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Form 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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75-2275152
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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851 West Cypress Creek Road
Fort Lauderdale, Florida
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33309
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(Address of principal executive offices)
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(Zip Code)
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x
Large accelerated filer
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o
Accelerated filer
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o
Non-accelerated filer
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o
Smaller reporting company
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Page
Number
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PART I:
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II:
|
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Item 1.
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||
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Item 1A.
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Item 2.
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Item 5.
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Item 6.
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September 30, 2015
|
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December 31, 2014
|
||||
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(Unaudited)
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(Derived from audited financial statements)
|
||||
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(In thousands, except par value)
|
||||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
527,594
|
|
|
$
|
260,149
|
|
Short-term investments, available-for-sale
|
545,206
|
|
|
529,260
|
|
||
Accounts receivable, net of allowances of $6,417 and $5,976 at September 30, 2015 and December 31, 2014, respectively
|
467,815
|
|
|
674,401
|
|
||
Inventories, net
|
10,863
|
|
|
12,617
|
|
||
Prepaid expenses and other current assets
|
141,742
|
|
|
166,005
|
|
||
Current portion of deferred tax assets, net
|
43,918
|
|
|
45,892
|
|
||
Total current assets
|
1,737,138
|
|
|
1,688,324
|
|
||
Long-term investments, available-for-sale
|
792,262
|
|
|
1,073,110
|
|
||
Property and equipment, net
|
371,101
|
|
|
367,779
|
|
||
Goodwill
|
1,957,436
|
|
|
1,796,851
|
|
||
Other intangible assets, net
|
366,048
|
|
|
390,717
|
|
||
Long-term portion of deferred tax assets, net
|
113,184
|
|
|
128,198
|
|
||
Other assets
|
68,314
|
|
|
67,028
|
|
||
Total assets
|
$
|
5,405,483
|
|
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$
|
5,512,007
|
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Liabilities and Stockholders' Equity
|
|
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|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
143,299
|
|
|
$
|
79,884
|
|
Accrued expenses and other current liabilities
|
263,840
|
|
|
298,079
|
|
||
Income taxes payable
|
2,575
|
|
|
12,053
|
|
||
Current portion of deferred revenues
|
1,137,828
|
|
|
1,200,093
|
|
||
Total current liabilities
|
1,547,542
|
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|
1,590,109
|
|
||
Long-term portion of deferred revenues
|
372,052
|
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|
357,771
|
|
||
Convertible notes
|
1,316,892
|
|
|
1,292,953
|
|
||
Other liabilities
|
84,305
|
|
|
97,529
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
||||
Preferred stock at $.01 par value: 5,000 shares authorized, none issued and outstanding
|
—
|
|
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—
|
|
||
Common stock at $.001 par value: 1,000,000 shares authorized; 298,112 and 294,674 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
|
298
|
|
|
295
|
|
||
Additional paid-in capital
|
4,492,313
|
|
|
4,292,706
|
|
||
Retained earnings
|
3,343,352
|
|
|
3,155,264
|
|
||
Accumulated other comprehensive loss
|
(29,464
|
)
|
|
(36,790
|
)
|
||
|
7,806,499
|
|
|
7,411,475
|
|
||
Less - common stock in treasury, at cost (140,987 and 133,898 shares at September 30, 2015 and December 31, 2014, respectively)
|
(5,721,807
|
)
|
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(5,237,830
|
)
|
||
Total stockholders' equity
|
2,084,692
|
|
|
2,173,645
|
|
||
Total liabilities and stockholders' equity
|
$
|
5,405,483
|
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$
|
5,512,007
|
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Three Months Ended September 30,
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Nine Months Ended September 30,
|
||||||||||||
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2015
|
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2014
|
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2015
|
|
2014
|
||||||||
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(In thousands, except per share information)
|
||||||||||||||
Revenues:
|
|
|
|
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|
||||||||
Product and licenses
|
$
|
206,252
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$
|
193,153
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$
|
594,507
|
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$
|
632,369
|
|
Software as a service
|
190,757
|
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|
165,253
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|
537,705
|
|
|
483,164
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|
||||
License updates and maintenance
|
379,585
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|
358,266
|
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|
1,128,043
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1,049,065
|
|
||||
Professional services
|
36,676
|
|
|
42,322
|
|
|
110,576
|
|
|
126,775
|
|
||||
Total net revenues
|
813,270
|
|
|
758,994
|
|
|
2,370,831
|
|
|
2,291,373
|
|
||||
Cost of net revenues:
|
|
|
|
|
|
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|
||||||||
Cost of product and license revenues
|
34,859
|
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|
24,045
|
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|
83,833
|
|
|
88,144
|
|
||||
Cost of services and maintenance revenues
|
91,295
|
|
|
87,981
|
|
|
270,218
|
|
|
254,763
|
|
||||
Amortization of product related intangible assets
|
20,100
|
|
|
23,959
|
|
|
57,560
|
|
|
102,660
|
|
||||
Total cost of net revenues
|
146,254
|
|
|
135,985
|
|
|
411,611
|
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|
445,567
|
|
||||
Gross margin
|
667,016
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|
623,009
|
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1,959,220
|
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1,845,806
|
|
||||
Operating expenses:
|
|
|
|
|
|
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|
||||||||
Research and development
|
139,128
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|
