GlobeNewswire Inc | Feb 11, 2021 04:06PM EST

February 11, 2021

CALHOUN, Ga., Feb. 11, 2021 (GLOBE NEWSWIRE) -- Mohawk Industries, Inc. (NYSE: MHK) today announced a 2020 fourth quarter net profit of $248 million and diluted earnings per share (EPS) of $3.49. Adjusted net earnings were $252 million, and EPS was $3.54, excluding restructuring, acquisition and other charges. Net sales for the fourth quarter of 2020 were $2.6 billion, an increase of 9.0% as reported and 5.5% on a constant currency and days basis. For the fourth quarter of 2019, net sales were $2.4 billion, net earnings were $265 million and EPS was $3.68, which included a one-time tax benefit. Adjusted net earnings were $162 million, and EPS was $2.25, excluding restructuring, acquisition and other charges in addition to the one-time tax benefit.

For the twelve months ending December 31, 2020, net earnings and EPS were $516 million and $7.22, respectively. Net earnings excluding restructuring, acquisition and other charges were $631 million and EPS was $8.83. For the 2020 twelve-month period, net sales were $9.6 billion, a decrease of 4.2% versus prior year as reported or 3.9% on a constant currency and days basis. For the twelve-month period ending December 31, 2019, net sales were approximately $10 billion, net earnings were $744 million and EPS was $10.30; excluding restructuring, acquisition, other charges and benefits, net earnings and EPS were $725 million and $10.04, respectively.

Commenting on Mohawk Industries fourth quarter performance, Jeffrey S. Lorberbaum, Chairman and CEO, stated, Our fourth quarter results exceeded our expectations as we posted our highest ever quarterly sales. All of our markets saw strengthening residential purchases, with laminate, LVT and sheet vinyl outperforming other flooring categories. Commercial activity remains weak and impacted sales and margins in the businesses where we have significant participation. Our results improved with higher volumes, restructuring initiatives and leverage on costs, while being adversely affected by lower runs and inventory, higher absenteeism and labor shortages in some operations. We are also seeing greater inflationary pressures in many product categories, and we are increasing prices to recover. We are mitigating the spread of Covid among our employees and customers by utilizing best practices across the business, including testing and tracking employees with potential contacts.

Through the fourth quarter we have achieved about $50 million of the projected $100 to $110 million in anticipated savings from our restructuring initiatives. We continue to assess some projects based on changing market conditions. Our free cash flow for the period was about $250 million after capital investments of approximately $160 million, and for the year our record free cash flow exceeded $1.3 billion. After paying off our short-term debt and prefunding our longer-term maturities in the second quarter, our net debt leverage is at a historical low. Our strong financial position gives us flexibility to pursue additional opportunities, including internal investments, acquisitions and stock purchases. Since the third quarter, we have acquired approximately one million shares of our stock for $130 million as part of our stock repurchase plan.

For the quarter, our Flooring Rest of the World Segments sales increased 20% as reported and 13% on a constant currency and days basis. The segments operating income grew over 60% with a margin of 17.5% as reported and 18.2%, excluding restructuring costs due to higher volumes and better productivity as well as favorable material costs. Sales and margins were strong in most categories and geographies with most of our plants operating near capacity. Raw material costs began to rise in many of our product categories, and we are taking pricing actions to respond to the increases. Laminate, the segments largest flooring category, delivered significant growth across most of our markets. Our margins increased as higher volumes drove greater absorption, while increased productivity and better throughputs enhanced our results. Our LVT sales increased substantially, led by accelerated growth of our rigid collections. Both our LVT margins and profitability improved due to increased volume, lower production costs and SG&A absorption. We are introducing new collections with enhanced visuals and exclusive water-tight joints that better prevent water damage. Our sheet vinyl business rebounded as our retailers re-opened their shops and our export markets picked up. Our greenfield Russian sheet vinyl plants volume has grown to a level that its margins are in line with our other businesses. Our wood panels business performed well in the period, with sales limited by our capacity and low inventories. We are expanding our capacity and increasing efficiency in melamine products to further improve our margins. In insulation, volume was good, with margins impacted by significant material inflation due to supply constraints. Our sales in Australia and New Zealand were strong, and margins improved with higher volume and lower material cost given their longer supply chain. We enhanced our market position with more aggressive sales initiatives and by providing more consistent service under difficult circumstances.

