[November 05, 2014] |
|
Ixia Announces Third Quarter 2014 Financial Results
CALABASAS, Calif. --(Business Wire)--
Ixia (Nasdaq: XXIA) today reported financial results for the
third quarter ended September 30, 2014.
"We executed well in a challenging spending environment and met our
financial targets for the quarter," said Bethany Mayer, Ixia's president
and chief executive officer. "We continued to see solid momentum in
sales to our enterprise customers and we are pleased with the progress
we have made in expanding our presence within this vertical. However, as
we expected, certain of our service provider and network equipment
customers continued to moderate capital investments."
Mayer continued, "Ixia enables its customers to move to new technologies
and architectures by validating the infrastructure, hardening the
virtual network, and optimizing the network to deliver application
performance. Looking ahead, we see several key areas of opportunity
where our IP portfolio and expertise can enable the transition to SDN
and NFV. Additionally, we believe our investments in security resilience
and application performance present a strong growth opportunity for
Ixia."
Total 2014 third quarter revenue was $114.0 million, compared with
$113.2 million reported for the 2013 third quarter. The 2014 third
quarter revenue includes $17.3 million in revenue from Net Optics, Inc.
("Net Optics"), which was acquired in December 2013.
On a GAAP basis, the company recorded a net loss for the 2014 third
quarter of $7.3 million, or $0.09 loss per diluted share, compared with
net income of $4.1 million, or $0.05 earnings per diluted share, for the
2013 third quarter. Non-GAAP net income for the 2014 third quarter was
$6.9 million, or $0.09 earnings per diluted share, compared with
non-GAAP net income of $13.0 million, or $0.16 earnings per diluted
share, for the 2013 third quarter.
Additional non-GAAP information and a reconciliation of Ixia's non-GAAP
measures to the most directly comparable GAAP measures for the 2014 and
2013 third quarters and year-to-date periods may be found in the
attached financial tables.
Ixia ended the 2014 third quarter with $113.6 million in cash, cash
equivalents and investments, compared with $97.0 million at June 30,
2014.
Conference Call and Webcast Information
Management will host a conference call today for analysts and investors
to discuss Ixia's 2014 third quarter results as well as its outlook and
guidance for the 2014 fourth quarter at 2:00 p.m. Pacific time (5:00
p.m. Eastern Time). Open to the public, interested parties may listen to
the call by dialing (804) 681-3728. A live audio webcast of the
conference call, along with supplemental financial information, will be
accessible from the "Investors" section of Ixia's web site (http://www.ixiacom.com).
Following the live webcast, an archived version will be available in the
"Investors" section on the Ixia web site for at least 90 days.
Non-GAAP Information
To supplement our consolidated financial results prepared in accordance
with Generally Accepted Accounting Principles ("GAAP"), we have included
certain non-GAAP financial measures in this press release and in the
attachments hereto. Specifically, we have provided non-GAAP financial
measures (i.e., non-GAAP net income and non-GAAP diluted earnings per
share) that exclude certain non-cash and/or non-recurring income and
expense items such as proceeds and expenses from certain legal and
contractual settlements, expenses relating to internal investigations
and any related remediation efforts, the restatement of our financial
statements for the first and second quarters of 2013 and for the six
months ended June 30, 2013, the pending securities class action against
the company and certain of its current and former officers and directors
as well as shareholder derivative actions, stock-based compensation
expenses, acquisition and other related costs, restructuring expenses,
the amortization of acquisition-related intangible assets, and the
related income tax effects of these items, as well as certain other
non-cash income tax impacts such as changes in the valuation allowance
recorded against certain deferred tax assets. The aforementioned items
represent income and expense items that may be difficult to estimate
from period to period and/or that we believe are not directly
attributable to the underlying performance of our business operations.