137,877
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|
423,972
|
|
|
411,870
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|
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Sales, marketing and services
|
293,587
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|
318,252
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|
896,250
|
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|
956,287
|
|
||||
General and administrative
|
79,799
|
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|
95,203
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|
241,697
|
|
|
242,606
|
|
||||
Amortization and impairment of other intangible assets
|
76,938
|
|
|
9,956
|
|
|
97,371
|
|
|
32,855
|
|
||||
Restructuring
|
13,766
|
|
|
3,124
|
|
|
62,251
|
|
|
17,285
|
|
||||
Total operating expenses
|
603,218
|
|
|
564,412
|
|
|
1,721,541
|
|
|
1,660,903
|
|
||||
Income from operations
|
63,798
|
|
|
58,597
|
|
|
237,679
|
|
|
184,903
|
|
||||
Interest income
|
3,004
|
|
|
2,411
|
|
|
8,679
|
|
|
6,705
|
|
||||
Interest expense
|
11,075
|
|
|
10,551
|
|
|
33,196
|
|
|
17,601
|
|
||||
Other expense, net
|
(2,369
|
)
|
|
(2,235
|
)
|
|
(13,480
|
)
|
|
(6,002
|
)
|
||||
Income before income taxes
|
53,358
|
|
|
48,222
|
|
|
199,682
|
|
|
168,005
|
|
||||
Income tax (benefit) expense
|
(2,567
|
)
|
|
690
|
|
|
11,595
|
|
|
11,510
|
|
||||
Net income
|
$
|
55,925
|
|
|
$
|
47,532
|
|
|
$
|
188,087
|
|
|
$
|
156,495
|
|
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.35
|
|
|
$
|
0.29
|
|
|
$
|
1.17
|
|
|
$
|
0.91
|
|
Diluted
|
$
|
0.35
|
|
|
$
|
0.29
|
|
|
$
|
1.16
|
|
|
$
|
0.90
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
160,359
|
|
|
164,229
|
|
|
160,359
|
|
|
172,622
|
|
||||
Diluted
|
161,777
|
|
|
165,713
|
|
|
161,716
|
|
|
174,023
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In thousands)
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
55,925
|
|
|
$
|
47,532
|
|
|
$
|
188,087
|
|
|
$
|
156,495
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
||||||||
Change in foreign currency translation adjustment
|
—
|
|
|
(12,890
|
)
|
|
—
|
|
|
(15,617
|
)
|
||||
Available for sale securities:
|
|
|
|
|
|
|
|
||||||||
Change in net unrealized gains (losses)
|
94
|
|
|
(911
|
)
|
|
1,392
|
|
|
(182
|
)
|
||||
Less: reclassification adjustment for net gains included in net income
|
232
|
|
|
(96
|
)
|
|
164
|
|
|
(961
|
)
|
||||
Net change (net of tax effect)
|
326
|
|
|
(1,007
|
)
|
|
1,556
|
|
|
(1,143
|
)
|
||||
Loss on pension liability
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
(45
|
)
|
||||
Cash flow hedges:
|
|
|
|
|
|
|
|
||||||||
Change in unrealized losses
|
(2,348
|
)
|
|
(6,809
|
)
|
|
(5,692
|
)
|
|
(4,197
|
)
|
||||
Less: reclassification adjustment for net losses (gains) included in net income
|
1,794
|
|
|
(1,500
|
)
|
|
11,462
|
|
|
(4,448
|
)
|
||||
Net change (net of tax effect)
|
(554
|
)
|
|
(8,309
|
)
|
|
5,770
|
|
|
(8,645
|
)
|
||||
Other comprehensive (loss) income
|
(228
|
)
|
|
(22,251
|
)
|
|
7,326
|
|
|
(25,450
|
)
|
||||
Comprehensive income
|
$
|
55,697
|
|
|
$
|
25,281
|
|
|
$
|
195,413
|
|
|
$
|
131,045
|
|
|
Nine Months Ended September 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In thousands)
|
||||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
188,087
|
|
|
$
|
156,495
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation, amortization and other
|
295,810
|
|
|
251,320
|
|
||
Stock-based compensation expense
|
103,674
|
|
|
128,440
|
|
||
Excess tax benefit from stock-based compensation
|
(2,236
|
)
|
|
(5,122
|
)
|
||
Deferred income tax benefit
|
(31,873
|
)
|
|
(25,114
|
)
|
||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
|
13,382
|
|
|
825
|
|
||
Other non-cash items
|
11,155
|
|
|
9,722
|
|
||
Total adjustments to reconcile net income to net cash provided by operating activities
|
389,912
|
|
|
360,071
|
|
||
Changes in operating assets and liabilities, net of the effects of acquisitions:
|
|
|
|
||||
Accounts receivable
|
198,075
|
|
|
182,542
|
|
||
Inventories
|
1,084
|
|
|
(4,342
|
)
|
||
Prepaid expenses and other current assets
|
(7,375
|
)
|
|
(5,763
|
)
|
||
Other assets
|
(1,460
|
)
|
|
1,651
|
|
||
Income taxes, net
|
21,088
|
|
|
(87,180
|
)
|
||
Accounts payable
|
6,658
|
|
|
7,526
|
|
||
Accrued expenses and other current liabilities
|
(674
|
)
|
|
53,846
|
|
||
Deferred revenues
|
(47,982
|
)
|
|
(8,183
|
)
|
||
Other liabilities
|
5,400
|
|
|
(1,113
|
)
|
||
Total changes in operating assets and liabilities, net of the effects of acquisitions
|
174,814
|
|
|
138,984
|
|
||
Net cash provided by operating activities
|
752,813
|
|
|
655,550
|
|
||
Investing Activities
|
|
|
|
||||
Purchases of available-for-sale investments
|
(1,806,781
|
)
|
|
(1,891,045
|
)
|
||
Proceeds from sales of available-for-sale investments
|
1,552,983
|
|
|
1,342,500
|
|
||
Proceeds from maturities of available-for-sale investments
|
518,755
|
|
|
282,711
|
|
||
Purchases of property and equipment
|
(119,591
|
)
|
|
(115,442
|
)
|
||
(Purchases) proceeds from cost method investments, net
|
(3,400
|
)
|
|
1,084
|
|
||
Cash paid for acquisitions, net of cash acquired
|
(250,986
|
)
|
|
(43,342
|
)
|
||
Cash paid for licensing agreements and product related intangible assets
|
(10,666
|
)
|
|
(12,712
|
)
|
||
Net cash used in investing activities
|
(119,686
|
)
|
|
(436,246
|
)
|
||
Financing Activities
|
|
|
|
||||
Proceeds from issuance of common stock under stock-based compensation plans
|
79,338
|
|
|
38,674
|
|
||
Proceeds from issuance of convertible notes, net of issuance costs
|
—
|
|
|
1,415,717
|
|
||
Purchase of convertible note hedges
|
—
|
|
|
(184,288
|
)
|
||
Proceeds from issuance of warrants
|
—
|
|
|
101,775
|
|
||
Proceeds from credit facility
|
95,000
|
|
|
—
|
|
||
Repayment of credit facility
|
(95,000
|
)
|
|
—
|
|
||
Repayment of acquired debt
|
(7,569
|
)
|
|
(3,766
|
)
|
||
Excess tax benefit from stock-based compensation
|
2,236
|
|
|
5,122
|
|
||
Stock repurchases, net
|
(398,070
|
)
|
|
(1,600,986
|
)
|
||
Cash paid for tax withholding on vested stock awards
|
(32,351
|
)
|
|
(27,777
|
)
|
||
Net cash used in financing activities
|
(356,416
|
)
|
|
(255,529
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(9,266
|
)
|
|
(1,728
|
)
|
||
Change in cash and cash equivalents
|
267,445
|
|
|
(37,953
|
)
|
||
Cash and cash equivalents at beginning of period
|
260,149
|
|
|
280,740
|
|
||
Cash and cash equivalents at end of period
|
$
|
527,594
|
|
|
$
|
242,787
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
55,925
|
|
|
$
|
47,532
|
|
|
$
|
188,087
|
|
|
$
|
156,495
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Denominator for basic earnings per share - weighted-average shares outstanding
|
160,359
|
|
|
164,229
|
|
|
160,359
|
|
|
172,622
|
|
||||
Effect of dilutive employee stock awards
|
1,418
|
|
|
1,484
|
|
|
1,357
|
|
|
1,401
|
|
||||
Denominator for diluted earnings per share - weighted-average shares outstanding
|
161,777
|
|
|
165,713
|
|
|
161,716
|
|
|
174,023
|
|
||||
Basic earnings per share
|
$
|
0.35
|
|
|
$
|
0.29
