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8-K - FORM 8-K - SIRONA DENTAL SYSTEMS, INC.d390931d8k.htm

Exhibit 99.1

 

LOGO

Sirona Reports Fiscal 2012 Third Quarter Results

 

   

Third quarter revenues of $242.0 million, down 1.1% compared to prior year, but up 7.0% constant currency.

 

   

Third quarter operating income, excluding amortization* of $11.9 million, totaled $57.8 million, compared to $60.4 million in the prior year.

 

   

Management now anticipates FY12 constant currency revenue growth to be in the range of 8% to 10% (previously at the upper-end of 6% to 8%). OI plus amortization now expected to be in the range of $228 to $232 million (previously $227 to $234 million).

Long Island City, New York, August 3, 2012 – Sirona (Nasdaq: SIRO), the dental technology leader, today announced its financial results for the quarter ended June 30, 2012.

Third Quarter Fiscal 2012 vs. Third Quarter Fiscal 2011 Financial Results

Revenue was $242.0 million, a decrease of $2.7 million or down 1.1% (but up 7.0% on a constant currency basis). The Company’s business segments grew as follows: CAD/CAM Systems increased 2.7% (up 9.5% on a constant currency basis), Treatment Centers increased 1.3% (up 13.3% on a constant currency basis), Imaging Systems decreased 3.4% (up 2.8% on a constant currency basis), and Instruments decreased 10.0% (up 0.6% on a constant currency basis).

Revenue in the United States increased 7.7%, while revenues outside the United States decreased 4.6% (up 6.6% constant currency), with particularly robust performance in the Asia-Pacific region.

Gross profit was $128.4 million, up $1.6 million. Gross profit margin was 53.1% in the third quarter of Fiscal 2012, compared to 51.8% in the prior year. Gross profit margin as a percent of sales was positively impacted by lower amortization.

Third quarter 2012 operating income excluding amortization expense was $57.8 million (operating income of $45.9 million plus amortization expense of $11.9 million, compared to $60.4 million (operating income of $46.4 million plus amortization expense of $14.1 million) in the third quarter of 2011.

Net income for the third quarter of 2012 was $30.3 million, or $0.53 per diluted share, versus $36.3 million, or $0.63 per diluted share in the prior year period. Non-GAAP earnings per diluted share for the third quarter of 2012 was $0.80 compared to $0.78 in the prior year quarter.

 

* Operating income plus amortization and constant currency growth and results are non-GAAP financial measures that exclude certain items. Please refer to “Reconciliation of GAAP and non-GAAP Information (unaudited)” in the attached exhibits for a description of these items.

 

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At June 30, 2012, the Company had cash and cash equivalents of $104.6 million and total debt of $79.0 million, resulting in net cash of $25.6 million. This compares to net debt of $22.5 million at September 30, 2011.

Jost Fischer, Chairman and CEO of Sirona commented: “I am very pleased to report solid results for the third quarter of fiscal 2012. Our 7.0% constant currency revenue growth was particularly noteworthy compared to a record setting third quarter of fiscal 2011. Last year we grew 24.0% constant currency in the third quarter, benefitting from the International Dental Show and numerous product launches.”

Mr. Fischer continued: “Treatment Centers and CAD/CAM led our growth, up 13.3% and 9.5% respectively on a constant currency basis. Revenue growth was particularly strong in non-European international markets, led again by Asia-Pacific. The U.S. continues to improve for us, up a robust 7.7%. These results validate our strategy to invest in our global sales and service infrastructure with innovation as our top priority. We expect our momentum to continue into the fourth quarter as reflected in our increased revenue guidance.”

Fiscal 2012 Guidance

Management now anticipates fiscal year 2012 constant currency revenue growth to be in the range of 8% to 10% (previously at the upper-end of the announced guidance range of 6% to 8%). Operating income plus amortization is now expected to be in the range of $228 to $232 million (previously $227 to $234 million).

First Nine Months Fiscal 2012 vs. First Nine Months Fiscal 2011 Financial Results

Revenue was $732.0 million, an increase of $36.9 million or up 5.3% (up 9.3% on a constant currency basis). The Company’s business segments grew as follows: Imaging Systems increased 7.6% (up 10.7% on a constant currency basis), Treatment Centers increased 5.3% (up 11.1% on a constant currency basis), CAD/CAM Systems increased 4.8% (up 8.2% on a constant currency basis), and Instruments decreased 0.1% (up 5.4% on a constant currency basis).

