0001122904-13-000037.txt : 20131024 0001122904-13-000037.hdr.sgml : 20131024 20131024161530 ACCESSION NUMBER: 0001122904-13-000037 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20131024 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Cost Associated with Exit or Disposal Activities FILED AS OF DATE: 20131024 DATE AS OF CHANGE: 20131024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETGEAR, INC CENTRAL INDEX KEY: 0001122904 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 770419172 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-50350 FILM NUMBER: 131168317 BUSINESS ADDRESS: STREET 1: 350 EAST PLUMERIA DRIVE CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4089078000 MAIL ADDRESS: STREET 1: 350 EAST PLUMERIA DRIVE CITY: SAN JOSE STATE: CA ZIP: 95134 FORMER COMPANY: FORMER CONFORMED NAME: NETGEAR INC DATE OF NAME CHANGE: 20000828 8-K 1 ntgr20131024-8k.htm FORM 8-K NTGR 2013.10.24 - 8K


          
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
 
 
 
 
 
 FORM 8-K
 
 CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
 
 
 
 
Date of Report (Date of earliest event reported): October 24, 2013
 
 NETGEAR, INC.
(Exact name of Registrant as specified in its charter)  
 
 
 
 
 
 
Delaware
 
000-50350
 
77-0419172
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification Number)
 
 
 
 
 
350 East Plumeria Drive
San Jose, CA 95134
(Address, including zip code, of principal executive offices)
 
 
 
 
 
(408) 907-8000
(Registrant's telephone number, including area code)  
 
 
 
 
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02    Results of Operations and Financial Condition.

On October 24, 2013, NETGEAR, Inc. (the "Company") issued a press release announcing its financial results for its third fiscal quarter, the text of which is furnished herewith as Exhibit 99.1.

The information furnished pursuant to this Item 2.02 and the exhibit to this Current Report are being furnished and 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. The information furnished pursuant to this Item 2.02 and the exhibit to this Current Report shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 2.05    Costs Associated with Exit or Disposal Activities.

On October 24, 2013, the Company also announced that it expects to incur a restructuring charge of between $3.0 and $4.0 million dollars during the fourth quarter of 2013, as part of a plan to realign resources to better focus on the key growth markets the Company is pursuing. These charges are primarily cash-based and include severance, other one-time benefits, and other associated costs.
The foregoing contains forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include the goals of the restructuring actions and the amount and timing of the related charges. Statements regarding future events are based on the Company’s current expectations and are necessarily subject to associated risks related to the completion of the restructuring in the manner anticipated by the Company. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: possible changes in the size and components of the expected costs and charges associated with the Company’s restructuring plan; and risks associated with the Company’s ability to achieve the benefits of the plan. For information regarding other factors that could cause the Company’s results to vary from expectations, please see the “Risk Factors” section of the Company’s filings with the Securities and Exchange Commission, including its most recent quarterly report on Form 10-Q. The Company undertakes no obligation to revise or update publicly any forward-looking statements.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number        Description

99.1             Press Release, dated October 24, 2013.






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
        

 
 
 
 
NETGEAR, INC.
 
 
 
 
 
Dated:
October 24, 2013
 
By:
By: /s/ Christine M. Gorjanc
 
 
 
 
Christine M. Gorjanc
 
 
 
 
Chief Financial Officer







EXHIBIT INDEX

Exhibit Number
 
Description
99.1
 
Press Release, dated October 24, 2013

            





 EX-99.1 2 exhibit99113q3earningsrele.htm PRESS RELEASE Exhibit 99.1 13Q3 Earnings Release


NEWS RELEASE



NETGEAR® REPORTS THIRD QUARTER RESULTS

•
Third quarter 2013 net revenue of $361.9 million, as compared to $315.2 million in the comparable prior year quarter, increase of 14.8% year-over-year
•
Third quarter 2013 non-GAAP net income of $22.9 million, as compared to $25.3 million in the comparable prior year quarter, decrease of 9.4% year-over-year
•
Third quarter 2013 non-GAAP diluted earnings per share of $0.58, as compared to $0.65 in the comparable prior year quarter, decrease of 10.8% year-over-year
•
Company expects fourth quarter 2013 net revenue to be in the range of $340 million to $355 million, with non-GAAP operating margin in the range of 9.5% to 10.5%

SAN JOSE, California - October 24, 2013 - NETGEAR, Inc. (NASDAQGS: NTGR), a global networking company that delivers innovative products to consumers, businesses and service providers, today reported financial results for the third quarter ended September 29, 2013.

