Netgear 2012 Annual Report Download - page 55

Table of Contents
We are exposed to risks associated with foreign exchange rate fluctuations due to our international sales and operating activities. These
exposures may change over time as business practices evolve and could negatively impact our operating results and financial condition. We began
using foreign currency forward contract derivatives in the fourth quarter of 2008 to partially offset our business exposure to foreign exchange risk on
our foreign currency denominated assets and liabilities. Additionally, in the second quarter of 2009 we began entering into certain foreign currency
forward contracts that have been designated as cash flow hedges under the authoritative guidance for derivatives and hedging to partially offset our
business exposure to foreign exchange risk on portions of our anticipated foreign currency revenue, costs of revenue, and certain operating expenses.
The objective of these foreign currency forward contracts is to reduce the impact of currency exchange rate movements on our operating results by
offsetting gains and losses on the forward contracts with increases or decreases in foreign currency transactions. The contracts are marked-to-
market
on a monthly basis with gains and losses included in other income (expense), net in the Consolidated Statements of Operations, and in cumulative
other comprehensive income on the Consolidated Balance Sheets. We do not use foreign currency contracts for speculative or trading purposes.
Hedging of our balance sheet and anticipated cash flow exposures may not always be effective to protect us against currency exchange rate
fluctuations. In addition, we do not fully hedge our balance sheet and anticipated cash flow exposures, leaving us at risk to foreign exchange gains
and losses on the un-
hedged exposures. If there were an adverse movement in exchange rates, we might suffer significant losses. See Note 5,
Derivative Financial Instruments,
of the Notes to Consolidated Financial Statements for additional disclosure on our foreign currency contracts,
which are hereby incorporated by reference into this Part II, Item 7A.
As of December 31, 2012
, we had net assets in various local currencies. A hypothetical 10% movement in foreign exchange rates would result
in an after-tax positive or negative impact of $1.2 million to net income, net of our hedged position, at December 31, 2012
. Actual future gains and
losses associated with our foreign currency exposures and positions may differ materially from the sensitivity analyses performed as of December 31,
2012
due to the inherent limitations associated with predicting the foreign currency exchange rates, and our actual exposures and positions. For the
year ended December 31, 2012 , 7% of total net revenue was denominated in a currency other than the U.S. dollar.
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