Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nasdaq  >  National Instruments Corp    NATI

NATIONAL INSTRUMENTS CORP (NATI)
Mes dernières consult.
Most popular
  Report  
Delayed Quote. Delayed  - 02/22 09:59:58 pm
50.31 USD   +0.20%
02/20NATIONAL INSTRU : NI and Samsung Collaborate on 5G New Radio Interop..
BU
02/09NATIONAL INSTRU : Ex-dividend day for
FA
01/30NATIONAL INSTRU : reports 4Q loss
AQ
SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets
The feature you requested does not exist. However, we suggest the following feature:

NATIONAL INSTRUMENTS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

share with twitter share with LinkedIn share with facebook
share via e-mail
0
02/22/2018 | 06:37pm CET
The following "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Any
statements contained herein regarding our future financial
performance, operations, or other activities (including, without limitation,
statements to the effect that we "believe," "expect," "plan,", ''intend
to","may," "will," "project," "anticipate", "continue," or "estimate" or other
variations thereof or comparable terminology or the negative thereof) should be
considered forward-looking statements. Actual results could differ materially
from those projected in the forward-looking statements as a result of a number
of important factors including those set forth under the heading "Risk Factors"
beginning on page 13, and elsewhere in this Form 10-K. Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. You should not place undue reliance on these forward-looking
statements. We disclaim any obligation to update information contained in any
forward-looking statement.
Overview
We design, manufacture and sell tools to engineers and scientists that
accelerate productivity, innovation and discovery. Our platform-based approach
to engineering provides an integrated software and hardware platform that speeds
the development of systems needing measurement and control. We believe our
long-term vision and focus on technology supports the success of our customers,
employees, partners, suppliers and stockholders. We sell to a large number of
customers in a wide variety of industries. We have been profitable in every year
since 1990. No single customer accounted for more than 3% of our sales in each
of the years ended 2017, 2016, and 2015.
The key strategies that we focus on in running our business are the following:
Expanding our broad customer base
We strive to increase our already broad customer base and to grow our large
order business by serving a large market on many computer platforms, through a
global marketing and distribution network. We also seek to acquire new
technologies and expertise from time to time to open new opportunities for our
existing product portfolio.
Maintaining a high level of customer satisfaction
To maintain a high level of customer satisfaction we strive to offer innovative,
modular and integrated products through a global sales and support network. We
strive to maintain a high degree of backwards compatibility across different
platforms to preserve the customer's investment in our products. In this time of
intense global competition, we believe it is crucial that we continue to offer
products with high quality and reliability, and that our products provide
cost-effective solutions for our customers.
Leveraging external and internal technology
Our product strategy is to provide superior products by leveraging generally
available technology, supporting open architectures on multiple platforms and by
leveraging our core technologies such as custom ASICs across multiple products.
We sell into test and measurement and industrial/embedded applications in a
broad range of industries and are subject to the economic and industry forces
that drive those markets. It has been our experience that the performance of
these industries and our performance are impacted by general trends in
industrial production for the global economy and by the specific performance of
certain vertical markets that are intensive consumers of measurement
technologies. Examples of these markets are advanced research, automotive,
automated test equipment, consumer electronics, commercial aerospace, computers
and electronics, continuous process manufacturing, education,
government/defense, medical research/pharmaceutical, power/energy,
semiconductors, and telecommunications.
Leveraging a worldwide sales, distribution and manufacturing network
We distribute and sell our software and hardware products primarily through a
direct sales organization. We also use independent distributors, OEMs, VARs,
system integrators and consultants to market and sell our products. We have
sales offices in the U.S. and sales offices and distributors in key
international markets. Sales outside of the Americas accounted for approximately
61% of our revenues in each of 2017 and 2016 and 59% of our revenues in 2015.
The vast majority of our foreign sales are denominated in the customers' local
currency, which exposes us to the effects of changes in foreign currency
exchange rates. We expect that a significant portion of our total revenues will
continue to be derived from international sales. (See Note 13 - Segment and
geographic information of Notes to Consolidated Financial Statements for details
concerning the geographic breakdown of our net sales and long-lived assets).


                                       27

--------------------------------------------------------------------------------

Table of Contents

We manufacture substantially all of our product volume at our facilities in
Debrecen, Hungary and Penang, Malaysia. In 2017, our site in Malaysia produced
approximately 35% of our global production and our site in Hungary produced 65%
of our global production. Our product manufacturing operations can be divided
into four areas: electronic circuit card and module assembly; chassis and cable
assembly; technical manuals and product support documentation; and software
duplication. Most of our electronic circuit card assemblies, modules and chassis
are manufactured in house, although contractors are used from time to time. The
majority of our electronic cable assemblies are produced by contractors;
however, we do manufacture some on an exception basis. Our software duplication,
technical manuals and product support documentation are primarily produced by
contractors.
Delivering high quality, reliable products
We believe that our long-term growth and success depend on delivering high
quality software and hardware products on a timely basis. Accordingly, we focus
significant efforts on research and development. We focus our research and
development efforts on enhancing existing products and developing new products
that incorporate appropriate features and functionality to be competitive with
respect to technology, price and performance. Our success also depends on our
ability to obtain and maintain patents and other proprietary rights related to
technologies used in our products. We have engaged in litigation and where
necessary, will likely engage in future litigation to protect our intellectual
property rights. In monitoring and policing our intellectual property rights, we
have been and may be required to spend significant resources.
Our operating results fluctuate from period to period due to changes in global
economic conditions and a number of other factors. As a result, we believe our
historical results of operations should not be relied upon as indications of
future performance. There can be no assurance that our net sales will grow or
that we will remain profitable in future periods.
Current business outlook
Many of the industries we serve have historically been cyclical and have
experienced periodic downturns. In assessing our business, we consider the
trends in the Global Purchasing Managers' Index ("PMI"), global industrial
production as well as industry reports on the specific vertical industries that
we target. In the three month period ended December 31, 2017, the average of the
PMI was 54.0 and the average of the new order element of the PMI was 55.1, both
indicating accelerating expansion. For January 2018, the most recent PMI reading
was 54.4, slightly above the most recent quarterly average and consistent with
the December 2017 reading of 54.5. For January 2018, the new order element of
the PMI was 55.4, also above the most recent quarterly average. During the three
month period ended December 31, 2017, the PMI in the U.S. and the Eurozone
maintained readings above 50. We are unable to predict whether the industrial
economy, as measured by the PMI, will remain above the neutral reading of 50,
strengthen or contract during 2018.
During 2017, we saw broad based improvement in the industrial economy. We saw
revenue growth across most of our product lines and across most geographies
where we do business. During 2017, we saw a minor impact on our results of
operations from currency fluctuations. During early 2018, we are seeing
significant appreciation of the value of the local currency against the U.S.
dollar in many of the currency markets where we do business, particularly the
Euro and Chinese yuan. In addition, the broad based strength of the overall
industrial economy and the PMI are encouraging. We are optimistic about our
long-term position in the industry through the sustained differentiation we
deliver to our customers through our platform-based approach.
We delivered record revenue for 2017 while improving our operating profitability
compared to 2016. During 2017, we took steps to reduce our overall employee
headcount by approximately 2% in an effort to improve efficiencies and rebalance
our resources on higher return activities. We incurred $12 million in severance
and other restructuring-related charges, net of tax.



