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 22, 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 January 22, 2014, Polycom, Inc. issued a press release announcing its financial results for the three months ended December 31, 2013. The full text of the press release is furnished as Exhibit 99.1.
Item 2.05 Costs Associated with Exit or Disposal Activities
On January 22, 2014, management finalized certain actions designed to better align expenses to our revenue and gross margin profile and position the company for improved operating performance and commenced communications regarding such actions to Polycom’s workforce. These actions are part of our efforts to manage expenses and increase our operating margins and will result in the elimination of approximately 6% of our global workforce. The significant majority of the reductions will take effect in the first quarter of 2014.
We expect to record charges and make cash expenditures, primarily related to severance and other one-time employee termination benefits, of between $9 million and $11 million through the third quarter of 2014 as a result of this action.
We have also approved plans to reduce or eliminate certain leased facilities. As a result, we expect to record between $23 million and $25 million in additional charges upon vacating these facilities through the third quarter of 2014. The underlying net cash expenditures of between $24 million and $26 million are expected to occur over the remaining lease terms, which range from less than 1 year to 9 years.
The total charges expected to be incurred in connection with these actions through the third quarter of 2014 are between $32 million and $36 million.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits

			
	 	99.1	  	Press Release, dated January 22, 2014, entitled “Polycom Announces Revenues of $348 Million for Fourth Quarter 2013.”	

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 22, 2014

EXHIBIT INDEX

Exhibit No.	  	Description	
		
99.1	  	Press Release, dated January 22, 2014, entitled “Polycom Announces Revenues of $348 Million for Fourth Quarter 2013.”	

Exhibit 99.1

 
			
Investor Contact:	  	Laura Graves	
	  	Polycom, Inc.	
	  	1.408.586.4271
laura.graves@polycom.com	
		
Press Contact:	  	Ryan Batty	
	  	Polycom, Inc.	
	  	1.408.586.4467
ryan.batty@polycom.com	
Polycom Announces Revenues of $348 Million for Fourth Quarter 2013
UC Personal Devices revenues grow 33 percent year-over-year
SAN JOSE, Calif. – January 22, 2014 – 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, 2013. Polycom reported fourth quarter 2013 net revenues of $348 million, non-GAAP net income of $25 million and non-GAAP earnings per diluted share of 16 cents. GAAP net loss for the fourth quarter was $2 million, or 1 cent per share. A reconciliation of GAAP to non-GAAP results is provided in the tables at the end of this press release.
“Polycom posted stronger sequential performance in Q4 2013, driven by on-going strength in UC Personal Devices and improvements in EMEA and Asia Pacific,” said Peter Leav, Polycom President and Chief Executive Officer. “In 2014, our goal is to prioritize growth areas within the business and deliver an improved cost structure that will result in better overall profitability for Polycom.”
“Polycom generated $168 million in operating cash flow in 2013,” said Eric Brown, Polycom Chief Operating Officer and Chief Financial Officer. “We continue to emphasize capital return for shareholders, including our recently executed $400 million share repurchase program. Polycom repurchased a total of 45 million shares in 2013.”
On a comparative basis, consolidated financial results were:

($ in millions, except per share data)	  	Q4 2013	 	 	Q3 2013	 	 	Q4 2012	 	
Revenues	  	$	347.9	  	 	$	336.5	  	 	$	353.0	  	
Non-GAAP Net Income	  	$	25.4	  	 	$	19.3	  	 	$	30.7	  	
Non-GAAP EPS	  	$	0.16	  	 	$	0.11	  	 	$	0.17	  	
GAAP Net Income (Loss)	  	$	(2.0	) 	 	$	(24.0	) 	 	$	1.9	  	
GAAP EPS	  	$	(0.01	) 	 	$	(0.14	) 	 	$	0.01	  	

On a geographic basis, consolidated net revenues were comprised of:

($ in millions)	  	Q4 2013	 	 	Q3 2013	 	 	Q4 2012	 	 	Sequential
Change	 	 	Year-Over-
Year
Change	 	
Americas	  	$	170.6	  	 	$	177.3	  	 	$	175.2	  	 	 	-4	% 	 	 	-3	% 	
% of revenues	  	 	49	% 	 	 	53	% 	 	 	50	% 	 				 				
Europe, Middle East & Africa (EMEA)	  	 	89.2	  	 	 	80.0	  	 	 	93.4	  	 	 	11	% 	 	 	-5	% 	
% of revenues	  	 	26	% 	 	 	24	% 	 	 	26	% 	 				 				
Asia Pacific	  	 	88.1	  	 	 	79.2	  	 	 	84.4	  	 	 	11	% 	 	 	4	% 	
% of revenues	  	 	25	% 	 	 	23	% 	 	 	24	% 	 				 				
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Totals *	  	$	347.9	  	 	$	336.5	  	 	$	353.0	  	 	 	3	% 	 	 	-1	% 	

*	may not foot due to rounding	
By product line, inclusive of its service component, consolidated net revenues were comprised of:

($ in millions)	  	Q4 2013	 	 	Q3 2013	 	 	Q4 2012	 	 	Sequential
Change	 	 	Year-Over-
Year
Change	 	
UC Group Systems	  	$	218.1	  	 	$	221.4	  	 	$	238.2	  	 	 	-1	% 	 	 	-8	% 	
% of revenues	  	 	63	% 	 	 	66	% 	 	 	67	% 	 				 				
UC Personal Devices	  	 	62.1	  	 	 	56.9	  	 	 	46.8	  	 	 	9	% 	 	 	33	% 	
% of revenues	  	 	18	% 	 	 	17	% 	 	 	13	% 	 				 				
UC Platform	  	 	67.7	  	 	 	58.2	  	 	 	68.0	  	 	 	16	% 	 	 	0	% 	
% of revenues	  	 	19	% 	 	 	17	% 	 	 	19	% 	 				 				
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Totals *	  	$	347.9	  	 	$	336.5	  	 	$	353.0	  	 	 	3	% 	 	 	-1	% 	

