Citrix 2014 Annual Report Download - page 116

Annual Report 2014 Citrix Systems, Inc.
Pursuant to the requirements of Regulation G, the Company has
provided a reconciliation of each non-GAAP nancial measure used
in this 2014 Annual Report to the most directly comparable GAAP
nancial measure. These measures differ from GAAP in that they
exclude amortization primarily related to acquired intangible assets
and debt discount, stock-based compensation expenses, charges
associated with the Company’s restructuring program, signicant
litigation charges and the related tax effect of those items. The
Company’s basis for these adjustments is described below.
Management uses these non-GAAP measures for internal reporting
and forecasting purposes, when publicly providing its business
outlook, to evaluate the Company’s performance and to evaluate and
compensate the Company’s executives. The Company has provided
these non-GAAP nancial measures in addition to GAAP nancial
results because it believes that these non-GAAP nancial measures
provide useful information to certain investors and nancial analysts
for comparison across accounting periods not inuenced by certain
non-cash items that are not used by management when evaluating
the Company’s historical and prospective nancial performance.
In addition, the Company has historically provided this or similar
information and understands that some investors and nancial
analysts nd this information helpful in analyzing the Company’s
operating margins, operating expenses and net income and
comparing the Company’s nancial performance to that of its peer
companies and competitors.
Management typically excludes the amounts described above when
evaluating the Company’s operating performance and believes that
the resulting non-GAAP measures are useful to investors and nancial
analysts in assessing the Company’s operating performance due to
the following factors:
• The Company does not acquire businesses on a predictable cycle.
The Company, therefore, believes that the presentation of
non-GAAP measures that adjust for the impact of amortization
and certain stock-based compensation expenses and the related
tax effects that are primarily related to acquisitions, provide
investors and nancial analysts with a consistent basis for
comparison across accounting periods and, therefore, are useful to
investors and nancial analysts in helping them to better
understand the Company’s operating results and underlying
operational trends.
• Amortization costs and the related tax effects are xed at the time
of an acquisition, are then amortized over a period of several years
after the acquisition and generally cannot be changed or inuenced
by management after the acquisition.
• Although stock-based compensation is an important aspect of
the compensation of the Company’s employees and executives,
stock-based compensation expense is generally xed at the time
of grant, then amortized over a period of several years after
the grant of the stock-based instrument, and generally cannot
be changed or inuenced by management after the grant.
• Under GAAP, certain convertible debt instruments that may be
settled in cash on conversion are required to be accounted for as
separate liability (debt) and equity (conversion option) components
in a manner that reects the issuer’s non-convertible debt
borrowing rate. The difference between the imputed interest
expense and the coupon interest expense, net of the interest
amount capitalized, is excluded from management’s assessment of
the company’s operating performance because management
believes that the exclusion of these charges will better help
investors and nancial analysts understand the Company’s
operating results and underlying operational trends.
• The charges incurred in conjunction with the Company’s
restructuring program, which relate to reductions in headcount
and the consolidation of leased facilities, are not anticipated to
be ongoing costs; and, thus, are outside of the normal operations
of the Company’s business. The Company, therefore, believes that
the exclusion of these charges will better help investors and
nancial analysts understand the Company’s operating results and
underlying operational trends as compared to prior periods.
• Charges or benets related to signicant litigation are not
anticipated to be ongoing costs; and, thus, are outside of the normal
operations of the Company’s business. These charges or benets
are recorded in the period when it is probable a liability had been
incurred and the amount of loss can be reasonably estimated even
though the subject matter of the underlying dispute may relate to
multiple or different periods. As such, the Company believes that
these expenses do not accurately reect the underlying
performance of continuing operations for the period in which
they are incurred.
These non-GAAP nancial measures are not prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”) and may differ from the non-GAAP information used by
other companies. There are signicant limitations associated with
the use of non-GAAP nancial measures. The additional non-
GAAP nancial information presented here should be considered
in conjunction with, and not as a substitute for or superior to, the
nancial information presented in accordance with GAAP (such as
net income and earnings per share) and should not be considered
measures of the Company’s liquidity. Furthermore, the Company
in the future may exclude amortization related to newly acquired
intangible assets and debt discount, additional charges related to its
restructuring program, signicant litigation charges and the related
tax effects from nancial measures that it releases, and the Company
expects to continue to incur stock-based compensation expenses.