Form 8-K Kimball Electronics, For: Aug 03
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
Date of Report (Date of earliest event reported) August 3, 2016
KIMBALL ELECTRONICS, INC.
________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Indiana | 001-36454 | 35-2047713 | ||
(State or other jurisdiction of | (Commission File | (IRS Employer Identification No.) | ||
incorporation) | Number) | |||
1205 Kimball Boulevard, Jasper, Indiana | 47546 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code (812) 634-4000
Not Applicable |
(Former name or former address, if changed since last report) |
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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
1
Item 2.02 Results of Operations and Financial Condition
On August 3, 2016, Kimball Electronics, Inc. (the “Company”) issued an earnings release for the fourth quarter ended June 30, 2016. The earnings release is attached as Exhibit 99.1 and supplementary information provided for the Company’s earnings conference call is attached as Exhibit 99.2.
The information, including Exhibit 99.1 and Exhibit 99.2, in this Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except as shall otherwise be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The following exhibits are filed as part of this report:
Exhibit | ||
Number | Description | |
99.1 | Earnings Release dated August 3, 2016 | |
99.2 | Supplementary Information | |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
KIMBALL ELECTRONICS, INC. | |
By: | /s/ Michael K. Sergesketter |
MICHAEL K. SERGESKETTER Vice President, Chief Financial Officer | |
Date: August 3, 2016
3
EXHIBIT INDEX
Exhibit | ||
Number | Description | |
99.1 | Earnings Release dated August 3, 2016 | |
99.2 | Supplementary Information | |
4
Exhibit 99.1
KIMBALL ELECTRONICS, INC. REPORTS FOURTH QUARTER AND FISCAL YEAR 2016 RESULTS
• | Quarterly net sales record of $220 million |
• | Cash flow from operating activities in the fourth quarter of $8.8 million |
• | Returned $5.0 million to Share Owners in stock repurchases during the fourth quarter |
JASPER, IN (August 3, 2016) - Kimball Electronics, Inc. (Nasdaq: KE), a leading global electronic manufacturing services provider of high-quality, durable electronic products, today announced financial results for its fourth quarter and fiscal year ended June 30, 2016.
Three Months Ended | Fiscal Year Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(Amounts in Thousands, except EPS) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net Sales | $ | 220,402 | $ | 201,126 | $ | 842,060 | $ | 819,350 | |||||||
Operating Income | $ | 8,790 | $ | 9,050 | $ | 29,722 | $ | 36,355 | |||||||
Adjusted Operating Income (non-GAAP) | $ | 8,790 | $ | 9,074 | $ | 29,859 | $ | 38,949 | |||||||
Operating Income % | 4.0 | % | 4.5 | % | 3.5 | % | 4.4 | % | |||||||
Adjusted Operating Income (non-GAAP) % | 4.0 | % | 4.5 | % | 3.5 | % | 4.8 | % | |||||||
Net Income | $ | 5,771 | $ | 7,394 | $ | 22,287 | $ | 26,205 | |||||||
Adjusted Net Income (non-GAAP) | $ | 5,771 | $ | 7,410 | $ | 22,372 | $ | 28,631 | |||||||
Diluted EPS | $ | 0.20 | $ | 0.25 | $ | 0.76 | $ | 0.89 | |||||||
Adjusted Diluted EPS (non-GAAP) | $ | 0.20 | $ | 0.25 | $ | 0.77 | $ | 0.97 | |||||||
Donald D. Charron, Chairman and Chief Executive Officer, stated, “Continued strength in the automotive market combined with sales from new program launches helped us set new quarterly and annual sales records in the fourth quarter and fiscal year of 2016. Our new business opportunities pipeline remains healthy and we continue to work diligently to achieve our goal of $1 billion in annual sales by fiscal year 2018.”