*	may not foot due to rounding	
In Q4 2013, Polycom generated a total of $50 million in operating cash flow. Operating cash flow on a trailing 12 month basis was $168 million. Cash and investments at the end of Q4 2013 totaled $584 million.
Earnings Call Details
Polycom will hold a conference call today, January 22, 2014, at 5:00 p.m. EST/2:00 p.m. PST to discuss its fourth quarter 2013 financial results. Peter Leav, President and CEO, and Eric Brown, Chief Operating Officer and Chief Financial Officer, will host the call. 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 1.888.223.4990 and for callers outside of the U.S. and Canada, by calling 1.303.223.2680. 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 21703637. 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 growth, cost reductions, profitability and capital return for shareholders. 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 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, 2013, 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.
© 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	 	 	Twelve Months Ended	 	
 	  	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 	
 	  	2013	 	 	2012	 	 	2013	 	 	2012	 	
Revenues:	  				 				 				 				
Product revenues	  	$	251,044	  	 	$	261,874	  	 	$	991,110	  	 	$	1,042,484	  	
Service revenues	  	 	96,898	  	 	 	91,152	  	 	 	377,279	  	 	 	350,144	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	  	 	347,942	  	 	 	353,026	  	 	 	1,368,389	  	 	 	1,392,628	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of revenues:	  				 				 				 				
Cost of product revenues	  	 	112,435	  	 	 	109,506	  	 	 	422,429	  	 	 	426,369	  	
Cost of service revenues	  	 	38,475	  	 	 	36,704	  	 	 	153,189	  	 	 	142,827	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of revenues	  	 	150,910	  	 	 	146,210	  	 	 	575,618	  	 	 	569,196	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	  	 	197,032	  	 	 	206,816	  	 	 	792,771	  	 	 	823,432	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses:	  				 				 				 				
Sales and marketing	  	 	109,384	  	 	 	116,312	  	 	 	435,047	  	 	 	464,353	  	
Research and development	  	 	51,250	  	 	 	55,085	  	 	 	216,032	  	 	 	208,510	  	
General and administrative	  	 	20,141	  	 	 	25,910	  	 	 	96,602	  	 	 	98,285	  	
Amortization of purchased intangibles	  	 	2,854	  	 	 	2,512	  	 	 	10,389	  	 	 	9,830	  	
Restructuring costs	  	 	13,831	  	 	 	195	  	 	 	48,470	  	 	 	22,024	  	
Acquisition-related expenses	  	 	13	  	 	 	2,271	  	 	 	3,424	  	 	 	14,064	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	197,473	  	 	 	202,285	  	 	 	809,964	  	 	 	817,066	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	  	 	(441	) 	 	 	4,531	  	 	 	(17,193	) 	 	 	6,366	  	
Interest expense	  	 	(1,481	) 	 	 	(281	) 	 	 	(3,217	) 	 	 	(751	) 	
Interest income and other income /(expense)	  	 	(753	) 	 	 	(577	) 	 	 	(1,794	) 	 	 	(3,117	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other expense, net	  	 	(2,234	) 	 	 	(858	) 	 	 	(5,011	) 	 	 	(3,868	) 	
Loss from continuing operations before provision for income taxes	  	 	(2,675	) 	 	 	3,673	  	 	 	(22,204	) 	 	 	2,498	  	
Provision for (benefit from) income taxes	  	 	(706	) 	 	 	39,362	  	 	 	(3,669	) 	 	 	39,467	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss from continuing operations	  	 	(1,969	) 	 	 	(35,689	) 	 	 	(18,535	) 	 	 	(36,969	) 	
Income from operations of discontinued operations, net of taxes	  	 	—  	  	 	 	2,178	  	 	 	—  	  	 	 	9,888	  	
Gain from sale of discontinued operations, net of taxes	  	 	—  	  	 	 	35,425	  	 	 	459	  	 	 	35,425	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income / (loss)	  	$	(1,969	) 	 	$	1,914	  	 	$	(18,076	) 	 	$	8,344	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted net income per share:	  				 				 				 				
Income per share from continuing operations	  	$	(0.01	) 	 	$	(0.20	) 	 	$	(0.11	) 	 	$	(0.21	) 	
Income per share from discontinued operations, net of taxes	  	$	—  	  	 	$	0.01	  	 	$	—  	  	 	$	0.06	  	
Gain per share from sale of discontinued operations, net of taxes	  	$	—  	  	 	$	0.20	  	 	$	—  	  	 	$	0.20	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted net income per share	  	$	(0.01	) 	 	$	0.01	  	 	$	(0.11	) 	 	$	0.05	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Number of shares used in computation of net income per share:	  				 				 				 				
Basic	  	 	151,158	  	 	 	175,519	  	 	 	167,272	  	 	 	176,878	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	 	151,158	  	 	 	175,519	  	 	 	167,272	  	 	 	176,878	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
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. *
The tax provision and net income for the three and twelve months ended December 31, 2012 has been revised from previously issued financial statements to correct an error. These adjustments were not considered material to previously issued financial statements. However, because of the significance of these adjustments to the current period, the Company has revised the prior periods contained herein. The adjustments had no impact on income before provision for income taxes or net cash flows.
 