Revenue in the United States increased 4.9%, while revenues outside the United States increased 5.5% (up 11.2% constant currency), with particularly robust performance in the Asia-Pacific region.

Gross profit was $391.9 million, up $18.9 million. Gross profit margin was 53.5% in the first nine months of Fiscal 2012, compared to 53.7% in the prior year. Gross profit margin as a percent of sales was positively impacted by lower amortization.

For the first nine months of Fiscal 2012 operating income excluding amortization expense was $176.6 million (operating income of $140.3 million plus amortization expense of $36.2 million), compared to $177.0 million (operating income of $135.9 million plus amortization expense of $41.1 million) in the first nine months of Fiscal 2011.

 

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Conference Call/Webcast Information

Sirona will hold a conference call to discuss its financial results at 8:30 a.m. Eastern Time on August 3, 2012. The teleconference can be accessed by calling +1 866.783.2144 (domestic) or +1 857.350.1603 (international) using passcode # 71442427. The webcast will be available via the Internet at http://ir.sirona.com and a presentation relating to the call will be available on our website. A replay of the conference call will be available through August 10, 2012 by calling +1 888 286 8010 (domestic) or +1 617 801 6888 (international) using passcode # 48436638. A web archive will be available for 30 days at www.sirona.com.

About Sirona Dental Systems, Inc.

Sirona, the dental technology leader, has served dealers and dentists worldwide for more than 130 years. Sirona develops, manufactures, and markets a complete line of dental products, including CAD/CAM restoration systems (CEREC), digital intra-oral, panoramic and 3D imaging systems, dental treatment centers and handpieces. Visit http://www.sirona.com for more information about Sirona and its products.

Contact information:

Joshua Zable

Vice President, Investor Relations

+1 718 482 2184

joshua.zable@sirona.com

This press release contains forward-looking information about Sirona Dental Systems, Inc.’s financial results, guidance and estimates, business prospects, and products and services that involve substantial risks and uncertainties or other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You can identify these statements by the use of words such as “may,” “could,” “estimate,” “will,” “believe,” “anticipate,” “think,” “intend,” “expect,” “project,” “plan,” “target,” “forecast”, and similar words and expressions which identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and involve known and unknown risks and uncertainties, and other factors. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date hereof. For a discussion of such risks, uncertainties and other matters that could cause actual results to differ materially, including risks relating to, among other factors, the market for dental product and services, pricing, future sales volume of the Company’s products, the possibility of changing economic, market and competitive conditions, dependence on products, dependence on key personnel, technological developments, intense competition, market uncertainties, dependence on distributors, ability to manage growth, dependence on key suppliers, dependence on key members of management, government regulation, acquisitions and affiliations and currency exchange rate fluctuations, readers are urged to carefully review and consider various disclosures made by the Company in its Annual Report on Form 10-K and in its reports on Forms 10-Q and 8-K filed with the U.S. Securities and Exchange Commission, which can be accessed through the SEC’s website, www.sec.gov. This presentation contains non GAAP financial measures, which should not be viewed in

 

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isolation and do not purport to be an alternative to net income (loss) as an indicator of operating performance or an alternative to cash flows from operating activities as a measure of liquidity. The Company assumes no obligation to and expressly disclaims any obligation to update or revise any forward-looking statements contained in this document to reflect new information or future events or developments after the date any such statement is made.

 

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SIRONA DENTAL SYSTEMS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

 

     Three months ended
June 30,
    Nine months ended
June 30,
 
     2012     2011     2012     2011  
     $’000s (except per share amounts)     $’000s (except per share amounts)  

Revenue

   $ 242,007      $ 244,686      $ 731,987      $ 695,069   

Cost of sales

     113,567        117,854        340,115        322,134   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     128,440        126,832        391,872        372,935   

Selling, general and administrative expense

     72,434        68,540        218,747        202,444   

Research and development

     13,092        14,390        40,016        42,045   

Provision for doubtful accounts and notes receivable

     (504     13        263        34   

Net other operating income

     (2,500     (2,500     (7,500     (7,500
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     45,918        46,389        140,346        135,912   

Loss/(gain) on foreign currency transactions, net

     2,675        (3,435     6,255        (8,532

Loss on derivative instruments

     2,686        1,081        186        1,162   

Interest expense, net

     866        984        2,783        2,863   

Other expense/(income)

     (218     383        272        (140
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

     39,909        47,376        130,850        140,559   

Income tax provision

     9,180        10,423        30,096        30,923   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     30,729        36,953        100,754        109,636   

Less: Net income attributable to noncontrolling interests

     431        622        1,658        1,601   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Sirona Dental Systems, Inc.

