n8k.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 6, 2012

NetLogic Microsystems, Inc.
(Exact Name of Registrant as Specified in Charter)
 
         
Delaware
  
000-50838
  
77-0455244
(State or Other Jurisdiction of Incorporation)
  
(Commission File Number)
  
(I.R.S. Employer Identification Number)

3975 Freedom Circle, Santa Clara, CA 95054
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 454-3000

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):
 
¨
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.
 
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 9, 2012, we issued a press release announcing our preliminary financial information for the three months and twelve months ended December 31, 2011, 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.
 
Item 4.02(a)
Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
 
On February 6, 2012, the Company concluded  it is necessary to correct, by restating its previously issued financial statements for the three months ended March 31, 2011, six months ended June 30, 2011, and three and nine-months ended September 30, 2011, for material errors related to the understatement of expenses consisting of $4.0 million of stock compensation expenses and $0.4 million of severance expenses, and related tax effect, associated with an employment arrangement that should have been recorded during the three months ended March 31, 2011.  In addition, the Company is correcting an under accrual of acquisition-related costs, consisting of legal expenses of $0.7 million that should have been recorded during the three months ended September 30, 3011.

Consequently, the consolidated financial statements and related financial information contained in such previously filed quarterly reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011, and September 30, 2011 should no longer be relied upon.   Additionally, the Company has re-evaluated its prior conclusions on the effectiveness of its disclosure controls and procedures for the evaluation of the accounting for non-standard equity transactions and concluded that a material weakness existed.  New processes are being adopted and operational controls are being strengthened to address this issue going forward.
 
The Company currently expects to disclose restated financial statements for the affected periods in conjunction with the filing of its 2011 annual report on Form 10-K, which it expects to file on or about February 15, 2012.
 
The decision to restate the Company’s previously issued financial statement was made by the Audit Committee of the Company’s Board of Directors, following consultation with and upon the recommendation of management.  The Company discussed the matters relating to the restatement with PricewaterhouseCoopers, LLP, the Company’s independent registered public accounting firm.
 
 
 
 

Restatement Adjustments
 
In connection with the departure of an officer and the payment of his separation package which occurred in December 2011, the Company determined that the severance benefit should have been recorded as an expense during the three months ended March 31, 2011, when the Company confirmed that the officer would be entitled to those benefits upon his elective resignation, rather than when he did resign in December 2011.  Consequently, cash severance expenses of $384,000, as well as stock compensation expenses of $4,013,000 associated with accelerated vesting of 226,934 common shares with respect to stock options and 126,072 common shares from awards of restricted stock units should have been accrued in a prior period, specifically the three months ended March 31, 2011.  There were no impacts on any other quarterly periods.

    In addition, the Company is correcting an under accrual of acquisition-related costs, consisting of legal expenses of $723,000 during the three months ended September 30, 3011.

The table below reflects the breakdown by quarter of the restatement adjustments to net income (loss) and total adjustments for the nine months ended September 30, 2011.  The consolidated financial statements will be restated as follows (in thousands):
 
   
Net income (loss), as previously reported
    
Stock compen-sation
    
Cash severance
    
Acquisition-related costs
    
Benefit from income taxes
    
Total adjustments, net of tax
    
Net income (loss), as restated
  
Three months ended March 31, 2011
   $ 6,004     $ (4,013 )   $ (384 )   $ -     $ 438     $ (3,959 )   $ 2,045  
Three months ended June 30, 2011
     (35,181 )     -       -       -       -       -       (35,181 )
Three months ended September 30, 2011
     7,209       -       -       (723 )     -       (723 )     6,486  
Nine months ended September 30, 2011
   $ (21,968 )   $ (4,013 )   $ (384 )   $ (723 )   $ 438     $ (4,682 )   $ (26,650 )

 
 
 
   
The following table presents the cumulative impact of financial statement adjustments on the previously reported consolidated statement of operations for the three months ended March 31, 2011 (in thousands, except for per share amounts):
 
   
Three Months Ended March 31, 2011
  
   
As Previously Reported
    
Adjustments
      
As Restated
  
Revenue
   $ 98,669     $ -       $ 98,669  
Cost of revenue
     38,242       -         38,242  
Gross profit
     60,427       -         60,427  
Operating expenses:
                          
