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)
July 23, 2014
 
POLYCOM, INC.
(Exact name of registrant as specified in its charter)

State of Delaware	 	000-27978	 	94-3128324	
(State or Other Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
 
6001 America Center Drive
San Jose, California	 	95002	
(Address of principal executive offices)	 	(Zip Code)	
(408) 586-6000
Registrant’s telephone number, including area code
N/A
(Former name or former address, if changed since last report)
 
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:
¨	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
On July 23, 2014, Polycom, Inc. issued a press release announcing its financial results for the three months ended June 30, 2014. The full text of the press release is furnished as Exhibit 99.1.
 
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release, dated July 23, 2014, entitled “Polycom Reports Significantly Improved Operating Performance on Revenue of $332 Million in Second Quarter 2014.”

 

SIGNATURES
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.
 
POLYCOM, INC.	
 
By:	/s/ Laura J. Durr 	
 	Laura J. Durr	
 	Chief Financial Officer and Executive Vice President	
Date: July 23, 2014

 

EXHIBIT INDEX
 
Exhibit No.	  	Description	
99.1	  	Press Release, dated July 23, 2014, entitled “Polycom Reports Significantly Improved Operating Performance on Revenue of $332 Million in Second Quarter 2014.”	

 
Exhibit 99.1

Investor Contact:	 	Laura Graves	
 	 	Polycom, Inc.	
 	 	1.408.586.4271	
 	 	laura.graves@polycom.com	

Polycom Reports Significantly Improved Operating Performance
on Revenue of $332 Million in Second Quarter 2014
 
· Non-GAAP EPS grows 40 percent and GAAP EPS grows 100 percent year-over-year
· Company Announces New $200 Million Share Repurchase Authorization
SAN JOSE, Calif. – July 23, 2014 – Polycom, Inc . (Nasdaq: PLCM) today reported second quarter 2014 revenues of $332 million, non-GAAP net income of $30 million and non-GAAP earnings per diluted share of 21 cents. GAAP net income for the second quarter was $9 million, or 6 cents per diluted share. A reconciliation of GAAP to non-GAAP results is provided in the tables at the end of this press release.
“We are successfully executing on our goal to improve operating performance,” said Peter Leav, Polycom President and Chief Executive Officer. “As a company, we are committed to developing the best solutions in the marketplace for our customers, to driving continuous improvement in our business, and to delivering on our commitment to provide enhanced value to our shareholders.”
“Operating margin improved on both a sequential and year-over-year basis as a result of better overall gross margin and steady expense control,” said Laura Durr, Chief Financial Officer and Executive Vice President.  “We are pleased to report a 40 percent year-over-year increase in non-GAAP earnings per share, driven by lower share count and improved operational performance.”
On a comparative basis, consolidated financial results were:
 
($ in millions, except per share data)	Q2 2014	 	 	Q1 2014	 	 	Q2 2013	 	 	Year-Over-Year Change	 	
Revenues	$	332.0	 	 	$	328.5	 	 	$	345.2	 	 	 	-4	%	
Non-GAAP Net Income	$	29.6	 	 	$	26.1	 	 	$	25.9	 	 	 	14	%	
Non-GAAP EPS	$	0.21	 	 	$	0.18	 	 	$	0.15	 	 	 	40	%	
GAAP Net Income (Loss)	$	8.6	 	 	$	(4.0	)	 	$	5.3	 	 	 	62	%	
GAAP EPS	$	0.06	 	 	$	(0.03	)	 	$	0.03	 	 	 	100	%	
 
On a geographic basis, consolidated revenues were comprised of:
 
($ in millions)	Q2 2014	 	 	Q1 2014	 	 	Q2 2013	 	 	Year-Over-Year Change	 	
Americas	$	167.8	 	 	$	163.1	 	 	$	175.6	 	 	 	-4	%	
% of revenues	 	51	%	 	 	50	%	 	 	51	%	 	 	 	 	
Europe, Middle East & Africa (EMEA)	 	83.1	 	 	 	89.0	 	 	$	79.7	 	 	 	4	%	
% of revenues	 	25	%	 	 	27	%	 	 	23	%	 	 	 	 	
Asia Pacific	 	81.1	 	 	 	76.4	 	 	$	89.9	 	 	 	-10	%	
% of revenues	 	24	%	 	 	23	%	 	 	26	%	 	 	 	 	
Totals *	$	332.0	 	 	$	328.5	 	 	$	345.2	 	 	 	-4	%	
 