Net revenue for the third quarter ended September 29, 2013 was $361.9 million, as compared to $315.2 million for the third quarter ended September 30, 2012, and $357.7 million in the second quarter ended June 30, 2013. The second and third quarter 2013 results reflect the full quarter effect of the AirCard business acquired from Sierra Wireless at the beginning of the second quarter of 2013. Net income, computed in accordance with GAAP, for the third quarter of 2013 was $14.5 million, or $0.37 per diluted share. This compared to GAAP net income of $23.8 million, or $0.61 per diluted share, for the third quarter of 2012, and GAAP net income of $14.0 million, or $0.36 per diluted share, in the second quarter of 2013.

Gross margin on a non-GAAP basis in the third quarter of 2013 was 28.9%, as compared to 31.6% in the year ago comparable quarter, and 29.8% in the second quarter of 2013. Non-GAAP operating margin was 9.9% in the third quarter of 2013, as compared to 11.5% in the third quarter of 2012, and 10.3% in the second quarter of 2013. Non-GAAP net income was $0.58 per diluted share in the third quarter of 2013, as compared to non-GAAP net income of $0.65 per diluted share in the third quarter of 2012, and non-GAAP net income of $0.62 per diluted share in the second quarter of 2013. The third quarter 2012 non-GAAP tax rate included a one-time tax rate benefit, which accounted for an incremental $0.05 per diluted share of earnings, which did not occur in the third quarter of 2013. The Company's non-GAAP tax rate was 37.2% in the third quarter 2013, as compared to 30.3% in the third quarter of 2012, and 32.9% in the second quarter of 2013.

The differences between GAAP and non-GAAP financial measures include adjustments, net of any tax effect, for amortization of purchased intangibles, stock-based compensation, restructuring and other charges, acquisition related expense, impact to cost of sales from acquisition accounting adjustments to inventory, gain on sale of cost method investment, impairment charges, and litigation reserves. The accompanying schedules provide a reconciliation of financial measures computed on a GAAP basis to financial measures computed on a non-GAAP basis.

Patrick Lo, Chairman and Chief Executive Officer of NETGEAR commented, “Our Retail Business Unit had a successful back-to-school season and continued to take advantage of the 802.11ac upgrade cycle. Our Service Provider Business Unit performed well during the quarter exceeding initial forecast. Our Commercial Business Unit performed below expectations as demand for our storage products was weaker than expected during the quarter. However, we recently introduced additional products in this category, which we believe will strengthen our position in the market.”


Page 1


“We are looking forward to some exciting new product introductions in the fourth quarter. We just introduced the world’s fastest 802.11ac router, the Nighthawk. The market excitement generated to date is the highest in NETGEAR history. We believe such ground breaking WiFi routers will help continue to increase our market share. We also recently introduced two high performance rack mount ReadyNAS storage products and an iPhone App for mobile access to ReadyNAS. We believe these new introductions will continue to strengthen our market position in the storage area. We believe leading edge products that satisfy customers’ needs better than our competition is what has made us successful in the past and will propel our growth in the future.”

Christine Gorjanc, Chief Financial Officer of NETGEAR, added, “Non-GAAP gross margin for the third quarter was down as compared to the comparable prior year quarter, due to the revenue mix being weighted more toward service provider. Looking forward, we have limited visibility driven by the lumpy nature of the service provider business and continued economic headwinds in Europe negatively affecting end-market demand. As such, we are expecting fourth quarter 2013 revenue to be in the range of approximately $340 million to $355 million and operating margin in the range of 9.5% to 10.5%. Additionally, during the fourth quarter we expect to incur a restructuring charge between $3 and $4 million dollars, as we will be realigning resources to better focus on the key growth markets we are pursuing.”