We believe that by excluding these items, our non-GAAP measures provide
supplemental information to both management and investors that is useful
in assessing our core operating performance, evaluating our ongoing
business operations and comparing our results of operations on a
consistent basis from period to period. These non-GAAP financial
measures are provided to enhance the user's overall understanding of our
financial performance. These non-GAAP financial measures are also used
by management to plan and forecast future periods and to assist
management in making operating and strategic decisions. The presentation
of this additional information is not prepared in accordance with GAAP.
The information therefore may not necessarily be comparable to that of
other companies and should be considered as a supplement to, not a
substitute for, or superior to, the corresponding measures calculated in
accordance with GAAP. Investors are encouraged to review the
reconciliations of GAAP to non-GAAP financial measures, which are
included below in the attached financial tables.
Safe Harbor under the Private Securities Litigation Reform Act of 1995
Certain statements made in this press release are forward-looking
statements, including, without limitation, statements regarding the
company's future business and opportunities. In some cases, such
forward-looking statements can be identified by terms such as may, will,
should, expect, plan, believe, estimate, predict or the like. Such
statements reflect our current intent, belief and expectations and are
subject to risks and uncertainties that could cause our actual results
to differ materially from those expressed or implied in the
forward-looking statements. Factors that could cause the actual results
to differ materially from the results predicted include, among others,
the risk that the company will not realize all of the expected benefits
of our previously announced restructuring and cost reduction programs,
the risk that the anticipated benefits and synergies of our 2012
acquisitions of Anue and BreakingPoint, and our 2013 acquisition of Net
Optics will not be realized, changes in the global economy, competition,
consistency of orders from significant customers, our success in
leveraging our IP portfolio, expertise, and market opportunities, our
expectations regarding the transition into Software Defined Networks
("SDN") and Network Functions Virtualization ("NFV"), our success in
developing and producing new products, our success in developing new
sales channels and customers, market acceptance of our products, war,
terrorism, political unrest, natural disasters and other circumstances
that could, among other consequences, reduce the demand for our
products, disrupt our supply chain and/or impact the delivery of our
products. Such factors also include those factors identified in our
Annual Report on Form 10-K for the year ended December 31, 2013, and in
our other filings with the SEC. We undertake no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
About Ixia
Ixia develops amazing products so its customers can connect the
world. Ixia helps its customers provide an always-on user experience
through fast, secure delivery of dynamic, connected technologies and
services. Through actionable insights that accelerate and secure
application and service delivery, Ixia's customers benefit from faster
time to market, optimized application performance and higher-quality
deployments. Learn more at http://www.ixiacom.com.
|
IXIA
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
42,621
|
|
|
$
|
34,189
|
|
Short-term investments in marketable securities
|
|
|
70,940
|
|
|
|
51,507
|
|
Accounts receivable, net of allowances of $742 and $840 as of
September 30, 2014 and December 31, 2013, respectively
|
|
|
94,236
|
|
|
|
109,590
|
|
Inventories
|
|
|
46,488
|
|
|
|
47,136
|
|
Prepaid expenses and other current assets
|
|
|
57,083
|
|
|
|
48,514
|
|
Total current assets
|
|
|
311,368
|
|
|
|
290,936
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
36,864
|
|
|
|
35,932
|
|
Intangible assets, net
|
|
|
155,769
|
|
|
|
189,949
|
|
Goodwill
|
|
|
339,214
|
|
|
|
338,836
|
|
