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8-K - 8-K - LOGITECH INTERNATIONAL S.A.a13-22726_18k.htm

Exhibit 99.1

 

 

For Immediate Release

 

Editorial Contacts:

 

Joe Greenhalgh, Vice President, Investor Relations — USA (510) 713-4430

Nancy Morrison, Vice President, Corporate Communications — USA (510) 713-4948

Laura Scorza, Sr. Public Relations Manager — Europe +41-(0) 21-863-5336

 

Logitech Announces Better-Than-Expected Q2 FY 2014 Results

 

Turnaround on Track

 

NEWARK, Calif. Oct. 23, 2013 and LAUSANNE, Switzerland, Oct. 24, 2013 — Logitech International (SIX: LOGN)(Nasdaq: LOGI) today announced financial results for the second quarter of Fiscal Year 2014, with better-than-expected revenue of $532 million, down 3 percent compared to second quarter of the prior year.

 

·                  Q2 GAAP operating income was $17 million, and GAAP EPS was $0.09

 

·                  Q2 non-GAAP operating income was $37 million, and non-GAAP EPS was $0.20

 

·                  Year-to-date GAAP operating income was $17 million, and GAAP EPS was $0.10

 

·                  Year-to-date non-GAAP operating income was $49 million, and non-GAAP EPS was $0.26

 

“We’re making progress toward building a faster and more profitable Logitech,” said Bracken P. Darrell, Logitech president and chief executive officer. “In spite of headwinds from weak market conditions in Europe and a decline in the global PC market, we significantly improved operating profitability in the first half of Fiscal Year 2014.

 

“Our growth categories performed well during the first half. Combined, tablet accessories, gaming and wireless speakers grew about 36 percent year over year. Although we have more work in front of us, I am confident that we are on track with our turnaround strategy.”

 

Outlook

 

For the full Fiscal Year 2014, Logitech continues to expect revenue of approximately $2 billion and GAAP operating income of approximately $50 million, compared to an operating loss in Fiscal Year 2013. The outlook for GAAP operating income now includes year-to-date charges of $13 million, related to restructuring, that were not anticipated when the Company originally provided the outlook in April 2013.

 

The current outlook for non-GAAP full Fiscal Year 2014 operating income is $100 million, an increase of $13 million compared to the previously expected non-GAAP operating income.

 



 

Prepared Remarks Available Online

 

Logitech has made its prepared written remarks for the financial results teleconference available online on the Logitech corporate Web site at http://ir.logitech.com, in the Calendar section.

 

Financial Results Teleconference and Webcast

 

Logitech will hold a financial results teleconference to discuss the results for Q2 FY 2014 on Thurs., Oct. 24, 2013 at 8:30 a.m. Eastern Daylight Time and 14:30 Central European Summer Time. A live webcast of the call will be available on the Logitech corporate website at http://ir.logitech.com.

 

Use of Non-GAAP Financial Information

 

To facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measures, which exclude share-based compensation expense, amortization of other intangible assets, restructuring charges (credits), other restructuring-related charges, investment impairment (recovery) and other items detailed under “Supplemental Financial Information” after the tables below. Logitech believes this information will help investors to evaluate its current period performance and trends in its business.

 

About Logitech

 

Logitech is a world leader in products that connect people to the digital experiences they care about. Spanning multiple computing, communication and entertainment platforms, Logitech’s combined hardware and software enable or enhance digital navigation, music and video entertainment, gaming, social networking, audio and video communication over the Internet, video security and home-entertainment control. Founded in 1981, Logitech International is a Swiss public company listed on the SIX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market (LOGI).

