Keysight Technologies Reports Second Quarter 2019 Results

Record GAAP Revenue of $1.09B Grew 10 Percent

GAAP Earnings Per Diluted Share Grew 137 Percent

Announces $500 Million Share Repurchase Program

SANTA ROSA, Calif.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/analyst?src=hash” target=”_blank”gt;#analystlt;/agt;–Keysight Technologies, Inc. (NYSE: KEYS) today reported financial
results for the second fiscal quarter of 2019 ended April 30, 2019.

“Keysight delivered another record quarter with both revenue and
earnings exceeding the high-end of our guidance. In the second quarter,
we saw growth across most end markets as customers continued R&D
investments in next-generation technologies. We are capturing a
significant portion of the demand we see in the marketplace with our
broad and differentiated portfolio of solutions, software and services.
In addition to expanding our leadership position, we are driving strong
earnings growth with our commitment to operational excellence defined by
our Keysight Leadership Model,” said Ron Nersesian, Keysight president
and CEO.

“Looking into the third quarter, we are complying with the recent United
States Department of Commerce export control regulations with China.
While this will have some impact on revenue, we expect to deliver
revenue growth between 7 and 8 percent for the year and are ahead of
schedule on our margin expansion plan,” said Nersesian.

Second Quarter Financial Summary

  • GAAP revenue grew 10 percent to reach $1,090 million, when compared
    with $990 million last year. Non-GAAP revenue, grew 9 percent to
    reach $1,093 million. Non-GAAP core revenue, which also excludes the
    impact of foreign currency changes and revenue associated with
    businesses acquired or divested within the last twelve months,
    increased 12 percent.
  • GAAP net income was $153 million, or $0.80 per share, compared with
    GAAP net income of $64 million, or $0.34 per share, in the second
    quarter of 2018.
  • Non-GAAP net income was $233 million, or $1.22 per share, compared
    with $158 million, or $0.83 per share in the second quarter of 2018.
  • As of April 30, 2019, cash and cash equivalents totaled $1,277 million.

Reporting Segments

  • Communications Solutions Group (CSG)

CSG reported revenue of $676 million in the second quarter, up 8
percent, driven by demand for 5G R&D across the wireless ecosystem and
data center related next-generation 400GbE digital test.

  • Electronic Industrial Solutions Group (EISG)

EISG reported revenue of $299 million in the second quarter, up 6
percent, driven by strength in automotive, general electronics and
next-generation parametric test.

  • Ixia Solutions Group (ISG)

ISG revenue was $118 million in the second quarter, up 32 percent when
compared with $90 million in the prior year second quarter, driven by
application and security sales along with large visibility renewals.

Share Repurchase Program

Keysight also announced today that its Board of Directors authorized a
new share repurchase program for up to $500 million of its common stock.
The new repurchase program is effective immediately and replaces the
previously authorized $350 million program from 2018 of which $160
million remained. Shares may be purchased from time to time, subject to
general business and market conditions and other investment
opportunities, through open market purchases, privately negotiated
transactions or other means. The repurchase authorization may be
commenced, suspended or discontinued at any time at the company’s
discretion.

Outlook

Keysight’s third fiscal quarter of 2019 GAAP revenue is expected to be
in the range of $1,018 million to $1,058 million and non-GAAP revenue
for the third fiscal quarter of 2019 is expected to be in the range of
$1,020 million to $1,060 million.

Non-GAAP earnings per share for the third fiscal quarter of 2019 are
expected to be in the range of $0.97 to $1.05, which exclude items that
pertain to future events and are not currently estimable with a
reasonable degree of accuracy. Therefore, no reconciliation to GAAP
amounts has been provided. Further information is discussed in the
section titled “Use of Non-GAAP Financial Measures” below.

Webcast

Keysight’s management will present more details about its second quarter
FY2019 financial results and its third quarter FY2019 outlook on a
conference call with investors today at 1:30 p.m. PT. This event will be
webcast in listen-only mode. Listeners may log on to the call at www.investor.keysight.com
under the “Upcoming
Events
” section and select “Q2
2019 Keysight Technologies Inc. Earnings Conference Call
” to
participate or dial +1 833-245-9654 (U.S. only) or +1 647-689-4226
(International) and enter passcode 1774914.