Other assets
|
|
|
27,177
|
|
|
|
32,070
|
|
Total assets
|
|
$
|
870,392
|
|
|
$
|
887,723
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
18,252
|
|
|
$
|
19,011
|
|
Accrued expenses and other
|
|
|
45,138
|
|
|
|
53,748
|
|
Deferred revenues
|
|
|
104,459
|
|
|
|
89,217
|
|
Total current liabilities
|
|
|
167,849
|
|
|
|
161,976
|
|
|
|
|
|
|
Deferred revenues
|
|
|
16,119
|
|
|
|
15,106
|
|
Other liabilities
|
|
|
13,003
|
|
|
|
11,529
|
|
Convertible senior notes
|
|
|
200,000
|
|
|
|
200,000
|
|
Total liabilities
|
|
|
396,971
|
|
|
|
388,611
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
Common stock, without par value; 200,000 shares authorized at
September 30, 2014 and December 31, 2013; 78,107 and 76,849 shares
issued and outstanding as of September 30, 2014 and December 31,
2013, respectively
|
|
|
185,122
|
|
|
|
178,347
|
|
Additional paid-in capital
|
|
|
201,438
|
|
|
|
191,976
|
|
Retained earnings
|
|
|
87,288
|
|
|
|
129,166
|
|
Accumulated other comprehensive loss
|
|
|
(427
|
)
|
|
|
(377
|
)
|
Total shareholders' equity
|
|
|
473,421
|
|
|
|
499,112
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
870,392
|
|
|
$
|
887,723
|
|
|
|
|
|
|
|
|
|
|
IXIA
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
78,697
|
|
|
$
|
83,059
|
|
|
$
|
236,255
|
|
|
$
|
262,364
|
|
Services
|
|
|
35,300
|
|
|
|
30,105
|
|
|
|
100,997
|
|
|
|
84,263
|
|
Total revenues
|
|
|
113,997
|
|
|
|
113,164
|
|
|
|
337,252
|
|
|
|
346,627
|
|
|
|
|
|
|
|
|
|
|
Costs and operating expenses:(1)
|
|
|
|
|
|
|
|
|
Cost of revenues - products (2)
|
|
|
24,205
|
|
|
|
20,339
|
|
|
|
73,207
|
|
|
|
62,814
|
|
Cost of revenues - services
|
|
|
4,008
|
|
|
|
4,228
|
|
|
|
12,128
|
|
|
|
10,564
|
|
Research and development
|
|
|
27,612
|
|
|
|
29,403
|
|
|
|
87,679
|
|
|
|
88,183
|
|
Sales and marketing
|
|
|
35,642
|
|
|
|
32,371
|
|
|
|
114,355
|
|
|
|
100,395
|
|
General and administrative
|
|
|
14,724
|
|
|
|
11,931
|
|
|
|
49,296
|
|
|
|
35,496
|
|
Amortization of intangible assets
|
|
|
10,904
|
|
|
|
10,060
|
|
|
|
35,986
|
|
|
|
30,253
|
|
Acquisition and other related
|
|
|
582
|
|
|
|
663
|
|
|
|
3,380
|
|
|
|
3,028
|
|
Restructuring
|
|
|
4,642
|
|
|
|
-
|
|
|
|
8,687
|
|
|
|
58
|
|
Total costs and operating expenses
|
|
|
122,319
|
|
|
|
108,995
|
|
|
|
384,718
|
|
|
|
330,791
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(8,322
|
)
|
|
|
4,169
|
|
|
|
(47,466
|
)
|
|
|
15,836
|
|
Interest income and other, net
|
|
|
(99
|
)
|
|
|
1,999
|
|
|
|
530
|
|
|
|
5,637
|
|
Interest expense
|
|
|
(1,943
|
)
|
|
|
(1,943
|
)
|
|
|
(5,829
|
)
|
|
|
(5,829
|
)
|
(Loss) income before income taxes
|
|
|
(10,364
|
)
|
|
|
4,225
|
|
|
|
(52,765
|
)
|
|
|
15,644
|
|
Income tax (benefit) expense
|
|
|
(3,035
|
)
|
|
|
123
|
|
|
|
(10,887
|
)
|
|
|
705
|
|
Net (loss) income
|
|
$
|
(7,329
|
)
|
|
$
|
4,102
|
|
|
$
|
(41,878
|
)
|
|
$
|
14,939
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.09
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.54
|
)
|
|
$
|
0.20
|
|
Diluted
|
|
$
|
(0.09
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.54
|
)
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
77,920
|
|
|
|
76,028
|
|
|
|
77,380
|
|
|
|
75,476
|
|
Diluted
|
|
|
77,920
|
|
|
|
77,541
|
|
|
|
77,380
|
|
|
|
77,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Stock-based compensation included in:
|
|
|
|
|
|
|
|
|
Cost of revenues - products
|
|
$
|
81
|
|
|
$
|
129
|
|
|
$
|
217
|
|
|
$
|
410
|
|
Cost of revenues - services
|
|
|
31
|
|
|
|
49
|
|
|
|
82
|
|
|
|
156
|
|
Research and development
|
|
|
1,615
|
|
|
|
2,031
|
|
|
|
4,918
|
|
|
|
6,057
|
|
Sales and marketing
|
|
|
719
|
|
|
|
1,702
|
|
|
|
4,140
|
|
|
|
5,345
|
|
General and administrative
|
|
|
762
|
|
|
|
1,656
|
|
|
|
1,755
|
|
|
|
5,020
|
|
|
|
|
|
|
|
|
|
|
(2) Cost of revenues - products excludes amortization of
intangible assets, related to purchased technologies of $6.4 million
and $22.5 million for the three and nine months ended September 30,
2014, respectively, and $6.4 million and $19.4 million for the three
and nine months ended September 30, 2013, respectively, which is
included in Amortization of intangible assets.