Research and development
     32,825       -         32,825  
Selling, general and administrative
     20,414       4,397  
 (A)(B)
     24,811  
Acquisition-related costs
     487       -         487  
Total operating expenses
     53,726       4,397         58,123  
Loss from operations
     6,701       (4,397 )       2,304  
Other income (expense):
                          
Interest and other income (expense), net
     311       -         311  
Loss before income taxes
     7,012       (4,397 )       2,615  
Benefit from income taxes
     1,008       (438 )
 (C)
     570  
Net income
   $ 6,004     $ (3,959 )     $ 2,045  
Net income per share - Basic
   $ 0.09               $ 0.03  
Net income per share - Diluted
   $ 0.08               $ 0.03  
Shares used in calculation - Basic
     68,002       76  
(D)
     68,078  
Shares used in calculation - Diluted
     72,696       96  
(D)
     72,792  
 
(A)
Adjustments for cash severance associated with the officer’s separation package
(B)
Adjustments for stock compensation associated with the officer’s separation package
(C)
Adjustments to record the tax effect of (A) and (B)
(D)
Adjustments for the effects of vesting acceleration in basic and diluted share count
 

 
 
 
   
The following table presents the cumulative impact of financial statement adjustments on the previously reported consolidated statement of operations for the three and six months ended June 30, 2011 (in thousands, except for per share amounts):
 
   
Three Months Ended June 30, 2011
    
Six Months Ended June 30, 2011
  
   
As Previously Reported
    
Adjustments
      
As Restated
    
As Previously Reported
    
Adjustments
      
As Restated
  
Revenue
   $ 103,689     $ -       $ 103,689     $ 202,358     $ -       $ 202,358  
Cost of revenue
     43,221       -         43,221       81,463       -         81,463  
Gross profit
     60,468       -         60,468       120,895       -         120,895  
Operating expenses:
                                                    
Research and
development
     40,789       -         40,789       73,614       -         73,614  
Selling, general and
administrative
     21,311       -         21,311       41,725       4,397  
 (A)(B)
     46,122  
Change in contingent
earn-out liability
     36,711       -         36,711       36,711       -         36,711  
Acquisition-related
costs
     1,446       -         1,446       1,933       -         1,933  
Total operating
expenses
     100,257       -         100,257       153,983       4,397         158,380  
Loss from operations
     (39,789 )     -         (39,789 )     (33,088 )     (4,397 )       (37,485 )
Other income (expense):
                                                    
Gain recognized on
investment in
Optichron, Inc.
     4,259       -         4,259       4,259       -         4,259  
Impairment charge
on other investment
     (1,276 )     -         (1,276 )     (1,276 )     -         (1,276 )
Interest and other
income (expense),
net
     93       -         93       404       -         404  
Loss before income taxes
     (36,713 )     -         (36,713 )     (29,701 )     (4,397 )       (34,098 )
Benefit from income taxes
     (1,532 )     -         (1,532 )     (524 )     (438 )
 (C)
     (962 )
Net loss
   $ (35,181 )   $ -       $ (35,181 )   $ (29,177 )   $ (3,959 )     $ (33,136 )
Net loss per share
-Basic
   $ (0.51 )             $ (0.51 )   $ (0.43 )             $ (0.48 )
Net loss per share
-Diluted
   $ (0.51 )             $ (0.51 )   $ (0.43 )             $ (0.48 )
Shares used in calculation
-Basic
     68,560       126  
(D)
     68,686       68,489       101  
(D)
     68,590  
Shares used in calculation
-Diluted
     68,560       126  
(D)
     68,686       68,489       101  
(D)
     68,590  
 
(A)
Adjustments for cash severance associated with the officer’s separation package
(B)
Adjustments for stock compensation associated with the officer’s separation package
(C)
Adjustments to record the tax effect of (A) and (B)
(D)
Adjustments for the effects of vesting acceleration in basic and diluted share count

 
 
 
   
     The following table presents the cumulative impact of financial statement adjustments on the previously reported consolidated statement of operations for the three and nine months ended September 30, 2011 (in thousands, except for per share amounts):
 
   
Three Months Ended September 30, 2011
    
Nine Months Ended September 30, 2011
  
   
As Previously Reported
    
Adjustments
      
As Restated
    
As Previously Reported
    
Adjustments
      
As Restated
  
Revenue
   $ 106,808     $ -       $ 106,808     $ 309,166     $ -       $ 309,166  
Cost of revenue
     39,690       -         39,690       121,153       -         121,153  
Gross profit
     67,118       -         67,118       188,013       -         188,013  
Operating expenses:
                                                    
