POLYCOM INC, 10-K filed on 2/20/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2014
Feb. 13, 2015
Jun. 30, 2014
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
PLCM 
 
 
Entity Registrant Name
POLYCOM INC 
 
 
Entity Central Index Key
0001010552 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
134,181,190 
 
Entity Public Float
 
 
$ 1,707,320,546 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets
 
 
Cash and cash equivalents
$ 443,132 
$ 392,629 
Short-term investments
185,783 
134,684 
Trade receivables, net of allowance for doubtful accounts of $3,040 and $2,827 at December 31, 2014 and 2013, respectively
169,400 
183,369 
Inventories
100,328 
103,309 
Deferred taxes
38,805 
37,085 
Prepaid expenses and other current assets
61,072 
50,352 
Total current assets
998,520 
901,428 
Property and equipment, net
109,195 
115,157 
Long-term investments
59,197 
56,372 
Goodwill
559,231 
559,460 
Purchased intangibles, net
24,567 
37,458 
Deferred taxes
54,019 
51,398 
Other assets
26,493 
27,757 
Total assets
1,831,222 
1,749,030 
Current liabilities
 
 
Accounts payable
108,172 
84,640 
Accrued payroll and related liabilities
42,901 
40,162 
Taxes payable
4,056 
5,389 
Deferred revenue
173,532 
172,408 
Current portion of long-term debt
6,250 
6,250 
Other accrued liabilities
86,193 
77,744 
Total current liabilities
421,104 
386,593 
Non-current liabilities
 
 
Long-term deferred revenue
89,366 
87,467 
Taxes payable
11,719 
12,419 
Deferred taxes
173 
149 
Long-term debt
235,938 
242,188 
Other non-current liabilities
49,189 
43,849 
Total non-current liabilities
386,385 
386,072 
Total liabilities
807,489 
772,665 
Commitments and contingencies (Note 13)
   
   
Stockholders' equity
 
 
Common stock, $0.0005 par value; Authorized: 350,000,000 shares; Issued and outstanding: 135,204,948 shares at December 31, 2014 and 135,159,966 shares at December 31, 2013
68 
68 
Additional paid-in capital
1,155,829 
1,104,273 
Accumulated deficit
(136,275)
(132,348)
Accumulated other comprehensive income
4,111 
4,372 
Total stockholders' equity
1,023,733 
976,365 
Total liabilities and stockholders' equity
$ 1,831,222 
$ 1,749,030 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Statement Of Financial Position [Abstract]
 
 
Trade receivables, allowance for doubtful accounts
$ 3,040 
$ 2,827 
Common stock, par value
$ 0.0005 
$ 0.0005 
Common stock, shares authorized
350,000,000 
350,000,000 
Common stock, shares issued
135,204,948 
135,159,966 
Common stock, shares outstanding
135,204,948 
135,159,966 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenues:
 
 
 
Product revenues
$ 960,726 
$ 991,110 
$ 1,042,484 
Service revenues
384,428 
377,279 
350,144 
Total revenues
1,345,154 
1,368,389 
1,392,628 
Cost of revenues:
 
 
 
Cost of product revenues
406,625 
422,429 
426,369 
Cost of service revenues
153,520 
153,189 
142,827 
Total cost of revenues
560,145 
575,618 
569,196 
Gross profit
785,009 
792,771 
823,432 
Operating expenses:
 
 
 
Sales and marketing
388,761 
435,047 
464,353 
Research and development
196,495 
216,032 
208,510 
General and administrative
99,886 
96,602 
98,285 
Amortization of purchased intangibles
9,781 
10,389 
9,830 
Restructuring costs
40,347 
48,470 
22,024 
Litigation reserves and payments
3,130 
 
 
Transaction-related costs
156 
3,424 
14,064 
Total operating expenses
738,556 
809,964 
817,066 
Operating income (loss)
46,453 
(17,193)
6,366 
Interest and other income (expense), net
 
 
 
