Delaware
|
|
77-0419172
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
350 East Plumeria Drive,
San Jose, California
|
|
95134
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large Accelerated filer
|
|
x
|
|
Accelerated filer
|
|
¨
|
Non-Accelerated filer
|
|
¨
|
|
Smaller reporting company
|
|
¨
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
|
Item 1.
|
Financial Statements
|
|
March 30,
2014 |
|
December 31,
2013 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
129,656
|
|
|
$
|
143,009
|
|
Short-term investments
|
110,605
|
|
|
105,145
|
|
||
Accounts receivable, net
|
291,251
|
|
|
266,484
|
|
||
Inventories
|
201,630
|
|
|
224,456
|
|
||
Deferred income taxes
|
28,515
|
|
|
27,239
|
|
||
Prepaid expenses and other current assets
|
37,047
|
|
|
33,778
|
|
||
Total current assets
|
798,704
|
|
|
800,111
|
|
||
Property and equipment, net
|
26,005
|
|
|
27,194
|
|
||
Intangibles, net
|
79,649
|
|
|
84,118
|
|
||
Goodwill
|
155,916
|
|
|
155,916
|
|
||
Other non-current assets
|
29,822
|
|
|
26,591
|
|
||
Total assets
|
$
|
1,090,096
|
|
|
$
|
1,093,930
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
96,285
|
|
|
$
|
114,531
|
|
Accrued employee compensation
|
18,534
|
|
|
16,551
|
|
||
Other accrued liabilities
|
141,052
|
|
|
143,218
|
|
||
Deferred revenue
|
30,096
|
|
|
24,496
|
|
||
Income taxes payable
|
1,744
|
|
|
1,287
|
|
||
Total current liabilities
|
287,711
|
|
|
300,083
|
|
||
Non-current income taxes payable
|
13,917
|
|
|
13,804
|
|
||
Other non-current liabilities
|
6,053
|
|
|
6,260
|
|
||
Total liabilities
|
307,681
|
|
|
320,147
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock
|
37
|
|
|
37
|
|
||
Additional paid-in capital
|
432,231
|
|
|
421,901
|
|
||
Cumulative other comprehensive (loss) income
|
(132
|
)
|
|
69
|
|
||
Retained earnings
|
350,279
|
|
|
351,776
|
|
||
Total stockholders’ equity
|
782,415
|
|
|
773,783
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,090,096
|
|
|
$
|
1,093,930
|
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
Net revenue
|
$
|
349,391
|
|
|
$
|
293,399
|
|
Cost of revenue
|
251,466
|
|
|
205,662
|
|
||
Gross profit
|
97,925
|
|
|
87,737
|
|
||
Operating expenses:
|
|
|
|
||||
Research and development
|
22,181
|
|
|
15,338
|
|
||
Sales and marketing
|
39,911
|
|
|
36,389
|
|
||
General and administrative
|
11,375
|
|
|
12,327
|
|
||
Restructuring and other charges
|
842
|
|
|
(30
|
)
|
||
Litigation reserves, net
|
117
|
|
|
48
|
|
||
Total operating expenses
|
74,426
|
|
|
64,072
|
|
||
Income from operations
|
23,499
|
|
|
23,665
|
|
||
Interest income
|
57
|
|
|
149
|
|
||
Other (expense) income, net
|
(108
|
)
|
|
74
|
|
||
Income before income taxes
|
23,448
|
|
|
23,888
|
|
||
Provision for income taxes
|
9,037
|
|
|
8,545
|
|
||
Net income
|
$
|
14,411
|
|
|
$
|
15,343
|
|
Net income per share:
|
|
|
|
||||
Basic
|
$
|
0.39
|
|
|
$
|
0.40
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
0.39
|
|
Weighted average shares outstanding used to compute net income per share:
|
|
|
|
||||
Basic
|
36,630
|
|
|
38,433
|
|
||
Diluted
|
37,305
|
|
|
39,050
|
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
Net income
|
$
|
14,411
|
|
|
$
|
15,343
|
|
Other comprehensive (loss) income, before tax:
|
|
|
|
||||
Unrealized (loss) gain on derivative instruments
|
(205
|
)
|
|
151
|
|
||
Unrealized gain (loss) on available-for-sale securities
|
7
|
|
|
(26
|
)
|
||
Other comprehensive (loss) income, before tax
|
(198
|
)
|
|
125
|
|
||
Tax (expense) benefit related to items of other comprehensive income
|
(3
|
)
|
|
10
|
|
||
Other comprehensive (loss) income, net of tax
|
(201
|
)
|
|
135
|
|
||
Comprehensive income
|
$
|
14,210
|
|
|
$
|
15,478
|
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
14,411
|
|
|
$
|
15,343
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
8,743
|
|
|
4,942
|
|
||
Purchase premium amortization/discount accretion on investments, net
|
93
|
|
|
373
|
|
||
Non-cash stock-based compensation
|
5,130
|
|
|
3,590
|
|
||
Income tax benefit associated with stock option exercises
|
(314
|
)
|
|
354
|
|
||
Excess tax benefit from stock-based compensation
|
(153
|
)
|
|
(354
|
)
|
||
Deferred income taxes
|
(671
|
)
|
|
(1,015
|
)
|
||
Changes in assets and liabilities, net of effect of acquisitions:
|
|
|
|
||||
Accounts receivable
|
(24,854
|
)
|
|
18,118
|
|
||
Inventories
|
22,826
|
|
|
16,348
|
|
||
Prepaid expenses and other assets
|
(7,179
|
)
|
|
(671
|
)
|
||
Accounts payable
|
(18,245
|
)
|
|
(4,901
|
)
|
||
Accrued employee compensation
|
1,983
|
|
|
(4,235
|
)
|
||
Other accrued liabilities
|
(2,422
|
)
|
|
(6,869
|
)
|
||
Deferred revenue
|
5,637
|
|
|
1,317
|
|
||
Income taxes payable
|
569
|
|
|
2,737
|
|
||
Net cash provided by operating activities
|
5,554
|
|
|
45,077
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of short-term investments
|
(59,958
|
)
|
|
(20,022
|
)
|
||
Proceeds from sales and maturities of short-term investments
|
54,500
|
|
|
104,154
|
|
||
Purchase of property and equipment
|
(3,085
|
)
|
|
(2,761
|
)
|
||
Net cash (used in) provided by investing activities
|
(8,543
|
)
|
|
81,371
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Purchase and retirement of treasury stock
|
(15,908
|
)
|
|
(336
|
)
|
||
Proceeds from exercise of stock options
|
4,063
|
|
|
2,547
|
|
||
Proceeds from issuance of common stock under employee stock purchase plan
|
1,328
|
|
|
1,053
|
|
||
Excess tax benefit from stock-based compensation
|
153
|
|
|
354
|
|
||
Net cash (used in) provided by financing activities
|
(10,364
|
)
|
|
3,618
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(13,353
|
)
|
|
130,066
|
|
||
Cash and cash equivalents, at beginning of period
|
143,009
|
|
|
149,032
|
|
||
Cash and cash equivalents, at end of period
|
$
|
129,656
|
|
|
$
|
279,098
|
|
Note 1.