 

# # #

 

This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding: the Company’s turnaround, product launches and profitability, as well as Fiscal Year 2014 revenue, operating income and restructuring-related charges. The forward-looking statements in this release involve risks and uncertainties that could cause Logitech’s actual results and events to differ materially from those anticipated in these forward-looking statements, including, without limitation: if our product offerings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitability growth we expect, or when we expect it; the demand of our customers and our consumers for our products and our ability to accurately forecast it; if we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories; if we do not successfully execute on our growth opportunities in our new product categories and sales in emerging market geographies; if sales of PC peripherals in mature markets are less than we expect; the effect of pricing, product, marketing and other initiatives by our competitors, and our reaction to them, on our sales, gross margins and profitability; if our products and marketing strategies fail to separate our products from competitors’ products; if there is a deterioration of business and economic conditions in one or more of our sales regions or operating segments, or significant fluctuations in exchange rates. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Logitech’s periodic filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013 and our Amended Annual Report on Form 10-K/A for the fiscal year ended March 31, 2013, available at www.sec.gov, under the caption Risk Factors and elsewhere. Logitech does not undertake any obligation to update any forward-looking statements to reflect new information or events or circumstances occurring after the date of this press release.

 

Logitech, the Logitech logo, and other Logitech marks are registered in Switzerland and other countries. All other trademarks are the property of their respective owners. For more information about Logitech and its products, visit the company’s Web site at www.logitech.com.

 

(LOGIIR)

 

2



 

LOGITECH INTERNATIONAL S.A.

 

(In thousands, except per share amounts) - Unaudited

 

 

 

Three Months Ended September 30,

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

2013

 

2012

 

 

 

 

 

As Revised (A)

 

 

 

 

 

 

 

Net sales

 

$

531,972

 

$

547,693

 

Cost of goods sold

 

348,559

 

351,919

 

Gross profit

 

183,413

 

195,774

 

% of net sales

 

34.5

%

35.7

%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Marketing and selling

 

93,710

 

110,522

 

Research and development

 

37,633

 

38,114

 

General and administrative

 

29,395

 

25,980

 

Restructuring charges (credits)

 

5,465

 

(2,671

)

Total operating expenses

 

166,203

 

171,945

 

 

 

 

 

 

 

Operating income

 

17,210

 

23,829

 

 

 

 

 

 

 

Interest income, net

 

183

 

153

 

Other income (loss), net

 

62

 

(509

)

 

 

 

 

 

 

Income before income taxes

 

17,455

 

23,473

 

Provision for (benefit from) income taxes

 

3,057

 

(31,076

)

 

 

 

 

 

 

Net income

 

$

14,398

 

$

54,549

 

 

 

 

 

 

 

Shares used to compute net income per share:

 

 

 

 

 

Basic

 

159,969

 

156,736

 

Diluted

 

161,177

 

157,932

 

Net income per share:

 

 

 

 

 

Basic

 

$

0.09

 

$

0.35

 

Diluted

 

$

0.09

 

$

0.35

 

 

3



 

LOGITECH INTERNATIONAL S.A.

 

(In thousands, except per share amounts) - Unaudited

 

 

 

Six Months Ended September 30,

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

2013

 

2012

 

 

 

 

 

As Revised (A)

 

 

 

 

 

 

 

Net sales

 

$

1,009,896

 

$

1,016,297

 

Cost of goods sold

 

658,128

 

675,177

 

Gross profit

 

351,768

 

341,120

 

% of net sales

 

34.8

%

33.6

%

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Marketing and selling

 

194,345

 

211,419

 

Research and development

 

73,824

 

77,137

 

General and administrative

 

58,543

 

58,460

 

Restructuring charges

 

7,799

 

28,556

 

Total operating expenses

 

334,511

 

375,572

 

 

 

 

 

 

 

Operating income (loss)

 

17,257

 

(34,452

)

 

 

 

 

 

 

Interest income, net

 

160

 

537

 

Other income (loss), net

 

279

 

(668

)

 

 

 

 

 

 

Income (loss) before income taxes

 

17,696

 

(34,583

)

Provision for (benefit from) income taxes

 

2,255

 

(37,986

)

 

 

 

 

 

 

Net income

 

$

15,441

 

$

3,403

 

 

 

 

 

 

 

Shares used to compute net income per share:

 

 

 

 

 

Basic

 

159,637

 

158,723

 

Diluted

 

160,869

 

159,853

 

Net income per share:

 

 

 

 

 

Basic

 

$

0.10

 

$

0.02

 

Diluted

 

$

0.10

 

$

0.02

 

 

4



 

LOGITECH INTERNATIONAL S.A.