|
|
IXIA
Non-GAAP Information and Reconciliation to Most Directly
Comparable GAAP Financial Measures
(in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
GAAP net (loss) income
|
|
$
|
(7,329
|
)
|
|
$
|
4,102
|
|
Adjustments:
|
|
|
|
|
Stock-based compensation(a)
|
|
|
3,208
|
|
|
|
5,567
|
|
Amortization of intangible assets(b)
|
|
|
10,904
|
|
|
|
10,060
|
|
Acquisition and other related(c)
|
|
|
582
|
|
|
|
663
|
|
Restructuring(d)
|
|
|
4,642
|
|
|
|
-
|
|
Investigations, shareholder litigation and related matters(e)
|
|
|
1,802
|
|
|
|
-
|
|
Legal and contract settlements and other(f)
|
|
|
-
|
|
|
|
(998
|
)
|
Income tax effect (g)
|
|
|
(6,888
|
)
|
|
|
(6,386
|
)
|
Non-GAAP net income
|
|
$
|
6,921
|
|
|
$
|
13,008
|
|
|
|
|
|
|
GAAP diluted (loss) earnings per share
|
|
$
|
(0.09
|
)
|
|
$
|
0.05
|
|
Adjustments:
|
|
|
|
|
Stock-based compensation(a)
|
|
|
0.04
|
|
|
|
0.07
|
|
Amortization of intangible assets(b)
|
|
|
0.14
|
|
|
|
0.13
|
|
Acquisition and other related(c)
|
|
|
0.01
|
|
|
|
0.01
|
|
Restructuring(d)
|
|
|
0.06
|
|
|
|
-
|
|
Investigations, shareholder litigation and related matters (e)
|
|
|
0.02
|
|
|
|
-
|
|
Legal and contract settlements and other(f)
|
|
|
-
|
|
|
|
(0.01
|
)
|
Income tax effect(g)
|
|
|
(0.09
|
)
|
|
|
(0.08
|
)
|
Convertible senior notes(h)
|
|
|
-
|
|
|
|
(0.01
|
)
|
Non-GAAP diluted earnings per share
|
|
$
|
0.09
|
|
|
$
|
0.16
|
|
|
|
|
|
|
Shares used in computing GAAP diluted earnings per common share
|
|
|
77,920
|
|
|
|
77,541
|
|
Effect of reconciling item(h)(i)
|
|
|
922
|
|
|
|
10,168
|
|
Shares used in computing non-GAAP diluted earnings per common
share
|
|
|
78,842
|
|
|
|
87,709
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
This reconciling item represents stock-based compensation expenses.
