(a) Quarterly return is equal to non-GAAP net income of $120 million plus net interest expense after tax of $10 million for Q2'15, net income of $133 million plus net interest expense after tax of zero for Q2'14 and $96 million plus net interest expense after tax of $9 million for Q1'15. Please see "Non-GAAP Net Income and Diluted EPS Reconciliations" for a reconciliation of non-GAAP net income to GAAP net income.
(b) Segment assets consist of inventory, accounts receivable, property plant and equipment, gross goodwill and other intangibles, deferred taxes and allocated corporate assets.
(c) Includes accounts payable, employee compensation and benefits, deferred revenue, certain other accrued liabilities and allocated corporate liabilities.
Return on Invested Capital (ROIC) is a non-GAAP measure that management believes provides useful supplemental information for management and the investor. ROIC is a tool by which we track how much value we are creating for our shareholders. Management uses ROIC as a performance measure for our businesses, and our senior managers' compensation is linked to ROIC improvements as well as other performance criteria. We believe that ROIC provides our management with a means to analyze and improve their business, measuring segment profitability in relation to net asset investments. We acknowledge that ROIC may not be calculated the same way by every company.
Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.
| The preliminary reconciliation of ROIC is based on our current information. |
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| KEYSIGHT TECHNOLOGIES, INC. | ||||||||||||||||||||
| RECONCILIATION FROM GAAP TO NON-GAAP OPERATING MARGIN | ||||||||||||||||||||
| THREE MONTHS ENDED APRIL 30, 2015 | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
|
PRELIMINARY |
NON-GAAP ADJUSTMENTS |
|||||||||||||||||||
| Intangible | Separation | Share Based | ||||||||||||||||||
| (in millions, except margins) | GAAP | Amortization | Costs | Compensation | Other | Non-GAAP | ||||||||||||||
| Net Revenue | $ 740 | ─ | ─ | ─ | ─ | $ 740 | ||||||||||||||
| Costs and expenses: | ||||||||||||||||||||
| Cost of products and services | 324 | (2) | ─ | (4) | ─ | 318 | ||||||||||||||
| Research and development | 96 | ─ | ─ | (2) | 1 | 95 | ||||||||||||||
| Selling, general and administrative | 192 | ─ | (5) | (7) | (3) | 177 | ||||||||||||||
| Total costs and expenses | 612 | (2) | (5) | (13) | (2) | 590 | ||||||||||||||
| Income from operations | Operating Margin | 17% | 128 | 2 | 5 | 13 | 2 | 150 |
20% |
Operating Margin | ||||||||||
