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): November 4, 2019
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||
(Address of Principal Executive Offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (412 ) 248-8000
(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):
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Item 2.02 Results of Operations and Financial Condition.
On November 4, 2019, Kennametal Inc. (Kennametal or the Company) issued an earnings announcement for its fiscal 2020 first quarter ended September 30, 2019. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 2.02.
The earnings announcement issued on November 4, 2019 is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section unless the Company specifically incorporates it by reference in a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
KENNAMETAL INC. | |||||||||
Date: | November 4, 2019 | By: | /s/ Patrick S. Watson | ||||||
Patrick S. Watson | |||||||||
Vice President Finance and Corporate Controller | |||||||||
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Exhibit 99.1
FOR IMMEDIATE RELEASE:
DATE: November 4, 2019
Investor Relations | Media Relations |
CONTACT: Kelly Boyer | CONTACT: Lori Lecker |
PHONE: 412-248-8287 | PHONE: 412-248-8224 |
kelly.boyer@kennametal.com | lori.lecker@kennametal.com |
Kennametal Announces Fiscal 2020 First Quarter Results
• | Earnings per diluted share (EPS) and sales down from prior year, driven by deteriorating end markets |
• | Continued progress on simplification/modernization benefits of approximately $8 million in the quarter; $58 million in annualized total savings inception to date |
• | Restructuring actions - including the discontinuation of production at a facility in Germany last month - are on track to deliver increased profitability beginning in the second half of 2020 |
• | As previously announced, fiscal 2020 outlook adjusted EPS of $1.70 to $2.10 reflects lower first quarter results and an expected delay in the global recovery of the transportation and energy end markets |
PITTSBURGH, (November 4, 2019) – Kennametal Inc. (NYSE: KMT) (the "Company") today reported results for its fiscal 2020 first quarter ended September 30, 2019, with EPS of $0.08, compared with $0.68 in the prior year quarter, and adjusted EPS of $0.17, compared with $0.70 in the prior year quarter.
“As announced on October 21st, we experienced significantly slower market conditions across all regions and in our end markets, primarily general engineering, energy and transportation. As a result, our first quarter performance was well below our expectations and necessitated a revised full year outlook that also reflects a delayed recovery in transportation and energy," said Christopher Rossi, President and CEO.
Rossi continued, “We are focused on the things we can control, including adjusting production levels based on lower demand and managing costs. We anticipate positive free operating cash flow for the year, and our capital structure enables us to deliver on our simplification/modernization investments as planned. Our structural cost reduction efforts are on schedule, including the proposed closures of three manufacturing locations and a distribution center, which we expect will drive significantly improved profitability beginning in the second half of the year.”
Fiscal 2020 First Quarter Key Developments
Sales of $518 million decreased 12 percent from $587 million in the prior year quarter, reflecting 11 percent organic sales decline and 2 percent unfavorable currency exchange effect, partially offset by a 1 percent favorable business day effect.
In connection with the Company's simplification/modernization initiative, pre-tax restructuring and related charges for the FY20 and FY21 Restructuring Actions(1) were $8 million, or $0.09 per share. Incremental pre-tax benefits from our simplification/modernization restructuring initiatives were approximately $2 million in the quarter. Total benefits from simplification/modernization, including restructuring initiatives, were approximately $8 million in the quarter. We achieved annualized total savings inception to date from simplification/modernization of $58 million.
1
As part of the FY20 Restructuring Actions, production was discontinued at the Company's Lichtenau, Germany facility at the end of October. The Company expects to finalize negotiations with the relevant employee representatives by the end of this month.
The Company also expects to complete in the second quarter of fiscal 2020 the divestiture of non-core specialty alloys business in Infrastructure segment as part of ongoing simplification/modernization initiatives.