As stock-based compensation represents a non-cash charge that is not
directly attributable to the underlying performance of our business
operations, we believe that by excluding stock-based compensation,
we provide investors supplemental information that is useful in
comparing our operating results from period to period and in
evaluating our core operations and performance. While we expect to
continue to recognize stock-based compensation expense in the
future, management also excludes this expense when evaluating
current performance, forecasting future results, measuring core
operating results, and making operating and strategic decisions.
|
|
|
|
(b)
|
|
This reconciling item represents the amortization of intangible
assets related to the acquisitions of various businesses and
technologies such as the acquisitions of Anue Systems, Inc.,
BreakingPoint Systems, Inc., and Net Optics, Inc. As the
amortization expense represents a non-cash charge that is not
directly attributable to the underlying performance of our business
operations, we believe that by excluding the amortization of
acquisition-related intangible assets, we provide investors with
supplemental information that is useful in evaluating our ongoing
operations and performance. While the amortization of
acquisition-related intangible assets is expected to continue in the
future, management also excludes this expense when evaluating
current performance, forecasting future results, measuring core
operating results, and making operating and strategic decisions.
|
|
|
|
(c)
|
|
This reconciling item represents costs associated with
acquisition-related activities. Acquisition and other related costs
consist primarily of transaction and integration related costs such
as professional fees for legal, accounting, tax, due diligence,
valuation and other related services, amortization of deferred
compensation, consulting fees, required regulatory costs, certain
employee, facility and infrastructure costs, and other related
expenses. We believe that by excluding acquisition and other related
costs, we provide investors with supplemental information that is
useful in comparing our ongoing operating results from period to
period and in evaluating our core operations and performance.
|
|
|
|
(d)
|
|
This reconciling item represents costs associated with our
restructuring plans. During the fourth quarter of 2013, we initiated
a plan to restructure certain of our operations related to our test
products. During the first quarter of 2014, we initiated a plan to
restructure certain of our operations following our December 5, 2013
acquisition of Net Optics, Inc. During the third quarter of 2014,
our management approved, committed to and implemented a company-wide
restructuring initiative to restructure our operations to better
align the Company's operating costs with its business opportunities.
These restructuring costs primarily relate to one-time employee
termination benefits, lease exit costs and other related costs. We
believe that by excluding restructuring costs, we provide investors
with supplemental information that is useful in comparing our
operating results from period to period and in evaluating our core
operations and performance.
|
|
|
|
(e)
|
|
This reconciling item for the third quarter of 2014 represents costs
incurred related to (i) internal investigations and any related
remediation efforts, (ii) the June 2014 restatement of our financial
statements for the first quarter of 2013 and for the three and six
months ended June 30, 2013, and (iii) the securities class action
against the company and certain of its current and former officers
and directors as well as shareholder derivative actions. These costs
consisted primarily of legal and accounting fees, recruiting and
consulting expenses, severance and retention costs, and other
related expenses. We believe that by excluding these non-recurring
costs, we are providing our investors with supplemental information
that is useful in comparing our operating results from period to
period and in evaluating our core operations and performance.
|
|
|
|
(f)
|
|
This reconciling item represents a $1.0 million realized gain
recorded in the third quarter of 2013 for the sale of certain
investment securities that were previously written down. We believe
that by excluding this non-recurring item, we are providing our
investors with supplemental information that is useful in comparing
our operating results from period to period and in evaluating our
core operations and performance.
|
|
|
|
(g)
|
|
This adjustment represents the income tax effects of the reconciling
items noted in footnotes (a), (b), (c), (d), (e), and (f), as well
as certain other non-cash income tax impacts such as changes in the
valuation allowance relating to certain deferred tax assets.
|
|
|
|
(h)
|
|
This reconciling item for the non-GAAP diluted earnings per share
calculation for the third quarter of 2013 includes the impact of our
convertible senior notes as this was anti-dilutive for the
equivalent GAAP earnings per share calculations for the third
quarter of 2013.
|
|
|
|
(i)
|
|
This adjustment represents the effects of stock-based compensation
on diluted common equivalent shares outstanding as well as any
adjustments required due to a change from a net loss to a net income
position.
