SEC Company Response from CIBA SPECIALTY CHEMICALS HOLDING — May 13, 2005
CIBA SPECIALTY CHEMICALS HOLDING INC /FI/ (CIK 0001035497)
Date: May 13, 2005 · CIK: 0001035497 · Accession: 0000950157-05-000385
AI Filing Summary & Sentiment
File numbers found in text: 333-56040
Referenced dates: April 14, 2005, April 27, 2005
Letter
Division of Corporation Finance United States Securities and Exchange Commission USA May 13, RE: Form 20-F; Filed February 1, 2005 File No. 333-56040
Dear Mr. Shah,
I am writing as Chief Financial Officer of Ciba Specialty Chemicals Holding Inc. (the “Company”) to respond to the comments in your letter dated April 14, 2005 (the “April 14 Letter”). This response is made pursuant to the Company’s notification in our letter dated April 27, 2005 that we would respond by May 15, 2005.
First, I would like to express my appreciation for the interest taken by the staff (the “Staff”) of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the “Commission” or “SEC”) in the Company’s filing. I appreciate the role the Commission plays in helping ensure that investors receive useful and accurate financial information.
The comments of the Staff and our responses to each of the numbered questions in your letter are set forth below.
As requested by the Staff, the Company acknowledges the following:
The adequacy and accuracy of the disclosure in the filing is the responsibility of the registrant. The registrant acknowledges that Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing. The registrant also represents that Staff comments may not be asserted as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Klybeckstrasse
Basel
Switzerland
Tel+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Schweiz
Tel.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Suisse
Tél.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
April 14 Letter
Item 5. Operating and Financial Review and Prospects
Comment 1: We note your use of the non-GAAP financial measure, free cash flow, as a liquidity measure. It appears that you are excluding restructuring payments, which appears to have required cash settlement. Item 10(e)(1)(ii)(A) of Regulation S-K prohibits the exclusion of charges or liabilities that required, or will require, cash settlement from non-GAAP liquidity measures. Please advise, or discontinue the exclusion of items prohibited by Item 10(e)(1)(ii)(A) of Regulation S-K in future filings.
Response to Comment 1:
In response to the Staff’s comment, the Company respectfully advises the Staff on a supplemental basis as follows:
The basis for the Company having excluded restructuring payments from free cash flow (“FCF”) was derived from Question 13 in Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures published June 13, 2003 by the SEC. In it’s answer to Question 13, the SEC states that FCF “…does not have a uniform definition and its title does not describe how it is calculated. Accordingly, a clear description of its calculation, as well as the necessary reconciliation, should accompany the measure where it is used.” Further, Question 13 refers to FCF as “…typically (emphasis added) calculated as cash flows from operating activities as presented in the statement of cash flows under GAAP less capital expenditures.”
The Company’s interpretation of the guidance provided in Question 13 is that, along with EBIT and EBIDTA, FCF is also permitted as a non-GAAP liquidity measure from which charges or liabilities that required, or will require, cash settlement may be excluded as long as the Company clearly describes how FCF is calculated, which has been done, and provides the necessary reconciliation, which has also been done.
The reason the Company excludes restructuring payments from its FCF calculation is that, while restructurings are not non-recurring events, they have not in the Company’s existence occurred with regularity. Therefore, the exclusion of restructuring payments from FCF provides a more consistent comparison of this liquidity measure from period-to-period than would result if restructuring payments were included in the calculation.
For the above reasons, the Company respectfully requests that it be permitted to continue in future filings to use FCF as presented.
Klybeckstrasse
Basel
Switzerland
Tel+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Schweiz
Tel.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Suisse
Tél.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Page 2 of 10
Comment 2: In future filings where you present the non-GAAP measure, free cash flows, please present the three major categories of the statement of cash flows with equal or greater prominence in accordance with Question 12 of the SEC “Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures.” It appears that you first present free cash flows in the table under the caption, “Year in review - 2004 compared to 2003.” The three major captions of the statement of cash flows are not included in this tabular presentation. Also, please include all of the information required per Question 13 of the SEC “Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures.” Specifically, it does not appear that you have included a discussion of all material limitations of this measure. Please advise, or revise in future filings.
Response to Comment 2:
In response to the Staff’s comment, the Company respectfully advises the Staff on a supplemental basis as follows:
In future filings, the Company will add, with equal or greater prominence, the two major categories of the statement of cash flows that are not currently presented. This will result in all three categories being presented as requested.