*	As a result of the net loss from continuing operations for all periods presented, all potentially issuable common shares have been excluded from the diluted shares used in the computation of earnings per share 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,	 	
 	  	2013	 	 	2012	 	 	2013	 	 	2012	 	
GAAP net income (loss)	  	$	(1,969	) 	 	$	1,914	  	 	$	(18,076	) 	 	$	8,344	  	
Income from discontinued operations, net of taxes	  	 	—  	  	 	 	(2,178	) 	 	 	—  	  	 	 	(9,888	) 	
Gain from sale of discontinued operations, net of taxes	  	 	—  	  	 	 	(35,425	) 	 	 	(459	) 	 	 	(35,425	) 	
Amortization of purchased intangibles	  	 	8,471	  	 	 	4,421	  	 	 	19,750	  	 	 	17,465	  	
Restructuring costs	  	 	13,831	  	 	 	195	  	 	 	48,470	  	 	 	22,024	  	
Acquisition-related expenses	  	 	13	  	 	 	2,271	  	 	 	3,424	  	 	 	14,064	  	
Stock-based compensation expense	  	 	11,165	  	 	 	23,690	  	 	 	64,465	  	 	 	88,761	  	
Effect of stock-based compensation on warranty rates	  	 	126	  	 	 	128	  	 	 	547	  	 	 	669	  	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	929	  	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	236	  	
Costs associated with CEO separation and related SEC investigation	  	 	802	  	 	 	—  	  	 	 	2,909	  	 	 	—  	  	
Tax expense on company reorganization	  	 	—  	  	 	 	38,835	  	 	 	—  	  	 	 	38,835	  	
Income tax effect of non-GAAP exclusions	  	 	(7,053	) 	 	 	(3,162	) 	 	 	(27,141	) 	 	 	(24,200	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP net income	  	$	25,386	  	 	$	30,689	  	 	$	93,889	  	 	$	121,814	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP earnings per share	  				 				 				 				
Basic and diluted	  	$	(0.01	) 	 	$	0.01	  	 	$	(0.11	) 	 	$	0.05	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP earnings per share	  				 				 				 				
Basic	  	$	0.17	  	 	$	0.17	  	 	$	0.56	  	 	$	0.69	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.16	  	 	$	0.17	  	 	$	0.55	  	 	$	0.68	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Number of shares used in computation of GAAP earnings per share:	  				 				 				 				
Basic and diluted	  	 	151,158	  	 	 	175,519	  	 	 	167,272	  	 	 	176,878	  	
Number of shares used in computation of non-GAAP earnings per share:	  				 				 				 				
Basic	  	 	151,158	  	 	 	175,519	  	 	 	167,272	  	 	 	176,878	  	
Diluted	  	 	155,310	  	 	 	177,953	  	 	 	171,008	  	 	 	178,945	  	
Note: As a result of the GAAP net loss from continuing operations for all periods presented, all potentially issuable common shares have been excluded from the diluted shares used in the computation of GAAP earnings per share as their effect is anti-dilutive

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

 	  	December 31,
2013	 	  	December 31,
2012	 	
ASSETS	  				  				
Current assets	  				  				
Cash and cash equivalents	  	$	392,629	  	  	$	477,073	  	
Short-term investments	  	 	134,684	  	  	 	197,196	  	
Trade receivables, net	  	 	183,369	  	  	 	194,654	  	
Inventories	  	 	103,309	  	  	 	99,960	  	
Deferred taxes	  	 	37,085	  	  	 	48,916	  	
Prepaid expenses and other current assets	  	 	50,352	  	  	 	52,539	  	
	  	 	 	 	  	 	 	 	
Total current assets	  	 	901,428	  	  	 	1,070,338	  	
Property and equipment, net	  	 	115,157	  	  	 	133,319	  	
Long-term investments	  	 	56,372	  	  	 	50,333	  	
Goodwill and purchased intangibles	  	 	596,918	  	  	 	608,802	  	
Deferred taxes	  	 	51,398	  	  	 	28,406	  	
Other assets	  	 	27,757	  	  	 	21,238	  	
	  	 	 	 	  	 	 	 	
