• First quarter revenue increased 55% to $2.079 billion (increased 46% on a constant currency basis) compared to the prior year period and exceeded guidance
  • Revenue in the Company’s international businesses exceeded 2019 pre-pandemic levels
  • Revenue through digital channels grew approximately 95%, with sales through its directly operated digital commerce businesses up 66% as compared to the prior year period
  • Digital penetration as a percentage of total revenue was approximately 25%
• Gross margin expansion experienced across all regions and brand businesses, with overall gross margin for the quarter exceeding 2019 pre-pandemic levels
• First quarter EPS exceeded guidance and was:
  • GAAP basis: $1.38 compared to guidance of $0.28 to $0.31
  • Non-GAAP basis: $1.92 compared to guidance of $0.80 to $0.83
• The Company is raising its full year 2021 EPS outlook despite continued uncertainty due to the COVID-19 pandemic globally:
  • GAAP basis: Raised to approximately $5.50 from approximately $5.00 previously
  • Non-GAAP basis: Raised to approximately $6.50 from approximately $6.00 previously
• The Company made $500 million of voluntary term loan payments during the first quarter and ended the quarter with over $2.4 billion of liquidity

PVH Corp. [NYSE: PVH] reported its 2021 first quarter results.

Non-GAAP Amounts:

Amounts stated to be on a non-GAAP basis exclude the items that are defined or described in greater detail near the end of this release under the heading “Non-GAAP Exclusions.” Reconciliations of amounts on a GAAP basis to amounts on a non-GAAP basis are presented after the “Non-GAAP Exclusions” and identify and quantify all excluded items.

CEO Comments:

Stefan Larsson, Chief Executive Officer, commented “We are very pleased with our first quarter 2021 results, which significantly exceeded our expectations, and reflect our team’s strong execution of our accelerated recovery priorities across our businesses globally – focused on the Calvin Klein and TOMMY HILFIGER brands, our international markets, driving product strength with increased pricing power and margin expansion, and winning in the marketplace through super-charging e-commerce.”

Mr. Larsson added, “Looking ahead, we are increasing our full year outlook despite continued uncertainty in the macro environment, as we navigate through the pandemic and related supply chain disruptions. We are confident in our ability to drive towards an accelerated recovery in a way that positions PVH closer to the consumer than any time before. Our focus on the consumer, while leaning into our core strengths, combined with a more demand and data-driven way of driving profitable market share growth, forms a very strong foundation for long-term sustainable growth.”

First Quarter Review:

• Revenue: Overall revenue for the first quarter increased 55% (increased 46% on a constant currency basis) compared to the prior year period, driven by growth across all regions and channels. The prior year period was negatively impacted by extensive temporary store closures, as virtually all of the Company’s retail stores and its wholesale customers’ stores globally were closed for six weeks on average.
  
  
  
  
  • Direct to Consumer: Total direct to consumer revenue for the first quarter increased 66% compared to the prior year period, which included a 66% increase in digital commerce. The Company’s retail stores continued to face pressure during the first quarter as a result of the pandemic, although to a much lesser extent than in the prior year period, with a significant percentage of the Company’s retail stores having been temporarily closed in Europe, Canada and Japan. All regions and brand businesses experienced strong digital growth due, in part, to the continued store closures, particularly in Europe.
    
    
    
    
  • Wholesale: The Company’s wholesale revenue for the first quarter increased 53% compared to the prior year period, driven by strong performance in Europe, and included a significant increase in the Company’s sales to the digital businesses of its traditional and pure play wholesale customers. The strong performance in Europe during the quarter was due, in part, to an unplanned shift in the timing of wholesale shipments from the second quarter into the first quarter.
    
    
    
    
• Gross Margin: The Company’s gross margin in the first quarter was 59.1% as compared to 49.5% in the prior year period, with improvements across all regions and brand businesses. The increase was primarily due to less promotional selling, a favorable shift in regional sales mix and the absence of significant inventory reserves that had been recorded in the prior year period. The Company continues to tightly manage its inventory, which decreased 7% as of the end of the first quarter compared to the prior year period.