                                       28

--------------------------------------------------------------------------------

Table of Contents

Results of Operations
The following table sets forth, for the periods indicated, the percentage of net
sales represented by geographic region and by certain items reflected in our
Consolidated Statements of Income:
                                      Years ended December 31,
                                     2017        2016       2015
Net sales:
Americas                             39.1  %    39.2  %    40.5  %
EMEIA                                31.7       31.7       33.4
APAC                                 29.2       29.1       26.1
Consolidated net sales              100.0      100.0      100.0
Cost of sales                        25.5       25.5       25.9
Gross profit                         74.5       74.5       74.1
Operating expenses:
Sales and marketing                  37.1       37.6       36.9
Research and development             18.0       19.2       18.4
General and administrative            8.2        8.0        7.6
Total operating expenses             63.3       64.8       62.9
Operating income                     11.3        9.7       11.2
Other income (expense):
Interest income                       0.2        0.1        0.1
Net foreign exchange gain (loss)      0.1       (0.4 )     (0.6 )
Other expense, net                   (0.1 )     (0.1 )        -
Income before income taxes           11.4        9.3       10.7
Provision for income taxes            7.4        2.6        2.9
Net income                            4.1  %     6.7  %     7.8  %


 Figures may not sum due to rounding.
Results of Operations for the years ended December 31, 2017, 2016, and 2015
Net Sales.  The following table sets forth our net sales for the years ended
December 31, 2017, 2016, and 2015 along with the changes between the
corresponding periods.
                                            Years ended December 31,

($ in millions)                 2017      Change      2016      Change      2015

Product sales                $ 1,173.5     5.1%    $ 1,116.7     0.3%    $ 1,113.6
Software maintenance sales       115.9     3.9%        111.5    (0.4)%       111.9
Total net sales              $ 1,289.4     5.0%    $ 1,228.2     0.2%    $ 1,225.5


In 2017, product and software maintenance sales increased compared to 2016. The
increase in product sales during 2017 is attributable to increased sales volume,
particularly for large orders greater than $20,000, across all geographic
regions. The increase in our large orders is discussed in more detail below. The
increase in software maintenance sales during 2017 can primarily be attributed
to increases in the annual renewal rate for our software maintenance
arrangements. In 2016 product and software maintenance sales were relatively
flat compared to 2015.
We do not typically maintain a large amount of order backlog as orders typically
translate to sales quickly. As such, any weakness in orders typically has a
pronounced impact on our net sales in the short term.


                                       29

--------------------------------------------------------------------------------

Table of Contents

Large orders, defined as orders with a value greater than $100,000, increased by
15% year over year during 2017 compared to a year over year increase of 7% in
2016. Large orders were 25%, 23%, and 23% of our total orders for the years
ended December 31, 2017, 2016, and 2015, respectively. Larger orders are more
volatile, are subject to greater discount variability and may contract at a
faster pace during an economic downturn. A significant factor in the continued
expansion of our large orders in the twelve months ended December 31, 2017,
compared to the comparable period in 2016 was strong demand for our automated
test products, 5G prototyping solutions and semiconductor test systems.
During 2017, we received new orders totaling $29 million from our largest
customer and recognized $28 million in revenue related to orders from this
customer. During 2016, we received $32 million in new orders from our largest
customer and recognized net revenue of $34 million related to orders from this
customer.
The following table sets forth our net sales by geographic region for the years
ended December 31, 2017, 2016, and 2015 along with the changes between the
corresponding periods and the region's percentage of total net sales.
?
                                             Years ended December 31,

($ in millions)                   2017      Change     2016      Change     2015

Americas                        $ 504.6      4.7%    $ 482.1     (3.0)%   $ 496.8
Percentage of total net sales        39 %                 39 %              

41 %

EMEIA                           $ 408.6      4.8%    $ 389.8     (4.7)%   $ 

409.1

Percentage of total net sales        32 %                 32 %              

33 %

APAC                            $ 376.1      5.6%    $ 356.3     11.5%    $ 

319.6

Percentage of total net sales        29 %                 29 %              

26 %


We expect sales outside of the Americas to continue to represent a significant
portion of our revenue. We intend to continue to expand our international
operations by increasing our presence in existing markets, adding a presence in
some new geographical markets and continuing the use of distributors to sell our
products in some countries.
Almost all of the sales made by our direct sales offices in the Americas
(excluding the U.S.), EMEIA, and APAC are denominated in local currencies, and
accordingly, the U.S. dollar equivalent of these sales is affected by changes in
foreign currency exchange rates. In order to provide a framework for assessing
how our underlying business performed excluding the effects of foreign currency
fluctuations between periods, we compare the percentage change in our results
from period to period using constant currency calculations. To calculate the
change in constant currency, current and comparative prior period results for
entities reporting in currencies other than U.S. Dollars are converted into U.S.
Dollars at constant exchange rates (i.e. the average rates in effect during the
years ended December 31, 2016 and 2015, respectively). The following tables
present this information, along with the impact of changes in foreign currency
exchange rates on sales denominated in local currencies, for the years ended
December 31, 2017 and 2016, respectively.
?
            Year Ended December                                     Impact 

of changes in foreign Year Ended

                 31, 2016                    Change                currency exchange rates on net     December 31, 2017
                                      in Constant Dollars                      sales
($ In              GAAP                                                                                     GAAP
millions)        Net Sales            Dollars       Percentage        Dollars            Percentage       Net Sales

Americas    $           482.1     $      22.2          4.6%      $         0.3              0.1%      $          504.6
EMEIA                   389.8            20.0          5.1%               (1.2 )           (0.3)%                408.6
APAC                    356.3            20.7          5.8%               (0.9 )           (0.2)%                376.1
Total net
sales       $         1,228.2     $      62.9          5.1%      $        (1.8 )           (0.1)%     $        1,289.4

Figures may not sum due to rounding.