For the quarter, our Global Ceramic Segments sales increased 7% as reported and 6% on a constant currency and days basis. The segment had an operating margin of 8.7% as reported and 9.5%, excluding restructuring cost. Operating income increased by over 50% as reported versus prior year and by 65%, excluding restructuring charges, primarily due to improved productivity, increased volume and lower shutdown cost, partially offset by unfavorable price and mix. Our U.S. business delivered strong residential sales growth while commercial sales remain challenged as businesses defer investments. Our service centers are experiencing improved customer traffic due to higher home sales and remodeling activity. We have announced price increases across most collections to pass through higher transportation costs. Our plant productivity and costs improved during the period due to higher volumes and continued process improvements. We expect to complete our planned plant consolidations by the end of the first quarter. Sales of our quartz products are growing significantly, and we are increasing our mix with higher stylized products. Our Brazilian and Mexican businesses delivered record quarterly sales and expanded margins even with inflationary headwinds and capacity constraints. In both markets, margins improved due to higher productivity, and we have implemented price increases to cover rising inflation. We are investing to further upgrade our Brazilian manufacturing assets this year. Our European sales and profitability improved with residential sales stronger and lower commercial sales negatively impacting our mix and margins. Our service levels improved with the plants operating at higher rates; though inventories remained low due to higher demand. Our Russian ceramic business delivered strong results, even with inflation and currency headwinds. Sales rose significantly in all channels and were led by new residential construction. We are successfully ramping up our premium sanitaryware manufacturing to expand our product offering in our owned and franchised stores.

During the quarter, our Flooring North America Segments sales increased 3% as reported and were flat on a constant days basis. The segment had an operating margin of 8.6% as reported and 9.5%, excluding restructuring cost. Operating income increased by over 25% excluding restructuring charges, primarily due to productivity, increased volume and lower material costs, partially offset by unfavorable price and mix. The segment had strong growth in the residential channel, offset by lower commercial which improved from its low base in the prior periods. Our service levels improved as we increased production, though high demand required allocating shipments of some products. Due to higher demand and Covid disruptions in our plants, our inventories did not grow as we anticipated. We are taking pricing actions in most products due to rising material, labor and transportation costs. We have executed a large part of our restructuring initiatives, which is benefiting our results with some of the savings flowing through inventory in future periods. Demand for our residential carpet grew as comfort and noise reduction have become more important to consumers. Our laminate business is growing substantially in all channels as our unique visuals and waterproof technology have become desirable alternatives to natural wood and LVT. Our laminate plants are running at capacity to meet the exceptional demand, and by the end of the year a new line should be operational with additional capabilities. We have repurposed a plant to manufacture a waterproof wood flooring with dramatically improved scratch, dent and wear resistance. Sales of our LVT and sheet vinyl increased substantially, and we are introducing updated residential and commercial LVT collections with our water tight technology that will improve our mix and margins. Engineers from our European business are working in our U.S. LVT operations to implement demonstrated improvements to increase output, reduce material cost and enhance product visuals and performance.

Our fourth quarter sales and operating performance were much stronger than we anticipated. We ran our plants around the world at high levels during the period, but fell short of the inventory build we anticipated. Our operations are taking actions to optimize throughput and reach our desired service levels. Given present trends, the momentum of our residential businesses should remain strong, while the commercial channel should slowly improve from its trough. We will benefit from structural improvements in our costs and innovative new products that will enhance our mix. Most of the Covid restrictions around the world have not directly impacted the sales or installation of our products. Continued government subsidies and low interest rates should support economic recoveries, new home construction and residential remodeling. We are seeing increasing inflation in most of our product categories and are raising prices in response. Assuming current conditions continue, we anticipate our first quarter adjusted EPS to be $2.69 to $2.79, excluding restructuring charges.

The strength of our organization was demonstrated by our management of last years historic decline in sales and the subsequent spike in demand while protecting our employees and customers. Our strategies and initiatives remain flexible to adapt to economic changes. With improving sales and cash flows and a strong balance sheet, we are well positioned to take advantage of future opportunities.