Mr. Charron continued, “While we were pleased to have achieved our goal of 4% operating income in the fourth quarter, we continue to experience pressure on our margins and still have work to do in order to consistently achieve our 4% operating income target. Margin expansion will continue to be a priority of focus for us going forward. Fiscal year 2017 will be a pivotal year for us as we work through another year of significant new program launches, the ramp-up of our new Romania operation, and the integration of our recent Medivative and Aircom acquisitions.”
Fourth Quarter Fiscal Year 2016 Overview:
• | Consolidated net sales increased 10% compared to the fourth quarter of fiscal year 2015, setting a new quarterly sales record. |
• | On May 2, 2016, the Company announced the acquisition of Medivative Technologies, LLC. Excluding the incremental net sales associated with the acquisition, consolidated net sales increased 8% over the prior year fourth quarter. Consolidated earnings were not materially impacted during the quarter from the Medivative acquisition. |
• | Incremental net loss associated with the start-up of the Romania facility was $1.0 million during the current year fourth quarter. |
• | Cash flow from operating activities was $8.8 million during the quarter. |
• | Investments in capital expenditures were $6.5 million during the quarter. |
• | $5.0 million was returned to Share Owners during the quarter in the form of common stock repurchases associated with the $20 million, 18-month stock repurchase program announced in October 2015. |
• | Cash and cash equivalents were $54.7 million and borrowings outstanding on credit facilities were $9.0 million at June 30, 2016. |
• | Cash conversion days (“CCD”) for the quarter ended June 30, 2016 were 59 days, which improved from 63 days for the same quarter last year. CCD is calculated as the sum of days sales outstanding plus production days supply on hand less accounts payable days. |
Net Sales by Vertical Market:
Three Months Ended | ||||||||||
June 30, | ||||||||||
(Amounts in Millions) | 2016 | 2015 | Percent Change | |||||||
Automotive | $ | 86.5 | $ | 79.2 | 9 | % | ||||
Medical | 65.2 | 58.0 | 12 | % | ||||||
Industrial | 48.6 | 44.9 | 8 | % | ||||||
Public Safety | 14.7 | 15.0 | (2 | )% | ||||||
Other | 5.4 | 4.0 | 34 | % | ||||||
Total Net Sales | $ | 220.4 | $ | 201.1 | 10 | % | ||||
Fiscal Year 2016 Overview:
• | Net sales increased 3% from the prior fiscal year, setting a new annual record of $842.1 million. |
• | Spin-off expenses totaled $0.1 million and $2.6 million in fiscal years 2016 and 2015, respectively. |
• | Cash flow provided by operating activities for fiscal year 2016 was $36.8 million. |
• | Capital expenditures were $34.6 million in fiscal year 2016 compared to $36.9 million in fiscal year 2015. |
• | Return on invested capital (“ROIC”) was 9.0% for fiscal year 2016, which declined from 12.5% for the prior fiscal year (see reconciliation of non-GAAP financial measures for ROIC calculation). |
• | Fiscal year 2015 financial results included an allocation of costs incurred by our former parent, Kimball International, Inc., through October 31, 2014, the completion date of our spin-off from our former parent. As a result, the full fiscal year 2015 financial statements were not necessarily indicative of our complete cost structure as an independent company. |
Outlook
• | Management maintains the goal of $1 billion in net sales by fiscal year 2018 and believes it is achievable. |
• | Management is maintaining a mid-range goal of 4% operating income. |
• | A long-term goal of 12.5% ROIC has been set by management. |
• | Fiscal year 2017 capital expenditures are expected to remain at a similar level as fiscal year 2016 with significantly higher spending occurring in the first half of the year. Fiscal year 2018 capital expenditures are expected to decline to a level that approximates depreciation expense. |
Forward-Looking Statements
Certain statements contained within this release are considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, our ability to fully realize the expected benefits of the completed spin-off, successful integration of acquisitions and new operations, the global economic conditions, significant volume reductions from key contract customers, loss of key customers or suppliers, financial stability of key customers and suppliers, availability or cost of raw materials, and increased competitive pricing pressures reflecting excess industry capacities. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in its Annual Report on Form 10-K for the year ended June 30, 2015.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP) in the United States in the statement of income, statement of comprehensive income, balance sheet, statement of cash flows, or statement of equity of the company. The non-GAAP financial measures contained herein include adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. These measures were adjusted for spin-off expenses. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the financial highlights table below. Management believes it is useful for investors to understand how its core operations performed without the effects of the spin-off expenses. Excluding these amounts
allows investors to meaningfully trend, analyze, and benchmark the performance of the Company’s core operations. Many of the Company’s internal performance measures that management uses to make certain operating decisions exclude these charges to enable meaningful trending of core operating metrics.
