Form 8-K
 
 
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): June 9, 2010
VERINT SYSTEMS INC.
(Exact name of registrant as specified in its charter)
         
Delaware   0-49790   11-3200514
         
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (IRS Employer Identification No.)
     
330 South Service Road,
Melville, New York
   
11747
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code: (631) 962-9600
None
(Former name or former address, if changed since last report.)
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:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   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 June 9, 2010, Verint Systems Inc. (“Verint”) issued a press release announcing that it had filed its Quarterly Report on Form 10-Q for the quarter ended April 30, 2010 with the Securities and Exchange Commission and providing selected financial information for the quarter ended April 30, 2010. A copy of the press release is attached as Exhibit 99.1 hereto and is incorporated by reference into Items 2.02 and 7.01 in its entirety.
Item 7.01 Regulation FD Disclosure.
The information referred to in “Item 2.02 Results of Operations and Financial Condition” above is hereby incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
         
Exhibit    
Number   Description
       
 
  99.1    
Press Release of Verint Systems Inc., dated June 9, 2010.

 

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SIGNATURES
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.
         
  Verint Systems Inc.    
 
Date: June 9, 2010    
 
  By:   /s/ Douglas E. Robinson    
    Name:   Douglas E. Robinson   
    Title:   Chief Financial Officer   
 

 

 


 

EXHIBIT INDEX
         
Exhibit    
Number   Description
       
 
  99.1    
Press Release of Verint Systems Inc., dated June 9, 2010.

 

 

Exhibit 99.1
Exhibit 99.1
(VERINT LOGO)
Contacts:
Investor Relations
Alan Roden
Verint Systems Inc.
(631) 962-9304
alan.roden@verint.com
Press Release
Verint Announces First Quarter Results and Files Quarterly Report on Form 10-Q for the Quarter Ended April 30, 2010
Webcast and Conference Call to Discuss Selected Financial Information and Outlook to be Held Today at 4:30 p.m.
MELVILLE, N.Y., June 9, 2010 Verint® Systems Inc. (NQB:VRNT) today announced that it has filed its Quarterly Report on Form 10-Q for the quarter ended April 30, 2010 with the Securities and Exchange Commission (“SEC”). As previously disclosed, the Company also intends to file its Quarterly Reports on Form 10-Q for the first three quarters of the year ended January 31, 2010 as soon as possible.
“We are pleased with our strong performance in the first quarter which we believe reflects an improving economic environment and our leadership position in the actionable intelligence market. Our non-GAAP operating margin came in strong at 24.5%, ahead of our annual target, reflecting sustained focus on execution in the workforce optimization and security intelligence markets. We look forward to discussing our results and outlook during today’s conference call,” said Dan Bodner, CEO and President of Verint Systems Inc.
Below is selected GAAP and non-GAAP financial information for the quarters ended April 30, 2010 and 2009.
                                 
    Selected GAAP Information     Selected Non-GAAP Information  
    Three Months Ended April 30,     Three Months Ended April 30,  
(In thousands, except per share data)   2010     2009     2010     2009  
Revenue
  $ 172,613     $ 175,148     $ 172,613     $ 175,148  
 
                               
Gross Profit
    114,806       118,079       119,447       121,093  
Gross Margin
    66.5 %     67.4 %     69.2 %     69.1 %
 
                               
Operating Income (Loss)
    (3,982 )(1)     36,009       42,279       57,169  
Operating Margin
    (2.3 %)     20.6 %     24.5 %     32.6 %
 
                               
Diluted Net Income (Loss) per Share
  $ (0.60 )   $ 0.47     $ 0.57     $ 0.93  
     
(1)   Includes $20 million of expenses related to our filing delay. See Table 2 for Reconciliation of GAAP to Non-GAAP Results.
Outlook for the Year Ended January 31, 2011
    We are updating our revenue outlook from approximately $700 million to a range of $700 to $715 million.
    We are updating our target non-GAAP operating margin from approximately 20% to a range of 20% to 23%.

