UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 18, 2012
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-15181 | 04-3363001 | ||
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
3030 Orchard Parkway
San Jose, CA 95134
(Address of principal executive offices, including zip code)
Registrants telephone number, including area code: (408) 822-2000
Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
On October 18, 2012, we announced consolidated financial results for the quarter ended September 30, 2012. The press release announcing the results is included as Exhibit 99.1 to this report. Additional information about non-GAAP financial measures included in the press release is included in Exhibit 99.2. Each exhibit is incorporated herein by reference.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Fairchild Semiconductor International, Inc. | ||||
Date: October 18, 2012 | /s/ Robin A. Sawyer | |||
Robin A. Sawyer | ||||
Vice President, Corporate Controller | ||||
(Principal Accounting Officer and | ||||
Duly Authorized Officer) |
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Press release dated October 18, 2012 announcing financial results for the quarter ended September 30, 2012. | |
99.2 | Additional information about non-GAAP financial measures included in the press release. |
Exhibit 99.1
Fairchild Semiconductor Reports Results for the Third Quarter 2012
Fairchild Semiconductor (NYSE: FCS), the leading global supplier of power semiconductors, today announced results for the third quarter ended September 30, 2012. Fairchild reported third quarter sales of $358.8 million, down 1 percent from the prior quarter and 11 percent lower than the third quarter of 2011. Third quarter revenue includes approximately a $3 million insurance recovery related to the Thailand flooding which was included in the original assumptions for third quarter guidance.
Fairchild reported third quarter net income of $24.7 million or $0.19 per diluted share compared to $11.9 million or $0.09 per diluted share in the prior quarter and $35.8 million or $0.28 per diluted share in the third quarter of 2011. Gross margin was 33.5 percent compared to 32.6 percent in the prior quarter and 35.9 percent in the year-ago quarter.
Adjusted net income was $32.3 million or $0.25 per diluted share, compared to $17.6 million or $0.14 per diluted share in the prior quarter and $44.5 million or $0.34 per diluted share in the third quarter of 2011. Adjusted net income excludes amortization of acquisition-related intangibles, restructuring and impairments, accelerated depreciation related to fab closures, write off of deferred financing fees, charges for litigation and associated net tax effects of these items and other acquisition-related intangibles.
As expected, we posted solid sequential sales growth for mobile products, said Mark Thompson, Fairchilds chairman and CEO. Offsetting the mobile growth was incremental weakness in other end markets, especially computing, where we were also more selective in accepting commodity notebook-related business. We under-shipped consumption in the distribution channel by about $8 million as we continue to aggressively control inventories during this uncertain economic time. If we had shipped in line with distribution sell through, sales would have been up sequentially in the third quarter.
Third Quarter Financials
Gross margin increased 1 point sequentially due primarily to a richer product mix and lower variable compensation, said Mark Frey, Fairchilds executive vice president and CFO. R&D and SG&A expenses were $85.8 million which was significantly better than guidance due to spending controls and the reversal of variable compensation expenses accrued in prior quarters. Free cash flow was a negative $17.5 million due to increases in accounts receivable and capital expenditures. We increased internal inventory dollars slightly to support higher mobile demand.
Forward Guidance
We expect sales to be in the range of $330 to $350 million for the fourth quarter, said Frey. Our current scheduled backlog is nearly sufficient to achieve the low end of this range. We expect adjusted gross margin to be in the range of 30 to 32 percent due primarily to lower factory loadings and start up costs at our 8 inch wafer fab in Korea. We anticipate R&D and SG&A spending to be in the range of $88 to $90 million as the reversal of our variable compensation accrual does not repeat in the fourth quarter. The adjusted tax rate is forecast at 15 percent plus or minus 3 percent for the quarter. Consistent with our usual practices, we are not assuming any obligation to update this information, although we may choose to do so before we announce fourth quarter results.
