NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Citrix Systems, Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown, are of a normal recurring nature and have been reflected in the condensed consolidated financial statements and accompanying notes. The results of operations for the periods presented are not necessarily indicative of the results expected for the full year or for any future period partially because of the seasonality of the Company’s business. Historically, the Company’s revenue for the fourth quarter of any year is typically higher than the revenue for the first quarter of the subsequent year. However, during the three months ended March 31, 2020, this trend was impacted by the novel coronavirus ("COVID-19") pandemic, and the Company's first quarter revenues were higher than the fourth quarter of 2019 due to the Company's decision to make limited use Workspace licenses of Citrix Workspace available in the form of shorter-duration, discounted on-premises term offerings to quickly help the Company's customers with their immediate business needs. The information included in these condensed consolidated financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The condensed consolidated financial statements of the Company include the accounts of its wholly-owned subsidiaries in the Americas; Europe, the Middle East and Africa (“EMEA”); and Asia-Pacific and Japan (“APJ”). All significant transactions and balances between the Company and its subsidiaries have been eliminated in consolidation.
The Company's revenues are derived from sales of its Workspace and Networking solutions, and related Support and services. The Company operates under one reportable segment. See Note 10 for more information on the Company's segment.
2. SIGNIFICANT ACCOUNTING POLICIES
During the first quarter of 2020, the Company adopted new accounting guidance related to current expected credit losses and fair value measurements, which are described below. There have been no other significant changes in the Company’s accounting policies during the six months ended June 30, 2020 as compared to the significant accounting policies described in its Annual Report on Form 10-K for the year ended December 31, 2019.
Recent Accounting Pronouncements
Current Expected Credit Losses
In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update on the measurement of credit losses on financial instruments. Previously, credit losses were measured using an incurred loss approach when it was probable that a credit loss had been incurred. The new guidance changes the credit loss model from an incurred loss to an expected loss approach. It requires the application of a current expected credit loss (“CECL”) impairment model to financial assets measured at amortized cost (including trade accounts receivable) and certain off-balance-sheet credit exposures. Under the CECL model, lifetime expected credit losses on such financial assets are measured and recognized at each reporting date based on historical, current, and forecasted information. The standard also changes the impairment model for available-for-sale debt securities, eliminating the concept of other than temporary impairment and requiring credit losses to be recorded through an allowance for credit losses. The amount of the allowance for credit losses for available-for-sale debt securities is limited to the amount by which fair value is below amortized cost. The Company adopted this standard as of January 1, 2020 using the required modified retrospective adoption method. Results for periods beginning after January 1, 2020 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported under the previous accounting guidance. Adoption of the new standard did not have a material impact on the Company's condensed consolidated financial position, results of operations and cash flows. See Note 5 for additional information regarding the Company’s allowance for credit losses.
Fair Value Measurements
In August 2018, the FASB issued an accounting standard update on fair value measurements. The new guidance modifies the disclosure requirements on fair value measurements by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty, and adding new disclosure requirements. The Company adopted this standard as of January 1, 2020, and it did not have a material impact on the Company's condensed consolidated financial position, results of operations and cash flows.
Income Taxes
In December 2019, the FASB issued an accounting standard update on income taxes. The new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The new standard will be effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial position, results of operations and cash flows.
Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued an accounting standard update to guidance applicable to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This update provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. An entity may elect to apply the amendments for contract modifications by topic or industry subtopic of the codification as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial position, results of operations and cash flows.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates made by management include estimation for reserves for legal contingencies, the standalone selling price related to revenue recognition, the provision for credit losses related to accounts receivable, contract assets, and available-for-sale debt securities, the provision to reduce obsolete or excess inventory to market, the provision for estimated returns, as well as sales allowances, the assumptions used in the valuation of stock-based awards, the assumptions used in the discounted cash flows to mark certain of its investments to market, the valuation of the Company’s goodwill, net realizable value of product related and other intangible assets, the provision for income taxes, valuation allowance for deferred tax assets, uncertain tax positions, and the amortization and depreciation periods for contract acquisition costs, intangible and long-lived assets. While the Company believes that such estimates are fair when considered in conjunction with the condensed consolidated financial position and results of operations taken as a whole, the actual amounts of such items, when known, will vary from these estimates.
Available-for-sale Investments
Short-term and long-term available-for-sale investments in debt securities as of June 30, 2020 and December 31, 2019 primarily consist of agency securities, corporate securities and government securities. Investments classified as available-for-sale debt securities are stated at fair value, with unrealized gains and losses, net of taxes, reported in Accumulated other comprehensive loss. The Company classifies its available-for-sale investments as current and non-current based on their actual remaining time to maturity. The Company does not recognize unrealized changes in the fair value of its available-for-sale debt securities in income unless a security is deemed to be impaired.
The Company’s investment policy is designed to limit exposure to any one issuer depending on credit quality. The Company uses information provided by third parties to adjust the carrying value of certain of its investments to fair value at the end of each period. Fair values are based on a variety of inputs and may include interest rates, known historical trades, yield curve information, benchmark data, prepayment speeds, credit quality and broker/dealer quotes. See Note 6 for additional information regarding the Company’s investments.
Foreign Currency
The functional currency for all of the Company’s wholly-owned foreign subsidiaries is the U.S. dollar. Monetary assets and liabilities of such subsidiaries are remeasured into U.S. dollars at exchange rates in effect at the balance sheet date, and revenues and expenses are remeasured at average rates prevailing during the year. Foreign currency transaction gains and losses are the result of exchange rate changes on transactions denominated in currencies other than the functional currency, including U.S. dollars. The remeasurement of those foreign currency transactions is included in determining net income or loss for the period of exchange.
Accounting for Stock-Based Compensation Plans
The Company has various stock-based compensation plans for its employees and outside directors and accounts for stock-based compensation arrangements in accordance with the authoritative guidance, which requires the Company to measure and record compensation expense in its condensed consolidated financial statements using a fair value method. See Note 8 for further information regarding the Company’s stock-based compensation plans.
3. REVENUE
The following is a description of the principal activities from which the Company generates revenue.
Subscription
Subscription revenues primarily consist of cloud-hosted offerings, which provide customers a right to access one or more of the Company’s cloud-hosted subscription offerings, with routine customer support, as well as revenues from the Citrix Service Provider ("CSP") program and on-premise subscription software licenses. For the Company’s cloud-hosted performance obligations, revenue is generally recognized on a ratable basis over the contract term beginning on the date that the Company's service is made available to the customer, as the Company continuously provides online access to the web-based software that the customer can use at any time. The CSP program provides subscription-based services in which the CSP partners host software services to their end users.
Product and license
Product and license revenues are primarily derived from perpetual offerings related to the Company’s Workspace solutions and Networking products. For performance obligations related to perpetual software license agreements, the Company determined that its licenses are functional intellectual property that are distinct as the user can benefit from the software on its own.
Support and services
Support and services revenues include license updates, maintenance and professional services which are primarily related to the Company's perpetual offerings. License updates and maintenance revenues are primarily comprised of software and hardware maintenance, when and if-available updates and technical support. For performance obligations related to license updates and maintenance, revenue is generally recognized on a straight-line basis over the period of service because the Company transfers control evenly by providing a stand-ready service. The Company is continuously working on improving its products and pushing those updates through to the customer, and stands ready to provide software updates on a when and if-available basis. Services revenues are comprised of fees from consulting services primarily related to the implementation of the Company’s products and fees from product training and certification.
The Company’s typical performance obligations include the following:
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Performance Obligation
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When Performance Obligation
is Typically Satisfied
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Subscription
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Cloud-hosted offerings
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Over the contract term, beginning on the date that service is made available to the customer (over time)
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CSP
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As the usage occurs (over time)
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On-premise subscription software licenses
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When software activation keys have been made available for download (point in time)
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Product and license
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Software licenses
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When software activation keys have been made available for download (point in time)
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Hardware
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When control of the product passes to the customer; typically upon shipment (point in time)
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Support and services
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License updates and maintenance
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Ratably over the course of the service term (over time)
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Professional services
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As the services are provided (over time)
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Significant Judgments
The Company generates all of its revenues from contracts with customers. At contract inception, the Company assesses the solutions or services, or bundles of solutions and services, obligated in the contract with a customer to identify each performance obligation within the contract, and then evaluates whether the performance obligations are capable of being distinct and distinct within the context of the contract. Solutions and services that are not both capable of being distinct and distinct within the context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue.
The standalone selling price is the price at which the Company would sell a promised product or service separately to the customer. For the majority of the Company's software licenses and hardware, CSP and on-premise subscription software licenses, the Company uses the observable price in transactions with multiple performance obligations. For the majority of the Company’s support and services, and cloud-hosted subscription offerings, the Company uses the observable price when the Company sells that support and service or cloud-hosted subscription separately to similar customers. If the standalone selling price for a performance obligation is not directly observable, the Company estimates it. The Company estimates a standalone selling price by taking into consideration market conditions, economics of the offering and customers’ behavior. The Company maximizes the use of observable inputs and applies estimation methods consistently in similar circumstances. The Company allocates the transaction price to each distinct performance obligation on a relative standalone selling price basis.
Revenues are recognized when control of the promised products or services are transferred to customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those products or services.
Sales tax
The Company records revenue net of sales tax.
Timing of revenue recognition
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Three Months Ended June 30,
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Six Months Ended June 30,
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2020
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2019
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2020
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2019
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(In thousands)
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Products and services transferred at a point in time
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$
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195,695
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$
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178,160
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$
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475,106
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$
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341,124
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Products and services transferred over time
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603,234
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570,537
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1,184,768
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1,126,716
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Total net revenues
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$
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798,929
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$
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748,697
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$
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1,659,874
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$
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1,467,840
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Contract balances
The Company's short-term and long-term contract assets, net of allowance for credit losses, were $17.1 million and $21.6 million, respectively, as of June 30, 2020. The Company's short-term and long-term contract assets were $12.2 million and $20.5 million, respectively, as of December 31, 2019. The Current portion of deferred revenues and the Long-term portion of deferred revenues were $1.38 billion and $409.6 million, respectively, as of June 30, 2020 and $1.35 billion and $443.5 million, respectively, as of December 31, 2019. The difference in the opening and closing balances of the Company’s contract assets and liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the three and six months ended June 30, 2020, the Company recognized $489.7 million and $841.0 million, respectively, of revenue that was included in the deferred revenue balance as of March 31, 2020 and December 31, 2019, respectively.
