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EX-99.1 - PRESS RELEASE - NETLOGIC MICROSYSTEMS INC | nex991.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): February
2, 2010
NetLogic
Microsystems, Inc.
(Exact
Name of Registrant as Specified in Charter)
Delaware
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000-50838
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77-0455244
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(State
or Other Jurisdiction of Incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification Number)
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1875
Charleston Road, Mountain View, CA 94043
(Address
of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number, including area code: (650) 961-6676
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (
see General Instruction A.2. below):
¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 2.02.
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Results
of Operations and Financial
Condition.
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The
information contained in this report and the exhibit attached hereto is
furnished solely pursuant to Item 2.02 of Form 8-K and shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, or otherwise subject to the liabilities of that section. The
information contained herein and the exhibit attached hereto shall not be
incorporated by reference into any filing with the Securities and Exchange
Commission made by NetLogic Microsystems, Inc., whether made before or after the
date hereof, except as shall be expressly set forth by specific reference in
such filing.
On
February 2, 2010, we issued a press release announcing our financial results for
the three months and twelve months ended December 31, 2009, which is included in
this report as Exhibit 99.1. The press release should be read in conjunction
with the statements regarding forward-looking statements that are included in
the text of the press release.
Discussion
of Non-GAAP Financial Measures
In
addition to disclosing financial results calculated in accordance with U.S.
generally accepted accounting principles (GAAP), the Company also reports
certain non-GAAP financial measures. Non-GAAP financial measures
exclude the effects of stock-based compensation, changes in contingent earn-out
liability, amortization of acquired intangible assets, fair value adjustments of
acquired inventory, acquisition-related costs, interest income on a bridge loan
to RMI Corporation (“RMI”), debt issuance cost write-off, establishment of
deferred tax asset valuation allowance on a portion of the Company’s California
research and development credit carryforward, tax effect of inventory fair value
adjustments, certain tax reserves relating to an intercompany license agreement,
and the effects of excluding stock-based compensation on the number of diluted
shares used in calculating non-GAAP earnings per share.
We
utilize a number of different financial measures, both GAAP and non-GAAP, in
analyzing and assessing the overall performance of our business, in making
operating decisions, forecasting and planning for future periods, and
determining payments under compensation programs. We consider the use of the
non-GAAP measures presented in our press release to be helpful in assessing the
performance of the operation of our core business which comprises the ongoing
revenue and expenses of our business excluding certain items that render
comparisons with prior periods or analysis of on-going operating trends more
difficult, such as non-cash expenses not directly related to the actual cash
costs of development, sale, delivery or support of our products, or expenses
that are reflected in periods unrelated to when the actual amounts were incurred
or paid. Consistent with this approach, we believe that disclosing non-GAAP
financial measures provides useful supplemental data that, while not a
substitute for financial measures prepared in accordance with GAAP, allows for
greater transparency in the review of our financial and operational performance.
In addition, we have historically reported non-GAAP results to the investment
community and believe that continuing to do so provides investors with a useful
measure for comparing results over time. In assessing the overall health of our
business for the periods covered in our press release and, in particular, in
evaluating the non-GAAP financial line items presented in our press release, we
have excluded items in the following three general categories, each of which are
described below: Stock-Based Compensation Related Items, Acquisition Related
Expenses and Other Items. We also provide additional detail below regarding the
shares used to calculate our non-GAAP net income per share.
Non-GAAP
net income reflects net income adjusted for the following items:
•
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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.
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•
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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.
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(i)
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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.
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(ii)
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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.
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(iii)
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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.
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(iv)
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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.
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(v)
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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.
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•
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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.
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The
calculation of non-GAAP net income per share is adjusted for the following
item:
•
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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.
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We expect
to continue to incur expenses similar to some of the non-GAAP adjustments
described above, and exclusion of these items from our non-GAAP financial
measures should not be construed as an inference that these costs are unusual,
infrequent or non-recurring. For example:
•
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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.
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•
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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.
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Item 9.01.
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Financial
Statements and Exhibits.
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(d)
Exhibits.
The
following exhibit is furnished with this document:
Exhibits
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Description
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99.1
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Press
Release dated February 2,
2010
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
NetLogic
Microsystems, Inc.
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Date:
February 2, 2010
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By:
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/s/
Michael T. Tate
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Michael
T. Tate
Vice
President and Chief Financial
Officer
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EXHIBIT
INDEX
Exhibits
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Description
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99.1
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Press
Release dated February 2, 2010
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