Netgear 2012 Annual Report Download - page 83

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
respectively. As of December 31, 2012 and December 31, 2011 , accrued interest and penalties on a gross basis was $1.8 million and $1.9 million
,
respectively. Included in accrued interest are amounts related to tax positions for which the ultimate deductibility is highly certain but for which there
is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest, the impact of any uncertain
tax benefits related to temporary differences would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing
authority to an earlier period.
With the exception of those foreign sales subsidiaries for which deferred tax has been provided, the Company intends to indefinitely reinvest
foreign earnings. These earnings were approximately $63.4 million and $40.2 million as of December 31, 2012 and December 31, 2011
,
respectively. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the income tax liability that would be payable if
such earnings were not indefinitely reinvested.
Note 9. Commitments and Contingencies
Leases
The Company leases office space, cars and equipment under non-cancelable operating leases with various expiration dates through
December
2026 . Rent expense in the years ended, December 31, 2012 , 2011 , and 2010 was $7.6 million , $7.0 million and $6.4 million
, respectively. The
terms of some of the Company’s office leases provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-
line basis over the lease period, and has accrued for rent expense incurred but not paid.
Future minimum lease payments under non-cancelable operating leases are as follows (in thousands):
Employment Agreements
The Company has signed various employment agreements with key executives pursuant to which, if their employment is terminated without
cause, such employees are entitled to receive their base salary (and commission or bonus, as applicable) for 52 weeks
(for the Chief Executive
Officer), 39 weeks (for the Senior Vice President of Worldwide Operations and Support) and up to 26 weeks
(for other key executives). Such
employees will also continue to have stock options vest for up to a one -
year period following such termination without cause. If a termination
without cause or resignation for good reason occurs within one year
of a change in control, such employees are entitled to full acceleration (for the
Chief Executive Officer) and up to two years acceleration (for other key executives) of any unvested portion of his or her stock options.
Purchase Obligations
The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50%
of 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 non-cancelable within 30 days prior to the expected shipment date. At December 31, 2012
, the
Company had $149.6 million in non-
cancelable purchase commitments with suppliers. The Company establishes a loss liability for all products it
does not expect to sell for which it has committed purchases from suppliers. Such losses have not been material to date.
79
Year Ending December 31,
2013
$
8,192
2014
6,547
2015
5,359
2016
4,242
2017
3,959
Thereafter
3,518
Total minimum lease payments
$
31,817