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Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, in evaluating the operating performance of its business, Sourcefire’s management excludes certain charges and credits that are required by GAAP. These non-GAAP results provide useful information to both management and investors by excluding (i) stock-based compensation, which does not involve the expenditure of cash, and (ii) items that Sourcefire believes may not be indicative of the Company’s operating performance, because either they are unusual and Sourcefire does not expect them to recur in the ordinary course of its business or they are unrelated to the ongoing operation of the business in the ordinary course.
Beginning with the three months ended March 31, 2010, the Company expects that non-GAAP results will also be adjusted to reflect the effect of an assumed tax rate of 35%, which is expected to be greater than the Company’s GAAP tax rate as a result of the utilization of net operating losses carried forward from prior periods to offset a portion of its current tax liability. Sourcefire believes this adjustment provides useful information to both management and investors because it more accurately reflects the Company’s expected long-term tax rate.
The specific non-GAAP measures reported by Sourcefire are adjusted net income and adjusted net income per share. These non-GAAP measures, together with reconciliations to the nearest GAAP measures, are included in each of the press releases and transcripts linked below and, beginning with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, are also included in annual and quarterly reports. 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.
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