Reconciliation of non-GAAP financial measures to the comparable GAAP measures
Non-GAAP financial measures:
This earnings release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”):
(1) Adjusted earnings per diluted share, which the Company defines as earnings per diluted share excluding acquisition-related amortization of intangible assets and discrete items, such as restructuring expenses, asbestos litigation-related charges, gain from antitrust litigation settlement, acquisition and related integration costs, change in foreign jurisdiction tax regulation on equity awards attributable to a prior period, transition services related to the asset acquisition, and gains or losses on asset or business dispositions (collectively, “Discrete Items”);
(2) Adjusted EBITDA, which the Company defines as net income excluding interest expense, income tax expense, depreciation and amortization, stock-based compensation expense and Discrete Items; and
(3) Adjusted operating margin, which the Company defines as operating margin excluding acquisition-related amortization of intangible assets and Discrete Items.
Management believes each of these measures is useful to investors because they allow for comparison to the Company’s performance in prior periods without the effect of items that, by their nature, tend to obscure the Company’s core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. As a result, management believes that adjusted earnings per diluted share, adjusted EBITDA and adjusted operating margin enhance the ability of investors to analyze trends in the Company’s business and evaluate the Company’s performance relative to peer companies. However, non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or solely as alternatives to, financial measures prepared in accordance with GAAP. In addition, these non-GAAP financial measures may differ from similarly named measures used by other companies. Reconciliations of the differences between these non-GAAP financial measures and their most directly comparable financial measures calculated in accordance with GAAP are set forth below.
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Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share for the first quarter*: |
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| 2019 | 2018 | ||||||||||||||||
| Earnings per diluted share | Q1 | Q4 | Q1 | ||||||||||||||
| GAAP earnings per diluted share | $ | 1.52 | $ | 1.31 | $ | 1.40 | |||||||||||
| Restructuring, severance, impairment and other related costs | 0.07 | 0.11 | 0.06 | ||||||||||||||
| Acquisition and related integration costs | 0.02 | 0.02 | 0.02 | ||||||||||||||
| Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period | 0.02 | — | — | ||||||||||||||
| Gain from antitrust litigation settlement | — | (0.06 | ) | (0.15 | ) | ||||||||||||
| Loss on sale of long-lived assets | 0.01 | — | — | ||||||||||||||
| Asbestos related charges | — | 0.03 | — | ||||||||||||||
| Transition services, net | 0.03 | 0.08 | — | ||||||||||||||
| Total discrete items | $ | 0.15 | $ | 0.18 | ($0.07 | ) | |||||||||||
| Earnings per diluted share adjusted for discrete items | $ | 1.67 | $ | 1.49 | $ | 1.33 | |||||||||||
| Acquisition intangible amortization | 0.18 | 0.18 | 0.15 | ||||||||||||||
| Adjusted earnings per diluted share | $ | 1.85 | $ | 1.67 | $ | 1.48 | |||||||||||
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Reconciliation of GAAP net income to adjusted EBITDA for the first quarter*: |
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| 2019 | 2018 | ||||||||||||||||
| (amounts in millions) | Q1 | Q4 | Q1 | ||||||||||||||
| Net income | $ | 28.4 | $ | 24.5 | $ | 26.1 | |||||||||||
| Interest expense, net | 1.9 | 2.1 | 1.2 | ||||||||||||||
| Income tax expense | 4.7 | 0.9 | 4.8 | ||||||||||||||
| Depreciation | 8.5 | 10.3 | 7.3 | ||||||||||||||
| Amortization | 4.5 | 4.4 | 3.8 | ||||||||||||||
| Stock-based compensation expense | 2.5 | 2.7 | 2.7 | ||||||||||||||
| Restructuring, severance, impairment and other related costs | 1.9 | 2.7 | 1.4 | ||||||||||||||
| Acquisition and related integration costs | 0.5 | 0.4 | 0.4 | ||||||||||||||
| Change in foreign jurisdiction tax regulation on equity awards attributable to a prior period | 0.5 | — | — | ||||||||||||||
| Gain from antitrust litigation settlement | — | (1.3 | ) | (3.6 | ) | ||||||||||||
| Asbestos-related charges | — | 0.7 | — | ||||||||||||||
| Loss on sale of long-lived assets | 0.3 | — | — | ||||||||||||||
| Transition services lease income | (0.6 | ) | (0.7 | ) | — | ||||||||||||
| Adjusted EBITDA** | $ | 53.1 | $ | 46.7 | $ | 44.1 | |||||||||||
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*Values in table may not add due to rounding. |
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**Adjusted EBITDA has been retrospectively restated for all periods presented to reflect the add-back of stock-based compensation expense. |