* may not foot due to rounding

 
By product category, inclusive of its service component, consolidated revenues were comprised of:
 
($ in millions)	Q2 2014	 	 	Q1 2014	 	 	Q2 2013	 	 	Year-Over-Year Change	 	
UC Group Systems	$	218.5	 	 	$	213.4	 	 	$	233.0	 	 	 	-6	%	
% of revenues	 	66	%	 	 	65	%	 	 	67	%	 	 	 	 	
UC Personal Devices	 	53.6	 	 	 	56.5	 	 	 	50.8	 	 	 	5	%	
% of revenues	 	16	%	 	 	17	%	 	 	15	%	 	 	 	 	
UC Platform	 	59.9	 	 	 	58.7	 	 	 	61.4	 	 	 	-2	%	
% of revenues	 	18	%	 	 	18	%	 	 	18	%	 	 	 	 	
Totals *	$	332.0	 	 	$	328.5	 	 	$	345.2	 	 	 	-4	%	
* may not foot due to rounding
 
In Q2 2014, Polycom generated a total of $62 million in operating cash flow. Operating cash flow on a trailing 12 month basis was $167 million. Cash and investments at the end of Q2 2014 totaled $640 million, of which approximately $234 million is located onshore. Net of existing debt, cash and investments at the end of Q2 2014 totaled $395 million.
 
Separately, Polycom also announced today that its board of directors approved a new $200 million share repurchase authorization.  Polycom expects to execute this new authorization over the next two years and expects to fund the share repurchases through cash on hand and future cash flow from operations.
Earnings Call Details
Polycom will hold a conference call today, July 23, 2014, at 5:00 p.m. ET/2:00 p.m. PT to discuss these second quarter 2014 financial results. You may participate by listening to the webcast at www.polycom.com/investors or, for callers in the U.S. and Canada, you may participate by calling 1.800.734.4208 and for callers outside of the U.S. and Canada, by calling 1.212.231.2902. The pass code for the call is “Polycom.” A replay of the call will also be available at www.polycom.com or, for callers in the U.S. and Canada, at 1.800.633.8284 and, for callers outside of the U.S. and Canada, at 1.402.977.9140. The access number for the replay is 21722011. A replay of the call will be available on www.polycom.com for at least three months.
Forward Looking Statements and Risk Factors
This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 regarding improved operating performance, future solutions, enhanced shareholder value and future share repurchases. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the impact of competition on our product sales and for our customers and partners and any resulting loss of business; the impact of increased competition due to consolidation in our industry or competition from companies that are larger or that have greater resources than we do; potential fluctuations in results and future growth rates; risks associated with global economic conditions and external market factors; the market acceptance of our products and changing market demands, including demands for differing technologies or product and services offerings; our ability to successfully implement process improvements and cost containment initiatives; changes to our strategic areas of focus; our ability to successfully integrate our acquisitions into our business; possible delays in the development, availability and shipment of new products due to engineering, manufacturing or other delays; increasing costs and the availability and differing uses of capital; changes in key personnel that may cause disruption to the business; the impact of restructuring actions; and the impact of global conflicts that may adversely impact our business. Many of these risks and uncertainties are discussed in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.
Polycom reserves the right to modify future product plans at any time. Products and/or related specifications referenced in this press release are not guaranteed and will be delivered on a when and if available basis.
GAAP to non-GAAP Reconciliation
To supplement our consolidated financial statements presented on a GAAP basis, Polycom uses non-GAAP measures of operating results, net income and income per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Polycom’s underlying operational results and trends and our marketplace performance. For example, the non-GAAP results are an indication of our baseline performance before gains, losses, or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary

 
indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or diluted net income per share prepared in accordance with generally accepted accounting principles in the United States.
About Polycom
Polycom helps organizations unleash the power of human collaboration. More than 400,000 companies and institutions worldwide defy distance with secure video, voice and content solutions from Polycom to increase productivity, speed time to market, provide better customer service, expand education and save lives. Polycom and its global partner ecosystem provide flexible collaboration solutions for any environment that deliver the best user experience, the broadest multi-vendor interoperability and unmatched investment protection. Visit www.polycom.com or connect with us on Twitter, Facebook and LinkedIn to learn more.
© 2014 Polycom, Inc. All rights reserved. POLYCOM ® , the Polycom logo, and the names and marks associated with Polycom’s products are trademarks and/or service marks of Polycom, Inc. and are registered and/or common law marks in the United States and various other countries. All other trademarks are property of their respective owners.

