Verigy (VRGY)

Net Cash Provided By Operating Activities

        In fiscal year 2008, we generated $97 million in cash from operating activities, compared to $121 million in fiscal year 2007. The $97 million cash generation during fiscal year 2008 was a result of $28 million of net income, a $35 million reduction in receivables as a result of customer payments, and a change in net assets of $17 million. Also during fiscal year 2008, we had non-cash charges of $15 million from depreciation and amortization expense, $30 million from inventory write-downs, $16 million of net share-based compensation costs, a $31 million impairment loss on marketable securities and cost-based equity investments, and a $2 million loss on disposal of property, plant and equipment. These impacts were partially offset by an increase of $33 million in inventory primarily due the purchase of raw materials relating to our service and support business and the introduction of our new V6000 which was released in the first quarter of fiscal year 2009, and decreases of $9 million in income tax and other taxes payable, $12 million in employee compensation and benefits, $12 million in payables, and $11 million in deferred revenue.

        Net cash provided by operating activities was $121 million in fiscal year 2007, compared to $164 million in fiscal year 2006. The $121 million cash generated during fiscal year 2007 was primarily due to $97 million of net income, a $9 million decrease in our receivables, a $10 million increase in employee compensation and benefits, and a $7 million increase in deferred revenue. These were partially offset by a decrease of $31 million in payables to Agilent, a decrease in income taxes and other taxes payable of $9 million and a decrease in other current and long-term assets and liabilities of approximately $5 million. Also, in fiscal year 2007, we had non-cash charges of $13 million from depreciation and amortization, $12 million of inventory write-downs, and $12 million of net share-based compensation costs.

Net Cash Provided By Operating Activities

        In fiscal year 2008, we generated $97 million in cash from operating activities, compared to $121 million in fiscal year
2007. The $97 million cash generation during fiscal year 2008 was a result of $28 million of net income, a $35 million reduction in receivables as a result of customer payments,
and a change in net assets of $17 million. Also during fiscal year 2008, we had non-cash charges of $15 million from depreciation and amortization expense, $30 million
from inventory write-downs, $16 million of net share-based compensation costs, a $31 million impairment loss on marketable securities and cost-based equity investments, and a
$2 million loss on disposal of property, plant and equipment. These impacts were partially offset by an increase of $33 million in inventory primarily due the purchase of raw materials
relating to our service and support business and the introduction of our new V6000 which was released in the first quarter of fiscal year 2009, and decreases of $9 million in income tax and
other taxes payable, $12 million in employee compensation and benefits, $12 million in payables, and $11 million in deferred revenue.

        Net
cash provided by operating activities was $121 million in fiscal year 2007, compared to $164 million in fiscal year 2006. The $121 million cash generated during
fiscal year 2007 was primarily due to $97 million of net income, a $9 million decrease in our receivables, a $10 million increase in employee compensation and benefits, and a
$7 million increase in deferred revenue. These were partially offset by a decrease of $31 million in payables to Agilent, a decrease in income taxes and other taxes payable of
$9 million and a decrease in other current and long-term assets and liabilities of approximately $5 million. Also, in fiscal year 2007, we had non-cash charges of
$13 million from depreciation and amortization, $12 million of inventory write-downs, and $12 million of net share-based compensation costs.

Net Cash Provided by Operating Activities

In the nine months ended July 31, 2008, we generated $93 million in cash from operating activities, compared to cash provided by operating activities of $86 million in the nine months ended July 31, 2007.  The $93 million cash generation during the nine months ended July 31, 2008 was a result of $64 million of net income, $22 million reduction in receivables, and a $14 million net increase in net assets.  Also, during the nine months ended July 31, 2008, we had non-cash charges of $11 million from depreciation and amortization expense, $8 million from inventory write-offs, $11 million of net share-based compensation costs, a $2 million impairment loss on marketable securities and a $1 million loss on disposal of property, plant and equipment.  These impacts were partially offset by an increase of $23 million in inventory, and decreases of $8 million in income and other taxes payable, $7 million in employee compensation and benefits, $1 million in payables, and $1 million in deferred revenue.

In the nine months ended July 31, 2007, we generated $86 million in cash from operating activities.  The $86 million cash generation during the nine months ended July 31, 2007, was the result of $65 million of net income, $38 million reduction in receivables and a $3 million decrease in inventory.  These impacts were partially offset by decreases of $24 million in trade payables, $11 million in income and other taxes payable and $13 million net increase in net assets.  Also, in the nine months ended July 31, 2007, we had non-cash charges of $9 million in depreciation and amortization expense, $8 million from inventory write-offs, $8 million of net SFAS No. 123(R) share-based compensation costs, $2 million in impairment of cost-based investments as well as $1 million in loss on disposal of fixed assets.

Net Cash Provided by Operating Activities

In the six months ended April 30, 2008, we generated $67 million in cash from operating activities, compared to cash provided by operating activities of $50 million in the six months ended April 30, 2007.  The $67 million cash generation during the six months ended April 30, 2008 was a result of $46 million of net income, an $18 million reduction in receivables and $9 million increase in other current and long-term assets and liabilities.  Also, during the six months ended April 30, 2008, we had non-cash charges of $8 million from depreciation and amortization expense, $5 million from gross inventory write-offs, $8 million of share-based compensation costs, and $1.5 million from an other-than-temporary impairment on marketable securities.  The effect of these charges was partially offset by an increase of $15 million in inventory and decreases of $9 million in income and other taxes payable, $4 million in deferred revenue, and $1 million in employee compensation and benefits.

In the six months ended April 30, 2007, we generated $50 million in cash from operating activities.  The $50 million cash generation during the six months ended April 30, 2007 was a result of $35 million of net income, $45 million reduction in receivables and a $7 million decrease in inventory.  Also, in the six months ended April 30, 2007, we had non-cash charges of $5 million from inventory write-offs, $7 million of share-based compensation costs, and $6 million in depreciation and amortization expense.  These impacts were partially offset by decreases of $31 million in payables, $14 million in income and other taxes payable, $5 million in deferred revenue and $5 million in other current and long-term assets and liabilities.