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)
January 23, 2013

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 January 23, 2013, Polycom, Inc. issued a press release announcing its financial results for the three months ended December 31, 2012. 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 January 23, 2013, entitled “Polycom Announces Revenues of $353 Million for Fourth Quarter 2012.”	

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/ Eric F. Brown	
	 	Eric F. Brown	
	 	Chief Operating Officer, Chief Financial Officer and Executive Vice President	
Date: January 23, 2013

EXHIBIT INDEX

Exhibit No.	  	Description	
		
99.1	  	Press Release, dated January 23, 2013, entitled “Polycom Announces Revenues of $353 Million for Fourth Quarter 2012.”	

Exhibit 99.1

 
															
Investor Contact:	  	Laura Graves	  	 	  	 	  	 	  	 	  	 	  	 	
	  	Polycom, Inc.	  		  		  		  		  		
	  	408.586.4271	  		  		  		  		  		  		
	  	laura.graves@polycom.com	  		  		  		  		  		
							
Press Contact:	  	Shawn Dainas	  		  		  		  		  		
	  	Polycom, Inc.	  		  		  		  		  		
	  	408.586.3768	  		  		  		  		  		  		
	  	shawn.dainas@polycom.com	  		  		  		  		  		
Polycom Announces Revenues of $353 Million for Fourth Quarter 2012
• Sequential Revenue Growth in All Major Product Categories
San Jose, California – January 23, 2013 – Polycom, Inc. (Nasdaq: PLCM), the global leader in open standards-based unified communication and collaboration (UC&C), today reported financial results for the fourth quarter ended December 31, 2012. 
Fourth quarter 2012 consolidated net revenues were $353 million, up 5 percent sequentially, growing in all product categories, compared to $335 million for the third quarter of 2012 and down 9 percent year-over-year compared to $386 million for the fourth quarter of 2011. Non-GAAP net income for the fourth quarter of 2012 was $31 million, or 17 cents per diluted share, compared to non-GAAP net income of $17 million or 10 cents per diluted share for the third quarter of 2012, and non-GAAP net income of $68 million, or 38 cents per diluted share for the fourth quarter of 2011. GAAP net income for the fourth quarter of 2012 was $2 million, or 1 cent per diluted share, compared to GAAP net income of $50 million, or 28 cents per diluted share, for the same period last year. All periods presented in this release have been adjusted to reflect the classification of Polycom’s Enterprise Wireless Solutions business as discontinued operations. The reconciliation between GAAP net income and non-GAAP net income is provided in the tables at the end of this release.
“Polycom has executed very well, demonstrating clear product leadership during the UC&C market transition in 2012,” stated Andrew M. Miller, Polycom President and Chief Executive Officer. “We are excited to begin 2013 with what we believe is the most comprehensive product portfolio in the industry and improved sales and go-to-market capabilities that enable new business models for collaboration, including software, cloud-delivered video, and virtualization.”
“We are pleased to report sequential revenue growth in all product categories, including UC Platform, which is above a quarter billion dollar per year run rate,” continued Eric Brown, Polycom Chief Operating Officer and Chief Financial Officer. “Services revenue also increased both sequentially and year-over-year in line with our increased focus on this area of the business.”

On a geographic basis, consolidated net revenues from continuing operations for the fourth quarter of 2012 were comprised of:
 
 	•	 	50 percent Americas, or $175.2 million, an increase of 2 percent sequentially and a decrease of 3 percent year-over-year;	
 
 	•	 	26 percent Europe, Middle East, and Africa (EMEA), or $93.4 million, an increase of 19 percent sequentially and a decrease of 10 percent year-over-year; and	
 
 	•	 	24 percent Asia Pacific, or $84.4 million, a decrease of 2 percent sequentially and a decrease of 18 percent year-over-year.	
By product line, inclusive of its service component, consolidated net revenues from continuing operations for the fourth quarter of 2012 were comprised of:
 
 	•	 	UC Group Systems of $238.2 million, an increase of 5 percent sequentially, and a decrease of 8 percent year-over-year;	
 
 	•	 	UC Personal Devices of $46.8 million, an increase of 2 percent both sequentially and year-over-year; and	
 
 	•	 	UC Platform of $68.0 million, an increase of 6 percent sequentially and a decrease of 15 percent year-over-year.	
In Q4 2012, Polycom generated a total of $66 million in operating cash flow and completed share repurchases of $5 million. Operating cash flow on a trailing 12 month basis was $187 million. Deferred revenue balances increased 2 percent sequentially to $250 million.
Q4 2012 Business Highlights
 
 	•	 	Announced a royalty-free license offering for an interoperable implementation of H.264 Scalable Video Coding (SVC) software technology.	
 