 

 
POLYCOM, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 	Three Months Ended	 	 	Six Months Ended	 	
 	June 30,
2014	 	 	June 30,
2013	 	 	June 30,
2014	 	 	June 30,
2013	 	
Revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product revenues	$	236,565	 	 	$	251,422	 	 	$	468,074	 	 	$	497,551	 	
Service revenues	 	95,454	 	 	 	93,812	 	 	 	192,469	 	 	 	186,435	 	
Total revenues	 	332,019	 	 	 	345,234	 	 	 	660,543	 	 	 	683,986	 	
Cost of revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of product revenues	 	97,710	 	 	 	105,286	 	 	 	195,346	 	 	 	207,164	 	
Cost of service revenues	 	39,087	 	 	 	38,350	 	 	 	77,990	 	 	 	76,127	 	
Total cost of revenues	 	136,797	 	 	 	143,636	 	 	 	273,336	 	 	 	283,291	 	
Gross profit	 	195,222	 	 	 	201,598	 	 	 	387,207	 	 	 	400,695	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales and marketing	 	97,836	 	 	 	109,657	 	 	 	191,804	 	 	 	218,372	 	
Research and development	 	49,031	 	 	 	54,628	 	 	 	97,178	 	 	 	110,563	 	
General and administrative	 	24,636	 	 	 	24,299	 	 	 	48,429	 	 	 	47,993	 	
Amortization of purchased intangibles	 	2,436	 	 	 	2,545	 	 	 	4,928	 	 	 	5,047	 	
Restructuring costs	 	9,175	 	 	 	4,329	 	 	 	39,518	 	 	 	9,752	 	
Transaction-related costs	 	—	 	 	 	49	 	 	 	156	 	 	 	3,372	 	
Total operating expenses	 	183,114	 	 	 	195,507	 	 	 	382,013	 	 	 	395,099	 	
Operating Income	 	12,108	 	 	 	6,091	 	 	 	5,194	 	 	 	5,596	 	
Interest and other income (expense), net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(1,460	)	 	 	(479	)	 	 	(2,934	)	 	 	(886	)	
Other income (expense)	 	(236	)	 	 	95	 	 	 	543	 	 	 	(257	)	
Interest and other income (expense), net	 	(1,696	)	 	 	(384	)	 	 	(2,391	)	 	 	(1,143	)	
Income from continuing operations before provision for (benefit from) income taxes	 	10,412	 	 	 	5,707	 	 	 	2,803	 	 	 	4,453	 	
Provision for (benefit from) income taxes	 	1,855	 	 	 	412	 	 	 	(1,763	)	 	 	(2,959	)	
Net income from continuing operations	 	8,557	 	 	 	5,295	 	 	 	4,566	 	 	 	7,412	 	
Gain from sale of discontinued operations, net of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	459	 	
Net income	$	8,557	 	 	$	5,295	 	 	$	4,566	 	 	$	7,871	 	
Basic net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income per share from continuing operations	$	0.06	 	 	$	0.03	 	 	$	0.03	 	 	$	0.04	 	
Gain per share from sale of discontinued operations, net
   of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Basic net income per share	$	0.06	 	 	$	0.03	 	 	$	0.03	 	 	$	0.05	 	
Diluted net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income per share from continuing operations	$	0.06	 	 	$	0.03	 	 	$	0.03	 	 	$	0.04	 	
Gain per share from sale of discontinued operations, net
   of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Diluted net income per share	$	0.06	 	 	$	0.03	 	 	$	0.03	 	 	$	0.04	 	
Number of shares used in computation of net income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	138,016	 	 	 	171,542	 	 	 	137,406	 	 	 	173,810	 	
Diluted	 	142,876	 	 	 	175,591	 	 	 	142,521	 	 	 	177,366	 	
 
Note: Earnings per share amounts for continuing operations, discontinued operations and net income, as presented above, are calculated individually and may not sum due to rounding differences.