First Quarter Consolidated Results:

First quarter revenue increased 55% to $2.079 billion (increased 46% on a constant currency basis) compared to the prior year period. The revenue increase compared to the prior year period reflects:

• A 63% increase (52% increase on a constant currency basis) in the Tommy Hilfiger business compared to the prior year period, including a 78% increase (63% increase on a constant currency basis) in Tommy Hilfiger International revenue and a 25% increase (24% increase on a constant currency basis) in Tommy Hilfiger North America revenue.
• A 65% increase (56% increase on a constant currency basis) in the Calvin Klein business compared to the prior year period, including a 91% increase (77% increase on a constant currency basis) in Calvin Klein International revenue and a 27% increase (26% increase on a constant currency basis) in Calvin Klein North America revenue.
• A 9% increase in the Heritage Brands business compared to the prior year period, which includes a reduction of 14% resulting from the sale of the Company’s Speedo North America business in April 2020.

Earnings per share on a GAAP basis was $1.38 for the first quarter of 2021 compared to a loss per share of $(15.37) in the prior year period. The prior year period included $962 million of pre-tax noncash impairment charges resulting from the impact of the COVID-19 pandemic on the Company’s business. These results include these charges and other amounts for the applicable period that are excluded from earnings per share and loss per share on a non-GAAP basis for these periods.

Earnings per share on a non-GAAP basis was $1.92 for the first quarter of 2021 compared to a loss per share of $(3.03) in the prior year period.

Earnings before interest and taxes on a GAAP basis for the quarter was $197 million compared to a loss before interest and taxes of $(1.218) billion in the prior year period. Included in earnings before interest and taxes for the first quarter of 2021 were costs of $51 million consisting of (i) $43 million in connection with actions to streamline the Company’s organization through reductions in its workforce, primarily in certain international markets, and to reduce its real estate footprint, including reductions in office space and select store closures (in addition to the exit from the Heritage Brands Retail business described below), consisting of $28 million of noncash asset impairments, $12 million of severance, and $3 million of contract termination and other costs and (ii) $8 million in connection with the exit from the Heritage Brands Retail business announced in July 2020, consisting of $5 million of severance and other termination benefits and $3 million of accelerated amortization of lease assets. Included in loss before interest and taxes for the prior year period were costs of $972 million consisting of (i) $962 million of noncash impairments resulting from the impact of the COVID-19 pandemic on the Company’s business, (ii) $7 million in connection with a consolidation within the Company’s warehouse and distribution network in North America, and (iii) a $3 million noncash net loss in connection with the Speedo transaction and the resulting deconsolidation of the net assets of the Speedo North America business. Earnings before interest and taxes and loss before interest and taxes on a non-GAAP basis for these periods, as discussed below, exclude these amounts.

Earnings before interest and taxes on a non-GAAP basis for the quarter was $249 million compared to a loss before interest and taxes of $(247) million in the prior year period. The increase was primarily driven by the revenue increase and gross margin improvements discussed above, as well as a leveraging of expenses across all regions and brand businesses. Earnings for the first quarter of 2021 also benefited from net cost savings resulting from (i) the North America workforce reduction announced in July 2020, (ii) the absence in the first quarter of 2021 of accounts receivable losses recorded in the prior year period as a result of the COVID-19 pandemic, partially offset by (iii) a reduction in the first quarter of 2021 of COVID-related government payroll subsidy programs in international jurisdictions as compared to the prior year period.

Net interest expense on a GAAP basis increased to $29 million from $21 million in the prior year period. Included in net interest expense for the prior year period was $4 million of income resulting from the remeasurement of a mandatorily redeemable non-controlling interest that was recognized in connection with the Australia acquisition. Net interest expense on a non-GAAP basis for the prior year period excludes this amount. The net interest expense of $29 million on a GAAP basis (there were no non-GAAP exclusions in the first quarter of 2021) is an increase from $25 million on a non-GAAP basis in the prior year period, primarily due to the impact of (i) the issuance of an additional €175 million of 3 5/8% senior notes in April 2020 and $500 million of 4 5/8% senior notes in July 2020, partially offset by (ii) $500 million of voluntary debt payments made during the first quarter of 2021.