ABOUT MOHAWK INDUSTRIES

Mohawk Industries is the leading global flooring manufacturer that creates products to enhance residential and commercial spaces around the world. Mohawks 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 worlds largest flooring company with operations in Australia, Brazil, Canada, Europe, India, Malaysia, Mexico, New Zealand, Russia, United Kingdom 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 Companys products; impairment charges; integration of acquisitions; international operations; introduction of new products; rationalization of operations; taxes and tax reform, product and other claims; litigation; the risks and uncertainty related to the COVID-19 pandemic; and other risks identified in Mohawks SEC reports and public announcements.

Conference call Friday, February 12, 2021, at 11:00 AM Eastern TimeThe telephone number is 1-800-603-9255 for US/Canada and 1-706-634-2294 for International/Local. Conference ID # 7346226. A replay will be available until March 12, 2021, by dialing 1-855-859-2056 for US/local calls and 1-404-537-3406 for International/Local calls and entering Conference ID # 7346226.

Contact: Frank Boykin, Chief Financial Officer (706) 624-2695

MOHAWKINDUSTRIES, INC. AND SUBSIDIARIES(Unaudited) CondensedConsolidated Three Months Ended Twelve Months EndedStatement ofOperations Data(Amounts in December 31, December December 31, December 31,thousands, except 2020 31, 2019 2020 2019per share data) Net sales $ 2,641,764 2,424,512 9,552,197 9,970,672 Cost of sales 1,903,680 1,801,705 7,121,507 7,294,629 Gross profit 738,084 622,807 2,430,690 2,676,043 Selling, generaland 455,351 467,993 1,794,688 1,848,819 administrativeexpensesOperating income 282,733 154,814 636,002 827,224 Interest expense 15,897 10,962 52,379 41,272 Other (income) (6,742 ) (9,522 ) (751 ) 36,407 expense, netEarnings before 273,578 153,374 584,374 749,545 income taxesIncome tax 25,180 (111,299 ) 68,647 4,974 expenseNet earningsincluding 248,398 264,673 515,727 744,571 noncontrollinginterestsNet earningsattributable to 176 6 132 360 noncontrollinginterestsNet earningsattributable to $ 248,222 264,667 515,595 744,211 MohawkIndustries, Inc. Basic earningsper shareattributable to MohawkIndustries, Inc.Basic earningsper shareattributable to $ 3.50 3.69 7.24 10.34 MohawkIndustries, Inc.Weighted-averagecommon shares 70,951 71,640 71,214 71,986 outstanding -basic Diluted earningsper shareattributable to MohawkIndustries, Inc.Diluted earningsper shareattributable to $ 3.49 3.68 7.22 10.30 MohawkIndustries, Inc.Weighted-averagecommon shares 71,209 71,954 71,401 72,264 outstanding -diluted Other Financial Information(Amounts in thousands)Net cash providedby operating $ 407,844 440,675 1,769,839 1,418,761 activitiesLess: Capital 160,142 139,849 425,557 545,462 expendituresFree cash flow $ 247,702 300,826 1,344,282 873,299 Depreciation and $ 156,555 153,759 607,507 576,452 amortization CondensedConsolidated Balance SheetData(Amounts in thousands) December 31, December 31, 2020 2019ASSETS Current assets: Cash and cash $ 768,625 134,785 equivalentsShort-term 571,741 42,500 investmentsReceivables, net 1,709,493 1,526,619 Inventories 1,913,020 2,282,328 Prepaid expensesand other current 400,775 443,225 assetsTotal current 5,363,654 4,429,457 assetsProperty, plantand equipment, 4,591,229 4,698,917 netRight of useoperating lease 323,138 323,003 assetsGoodwill 2,650,831 2,570,027 Intangible 951,607 928,879 assets, netDeferred incometaxes and other 447,292 436,397 non-currentassetsTotal assets $ 14,327,751 13,386,680 LIABILITIES ANDSTOCKHOLDERS' EQUITYCurrent liabilities:Short-term debtand current $ 377,255 1,051,498 portion oflong-term debtAccounts payableand accrued 1,895,951 1,559,140 expensesCurrent operating 98,042 101,945 lease liabilitiesTotal current 2,371,248 2,712,583 liabilitiesLong-term debt,less current 2,356,887 1,518,388 portionNon-currentoperating lease 234,726 228,155 liabilitiesDeferred incometaxes and other 823,732 801,106 long-termliabilitiesTotal liabilities 5,786,593 5,260,232 Totalstockholders' 8,541,158 8,126,448 equityTotal liabilitiesand stockholders' $ 14,327,751 13,386,680 equity Segment Three Months Ended As of or for the TwelveInformation Months Ended(Amounts in December 31, December December 31, December 31,thousands) 2020 31, 2019 2020 2019 Net sales: Global Ceramic $ 919,668 858,337 3,432,756 3,631,142 Flooring NA 963,365 936,387 3,594,075 3,843,714 Flooring ROW 758,731 629,788 2,525,366 2,495,816 Consolidated net $ 2,641,764 2,424,512 9,552,197 9,970,672 sales Operating income (loss):Global Ceramic $ 79,565 52,068 167,731 335,639 Flooring NA 82,407 29,556 147,442 177,566 Flooring ROW 132,505 81,595 366,934 353,666 Corporate andintersegment (11,744 ) (8,405 ) (46,105 ) (39,647 )eliminationsConsolidatedoperating income $ 282,733 154,814 636,002 827,224 (a) Assets: Global Ceramic $ 5,250,069 5,419,896 Flooring NA 3,594,976 3,823,654 Flooring ROW 4,194,447 3,925,246 Corporate andintersegment 1,288,259 217,884 eliminationsConsolidated $ 14,327,751 13,386,680 assets (a) During the second quarter of 2020, the Company revised the methodology ituses to estimate and allocate corporate general and administrative expenses toits operating segments to better align usage of corporate resources allocatedto the Company segments. The updated allocation methodology had no impact onthe Company?s consolidated statements of operations. This change was appliedretrospectively, and segment operating income for all comparative periods hasbeen updated to reflect this change.