Total assets	  	$	1,749,030	  	  	$	1,912,436	  	

LIABILITIES AND STOCKHOLDERS’ EQUITY	  				  				
Current liabilities	  				  				
Accounts payable	  	$	84,640	  	  	$	89,983	  	
Accrued payroll and related liabilities	  	 	40,162	  	  	 	39,469	  	
Taxes payable	  	 	5,389	  	  	 	4,736	  	
Deferred revenue	  	 	172,408	  	  	 	158,482	  	
Term loan-current	  	 	6,250	  	  	 	—  	  	
Other accrued liabilities	  	 	77,744	  	  	 	63,018	  	
	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	386,593	  	  	 	355,688	  	
Non-current liabilities	  				  				
Deferred revenue	  	 	87,467	  	  	 	91,061	  	
Term loan-non current	  	 	242,188	  	  	 	—  	  	
Taxes payable	  	 	12,419	  	  	 	15,598	  	
Deferred taxes	  	 	149	  	  	 	236	  	
Other non-current liabilities	  	 	43,849	  	  	 	22,079	  	
	  	 	 	 	  	 	 	 	
Total liabilities	  	 	772,665	  	  	 	484,662	  	
Stockholders’ equity	  	 	976,365	  	  	 	1,427,774	  	
	  	 	 	 	  	 	 	 	
Total liabilities and stockholders’ equity	  	$	1,749,030	  	  	$	1,912,436	  	
	  	 	 	 	  	 	 	 	
The tax provision and net income for the year ended December 31, 2012 have been revised from previously issued financial statements to correct an error. These adjustments were not considered material to previously issued financial statements. However, because of the significance of these adjustments to the current period, the Company has revised the prior periods contained herein. The adjustments had no impact on income before provision for income taxes or net cash flows.

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

 	  	Twelve Months Ended	 	
 	  	December 31,
2013	 	 	December 31,
2012	 	
Cash flows from operating activities:	  				 				
Net income (loss)	  	$	(18,076	) 	 	$	8,344	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  				 				
Gain from sale of discontinued operations, net of tax	  	 	(459	) 	 	 	(35,425	) 	
Tax expense on company reorganization	  	 	—  	  	 	 	38,836	  	
Depreciation and amortization	  	 	64,975	  	 	 	61,586	  	
Amortization of purchased intangibles	  	 	19,825	  	 	 	20,318	  	
Amortization of debt issue costs	  	 	178	  	 	 	—  	  	
Amortization of discounts and premiums on investments, net	  	 	1,816	  	 	 	2,381	  	
Provision for excess and obsolete inventories	  	 	7,390	  	 	 	6,420	  	
Provision for doubtful accounts	  	 	—  	  	 	 	1,100	  	
Stock-based compensation expense	  	 	64,465	  	 	 	89,245	  	
Excess tax benefits from stock-based compensation	  	 	(920	) 	 	 	(9,297	) 	
Loss on disposals of property and equipment	  	 	5,859	  	 	 	4,080	  	
Changes in assets and liabilities, net of the effect of acquisitions:	  				 				
Trade receivables	  	 	13,809	  	 	 	16,582	  	
Inventories	  	 	(10,739	) 	 	 	(11,428	) 	
Deferred taxes	  	 	(14,332	) 	 	 	(15,933	) 	
Prepaid expenses and other assets	  	 	(637	) 	 	 	(7,424	) 	
Accounts payable	  	 	(5,184	) 	 	 	(22,901	) 	
Taxes payable	  	 	(5,848	) 	 	 	5,123	  	
Other accrued liabilities	  	 	46,320	  	 	 	37,754	  	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	168,442	  	 	 	189,361	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				 				
Purchases of property and equipment	  	 	(55,207	) 	 	 	(67,270	) 	
Purchases of investments	  	 	(228,238	) 	 	 	(315,012	) 	
Proceeds from sale of investments	  	 	45,467	  	 	 	52,286	  	
Proceeds from maturities of investments	  	 	237,499	  	 	 	229,211	  	
Net cash received from sale of discontinued operations	  	 	556	  	 	 	50,411	  	
Net cash paid in purchase acquisitions	  	 	(7,974	) 	 	 	(4,583	) 	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(7,897	) 	 	 	(54,957	) 	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities:	  				 				
Proceeds from issuance of common stock under employee option and stock purchase plans	  	 	23,326	  	 	 	25,832	  	
Proceeds from term loan, net	  	 	247,349	  	 	 	—  	  	
Payment on debt	  	 	(1,562	) 	 	 	—  	  	
Repurchase of common stock	  	 	(515,022	) 	 	 	(67,901	) 	
Excess tax benefits from stock-based compensation	  	 	920	  	 	 	9,297	  	
	  	 	 	 	 	 	 	 	