The effective tax rate on a GAAP basis for the first quarter of 2021 was 40.7% as compared to 11.5% in the prior year period. The effective tax rate on a non-GAAP basis for the first quarter of 2021 was 36.8% as compared to 20.2% in the prior year period.

2021 Outlook:

The Company is providing its 2021 outlook despite the continued uncertainty due to the COVID-19 pandemic globally and, as such, it could be subject to material change. The Company’s 2021 outlook does not contemplate any new store closures, new lockdowns, or extensions of current lockdowns beyond what is already known. In addition, the Company’s 2021 outlook contemplates for certain inventory orders delays of approximately four to six weeks on average, but does not contemplate any greater supply chain disruptions beyond that. The Company’s 2021 results could differ materially from its current outlook as a result of the occurrence of any of these uncontemplated events.

The Company expects its 2021 revenue and earnings will continue to be impacted negatively by the pandemic. The Company’s international businesses have exceeded and are expected to continue to exceed 2019 pre-pandemic revenue levels for the remainder of 2021. The North America businesses are expected to remain challenged throughout 2021, as international tourism, which is the source of a significant portion of regional revenue, is not expected to return to any significant level this year. In addition, both the Company’s GAAP and non-GAAP outlook reflect approximately $20 million of estimated operating losses associated with the wind down of the Heritage Brands Retail business in the first half of the year.

The Company continues to tightly manage its inventory and expects gross margin to improve in 2021 compared to 2020 due to less promotional selling. However, gross margin improvements for the remainder of the year, as compared to the gross margin improvement in the first quarter of 2021, will not be as pronounced due, in part, to a less favorable shift in regional sales mix.

The Company continues to manage its cost structure proactively, including reducing operating expenses and reallocating resources to support strategic growth areas of the business.

Full Year Guidance

Revenue in 2021 is projected to increase 24% to 26% (increase 21% to 23% on a constant currency basis) as compared to 2020.

The Company currently projects that 2021 earnings per share on a GAAP basis will be approximately $5.50 compared to a loss per share of $(15.96) in 2020. The Company currently projects that 2021 earnings per share on a non-GAAP basis will be approximately $6.50 compared to a loss per share of $(1.97) in 2020.

The Company estimates that the 2021 effective tax rate will be in a range of 17.5% to 19%.

The Company’s estimate of 2021 earnings per share on a non-GAAP basis excludes (i) approximately $70 million of costs expected to be incurred in connection with actions to streamline its organization through reductions in its workforce, primarily in certain international markets, and to reduce its real estate footprint, including reductions in office space and select store closures, and (ii) approximately $21 million of costs expected to be incurred in connection with the exit from the Heritage Brands Retail business.

Second Quarter Guidance

Revenue in the second quarter of 2021 is projected to increase 34% to 36% (increase 29% to 31% on a constant currency basis) compared to the prior year period.

The Company currently projects that second quarter 2021 earnings per share on a GAAP basis will be in a range of $0.79 to $0.82 compared to loss per share of $(0.72) in the prior year period. The Company currently projects that second quarter 2021 earnings per share on a non-GAAP basis will be in a range of $1.15 to $1.18 compared to $0.13 in the prior year period.

The Company estimates that the second quarter 2021 effective tax rate will be in a range of 44% to 46% on a GAAP basis and in a range of 36% to 38% on a non-GAAP basis.

The Company’s estimate of second quarter 2021 earnings per share on a non-GAAP basis excludes (i) approximately $15 million of costs expected to be incurred in connection with the previously described actions to streamline its organization and reduce its real estate footprint and (ii) approximately $13 million of costs expected to be incurred in connection with the exit from the Heritage Brands Retail business.

Please see the section entitled “Full Year and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” at the end of this release for further detail and reconciliations of GAAP to non-GAAP amounts discussed in this section.