Research and
development
     39,848       -         39,848       113,462       -         113,462  
Selling, general and
administrative
     22,000       -         22,000       63,725       4,397  
 (A)(B)
     68,122  
Change in contingent
earn-out liability
     (5,295 )     -         (5,295 )     31,416       -         31,416  
Acquisition-related
costs
     5,591       723  
 (E)
     6,314       7,524       723  
 (E)
     8,247  
Total operating
expenses
     62,144       723         62,867       216,127       5,120         221,247  
Loss from operations
     4,974       (723 )       4,251       (28,114 )     (5,120 )       (33,234 )
Other income (expense):
                                                    
Gain recognized on
investment in
Optichron, Inc.
     -       -         -       4,259       -         4,259  
Impairment charge
on other investment
     -       -         -       (1,276 )     -         (1,276 )
Interest and other
income (expense),
net
     94       -         94       498       -         498  
Loss before income taxes
     5,068       (723 )       4,345       (24,633 )     (5,120 )       (29,753 )
Benefit from income taxes
     (2,141 )     -         (2,141 )     (2,665 )     (438 )
 (C)
     (3,103 )
Net income (loss)
   $ 7,209     $ (723 )     $ 6,486     $ (21,968 )   $ (4,682 )     $ (26,650 )
Net income (loss) per share
-Basic
   $ 0.10               $ 0.09     $ (0.32 )             $ (0.39 )
Net income (loss) per share
-Diluted
   $ 0.10               $ 0.09     $ (0.32 )             $ (0.39 )
Shares used in calculation
-Basic
     69,266       126  
 (D)
     69,392       68,585       109  
 (D)
     68,694  
Shares used in calculation
-Diluted
     73,498       83  
(D)
     73,581       68,585       109  
 (D)
     68,694  
 
(A)
Adjustments for cash severance associated with the officer’s separation package
(B)
Adjustments for stock compensation associated with the officer’s separation package
(C)
Adjustments to record the tax effect of (A) and (B)
(D)
Adjustments for the effects of vesting acceleration in basic and diluted share count
(E)
Adjustments for under accrual of acquisition-related costs

 
 
 
 
The following table presents the cumulative impact of financial statement adjustments on the previously reported consolidated statement of operations for the three and nine months ended September 30, 2011 (in thousands, except for per share amounts):
 
   
September 30, 2011
  
   
As Previously Reported
    
Adjustments
      
As Restated
  
ASSETS
                    
Current assets:
                    
Cash and cash equivalents
   $ 125,751             $ 125,751  
Short-term investments
     116,621               116,621  
Accounts receivables, net
     38,916               38,916  
Inventories
     38,326               38,326  
Deferred income taxes
     7,493               7,493  
Prepaid expenses and other current assets
     12,536       438  
(C)
     12,974  
Total current assets
     339,643                 340,081  
Property and equipment, net
     31,235                 31,235  
Goodwill
     167,152                 167,152  
Intangible assets, net
     204,029                 204,029  
Other assets
     78,521                 78,521  
Total assets
   $ 820,580               $ 821,018  
LIABILITIES AND STOCKHOLDERS' EQUITY
                          
Current liabilities
                          
Accounts payable
   $ 16,470               $ 16,470  
Accrued liabilities
     29,275       1,107  
(A)(E)
     30,382  
Contingent earn-out liability, current
     71,024                 71,024  
Deferred margin
     2,932                 2,932  
Software licenses and other obligations, current
     4,722                 4,722  
Total current liabilities
     124,423                 125,530  
Contingent earn-out liability, long-term
     3,867                 3,867  
Software licenses and other obligations, long-term
     3,394                 3,394  
Other liabilities
     41,520                 41,520  
Total liabilities
     173,204                 174,311  
Stockholders' equity
                          
Common stock
     696                 696  
Additional paid-in capital
     860,623       4,013  
(B)
     864,636  
Accumulated other comprehensive loss
     (2,461 )               (2,461 )
Accumulated deficit
     (211,482 )     (4,682 )
(A)(B)(C)(E)
     (216,164 )
Total stockholders' equity
     647,376                 646,707  
Total liabilities and stockholders' equity
   $ 820,580               $ 821,018  
 
(A)
Adjustments for cash severance associated with the officer’s separation package
(B)
Adjustments for stock compensation associated with the officer’s separation package
(C)
Adjustments to record the tax effect of (A) and (B)
(E)
Adjustments for under accrual of acquisition-related costs