                                       30

--------------------------------------------------------------------------------

Table of Contents

            Year Ended December                                   Impact of 

changes in foreign Year Ended

                 31, 2015                   Change               currency exchange rates on net     December 31, 2016
                                     in Constant Dollars                     sales
($ In              GAAP                                                                                   GAAP
millions)        Net Sales           Dollars      Percentage        Dollars            Percentage       Net Sales

Americas    $           496.8     $     (11.2 )     (2.3)%     $        (3.5 )           (0.7)%     $          482.1
EMEIA                   409.1            10.2        2.5%              (29.5 )           (7.2)%                389.8
APAC                    319.6            44.6       14.0%               (7.9 )           (2.5)%                356.3
Total net
sales       $         1,225.5     $      43.6        3.6%      $       (40.9 )           (3.3)%     $        1,228.2


To help protect against changes in the U.S. dollar equivalent value caused by
fluctuations in foreign currency exchange rates of forecasted foreign currency
cash flows resulting from international sales, we hedge portions of our
forecasted revenue denominated in foreign currencies with average rate forward
contracts. (See Note 4 - Derivative instruments and hedging activities of Notes
to Consolidated Financial Statements for further discussion regarding our cash
flow hedging program and its related impact on our consolidated sales for 2017
and 2016).
Gross Profit. The following table sets forth our gross profit and gross profit
as a percentage of net sales for the years ended December 31, 2017, 2016, and
2015 along with the percentage changes in gross profit for the corresponding
periods. We continue to focus on cost control and cost reduction measures
throughout our manufacturing cycle.
                                                         Years Ended December 31,
($ in millions)                               2017      Change     2016      Change     2015

Gross Profit                                $ 961.1      5.0%    $ 915.1      0.7%    $ 908.5
Gross Profit as a percentage of net sales      74.5 %               74.5 %               74.1 %



During the years ended December 31, 2017 and 2016, the change in exchange rates
had the effect of decreasing our cost of sales by $0.8 million and $3.0 million,
respectively. To help protect against changes in our cost of sales caused by a
fluctuation in foreign currency exchange rates of forecasted foreign currency
cash flows, we hedge portions of our forecasted costs of sales denominated in
foreign currencies with average rate forward contracts. During the year ended
December 31, 2017 and 2016, these hedges had the effect of increasing our cost
of sales by $1.2 million and $1.9 million, respectively. (See Note 4 -
Derivative instruments and hedging activities of Notes to Consolidated Financial
Statements for further discussion regarding our cash flow hedging program and
its related impacted on our consolidated sales for 2017 and 2016).


                                       31

--------------------------------------------------------------------------------

Table of Contents

Operating Expenses. The following table sets forth our operating expenses for
the years ended December 31, 2017, 2016, and 2015 along with the percentage
changes between the corresponding periods and the line item as a percentage of
total net sales.
?
                                                Years Ended December 31,
($ in thousands)                   2017       Change      2016       Change      2015

Sales and marketing             $ 477,921       4%     $ 461,236       2%     $ 452,262
Percentage of total net sales          37 %                   38 %          

37 %

Research and development $ 231,761 (2)% $ 235,706 5%

   $ 225,131
Percentage of total net sales          18 %                   19 %          

18 %

General and Administrative $ 105,602 7% $ 98,390 5%

   $  93,935
Percentage of total net sales           8 %                    8 %          

8 %

Total operating expenses $ 815,284 3% $ 795,332 3%

   $ 771,328
Percentage of total net sales          63 %                   65 %          

63 %


The increase in our operating expenses in 2017 was primarily the result of $34
million in higher personnel-related expenses due to increased variable
compensation in regions with strong sales growth, accrual of an expected payment
under our annual company profit sharing program, an increase in our employer
matching contribution for our defined contribution retirement plan, and $16
million in severance and other related costs associated with our restructuring
initiative. Building and equipment costs also increased by $4 million compared
to 2016. These increases were partially offset by a decrease in software
development costs of $10 million due to an increase in capitalization of
software development costs compared to the year ending December 31, 2016 and a
$6 million decrease in marketing and outside services. Additionally, the year
over year change in exchange rates had the effect of decreasing our operating
expenses by $1.4 million.
The increase in our operating expenses in 2016 was due to higher personnel
related expenses of $32.5 million due to increased variable compensation in
regions with strong local currency growth as well as raises for eligible
employees, and increased building and outside services expenses of $4.2 million.
This was partially offset by a decrease of $9.2 million due to the net impact of
changes in foreign currency exchange rates and a decrease in travel expenses of
$2.3 million related to cost-savings initiatives implemented in the second half
of 2016.
The increase in our capitalized software is consistent with our focus on new
product development to support future growth in our business. We capitalize
software development costs when technological feasibility has been established
and amortize those costs as a component of cost of sales once the corresponding
product is available for general release to customers. (See Note 1 - Operations
and summary of significant accounting policies and Note 7 - Intangible assets of
Notes to Consolidated Financial Statements for further discussion related to the
capitalization and amortization of software development costs.)
We believe that our long-term growth and success depends on developing high
quality software and hardware products on a timely basis. We are focused on
leveraging recent investments in research and development and in our field sales
force and taking actions to help ensure that those resources are focused in
areas and initiatives that will contribute to future growth in our business. The
increase in sales and marketing expenses in 2017 was primarily driven by $11
million in severance and other costs related to our restructuring initiative as
well as an increase in commissions due to higher sales volume compared to 2016.
Operating Income.  For the years ended December 31, 2017, 2016, and 2015,
operating income was $146 million, $120 million and $137 million, respectively,
an increase of 22% in 2017, following a decrease of 13% in 2016. As a percentage
of net sales, operating income was 11%, 10% and 11%, respectively, over the
three year period. The changes in operating income in absolute dollars and as a
percent of sales in 2016 and 2017 are attributable to the factors discussed in
Net Sales, Gross Profit and Operating Expenses above.
Interest Income.    Interest income was $2.3 million, $1.1 million and $1.4
million for the years ended December 31, 2017, 2016, and 2015, respectively, an
increase of 103% in 2017, following a decrease of 20% in 2016. We are seeing
improving yields for high quality investment alternatives that comply with our
corporate investment policy. We expect yields in these types of investments to
increase moderately in 2018.


                                       32

--------------------------------------------------------------------------------

Table of Contents

Net Foreign Exchange Gain/(Loss).    Net foreign exchange gain/(loss) was $0.9
million, $(4.6) million, and $(7.1) million for the years ended December 31,
2017, 2016, and 2015, respectively. These results are attributable to movements
in the foreign currency exchange rates between the U.S. dollar and foreign
currencies in subsidiaries for which our functional currency is not the U.S.
dollar. During 2017, there was a moderately stronger U.S. dollar during the
first nine months of the year and a moderately weaker U.S. dollar during the
last three months of the year when compared year over year to 2016, resulting in
a modest decrease in our U.S. dollar equivalent revenues and expenses in 2017,
when compared year over year to 2016. During 2016 and 2015, there was sharp
volatility in the exchange rates between the U.S. dollar and most of the major
currencies in the markets in which we do business and such volatility was
characterized by a broad and sharp strengthening of the U.S. dollar against most
currencies. In 2015 net foreign exchange loss included a $3.1 million loss on
Euro cash holdings that were subsequently used to fund our acquisition of M2 and
its wholly-owned subsidiary, Micropross. We cannot predict the direction or
degree of future volatility in these exchange rates. In the past, we have noted
that significant volatility in foreign currency exchange rates in the markets in
which we do business has had a significant impact on the revaluation of our
foreign currency denominated firm commitments, on our ability to forecast our
U.S. dollar equivalent revenues and expenses and on the effectiveness of our
hedging programs. In the past, these dynamics have also adversely affected our
revenue growth in international markets and may pose similar challenges in the
future. We recognize the local currency as the functional currency in virtually
all of our international subsidiaries.
We utilize foreign currency forward contracts to hedge our foreign denominated
net foreign currency balance sheet positions to help protect against the change
in value caused by a fluctuation in foreign currency exchange rates. We
typically hedge up to 90% of our outstanding foreign denominated net receivable
or payable positions and typically limit the duration of these foreign currency
forward contracts to approximately 90 days. The gain or loss on these
derivatives as well as the offsetting gain or loss on the hedged item
attributable to the hedged risk is recognized in current earnings under the line
item "Net foreign exchange loss". Our hedging strategy decreased our foreign
exchange gains by $(5.9) million and decreased our foreign exchange losses by
$1.9 million, and $4.3 million in 2017, 2016, and 2015, respectively. (See Note
4 - Derivative instruments and hedging activities of Notes to Consolidated
Financial Statements for a further description of our derivative instruments and
hedging activities).