 

 
POLYCOM, INC.
Reconciliation of GAAP to Non-GAAP Net Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
 
 	Three Months Ended	 	 	Six Months Ended	 	
 	June 30,
2014	 	 	June 30,
2013	 	 	June 30,
2014	 	 	June 30,
2013	 	
GAAP net income	$	8,557	 	 	$	5,295	 	 	$	4,566	 	 	$	7,871	 	
Gain from sale of discontinued operations, net of taxes	 	—	 	 	 	—	 	 	 	—	 	 	 	(459	)	
Amortization of purchased intangibles	 	3,167	 	 	 	3,793	 	 	 	6,500	 	 	 	7,543	 	
Restructuring costs	 	9,175	 	 	 	4,329	 	 	 	39,518	 	 	 	9,752	 	
Transaction-related costs	 	—	 	 	 	49	 	 	 	156	 	 	 	3,372	 	
Stock-based compensation expense	 	13,763	 	 	 	18,329	 	 	 	19,410	 	 	 	36,100	 	
Effect of stock-based compensation on warranty rates	 	77	 	 	 	144	 	 	 	206	 	 	 	301	 	
Costs associated with CEO separation and related SEC
   investigation	 	381	 	 	 	—	 	 	 	991	 	 	 	—	 	
Income tax effect of non-GAAP exclusions	 	(5,540	)	 	 	(6,058	)	 	 	(15,680	)	 	 	(15,262	)	
Non-GAAP net income	$	29,580	 	 	$	25,881	 	 	$	55,667	 	 	$	49,218	 	
GAAP net income per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	$	0.06	 	 	$	0.03	 	 	$	0.03	 	 	$	0.05	 	
Diluted	$	0.06	 	 	$	0.03	 	 	$	0.03	 	 	$	0.04	 	
Non-GAAP net income per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	$	0.21	 	 	$	0.15	 	 	$	0.41	 	 	$	0.28	 	
Diluted	$	0.21	 	 	$	0.15	 	 	$	0.39	 	 	$	0.28	 	
Number of shares used in computation of net
   income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	138,016	 	 	 	171,542	 	 	 	137,406	 	 	 	173,810	 	
Diluted	 	142,876	 	 	 	175,591	 	 	 	142,521	 	 	 	177,366	 	

 

POLYCOM, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 	June 30,
2014	 	 	December 31,
2013	 	
ASSETS	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	
Cash and cash equivalents	$	413,133	 	 	$	392,629	 	
Short-term investments	 	136,320	 	 	 	134,684	 	
Trade receivables, net	 	177,074	 	 	 	183,369	 	
Inventories	 	105,904	 	 	 	103,309	 	
Deferred taxes	 	37,680	 	 	 	37,085	 	
Prepaid expenses and other current assets	 	55,651	 	 	 	50,352	 	
Total current assets	 	925,762	 	 	 	901,428	 	
Property and equipment, net	 	108,833	 	 	 	115,157	 	
Long-term investments	 	90,915	 	 	 	56,372	 	
Goodwill and purchased intangibles, net	 	590,166	 	 	 	596,918	 	
Deferred taxes	 	46,177	 	 	 	51,398	 	
Other assets	 	30,201	 	 	 	27,757	 	
Total assets	$	1,792,054	 	 	$	1,749,030	 	
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	
Accounts payable	$	93,357	 	 	$	84,640	 	
Accrued payroll and related liabilities	 	41,843	 	 	 	40,162	 	
Taxes payable	 	2,260	 	 	 	5,389	 	
Deferred revenue	 	174,252	 	 	 	172,408	 	
Current portion of long-term debt	 	6,250	 	 	 	6,250	 	
Other accrued liabilities	 	83,286	 	 	 	77,744	 	
Total current liabilities	 	401,248	 	 	 	386,593	 	
Non-current liabilities	 	 	 	 	 	 	 	
Long-term deferred revenue	 	84,338	 	 	 	87,467	 	
Taxes payable	 	12,580	 	 	 	12,419	 	
Deferred taxes	 	123	 	 	 	149	 	
Long-term debt	 	239,063	 	 	 	242,188	 	
Other non-current liabilities	 	52,071	 	 	 	43,849	 	
Total liabilities	 	789,423	 	 	 	772,665	 	
Stockholders' equity	 	1,002,631	 	 	 	976,365	 	
Total liabilities and stockholders' equity	$	1,792,054	 	 	$	1,749,030	 	

 

