Netgear 2006 Annual Report Download - page 65

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Table of Contents
NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The pro forma table below reflects net income and basic and diluted net income per share for the years ended
December 31, 2004 and 2005, had the Company applied the fair value recognition provisions of SFAS 123, as
follows (in thousands, except per share data):
As of December 31, 2006, the Company has the following share-based compensation plans:
2000 Stock Option Plan
In April 2000, the Company adopted the 2000 Stock Option Plan (the “2000 Plan”). The 2000 Plan provides for
the granting of stock options to employees and consultants of the Company. Options granted under the 2000 Plan
may be either incentive stock options or nonqualified stock options. Incentive stock options (“ISO”) may be granted
only to Company employees (including officers and directors who are also employees). Nonqualified stock options
(“NSO”)
may be granted to Company employees, directors and consultants. 7,350,000 shares of Common Stock have
been reserved for issuance under the 2000 Plan.
Options under the 2000 Plan may be granted for periods of up to ten years and at prices no less than the
estimated fair value of the shares on the date of grant as determined by the Board of Directors, provided, however,
that (i) the exercise price of an ISO and NSO shall not be less than the estimated fair value of the shares on the date
of grant and (ii) the exercise price of an ISO and NSO granted to a 10% shareholder shall not be less than 110% of
the estimated fair value of the shares on the date of grant. To date, options granted generally vest over four years.
2003 Stock Plan
In April 2003, the Company adopted the 2003 Stock Plan (the “2003 Plan”). The 2003 Plan provides for the
granting of stock options to employees and consultants of the Company. Options granted under the 2003 Plan may be
either incentive stock options or nonqualified stock options. ISOs may be granted only to Company employees
(including officers and directors who are also employees). NSOs may be granted to Company employees, directors
61
Year Ended
December 31,
2004
2005
Net income, as reported
$
23,465
$
33,623
Add:
Employee stock
-
based compensation included in reported net income
1,687
1,064
Less:
Total employee stock-based compensation determined under fair value method, net of taxes
(1)
(4,329
)
(9,684
)
Pro forma net income
$
20,823
$
25,003
Basic net income per share:
As reported
$
0.77
$
1.04
Pro forma
$
0.68
$
0.77
Diluted net income per share:
As reported
$
0.72
$
0.99
Pro forma
$
0.64
$
0.74
(1)
Of the 1,144,050 options granted during the year ended December 31, 2005, 964,100 were sales-restricted
options that vested immediately on grant. These options had a fair value of $6.1 million, net of taxes. No such
options were granted in 2004.