The webcast will remain on the company site for 90 days. A telephone
replay of the conference call will be available at approximately 4:30
p.m. PT after the call and remain available for one week. The replay may
be accessed by dialing +1 800-585-8367 (or +1 416-621-4642 from outside
the U.S.) and entering passcode 1774914.

Forward-Looking Statements

This communication contains forward-looking statements as defined in the
Securities Exchange Act of 1934 and is subject to the safe harbors
created therein. These forward-looking statements involve risks and
uncertainties that could significantly affect the expected results and
are based on certain key assumptions of Keysight’s management and on
currently available information. Due to such uncertainties and risks, no
assurances can be given that such expectations or assumptions will prove
to have been correct, and readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of the
date hereof. Keysight undertakes no responsibility to publicly update or
revise any forward-looking statement. The forward-looking statements
contained herein include, but are not limited to, information and future
guidance on the company’s goals, priorities, revenues, demand, financial
condition, earnings, impacts of US export control regulations, the
continued strengths and expected growth of the markets the company sells
into, operations, operating earnings, and tax rates that involve risks
and uncertainties that could cause Keysight’s results to differ
materially from management’s current expectations. Such risks and
uncertainties include, but are not limited to, changes in the demand for
current and new products, technologies, and services; customer
purchasing decisions and timing, and the risk that we are not able to
realize the savings or benefits expected from integration or
restructuring activities. The words “estimate,” “expect,” “intend,”
“will,” “should,” “forecast,” and similar expressions, as they relate to
the company, are intended to identify forward-looking statements.

In addition to the risks above, other risks that Keysight faces include
those detailed in Keysight’s filings with the Securities and Exchange
Commission, including our Form 10-K for the fiscal year ended Oct. 31,
2018 and Keysight’s quarterly report on Form 10-Q for the period ended
January 31, 2019.

Segment Data

Segment data reflects the results of our reportable segments under our
management reporting system. Segment revenue excludes the impact of fair
value adjustments to acquisition-related deferred revenue balances.
Segment data are provided on page 6 of the attached tables.

Use of Non-GAAP Financial Measures

In addition to financial information prepared in accordance with U.S.
GAAP (“GAAP”), this document also contains certain non-GAAP financial
measures based on management’s view of performance, including:

  • Non-GAAP Revenue
  • Non-GAAP Core Revenue
  • Non-GAAP Net Income
  • Non-GAAP Net Income per share

Income per share is based on weighted average diluted share count. See
the attached supplemental schedules for reconciliations of each non-GAAP
financial measure to its most directly comparable GAAP financial measure
for the three months ended April 30, 2019 and for projected non-GAAP
revenue amounts for the three months ended July 31, 2019. Following the
reconciliations is a discussion of the items adjusted from our non-GAAP
financial measures and the company’s reasons for including or excluding
certain categories of income or expenses from our non-GAAP results.

About Keysight Technologies

Keysight Technologies, Inc. (NYSE: KEYS) is a leading technology company
that helps enterprises, service providers, and governments accelerate
innovation to connect and secure the world. Keysight’s solutions
optimize networks and bring electronic products to market faster and at
a lower cost with offerings from design simulation, to prototype
validation, to manufacturing test, to optimization in networks and cloud
environments. Customers span the worldwide communications ecosystem,
aerospace and defense, automotive, energy, semiconductor and general
electronics end markets. Keysight generated revenues of $3.9B in fiscal
year 2018. More information is available at www.keysight.com.

Additional information about Keysight Technologies is available in the
newsroom at www.keysight.com/go/news and
on FacebookLinkedInTwitter and YouTube.