Non-GAAP Exclusions:

The discussions in this release that refer to non-GAAP amounts exclude the following:

• Pre-tax costs of $70 million incurred and expected to be incurred in 2021 in connection with actions to streamline the Company’s organization through reductions in its workforce, primarily in certain international markets, and to reduce its real estate footprint, including reductions in office space and select store closures, consisting of noncash asset impairments, severance, and contract termination and other costs, of which $43 million was incurred in the first quarter and approximately $15 million is expected to be incurred in the second quarter.
• Pre-tax costs of $21 million incurred and expected to be incurred in 2021 in connection with the exit from the Heritage Brands Retail business announced in July 2020 and expected to be completed by mid-2021, consisting of severance and other termination benefits, accelerated amortization of lease assets and contract termination and other costs, of which $8 million was incurred in the first quarter and approximately $13 million is expected to be incurred in the second quarter.
• Pre-tax noncash impairment charges of $1.021 billion recorded in 2020, primarily resulting from the impact of the COVID-19 pandemic on the Company’s business, including $933 million related to goodwill and other intangible assets, $75 million related to store assets, and $12 million related to an equity method investment, of which $962 million was recorded in the first quarter and $59 million was recorded in the fourth quarter.
• Pre-tax costs of $7 million incurred in the first quarter of 2020 in connection with a consolidation within the Company’s warehouse and distribution network in North America.
• Pre-tax noncash net loss of $3 million recorded in the first quarter of 2020 related to the April 2020 sale of the Company’s Speedo North America business to Pentland Group PLC, the parent company of the Speedo brand (the “Speedo transaction”) and the resulting deconsolidation of the net assets of the Speedo North America business.
• Pre-tax expense of $5 million recorded in 2020 resulting from the remeasurement of a mandatorily redeemable non-controlling interest that was recognized in connection with the Company’s acquisition of the approximately 78% interest in Gazal Corporation Limited that it did not already own (the “Australia acquisition”), of which $4 million of income was recorded in the first quarter, $5 million of expense was recorded in the second quarter, $1 million of expense was recorded in the third quarter and $3 million of expense was recorded in the fourth quarter.
• Pre-tax costs of $40 million incurred in 2020 related to the reduction in the Company’s North America office workforce announced in July 2020 (the “North America workforce reduction”), primarily consisting of severance, of which $38 million was recorded in the second quarter and $1 million was recorded in the third quarter.
• Pre-tax costs of $29 million incurred in 2020 in connection with the exit from the Heritage Brands Retail business announced in July 2020 and expected to be completed by mid-2021, consisting of $15 million of severance, $7 million of noncash asset impairments and $7 million of accelerated amortization of lease assets and other costs, of which $12 million was incurred in the second quarter, $9 million was incurred in the third quarter and $8 million was incurred in the fourth quarter.
• Pre-tax gain of $65 million recorded in the fourth quarter of 2020 related to the recognized actuarial gain on retirement plans.
• Discrete tax expense of $33 million recorded in the fourth quarter of 2020 related to the remeasurement of certain of the Company’s net deferred tax liabilities in connection with the enactment of legislation in the Netherlands known as the “2021 Dutch Tax Plan,” which became effective on January 1, 2021.
• Estimated tax effects associated with the above pre-tax items, which are based on the Company’s assessment of deductibility. In making this assessment, the Company evaluated each item that it had identified above as a non-GAAP exclusion to determine if such item is taxable or tax deductible, and if so, in what jurisdiction the tax expense or tax deduction would occur. All items above were identified as either primarily taxable or tax deductible, with the tax effect taken at the applicable income tax rate in the local jurisdiction, or as non-taxable or non-deductible, in which case the Company assumed no tax effect.

As a supplement to the Company’s GAAP results, the Company presents constant currency revenue information, which is a non-GAAP financial measure. The Company presents results in this manner because it is a global company that transacts business in multiple currencies but reports financial information in U.S. dollars. Foreign currency exchange rate fluctuations affect the amounts reported by the Company in U.S. dollars with respect to its foreign revenues. Exchange rate fluctuations can have a significant effect on reported revenues. The Company believes presenting constant currency revenue information provides useful information to investors, as it provides information to assess how its businesses performed excluding the effects of changes in foreign currency exchange rates and assists investors in evaluating the effectiveness of the Company’s operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.

The Company calculates constant currency revenue information by translating its foreign revenues for the relevant period into U.S. dollars at the average exchange rates in effect during the comparable prior year period (rather than at the actual exchange rates in effect during the relevant period).

Constant currency performance should be viewed in addition to, and not in lieu of or as superior to, the Company’s operating performance calculated in accordance with GAAP. The constant currency revenue information presented may not be comparable to similarly described measures reported by other companies.