Operating income was $16 million, or 3.2 percent margin, compared to $83 million, or 14.2 percent margin, in the prior year quarter. Adjusted operating income was $24 million, or 4.7 percent margin, compared to $84 million, or 14.4 percent margin, in the prior year quarter. The decrease in adjusted operating income was due primarily to organic sales decline, higher raw material costs and unfavorable labor and fixed cost absorption in certain facilities due to lower volumes and simplification/modernization efforts in progress, partially offset by incremental simplification/modernization benefits. Higher raw material costs, which are expected to abate in the second half of fiscal 2020, had a detrimental effect on year-over-year adjusted operating margin of approximately 360 basis points.
The reported effective tax rate (ETR) for the quarter was 33.7 percent and the adjusted ETR was 22.5 percent, compared to reported ETR of 24.9 percent and adjusted ETR of 23.6 percent in the prior year quarter.
Reported EPS in the current quarter includes restructuring and related charges of $0.09. Reported EPS in the prior year quarter includes a discrete effect from U.S. tax reform of $0.01 and restructuring and related charges of $0.01.
Net cash flow provided by operating activities was $28 million compared to $9 million in the prior year quarter. Free operating cash flow (FOCF) was negative $45 million compared to negative $33 million in the prior year quarter. The change in FOCF was driven primarily by lower earnings and greater capital expenditures, partially offset by changes in working capital.
Outlook
On October 21, 2019, the Company revised its full year outlook due to market conditions deteriorating more significantly than anticipated across all regions, and primarily in the general engineering, energy and transportation end markets, coupled with an expected delay in the global recovery of the transportation and energy end markets:
• | Adjusted EPS of $1.70 to $2.10 on organic sales decline of 9 to 5 percent |
• | Adjusted ETR of 22 to 24 percent |
• | Capital spending of $240 to $260 million |
• | Free operating cash flow of $20 to $50 million |
Segment Results
Industrial sales of $280 million decreased 13 percent from $321 million year-over-year, driven by organic sales decline of 11 percent and a 2 percent unfavorable currency exchange impact. Operating income was $21 million, or 7.6 percent margin, compared to $59 million, or 18.3 percent margin, in the prior year quarter. Adjusted operating income was $27 million, or 9.8 percent margin, compared to $59 million, or 18.3 percent margin, in the prior year quarter. The decrease in adjusted operating income was driven primarily by organic sales decline, unfavorable labor and fixed cost absorption in certain facilities due to lower volumes and simplification/modernization efforts in progress, higher raw material costs and higher compensation expense, partially offset by incremental simplification/modernization benefits. Higher raw material costs, which are expected to abate in the second half of fiscal 2020, had a detrimental effect on year-over-year adjusted operating margin of approximately 140 basis points.
Widia sales of $44 million decreased 9 percent from $49 million year-over-year, driven by organic sales decline of 10 percent and a 1 percent unfavorable currency exchange impact, partially offset by a favorable business day effect of 2 percent. Operating loss was $2 million, or 4.5 percent loss margin, compared to operating income of $2 million, or 4.3 percent margin, in the prior year quarter. Adjusted operating loss was $2 million, or 4.1 percent loss margin, compared to adjusted operating income of $2 million, or 4.4 percent margin, in the prior year quarter. The change was driven primarily by higher raw material costs, organic sales decline and unfavorable volume-related labor and fixed cost absorption in certain facilities, partially offset by incremental simplification/modernization benefits. Higher raw material costs, which are expected to abate in the second half of fiscal 2020, had a detrimental effect on year-over-year adjusted operating margin of approximately 430 basis points.
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Infrastructure sales of $194 million decreased 11 percent from $217 million year-over-year, driven by organic sales decline of 11 percent and an unfavorable currency exchange impact of 1 percent, partially offset by a favorable business day effect of 1 percent. Operating loss was $3 million, or 1.4 percent loss margin, compared to operating income of $24 million, or 11.0 percent margin, in the prior year quarter. Adjusted operating loss was $1 million, or 0.5 percent loss margin, compared to adjusted operating income of $25 million, or 11.4 percent margin, in the prior year quarter. The change was primarily driven by higher raw material costs, unfavorable mix, organic sales decline and unfavorable volume-related labor and fixed cost absorption in certain facilities, partially offset by incremental simplification/modernization benefits. Higher raw material costs, which are expected to abate in the second half of fiscal 2020, had a detrimental effect on year-over-year adjusted operating margin of approximately 660 basis points.