|
The Company and Basis of Presentation
|
2.
|
Summary of Significant Accounting Policies
|
3.
|
Business Acquisitions
|
Inventories
|
$
|
2,874
|
|
Prepaid expenses
|
9,030
|
|
|
Other assets
|
3,226
|
|
|
Property and equipment, net
|
7,455
|
|
|
Intangible assets, net
|
69,700
|
|
|
Goodwill
|
53,841
|
|
|
Liabilities assumed
|
(6,096
|
)
|
|
Total purchase price
|
$
|
140,030
|
|
|
Three Months Ended
|
||
|
March 31,
2013 |
||
|
(in millions)
|
||
Revenue
|
$
|
338
|
|
Net income
|
$
|
15
|
|
4.
|
Balance Sheet Components (in thousands)
|
|
As of
|
||||||||||||||||||||||||||||||
|
March 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||||||||||
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
|
Cost
|
|
Unrealized Gain
|
|
Unrealized Loss
|
|
Estimated Fair Value
|
||||||||||||||||
U.S. Treasuries
|
$
|
109,946
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
109,959
|
|
|
$
|
104,595
|
|
|
$
|
7
|
|
|
$
|
(1
|
)
|
|
$
|
104,601
|
|
Certificates of Deposits
|
174
|
|
|
—
|
|
|
—
|
|
|
174
|
|
|
159
|
|
|
—
|
|
|
—
|
|
|
159
|
|
||||||||
Total
|
$
|
110,120
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
110,133
|
|
|
$
|
104,754
|
|
|
$
|
7
|
|
|
$
|
(1
|
)
|
|
$
|
104,760
|
|
|
As of
|
||||||
|
March 30,
2014 |
|
December 31,
2013 |
||||
Gross accounts receivable
|
$
|
314,432
|
|
|
$
|
289,479
|
|
Allowance for doubtful accounts
|
(1,255
|
)
|
|
(1,255
|
)
|
||
Allowance for sales returns
|
(18,550
|
)
|
|
(17,467
|
)
|
||
Allowance for price protection
|
(3,376
|
)
|
|
(4,273
|
)
|
||
Total allowances
|
(23,181
|
)
|
|
(22,995
|
)
|
||
Total accounts receivable, net
|
$
|
291,251
|
|
|
$
|
266,484
|
|
|
As of
|
||||||
|
March 30,
2014 |
|
December 31,
2013 |
||||
Raw materials
|
$
|
6,591
|
|
|
$
|
8,676
|
|
Work in process
|
5,244
|
|
|
6,233
|
|
||
Finished goods
|
189,795
|
|
|
209,547
|
|
||
Total inventories
|
$
|
201,630
|
|
|
$
|
224,456
|
|
|
As of
|
||||||
|
March 30,
2014 |
|
December 31,
2013 |
||||
Computer equipment
|
$
|
8,728
|
|
|
$
|
8,527
|
|
Furniture, fixtures and leasehold improvements
|
14,169
|
|
|
14,019
|
|
||
Software
|
25,875
|
|
|
25,722
|
|
||
Machinery and equipment
|
53,270
|
|
|
50,656
|
|
||
Construction in progress
|
12
|
|
|
21
|
|
||
Total property and equipment, gross
|
102,054
|
|
|
98,945
|
|
||
Accumulated depreciation and amortization
|
(76,049
|
)
|
|
(71,751
|
)
|
||
Total property and equipment, net
|
$
|
26,005
|
|
|
$
|
27,194
|
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
March 30, 2014
|
|
|
|
|
|
||||||
Technology
|
$
|
60,999
|
|
|
$
|
(32,026
|
)
|
|
$
|
28,973
|
|
Customer contracts and relationships
|
56,500
|
|
|
(10,892
|
)
|
|
45,608
|
|
|||
Other
|
10,545
|
|
|
(5,577
|
)
|
|
4,968
|
|
|||
Finite-lived intangibles, net
|
128,044
|
|
|
(48,495
|
)
|
|
79,549
|
|
|||
Indefinite-lived intangible assets
|
100
|
|
|
—
|
|
|
100
|
|
|||
Total purchased intangible assets, net
|
$
|
128,144
|
|
|
$
|
(48,495
|
)
|
|
$
|
79,649
|
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||
December 31, 2013
|
|
|
|
|
|
||||||
Technology
|
$
|
60,999
|
|
|
$
|
(29,593
|
)
|
|
$
|
31,406
|
|
Customer contracts and relationships
|
56,500
|
|
|
(9,120
|
)
|
|
47,380
|
|
|||
Other
|
10,545
|
|
|
(5,313
|
)
|
|
5,232
|
|
|||
Finite-lived intangibles, net
|
128,044
|
|
|
(44,026
|
)
|
|
84,018
|
|
|||
Indefinite-lived intangible assets
|
100
|
|
|
—
|
|
|
100
|
|
|||
Total purchased intangible assets, net
|
$
|
128,144
|
|
|
$
|
(44,026
|
)
|
|
$
|
84,118
|
|
Year Ending December 31
|
Amount
|
||
2014 (remaining nine months)
|
$
|
13,406
|
|
2015
|
17,258
|
|
|
2016
|
16,896
|
|
|
2017
|
11,361
|
|
|
2018
|
7,859
|
|
|
Thereafter
|
12,769
|
|
|
Total expected amortization expense
|
$
|
79,549
|
|
|
Retail
|
|
Commercial
|
|
Service Provider
|
|
Total
|
||||||||
Goodwill at December 31, 2013
|
$
|
45,441
|
|
|
$
|
36,279
|
|
|
$
|
74,196
|
|
|
$
|
155,916
|
|
Goodwill acquired during the period
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Goodwill at March 30, 2014
|
$
|
45,441
|
|
|
$
|
36,279
|
|
|
$
|
74,196
|
|
|
$
|
155,916
|
|
|
As of
|
||||||
|
March 30,
2014 |
|
December 31, 2013
|
||||
Non-current deferred income taxes
|
$
|
19,630
|
|
|
$
|
20,235
|
|
Cost method investment
|
1,322
|
|
|
1,322
|
|
||
Other
|
8,870
|
|
|
5,034
|
|
||
Total other non-current assets
|
$
|
29,822
|
|
|
$
|
26,591
|
|
|
As of
|
||||||
|
March 30,
2014 |
|
December 31,
2013 |
||||
Sales and marketing programs
|
$
|
50,870
|
|
|
$
|
47,941
|
|
Warranty obligation
|
45,403
|
|
|
48,754
|
|
||
Freight
|
5,777
|
|
|
5,790
|
|
||
Other
|
39,002
|
|
|
40,733
|
|
||
Total other accrued liabilities
|
$
|
141,052
|
|
|
$
|
143,218
|
|
5.