|
|
|
|
IXIA
Non-GAAP Information and Reconciliation to Most Directly
Comparable GAAP Financial Measures
(in thousands, except per share data)
(unaudited)
|
|
|
|
Nine months ended
September 30,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
GAAP net (loss) income
|
|
$
|
(41,878
|
)
|
|
$
|
14,939
|
|
Adjustments:
|
|
|
|
|
Stock-based compensation(a)
|
|
|
11,112
|
|
|
|
16,988
|
|
Amortization of intangible assets(b)
|
|
|
35,986
|
|
|
|
30,253
|
|
Acquisition and other related(c)
|
|
|
3,380
|
|
|
|
3,028
|
|
Restructuring(d)
|
|
|
8,687
|
|
|
|
58
|
|
Investigations, shareholder litigation and related matters(e)
|
|
|
11,889
|
|
|
|
-
|
|
Legal and contract settlements and other(f)
|
|
|
-
|
|
|
|
(4,020
|
)
|
Inventory adjustments(g)
|
|
|
1,393
|
|
|
|
-
|
|
Income tax effect (h)
|
|
|
(18,044
|
)
|
|
|
(16,739
|
)
|
Non-GAAP net income
|
|
$
|
12,525
|
|
|
$
|
44,507
|
|
|
|
|
|
|
GAAP diluted (loss) earnings per share
|
|
$
|
(0.54
|
)
|
|
$
|
0.19
|
|
Adjustments:
|
|
|
|
|
Stock-based compensation(a)
|
|
|
0.14
|
|
|
|
0.22
|
|
Amortization of intangible assets(b)
|
|
|
0.47
|
|
|
|
0.39
|
|
Acquisition and other related(c)
|
|
|
0.04
|
|
|
|
0.04
|
|
Restructuring(d)
|
|
|
0.11
|
|
|
|
-
|
|
Investigations, shareholder litigation and related matters (e)
|
|
|
0.15
|
|
|
|
-
|
|
Legal and contract settlements and other(f)
|
|
|
-
|
|
|
|
(0.05
|
)
|
Inventory adjustments(g)
|
|
|
0.02
|
|
|
|
-
|
|
Income tax effect(h)
|
|
|
(0.23
|
)
|
|
|
(0.21
|
)
|
Convertible senior notes(i)
|
|
|
-
|
|
|
|
(0.03
|
)
|
Non-GAAP diluted earnings per share
|
|
$
|
0.16
|
|
|
$
|
0.55
|
|
|
|
|
|
|
Shares used in computing GAAP diluted earnings per common share
|
|
|
77,380
|
|
|
|
77,141
|
|
Effect of reconciling item(i)(j)
|
|
|
1,187
|
|
|
|
10,247
|
|
Shares used in computing non-GAAP diluted earnings per common
share
|
|
|
78,567
|
|
|
|
87,388
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
This reconciling item represents stock-based compensation expenses.
As stock-based compensation represents a non-cash charge that is not
directly attributable to the underlying performance of our business
operations, we believe that by excluding stock-based compensation,
we provide investors with supplemental information that is useful in
comparing our operating results from period to period and in
evaluating our core operations and performance. While we expect to
continue to recognize stock-based compensation expense in the
future, management also excludes this expense when evaluating
current performance, forecasting future results, measuring core
operating results, and making operating and strategic decisions.
|
|
|
|
(b)
|
|
This reconciling item represents the amortization of intangible
assets related to the acquisitions of various businesses and
technologies such as the acquisitions of Anue Systems, Inc.,
BreakingPoint Systems, Inc., and Net Optics, Inc. As the
amortization expense represents a non-cash charge that is not
directly attributable to the underlying performance of our business
operations, we believe that by excluding the amortization of
acquisition-related intangible assets, we provide investors with
supplemental information that is useful in evaluating our ongoing
operations and performance. While the amortization of
acquisition-related intangible assets is expected to continue in the
future, management also excludes this expense when evaluating
current performance, forecasting future results, measuring core
operating results, and making operating and strategic decisions.
