Netgear 2011 Annual Report Download - page 109

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Table of Contents
The Company believes this new structure enables it to better focus its efforts on the Company’
s core customer segments and allows it to be
more nimble and opportunistic as a company overall. The business units are determined in accordance with how management views and
evaluates the Company’s business and based on the criteria as outlined in the authoritative guidance. As a result, beginning in the second fiscal
quarter of 2011, the Company changed its segment reporting accordingly, and revised its prior period presentation to conform to the new
segments.
The results of the reportable segments are derived directly from the Company’
s management reporting system. The results are based on the
Company’s method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United
States. Management measures the performance of each segment based on several metrics, including contribution income. Refer to the
reconciliation of segment information to the Company’s consolidated totals below to see the reconciliation of segment data to earnings prepared
in conformity with accounting principles generally accepted in the United States.
Asset data is not reviewed by the Company’s CODM at the segment level and therefore is not presented. Discrete financial information on
individual products and services within the respective segments is not reviewed by the Company’
s CODM, and therefore a separate disclosure of
similar classes of products and services below the segment level is not presented. Financial information for each reportable segment and a
reconciliation of segment contribution income to income before income taxes is as follows (in thousands, except percentage data):
Segment contribution income includes all product line segment revenues less the related cost of sales, research and development and sales
and marketing costs. Contribution income is used, in part, to evaluate the performance of, and allocate resources to, each of the segments.
Certain operating expenses are not allocated to
105
Year Ended December 31,
2011
2010
2009
Net revenues:
Retail
$
481,795
$
435,484
$
288,728
Commercial
331,439
284,539
209,953
Service Provider
367,784
182,029
187,914
Total net revenues
1,181,018
902,052
686,595
Contribution income:
Retail
$
81,589
$
71,862
$
24,901
Retail contribution margin
16.9
%
16.5
%
8.6
%
Commercial
74,746
63,021
43,255
Commercial contribution margin
22.6
%
22.1
%
20.6
%
Service Provider
32,797
14,026
19,697
Service Provider contribution margin
8.9
%
7.7
%
10.5
%
Total segment contribution income
189,132
148,909
87,853
Corporate and unallocated costs
(43,301
)
(39,244
)
(34,248
)
Amortization of intangible assets
(4,658
)
(5,293
)
(5,013
)
Stock
-
based compensation expense
(13,762
)
(12,201
)
(11,024
)
Restructuring and other charges
(2,094
)
88
(809
)
Technology license agreements
—
—
(
2,500
)
Acquisition related compensation
(40
)
(686
)
(113
)
Impact to cost of sales from acquisition accounting adjustments to
inventory
(609
)
—
—
Litigation reserves, net
201
(211
)
(2,080
)
Interest income
477
426
629
Other income (expense), net
(1,136
)
(564
)
(128
)
Income before income taxes
$
124,210
$
91,224
$
32,567