 

 


 

Webcast and Conference Call Information
Verint will be conducting a webcast and conference call today at 4:30 p.m. to discuss its first quarter results and outlook for the year ending January 31, 2011. The webcast, including audio, will be available on our website under Investor Relations at www.verint.com. Audio only from the webcast can also be accessed via telephone at 1-888-396-2386 and the passcode is 13074775. Please dial in 10-15 minutes prior to the scheduled start time.
About Non-GAAP Financial Measures
This press release and the accompanying tables include non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), please see Table 2 as well as “Supplemental Information About Non-GAAP Measures” at the end of this press release. Because we do not predict special items that might occur in the future, and our outlook is developed at a level of detail different than that used to prepare GAAP financial measures, we are not providing a reconciliation to GAAP of our forward-looking financial measures for the year ending January 31, 2011.
About Verint Systems Inc.
Verint® Systems Inc. is a global leader in Actionable Intelligence® solutions and value-added services. Our solutions enable organizations of all sizes to make timely and effective decisions to improve enterprise performance and make the world a safer place. More than 10,000 organizations in over 150 countries — including over 80% of the Fortune 100 — use Verint solutions to capture, distill, and analyze complex and underused information sources, such as voice, video, and unstructured text. Headquartered in Melville, New York, we support our customers around the globe directly and with an extensive network of selling and support partners. Visit us at our website www.verint.com.
Cautions About Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expectations, predictions, views, opportunities, plans, strategies, beliefs, and statements of similar effect relating to Verint Systems Inc. These forward-looking statements are not guarantees of future performance and they are based on management’s expectations that involve a number of risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Some of the factors that could cause actual future results or conditions to differ materially from current expectations include: risks relating to the filing of our SEC reports, including the occurrence of known contingencies or unforeseen events that could delay our plan for completion of our outstanding or future filings, management distractions, and significant expense; risk associated with the SEC’s initiation of an administrative proceeding on March 3, 2010 to suspend or revoke the registration of our common stock under the Securities Exchange Act of 1934 due to our previous failure to file an annual report on either Form 10-K or Form 10-KSB since April 25, 2005 or quarterly reports on either Form 10-Q or Form 10-QSB since December 12, 2005; risk that our credit rating could be downgraded or placed on a credit watch based on, among other things, our financial results, delays in the filing of our periodic reports, or the results of the SEC’s administrative proceeding; risks associated with being a consolidated, controlled subsidiary of Comverse Technology, Inc. (“Comverse”) and formerly part of Comverse’s consolidated tax group, including risk of any future impact on us resulting from Comverse’s special committee investigation and restatement or related effects, and risks related to our dependence on Comverse to provide us with accurate financial information, including with respect to stock-based compensation expense and net operating loss carryforwards (“NOLs”), for our financial statements; uncertainty regarding the impact of general economic conditions, particularly in information technology spending, on our business; risk that our financial results will cause us not to be compliant with the leverage ratio covenant under our credit facility or that any delays in the filing of future SEC reports could cause us not to be compliant with the financial statement delivery covenant under our credit facility; risk that customers or partners delay or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in their business, or otherwise; risk that we will experience liquidity or working capital issues and related risk that financing sources will be unavailable to us on reasonable terms or at all; uncertainty regarding the future impact on our business of our internal investigation, restatement, extended filing delay, and the SEC’s administrative proceeding, including customer, partner, employee, and investor concern, and potential customer and partner transaction deferrals or losses; risks relating to the remediation or inability to adequately remediate material weaknesses in our internal controls over financial reporting and relating to the proper application of highly complex accounting rules and pronouncements in order to produce accurate SEC reports on a timely basis; risks relating to our implementation and maintenance of adequate systems and internal controls for our current and future operations and reporting needs; risk of possible future restatements if

 

