 3,724 | 6,609 | 3,724 | |||||||||||
| Non-GAAP Operating Income | $ | 94,709 | $ | 75,831 | $ | 79,627 | $ | 291,157 | $ | 333,892 | ||||||
| Non-GAAP operating margin | 5.1 | % | 4.6 | % | 4.2 | % | 4.2 | % | 4.1 | % | ||||||
| GAAP Net Income | $ | 51,606 | $ | 44,880 | $ | 19,757 | $ | 139,713 | $ | 141,515 | ||||||
| Adjustments: | ||||||||||||||||
| Operating income adjustments (see above) | 12,675 | 11,728 | 16,542 | 63,470 | 47,775 | |||||||||||
| Legal and other (3) | (729 | ) | - | - | (988 | ) | (830 | ) | ||||||||
| Adjustments for taxes (4) | 11,869 | 3,387 | 24,312 | 13,426 | 55,538 | |||||||||||
| Non-GAAP Net Income | $ | 75,421 | $ | 59,995 | $ | 60,611 | $ | 215,621 | $ | 243,998 | ||||||
| GAAP Net Income Per Share: | ||||||||||||||||
| Basic | $ | 0.77 | $ | 0.66 | $ | 0.28 | $ | 2.02 | $ | 2.05 | ||||||
| Diluted | $ | 0.75 | $ | 0.64 | $ | 0.27 | $ | 1.97 | $ | 1.97 | ||||||
| Non-GAAP Net Income Per Share: | ||||||||||||||||
| Basic | $ | 1.12 | $ | 0.88 | $ | 0.87 | $ | 3.12 | $ | 3.53 | ||||||
| Diluted | $ | 1.10 | $ | 0.86 | $ | 0.84 | $ | 3.05 | $ | 3.40 | ||||||
| Weighted-average shares used in computing per share amounts: | ||||||||||||||||
| Basic | 67,329 | 68,216 | 69,898 | 69,041 | 69,129 | |||||||||||
| Diluted | 68,799 | 69,645 | 72,294 | 70,793 | 71,678 | |||||||||||
| (1) | Stock<br> compensation expense was as follows: | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Cost<br> of sales | $ | 1,833 | $ | 2,772 | $ | 2,711 | $ | 10,099 | $ | 9,757 | ||||||
| Selling,<br> general and administrative | 2,349 | 4,496 | 7,550 | 15,897 | 20,807 | |||||||||||
| Research<br> and development | 10 | 86 | 5 | 239 | 280 | |||||||||||
| Total | $ | 4,192 | $ | 7,354 | $ | 10,266 | $ | 26,235 | $ | 30,844 | ||||||
| (2) | Relates to accounts receivable and inventory write-downs (recoveries) associated with distressed customers. | |||||||||||||||
| (3) | Represents expenses, charges and recoveries associated with certain legal matters. | |||||||||||||||
| (4) | GAAP<br> provision for income taxes | $ | 25,526 | $ | 14,727 | $ | 34,649 | $ | 61,045 | $ | 104,104 | |||||
| Adjustments: | ||||||||||||||||
| Tax<br> impact of operating income adjustments | 285 | 602 | 337 | 1,500 | 957 | |||||||||||
| Discrete<br> tax items | (5,991 | ) | 3,152 | (3,983 | ) | (2,121 | ) | (3,357 | ) | |||||||
| Deferred<br> tax adjustments | (6,163 | ) | (7,141 | ) | (20,666 | ) | (12,805 | ) | (53,138 | ) | ||||||
| Subtotal<br> - adjustments for taxes | (11,869 | ) | (3,387 | ) | (24,312 | ) | (13,426 | ) | (55,538 | ) | ||||||
| Non-GAAP<br> provision for income taxes | $ | 13,657 | $ | 11,340 | $ | 10,337 | $ | 47,619 | $ | 48,566 | ||||||
| Q1 FY21 Earnings Per Share Outlook*: | Q1 FY21 EPS Range | |||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||
| Low | High | |||||||||||||||
| GAAP diluted earnings per share | $ | 0.65 | $ | 0.75 | ||||||||||||
| Stock compensation expense | $ | 0.10 | $ | 0.10 | ||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.75 | $ | 0.85 |
* Due to uncertainty regarding the timing of recognition of restructuring charges, impairment charges and other unusual or infrequent items, if any, that could be incurred during the first quarter of FY21, an estimate of such items is not included in the outlook for Q1 FY21 GAAP EPS.
