As described above, Cisco excludes the following items from one or more of its
non-GAAP
measures when applicable:
Share-based compensation expense.
These expenses consist
primarily of expenses for employee restricted stock and restricted stock units, employee stock options, and employee stock purchase rights, including such expenses associated with acquisitions. Cisco excludes share-based compensation expense from
its
non-GAAP
measures primarily because they are
non-cash
expenses and Cisco believes that it is useful to investors to understand the impact of share-based compensation
to its results of operations.
Amortization of acquisition-related intangible assets
. Cisco incurs amortization of intangible
assets (which may include impairment charges from the write-downs of purchased intangible assets) in connection with acquisitions. Such intangible assets may include purchased intangible assets with finite lives, capitalized in process research and
development and goodwill. Cisco excludes these items because Cisco does not believe these expenses are reflective of ongoing operating results in the period incurred. These amounts arise from Ciscos prior acquisitions and have no direct
correlation to the operation of Ciscos business.
Acquisition-related/divestiture costs
. In connection with its business
combinations, Cisco incurs compensation expense, changes to the fair value of contingent consideration, as well as professional fees and other direct expenses such as restructuring activities related to the acquired company. In addition, from time
to time Cisco enters into foreign currency transactions related to pending acquisitions, and may incur gains or losses on such transactions. Cisco may also from time to time incur gains or losses from divestitures of a business area as well as
professional fees and other direct expenses associated with such transactions. Cisco excludes such compensation expense, changes to the fair value of contingent consideration, fees, other direct expenses, and gains and losses, as they are related to
acquisitions and divestitures and have no direct correlation to the operation of Ciscos business.
Significant asset impairments
and restructurings
. Cisco from time to time incurs significant asset impairments, restructuring charges, and gains or losses on asset disposals. Cisco excludes these items, when significant, because it does not believe they are reflective of
ongoing business and operating results.
Significant litigation settlements and other contingencies
. Cisco from time to time may
incur charges or benefits related to significant litigation settlements and other contingencies. Cisco excludes these charges or benefits, when significant, because it does not believe they are reflective of ongoing business and operating results.
Significant gains and losses on investments.
Cisco does not actively trade public equity securities and investments in privately
held companies nor does it plan on these investments for funding of ongoing operations, and investments. Cisco excludes gains and losses on these investments, when significant, because it does not believe they are reflective of ongoing business and
operating results.
Income tax effects of the foregoing
. This amount is used to present each of the amounts described above on an
after-tax
basis consistent with the presentation of
non-GAAP
net income.
Significant tax matters.
Cisco may incur tax charges or benefits that are (i) related to prior periods or (ii) not reflective
of its ongoing provision for income taxes. These tax charges or benefits may be the result of events such as changes in tax legislation (including the Tax Cuts and Jobs Act), court decisions, and/or tax settlements. Cisco excludes these charges or
benefits, when significant, because it does not believe they are reflective of ongoing business and operating results.
From time to time
in the future, there may be other items that Cisco may exclude if it believes that doing so is consistent with the goal of providing useful information to investors and management.
Cisco will incur share-based compensation expense, amortization of acquisition-related intangible assets, and acquisition-related costs, in
future periods. Significant asset impairments, restructurings, significant litigation settlements and other contingencies, significant gains and losses on investments, and divestiture costs could occur in future periods. Cisco could also be impacted
by significant tax matters in future periods.