Source: IR-KEYS

 
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
     
 
Three months ended
April 30, Percent
  2019    

2018 (a)

 

Inc/(Dec)
 
Orders $ 1,121 $ 987 14 %
 
 
Net revenue $ 1,090 $ 990 10 %
 
Costs and expenses:
Cost of products and services 442 451 (2 )%
Research and development 171 160 7 %
Selling, general and administrative 300 305 (1 )%
Other operating expense (income), net   (8 )   (12 ) (27 )%
Total costs and expenses   905     904  
 
Income from operations 185 86 116 %
 
Interest income 6 2 121 %
Interest expense (20 ) (21 ) (5 )%
Other income (expense), net   22     16   42 %
 
Income before taxes 193 83 133 %
 
Provision for income taxes   40     19   115 %
 
Net Income $ 153   $ 64   138 %
 
 
Net income per share:
Basic $ 0.81 $ 0.34
Diluted $ 0.80 $ 0.34
 
Weighted average shares used in computing net income per share:
Basic 188 188
Diluted 191 190
 
(a) Restated to include the impact of adoption of ASU
2017-07, Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost
, on November 1,
2018. There is no impact to net income or net income per share.
 
 
Page 1
 
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
     
 
Six months ended
April 30, Percent
  2019    

2018(a)

 

Inc/(Dec)
 
Orders $ 2,137 $ 1,951 10 %
 
 
Net revenue $ 2,096 $ 1,827 15 %
 
Costs and expenses:
Cost of products and services 870 863 1 %
Research and development 344 310 11 %
Selling, general and administrative 588 600 (2 )%
Other operating expense (income), net   (12 )   (15 ) (16 )%
Total costs and expenses   1,790     1,758   2 %
 
Income from operations 306 69 343 %
 
Interest income 10 5 91 %
Interest expense (40 ) (43 ) (7 )%
Other income (expense), net   37     29   28 %
 
Income before taxes 313 60 420 %
 
Provision (benefit) for income taxes   46     (98 )
 
Net Income $ 267   $ 158   69 %
 
 
Net income per share:
Basic $ 1.42 $ 0.84
Diluted $ 1.40 $ 0.83
 
Weighted average shares used in computing net income per share:
Basic 188 187
Diluted 191 190
 
(a) Restated to include the impact of adoption of ASU
2017-07, Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost,
on November 1,
2018. There is no impact to net income or net income per share.
 
 
Page 2
 
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
PRELIMINARY
 
 
April 30, October 31,
  2019     2018  
(unaudited)
ASSETS
 
Current assets:
Cash and cash equivalents $ 1,277 $ 913
Accounts receivable, net 660 624
Inventory 660 619
Other current assets   227     222  
Total current assets 2,824 2,378
 
Property, plant and equipment, net 563 555
Goodwill 1,174 1,171
Other intangible assets, net 543 645
Long-term investments 42 46
Long-term deferred tax assets 727 750
Other assets   317     279  
Total assets $ 6,190   $ 5,824  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Short-term debt $ 500 $ 499
Accounts payable 236 242
Employee compensation and benefits 281 276
Deferred revenue 333 334
Income and other taxes payable 61 42
Other accrued liabilities   74     69  
Total current liabilities 1,485 1,462
 
Long-term debt 1,292 1,291
Retirement and post-retirement benefits 214 224
Long-term deferred revenue 150 127
Other long-term liabilities   251     287  
Total liabilities   3,392     3,391  
 
Stockholders’ Equity:
Preferred stock; $0.01 par value; 100 million shares
authorized; none issued and outstanding
Common stock; $0.01 par value; 1 billion shares
authorized; 193 million shares at April 30, 2019,
and 191 million shares at October 31, 2018, issued 2 2
Treasury stock at cost; 5.4 million shares at April 30, 2019 and
4.4 million shares at October 31, 2018 (252 ) (182 )
Additional paid-in-capital 1,954 1,889
Retained earnings 1,555 1,212
Accumulated other comprehensive loss   (461 )   (488 )
Total stockholders’ equity   2,798     2,433  
Total liabilities and equity $ 6,190   $ 5,824  
 
 
 
Page 3
   
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
PRELIMINARY
 
Six months ended
April 30,
  2019     2018  
 
Cash flows from operating activities:
Net income $ 267 $ 158
 
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 48 53
Amortization 103 104
Share-based compensation 50 34
Deferred tax benefit (2 ) (237 )
Excess and obsolete inventory-related charges 13 11
Gain on divestitures (1 ) (8 )
Other non-cash expenses, net (2 ) 5
Changes in assets and liabilities:
Accounts receivable (28 ) (31 )
Inventory (53 ) (18 )
Accounts payable 1 20
Employee compensation and benefits 5 23
Deferred revenue 85 71
Income taxes payable (8 ) 125
Retirement and post-retirement benefits (23 ) (22 )
Other assets and liabilities   6     (6 )
Net cash provided by operating activities (a)   461     282  
 