Reconciliation of Net Earnings Attributable to Mohawk Industries, Inc. toAdjusted Net Earnings Attributable to Mohawk Industries, Inc. and AdjustedDiluted Earnings Per Share Attributable to Mohawk Industries, Inc.(Amounts inthousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2020 2019 2020 2019Net earningsattributable to $ 248,222 264,667 515,595 744,211 Mohawk Industries,Inc.Adjusting items: Restructuring,acquisition and 22,395 49,802 167,079 99,679 integration-relatedand other costsAcquisitionspurchaseaccounting, - 222 - 3,938 including inventorystep-upDeferred loan cost - 601 - 601 write offImpairment of net investmentin a manufacturer and - (5,226 ) - 59,946 distributor of Ceramic tilein China (1)European tax - (136,194 ) - (136,194 ) restructuring(2)Release ofindemnification (13 ) 603 (262 ) (57 ) assetIncome taxes -reversal of 13 (603 ) 262 56 uncertain taxpositionIncome taxes (18,609 ) (12,183 ) (52,002 ) (46,842 ) Adjusted netearningsattributable to $ 252,008 161,689 630,672 725,338 Mohawk Industries,Inc. Adjusted dilutedearnings per shareattributable to $ 3.54 2.25 8.83 10.04 Mohawk Industries,Inc.Weighted-averagecommon shares 71,209 71,954 71,401 72,264 outstanding -diluted [1] In September 2019, the US commerce department imposed a 104% countervailingduty on top of the 25% general tariffs on all ceramic produced in China. As aconsequence, ceramic purchases from China would dramatically decline and Mohawktook a $60 million write off to our investment in a Chinese manufacturer anddistributor.