The Company performs its obligations under a contract with a customer by transferring solutions and services in exchange for consideration from the customer. Accounts receivable are recorded when the right to consideration becomes unconditional. The timing of the Company’s performance often differs from the timing of the customer’s payment, which results in the recognition of a contract asset or a contract liability. The Company recognizes a contract asset when the Company transfers products or services to a customer and the right to consideration is conditional on something other than the passage of time. The Company recognizes a contract liability when it has received consideration or an amount of consideration is due from the customer and the Company has a future obligation to transfer products or services. The Company had no material asset impairment charges related to contract assets for either the three and six months ended June 30, 2020 or June 30, 2019.
For the Company’s software and hardware products, the timing of payment is typically upfront for its perpetual offerings and the Company’s on-premise subscriptions. Therefore, deferred revenue is created when a contract includes performance obligations such as license updates and maintenance or certain professional services that are satisfied over time. For subscription contracts, the timing of payment is typically in advance of services, and deferred revenue is created as these services are provided over time.
A significant portion of the Company’s contracts have an original duration of one year or less; therefore, the Company applies a practical expedient to determine whether a significant financing component exists and does not consider the effects of the time value of money. For multi-year contracts, the Company bills annually.
Transaction price allocated to the remaining performance obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands):
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<1-3 years
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3-5 years
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5 years or more
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Total
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Subscription
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$
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1,082,835
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$
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83,904
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$
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1,166
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$
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1,167,905
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Support and services
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1,448,652
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36,065
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|
1,864
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|
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1,486,581
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Total net revenues
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$
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2,531,487
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$
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119,969
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$
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3,030
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$
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2,654,486
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Contract acquisition costs
The Company is required to capitalize certain contract acquisition costs consisting primarily of commissions paid and related payroll taxes when contracts are signed. The asset recognized from capitalized incremental and recoverable acquisition costs is amortized on a basis consistent with the pattern of transfer of the products or services to which the asset relates.
The Company’s typical contracts include performance obligations related to product and licenses and support. In these contracts, incremental costs of obtaining a contract are allocated to the performance obligations based on the relative estimated standalone selling prices and then recognized on a basis that is consistent with the transfer of the goods or services to which the asset relates. The commissions paid on annual renewals of support for product and licenses are not commensurate with the initial commission. The costs allocated to product and licenses are expensed at the time of sale, when revenue for the product and functional software licenses is recognized. The costs allocated to customer support for product and licenses are amortized ratably over a period of the greater of the contract term or the average customer life, the expected period of benefit of the asset capitalized. The Company currently estimates an average customer life of three years to five years, which it believes is appropriate based on consideration of the historical average customer life and the estimated useful life of the underlying product and license sold as part of the transaction. Amortization of contract acquisition costs related to support is limited to the contractual period of the arrangement as the Company intends to pay a commensurate commission upon renewal of the related support. For contracts that contain multi-year services or subscriptions, the amortization period of the capitalized costs is the expected period of benefit, which is the greater of the contractual term or the expected customer life.
The Company elects to apply a practical expedient to expense contract acquisition costs as incurred where the expected period of benefit is one year or less.
For the three and six months ended June 30, 2020, the Company recorded amortization of capitalized contract acquisition costs of $13.8 million and $26.9 million, respectively, and for the three and six months ended June 30, 2019, the Company recorded amortization of capitalized contract acquisition costs of $10.9 million and $21.6 million, respectively, which is recorded in Sales, marketing and services expense in the accompanying condensed consolidated statements of income. The Company's short-term and long-term contract acquisition costs were $56.2 million and $93.8 million, respectively, as of June 30, 2020, and $50.4 million and $81.0 million, respectively, as of December 31, 2019, and are included in Prepaid and other current assets and Other assets, respectively, in the accompanying condensed consolidated balance sheets. There was no impairment loss in relation to costs capitalized during either the three and six months ended June 30, 2020 or June 30, 2019.
4. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed using the weighted-average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise or settlement of stock awards and shares issuable under the employee stock purchase plan (calculated using the treasury stock method) during the period they were outstanding and potential dilutive common shares from the conversion spread on the Company’s 0.500% Convertible Notes due 2019 (the “Convertible Notes”) and the Company's warrants during the period they were outstanding.
The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share information):
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2020
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2019
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2020
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2019
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Numerator:
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Net income
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$
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112,906
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$
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93,495
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$
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294,128
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$
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203,843
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Denominator:
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Denominator for basic earnings per share - weighted-average shares outstanding
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123,522
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131,309
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124,128
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131,396
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Effect of dilutive employee stock awards
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2,213
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1,453
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2,531
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2,145
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Effect of dilutive Convertible Notes
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—
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782
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—
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2,867
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Effect of dilutive warrants
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—
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733
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—
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1,227
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Denominator for diluted earnings per share - weighted-average shares outstanding
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125,735
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|
134,277
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|
126,659
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137,635
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Basic earnings per share
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$
|
0.91
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|
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$
|
0.71
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$
|
2.37
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$
|
1.55
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Diluted earnings per share
|
$
|
0.90
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|
|
$
|
0.70
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|
|
$
|
2.32
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|
|
$
|
1.48
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For the three and six months ended June 30, 2020, there were no weighted-average number of shares outstanding used in the computation of diluted earnings per share for the Company's warrants, as they expired on November 18, 2019. For the three and six months ended June 30, 2019, the weighted-average number of shares outstanding used in the computation of diluted earnings per share includes the dilutive effect of the Company's warrants, as the average stock price during the quarters was above the weighted-average warrant strike price of $94.53 per share and $94.69 per share, respectively. Anti-dilutive stock-based awards excluded from the calculations of diluted earnings per share were immaterial during the periods presented. The Company used the treasury stock method to consider the dilutive effect of the forward sale contract related to the accelerated share repurchase transactions ("ASR") entered into in January 2020, and determined that the forward sale contract was anti-dilutive in calculating dilutive EPS.
The Company used the treasury stock method for calculating any potential dilutive effect of the conversion spread on its Convertible Notes on diluted earnings per share because upon conversion the Company paid cash up to the aggregate principal amount of the Convertible Notes converted and delivered shares of common stock in respect of the remainder of the Company’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes converted. The conversion spread had a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given
period exceeded the conversion price. For the three and six months ended June 30, 2020, there was no dilution as the Convertible Notes matured on April 15, 2019. For the three and six months ended June 30, 2019, the average market price of the Company's common stock exceeded the conversion price; therefore, the dilutive effect of the Convertible Notes was included in the denominator of diluted earnings per share.
5. CREDIT LOSSES
The Company is exposed to credit losses primarily through its accounts receivable, investments in available-for-sale debt securities, and contract assets. See Note 3 for additional information related to the Company's contract assets.
Accounts receivable, net
The Company's accounts receivable, which are typically due within one year, consist of the following (in thousands):
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June 30, 2020
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Accounts receivable, gross
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$
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634,285
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Less: allowance for returns
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(4,886)
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Less: allowance for credit losses
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(15,249)
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Accounts receivable, net
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$
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614,150
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The allowance for credit losses on accounts receivable is determined using a combination of specific reserves for accounts that are deemed to exhibit credit loss indicators and general reserves that are judgmentally determined using loss rates based on historical write-offs by geography and customer accounts subject to credit check versus non-credit check status and consideration of recent forecasted information, including underlying economic expectations. The credit loss reserves are updated quarterly for most recent write-offs and collections information and underlying economic expectations, which for the first half of 2020 included consideration of the current and expected future economic and market conditions surrounding the COVID-19 pandemic. The Company will compare its current estimate of expected credit losses with the estimate of credit losses from the prior period and will report in net income the amount necessary to adjust the allowance for current expected credit losses. The Company recorded $2.8 million and $9.1 million of credit loss expense during the three and six months ended June 30, 2020, respectively, which is included within General and administrative expenses in the accompanying condensed consolidated statements of income.
The activity in the Company's allowance for credit losses for the six months ended June 30, 2020 is summarized as follows (in thousands):
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Total
|
|
Balance of allowance for credit losses at January 1, 2020
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$
|
6,161
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Adjustment for ASC 326 adoption
|
1,245
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Current period provision for expected losses
|
9,057
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Write-offs charged against allowance
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(1,214)
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Balance of allowance for credit losses at June 30, 2020
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$
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15,249
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As of June 30, 2020, one distributor, the Arrow Group, accounted for 13% of the Company's total gross accounts receivable.
Available-for-sale Investments
The allowance for credit losses on the Company's investments in available-for-sale debt securities is determined using a quantitative discounted cash flow analysis if impairment triggers exist after a qualitative screen is completed. Impairment on available-for-sale debt securities is determined on an individual security basis and the security is subject to impairment when its fair value declines below its amortized cost basis. If the fair value is less than the amortized cost basis, management must then determine whether it intends to sell the security or whether it is more likely than not that it will be required to sell the security before it recovers its value. If management intends to sell the security or will more-likely-than-not be required to sell the impaired security before it recovers its value, a credit loss is recorded to Other income (expense), net in the accompanying condensed consolidated statements of income. If management does not intend to sell the security, nor will it more-likely-than-not be required to sell the security before the security recovers its value, management must then determine whether the loss is due to credit loss or other factors. For impairment indicators due to credit loss factors, management establishes an allowance for credit losses with a charge to Other income (expense), net. On the contrary, for impairment indicators due to other factors, management records the loss with a charge to Other comprehensive loss in the accompanying condensed balance sheets.
Upon adoption of the credit loss standard, the Company established an allowance for credit losses and did not have any credit loss expense recorded related to available-for-sale debt securities for the three and six months ended June 30, 2020, respectively. See Note 6 for more information on allowances for credit losses related to available-for-sale debt securities.
