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Form 8-K Keysight Technologies, For: Aug 17

August 17, 2022 4:07 PM EDT

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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): August 17, 2022
 
KEYSIGHT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
 
Delaware 001-36334 46-4254555
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
 
1400 Fountaingrove Parkway 95403
Santa RosaCA
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code (800) 829-4444

(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:
 
        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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName on each exchange on which registered
Common Stock, par value $0.01 per shareKEYSNew York Stock Exchange

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.
 
The information in this Item 2.02 of Form 8-K and Exhibit 99.1 attached hereto is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
 
On August 17, 2022, Keysight Technologies, Inc. (the “Company”) issued its press release announcing financial results for the third fiscal quarter ended July 31, 2022. A copy of this press release is attached hereto as Exhibit 99.1.
 
We provide non-GAAP financial information in order to provide meaningful supplemental information regarding our operational performance and to enhance our investors’ overall understanding of our core current financial performance and our prospects for the future. We believe that our investors benefit from seeing our results “through the eyes” of management in addition to the GAAP presentation. Management measures segment and enterprise performance using measures such as those that are disclosed in this release. This information is used to facilitate management’s internal comparisons to the Company’s historical operating results, comparisons to competitors’ operating results and guidance provided to investors. Non-GAAP information allows for greater transparency to supplemental information used by management in its financial and operations decision making. We believe that the inclusion of comparative numbers provides consistency in our financial reporting.
 
This information is not in accordance with, or an alternative for, generally accepted accounting principles in the United States. It excludes items, such as amortization of acquisition-related balances, share-based compensation, acquisition and integration costs, restructuring and others, including any one-time adjustments that may have a material effect on the Company’s expenses and income from operations calculated in accordance with GAAP. Management monitors these items to ensure that expenses are in line with expectations and that our GAAP results are correctly stated but does not use them to measure the ongoing operating performance of the Company. The non-GAAP information we provide may be different from the non-GAAP information provided by other companies.
 
Additional explanation of non-GAAP information is provided in Exhibit 99.1.


Item 9.01.              Financial Statements and Exhibits.
 
(d) Exhibits
 
The following is furnished as an exhibit to this report and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended:
 
Exhibit No. Description
 
101 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
104 The cover page from this Current Report on Form 8-K, formatted as Inline XBRL.

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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.
 
 
 KEYSIGHT TECHNOLOGIES, INC.
  
  
 By:/s/ JoAnn Juskie
 Name: JoAnn Juskie
 Title:Vice President, Assistant General Counsel and Assistant Secretary
  
Date: August 17, 2022 





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EXHIBIT INDEX
 
Exhibit No.Description
101 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
104 The cover page from this Current Report on Form 8-K, formatted as Inline XBRL.

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Exhibit 99.1

Keysight Technologies Reports Third Quarter 2022 Results

Achieved Record Revenue and EPS; Raises Fiscal Year Outlook


SANTA ROSA, Calif., August 17, 2022 - Keysight Technologies, Inc. (NYSE: KEYS) today reported financial results for the third fiscal quarter ended July 31, 2022.

“Keysight delivered an exceptional third quarter, with both revenue and EPS exceeding the high end of guidance. Our outperformance reflects the effectiveness of our strategy, outstanding execution by our teams around the world, and the strength of our operating model,” said Satish Dhanasekaran, Keysight’s President and CEO. “Keysight’s deep customer engagements with industry leaders, and high value, differentiated solutions continue to drive broad-based demand across key technology mega trends.”
Third Quarter Financial Summary
Orders grew 12 percent to reach $1.46 billion, compared with $1.31 billion last year, or 14 percent on a core basis, which excludes the impact of foreign currency changes and orders associated with businesses acquired or divested within the last twelve months.
Revenue grew 10 percent to reach $1.38 billion, compared with $1.25 billion last year, or 13 percent on a core basis, which excludes the impact of foreign currency changes and revenue associated with businesses acquired or divested within the last twelve months.
GAAP net income was $338 million, or $1.87 per share, compared with $254 million, or $1.36 per share, in the third quarter of 2021.
Non-GAAP net income was $363 million, or $2.01 per share, compared with $286 million, or $1.54 per share in the third quarter of 2021.
Keysight acquired approximately 1.6 million shares in the open market at an average share price of $139.46, for a total consideration of $228 million.
As of July 31, 2022, cash and cash equivalents totaled $1.85 billion.