Dividend Declared
Kennametal also announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share. The dividend is payable on November 26, 2019 to shareholders of record as of the close of business on November 12, 2019.
The Company will host its first quarter fiscal 2020 results on Tuesday, November 5, 2019 at 8:00 a.m. Eastern Time.
The conference call will be broadcast via real-time audio on the Kennametal website at www.kennametal.com. Once on the homepage, select "About Us", “Investor Relations” and then “Events.” A replay of the call will be available on the Company’s website on the Investor Relations/Events page beginning on November 5, 2019 at 10:00 a.m. through December 5, 2019.
(1) Previously announced restructuring actions associated with the ongoing simplification/modernization program. These restructurings and proposed facility closures in fiscal 2020 (FY20 Restructuring Actions) are currently estimated to deliver annualized savings of $35 to $40 million with pre-tax charges of $55 to $65 million. Fiscal 2021 proposed restructuring and facility closures (FY21 Restructuring Actions) estimated to deliver annualized savings of $25 to $30 million with pre-tax charges of $60 to $75 million.
This earnings release contains non-GAAP financial measures. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the tables that follow.
Certain statements in this release may be forward-looking in nature, or “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements that do not relate strictly to historical or current facts. For example, statements about Kennametal’s outlook for earnings, sales volumes, cash flow, capital expenditures and effective tax rate for fiscal year 2020 and our expectations regarding future growth and financial performance are forward-looking statements. Any forward-looking statements are based on current knowledge, expectations and estimates that involve inherent risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, our actual results could vary materially from our current expectations. There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements. They include: downturns in the business cycle or the economy; our ability to achieve all anticipated benefits of restructuring, simplification and modernization initiatives; risks related to our foreign operations and international markets, such as currency exchange rates, different regulatory environments, trade barriers, exchange controls, and social and political instability; changes in the regulatory environment in which we operate, including environmental, health and safety regulations; potential for future goodwill and other intangible asset impairment charges; our ability to protect and defend our intellectual property; continuity of information technology infrastructure; competition; our ability to retain our management and employees; demands on management resources; availability and cost of the raw materials we use to manufacture our products; product liability claims; integrating acquisitions and achieving the expected savings and synergies; global or regional catastrophic events; demand for and market acceptance of our products; business divestitures; labor relations; and implementation of environmental remediation matters. Many of these risks and other risks are more fully described in Kennametal’s latest annual report on Form 10-K and its other periodic filings with the Securities and Exchange Commission. We can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.
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About Kennametal
With over 80 years as an industrial technology leader, Kennametal Inc. delivers productivity to customers through materials science, tooling and wear-resistant solutions. Customers across aerospace, earthworks, energy, general engineering and transportation turn to Kennametal to help them manufacture with precision and efficiency. Every day approximately 10,000 employees are helping customers in more than 60 countries stay competitive. Kennametal generated nearly $2.4 billion in revenues in fiscal 2019. Learn more at www.kennametal.com. Follow @Kennametal: Twitter, Instagram, Facebook, LinkedIn and YouTube.