 

(In thousands) - Unaudited

 

CONSOLIDATED BALANCE SHEETS

 

September 30, 2013

 

March 31, 2013

 

September 30, 2012

 

 

 

 

 

As Revised (A)

 

As Revised (A)

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

294,796

 

$

333,824

 

$

237,033

 

Accounts receivable

 

258,858

 

179,565

 

284,451

 

Inventories

 

292,777

 

261,083

 

321,307

 

Other current assets

 

65,808

 

58,103

 

70,730

 

Assets held for sale

 

 

10,960

 

 

Total current assets

 

912,239

 

843,535

 

913,521

 

Non-Current assets

 

 

 

 

 

 

 

Property, plant and equipment, net

 

87,133

 

87,649

 

93,854

 

Goodwill

 

344,759

 

341,357

 

560,098

 

Other intangible assets

 

17,747

 

26,024

 

39,232

 

Other assets

 

71,817

 

75,098

 

83,303

 

Total assets

 

$

1,433,695

 

$

1,373,663

 

$

1,690,008

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

 

$

303,089

 

$

265,995

 

$

368,509

 

Accrued and other liabilities

 

219,646

 

192,774

 

199,941

 

Liabilities held for sale

 

 

3,202

 

 

Total current liabilities

 

522,735

 

461,971

 

568,450

 

Non-current liabilities

 

202,556

 

195,882

 

197,249

 

Total liabilities

 

725,291

 

657,853

 

765,699

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

708,404

 

715,810

 

924,309

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,433,695

 

$

1,373,663

 

$

1,690,008

 

 

5



 

LOGITECH INTERNATIONAL S.A.

 

(In thousands) - Unaudited

 

 

 

Six Months Ended September 30,

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

2013

 

2012

 

 

 

 

 

As Revised (A)

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

15,441

 

$

3,403

 

Non-cash items included in net income:

 

 

 

 

 

Depreciation

 

19,283

 

22,307

 

Amortization of other intangible assets

 

10,518

 

12,589

 

Investment impairment and loss

 

530

 

 

Share-based compensation expense

 

8,499

 

13,437

 

Loss on disposal of property, plant and equipment

 

2,456

 

 

Gain on sale of available-for-sale securities

 

 

(831

)

Excess tax benefits from share-based compensation

 

 

(22

)

Deferred income taxes and others

 

(3,902

)

(3,806

)

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

Accounts receivable

 

(77,042

)

(58,533

)

Inventories

 

(21,350

)

(31,825

)

Other assets

 

(5,893

)

(7,570

)

Accounts payable

 

39,555

 

71,095

 

Accrued liabilities

 

26,091

 

(10,997

)

Net cash provided by operating activities

 

14,186

 

9,247

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property, plant and equipment

 

(23,063

)

(32,817

)

Acquisitions, net of cash acquired

 

(650

)

 

Investment in a privately-held company

 

 

(3,970

)

Proceeds from sale of available-for-sale securities

 

 

917

 

Purchases of trading investments for deferred compensation plan

 

(6,146

)

(1,648

)

Proceeds from sales of trading investments for deferred compensation plan

 

6,602

 

1,638

 

Net cash used in investing activities

 

(23,257

)

(35,880

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Payment of cash dividends

 

(36,123

)

(133,462

)

Purchases of treasury shares

 

 

(87,812

)

Proceeds from sale of shares upon exercise of options and purchase rights

 

6,135

 

9,008

 

Tax withholdings related to net share settlements of restricted stock units

 

(453

)

(635

)

Excess tax benefits from share-based compensation

 

 

22

 

Net cash used in financing activities

 

(30,441

)

(212,879

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

484

 

(1,825

)

Net decrease in cash and cash equivalents

 

(39,028

)

(241,337

)

Cash and cash equivalents at beginning of period

 

333,824

 

478,370

 

Cash and cash equivalents at end of period

 

$

294,796

 

$

237,033

 

 

6



 

LOGITECH INTERNATIONAL S.A.