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the processes used to produce the financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended April 30, 2010 or in future SEC reports are inadequate; risk associated with current or future regulatory actions or private litigations relating to our internal investigation, restatement, or delays in filing required SEC reports; risk that we will be unable to re-list our common stock on NASDAQ or another national securities exchange and maintain such listing; risks associated with Comverse controlling our board of directors and a majority of our common stock (and therefore the results of any significant stockholder vote); risks associated with significant leverage resulting from our current debt position; risks due to aggressive competition in all of our markets, including with respect to maintaining margins and sufficient levels of investment in the business and with respect to introducing quality products which achieve market acceptance; risks created by continued consolidation of competitors or introduction of large competitors in our markets with greater resources than us; risks associated with significant foreign and international operations, including exposure to fluctuations in exchange rates; risks associated with complex and changing local and foreign regulatory environments; risks associated with our ability to recruit and retain qualified personnel in all geographies in which we operate; challenges in accurately forecasting revenue and expenses; risks associated with acquisitions and related system integrations; risks relating to our ability to improve our infrastructure to support growth; risks that our intellectual property rights may not be adequate to protect our business or that others may make claims on our intellectual property or claim infringement on their intellectual property rights; risks associated with a significant amount of our business coming from domestic and foreign government customers; risk that we improperly handle sensitive or confidential information or perception of such mishandling; risks associated with dependence on a limited number of suppliers for certain components of our products; risk that we are unable to maintain and enhance relationships with key resellers, partners, and systems integrators; and risk that use of our NOLs or other tax benefits may be restricted or eliminated in the future. We assume no obligation to revise or update any forward-looking statement, except as otherwise required by law. For a detailed discussion of these risk factors, see our Annual Report on Form 10-K for the year ended January 31, 2010.
VERINT, the VERINT logo, ACTIONABLE INTELLIGENCE, POWERING ACTIONABLE INTELLIGENCE, WITNESS ACTIONABLE SOLUTIONS, STAR-GATE, RELIANT, VANTAGE, X-TRACT, NEXTIVA, EDGEVR, ULTRA, AUDIOLOG, WITNESS, the WITNESS logo, IMPACT 360, the IMPACT 360 logo, IMPROVE EVERYTHING, EQUALITY, CONTACTSTORE, EYRETEL, BLUE PUMPKIN SOFTWARE, BLUE PUMPKIN, the BLUE PUMPKIN logo, EXAMETRIC and the EXAMETRIC logo, CLICK2STAFF, STAFFSMART, AMAE SOFTWARE and the AMAE logo are trademarks and registered trademarks of Verint Systems Inc. Other trademarks mentioned are the property of their respective owners.

 

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Table 1
Verint Systems Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
                 
    Three Months Ended April 30,  
    2010     2009  
 
Revenue:
               
Product
  $ 92,070     $ 97,071  
Service and support
    80,543       78,077  
 
           
Total revenue
    172,613       175,148  
 
           
Cost of revenue:
               
Product
    28,346       32,057  
Service and support
    27,228       22,913  
Amortization of acquired technology and backlog
    2,233       2,099  
 
           
Total cost of revenue
    57,807       57,069  
 
           
Gross profit
    114,806       118,079  
 
           
Operating expenses:
               
Research and development, net
    26,432       18,901  
Selling, general and administrative
    87,017       57,226  
Amortization of other acquired intangible assets
    5,339       5,930  
Restructuring
          13  
 
           
Total operating expenses
    118,788       82,070  
 
           
Operating income (loss)
    (3,982 )     36,009  
 
           
Other income (expense), net
               
Interest income
    83       147  
Interest expense
    (5,948 )     (6,353 )
Other expense, net
    (3,698 )     (4,963 )
 
           
Total other expense, net
    (9,563 )     (11,169 )
 
           
Income (loss) before provision for income taxes
    (13,545 )     24,840  
Provision for income taxes
    2,071       4,268  
 
           
Net income (loss)
    (15,616 )     20,572  
Net income attributable to noncontrolling interest
    592       938  
 
           
Net income (loss) attributable to Verint Systems Inc.
    (16,208 )     19,634  
Dividends on preferred stock
    (3,403 )     (3,262 )
 
           
Net income (loss) applicable to Verint Systems Inc. common shares
  $ (19,611 )   $ 16,372  
 
           
 
               
Net income (loss) per share attributable to Verint Systems Inc.
               