Reporting Segments
Communications Solutions Group (CSG)
CSG reported revenue of $970 million in the third quarter, up 11 percent over last year, with strength in 5G, O-RAN, 400G, 800G, and high-speed digital applications, as well as cyber, space and satellite solutions.
Electronic Industrial Solutions Group (EISG)
EISG reported revenue of $406 million in the third quarter, up 10 percent over last year, driven by general electronics, semiconductor measurement solutions, and next-generation automotive and energy solutions. EISG reported growth across all regions.

Outlook
Keysight’s fourth fiscal quarter of 2022 revenue is expected to be in the range of $1.38 billion to $1.40 billion. Non-GAAP earnings per share for the fourth fiscal quarter of 2022 are expected to be in the range of $1.94 to $2.00. Full fiscal year 2022 revenue growth is expected to approach 9 percent. At the midpoint of fourth quarter guidance, non-GAAP earnings per share growth for fiscal year 2022 is expected to be 20 percent. Certain items impacting the GAAP tax rate pertain to future events and are not currently estimable with a reasonable degree of accuracy; therefore, no reconciliation of GAAP earnings per share to non-GAAP has been provided. Further information is discussed in the section titled “Use of Non-GAAP Financial Measures” below.
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Webcast
Keysight’s management will present more details about its third quarter FY2022 financial results and its fourth quarter FY2022 outlook on a conference call with investors today at 1:30 p.m. PT. This event will be webcast in listen-only mode. Listeners may log on to the call at www.investor.keysight.com under the “Upcoming Events section and select “Q3 2022 Keysight Technologies Inc. Earnings Conference Call” to participate or dial +1-844-200-6205 (U.S. only) or +1-929-526-1599 (International) and enter passcode 993594. The webcast will remain on the company site for 90 days.

Forward-Looking Statements
This communication contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The words “expect,” “intend,” “will,” “should,” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties that could significantly affect the expected results and are based on certain key assumptions of Keysight’s management and on currently available information. Due to such uncertainties and risks, no assurances can be given that such expectations or assumptions will prove to have been correct, and readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Keysight undertakes no responsibility to publicly update or revise any forward-looking statement. The forward-looking statements contained herein include, but are not limited to, predictions, future guidance, projections, beliefs, and expectations about the company’s goals, revenues, financial condition, earnings, and operations that involve risks and uncertainties that could cause Keysight’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, impacts of current supply chain constraints; impacts of geopolitical tension and conflict outside of the U.S., including the war between Russia and Ukraine and increasing tensions between China and Taiwan; export control regulations and compliance; net zero emissions commitments; increases in attrition and our ability to retain key personnel; changes in the demand for current and new products, technologies, and services; customer purchasing decisions and timing; and order cancellations.

In addition to the risks above, other risks that Keysight faces include those detailed in Keysight’s filings with the Securities and Exchange Commission on Keysight’s yearly report on Form 10-K for the period ended October 31, 2021, and Keysight’s quarterly report on Form 10-Q for the period ended April 30, 2022.

Segment Data
Segment data reflect the results of our reportable segments under our management reporting system. Segment data are provided on page 5 of the attached tables.

Use of Non-GAAP Financial Measures
In addition to financial information prepared in accordance with U.S. GAAP (“GAAP”), this document also contains certain non-GAAP financial measures based on management’s view of performance, including:
Core Revenue
Non-GAAP Net Income/Earnings
Non-GAAP Net Income per share/Earnings per share
Income per share is based on weighted average diluted share count. See the attached supplemental schedules for reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure for the three months ended July 31, 2022. Following the reconciliations is a discussion of the items adjusted from our non-GAAP financial measures and the company’s reasons for including or excluding certain categories of income or expenses from our non-GAAP results.

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About Keysight Technologies
Keysight delivers advanced design and validation solutions that help accelerate innovation to connect and secure the world. Keysight’s dedication to speed and precision extends to software-driven insights and analytics that bring tomorrow’s technology products to market faster across the development lifecycle, in design simulation, prototype validation, automated software testing, manufacturing analysis, and network performance optimization and visibility in enterprise, service provider and cloud environments. Our customers span the worldwide communications and industrial ecosystems, aerospace and defense, automotive, energy, semiconductor and general electronics markets. Keysight generated revenues of $4.9B in fiscal year 2021. For more information about Keysight Technologies (NYSE: KEYS), visit us at www.keysight.com.

