SanDisk 2014 Annual Report Download - page 67

ANNEX A
Non-GAAP Financial Measures
Reconciliation Operating Income and Margin
Fiscal years ended
December 28, December 29, December 30, January 1, January 2,
2014 2013 2012 2012 2011
(In millions)
GAAP Operating Income .............. $ 1,558 $ 1,562 $ 696 $ 1,530 $ 1,462
Share-based compensation ............. 155 100 78 63 78
Amortization of acquisition-related intangible
assets .......................... 127 61 52 44 14
Inventory step-up ................... 8 — — — —
Impairment of acquisition-related intangible
assets .......................... — 83 1 — —
Non-GAAP Operating Income ......... $ 1,848 $ 1,806 $ 827 $ 1,637 $ 1,553
Fiscal years ended
December 28, December 29, December 30, January 1, January 2,
2014 2013 2012 2012 2011
GAAP Operating Margin .............. 24% 25% 14% 27% 30%
Share-based compensation ............. 2% 2% 2% 1% 2%
Amortization of acquisition-related intangible
assets .......................... 2% 1% 1% 1% —%
Inventory step-up ................... —% —% —% —% —%
Impairment of acquisition-related intangible
assets .......................... —% 1% —% —% —%
Non-GAAP Operating Margin . . . . . . . . . 28% 29% 16% 29% 32%
The Company believes these non-GAAP measures provide investors the ability to better assess and
understand operating performance, especially when comparing results with previous periods or forecasting
performance for future periods, primarily because management typically monitors the business excluding
these items. The Company also uses these non-GAAP measures to establish operational goals and for
measuring performance for compensation purposes. However, analysis of results on a non-GAAP basis
should be used as a complement to, and in conjunction with, and not as a replacement for, data presented
in accordance with GAAP.
The Company believes that the presentation of non-GAAP measures, including non-GAAP net
income and non-GAAP diluted net income per share, provides important supplemental information to
management and investors about financial and business trends relating to the Company’s operating results.
The Company believes that the use of these non-GAAP financial measures also provides consistency and
comparability with the Company’s past financial reports.
The Company has historically used these non-GAAP measures when evaluating operating
performance because the Company believes that the inclusion or exclusion of the items described below
provides an additional measure of the Company’s core operating results and facilitates comparisons of the
Company’s core operating performance against prior periods and the Company’s business model
objectives. The Company has chosen to provide this information to investors to enable them to perform
additional analyses of past, present and future operating performance and as a supplemental means to
A-1
Proxy Statement