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FINANCIAL HIGHLIGHTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended September 30, | |||||||
(in thousands, except per share amounts) | 2019 | 2018 | |||||
Sales | $ | 518,088 | $ | 586,687 | |||
Cost of goods sold | 379,108 | 375,595 | |||||
Gross profit | 138,980 | 211,092 | |||||
Operating expense | 114,191 | 123,285 | |||||
Restructuring and asset impairment charges | 4,666 | 1,075 | |||||
Amortization of intangibles | 3,747 | 3,580 | |||||
Operating income | 16,376 | 83,152 | |||||
Interest expense | 7,881 | 8,097 | |||||
Other income, net | (2,681 | ) | (2,761 | ) | |||
Income before income taxes | 11,176 | 77,816 | |||||
Provision for income taxes | 3,766 | 19,392 | |||||
Net income | 7,410 | 58,424 | |||||
Less: Net income attributable to noncontrolling interests | 944 | 1,725 | |||||
Net income attributable to Kennametal | $ | 6,466 | $ | 56,699 | |||
PER SHARE DATA ATTRIBUTABLE TO KENNAMETAL SHAREHOLDERS | |||||||
Basic earnings per share | $ | 0.08 | $ | 0.69 | |||
Diluted earnings per share | $ | 0.08 | $ | 0.68 | |||
Dividends per share | $ | 0.20 | $ | 0.20 | |||
Basic weighted average shares outstanding | 82,881 | 82,105 | |||||
Diluted weighted average shares outstanding | 83,487 | 83,194 | |||||
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands) | September 30, 2019 | June 30, 2019 | |||||
ASSETS | |||||||
Cash and cash equivalents | $ | 113,522 | $ | 182,015 | |||
Accounts receivable, net | 327,628 | 379,855 | |||||
Inventories | 557,133 | 571,576 | |||||
Other current assets | 67,106 | 57,381 | |||||
Total current assets | 1,065,389 | 1,190,827 | |||||
Property, plant and equipment, net | 964,288 | 934,895 | |||||
Goodwill and other intangible assets, net | 451,292 | 461,009 | |||||
Other assets | 118,436 | 69,538 | |||||
Total assets | $ | 2,599,405 | $ | 2,656,269 | |||
LIABILITIES | |||||||
Current maturities of long-term debt, including notes payable | $ | 3,528 | $ | 157 | |||
Accounts payable | 198,674 | 212,908 | |||||
Other current liabilities | 216,517 | 248,661 | |||||
Total current liabilities | 418,719 | 461,726 | |||||
Long-term debt | 592,858 | 592,474 | |||||
Other liabilities | 250,178 | 227,365 | |||||
Total liabilities | 1,261,755 | 1,281,565 | |||||
KENNAMETAL SHAREHOLDERS’ EQUITY | 1,298,566 | 1,335,172 | |||||
NONCONTROLLING INTERESTS | 39,084 | 39,532 | |||||
Total liabilities and equity | $ | 2,599,405 | $ | 2,656,269 | |||
SEGMENT DATA (UNAUDITED) | Three Months Ended September 30, | ||||||
(in thousands) | 2019 | 2018 | |||||
Outside Sales: | |||||||
Industrial | $ | 280,028 | $ | 320,559 | |||
Widia | 44,057 | 48,672 | |||||
Infrastructure | 194,003 | 217,456 | |||||
Total sales | $ | 518,088 | $ | 586,687 | |||
Sales By Geographic Region: | |||||||
Americas | $ | 259,289 | $ | 289,129 | |||
EMEA | 153,480 | 171,508 | |||||
Asia Pacific | 105,319 | 126,050 | |||||
Total sales | $ | 518,088 | $ | 586,687 | |||
Operating Income (Loss): | |||||||
Industrial | $ | 21,271 | $ | 58,542 | |||
Widia | (1,965 | ) | 2,093 | ||||
Infrastructure | (2,690 | ) | 23,860 | ||||
Corporate (2) | (240 | ) | (1,343 | ) | |||
Total operating income | $ | 16,376 | $ | 83,152 | |||
(2) Represents unallocated corporate expenses
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NON-GAAP RECONCILIATIONS (UNAUDITED)
In addition to reported results under generally accepted accounting principles in the United States of America (GAAP), the following financial highlight tables include, where appropriate, a reconciliation of adjusted results including: operating income and margin; ETR; net income attributable to Kennametal; diluted EPS; Industrial operating income and margin; Widia operating (loss) income and margin; Infrastructure operating (loss) income and margin; FOCF; and consolidated and segment organic sales decline (all of which are non-GAAP financial measures), to the most directly comparable GAAP financial measures. Adjustments for the three months ended September 30, 2019 include restructuring and related charges. Adjustments for the three months ended September 30, 2018 include: (1) restructuring and related charges; and (2) discrete effect from tax reform. For those adjustments that are presented ‘net of tax’, the tax effect of the adjustment can be derived by calculating the difference between the pre-tax and the post-tax adjustments presented. The tax effect on adjustments is calculated by preparing an overall tax calculation including the adjustments and then a tax calculation excluding the adjustments. The difference between these calculations results in the tax impact of the adjustments.