Interest expense
(5,893)
(3,217)
(751)
Other income (expense)
2,455 
(1,794)
(3,117)
Interest and other income (expense), net
(3,438)
(5,011)
(3,868)
Income (loss) from continuing operations before provision for (benefit from) income taxes
43,015 
(22,204)
2,498 
Provision for (benefit from) income taxes
956 
(3,669)
39,467 
Net income (loss) from continuing operations
42,059 
(18,535)
(36,969)
Income from discontinued operations, net of taxes
 
 
9,888 
Gain from sale of discontinued operations, net of taxes
 
459 
35,425 
Net income (loss)
$ 42,059 
$ (18,076)
$ 8,344 
Basic net income (loss) per share:
 
 
 
Net income (loss) per share from continuing operations
$ 0.31 
$ (0.11)
$ (0.21)
Income per share from discontinued operations, net of taxes
 
 
$ 0.06 
Gain per share from sale of discontinued operations, net of taxes
 
 
$ 0.20 
Basic net income (loss) per share
$ 0.31 
$ (0.11)
$ 0.05 
Diluted net income (loss) per share:
 
 
 
Net income (loss) per share from continuing operations
$ 0.30 
$ (0.11)
$ (0.21)
Income per share from discontinued operations, net of taxes
 
 
$ 0.06 
Gain per share from sale of discontinued operations, net of taxes
 
 
$ 0.20 
Diluted net income (loss) per share
$ 0.30 
$ (0.11)
$ 0.05 
Number of shares used in computation of net income (loss) per share:
 
 
 
Basic
136,801 
167,272 
176,878 
Diluted
142,005 
167,272 
176,878 
Consolidated Statements Of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Net income (loss)
$ 42,059 
$ (18,076)
$ 8,344 
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments
(1,422)
1,039 
1,339 
Unrealized gains/losses on investments:
 
 
 
Unrealized holding gains (losses) arising during the period
(115)
18 
(30)
Net gains/losses reclassified into earnings
(10)
53 
(7)
Net unrealized gains (losses) on investments
(125)
71 
(37)
Unrealized gains/losses on hedging securities:
 
 
 
Unrealized hedge gains arising during the period
3,627 
1,374 
1,018 
Net unrealized gains (losses) on hedging securities
1,286 
(934)
(2,716)
Other comprehensive income (loss)
(261)
176 
(1,414)
Comprehensive income (loss)
41,798 
(17,900)
6,930 
Product revenues
 
 
 
Unrealized gains/losses on hedging securities:
 
 
 
Net gains/losses reclassified into earnings for hedges
(1,170)
(207)
(7,133)
Expense
 
 
 
Unrealized gains/losses on hedging securities:
 
 
 
Net gains/losses reclassified into earnings for hedges
$ (1,171)
$ (2,101)
$ 3,399 
Consolidated Statements Of Stockholders' Equity (USD $)
In Thousands, except Share data
Total
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income
Retained Earnings (Accumulated Deficit)
Beginning balances at Dec. 31, 2011
$ 1,368,612 
$ 40 
$ 1,246,201 
$ 5,610 
$ 116,761 
Beginning balances, shares at Dec. 31, 2011
 
176,316,968 
 
 
 
Net income (loss)
8,344 
 
 
 
8,344 
Other comprehensive income (loss)
(1,414)
 
 
(1,414)
 
Issuance of vested performance shares and restricted stock units (in shares)
 
2,463,130 
 
 
 
Exercise of stock options under stock option plan
4,856 
 
4,856 
 
 
Exercise of stock options under stock option plan, shares
 
579,712 
 
 
 
Shares purchased under employee stock purchase plan
20,976 
20,975 
 
 
Shares purchased under employee stock purchase plan, shares
 
1,867,683 
 
 
 
Purchase and retirement of common stock at cost, including fees and expenses
(67,901)
(3)
(39,897)
 
(28,001)
Purchase and retirement of common stock at cost, including fees and expenses, shares
 
(5,903,608)
 
 
 
Stock-based compensation
89,245 
 
89,245 
 
 
Tax benefit from stock option activity
5,056 
 
5,056 
 
 
Ending balances at Dec. 31, 2012
1,427,774 
38 
1,326,436 
4,196 
97,104 
Ending balances, shares at Dec. 31, 2012
 