Investor Conference Call / Webcast Details
NETGEAR will review the third quarter results and discuss management's expectations for the third quarter of 2013 today, Thursday, October 24, 2013 at 5 p.m. EDT (2 p.m. PDT). The dial-in number for the live audio call is (201) 689-8471. A live webcast of the conference call will be available on NETGEAR's website at http://investor.netgear.com. A replay of the call will be available 2 hours following the call through midnight Eastern (9 p.m. Pacific) on Thursday, October 31, 2013 by telephone at (858) 384-5517 and via the web at http://investor.netgear.com. The account number to access the phone replay is 10000607.

About NETGEAR, Inc.
NETGEAR (NASDAQGS: NTGR) is a global networking company that delivers innovative products to consumers, businesses and service providers. For consumers, the company makes high performance, dependable and easy to use home networking, storage and digital media products to connect people with the Internet and their content and devices. For businesses, NETGEAR provides networking, storage and security solutions without the cost and complexity of Big IT. The company also supplies top service providers with retail proven, whole home solutions for their customers. NETGEAR products are built on a variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease-of-use. NETGEAR products are sold in approximately 45,000 retail locations around the globe, and through approximately 39,000 value-added resellers. The company's headquarters are in San Jose, Calif., with additional offices in over 25 countries. NETGEAR is an ENERGY STAR partner. More information is available at http://investor.netgear.com or by calling (408) 907-8000. Connect with NETGEAR at http://twitter.com/NETGEAR and http://www.facebook.com/NETGEAR.

© 2013 NETGEAR, Inc. NETGEAR, ReadyNAS, AirCard, Nighthawk and the NETGEAR logo are trademarks or registered trademarks of NETGEAR, Inc. and its affiliates in the United States and/or other countries. Other brand and product names are trademarks or registered trademarks of their respective holders. The information contained herein is subject to change without notice. NETGEAR shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved.


Contact:
NETGEAR Investor Relations
Christopher Genualdi
netgearIR@netgear.com
(408) 890-3520


Page 2


Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 for NETGEAR, Inc.:
This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The words “anticipate,” “expect,” “believe,” “will,” “may,” “should,” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. The forward-looking statements represent NETGEAR, Inc.’s expectations or beliefs concerning future events based on information available at the time such statements were made and include statements regarding: expected net revenue and non-GAAP operating margin; expectations regarding the timing and market acceptance of recent and anticipated new product introductions that position the Company for growth; expectations regarding market share gains in various product categories; estimates of sales data and market demand for the Company’s new products; the ability of the Company’s products to satisfy customers’ needs better than competing products; and the timing and magnitude of restructuring charges. These statements are based on management's current expectations and are subject to certain risks and uncertainties, including the following: future demand for the Company's products may be lower than anticipated; consumers may choose not to adopt the Company's new product offerings or adopt competing products; product performance may be adversely affected by real world operating conditions; the Company may be unsuccessful or experience delays in manufacturing and distributing its new and existing products; telecommunications service providers may choose to slow their deployment of the Company's products or utilize competing products; the Company may be unable to collect receivables as they become due; the Company may fail to manage costs, including the cost of developing new products and manufacturing and distribution of its existing offerings; the Company may fail to successfully continue to effect operating expense savings; changes in the level of NETGEAR's cash resources and the Company's planned usage of such resources; changes in the Company's stock price and developments in the business that could increase the Company's cash needs; fluctuations in foreign exchange rates; and the actions and financial health of the Company's customers. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Further information on potential risk factors that could affect NETGEAR and its business are detailed in the Company's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Part II - Item 1A. Risk Factors,” pages 52 through 73, in the Company's quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2013, filed with the Securities and Exchange Commission on August 6, 2013. NETGEAR undertakes no obligation to release publicly any revisions to any forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Use of Non-GAAP Financial Information:
To supplement our consolidated financial statements presented on a GAAP basis, NETGEAR uses non-GAAP financial measures, which are adjusted to exclude certain expenses and tax benefits, where applicable. We believe non-GAAP financial measures are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of NETGEAR's underlying operational results and trends and our marketplace performance. For example, the non-GAAP results are an indication of our baseline performance before charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial measures prepared in accordance with generally accepted accounting principles in the United States.    
    