Adjusted gross margin, adjusted net income and free cash flow are non-GAAP financial measures and should not be considered replacements for GAAP results. We exclude accelerated depreciation related to fab closures from GAAP gross margins to determine adjusted gross margins. To determine adjusted net income/loss, we exclude amortization of acquisition-related intangibles, restructuring and impairments, accelerated depreciation related to fab closures, write off of deferred financing fees, charges for litigation and associated net tax effects of these items and other acquisition-related intangibles. To determine free cash flow, we subtract capital expenditures from GAAP cash provided by operating activities. Fairchild presents adjusted results because its management uses them as additional
measures of the companys operating performance, and management believes adjusted financial information is useful to investors because it illuminates underlying operational trends by excluding significant non-recurring, non-cash or otherwise unusual transactions. Fairchilds criteria for determining adjusted results may differ from methods used by other companies, and should not be regarded as a replacement for corresponding GAAP measures See additional information on our non-GAAP financial measures and reconciliations to the most comparable GAAP measures in our SEC filings related to this announcement.
Special Note on Forward Looking Statements:
Some of the paragraphs above, including the one headed Forward Guidance, contain forward-looking statements that are based on managements assumptions and expectations and involve risk and uncertainty. Other forward-looking statements may also be found in this news release. Forward-looking statements usually, but do not always, contain forward-looking terminology such as we believe, we expect, or we anticipate, or refer to managements expectations about Fairchilds future performance. Many factors could cause actual results to differ materially from those expressed in forward-looking statements. Among these factors are the following: failure to maintain order rates at expected levels; failure to achieve expected savings from cost reduction actions or other adverse results from those actions; changes in demand for our products; changes in inventories at our customers and distributors; technological and product development risks, including the risks of failing to maintain the right to use some technologies or failing to adequately protect our own intellectual property against misappropriation or infringement; availability of manufacturing capacity; the risk of production delays; availability of raw materials at competitive prices; competitors actions; loss of key customers, including but not limited to distributors; the inability to attract and retain key management and other employees; order cancellations or reduced bookings; changes in manufacturing yields or output; risks related to warranty and product liability claims; risks inherent in doing business internationally; changes in tax regulations or the migration of profits from lower tax jurisdictions to higher tax jurisdictions; regulatory risks and significant litigation. These and other risk factors are discussed in the companys quarterly and annual reports filed with the Securities and Exchange Commission (SEC) and available at the Investor Relations section of Fairchild Semiconductors web site at investor.fairchildsemi.com or the SECs web site at www.sec.gov.
About Fairchild Semiconductor:
Fairchild Semiconductor (NYSE: FCS) global presence, local support, smart ideas. Fairchild delivers energy-efficient, easy-to-use and value-added semiconductor solutions for power and mobile designs. We help our customers differentiate their products and solve difficult technical challenges with our expertise in power and signal path products. Please contact us on the web at www.fairchildsemi.com.
Fairchild Semiconductor International, Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | July 1, | September 25, | September 30, | September 25, | ||||||||||||||||
2012 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Total revenue |
$ | 358.8 | $ | 361.5 | $ | 403.2 | $ | 1,072.5 | $ | 1,249.4 | ||||||||||
Cost of sales (1) |
238.7 | 243.8 | 258.4 | 729.8 | 791.9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross margin |
120.1 | 117.7 | 144.8 | 342.7 | 457.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross margin % |
33.5 | % | 32.6 | % | 35.9 | % | 32.0 | % | 36.6 | % | ||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development (2) |
37.8 | 41.1 | 37.8 | 119.0 | 114.6 | |||||||||||||||
Selling, general and administrative (3) |
48.0 | 55.1 | 54.4 | 157.8 | 167.8 | |||||||||||||||
Amortization of acquisition-related intangibles |
4.5 | 4.4 | 4.7 | 13.7 | 15.0 | |||||||||||||||
Restructuring and impairments |
3.4 | 0.5 | 4.1 | 6.3 | 9.5 | |||||||||||||||
Charge for litigation |
| 1.3 | | 1.3 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
93.7 | 102.4 | 101.0 | 298.1 | 306.9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
26.4 | 15.3 | 43.8 | 44.6 | 150.6 | |||||||||||||||
Other expense, net |
1.2 | 1.5 | 1.4 | 4.2 | 5.8 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income before income taxes |
25.2 | 13.8 | 42.4 | 40.4 | 144.8 | |||||||||||||||
Provision for income taxes |
0.5 | 1.9 | 6.6 | 2.2 | 20.6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ | 24.7 | $ | 11.9 | $ | 35.8 | $ | 38.2 | $ | 124.2 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income per common share: |
||||||||||||||||||||
Basic |
$ | 0.19 | $ | 0.09 | $ | 0.28 | $ | 0.30 | $ | 0.98 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
$ | 0.19 | $ | 0.09 | $ | 0.28 | $ | 0.30 | $ | 0.95 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Weighted average common shares: |
||||||||||||||||||||
Basic |
126.8 | 126.9 | 126.9 | 126.7 | 127.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
128.8 | 128.7 | 129.9 | 129.1 | 130.8 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(1) Equity compensation expense included in cost of sales |
$ | 1.0 | $ | 1.5 | $ | 1.2 | $ | 3.7 | $ | 3.2 | ||||||||||
(2) Equity compensation expense included in research and development |
$ | 1.3 | $ | 1.5 | $ | 1.3 | $ | 4.3 | $ | 3.5 | ||||||||||
(3) Equity compensation expense included in selling, general and administrative |
$ | 1.9 | $ | 4.3 | $ | 3.5 | $ | 10.4 | $ | 12.3 |
Fairchild Semiconductor International, Inc.