                                       33

--------------------------------------------------------------------------------

  Table of Contents


Provision for Income Taxes.  For the years ended December 31, 2017, 2016, and
2015, our provision for income taxes reflected an effective tax rate of 64%, 28%
and 27%, respectively. The factors that caused our effective tax rates to change
year-over-year are detailed in the table below:
                                                                      Years 

ended

                                                                      December 31,
Effective tax rate for 2016                                                   28  %
Increased profits in foreign jurisdictions with reduced income                (5 )%
tax rates
Change in enhanced deduction for certain research and                         (1 )%
development expenses
Change in intercompany prepaid tax asset                                      (3 )%
Change in state income taxes, net of federal benefit                          (1 )%
Change in employee share-based compensation                                   (1 )%
Remeasurement of U.S. deferred tax balance                                   (10 )%
Transition tax on deferred foreign income                                     54  %
Foreign tax on undistributed earnings                                          3  %
Effective tax rate for 2017                                                   64  %



                                                                      Years ended
                                                                      December 31,
Effective tax rate for 2015                                                   27  %
Increased profits in foreign jurisdictions with reduced income                (6 )
tax rates
Change in valuation allowance                                               

1

Change in enhanced deduction for certain research and                       

5

development expenses
Change in intercompany prepaid tax asset                                    

-

Change in amortization of intangible assets                                    1
Other                                                                          -
Effective tax rate for 2016                                                   28  %


The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduces the
US federal corporate tax rate from 35% to 21%, requires companies to pay a
one-time transition tax on earnings of certain foreign subsidiaries that were
previously tax deferred, and creates new taxes on certain foreign sourced
earnings. As of December 31, 2017, we have not completed our accounting for the
tax effects of enactment of the Act. However, we have made a reasonable estimate
of the effects on our existing deferred tax balances and the one-time transition
tax. We have recognized a provisional amount of $69.9 million, which is included
as a component of income tax expense from continuing operations. Our estimates
may be affected as we gain a more thorough understanding of the tax law. We will
continue to make and refine our calculations as additional analysis is
completed.
For additional discussion about our income taxes including the effect of the Tax
Cuts and Jobs Act, components of income before income taxes, our provision for
income taxes charged to operations, components of our deferred tax assets and
liabilities, a reconciliation of income taxes at the U.S. federal statutory rate
to our effective tax rate, and other tax matters, see Note 9 - Income taxes of
Notes to Consolidated Financial Statements.


                                       34

--------------------------------------------------------------------------------

Table of Contents

Quarterly results of operations
The following quarterly results have been derived from our unaudited
consolidated financial statements that, in the opinion of management, reflect
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of such quarterly information. The operating results for any
quarter are not necessarily indicative of the results to be expected for any
future period. You should read the following tables presenting our quarterly
results of operations in conjunction with the consolidated financial statements
and related notes contained elsewhere in this Annual Report on Form 10-K. The
unaudited quarterly financial data for each of the eight quarters in the two
years ended December 31, 2017 and December 31, 2016 are as follows:
                                                             Three months ended
                                                    (in thousands, except per share data)
                                 March 31, 2017       June 30, 2017      September 30,      December 31, 2017
                                                                              2017
Net sales                      $        300,106     $       318,609     $      320,921     $         349,751
Gross profit                            223,582             236,149            237,170               264,160
Operating income                         22,318              28,631             37,515                57,312
Net income (loss)                        18,148              25,155             33,389               (24,282 )
Basic earnings per share       $           0.14     $          0.19     $         0.26     $           (0.19 )
Weighted average shares
outstanding - basic                     129,438             130,197            130,660               130,886
Diluted earnings per share     $           0.14     $          0.19     $         0.25     $           (0.18 )
Weighted average shares
outstanding - diluted                   130,108             131,117            131,617               132,113
Dividends declared per share   $           0.21     $          0.21     $         0.21     $            0.21


?
?
                                                              Three months ended
                                                     (in thousands, except per share data)
                                 March 31, 2016       June 30, 2016      September 30,       December 31, 2016
                                                                              2016
Net sales                      $        287,177     $       306,105     $      306,365     $           328,532
Gross profit                            211,031             228,597            229,630                 245,800
Operating income                         13,844              27,267             29,364                  49,251
Net income                                9,298              19,800             24,487                  29,149
Basic earnings per share       $           0.07     $          0.15     $         0.19     $              0.23
Weighted average shares
outstanding - basic                     127,595             128,282            128,815                 129,108
Diluted earnings per share     $           0.07     $          0.15     $         0.19     $              0.23
Weighted average shares
outstanding - diluted                   128,103             128,746            129,047                 129,503
Dividends declared per share   $           0.20     $          0.20     $         0.20     $              0.20



                                       35

--------------------------------------------------------------------------------

Table of Contents

Other operational information
We believe that the following additional unaudited operational metrics assist
investors in assessing our operational performance relative to others in our
industry and to our historical results.  The following tables provide details
with respect to the amount of GAAP charges related to stock-based compensation,
amortization of acquisition intangibles, acquisition related transaction costs,
restructuring charges, foreign exchange loss on acquisitions, taxes levied on
the transfer of acquired intellectual property, and acquisition-related fair
value adjustments that were recorded in the line items indicated below (in
thousands).
                                  Three Months Ended December 31,              Years Ended December 31,
(In thousands)                      2017                   2016                2017                 2016
Stock-based compensation
Cost of sales                $           714         $           568     $        2,628       $        2,210
Sales and marketing                    3,035                   2,636             11,559               11,057
Research and development               2,462                   2,131              9,014                8,876
General and administrative             1,585                     859              5,944                3,623
Provision for income taxes            (2,934 )                (1,125 )          (10,322 )             (7,322 )
Total                        $         4,862         $         5,069     $       18,823       $       18,444


                                  Three Months Ended December 31,               Years Ended December 31,
(In thousands)                      2017                    2016                2017                 2016
Amortization of
acquisition intangibles
Cost of sales               $          1,444         $          1,725     $        6,092       $        9,346
Sales and marketing                      529                      497              2,009                2,638
Research and development                 204                      273              1,017                1,088
Provision for income
taxes                                   (491 )                    855             (2,148 )              2,162
Total                       $          1,686         $          3,350     $        6,970       $       15,234


?
?
                                 Three Months Ended December 31,               Years Ended December 31,
(In thousands)                      2017                   2016                2017                 2016
Acquisition transaction
costs, restructuring
charges, and other
Cost of sales               $            222         $            74     $        1,210       $          327
Sales and marketing                    2,972                      42             10,990                  183
Research and development               1,693                     170              3,509                  818
General and                            1,097                      50              1,900                  367

administrative

Net foreign exchange gain                  -                       -                  -                   94
(loss)
Other expense, net                         -                       -                  -                2,475
Provision for income
taxes                                 (1,754 )                   (94 )           (5,407 )             (1,452 )
Total                       $          4,230         $           242     $       12,202       $        2,812


(1) Foreign exchange losses on acquisitions were $0 and $94 for the years ended
December 31, 2017 and 2016, respectively.
(2) Taxes levied on the transfer of acquired intellectual property were $0 and
$2,475 for the years ended December 31, 2017 and 2016, respectively.

