Netgear 2013 Annual Report Download - page 41

Table of Contents
During the fourth quarter of 2013, we incurred a restructuring charge of appropriately $3.2 million related to the consolidation of certain teams and
locations to drive efficiencies and realign resources to better focus on key growth markets. As always, we remain focused on long term growth driven by
our mission to connect everyone to the high speed Internet. We will continue to invest in the growth markets of the Smart Home, access networks for
cloud computing and LTE gateways.
We experienced revenue growth of 7.7% during fiscal year 2013
. The increase in net revenue was primarily attributable to increased sales of our
mobile products acquired through our acquisition of AirCard, home security monitoring and automation products, and switches, partially offset by a
decrease in sales of our broadband gateways. On a geographic basis, net revenue increased in the Americas and APAC regions, and decreased in the
EMEA region. On a segment basis, net revenues from all business units increased. The increase in service provider business unit net revenue was largely
driven by our mobile products acquired through our acquisition of AirCard. The increase in commercial business unit net revenue was primarily due to
increased sales of our switches. The increase in retail business unit net revenue was primarily due to increased sales of our multimedia products.
Looking forward, we expect to see continued success in our retail business unit, driven by sales of our high-
end AC WiFi router, which will
expand to both Europe and Asia, and our two new range extenders, which will be introduced worldwide in the first quarter of 2014. We also expect to
see growth in our commercial business unit, driven by our 10Gig and PoE switches as well as high end storage products. In addition, we remain positive
on the product opportunities from combining AirCard’s engineering strength in LTE and NETGEAR’s strength in WiFi.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America and pursuant to the rules and regulations of the SEC. The preparation of these financial statements requires management to make assumptions,
judgments and estimates that can have a significant impact on the reported amounts of assets, liabilities, revenues and expenses. We base our estimates
on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. Actual results could differ
significantly from these estimates. These estimates may change as new events occur, as additional information is obtained and as our operating
environment changes. On a regular basis we evaluate our assumptions, judgments and estimates and make changes accordingly. We also discuss our
critical accounting estimates with the Audit Committee of the Board of Directors. Note 1,
The Company and Summary of Significant Accounting
Policies
, of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-
K describes the significant accounting policies used in
the preparation of the consolidated financial statements. We have listed below our critical accounting policies that we believe to have the greatest
potential impact on our consolidated financial statements. Historically, our assumptions, judgments and estimates relative to our critical accounting
policies have not differed materially from actual results.
Revenue Recognition
Refer to Note 1, The Company and Summary of Significant Accounting Policies
, of the Notes to Consolidated Financial Statements of this Annual
Report on Form 10-
K for a discussion of our revenue recognition policies. Revenue from product sales is generally recognized at the time the product is
shipped, provided that persuasive evidence of an arrangement exists, title and risk of loss has transferred to the customer, the selling price is fixed or
determinable and collection of the related receivable is reasonably assured. Currently, for some of our customers, title passes to the customer upon
delivery to the port or country of destination, upon their receipt of the product, or upon the customer’
s resale of the product. At the end of each fiscal
quarter, we estimate and defer revenue related to product where title has not transferred. The revenue continues to be deferred until such time that title
passes to the customer. We have not made any material changes in the accounting methodology we use to estimate deferred revenue related to product
where title has not transferred. We do not believe there will be a material change in the future estimates or assumptions used in our estimate of deferred
revenue. We assess collectability based on a number of factors, including general economic and market conditions, past transaction history with the
customer, and the creditworthiness of the customer. If we determine that collection of the corresponding receivable is not reasonably assured, we defer
the revenue until receipt of payment.
Allowances for Product Warranties, Returns due to Stock Rotation, Sales Incentives and Doubtful Accounts
Our standard warranty obligation to our direct customers generally provides for a right of return of any product for a full refund in the event that
such product is not merchantable or is found to be damaged or defective. At the time revenue is recognized, an estimate of future warranty returns is
recorded to reduce revenue in the amount of the expected credit or refund to be provided to our direct customers. At the time we record the reduction to
revenue related to warranty returns, we include within cost of revenue a write-
down to reduce the carrying value of such products to net realizable value.
Our standard warranty obligation to end-
users provides for replacement of a defective product for one or more years. Factors that affect the warranty
obligation include
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