Reconciliation of Net Income To Adjusted Net Income
(In millions)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | July 1, | September 25, | September 30, | September 25, | ||||||||||||||||
2012 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Net income |
$ | 24.7 | $ | 11.9 | $ | 35.8 | $ | 38.2 | $ | 124.2 | ||||||||||
Adjustments to reconcile net income to adjusted net income: |
||||||||||||||||||||
Restructuring and impairments |
3.4 | 0.5 | 4.1 | 6.3 | 9.5 | |||||||||||||||
Accelerated depreciation on assets related to fab closure (1) |
| | 0.2 | | 0.7 | |||||||||||||||
Write-off of deferred financing fees |
| | | | 2.1 | |||||||||||||||
Charge for litigation |
| 1.3 | | 1.3 | | |||||||||||||||
Amortization of acquisition-related intangibles |
4.5 | 4.4 | 4.7 | 13.7 | 15.0 | |||||||||||||||
Associated net tax effects of the above and other acquisition-related intangibles |
(0.3 | ) | (0.5 | ) | (0.3 | ) | (1.3 | ) | (1.1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted net income |
$ | 32.3 | $ | 17.6 | $ | 44.5 | $ | 58.2 | $ | 150.4 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted net income per common share: |
||||||||||||||||||||
Basic |
$ | 0.25 | $ | 0.14 | $ | 0.35 | $ | 0.46 | $ | 1.18 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
$ | 0.25 | $ | 0.14 | $ | 0.34 | $ | 0.45 | $ | 1.15 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Recorded in cost of sales |
Fairchild Semiconductor International, Inc.
Reconciliation of Gross Margin To Adjusted Gross Margin
(In millions)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | July 1, | September 25, | September 30, | September 25, | ||||||||||||||||
2012 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Gross margin |
$ | 120.1 | $ | 117.7 | $ | 144.8 | $ | 342.7 | $ | 457.5 | ||||||||||
Adjustments to reconcile gross margin to adjusted gross margin: |
||||||||||||||||||||
Accelerated depreciation on assets related to fab closure |
| | 0.2 | | 0.7 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted gross margin |
$ | 120.1 | $ | 117.7 | $ | 145.0 | $ | 342.7 | $ | 458.2 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted gross margin % |
33.5 | % | 32.6 | % | 36.0 | % | 32.0 | % | 36.7 | % |
Fairchild Semiconductor International, Inc.