175,323,885 
 
 
 
Net income (loss)
(18,076)
 
 
 
(18,076)
Other comprehensive income (loss)
176 
 
 
176 
 
Issuance of vested performance shares and restricted stock units (in shares)
 
2,828,464 
 
 
 
Exercise of stock options under stock option plan
1,786 
 
1,786 
 
 
Exercise of stock options under stock option plan, shares
 
187,682 
 
 
 
Shares purchased under employee stock purchase plan
21,540 
21,539 
 
 
Shares purchased under employee stock purchase plan, shares
 
2,904,287 
 
 
 
Purchase and retirement of common stock at cost, including fees and expenses
(487,180)
(22)
(275,782)
 
(211,376)
Purchase and retirement of common stock at cost, including fees and expenses, shares
 
(46,084,352)
 
 
 
Common stock repurchase holdback
(27,922)
 
(27,922)
 
 
Stock-based compensation
64,665 
 
64,665 
 
 
Tax expense for stock-based award activity
(6,398)
 
(6,398)
 
 
Correction of an error in par value
 
51 
(51)
 
 
Ending balances at Dec. 31, 2013
976,365 
68 
1,104,273 
4,372 
(132,348)
Ending balances, shares at Dec. 31, 2013
135,159,966 
135,159,966 
 
 
 
Net income (loss)
42,059 
 
 
 
42,059 
Other comprehensive income (loss)
(261)
 
 
(261)
 
Issuance of vested performance shares and restricted stock units
 
(2)
 
 
Issuance of vested performance shares and restricted stock units (in shares)
 
3,467,414 
 
 
 
Exercise of stock options under stock option plan
1,513 
 
1,513 
 
 
Exercise of stock options under stock option plan, shares
133,037 
133,037 
 
 
 
Shares purchased under employee stock purchase plan
22,217 
22,216 
 
 
Shares purchased under employee stock purchase plan, shares
 
2,944,069 
 
 
 
Purchase and retirement of common stock at cost, including fees and expenses
(64,762)
(3)
(18,773)
 
(45,986)
Purchase and retirement of common stock at cost, including fees and expenses, shares
 
(6,499,538)
 
 
 
Stock-based compensation
48,204 
 
48,204 
 
 
Tax expense for stock-based award activity
(1,602)
 
(1,602)
 
 
Ending balances at Dec. 31, 2014
$ 1,023,733 
$ 68 
$ 1,155,829 
$ 4,111 
$ (136,275)
Ending balances, shares at Dec. 31, 2014
135,204,948 
135,204,948 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cash flows from operating activities:
 
 
 
Net income (loss)
$ 42,059 
$ (18,076)
$ 8,344 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
57,412 
64,779 
61,586 
Amortization of purchased intangibles
12,891 
19,825 
20,318 
Amortization of capitalized software development costs for products to be sold
1,704 
196 
 
Amortization of debt issuance costs
533 
178 
   
Amortization of discounts and premiums on investments, net
1,964 
1,816 
2,381 
Provision for doubtful accounts
600 
 
1,100 
Write-down of excess and obsolete inventories
6,532 
7,390 
6,420 
Stock-based compensation expense
47,960 
64,465 
89,245 
Excess tax benefits from stock-based compensation expense
(3,371)
(920)
(9,297)
Loss on disposal of property and equipment
5,007 
5,859 
4,080 
Net gain on sale of discontinued operations
 
(459)
(35,425)
Tax expense on company reorganization
 
 
38,836 
Changes in assets and liabilities, net of effects of acquisitions:
 
 
 
Trade receivables
13,479 
13,809 
16,582 
Inventories
(3,551)
(10,739)
(11,428)
Deferred taxes
(17,792)
(14,332)
(15,933)
Prepaid expenses and other assets
(8,456)
(637)
(7,424)
Accounts payable
19,006 
(5,184)
(22,901)
Taxes payable
9,825 
(5,848)
5,123 
Other accrued liabilities and deferred revenue
19,624 
46,320 
37,754 
Net cash provided by operating activities
205,426 
168,442 
189,361 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(50,133)
(53,042)
(67,270)
Capitalized software development costs for products to be sold
(4,807)
(2,165)
 