 

(In thousands) - Unaudited

 

 

 

Three Months Ended September 30,

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

2013

 

2012

 

 

 

 

 

As Revised (A)

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

14,398

 

$

54,549

 

Non-cash items included in net income :

 

 

 

 

 

Depreciation

 

9,144

 

11,155

 

Amortization of other intangible assets

 

5,254

 

6,191

 

Investment impairment and loss

 

160

 

 

Share-based compensation expense

 

4,109

 

7,266

 

Loss on disposal of property and plant

 

145

 

 

Gain on sale of available-for-sale securities

 

 

(831

)

Excess tax benefits from share-based compensation

 

 

(17

)

Deferred income taxes and others

 

(486

)

(2,751

)

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

Accounts receivable

 

(38,143

)

(64,849

)

Inventories

 

6,702

 

(42,178

)

Other assets

 

(4,123

)

(7,372

)

Accounts payable

 

5,975

 

106,283

 

Accrued liabilities

 

12,358

 

(52,126

)

Net provided by operating activities

 

15,493

 

15,320

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property, plant and equipment

 

(9,855

)

(10,901

)

Investment in a privately-held company

 

 

(3,970

)

Purchases of trading investments for deferred compensation plan

 

(1,740

)

(251

)

Proceeds from sales of trading investments for deferred compensation plan

 

1,854

 

253

 

Net cash used in investing activities

 

(9,741

)

(14,869

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Payment of cash dividends

 

(36,123

)

(133,462

)

Proceeds from sale of shares upon exercise of options and purchase rights

 

6,123

 

8,604

 

Tax withholdings related to net share settlements of restricted stock units

 

(238

)

(465

)

Excess tax benefits from share-based compensation

 

 

17

 

Net cash used in financing activities

 

(30,238

)

(125,306

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

425

 

320

 

Net decrease in cash and cash equivalents

 

(24,061

)

(124,535

)

Cash and cash equivalents at beginning of period

 

318,857

 

360,737

 

Cash and cash equivalents at end of period

 

$

294,796

 

$

236,202

 

 

7



 

LOGITECH INTERNATIONAL S.A.

 

(In thousands, except per share amounts) - Unaudited

 

 

 

Three Months Ended September 30,

 

Six Months Ended September 30,

 

SUPPLEMENTAL FINANCIAL INFORMATION

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Gross profit - GAAP

 

$

183,413

 

$

195,774

 

$

351,768

 

$

341,120

 

Share-based compensation expense

 

594

 

608

 

1,171

 

1,397

 

Amortization of other intangible assets

 

2,593

 

3,633

 

5,171

 

7,463

 

Restructuring-related charges

 

5,194

 

315

 

5,194

 

3,315

 

Gross profit - Non-GAAP

 

$

191,794

 

$

200,330

 

$

363,304

 

$

353,295

 

 

 

 

 

 

 

 

 

 

 

Gross margin - GAAP

 

34.5

%

35.7

%

34.8

%

33.6

%

Gross margin - Non-GAAP

 

36.1

%

36.6

%

36.0

%

34.8

%

 

 

 

 

 

 

 

 

 

 

Operating expenses - GAAP

 

$

166,203

 

$

171,945

 

$

334,511

 

$

375,572

 

Less: Share-based compensation expense

 

3,515

 

6,658

 

7,328

 

12,040

 

Less: Amortization of other intangible assets

 

2,661

 

2,558

 

5,347

 

5,126

 

Less: Restructuring charges (credits)

 

5,465

 

(2,671

)

7,799

 

28,556

 

Less: Restructuring-related charges

 

 

1,946

 

 

1,946

 

Operating expenses - Non-GAAP

 

$

154,562

 

$

163,454

 

$

314,037

 

$

327,904

 

 

 

 

 

 

 

 

 

 

 

% of net sales - GAAP

 

31.2

%

31.4

%

33.1

%

37.0

%

% of net sales - Non - GAAP

 

29.1

%

29.8

%

31.1

%

32.3

%

 

 

 

 

 

 

 

 

 

 

Operating expenses - GAAP

 

$

166,203

 

$

171,945

 

$

334,511

 

$

375,572

 

Less: Restructuring charges (credits)

 

5,465

 

(2,671

)

7,799

 

28,556

 

Operating expenses excluding restructuring charges - Non-GAAP

 

$

160,738

 

$

174,616

 

$

326,712

 

$

347,016

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) - GAAP

 

$

17,210

 

23,829

 

$

17,257

 

$

(34,452

)

Share-based compensation expense

 

4,109

 