The Company has available-for-sale debt securities that have fair values below amortized cost; however, the Company does not consider a credit allowance necessary as (i) the Company does not intend to sell the securities, (ii) it is not more-likely-than-not that the Company will be required to sell the investments before recovery of the amortized cost basis, and (iii) the unrealized losses are due to market factors rather than credit loss factors.
6. INVESTMENTS
Available-for-sale Investments
Investments in available-for-sale securities at fair value were as follows for the periods ended (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
Description of the Securities
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Allowance
for
Credit Losses
|
|
Fair Value
|
|
Agency securities
|
$
|
19,996
|
|
|
$
|
—
|
|
|
$
|
(3)
|
|
|
$
|
—
|
|
|
$
|
19,993
|
|
|
Corporate securities
|
188,455
|
|
|
12
|
|
|
(23)
|
|
|
(147)
|
|
|
188,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government securities
|
116,969
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
116,956
|
|
|
Total
|
$
|
325,420
|
|
|
$
|
12
|
|
|
$
|
(39)
|
|
|
$
|
(147)
|
|
|
$
|
325,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
Description of the Securities
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Agency securities
|
$
|
1,681
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1,682
|
|
|
Corporate securities
|
49,027
|
|
|
6
|
|
|
(149)
|
|
|
48,884
|
|
|
|
|
|
|
|
|
|
|
|
Government securities
|
9,124
|
|
|
5
|
|
|
—
|
|
|
9,129
|
|
|
Total
|
$
|
59,832
|
|
|
$
|
12
|
|
|
$
|
(149)
|
|
|
$
|
59,695
|
|
The change in net unrealized gains (losses) on available-for-sale securities recorded in Other comprehensive income (loss) includes unrealized gains (losses) that arose from changes in market value, excluding credit-related factors, of specifically identified securities that were held during the period, gains (losses) that were previously unrealized, but have been recognized in current period net income due to sales, and prepayments of available-for-sale investments purchased at a premium. See Note 13 for more information related to comprehensive income.
The average remaining maturities of the Company’s short-term and long-term available-for-sale investments at June 30, 2020 were approximately three months and two years, respectively.
For the three and six months ended June 30, 2020, the Company did not receive any proceeds from the sales of available-for-sale investments. For the three and six months ended June 30, 2019, the Company received proceeds from the sales of available-for-sale investments of $165.0 million and $938.0 million, respectively.
Realized and Unrealized Gains and Losses on Available-for-sale Investments
For the three and six months ended June 30, 2020, the Company did not have any realized gains on available-for-sale investments. For the three and six months ended June 30, 2019, the Company had realized gains on available-for-sale investments of $0.5 million and $1.5 million, respectively.
Effective January 1, 2020, the new CECL guidance requires the recognition of an allowance for estimated credit losses on investments in available-for-sale debt securities. For the three and six months ended June 30, 2020, the Company did not have any realized losses on available-for-sale investments. For the three and six months ended June 30, 2019, the Company had realized losses on available-for-sale investments of $0.5 million and $0.9 million, respectively. Realized losses primarily related to sales of these investments during the respective periods. All realized gains and losses related to the sales of available-for-sale investments are included in Other income (expense), net, in the accompanying condensed consolidated statements of income.
As of December 31, 2019, the Company's gross unrealized losses on available-for-sale investments were $0.1 million and were not deemed to be other-than-temporarily impaired under the prior accounting guidance.
Equity Securities without Readily Determinable Fair Values
The Company held direct investments in privately-held companies of $12.7 million and $12.3 million as of June 30, 2020 and December 31, 2019, respectively, which are accounted for at cost, less impairment plus or minus adjustments resulting from observable price changes in orderly transactions for an identical or a similar investment of the same issuer. These investments are included in Other assets in the accompanying condensed consolidated balance sheets. The Company periodically reviews these investments for impairment and observable price changes on a quarterly basis, and adjusts the carrying value accordingly. The fair value of these investments represent a Level 3 valuation as the assumptions used in valuing these investments are not directly or indirectly observable. See Note 7 for detailed information on fair value measurements.
Equity Securities Accounted for at Net Asset Value
The Company held equity interests in certain private equity funds of $10.2 million and $11.2 million as of June 30, 2020 and December 31, 2019, respectively, which are accounted for under the net asset value practical expedient. These investments are included in Other assets in the accompanying condensed consolidated balance sheets. The net asset value of these investments is determined using quarterly capital statements from the funds, which are based on the Company’s contributions to the funds, allocation of profit and loss and changes in fair value of the underlying fund investments. These private equity funds focus on making venture capital investments, principally by investing in equity securities of early and late stage privately-held corporations. The funds’ general partner shall determine the amount, timing and form (whether cash or in kind) of all distributions made by the funds. The Company may only transfer its investments in private equity fund interests subject to the general partner’s written consent and cannot trade its fund interests in established securities markets, secondary markets or equivalents thereof. The Company has unfunded commitments of $0.5 million as of June 30, 2020.
7. FAIR VALUE MEASUREMENTS
The authoritative guidance defines fair value as an exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
•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.
Available-for-sale securities included in Level 2 are valued utilizing inputs obtained from an independent pricing service (the “Service”) which uses quoted market prices for identical or comparable instruments rather than direct observations of quoted prices in active markets. The Service applies a four level hierarchical pricing methodology to all of the Company’s fixed income securities based on the circumstances. The hierarchy starts with the highest priority pricing source, then subsequently uses inputs obtained from other third-party sources and large custodial institutions. The Service’s providers utilize a variety of inputs to determine their quoted prices. These inputs may include interest rates, known historical trades, yield curve information, benchmark data, prepayment speeds, credit quality and broker/dealer quotes. Substantially all of the Company’s available-for-sale investments are valued utilizing inputs obtained from the Service and accordingly are categorized as Level 2 in the table below. The Company periodically independently assesses the pricing obtained from the Service and historically has not adjusted the Service's pricing as a result of this assessment. Available-for-sale securities are included in Level 3 when relevant observable inputs for a security are not available.
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy. In certain instances, the inputs used to measure fair value may meet the definition of more than one level of the fair value hierarchy. The input with the lowest level priority is used to determine the applicable level in the fair value hierarchy.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2020
|
|
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
|
$
|
457,042
|
|
|
$
|
457,042
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
20,288
|
|
|
20,288
|
|
|
—
|
|
|
—
|
|
|
Corporate securities
|
32,746
|
|
|
—
|
|
|
32,746
|
|
|
—
|
|
|
Government securities
|
44,996
|
|
|
—
|
|
|
44,996
|
|
|
—
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
Agency securities
|
19,993
|
|
|
—
|
|
|
19,993
|
|
|
—
|
|
|
Corporate securities
|
188,297
|
|
|
—
|
|
|
187,797
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
Government securities
|
116,956
|
|
|
—
|
|
|
116,956
|
|
|
—
|
|
|
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
|
Foreign currency derivatives
|
781
|
|
|
—
|
|
|
781
|
|
|
—
|
|
|
Total assets
|
$
|
881,099
|
|
|
$
|
477,330
|
|
|
$
|
403,269
|
|
|
$
|
500
|
|
|
Accrued expenses and other current liabilities:
|
|
|
|
|
|
|
|
|
Foreign currency derivatives
|
2,236
|
|
|
—
|
|
|
2,236
|
|
|
—
|
|
|
Total liabilities
|
$
|
2,236
|
|
|
$
|
—
|
|
|
$
|
2,236
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
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
|
$
|
474,756
|
|
|
$
|
474,756
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Money market funds
|
42,019
|
|
|
42,019
|
|
|
—
|
|
|
—
|
|
|
Agency securities
|
19,993
|
|
|
—
|
|
|
19,993
|
|
|
—
|
|
|
Corporate securities
|
8,993
|
|
|
—
|
|
|
8,993
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
Agency securities
|
1,682
|
|
|
—
|
|
|
1,682
|
|
|
—
|
|
|
Corporate securities
|
48,884
|
|
|
—
|
|
|
47,884
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
Government securities
|
9,129
|
|
|
—
|
|
|
9,129
|
|
|
—
|
|
|
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
|
Foreign currency derivatives
|
1,889
|
|
|
—
|
|
|
1,889
|
|
|
—
|
|
|
Total assets
|
$
|
607,345
|
|
|
$
|
516,775
|
|
|
$
|
89,570
|
|
|
$
|
1,000
|
|
|
Accrued expenses and other current liabilities:
|
|
|
|
|
|
|
|
|
Foreign currency derivatives
|
1,390
|
|
|
—
|
|
|
1,390
|
|
|
—
|
|
|
Total liabilities
|
$
|
1,390
|
|
|
$
|
—
|
|
|
$
|
1,390
|
|
|
$
|
—
|
|
The Company’s fixed income available-for-sale security portfolio generally consists of investment grade securities from diverse issuers with a minimum credit rating of A-/A3 and a weighted-average credit rating of AA-/Aa3. The Company values these securities based on pricing from the Service, whose sources may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value, and accordingly, the Company classifies the majority of its fixed income available-for-sale securities as Level 2.
The Company measures its cash flow hedges, which are classified as Prepaid expenses and other current assets and Accrued expenses and other current liabilities, at fair value based on indicative prices in active markets (Level 2 inputs).
Assets Measured at Fair Value on a Non-recurring Basis Using Significant Unobservable Inputs (Level 3)
During the three months ended June 30, 2020, no direct investments in privately-held companies were determined to be impaired. During the six months ended June 30, 2020, certain direct investments in privately-held companies with a carrying value of $1.3 million were determined to be impaired and written down to a fair value of zero, resulting in an impairment charge of $1.3 million. The impairment charges were included in Other income (expense), net in the accompanying condensed consolidated statements of income.
During the three and six months ended June 30, 2019, a certain direct investment in a privately-held company with a carrying value of $1.9 million was acquired by a third party and the Company received proceeds of $0.2 million. As a result, the Company wrote down the fair value of the investment and recorded an impairment charge of $1.7 million, which is included in Other income (expense), net in the accompanying condensed consolidated statements of income.
In determining the fair value of the investments, the Company considers many factors, including, but not limited to, operating performance of the investee, the amount of cash that the investee has on-hand, the ability to obtain additional financing and the overall market conditions in which the investee operates.