Consolidated Balance Sheets
(In millions)
(Unaudited)
September 30, | July 1, | December 25, | ||||||||||
2012 | 2012 | 2011 | ||||||||||
ASSETS | ||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 385.6 | $ | 402.3 | $ | 423.3 | ||||||
Short-term marketable securities |
0.1 | 0.2 | 0.2 | |||||||||
Receivables, net |
162.5 | 148.0 | 142.9 | |||||||||
Inventories |
242.3 | 239.7 | 234.2 | |||||||||
Other current assets |
51.5 | 44.9 | 52.4 | |||||||||
|
|
|
|
|
|
|||||||
Total current assets |
842.0 | 835.1 | 853.0 | |||||||||
Property, plant and equipment, net |
775.2 | 768.5 | 765.4 | |||||||||
Intangible assets, net |
51.8 | 56.3 | 65.4 | |||||||||
Goodwill |
169.3 | 169.3 | 169.3 | |||||||||
Long-term securities |
28.4 | 28.5 | 32.3 | |||||||||
Other assets |
59.5 | 59.4 | 51.5 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
$ | 1,926.2 | $ | 1,917.1 | $ | 1,936.9 | ||||||
|
|
|
|
|
|
|||||||
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS EQUITY | ||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 117.7 | $ | 137.5 | $ | 132.5 | ||||||
Accrued expenses and other current liabilities |
82.9 | 93.9 | 125.7 | |||||||||
|
|
|
|
|
|
|||||||
Total current liabilities |
200.6 | 231.4 | 258.2 | |||||||||
Long-term debt, less current portion |
300.1 | 300.1 | 300.1 | |||||||||
Other liabilities |
58.8 | 55.2 | 54.1 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
559.5 | 586.7 | 612.4 | |||||||||
Temporary equity - deferred stock units |
2.6 | 2.3 | 2.3 | |||||||||
Total stockholders equity |
1,364.1 | 1,328.1 | 1,322.2 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities, temporary equity and stockholders equity |
$ | 1,926.2 | $ | 1,917.1 | $ | 1,936.9 | ||||||
|
|
|
|
|
|
Fairchild Semiconductor International, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | September 25, | ||||||||||
2012 | 2012 | 2011 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 24.7 | $ | 38.2 | $ | 124.2 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
33.9 | 100.5 | 113.5 | |||||||||
Non-cash stock-based compensation expense |
4.2 | 18.4 | 19.0 | |||||||||
Deferred income taxes, net |
(2.8 | ) | (6.7 | ) | (7.6 | ) | ||||||
Other |
0.7 | 1.6 | 3.6 | |||||||||
Changes in operating assets and liabilities, net of acquisitions |
(35.9 | ) | (47.7 | ) | (30.0 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash provided by operating activities |
24.8 | 104.3 | 222.7 | |||||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities: |
||||||||||||
Capital expenditures |
(42.3 | ) | (122.4 | ) | (141.6 | ) | ||||||
Purchase of marketable securities |
| (0.5 | ) | (0.1 | ) | |||||||
Sale of marketable securities |
| 0.3 | | |||||||||
Maturity of marketable securities |
| 0.2 | 0.1 | |||||||||
Other |
(1.0 | ) | (1.9 | ) | (2.0 | ) | ||||||
Acquisitions, net of cash acquired |
| | (16.5 | ) | ||||||||
|
|
|
|
|
|
|||||||
Cash used in investing activities |
(43.3 | ) | (124.3 | ) | (160.1 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from financing activities: |
||||||||||||
Repayment of long-term debt |
| | (320.6 | ) | ||||||||
Issuance of long-term debt |
| | 300.0 | |||||||||
Proceeds from issuance of common stock and from exercise of stock options, net |
3.8 | 4.4 | 35.4 | |||||||||
Purchase of treasury stock |
(1.3 | ) | (12.0 | ) | (33.1 | ) | ||||||
Shares withheld for employees taxes |
(0.7 | ) | (10.1 | ) | (10.3 | ) | ||||||
Other |
| | (5.2 | ) | ||||||||
|
|
|
|
|
|
|||||||
Cash provided by (used in) financing activities |
1.8 | (17.7 | ) | (33.8 | ) | |||||||
|
|
|
|
|
|
|||||||
Net change in cash and cash equivalents |
(16.7 | ) | (37.7 | ) | 28.8 | |||||||
Cash and cash equivalents at beginning of period |
402.3 | 423.3 | 404.6 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents at end of period |
$ | 385.6 | $ | 385.6 | $ | 433.4 | ||||||
|
|
|
|
|
|
Fairchild Semiconductor International, Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(In millions)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | September 25, | ||||||||||
2012 | 2012 | 2011 | ||||||||||
Cash provided by operating activities |
$ | 24.8 | $ | 104.3 | $ | 222.7 | ||||||
Capital expenditures |
(42.3 | ) | (122.4 | ) | (141.6 | ) | ||||||
|
|
|
|
|
|
|||||||
Free cash flow |
$ | (17.5 | ) | $ | (18.1 | ) | $ | 81.1 | ||||
|
|
|
|
|
|
Exhibit 99.2
Editorial Contacts:
Fairchild Semiconductor: |
Agency Contact: | |
Dan Janson | Topaz Partners | |
Investor Relations | Sarah Thomas | |
(207) 775-8660 | (781) 404-2427 | |
Email: investor@fairchildsemi.com | fairchild@topazpartners.com |
Information About Our Non-GAAP Financial Measures
Regulation G and other provisions of the securities laws regulate the use of financial measures that are not prepared in accordance with generally accepted accounting principles (we refer to such measures as non-GAAP financial measures). In the press release included in this current report on Form 8-K, we provide information on free cash flow, adjusted net income, the related adjusted earnings per share (or adjusted EPS), adjusted gross margin and the related adjusted gross margin percent, each of which is a non-GAAP financial measure.