 	•	 	Unveiled a comprehensive set of breakthrough products at our Strategy Day in October, including:	
 
 	•	 	Polycom ® RealPresence ® CloudAXIS™ Suite, a software extension of the Polycom ® RealPresence ® Platform for private and public cloud deployments – available in both an enterprise and partner/service provider edition – that enables universal access to enterprise-grade video collaboration to any business (B2B) or consumer (B2C) at the highest quality, reliability, and security	
 
 	•	 	Powerful Polycom RealPresence Platform enhancements, including the industry’s first open standards-based SVC (Scalable Video Coding), with 3X HD multipoint video call capacity for greater scalability, dramatically lower TCO, superior performance, and backwards—and forwards-compatibility to protect customer investments—all available through a software update	
 
 	•	 	Polycom ® RealPresence ® Collaboration Server 800s, Virtual Edition, the industry’s first multi-protocol, integrated software MCU that runs on industry-standard servers	
 
 	•	 	Next-generation video endpoints, including new Polycom ® RealPresence ® Group Series products, the new ultra-slim Polycom ® RealPresence ® VisualEdge™ Executive Desktop offering, and Polycom RealPresence software for PCs and mobile devices.	

 	•	 	Launched Polycom ® VVX ® 600 solutions, offering workers a flexible and intuitive phone that integrates seamlessly with popular UC&C productivity applications and Bluetooth headsets for hands-free privacy. Users can also join video conferences via the optional Polycom VVX Camera, which Polycom also unveiled for both Polycom VVX 600 and Polycom ® VVX ® 500 business media phones.	
 
 	•	 	Introduced a series of new customer financing options that help free customers from the limitations of quarterly capital expense budgets and allow more organizations to implement UC&C solutions that fully meet their needs.	
 
 	•	 	Announced enhancements to the Company’s video content management solutions, including a new cloud-delivered version of the Polycom ® RealPresence ® Media Manager and Polycom ® RSS™ 4000 v8.5, which help organizations record, stream, manage and view live and on-demand video content quickly, easily and cost-effectively.	
 