Cash flows from investing activities:
Investments in property, plant and equipment (60 ) (58 )
Proceeds from the sale of investments 7
Proceeds from divestitures 2 12
Other investing activities   2      
Net cash used in investing activities   (49 )   (46 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans 39 33
Payment of taxes related to net share settlement of equity awards (24 ) (16 )
Payment of acquisition-related contingent consideration (3 )
Proceeds from credit facility 40
Repayment of debt and credit facility (300 )
Treasury stock repurchases (b)   (69 )   (28 )
Net cash used in financing activities   (54 )   (274 )
 
Effect of exchange rate movements   5     4  
 
Net increase (decrease) in cash, cash equivalents and restricted cash 363 (34 )
 
Cash, cash equivalents and restricted cash at beginning of period   917     820  
 
Cash, cash equivalents and restricted cash at end of period $ 1,280   $ 786  
 
 
(a) Cash payments included in operating activities:
Income tax payments, net $ (48 ) $ (11 )
Interest payment on debt $ (38 ) $ (41 )
 
(b) For the six months ended April 30, 2019, we
repurchased 1,030,120 shares of common stock for $70 million, held
as treasury stock and accounted for at trade date using the cost
method. There were $1 million stock repurchases pending settlements
as of April 30, 2019. For the six months ended April 30, 2018, we
repurchased 773,352 shares of common stock for $40 million, held as
treasury stock and accounted for at trade date using the cost
method. There were $12 million stock repurchases pending settlement
as of April 30, 2018.
 
 
Page 4
             
KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATION OF REVENUE GUIDANCE AND NON-GAAP CORE REVENUE
(In millions)
(Unaudited)
PRELIMINARY
 
Q3’19 Guidance Year-over-year compare    
Low end High end Q2’19 Q2’18 Percent Inc/(Dec)
GAAP Revenue $ 1,018 $ 1,058 $ 1,090 $ 990 10 %
Amortization of acquisition-related balances   2   2   3   9  
Non-GAAP Revenue $ 1,020 $ 1,060 $ 1,093 $ 999 9 %
Less: Revenue from acquisition or divestitures included in segment
results
(5 )
Currency impacts   17    
Non-GAAP Core Revenue $ 1,110 $ 994   12 %
 
 
 
Non-GAAP core revenue excludes impact of currency and revenue from
acquisitions or divestitures closed within the last twelve months.
 
Please refer page 8 for discussion on our non-GAAP financial
measures.
 
 
Page 5
     
KEYSIGHT TECHNOLOGIES, INC.
SEGMENT RESULTS INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
 
 
 
Communications Solutions Group YoY
Q2’19 Q2’18 % Chg
Revenue $ 676 $ 627 8 %
Gross margin, % 63.4 % 58.2 %
Income from operations $ 187 $ 132
Operating margin, % 28 % 21 %
 
 
Electronic Industrial Solutions Group YoY
Q2’19 Q2’18 % Chg
Revenue $ 299 $ 282 6 %
Gross margin, % 61.3 % 59.0 %
Income from operations $ 78 $ 68
Operating margin, % 26 % 24 %
 
 
Ixia Solutions Group YoY
Q2’19 Q2’18 % Chg
Revenue $ 118 $ 90 32 %
Gross margin, % 71.5 % 75.6 %
Income from operations $ 3 $ (10 )
Operating margin, % 3 % (11 )%
 
 
Restated for (1) the recently announced organizational change to
align our services business with its customers and end markets. With
this change, services, which was previously reported as Services
Solutions Group (SSG), is now reported as part of the Communications
Solutions Group (CSG) and Electronic Industrial Solutions Group
(EISG); and (2) the retrospective application of ASU 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost
, which the company adopted
on November 1, 2018.
 