We believe these measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our press releases provide a more complete understanding of factors and trends affecting our business. We strongly encourage you to review all of our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure.
For information about our financial results as reported in accordance with GAAP, see Item 8 of Part II, Consolidated Financial Statements and Supplementary Data in our annual report on Form 10-K for the year ended December 25, 2011. For a quantitative reconciliation of our non-GAAP financial measures to the most comparable GAAP measures, see Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Reconciliation of Gross Margin to Adjusted Gross Margin and Reconciliation of Cash Provided by Operating Activities to Free Cash Flow in Exhibit 99.1 included in this current report on Form 8-K.
Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies non-GAAP financial measures, even if they have similar names.
Items That We Exclude In the Calculation of Adjusted Net Income (Loss)
Adjusted net income (loss), which we reconcile to net income (loss), excludes the following items:
| restructuring and impairments, |
| costs associated with redemption of convertible debt, |
| amortization of acquisition-related intangibles, |
| gain on sale of equity investment, |
| impairment of equity investment, |
| gain associated with debt buyback, |
| goodwill impairment loss, |
| change in retirement plans, |
| impairment of investments, |
| charge (release) for litigation, |
| write-off of deferred financing fees |
| accelerated depreciation and inventory write-off (release) associated with fab closure, |
| the tax effects associated with the above and other acquisition-related intangibles, and |
| tax effects from finalized tax filings and positions. |
Not all of these items are necessarily included in the calculation of net income (loss) each quarter. To understand which of the above items are included in the calculation of net income (loss), and excluded from the calculation of adjusted net income (loss), see the reconciliation data in Exhibit 99.1 included in this current report on Form 8-K.
Adjusted EPS is derived from adjusted net income (loss), using the same measures of outstanding shares as are used to calculate net income (loss) per share in accordance with GAAP.
Items That We Exclude In the Calculation of Adjusted Gross Margin
Adjusted gross margin, which we reconcile to gross margin, excludes accelerated depreciation, change in retirement plans, and inventory write-off (release) associated with fab closure.
Adjusted gross margin percent is derived from adjusted gross margin using the same measures of revenue as are used to calculate gross margin percent in accordance with GAAP.
Items That We Exclude In the Calculation of Free Cash Flow
Free cash flow, which we reconcile to cash provided by operating activities, excludes capital expenditures. Free cash flow is not intended as an alternative measure of cash flows provided by operating activities, as determined in accordance with GAAP.
We exclude these items for the following reasons:
| We believe such charges do not reflect results of our ongoing operations. |
| We believe that, since such charges are not recorded in all periods, excluding them provides better comparability of our results of operations from period-to-period. |
| Adjusted results provide an additional measure that our stockholders and debtholders have requested and expect as a means to project future results of operations. |
| Although, for the reasons given above, our adjusted results may not be directly comparable with those of other companies, we believe they provide an additional point of comparison (particularly when viewed in the context of the reconciling data that we also provide) that investors may use to compare us with other companies in our industry, many of which also provide non-GAAP financial measures or highlight certain charges in their GAAP presentations. |
| For comparison and projection purposes, GAAP measures alone may not provide all information that an investor may wish to consider. For example, amortization of acquisition-related intangibles, included in the GAAP measure, would be higher for a company that has grown through acquisitions than for a company that has grown internally. Excluding and explaining such charges as part of the presentation of the non-GAAP financial measure provides additional information for an investor to use, together with the GAAP measure, in comparing the performance of the two companies. |