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 25, 2017
FLIR Systems, Inc.
(Exact Name of Registrant as Specified in Charter)
Oregon | 0-21918 | 93-0708501 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
27700 SW Parkway Avenue Wilsonville, Oregon 97070 (503) 498-3547 |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
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 (see General Instruction A.2. below): | ||
[ ] | 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On October 25, 2017, FLIR Systems, Inc. (the “Company”) issued a news release announcing (i) its financial results for the quarter and nine months ended September 30, 2017, (ii) affirmation of expectations of revenue and a revision of expectations of earnings per share for the year ending December 31, 2017, and (iii) the declaration of a quarterly dividend. The news release issued October 25, 2017 is furnished herewith as Exhibit 99.1 to this Report, and shall not be deemed to be filed for purposes of Section 18 of the Exchange Act.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. 99.1 News release issued by FLIR Systems, Inc. dated October 25, 2017.
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 hereunto duly authorized.
FLIR Systems, Inc. | ||
Date: October 25, 2017 | By: | /s/ Shane R, Harrison |
Shane R, Harrison | ||
Senior Vice President, Corporate Development and Strategy and Interim Chief Financial Officer | ||
EXHIBIT 99.1
FLIR Systems Announces Third Quarter 2017 Financial Results
Third Quarter Revenue Growth of 15% Over Prior Year
GAAP EPS of $0.46; Adjusted EPS of $0.52, Up 8% Over Prior Year
Backlog reaches $709 million, the highest level in FLIR’s history
WILSONVILLE, Ore., Oct. 25, 2017 (GLOBE NEWSWIRE) -- FLIR Systems, Inc. (NASDAQ:FLIR) today announced financial results for the third quarter ended September 30, 2017. Third quarter 2017 revenue was $464.7 million, up 15% over third quarter 2016 revenue of $405.2 million. GAAP operating income in the third quarter grew 8% to $87.1 million, compared to $80.8 million in the third quarter of 2016. Adjusted operating income was $101.1 million in the third quarter, which is 14% higher than adjusted operating income of $89.0 million in the third quarter of 2016.
Third quarter 2017 GAAP net earnings were $63.5 million, or $0.46 per diluted share, compared with GAAP net earnings of $58.6 million, or $0.43 per diluted share in the third quarter a year ago. Adjusted net earnings in the third quarter were $72.7 million, or $0.52 per diluted share, which was 8% higher than adjusted net earnings per diluted share of $0.48 in the third quarter of 2016, where a lower tax rate relative to the current year added $0.02 of income per share.
Revenue from the Surveillance segment was $146.8 million, an increase of 8% from the third quarter results last year. The Instruments segment contributed $91.4 million of revenue during the third quarter, up 11% over the prior year. The Security segment recorded revenue of $65.7 million in the third quarter, up 16% from the prior year. FLIR’s OEM & Emerging Markets segment had $87.2 million of revenue, an increase of 39% over the prior year, and was driven by the addition of the Integrated Imaging Solutions line of business from the fourth quarter 2016 acquisition of Point Grey Research. Revenue from the Maritime segment was $42.3 million, which was 4% higher than the third quarter of 2016. The Detection segment contributed $31.4 million of revenue, an increase of 19% over the prior year, and was driven by timing of DR-SKO program shipments.
FLIR's backlog of firm orders for delivery within the next twelve months was approximately $709 million as of September 30, 2017, an increase of $64 million, or 10%, during the quarter.
“Our teams executed very well during the third quarter, with all six of our segments exhibiting organic revenue growth. This translated to EPS acceleration and operating cash flow that significantly exceeded net income,” said Jim Cannon, President and CEO of FLIR. “Bookings in the quarter drove our backlog to its highest level in our history. This positions us well as we realign our businesses and deploy The FLIR Method for continuous business improvement, initiatives that we expect to drive organic growth, increase profitability, and generate ample cash for us to deploy in ways that enhance shareholder returns.”
Revenue and Earnings Outlook for 2017
Based on financial results for the first nine months of the year and the outlook for the remainder of the year, FLIR expects revenue in 2017 to continue to be in the range of $1.775 billion to $1.825 billion and adjusted net earnings per diluted share to now be in the range of $1.83 to $1.88 per diluted share.