 	•	 	Announced the worldwide availability of the Polycom ® HDX ® Series 3.1, a software update for the Company’s popular HDX video collaboration solution for executive desktops and rooms.	
Earnings Call Details
Polycom will hold a conference call today, January 23, 2013, at 5:00 p.m. EST/2:00 p.m. PST to discuss its fourth quarter financial results. Andrew M. Miller, President and CEO, and Eric Brown, Chief Operating Officer and Chief Financial Officer, will host the call. You may participate by viewing the webcast at www.polycom.com/investors or, for callers in the U.S. and Canada, you may participate by calling 800.707.8704 and for callers outside of the U.S. and Canada, by calling 303.223.4360. 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 800.633.8284 and, for callers outside of the U.S. and Canada, at 402.977.9140. The access number for the replay is 21643789. 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 future events, future demand for our products, and the future performance of the Company, including statements regarding the comprehensiveness of our product portfolio and improved sales and go-to-market capabilities that enable new business models for collaboration, and future expectations for continued growth of our UC Platform revenues. 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; 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 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 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 quarter ended September 30, 2012, 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 is the global leader in open standards-based unified communications and collaboration (UC&C) solutions for voice and video collaboration, trusted by more than 415,000 customers around the world. Polycom solutions are powered by the Polycom ® RealPresence ® Platform, comprehensive software infrastructure and rich APIs that interoperate with the broadest set of communication, business, mobile and cloud applications and devices to deliver secure face-to-face video collaboration in any environment. Polycom and its ecosystem of over 7,000 partners provide truly unified communications solutions that deliver the best user experience, highest multi-vendor interoperability, and lowest TCO Visit www.polycom.com or connect with us on Twitter, Facebook, and LinkedIn to learn how we’re pushing the greatness of human collaboration forward.
© 2013 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	 	 	Twelve Months Ended	 	
 	  	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 	
 	  	2012	 	 	2011	 	 	2012	 	 	2011	 	
Revenues:	  				 				 				 				
Product revenues	  	$	261,874	  	 	$	303,461	  	 	$	1,042,484	  	 	$	1,138,050	  	
Service revenues	  	 	91,152	  	 	 	82,769	  	 	 	350,144	  	 	 	264,139	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	  	 	353,026	  	 	 	386,230	  	 	 	1,392,628	  	 	 	1,402,189	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of revenues:	  				 				 				 				
Cost of product revenues	  	 	109,506	  	 	 	120,906	  	 	 	426,369	  	 	 	439,995	  	
Cost of service revenues	  	 	36,704	  	 	 	31,364	  	 	 	142,827	  	 	 	103,930	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenues	  	 	146,210	  	 	 	152,270	  	 	 	569,196	  	 	 	543,925	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	  	 	206,816	  	 	 	233,960	  	 	 	823,432	  	 	 	858,264	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses:	  				 				 				 				
Sales and marketing	  	 	116,312	  	 	 	113,401	  	 	 	464,353	  	 	 	428,829	  	
Research and development	  	 	55,085	  	 	 	51,431	  	 	 	208,510	  	 	 	190,322	  	
General and administrative	  	 	25,910	  	 	 	20,629	  	 	 	98,285	  	 	 	81,661	  	
Amortization of purchased intangibles	  	 	2,512	  	 	 	2,671	  	 	 	9,830	  	 	 	5,542	  	
Restructuring costs	  	 	195	  	 	 	4,657	  	 	 	22,024	  	 	 	9,396	  	
Acquisition-related expenses	  	 	2,271	  	 	 	1,764	  	 	 	14,064	  	 	 	9,688	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	202,285	  	 	 	194,553	  	 	 	817,066	  	 	 	725,438	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	  	 	4,531	  	 	 	39,407	  	 	 	6,366	  	 	 	132,826	  	
Other income (expense), net	  	 	(858	) 	 	 	1,778	  	 	 	(3,868	) 	 	 	(1,672	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations before provision for income taxes	  	 	3,673	  	 	 	41,185	  	 	 	2,498	  	 	 	131,154	  	
Provision (benefit) for income taxes	  	 	39,081	  	 	 	(4,545	) 	 	 	38,056	  	 	 	5,246	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations	  	 	(35,408	) 	 	 	45,730	  	 	 	(35,558	) 	 	 	125,908	  	
Income from operations of discontinued operations, net of taxes	  	 	2,178	  	 	 	3,843	  	 	 	9,888	  	 	 	9,906	  	
Gain from sale of discontinued operations, net of taxes	  	 	35,425	  	 	 	—  	  	 	 	35,425	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	$	2,195	  	 	$	49,573	  	 	$	9,755	  	 	$	135,814	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic net income (loss) per share:	  				 				 				 				
Income (loss) per share from continuing operations	  	$	(0.20	) 	 	$	0.26	  	 	$	(0.20	) 	 	$	0.71	  	
Income per share from operations of discontinued operations, net of taxes	  	$	0.01	  	 	$	0.02	  	 	$	0.06	  	 	$	0.06	  	
Gain per share from sale of discontinued operations, net of taxes	  	$	0.20	  	 	$	—  	  	 	$	0.20	  	 	$	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic net income per share	  	$	0.01	  	 	$	0.28	  	 	$	0.06	  	 	$	0.77	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted net income (loss) per share:	  				 				 				 				
Income (loss) per share from continuing operations	  	$	(0.20	) 	 	$	0.26	  	 	$	(0.20	) 	 	$	0.69	  	
Income per share from operations of discontinued operations, net of taxes	  	$	0.01	  	 	$	0.02	  	 	$	0.06	  	 	$	0.05	  	
Gain per share from sale of discontinued operations, net of taxes	  	$	0.20	  	 	$	—  	  	 	$	0.20	  	 	$	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted net income per share	  	$	0.01	  	 	$	0.28	  	 	$	0.06	  	 	$	0.75	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Number of shares used in computation of net income (loss) per share:	  				 				 				 				
Basic	  	 	175,519	  	 	 	176,729	  	 	 	176,878	  	 	 	176,426	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	 	175,519	  	 	 	179,331	  	 	 	176,878	  	 	 	181,195	  	

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.	
As a result of the net loss from continuing operations for the three and twelve month periods ended December 31, 2012, all potentially issuable common shares have been excluded from the diluted shares used in the computation of earnings per share for those periods as their effect is anti-dilutive.