Please see Tables 1 through 8 and the sections entitled “Reconciliations of 2021 Constant Currency Revenue” and “Full Year and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” later in this release for reconciliations of GAAP to non-GAAP amounts.

The Company webcasts its conference calls to review its earnings releases. The Company’s conference call to review its first quarter earnings release is scheduled for Thursday, June 3, 2021 at 9:00 a.m. EDT. Please log on to the Company’s web site at www.PVH.com and go to the Events page included in the Investors section to listen to the live webcast of the conference call. The webcast will be available for replay for one year after it is held, commencing approximately two hours after the live broadcast ends. Please log on to www.PVH.com as described above to listen to the replay. In addition, an audio replay of the conference call is available for 48 hours starting approximately two hours after it is held. The replay of the conference call can be accessed by calling (domestic) 888-203-1112 and (international) 719-457-0820 and using passcode 1827889. The conference call and webcast consist of copyrighted material. They may not be re-recorded, reproduced, re-transmitted, rebroadcast or otherwise used without the Company’s express written permission. Your participation represents your consent to these terms and conditions, which are governed by New York law.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this press release and made during the conference call/webcast, including, without limitation, statements relating to the Company’s future revenue, earnings, plans, strategies, objectives, expectations and intentions are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated, including, without limitation, (i) the Company’s plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the Company’s ability to realize anticipated benefits and savings from restructuring and similar plans, such as the workforce reductions in North America and certain international markets, the exit from the Heritage Brands Retail business by mid-2021 and the reductions in its office and store real estate footprint, all as previously announced; (iii) the Company may be considered to be highly leveraged and uses a significant portion of its cash flows to service its indebtedness, as a result of which the Company might not have sufficient funds to operate its businesses in the manner it intends or has operated in the past; (iv) the levels of sales of the Company’s apparel, footwear and related products, both to its wholesale customers and in its retail stores and its directly operated digital commerce sites, the levels of sales of the Company’s licensees at wholesale and retail, and the extent of discounts and promotional pricing in which the Company and its licensees and other business partners are required to engage, all of which can be affected by weather conditions, changes in the economy, fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, repositionings of brands by the Company’s licensors, consumer sentiment and other factors; (v) the Company’s ability to manage its growth and inventory; (vi) quota restrictions, the imposition of safeguard controls and the imposition of new or increased duties or tariffs on goods from the countries where the Company or its licensees produce goods under its trademarks, any of which, among other things, could limit the ability to produce products in cost-effective countries, or in countries that have the labor and technical expertise needed, or require the Company to absorb costs or try to pass costs onto consumers, which could materially impact the Company’s revenue and profitability; (vii) the availability and cost of raw materials; (viii) the Company’s ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where the Company’s products can best be produced); (ix) the regulation or prohibition of the transaction of business with specific individuals or entities and their affiliates or goods manufactured in (or containing raw materials or components from) certain regions, such as the listing of a person or entity as a Specially Designated National or Blocked Person by the U.S. Department of the Treasury’s Office of Foreign Assets Control and the issuance of Withhold Release Orders by the U.S. Customs and Border Patrol; (x) changes in available factory and shipping capacity, wage and shipping cost escalation, civil conflict, war or terrorist acts, the threat of any of the foregoing, or political or labor instability in any of the countries where the Company’s or its licensees’ or other business partners’ products are sold, produced or are planned to be sold or produced; (xi) disease epidemics and health-related concerns, such as the ongoing COVID-19 pandemic, which could result in (and, in the case of the COVID-19 pandemic, has resulted in some of the following) supply-chain disruptions due to closed factories, reduced workforces and production capacity, scarcity of raw materials and scrutiny or embargoing of goods produced in affected areas, closed stores, reduced consumer traffic and purchasing, as consumers become ill or limit or cease shopping in order to avoid exposure, or governments implement mandatory business closures, travel restrictions or the like to prevent the spread of disease, and market or other changes that could result (or, with respect to the COVID-19 pandemic, could continue to result) in noncash impairments of the Company’s goodwill and other intangible assets, operating lease right-of-use assets, and property, plant and equipment; (xii) acquisitions and divestitures and issues arising with acquisitions, divestitures and proposed transactions, including, without limitation, the ability to integrate an acquired entity or business into the Company with no substantial adverse effect on the acquired entity’s, the acquired business’s or the Company’s existing operations, employee relationships, vendor relationships, customer relationships or financial performance, and the ability to operate effectively and profitably the Company’s continuing businesses after the sale or other disposal of a subsidiary, business or the assets thereof; (xiii) the failure of the Company’s licensees to market successfully licensed products or to preserve the value of the Company’s brands, or their misuse of the Company’s brands; (xiv) significant fluctuations of the U.S. dollar against foreign currencies in which the Company transacts significant levels of business; (xv) the Company’s retirement plan expenses recorded throughout the year are calculated using actuarial valuations that incorporate assumptions and estimates about financial market, economic and demographic conditions, and differences between estimated and actual results give rise to gains and losses, which can be significant, that are recorded immediately in earnings, generally in the fourth quarter of the year; (xvi) the impact of new and revised tax legislation and regulations; and (xvii) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”).