   $ 30,298      $ 36,331      $ 99,096      $ 108,035   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income per share (attributable to Sirona Dental Systems, Inc. common shareholders):

        

- Basic

   $ 0.55      $ 0.65      $ 1.78      $ 1.94   

- Diluted

   $ 0.53      $ 0.63      $ 1.74      $ 1.89   

Weighted average shares - basic

     55,507,312        55,992,911        55,721,869        55,619,151   

Weighted average shares - diluted

     56,717,943        57,577,513        56,939,621        57,246,485   

 

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SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     June 30,
2012
    September 30,
2011
 
     (unaudited)        
     $’000s (except per share amounts)  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 104,600      $ 345,859   

Accounts receivable, net of allowance for doubtful accounts of $1,575 and $1,868, respectively

     117,491        97,853   

Inventories, net

     89,451        93,028   

Deferred tax assets

     24,501        25,014   

Prepaid expenses and other current assets

     11,772        15,477   

Income tax receivable

     2,953        4,193   
  

 

 

   

 

 

 

Total current assets

     350,768        581,424   

Property, plant and equipment, net of accumulated depreciation and amortization of $122,694 and $111,832, respectively

     130,048        131,044   

Goodwill

     617,518        653,799   

Investments

     2,507        2,453   

Restricted cash

     —          655   

Intangible assets, net of accumulated amortization of $425,707 and $412,428, respectively

     295,130        346,442   

Other non-current assets

     9,141        2,884   

Deferred tax assets

     8,357        7,427   
  

 

 

   

 

 

 

Total assets

   $ 1,413,469      $ 1,726,128   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities

    

Trade accounts payable

   $ 40,262      $ 48,697   

Short-term debt and current portion of long-term debt

     4,017        368,403   

Income taxes payable

     11,932        6,811   

Deferred tax liabilities

     250        1,108   

Accrued liabilities and deferred income

     94,592        110,207   
  

 

 

   

 

 

 

Total current liabilities

     151,053        535,226   

Long-term debt

     75,000        —     

Deferred tax liabilities

     122,218        138,327   

Other non-current liabilities

     18,613        16,978   

Pension related provisions

     46,372        49,677   

Deferred income

     42,500        50,000   
  

 

 

   

 

 

 

Total liabilities

     455,756        790,208   
  

 

 

   

 

 

 

Shareholders’ equity

    

Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued and outstanding)

     0        0   

Common stock ($0.01 par value; 95,000,000 shares authorized;

    

56,478,084 shares issued and 55,270,838 shares outstanding at Jun. 30, 2012;

    

56,292,420 shares issued and 55,815,323 shares outstanding at Sept. 30, 2011

     565        563   

Additional paid-in capital

     693,725        685,617   

Treasury stock (at cost)

    

1,207,246 shares held at cost at Jun. 30, 2012;

    

477,097 shares held at cost at Sept. 30, 2011

     (52,481     (19,749

Excess of purchase price over predecessor basis

     (49,103     (49,103

Retained earnings

     402,735        303,639   

Accumulated other comprehensive income/(loss)

     (40,562     11,309   
  

 

 

   

 

 

 

Total Sirona Dental Systems, Inc. shareholders’ equity

     954,879        932,276   
  

 

 

   

 

 

 

Noncontrolling interests

     2,834        3,644   
  

 

 

   

 

 

 

Total shareholders’ equity

     957,713        935,920   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,413,469      $ 1,726,128   
  

 

 

   

 

 

 

 

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SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Nine months ended
June 30,
 
     2012     2011  
     $’000s  

Cash flows from operating activities

    

Net income

   $ 100,754      $ 109,636   

Adjustments to reconcile net income to net cash provided by operating activities

    