                                       36

--------------------------------------------------------------------------------

Table of Contents

Liquidity and Capital Resources
Overview
At December 31, 2017, we had $412 million in cash, cash equivalents and
short-term investments. Our cash and cash equivalent balances are held in
numerous financial institutions throughout the world, including substantial
amounts held outside of the U.S., however, the majority of our short-term
investments that are located outside of the U.S. are denominated in the U.S.
dollar with the exception of $5 million U.S. dollar equivalent of corporate
bonds that are denominated in Euro. Our short-term investments do not include
any foreign sovereign debt. The following table presents the geographic
distribution of our cash, cash equivalents, and short-term investments as of
December 31, 2017 (in millions):
                                                  Domestic International Total
Cash and Cash Equivalents                           $63        $227      $290
                                                    22%         78%
Short-term Investments                               $-        $122      $122
                                                     -%        100%

Cash, Cash Equivalents and Short-term Investments $63 $349 $412

                                                    15%         85%


We utilize a variety of tax planning and financing strategies with the objective
of having our worldwide cash available in the locations in which it is needed.
The following table presents our working capital, cash and cash equivalents and
short-term investments:
?
                                                                                         Increase/
(In thousands)                         December 31, 2017       December 31, 2016        (Decrease)

Working capital                      $           624,835     $           574,572     $        50,263
Cash and cash equivalents (1)                    290,164                 285,283               4,881
Short-term investments (1)                       121,888                  73,117              48,771
Total cash, cash equivalents and
short-term investments               $           412,052     $           

358,400 $ 53,652

(1) Included in working capital

Our principal sources of liquidity include cash, cash equivalents, and
marketable securities, as well as the cash flows generated from our operations.
We also have additional borrowing capacity under our Loan Agreement. Proceeds of
loans made under the Loan Agreement may be used for working capital and other
general corporate purposes.

The primary drivers of the net increase in working capital between December 31, 2016 and December 31, 2017 were:

•      Cash, cash equivalents, and short-term investments increased by $54
       million . Additional analysis of the changes in our cash flows for the
       year ended December 31, 2017 compared to the year ended December 31, 2016
       are discussed below.

• Accounts receivable increased by $20 million. Days sales outstanding

("DSO") remained relatively flat at 68 days at December 31, 2017, compared

       to 66 days at December 31, 2016.


•      Inventory decreased by $9 million to $185 million at December 31, 2017,
       from $194 million at December 31, 2016. Inventory turns were 1.7 at each
       of December 31, 2017 and December 31, 2016.


•      Prepaid expenses and other current assets decreased by $5 million which
       was primarily related to a $6 million decrease in the fair value of our

foreign currency forward exchange contracts and the timing of prepaid

insurance and maintenance.

• Accrued compensation increased by $16 million which can be attributed to

severance costs arising from our restructuring initiative and a future

payment under our company profit sharing plan.

• The current portion of deferred revenue increased by $5 million, primarily

due to the effect of foreign currency translation.

• Other current liabilities decreased by $9 million which was primarily

       related to income tax payments.


•      Other taxes payable decreased by $3 million primarily related to the
       timing of payments for VAT and other indirect taxes.



                                       37

--------------------------------------------------------------------------------

Table of Contents

Analysis of Cash Flow
The following table summarizes the proceeds and (uses) of cash:
                                       ?
(In thousands)                                                December 31,
                                                    2017          2016      

2015

Cash provided by operating activities            $ 224,442     $ 200,199     $ 169,065
Cash used by investing activities                 (122,410 )     (70,503 )     (78,392 )
Cash used by financing activities                 (106,299 )     (91,625 )    (108,113 )
Effect of exchange rate changes on cash              9,148        (3,917 )      (5,461 )
Net change in cash equivalents                       4,881        34,154       (22,901 )
Cash and cash equivalents at beginning of year     285,283       251,129    

274,030

Cash and cash equivalents at end of period $ 290,164 $ 285,283

$ 251,129


Operating Activities Cash provided by operating activities for the year ended
December 31, 2017 increased by $24 million compared to the same period in 2016.
This increase was primarily due to the $26 million increase in our operating
income.

Investing Activities Cash used for investing activities for the year ended
December 31, 2017 increased by $52 million compared to the same period in 2016.
This was primarily attributable to a net purchase of short-term investments of
$48 million compared to a net sale of short-term investments of $9 million
during the same period in 2016, to take advantage of favorable increases in the
yields offered by short-term investments that comply with our investment policy.
Cash outflows related to capitalized software development also increased by $10
million which was offset by a decrease in capital expenditures of $14 million
compared to the same period in 2016.
Financing Activities Cash used by financing activities increased by $15 million
for the year ended December 31, 2017 compared to the same period in 2016. This
was primarily due to a $7 million increase in cash outflows related to the
increase in our quarterly dividend and a $13 million increase in cash outflows
related to net repayments under our Loan Agreement, offset by $6 million
decrease in cash outflows related to 2016 repurchases of our common stock. From
time to time, our Board of Directors has authorized various programs for our
repurchase of shares of our common stock depending on market conditions and
other factors. Under the current program, we did not repurchase any shares
during the year ended December 31, 2017. (See "Note 11 - Authorized shares of
common and preferred stock and stock-based compensation plans" of Notes to
Consolidated Financial Statements for additional discussion about our equity
compensation plans and share repurchase program).
Contractual Cash Obligations.  The following summarizes our contractual cash
obligations as of December 31, 2017:
                                                       Payments due by 

period

(In thousands) Total 2018 2019 2020

     2021         2022        Beyond
Long-term debt     $         -     $       -     $       -     $       -     $      -     $      -     $       -
Tax payable
(1)                     88,603         7,088         7,088         7,088        7,088        7,088        53,163
Capital lease
obligations                  -             -             -             -            -            -             -
Operating
leases                  77,304        20,012        15,696        10,875        7,853        5,298        17,570
Total
contractual
obligations        $   165,907     $  27,100     $  22,784     $  17,963     $ 14,941     $ 12,386     $  70,733
(1) Represents one-time transition tax payable related to known amounts of cash taxes payable in future years as a
result of the Tax Act. For further information, refer to Note 9 - Income Taxes of Notes to Consolidated Financial
Statements