Basic
  $ (0.60 )   $ 0.50  
 
           
Diluted
  $ (0.60 )   $ 0.47  
 
           
 
               
Weighted-average common shares outstanding
               
Basic
    32,663       32,459  
 
           
Diluted
    32,663       42,151  
 
           

 

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Table 2
Verint Systems Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Results
(Unaudited)
(In thousands, except per share data)
                 
    Three Months Ended April 30,  
    2010     2009  
 
Table of Reconciliation from GAAP Gross Profit to Non-GAAP Gross Profit
               
 
               
GAAP gross profit
  $ 114,806     $ 118,079  
Amortization of acquired technology and backlog
    2,233       2,099  
Stock-based compensation expenses
    2,408       915  
 
           
Non-GAAP gross profit
  $ 119,447     $ 121,093  
 
           
 
               
Table of Reconciliation from GAAP Operating Income (Loss) to Non-GAAP Operating Income
               
 
               
GAAP operating income (loss)
  $ (3,982 )   $ 36,009  
Amortization of acquired technology and backlog
    2,233       2,099  
Amortization of other acquired intangible assets
    5,339       5,930  
Restructuring costs
          13  
Stock-based compensation expenses
    17,969       6,556  
Other adjustments
    507        
Expenses related to our filing delay
    20,213       6,562  
 
           
Non-GAAP operating income
  $ 42,279     $ 57,169  
 
           
 
               
Table of Reconciliation from GAAP Other Expense, net to Non-GAAP Other Expense, net
               
 
               
GAAP other expense, net
  $ (9,563 )   $ (11,169 )
Unrealized gains and losses on investments and derivatives
    (3,967 )     (2,462 )
 
           
Non-GAAP other expense, net
  $ (13,530 )   $ (13,631 )
 
           
 
               
Table of Reconciliation from GAAP Provision for Income Taxes to Non-GAAP Provision for Income Taxes
               
 
               
GAAP provision for income taxes
  $ 2,071     $ 4,268  
Tax adjustments
    1,091       (794 )
 
           
Non-GAAP provision for income taxes
  $ 3,162     $ 3,474  
 
           
 
               
Table of Reconciliation from GAAP Net Income (Loss) Attributable to Verint Systems Inc. Common Shares to Non-GAAP Net Income Attributable to Verint Systems Inc. Common Shares
               
 
               
GAAP net income (loss) attributable to Verint Systems Inc. common shares
  $ (19,611 )   $ 16,372  
Amortization of acquired technology and backlog
    2,233       2,099  
Amortization of other acquired intangible assets
    5,339       5,930  
Restructuring costs
          13  
Stock-based compensation expenses
    17,969       6,556  
Other adjustments
    507        
Expenses related to our filing delay
    20,213       6,562  
Unrealized gains and losses on investments and derivatives
    (3,967 )     (2,462 )
Tax adjustments
    (1,091 )     794  
 
           
Non-GAAP net income attributable to Verint Systems Inc. common shares
  $ 21,592     $ 35,864  
 
           
 
               
Table Comparing GAAP Diluted Net Income (Loss) Per Share Attributable to Verint Systems Inc. to Non-GAAP Net Income Per Share Attributable to Verint Systems Inc.
               
 
               
GAAP diluted net income (loss) per share
  $ (0.60 )   $ 0.47  
 
           
Non-GAAP diluted net income per share
  $ 0.57     $ 0.93  
 
           
Shares used in computing GAAP diluted net income (loss) per share (in thousands)
    32,663       42,151  
 
           
Shares used in computing non-GAAP diluted net income per share (in thousands)
    43,920       42,151  
 
           

 

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Table 3
Verint Systems Inc. and Subsidiaries
Segment Revenue
(Unaudited)
(In thousands)
                 
    Three Months Ended April 30,  
    2010     2009  
 
Revenue By Segment
               
Enterprise Workforce Optimization Segment
  $ 96,880     $ 85,314  
 
           
 
Video Intelligence Segment
    31,545       41,678  
Communications Intelligence and Investigative Segment
    44,188       48,156  
 
           
Total Video and Communications Intelligence
    75,733       89,834  
 
           
 
Total Revenue
  $ 172,613     $ 175,148  
 
           

 

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Table 4
Verint Systems Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share data)
                 
    April 30,     January 31,  
    2010     2010  
 
Assets
               
Current Assets:
               