|
Product Warranties
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
Balance as of beginning of the period
|
$
|
48,754
|
|
|
$
|
46,659
|
|
Provision for warranty liability made during the period
|
14,158
|
|
|
16,375
|
|
||
Settlements made during the period
|
(17,509
|
)
|
|
(17,158
|
)
|
||
Balance at end of period
|
$
|
45,403
|
|
|
$
|
45,876
|
|
6.
|
Derivative Financial Instruments
|
Derivative Assets
|
|
Balance Sheet
Location
|
|
Fair Value at
March 30, 2014
|
|
Balance Sheet
Location
|
|
Fair Value at
December 31, 2013
|
||||
Derivative assets not designated as hedging instruments
|
|
Prepaid expenses and other current assets
|
|
$
|
254
|
|
|
Prepaid expenses and other current assets
|
|
$
|
842
|
|
Derivative assets designated as hedging
instruments
|
|
Prepaid expenses and other current assets
|
|
7
|
|
|
Prepaid expenses and other current assets
|
|
63
|
|
||
Total
|
|
|
|
$
|
261
|
|
|
|
|
$
|
905
|
|
Derivative Liabilities
|
|
Balance Sheet
Location
|
|
Fair Value at
March 30, 2014
|
|
Balance Sheet
Location
|
|
Fair Value at
December 31, 2013
|
||||
Derivative liabilities not designated as hedging instruments
|
|
Other accrued liabilities
|
|
$
|
(1,044
|
)
|
|
Other accrued liabilities
|
|
$
|
(368
|
)
|
Derivative liabilities designated as hedging instruments
|
|
Other accrued liabilities
|
|
(148
|
)
|
|
Other accrued liabilities
|
|
(13
|
)
|
||
Total
|
|
|
|
$
|
(1,192
|
)
|
|
|
|
$
|
(381
|
)
|
As of March 30, 2014
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
Barclays
|
|
$
|
261
|
|
|
$
|
—
|
|
|
$
|
261
|
|
|
$
|
(261
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Wells Fargo Bank
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
261
|
|
|
$
|
—
|
|
|
$
|
261
|
|
|
$
|
(261
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
As of December 31, 2013
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Assets Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
Barclays
|
|
$
|
905
|
|
|
$
|
—
|
|
|
$
|
905
|
|
|
$
|
(287
|
)
|
|
$
|
—
|
|
|
$
|
618
|
|
Wells Fargo Bank
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
905
|
|
|
$
|
—
|
|
|
$
|
905
|
|
|
$
|
(287
|
)
|
|
$
|
—
|
|
|
$
|
618
|
|
As of March 30, 2014
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Liabilities Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
Barclays
|
|
$
|
1,192
|
|
|
$
|
—
|
|
|
$
|
1,192
|
|
|
$
|
(261
|
)
|
|
$
|
—
|
|
|
$
|
931
|
|
Wells Fargo Bank
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
1,192
|
|
|
$
|
—
|
|
|
$
|
1,192
|
|
|
$
|
(261
|
)
|
|
$
|
—
|
|
|
$
|
931
|
|
As of December 31, 2013
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Of Liabilities Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Pledged
|
|
Net Amount
|
|||||||||||||
Barclays
|
|
$
|
287
|
|
|
$
|
—
|
|
|
$
|
287
|
|
|
$
|
(287
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Wells Fargo Bank
|
|
94
|
|
|
—
|
|
|
94
|
|
|
—
|
|
|
—
|
|
|
94
|
|
||||||
Total
|
|
$
|
381
|
|
|
$
|
—
|
|
|
$
|
381
|
|
|
$
|
(287
|
)
|
|
$
|
—
|
|
|
$
|
94
|
|
Derivatives Designated as Hedging Instruments
|
|
Three Months Ended March 30, 2014
|
||||||||||||||
|
Gain or (Loss)
Recognized in
OCI -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gain or (Loss)
Reclassified
from
OCI into
Income -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gain or (Loss) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
(564
|
)
|
|
Net revenue
|
|
$
|
(425
|
)
|
|
Other (expense) income, net
|
|
$
|
(27
|
)
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
2
|
|
|
Other (expense) income, net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
64
|
|
|
Other (expense) income, net
|
|
—
|
|
|||
Total
|
|
$
|
(564
|
)
|
|
|
|
$
|
(359
|
)
|
|
|
|
$
|
(27
|
)
|
Derivatives Designated as Hedging Instruments
|
|
Three Months Ended March 31, 2013
|
||||||||||||||
|
Gain or (Loss)
Recognized in
OCI -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Reclassified from OCI
into Income - Effective
Portion
|
|
Gain or (Loss)
Reclassified
from
OCI into
Income -
Effective
Portion (a)
|
|
Location of
Gain or (Loss)
Recognized in
Income and
Excluded from
Effectiveness Testing
|
|
Amount of Gain or (Loss) Recognized in
Income and
Excluded from
Effectiveness Testing
|
|||||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency forward contracts
|
|
$
|
178
|
|
|
Net revenue
|
|
$
|
75
|
|
|
Other (expense)income, net
|
|
$
|
(22
|
)
|
Foreign currency forward contracts
|
|
—
|
|
|
Cost of revenue
|
|
(2
|
)
|
|
Other (expense)income, net
|
|
—
|
|
|||
Foreign currency forward contracts
|
|
—
|
|
|
Operating expenses
|
|
(46
|
)
|
|
Other (expense)income, net
|
|
—
|
|
|||
Total
|
|
$
|
178
|
|
|
|
|
$
|
27
|
|
|
|
|
$
|
(22
|
)
|
(a)
|
Refer to Note 10,
Stockholders' Equity
, which summarizes the cumulative other comprehensive income activity related to derivatives.