-Financial Tables Attached-


Page 3



NETGEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
September 29,
2013
 
December 31,
2012
 
 
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
160,484

 
$
149,032

Short-term investments
140,934

 
227,845

Accounts receivable, net
269,964

 
256,014

Inventories
211,275

 
174,903

Deferred income taxes
25,455

 
22,691

Prepaid expenses and other current assets
38,477

 
33,724

Total current assets
846,589

 
864,209

Property and equipment, net
25,450

 
19,025

Intangibles, net
88,631

 
27,621

Goodwill
155,916

 
100,880

Other non-current assets
24,608

 
22,834

Total assets
$
1,141,194

 
$
1,034,569

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
119,273

 
$
87,310

Accrued employee compensation
17,185

 
18,338

Other accrued liabilities
136,707

 
126,255

Deferred revenue
26,225

 
27,645

Income taxes payable
3,541

 
1,382

Total current liabilities
302,931

 
260,930

Non-current income taxes payable
13,314

 
13,735

Other non-current liabilities
6,366

 
5,293

Total liabilities
322,611

 
279,958

Stockholders' equity:
 
 
 
Common stock
39

 
38

Additional paid-in capital
415,254

 
394,427

Cumulative other comprehensive income
(151
)
 
4

Retained earnings
403,441

 
360,142

Total stockholders' equity
818,583

 
754,611

Total liabilities and stockholders' equity
$
1,141,194

 
$
1,034,569




Page 4



NETGEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 29,
2013
 
June 30,
2013
 
September 30,
2012
 
September 29,
2013
 
September 30,
2012
 
 
 
 
 
 
 
 
 
 
Net revenue
$
361,895

 
$
357,719

 
$
315,210

 
$
1,013,013

 
$
961,485

Cost of revenue
260,236

 
254,289

 
217,522

 
720,187

 
669,310

Gross profit
101,659

 
103,430

 
97,688

 
292,826

 
292,175

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
23,320

 
23,981

 
17,399

 
62,639

 
46,277

Sales and marketing
39,465

 
40,406

 
37,600

 
116,260

 
114,247

General and administrative
11,930

 
12,319

 
11,888

 
36,576

 
33,520

Restructuring and other charges
400

 
1,587

 
—

 
1,957

 
—

Litigation reserves, net
305

 
3,555

 
269

 
3,908

 
420

Impairment charges
2,000

 
—

 
—

 
2,000

 
—

Total operating expenses
77,420

 
81,848

 
67,156

 
223,340

 
194,464

Income from operations
24,239

 
21,582

 
30,532

 
69,486

 
97,711

Interest income
71

 
95

 
109

 
315

 
344

Other income (expense), net
511

 
(548
)
 
3,070

 
37

 
2,823

Income before income taxes
24,821

 
21,129

 
33,711

 
69,838

 
100,878

Provision for income taxes
10,364

 
7,144

 
9,920

 
26,053

 
30,418

Net income
$
14,457

 
$
13,985

 
$
23,791

 
$
43,785

 
$
70,460

 
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.37

 
$
0.36

 
$
0.62

 
$
1.14

 
$
1.86

Diluted
$
0.37

 
$
0.36

 
$
0.61

 
$
1.12

 
$
1.82

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding used to compute net income per share:
 
 
 
 
 
 
 
 
 
Basic
38,700

 
38,539

 
38,162

 
38,562

 
37,978

Diluted
39,198

 
39,074

 
38,802

 
39,127

 
38,682

 
 
 
 
 
 
 
 
 
 



Page 5





NETGEAR, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Excluding amortization of purchased intangibles, stock-based compensation, restructuring and other charges, acquisition related expense, impact to cost of sales from acquisition accounting adjustments to inventory, gain on sale of cost method investment, impairment charges, and litigation reserves, net of tax.
(In thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 29,
2013
 
June 30,
2013
 
September 30,
2012
 
September 29,
2013
 
September 30,
2012
 
 
 
 
 
 
 
 
 
 
Net revenue
$
361,895

 
$
357,719

 
$
315,210

 
$
1,013,013

 
$
961,485

Cost of revenue
257,343

 
251,061

 
215,695

 
712,406

 
664,972

Gross profit
104,552

 
106,658

 
99,515

 
300,607

 
296,513

 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
22,273

 
22,846

 
16,621

 
59,785

 
44,211

Sales and marketing
36,109

 
36,478

 
36,362

 
107,746

 
110,624

General and administrative
10,276

 
10,565

 
10,358

 
30,959

 
29,424

Total operating expenses
68,658

 
69,889

 
63,341

 
198,490

 
184,259

Income from operations
35,894

 
36,769

 
36,174

 
102,117

 
112,254

Interest income
71

 
95

 
109

 
315

 
344

Other income (expense), net
511

 
(548
)
 