Conference Call / Webcast | ||
Date: | August 4, 2016 | |
Time: | 10:00 AM Eastern Time | |
Dial-In #: | 800-992-4934 (International Calls - 937-502-2251) | |
Conference ID: | 47764754 | |
The live webcast of the conference call can be accessed at investors.kimballelectronics.com. For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.
About Kimball Electronics, Inc.
Recognized with a reputation for excellence, Kimball Electronics is committed to a high performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball Electronics employees know they are part of a company culture that builds lasting relationships and global success for customers while enabling employees to share in the Company’s success through personal, professional, and financial growth.
Kimball Electronics trades under the symbol “KE” on The NASDAQ Stock Market. Kimball Electronics is a global contract electronic manufacturing services (“EMS”) company that specializes in durable electronics for the medical, automotive, industrial, and public safety markets. Kimball Electronics is well recognized by customers and industry trade publications for its excellent quality, reliability, and innovative service. From its manufacturing operations in the United States, Mexico, Thailand, Poland, China, and Romania, Kimball Electronics provides engineering, manufacturing, and supply chain services which utilize common production and support capabilities to a variety of industries globally. Kimball Electronics is headquartered in Jasper, Indiana.
To learn more about Kimball Electronics, visit: www.kimballelectronics.com.
Lasting relationships. Global success.
Financial highlights for the fourth quarter and fiscal year ended June 30, 2016 are as follows:
Condensed Consolidated Statements of Income | |||||||||||||
(Unaudited) | Three Months Ended | ||||||||||||
(Amounts in Thousands, except Per Share Data) | June 30, 2016 | June 30, 2015 | |||||||||||
Net Sales | $ | 220,402 | 100.0 | % | $ | 201,126 | 100.0 | % | |||||
Cost of Sales | 203,444 | 92.3 | % | 183,417 | 91.2 | % | |||||||
Gross Profit | 16,958 | 7.7 | % | 17,709 | 8.8 | % | |||||||
Selling and Administrative Expenses | 8,168 | 3.7 | % | 8,659 | 4.3 | % | |||||||
Operating Income | 8,790 | 4.0 | % | 9,050 | 4.5 | % | |||||||
Other Income (Expense), net | (725 | ) | (0.3 | )% | (355 | ) | (0.2 | )% | |||||
Income Before Taxes on Income | 8,065 | 3.7 | % | 8,695 | 4.3 | % | |||||||
Provision for Income Taxes | 2,294 | 1.1 | % | 1,301 | 0.6 | % | |||||||
Net Income | $ | 5,771 | 2.6 | % | $ | 7,394 | 3.7 | % | |||||
Earnings Per Share of Common Stock: | |||||||||||||
Basic | $ | 0.20 | $ | 0.25 | |||||||||
Diluted | $ | 0.20 | $ | 0.25 | |||||||||
Average Number of Shares Outstanding: | |||||||||||||
Basic | 28,374 | 29,172 | |||||||||||
Diluted | 28,641 | 29,367 | |||||||||||
(Unaudited) | Fiscal Year Ended | ||||||||||||
(Amounts in Thousands, except Per Share Data) | June 30, 2016 | June 30, 2015 | |||||||||||
Net Sales | $ | 842,060 | 100.0 | % | $ | 819,350 | 100.0 | % | |||||
Cost of Sales | 777,522 | 92.3 | % | 746,927 | 91.2 | % | |||||||
Gross Profit | 64,538 | 7.7 | % | 72,423 | 8.8 | % | |||||||
Selling and Administrative Expenses | 34,816 | 4.2 | % | 36,068 | 4.4 | % | |||||||
Operating Income | 29,722 | 3.5 | % | 36,355 | 4.4 | % | |||||||
Other Income (Expense), net | (1,746 | ) | (0.2 | )% | (1,584 | ) | (0.2 | )% | |||||