|
|
|
$
|
1.17
|
|
|
$
|
0.91
|
|
Diluted earnings per share
|
$
|
0.35
|
|
|
$
|
0.29
|
|
|
$
|
1.16
|
|
|
$
|
0.90
|
|
Anti-dilutive weighted-average shares from stock awards
|
1,572
|
|
|
2,807
|
|
|
2,416
|
|
|
3,287
|
|
|
Sanbolic
|
|
Grasshopper
|
||||||||
|
Purchase Price Allocation
|
|
Asset Life
|
|
Purchase Price Allocation
|
|
Asset Life
|
||||
Current assets
|
$
|
581
|
|
|
|
|
$
|
4,818
|
|
|
|
Property and equipment
|
—
|
|
|
|
|
467
|
|
|
Various
|
||
Intangible assets
|
45,300
|
|
|
Various
|
|
71,400
|
|
|
Various
|
||
Goodwill
|
61,639
|
|
|
Indefinite
|
|
99,686
|
|
|
Indefinite
|
||
Other assets
|
—
|
|
|
|
|
80
|
|
|
|
||
Assets acquired
|
107,520
|
|
|
|
|
176,451
|
|
|
|
||
Current liabilities assumed
|
1,454
|
|
|
|
|
11,181
|
|
|
|
||
Long-term liabilities assumed
|
3,175
|
|
|
|
|
158
|
|
|
|
||
Deferred tax liabilities, non-current
|
13,295
|
|
|
|
|
—
|
|
|
|
||
Net assets acquired
|
$
|
89,596
|
|
|
|
|
$
|
165,112
|
|
|
|
|
Sanbolic
|
|
Asset Life
|
|
Grasshopper
|
|
Asset Life
|
||||
Core and product technologies
|
$
|
43,800
|
|
|
5 and 6 years
|
|
$
|
25,000
|
|
|
7 years
|
Customer relationships
|
1,500
|
|
|
2 years
|
|
37,900
|
|
|
5 years
|
||
Telecommunication carrier relationships
|
—
|
|
|
|
|
7,900
|
|
|
2 years
|
||
Trade name
|
—
|
|
|
|
|
600
|
|
|
2 years
|
||
Total
|
$
|
45,300
|
|
|
|
|
$
|
71,400
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenues
|
$
|
813,309
|
|
|
$
|
766,282
|
|
|
$
|
2,384,428
|
|
|
$
|
2,310,979
|
|
Income from operations
|
63,837
|
|
|
53,260
|
|
|
229,379
|
|
|
166,384
|
|
||||
Net income
|
55,949
|
|
|
44,005
|
|
|
182,685
|
|
|
144,398
|
|
||||
Per share - basic
|
0.35
|
|
|
0.27
|
|
|
1.14
|
|
|
0.84
|
|
||||
Per share - diluted
|
0.35
|
|
|
0.27
|
|
|
1.13
|
|
|
0.83
|
|
|
September 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||||
Description of the
Securities
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||||||||||
Agency securities
|
$
|
577,539
|
|
|
$
|
1,422
|
|
|
$
|
(80
|
)
|
|
$
|
578,881
|
|
|
$
|
637,474
|
|
|
$
|
1,296
|
|
|
$
|
(457
|
)
|
|
$
|
638,313
|
|
Corporate securities
|
679,887
|
|
|
396
|
|
|
(928
|
)
|
|
679,355
|
|
|
795,255
|
|
|
232
|
|
|
(1,372
|
)
|
|
794,115
|
|
||||||||
Municipal securities
|
15,466
|
|
|
28
|
|
|
(1
|
)
|
|
15,493
|
|
|
48,744
|
|
|
17
|
|
|
(31
|
)
|
|
48,730
|
|
||||||||
Government securities
|
63,596
|
|
|
143
|
|
|
—
|
|
|
63,739
|
|
|
121,431
|
|
|
37
|
|
|
(256
|
)
|
|
121,212
|
|
||||||||
Total
|
$
|
1,336,488
|
|
|
$
|
1,989
|
|
|
$
|
(1,009
|
)
|
|
$
|
1,337,468
|
|
|
$
|
1,602,904
|
|
|
$
|
1,582
|
|
|
$
|
(2,116
|
)
|
|
$
|
1,602,370
|
|
•
|
Level 1.
Observable inputs such as quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2
. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
•
|
Level 3
. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
|
As of September 30, 2015
|
|
Quoted
Prices In
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
||||||||
|
(In thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash
|
$
|
295,170
|
|
|
$
|
295,170
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Money market funds
|
220,004
|
|
|
220,004
|
|
|
—
|
|
|
—
|
|
||||
Corporate securities
|
12,420
|
|
|
—
|
|
|
12,420
|
|
|
—
|
|
||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Agency securities
|
578,881
|
|
|
—
|
|
|
578,881
|
|
|
—
|
|
||||
Corporate securities
|
679,355
|
|
|
—
|
|
|
673,193
|
|
|
6,162
|
|
||||
Municipal securities
|
15,493
|
|
|
—
|
|
|
15,493
|
|
|
—
|
|
||||
Government securities
|
63,739
|
|
|
—
|
|
|
63,739
|
|
|
—
|
|
||||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency derivatives
|
1,191
|
|
|
—
|
|
|
1,191
|
|
|
—
|
|
||||
Total assets
|
$
|
1,866,253
|
|
|
$
|
515,174
|
|
|
$
|
1,344,917
|
|
|
$
|
6,162
|
|
Accrued expenses and other current liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency derivatives
|
3,783
|
|
|
—
|
|
|
3,783
|
|
|
—
|
|
||||
Total liabilities
|
$
|
3,783
|
|
|
$
|
—
|
|
|
$
|
3,783
|
|
|
$
|
—
|
|
|
As of December 31, 2014
|
|
Quoted
Prices In
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
||||||||
|
(In thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash
|
$
|
230,370
|
|
|
$
|
230,370
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Money market funds
|
29,512
|
|
|
29,512
|
|
|
—
|
|
|
—
|
|
||||
Corporate securities
|
267
|
|
|
—
|
|
|
267
|
|
|
—
|
|
||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Agency securities
|
638,313
|
|
|
—
|
|
|
638,313
|
|
|
—
|
|
||||
Corporate securities
|
794,115
|
|
|
—
|
|
|
788,042
|
|
|
6,073
|
|
||||
Municipal securities
|
48,730
|
|
|
—
|
|
|
48,730
|
|
|
—
|
|
||||
Government securities
|
121,212
|
|
|
—
|
|
|
121,212
|
|
|
—
|
|
||||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency derivatives
|
1,206
|
|
|
—
|
|
|
1,206
|
|
|
—
|
|
||||
Total assets
|
$
|
1,863,725
|
|
|
$
|
259,882
|
|
|
$
|
1,597,770
|
|
|
$
|
6,073
|
|
Accrued expenses and other current liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency derivatives
|
9,692
|
|
|
—
|
|
|
9,692
|
|
|
—
|
|
||||
Total liabilities
|
$
|
9,692
|
|
|
$
|
—
|
|
|
$
|
9,692
|
|
|
$
|
—
|
|
|
Corporate Securities
|
||
|
(In thousands)
|
||
Balance at December 31, 2014
|
$
|
6,073
|
|
Purchases of Level 3 securities
|
1,475
|
|
|
Proceeds received on Level 3 securities
|
(101
|
)
|
|
Total net realized losses included in earnings
|
(838
|
)
|
|
Transfers out of Level 3
|
(447
|
)
|
|
Balance at September 30, 2015
|
$
|
6,162
|
|
|
Fair Value
|
|
Carrying Value
|
||||
Convertible Senior Notes
|
$
|
1,541,719
|
|
|
$
|
1,316,892
|
|
|
Three Months Ended
|
|
|
September 30, 2015
|
|
Expected volatility factor
|
0.35
|
|
Risk free interest rate
|
0.25
|
%
|
Expected dividend yield
|
0
|
%
|
Expected life (in years)
|
0.5
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||
Income Statement Classifications
|
September 30, 2015
|
|
September 30, 2014
|
|
September 30, 2015
|
|
September 30, 2014
|
||||||||
Cost of services and maintenance revenues
|
$
|
803
|
|
|
$
|
673
|
|
|
$
|
2,095
|
|
|
$
|
1,854
|
|
Research and development
|
9,118
|
|
|
13,989
|
|
|
31,454
|
|
|
42,102
|
|
||||
Sales, marketing and services
|
16,922
|
|
|
15,073
|
|
|
38,083
|
|
|
46,885
|
|
||||
General and administrative
|
11,828
|
|
|
12,714
|
|
|
32,042
|
|
|
37,599
|
|
||||
Total
|
$
|
38,671
|
|
|
$
|
42,449
|
|
|
$
|
103,674
|
|
|
$
|
128,440
|
|
|
March 2015 Grant
|
March 2014 Grant
|
||
Expected volatility factor
|
0.14 - 0.29
|
|
0.19 - 0.38
|
|
Risk free interest rate
|
0.85
|
%
|
0.81
|
%
|
Expected dividend yield
|
0
|
%
|
0
|
%
|
|
Balance at January 1, 2015
|
|
Additions
|
|
|
Other
|
|
|
Balance at September 30, 2015
|
||||||||
Enterprise and Service Provider
|
$
|
1,434,369
|
|
|
$
|
61,639
|
|
|
|
$
|
(740
|
)
|
(2)
|
|
$
|
1,495,268
|
|
Mobility Apps
|
362,482
|
|
|
99,686
|
|
|
|
—
|
|
|
|
462,168
|
|
||||
Consolidated
|
$
|
1,796,851
|
|
|
$
|
161,325
|
|
(1)
|
|
$
|
(740
|
)
|
|
|
$
|
1,957,436
|
|
|
|
(1)
|
Amounts relate to 2015 acquisitions. See Note 4 for more information regarding the Company’s acquisitions.