Net cash used in financing activities	  	 	(244,989	) 	 	 	(32,772	) 	
	  	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	  	 	(84,444	) 	 	 	101,632	  	
Cash and cash equivalents, beginning of period	  	 	477,073	  	 	 	375,441	  	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents, end of period	  	$	392,629	  	 	$	477,073	  	
	  	 	 	 	 	 	 	 	
The tax provision and net income for the three and twelve months ended December 31, 2012 has been revised from previously issued financial statements to correct an error. These adjustments were not considered material to previously issued financial statements. However, because of the significance of these adjustments to the current period, the Company has revised the prior periods contained herein. The adjustments had no impact on income before provision for income taxes or net cash flows. Certain other 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)

 	  	December 31,
2013	 	 	September 30,
2013	 	 	December 31,
2012	 	
Balance Sheet Highlights	  				 				 				
Cash and investments	  	$	584	  	 	$	954	  	 	$	725	  	
Number of shares outstanding	  	 	135	  	 	 	170	  	 	 	175	  	
Cash and investments per share	  	$	4.32	  	 	$	5.60	  	 	$	4.13	  	
Debt	  	$	248	  	 	$	250	  	 	$	0	  	
Operating cash flow - quarterly	  	$	50	  	 	$	37	  	 	$	66	  	
Operating cash flow - trailing 12 months	  	$	168	  	 	$	185	  	 	$	189	  	
DSO (Days Sales Outstanding)	  	 	48	  	 	 	47	  	 	 	50	  	
Inventory turns - GAAP	  	 	5.8	  	 	 	5.3	  	 	 	5.7	  	
Inventory turns - non-GAAP	  	 	5.5	  	 	 	5.1	  	 	 	5.7	  	
Deferred revenues	  	$	260	  	 	$	260	  	 	$	250	  	
Share repurchases:	  				 				 				
Quarter-to-date share purchases - shares	  	 	35.4	  	 	 	1.7	  	 	 	0.5	  	
Quarter-to-date share repurchases - dollars	  	$	400	  	 	$	18	  	 	$	5	  	
Year-to-date share purchases - shares	  	 	45	  	 	 	10	  	 	 	5	  	
Year-to-date share repurchases - dollars	  	$	502	  	 	$	102	  	 	$	55	  	
Remaining authorization for share repurchases (1)	  	$	—  	  	 	$	400	  	 	$	73	  	
Ending headcount	  	 	3,774	  	 	 	3,789	  	 	 	3,747	  	
		
 	  	For the three months ended	 	
 	  	December 31,
2013	 	 	September 30,
2013	 	 	December 31,
2012	 	
Income Statement Highlights	  				 				 				
GAAP:	  				 				 				
Revenues	  	$	348	  	 	$	336	  	 	$	353	  	
Gross margin	  	 	56.6	% 	 	 	58.0	% 	 	 	58.6	% 	
Operating expenses	  	$	197	  	 	$	217	  	 	$	202	  	
Operating margin	  	 	-0.1	% 	 	 	-6.6	% 	 	 	1.3	% 	
Diluted EPS	  	$	(0.01	) 	 	$	(0.14	) 	 	$	0.01	  	
Non-GAAP:	  				 				 				
Revenues	  	$	348	  	 	$	336	  	 	$	353	  	
Gross margin	  	 	58.8	% 	 	 	59.0	% 	 	 	59.9	% 	
Operating expenses	  	$	171	  	 	$	173	  	 	$	176	  	
Operating margin	  	 	9.8	% 	 	 	7.7	% 	 	 	10.0	% 	
Diluted EPS	  	$	0.16	  	 	$	0.11	  	 	$	0.17	  	
 