The following summarizes our other commercial commitments as of December 31,
2017:
(In thousands)                   Total       2018       2019     2020     2021     2022     Beyond
Guarantees                     $  2,629    $  2,629    $   -    $   -    $   -    $   -    $     -
Purchase obligations              9,123       9,123        -        -        -        -          -
Total commercial commitments   $ 11,752    $ 11,752    $   -    $   -    $   -    $   -    $     -



                                       38

--------------------------------------------------------------------------------

Table of Contents

We have commitments under non-cancelable operating leases primarily for office
facilities throughout the world. Certain leases require us to pay property
taxes, insurance and routine maintenance, and include escalation clauses. As of
December 31, 2017, we had non-cancelable operating lease obligations of
approximately $77 million compared to $55 million at December 31, 2016. Rent
expense under operating leases was $20 million for each of the years ended
December 31, 2017, 2016, and 2015, respectively.
Purchase obligations primarily represent purchase commitments for customized
inventory and inventory components. As of December 31, 2017, we had
non-cancelable purchase commitments with various suppliers of customized
inventory and inventory components totaling approximately $9.1 million over the
next twelve months. At December 31, 2016, we had non-cancelable purchase
commitments with various suppliers of customized inventory and inventory
components totaling approximately $6.8 million.
At December 31, 2017, we had outstanding guarantees for payment of customs and
foreign grants totaling approximately $2.6 million. At December 31, 2016, we had
outstanding guarantees for payment of customs, foreign grants and potential
customer disputes totaling approximately $3 million.
Loan Agreement.  On May 9, 2013, we entered into a Loan Agreement (the "Loan
Agreement") with Wells Fargo Bank (the "Lender"). On October 29, 2015, we
entered into a First Amendment to Loan Agreement (the "Amendment") with the
Lender, which amended our Loan Agreement to among other things, (i) increase the
unsecured revolving line of credit from $50 million to $125 million, (ii) extend
the maturity date of the line of credit from May 9, 2018 to October 29, 2020,
and (iii) provide us with an option to request increases to the line of credit
of up to an additional $25 million in the aggregate, subject to consent of the
Lender and terms and conditions to be mutually agreed between us and the Lender.
Proceeds of loans made under the Loan Agreement may be used for working capital
and other general corporate purposes. We may prepay the loans under the Loan
Agreement in whole or in part at any time without premium or penalty. Certain of
our existing and future material domestic subsidiaries are required to guaranty
our obligations under the Loan Agreement. We may choose to borrow additional
funds against this line of credit in future periods to have sufficient domestic
cash to fund continued dividends to our stockholders, to fund potential
acquisitions or other domestic general corporate purposes without the need to
repatriate foreign earnings. (See Note 14 - Debt of Notes to Consolidated
Financial Statements for additional details on our revolving line of credit).
Off-Balance Sheet Arrangements.    We do not have any off-balance sheet debt. At
December 31, 2017, we did not have any relationships with any unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance entities, which would have been established for the purpose
of facilitating off-balance sheet arrangements. As such, we are not exposed to
any financing, liquidity, market or credit risk that could arise if we were
engaged in such relationships.
Prospective Capital Needs.    We believe that our existing cash, cash
equivalents and short-term investments, together with cash generated from
operations as well as from the purchase of common stock through our employee
stock purchase plan, and available borrowings under our Loan Agreement will be
sufficient to cover our working capital needs, capital expenditures, investment
requirements, commitments, payment of dividends to our stockholders and
repurchases of our common stock for at least the next 12 months. The enactment
of the Tax Cuts and Jobs Act of 2017 will allow us to repatriate a majority of
our foreign cash for domestic needs without additional taxation and to meet our
capital deployment initiatives. We may also seek to pursue additional financing
or to raise additional funds by selling equity or debt to the public or in
private transactions from time to time. If we elect to raise additional funds,
we may not be able to obtain such funds on a timely basis or on acceptable
terms, if at all. If we raise additional funds by issuing additional equity or
convertible debt securities, the ownership percentages of our existing
stockholders would be reduced. In addition, the equity or debt securities that
we issue may have rights, preferences or privileges senior to those of our
common stock.

                                       39

--------------------------------------------------------------------------------

Table of Contents

Although we believe that we have sufficient capital to fund our operating
activities for at least the next 12 months, our future capital requirements may
vary materially from those now planned. We anticipate that the amount of capital
we will need in the future will depend on many factors, including:
• payment of dividends to our stockholders;


• required levels of research and development and other operating costs;

• our business, product, capital expenditure and research and development

plans, and product and technology roadmaps;

• acquisitions of other businesses, assets, products or technologies;

• the overall levels of sales of our products and gross profit margins;

• the levels of inventory and accounts receivable that we maintain;

• general economic and political uncertainty and specific conditions in

         the markets we address, including any volatility in the industrial
         economy in the various geographic regions in which we do business;

• the inability of certain of our customers who depend on credit to have

access to their traditional sources of credit to finance the purchase of

products from us, which may lead them to reduce their level of purchases

or to seek credit or other accommodations from us;

• capital improvements for facilities;

• repurchases of our common stock;

• our relationships with suppliers and customers; and

• the level of stock purchases under our employee stock purchase plan.

Recently Issued Accounting Pronouncements See Note 1 - Operations and summary of significant accounting policies for discussion regarding recently issued accounting pronouncements.

                                       40

--------------------------------------------------------------------------------

Table of Contents

Critical Accounting Policies
The preparation of our financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues, expenses and
related disclosures of contingent assets and liabilities. We base our estimates
on past experience and other assumptions that we believe are reasonable under
the circumstances, and we evaluate these estimates on an ongoing basis. Our
critical accounting policies are those that affect our financial statements
materially and involve difficult, subjective or complex judgments by management.
Although these estimates are based on management's best knowledge of current
events and actions that may impact the company in the future, actual results may
be materially different from the estimates.
Our critical accounting policies are as follows:
• Revenue recognition