|
(2)
|
Amount relates to adjustments to the preliminary purchase price allocation associated with 2014 acquisitions.
|
|
September 30, 2015
|
|
December 31, 2014
|
||||||||||||
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Product related intangible assets
|
$
|
683,695
|
|
|
$
|
500,282
|
|
|
$
|
618,336
|
|
|
$
|
454,830
|
|
Other
|
455,862
|
|
|
273,227
|
|
|
492,960
|
|
|
265,749
|
|
||||
Total
|
$
|
1,139,557
|
|
|
$
|
773,509
|
|
|
$
|
1,111,296
|
|
|
$
|
720,579
|
|
Year ending December 31,
|
Amount
|
|
|
2015 (remaining three months)
|
$
|
27,251
|
|
2016
|
98,586
|
|
|
2017
|
74,536
|
|
|
2018
|
62,561
|
|
|
2019
|
43,012
|
|
|
Thereafter
|
60,102
|
|
|
Total
|
$
|
366,048
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net revenues:
|
|
|
|
|
|
|
|
||||||||
Enterprise and Service Provider
|
$
|
622,513
|
|
|
$
|
593,741
|
|
|
$
|
1,833,126
|
|
|
$
|
1,808,209
|
|
Mobility Apps
|
190,757
|
|
|
165,253
|
|
|
537,705
|
|
|
483,164
|
|
||||
Consolidated
|
$
|
813,270
|
|
|
$
|
758,994
|
|
|
$
|
2,370,831
|
|
|
$
|
2,291,373
|
|
Segment profit
(1)
:
|
|
|
|
|
|
|
|
||||||||
Enterprise and Service Provider
|
$
|
190,372
|
|
|
$
|
131,409
|
|
|
$
|
497,351
|
|
|
$
|
394,536
|
|
Mobility Apps
|
22,901
|
|
|
27,402
|
|
|
60,202
|
|
|
92,333
|
|
||||
Unallocated expenses
(2)
:
|
|
|
|
|
|
|
|
||||||||
Amortization and impairment
of intangible assets
|
(97,038
|
)
|
|
(33,915
|
)
|
|
(154,931
|
)
|
|
(135,515
|
)
|
||||
Patent litigation charge
|
—
|
|
|
(20,727
|
)
|
|
—
|
|
|
(20,727
|
)
|
||||
Other
|
—
|
|
|
—
|
|
|
982
|
|
|
—
|
|
||||
Restructuring
|
(13,766
|
)
|
|
(3,124
|
)
|
|
(62,251
|
)
|
|
(17,285
|
)
|
||||
Net interest and other expense, net
|
(10,440
|
)
|
|
(10,374
|
)
|
|
(37,997
|
)
|
|
(16,897
|
)
|
||||
Stock-based compensation
|
(38,671
|
)
|
|
(42,449
|
)
|
|
(103,674
|
)
|
|
(128,440
|
)
|
||||
Consolidated income before income taxes
|
$
|
53,358
|
|
|
$
|
48,222
|
|
|
$
|
199,682
|
|
|
$
|
168,005
|
|
|
|
(1)
|
The Company revised its methodology for allocating certain corporate costs within General and administrative expenses to more closely align these costs to the employees directly utilizing the related services within each of its reporting segments, thereby impacting Segment profit for the nine months ended September 30, 2015. Accordingly, the adjusted Segment profit for the Enterprise and Service Provider and Mobility Apps segments is
$132.1 million
and
$15.0 million
, respectively for the three months ended March 31, 2015 and
$174.9 million
and
$22.3 million
, respectively for the three months ended June 30, 2015. This change in presentation does not affect the Company's consolidated financial position, results from operations or cash flows.
|
(2)
|
Represents expenses presented to management on a consolidated basis only and not allocated to the operating segments.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net revenues:
|
|
|
|
|
|
|
|
||||||||
Enterprise and Service Provider
|
|
|
|
|
|
|
|
||||||||
Workspace Services revenues
(1)
|
$
|
396,167
|
|
|
$
|
392,875
|
|
|
$
|
1,193,178
|
|
|
$
|
1,170,103
|
|
Delivery Networking revenues
(2)
|
187,447
|
|
|
155,388
|
|
|
521,488
|
|
|
501,231
|
|
||||
Professional services
(3)
|
36,676
|
|
|
42,322
|
|
|
110,576
|
|
|
126,775
|
|
||||
Other
|
2,223
|
|
|
3,156
|
|
|
7,884
|
|
|
10,100
|
|
||||
Total Enterprise and Service Provider revenues
|
622,513
|
|
|
593,741
|
|
|
1,833,126
|
|
|
1,808,209
|
|
||||
Mobility Apps revenues
|
190,757
|
|
|
165,253
|
|
|
537,705
|
|
|
483,164
|
|
||||
Total net revenues
|
$
|
813,270
|
|
|
$
|
758,994
|
|
|
$
|
2,370,831
|
|
|
$
|
2,291,373
|
|
|
|
(1)
|
Workspace Services revenues are primarily comprised of sales from the Company’s windows app delivery products, which include XenDesktop and XenApp, and the Company's mobile app delivery products, which include XenMobile and related license updates and maintenance and support.
|
(2)
|
Delivery Networking revenues primarily include NetScaler, ByteMobile Smart Capacity and CloudBridge products and related license updates and maintenance and support.
