|
Delaware
|
000-50838
|
77-0455244
|
||
|
(State
or Other Jurisdiction of Incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification Number)
|
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
|
Item 2.02.
|
Results
of Operations and Financial
Condition.
|
|
•
|
Stock-based Compensation and
Related Payroll Taxes. We provide non-GAAP information relative to
our expense for stock-based compensation and related payroll tax. We began
to include stock-based compensation expense in our GAAP financial measures
in January 2006. Because of varying available valuation methodologies,
subjective assumptions and the variety of award types, which affect the
calculations of stock-based compensation, we believe that the exclusion of
stock-based compensation allows for more accurate comparisons of our
operating results to our peer companies. Stock-based compensation is very
different from other forms of compensation that have a fixed and unvarying
cash cost. In contrast, the expense associated with an award of an option
for shares of our stock is unrelated to the amount of compensation
ultimately received by the employee. Furthermore, the amount of
expense that we record is based on a stock-based compensation valuation
methodology and underlying assumptions that may vary over time and that do
not reflect any cash expenditure. The expense associated with an award of
options for shares of company stock in one quarter may have a very
different expense than an award of an identical number of options in a
different quarter. Finally, the expense we recognize for options may be
very different than the expense that other companies recognize for
awarding a comparable option, which can make it difficult to assess our
operating performance relative to our competitors. Similar to stock-based
compensation, payroll tax on stock option exercises is dependent on our
stock price and the timing of employee exercises over which our management
has little control, and as such does not correlate to the operation of our
business. Because of these unique characteristics of stock-based
compensation expense and the related payroll tax, management excludes
these expenses when analyzing our business
performance.
|
|
•
|
Acquisition-Related
Expenses. We exclude certain expense items resulting from
acquisitions including the following, when applicable: (i) changes in RMI
contingent earn-out liability; (ii) amortization of purchased intangible
assets associated with our acquisitions; (iii) fair value adjustments of
acquired inventory; (iv) acquisition-related costs; and (v) interest
income on the bridge loan to RMI. We believe that providing non-GAAP
information for acquisition-related expense items in addition to the
corresponding GAAP information allows the users of our financial
statements to better review and understand the historic and current
results of our continuing operations, and also facilitates comparisons
with less acquisitive peer
companies.
|
|
(i)
|
Changes in RMI contingent
earn-out liability. In accordance with changes in GAAP requirements
for business combination accounting of contingent earn-out consideration
effective in 2009, an estimated fair value of contingent earn-out
consideration is recorded at the close of an acquisition. As
changes to the estimated fair value occur, which may be for a variety of
reasons, including but not limited to, changes in our stock
price, we are required to record the changes in the estimated
liability through our operating results until the liability is
fixed. Under the terms of the merger agreement with RMI, a
substantial portion of the contingent earn-out consideration is
payable in stock. We evaluate this contingent earn-out
consideration as part of total purchase consideration of the business and
do not consider changes in the total purchase consideration recorded in
our operating results to meaningfully reflect the near-term performance of
our business.
|
|
(ii)
|
Amortization of intangible
assets. The amortization of purchased intangible assets
associated with our acquisitions results in recording expenses in our GAAP
financial statements for which we have not expended cash. Moreover, had we
developed the products acquired, the amortization of intangible assets,
and the expenses of uncompleted research and development would have been
expensed in prior periods. Accordingly, we analyze the performance of our
operations in each period without regard to such
expenses.
|
|
(iii)
|
Fair value adjustments of
acquired inventory and related tax effect. As part of
business combination accounting for acquired inventory, we increase the
value of acquired inventory to effectively eliminate any accounting gross
profit except for a portion attributed to any manufacturing effort to be
completed post-acquisition and any incremental selling
effort. Such adjustments do not reflect costs we would
otherwise have expended to manufacture such inventory on our
own. Therefore, we analyze the performance of our operations in
each period without regard to such expenses. Similarly, we
exclude the income tax effect of this item when evaluating our operating
results.
|
|
(iv)
|
Acquisition-related
costs. Acquisition-related costs include transaction
costs and integration-related costs, including severance payments that
were made by RMI prior to its acquisition by us, which severance payments
might be construed to be undertaken for our benefit and therefore required
to be recorded as our expense under GAAP. We consider these
charges unrelated to our core operating performance. In addition,
acquisitions result in non-continuing operating expenses, which would not
otherwise have been incurred by us in the normal course of our business
operations. For example, we have incurred deferred compensation charges
related to assumed options and transition and integration costs such as
retention bonuses and acquisition-related milestone payments to employees
of the acquired entity.
|
|
(v)
|
Interest income on RMI bridge
loan. We entered into an interest-bearing bridge loan
with RMI in connection with our agreement to purchase the
company. We completed the acquisition of RMI during the quarter
ended December 31, 2009, and eliminated the bridge loan in our
consolidated financial position. As the arrangement represented
a temporary financing arrangement between the two parties as part of the
acquisition, we considered the interest income earned to be unrelated to
the performance of our business.
|
|
•
|
Other Items. We exclude
certain other items that are the result of either unique or unplanned
events including the following, when applicable: (i) debt issuance costs
write off in conjunction with early repayment of term notes owing to a
bank syndication; (ii) adjustments to certain tax reserves relating to an
intercompany license agreement; and (iii) deferred tax asset valuation
allowance on a portion of the Company’s California research and
development credit carryforward. The early repayment of term notes and
adjustments to certain tax reserves relating to an intercompany license
agreement were unplanned and reflect changes to original
estimates. The establishment of deferred tax asset valuation
allowance on a portion of the Company’s California research and
development credit carryforward arose as a result in a change in the
law. We believe that providing financial information without
these items, in addition to our GAAP operating results, provides our
management and users of our financial statements with better clarity
regarding the on-going performance and future liquidity of our
business.
|
|
•
|
Non-GAAP
net income per share is calculated by dividing non-GAAP net income by
non-GAAP diluted weighted average shares. For purposes of calculating
non-GAAP net income per share, the GAAP anti-dilutive weighted average
shares outstanding is included after adjustments to exclude the
benefits of stock-based compensation costs attributable to future services
and not yet recognized in the financial statements. Under the GAAP
treasury stock method, these stock-based compensation costs are treated as
proceeds assumed to be used to repurchase shares. Since our non-GAAP net
income does not reflect the effects of stock-based compensation costs,
management believes these amounts should not be applied to the repurchase
of shares in calculating non-GAAP net income per
share.
|
|
•
|
Non-GAAP
financial measures do not account for stock-based compensation expense
related to equity awards granted to our employees. Our stock incentive
plans are an important component of our employee incentive compensation
arrangements and are reflected as expense in our GAAP
results.
|
|
•
|
While
amortization of purchased intangible assets does not directly affect our
current cash position, such expenses represent the estimated decline in
value of technology and other intangible assets we have acquired over
their respective expected economic lives. We have excluded the
expense associated with this decline in value from non-GAAP
financial measures, and therefore the non-GAAP financial measures do not
reflect the costs of acquired intangible assets that supplement our
research and development efforts.
|
|
Item 9.01.
|
Financial
Statements and Exhibits.
|
|
Exhibits
|
|
Description
|
|
99.1
|
|
Press
Release dated February 2,
2010
|
|
NetLogic
Microsystems, Inc.
|
||||||||
|
Date:
February 2, 2010
|
By:
|
/s/
Michael T. Tate
|
||||||
|
Michael
T. Tate
Vice
President and Chief Financial
Officer
|
||||||||
|
Exhibits
|
|
Description
|
||
|
99.1
|
|
Press
Release dated February 2, 2010
|
||
|
|
||||