Amortization of Purchased Intangible Assets and Other.
Amortization of
purchased intangible assets and other in the three months ended March 31, 2019, decreased by $5.2 million, or 17.9% to $23.6 million from $28.8 million in the three months ended March 31, 2018. The decrease in amortization
of purchased intangible assets and other was primarily attributable to a completion of amortization of previously purchased intangible assets, partially offset by an increase in amortization of intangible assets due to acquisitions completed in
fiscal year 2018.
Operating Income
. Operating income increased by $18.3 million, or 13.9%, in the three months ended
March 31, 2019, to $150.2 million, or 14.7% of revenue, from $131.8 million, or 13.3% of revenue, in the three months ended March 31, 2018. The increase in operating income was attributable primarily to revenue and cost of
service growth during the three months ended March 31, 2019. Negative foreign exchange impacts on our revenue were partially offset by the negative foreign exchange impacts on our operating expense, resulting in a negative impact on our
operating income.
Interest and Other Expense, Net.
Interest and other expense, net, changed from a net loss of
$0.2 million in the three months ended March 31, 2018 to a net loss of $1.9 million in the three months ended March 31, 2019. The increase in interest and other expense, net, was primarily attributable to foreign exchange
impacts.
Income Taxes
. Income taxes for the three months ended March 31, 2019 were $24.0 million
on
pre-tax
income of $148.3 million, resulting in an effective tax rate of 16.2%, compared to 22.7% in the three months ended March 31, 2018. Our effective tax rate may fluctuate between periods as a
result of discrete items that may affect a particular period. Please see Note 9 to our consolidated financial statements.
Net
Income
. Net income increased by $22.6 million, or 22.2%, to $124.3 million in the three months ended March 31, 2019, from $101.7 million in the three months ended March 31, 2018. The increase in net income during the
three months ended March 31, 2019 was primarily attributable to the increase in Operating Income and to decrease in income taxes.
Diluted Earnings Per Share.
Diluted earnings per share increased by $0.20, or 28.0%, to $0.90 in the three months ended
March 31, 2019, from $0.70 in the three months ended March 31, 2018. The increase in diluted earnings per share was primarily attributable to the increase in net income, as well as to the decrease in the diluted weighted average number of
shares outstanding which resulted from share repurchases. Please see also Note 10 to our consolidated financial statements.
Liquidity and Capital
Resources
Cash, Cash Equivalents and Short-Term Interest-Bearing Investments.
Cash, cash equivalents and short-term
interest-bearing investments, totaled $449.7 million as of March 31, 2019, compared to $519.2 million as of September 30, 2018. The decrease was mainly attributable to $219.2 million repurchase of our ordinary shares,
$69.8 million of cash dividend payment, $57.9 million for capital expenditures, net, $8.3 million acquisition payment and $4.8 million payment to
non-controlling
interests, partially offset
by $278.3 million in positive cash flow from operations and $11.5 million of proceeds from stock option exercises. Net cash provided by operating activities amounted to $278.3 million and $278.3 million in the six months ended
March 31, 2019 and 2018, respectively.
Our normalized free cash flow for the six months ended March 31, 2019 was
$280.7 million, which is calculated as net cash provided by operating activities for the period less $57.9 million for capital expenditures, net and excluding $55.0 million of payments related to the settlement of the legal dispute in
the U.S. District Court in Oregon, $10.9 million of payments for the
non-recurring
charges for
re-alignment
actions in North-America and $5.6 million of the
capital expenditures associated with the multiyear development of our new campus in Israel, (which is net of proceeds of $9.7 million relating to the refund of betterment levy).
Our policy is to retain sufficient cash balances in order to support our growth. We believe that our current cash balances, cash generated
from operations, our current lines of credit and our ability to access capital markets will provide sufficient resources to meet our operational needs and to fund share repurchases and the payment of cash dividends for at least the next twelve
months.
As a general long-term guideline, we expect to retain a portion of our free cash flow (calculated as cash flow from operations
less net capital expenditures and other) to support the growth of our business, including possible mergers and acquisitions, with the majority returned to our shareholders through share repurchases and dividends. In fiscal year 2019, we plan to
return to shareholders the majority of our normalized free cash flow subject to factors such as mergers and acquisitions, financial markets and prevailing industry conditions, through our ongoing share repurchase and dividend program. While having
this plan in mind, our actual share repurchase activity and payment of future dividends, if any, may vary quarterly or annually and will be based on several factors including our financial performance, outlook and liquidity, the size of possible
mergers and acquisitions activity, financial market conditions and prevailing industry conditions.
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