|
(3)
|
Professional services revenues are primarily comprised of revenues from consulting services and product training and certification services.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net revenues:
|
|
|
|
|
|
|
|
||||||||
Enterprise and Service Provider
|
|
|
|
|
|
|
|
||||||||
Americas
|
$
|
345,417
|
|
|
$
|
318,180
|
|
|
$
|
1,005,967
|
|
|
$
|
977,166
|
|
EMEA
|
206,377
|
|
|
202,557
|
|
|
616,558
|
|
|
610,254
|
|
||||
Asia-Pacific
|
70,719
|
|
|
73,004
|
|
|
210,601
|
|
|
220,789
|
|
||||
Total Enterprise and Service Provider revenues
|
622,513
|
|
|
593,741
|
|
|
1,833,126
|
|
|
1,808,209
|
|
||||
Mobility Apps
|
|
|
|
|
|
|
|
||||||||
Americas
|
160,079
|
|
|
137,031
|
|
|
452,672
|
|
|
400,580
|
|
||||
EMEA
|
24,480
|
|
|
22,407
|
|
|
67,843
|
|
|
65,780
|
|
||||
Asia-Pacific
|
6,198
|
|
|
5,815
|
|
|
17,190
|
|
|
16,804
|
|
||||
Total Mobility Apps revenues
|
190,757
|
|
|
165,253
|
|
|
537,705
|
|
|
483,164
|
|
||||
Total net revenues
|
$
|
813,270
|
|
|
$
|
758,994
|
|
|
$
|
2,370,831
|
|
|
$
|
2,291,373
|
|
|
September 30, 2015
|
||
Liability component
|
|
||
Principal
|
$
|
1,437,500
|
|
Less: note discount
|
(120,608
|
)
|
|
Net carrying amount
|
1,316,892
|
|
|
|
|
||
Equity component *
|
$
|
162,869
|
|
|
Three Months Ended
|
Nine Months Ended
|
||||||||||
|
September 30,
|
September 30,
|
||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||
Contractual interest expense
|
$
|
1,797
|
|
$
|
1,797
|
|
$
|
5,391
|
|
$
|
2,995
|
|
Amortization of debt issuance costs
|
997
|
|
922
|
|
2,971
|
|
1,533
|
|
||||
Amortization of debt discount
|
8,039
|
|
7,802
|
|
23,939
|
|
12,971
|
|
||||
|
$
|
10,833
|
|
$
|
10,521
|
|
$
|
32,301
|
|
$
|
17,499
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||
|
(In thousands)
|
||||||||||||||
|
September 30, 2015
|
|
December 31, 2014
|
|
September 30, 2015
|
|
December 31, 2014
|
||||||||
Derivatives Designated as
Hedging Instruments
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
Foreign currency forward contracts
|
Prepaid
expenses
and other
current
assets
|
|
$462
|
|
Prepaid
expenses
and other
current
assets
|
|
$435
|
|
Accrued
expenses
and other
current
liabilities
|
|
$3,297
|
|
Accrued
expenses
and other
current
liabilities
|
|
$9,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||
|
(In thousands)
|
||||||||||||||
|
September 30, 2015
|
|
December 31, 2014
|
|
September 30, 2015
|
|
December 31, 2014
|
||||||||
Derivatives Not Designated as
Hedging Instruments
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Fair
Value
|
Foreign currency forward contracts
|
Prepaid
expenses
and other
current
assets
|
|
$729
|
|
Prepaid
expenses
and other
current
assets
|
|
$771
|
|
Accrued
expenses
and other
current
liabilities
|
|
$486
|
|
Accrued
expenses
and other
current
liabilities
|
|
$328
|
|
For the Three Months Ended September 30,
|
||||||||
|
(In thousands)
|
||||||||
Derivatives Not Designated as Hedging Instruments
|
Location of Gain Recognized in Income on
Derivative
|
|
Amount of Gain Recognized in Income on Derivative
|
||||||
|
|
|
2015
|
|
2014
|
||||
Foreign currency forward contracts
|
Other expense, net
|
|
$
|
1,238
|
|
|
$
|
2,626
|
|
|
|
|
|
|
|
||||
|
For the Nine Months Ended September 30,
|
||||||||
|
(In thousands)
|
||||||||
Derivatives Not Designated as Hedging Instruments
|
Location of Gain Recognized in Income on
Derivative
|
|
Amount of Gain Recognized in Income on Derivative
|
||||||
|
|
|
2015
|
|
2014
|
||||
Foreign currency forward contracts
|
Other expense, net
|
|
$
|
1,727
|
|
|
$
|
1,064
|
|
Foreign Currency
|
Currency
Denomination
|
Australian Dollar
|
AUD 10,332
|
Brazilian Real
|
BRL 5,100
|
Pounds Sterling
|
GBP 8,550
|
Canadian Dollar
|
CAD 2,600
|
Chinese Yuan Renminbi
|
CNY 12,217
|
Danish Krone
|
DKK 21,300
|
Euro
|
EUR 6,300
|
Hong Kong Dollar
|
HKD 51,268
|
Indian Rupee
|
INR 615,751
|
Japanese Yen
|
JPY 731,342
|
Singapore Dollar
|
SGD 11,615
|
Swiss Franc
|
CHF 22,700
|
|
Foreign currency
|
|
Unrealized gain (loss) on available-for-sale securities
|
|
Unrealized (loss) gain on derivative instruments
|
|
Other comprehensive loss on pension liability
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Balance at December 31, 2014
|
$
|
(16,346
|
)
|
|
$
|
(990
|
)
|
|
$
|
(8,345
|
)
|
|
$
|
(11,109
|
)
|
|
$
|
(36,790
|
)
|
Other comprehensive income before reclassifications
|
—
|
|
|
1,392
|
|
|
(5,692
|
)
|
|
—
|
|
|
(4,300
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
164
|
|
|
11,462
|
|
|
—
|
|
|
11,626
|
|
|||||
Net current period other comprehensive income
|
—
|
|
|
1,556
|
|
|
5,770
|
|
|
—
|
|
|
7,326
|
|
|||||
Balance at September 30, 2015
|
$
|
(16,346
|
)
|
|
$
|
566
|
|
|
$
|
(2,575
|
)
|
|
$
|
(11,109
|
)
|
|
$
|
(29,464
|
)
|
|
|
For the Three Months Ended September 30, 2015
|
||||
|
|
(In thousands)
|
||||
Details about accumulated other comprehensive loss components
|
|
Amount reclassified from accumulated other comprehensive loss, net of tax
|
|
Affected line item in the Condensed Consolidated Statements of Income
|
||
Unrealized net losses on available-for-sale securities
|
|
$
|
232
|
|
|
Other expense, net
|
Unrealized net losses on cash flow hedges
|
|
1,794
|
|
|
Operating expenses *
|
|
|
|
$
|
2,026
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
||
|
|
For the Nine Months Ended September 30, 2015
|
||||
|
|
(In thousands)
|
||||
Details about accumulated other comprehensive loss components
|
|
Amount reclassified from accumulated other comprehensive loss, net of tax
|
|
Affected line item in the Condensed Consolidated Statements of Income
|
||
Unrealized net losses on available-for-sale securities
|
|
$
|
164
|
|
|
Other expense, net
|
Unrealized net losses on cash flow hedges
|
|
11,462
|
|
|
Operating expenses *
|
|
|
|
$
|
11,626
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
2014 Restructuring Program
|
|
|
|
|
|
|
|
||||||||
Enterprise and Service Provider
|
$
|
(263
|
)
|
|
$
|
3,122
|
|
|
$
|
1,747
|
|
|
$
|
11,093
|
|
Mobility Apps
|
—
|
|
|
2
|
|
|
50
|
|
|
6,192
|
|
||||
2015 Restructuring Program
|
|
|
|
|
|
|
|
||||||||
Enterprise and Service Provider
|
13,714
|
|
|
—
|
|
|
59,580
|
|
|
—
|
|
||||
Mobility Apps
|
315
|
|
|
—
|
|
|
874
|
|
|
—
|
|
||||
Total restructuring charges
|
$
|
13,766
|
|
|
$
|
3,124
|
|
|
$
|
62,251
|
|
|
$
|
17,285
|
|
|
2014 Restructuring Program
|
2015 Restructuring Program
|
Total
|
||||||
Balance at January 1, 2015
|
$
|
2,780
|
|
$
|
—
|
|
$
|
2,780
|
|
Employee severance and related costs
|
2,060
|
|
44,696
|
|
46,756
|
|
|||
Consolidation of leased facilities
|
—
|
|
14,703
|
|
14,703
|
|
|||
Payments
|
(3,433
|
)
|
(40,405
|
)
|
(43,838
|
)
|
|||
Reversal of previous charges
|
(263
|
)
|
—
|
|
(263
|
)
|
|||
Balance at September 30, 2015
|
$
|
1,144
|
|
$
|
18,994
|
|
$
|
20,138
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Product and licenses revenue increased 6.8% to $
206.3 million
;
|
•
|
Software as a service revenue increased 15.4% to $
190.8 million
;
|
•
|
License updates and maintenance revenue increased 6.0% to $
379.6 million
;
|
•
|
Professional services revenue decreased 13.3% to $
36.7 million
;
|
•
|
Gross margin as a percentage of revenue decreased 0.1% to 82.0%;
|
•
|
Operating income increased 8.9% to $
63.8 million
; and
|
•
|
Diluted net income per share increased 20.7% to $
0.35
.