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	 	 	Twelve Months Ended	 	
 	  	December 31,	 	 	December 31,	 	 	December 31,	 	 	December 31,	 	
 	  	2013	 	 	2012	 	 	2013	 	 	2012	 	
GAAP cost of revenues used in inventory turns	  	$	150,910	  	 	$	146,210	  	 	$	575,618	  	 	$	569,196	  	
Stock-based compensation expense	  	 	(1,892	) 	 	 	(2,532	) 	 	 	(8,744	) 	 	 	(10,204	) 	
Effect of stock-based compensation on warranty rates	  	 	(126	) 	 	 	(128	) 	 	 	(547	) 	 	 	(669	) 	
Amortization of purchased intangibles	  	 	(5,617	) 	 	 	(1,909	) 	 	 	(9,361	) 	 	 	(7,635	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP cost of revenues used in inventory turns	  	$	143,275	  	 	$	141,641	  	 	$	556,966	  	 	$	550,688	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP gross profit	  	$	197,032	  	 	$	206,816	  	 	$	792,771	  	 	$	823,432	  	
Stock-based compensation expense	  	 	1,892	  	 	 	2,532	  	 	 	8,744	  	 	 	10,204	  	
Effect of stock-based compensation on warranty rates	  	 	126	  	 	 	128	  	 	 	547	  	 	 	669	  	
Amortization of purchased intangibles	  	 	5,617	  	 	 	1,909	  	 	 	9,361	  	 	 	7,635	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross profit	  	$	204,667	  	 	$	211,385	  	 	$	811,423	  	 	$	841,940	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP gross margin	  	 	58.8	% 	 	 	59.9	% 	 	 	59.3	% 	 	 	60.5	% 	
GAAP sales and marketing expense	  	$	109,384	  	 	$	116,312	  	 	$	435,047	  	 	$	464,353	  	
Stock-based compensation expense	  	 	(6,828	) 	 	 	(9,722	) 	 	 	(26,570	) 	 	 	(36,791	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP sales and marketing expense	  	$	102,556	  	 	$	106,590	  	 	$	408,477	  	 	$	427,562	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP sales and marketing expense as percent of revenues	  	 	29.5	% 	 	 	30.2	% 	 	 	29.9	% 	 	 	30.7	% 	
GAAP research and development expense	  	$	51,250	  	 	$	55,085	  	 	$	216,032	  	 	$	208,510	  	
Stock-based compensation expense	  	 	(3,056	) 	 	 	(5,387	) 	 	 	(15,634	) 	 	 	(20,195	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP research and development expense	  	$	48,194	  	 	$	49,698	  	 	$	200,398	  	 	$	188,315	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP research and development expense as percent of revenues	  	 	13.9	% 	 	 	14.1	% 	 	 	14.6	% 	 	 	13.5	% 	
GAAP general and administrative expense	  	$	20,141	  	 	$	25,910	  	 	$	96,602	  	 	$	98,285	  	
Stock-based compensation expense	  	 	611	  	 	 	(6,049	) 	 	 	(13,517	) 	 	 	(21,571	) 	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(929	) 	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(236	) 	
Costs associated with CEO separation and related SEC investigation	  	 	(802	) 	 	 	—  	  	 	 	(2,909	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP general and administrative expense	  	$	19,950	  	 	$	19,861	  	 	$	80,176	  	 	$	75,549	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP general and administrative expense as percent of revenues	  	 	5.7	% 	 	 	5.6	% 	 	 	5.9	% 	 	 	5.4	% 	
GAAP total operating expenses	  	$	197,473	  	 	$	202,285	  	 	$	809,964	  	 	$	817,066	  	
