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RHT > SEC Filings for RHT > Form 8-K on 27-Mar-2013All Recent SEC Filings

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Form 8-K for RED HAT INC


27-Mar-2013

Results of Operations and Financial Condition, Financial Statements and Exhibits


Item 2.02. Results of Operations and Financial Condition

On March 27, 2013, Red Hat, Inc. announced its financial results for the fiscal fourth quarter and fiscal year ended February 28, 2013. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

In the press release, we disclosed non-GAAP financial information for the three months and fiscal year ended February 28, 2013 and February 29, 2012. These non-GAAP disclosures include non-GAAP revenue growth rates measured on a constant currency basis and a reconciliation of GAAP net income to non-GAAP adjusted net income based on:

the impact of non-cash share-based compensation expense under FASB ASC
Section 718 Compensation-Stock Compensation (formerly referenced as Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment) ("ASC 718");
the impact of expense associated with the amortization of intangible assets primarily related to business combinations; and
the impact of a charge recorded in connection with subleasing and exiting one of the Company's facilities located in Raleigh, NC (the "Facility Exit").

These non-GAAP disclosures should not be used as a substitute for our GAAP results, but rather read in conjunction with our GAAP results. The non-GAAP financial measures we disclosed and the methods we used to calculate non-GAAP results are not in accordance with GAAP and may be materially different from the non-GAAP measures and methods used by other companies.

We disclosed non-GAAP revenue growth rates for subscription revenue and total revenue measured on a constant currency basis for the three months and fiscal year ended February 28, 2013, in an effort to provide a comparable framework for assessing how our business performed when compared to the three months and fiscal year ended February 29, 2012. Approximately 43.8% and 43.3% of our revenue for the three months and fiscal year, respectively, ended February 28, 2013 was produced by sales outside the United States. The income statements of our non-U.S. operations are translated into U.S. dollars using the average exchange rates for each month in an applicable period. To the extent the U.S. dollar weakens against foreign currencies, the translation of transactions denominated in foreign currencies results in increased revenue, as stated in U.S. dollars, for our non-U.S. operations. Similarly, revenue, as stated in U.S. dollars, for our non-U.S. operations decreases if the U.S. dollar strengthens against foreign currencies. Using the average foreign currency exchange rates for each month of the three months and fiscal year ended February 29, 2012, our subscription revenue for the three months and fiscal year ended February 28, 2013 would have been higher than we reported by $3.0 million and $28.2 million, respectively, and our total revenue for the three months and fiscal year ended February 28, 2013, would have been higher than we reported by $3.3 million and $32.9 million, respectively.

We excluded GAAP share-based compensation expense for the purpose of calculating non-GAAP adjusted net income and non-GAAP adjusted net income per share because it is a non-cash expense which may vary significantly from period to period as a result of changes not directly or immediately related to the particular periods operational performance. For example, the amount recognized for share-based awards is directly related to the underlying share price of our common stock as of the date of grant, which, in the short-term, may not be directly related to our operational performance. Consequently, management believes that by excluding such expense we provide an alternative and useful measure of operating performance. Management also believes that non-GAAP measures of profitability that exclude share-based compensation expense are used by a number of financial analysts in the software industry to compare current performance to prior periods and to forecast future performance. Our reconciliation of GAAP net income to non-GAAP adjusted net income includes GAAP non-cash, share-based compensation expense of $26.0 million and $98.7 million for the three months and fiscal year ended February 28, 2013, and $23.6 million and $79.3 million for the three months and fiscal year ended February 29, 2012, respectively, versus the non-GAAP exclusion of such expense.

Amortization expense related to intangible assets results primarily from business combinations. These costs are fixed in connection with an acquisition, are then amortized over a number of years after the acquisition and generally cannot be changed or influenced by management after the acquisition. Accordingly, management generally does not consider such costs for the purpose of evaluating the performance of the business or its managers or when making decisions to allocate resources. Management also believes that non-GAAP measures of profitability that exclude amortization expense related to intangible assets are used by a number of financial analysts in the software industry to compare current performance to prior periods and to forecast future performance. Our reconciliation of GAAP net income to non-GAAP adjusted net income includes GAAP non-cash amortization expense of $7.3 million and $23.5 million for the three months and fiscal year ended February 28, 2013, and $5.1 million and $19.7 million for the three months and fiscal year ended February 29, 2012, respectively, versus the non-GAAP exclusion of such expense.


We also excluded GAAP expense relating to a charge we recorded in connection with the Facility Exit. Our reconciliation of GAAP net income to non-GAAP adjusted net income includes GAAP expense of $3.1 million for the fiscal year ended February 28, 2013.

Management believes that these adjusted non-GAAP results, when read in conjunction with the GAAP results, offer a useful view of our business performance in that they provide a more consistent means of comparing performance to prior periods in light of the effect of exchange rate differences, potential variations in the amount of expense for share-based awards recognized from period to period due to changes in the price of our common stock, the irregularity with which management acquires intangible assets and the non-recurring nature of the expense we recognized in connection with the Facility Exit. Management also uses non-GAAP measures as a component of its regular internal reporting to evaluate performance of the business and compare it to prior performance, to make operating decisions, including internal budgeting and the calculation of incentive compensation, and to forecast future performance. Our disclosure of non-GAAP financial measures allows investors to evaluate the Company's performance using information used by management.

The information furnished pursuant to Item 2.02 of this Form 8-K, including Exhibit 99.1 referenced herein, shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.



Item 9.01. Financial Statements and Exhibits

(d) Exhibits

99.1 Press Release dated March 27, 2013


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