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Product and licenses
|
$
|
206,252
|
|
|
$
|
193,153
|
|
|
$
|
594,507
|
|
|
$
|
632,369
|
|
|
6.8
|
%
|
|
(6.0
|
)%
|
Software as a service
|
190,757
|
|
|
165,253
|
|
|
537,705
|
|
|
483,164
|
|
|
15.4
|
|
|
11.3
|
|
||||
License updates and maintenance
|
379,585
|
|
|
358,266
|
|
|
1,128,043
|
|
|
1,049,065
|
|
|
6.0
|
|
|
7.5
|
|
||||
Professional services
|
36,676
|
|
|
42,322
|
|
|
110,576
|
|
|
126,775
|
|
|
(13.3
|
)
|
|
(12.8
|
)
|
||||
Total net revenues
|
813,270
|
|
|
758,994
|
|
|
2,370,831
|
|
|
2,291,373
|
|
|
7.2
|
|
|
3.5
|
|
||||
Cost of net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of product and license revenues
|
34,859
|
|
|
24,045
|
|
|
83,833
|
|
|
88,144
|
|
|
45.0
|
|
|
(4.9
|
)
|
||||
Cost of services and maintenance revenues
|
91,295
|
|
|
87,981
|
|
|
270,218
|
|
|
254,763
|
|
|
3.8
|
|
|
6.1
|
|
||||
Amortization of product related intangible assets
|
20,100
|
|
|
23,959
|
|
|
57,560
|
|
|
102,660
|
|
|
(16.1
|
)
|
|
(43.9
|
)
|
||||
Total cost of net revenues
|
146,254
|
|
|
135,985
|
|
|
411,611
|
|
|
445,567
|
|
|
7.6
|
|
|
(7.6
|
)
|
||||
Gross margin
|
667,016
|
|
|
623,009
|
|
|
1,959,220
|
|
|
1,845,806
|
|
|
7.1
|
|
|
6.1
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Research and development
|
139,128
|
|
|
137,877
|
|
|
423,972
|
|
|
411,870
|
|
|
0.9
|
|
|
2.9
|
|
||||
Sales, marketing and services
|
293,587
|
|
|
318,252
|
|
|
896,250
|
|
|
956,287
|
|
|
(7.8
|
)
|
|
(6.3
|
)
|
||||
General and administrative
|
79,799
|
|
|
95,203
|
|
|
241,697
|
|
|
242,606
|
|
|
(16.2
|
)
|
|
(0.4
|
)
|
||||
Amortization and impairment of other intangible assets
|
76,938
|
|
|
9,956
|
|
|
97,371
|
|
|
32,855
|
|
|
672.8
|
|
|
196.4
|
|
||||
Restructuring
|
13,766
|
|
|
3,124
|
|
|
62,251
|
|
|
17,285
|
|
|
340.7
|
|
|
260.1
|
|
||||
Total operating expenses
|
603,218
|
|
|
564,412
|
|
|
1,721,541
|
|
|
1,660,903
|
|
|
6.9
|
|
|
3.7
|
|
||||
Income from operations
|
63,798
|
|
|
58,597
|
|
|
237,679
|
|
|
184,903
|
|
|
8.9
|
|
|
28.5
|
|
||||
Interest income
|
3,004
|
|
|
2,411
|
|
|
8,679
|
|
|
6,705
|
|
|
24.6
|
|
|
29.4
|
|
||||
Interest expense
|
11,075
|
|
|
10,551
|
|
|
33,196
|
|
|
17,601
|
|
|
5.0
|
|
|
88.6
|
|
||||
Other expense, net
|
(2,369
|
)
|
|
(2,235
|
)
|
|
(13,480
|
)
|
|
(6,002
|
)
|
|
6.0
|
|
|
124.6
|
|
||||
Income before income taxes
|
53,358
|
|
|
48,222
|
|
|
199,682
|
|
|
168,005
|
|
|
10.7
|
|
|
18.9
|
|
||||
Income tax (benefit) expense
|
(2,567
|
)
|
|
690
|
|
|
11,595
|
|
|
11,510
|
|
|
(472.0
|
)
|
|
0.7
|
|
||||
Net income
|
$
|
55,925
|
|
|
$
|
47,532
|
|
|
$
|
188,087
|
|
|
$
|
156,495
|
|
|
17.7
|
|
|
20.2
|
|
•
|
Workspace Services is primarily comprised of our Windows App Delivery products, which include XenDesktop and XenApp, our Mobile App Delivery products which include XenMobile products and Workspace Suite; and
|
•
|
Delivery Networking primarily includes NetScaler, ByteMobile Smart Capacity, and CloudBridge; and
|
•
|
Our CSP program provides subscription-based services in which the CSP partners host software services to their end users. The fees from the CSP program are recognized based on usage and as the CSP services are provided to their end users.
|
•
|
Our Subscription Advantage program, an annual renewable program that provides subscribers with automatic delivery of unspecified software upgrades, enhancements and maintenance releases when and if they become available during the term of the subscription, for which fees are recognized ratably over the term of the contract, which is typically 12 to 24 months; and
|
•
|
Our maintenance fees, which include technical support and hardware and software maintenance, and which are recognized ratably over the contract term; and
|
•
|
Fees from consulting services related to implementation of our products, which are recognized as the services are provided; and
|
•
|
Fees from product training and certification, which are recognized as the services are provided.
|
•
|
Communications Cloud products, which primarily include GoToMeeting, GoToWebinar and GoToTraining; and
|
•
|
Workflow Cloud products, which primarily include GoToMyPC, GoToAssist and ShareFile.