Net revenue for Ixia Solutions Group excludes the impact of
amortization of acquisition-related balances of $3 million and $8
million for Q2’19 and Q2’18, respectively. Net revenue for
Communication Solutions Group excludes the impact of amortization of
acquisition-related balances of $1 million for Q2’18. Segment
revenue and income from operations are consistent with the
respective non-GAAP measures as discussed on Page 8.
 
 
 
Page 6
       
KEYSIGHT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
 
 
Three months ended Six months ended
April 30, April 30,
2019   2018   2019   2018  

Net
Income

Diluted
EPS

 

Net
Income

Diluted
EPS

 

Net
Income

Diluted
EPS

 

Net
Income

Diluted
EPS

 
GAAP Net income $ 153 $ 0.80 $ 64 $ 0.34 $ 267 $ 1.40 $ 158 $ 0.83
Non-GAAP adjustments:
Amortization of acquisition-related balances 54 0.28 65 0.34 108 0.56 154 0.81
Share-based compensation 23 0.12 15 0.08 50 0.26 34 0.18
Acquisition and integration costs 1 0.01 17 0.09 3 0.02 36 0.19
Northern California wildfire-related costs 7 0.04
Restructuring and related costs 6 0.03 11 0.06 6 0.03 13 0.07
Other (12 ) (0.06 ) (5 ) (0.02 ) (15 ) (0.08 ) (4 ) (0.02 )
Adjustment for taxes (a)   8     0.04     (9 )   (0.06 )   (10 )   (0.05 )   (143 )   (0.76 )
Non-GAAP Net income $ 233   $ 1.22   $ 158   $ 0.83   $ 409   $ 2.14   $ 255   $ 1.34  
 
Weighted average shares outstanding – diluted 191 190 191 190
 
(a) For the three and six months ended April 30, 2019 and
April 30, 2018 management uses a non-GAAP effective tax rate of 12%
and 15%, respectively.
 
Historical amounts are reclassified to conform with current
presentation.
 
Please refer page 8 for discussion on our non-GAAP financial
measures.
 
 
 
Page 7
Non-GAAP Financial Measures
   
Management uses both GAAP and non-GAAP financial measures to analyze
and assess the overall performance of the business, to make
operating decisions and to forecast and plan for future periods. We
believe that our investors benefit from seeing our results “through
the eyes of management” in addition to seeing our GAAP results. This
information enhances investors’ understanding of the continuing
performance of our business and facilitates comparison of
performance to our historical and future periods.
 
Our non-GAAP financial measures may not be comparable to similarly
titled measures used by other companies, including industry peer
companies, limiting the usefulness of these measures for comparative
purposes.
 
These non-GAAP measures should be considered supplemental to and not
a substitute for financial information prepared in accordance with
GAAP. The discussion below presents information about each of the
non-GAAP financial measures and the company’s reasons for including
or excluding certain categories of income or expenses from our
non-GAAP results. In future periods, we may exclude such items and
may incur income and expenses similar to these excluded items.
Accordingly, adjustments for these items and other similar items in
our non-GAAP presentation should not be interpreted as implying that
these items are non-recurring, infrequent or unusual.
 
Non-GAAP Revenue includes recognition of acquired deferred
revenue that was written down to fair value in purchase accounting.
Management believes that excluding fair value purchase accounting
adjustments more closely correlates with the ordinary and ongoing
course of the acquired company’s operations and facilitates analysis
of revenue growth and business trends.
 
Non-GAAP Core Revenue is non-GAAP revenue (see Non-GAAP
Revenue
above) excluding the impact of foreign currency changes
and revenue associated with businesses acquired and divested within
the last twelve months. We exclude the impact of foreign currency
changes as currency rates can fluctuate based on factors that are
not within our control and can obscure revenue growth trends. As the
nature, size and number of acquisitions can vary significantly from
period to period and as compared to our peers, we exclude revenue
associated with recently acquired businesses to facilitate
comparisons of revenue growth and analysis of underlying business
trends.
 