# # #

Additional information about Keysight Technologies is available in the newsroom at www.keysight.com/go/news and on FacebookLinkedInTwitter and YouTube.

EDITORIAL CONTACT:
Andrea Mueller
+ 1 408-218-4754
andrea.mueller@keysight.com

INVESTOR CONTACT:
Jason Kary
+1 707-577-6916
jason.kary@keysight.com
Source: IR-KEYS
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KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
(Unaudited)
PRELIMINARY
Three months ended
July 31,Percent
20222021Inc/(Dec)
Orders$1,461 $1,310 12%
Revenue$1,376 $1,246 10%
Costs and expenses:
Cost of products and services499 458 9%
Research and development206 207 (1)%
Selling, general and administrative317 302 5%
Other operating expense (income), net(3)(5)(44)%
Total costs and expenses1,019 962 6%
Income from operations357 284 26%
Interest income660%
Interest expense(20)(20)(1)%
Other income (expense), net1%
Income before taxes346 270 29%
Provision for income taxes16 (50)%
Net income$338 $254 33%
Net income per share:
Basic$1.89 $1.38 
Diluted$1.87 $1.36 
Weighted average shares used in computing net income per share:
Basic179 184 
Diluted181 186 

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KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
(Unaudited)
PRELIMINARY
Nine months ended
July 31,Percent
20222021Inc/(Dec)
Orders$4,414 $3,865 14%
Revenue$3,977 $3,647 9%
Costs and expenses:
Cost of products and services1,437 1,415 2%
Research and development626 615 2%
Selling, general and administrative962 900 7%
Other operating expense (income), net(3)(14)(80)%
Total costs and expenses3,022 2,916 4%
Income from operations955 731 31%
Interest income271%
Interest expense(59)(59)
Other income (expense), net15 (1)
Income before taxes917 673 36%
Provision for income taxes92 61 52%
Net income$825 $612 35%
Net income per share:
Basic$4.56 $3.31 
Diluted$4.52 $3.27 
Weighted average shares used in computing net income per share:
Basic181 185 
Diluted182 187 
2


KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except par value and share data)
(Unaudited)
PRELIMINARY
July 31,October 31,
20222021
ASSETS
Current assets:
Cash and cash equivalents$1,847 $2,052 
Accounts receivable, net882 735 
Inventory837 777 
Other current assets395 270 
Total current assets3,961 3,834 
Property, plant and equipment, net668 650 
Operating lease right-of-use assets225 227 
Goodwill1,606 1,628 
Other intangible assets, net216 272 
Long-term investments73 70 
Long-term deferred tax assets661 711 
Other assets442 389 
Total assets$7,852 $7,781 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$328 $287 
Employee compensation and benefits275 355 
Deferred revenue496 478 
Income and other taxes payable63 74 
Operating lease liabilities40 41 
Other accrued liabilities110 74 
Total current liabilities1,312 1,309 
Long-term debt1,792 1,791 
Retirement and post-retirement benefits131 167 
Long-term deferred revenue200 187 
Long-term operating lease liabilities192 191 
Other long-term liabilities305 352 
Total liabilities3,932 3,997 
Stockholders' Equity:
Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding— — 
Common stock; $0.01 par value; 1 billion shares authorized; 199 million shares at July 31, 2022 and 197 million shares at October 31, 2021 issued
Treasury stock at cost; 19.7 million shares at July 31, 2022 and 15.1 million shares at October 31, 2021(2,148)(1,425)
Additional paid-in-capital2,311 2,219 
Retained earnings4,255 3,430 
Accumulated other comprehensive loss(500)(442)
Total stockholders' equity3,920 3,784 
Total liabilities and equity$7,852 $7,781 
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KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
PRELIMINARY
Nine months ended
July 31,
20222021
Cash flows from operating activities:
Net income$825 $612 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation88 87 
Amortization80 149 
Share-based compensation102 83 
Deferred tax expense (benefit)19 (49)
Excess and obsolete inventory-related charges18 20 
Loss on settlement of pension plan— 16 
Other non-cash expense (income), net30 
Changes in assets and liabilities:
Accounts receivable(166)(64)
Inventory(88)(30)
Accounts payable41 10 
Employee compensation and benefits(81)(12)
Deferred revenue69 86 
Income taxes payable(59)
Retirement and post-retirement benefits(21)
Other assets and liabilities(111)26 
Net cash provided by operating activities(a)
746 954 
Cash flows from investing activities:
Investments in property, plant and equipment(127)(101)
Acquisition of businesses and intangible assets, net of cash acquired(33)(136)
Purchase of investments(30)— 
Other investing activities— (1)
Net cash used in investing activities(190)(238)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans63 59 
Payment of taxes related to net share settlement of equity awards(74)(53)
Treasury stock repurchases(723)(320)
Payment of acquisition-related contingent consideration— (2)
Other financing activities— (1)
Net cash used in financing activities(734)(317)
Effect of exchange rate movements(27)
Net increase (decrease) in cash, cash equivalents, and restricted cash(205)403 
Cash, cash equivalents and restricted cash at beginning of period2,068 1,767 
Cash, cash equivalents and restricted cash at end of period$1,863 $2,170 