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Product and licenses
|
$
|
206,252
|
|
|
$
|
193,153
|
|
|
$
|
594,507
|
|
|
$
|
632,369
|
|
|
$
|
13,099
|
|
|
$
|
(37,862
|
)
|
Software as a service
|
190,757
|
|
|
165,253
|
|
|
537,705
|
|
|
483,164
|
|
|
25,504
|
|
|
54,541
|
|
||||||
License updates and maintenance
|
379,585
|
|
|
358,266
|
|
|
1,128,043
|
|
|
1,049,065
|
|
|
21,319
|
|
|
78,978
|
|
||||||
Professional services
|
36,676
|
|
|
42,322
|
|
|
110,576
|
|
|
126,775
|
|
|
(5,646
|
)
|
|
(16,199
|
)
|
||||||
Total net revenues
|
$
|
813,270
|
|
|
$
|
758,994
|
|
|
$
|
2,370,831
|
|
|
$
|
2,291,373
|
|
|
$
|
54,276
|
|
|
$
|
79,458
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||
Enterprise and Service Provider
|
$
|
622,513
|
|
|
$
|
593,741
|
|
|
$
|
1,833,126
|
|
|
$
|
1,808,209
|
|
|
4.8
|
%
|
|
1.4
|
%
|
Mobility Apps
|
190,757
|
|
|
165,253
|
|
|
537,705
|
|
|
483,164
|
|
|
15.4
|
%
|
|
11.3
|
%
|
||||
Net revenues
|
$
|
813,270
|
|
|
$
|
758,994
|
|
|
$
|
2,370,831
|
|
|
$
|
2,291,373
|
|
|
7.2
|
%
|
|
3.5
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Cost of product and license revenues
|
$
|
34,859
|
|
|
$
|
24,045
|
|
|
$
|
83,833
|
|
|
$
|
88,144
|
|
|
$
|
10,814
|
|
|
$
|
(4,311
|
)
|
Cost of services and maintenance revenues
|
91,295
|
|
|
87,981
|
|
|
270,218
|
|
|
254,763
|
|
|
3,314
|
|
|
15,455
|
|
||||||
Amortization of product related intangible assets
|
20,100
|
|
|
23,959
|
|
|
57,560
|
|
|
102,660
|
|
|
(3,859
|
)
|
|
(45,100
|
)
|
||||||
Total cost of net revenues
|
$
|
146,254
|
|
|
$
|
135,985
|
|
|
$
|
411,611
|
|
|
$
|
445,567
|
|
|
$
|
10,269
|
|
|
$
|
(33,956
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Research and development
|
$
|
139,128
|
|
|
$
|
137,877
|
|
|
$
|
423,972
|
|
|
$
|
411,870
|
|
|
$
|
1,251
|
|
|
$
|
12,102
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Sales, marketing and services
|
$
|
293,587
|
|
|
$
|
318,252
|
|
|
$
|
896,250
|
|
|
$
|
956,287
|
|
|
$
|
(24,665
|
)
|
|
$
|
(60,037
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
General and administrative
|
$
|
79,799
|
|
|
$
|
95,203
|
|
|
$
|
241,697
|
|
|
$
|
242,606
|
|
|
$
|
(15,404
|
)
|
|
$
|
(909
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
|
September 30,
|
|
September 30,
|
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
vs. September 30, 2014
|
|
vs. September 30, 2014
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Other expense, net
|
$
|
(2,369
|
)
|
|
$
|
(2,235
|
)
|
|
$
|
(13,480
|
)
|
|
$
|
(6,002
|
)
|
|
$
|
(134
|
)
|
|
$
|
(7,478
|
)
|
|
September 30, 2015
|
|
December 31, 2014
|
|
2015 Compared to 2014
|
||||||
|
(In thousands)
|
||||||||||
Cash, cash equivalents and investments
|
$
|
1,865,062
|
|
|
$
|
1,862,519
|
|
|
$
|
2,543
|
|
•
|
Level 1.
Observable inputs such as quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2
. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
•
|
Level 3
. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
|
Corporate Securities
|
||
|
(In thousands)
|
||
Balance at December 31, 2014
|
$
|
6,073
|
|
Purchases of Level 3 securities
|
1,475
|
|
|
Proceeds received on Level 3 securities
|
(101
|
)
|
|
Transfers out of Level 3
|
(447
|
)
|
|
Total net realized losses included in earnings
|
(838
|
)
|
|
Balance at September 30, 2015
|
$
|
6,162
|
|
|
September 30, 2015
|
|
December 31, 2014
|
|
2015 Compared to 2014
|
||||||
|
(In thousands)
|
||||||||||
Accounts receivable
|
$
|
474,232
|
|
|
$
|
680,377
|
|
|
$
|
(206,145
|
)
|
Allowance for returns
|
(1,131
|
)
|
|
(2,185
|
)
|
|
1,054
|
|
|||
Allowance for doubtful accounts
|
(5,286
|
)
|
|
(3,791
|
)
|
|
(1,495
|
)
|
|||
Accounts receivable, net
|
$
|
467,815
|
|
|
$
|
674,401
|
|
|
$
|
(206,586
|
)
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
diversion of management’s attention from other business concerns;
|
•
|
disruption of our business;
|
•
|
loss of customers and other business opportunities;
|
•
|
challenges in attracting, retaining and motivating key employees; and
|
•
|
difficulties associated with the separation of operations, services, products and personnel if a transaction is pursued.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Total Number
of Shares
(or Units)
Purchased
(1)
|
|
Average Price
Paid per Share
(or Unit)
|
|
Total Number of Shares
(or Units) Purchased as
Part of Publicly
Announced Plans or
Programs
|
|
Maximum Number (or Approximate Dollar Value)
of Shares (or Units) that
May Yet Be Purchased
Under the Plans or
Programs (In thousands) (2)
|
||||||
July 1, 2015 through July 31, 2015
|
58,463
|
|
|
$
|
74.83
|
|
|
22,300
|
|
|
$
|
114,579,324
|
|
August 1, 2015 through August 31, 2015
|
480,899
|
|
|
73.89
|
|
|
480,700
|
|
|
79,060,206
|
|
||
September 1, 2015 through September 30, 2015
|
3,411,884
|
|
|
71.40
|
|
|
3,392,283
|
|
|
336,772,881
|
|
||
Total
|
3,951,246
|
|
|
|
|
3,895,283
|
|
|
336,772,881
|
|
|
|
|
|
|
(1)
|
Represents shares acquired in open market purchases and
55,963
shares withheld from stock units that vested in the
third
quarter of
2015
to satisfy minimum tax withholding obligations that arose on the vesting of stock units. We expended approximately
$279.5 million
during the quarter ended
September 30, 2015
for repurchases of our common stock. For more information see Note 15 to our condensed consolidated financial statements.
|
(2)
|
Shares withheld from stock units that vested to satisfy minimum tax withholding obligations that arose on the vesting of stock units do not deplete the dollar amount available for purchases under the repurchase program.