During the three months ended June 30, 2020, the Company determined that there were no material adjustments resulting from observable price changes to the Company's investments in privately-held companies without a readily determinable fair value. During the six months ended June 30, 2020, the Company determined there was an upward adjustment of $1.8 million to one of the Company's investments in a privately-held company without a readily determinable fair value based on an observable input, specifically its ability to obtain additional financing at a favorable valuation. During the three and six months ended June 30, 2019, the Company determined that there were no material adjustments resulting from observable price changes to the Company's investments in privately-held companies without a readily determinable fair value.
Additional Disclosures Regarding Fair Value Measurements
The carrying value of accounts receivable, accounts payable and accrued expenses approximate their fair value due to the short maturity of these items.
As of June 30, 2020, the fair value of the $750.0 million unsecured senior notes due March 1, 2030 (the "2030 Notes") and $750.0 million unsecured senior notes due December 1, 2027 (the “2027 Notes") was determined based on inputs that are observable in the market (Level 2). Based on the closing trading price per $100 as of the last day of trading for the quarter ended June 30, 2020, the carrying value was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Carrying Value
|
|
2030 Notes
|
$
|
802,890
|
|
|
$
|
738,516
|
|
|
2027 Notes
|
$
|
863,363
|
|
|
$
|
743,371
|
|
See Note 11 for more information on the 2030 Notes and 2027 Notes.
8. STOCK-BASED COMPENSATION
Plans
The Company’s stock-based compensation program is a long-term retention program that is intended to attract and reward talented employees and align stockholder and employee interests. As of June 30, 2020, the Company had one stock-based compensation plan under which it was granting equity awards. The Company is currently granting stock-based awards from its Second Amended and Restated 2014 Equity Incentive Plan (the "2014 Plan"), which was recently amended at the Company's Annual Meeting of Stockholders on June 3, 2020. Pursuant to the June 2020 amendment, the maximum number of shares of common stock available for issuance under the 2014 Plan was increased to 51,300,000. In addition, the amendment extended the term of the 2014 Plan to June 3, 2030 and updated the vesting provisions from monthly to annual vesting for annual director awards, consistent with the Company's current compensation program for non-employee directors.
As of June 30, 2020, there were 18,537,938 shares of common stock reserved for issuance pursuant to the Company’s stock-based compensation plans, including authorization under its 2014 Plan to grant stock-based awards covering 12,685,478 shares of common stock.
The Company also has an Employee Stock Purchase Plan (the “ESPP”), which provides for the issuance of a maximum of 16,000,000 shares of common stock. As of June 30, 2020, 2,438,105 shares have been issued under the ESPP. The Company recorded stock-based compensation costs related to the ESPP of $2.6 million and $2.6 million for the three months ended June 30, 2020 and 2019, respectively, and $4.6 million and $5.5 million for the six months ended June 30, 2020 and 2019, respectively.
The Company used the Black-Scholes model to estimate the fair value of the ESPP awards with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
Expected volatility factor
|
0.21 - 0.22
|
|
0.26 - 0.29
|
|
|
|
|
|
|
|
|
|
Risk free interest rate
|
1.56% - 2.06%
|
|
2.19% - 2.49%
|
|
|
|
|
|
|
|
|
|
Expected dividend yield
|
1.20% - 1.39%
|
|
1.27% - 1.31%
|
|
|
|
|
|
|
|
|
|
Expected life (in years)
|
0.5
|
|
0.5
|
|
|
|
|
|
|
|
|
The Company determined the expected volatility factor by considering the implied volatility in six-month market-traded options of the Company's common stock based on third-party volatility quotes. The Company's decision to use implied volatility was based upon the availability of actively traded options on the Company's common stock and its assessment that implied volatility is more representative of future stock price trends than historical volatility. The risk-free interest rate was based on a U.S. Treasury instrument whose term is consistent with the expected term of the stock options. The current dividend yield has been updated for expected dividend yield payout. The expected term was based on the term of the purchase period for grants made under the ESPP.
Stock-Based Compensation
The detail of the total stock-based compensation recognized by income statement classification is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
Income Statement Classifications
|
June 30, 2020
|
|
June 30, 2019
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Cost of subscription, support and services
|
$
|
3,404
|
|
|
$
|
2,956
|
|
|
$
|
6,166
|
|
|
$
|
5,158
|
|
|
Research and development
|
30,987
|
|
|
25,419
|
|
|
52,583
|
|
|
53,256
|
|
|
Sales, marketing and services
|
27,843
|
|
|
24,424
|
|
|
48,229
|
|
|
44,350
|
|
|
General and administrative
|
23,128
|
|
|
15,521
|
|
|
36,707
|
|
|
30,790
|
|
|
Total
|
$
|
85,362
|
|
|
$
|
68,320
|
|
|
$
|
143,685
|
|
|
$
|
133,554
|
|
Non-vested Stock Units
Service-Based Stock Units
The Company awards senior level employees and certain other employees non-vested stock units granted under the 2014 Plan that vest based on service. These non-vested stock unit awards vest 33.33% on each of the first, second and third anniversary subsequent to the grant date of the award. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. In addition, the Company awards non-vested stock units to all of its continuing non-employee directors, which represent the right to receive one share of the Company's common stock upon vesting. Previously, non-vested stock unit awards granted to the Company's continuing non-employee directors vested monthly in 12 equal installments. Beginning in 2020, new awards granted to non-employee directors will vest in full in one installment on the earlier of: (i) the first anniversary of the award date; or (ii) the day immediately prior to the Company’s next annual meeting of the stockholders following the award date.
Company Performance Stock Units
On April 1, 2020, the Company awarded senior level employees 294,605 non-vested performance stock unit awards granted under the 2014 Plan. The number of non-vested performance stock units that ultimately vest will be determined within sixty days following completion of the performance period ending December 31, 2022 and will be based on the achievement of specific corporate financial performance goals related to the Company’s annualized recurring revenue (ARR) growth measured during the period from January 1, 2020 to December 31, 2022. The number of non-vested stock units issued will be based on a
graduated slope, with the maximum number of non-vested stock units issuable pursuant to the award capped at 200% of the target number of non-vested stock units set forth in the award agreement. The Company is required to estimate the attainment expected to be achieved related to the defined performance goals and the number of non-vested stock units that will ultimately be awarded in order to recognize compensation expense over the vesting period. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. Compensation expense will be recorded through the end of the performance period on December 31, 2022 if it is deemed probable that the performance goals will be met. If the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed.
On April 6, 2020, the Company awarded certain senior level employees 90,756 non-vested performance stock unit awards granted under the 2014 Plan that vest based on the Company’s ARR growth during the relevant performance periods, which span January 1, 2020 through December 31, 2021. The number of non-vested stock units issued upon the vesting of the award will be based on a graduated slope, with the maximum number of non-vested stock units issuable pursuant to the award capped at 125% of the target number of non-vested stock units set forth in the award agreement. The Company is required to estimate the attainment expected to be achieved related to the defined performance goals and the number of non-vested stock units that will ultimately be awarded in order to recognize compensation expense over the vesting period. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. Compensation expense will be recorded through the end of the performance period on December 31, 2021 if it is deemed probable that the performance goals will be met. If the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed.
Unrecognized Compensation Related to Stock Units
As of June 30, 2020, the total number of non-vested stock units outstanding, including company performance awards and service-based awards was 5,803,303. As of June 30, 2020, there was $550.0 million of total unrecognized compensation cost related to non-vested stock units. The unrecognized cost of the awards legally granted through June 30, 2020 is expected to be recognized over a weighted-average period of 1.87 years.
9. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The Company accounts for goodwill in accordance with the authoritative guidance, which requires that goodwill and certain intangible assets are not amortized, but are subject to an annual impairment test. The Company performed a qualitative assessment in connection with its annual goodwill impairment test in the fourth quarter of 2019. As a result of the qualitative analysis, a quantitative impairment test was not deemed necessary. There was no impairment of goodwill or indefinite lived intangible assets as a result of the annual impairment test analysis completed during the fourth quarter of 2019. The balance of goodwill at June 30, 2020 and December 31, 2019 was $1.80 billion.
Intangible Assets
The Company has intangible assets which were primarily acquired in conjunction with business combinations and technology purchases. Intangible assets with finite lives are recorded at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally three to seven years, except for patents, which are amortized over the lesser of their remaining life or seven to ten years.
Intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Product related intangible assets
|
$
|
738,243
|
|
|
$
|
650,217
|
|
|
$
|
734,973
|
|
|
$
|
633,633
|
|
|
Other
|
187,173
|
|
|
181,431
|
|
|
187,173
|
|
|
180,035
|
|
|
Total
|
$
|
925,416
|
|
|
$
|
831,648
|
|
|
$
|
922,146
|
|
|
$
|
813,668
|
|
Amortization of product related intangible assets, which consists primarily of product related technologies and patents, was $8.3 million and $9.8 million for the three months ended June 30, 2020 and 2019, respectively, and $16.6 million and $20.1 million for the six months ended June 30, 2020 and 2019, respectively, and is classified as a component of Cost of net revenues in the accompanying condensed consolidated statements of income. Amortization of other intangible assets, which consist primarily of customer relationships, trade names and covenants not to compete was $0.7 million and $3.2 million for the three months ended June 30, 2020 and 2019, respectively, and $1.4 million and $6.7 million for the six months ended June 30,
2020 and 2019, respectively, and is classified as a component of Operating expenses in the accompanying condensed consolidated statements of income.
The Company monitors its intangible assets for indicators of impairment. If the Company determines impairment has occurred, it will write-down the intangible asset to its fair value. For certain intangible assets where the unamortized balances exceeded the undiscounted future net cash flows, the Company measures the amount of the impairment by calculating the amount by which the carrying values exceed the estimated fair values, which are based on projected discounted future net cash flows.
Estimated future amortization expense of intangible assets with finite lives as of June 30, 2020 is as follows (in thousands):
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
|
2020 (remaining six months)
|
$
|
17,430
|
|
|
2021
|
23,251
|
|
|
2022
|
21,053
|
|
|
2023
|
16,785
|
|
|
2024
|
5,751
|
|
|
Thereafter
|
9,498
|
|
|
Total
|
$
|
93,768
|
|
10. SEGMENT INFORMATION
Citrix has one reportable segment. The Company's chief operating decision maker (“CODM”) reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company's CEO is the CODM.
