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
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 Cisco’s prior
acquisitions and have no direct correlation to the operation of
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 Cisco’s 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.
Russia-Ukraine War Costs. In
March 2022, in connection with the Russian invasion of Ukraine,
Cisco announced its intention to stop business operations in Russia
and Belarus for the foreseeable future. Cisco has and may incur
charges related to these events. These charges include non-recoverability of certain assets,
special personnel-related charges in order to support impacted
employees (unrelated to ordinary compensation expenses), and
potential future litigation and other contingencies, among others.
Cisco excludes these charges because it believes they are not
normal and recurring with respect to ongoing business and operating
results. These excluded amounts do not include any impacts to
Gains and losses on equity
investments. Cisco excludes gains and losses on equity
investments 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
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, 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
Cisco will incur share-based compensation expense, amortization of
acquisition-related intangible assets, acquisition-related costs,
and gains and losses on equity investments, in future periods.
Significant asset impairments, restructurings, significant
litigation settlements, Russia-Ukraine war costs and other
contingencies, and divestiture costs could occur in future periods.
Cisco could also be impacted by significant tax matters in future