Netgear 2010 Annual Report Download - page 54

Table of Contents
We enter into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of the orders are
cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45 days
prior to the expected shipment date. Orders are not cancelable within 30 days prior to the expected shipment date. At December 31, 2010, we
had $160.4 million in non-cancelable purchase commitments with suppliers. We expect to sell all products for which we have committed
purchases from suppliers.
We adopted the guidance related to the recognition and measurement of uncertain tax positions on January 1, 2007. As of December 31,
2010 and December 31, 2009, we had $19.8 million and $18.0 million, respectively, of total gross unrecognized tax benefits and related interest.
The timing of any payments that could result from these unrecognized tax benefits will depend upon a number of factors. Accordingly, the
timing of payment cannot be estimated. The possible reduction in liabilities for uncertain tax positions in multiple jurisdictions in the next 12
months is approximately $5.3 million, excluding the interest, penalties and the effect of any related deferred tax assets or liabilities.
Off-Balance Sheet Arrangements
As of December 31, 2010, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Recent Accounting Pronouncements
See Note 1 of the Notes to Consolidated Financial Statements for recent accounting pronouncements, which are hereby incorporated by
reference into this Part II, Item 7.
Interest Rate Risk
We do not use derivative financial instruments in our investment portfolio. We have an investment portfolio of fixed income securities that
are classified as “available-for-sale” securities. These securities, like all fixed income instruments, are subject to interest rate risk and will fall in
value if market interest rates increase. We attempt to limit this exposure by investing primarily in highly rated short-term securities. Our
investment policy requires investments to be rated triple-A with the objective of minimizing the potential risk of principal loss. Due to the short
duration and conservative nature of our investment portfolio, a movement of 10% by market interest rates would not have a material impact on
our operating results and the total value of the portfolio over the next fiscal year. We monitor our interest rate and credit risks, including our
credit exposure to specific rating categories and to individual issuers. There were no impairment charges on our investments during fiscal 2010.
Foreign Currency Transaction Risk
We invoice some of our international customers in foreign currencies including, but not limited to, the Australian dollar, British pound,
euro, and Japanese yen. As the customers that are currently invoiced in local currency become a larger percentage of our business, or to the
extent we begin to bill additional customers in foreign currencies, the impact of fluctuations in foreign exchange rates could have a more
significant impact on our results of operations. For those customers in our international markets that we continue to sell to in U.S. dollars, an
increase in the value of the U.S. dollar relative to foreign currencies could make our products more expensive and therefore reduce the demand
for our products. Such a decline in the demand for our products could reduce sales and negatively impact our operating results. Certain operating
expenses of our foreign operations require payment in the local currencies.
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Item 7A.
Quantitative and Qualitative Disclosures About Market Risk