(56
)
 
37

 
(303
)
Income before income taxes
36,476

 
36,316

 
36,227

 
102,469

 
112,295

Provision for income taxes
13,584

 
11,944

 
10,959

 
35,791

 
34,315

Net income
$
22,892

 
$
24,372

 
$
25,268

 
$
66,678

 
$
77,980

 
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.59

 
$
0.63

 
$
0.66

 
$
1.73

 
$
2.05

Diluted
$
0.58

 
$
0.62

 
$
0.65

 
$
1.70

 
$
2.02

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding used to compute net income per share:
 
 
 
 
 
 
 
 
 
Basic
38,700

 
38,539

 
38,162

 
38,562

 
37,978

Diluted
39,198

 
39,074

 
38,802

 
39,127

 
38,682




Page 6



NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)

STATEMENT OF OPERATIONS DATA:
 
Three Months Ended
 
Nine Months Ended
 
September 29,
2013
 
June 30,
2013
 
September 30,
2012
 
September 29,
2013
 
September 30,
2012
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
$
101,659

 
$
103,430

 
$
97,688

 
$
292,826

 
$
292,175

Amortization of intangible assets
2,414

 
2,254

 
1,354

 
6,139

 
3,317

Stock-based compensation expense
479

 
406

 
473

 
1,074

 
1,021

Impact to cost of sales from acquisition accounting adjustments to inventory
—

 
568

 
—

 
568

 
—

Non-GAAP gross profit
$
104,552

 
$
106,658

 
$
99,515

 
$
300,607

 
$
296,513

Non-GAAP gross margin
28.9
%
 
29.8
%
 
31.6
%
 
29.7
%
 
30.8
%
 
 
 
 
 
 
 
 
 
 
GAAP research and development
$
23,320

 
$
23,981

 
$
17,399

 
$
62,639

 
$
46,277

Stock-based compensation expense
(1,047
)
 
(1,135
)
 
(778
)
 
(2,854
)
 
(2,066
)
Non-GAAP research and development
$
22,273

 
$
22,846

 
$
16,621

 
$
59,785

 
$
44,211

 
 
 
 
 
 
 
 
 
 
GAAP sales and marketing
$
39,465

 
$
40,406

 
$
37,600

 
$
116,260

 
$
114,247

Amortization of intangible assets
(2,025
)
 
(2,618
)
 
—

 
(4,643
)
 
—

Stock-based compensation expense
(1,331
)
 
(1,310
)
 
(1,238
)
 
(3,871
)
 
(3,623
)
Non-GAAP sales and marketing
$
36,109

 
$
36,478

 
$
36,362

 
$
107,746

 
$
110,624

 
 
 
 
 
 
 
 
 
 
GAAP general and administrative
$
11,930

 
$
12,319

 
$
11,888

 
$
36,576

 
$
33,520

Stock-based compensation expense
(1,654
)
 
(1,540
)
 
(1,530
)
 
(4,693
)
 
(4,096
)
Acquisition related expense
—

 
(214
)
 
—

 
(924
)
 
—

Non-GAAP general and administrative
$
10,276

 
$
10,565

 
$
10,358

 
$
30,959

 
$
29,424

 
 
 
 
 
 
 
 
 
 
GAAP total operating expenses
$
77,420

 
$
81,848

 
$
67,156

 
$
223,340

 
$
194,464

Amortization of intangible assets
(2,025
)
 
(2,618
)
 
—

 
(4,643
)
 
—

Stock-based compensation expense
(4,032
)
 
(3,985
)
 
(3,546
)
 
(11,418
)
 
(9,785
)
Restructuring and other charges
(400
)
 
(1,587
)
 
—

 
(1,957
)
 
—

Acquisition related expense
—

 
(214
)
 
—

 
(924
)
 
—

Litigation reserves, net
(305
)
 
(3,555
)
 
(269
)
 
(3,908
)
 
(420
)
Impairment charges
(2,000
)
 
—

 
—

 
(2,000
)
 