[2] In 2019, the Company implemented select operational, administrative andfinancial restructurings that centralized certain business processes andintangible assets in various European jurisdictions into a new entity. Therestructurings resulted in a current tax liability of $136 million, calculatedby measuring the fair value of intangible assets transferred. The Companyoffset the tax liability with the utilization of $136 million of deferred taxassets from accumulated net operating loss carry forwards. The restructuringsalso resulted in the Company recording a $136 million deferred tax asset, and acorresponding deferred tax benefit, related to the tax basis of the intangibleassets transferred. Reconciliation of Total Debt to Net Debt Less Short-Term Investments(Amounts in thousands) December 31, 2020Short-term debt andcurrent portion of $ 377,255 long-term debtLong-term debt,less current 2,356,887 portionTotal debt 2,734,142 Less: Cash and cash 768,625 equivalentsNet Debt 1,965,517 Less: Short-term 571,741 investmentsNet debt lessshort-term $ 1,393,776 investments Reconciliation ofOperating Income (Loss) to AdjustedEBITDA(Amounts in Trailingthousands) Twelve Three Months Ended Months Ended March 28, 2020 June 27, September December 31, December 31, 2020 26, 2020 2020 2020Operating income $ 151,483 (60,958 ) 262,744 282,733 636,002 (loss)Other (expense) (5,679 ) (1,037 ) 726 6,742 752 incomeNet (income) lossattributable to 49 331 (336 ) (176 ) (132 )noncontrollinginterestsDepreciation and 145,516 154,094 151,342 156,555 607,507 amortization (1)EBITDA 291,369 92,430 414,476 445,854 1,244,129 Restructuring,acquisition and 10,376 91,963 27,116 15,960 145,415 integration-relatedand other costsRelease ofindemnification (35 ) (23 ) (191 ) (13 ) (262 )assetAdjusted EBITDA $ 301,710 184,370 441,401 461,801 1,389,282 Net Debt lessshort-term 1.0 investments toAdjusted EBITDA(1) Includes $1,589 of accelerated depreciation in Q1 2020with $8,395 in Q2 2020, $5,243 in Q3 2020 and $6,435 in Q4 2020. Reconciliation of Net Sales to Net Sales on a Constant Exchange Rate and on Constant Shipping Days(Amounts in thousands) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2020 2019 2020 2019Net sales $ 2,641,764 2,424,512 9,552,197 9,970,672 Adjustment to netsales on constant (65,438 ) - (30,192 ) - shipping daysAdjustment to netsales on a constant (17,445 ) - 58,799 - exchange rateNet sales on a constantexchange rate and $ 2,558,881 2,424,512 9,580,804 9,970,672 constant shipping days Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days(Amounts in thousands) Three Months Ended Global Ceramic December 31, December 31, 2020 2019Net sales $ 919,668 858,337 Adjustment tosegment net sales (25,205 ) - on constantshipping daysAdjustment tosegment net sales 17,465 - on a constantexchange rateSegment net sales on aconstant exchange rate $ 911,928 858,337 and constant shippingdays Reconciliation of Segment Net Sales to Segment Net Sales on Constant Shipping Days(Amounts in thousands) Three Months Ended Flooring NA December 31, December 31, 2020 2019Net sales $ 963,365 936,387 Adjustment tosegment net sales (29,193 ) - on constantshipping daysSegment net sales on $ 934,172 936,387 constant shipping days Reconciliation of Segment Net Sales to Segment Net Sales on a Constant Exchange Rate and on Constant Shipping Days(Amounts in thousands) Three Months Ended Flooring ROW December 31, December 31, 2020 2019Net sales $ 758,731 629,788 Adjustment tosegment net sales (11,041 ) - on constantshipping daysAdjustment tosegment net sales (34,911 ) - on a constantexchange rateSegment net sales on aconstant exchange rate $ 712,779 629,788 and constant shippingdays Reconciliation ofGross Profit to Adjusted GrossProfit(Amounts in thousands) Three Months Ended December 31, December 31, 2020 2019Gross Profit $ 738,084 622,807 Adjustments to gross profit:Restructuring,acquisition and 22,789 45,372 integration-relatedand other costsAdjusted gross $ 760,873 668,179 profit Reconciliation of Selling, General and AdministrativeExpenses to Adjusted Selling, General and Administrative Expenses(Amounts in thousands) Three Months Ended December 31, December 31, 2020 2019Selling, generaland administrative $ 455,351 467,993 expensesAdjustments toselling, general and administrativeexpenses:Restructuring,acquisition and 394 (4,651 ) integration-relatedand other costsRelease ofindemnification - (2 ) assetAdjusted selling,general and $ 455,745 463,340 administrativeexpenses Reconciliation