We sell test and measurement solutions that include hardware, software licenses,
and related services. Our sales are generally made under standard sales
arrangements with payment terms ranging from net 30 days in the U.S. to net 30
days and up to net 180 days in some international markets. We offer rights of
return and standard warranties for product defects related to our products. The
rights of return are generally for a period of up to 30 days after the delivery
date. Our standard warranties cover periods ranging from 90 days to three years.
Our standard sales arrangements do not require product acceptance from the
customer.
In recent years, we have made a concentrated effort to increase our revenue
through the pursuit of orders with a value greater than $1.0 million. These
orders often include contract terms that vary substantially from our standard
terms of sale including product acceptance requirements and product performance
evaluations which create uncertainty with respect to the timing of our ability
to recognize revenue from such orders. These orders may also include
most-favored customer pricing, significant discounts, extended payment terms and
volume rebates, all of which also may create uncertainty with respect to the
amount and timing of revenue recognized from such orders.
Sales of application software licenses include post-contract support services.
Other services include customer training, customer support, and extended
warranties.
We recognize revenue when persuasive evidence of an arrangement exists, delivery
has occurred, the price is fixed or determinable, and collectability is
reasonably assured. Delivery is considered to have occurred when title and risk
of loss have transferred to the customer. For most of our hardware and software
sales, title and risk of loss transfer upon shipment. For services, we recognize
revenue when the service is provided, except for extended warranties for which
revenue is recognized ratably over the warranty period.
We apply the separation guidance under U.S. GAAP for contracts with multiple
deliverables. We analyze revenue arrangements with multiple deliverables to
determine whether the deliverables should be divided into more than one unit of
accounting. For contracts with more than one unit of accounting, we allocate the
consideration we receive among the separate units of accounting based on their
relative selling prices, which we determine based on prices of the deliverables
as sold on a stand-alone basis, or if not sold on a stand-alone basis, the
prices we would charge if sold on a stand-alone basis. We recognize revenue for
each deliverable based on the revenue recognition policies described below.
For software arrangements that include multiple elements, including perpetual
software licenses and undelivered items (e.g., software maintenance;
subscriptions/term licenses), we allocate and defer revenue for the undelivered
items based on vendor specific objective evidence ("VSOE") of the fair value of
the undelivered elements, and recognize revenue on the perpetual license using
the residual method. We base VSOE of each element on the price for which the
undelivered element is sold separately. We determine fair value of the
undelivered elements based on historical evidence of our stand-alone sales of
these elements to third parties or from the stated renewal rate for the
undelivered elements. When VSOE does not exist for undelivered items, we
recognize the entire arrangement fee ratably over the applicable performance
period.
A portion of our revenues are generated from the sale of systems that contain
software components that operate together with our hardware platform to provide
the essential functionality of the system. When sold in a multiple element
arrangement, these systems are considered non-software deliverables, so we can
allocate the arrangement fee based upon relative selling price of each element.
When applying the relative selling price method, we determine the selling price
of each element using best estimate of selling price ("BESP"), because VSOE and
third-party evidence ("TPE") are not available.

                                       41

--------------------------------------------------------------------------------

Table of Contents

The revenues allocated to the software-related elements are recognized based on
software industry specific revenue recognition guidance, as noted above. The
revenues allocated to the non-software related elements are recognized based on
the nature of the element provided. We estimate BESP by considering internal
factors such as historical pricing practices and gross margin objectives, as
well as market conditions such as competitor pricing strategies, customer
demands and geography, and regularly review these assumptions.
The application of revenue recognition standards requires judgment, including
whether a software arrangement includes multiple elements, and if so, whether
VSOE of fair value exists for those elements. Changes to the elements in a
software arrangement, the ability to identify VSOE for those elements, the fair
value of the respective elements, and changes to a product's estimated life
cycle could materially impact the amount of our earned and unearned revenue.
Judgment is also required to assess whether future releases of certain software
represent new products or upgrades and enhancements to existing products.
Recent Updates to Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers
(Topic 606), which became effective for us beginning January 1, 2018. For
additional information on the new revenue recognition guidance and the expected
impact of adoption, see Note 1 - Operations and summary of significant
accounting policies of Notes to Consolidated Financial Statements.
• Estimating allowances for sales returns


The preparation of financial statements requires that we make estimates and
assumptions of potential future product returns related to current period
product revenue. We analyze historical returns, current economic trends, and
changes in customer demand and acceptance of our products when evaluating the
adequacy of our sales returns allowance. Significant judgments and estimates
must be made and used in connection with establishing the sales returns
allowance in any accounting period. A provision for estimated sales returns is
made by reducing recorded revenue by the amount of the allowance. Accounts
receivable is reported net of the allowance for sales returns. Our allowance for
sales returns was $2.1 million and $1.8 million at December 31, 2017 and 2016,
respectively. Material differences may result in the amount and timing of our
revenue for any period if we made different judgments or utilized different
estimates or if our actual results varied materially from our estimates.
•            Estimating allowances, specifically the allowance for 

doubtful

             accounts and the adjustment for excess and obsolete 

inventories


In addition to estimating an allowance for sales returns, we must also make
estimates about the uncollectability of our accounts receivable. We specifically
analyze accounts receivable and analyze historical bad debts, customer
concentrations, customer credit-worthiness and current economic trends when
evaluating the adequacy of our allowance for doubtful accounts. Our allowance
for doubtful accounts was $2.9 million and $1.9 million at December 31, 2017 and
2016, respectively. We also write down our inventory for estimated obsolescence
or unmarketable inventory equal to the difference between the cost of inventory
and estimated net realizable value based on assumptions of future demand and
market conditions. Our allowance for excess and obsolete inventories was $16.4
million and $12.6 million at December 31, 2017 and 2016, respectively.
Significant judgments and estimates must be made and used in connection with
establishing these allowances. Material differences may result in the amount and
timing of our bad debt and inventory obsolescence if we made different judgments
or utilized different estimates or if actual results varied materially from our
estimates.
• Accounting for costs of computer software


We capitalize costs related to the development and acquisition of certain
software products. Capitalization of costs begins when technological feasibility
has been established and ends when the product is available for general release
to customers. Technological feasibility for our products is established when the
product is available for beta release. Judgment is required in determining when
technological feasibility of a product is established. Amortization is computed
on an individual product basis for those products available for market and has
been recognized based on the product's estimated economic life, generally three
years. At each balance sheet date, the unamortized costs are reviewed by
management and reduced to net realized value when necessary. As of December 31,
2017 and 2016, unamortized capitalized software development costs were $86
million and $65 million, respectively.



                                       42

--------------------------------------------------------------------------------

Table of Contents

• Valuation of long-lived and intangible assets


We assess the impairment of identifiable intangibles, long-lived assets and
related goodwill whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. In accordance with FASB ASC 350,
Intangibles - Goodwill and Other (FASB ASC 350), goodwill is tested for
impairment on an annual basis, and between annual tests if indicators of
potential impairment exist, using a fair-value-based approach based on the
market capitalization of the reporting unit. Our annual impairment test was
performed as of November 30, 2017. No impairment of goodwill and long-lived and
intangible assets was identified during 2017 and 2016. Goodwill is deductible
for tax purposes in certain jurisdictions. We have one operating segment and one
reporting unit. Factors considered important which could trigger an impairment
review include the following:
•significant underperformance relative to expected historical or projected
future operating results;
•significant changes in the manner of our use of the acquired assets or the
strategy for our overall business;
•significant negative industry or economic trends; and,
•our market capitalization relative to net book value.
When it is determined that the carrying value of intangibles, long-lived assets
and related goodwill may not be recoverable based upon the existence of one or
more of the above indicators of impairment, the measurement of any impairment is
determined and the carrying value is reduced as appropriate. As of December 31,
2017 and 2016, we had goodwill of approximately $267 million and $253 million,
respectively.
• Accounting for income taxes