Income Before Taxes on Income | 27,976 | 3.3 | % | 34,771 | 4.2 | % | |||||||
Provision for Income Taxes | 5,689 | 0.7 | % | 8,566 | 1.0 | % | |||||||
Net Income | $ | 22,287 | 2.6 | % | $ | 26,205 | 3.2 | % | |||||
Earnings Per Share of Common Stock: | |||||||||||||
Basic | $ | 0.77 | $ | 0.90 | |||||||||
Diluted | $ | 0.76 | $ | 0.89 | |||||||||
Average Number of Shares Outstanding: | |||||||||||||
Basic | 28,916 | 29,162 | |||||||||||
Diluted | 29,176 | 29,388 | |||||||||||
Condensed Consolidated Statements of Cash Flows | Fiscal Year Ended | ||||||
(Unaudited) | June 30, | ||||||
(Amounts in Thousands) | 2016 | 2015 | |||||
Net Cash Flow provided by Operating Activities | $ | 36,832 | $ | 28,064 | |||
Net Cash Flow used for Investing Activities | (42,590 | ) | (36,516 | ) | |||
Net Cash Flow (used for) provided by Financing Activities | (4,300 | ) | 50,172 | ||||
Effect of Exchange Rate Change on Cash and Cash Equivalents | (384 | ) | (2,800 | ) | |||
Net (Decrease) Increase in Cash and Cash Equivalents | (10,442 | ) | 38,920 | ||||
Cash and Cash Equivalents at Beginning of Year | 65,180 | 26,260 | |||||
Cash and Cash Equivalents at End of Year | $ | 54,738 | $ | 65,180 | |||
(Unaudited) | |||||||
Condensed Consolidated Balance Sheets | June 30, 2016 | June 30, 2015 | |||||
(Amounts in Thousands) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 54,738 | $ | 65,180 | |||
Receivables, net | 149,652 | 139,892 | |||||
Inventories | 132,877 | 125,198 | |||||
Prepaid expenses and other current assets | 24,944 | 23,922 | |||||
Property and Equipment, net | 120,701 | 106,779 | |||||
Goodwill | 6,191 | 2,564 | |||||
Other Intangible Assets, net | 4,593 | 4,509 | |||||
Other Assets | 16,869 | 15,213 | |||||
Total Assets | $ | 510,565 | $ | 483,257 | |||
LIABILITIES AND SHARE OWNERS’ EQUITY | |||||||
Borrowings under credit facilities | $ | 9,000 | $ | — | |||
Accounts payable | 142,152 | 133,409 | |||||
Accrued expenses | 23,651 | 26,545 | |||||
Other | 11,393 | 10,854 | |||||
Share Owners’ Equity | 324,369 | 312,449 | |||||
Total Liabilities and Share Owners’ Equity | $ | 510,565 | $ | 483,257 | |||
Reconciliation of Non-GAAP Financial Measures | |||||||||||||||
(Unaudited) | |||||||||||||||
(Amounts in Thousands, except Per Share Data) | |||||||||||||||
Operating Income excluding Spin-off Expenses | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Kimball Electronics, Inc. | 2016 | 2015 | 2016 | 2015 | |||||||||||
Operating Income, as reported | $ | 8,790 | $ | 9,050 | $ | 29,722 | $ | 36,355 | |||||||
Add: Pre-tax Spin-off Expenses | — | 24 | 137 | 2,594 | |||||||||||
Adjusted Operating Income | $ | 8,790 | $ | 9,074 | $ | 29,859 | $ | 38,949 | |||||||
Net Income excluding Spin-off Expenses | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Kimball Electronics, Inc. | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net Income, as reported | $ | 5,771 | $ | 7,394 | $ | 22,287 | $ | 26,205 | |||||||
Add: After-tax Spin-off Expenses | — | 16 | 85 | 2,426 | |||||||||||
Adjusted Net Income | $ | 5,771 | $ | 7,410 | $ | 22,372 | $ | 28,631 | |||||||
Diluted Earnings per Share excluding Spin-off Expenses | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Kimball Electronics, Inc. | 2016 | 2015 | 2016 | 2015 | |||||||||||
Diluted Earnings per Share, as reported | $ | 0.20 | $ | 0.25 | $ | 0.76 | $ | 0.89 | |||||||