Revenues by Product Grouping
Revenues by product grouping were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
Workspace (1)
|
$
|
584,878
|
|
|
$
|
535,063
|
|
|
$
|
1,238,594
|
|
|
$
|
1,049,670
|
|
|
Networking (2)
|
186,069
|
|
|
178,204
|
|
|
366,003
|
|
|
349,437
|
|
|
Professional services (3)
|
27,982
|
|
|
35,430
|
|
|
55,277
|
|
|
68,733
|
|
|
Total net revenues
|
$
|
798,929
|
|
|
$
|
748,697
|
|
|
$
|
1,659,874
|
|
|
$
|
1,467,840
|
|
(1)Workspace revenues are primarily comprised of sales from the Company’s application virtualization solutions, which include Citrix Workspace, Citrix Virtual Apps and Desktops, the Company's unified endpoint management solutions, which include Citrix Endpoint Management and Citrix Content Collaboration.
(2)Networking revenues primarily include Citrix ADC and Citrix SD-WAN.
(3)Professional services revenues are primarily comprised of revenues from consulting services and product training and certification services.
Revenues by Geographic Location
The following table presents revenues by geographic location, for the following periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
Americas
|
$
|
432,210
|
|
|
$
|
432,281
|
|
|
$
|
916,325
|
|
|
$
|
833,428
|
|
|
EMEA
|
277,313
|
|
|
240,388
|
|
|
570,960
|
|
|
477,201
|
|
|
APJ
|
89,406
|
|
|
76,028
|
|
|
172,589
|
|
|
157,211
|
|
|
Total net revenues
|
$
|
798,929
|
|
|
$
|
748,697
|
|
|
$
|
1,659,874
|
|
|
$
|
1,467,840
|
|
Strategic Service Providers
The Company defines Strategic Service Providers (SSP) as its three historically largest hyperscale Networking customers. The following table summarizes SSP revenue for the following periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
SSP revenue
|
$
|
29,659
|
|
|
$
|
23,731
|
|
|
$
|
49,502
|
|
|
$
|
45,832
|
|
|
Non-SSP revenue
|
769,270
|
|
|
724,966
|
|
|
1,610,372
|
|
|
1,422,008
|
|
|
Total net revenues
|
$
|
798,929
|
|
|
$
|
748,697
|
|
|
$
|
1,659,874
|
|
|
$
|
1,467,840
|
|
Subscription Revenue
Subscription revenue relates to fees which are generally recognized ratably over the contractual term. The Company's subscription revenue includes Software as a Service (SaaS), which primarily consists of subscriptions delivered via a cloud-hosted service whereby the customer does not take possession of the software and hybrid subscription offerings; and non-SaaS, which consists primarily of on-premise licensing, hybrid subscription offerings, CSP services and the related support. The Company's hybrid subscription offerings are allocated between SaaS and non-SaaS, which are generally recognized at a point in time. The following table presents subscription revenues by SaaS and non-SaaS components, for the following periods (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Subscription:
|
|
|
|
|
|
|
|
|
SaaS
|
$
|
130,618
|
|
|
$
|
91,208
|
|
|
$
|
253,188
|
|
|
$
|
176,655
|
|
|
Non-SaaS
|
112,832
|
|
|
64,625
|
|
|
258,498
|
|
|
120,784
|
|
|
Total Subscription revenue
|
$
|
243,450
|
|
|
$
|
155,833
|
|
|
$
|
511,686
|
|
|
$
|
297,439
|
|
11. DEBT
The components of the Company's long-term debt were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Term Loan Credit Agreement
|
$
|
250,000
|
|
|
$
|
—
|
|
|
2027 Senior Notes
|
750,000
|
|
|
750,000
|
|
|
2030 Senior Notes
|
750,000
|
|
|
—
|
|
|
Total face value
|
1,750,000
|
|
|
750,000
|
|
|
Less: unamortized discount
|
(5,917)
|
|
|
(1,291)
|
|
|
Less: unamortized issuance costs
|
(12,569)
|
|
|
(5,783)
|
|
|
Total long-term debt
|
$
|
1,731,514
|
|
|
$
|
742,926
|
|
Term Loan Credit Agreement
On January 21, 2020, the Company entered into a Term Loan Credit Agreement with Bank of America, N.A., as administrative agent, and the other lenders party thereto from time to time (collectively, the “Lenders”). The Term Loan Credit Agreement provides the Company with facilities to borrow term loans on an unsecured basis in an aggregate principal amount of up to $1.00 billion, consisting of (i) a $500.0 million 364-day term loan facility (the “364-day Term Loan”), and (ii) a $500.0 million 3-year term loan (the “3-year Term Loan”), in each case in a single borrowing, subject to satisfaction of certain conditions set forth in the Term Loan Credit Agreement. On January 30, 2020, the Company borrowed $1.00 billion under the term loans and used the proceeds to enter into the ASR with each of Goldman Sachs & Co. LLC and Wells Fargo Bank, National Association (each, a "Dealer") for an aggregate of $1.00 billion. See Note 15 for detailed information on the accelerated share repurchase.
Borrowings under the Term Loan Credit Agreement bear interest at a rate equal to (a) either (i) LIBOR or, upon a phase-out of LIBOR, an alternative benchmark rate as provided in the Credit Agreement, or (ii) a customary base rate formula, plus (b) the applicable margin with respect thereto, which initially will be determined based on the Company’s consolidated leverage ratio but may, if so elected by the Company, be based on the Company’s non-credit enhanced, senior unsecured long-term debt rating as determined by Moody’s Investors Service, Inc., Standard & Poor’s Financial Services, LLC and Fitch Ratings Inc., in each case as set forth in the Term Loan Credit Agreement.
The Term Loan Credit Agreement includes a covenant limiting the Company’s consolidated leverage ratio to not more than 3.5:1.0, subject to, upon the occurrence of a qualified acquisition, if so elected by the Company, a step-up to 4.0:1.0 for the four fiscal quarters following such qualified acquisition, and a covenant limiting the Company’s consolidated interest coverage ratio to not less than 3.0:1.0. The Term Loan Credit Agreement includes customary events of default, with corresponding grace periods in certain circumstances, including, without limitation, payment defaults, cross-defaults, the occurrence of a change of control of the Company and bankruptcy-related defaults. The Lenders are entitled to accelerate repayment of the loans under the Term Loan Credit Agreement upon the occurrence of any of the events of default. In addition, the Term Loan Credit Agreement contains customary affirmative and negative covenants, including covenants that limit or restrict the ability of the Company to grant liens, merge or consolidate, dispose of all or substantially all of its assets, change its business and incur subsidiary indebtedness, in each case subject to customary exceptions. In addition, the Term Loan Credit Agreement requires the Company to make prepayments of any net cash proceeds received in connection with the Company issuing or incurring debt or issuing equity, subject to certain ordinary course exceptions described in the Term Loan Credit Agreement. The Term Loan Credit Agreement also contains representations and warranties customary for an unsecured financing of this type. The Company was in compliance with these covenants as of June 30, 2020.
Senior Notes
On February 25, 2020, the Company issued $750.0 million of unsecured senior notes due March 1, 2030. The 2030 Notes accrue interest at a rate of 3.300% per annum. Interest on the 2030 Notes is due semi-annually on March 1 and September 1 of each year, beginning on September 1, 2020. The net proceeds from this offering were $738.1 million, after deducting the underwriting discount and estimated offering expenses payable by the Company. Net proceeds from this offering were primarily used to repay amounts outstanding under the Company's unsecured Term Loan Credit Agreement. The 2030 Notes will mature on March 1, 2030, unless earlier redeemed in accordance with their terms prior to such date. The Company may redeem the 2030 Notes at its option at any time in whole or from time to time in part prior to December 1, 2029 at a redemption price equal to the greater of (i) 100% of the aggregate principal amount of the 2030 Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of such Notes under such 2030 Notes, plus in each case, accrued and unpaid interest to, but excluding, the redemption date. At any time on or after December 1, 2029, the redemption price shall be
equal to 100% of the aggregate principal amount of the 2030 Notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date. Among other terms, under certain circumstances, holders of the 2030 Notes may require the Company to repurchase their 2030 Notes upon the occurrence of a change of control prior to maturity for cash at a repurchase price equal to 101% of the principal amount of the 2030 Notes to be repurchased plus accrued and unpaid interest to, but excluding, the repurchase date.
During the six months ended June 30, 2020, the Company used the net proceeds from the 2030 Notes and cash to repay $500.0 million under the 364-day Term Loan and $250.0 million under the 3-year Term Loan. As of June 30, 2020, $250.0 million in principal amount was outstanding under the 3-year Term Loan.
On November 15, 2017, the Company issued $750.0 million of unsecured senior notes due December 1, 2027. The 2027 Notes accrue interest at a rate of 4.500% per annum. Interest on the 2027 Notes is due semi-annually on June 1 and December 1 of each year. The 2027 Notes will mature on December 1, 2027, unless earlier redeemed in accordance with their terms prior to such date. The Company may redeem the 2027 Notes at its option at any time in whole or from time to time in part prior to September 1, 2027 at a redemption price equal to the greater of (i) 100% of the aggregate principal amount of the 2027 Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments under such 2027 Notes, plus in each case, accrued and unpaid interest to, but excluding, the redemption date. Among other terms, under certain circumstances, holders of the 2027 Notes may require the Company to repurchase their 2027 Notes upon the occurrence of a change of control prior to maturity for cash at a repurchase price equal to 101% of the principal amount of the 2027 Notes to be repurchased plus accrued and unpaid interest to, but excluding, the repurchase date.