POLYCOM, INC.
Reconciliation of GAAP to Non-GAAP Net Income
(In thousands, except per share amounts)
(Unaudited)

 	  	Three Months Ended	 	 	Twelve Months Ended	 	
 	  	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 	
 	  	2012	 	 	2011	 	 	2012	 	 	2011	 	
GAAP net income	  	$	2,195	  	 	$	49,573	  	 	$	9,755	  	 	$	135,814	  	
Income from operations of discontinued operations, net of tax	  	 	(2,178	) 	 	 	(3,843	) 	 	 	(9,888	) 	 	 	(9,906	) 	
Gain from sale of discontinued operations, net of tax	  	 	(35,425	) 	 	 	—  	  	 	 	(35,425	) 	 	 	—  	  	
Tax expense on company reorganization	  	 	38,836	  	 	 	—  	  	 	 	38,836	  	 	 	—  	  	
Amortization of purchased intangibles	  	 	4,421	  	 	 	4,529	  	 	 	17,465	  	 	 	11,201	  	
Restructuring costs	  	 	195	  	 	 	4,657	  	 	 	22,024	  	 	 	9,396	  	
Acquisition-related expenses	  	 	2,271	  	 	 	1,764	  	 	 	14,064	  	 	 	9,688	  	
Stock-based compensation expense	  	 	23,690	  	 	 	18,276	  	 	 	88,761	  	 	 	63,853	  	
Effect of stock-based compensation on warranty rates	  	 	128	  	 	 	181	  	 	 	669	  	 	 	546	  	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	929	  	 	 	—  	  	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	(87	) 	 	 	236	  	 	 	1,552	  	
Impairment (recovery) of an investment in a private company	  	 	—  	  	 	 	(421	) 	 	 	—  	  	 	 	79	  	
Benefit related to the resolution of a multi-year tax audit	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(7,487	) 	
Income tax effect of other non-GAAP exclusions	  	 	(3,444	) 	 	 	(6,696	) 	 	 	(25,612	) 	 	 	(20,078	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP net income	  	$	30,689	  	 	$	67,933	  	 	$	121,814	  	 	$	194,658	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP earnings per share:	  				 				 				 				
Basic	  	$	0.01	  	 	$	0.28	  	 	$	0.06	  	 	$	0.77	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.01	  	 	$	0.28	  	 	$	0.06	  	 	$	0.75	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP earnings per share:	  				 				 				 				
Basic	  	$	0.17	  	 	$	0.38	  	 	$	0.69	  	 	$	1.10	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.17	  	 	$	0.38	  	 	$	0.68	  	 	$	1.07	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Number of shares used in computation of GAAP earnings per share:	  				 				 				 				
Basic	  	 	175,519	  	 	 	176,729	  	 	 	176,878	  	 	 	176,426	  	
Diluted	  	 	175,519	  	 	 	179,331	  	 	 	176,878	  	 	 	181,195	  	
Number of shares used in computation of non-GAAP earnings per share:	  				 				 				 				
Basic	  	 	175,519	  	 	 	176,729	  	 	 	176,878	  	 	 	176,426	  	
Diluted	  	 	177,953	  	 	 	179,331	  	 	 	178,945	  	 	 	181,195	  	

POLYCOM, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

 	  	December 31,	 	  	December 31,	 	
 	  	2012	 	  	2011	 	
ASSETS	  				  				
Current assets	  				  				
Cash and cash equivalents	  	$	477,073	  	  	$	375,241	  	
Short-term investments	  	 	197,196	  	  	 	159,426	  	
Trade receivables, net	  	 	194,654	  	  	 	210,804	  	
Inventories	  	 	99,960	  	  	 	93,284	  	
Deferred taxes	  	 	48,916	  	  	 	37,282	  	
Prepaid expenses and other current assets	  	 	55,454	  	  	 	51,241	  	
Assets held for sale	  	 	—  	  	  	 	67,130	  	
	  	 	 	 	  	 	 	 	
