Netgear 2004 Annual Report Download - page 33

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Table of Contents
the valuation allowance on deferred tax assets of $3.8million, arising from, among other factors, the utilization of net operating loss tax
carry forwards.
Net Income
Net income increased $5.0million, to $13.1million for the year ended December31, 2003 from $8.1million for the year ended December31,
2002. This increase was due to an increase in gross profit of $23.6million, a benefit in the income tax provision of $4.9million, offset by a
charge for the extinguishment of debt, related to a note payable to Nortel Networks, of $5.9million and an increase in operating
expenses of $18.2million.
Liquidity and Capital Resources
As of December31, 2004 we had cash, cash equivalents and short-term investments totaling $141.7million.
Our cash and cash equivalents balance increased from $27.7million as of December31, 2003 to $65.1million as of December31, 2004.
Operating activities during the year ended December31, 2004 generated cash of $57.3million. Investing activities during the year ended
December31, 2004 used $33.3million primarily for the net purchase of short-term investments of $30.8million and purchases of property
and equipment amounting to $2.5million. During the year ended December31, 2004, financing activities provided $13.3million, primarily
resulting from the issuance of common stock upon exercise of stock options and our employee stock purchase program.
Our days sales outstanding decreased from 80days as of December31, 2003 to 70days as of December31, 2004. This decrease was
attributable primarily to changes in geographical and channel mix as well as improved collections.
Our accounts payable increased from $30.9million at December31, 2003 to $52.7million at December31, 2004. The increase of
$21.9million is due to the timing of inventory receipts including inventory that is in-transit from our vendors as of December31, 2004.
The increase in in-transit inventory is to support the revenue growth.
Inventory grew by $14.3million from $39.3million at December31, 2003 to $53.6million at December31, 2004, to support increased
product shipments to customers. The primary areas of growth were finished goods of $8.6million and in-transit inventory of $7.2million.
In the quarter ended December31, 2004 we experienced inventory turns of approximately 5.3 times, down from approximately 6.3 times
in the quarter ended December31, 2003.
Based on our current plans and market conditions, we believe that our existing cash, cash equivalents and short-term investments will
be sufficient to satisfy our anticipated cash requirements for at least the next twelve months. However, we cannot be certain that our
planned levels of revenue, costs and expenses will be achieved. If our operating results fail to meet our expectations or if we fail to
manage our inventory, accounts receivable or other assets, we could be required to seek additional funding through public or private
financings or other arrangements. In addition, as we continue to expand our product offerings, channels and geographic presence, we
may require additional working capital. In such event, adequate funds may not be available when needed or may not be available on
favorable or commercially acceptable terms, which could have a negative effect on our business and results of operations.
Backlog
As of December31, 2004, we had a backlog of approximately $13.5million compared to approximately $11.5million as of December31,
2003. Our backlog consists of products for which customer purchase orders have been received and which are scheduled or in the
process of being scheduled for shipment. While we expect to fulfill the order backlog within the current year, most orders are subject to
rescheduling or cancellation with little or no penalties. Because of the possibility of customer changes in product scheduling or
21
2005. EDGAR Online, Inc.