| Press Release Financials | SANMINA | |
|---|---|---|
| **** | 2700 North First Street | |
| **** | San Jose, CA 95134 | |
| **** | Tel: 408-964-3610 | |
| Sanmina Corporation | ||
| Pre-tax Return on Invested Capital (ROIC) | ||
| (in thousands) | ||
| (<br> in thousands) | Q4<br> FY20 | |
| --- | --- | --- |
| Pre-tax<br> Return on Invested Capital (ROIC) | ||
| GAAP<br> operating income | 82,034 | 14<br> weeks |
| 3.7 | =<br> 4*(13/14) | |
| Annualized<br> GAAP operating income | 304,698 | |
| Average<br> invested capital (1) | 1,245,006 | |
| GAAP<br> pre-tax ROIC | 24.5 | |
| Non-GAAP<br> operating income | 94,709 | 14<br> weeks |
| 3.7 | =<br> 4*(13/14) | |
| Annualized<br> non-GAAP operating income | 351,776 | |
| Average<br> invested capital (1) | 1,245,006 | |
| Non-GAAP<br> pre-tax ROIC | 28.3 |
All values are in US Dollars.
(1) Invested capital is defined as total assets (not including cash and cash equivalents and deferred tax assets) less total liabilities (excluding short-term and long-term debt).
| Press Release Financials | SANMINA | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 2700 North First Street | ||||||||||||||
| **** | San Jose, CA 95134 | ||||||||||||||
| **** | Tel: 408-964-3610 | ||||||||||||||
| Sanmina Corporation | |||||||||||||||
| Condensed Consolidated Cash Flow | |||||||||||||||
| (in thousands) | |||||||||||||||
| Three Month Periods | Twelve Month Periods | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ($ in thousands) | Q4'20 | Q3'20 | Q4'19 | FY20 | FY19 | ||||||||||
| GAAP Net Income | $ | 51,606 | $ | 44,880 | $ | 19,757 | $ | 139,713 | $ | 141,515 | |||||
| Depreciation and amortization | 28,555 | 28,886 | 28,508 | 114,218 | 116,949 | ||||||||||
| Other, net* | 6,822 | 15,532 | 41,332 | 47,972 | 87,731 | ||||||||||
| Net change in net working capital | (7,094 | ) | (25,531 | ) | 100,600 | (1,348 | ) | 36,770 | |||||||
| Cash provided by operating activities | 79,889 | 63,767 | 190,197 | 300,555 | 382,965 | ||||||||||
| Sales (purchases) of short-term investments | 30,000 | (30,000 | ) | - | - | - | |||||||||
| Purchases of long-term investments | - | - | - | - | (499 | ) | |||||||||
| Net purchases of property & equipment | (10,512 | ) | (9,441 | ) | (29,174 | ) | (64,409 | ) | (127,142 | ) | |||||
| Cash used in investing activities | 19,488 | (39,441 | ) | (29,174 | ) | (64,409 | ) | (127,641 | ) | ||||||
| Net share issuances <repurchases> | (76,580 | ) | (17,791 | ) | 820 | (171,232 | ) | 925 | |||||||
| Net borrowing activities | (659,374 | ) | (4,688 | ) | (121,000 | ) | (39,048 | ) | (221,143 | ) | |||||
| Cash used in financing activities | (735,954 | ) | (22,479 | ) | (120,180 | ) | (210,280 | ) | (220,218 | ) | |||||
| Effect of exchange rate changes | (114 | ) | 785 | (375 | ) | (81 | ) | 107 | |||||||
| Net change in cash & cash equivalents | $ | (636,691 | ) | $ | 2,632 | $ | 40,468 | $ | 25,785 | $ | 35,213 | ||||
| Free cash flow: | |||||||||||||||
| Cash provided by operating activities | $ | 79,889 | $ | 63,767 | $ | 190,197 | $ | 300,555 | $ | 382,965 | |||||
| Net purchases of property & equipment | (10,512 | ) | (9,441 | ) | (29,174 | ) | (64,409 | ) | (127,142 | ) | |||||
| $ | 69,377 | $ | 54,326 | $ | 161,023 | $ | 236,146 | $ | 255,823 |
*Primarily changes in deferred income taxes and stock-based compensation expense.