—

Non-GAAP total operating expenses
$
68,658

 
$
69,889

 
$
63,341

 
$
198,490

 
$
184,259


Page 7


NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
(In thousands, except per share data)
(Unaudited)

STATEMENT OF OPERATIONS DATA (CONTINUED):

 
Three Months Ended
 
Nine Months Ended
 
September 29,
2013
 
June 30,
2013
 
September 30,
2012
 
September 29,
2013
 
September 30,
2012
 
 
 
 
 
 
 
 
 
 
GAAP operating income
$
24,239

 
$
21,582

 
$
30,532

 
$
69,486

 
$
97,711

Amortization of intangible assets
4,439

 
4,872

 
1,354

 
10,782

 
3,317

Stock-based compensation expense
4,511

 
4,391

 
4,019

 
12,492

 
10,806

Restructuring and other charges
400

 
1,587

 
—

 
1,957

 
—

Acquisition related expense
—

 
214

 
—

 
924

 
—

Impact to cost of sales from acquisition accounting adjustments to inventory
—

 
568

 
—

 
568

 
—

Litigation reserves, net
305

 
3,555

 
269

 
3,908

 
420

Impairment charges
2,000

 
—

 
—

 
2,000

 
—

Non-GAAP operating income
$
35,894

 
$
36,769

 
$
36,174

 
$
102,117

 
$
112,254

Non-GAAP operating margin
9.9
%
 
10.3
%
 
11.5
%
 
10.1
%
 
11.7
%
 
 
 
 
 
 
 
 
 
 
GAAP other income (expense),net
$
511

 
$
(548
)
 
$
3,070

 
$
37

 
$
2,823

Gain on sale of cost method investment
—

 
—

 
(3,126
)
 
—

 
(3,126
)
Non-GAAP other income (expense), net
$
511

 
$
(548
)
 
$
(56
)
 
$
37

 
$
(303
)
 
 
 
 
 
 
 
 
 
 
GAAP net income
$
14,457

 
$
13,985

 
$
23,791

 
$
43,785

 
$
70,460

Amortization of intangible assets
4,439

 
4,872

 
1,354

 
10,782

 
3,317

Stock-based compensation expense
4,511

 
4,391

 
4,019

 
12,492

 
10,806

Restructuring and other charges
400

 
1,587

 
—

 
1,957

 
—

Acquisition related expense
—

 
214

 
—

 
924

 
—

Impact to cost of sales from acquisition accounting adjustments to inventory
—

 
568

 
—

 
568

 
—

Litigation reserves, net
305

 
3,555

 
269

 
3,908

 
420

Impairment charges
2,000

 
—

 
—

 
2,000

 
—

Gain on sale of cost method investment
—

 
—

 
(3,126
)
 
—

 
(3,126
)
Tax effect
(3,220
)
 
(4,800
)
 
(1,039
)
 
(9,738
)
 
(3,897
)
Non-GAAP net income
$
22,892

 
$
24,372

 
$
25,268

 
$
66,678

 
$
77,980


Page 8


NETGEAR, INC.
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES (CONTINUED)
(In thousands, except per share data)
(Unaudited)

STATEMENT OF OPERATIONS DATA (CONTINUED):

 
Three Months Ended
 
Nine Months Ended
 
September 29,
2013
 
June 30,
2013
 
September 30,
2012
 
September 29,
2013
 
September 30,
2012
 
 
 
 
 
 
 
 
 
 
NET INCOME PER DILUTED SHARE:
 
 
 
 
 
 
 
 
GAAP net income per diluted share
$
0.37

 
$
0.36

 
$
0.61

 
$
1.12

 
$
1.82

Amortization of intangible assets
0.11

 
0.12

 
0.03

 
0.28

 
0.09

Stock-based compensation expense
0.12

 
0.11

 
0.10

 
0.32

 
0.28

Restructuring and other charges
0.01

 
0.04

 
—

 
0.05

 
—

Acquisition related expense
—

 
0.01

 
—

 
0.02

 
—

Impact to cost of sales from acquisition accounting adjustments to inventory
—

 
0.01

 
—

 
0.01

 
—

Litigation reserves, net
0.01

 
0.09

 
0.01

 
0.10

 
0.01

Impairment charges
0.05

 
—

 
—

 
0.05

 
—

Gain on sale of cost method investment
—

 
—

 
(0.08
)
 