 
 
 
  
The following table presents the cumulative impact of financial statement adjustments on the previously reported consolidated statement of cash flows for the nine months ended September 30, 2011 (in thousands):
 
   
Nine Months Ended September 30, 2011
  
   
As Previously Reported
    
Adjustments
      
As Restated
  
Cash flows from operating activities:
                    
Net loss
   $ (21,968 )   $ (4,682 )
 (A)(B)(C)(E)
   $ (26,650 )
Adjustments to reconcile net loss to net cash provided
by operating activities:
            
Depreciation and amortization
     51,246                 51,246  
Loss on disposal of property and equipment
     52                 52  
Amortization of premium related to debt securities,
net
     1,060                 1,060  
Stock-based compensation
     39,526       4,013  
(B)
     43,539  
Recovery of doubtful accounts
     (55 )               (55 )
Provision for inventory reserves
     5,132                 5,132  
Gain recognized on investment in Optichron, Inc.
     (4,259 )               (4,259 )
Impairment charge on other investment
     1,276                 1,276  
Deferred income taxes, net
     114                 114  
Excess tax benefit from stock-based awards
     (248 )               (248 )
Changes in current assets and liabilities:
                          
Accounts receivables
     (15,232 )               (15,232 )
Inventories
     (4,260 )               (4,260 )
Prepaid expenses and other assets
     232       (438 )
(C)
     (206 )
Accounts payable and accrued liabilities
     (4,534 )     1,107  
(A)(E)
     (3,427 )
Cash settled contingent earn-out liability
     31,416                 31,416  
Deferred margin
     (2,254 )               (2,254 )
Other long-term liabilities
     2,507                 2,507  
Net cash provided by operating activities
     79,751                 79,751  
Cash flows from investing activities:
                          
Acquisition of Optichron, Inc, net of cash acquired
of $2.5 million
     (74,679 )               (74,679 )
Purchase of property and equipment
     (8,720 )               (8,720 )
Purchase of short-term investments
     (94,259 )               (94,259 )
Sales and maturities of short-term investments
     132,230                 132,230  
Purchase of long term investments and other
     (17,500 )               (17,500 )
Net cash used in investing activities
     (62,928 )               (62,928 )
Cash flows from financing activities:
                          
Payments of software license and other obligations
     (4,931 )               (4,931 )
Proceeds from issuance of common stock
     17,939                 17,939  
Tax payments related to vested awards
     (4,851 )               (4,851 )
Excess tax benefit from stock-based awards
     248                 248  
Net cash provided by financing activities
     8,405                 8,405  
Net increase (decrease) in cash and cash equivalents
     25,228                 25,228  
Cash and cash equivalents at beginning of year
     100,523                 100,523  
Cash and cash equivalents at end of year
   $ 125,751               $ 125,751  
 
(A)
Adjustments for cash severance associated with the officer’s separation package
(B)
Adjustments for stock compensation associated with the officer’s separation package
(C)
Adjustments to record the tax effect of (A) and (B)
(E)
Adjustments for under accrual of acquisition-related costs

 
 
 
 
Controls and Procedures 
 
At the time that our Quarterly Reports on Form 10-Q for the three months ended March 31, 2011, June 30, 2011, and September 30, 2011 were on file, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.  Subsequent to that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective for these periods because of a material weakness identified below.
 
We have determined that our control over the evaluation of the accounting for non-standard equity transactions was not effective as for each of our interim periods and as of December 31, 2011, which resulted in a material adjustment to our first quarter ended March 31, 2011 related to a severance arrangement.  Accordingly, our management has determined that this control deficiency constitutes a material weakness.
 
Planned Remedial Actions of Material Weakness
 
    Our planned remedial action is to require an accounting analysis to be prepared and documented on a timely basis for non-standard equity transactions related to severance arrangements.
 
 
 
 
Item 9.01.
Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is furnished with this document:
 
     
Exhibits
  
Description
   
99.1
  
Press Release dated February 09, 2012


 
 
 

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.
       
Date: February 09, 2012
      
By:
  
/s/ Michael T. Tate
               
Michael T. Tate
Vice President and Chief Financial Officer


 
 
 

EXHIBIT INDEX
 
     
Exhibits
  
Description
   
99.1
  
Press Release dated February 09, 2012