|
Derivatives Not Designated as Hedging Instruments
|
|
Location of Gains or (Losses)
Recognized in Income on Derivative
|
|
Amount of Gains or (Losses)
Recognized in Income on Derivative
|
||||||
|
Three Months Ended
March 30, 2014
|
|
Three Months Ended
March 31, 2013
|
|||||||
Foreign currency forward contracts
|
|
Other (expense) income, net
|
|
$
|
(766
|
)
|
|
$
|
268
|
|
7.
|
Net Income Per Share
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
Net income
|
$
|
14,411
|
|
|
$
|
15,343
|
|
Weighted average shares outstanding:
|
|
|
|
||||
Basic
|
36,630
|
|
|
38,433
|
|
||
Dilutive potential common shares
|
675
|
|
|
617
|
|
||
Total diluted
|
37,305
|
|
|
39,050
|
|
||
|
|
|
|
||||
Basic net income per share
|
$
|
0.39
|
|
|
$
|
0.40
|
|
Diluted net income per share
|
$
|
0.39
|
|
|
$
|
0.39
|
|
8.
|
Income Taxes
|
9.
|
Commitments and Contingencies
|
10.
|
Stockholders' Equity
|
|
Gains and losses on available for sale securities
|
|
Gains and losses on derivatives
|
|
Total
|
||||||
Beginning balance as of December 31, 2013
|
$
|
4
|
|
|
$
|
65
|
|
|
$
|
69
|
|
Other comprehensive income (loss) before reclassifications
|
4
|
|
|
(564
|
)
|
|
(560
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
359
|
|
|
359
|
|
|||
Net current period other comprehensive income (loss)
|
4
|
|
|
(205
|
)
|
|
(201
|
)
|
|||
Ending balance as of March 30, 2014
|
$
|
8
|
|
|
$
|
(140
|
)
|
|
$
|
(132
|
)
|
Details about Accumulated Other Comprehensive Income Components
|
|
Three Months Ended March 30, 2014
|
|
Three Months Ended March 31, 2013
|
||||||||
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Statement of Operations
|
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Statement of Operations
|
|||||
Gains and losses on cash flow hedge:
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
|
$
|
(425
|
)
|
|
Net revenue
|
|
$
|
75
|
|
|
Net revenue
|
Foreign currency forward contracts
|
|
2
|
|
|
Cost of revenue
|
|
(2
|
)
|
|
Cost of revenue
|
||
Foreign currency forward contracts
|
|
64
|
|
|
Operating expenses
|
|
(46
|
)
|
|
Operating expenses
|
||
|
|
(359
|
)
|
|
Total before tax
|
|
27
|
|
|
Total before tax
|
||
|
|
—
|
|
|
Tax expense (1)
|
|
—
|
|
|
Tax expense (1)
|
||
|
|
$
|
(359
|
)
|
|
Total, net of tax
|
|
$
|
27
|
|
|
Total, net of tax
|
(1)
|
Under our tax structure all hedging gains and losses from derivative contracts are ultimately borne by a legal entity in a jurisdiction with no income tax.
|
11.
|
Employee Benefit Plans
|
|
Options Outstanding
|
|||||
|
Number of shares
|
|
Weighted Average Exercise Price Per Share
|
|||
|
(in thousands)
|
|
(in dollars)
|
|||
December 31, 2013
|
4,165
|
|
|
$
|
30.11
|
|
Granted
|
—
|
|
|
—
|
|
|
Exercised
|
(167
|
)
|
|
24.27
|
|
|
Cancelled
|
(32
|
)
|
|
36.65
|
|
|
Expired
|
(76
|
)
|
|
35.95
|
|
|
March 30, 2014
|
3,890
|
|
|
$
|
30.19
|
|
|
RSUs Outstanding
|
|||||
|
Number of shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
|
(in thousands)
|
|
(in dollars)
|
|||
December 31, 2013
|
731
|
|
|
$
|
29.40
|
|
RSUs granted
|
23
|
|
|
31.03
|
|
|
RSUs vested
|
(3
|
)
|
|
27.95
|
|
|
RSUs cancelled
|
(22
|
)
|
|
28.70
|
|
|
March 30, 2014
|
729
|
|
|
$
|
29.37
|
|
|
Three Months Ended
|
|
|
March 31, 2013
|
|
Expected life (in years)
|
4.4
|
|
Risk-free interest rate
|
0.74
|
%
|
Expected volatility
|
50.3
|
%
|
Dividend yield
|
—
|
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
Cost of revenue
|
$
|
471
|
|
|
$
|
189
|
|
Research and development
|
1,396
|
|
|
672
|
|
||
Sales and marketing
|
1,949
|
|
|
1,230
|
|
||
General and administrative
|
1,314
|
|
|
1,499
|
|
||
Total stock-based compensation
|
$
|
5,130
|
|
|
$
|
3,590
|
|
12.