Stock-based compensation expense	  	 	(9,273	) 	 	 	(21,158	) 	 	 	(55,721	) 	 	 	(78,557	) 	
Amortization of purchased intangibles	  	 	(2,854	) 	 	 	(2,512	) 	 	 	(10,389	) 	 	 	(9,830	) 	
Restructuring costs	  	 	(13,831	) 	 	 	(195	) 	 	 	(48,470	) 	 	 	(22,024	) 	
Acquisition-related expenses	  	 	(13	) 	 	 	(2,271	) 	 	 	(3,424	) 	 	 	(14,064	) 	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(929	) 	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(236	) 	
Costs associated with CEO separation and related SEC investigation	  	 	(802	) 	 	 	—  	  	 	 	(2,909	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP total operating expenses	  	$	170,700	  	 	$	176,149	  	 	$	689,051	  	 	$	691,426	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP total operating expenses as percent of revenues	  	 	49.1	% 	 	 	49.9	% 	 	 	50.4	% 	 	 	49.6	% 	
GAAP operating income (loss)	  	$	(441	) 	 	$	4,531	  	 	$	(17,193	) 	 	$	6,366	  	
Stock-based compensation expense	  	 	11,165	  	 	 	23,690	  	 	 	64,465	  	 	 	88,761	  	
Effect of stock-based compensation on warranty rates	  	 	126	  	 	 	128	  	 	 	547	  	 	 	669	  	
Amortization of purchased intangibles	  	 	8,471	  	 	 	4,421	  	 	 	19,750	  	 	 	17,465	  	
Restructuring costs	  	 	13,831	  	 	 	195	  	 	 	48,470	  	 	 	22,024	  	
Acquisition-related expenses	  	 	13	  	 	 	2,271	  	 	 	3,424	  	 	 	14,064	  	
Severance costs associated with CFO retirement	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	929	  	
Legal costs associated with the indemnification of a former officer	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	236	  	
Costs associated with CEO separation and related SEC investigation	  	 	802	  	 	 	—  	  	 	 	2,909	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating income	  	$	33,967	  	 	$	35,236	  	 	$	122,372	  	 	$	150,514	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP operating margin	  	 	9.8	% 	 	 	10.0	% 	 	 	8.9	% 	 	 	10.8	% 	

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

 	  	Three Months Ended	 	  	Twelve Months Ended	 	
 	  	December 31,	 	 	December 31,	 	  	December 31,	 	  	December 31,	 	
 	  	2013	 	 	2012	 	  	2013	 	  	2012	 	
Cost of sales - product	  	$	640	  	 	$	873	  	  	$	2,892	  	  	$	3,593	  	
Cost of sales - service	  	 	1,252	  	 	 	1,659	  	  	 	5,852	  	  	 	6,611	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Stock-based compensation expense in cost of sales	  	 	1,892	  	 	 	2,532	  	  	 	8,744	  	  	 	10,204	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Sales and marketing	  	 	6,828	  	 	 	9,722	  	  	 	26,570	  	  	 	36,791	  	
Research and development	  	 	3,056	  	 	 	5,387	  	  	 	15,634	  	  	 	20,195	  	
General and administrative	  	 	(611	) 	 	 	6,049	  	  	 	13,517	  	  	 	21,571	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Stock-based compensation expense in operating expenses	  	 	9,273	  	 	 	21,158	  	  	 	55,721	  	  	 	78,557	  	
	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	
Total stock-based compensation expense	  	$	11,165	  	 	$	23,690	  	  	$	64,465	  	  	$	88,761