(a) Cash payments included in operating activities:
Interest payments$37 $37 
Income tax paid, net $157 $100 
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KEYSIGHT TECHNOLOGIES, INC.
SEGMENT RESULTS INFORMATION
(In millions, except where noted)
(Unaudited)
PRELIMINARY
Communications Solutions GroupYoY
Q3'22Q3'21% Chg
Revenue$970 $875 11%
Gross margin, %66.5 %65.7 %
Income from operations$288 $224 
Operating margin, %30 %26 %
Electronic Industrial Solutions GroupYoY
Q3'22Q3'21% Chg
Revenue$406 $371 10%
Gross margin, %61.3 %63.7 %
Income from operations$127 $115 
Operating margin, %31 %31 %

Segment revenue and income from operations are consistent with the respective non-GAAP financial measures as discussed on last page.




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KEYSIGHT TECHNOLOGIES, INC.
RECONCILIATION OF CORE REVENUE
(In millions)
(Unaudited)
PRELIMINARY
Year-over-year compare
Q3'22Q3'21Percent Inc/(Dec)
Revenue$1,376 $1,246 10%
Adjustments:
Revenue from acquisitions or divestitures(2)— 
Currency impacts33 — 
Core Revenue$1,407 $1,246 13%


Please refer last page for details on the use of non-GAAP financial measures.

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KEYSIGHT TECHNOLOGIES, INC.
NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATION
(In millions, except per share data)
(Unaudited)
PRELIMINARY
Three months endedNine months ended
July 31,July 31,
2022202120222021
Net IncomeDiluted EPSNet IncomeDiluted EPSNet IncomeDiluted EPSNet IncomeDiluted EPS
GAAP Net income$338 $1.87 $254 $1.36 $825 $4.52 $612 $3.27 
Non-GAAP adjustments:
Amortization of acquisition-related balances26 0.14 33 0.18 78 0.43 147 0.79 
Share-based compensation26 0.14 19 0.10 103 0.56 84 0.45 
Acquisition and integration costs0.01 0.01 0.04 0.04 
Restructuring and others13 0.07 0.01 34 0.19 27 0.15 
Adjustment for taxes(a)
(42)(0.22)(24)(0.12)(45)(0.25)(52)(0.28)
Non-GAAP Net income$363 $2.01 $286 $1.54 $1,002 $5.49 $826 $4.42 
Weighted average shares outstanding - diluted181 186 182187

(a) For both the three and nine months ended July 31, 2022 and 2021, management uses a non-GAAP effective tax rate of 12%.

Please refer last page for details on the use of non-GAAP financial measures.




