Add: Impact of Spin-off Expenses | — | 0.00 | 0.01 | 0.08 | |||||||||||
Adjusted Diluted Earnings per Share | $ | 0.20 | $ | 0.25 | $ | 0.77 | $ | 0.97 | |||||||
Return on Invested Capital (ROIC) | |||||||||||||||
Fiscal Year Ended | |||||||||||||||
June 30, | |||||||||||||||
Kimball Electronics, Inc. | 2016 | 2015 | |||||||||||||
Adjusted Operating Income | $ | 29,859 | $ | 38,949 | |||||||||||
Tax Rate | 20.4 | % | 23.4 | % | |||||||||||
Tax Effect | $ | 6,091 | $ | 9,114 | |||||||||||
After Tax Adjusted Operating Income | $ | 23,768 | $ | 29,835 | |||||||||||
Average Invested Capital * | $ | 263,371 | $ | 239,463 | |||||||||||
ROIC | 9.0 | % | 12.5 | % | |||||||||||
* Average Invested Capital is computed using the average quarterly Share Owners’ equity plus current and non-current debt less cash and cash equivalents.
Lasting relationships. Global success.Lasting relationships. Global success.
Financial Results
Fourth Quarter Fiscal Year 2016
Quarter Ended June 30, 2016
Supplementary Information to August 4, 2016
Earnings Conference Call
Exhibit 99.2
Lasting relationships. Global success.Lasting relationships. Global success.
Safe Harbor Statement
Certain statements contained within this supplementary information and any statements made during our earnings
conference call today may be considered forward-looking under the Private Securities Litigation Reform Act of 1995
and are subject to risks and uncertainties including, but not limited to, our ability to fully realize the expected benefits of
the completed spin-off, successful integration of acquisitions and new operations, the global economic conditions,
significant volume reductions from key contract customers, loss of key customers or suppliers, financial stability of key
customers and suppliers, availability or cost of raw materials, and increased competitive pricing pressures reflecting
excess industry capacities. Additional cautionary statements regarding other risk factors that could have an effect on
the future performance of Kimball Electronics, Inc. (the “Company”) are contained in the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2015, our earnings release, and other filings with the Securities and
Exchange Commission (the “SEC”).
This supplementary information contains non-GAAP financial measures. A non-GAAP financial measure is a numerical
measure of a company’s financial performance that excludes or includes amounts so as to be different than the most
directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles
(GAAP) in the United States in the statement of income, statement of comprehensive income, balance sheet, statement
of cash flows, or statement of equity of the company. The non-GAAP financial measures contained herein include
Selling & Administrative Expense (%), Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA and Return
on Invested Capital (ROIC), which have been adjusted for spin-off expenses. Management believes it is useful for
investors to understand how its core operations performed without the effects of incremental costs related to the spin-
off. Excluding these amounts allows investors to meaningfully trend, analyze, and benchmark the performance of the
Company’s core operations. Many of the Company’s internal performance measures that management uses to make
certain operating decisions use these and other non-GAAP measures to enable meaningful trending of core operating
metrics.