Credit Facility
On November 26, 2019, the Company entered into an amended and restated credit agreement (the "Credit Agreement") with a group of financial institutions, which amends and restates the Company’s Credit Agreement, dated January 7, 2015. The Credit Agreement provides for a five year unsecured revolving credit facility in the aggregate amount of $250.0 million, subject to continued covenant compliance. The Company may elect to increase the revolving credit facility by up to $250.0 million if existing or new lenders provide additional revolving commitments in accordance with the terms of the Credit Agreement. A portion of the revolving line of credit (i) in the aggregate amount of $25.0 million may be available for issuances of letters of credit and (ii) in the aggregate amount of $10.0 million may be available for swing line loans, as part of, not in addition to, the aggregate revolving commitments. The credit facility bears interest at a rate equal to (a) either (i) LIBOR or, upon a phase-out of LIBOR, an alternative benchmark rate as provided in the Credit Agreement, or (ii) a customary base rate formula, plus (b) the applicable margin with respect thereto, which initially will be determined based on the Company’s consolidated leverage ratio but may, if so elected by the Company, be based on the Company’s long-term debt rating as set forth in the Credit Agreement. In addition, the Company is required to pay a quarterly facility fee ranging from 0.11% to 0.20% of the aggregate revolving commitments under the credit facility and based on the ratio of the Company’s total debt to the Company’s consolidated EBITDA or long-term credit rating. As of June 30, 2020 and December 31, 2019, no amounts were outstanding under the credit facility. The Credit Agreement contains certain financial covenants and the Company was in compliance with these covenants as of June 30, 2020.
Convertible Notes
During 2014, the Company completed a private placement of approximately $1.44 billion principal amount of 0.500% Convertible Notes due 2019. All Convertible Notes were converted by their beneficial owners prior to their maturity on April 15, 2019. In accordance with the terms of the indenture governing the Convertible Notes, on April 15, 2019 the Company paid $1.16 billion in the outstanding aggregate principal amount of the Convertible Notes and delivered 4.9 million newly issued shares of its common stock in respect of the remainder of the Company's conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted, in full satisfaction of such converted notes. The Company received shares of its common stock under the Bond Hedges (as defined below) that offset the issuance of shares of common stock upon conversion of the Convertible Notes.
The following table includes total interest expense recognized related to the Term Loan Credit Agreement, the 2030 Notes, the 2027 Notes and the Convertible Notes (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Contractual interest expense
|
$
|
16,386
|
|
|
$
|
8,614
|
|
|
$
|
29,816
|
|
|
$
|
18,507
|
|
|
Amortization of debt issuance costs
|
392
|
|
|
317
|
|
|
1,387
|
|
|
1,306
|
|
|
Amortization of debt discount
|
161
|
|
|
1,204
|
|
|
249
|
|
|
8,191
|
|
|
|
$
|
16,939
|
|
|
$
|
10,135
|
|
|
$
|
31,452
|
|
|
$
|
28,004
|
|
See Note 7 for fair value disclosures related to the Company's 2030 Notes and 2027 Notes.
Convertible Note Hedge and Warrant Transactions
To minimize the impact of potential dilution upon conversion of the Convertible Notes, the Company entered into convertible note hedge transactions relating to approximately 16.0 million shares of common stock (the "Bond Hedges") and also entered into separate warrant transactions (the "Warrant Transactions") with each of the Option Counterparties relating to approximately 16.0 million shares of common stock to offset any payments in cash or shares of common stock at the Company’s election. As a result of the spin-off of its GoTo Business in January 2017, the number of shares of the Company's common stock covered by the Bond Hedges and Warrant Transactions was adjusted to approximately 20.0 million shares.
As noted above, the Bond Hedges reduced the dilution upon conversion of the Convertible Notes, as the market price per share of common stock, as measured under the terms of the Bond Hedges, was greater than the strike price of the Bond Hedges, which initially corresponded to the conversion price of the Convertible Notes and was subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Convertible Notes. The Warrant Transactions would have separately had a dilutive effect to the extent that the market value per share of common stock, as measured under the terms of the Warrant Transactions, exceeded the applicable strike price of the warrants issued pursuant to the Warrant Transactions (the “Warrants”).
The Warrants expired in ratable portions on a series of expiration dates that commenced on July 15, 2019 and concluded on November 18, 2019, and no Warrants remain outstanding. The Warrants were not marked to market as the value of the Warrants were initially recorded in stockholders' equity and remained classified within stockholders' equity through their expiration. During the three months ended June 30, 2019, the strike price of the Warrants was adjusted to $94.27 per share and the number of shares of the Company's common stock covered by the Warrant Transactions was adjusted to approximately 20.2 million shares as a result of the cash dividend paid in June 2019.
12. DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives Designated as Hedging Instruments
As of June 30, 2020, the Company’s derivative assets and liabilities primarily resulted from cash flow hedges related to its forecasted operating expenses transacted in local currencies. A substantial portion of the Company’s overseas expenses are and will continue to be transacted in local currencies. To protect against fluctuations in operating expenses and the volatility of future cash flows caused by changes in currency exchange rates, the Company has established a program that uses foreign exchange forward contracts to hedge its exposure to these potential changes. The terms of these instruments, and the hedged transactions to which they relate, generally do not exceed 12 months.
Generally, when the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will be partially offset by the gains realized from the Company’s hedging contracts. Conversely, if the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from the Company’s hedging contracts. Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Gains and losses on derivatives that are designated as cash flow hedges are initially reported as a component of Accumulated other comprehensive loss and are subsequently recognized in income when the hedged exposure is recognized in income. Gains and losses from changes in fair values of derivatives that are not designated as hedges are recognized in Other income (expense), net.
The total cumulative unrealized loss on cash flow derivative instruments was $0.6 million at June 30, 2020, and is included in Accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. The total
unrealized gain on cash flow derivative instruments was $0.9 million at December 31, 2019, and is included in Accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. See Note 13 for more information related to comprehensive income. The net unrealized loss as of June 30, 2020 is expected to be recognized in income over the next 12 months at the same time the hedged items are recognized in income.
Derivatives not Designated as Hedging Instruments
A substantial portion of the Company’s overseas assets and liabilities are and will continue to be denominated in local currencies. To protect against fluctuations in earnings caused by changes in currency exchange rates when remeasuring the Company’s balance sheet, the Company utilizes foreign exchange forward contracts to hedge its exposure to this potential volatility. These contracts are not designated for hedge accounting treatment under the authoritative guidance. Accordingly, changes in the fair value of these contracts are recorded in Other income (expense), net.
Fair Values of Derivative Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
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
|
|
$605
|
|
Prepaid
expenses
and other
current
assets
|
|
$1,335
|
|
Accrued
expenses
and other
current
liabilities
|
|
$1,256
|
|
Accrued
expenses
and other
current
liabilities
|
|
$371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
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
|
|
$176
|
|
Prepaid
expenses
and other
current
assets
|
|
$554
|
|
Accrued
expenses
and other
current
liabilities
|
|
$980
|
|
Accrued
expenses
and other
current
liabilities
|
|
$1,019
|
The Effect of Derivative Instruments on Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Derivatives in Cash Flow
Hedging Relationships
|
Amount of Gain Recognized in Other
Comprehensive Income (Loss)
|
|
|
|
Location of Loss Reclassified
from Accumulated Other
Comprehensive Loss into
Income
|
|
Amount of Loss Reclassified from Accumulated Other
Comprehensive Loss
|
|
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
Foreign currency forward contracts
|
$
|
1,377
|
|
|
$
|
285
|
|
|
Operating expenses
|
|
$
|
(919)
|
|
|
$
|
(97)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Derivatives in Cash Flow
Hedging Relationships
|
Amount of (Loss) Gain Recognized in Other
Comprehensive Income (Loss)
|
|
|
|
Location of Loss Reclassified
from Accumulated Other
Comprehensive Loss into
Income
|
|
Amount of Loss Reclassified from Accumulated Other
Comprehensive Loss
|
|
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
Foreign currency forward contracts
|
$
|
(1,456)
|
|
|
$
|
1,326
|
|
|
Operating expenses
|
|
$
|
(671)
|
|
|
$
|
(991)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Loss Recognized in Income on
Derivative
|
|
Amount of Loss Recognized
in Income on Derivative
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Foreign currency forward contracts
|
Other income (expense), net
|
|
$
|
(1,229)
|
|
|
$
|
(584)
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss) Recognized in Income on
Derivative
|
|
Amount of Gain (Loss) Recognized
in Income on Derivative
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Foreign currency forward contracts
|
Other income (expense), net
|
|
$
|
2,529
|
|
|
$
|
(1,980)
|
|
Outstanding Foreign Currency Forward Contracts
As of June 30, 2020, the Company had the following net notional foreign currency forward contracts outstanding (in thousands):
|
|
|
|
|
|
|
|
Foreign Currency
|
Currency
Denomination
|
|
Australian Dollar
|
AUD 34,800
|
|
Brazilian Real
|
BRL 2,000
|
|
Pounds Sterling
|
GBP 700
|
|
Canadian Dollar
|
CAD 850
|
|
Chinese Yuan Renminbi
|
CNY 47,725
|
|
Czech Koruna
|
CZK 7,400
|
|
Danish Krone
|
DKK 9,100
|
|
Euro
|
EUR 936
|
|
Hong Kong Dollar
|
HKD 17,300
|
|
Indian Rupee
|
INR 912,000
|
|
Japanese Yen
|
JPY 662,000
|
|
Korean Won
|
KRW 2,768,000
|
|
|
|
|
Singapore Dollar
|
SGD 14,400
|
|
Swedish Krona
|
SEK 5,900
|
|
Swiss Franc
|
CHF 162,972
|
13. COMPREHENSIVE INCOME
The changes in Accumulated other comprehensive loss by component, net of tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
Unrealized loss on available-for-sale securities
|
|
Unrealized gain (loss) on derivative instruments
|
|
Other comprehensive loss on pension liability
|
|
Total
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
(2,946)
|
|
|
$
|
(139)
|
|
|
$
|
868
|
|
|
$
|
(2,910)
|
|
|
$
|
(5,127)
|
|
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
131
|
|
|
(2,127)
|
|
|
8
|
|
|
(1,988)
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
(21)
|
|
|
671
|
|
|
—
|
|
|
650
|
|
|
Net current period other comprehensive income (loss)
|
—
|
|
|
110
|
|
|
(1,456)
|
|
|
8
|
|
|
(1,338)
|
|
|
Balance at June 30, 2020
|
$
|
(2,946)
|
|
|
$
|
(29)
|
|
|
$
|
(588)
|
|
|
$
|
(2,902)
|
|
|
$
|
(6,465)
|
|
Income tax expense or benefit allocated to each component of other comprehensive loss is not material.