 
POLYCOM, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 	Six Months Ended	 	
 	June 30,
2014	 	 	June 30,
2013	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	
Net income	$	4,566	 	 	$	7,871	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	
Depreciation and amortization	 	29,034	 	 	 	33,242	 	
Amortization of purchased intangibles	 	6,538	 	 	 	7,581	 	
Amortization of capitalized software development costs for products to be sold	 	702	 	 	 	—	 	
Amortization of debt issuance costs	 	267	 	 	 	—	 	
Amortization of discounts and premiums on investments, net	 	944	 	 	 	794	 	
Provision for doubtful accounts	 	600	 	 	 	—	 	
Write-down of excess and obsolete inventories	 	2,253	 	 	 	3,860	 	
Stock-based compensation expense	 	19,410	 	 	 	36,100	 	
Excess tax benefits from stock-based compensation expense	 	(1,819	)	 	 	(436	)	
Loss on disposal of property and equipment	 	4,965	 	 	 	1,742	 	
Net gain on sale of discontinued operations	 	—	 	 	 	(459	)	
Changes in assets and liabilities, net of effects of acquisitions:	 	 	 	 	 	 	 	
Trade receivables	 	5,805	 	 	 	(8,235	)	
Inventories	 	(4,848	)	 	 	(4,128	)	
Deferred taxes	 	(4,848	)	 	 	847	 	
Prepaid expenses and other assets	 	(7,327	)	 	 	(8,720	)	
Accounts payable	 	6,130	 	 	 	6,619	 	
Taxes payable	 	4,124	 	 	 	(1,394	)	
Other accrued liabilities and deferred revenue	 	14,125	 	 	 	6,774	 	
Net cash provided by operating activities	 	80,621	 	 	 	82,058	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	
Purchases of property and equipment	 	(24,338	)	 	 	(27,560	)	
Capitalized software development costs for products to be sold	 	(2,474	)	 	 	—	 	
Purchases of investments	 	(151,611	)	 	 	(136,990	)	
Proceeds from sale of investments	 	37,056	 	 	 	10,358	 	
Proceeds from maturity of investments	 	77,440	 	 	 	143,205	 	
Net cash received from sale of discontinued operations	 	—	 	 	 	556	 	
Net cash paid in purchase acquisitions	 	—	 	 	 	(8,350	)	
Net cash used in investing activities	 	(63,927	)	 	 	(18,781	)	
Cash flows from financing activities:	 	 	 	 	 	 	 	
Proceeds from issuance of common stock under employee option and stock purchase plans	 	13,542	 	 	 	13,850	 	
Payments on debt	 	(3,125	)	 	 	—	 	
Purchase and retirement of common stock	 	(8,426	)	 	 	(90,429	)	
Excess tax benefits from stock-based compensation expense	 	1,819	 	 	 	436	 	
Net cash provided by (used in) financing activities	 	3,810	 	 	 	(76,143	)	
Net increase (decrease) in cash and cash equivalents	 	20,504	 	 	 	(12,866	)	
Cash and cash equivalents, beginning of period	 	392,629	 	 	 	477,073	 	
Cash and cash equivalents, end of period	$	413,133	 	 	$	464,207	 	
Certain prior period amounts have also been reclassified to conform to the current period presentation.

 

 
POLYCOM, INC.
Selected Summary Data
(In millions except per share amounts and headcount)
(Unaudited)
 
 	June 30,
2014	 	 	March 31,
2014	 	 	June 30,
2013	 	
Balance Sheet Highlights	 	 	 	 	 	 	 	 	 	 	 	
Cash and investments	$	640	 	 	$	596	 	 	$	694	 	
Number of shares outstanding	 	137	 	 	 	138	 	 	 	170	 	
Cash and investments per share	$	4.68	 	 	$	4.31	 	 	$	4.08	 	
Debt	$	245	 	 	$	247	 	 	$	—	 	
Operating cash flow - quarterly	$	62	 	 	$	19	 	 	$	33	 	
Operating cash flow - trailing 12 months	$	167	 	 	$	138	 	 	$	196	 	
DSO (Days Sales Outstanding)	 	49	 	 	 	51	 	 	 	54	 	
Inventory turns - GAAP	 	5.2	 	 	 	5.3	 	 	 	5.7	 	
Inventory turns - non-GAAP	 	5.1	 	 	 	5.2	 	 	 	5.6	 	
Deferred revenue	$	259	 	 	$	259	 	 	$	259	 	
Share repurchases:	 	 	 	 	 	 	 	 	 	 	 	
Quarter-to-date share purchases - shares	 	1.5	 	 	 	—	 	 	 	4.7	 	
Quarter-to-date share repurchases - dollars	$	—	 	 	$	—	 	 	$	50	 	
Year-to-date share purchases - shares	 	1.5	 	 	 	—	 	 	 	8.1	 	
Year-to-date share repurchases - dollars	$	—	 	 	$	—	 	 	$	84	 	
Remaining authorization for share repurchases (1)	$	—	 	 	$	—	 	 	$	89	 	
Ending headcount	 	3,558	 	 	 	3,578	 	 	 	3,844	 	
 
