SanDisk 2013 Annual Report Download - page 74

Internally, these non-GAAP measures are significant measures used by us for purposes of:
• evaluating our core operating performance;
• establishing internal budgets;
• setting and determining variable compensation levels;
• calculating return on investment for development programs and growth initiatives;
• comparing performance with internal forecasts and targeted business models;
• strategic planning; and
• benchmarking performance externally against our competitors.
We exclude the following items from our non-GAAP measures:
•Share-based Compensation Expense. These expenses consist primarily of expenses for share-based
compensation, such as stock options, RSUs and our employee stock purchase plan. Although share-
based compensation is an important aspect of the compensation of our employees, we exclude
share-based compensation expenses from our non-GAAP measures primarily because they are
non-cash expenses. Further, share-based compensation expenses are based on valuations with many
underlying assumptions not in our control that vary over time and may include modifications that
may not occur on a predictable cycle, neither of which is necessarily indicative of our ongoing
business performance. In addition, the share-based compensation expenses recorded are often
unrelated to the actual compensation an employee realizes. We believe that it is useful to exclude
share-based compensation expense for investors to better understand the long-term performance of
our core operations and to facilitate comparison of our results to our prior periods and to our peer
companies.
•Amortization and Impairment of Acquisition-related Intangible Assets. We incur amortization, and,
occasionally, impair intangible assets in connection with acquisitions. Since we do not acquire
businesses on a predictable cycle, we exclude these items in order to provide investors and others
with a consistent basis for comparison across accounting periods.
From time-to-time in the future, there may be other items that we may exclude if we believe that
doing so is consistent with the goal of providing useful information to investors and management.
Limitations of Relying on Non-GAAP Financial Measures. We have incurred and will incur in the future,
many of the costs that we exclude from the non-GAAP measures, including share-based compensation
expense, impairment of goodwill and acquisition-related intangible assets, amortization of acquisition-
related intangible assets and other acquisition-related costs, non-cash economic interest expense associated
with our convertible debt and income tax adjustments. These measures should be considered in addition to
results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to,
GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other
companies.
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