We account for income taxes under the asset and liability method. Deferred tax
assets and liabilities are recognized for the expected tax consequences of
temporary differences between the tax bases of assets and liabilities and their
reported amounts. Valuation allowances are established when necessary to reduce
deferred tax assets to amounts which are more likely than not to be realized. We
had a valuation allowance of $78 million and $62 million at December 31,
2017 and December 31, 2016, respectively. A majority of the valuation allowance
is related to the deferred tax assets of National Instruments Hungary Kft. ("NI
Hungary"). The decrease in the valuation allowance from 2015 to 2016 was
primarily due to the revaluation of NI Hungary's gross deferred tax assets
following the reduction in the Hungarian corporate income tax rate
from 19% to 9%.
Judgment is required in assessing the future tax consequences of events that
have been recognized in our financial statements or tax returns. Variations in
the actual outcome of these future tax consequences could materially impact our
financial position or our results of operations. In estimating future tax
consequences, all expected future events are considered other than enactments of
changes in tax laws or rates. We account for uncertainty in income taxes
recognized in our financial statements using prescribed recognition thresholds
and measurement attributes for financial statement disclosure of tax positions
taken or expected to be taken on our tax returns. Our continuing policy is to
recognize interest and penalties related to income tax matters in income tax
expense.
Our earnings in Hungary are subject to a statutory tax rate of 9%. In addition,
our research and development activities in Hungary continue to benefit from a
tax law in Hungary that provides for an enhanced deduction for qualified
research and development expenses. The tax position of our Hungarian operations
resulted in income tax benefits of $16.1 million and $4 million for the years
ended December 31, 2017 and 2016, respectively.  Earnings from our operations in
Malaysia are free of tax under a tax holiday effective January 1, 2013. This tax
holiday expires in 2027. If we fail to satisfy the conditions of the tax
holiday, this tax benefit may be terminated early. The tax holiday resulted in
income tax benefits of $5.5 million and $3.3 million for the years ended
December 31, 2017 and 2016, respective1y. The impact of the tax holiday on a per
share basis for the years ended December 31, 2017 and 2016 was a benefit of
$0.04 and $0.03 per share, respectively.
No other taxing jurisdictions had a significant impact on our effective tax
rate. We have not entered into any advanced pricing or other agreements with the
Internal Revenue Service with regard to any foreign jurisdictions.
Our effective tax rate was lower than the U.S. federal statutory rate during
2015 and 2016 primarily due to earnings taxed at lower rates in foreign
jurisdictions. The Tax Cuts and Jobs Act, which was enacted in December 2017,
had a substantial impact on our income tax expense for the year ended
December 31, 2017. For additional discussion about our income taxes including
the effect of the Tax Cuts and Jobs Act, components of income before income
taxes, our provision for income taxes charged to operations, components of our
deferred tax assets and liabilities, a reconciliation of income taxes at the
U.S. federal statutory rate of 35% to our effective tax rate and other tax
matters, see Note 9 - Income taxes of Notes to Consolidated Financial
Statements.


                                       43

--------------------------------------------------------------------------------

  Table of Contents



• Loss contingencies


We accrue for probable losses from contingencies including legal defense costs,
on an undiscounted basis, when such costs are considered probable of being
incurred and are reasonably estimable. We periodically evaluate available
information, both internal and external, relative to such contingencies and
adjust this accrual as necessary. Disclosure of a contingency is required if
there is at least a reasonable possibility that a loss has been incurred. In
determining whether a loss should be accrued we evaluate, among other factors,
the degree of probability of an unfavorable outcome and our ability to make a
reasonable estimate of the amount of loss. Changes in these factors could
materially impact our financial position or our results of operation.
• Accounting for costs related to exit or disposal activities


Costs related to exit or disposal activities incurred as part of our recent
restructuring activities may consist of voluntary or involuntary
severance-related charges, asset-related charges and other costs related to exit
activities. We recognize voluntary termination benefits when the employee
accepts the offered benefit arrangement. We recognize involuntary
severance-related charges depending on whether the termination benefits are
provided under an ongoing benefit arrangement or under a one-time benefit
arrangement. If the former, we recognize the charges once they are probable and
the amounts are estimable. If the latter, we recognize the charges once the
benefits have been communicated to employees.
 Restructuring activities associated with assets would be recorded as an
adjustment to the basis of the asset, not as a liability. When we commit to a
plan to abandon a long-lived asset before the end of its previously estimated
useful life, we accelerate the recognition of depreciation to reflect the use of
the asset over its shortened useful life.


                                       44

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on NATIONAL INSTRUMENTS CORP
02/22NATIONAL INSTRUMENTS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITI..
AQ
02/20NATIONAL INSTRUMENTS : NI and Samsung Collaborate on 5G New Radio Interoperabili..
BU
02/17NATIONAL INSTRUMENTS : supply of the National Instruments corporate program for ..
AQ
02/13NATIONAL INSTRUMENTS CORP : Free Post Earnings Research Report: National Instrum..
AC
02/09NATIONAL INSTRUMENTS CORP : Ex-dividend day for
FA
01/30NATIONAL INSTRUMENTS : reports 4Q loss
AQ
01/30NATIONAL INSTRUMENTS CORP : Results of Operations and Financial Condition (form ..
AQ
01/30NATIONAL INSTRUMENTS : NI Declares Quarterly Dividend
BU
01/30NATIONAL INSTRUMENTS : Reports Record Quarterly and Annual Revenue and Operating..
BU
01/30NATIONAL INSTRUMENTS : NI and Shanghai University Collaborate on a 5G Ultra-Reli..
BU
More news
News from SeekingAlpha
02/20FORTIVE : I Missed The Party 
01/31National Instruments +7.2% after Q4 beats, in-line guidance 
01/30National Instruments Corporation's (NATI) CEO Alex Davern on Q4 2017 Results .. 
01/30National Instruments Corporation 2017 Q4 - Results - Earnings Call Slides 
01/30National Instruments declares $0.23 dividend 
Financials ($)
Sales 2018 1 386 M
EBIT 2018 184 M
Net income 2018 159 M
Finance 2018 151 M
Yield 2018 1,75%
P/E ratio 2018 42,19
P/E ratio 2019 33,93
EV / Sales 2018 4,63x
EV / Sales 2019 4,22x
Capitalization 6 565 M
Chart NATIONAL INSTRUMENTS CORP
Duration : Period :
National Instruments Corp Technical Analysis Chart | NATI | US6365181022 | 4-Traders
Technical analysis trends NATIONAL INSTRUMENTS CORP
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 3
Average target price 47,7 $
Spread / Average Target -5,1%
EPS Revisions
Managers
NameTitle
Alexander M. Davern President & Chief Executive Officer
James J. Truchard Chairman
Karen Rapp Chief Financial Officer
Arleene Porterfield Vice President-Global Information Technology
Scott Arthur Rust Senior Vice President-Research & Development
Sector and Competitors
1st jan.Capitalization (M$)
NATIONAL INSTRUMENTS CORP18.64%6 565
MICROSOFT CORPORATION8.39%704 454
RED HAT20.17%25 386
HEXAGON19.59%20 806
CITRIX SYSTEMS4.30%13 769
SYNOPSYS5.30%13 155