Dividend Declaration
FLIR’s Board of Directors has declared a quarterly cash dividend of $0.15 per share on FLIR common stock, payable December 8, 2017, to shareholders of record as of close of business on November 24, 2017.
Conference Call
FLIR has scheduled a conference call at 9:00 a.m. ET (6:00 a.m. PT) today to discuss its results for the quarter. A simultaneous webcast of the conference call and the accompanying summary presentation can be accessed online from a link in the Events & Presentations section of www.FLIR.com/investor. A replay will be available after 12:00 p.m. ET (9:00 a.m. PT) at this same internet address. Summary third quarter and historical financial data may be accessed online from the Financial Info Database link under the Financials & Filings section at www.FLIR.com/investor.
About FLIR Systems
Founded in 1978 and headquartered in Wilsonville, Oregon, FLIR Systems is a world-leading maker of sensor systems that enhance perception and heighten awareness, helping to save lives, improve productivity, and protect the environment. Through its nearly 3,500 employees, FLIR’s vision is to be “The World’s Sixth Sense” by leveraging thermal imaging and adjacent technologies to provide innovative, intelligent solutions for security and surveillance, environmental and condition monitoring, outdoor recreation, machine vision, navigation, and advanced threat detection. For more information, please visit www.flir.com and follow @flir.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release makes reference to non-GAAP measures. With respect to the outlook for the full year 2017, certain items that affect GAAP net earnings per diluted share are out of the Company’s control and/or cannot be reasonably predicted. Consequently, the Company is unable to provide a reasonable estimate of GAAP net earnings per diluted share or a corresponding reconciliation to GAAP net earnings per diluted share for the full year. Additional information regarding the reasons the Company uses non-GAAP measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included below, following the GAAP financial information.
Forward-Looking Statements
Statements in this release by Jim Cannon and the statements in the section captioned "Revenue and Earnings Outlook for 2017" above are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” “estimates,” or similar expressions) should be considered to be forward looking statements. Such statements are based on current expectations, estimates, and projections about FLIR’s business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including the following: changes in demand for FLIR’s products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, the impact of FLIR’s continuing compliance with U.S. export control laws and regulations and similar laws and regulations, the timely receipt of any necessary export licenses, constraints on supplies of critical components, excess or shortage of production capacity, the ability to manufacture and ship the products in the time period required, actual purchases under agreements, the continuing eligibility of FLIR to act as a federal contractor, the amount and availability of appropriated government procurement funds and other risks discussed from time to time in filings and reports filed with the Securities and Exchange Commission. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and FLIR does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release, or for changes made to this document by wire services or internet service providers.
Investor Relations
Shane Harrison
503-498-3547
shane.harrison@flir.com
FLIR SYSTEMS, INC. | |||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
(In thousands, except per share amounts) (Unaudited) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Revenue | $ | 464,712 | $ | 405,228 | $ | 1,305,650 | $ | 1,187,429 | |||||||||
Cost of goods sold | 241,821 | 213,852 | 684,706 | 635,041 | |||||||||||||