Reclassifications out of Accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2020
|
|
|
|
|
|
(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 gains on available-for-sale securities
|
|
$
|
(8)
|
|
|
Other income (expense), net
|
|
Unrealized net losses on cash flow hedges
|
|
919
|
|
|
Operating expenses *
|
|
|
|
$
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2020
|
|
|
|
|
|
(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 gains on available-for-sale securities
|
|
$
|
(21)
|
|
|
Other income (expense), net
|
|
Unrealized net losses on cash flow hedges
|
|
671
|
|
|
Operating expenses *
|
|
|
|
$
|
650
|
|
|
|
* Operating expenses amounts allocated to Research and development, Sales, marketing and services, and General and administrative are not individually significant.
14. INCOME TAXES
The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of the process of preparing its condensed consolidated financial statements. The Company maintains certain strategic management and operational activities in overseas subsidiaries and its foreign earnings are taxed at rates that are generally lower than in the United States.
The Company’s effective tax rate generally differs from the U.S. federal statutory rate primarily due to tax credits and lower tax rates on earnings generated by the Company’s foreign operations that are taxed primarily in Switzerland.
The Company’s effective tax rate was 12.5% and 12.8% for the three months ended June 30, 2020 and 2019, respectively. When comparing the three months ended June 30, 2020 to the three months ended June 30, 2019, the effective tax rate did not materially change.
The Company’s effective tax rate was 8.0% and 9.6% for the six months ended June 30, 2020 and 2019, respectively. The decrease in the effective tax rate when comparing the six months ended June 30, 2020 to the six months ended June 30, 2019 was primarily due to an increase in the discrete tax benefits for share-based payments and a tax benefit for the impact of the closure of a California audit during the six month period ended June 30, 2020.
On May 19, 2019, Swiss voters approved the Federal Act on Tax Reform and AHV Financing (“TRAF”), which provides for broad changes to federal and cantonal taxation in Switzerland effective January 1, 2020. The TRAF requires the abolishment of certain favorable tax regimes, provides for certain transitional relief, and directs the cantons to implement certain mandatory measures while other provisions are at the discretion of the canton. During the period ended December 31, 2019, the Company recorded a deferred tax asset and a partial valuation allowance for the cantonal and federal impact of the TRAF. The income tax impact of the TRAF may be subject to change due to the issuance of further legislative guidance from the Swiss taxing authorities.
The Company’s net unrecognized tax benefits totaled $72.7 million and $84.5 million as of June 30, 2020 and December 31, 2019, respectively. At June 30, 2020, $60.9 million included in the balance for tax positions would affect the annual effective tax rate if recognized. The Company recognizes interest accrued related to uncertain tax positions and penalties in income tax expense. As of June 30, 2020, the Company has accrued $3.6 million for the payment of interest.
The Company and one or more of its subsidiaries are subject to U.S. federal income taxes in the United States, as well as income taxes of multiple state and foreign jurisdictions. The Company is not currently under examination by the United States Internal Revenue Service. With few exceptions, the Company is generally not subject to examination for state and local income tax, or in non-U.S. jurisdictions, by tax authorities for years prior to 2016.
The Company's U.S. liquidity needs are currently satisfied using cash flows generated from its U.S. operations, borrowings, or both. The Company also utilizes a variety of tax planning strategies in an effort to ensure that its worldwide cash is available in locations in which it is needed. The Company expects to repatriate a substantial portion of its foreign earnings over time, to the extent that the foreign earnings are not restricted by local laws or result in significant incremental costs associated with repatriating the foreign earnings.
At June 30, 2020, the Company had $380.2 million in net deferred tax assets. The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company reviews deferred tax assets periodically for recoverability and makes estimates and judgments regarding the expected geographic sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance. If the estimates and assumptions used in the Company's determination change in the future, the Company could be required to revise its estimates of the valuation allowances against its deferred tax assets and adjust its provisions for additional income taxes.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief & Economic Security (“CARES”) Act. The CARES Act includes a wide variety of tax and non-tax provisions aimed to provide relief to individuals and businesses adversely affected by the COVID-19 pandemic. This legislation includes an array of tax benefits and incentives for businesses, including in part, the deferral of payment of certain employer payroll taxes. Similarly, the Swiss government enacted a number of measures to help mitigate the negative effects of COVID-19 on the Swiss economy. The Company is evaluating the impact of global COVID-19-related laws and proposed laws, however, no material impact to the Company's financial results is expected as a result of legislation enacted to date. The Company will review any guidance issued in the future by applicable tax authorities and continue to evaluate the impact of any new developments or legislation.
On June 22, 2020, the US Supreme Court denied Altera Corp.’s petition for writ of certiorari and as a result the Supreme Court will not review the decision of the U.S. Court of Appeals for the Ninth Circuit that upheld the validity of the U.S. Treasury Department’s regulations requiring participants in a cost-sharing arrangement to share stock-based compensation costs. Because the Company has already accrued amounts for this uncertain tax position, there are no changes to the Company's position or treatment of its cost-sharing arrangements in the current period.
15. TREASURY STOCK
Stock Repurchase Program
The Company’s Board of Directors has authorized an ongoing stock repurchase program, of which $1.00 billion was approved in January 2020. The Company may use the approved dollar authority to repurchase stock at any time until the approved amount is exhausted. The objective of the Company’s stock repurchase program is to improve stockholders’ returns. At June 30, 2020, $914.1 million ($714.1 million after taking into consideration the contracted but undelivered shares under the ASR of $200.0 million) was available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased are recorded as treasury stock. A portion of the funds used to repurchase stock over the course of the program was provided by net proceeds from the Convertible Notes, the 2027 Notes and the Term Loan Credit Agreement, as well as proceeds from employee stock awards and the related tax benefit. The Company is authorized to make purchases of its common stock using general corporate funds through open market purchases, pursuant to a Rule 10b5-1 plan or in privately negotiated transactions.
On January 30, 2020, the Company used the proceeds from its Term Loan Credit Agreement and entered into ASR transactions with a group of Dealers for an aggregate of $1.00 billion. Under the ASR transactions, the Company received an initial share delivery of 6.5 million shares of its common stock, with the remainder, if any, delivered upon completion of the ASR transactions. The total number of shares of common stock that the Company will repurchase under each ASR agreement will be based on the average of the daily volume-weighted average prices of its common stock during the term of the applicable ASR agreement, less a discount. At settlement, each Dealer may be required to deliver additional shares of common stock to the Company or, under certain circumstances, the Company may be required to deliver shares of common stock, at its election, or make a cash payment to the applicable Dealer. Final settlement of the ASR agreement is expected to be completed by the end of the third quarter of 2020. See Note 11 for detailed information on the Term Loan Credit Agreement.
During the three months ended June 30, 2020, the Company made no open market purchases under the stock repurchase program. During the six months ended June 30, 2020, the Company expended $199.9 million on open market purchases under the stock repurchase program, repurchasing 1,731,500 shares of common stock at an average price of $115.45.
During the three months ended June 30, 2019, the Company expended $156.2 million on open market purchases under the stock repurchase program, repurchasing 1,599,822 shares of common stock at an average price of $97.63. During the six months ended June 30, 2019, the Company expended $250.0 million on open market purchases under the stock repurchase program, repurchasing 2,510,882 shares of common stock at an average price of $99.57.
Shares for Tax Withholding
During the three and six months ended June 30, 2020, the Company withheld 256,376 and 739,600 shares, respectively, from equity awards that vested, totaling $35.8 million and $101.2 million, respectively, to satisfy minimum tax withholding obligations that arose on the vesting of such equity awards. During the three and six months ended June 30, 2019, the Company withheld 104,129 and 698,117 shares, respectively, from equity awards that vested, totaling $10.4 million and $70.6 million respectively, to satisfy minimum tax withholding obligations that arose on the vesting of such equity awards. These shares are reflected as treasury stock in the Company’s condensed consolidated balance sheets and the related cash outlays do not reduce the Company’s total stock repurchase authority.
16. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company accrues a liability for legal contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and the Company's views on the probable outcomes of any pending claims, suits, assessments, regulatory investigations, or other legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such determination is made. In addition, in accordance with the relevant authoritative guidance, for matters in which the likelihood of material loss is at least reasonably possible, the Company provides disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, the Company will provide disclosure to that effect.
Due to the nature of the Company's business, the Company is subject to patent infringement claims, including current litigation alleging infringement by various Company solutions and services. The Company believes that it has meritorious defenses to the allegations made in its pending litigation and intends to vigorously defend itself; however, it is unable currently to determine the ultimate outcome of these or similar matters or the potential exposure to loss, if any. In addition, the Company is subject to various other legal proceedings, including suits, assessments, regulatory actions and investigations generally arising out of the normal course of business. Although it is difficult to predict the ultimate outcomes of these matters, the Company believes that outcomes that will materially and adversely affect its results of operations or cash flows are reasonably possible but not estimable at this time.
On July 25, 2019, a class action lawsuit was filed against Citrix, LogMeIn, Inc. (“LogMeIn”) and certain of their directors and officers in the Circuit Court of the 15th Judicial Circuit, Palm Beach County, Florida. The complaint alleges that the defendants violated federal securities laws by making alleged misstatements and omissions in LogMeIn’s Registration Statement and Prospectus filed in connection with the 2017 spin-off of Citrix’s GoTo family of service offerings and subsequent merger of that business with LogMeIn. The complaint seeks among other things the recovery of monetary damages. On April 28, 2020, the defendants filed motions to dismiss the complaint, which remain pending. The Company believes that Citrix and its directors have meritorious defenses to these allegations; however, the Company is unable to currently determine the ultimate outcome of this matter or the potential exposure or loss, if any.