Total current assets	  	 	1,073,253	  	  	 	994,408	  	
Property and equipment, net	  	 	133,319	  	  	 	126,884	  	
Long-term investments	  	 	50,333	  	  	 	56,772	  	
Goodwill and purchased intangibles	  	 	608,802	  	  	 	623,121	  	
Deferred taxes	  	 	28,406	  	  	 	23,356	  	
Other assets	  	 	21,238	  	  	 	20,264	  	
	  	 	 	 	  	 	 	 	
Total assets	  	$	1,915,351	  	  	$	1,844,805	  	
	  	 	 	 	  	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	  				  				
Current liabilities	  				  				
Accounts payable	  	$	89,983	  	  	$	110,719	  	
Accrued payroll and related liabilities	  	 	39,469	  	  	 	38,546	  	
Taxes payable	  	 	4,736	  	  	 	—  	  	
Deferred revenue	  	 	158,482	  	  	 	138,486	  	
Other accrued liabilities	  	 	63,018	  	  	 	59,288	  	
Liabilities held for sale	  	 	—  	  	  	 	14,119	  	
	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	355,688	  	  	 	361,158	  	
Non-current liabilities	  				  				
Deferred revenue	  	 	91,061	  	  	 	82,898	  	
Taxes payable	  	 	15,598	  	  	 	16,813	  	
Deferred taxes	  	 	236	  	  	 	558	  	
Other non-current liabilities	  	 	22,079	  	  	 	13,262	  	
	  	 	 	 	  	 	 	 	
Total liabilities	  	 	484,662	  	  	 	474,689	  	
Stockholders’ equity	  	 	1,430,689	  	  	 	1,370,116	  	
	  	 	 	 	  	 	 	 	
Total liabilities and stockholders’ equity	  	$	1,915,351	  	  	$	1,844,805	  	

POLYCOM, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 	  	Twelve Months Ended	 	
 	  	December 31,	 	 	December 31,	 	
 	  	2012	 	 	2011	 	
Cash flows from operating activities:	  				 				
Net income	  	$	9,755	  	 	$	135,814	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  				 				
Depreciation and amortization	  	 	61,586	  	 	 	52,564	  	
Amortization of purchased intangibles	  	 	20,318	  	 	 	21,742	  	
Provision for excess and obsolete inventories	  	 	6,420	  	 	 	8,567	  	
Provision for doubtful accounts	  	 	1,100	  	 	 	—  	  	
Stock-based compensation expense	  	 	89,245	  	 	 	65,262	  	
Impairment of private company investments	  	 	—  	  	 	 	79	  	
Excess tax benefits from stock-based compensation	  	 	(9,297	) 	 	 	(13,430	) 	
Loss on disposals of property and equipment	  	 	4,080	  	 	 	1,537	  	
Net gain on sale of discontinued operations	  	 	(35,425	) 	 	 	—  	  	
Tax expense on company reorganization	  	 	38,836	  	 	 	—  	  	
Changes in assets and liabilities, net of the effect of acquisitions and divestitures:	  				 				
Trade receivables	  	 	16,582	  	 	 	(63,009	) 	
Inventories	  	 	(11,428	) 	 	 	2,545	  	
Deferred taxes	  	 	(15,933	) 	 	 	(12,446	) 	
Prepaid expenses and other assets	  	 	(8,835	) 	 	 	(3,190	) 	
Accounts payable	  	 	(22,901	) 	 	 	22,816	  	
Taxes payable	  	 	5,123	  	 	 	13,496	  	
Other accrued liabilities	  	 	37,754	  	 	 	67,298	  	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	186,980	  	 	 	299,645	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				 				
Purchases of property and equipment	  	 	(67,270	) 	 	 	(69,279	) 	
Purchases of investments	  	 	(312,631	) 	 	 	(372,567	) 	
Proceeds from sale of investments	  	 	52,286	  	 	 	41,461	  	
Proceeds from maturities of investments	  	 	229,211	  	 	 	326,332	  	
Net cash received from sale of discontinued operations	  	 	50,411	  	 	 	—  	  	
Net cash paid in purchase acquisitions	  	 	(4,583	) 	 	 	(163,630	) 	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(52,576	) 	 	 	(237,683	) 	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities:	  				 				
Proceeds from issuance of common stock under employee option and stock purchase plans	  	 	25,832	  	 	 	40,798	  	
Repurchase and retirement of common stock	  	 	(67,901	) 	 	 	(64,937	) 	
Excess tax benefits from stock-based compensation	  	 	9,297	  	 	 	13,430	  	
	  	 	 	 	 	 	 	 	