Depreciation and amortization

     58,107        59,839   

Loss on derivative instruments

     186        1,162   

Loss/(gain) on foreign currency transactions

     6,255        (8,532

Deferred income taxes

     (11,079     (9,143

Amortization of debt issuance cost

     491        895   

Share-based compensation expense

     6,375        7,241   

Changes in assets and liabilities

    

Accounts receivable

     (25,939     (27,953

Inventories

     (1,503     (13,801

Prepaid expenses and other current assets

     3,528        10,042   

Restricted cash

     646        20   

Other non-current assets

     (252     (243

Trade accounts payable

     (6,239     1,171   

Accrued liabilities and deferred income

     (14,928     (19,478

Other non-current liabilities

     818        712   

Income taxes receivable

     1,167        (5,518

Income taxes payable

     5,631        (604
  

 

 

   

 

 

 

Net cash provided by operating activities

     124,018        105,446   

Cash flows from investing activities

    

Investment in property, plant and equipment

     (29,675     (37,097

Prepayments for other assets

     (4,612     —     

Purchase of intangible assets

     (82     (247

Purchase of long-term investments

     (48     (95

Acquisition of business, net of cash acquired

     —          (20,840
  

 

 

   

 

 

 

Net cash used in investing activities

     (34,417     (58,279

 

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     Nine months ended
June 30,
 
     2012     2011  
     $’000s  

Cash flows from financing activities

    

Repayments of short-term and long-term debt

     (433,093     —     

Proceeds from borrowings

     141,297        —     

Purchase of treasury stock

     (32,732     —     

Debt issuance cost

     (2,765     —     

Dividend distributions to noncontrolling interest

     (1,698     (487

Common shares issued under share based compensation plans

     1,744        10,365   

Tax effect of common shares issued under share based compensation plans

     (1,067     8,283   
  

 

 

   

 

 

 

Net cash (used in)/provided by financing activities

     (328,314     18,161   

Change in cash and cash equivalents

     (238,713     65,328   

Effect of exchange rate change on cash and cash equivalents

     (2,546     14,108   

Cash and cash equivalents at beginning of period

     345,859        251,767   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 104,600      $ 331,203   
  

 

 

   

 

 

 

Supplemental information

    

Interest paid

   $ 2,005      $ 3,114   

Interest capitalized

     203        376   

Income taxes paid

     32,460        37,291   

Acquisition of business

    

Current assets

   $ —        $ 201   

Non-current assets

     —          47,277   

Current liabilities

     —          (269

Non-current liabilities

     —          (16,156
  

 

 

   

 

 

 
     —          31,053   

Cash paid

     —          (20,898
  

 

 

   

 

 

 

Fair value of liabilities incurred

   $ —        $ 10,155   
  

 

 

   

 

 

 

 

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Reconciliation of GAAP and Non-GAAP Information (unaudited)

HISTORICAL

Non-GAAP Adjusted Net Income Financial Measures (unaudited)

 

     Three months ended June 30, 2012  
     Pre Tax     Tax Impact*     After Tax     Per Diluted
Share
 
     $’000s, except per share amount        

GAAP net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 30,298      $ 0.53   

Adjustments

        

Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations

   $ 11,537      $ 2,654      $ 8,883     

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee

     3,153        725        2,428     

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans

     4,822        1,109        3,713     
      

 

 

   

 

 

 

Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 45,322      $ 0.80   
      

 

 

   

 

 

 
     Three months ended June 30, 2011  
     Pre Tax     Tax Impact*     After Tax     Per Diluted
Share
 
     $’000s, except per share amount        

GAAP net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 36,331      $ 0.63   

Adjustments

        

Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations

   $ 13,693      $ 3,012      $ 10,681     

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee

     (1,248     (275     (973  

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans

     (1,618     (356     (1,262  
      

 

 

   

 

 

 

Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 44,776      $ 0.78   
      

 

 

   

 

 

 
     Nine months ended June 30, 2012  
     Pre Tax     Tax Impact*     After Tax     Per Diluted
Share
 
     $’000s, except per share amount        

GAAP net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 99,096      $ 1.74   

Adjustments

        

Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations

   $ 35,203      $ 8,097      $ 27,106     

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee

     3,914        900        3,014     

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans

     5,866        1,349        4,517     
      

 