Gross profit | 222,891 | 191,376 | 620,944 | 552,388 | |||||||||||||
Operating expenses: | |||||||||||||||||
Research and development | 42,873 | 33,839 | 127,902 | 109,327 | |||||||||||||
Selling, general and administrative | 92,932 | 76,688 | 280,240 | 239,623 | |||||||||||||
Total operating expenses | 135,805 | 110,527 | 408,142 | 348,950 | |||||||||||||
Earnings from operations | 87,086 | 80,849 | 212,802 | 203,438 | |||||||||||||
Interest expense | 3,819 | 5,736 | 12,744 | 13,543 | |||||||||||||
Interest income | (488 | ) | (336 | ) | (1,114 | ) | (924 | ) | |||||||||
Other (income) expense, net | (778 | ) | 241 | (2,465 | ) | 138 | |||||||||||
Earnings before income taxes | 84,533 | 75,208 | 203,637 | 190,681 | |||||||||||||
Income tax provision | 21,004 | 16,575 | 46,124 | 85,555 | |||||||||||||
Net earnings | $ | 63,529 | $ | 58,633 | $ | 157,513 | $ | 105,126 | |||||||||
Earnings per share: | |||||||||||||||||
Basic | $ | 0.46 | $ | 0.43 | $ | 1.15 | $ | 0.76 | |||||||||
Diluted | $ | 0.46 | $ | 0.43 | $ | 1.13 | $ | 0.76 | |||||||||
Weighted average shares outstanding: | |||||||||||||||||
Basic | 137,849 | 136,963 | 137,030 | 137,438 | |||||||||||||
Diluted | 139,419 | 137,938 | 138,853 | 138,594 | |||||||||||||
FLIR SYSTEMS, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands) (Unaudited) | ||||||||
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 436,961 | $ | 361,349 | ||||
Accounts receivable, net | 345,542 | 352,020 | ||||||
Inventories | 413,005 | 371,371 | ||||||
Prepaid expenses and other current assets | 86,570 | 79,917 | ||||||
Total current assets | 1,282,078 | 1,164,657 | ||||||
Property and equipment, net | 270,023 | 271,785 | ||||||
Deferred income taxes, net | 51,179 | 45,243 | ||||||
Goodwill | 930,846 | 801,406 | ||||||
Intangible assets, net | 183,677 | 168,460 | ||||||
Other assets | 48,472 | 168,155 | ||||||
$ | 2,766,275 | $ | 2,619,706 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 127,420 | $ | 114,225 | ||||
Deferred revenue | 29,015 | 34,420 | ||||||
Accrued payroll and related liabilities | 67,759 | 52,874 | ||||||
Accrued expenses | 47,528 | 34,022 | ||||||
Accrued income taxes | 46,175 | 51,017 | ||||||
Other current liabilities | 50,041 | 60,154 | ||||||
Current portion long-term debt | - | 15,000 | ||||||
Total current liabilities | 367,938 | 361,712 | ||||||
Long-term debt | 420,369 | 501,921 | ||||||
Deferred income taxes | 14,569 | 2,331 | ||||||
Accrued income taxes | 14,054 | 9,643 | ||||||
Other long-term liabilities | 59,827 | 65,773 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity | 1,889,518 | 1,678,326 | ||||||
$ | 2,766,275 | $ | 2,619,706 | |||||
FLIR SYSTEMS, INC. | |||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(In thousands) (Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net earnings | $ | 63,529 | $ | 58,633 | $ | 157,513 | $ | 105,126 | |||||||
Income items not affecting cash: | |||||||||||||||
Depreciation and amortization | 18,418 | 14,079 | 53,426 | 41,857 | |||||||||||
Deferred income taxes | (2,187 | ) | 172 | (2,337 | ) | (200 | ) | ||||||||
Stock-based compensation arrangements | 9,891 | 6,872 | 24,745 | 21,253 | |||||||||||
Other non-cash items | (8,796 | ) | 4,379 | (28,007 | ) | 19,830 | |||||||||
Changes in operating assets and liabilities net of acquisitions | 23,227 | 4,656 | 3,996 | 34,741 | |||||||||||
Cash provided by operating activities | 104,082 | 88,791 | 209,336 | 222,607 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Additions to property and equipment | (8,208 | ) | (6,806 | ) | (31,861 | ) | (27,682 | ) | |||||||
Proceeds from sale of assets | - | 2,111 | 27 | 6,986 | |||||||||||
Business acquisitions, net of cash acquired | - | - | - | (42,445 | ) | ||||||||||
Other Investments | - | - | 2,859 | - | |||||||||||
Cash used by investing activities | (8,208 | ) | (4,695 | ) | (28,975 | ) | (63,141 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Net proceeds from credit agreement | |||||||||||||||