Net cash used in financing activities	  	 	(32,772	) 	 	 	(10,709	) 	
	  	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	  	 	101,632	  	 	 	51,253	  	
Cash and cash equivalents, beginning of period	  	 	375,441	  	 	 	324,188	  	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents, end of period	  	$	477,073	  	 	$	375,441	  	
	  	 	 	 	 	 	 	 	
These Condensed Consolidated Statements of Cash Flows include combined cash flows of continuing and discontinued operations.
The end of period cash and cash equivalents balance for December 31, 2011 includes $200 of cash included within “Assets held for sale” in the condensed consolidated balance sheets.

POLYCOM, INC.
Reconciliations of GAAP Measures to Non-GAAP Measures
(In thousands)
(Unaudited)

 	  	Three Months Ended	 	 	Twelve Months Ended	 	
 	  	December 31,
2012	 	 	December 31,
2011	 	 	December 31,
2012	 	 	December 31,
2011	 	
GAAP cost of revenues used in inventory turns	  	$	146,210	  	 	$	152,270	  	 	$	569,196	  	 	$	543,925	  	
Stock-based compensation expense	  	 	(2,532	) 	 	 	(1,591	) 	 	 	(10,204	) 	 	 	(6,267	) 	
Effect of stock-based compensation on warranty rates	  	 	(128	) 	 	 	(181	) 	 	 	(669	) 	 	 	(546	) 	
Amortization of purchased intangibles	  	 	(1,909	) 	 	 	(1,858	) 	 	 	(7,635	) 	 	 	(5,659	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP cost of revenues used in inventory turns	  	$	141,641	  	 	$	148,640	  	 	$	550,688	  	 	$	531,453	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP gross profit	  	$	206,816	  	 	$	233,960	  	 	$	823,432	  	 	$	858,264	  	
Stock-based compensation expense	  	 	2,532	  	 	 	1,591	  	 	 	10,204	  	 	 	6,267	  	
Effect of stock-based compensation on warranty rates	  	 	128	  	 	 	181	  	 	 	669	  	 	 	546	  	
Amortization of purchased intangibles	  	 	1,909	  	 	 	1,858	  	 	 	7,635	  	 	 	5,659	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross profit	  	$	211,385	  	 	$	237,590	  	 	$	841,940	  	 	$	870,736	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross margin	  	 	59.9	% 	 	 	61.5	% 	 	 	60.5	% 	 	 	62.1	% 	
GAAP sales and marketing expense	  	$	116,312	  	 	$	113,401	  	 	$	464,353	  	 	$	428,829	  	
Stock-based compensation expense	  	 	(9,722	) 	 	 	(8,131	) 	 	 	(36,791	) 	 	 	(27,022	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP sales and marketing expense	  	$	106,590	  	 	$	105,270	  	 	$	427,562	  	 	$	401,807	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP sales and marketing expense as percent of revenues	  	 	30.2	% 	 	 	27.3	% 	 	 	30.7	% 	 	 	28.7	% 	
GAAP research and development expense	  	$	55,085	  	 	$	51,431	  	 	$	208,510	  	 	$	190,322	  	
Stock-based compensation expense	  	 	(5,387	) 	 	 	(4,228	) 	 	 	(20,195	) 	 	 	(14,850	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP research and development expense	  	$	49,698	  	 	$	47,203	  	 	$	188,315	  	 	$	175,472	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP research and development expense as percent of revenues	  	 	14.1	% 	 	 	12.2	% 	 	 	13.5	% 	 	 	12.5	% 	
GAAP general and administrative expense	  	$	25,910	  	 	$	20,629	  	 	$	98,285	  	 	$	81,661	  	