Purchases of investments
(269,842)
(228,238)
(315,012)
Proceeds from sales of investments
45,492 
45,467 
52,286 
Proceeds from maturities of investments
168,328 
237,499 
229,211 
Net cash received from sale of discontinued operations
 
556 
50,411 
Net cash paid in purchase acquisitions
 
(7,974)
(4,583)
Net cash used in investing activities
(110,962)
(7,897)
(54,957)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock under employee option and stock purchase plans
23,729 
23,326 
25,832 
Proceeds from debt, net of debt issuance costs
 
247,349 
 
Payments on debt
(6,250)
(1,562)
 
Purchase and retirement of common stock
(64,811)
(515,022)
(67,901)
Excess tax benefits from stock-based compensation expense
3,371 
920 
9,297 
Net cash used in financing activities
(43,961)
(244,989)
(32,772)
Net increase (decrease) in cash and cash equivalents
50,503 
(84,444)
101,632 
Cash and cash equivalents, beginning of period
392,629 
477,073 
375,441 
Cash and cash equivalents, end of period
443,132 
392,629 
477,073 
Supplemental Disclosures of Cash flow information:
 
 
 
Cash paid for interest
5,028 
2,847 
751 
Cash paid for income taxes
$ 15,273 
$ 9,505 
$ 24,570 
Description of Business and Basis of Presentation
Description of Business and Basis of Presentation

1. Description of Business and Basis of Presentation:

Description of Business:

Polycom, Inc. (“Polycom” or “the Company”) is a leading global provider of high-quality, easy-to-use communication solutions that enable enterprise, government, education and healthcare customers to more effectively collaborate over distance, time zones and organizational boundaries. The Company’s solutions are built on architectures that enable unified video, voice and content communications.

Polycom was incorporated in the state of Delaware in December 1990 and trades on the NASDAQ Global Select Market under the ticker symbol “PLCM”.

Principles of Accounting and Consolidation:

These Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

 

Use of Estimates:

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements. Actual results could differ from those estimates.

Summary of Significant Accounting Policies:
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies:

Cash and Cash Equivalents:

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Investments:

Investments are classified as short-term or long-term based on their remaining maturities. The Company’s short-term and long-term investments as of December 31, 2014 are comprised of U.S. and non-U.S. government securities, U.S. agency securities and corporate debt securities. All investments are held in the Company’s name at a limited number of major financial institutions. At December 31, 2014 and 2013, all of the Company’s investments were classified as available-for-sale and unrealized gains and losses on investments are recorded as a separate component of “Accumulated other comprehensive income” in the Consolidated Statements of Stockholders’ Equity. The Company reviews the individual securities in its portfolio to determine whether a decline in a security’s fair value below the amortized cost basis is other-than-temporary. If the decline in fair value is considered to be other-than-temporary, the cost basis of the individual security is written down to its fair value as a new cost basis. If the investments are sold at a loss or are considered to have other-than-temporarily declined in value, the amount of the loss or write-down is accounted for as a realized loss and included in earnings. The specific identification method is used to determine the cost of securities disposed of, with realized gains and losses reflected in “Interest and other income (expense), net” in the Consolidated Statements of Operations.

Allowance for Doubtful Accounts:

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company regularly performs credit evaluations of its customers' financial condition and considers factors such as historical experience, credit quality, age of the accounts receivable balances, and geographic or country-specific risks and economic conditions that may affect a customer's ability to pay. The allowance for doubtful accounts is reviewed quarterly and adjusted if necessary based on the Company's assessment of its customers' abilities to pay. If the financial conditions of the Company’s customers were to deteriorate, adversely affecting their abilities to make payments, additional allowances would be required.

Inventories:

Inventories are valued at the lower of cost or market with cost computed on a first-in, first-out (FIFO) basis. Consideration is given to obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value. The Company records write-downs for excess and obsolete inventory equal to the difference between the carrying value of inventory and the estimated future selling price based upon assumptions about future product life-cycles, product demand and market conditions. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Property and Equipment:

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally from one to seven years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the related assets, typically three to thirteen years. Disposals of capital equipment are recorded by removing the costs and accumulated depreciation from the accounts and gains or losses on disposals are included in “Interest and other income (expense), net” in the Consolidated Statements of Operations.

