We use thesenon-GAAP financial measures in making operating decisions because we believe the measures provide meaningful supplemental information regarding our core operational performance and give us a better understanding of how we should invest in research and development, as well as fund infrastructure and product and market strategies. We use these measures to help us make budgeting decisions, for example, among product development expenses and research and development, sales and marketing, and general and administrative expenses. In addition, thesenon-GAAP financial measures facilitate our internal comparisons to our historical operating results, forecasted targets and comparisons to competitors’ operating results.
As described above, we exclude the following items from one or more of ournon-GAAP measures:
(i) Amortization of acquired intangible assets. We incur expenses from amortization of acquired intangible assets, which include contract rights, core/developed technology, trademarks, trade names, customer relationships, covenants not to compete, and other intangibles related to acquisitions. We amortize the intangible assets over their economic lives. We exclude this item because the expense isnon-cash in nature and because we believe thenon-GAAP financial measures excluding this item provide meaningful supplemental information regarding (a) our core operational performance and liquidity, and (b) our ability to invest in research and development and fund acquisitions and capital expenditures.
(ii) Stock compensation impact. While stock compensation expense constitutes an ongoing and recurring expense, such expense is excluded fromnon-GAAP results because it is not an expense that typically requires or will require cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations. In addition, excluding this item from variousnon-GAAP measures facilitates comparisons to our competitors’ operating results.
(iii) Acquisition-related costs. In connection with our business combinations, we incur significant expenses which we would not have otherwise incurred as part of our business operations. These expenses include compensation expenses, professional fees and other direct expenses, and concurrent restructuring activities, including employee severance and other exit costs, as well as changes to the fair value of contingent consideration related to the acquired company. We exclude such expenses, which we would not have otherwise incurred, as they are related to acquisitions and have no direct correlation to the operation of our business.
(iv) Restructuring charges. We initiate restructuring activities in order to align our costs in connection with both our operating plans and our business strategies based on then-current economic conditions. The amounts of the restructuring activities and frequency of occurrence may vary from time to time. Restructuring costs generally include severance and other termination benefits related to voluntary retirement programs and involuntary headcount reductions as well as facilities closures. Such restructuring costs include elimination of operational redundancy and permanent reductions in workforce and facilities closures and, therefore, are not considered by us to be a part of the core operation of our business and not used by us when assessing the core profitability and performance of our business operations. Furthermore, excluding this item from variousnon-GAAP measures facilitates comparisons to our competitors’ and our past operating results.
(v)Legal matters. From time to time we are party to legal proceedings. Legal proceedings could result in an expense or benefit due to settlements, final judgments, or accruals for loss contingencies. We exclude these types of expenses or benefits because we do not believe they are reflective of the core operation of our business.
(vi)-(vii)Impact of U.S. Tax Reform.On December 22, 2017, the Tax Cut and Jobs Act was enacted into law, and includes numerous provisions that affect our business, including aone-time transition tax on deemed repatriation of foreign earnings and a reduction of the U.S. federal statutory tax rate from 35% to 21%, effective January 1, 2018. In the first quarter of fiscal year 2018, these changes resulted in a $73 million tax expense for the deemed repatriation, as well as a $46 million tax expense for the write-down of certain deferred tax assets as a result of the statutory rate change. We treat these items as separate from our normalized annualnon-GAAP tax rate, as they are unusual and infrequent events that do not have a direct correlation to the operation of our business.
