Netgear 2009 Annual Report Download - page 48

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Table of Contents
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 expenses.
2009 Interest Income and Other Income (Expense) Compared to 2008 Interest Income and Other Income (Expense)
The aggregate of interest income, interest expense, other income, and other expense amounted to net other income of $501,000 for the year
ended December 31, 2009, compared to net other expense of $4.0 million for the year ended December 31, 2008. We recorded a net foreign
exchange loss of $8.4 million during the year ended December 31, 2008 due to the continued strengthening of the U.S. dollar against the euro,
the British pound, the Australian dollar and the Japanese yen during 2008. We implemented a hedging program in November 2008, and therefore
the impact of fluctuations in currency decreased significantly during the year ended December 31, 2009, resulting in a decrease in net foreign
exchange losses of $8.3 million. This decrease in net other expense is partially offset by decrease in interest income of $3.7 million, which is a
result of a decrease in interest rates on our cash, cash equivalents, and short-term investments balances during the year.
2008 Interest Income and Other Income (Expense) Compared to 2007 Interest Income and Other Income (Expense)
The aggregate of interest income, interest expense, other income, and other expense amounted to net other expense of $4.0 million for the
year ended December 31, 2008, compared to net other income of $11.7 million for the year ended December 31, 2007. The decrease is partially
due to a $4.1 million decrease in interest income, which is a result of a decrease in interest rates on our cash, cash equivalents, and short-term
investments balances during the year. We also recorded a net foreign exchange loss of $8.4 million due to the continued strengthening of the
U.S. dollar against the euro, the British pound, the Australian dollar and the Japanese yen during 2008, which was a reversal of the weakening
U.S. dollar trend experienced in 2007.
Provision for Income Taxes
2009 Provision for Income Taxes Compared to 2008 Provision for Income Taxes
Provision for income taxes decreased $4.1 million, resulting in a provision of $23.2 million for the year ended December 31, 2009,
compared to a provision of $27.3 million for the year ended December 31, 2008. The effective tax rate increased from 60.2% for the year ended
December 31, 2008 to 71.3% for the year ended December 31, 2009. The effective tax rate for both periods differed from the statutory rate of
35% due to non-deductible stock-based compensation, state taxes, other non-deductible expenses, and tax credits. Additionally, in 2009 tax
attributable to foreign operations increased the effective tax rate by 28.4 percentage points compared to an increase of 19.4 percentage points for
2008. This was primarily caused by the tax effect of non-deductible losses in foreign jurisdictions where no benefit can be claimed as well as
increases in earnings in countries with rates higher than 35%.
46
Year Ended December 31,
2009
2008
2007
(In thousands)
Interest income and other income (expense)
Interest income, net
$
629
$
4,336
$
8,426
Other income (expense), net
(128
)
(8,384
)
3,298
Total interest income and other income (expense)
$
501
$
(4,048
)
$
11,724