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KEYSIGHT TECHNOLOGIES, INC.
Non-GAAP Financial Measures
Management uses both GAAP and non-GAAP financial measures to analyze and assess the overall performance of the business, to make operating decisions and to forecast and plan for future periods. We believe that our investors benefit from seeing our results “through the eyes of management” in addition to seeing our GAAP results. This information enhances investors’ understanding of the continuing performance of our business and facilitates comparison of performance to our historical and future periods.
Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies, including industry peer companies, limiting the usefulness of these measures for comparative purposes.
These non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The discussion below presents information about each of the non-GAAP financial measures and the company’s reasons for including or excluding certain categories of income or expenses from our non-GAAP results. In future periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, adjustments for these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual.            
Non-GAAP Revenue generally relates to an acquisition and includes recognition of acquired deferred revenue that was written down to fair value in purchase accounting. Management believes that excluding fair value purchase accounting adjustments more closely correlates with the ordinary and ongoing course of the acquired company’s operations and facilitates analysis of revenue growth and business trends. We may not have non-GAAP revenue in all periods.
Core Revenue is GAAP/non-GAAP revenue (as applicable) excluding the impact of foreign currency changes and revenue associated with material acquisitions or divestitures completed within the last twelve months. We exclude the impact of foreign currency changes as currency rates can fluctuate based on factors that are not within our control and can obscure revenue growth trends. As the nature, size and number of acquisitions can vary significantly from period to period and as compared to our peers, we exclude revenue associated with recently acquired businesses to facilitate comparisons of revenue growth and analysis of underlying business trends.
Free cash flow includes net cash provided by operating activities adjusted for investments in property, plant & equipment.
Non-GAAP Income from Operations, Non-GAAP Net Income and Non-GAAP Diluted EPS may include the following types of adjustments:
Acquisition-related Items: We exclude the impact of certain items recorded in connection with business combinations from our non-GAAP financial measures that are either non-cash or not normal, recurring operating expenses due to their nature, variability of amounts and lack of predictability as to occurrence or timing. These amounts may include non-cash items such as the amortization of acquired intangible assets and amortization of items associated with fair value purchase accounting adjustments, including recognition of acquired deferred revenue (see Non-GAAP Revenue above). We also exclude other acquisition and integration costs associated with business acquisitions that are not normal recurring operating expenses, including amortization of amounts paid to redeem acquiree's unvested stock-based compensation awards, and legal, accounting and due diligence costs. We exclude these charges to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.
Share-based Compensation Expense: We exclude share-based compensation expense from our non-GAAP financial measures because share-based compensation expense can vary significantly from period to period based on the company’s share price, as well as the timing, size and nature of equity awards granted. Management believes the exclusion of this expense facilitates the ability of investors to compare the company’s operating results with those of other companies, many of which also exclude share-based compensation expense in determining their non-GAAP financial measures.
Gain on insurance settlement: We exclude certain other significant income or expense items that may occur occasionally and are not normal and recurring from our non-GAAP financial measures. This represents cost and recoveries related to the 2017 Northern California wildfires.
Restructuring and others: We exclude incremental expenses associated with restructuring initiatives, usually aimed at material changes in the business or cost structure. Such costs may include employee separation costs, asset impairments, facility-related costs, contract termination fees, and costs to move operations from one location to another. These activities can vary significantly from period to period based on the timing, size and nature of restructuring plans; therefore, we do not consider such costs to be normal, recurring operating expenses.
We also exclude “others”, not normal, recurring, cash operating income/expenses from our non-GAAP financial measures. Such items are evaluated on an individual basis, based on both quantitative and qualitative factors and generally represent items that we do not anticipate occurring as part of our normal business. While not all-inclusive, examples of such items would include net unrealized gains on equity investments still held, significant non-recurring events like realized gains or losses associated with our employee benefit plans, costs and recoveries related to unusual events, gain on sale of assets/divestitures, etc. We believe that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of the company’s current operating performance or comparisons to our operating performance in other periods.
Estimated Tax Rate: We utilize a consistent methodology for long-term projected non-GAAP tax rate. When projecting this long-term rate, we exclude any tax benefits or expenses that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. Additionally, we evaluate our current long-term projections, current tax structure and other factors, such as existing tax positions in various jurisdictions and key tax holidays in major jurisdictions where Keysight operates. This tax rate could change in the future for a variety of reasons, including but not limited to significant changes in geographic earnings mix including acquisition activity, or fundamental tax law changes in major jurisdictions where Keysight operates. The above reasons also limit our ability to reasonably estimate the future GAAP tax rate and provide a reconciliation of the expected non-GAAP earnings per share for the fourth quarter and fiscal 2022 to the GAAP equivalent.
Management recognizes these items can have a material impact on our cash flows and/or our net income. Our GAAP financial statements, including our Condensed Consolidated Statement of Cash Flows, portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded costs are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company’s profit and loss from any and all events, management does (and investors should) rely upon the Condensed Consolidated Statement of Operations prepared in accordance with GAAP. The non-GAAP measures focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company’s performance.
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