Keysight Technologies Reports Second-Quarter 2015 Results

Non-GAAP Measures

Keysight uses a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. The definition of these non-GAAP financial measures may differ from similarly titled measures used by others, and such non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. Keysight generally uses non-GAAP financial measures to facilitate management’s comparisons to historic operating results, to competitors’ operating results and to guidance provided to investors. In addition, Keysight believes that the use of these non-GAAP financial measures provides greater transparency to investors of information used by management in its financial and operational decision-making.

(1) Non-GAAP net income, non-GAAP operating margin and non-GAAP net income per share exclude primarily the impacts of share-based compensation, separation costs, asset impairments and non-cash intangible amortization. Non–GAAP net income and non-GAAP net income per share also excludes 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. Earnings per share is based on diluted shares. Reconciliation between non-GAAP net income and GAAP net income, and non- GAAP operating margin and GAAP operating margin is set forth on page 5 and page 8 of the attached tables respectively, along with additional information regarding the use of this non-GAAP measure.

(2) Non-GAAP earnings per share as projected for Q3FY15 excludes primarily the impacts of share-based compensation, separation costs, asset impairments and non-cash intangible amortization. We also 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. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided.

(3) Return on invested capital (ROIC) is a non-GAAP measure and is defined as income from operations less other (income) expense and taxes, annualized, divided by the average of the two most recent quarter-end balances of assets less net current liabilities. The reconciliation of ROIC can be found on page 7 of the attached tables, along with additional information regarding the use of this non-GAAP measure.

NOTE TO EDITORS: Further technology, corporate citizenship and executive news is available at www.keysight.com/go/news.

Source: IR-KEYS

 
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED COMBINED AND CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
                           
 
Three Months Ended
April 30, Percent
  2015     2014 Inc/(Dec)
 
Orders $ 697 $ 782 (11 %)
 
 
Net revenue $ 740 $ 743
 
Costs and expenses:
Cost of products and services 324 328 (1 %)
Research and development 96 89 7 %
Selling, general and administrative   192     199 (4 %)
Total costs and expenses   612     616 (1 %)
 
Income from operations 128 127 1 %
 
Interest income 1
Interest expense (11 )
Other income (expense), net   4     1 300 %
 
Income before taxes 122 128 (5 %)
 
Provision for income taxes   26     18 44 %
 
Net income $ 96   $ 110 (13 %)
 
 
Net income per share:
Basic $ 0.57 $ 0.66
Diluted $ 0.56 $ 0.66
 
Weighted average shares used in computing net income per share: (a)
Basic 169 167
Diluted 171 167
 
(a) On November 1, 2014, Agilent Technologies, Inc. distributed 167 million shares of Keysight common stock to existing holders of Agilent common stock.
Basic and diluted net income per share for all periods through April 30, 2014 is calculated using the shares distributed on November 1, 2014.
 
The preliminary income statement is estimated based on our current information.
 

Page 1

 
 

KEYSIGHT TECHNOLOGIES, INC.

CONDENSED COMBINED AND CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
                     
 
Six Months Ended
April 30, Percent
  2015     2014 Inc/(Dec)
 
Orders $ 1,388 $ 1,481 (6 %)
 
 
Net revenue $ 1,441 $ 1,414 2 %
 
Costs and expenses:
Cost of products and services 642 627 2 %
Research and development 192 179 7 %
Selling, general and administrative   398     390 2 %
Total costs and expenses   1,232     1,196 3 %
 
Income from operations 209 218 (4 %)
 
Interest income 1
Interest expense (23 )
Other income (expense), net   13     2 550 %
 
Income before taxes 200 220 (9 %)
 
Provision for income taxes   34     36 (6 %)
 
Net income $ 166   $ 184 (10 %)
 
 
Net income per share:
Basic $ 0.99 $ 1.10
Diluted $ 0.97 $ 1.10
 
Weighted average shares used in computing net income per share: (a)
Basic 168 167
Diluted 171 167
 
(a) On November 1, 2014, Agilent Technologies, Inc. distributed 167 million shares of Keysight common stock to existing holders of Agilent common stock.
Basic and diluted net income per share for all periods through April 30, 2014 is calculated using the shares distributed on November 1, 2014.
 
The preliminary income statement is estimated based on our current information.
 