7,266

 

8,499

 

13,437

 

Amortization of other intangible assets

 

5,254

 

6,191

 

10,518

 

12,589

 

Restructuring charges (credits)

 

5,465

 

(2,671

)

7,799

 

28,556

 

Restructuring-related charges

 

5,194

 

2,261

 

5,194

 

5,261

 

Operating income (loss) - Non - GAAP

 

$

37,232

 

$

36,876

 

$

49,267

 

$

25,391

 

 

 

 

 

 

 

 

 

 

 

% of net sales - GAAP

 

3.2

%

4.4

%

1.7

%

-3.4

%

% of net sales - Non - GAAP

 

7.0

%

6.7

%

4.9

%

2.5

%

 

 

 

 

 

 

 

 

 

 

Net income - GAAP

 

$

14,398

 

$

54,549

 

$

15,441

 

$

3,403

 

Share-based compensation expense

 

4,109

 

7,266

 

8,499

 

13,437

 

Amortization of other intangible assets

 

5,254

 

6,191

 

10,518

 

12,589

 

Restructuring charges (credits)

 

5,465

 

(2,671

)

7,799

 

28,556

 

Restructuring-related charges

 

5,194

 

2,261

 

5,194

 

5,261

 

Investment impairment (recovery)

 

(261

)

 

109

 

 

Benefit from income taxes

 

(2,638

)

(41,102

)

(5,368

)

(44,916

)

Net income - Non - GAAP

 

$

31,521

 

$

26,494

 

$

42,192

 

$

18,330

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Diluted - GAAP

 

$

0.09

 

$

0.35

 

$

0.10

 

$

0.02

 

Diluted - Non - GAAP

 

$

0.20

 

$

0.17

 

$

0.26

 

$

0.11

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute net income per share:

 

 

 

 

 

 

 

 

 

Diluted - GAAP & Non-GAAP

 

161,177

 

157,932

 

160,869

 

159,853

 

 

 

 

 

 

 

 

 

 

 

Net sales by channel:

 

 

 

 

 

 

 

 

 

Retail

 

$

464,853

 

$

476,479

 

$

878,089

 

$

871,580

 

OEM

 

37,526

 

36,718

 

72,039

 

73,393

 

LifeSize

 

29,593

 

34,496

 

59,768

 

71,324

 

Total net sales

 

$

531,972

 

$

547,693

 

$

1,009,896

 

$

1,016,297

 

 

 

 

 

 

 

 

 

 

 

Net retail sales by product family(*):

 

 

 

 

 

 

 

 

 

Retail - Pointing Devices

 

$

130,656

 

$

122,524

 

$

245,307

 

$

238,353

 

Retail - Keyboards & Desktops

 

105,236

 

97,069

 

203,186

 

191,628

 

Retail - Tablet Accessories

 

34,711

 

33,737

 

73,270

 

49,623

 

Retail - Audio - PC

 

67,199

 

77,267

 

119,164

 

138,792

 

Retail - Audio - Wearables & Wireless

 

25,648

 

19,108

 

44,723

 

33,707

 

Retail - Video

 

41,061

 

49,453

 

76,319

 

86,612

 

Retail - PC Gaming

 

41,493

 

46,673

 

81,110

 

73,456

 

Retail - Remotes

 

13,327

 

16,434

 

27,901

 

30,166

 

Retail - Other

 

5,522

 

14,214

 

7,109

 

29,243

 

Total net retail sales

 

$

464,853

 

$

476,479

 

$

878,089

 

$

871,580

 

 


*  Certain products within the retail product families as presented in prior years have been reclassified to conform to the current year presentation, with no impact on previously reported total net retail sales.