|
|
|
|
(c)
|
|
This reconciling item represents costs associated with
acquisition-related activities. Acquisition and other related costs
consist primarily of transaction and integration related costs such
as professional fees for legal, accounting, tax, due diligence,
valuation and other related services, amortization of deferred
compensation, consulting fees, required regulatory costs, certain
employee, facility and infrastructure costs, and other related
expenses. We believe that by excluding acquisition and other related
costs, we provide investors with supplemental information that is
useful in comparing our ongoing operating results from period to
period and in evaluating our core operations and performance.
|
|
|
|
(d)
|
|
This reconciling item represents costs associated with our
restructuring plans. During the fourth quarter of 2013, we initiated
a plan to restructure certain of our operations related to our test
products. During the first quarter of 2014, we initiated a plan to
restructure certain of our operations following our December 5, 2013
acquisition of Net Optics, Inc. During the third quarter of 2014,
our management approved, committed to and implemented a company-wide
restructuring initiative to restructure our operations to better
align the Company's operating costs with its business opportunities.
These restructuring costs primarily relate to one-time employee
termination benefits, lease-exit costs and other related costs. We
believe that by excluding restructuring costs, we provide investors
with supplemental information that is useful in comparing our
operating results from period to period and in evaluating our core
operations and performance.
|
|
|
|
(e)
|
|
This reconciling item for the first nine months of 2014 represents
costs incurred related to (i) internal investigations and any
related remediation efforts, (ii) the June 2014 restatement of our
financial statements for the first quarter of 2013 and for the three
and six months ended June 30, 2013, and (iii) the securities class
action against the company and certain of its current and former
officers and directors as well as shareholder derivative actions.
These costs consisted primarily of legal and accounting fees,
recruiting and consulting expenses, severance and retention costs,
and other related expenses. We believe that by excluding these
non-recurring costs, we are providing our investors with
supplemental information that is useful in comparing our operating
results from period to period and in evaluating our core operations
and performance.
|
|
|
|
(f)
|
|
This reconciling item represents a $1.0 million realized gain
recorded in the third quarter of 2013 for the sale of certain
investment securities that were previously written down, a $2.9
million realized gain recorded during the second quarter of 2013 for
the sale of certain of our auction rate securities that were
previously written down, and $1.2 million of proceeds from the
settlement of a legal matter in the first quarter of 2013, partially
offset by $1.0 million of costs incurred in the first six months of
2013 related to the April 2013 restatement of certain of our
previously filed financial statements. We believe that by excluding
these gains, proceeds and costs, we are providing our investors with
supplemental information that is useful in comparing our operating
results from period to period and in evaluating our core operations
and performance.
|
|
|
|
(g)
|
|
This reconciling item represents the amortization of the purchase
price accounting adjustment related to the fair value of inventory
as a result of our acquisition of Net Optics, Inc. While we may have
additional amortization charges in the future resulting from
purchase price accounting adjustments, management excludes these
expenses when evaluating current performance, forecasting future
results, measuring core operating results, and making operating and
strategic decisions. We believe that by excluding these charges, we
provide investors with supplemental information that is useful in
comparing our operating results from period to period and in
evaluating our core operations and performance.
|
|
|
|
(h)
|
|
This adjustment represents the income tax effects of the reconciling
items noted in footnotes (a), (b), (c), (d), (e), (f), and (g), as
well as certain other non-cash income tax impacts such as changes in
the valuation allowance relating to certain deferred tax assets.
|
|
|
|
(i)
|
|
This reconciling item for the non-GAAP diluted earnings per share
calculation for the nine months ended September 30, 2013 includes
the impact of our convertible senior notes as these were
anti-dilutive for the equivalent GAAP earnings per share
calculations for the nine months ended September 30, 2013.
|
|
|
|
(j)
|
|
This adjustment represents the effects of stock-based compensation
on diluted common equivalent shares outstanding as well as any
adjustments required due to a change from a net loss to a net income
position.
|
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