|
Segment Information, Operations by Geographic Area and Significant Customers
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
Net revenues:
|
|
|
|
||||
Retail
|
$
|
118,232
|
|
|
$
|
126,322
|
|
Commercial
|
78,863
|
|
|
70,851
|
|
||
Service provider
|
152,296
|
|
|
96,226
|
|
||
Total net revenues
|
349,391
|
|
|
293,399
|
|
||
Contribution income:
|
|
|
|
||||
Retail
|
$
|
14,683
|
|
|
$
|
18,618
|
|
Retail contribution margin
|
12.4
|
%
|
|
14.7
|
%
|
||
Commercial
|
19,540
|
|
|
13,811
|
|
||
Commercial contribution margin
|
24.8
|
%
|
|
19.5
|
%
|
||
Service Provider
|
13,519
|
|
|
9,491
|
|
||
Service Provider contribution margin
|
8.9
|
%
|
|
9.9
|
%
|
||
Total segment contribution income
|
47,742
|
|
|
41,920
|
|
||
Corporate and unallocated costs
|
(13,756
|
)
|
|
(12,466
|
)
|
||
Amortization of intangible assets (1)
|
(4,390
|
)
|
|
(1,471
|
)
|
||
Stock-based compensation expense
|
(5,130
|
)
|
|
(3,590
|
)
|
||
Restructuring and other charges
|
(842
|
)
|
|
30
|
|
||
Acquisition-related expense
|
(8
|
)
|
|
(710
|
)
|
||
Litigation reserves, net
|
(117
|
)
|
|
(48
|
)
|
||
Interest income
|
57
|
|
|
149
|
|
||
Other (expense) income, net
|
(108
|
)
|
|
74
|
|
||
Income before income taxes
|
$
|
23,448
|
|
|
$
|
23,888
|
|
(1)
|
Amount excludes amortization expense related to patents within purchased intangible assets in costs of revenues.
|
|
Three Months Ended
|
||||||
|
March 30,
2014 |
|
March 31,
2013 |
||||
United States
|
$
|
190,276
|
|
|
$
|
153,713
|
|
Americas (excluding U.S.)
|
4,503
|
|
|
2,963
|
|
||
United Kingdom
|
41,200
|
|
|
40,858
|
|
||
EMEA (excluding U.K.)
|
65,593
|
|
|
66,267
|
|
||
APAC
|
47,819
|
|
|
29,598
|
|
||
Total net revenue
|
$
|
349,391
|
|
|
$
|
293,399
|
|
|
March 30,
2014 |
|
December 31,
2013 |
||||
United States
|
$
|
9,802
|
|
|
$
|
10,273
|
|
Americas (excluding U.S.)
|
1,976
|
|
|
2,160
|
|
||
EMEA
|
903
|
|
|
914
|
|
||
China
|
11,561
|
|
|
11,905
|
|
||
APAC (excluding China)
|
1,763
|
|
|
1,942
|
|
||
|
$
|
26,005
|
|
|
$
|
27,194
|
|
13.
|
Fair Value Measurements
|
|
As of March 30, 2014
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Cash equivalents—money-market funds
|
$
|
9,099
|
|
|
$
|
9,099
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities—U.S. Treasuries (1)
|
109,959
|
|
|
109,959
|
|
|
—
|
|
|
—
|
|
||||
Available-for-sale securities—Certificates of Deposit (1)
|
174
|
|
|
174
|
|
|
—
|
|
|
—
|
|
||||
Trading securities- Mutual Funds (1)
|
472
|
|
|
472
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency forward contracts (2)
|
261
|
|
|
—
|
|
|
261
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
119,965
|
|
|
$
|
119,704
|
|
|
$
|
261
|
|
|
$
|
—
|
|
(1)
|
Included in short-term investments on the Company’s unaudited condensed consolidated balance sheet.
|
(2)
|
Included in prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheet.
|
|
As of March 30, 2014
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Foreign currency forward contracts (3)
|
$
|
(1,192
|
)
|
|
$
|
—
|
|
|
$
|
(1,192
|
)
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
(1,192
|
)
|
|
$
|
—
|
|
|
$
|
(1,192
|
)
|
|
$
|
—
|
|
(3)
|
Included in other accrued liabilities on the Company’s unaudited condensed consolidated balance sheet.
|
|
As of December 31, 2013
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Cash equivalents—money-market funds
|
$
|
31,295
|
|
|
$
|
31,295
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities—Treasuries (1)
|
104,601
|
|
|
104,601
|
|
|
—
|
|
|
—
|
|
||||
Available-for-sale securities-Certificates of Deposit (1)
|
159
|
|
|
159
|
|
|
—
|
|
|
—
|
|
||||
Trading securities - Mutual Funds (1)
|
385
|
|
|
385
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency forward contracts (2)
|
905
|
|
|
—
|
|
|
905
|
|
|
—
|
|
||||
Total assets measured at fair value
|
$
|
137,345
|
|
|
$
|
136,440
|
|
|
$
|
905
|
|
|
$
|
—
|
|
(1)
|
Included in short-term investments on the Company’s unaudited condensed consolidated balance sheet.
|
(2)
|
Included in prepaid expenses and other current assets on the Company’s unaudited condensed consolidated balance sheet.
|
|
As of December 31, 2013
|
||||||||||||||
|
Total
|
|
Quoted market
prices in active
markets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Foreign currency forward contracts (3)
|
$
|
(381
|
)
|
|
$
|
—
|
|
|
$
|
(381
|
)
|
|
$
|
—
|
|
Total liabilities measured at fair value
|
$
|
(381
|
)
|
|
$
|
—
|
|
|
$
|
(381
|
)
|
|
$
|
—
|
|
(3)
|
Included in other accrued liabilities on the Company’s unaudited condensed consolidated balance sheet.
|
14.
|
Shipping and Handling Fees and Costs
|
15.
|
Restructuring and Other Charges
|
|
Accrued Restructuring and Other Charges at December 31, 2013
|
|
Additions
|
|
Cash Payments
|
|
Adjustments
|
|
Accrued Restructuring and Other Charges at March 30, 2014
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Restructuring
|
$
|
1,013
|
|
|
$
|
844
|
|
|
$
|
(952
|
)
|
|
$
|
(8
|
)
|
|
$
|
897
|
|
Acquisition transition costs
|
10
|
|
|
6
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|||||
Restructuring and other charges
|
$
|
1,023
|
|
|
$
|
850
|
|
|
$
|
(968
|
)
|
|
$
|
(8
|
)
|
|
$
|
897
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(In thousands, except percentage data)
|
|||||||||
Net revenue
|
$
|
349,391
|
|
|
19.1
|
%
|
|
$
|
293,399
|
|
Cost of revenue
|
251,466
|
|
|
22.3
|
%
|
|
205,662
|
|
||
Gross profit
|
97,925
|
|
|
11.6
|
%
|
|
87,737
|
|
||
Operating expenses:
|
|
|
|
|
|
|||||
Research and development
|
22,181
|
|
|
44.6
|
%
|
|
15,338
|
|
||
Sales and marketing
|
39,911
|
|
|
9.7
|
%
|
|
36,389
|
|
||
General and administrative
|
11,375
|
|
|
(7.7
|
)%
|
|
12,327
|
|
||
Restructuring and other charges
|
842
|
|
|
**
|
|
|
(30
|
)
|
||
Litigation reserves, net
|
117
|
|
|
143.8
|
%
|
|
48
|
|
||
Total operating expenses
|
74,426
|
|
|
16.2
|
%
|
|
64,072
|
|
||
Income from operations
|
23,499
|
|
|
(0.7
|
)%
|
|
23,665
|
|
||
Interest income
|
57
|
|
|
(61.7
|
)%
|
|
149
|
|
||
Other income, net
|
(108
|
)
|
|
**
|
|
|
74
|
|
||
Income before income taxes
|
23,448
|
|
|
(1.8
|
)%
|
|
23,888
|
|
||
Provision for income taxes
|
9,037
|
|
|
5.8
|
%
|
|
8,545
|
|
||
Net income
|
$
|
14,411
|
|
|
(6.1
|
)%
|
|
$
|
15,343
|
|
|
Three Months Ended
|
||||
|
March 30,
2014 |
|
March 31,
2013 |
||
Net revenue
|
100
|
%
|
|
100
|
%
|
Cost of revenue
|
72.0
|
%
|
|
70.1
|
%
|
Gross margin
|
28.0
|
%
|
|
29.9
|
%
|
Operating expenses:
|
|
|
|
||
Research and development
|
6.3
|
%
|
|
5.2
|
%
|
Sales and marketing
|
11.5
|
%
|
|
12.4
|
%
|
General and administrative
|
3.3
|
%
|
|
4.2
|
%
|
Restructuring and other charges
|
0.2
|
%
|
|
0.0
|
%
|
Litigation reserves, net
|
0.0
|
%
|
|
0.0
|
%
|
Total operating expenses
|
21.3
|
%
|
|
21.8
|
%
|
Income from operations
|
6.7
|
%
|
|
8.1
|
%
|
Interest income
|
0.0
|
%
|
|
0.0
|
%
|
Other income, net
|
0.0
|
%
|
|
0.0
|
%
|
Income before income taxes
|
6.7
|
%
|
|
8.1
|
%
|
Provision for income taxes
|
2.6
|
%
|
|
2.9
|
%
|
Net income
|
4.1
|
%
|
|
5.2
|
%
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(In thousands, except percentage data)
|
|||||||||
Americas
|
$
|
194,779
|
|
|
24.3
|
%
|
|
$
|
156,676
|
|
Percentage of net revenue
|
55.7
|
%
|
|
|
|
53.4
|
%
|
|||
EMEA
|
$
|
106,793
|
|
|
(0.3
|
)%
|
|
$
|
107,125
|
|
Percentage of net revenue
|
30.6
|
%
|
|
|
|
36.5
|
%
|
|||
APAC
|
$
|
47,819
|
|
|
61.6
|
%
|
|
$
|
29,598
|
|
Percentage of net revenue
|
13.7
|
%
|
|
|
|
10.1
|
%
|
|||
Total net revenue
|
$
|
349,391
|
|
|
19.1
|
%
|
|
$
|
293,399
|
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(In thousands, except percentage data)
|
|||||||||
Cost of revenue
|
$
|
251,466
|
|
|
22.3
|
%
|
|
$
|
205,662
|
|
Gross margin percentage
|
28.0
|
%
|
|
|
|
29.9
|
%
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(In thousands, except percentage data)
|
|||||||||
Research and development expense
|
$
|
22,181
|
|
|
44.6
|
%
|
|
$
|
15,338
|
|
Percentage of net revenue
|
6.3
|
%
|
|
|
|
5.2
|
%
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(In thousands, except percentage data)
|
|||||||||
Sales and marketing expense
|
$
|
39,911
|
|
|
9.7
|
%
|
|
$
|
36,389
|
|
Percentage of net revenue
|
11.5
|
%
|
|
|
|
12.4
|
%
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(In thousands, except percentage data)
|
|||||||||
General and administrative expense
|
$
|
11,375
|
|
|
(7.7
|
)%
|
|
$
|
12,327
|
|
Percentage of net revenue
|
3.3
|
%
|
|
|
|
4.2
|
%
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(In thousands, except percentage data)
|
|||||||||
Interest income
|
$
|
57
|
|
|
(61.7
|
)%
|
|
$
|
149
|
|
Other (expense) income, net
|
(108
|
)
|
|
**
|
|
|
74
|
|
||
Total interest income and other income, net
|
$
|
(51
|
)
|
|
**
|
|
|
$
|
223
|
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
( in thousands, except percentage data)
|
|||||||||
Net revenue
|
$
|
118,232
|
|
|
(6.4
|
)%
|
|
$
|
126,322
|
|
Percentage of net revenue
|
33.8
|
%
|
|
|
|
43.1
|
%
|
|||
Contribution income
|
$
|
14,683
|
|
|
(21.1
|
)%
|
|
$
|
18,618
|
|
Contribution margin
|
12.4
|
%
|
|
|
|
14.7
|
%
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
(in thousands, except percentage data)
|
|||||||||
Net revenue
|
$
|
78,863
|
|
|
11.3
|
%
|
|
$
|
70,851
|
|
Percentage of net revenue
|
22.6
|
%
|
|
|
|
24.1
|
%
|
|||
Contribution income
|
$
|
19,540
|
|
|
41.5
|
%
|
|
$
|
13,811
|
|
Contribution margin
|
24.8
|
%
|
|
|
|
19.5
|
%
|
|
Three Months Ended
|
|||||||||
|
March 30,
2014 |
|
% Change
|
|
March 31,
2013 |
|||||
|
( in thousands, except percentage data)
|
|||||||||
Net revenue
|
$
|
152,296
|
|
|
58.3
|
%
|
|
$
|
96,226
|
|
Percentage of net revenue
|
43.6
|
%
|
|
|
|
32.8
|
%
|
|||
Contribution income
|
$
|
13,519
|
|
|
42.4
|
%
|
|
$
|
9,491
|
|
Contribution margin
|
8.9
|
%
|
|
|
|
9.9
|
%
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
changes in the pricing policies of or the introduction of new products by us or our competitors;
|
•
|
unanticipated shift or decline in profit by geographical region that would adversely impact our tax rate;
|
•
|
slow or negative growth in the networking product, personal computer, Internet infrastructure, home electronics and related technology markets, as well as decreased demand for Internet access;
|
•
|
operational disruptions, such as transportation delays or failure of our order processing system, particularly if they occur at the end of a fiscal quarter;
|
•
|
geopolitical disruption leading to delay or even stoppage of our operations in manufacturing, transportation, technical support and research and development;
|
•
|
delay or failure of our service provider customers to purchase at the volumes that they forecast;
|
•
|
foreign currency exchange rate fluctuations in the jurisdictions where we transact sales and expenditures in local currency;
|
•
|
changes in or consolidation of our sales channels and wholesale distributor relationships or failure to manage our sales channel inventory and warehousing requirements;
|
•
|
delay or failure to fulfill orders for our products on a timely basis;
|
•
|
allowance for bad debts exposure with our existing customers and new customers, particularly as we expand into new international markets;
|
•
|
disruptions or delays related to our financial and enterprise resource planning systems;
|
•
|
our inability to accurately forecast product demand, particularly from our service provider sales channel, resulting in increased inventory exposure;
|
•
|
component supply constraints from our vendors;
|
•
|
unfavorable level of inventory and turns;
|
•
|
shift in overall product mix sales from higher to lower margin products, or from one business unit to another, that would adversely impact our margins;
|
•
|
terms of our contracts with customers or suppliers that cause us to incur additional expenses or assume additional liabilities;
|
•
|
the inability to maintain stable operations by our suppliers and other parties with which we have commercial relationships;
|
•
|
delays in the introduction of new products by us or market acceptance of these products;
|
•
|
an increase in price protection claims, redemptions of marketing rebates, product warranty and stock rotation returns or allowance for doubtful accounts;
|
•
|
litigation involving alleged patent infringement;
|
•
|
epidemic or widespread product failure, or unanticipated safety issues, in one or more of our products;
|
•
|
challenges associated with integrating acquisitions that we make, or with realizing value from our strategic investments in other companies;
|
•
|
failure to effectively manage our third party customer support partners which may result in customer complaints and/or harm to the NETGEAR brand;
|
•
|
our inability to monitor and ensure compliance with our anti-corruption compliance program and domestic and international anti-corruption laws and regulations, whether in relation to our employees or with our suppliers or customers;
|
•
|
labor unrest at facilities managed by our third-party manufacturers;
|
•
|
seasonal shifts in end market demand for our products, particularly in our retail business;
|
•
|
unanticipated increase in costs, including air freight, associated with shipping and delivery of our products;
|
•
|
our failure to implement and maintain the appropriate internal controls over financial reporting which may result in restatements of our financial statements; and
|
•
|
any changes in accounting rules.
|
•
|
actual or anticipated fluctuations in our operating results or our competitors' operating results;
|
•
|
actual or anticipated changes in the growth rate of the general networking sector, our growth rates or our competitors' growth rates;
|
•
|
conditions in the financial markets in general or changes in general economic conditions, including government efforts to stabilize currencies;
|
•
|
interest rate or currency exchange rate fluctuations;
|
•
|
our ability to report accurate financial results in our periodic reports filed with the SEC;
|
•
|
our ability or inability to raise additional capital; and
|
•
|
changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally.
|
•
|
loss of or delay in revenue and loss of market share;
|
•
|
negative publicity and damage to our reputation and brand;
|
•
|
a decline in the average selling price of our products;
|
•
|
adverse reactions in our sales channels, such as reduced shelf space, reduced online product visibility, or loss of sales channel; and
|
•
|
increased levels of product returns.
|
•
|
our reseller agreements generally do not require substantial minimum purchases;
|
•
|
our customers can stop purchasing and our resellers can stop marketing our products at any time; and
|
•
|
our reseller agreements generally are not exclusive.
|
•
|
integrating the companies, assets, systems, products, sales channels and personnel that we acquire;
|
•
|
higher than anticipated acquisition and integration costs and expenses;
|
•
|
reliance on third parties to provide transition services for a period of time after closing to ensure an orderly transition of the business;
|
•
|
growing or maintaining revenues to justify the purchase price and the increased expenses associated with acquisitions;
|
•
|
entering into territories or markets with which we have limited or no prior experience;
|
•
|
establishing or maintaining business relationships with customers, vendors and suppliers who may be new to us;
|
•
|
overcoming the employee, customer, vendor and supplier turnover that may occur as a result of the acquisition;
|
•
|
disruption of, and demands on, our ongoing business as a result of integration activities including diversion of management's time and attention from running the day to day operations of our business;
|
•
|
inability to implement uniform standards, disclosure controls and procedures, internal controls over financial reporting and other procedures and policies in a timely manner;
|
•
|
inability to realize the anticipated benefits of or successfully integrate with our existing business the businesses, products, technologies or personnel that we acquire; and
|
•
|
potential post-closing disputes.
|
•
|
changes in the regulatory environment;
|
•
|
changes in accounting and tax standards or practices;
|
•
|
changes in the composition of operating income by tax jurisdiction; and
|
•
|
our operating results before taxes.
|
•
|
unexpected increases in manufacturing and repair costs;
|
•
|
inability to control the quality and reliability of finished products;
|
•
|
inability to control delivery schedules;
|
•
|
potential liability for expenses incurred by third-party manufacturers in reliance on our forecasts that later prove to be inaccurate;
|
•
|
potential lack of adequate capacity to manufacture all or a part of the products we require; and
|
•
|
potential labor unrest affecting the ability of the third-party manufacturers to produce our products.
|
•
|
political and economic instability, international terrorism and anti-American sentiment, particularly in emerging markets;
|
•
|
potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud;
|
•
|
preference for locally branded products, and laws and business practices favoring local competition;
|
•
|
exchange rate fluctuations;
|
•
|
increased difficulty in managing inventory;
|
•
|
delayed revenue recognition;
|
•
|
less effective protection of intellectual property;
|
•
|
stringent consumer protection and product compliance regulations, including but not limited to the Restriction of Hazardous Substances directive, the Waste Electrical and Electronic Equipment directive and the recently enacted European Ecodesign directive, or EuP, that are costly to comply with and may vary from country to country;
|
•
|
difficulties and costs of staffing and managing foreign operations;
|
•
|
business difficulties, including potential bankruptcy or liquidation, of any of our worldwide third party logistics providers; and
|
•
|
changes in local tax laws or changes in the enforcement, application or interpretation of such laws.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of
Shares Purchased (2)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|
|||||
January 1, 2014 - January 26, 2014
|
|
35,734
|
|
|
$
|
32.64
|
|
|
35,734
|
|
|
2,790,554
|
|
January 27, 2014 - February 23, 2014
|
|
459,846
|
|
|
$
|
32.04
|
|
|
458,993
|
|
|
2,331,561
|
|
February 24, 2014 - March 30, 2014
|
|
174
|
|
|
$
|
33.69
|
|
|
—
|
|
|
2,331,561
|
|
Total
|
|
495,754
|
|
|
$
|
32.09
|
|
|
494,727
|
|
|
|
1.
|
On October 21, 2008, the Board of Directors authorized the repurchase of up to
6,000,000
shares of our outstanding common stock. Under this authorization, the timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, such as levels of cash generation from operations, cash requirements for acquisitions and the price of our common stock. During the three months ended
March 30, 2014
, we repurchased and retired approximately 0.5 million shares, or $15.9 million of common stock under this authorization and we did not repurchase any shares during the three months ended March 31, 2013.
|
2.
|
We repurchased approximately
1,000
shares, or
$33,000
of common stock to help administratively facilitate the withholding and subsequent remittance of personal income and payroll taxes for individuals receiving RSUs during the three months ended
March 30, 2014
.
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit
Number
|
|
Description
|
3.3
|
|
Amended and Restated Certificate of Incorporation of the registrant (Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333-104419), which the Securities and Exchange Commission declared effective on July 30, 2003)
|
3.5
|
|
Amended and Restated Bylaws of the registrant (Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333-104419), which the Securities and Exchange Commission declared effective on July 30, 2003)
|
4.1
|
|
Form of registrant's common stock certificate(Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333-104419), which the Securities and Exchange Commission declared effective on July 30, 2003)
|
10.1
|
|
Change of Control and Severance Agreement dated October 5, 2009 by and between NETGEAR, Inc. and Andrew W. Kim
|
10.2
|
|
Separation Agreement and Mutual Release, dated February 26, 2014, between NETGEAR, Inc. and David S.G. Soares
(1)
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
|
32.1
|
|
Section 1350 Certification of Principal Executive Officer
|
32.2
|
|
Section 1350 Certification of Principal Financial Officer
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
(1)
|
|
Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on February 26, 2014 with the Securities and Exchange Commission.
|
NETGEAR, INC.
|
Registrant
|
/s/ CHRISTINE M. GORJANC
|
Christine M. Gorjanc
|
Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
Exhibit
Number
|
|
Description
|
3.3
|
|
Amended and Restated Certificate of Incorporation of the registrant (Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333-104419), which the Securities and Exchange Commission declared effective on July 30, 2003)
|
3.5
|
|
Amended and Restated Bylaws of the registrant (Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333-104419), which the Securities and Exchange Commission declared effective on July 30, 2003)
|
4.1
|
|
Form of registrant's common stock certificate(Incorporated by reference to an exhibit filed with the Registrant's Registration Statement on Form S-1 (Registration Statement 333-104419), which the Securities and Exchange Commission declared effective on July 30, 2003)
|
10.1
|
|
Change of Control and Severance Agreement dated October 5, 2009 by and between NETGEAR, Inc. and Andrew W. Kim
|
10.2
|
|
Separation Agreement and Mutual Release, dated February 26, 2014, between NETGEAR, Inc. and David S.G. Soares(1)
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
|
32.1
|
|
Section 1350 Certification of Principal Executive Officer
|
32.2
|
|
Section 1350 Certification of Principal Financial Officer
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
(1)
|
|
Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on February 26, 2014 with the Securities and Exchange Commission.
|
1.
|
Duties and Scope of Employment
.
|
6.
|
Severance
.
|
8.
|
Change of Control/Good Reason
.
|
(i)
|
a material decrease in your target annual compensation; or
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of NETGEAR, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ PATRICK C.S. LO
|
|
Patrick C.S. Lo
|
|
Chairman and
|
|
Chief Executive Officer
|
|
NETGEAR, Inc.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of NETGEAR, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
|
/s/ CHRISTINE M. GORJANC
|
|
Christine M. Gorjanc
|
|
Chief Financial Officer
|
|
NETGEAR, Inc.
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By:
|
|
/s/ PATRICK C.S. LO
|
|
|
Patrick C.S. Lo
|
|
|
Chairman and
|
|
|
Chief Executive Officer
|
|
|
NETGEAR, Inc.
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
By:
|
|
/s/ CHRISTINE M. GORJANC
|
|
|
Christine M. Gorjanc
|
|
|
Chief Financial Officer
|
|
|
NETGEAR, Inc.
|