and long-term debt | - | (940 | ) | - | 524,826 | ||||||||||
Repayments of credit agreement and long-term debt | (86,250 | ) | (254,935 | ) | (97,500 | ) | (367,435 | ) | |||||||
Repurchase of common stock | - | (36,310 | ) | - | (66,057 | ) | |||||||||
Dividends paid | (20,763 | ) | (16,474 | ) | (61,776 | ) | (49,564 | ) | |||||||
Proceeds from shares issued pursuant to stock-based compensation plans | 37,196 | 806 | 44,231 | 7,347 | |||||||||||
Tax paid for net share exercises and issuance of vested restricted stock units | (483 | ) | (159 | ) | (9,505 | ) | (5,775 | ) | |||||||
Other financing activities | (8 | ) | - | (13 | ) | 10 | |||||||||
Cash (used) provided by financing activities | (70,308 | ) | (308,012 | ) | (124,563 | ) | 43,352 | ||||||||
Effect of exchange rate changes on cash | 7,804 | (1,575 | ) | 19,814 | 2,085 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 33,370 | (225,491 | ) | 75,612 | 204,903 | ||||||||||
Cash and cash equivalents: | |||||||||||||||
Beginning of period | 403,591 | 903,179 | 361,349 | 472,785 | |||||||||||
End of period | $ | 436,961 | $ | 677,688 | $ | 436,961 | $ | 677,688 | |||||||
FLIR SYSTEMS, INC. | ||||||||||||||||
OPERATING SEGMENT PERFORMANCE | ||||||||||||||||
(In thousands) (Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
SEGMENT REVENUE | ||||||||||||||||
Surveillance | $ | 146,805 | $ | 136,402 | $ | 394,742 | $ | 373,993 | ||||||||
Instruments | 91,429 | 82,673 | 255,253 | 240,160 | ||||||||||||
Security | 65,660 | 56,431 | 160,447 | 166,872 | ||||||||||||
OEM & Emerging Markets | 87,206 | 62,719 | 259,418 | 167,544 | ||||||||||||
Maritime | 42,256 | 40,586 | 145,909 | 147,469 | ||||||||||||
Detection | 31,356 | 26,417 | 89,881 | 91,391 | ||||||||||||
SEGMENT EARNINGS FROM OPERATIONS | ||||||||||||||||
Surveillance | $ | 44,941 | $ | 41,428 | $ | 104,313 | $ | 103,888 | ||||||||
Instruments | 29,603 | 27,578 | 74,376 | 67,254 | ||||||||||||
Security | 6,486 | 4,784 | 8,090 | 7,025 | ||||||||||||
OEM & Emerging Markets | 26,931 | 20,658 | 77,628 | 48,100 | ||||||||||||
Maritime | 4,466 | 3,155 | 19,060 | 16,482 | ||||||||||||
Detection | 8,883 | 6,999 | 24,644 | 25,556 | ||||||||||||
SEGMENT OPERATING MARGIN | ||||||||||||||||
Surveillance | 30.6 | % | 30.4 | % | 26.4 | % | 27.8 | % | ||||||||
Instruments | 32.4 | % | 33.4 | % | 29.1 | % | 28.0 | % | ||||||||
Security | 9.9 | % | 8.5 | % | 5.0 | % | 4.2 | % | ||||||||
OEM & Emerging Markets | 30.9 | % | 32.9 | % | 29.9 | % | 28.7 | % | ||||||||
Maritime | 10.6 | % | 7.8 | % | 13.1 | % | 11.2 | % | ||||||||
Detection | 28.3 | % | 26.5 | % | 27.4 | % | 28.0 | % | ||||||||
FLIR SYSTEMS, INC. | ||||||||||||||||
GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||||
(In thousands, except per share amounts) (Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross profit: | ||||||||||||||||
GAAP gross profit | $ | 222,891 | $ | 191,376 | $ | 620,944 | $ | 552,388 | ||||||||
Amortization of acquired intangible assets | 3,704 | 2,127 | 10,906 | 6,722 | ||||||||||||
Purchase accounting adjustments | - | - | 1,992 | - | ||||||||||||
Restructuring charges | - | 22 | - | - | ||||||||||||
Other | 1,088 | 2,000 | 3,088 | 2,000 | ||||||||||||
Adjusted gross profit | $ | 227,683 | $ | 195,525 | $ | 636,930 | $ | 561,110 | ||||||||
Gross margin: | ||||||||||||||||
GAAP gross margin | 48.0 | % | 47.2 | % | 47.6 | % | 46.5 | % | ||||||||
Cumulative effect of non-GAAP Adjustments | 1.0 | % | 1.0 | % | 1.2 | % | 0.7 | % | ||||||||
Adjusted gross margin | 49.0 | % | 48.3 | % | 48.8 | % | 47.3 | % | ||||||||
Earnings from operations: | ||||||||||||||||
GAAP earnings from operations | $ | 87,086 | $ | 80,849 | $ | 212,802 | $ | 203,438 | ||||||||
Amortization of acquired intangible assets | 7,102 | 4,329 | 20,854 | 12,464 | ||||||||||||
Purchase accounting adjustments | - | - | 1,992 | - | ||||||||||||
Restructuring charges | 542 | 910 | 642 | 1,217 | ||||||||||||