With regard to your comment that it does not appear that the Company has included a discussion of all material limitations of FCF, in future filings the Company will add a statement that FCF should not be used to measure the residual cash flow that may be available for discretionary expenditures because of mandatory debt service requirements and other non-discretionary expenditures that are not deducted from the measure. Further, the Company will continue to remind investors as before that FCF is limited to being used only as a measure of the amount of net cash flow produced that is available for required or discretionary debt principle payments, reinvestment in the Company’s businesses, or distributions to shareholders. In the preceding sentence, no mention is made to the pro forma CHF 2 per share dividend that is included in the Company’s definition of FCF for the year ended December 31, 2004 because, after benchmarking against other companies that use FCF as a liquidity measure, the Company decided earlier in 2005, and has been communicating to the investment community, that it will change effective for the year ending December 31, 2005 its definition of FCF to exclude from the calculation a pro forma CHF 2 per share distribution to shareholders.
Comment 3: We note that the first time you present your non-GAAP measure referred to as EBITDA is within your Selected Financial Data section. Please either provide the disclosures required by Item 10(e) of Regulation S-K and the SEC “Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures” in this section, including the reconciliation from net income, or include a cross reference to where the required disclosures are located in future filings.
Klybeckstrasse
Basel
Switzerland
Tel+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Schweiz
Tel.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Suisse
Tél.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Page 3 of 10
Response to Comment 3:
In response to the Staff’s comment, the Company respectfully advises the Staff on a supplemental basis as follows:
In future filings, a footnote reference will be added that cross-references to the discussion of Non-GAAP measures in MD&A.
Comment 4: When note you are presenting a non-GAAP measure you refer to as “EBITDA.” From the reconciliation referenced you are removing more than just interest, taxes, depreciation and amortization. Item 10(e)(1)(ii)(B) of Regulation S-K prohibits you from eliminating items that are not considered non-recurring, infrequent or unusual, such as other financial expense, net, minority interest, and income from discontinued operations, net of tax. As such, please confirm that you will discontinue presenting such a measure in which you are removing items other than interest, taxes, depreciation, amortization or non-recurring, infrequent or unusual in nature. If you present a measure that removes non-recurring, infrequent or unusual in nature items from the standard EBITDA measure, then you should label the figure as something other than EBITDA. Please see the response to Question 14 of “Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures” for guidance.
Response to Comment 4:
In response to the Staff’s comment, the Company respectfully advises the Staff on a supplemental basis as follows:
As a result of the ongoing convergence project involving International Financial Reporting Standards and U.S. Generally Accepted Accounting Principles, the Company expected that it would, at some time in the future, discontinue using EBITDA as a performance measure due to the increased comparability of financial statements that would result from the project. In light of the Staff’s comment, the Company decided to discontinue using EBITDA effective in the year ending December 31, 2006. As a result, all issues related to using EBITDA as a performance measure will become moot.
The Company respectfully requests that for 2005, it be permitted to continue using EBITDA as presented in its 2004 Form 20-F. This is because targets have been set based on this measure that have been communicated both to the Company’s employees as well as to the investment community. Current incentive payments are based on EBITDA as currently used by the Company. The Company believes that changing in mid-2005 this performance measure, which it believes is clearly understood by its employees and investors, would be confusing and disruptive to them. By agreeing to change to operating income beginning in 2006, the Company will have the remainder of 2005 to communicate this upcoming change to employees and investors, and thereby effect a smooth transition to the new measure.
Klybeckstrasse
Basel
Switzerland
Tel+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Schweiz
Tel.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Suisse
Tél.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Page 4 of 10
Comment 5: We note that you present EBITDA to assess the Company’s performance. However, your disclosures do not fully comply with Item 10(e) of Regulation S-K or with Question 8 of the SEC “Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures.” In future filings, adequately addressed each disclosure item set forth in Question 8 of the SEC “Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures,” as noted below:
·
How the exclusion of each item materially limits the usefulness of EBITDA. For instance you might expand your disclosures, in part, to address the limitations of EBITDA by providing the following information:
-
It does not include interest expense. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and ability to generate revenue. Therefore any measure that excludes interest expense has material limitations;
-
It does not include depreciation and amortization expense. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate revenue. Therefore any measure that excludes depreciation and amortization expense has material limitations;
-
It does not include taxes. Because the payment of taxes is a necessary element of our operations, any measure that excludes tax expense has material limitations.
·
How management compensates for the limitations noted above when using EBITDA.
·
The substantive reasons why management believes EBITDA provides useful information to investors.
Response to Comment 5:
In response to the Staff’s comment, the Company respectfully advises the Staff on a supplemental basis as follows:
Please see the response to Comment 4 above.
In addition, with regard to the first and second bullet points in the Staff’s letter, in future filings the Company will provide additional disclosure as to how the exclusion of each item materially limits the usefulness of EBITDA as well as how management compensates for each limitation regarding each such item.
With regard to the third bullet point in the Staff’s letter, the Company has disclosed the substantive reasons why management believes EBITDA provides useful information. Please see Item 5. Operating and Financial Review and Prospects, Use of Certain Supplementary Financial Indicators, EBITDA, first and second paragraphs, in the Company’s Form 20-F for the year ended December 31, 2004, which read as follows, for this disclosure:
Klybeckstrasse
Basel
Switzerland
Tel+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Schweiz
Tel.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Klybeckstrasse
Basel
Suisse
Tél.+41 61 636 21 67
Fax+41 61 636 20 42
www.cibasc.com
Page 5 of 10
“As described in the Business Segment Data section of the Consolidated Financial Statements, the Company evaluates the performance of its reportable segments based on operating income as well as EBITDA. EBITDA, and EBITDA margin derived therefrom, provide management with additional quantitative measures of the quality of sales growth as well as the results of past and current actions taken to manage costs.
More importantly, the Company operates in a multinational environment and competes with companies in different countries. In some of these countries, very significant differences in accounting exist with regard to depreciation as some companies with which the Company c
Show Raw Text
CORRESP
1
filename1.htm
Letter to SEC
Ciba
Specialty Chemicals Inc.
Switzerland
Ciba
Spezialitätenchemie AG
Schweiz
Ciba
Spécialités Chimiques
SA
Suisse
Michael
Jacobi
K-141.1.24
Nili
Shah
Accounting
Branch Chief
Division
of Corporation Finance
United
States Securities and Exchange Commission
Washington,
DC 20549
USA
May 13,
2005
RE: Form
20-F; Filed February 1, 2005
File No.
333-56040
Dear Mr.
Shah,
I am
writing as Chief Financial Officer of Ciba Specialty Chemicals Holding Inc. (the
“Company”) to respond to the comments in your letter dated April 14, 2005 (the
“April 14
Letter”). This response is made pursuant to the Company’s notification in our
letter dated April 27, 2005 that we would respond by May 15, 2005.
First, I
would like to express my appreciation for the interest taken by the staff (the
“Staff”) of the Division of Corporation Finance of the U.S. Securities and
Exchange Commission (the “Commission” or “SEC”) in the Company’s filing. I
appreciate the role the Commission plays in helping ensure that investors
receive useful and accurate financial information.
The
comments of the Staff and our responses to each of the numbered questions in
your letter
are set forth below.
As
requested
by the Staff, the
Company acknowledges the following:
The
adequacy and accuracy of the disclosure in the filing is the responsibility of
the registrant. The registrant acknowledges that Staff comments or changes to
disclosure in response to Staff comments do not foreclose the Commission from
taking any action with respect to the filing. The registrant also represents
that Staff comments may not be asserted as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United
States.
Klybeckstrasse
141
4002
Basel
Switzerland
Tel+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Schweiz
Tel.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Suisse
Tél.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
April
14 Letter
Item
5. Operating and Financial Review and Prospects
Comment
1: We
note your use of the non-GAAP financial measure, free cash flow, as a liquidity
measure. It appears that you are excluding restructuring payments, which appears
to have required cash settlement. Item 10(e)(1)(ii)(A) of Regulation S-K
prohibits the exclusion of charges or liabilities that required, or will
require, cash settlement from non-GAAP liquidity measures. Please advise, or
discontinue the exclusion of items prohibited by Item 10(e)(1)(ii)(A) of
Regulation S-K in future filings.
Response
to Comment 1:
In
response to the Staff’s comment, the Company respectfully advises the Staff on a
supplemental basis as follows:
The basis
for the Company having excluded restructuring payments from free cash flow
(“FCF”) was derived from Question 13 in Frequently Asked Questions Regarding the
Use of Non-GAAP Financial Measures published June 13, 2003 by the SEC. In it’s
answer to Question 13, the SEC states that FCF “…does not have a uniform
definition and its title does not describe how it is calculated. Accordingly, a
clear description of its calculation, as well as the necessary reconciliation,
should accompany the measure where it is used.” Further, Question 13 refers to
FCF as “…typically
(emphasis
added) calculated as cash flows from operating activities as presented in the
statement of cash flows under GAAP less capital expenditures.”
The
Company’s interpretation of the guidance provided in Question 13 is that, along
with EBIT and EBIDTA, FCF is also permitted as a non-GAAP liquidity measure from
which charges or liabilities that required, or will require, cash settlement may
be excluded as long as the Company clearly describes how FCF is calculated,
which has been done, and provides the necessary reconciliation, which has also
been done.
The
reason the Company excludes restructuring payments from its FCF calculation is
that, while restructurings are not non-recurring events, they have not in the
Company’s existence occurred with regularity. Therefore, the exclusion of
restructuring payments from FCF provides a more consistent comparison of this
liquidity measure from period-to-period than would result if restructuring
payments were included in the calculation.
For the
above reasons, the Company respectfully requests that it be permitted to
continue in future filings to use FCF as presented.
Klybeckstrasse
141
4002
Basel
Switzerland
Tel+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Schweiz
Tel.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Suisse
Tél.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Page
2 of 10
Comment
2: In
future filings where you present the non-GAAP measure, free cash flows, please
present the three major categories of the statement of cash flows with equal or
greater prominence in accordance with Question 12 of the SEC “Frequently Asked
Questions Regarding the Use of Non-GAAP Financial Measures.” It appears that you
first present free cash flows in the table under the caption, “Year in review -
2004 compared to 2003.” The three major captions of the statement of cash flows
are not included in this tabular presentation. Also, please include all of the
information required per Question 13 of the SEC “Frequently Asked Questions
Regarding the Use of Non-GAAP Financial Measures.” Specifically, it does not
appear that you have included a discussion of all
material limitations of this measure. Please advise, or revise in future
filings.
Response
to Comment 2:
In
response to the Staff’s comment, the Company respectfully advises the Staff on a
supplemental basis as follows:
In future
filings, the Company will add, with equal or greater prominence, the two major
categories of the statement of cash flows that are not currently presented. This
will result in all three categories being presented as requested.
With
regard to your comment that it does not appear that the Company has included a
discussion of all material
limitations of FCF, in future filings the Company will add a statement that FCF
should not be used to measure the residual cash flow that may be available for
discretionary expenditures because of mandatory debt service requirements and
other non-discretionary expenditures that are not deducted from the measure.
Further, the Company will continue to remind investors as before that FCF is
limited to being used only as a measure of the amount of net cash flow produced
that is available for required or discretionary debt principle payments,
reinvestment in the Company’s businesses, or distributions to shareholders. In
the preceding sentence, no mention is made to the pro forma CHF 2 per share
dividend that is included in the Company’s definition of FCF for the year ended
December 31, 2004 because, after benchmarking against other companies that use
FCF as a liquidity measure, the Company decided earlier in 2005, and has been
communicating to the investment community, that it will change effective for the
year ending December 31, 2005 its definition of FCF to exclude from the
calculation a pro forma CHF 2 per share distribution to
shareholders.
Comment
3: We
note that the first time you present your non-GAAP measure referred to as EBITDA
is within your Selected Financial Data section. Please either provide the
disclosures required by Item 10(e) of Regulation S-K and the SEC “Frequently
Asked Questions Regarding the Use of Non-GAAP Financial Measures” in this
section, including the reconciliation from net income, or include a cross
reference to where the required disclosures are located in future
filings.
Klybeckstrasse
141
4002
Basel
Switzerland
Tel+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Schweiz
Tel.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Suisse
Tél.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Page 3
of 10
Response
to Comment 3:
In
response to the Staff’s comment, the Company respectfully advises the Staff on a
supplemental basis as follows:
In future
filings, a footnote reference will be added that cross-references to the
discussion of Non-GAAP measures in MD&A.
Comment
4: When
note you are presenting a non-GAAP measure you refer to as “EBITDA.” From the
reconciliation referenced you are removing more than just interest, taxes,
depreciation and amortization. Item 10(e)(1)(ii)(B) of Regulation S-K prohibits
you from eliminating items that are not considered non-recurring, infrequent or
unusual, such as other financial expense, net, minority interest, and income
from discontinued operations, net of tax. As such, please confirm that you will
discontinue presenting such a measure in which you are removing items other than
interest, taxes, depreciation, amortization or non-recurring, infrequent or
unusual in nature. If you present a measure that removes non-recurring,
infrequent or unusual in nature items from the standard EBITDA measure, then you
should label the figure as something other than EBITDA. Please see the response
to Question 14 of “Frequently Asked Questions Regarding the Use of Non-GAAP
Financial Measures” for guidance.