Management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company for the current and past periods. Management believes that investors should have available the same information that management uses to assess operating performance, determine compensation and assess the capital structure of the Company. These non-GAAP financial measures should not be considered in isolation or as a substitute for the most comparable GAAP financial measures. Investors are cautioned that non-GAAP financial measures used by management may not be comparable to non-GAAP financial measures used by other companies. Reconciliations and descriptions of all non-GAAP financial measures are set forth in the disclosures below.
Reconciliations to the most directly comparable GAAP financial measures for the following forward-looking non-GAAP financial measures for the full fiscal year of 2019 have not been provided, including but not limited to: adjusted EPS, adjusted ETR, organic sales growth (decline) and FOCF. The most comparable GAAP financial measures are earnings per share, ETR, sales growth (decline) and net cash flow from operating activities, respectively. Because the non-GAAP financial measures on a forward-looking basis are subject to uncertainty and variability as they are dependent on many factors - including, but not limited to, the effect of foreign currency exchange fluctuations, impacts from potential acquisitions or divestitures, gains or losses on the potential sale of businesses or other assets, restructuring costs, asset impairment charges, gains or losses from early extinguishment of debt, the tax impact of the items above and the impact of tax law changes or other tax matters - reconciliations to the most directly comparable forward-looking GAAP financial measures are not available without unreasonable effort.
THREE MONTHS ENDED SEPTEMBER 30, 2019 (UNAUDITED) | ||||||||||||||
(in thousands, except percents and per share data) | Sales | Operating income | ETR | Net income(3) | Diluted EPS | |||||||||
Reported results | $ | 518,088 | $ | 16,376 | 33.7 | % | $ | 6,466 | $ | 0.08 | ||||
Reported margins | 3.2 | % | ||||||||||||
Restructuring and related charges | — | 7,970 | (11.2 | ) | 7,429 | 0.09 | ||||||||
Adjusted results | $ | 518,088 | $ | 24,346 | 22.5 | % | $ | 13,895 | $ | 0.17 | ||||
Adjusted margins | 4.7 | % | ||||||||||||
(3) Attributable to Kennametal
Industrial | Widia | Infrastructure | ||||||||||||||||
(in thousands, except percents) | Sales | Operating income | Sales | Operating loss | Sales | Operating loss | ||||||||||||
Reported results | $ | 280,028 | $ | 21,271 | $ | 44,057 | $ | (1,965 | ) | $ | 194,003 | $ | (2,690 | ) | ||||
Reported operating margin | 7.6 | % | (4.5 | )% | (1.4 | )% | ||||||||||||
Restructuring and related charges | — | 6,167 | — | 141 | — | 1,663 | ||||||||||||
Adjusted results | $ | 280,028 | $ | 27,438 | $ | 44,057 | $ | (1,824 | ) | $ | 194,003 | $ | (1,027 | ) | ||||
Adjusted operating margin | 9.8 | % | (4.1 | )% | (0.5 | )% | ||||||||||||
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THREE MONTHS ENDED SEPTEMBER 30, 2018 (UNAUDITED) | ||||||||||||||
(in thousands, except percents and per share data) | Sales | Operating income | ETR | Net income(3) | Diluted EPS | |||||||||
Reported results | $ | 586,687 | $ | 83,152 | 24.9 | % | $ | 56,699 | $ | 0.68 | ||||
Reported margins | 14.2 | % | ||||||||||||
Restructuring and related charges | — | 1,062 | — | 758 | 0.01 | |||||||||
Discrete effect from tax reform (4) | — | — | (1.3 | ) | 1,011 | 0.01 | ||||||||
Adjusted results | $ | 586,687 | $ | 84,214 | 23.6 | % | $ | 58,468 | $ | 0.70 | ||||
Adjusted margins | 14.4 | % | ||||||||||||
(4) Additional charge recorded to reflect adjustments to the amounts recorded for the application of a measure of the Tax Cuts and Jobs Act of 2017 (TCJA) requiring a one-time transition tax on previously untaxed accumulated earnings and profits of non-U.S. companies (toll tax) considering regulatory guidance issued through September 30, 2018.