Non-GAAP Income from Operations, Non-GAAP Net Income and Non-GAAP
Diluted EPS
may include the following types of adjustments:
 

Acquisition-related Items: We exclude the impact of certain
items recorded in connection with business combinations from our
non-GAAP financial measures that are either non-cash or not normal,
recurring operating expenses due to their nature, variability of
amounts and lack of predictability as to occurrence or timing. These
amounts may include non-cash items such as the amortization of
acquired intangible assets and amortization of items associated with
fair value purchase accounting adjustments, including recognition of
acquired deferred revenue (see Non-GAAP Revenue above). We also
exclude other acquisition and integration costs associated with
business acquisitions that are not normal recurring operating
expenses, including amortization of amounts paid to redeem acquires’
unvested stock-based compensation awards, and legal, accounting and
due diligence costs. We exclude these charges to facilitate a more
meaningful evaluation of our current operating performance and
comparisons to our past operating performance.
 

Share-based Compensation Expense: We exclude share-based
compensation expense from our non-GAAP financial measures because
share-based compensation expense can vary significantly from period
to period based on the company’s share price, as well as the timing,
size and nature of equity awards granted. Management believes the
exclusion of this expense facilitates the ability of investors to
compare the company’s operating results with those of other
companies, many of which also exclude share-based compensation
expense in determining their non-GAAP financial measures.
 

Restructuring and Related Costs: We exclude incremental
expenses associated with restructuring initiatives, usually aimed at
material changes in the business or cost structure. Such costs may
include employee separation costs, asset impairments,
facility-related costs, contract termination fees, and costs to move
operations from one location to another. These activities can vary
significantly from period to period based on the timing, size and
nature of restructuring plans; therefore, we do not consider such
costs to be normal, recurring operating expenses. We believe that
these costs do not reflect expected future operating expenses and do
not contribute to a meaningful evaluation of the company’s current
operating performance or comparisons to our operating performance in
other periods.
 

Northern California wildfire-related costs and Other Items:
We exclude certain other significant income or expense items that
may occur occasionally and are not normal, recurring, cash
operating, from our non-GAAP financial measures. Such items are
evaluated on an individual basis based on both quantitative and
qualitative factors and generally represent items that we would not
anticipate occurring as part of our normal business on a regular
basis. While not all-inclusive, examples of certain other
significant items excluded from non-GAAP financial measures would
include net unrealized gains on equity investments still held, and
significant non recurring events like goodwill impairment charges,
realized gains or losses associated with our employee benefit plans,
costs related to unusual disaster like Northern California
wildfires, gain on sale of assets and small divestitures, separation
and related costs, etc.
 

Estimated Tax Rate: We utilize a consistent methodology for
long-term projected non-GAAP tax rate. When projecting this
long-term rate, we exclude any tax benefits or expenses that are not
directly related to ongoing operations and which are either isolated
or cannot be expected to occur again with any regularity or
predictability. Additionally, we evaluate our current long-term
projections, current tax structure and other factors, such as
existing tax positions in various jurisdictions and key tax holidays
in major jurisdictions where Keysight operates. This tax rate could
change in the future for a variety of reasons, including but not
limited to significant changes in geographic earnings mix including
acquisition activity, or fundamental tax law changes in major
jurisdictions where Keysight operates. The above reasons also limit
our ability to reasonably estimate the future GAAP tax rate and
provide a reconciliation of the expected non-GAAP earnings per share
for the third fiscal quarter of 2019 to the GAAP equivalent.
 
Management recognizes these items can have a material impact on our
cash flows and/or our net income. Our GAAP financial statements,
including our Condensed Consolidated Statement of Cash Flows,
portray those effects. Although we believe it is useful for
investors to see core performance free of special items, investors
should understand that the excluded costs are actual expenses that
may impact the cash available to us for other uses. To gain a
complete picture of all effects on the company’s profit and loss
from any and all events, management does (and investors should) rely
upon the Condensed Consolidated Statement of Operations prepared in
accordance with GAAP. The non-GAAP measures focus instead upon the
core business of the company, which is only a subset, albeit a
critical one, of the company’s performance.
 
Page 8

Contacts

EDITORIAL CONTACT:
Denise Idone
+ 1 631-849-3500
[email protected]

INVESTOR CONTACT:
Jason Kary
+1 707-577-6916
[email protected]

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