Stock-based compensation expense	  	 	(6,049	) 	 	 	(4,326	) 	 	 	(21,571	) 	 	 	(15,714	) 	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	(929	) 	 	 	—  	  	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	87	  	 	 	(236	) 	 	 	(1,552	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP general and administrative expense	  	$	19,861	  	 	$	16,390	  	 	$	75,549	  	 	$	64,395	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP general and administrative expense as percent of revenues	  	 	5.6	% 	 	 	4.2	% 	 	 	5.4	% 	 	 	4.6	% 	
GAAP total operating expenses	  	$	202,285	  	 	$	194,553	  	 	$	817,066	  	 	$	725,438	  	
Stock-based compensation expense	  	 	(21,158	) 	 	 	(16,685	) 	 	 	(78,557	) 	 	 	(57,586	) 	
Amortization of purchased intangibles	  	 	(2,512	) 	 	 	(2,671	) 	 	 	(9,830	) 	 	 	(5,542	) 	
Restructuring costs	  	 	(195	) 	 	 	(4,657	) 	 	 	(22,024	) 	 	 	(9,396	) 	
Acquisition-related expenses	  	 	(2,271	) 	 	 	(1,764	) 	 	 	(14,064	) 	 	 	(9,688	) 	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	(929	) 	 	 	—  	  	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	87	  	 	 	(236	) 	 	 	(1,552	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP total operating expenses	  	$	176,149	  	 	$	168,863	  	 	$	691,426	  	 	$	641,674	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP total operating expenses as percent of revenues	  	 	49.9	% 	 	 	43.7	% 	 	 	49.6	% 	 	 	45.8	% 	
GAAP operating income (loss)	  	$	4,531	  	 	$	39,407	  	 	$	6,366	  	 	$	132,826	  	
Stock-based compensation expense	  	 	23,690	  	 	 	18,276	  	 	 	88,761	  	 	 	63,853	  	
Effect of stock-based compensation on warranty rates	  	 	128	  	 	 	181	  	 	 	669	  	 	 	546	  	
Amortization of purchased intangibles	  	 	4,421	  	 	 	4,529	  	 	 	17,465	  	 	 	11,201	  	
Restructuring costs	  	 	195	  	 	 	4,657	  	 	 	22,024	  	 	 	9,396	  	
Acquisition-related expenses	  	 	2,271	  	 	 	1,764	  	 	 	14,064	  	 	 	9,688	  	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	929	  	 	 	—  	  	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	(87	) 	 	 	236	  	 	 	1,552	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating income	  	$	35,236	  	 	$	68,727	  	 	$	150,514	  	 	$	229,062	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating margin	  	 	10.0	% 	 	 	17.8	% 	 	 	10.8	% 	 	 	16.3	% 	

POLYCOM, INC.
Summary of Stock-Based Compensation Expense
(In thousands)
(Unaudited)

 	  	Three Months Ended	 	  	Twelve Months Ended	 	
 	  	December 31,
2012	 	  	December 31,
2011	 	  	December 31,
2012	 	  	December 31,
2011	 	
Cost of sales - product	  	$	873	  	  	$	707	  	  	$	3,593	  	  	$	2,501	  	
Cost of sales - service	  	 	1,659	  	  	 	884	  	  	 	6,611	  	  	 	3,766	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Stock-based compensation expense in cost of sales	  	 	2,532	  	  	 	1,591	  	  	 	10,204	  	  	 	6,267	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Sales and marketing	  	 	9,722	  	  	 	8,131	  	  	 	36,791	  	  	 	27,022	  	
Research and development	  	 	5,387	  	  	 	4,228	  	  	 	20,195	  	  	 	14,850	  	
General and administrative	  	 	6,049	  	  	 	4,326	  	  	 	21,571	  	  	 	15,714	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Stock-based compensation expense in operating expenses	  	 	21,158	  	  	 	16,685	  	  	 	78,557	  	  	 	57,586	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total stock-based compensation expense	  	$	23,690	  	  	$	18,276	  	  	$	88,761	  	  	$	63,853