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
(a)
|
List of exhibits
|
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
Amended and Restated Bylaws of Citrix Systems, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed July 31, 2015)
|
|
|
|
10.1*
|
|
Form of Incentive Agreement by and between the Citrix Systems, Inc. and each of David R. Friedman, David J. Henshall, Christopher Hylen, Klaus Oestermann, T. Geir Ramleth and Carlos Sartorius
|
|
|
|
10.2
|
|
Cooperation Agreement, by and among Citrix Systems, Inc., Elliott Associates, L.P., Elliott International, L.P. and Elliott International Capital Advisors Inc., dated July 28, 2015 (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 28, 2015)
|
|
|
|
10.3
|
|
First Amendment to Credit Agreement, dated as of August 7, 2015, by and among Citrix Systems, Inc., the lenders named therein and Bank of America, N.A., as Administrative Agent
|
|
|
|
10.4*
|
|
Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for Robert Calderoni granted August 1, 2015 (Time Based Awards)
|
|
|
|
10.5*
|
|
Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for Robert Calderoni granted August 1, 2015 (Performance Based Awards)
|
|
|
|
10.6*
|
|
Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for Robert Calderoni granted August 1, 2015 (Performance Based Awards)
|
|
|
|
10.7*
|
|
Form of Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for each of David J. Henshall, Christopher Hylen, Klaus Oestermann, Carlos Sartorius and T. Geir Ramleth (Performance Based Awards)
|
|
|
|
31.1
|
|
Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
|
|
|
|
31.2
|
|
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer
|
|
|
|
32.1†
|
|
Section 1350 Certification of Principal Executive Officer and Principal Financial Officer
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
*
|
Indicates a management contract or a compensatory plan, contract or arrangement.
|
†
|
Furnished herewith.
|
|
|
|
|
CITRIX SYSTEMS, INC.
|
|
|
|
|
|
By:
|
/s/ D
AVID
J. H
ENSHALL
|
|
|
David J. Henshall
|
|
|
Executive Vice President, Chief Operating Officer and Chief Financial Officer
|
|
|
(Authorized Officer and Principal Financial Officer)
|
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
Amended and Restated Bylaws of Citrix Systems, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed July 31, 2015)
|
|
|
|
10.1*
|
|
Form of Incentive Agreement by and between the Citrix Systems, Inc. and each of David R. Friedman, David J. Henshall, Christopher Hylen, Klaus Oestermann, T. Geir Ramleth and Carlos Sartorius
|
|
|
|
10.2
|
|
Cooperation Agreement, by and among Citrix Systems, Inc., Elliott Associates, L.P., Elliott International, L.P. and Elliott International Capital Advisors Inc., dated July 28, 2015 (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 28, 2015)
|
|
|
|
10.3
|
|
First Amendment to Credit Agreement, dated as of August 7, 2015, by and among Citrix Systems, Inc., the lenders named therein and Bank of America, N.A., as Administrative Agent
|
|
|
|
10.4*
|
|
Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for Robert Calderoni granted August 1, 2015 (Time Based Awards)
|
|
|
|
10.5*
|
|
Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for Robert Calderoni granted August 1, 2015 (Performance Based Awards)
|
|
|
|
10.6*
|
|
Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for Robert Calderoni granted August 1, 2015 (Performance Based Awards)
|
|
|
|
10.7*
|
|
Form of Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2014 Equity Incentive Plan for each of David J. Henshall, Christopher Hylen, Klaus Oestermann, Carlos Sartorius and T. Geir Ramleth (Performance Based Awards)
|
|
|
|
31.1
|
|
Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
|
|
|
|
31.2
|
|
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer
|
|
|
|
32.1†
|
|
Section 1350 Certification of Principal Executive Officer and Principal Financial Officer
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
*
|
Indicates a management contract or a compensatory plan, contract or arrangement.
|
†
|
Furnished herewith.
|
•
|
Number of Time-Based RSUs
: _______________
|
•
|
Vesting of Time-Based RSUs
:
Subject to the terms of the applicable award agreement, the Executive shall become vested in the time-based RSUs included in the Special Equity Grant if the Executive remains employed with the Company in a full‑time capacity on each of the following dates:
|
◦
|
50% of the time-based RSUs shall vest on April 1, 2016; and
|
◦
|
50% of the time-based RSUs shall vest on October 1, 2016.
|
•
|
Number of Performance-Based RSUs
: ______________
|
•
|
Vesting of Performance-Based RSUs
:
Subject to the terms of the applicable award agreement, the Executive shall become vested in the performance-based RSUs included in the Special Equity Grant based on the Company, business unit, function and/or the Executive’s individual performance during the Performance Period identified below, and conditioned upon the Executive remaining employed with the Company in a full‑time capacity through the end of the Performance Period:
|
◦
|
Performance Metrics
: One or more performance metrics of either the Company as a whole or any business unit or function or individual performance objectives to be determined by the Committee following the Board of Directors’ review of the recommendation of the Operations Committee of the Board
|
◦
|
|
◦
|
Performance Period
:
The measurement period approved by the Committee when it establishes the performance metrics referenced above
|
•
|
relating to my employment by the Company and my separation from employment;
|
•
|
of wrongful discharge;
|
•
|
of breach of contract;
|
•
|
of retaliation or discrimination under federal, state or local law (including, without limitation, Claims of age discrimination or retaliation under the Age Discrimination in Employment Act, Claims of disability discrimination or retaliation under the Americans with Disabilities Act, Claims of discrimination or retaliation under Title VII of the Civil Rights Act of 1964 and Claims of any form of discrimination or retaliation that is prohibited by the [Florida Civil Rights Act] or the law of any other state);
|
•
|
under any other federal or state statute;
|
•
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of defamation or other torts;
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•
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of violation of public policy;
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•
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for wages, bonuses, incentive compensation, vacation pay or any other compensation or benefits; and
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•
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for damages or other remedies of any sort, including, without limitation, compensatory damages, punitive damages, injunctive relief and attorney’s fees;
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Performance Metric:
|
Non-GAAP operating margin as calculated by the Company consistent with its earnings announcement practices
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Target:
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The non-GAAP operating margin target for the Performance Period as approved by the Board of Directors following its review of the recommendation of the Operations Committee of the Board
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Performance Period:
|
The measurement period approved by the Board when it establishes the non-GAAP operating margin target referenced above
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Company TSR
|
Percentage of Target Award Vested
|
Greater than or equal to 10%
but less than 20%
|
50%
|
Greater than or equal to 20%
|
100%
|
Performance Period:
|
The measurement period approved by the Committee when it establishes the performance metrics referenced above
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1.
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I have reviewed this quarterly report on Form 10-Q of Citrix Systems, Inc.;
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
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By:
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/s/ ROBERT M. CALDERONI
|
|
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Robert M. Calderoni
|
|
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Interim Chief Executive Officer and President
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|
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(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Citrix Systems, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
By:
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/s/ DAVID J. HENSHALL
|
|
|
David J. Henshall
|
|
|
Executive Vice President, Chief Operating
|
|
|
Officer and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
By:
|
/s/ ROBERT M. CALDERONI
|
|
|
Robert M. Calderoni
|
|
|
Interim Chief Executive Officer and President
|
|
|
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ DAVID J. HENSHALL
|
|
|
David J. Henshall
|
|
|
Executive Vice President, Chief Operating Officer and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
|