 	For the Three Months Ended	 	
 	June 30,
2014	 	 	March 31,
2014	 	 	June 30,
2013	 	
Income Statement Highlights	 	 	 	 	 	 	 	 	 	 	 	
GAAP:	 	 	 	 	 	 	 	 	 	 	 	
Revenues	$	332	 	 	$	329	 	 	$	345	 	
Gross margin	 	58.8	%	 	 	58.4	%	 	 	58.4	%	
Operating expenses	$	183	 	 	$	199	 	 	$	196	 	
Operating margin	 	3.6	%	 	 	(2.1	)%	 	 	1.8	%	
Diluted EPS	$	0.06	 	 	$	(0.03	)	 	$	0.03	 	
Non-GAAP:	 	 	 	 	 	 	 	 	 	 	 	
Revenues	$	332	 	 	$	329	 	 	$	345	 	
Gross margin	 	59.5	%	 	 	59.2	%	 	 	59.5	%	
Operating expenses	$	159	 	 	$	161	 	 	$	173	 	
Operating margin	 	11.6	%	 	 	10.1	%	 	 	9.5	%	
Diluted EPS	$	0.21	 	 	$	0.18	 	 	$	0.15	 	
 
(1)	Polycom is not obligated to purchase any specific number of shares under its Share Repurchase Program and the program may be modified, suspended or discontinued at any time.	

 