Industrial | Widia | Infrastructure | ||||||||||||||||
(in thousands, except percents) | Sales | Operating income | Sales | Operating income | Sales | Operating income | ||||||||||||
Reported results | $ | 320,559 | $ | 58,542 | $ | 48,672 | $ | 2,093 | $ | 217,456 | $ | 23,860 | ||||||
Reported operating margin | 18.3 | % | 4.3 | % | 11.0 | % | ||||||||||||
Restructuring and related charges | — | 185 | — | 40 | — | 837 | ||||||||||||
Adjusted results | $ | 320,559 | $ | 58,727 | $ | 48,672 | $ | 2,133 | $ | 217,456 | $ | 24,697 | ||||||
Adjusted operating margin | 18.3 | % | 4.4 | % | 11.4 | % | ||||||||||||
Free Operating Cash Flow (FOCF)
FOCF is a non-GAAP financial measure and is defined by the Company as net cash flow provided by operating activities (which is the most directly comparable GAAP financial measure) less capital expenditures plus proceeds from disposals of fixed assets. Management considers FOCF to be an important indicator of the Company's cash generating capability because it better represents cash generated from operations that can be used for dividends, debt repayment, strategic initiatives (such as acquisitions) and other investing and financing activities.
Three Months Ended September 30, | ||||||||
FREE OPERATING CASH FLOW (UNAUDITED) | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Net cash flow provided by operating activities | $ | 27,545 | $ | 9,201 | ||||
Purchases of property, plant and equipment | (72,455 | ) | (43,263 | ) | ||||
Disposals of property, plant and equipment | 395 | 833 | ||||||
Free operating cash flow | $ | (44,515 | ) | $ | (33,229 | ) | ||
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Organic Sales Decline
Organic sales decline is a non-GAAP financial measure of sales decline (which is the most directly comparable GAAP measure) excluding the impacts of acquisitions, divestitures, business days and foreign currency exchange from year-over-year comparisons. Management believes this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth (decline) on a consistent basis. Management reports organic sales growth (decline) at the consolidated and segment levels.
ORGANIC SALES DECLINE (UNAUDITED) | ||||||||
Three Months Ended September 30, 2019 | Industrial | Widia | Infrastructure | Total | ||||
Organic sales decline | (11)% | (10)% | (11)% | (11)% | ||||
Foreign currency exchange impact (5) | (2) | (1) | (1) | (2) | ||||
Business days impact (6) | — | 2 | 1 | 1 | ||||
Sales decline | (13)% | (9)% | (11)% | (12)% | ||||
(5) Foreign currency exchange impact is calculated by dividing the difference between current period sales at prior period foreign exchange rates and prior period sales by prior period sales.
(6) Business days impact is calculated by dividing the year-over-year change in weighted average working days (based on mix of sales by country) by prior period weighted average working days.
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