Schedule1
The commentary and financial information above includes non-GAAP measures of operating income, operating margin, net income and diluted earnings per share. Management excludes from these measures stock-based compensation, restructuring, acquisition and integration expenses, impairment charges, amortization charges and other unusual or infrequent items, as adjusted for taxes, as more fully described below.
Management excludes these items principally because such charges or benefits are not directly related to the Company’s ongoing core business operations. We use such non-GAAP measures in order to (1) make more meaningful period-to-period comparisons of the Company’s operations, both internally and externally, (2) guide management in assessing the performance of the business, internally allocating resources and making decisions in furtherance of Company’s strategic plan, (3) provide investors with a better understanding of how management plans and measures the business and (4) provide investors with a better understanding of our ongoing, core business. The material limitations to management’s approach include the fact that the charges, benefits and expenses excluded are nonetheless charges, benefits and expenses required to be recognized under GAAP and, in some cases, consume cash which reduces the Company’s liquidity. Management compensates for these limitations primarily by reviewing GAAP results to obtain a complete picture of the Company’s performance and by including a reconciliation of non-GAAP results to GAAP results in its earnings releases.
Additional information regarding the economic substance of each exclusion, management’s use of the resultant non-GAAP measures, the material limitations of management’s approach and management’s methods for compensating for such limitations is provided below.
Stock-basedCompensation Expense, which consists of non-cash charges for the estimated fair value of equity awards granted to employees and directors, is excluded in order to permit more meaningful period-to-period comparisons of the Company’s results since the Company grants different amounts and value of equity awards each quarter. In addition, given the fact that competitors grant different amounts and types of equity awards and may use different valuation assumptions, excluding stock-based compensation permits more accurate comparisons of the Company’s core results with those of its competitors.
Restructuring,Acquisition and Integration Expenses, which consist of severance, lease termination costs, exit costs and other charges primarily related to closing and consolidating manufacturing facilities and those associated with the acquisition and integration of acquired businesses, are excluded because such charges (1) can be driven by the timing of acquisitions and exit activities which are difficult to predict, (2) are not directly related to ongoing business results and (3) do not reflect expected future operating expenses. In addition, given the fact that the Company’s competitors complete acquisitions and adopt restructuring plans at different times and in different amounts than the Company, excluding these charges or benefits permits more accurate comparisons of the Company’s core results with those of its competitors. Items excluded by the Company may be different from those excluded by the Company’s competitors and restructuring and integration expenses include both cash and non-cash expenses. Cash expenses reduce the Company’s liquidity. Therefore, management also reviews GAAP results including these amounts.
ImpairmentCharges, which consist of non-cash charges, are excluded because such charges are non-recurring and do not reduce the Company’s liquidity. In addition, given the fact that the Company’s competitors may record impairment charges at different times, excluding these charges permits more accurate comparisons of the Company’s core results with those of its competitors.
AmortizationCharges, which consist of non-cash charges impacted by the timing and magnitude of acquisitions of businesses or assets, are also excluded because such charges do not reduce the Company’s liquidity. In addition, such charges can be driven by the timing of acquisitions, which is difficult to predict. Excluding these charges permits more accurate comparisons of the Company’s core results with those of its competitors because the Company’s competitors complete acquisitions at different times and for different amounts than the Company.
OtherUnusual or Infrequent Items, such as charges or benefits associated with distressed customers, expenses, charges and recoveries relating to certain legal matters, gains and losses on sales of assets and redemptions of debt, deferred tax and discrete tax items, are excluded because such items are typically non-recurring, difficult to predict or not directly related to the Company’s ongoing or core operations and are therefore not considered by management in assessing the current operating performance of the Company and forecasting earnings trends. However, items excluded by the Company may be different from those excluded by the Company’s competitors. In addition, these items may include both cash and non-cash expenses. Cash expenses reduce the Company’s liquidity. Management compensates for these limitations by reviewing GAAP results including these amounts.
Adjustmentsfor Taxes, which consist of the tax effects of the various adjustments that we exclude from our non-GAAP measures, and adjustments related to deferred tax and discrete tax items. Including these adjustments permits more accurate comparisons of the Company's core results with those of its competitors*.* We determine the tax adjustments based upon the various applicable effective tax rates. In those jurisdictions in which we do not expect to realize a tax cost or benefit (due to a history of operating losses or other factors), a reduced tax rate is applied.