Acquisition related expenses | 526 | 949 | 1,864 | 2,211 | ||||||||||||
Other | 5,890 | 2,000 | 13,621 | 2,000 | ||||||||||||
Adjusted earnings from operations | $ | 101,146 | $ | 89,037 | $ | 251,775 | $ | 221,330 | ||||||||
Operating margin: | ||||||||||||||||
GAAP operating margin | 18.7 | % | 20.0 | % | 16.3 | % | 17.1 | % | ||||||||
Cumulative effect of non-GAAP Adjustments | 3.0 | % | 2.0 | % | 3.0 | % | 1.5 | % | ||||||||
Adjusted operating margin | 21.8 | % | 22.0 | % | 19.3 | % | 18.6 | % | ||||||||
Net earnings: | ||||||||||||||||
GAAP net earnings | $ | 63,529 | $ | 58,633 | $ | 157,513 | $ | 105,126 | ||||||||
Amortization of acquired intangible assets | 7,102 | 4,329 | 20,854 | 12,464 | ||||||||||||
Purchase accounting adjustments | - | - | 1,992 | - | ||||||||||||
Restructuring charges | 542 | 910 | 642 | 1,217 | ||||||||||||
Acquisition related expenses | 526 | 949 | 1,864 | 2,211 | ||||||||||||
Other | 5,890 | 3,262 | 13,621 | 5,262 | ||||||||||||
Estimated tax benefit of non-GAAP adjustments | (3,709 | ) | (2,357 | ) | (9,937 | ) | (4,788 | ) | ||||||||
Discrete tax items, net | (1,148 | ) | (100 | ) | (5,804 | ) | 40,458 | |||||||||
Adjusted net earnings | $ | 72,732 | $ | 65,626 | $ | 180,745 | $ | 161,950 | ||||||||
Earnings Per Diluted Share: | ||||||||||||||||
GAAP Earnings Per Diluted Share | $ | 0.46 | $ | 0.43 | $ | 1.13 | $ | 0.76 | ||||||||
Cumulative effect of non-GAAP Adjustments | 0.06 | 0.05 | 0.17 | 0.41 | ||||||||||||
Adjusted Earnings Per Diluted Share | $ | 0.52 | $ | 0.48 | $ | 1.30 | $ | 1.17 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Diluted | 139,419 | 137,938 | 138,853 | 138,594 | ||||||||||||
Explanation of Non-GAAP Financial Measures
We report our financial results in accordance with United States generally accepted accounting principles (GAAP). As a supplement to our GAAP financial results, this earnings announcement contains some or all of the following non-GAAP financial measures: (i) adjusted gross profit, (ii) adjusted gross margin (defined as adjusted gross profit divided by revenue), (iii) adjusted operating earnings/income, (iv) adjusted operating margin (defined as adjusted operating income divided by revenue), (v) adjusted net earnings/income, and (vi) adjusted earnings per diluted share (EPS). These non-GAAP measures of financial performance are not prepared in accordance with GAAP and computational methods may differ from those used by other companies. Additionally, these non-GAAP measures should not be considered a substitute for any other performance measure determined in accordance with GAAP and the Company cautions investors and potential investors to consider these measures in addition to, not as a substitute for, its consolidated financial results as presented in accordance with GAAP. Each of the non-GAAP measures is adjusted from GAAP results and are outlined in the "GAAP to Non-GAAP Reconciliation" tables included within this earnings release.
In calculating non-GAAP financial measures, we exclude certain items (including gains and losses) to facilitate a review of the comparability of our core operating performance on a period-to-period basis. The excluded items represent amortization of acquired intangible assets, purchase accounting adjustments, restructuring charges, acquisition related expenses, gains and losses on cost-basis investments, discrete tax items, and other items we do not consider to be directly related to our core operating performance. We use non-GAAP measures internally to evaluate the core operating performance of our business, for comparison with forecasts and strategic plans and for calculating return on investment. Accordingly, supplementing GAAP financial results with these non-GAAP financial measures enables the comparison of our ongoing operating results in a manner consistent with the metrics reviewed by management. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating:
The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures: