Netgear 2012 Annual Report Download - page 49

Table of Contents
December 31, 2011. In addition, we incurred $464,000 in transition services in connection with the acquisition of the Customer Networking
Solutions division of Westell Technologies, Inc. during the year ended December 31, 2011.
For a further discussion of restructuring and other charges, refer to Note 4, Restructuring and Other Charges
, in the Notes to Consolidated
Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
Litigation Reserves and Payments
During the year ended December 31, 2012 , we recorded a litigation reserve of $0.4 million
for estimated costs related to the settlement of
potential lawsuits or lawsuits already filed against us. For a detailed discussion of our litigation matters, refer to Note 9,
Commitments and
Contingencies , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
During the year ended December 31, 2011, we recorded a litigation reserve benefit of $201,000 for estimated costs related to the settlement of
potential lawsuits or lawsuits already filed against us. During the year ended December 31, 2010, we recorded a litigation reserve expense of
$211,000 for estimated costs related to the settlement of potential lawsuits or lawsuits already filed against us.
Interest Income and Other Income (Expense)
Interest income represents amounts earned on our cash, cash equivalents and short-
term investments. Other income (expense), net, primarily
represents gains and losses on transactions denominated in foreign currencies and other miscellaneous income and expenses. For details of our
hedging program and related foreign currency contracts, refer to Note 5, Derivative Financial Instruments
, in Notes to Consolidated Financial
Statements in Item 8 of Part II of this Annual Report on Form 10-K.
2012 vs 2011
Interest income increased $21,000 , or 4.4% , to $498,000 for the year ended December 31, 2012 , from $477,000 for the year ended
December 31, 2011 . The increase in interest income was primarily attributable to an increase in our average balance of cash, cash equivalents, and
short-term investments during the year ended December 31, 2012 , as compared to the year ended December 31, 2011 , which was partially offset by
falling interest rates.
Other income and expense, net, increased $3.8 million to income of $2.7 million for the year ended December 31, 2012 , from expense of
$1.1
million for year ended December 31, 2011
. The increase was primarily attributable to the $3.1 million gain on the sale of a cost method investment.
In addition, our foreign currency hedging program reduced volatility associated with hedged currency exchange rate movements during the year
ended December 31, 2012 .
2011 vs 2010
Interest income increased $51,000, or 12.0%, to $477,000 for the year ended December 31, 2011, from $426,000 for the year ended
December 31, 2010. The increase in interest income was primarily attributable to an increase in our average balance of cash, cash equivalents, and
short-
term investments during the year ended December 31, 2011, as compared to the year ended December 31, 2010, which was partially offset by
falling interest rates.
Other expense, net, increased $572,000 to expense of $1.1 million for year ended December 31, 2011, from expense of $564,000 for year ended
December 31, 2010. Our foreign currency hedging program reduced volatility associated with hedged currency exchange rate movements during the
year ended December 31, 2011. The expense of $1.1 million mainly related to forward points for hedged currency.
Provision for Income Taxes
2012 vs 2011
Provision for income taxes increased $9.9 million , resulting in a provision of $42.7 million for the year ended December 31, 2012
, compared
to a provision of $32.8 million for the year ended December 31, 2011 . The effective tax rate increased to 33.1% for the year ended
December 31,
2012 from 26.4% for the year ended December 31, 2011
. The effective tax rate for both periods differed from the statutory rate of 35% due to
earnings from foreign jurisdictions, state taxes and other non-deductible expenses. Non-
deductible expenses in the year ended December 31, 2012
included certain stock based compensation. For the year ended December 31, 2012, tax on earnings from foreign operations reduced the effective tax
rate by 4.8 percentage points compared to
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