Guarantees
The authoritative guidance requires certain guarantees to be recorded at fair value and requires a guarantor to make disclosures, even when the likelihood of making any payments under the guarantee is remote. For those guarantees and indemnifications that do not fall within the initial recognition and measurement requirements of the authoritative guidance, the Company must continue to monitor the conditions that are subject to the guarantees and indemnifications, as required under existing generally accepted accounting principles, to identify if a loss has been incurred. If the Company determines that it is probable that a loss has been incurred, any such estimable loss would be recognized. The initial recognition and measurement requirements do not apply to the provisions contained in the majority of the Company’s software license agreements that indemnify licensees of the Company’s software from damages and costs resulting from claims alleging that the Company’s software infringes the intellectual property rights of a third party. The Company has not made material payments pursuant to these provisions. The Company has not identified any losses that are probable under these provisions and, accordingly, the Company has not recorded a liability related to these indemnification provisions.
Other Purchase Commitments
In May 2020, the Company entered into an amended agreement with a third-party provider, in the ordinary course of business, for the use of certain cloud services through June 2029. Under the amended agreement, the Company is committed to a purchase of $1.00 billion throughout the term of the agreement. As of June 30, 2020, the Company had $987.9 million of remaining obligations under the purchase agreement.
17. RESTRUCTURING
The Company has implemented multiple restructuring plans to reduce its cost structure, align resources with its product strategy and improve efficiency, which has resulted in workforce reductions and the consolidation of certain leased facilities.
For the three and six months ended June 30, 2020 and 2019, restructuring charges were comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Employee severance and related costs
|
$
|
647
|
|
|
$
|
4,311
|
|
|
$
|
3,100
|
|
|
$
|
7,143
|
|
|
Right-of-use asset impairment
|
8,881
|
|
|
—
|
|
|
8,881
|
|
|
—
|
|
|
Total Restructuring charges
|
$
|
9,528
|
|
|
$
|
4,311
|
|
|
$
|
11,981
|
|
|
$
|
7,143
|
|
The Company reviews for impairment of long-lived assets, including right-of-use (“ROU”) assets, whenever events or changes in circumstances indicate that the carrying amount of such assets may be impaired. Measurement of an impairment loss is based on the fair value of the asset compared to its carrying value. The fair value of the ROU assets is determined by utilizing the present value of the estimated future cash flows attributable to the assets. During the three and six months ended June 30, 2020, in connection with the COVID-19 pandemic, the Company determined that a vacant facility partially impaired under a previous restructuring plan became fully impaired due to a reassessment of the timing and fees of the assumed sublease rentals and recorded impairment charges of $8.9 million. This non-recurring fair value measurement was categorized as Level 3, as significant unobservable inputs were utilized.
Restructuring accruals
The activity in the Company’s restructuring accruals for the six months ended June 30, 2020 is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
Total
|
|
Balance at January 1, 2020
|
$
|
6,957
|
|
|
|
|
|
Employee severance and related costs
|
3,100
|
|
|
Payments
|
(8,113)
|
|
|
Balance at June 30, 2020
|
$
|
1,944
|
|
18. STATEMENT OF CHANGES IN EQUITY
The following tables presents the changes in total stockholders' (deficit) equity during the three and six months ended June 30, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Additional Paid In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Common Stock in Treasury
|
|
|
|
Total (Deficit) Equity
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance at March 31, 2020
|
320,437
|
|
|
$
|
320
|
|
|
$
|
6,125,589
|
|
|
$
|
4,794,964
|
|
|
$
|
(7,810)
|
|
|
(197,436)
|
|
|
$
|
(11,131,992)
|
|
|
$
|
(218,929)
|
|
|
Shares issued under stock-based compensation plans
|
773
|
|
|
1
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
90,117
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares turned in for tax withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(257)
|
|
|
(35,813)
|
|
|
(35,813)
|
|
|
Cash dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(43,222)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43,222)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
—
|
|
|
1,133
|
|
|
(1,133)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,345
|
|
|
—
|
|
|
—
|
|
|
1,345
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
112,906
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
112,906
|
|
|
Balance at June 30, 2020
|
321,210
|
|
|
$
|
321
|
|
|
$
|
6,216,838
|
|
|
$
|
4,863,515
|
|
|
$
|
(6,465)
|
|
|
(197,693)
|
|
|
$
|
(11,167,805)
|
|
|
$
|
(93,596)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Additional
Paid In Capital
|
|
Retained
Earnings
|
|
Accumulated Other
Comprehensive
Loss
|
|
Common Stock
in Treasury
|
|
|
|
Total Equity (Deficit)
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance at December 31, 2019
|
318,760
|
|
|
$
|
319
|
|
|
$
|
6,249,065
|
|
|
$
|
4,660,145
|
|
|
$
|
(5,127)
|
|
|
(188,693)
|
|
|
$
|
(10,066,746)
|
|
|
$
|
837,656
|
|
|
Shares issued under stock-based compensation plans
|
2,205
|
|
|
2
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
143,685
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
143,685
|
|
|
Common stock issued under employee stock purchase plan
|
245
|
|
|
—
|
|
|
21,035
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,035
|
|
|
Stock repurchases, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,732)
|
|
|
(199,903)
|
|
|
(199,903)
|
|
|
Restricted shares turned in for tax withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(740)
|
|
|
(101,156)
|
|
|
(101,156)
|
|
|
Cash dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(86,062)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(86,062)
|
|
|
Accelerated stock repurchase program
|
—
|
|
|
—
|
|
|
(200,000)
|
|
|
—
|
|
|
—
|
|
|
(6,528)
|
|
|
(800,000)
|
|
|
(1,000,000)
|
|
|
Cumulative-effect adjustment from adoption of accounting standard
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,641)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,641)
|
|
|
Other
|
—
|
|
|
—
|
|
|
3,055
|
|
|
(3,055)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,338)
|
|
|
—
|
|
|
—
|
|
|
(1,338)
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
294,128
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
294,128
|
|
|
Balance at June 30, 2020
|
321,210
|
|
|
$
|
321
|
|
|
$
|
6,216,838
|
|
|
$
|
4,863,515
|
|
|
$
|
(6,465)
|
|
|
(197,693)
|
|
|
$
|
(11,167,805)
|
|
|
$
|
(93,596)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables presents the changes in total stockholders' equity during the three and six months ended June 30, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Additional Paid In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Common Stock in Treasury
|
|
|
|
Total Equity
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance at March 31, 2019
|
311,732
|
|
|
$
|
312
|
|
|
$
|
5,495,935
|
|
|
$
|
4,232,181
|
|
|
$
|
(5,483)
|
|
|
(179,832)
|
|
|
$
|
(9,168,067)
|
|
|
$
|
554,878
|
|
|
Shares issued under stock-based compensation plans
|
287
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
70,080
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70,080
|
|
|
Temporary equity reclassification
|
—
|
|
|
—
|
|
|
1,163
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock repurchases, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,600)
|
|
|
(156,195)
|
|
|
(156,195)
|
|
|
Restricted shares turned in for tax withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(104)
|
|
|
(10,445)
|
|
|
(10,445)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,827)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,827)
|
|
|
Settlement of convertible notes and hedges
|
4,950
|
|
|
5
|
|
|
509,519
|
|
|
—
|
|
|
—
|
|
|
(4,950)
|
|
|
(509,524)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
—
|
|
|
2,263
|
|
|
(2,263)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
873
|
|
|
—
|
|
|
—
|
|
|
873
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
93,495
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
93,495
|
|
|
Balance at June 30, 2019
|
316,969
|
|
|
$
|
317
|
|
|
$
|
6,078,960
|
|
|
$
|
4,277,586
|
|
|
$
|
(4,610)
|
|
|
(186,486)
|
|
|
$
|
(9,844,231)
|
|
|
$
|
508,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Additional
Paid In Capital
|
|
Retained
Earnings
|
|
Accumulated Other
Comprehensive
Loss
|
|
Common Stock
in Treasury
|
|
|
|
Total
Equity
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance at December 31, 2018
|
309,761
|
|
|
$
|
310
|
|
|
$
|
5,404,500
|
|
|
$
|
4,169,019
|
|
|
$
|
(8,154)
|
|
|
(178,327)
|
|
|
$
|
(9,014,156)
|
|
|
$
|
551,519
|
|
|
Shares issued under stock-based compensation plans
|
2,042
|
|
|
2
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
133,554
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
133,554
|
|
|
Temporary equity reclassification
|
—
|
|
|
—
|
|
|
8,110
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,110
|
|
|
Common stock issued under employee stock purchase plan
|
216
|
|
|
—
|
|
|
19,016
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,016
|
|
|
Stock repurchases, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,511)
|
|
|
(250,000)
|
|
|
(250,000)
|
|
|
Restricted shares turned in for tax withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(698)
|
|
|
(70,551)
|
|
|
(70,551)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(91,851)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(91,851)
|
|
|
Settlement of convertible notes and hedges
|
4,950
|
|
|
5
|
|
|
509,519
|
|
|
—
|
|
|
—
|
|
|
(4,950)
|
|
|
(509,524)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative-effect adjustment from adoption of accounting standard
|
—
|
|
|
—
|
|
|
—
|
|
|
838
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
838
|
|
|
Other
|
—
|
|
|
—
|
|
|
4,263
|
|
|
(4,263)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,544
|
|
|
—
|
|
|
—
|
|
|
3,544
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
203,843
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
203,843
|
|
|
Balance at June 30, 2019
|
316,969
|
|
|
$
|
317
|
|
|
$
|
6,078,960
|
|
|
$
|
4,277,586
|
|
|
$
|
(4,610)
|
|
|
(186,486)
|
|
|
$
|
(9,844,231)
|
|
|
$
|
508,022
|
|
Cash Dividend
The following table provides information with respect to quarterly dividends on common stock during the six months ended June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
Dividends per Share
|
|
Record Date
|
|
Payable Date
|
|
January 22, 2020
|
$
|
0.35
|
|
|
March 6, 2020
|
|
March 20, 2020
|
|
April 23, 2020
|
$
|
0.35
|
|
|
June 5, 2020
|
|
June 19, 2020
|
Subsequent Event
On July 23, 2020, the Company announced that its Board of Directors approved a quarterly cash dividend of $0.35 per share which will be paid on September 25, 2020 to all shareholders of record as of the close of business on September 11, 2020.