ofOperating Income to Adjusted OperatingIncome(Amounts in thousands) Three Months Ended December 31, December 31, 2020 2019Operating income $ 282,733 154,814 Adjustments to operating income:Restructuring,acquisition and 22,395 49,802 integration-relatedand other costsRelease ofindemnification - 2 assetAcquisitionspurchaseaccounting, - 222 including inventorystep-upAdjusted operating $ 305,128 204,840 income Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands) Three Months Ended Global Ceramic December 31, December 31, 2020 2019Operating income $ 79,565 52,068 Adjustments tosegment operating income:Restructuring,acquisition and 8,164 1,204 integration-relatedand other costsAdjusted segment $ 87,729 53,272 operating income Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands) Three Months Ended Flooring NA December 31, December 31, 2020 2019Operating income $ 82,407 29,556 Adjustments tosegment operating income:Restructuring,acquisition and 8,651 42,149 integration-relatedand other costsAdjusted segment $ 91,058 71,705 operating income Reconciliation of Segment Operating Income to Adjusted Segment Operating Income(Amounts in thousands) Three Months Ended Flooring ROW December 31, December 31, 2020 2019Operating income $ 132,505 81,595 Adjustments tosegment operating income:Restructuring,acquisition and 5,496 6,235 integration-relatedand other costsAcquisitionspurchaseaccounting, - 222 including inventorystep-upAdjusted segment $ 138,001 88,052 operating income Reconciliation of Earnings Including Noncontrolling Interests Before IncomeTaxes to Adjusted Earnings Including Noncontrolling Interests Before Income Taxes(Amounts in thousands) Three Months Ended December 31, December 31, 2020 2019Earnings before $ 273,578 153,374 income taxesNet earningsattributable to (176 ) (6 ) noncontrollinginterestsAdjustments toearnings includingnoncontrolling interests beforeincome taxes:Restructuring,acquisition and 22,395 49,802 integration-relatedand other costsAcquisitionspurchaseaccounting, - 222 including inventorystep-upImpairment of netinvestment in amanufacturer and - (5,226 ) distributor of Ceramictile in ChinaRelease ofindemnification (13 ) 603 assetDeferred loan cost - 601 write offAdjusted earningsincludingnoncontrolling $ 295,784 199,370 interests beforeincome taxes Reconciliation of Income Tax Expense to Adjusted Income Tax Expense(Amounts in thousands) Three Months Ended December 31, December 31, 2020 2019Income tax expense $ 25,180 (111,299 ) European tax - 136,194 restructuringIncome taxes -reversal of (13 ) 603 uncertain taxpositionIncome tax effect 18,609 12,183 of adjusting itemsAdjusted income tax $ 43,776 37,681 expense Adjusted income tax 14.8 % 18.9 % rate The Company supplements its condensed consolidated financial statements, whichare prepared and presented in accordance with US GAAP, with certain non-GAAPfinancial measures. As required by the Securities and Exchange Commissionrules, the tables above present a reconciliation of the Company's non-GAAPfinancial measures to the most directly comparable US GAAP measure. Each of thenon-GAAP measures set forth above should be considered in addition to thecomparable US GAAP measure, and may not be comparable to similarly titledmeasures reported by other companies. The Company believes these non-GAAPmeasures, when reconciled to the corresponding US GAAP measure, help itsinvestors as follows: Non-GAAP revenue measures that assist in identifyinggrowth trends and in comparisons of revenue with prior and future periods andnon-GAAP profitability measures that assist in understanding the long-termprofitability trends of the Company's business and in comparisons of itsprofits with prior and future periods. The Company excludes certain items from its non-GAAP revenue measures becausethese items can vary dramatically between periods and can obscure underlyingbusiness trends. Items excluded from the Company's non-GAAP revenue measuresinclude: foreign currency transactions and translation and the impact ofacquisitions. The Company excludes certain items from its non-GAAP profitability measuresbecause these items may not be indicative of, or are unrelated to, theCompany's core operating performance. Items excluded from the Company'snon-GAAP profitability measures include: restructuring, acquisition andintegration-related and other costs, acquisition purchase accounting, includinginventory step-up, release of indemnification assets and the reversal ofuncertain tax positions.