 
POLYCOM, INC.
Reconciliations of GAAP Measures to Non-GAAP Measures
(In thousands)
(Unaudited)
 	Three Months Ended	 	 	Six Months Ended	 	
 	June 30,
2014	 	 	June 30,
2013	 	 	June 30,
2014	 	 	June 30,
2013	 	
GAAP cost of revenues used in inventory turns	$	136,797	 	 	$	143,636	 	 	$	273,336	 	 	$	283,291	 	
Stock-based compensation expense	 	(1,621	)	 	 	(2,350	)	 	 	(3,222	)	 	 	(4,687	)	
Effect of stock-based compensation expense on warranty rates	 	(77	)	 	 	(144	)	 	 	(206	)	 	 	(301	)	
Amortization of purchased intangibles	 	(731	)	 	 	(1,248	)	 	 	(1,572	)	 	 	(2,496	)	
Non-GAAP cost of revenues used in inventory turns	$	134,368	 	 	$	139,894	 	 	$	268,336	 	 	$	275,807	 	
GAAP gross profit	$	195,222	 	 	$	201,598	 	 	$	387,207	 	 	$	400,695	 	
Stock-based compensation expense	 	1,621	 	 	 	2,350	 	 	 	3,222	 	 	 	4,687	 	
Effect of stock-based compensation expense on warranty rates	 	77	 	 	 	144	 	 	 	206	 	 	 	301	 	
Amortization of purchased intangibles	 	731	 	 	 	1,248	 	 	 	1,572	 	 	 	2,496	 	
Non-GAAP gross profit	$	197,651	 	 	$	205,340	 	 	$	392,207	 	 	$	408,179	 	
Non-GAAP gross margin	 	59.5	%	 	 	59.5	%	 	 	59.4	%	 	 	59.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP sales and marketing expense	$	97,836	 	 	$	109,657	 	 	$	191,804	 	 	$	218,372	 	
Stock-based compensation expense	 	(5,333	)	 	 	(7,218	)	 	 	(5,724	)	 	 	(13,854	)	
Non-GAAP sales and marketing expense	$	92,503	 	 	$	102,439	 	 	$	186,080	 	 	$	204,518	 	
Non-GAAP sales and marketing expense as percent of revenues	 	27.9	%	 	 	29.7	%	 	 	28.2	%	 	 	29.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP research and development expense	$	49,031	 	 	$	54,628	 	 	$	97,178	 	 	$	110,563	 	
Stock-based compensation expense	 	(3,059	)	 	 	(4,189	)	 	 	(4,101	)	 	 	(8,910	)	
Non-GAAP research and development expense	$	45,972	 	 	$	50,439	 	 	$	93,077	 	 	$	101,653	 	
Non-GAAP research and development expense as percent of
     revenues	 	13.8	%	 	 	14.6	%	 	 	14.1	%	 	 	14.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP general and administrative expense	$	24,636	 	 	$	24,299	 	 	$	48,429	 	 	$	47,993	 	
Stock-based compensation expense	 	(3,750	)	 	 	(4,572	)	 	 	(6,363	)	 	 	(8,649	)	
Costs associated with CEO separation and related SEC
     investigation	 	(381	)	 	 	—	 	 	 	(991	)	 	 	—	 	
Non-GAAP general and administrative expense	$	20,505	 	 	$	19,727	 	 	$	41,075	 	 	$	39,344	 	
Non-GAAP general and administrative expense as percent of
     revenues	 	6.2	%	 	 	5.7	%	 	 	6.2	%	 	 	5.8	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP total operating expenses	$	183,114	 	 	$	195,507	 	 	$	382,013	 	 	$	395,099	 	
Stock-based compensation expense	 	(12,142	)	 	 	(15,979	)	 	 	(16,188	)	 	 	(31,413	)	
Amortization of purchased intangibles	 	(2,436	)	 	 	(2,545	)	 	 	(4,928	)	 	 	(5,047	)	
Restructuring costs	 	(9,175	)	 	 	(4,329	)	 	 	(39,518	)	 	 	(9,752	)	
Transaction-related costs	 	—	 	 	 	(49	)	 	 	(156	)	 	 	(3,372	)	
Costs associated with CEO separation and related SEC
     investigation	 	(381	)	 	 	—	 	 	 	(991	)	 	 	—	 	
Non-GAAP total operating expenses	$	158,980	 	 	$	172,605	 	 	$	320,232	 	 	$	345,515	 	
Non-GAAP total operating expenses as percent of revenues	 	47.9	%	 	 	50.0	%	 	 	48.50	%	 	 	50.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP operating income	$	12,108	 	 	$	6,091	 	 	$	5,194	 	 	$	5,596	 	
Stock-based compensation expense	 	13,763	 	 	 	18,329	 	 	 	19,410	 	 	 	36,100	 	
Effect of stock-based compensation expense on warranty rates	 	77	 	 	 	144	 	 	 	206	 	 	 	301	 	
Amortization of purchased intangibles	 	3,167	 	 	 	3,793	 	 	 	6,500	 	 	 	7,543	 	
Restructuring costs	 	9,175	 	 	 	4,329	 	 	 	39,518	 	 	 	9,752	 	
Transaction-related costs	 	—	 	 	 	49	 	 	 	156	 	 	 	3,372	 	
Costs associated with CEO separation and related SEC
     investigation	 	381	 	 	 	—	 	 	 	991	 	 	 	—	 	
Non-GAAP operating income	$	38,671	 	 	$	32,735	 	 	$	71,975	 	 	$	62,664	 	
Non-GAAP operating margin	 	11.6	%	 	 	9.5	%	 	 	10.9	%	 	 	9.2	%	

 
POLYCOM, INC.
Summary of Stock-Based Compensation Expense
(In thousands)
(Unaudited)
 
 	Three Months Ended	 	 	Six Months Ended	 	
 	June 30,
2014	 	 	June 30,
2013	 	 	June 30,
2014	 	 	June 30,
2013	 	
Cost of product revenues	$	520	 	 	$	705	 	 	$	1,160	 	 	$	1,566	 	
Cost of service revenues	 	1,101	 	 	 	1,645	 	 	 	2,062	 	 	 	3,121	 	
Stock-based compensation expense in total cost of revenues	 	1,621	 	 	 	2,350	 	 	 	3,222	 	 	 	4,687	 	
Sales and marketing	 	5,333	 	 	 	7,218	 	 	 	5,724	 	 	 	13,854	 	
Research and development	 	3,059	 	 	 	4,189	 	 	 	4,101	 	 	 	8,910	 	
General and administrative	 	3,750	 	 	 	4,572	 	 	 	6,363	 	 	 	8,649	 	
Stock-based compensation expense in operating expenses	 	12,142	 	 	 	15,979	 	 	 	16,188	 	 	 	31,413	 	
Total stock-based compensation expense	$	13,763	 	 	$	18,329	 	 	$	19,410	 	 	$	36,100