Page 2

 
 
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share amounts)
(Unaudited)
PRELIMINARY
               
 
April 30, October 31,
  2015     2014  
ASSETS
 
Current assets:
Cash and cash equivalents $ 894 $ 810
Accounts receivable, net 353 357
Receivable from Agilent 23
Inventory 476 498
Deferred tax assets 73 83
Other current assets   131     79  
Total current assets 1,927 1,850
 
Property, plant and equipment, net 460 470
Goodwill 378 392
Other intangible assets, net 14 18
Long-term investments 67 63
Long-term deferred tax assets 126 163
Other assets   89     94  
Total assets $ 3,061   $ 3,050  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 178 $ 173
Payable to Agilent 125
Employee compensation and benefits 173 167
Deferred revenue 164 175
Income and other taxes payable 51 72
Other accrued liabilities   65     57  
Total current liabilities 631 769
 
Long-term debt 1,099 1,099
Retirement and post-retirement benefits 173 213
Long-term deferred revenue 64 69
Other long-term liabilities   58     131  
Total liabilities   2,025     2,281  
 
Total 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; 169 million shares at April 30, 2015
and 167 million shares at October 31, 2014, issued and outstanding 2 2
Additional paid-in-capital 1,124 1,002
Retained earnings 267 101
Accumulated other comprehensive loss   (357 )   (336 )
Total stockholders' equity   1,036     769  
Total liabilities and equity $ 3,061   $ 3,050  
 
The preliminary balance sheet is estimated based on our current information.
 

Page 3

 
 
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY
                       
 
Three Months Six Months
Ended Ended
April 30, April 30,
  2015     2015  
Cash flows from operating activities:
Net income $ 96 $ 166
 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 23 46
Share-based compensation 13 42
Excess tax benefit from share-based plans - (3 )
Deferred taxes 14 13
Excess and obsolete inventory related charges 7 17
Other non-cash expenses, net 2 1
Changes in assets and liabilities:
Accounts receivable (41 ) (5 )
Inventory (8 ) (17 )
Accounts payable 14 1
Payment to Agilent, net (14 ) (28 )
Employee compensation and benefits 29 7
Other assets and liabilities   (67 )   (80 )
Net cash provided by operating activities (a)   68     160  
 
Cash flows from investing activities:
Investments in property, plant and equipment (16 ) (31 )
Proceeds from sale of investment securities       1  
Net cash used in investing activities   (16 )   (30 )
 
Cash flows from financing activities:
Issuance of common stock under employee stock plans 4 8
Excess tax benefit from share-based plans 3
Return of Capital to Agilent   (49 )   (49 )
Net cash used in financing activities   (45 )   (38 )
 
Effect of exchange rate movements       (8 )
 
Net increase in cash and cash equivalents 7 84
 
Cash and cash equivalents at beginning of period   887     810  
 
Cash and cash equivalents at end of period $ 894   $ 894  
 
(a) Cash payments included in operating activities:
Income tax payments, net (8 ) (22 )
Interest payment (24 ) (24 )
 
The preliminary cash flow is estimated based on our current information.

 

Page 4

                                       
 
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,
2015 2014   2015   2014  
Net Income     Diluted EPS Net Income     Diluted EPS Net Income     Diluted EPS Net Income     Diluted EPS
 
GAAP Net income $ 96 $ 0.56 $ 110 $ 0.66 $ 166 $ 0.97 $ 184 $ 1.10
Non-GAAP adjustments:
Restructuring and other related costs - - - - - - (3 ) (0.02 )
Intangible amortization 2 0.01 2 0.01 4 0.02 4 0.02
Asset impairment 2 0.01 - - 2 0.01 - -
Share Based Compensation 13 0.08 10 0.06 42 0.25 27 0.16
Transformational initiatives - - - - - - 1 0.01
Acquisition and integration costs - - - - - - 1 0.01
Separation costs 5 0.03 17 0.10 12 0.07 25 0.15
Other 1 0.01 1 0.01 - - 1 0.01
Adjustment for taxes (a)   1       -   (7 )       (0.04 )   (10 )       (0.06 )   (8 )       (0.05 )
Non-GAAP Net income $ 120     $ 0.70 $ 133       $ 0.80   $ 216       $ 1.26   $ 232       $ 1.39  
 

 


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