 

   

 

 

 

Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 133,733      $ 2.35   
      

 

 

   

 

 

 
     Nine months ended June 30, 2011  
     Pre Tax     Tax Impact*     After Tax     Per Diluted
Share
 
     $’000s, except per share amount        

GAAP net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 108,035      $ 1.89   

Adjustments

        

Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations

   $ 40,031      $ 8,807      $ 31,224     

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee

     (3,718     (818     (2,900  

Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans

     (4,619     (1,016     (3,603  
      

 

 

   

 

 

 

Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders

       $ 132,756      $ 2.32   
      

 

 

   

 

 

 

 

* tax impact calculated using estimated effective tax rate of 23% for first six months of FY12 and 22% for first six months of FY11

 

 

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Non-GAAP Adjusted Operating Income (unaudited)

 

     Three months ended June 30,      Nine months ended June 30,  
     2012      2011      2012      2011  
     $ ‘000s      $ ‘000s  

GAAP operating income

   $ 45,918       $ 46,389       $ 140,346       $ 135,912   

Adjustments

           

Amortization expense

     11,869         14,055         36,206         41,067   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP adjusted operating income

   $ 57,787       $ 60,444       $ 176,552       $ 176,979   

FORWARD-LOOKING

Non-GAAP Adjusted Operating Income (unaudited)

 

     Year Ending September 30, 2012  
     Low Range      High Range  
     $ millions  

GAAP operating income guidance

   $ 180.0       $ 184.0   

Adjustments

     

Amortization expense

     48.0         48.0   
  

 

 

    

 

 

 

Non-GAAP adjusted operating income guidance

   $ 228.0       $ 232.0   

To supplement our consolidated financial statements and our business outlook, we use the following non-GAAP financial measures: non-GAAP adjusted net income, and non-GAAP adjusted earnings per diluted share, which exclude, as applicable, amortization and depreciation expense resulting from the step-up to fair values of intangible and tangible assets related to past business combinations, unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee, unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans and any related tax effects. In addition, we supplement our business outlook by using non-GAAP adjusted operating income, which excludes amortization. Also set forth above under the heading “FORWARD-LOOKING” are reconciliations of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures.

Management recognizes that the use of these non-GAAP measures has limitations, including the fact that they might not be comparable with similar non-GAAP measures used by other companies and that management must exercise judgment in determining which types of charges and other items should be excluded from its non-GAAP financial measures. Management currently compensates for these limitations by providing full disclosure of each non-GAAP financial measure and a reconciliation to the most directly comparable GAAP measure. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our “core operating performance”. Management believes that “core operating performance” represents Sirona’s operating performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from “core operating performance” the impact of acquisition-related intangible depreciation and amortization in order to compare our underlying financial performance

 

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to prior periods, certain non-cash charges related to currency revaluation that do not reflect our period-to-period operating performance, and to the extent relevant in a particular period, any other cash or non-cash items that management does not view as indicative of its on-going operating performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal evaluation of period-to-period comparisons. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are provided to and used by our institutional investors and the analyst community to facilitate comparisons with prior and subsequent reporting periods.

Constant Currency: We have included certain revenue information in this press release on a constant currency basis. This information is a non-GAAP financial measure. We supplementally present revenue on a constant currency basis because we believe it facilitates a comparison of our operating results from period to period without regard to changes resulting solely from fluctuations in currency rates.

Sirona calculates constant currency revenue growth by comparing current period revenues to prior period revenues with both periods converted at the U.S. Dollar/Euro average foreign exchange rate for each month of the current period. The average exchange rate for the three and nine months ended June 30, 2012, was $1.28513 and $1.31527, respectively and varied from $1.25378 to $1.37045. For the three and nine months ended June 30, 2011, an average exchange rate converting Euro denominated revenues into U.S. Dollars of $1.43894 and $1.38876, respectively, was applied.

Our forecasted 2012 constant currency net revenue guidance excludes the impact of foreign exchange. We are unable to reconcile our projected 2012 constant currency net revenue growth to our full-year projected 2012 net revenue growth because we are unable to predict the 2012 and long-term impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates. Therefore, we are unable to provide a reconciliation of these measures.

 

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