2
Lasting relationships. Global success.Lasting relationships. Global success.
Net Sales
(Unaudited)
$225
$220
$215
$210
$205
$200
$195
$190
$185
$180
$175
In
M
illi
on
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
$204
$208 $207
$201 $200
$207
$214
$220
+10%
from Q4'15
3
Lasting relationships. Global success.Lasting relationships. Global success.
Net Sales Mix by Vertical Market
(Unaudited)
Automotive Medical Industrial Public Safety Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
%
of
Sa
le
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
35% 36% 36% 39% 36%
40% 40% 39%
30% 30% 29%
29%
29%
29% 31% 30%
26% 24% 25% 22% 25% 20%
21% 22%
7% 8% 7% 8% 8% 8%
7% 7%
2% 2% 3% 2% 2% 3% 1% 2%
4
Lasting relationships. Global success.Lasting relationships. Global success.
Gross Margin %
(Unaudited)
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
%
of
Sa
le
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
8.8% 8.6%
9.2%
8.8%
7.6% 7.8% 7.6% 7.7%
5
Lasting relationships. Global success.Lasting relationships. Global success.
Selling & Administrative Expense (%)
(Excludes spin-off costs*)
(Unaudited)
4.6%
4.4%
4.2%
4.0%
3.8%
3.6%
3.4%
%
of
Sa
le
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
4.5%
3.8% 3.8%
4.3%
4.1%
4.5%
4.3%
3.7%
*Spin-off costs excluded by quarter were Q1’15 - $1.0M (0.5%), Q2’15 - $1.3M (0.6%), Q3’15 - $0.3M (0.2%),
Q1’16 - $0.1M (0.0%)
6
Lasting relationships. Global success.Lasting relationships. Global success.
Adjusted Operating Income
(Excludes spin-off costs)
(Unaudited)
Adj Op Income % of Net Sales
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
In
M
illi
on
s
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
%
of
Sa
le
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
$8.8
$10.0
$11.1
$9.1
$7.1 $6.9 $7.1
$8.8
4.3%
4.8%
5.4%
4.5%
3.5%
3.3% 3.3%
4.0%
Note: Adjusted Operating Income is a Non-GAAP measure – refer to Reconciliation of Non-GAAP Results
on the final slide of this supplementary information 7
Lasting relationships. Global success.Lasting relationships. Global success.
Adjusted Net Income
(Excludes spin-off costs)
(Unaudited)
$8.0
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
In
M
illi
on
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
$6.4
$7.4 $7.5 $7.4
$4.6 $4.6
$7.5
$5.8
Notes: Q3'16 includes a $1.8 million discrete foreign tax benefit related to the capitalization of our Romania subsidiary;
Adjusted Net Income is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide of this
supplementary information
8
Lasting relationships. Global success.Lasting relationships. Global success.
Adjusted EBITDA
(Excludes spin-off costs)
(Unaudited)
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$4.0
$2.0
$0.0
In
M
illi
on
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
$13.0
$15.0 $15.0
$13.7
$11.2 $11.2
$11.9
$13.6
Note: Adjusted EBITDA is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide
of this supplementary information
9
Lasting relationships. Global success.Lasting relationships. Global success.
Return on Invested Capital
(Excludes spin-off costs)
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
R
O
IC
%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
11.6% 11.8%
12.4% 12.5%
7.9% 7.7%
8.7% 9.0%
Notes: We define ROIC as after tax annualized adjusted operating income divided by average invested capital;
ROIC is a Non-GAAP measure - refer to Reconciliation of Non-GAAP Results on the final slide of this
supplementary information
(Unaudited)
10
Lasting relationships. Global success.Lasting relationships. Global success.