—

 
(0.08
)
Tax effect
(0.09
)
 
(0.12
)
 
(0.02
)
 
(0.25
)
 
(0.10
)
Non-GAAP net income per diluted share
$
0.58

 
$
0.62

 
$
0.65

 
$
1.70

 
$
2.02




Page 9


SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands, except per share data, DSO, inventory turns, weeks of channel inventory and headcount)
(Unaudited)

 
Three Months Ended
 
September 29,
2013
 
June 30,
2013
 
March 31,
2013
 
December 31,
2012
 
September 30,
2012
 
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and short-term investments
$
301,418

 
$
288,103

 
$
422,412

 
$
376,877

 
$
362,420

Cash, cash equivalents and short-term investments per diluted share
$
7.69

 
$
7.37

 
$
10.82

 
$
9.68

 
$
9.34

 
 
 
 
 
 
 
 
 
 
Accounts receivable, net
$
269,964

 
$
288,483

 
$
237,896

 
$
256,014

 
$
248,862

Days sales outstanding (DSO)
68

 
73

 
73

 
76

 
72

 
 
 
 
 
 
 
 
 
 
Inventories
$
211,275

 
$
185,383

 
$
158,555

 
$
174,903

 
$
178,916

Ending inventory turns
4.9

 
5.5

 
5.2

 
5.0

 
4.9

 
 
 
 
 
 
 
 
 
 
Weeks of channel inventory:
 
 
 
 
 
 
 
 
 
U.S. retail channel
11.5

 
10.4

 
9.9

 
8.8

 
9.8

U.S. distribution channel
9.9

 
9.0

 
8.9

 
10.2

 
8.4

EMEA distribution channel
4.5

 
5.1

 
4.1

 
4.4

 
4.4

APAC distribution channel
8.2

 
7.3

 
7.2

 
7.2

 
4.7

 
 
 
 
 
 
 
 
 
 
Deferred revenue
$
28,049

 
$
33,717

 
$
28,961

 
$
27,645

 
$
28,205

 
 
 
 
 
 
 
 
 
 
Headcount
1,100

 
1,095

 
866

 
850

 
854

Non-GAAP diluted shares
39,198

 
39,074

 
39,050

 
38,924

 
38,802


NET REVENUE BY GEOGRAPHY
 
Three Months Ended
 
Nine Months Ended
 
September 29,
2013
 
 
 
June 30,
2013
 
 
 
September 30,
2012
 
 
 
September 29,
2013
 
 
 
September 30,
2012
 
 
Americas
$
220,487

 
61
%
 
$
200,848

 
56
%
 
$
177,647

 
56
%
 
$
578,011

 
57
%
 
$
509,440

 
53
%
EMEA
97,220

 
27
%
 
108,367

 
30
%
 
104,368

 
33
%
 
312,712

 
31
%
 
347,264

 
36
%
APAC
44,188

 
12
%
 
48,504

 
14
%
 
33,195

 
11
%
 
122,290

 
12
%
 
104,781

 
11
%
Total
$
361,895

 
100
%
 
$
357,719

 
100
%
 
$
315,210

 
100
%
 
$
1,013,013

 
100
%
 
$
961,485

 
100
%

NET REVENUE BY SEGMENT
 
Three Months Ended
 
Nine Months Ended
 
September 29,
2013
 
 
 
June 30,
2013
 
 
 
September 30,
2012
 
 
 
September 29,
2013
 
 
 
September 30,
2012
 
 
Retail
$
130,301

 
36
%
 
$
117,395

 
33
%
 
$
123,457

 
39
%
 
$
374,018

 
37
%
 
$
366,258

 
38
%
Commercial
76,957

 
21
%
 
88,446

 
25
%
 
79,240

 
25
%
 
236,254

 
23
%
 
234,498

 
24
%
Service Provider
154,637

 
43
%
 
151,878

 
42
%
 
112,513

 
36
%
 
402,741

 
40
%
 
360,729

 
38
%
Total
$
361,895

 
100
%
 
$
357,719

 
100
%
 
$
315,210

 
100
%
 
$
1,013,013

 
100
%
 
$
961,485

 
100
%



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