Response
to Comment 4:
In
response to the Staff’s comment, the Company respectfully advises the Staff on a
supplemental basis as follows:
As a
result of the ongoing convergence project involving International Financial
Reporting Standards and U.S. Generally Accepted Accounting Principles, the
Company expected that it would, at some time in the future, discontinue using
EBITDA as a performance measure due to the increased comparability of financial
statements that would result from the project. In light of the Staff’s comment,
the Company decided to discontinue using EBITDA effective in the year ending
December 31, 2006. As a result, all issues related to using EBITDA as a
performance measure will become moot.
The
Company respectfully requests that for 2005, it be permitted to continue using
EBITDA as presented in its 2004 Form 20-F. This is because targets have been set
based on this measure that have been communicated both to the Company’s
employees as well as to the investment community. Current incentive payments are
based on EBITDA as currently used by the Company. The Company believes that
changing in mid-2005 this performance measure, which it believes is clearly
understood by its employees and investors, would be confusing and disruptive to
them. By agreeing to change to operating income beginning in 2006, the Company
will have the remainder of 2005 to communicate this upcoming change to employees
and investors, and thereby effect a smooth transition to the new
measure.
Klybeckstrasse
141
4002
Basel
Switzerland
Tel+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Schweiz
Tel.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Suisse
Tél.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Page 4
of 10
Comment
5: We
note that you present EBITDA to assess the Company’s performance. However, your
disclosures do not fully comply with Item 10(e) of Regulation S-K or with
Question 8 of the SEC “Frequently Asked Questions Regarding the Use of Non-GAAP
Financial Measures.” In future filings, adequately addressed each
disclosure
item set forth in Question 8 of the SEC “Frequently Asked Questions Regarding
the Use of Non-GAAP Financial Measures,” as noted below:
·
How
the exclusion of each
item materially limits the usefulness of EBITDA. For instance you might
expand your disclosures, in part, to address the limitations of EBITDA by
providing the following information:
-
It
does not include interest expense. Because we have borrowed money in order
to finance our operations, interest expense is a necessary element of our
costs and ability to generate revenue. Therefore any measure that excludes
interest expense has material
limitations;
-
It
does not include depreciation and amortization expense. Because we use
capital assets, depreciation and amortization expense is a necessary
element of our costs and ability to generate revenue. Therefore any
measure that excludes depreciation and amortization expense has material
limitations;
-
It
does not include taxes. Because the payment of taxes is a necessary
element of our operations, any measure that excludes tax expense has
material limitations.
·
How
management compensates for the limitations noted above when using
EBITDA.
·
The
substantive reasons why management believes EBITDA provides useful
information to investors.
Response
to Comment 5:
In
response to the Staff’s comment, the Company respectfully advises the Staff on a
supplemental basis as follows:
Please
see the response to Comment 4 above.
In
addition, with regard to the first and second bullet points in the Staff’s
letter, in future filings the Company will provide additional disclosure as to
how the exclusion of each item
materially limits the usefulness of EBITDA as well as how management compensates
for each limitation regarding each such item.
With
regard to the third bullet point in the Staff’s letter, the Company has
disclosed the substantive reasons why management believes EBITDA provides useful
information. Please see Item 5. Operating and Financial Review and Prospects,
Use of Certain Supplementary Financial Indicators, EBITDA, first and second
paragraphs, in the Company’s Form 20-F for the year ended December 31, 2004,
which read as follows, for this disclosure:
Klybeckstrasse
141
4002
Basel
Switzerland
Tel+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Schweiz
Tel.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Klybeckstrasse
141
4002
Basel
Suisse
Tél.+41
61 636 21 67
Fax+41
61 636 20 42
www.cibasc.com
Page 5
of 10
“As
described in the Business Segment Data section of the Consolidated Financial
Statements, the Company evaluates the performance of its reportable segments
based on operating income as well as EBITDA. EBITDA, and EBITDA margin derived
therefrom, provide management with additional quantitative measures of the
quality of sales growth as well as the results of past and current actions taken
to manage costs.
More
importantly, the Company operates in a multinational environment and competes
with companies in different countries. In some of these countries, very
significant differences in accounting exist with regard to depreciation as some
companies with which the Company c