This press release includes, and the conference call/webcast will include, certain non-GAAP financial measures, as defined under SEC rules. Reconciliations of these measures are included in the financial information following this Safe Harbor Statement, as well as in the Company’s Current Report on Form 8-K furnished to the SEC in connection with this earnings release, which is available on the Company’s website at www.PVH.com and on the SEC’s website at www.sec.gov.

The Company does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimate regarding revenue or earnings, whether as a result of the receipt of new information, future events or otherwise.

Please see following pages for information related to non-GAAP measures discussed in this release.

PVH CORP.

Non-GAAP Measures

The Company believes it is useful to investors to present its results for the quarters ended May 2, 2021 and May 3, 2020 on a non-GAAP basis by excluding (i) the costs incurred in the first quarter of 2021 related to the exit from the Heritage Brands Retail business, consisting of severance and other termination benefits and accelerated amortization of lease assets; (ii) the costs incurred in the first quarter of 2021 in connection with actions announced in March 2021 to streamline the Company’s organization through reductions in its workforce, primarily in certain international markets, and to reduce its real estate footprint, including reductions in office space and select store closures, consisting of noncash asset impairments, severance, and contract termination and other costs; (iii) the noncash impairment charges recorded in the first quarter of 2020 related to store assets as a result of the significant negative impacts of the COVID-19 pandemic on the Company's business, consisting of property, plant and equipment; (iv) the noncash impairment charges recorded in the first quarter of 2020 related to goodwill, tradenames, and other intangible assets, as well as an equity method investment, as a result of the significant negative impacts of the COVID-19 pandemic on the Company’s business; (v) the noncash net loss recorded in the first quarter of 2020 related to the sale of the Speedo North America business in April 2020 (the “Speedo transaction”) and the resulting deconsolidation of the net assets of the business; (vi) the costs incurred in the first quarter of 2020 in connection with the consolidation within the Company’s warehouse and distribution network in North America; (vii) the income recorded in the first quarter of 2020 resulting from the remeasurement of a mandatorily redeemable non-controlling interest that was recognized in connection with the acquisition of the approximately 78% interest in Gazal Corporation Limited that the Company did not already own (the “Australia acquisition”); and (viii) the tax effects associated with the foregoing pre-tax items. The Company excludes these amounts because it deems them to be non-recurring or non-operational and believes that their exclusion (i) facilitates comparing the results being reported against past and future results by eliminating amounts that it believes are not comparable between periods, thereby permitting management to evaluate performance and investors to make decisions based on the ongoing operations of the Company, and (ii) assists investors in evaluating the effectiveness of the Company’s operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. The Company believes that investors often look at ongoing operations of an enterprise as a measure of assessing performance. The Company uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company’s Board of Directors and others. The Company’s results excluding the items described above are also the basis for certain incentive compensation calculations. The non-GAAP measures should be viewed in addition to, and not in lieu of or superior to, the Company’s operating performance measures calculated in accordance with GAAP. The information presented on a non-GAAP basis may not be comparable to similarly titled measures reported by other companies.

Note: Year over year balances are impacted by changes in foreign currency exchange rates.