Cash and cash equivalents
  $ 149,403     $ 184,335  
Restricted cash and bank time deposits
    4,972       5,206  
Accounts receivable, net
    140,649       127,826  
Inventories
    14,654       14,373  
Deferred cost of revenue
    8,576       11,232  
Prepaid expenses and other current assets
    59,997       64,554  
 
           
Total current assets
    378,251       407,526  
 
           
Property and equipment, net
    23,396       24,453  
Goodwill
    730,053       724,670  
Intangible assets, net
    171,541       173,833  
Capitalized software development costs, net
    7,812       8,530  
Deferred cost of revenue
    28,847       33,019  
Other assets
    25,712       24,306  
 
           
Total assets
  $ 1,365,612     $ 1,396,337  
 
           
 
               
Liabilities, Preferred Stock, and Stockholders’ Deficit
               
Current Liabilities:
               
Accounts payable
  $ 44,464     $ 46,570  
Accrued expenses and other liabilities
    171,197       155,422  
Current maturities of long-term debt
    22,098       22,678  
Deferred revenue
    165,696       183,719  
Liabilities to affiliates
    1,793       1,709  
 
           
Total current liabilities
    405,248       410,098  
 
           
Long-term debt
    598,234       598,234  
Deferred revenue
    47,991       51,412  
Other liabilities
    62,778       65,618  
 
           
Total liabilities
    1,114,251       1,125,362  
 
           
Preferred Stock — $0.001 par value; authorized 2,500,000 shares. Series A convertible preferred stock; 293,000 shares issued and outstanding; aggregate liquidation preference and redemption value of $328,983 at April 30, 2010
    285,542       285,542  
 
           
Commitments and Contingencies
               
Stockholders’ Deficit:
               
Common stock — $0.001 par value; authorized 120,000,000 shares. Issued 33,029,000 and 32,687,000 shares, respectively; outstanding 32,803,000 and 32,584,000 shares, as of April 30, 2010 and January 31, 2010, respectively
    33       33  
Additional paid-in capital
    458,665       451,166  
Treasury stock, at cost — 226,000 and 103,000 shares as of April 30, 2010 and January 31, 2010, respectively
    (5,805 )     (2,493 )
Accumulated deficit
    (436,546 )     (420,338 )
Accumulated other comprehensive loss
    (51,314 )     (43,134 )
 
           
Total Verint Systems Inc. stockholders’ deficit
    (34,967 )     (14,766 )
Noncontrolling interest
    786       199  
 
           
Total liabilities stockholders’ deficit
    (34,181 )     (14,567 )
 
           
Total liabilities, preferred stock, and stockholders’ deficit
  $ 1,365,612     $ 1,396,337  
 
           

 

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Table 5
Verint Systems Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                 
    Three Months Ended April 30,  
    2010     2009  
 
Cash flows from operating activities:
               
Net income (loss)
  $ (15,616 )   $ 20,572  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
               
Depreciation and amortization
    11,898       13,073  
Stock-based compensation
    7,546       6,257  
Non-cash losses on derivative financial instruments, net
    1,703       3,539  
Other non-cash items, net
    1,189       1,685  
Changes in operating assets and liabilities, net of effects of business combinations:
               
Accounts receivable
    (13,787 )     (5,365 )
Inventories
    (488 )     938  
Deferred cost of revenue
    6,161       7,041  
Accounts payable and accrued expenses
    14,959       (15,012 )
Deferred revenue
    (18,476 )     3,255  
Prepaid expenses and other assets
    1,501       (6,667 )
Other, net
    (1,110 )     (1,874 )
 
           
Net cash provided by (used in) operating activities
    (4,520 )     27,442  
 
           
 
               
Cash flows from investing activities:
               
 
               
Cash paid for business combination, net of cash acquired, and payments of contingent consideration associated with business combinations in prior periods
    (15,292 )     (7 )
 
               
Purchases of property and equipment
    (1,878 )     (738 )
Settlements of derivative financial instruments not designated as hedges
    (6,333 )     (3,850 )
Cash paid for capitalized software development costs
    (462 )     (509 )
Other investing activities
    205       805  
 
           
Net cash used in investing activities
    (23,760 )     (4,299 )
 
           
 