Operating Cash Flow
(Unaudited)
$20.0
$15.0
$10.0
$5.0
$0.0
-$5.0
-$10.0
In
M
illi
on
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
($4.5)
$8.0 $7.7
$16.8
($0.5)
$16.8
$11.7
$8.8
11
Lasting relationships. Global success.Lasting relationships. Global success.
Capital Expenditures and
Depreciation & Amortization
(Unaudited)
Cap Ex Depr & Amort
$15.0
$13.0
$11.0
$9.0
$7.0
$5.0
$3.0
In
M
illi
on
s
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
$7.9
$9.0
$6.1
$13.9
$11.3
$8.2
$8.6
$6.5
$4.8 $5.0 $4.8 $5.0 $4.9 $4.9 $4.6
$5.5
Note: Capital Expenditures include purchases of capitalized software.
12
Lasting relationships. Global success.Lasting relationships. Global success.
Reconciliation of Non-GAAP Results
(Unaudited) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
Operating Income, as Reported $ 7,787 $ 8,697 $ 10,821 $ 9,050 $ 6,921 $ 6,933 $ 7,078 $ 8,790
Add: Spin-off Expenses 964 1,285 321 24 137 0 0 0
Adjusted Operating Income $ 8,751 $ 9,982 $ 11,142 $ 9,074 $ 7,058 $ 6,933 $ 7,078 $ 8,790
Net Income, as reported $ 5,391 $ 6,229 $ 7,191 $ 7,394 $ 4,475 $ 4,564 $ 7,477 $ 5,771
Add: Spin-off Expenses 964 1,168 278 16 85 0 0 0
Adjusted Net Income $ 6,355 $ 7,397 $ 7,469 $ 7,410 $ 4,560 $ 4,564 $ 7,477 $ 5,771
Adjusted Net Income $ 6,355 $ 7,397 $ 7,469 $ 7,410 $ 4,560 $ 4,564 $ 7,477 $ 5,771
Add(Less) Interest, net 0 (7) (10) (8) (11) (8) 1 19
Add Depreciation & Amortization 4,794 5,023 4,832 4,958 4,885 4,894 4,557 5,533
Add(Less) Taxes 1,899 2,622 2,744 1,301 1,780 1,781 (166) 2,294
Adjusted EBITDA $ 13,048 $ 15,035 $ 15,035 $ 13,661 $ 11,214 $ 11,231 $ 11,869 $ 13,617
Operating Income, As Reported (YTD) $ 7,787 $ 16,484 $ 27,305 $ 36,355 $ 6,921 $ 13,854 $ 20,932 $ 29,722
Add: Spin-off Expenses (YTD) $ 964 $ 2,249 $ 2,571 $ 2,594 $ 137 $ 137 $ 137 $ 137
Adjusted Operating Income (YTD) $ 8,751 $ 18,733 $ 29,876 $ 38,949 $ 7,058 $ 13,991 $ 21,069 $ 29,859
Annualized Adjusted Operating Income $ 35,004 $ 37,466 $ 39,835 $ 28,232 $ 27,982 $ 28,092
Tax Rate 22.7% 25.5% 26.3% 23.4% 28.8% 29.2% 19.5% 20.4%
Tax Effect $ 7,946 $ 9,554 $ 10,477 $ 9,114 $ 8,131 $ 8,171 $ 5,478 $ 6,091
After Tax Adjusted Operating Income (YTD) $ 27,058 $ 27,912 $ 29,358 $ 29,835 $ 20,101 $ 19,811 $ 22,614 $ 23,768
Average Invested Capital * $ 233,902 $ 236,021 $ 237,512 $ 239,463 $ 255,406 $ 256,785 $ 259,557 $ 263,371
ROIC 11.6% 11.8% 12.4% 12.5% 7.9% 7.7% 8.7% 9.0%
13* Average Invested Capital is computed using the average quarterly Share Owners equity plus current and non-current debt less cash and cash equivalents.