 

 

 

Three Months Ended September 30,

 

Six Months Ended September 30,

 

Share-based Compensation Expense

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

$

594

 

$

608

 

$

1,171

 

$

1,397

 

Marketing and selling

 

1,017

 

2,644

 

2,923

 

4,424

 

Research and development

 

840

 

1,763

 

1,934

 

3,588

 

General and administrative

 

1,658

 

2,251

 

2,471

 

4,028

 

Income tax benefit

 

(1,300

)

(1,671

)

(2,175

)

(3,047

)

Total share-based compensation expense after income taxes

 

$

2,809

 

$

5,595

 

$

6,324

 

$

10,390

 

 


(A) - In the first quarter of fiscal year 2014, the Company identified errors related to the accounting for its product warranty liability, amortization expense of certain intangible assets, and other out-of-period adjustments. The errors impacted prior reporting periods, starting prior to fiscal year 2009. While these errors were not material to any previously issued annual or quarterly consolidated financial statements, management concluded that correcting the cumulative errors and related tax effects, which amounted to $19.1 million, in the first quarter of fiscal year 2014 would be material to the consolidated financial statements for the three months ended June 30, 2013 and to the expected results of operations for the fiscal year ending March 31, 2014.  Accordingly, the Company revised its prior period annual and quarterly consolidated financial statements to correct the errors in future SEC filings.

 

In this earnings release, the Company has revised the March 31, 2013 and September 30, 2012 consolidated balance sheets, and the consolidated statements of operations and cash flows for the three and six months  ended September 30, 2012 to record an additional warranty liability, amortization of certain intangible assets, and other out-of-period adjustments.

 

 

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(B) - Non-GAAP Financial Measures

 

To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use a number of financial measures, both GAAP and non-GAAP, in analyzing and assessing our overall business performance, for making operating decisions and for forecasting and planning future periods. We consider the use of non-GAAP financial measures helpful in assessing our current financial performance, ongoing operations and prospects for the future as well as understanding financial and business trends relating to our financial condition and results of operations.

 

While we use non-GAAP financial measures as a tool to enhance our understanding of certain aspects of our financial performance and to provide incremental insight into the underlying factors and trends affecting both our performance and our cash-generating potential, we do not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides useful supplemental data that, while not a substitute for GAAP financial measures, can offer insight in the review of our financial and operational performance and enables investors to more fully understand trends in our current and future performance. In assessing our business during the three and six months ended September 30, 2013, we excluded items in the following general categories, each of which are described below:

 

Share-based compensation expenses. We believe that providing non-GAAP measures excluding share-based compensation expense, in addition to the GAAP measures, allows for a more transparent comparison of our financial results from period to period. We prepare and maintain our budgets and forecasts for future periods on a basis consistent with this non-GAAP financial measure. Further, companies use a variety of types of equity awards as well as a variety of methodologies, assumptions and estimates to determine share-based compensation expense. We believe that excluding share-based compensation expense enhances our ability and the ability of investors to understand the impact of non-cash share-based compensation on our operating results and to compare our results against the results of other companies.

 

Amortization of other intangible assets. We incur amortization of intangible assets, primarily in connection with our acquisition of certain businesses and technologies. The amortization of purchased intangibles varies depending on the level of acquisition activity. We exclude these variable charges in budgeting, planning and forecasting future periods, and we believe that providing the non-GAAP measures excluding these non-cash variable charges, as well as the GAAP measures, provides additional insight when comparing our operating expenses and financial results from period to period.

 

Restructuring and restructuring-related charges. These expenses are associated with re-aligning our business strategies based on current economic conditions. We have undertaken several restructurings in recent years. In connection with our restructuring initiatives, we incurred costs related to employee terminations, facility closures and early cancellation of certain contracts, included in restructuring charges (credits). Our restructuring initiatives also resulted in other costs related to restructurings not qualifying for inclusion in restructuring charges (credits).  We believe that providing the non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges are not reflective of our ongoing operating results in the current period.

 

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Other charges. We provided non-GAAP measures excluding the effect of certain charges and income that are not reflective of our ongoing operations.

 

Each of the non-GAAP financial measures described above, and used in this press release, should not be considered in isolation from, or as a substitute for, a measure of financial performance prepared in accordance with GAAP.  Further, investors are cautioned that there are inherent limitations associated with the use of each of these non-GAAP financial measures as an analytical tool. In particular, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the exclusion of items that are recurring and/may be reflected in the Company’s financial results for the foreseeable future. We compensate for these limitations by providing specific information in the reconciliation included in this press release regarding the GAAP amounts excluded from the non-GAAP financial measures. In addition, as noted above, we evaluate the non-GAAP financial measures together with the most directly comparable GAAP financial information.

 

10