               
Cash flows from financing activities:
               
Repayments of borrowings and other financing obligations
    (580 )     (1,562 )
Dividends paid to noncontrolling interest
          (2,142 )
Purchases of treasury stock
    (3,312 )      
Other financing activities
    (897 )      
 
           
Net cash used in financing activities
    (4,789 )     (3,704 )
 
           
Effect of exchange rate changes on cash and cash equivalents
    (1,863 )     805  
 
           
Net increase (decrease) in cash and cash equivalents
    (34,932 )     20,244  
Cash and cash equivalents, beginning of period
    184,335       115,928  
 
           
Cash and cash equivalents, end of period
  $ 149,403     $ 136,172  
 
           
 
               
Supplemental disclosures of cash flow information:
               
Cash paid for interest
  $ 3,538     $ 7,310  
 
           
Cash paid for income taxes
  $ 1,525     $ 3,050  
 
           
Non-cash investing and financing transactions:
               
Accrued but unpaid purchases of property and equipment
  $ 495     $ 216  
 
           
Inventory transfers to property and equipment
  $ 77     $ 195  
 
           

 

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Verint Systems Inc. and Subsidiaries
Supplemental Information About Non-GAAP Measures
This press release contains non-GAAP measures. Table 2 includes a reconciliation of each non-GAAP financial measure presented in this press release to the most directly comparable financial measure prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). Non-GAAP measures should not be considered in isolation or as a substitute for comparable measures of financial performance prepared in accordance with GAAP. We believe that the non-GAAP measures we present have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.
We believe that the non-GAAP measures presented in the press release provide meaningful supplemental information regarding Verint’s operating results primarily because they exclude certain non-cash charges or items that we do not consider part of ongoing operating results when planning and forecasting and when assessing the performance of our business, with our individual operating segments or our senior management. We believe that our non-GAAP measures also facilitate the comparison by management and investors of results between periods and among our peer companies.
As set forth in Table 2, our non-GAAP measures reflect adjustments to the corresponding GAAP measure based on the items set forth below. The purpose of these adjustments is to give an indication of our performance exclusive of certain non-cash charges and other items that are considered by our senior management to be outside of our ongoing operating results.
Acquisition Related Adjustments
Acquisition related adjustments include (i) amortization of acquisition-related intangibles, and (ii) other adjustments. These adjustments are discussed below.
Amortization of acquisition-related intangibles. When we acquire an entity, we are required under GAAP to record the fair values of the intangible assets of the acquired entity and amortize them over their useful lives. We exclude the amortization of acquisition-related intangibles from our non-GAAP measures. These expenses are excluded from our non-GAAP measures because they are non-cash charges. In addition, these amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Thus, we also exclude these amounts to provide better comparability of pre- and post-acquisition operating results.
Other adjustments. We exclude from our non-GAAP measures legal and other professional fees associated with acquisitions. We excluded these items from our non-GAAP results because they are not reflective of our ongoing operations.
Other Adjustments
Stock-based compensation expenses. We exclude stock-based compensation expenses related to stock options, restricted stock awards and units and phantom stock from our non-GAAP measures. These expenses are excluded from our non-GAAP measures because they are generally non-cash charges although in current periods we had higher amounts of phantom stock settled in cash.
Expenses related to our filing delay. We exclude from our non-GAAP measures expenses associated with our filing delay. These expenses included professional fees and related expenses as well as expenses associated with a special cash retention program. These expenses are excluded from our non-GAAP measures because they are not reflective of our ongoing operations.

 

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Restructuring costs. We exclude from our non-GAAP measures expense associated with the restructuring of our operations due to internal or external market factors. These expenses are excluded from our non-GAAP measures because they are not reflective of our ongoing operations.
Unrealized gains and losses on investments and derivatives. We exclude from our non-GAAP measures investment write-down in auction rate securities and unrealized gain/(loss) on embedded derivatives, interest rate swaps, and foreign currency derivatives. These gains/(losses) are excluded from our non-GAAP measures because they are non-cash gains/(losses).
Tax adjustments. Our non-GAAP quarterly provision for income taxes reflects expected annual effective tax rate on a cash basis.

 

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