Goodwill:

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is regularly reviewed for potential impairment. The Company reviews goodwill for impairment annually during the fourth quarter of each calendar year, or whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. The Company performs an initial qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, after the initial qualitative assessment, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed; however, if the Company concludes otherwise, then the Company is required to perform a two-step impairment test to assess if a potential impairment has occurred and measure an impairment loss, if any. For further discussion of goodwill and its impairment review, see Note 6.

Long-Lived Assets:

Purchased intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from several months to six years. Purchased intangible assets determined to have indefinite useful lives are not amortized. Long-lived assets, including purchased intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset or group of assets and their eventual disposition. The Company periodically assesses the remaining useful lives of long-lived assets. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or estimated fair value less costs to sell.

Guarantees:

Warranty

The Company provides for the estimated costs of product warranties at the time revenue is recognized. The specific terms and conditions of those warranties vary depending upon the product sold. In the case of hardware products, warranties generally start from the delivery date and continue for one year. Software products generally carry a 90-day warranty from the date of purchase. The Company’s liability under warranties on software products is to provide a corrected copy of any portion of the software found not to be in substantial compliance with the agreed upon specifications. Factors that affect the Company’s warranty obligation include product failure rates, material usage and service delivery costs incurred in correcting product failures. The Company assesses the adequacy of the recorded warranty liabilities every quarter and makes adjustments to the liability if necessary.

Deferred Services Revenue

The Company offers maintenance contracts for sale on most of its products which allow for customers to receive service and support in addition to, or subsequent to, the expiration of the contractual product warranty. The Company also provides managed services to its customers under contractual arrangements. The Company recognizes the maintenance and managed services revenues from these contracts over the life of the service contract.

Officer and Director Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, the Company has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited; however, the Company has a director and officer insurance policy that mitigates the Company’s exposure and enables the Company to recover a portion of any future amounts paid. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification obligations is not material.

Other Indemnifications

As is customary in the Company’s industry, as provided for in local law in the U.S. and other jurisdictions, the Company’s standard contracts provide remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of its products. From time to time, the Company indemnifies customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of its products and services. In addition, from time to time the Company also provides protection to customers against claims related to undiscovered liabilities, additional product liabilities or environmental obligations.

Revenue Recognition:

The Company recognizes revenue when persuasive evidence of an arrangement exists, title and risk of loss have transferred, product payment is not contingent upon performance of installation or service obligations, the price is fixed or determinable, and collectability is reasonably assured. In instances where final acceptance of the product or service is specified by the customer, revenue is deferred until all acceptance criteria have been met. Additionally, the Company recognizes maintenance service revenues on its hardware and software products ratably over the service periods of one to five years, and other services upon the completion of installation or professional services provided.

Most of the Company’s products are integrated with software that is essential to the functionality of the equipment. Additionally, the Company provides unspecified software upgrades and enhancements related to most of these products through maintenance contracts.

A multiple-element arrangement includes the sale of one or more tangible product offerings with one or more associated services offerings, each of which are individually considered separate units of accounting. The Company allocates revenue to each element in a multiple-element arrangement based upon the relative selling price of each deliverable. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor specific objective evidence (“VSOE”) of selling price, if it exists, or third party evidence (“TPE”) of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses its best estimate of selling price (“ESP”) for that deliverable. Revenue allocated to each element is then recognized when the other revenue recognition criteria are met for each element.

VSOE is established based on the Company’s standard pricing and discounting practices for the specific product or service when sold separately. In determining VSOE, the Company requires that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range.

When VSOE cannot be established, the Company attempts to establish the selling price of each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately.

When the Company is unable to establish the selling price using VSOE or TPE, the Company uses ESP in its allocation of revenue for the arrangement. ESP represents the price at which the Company would transact a sale if the element were sold on a stand-alone basis. The Company determines ESP for a product by considering multiple factors including, but not limited to, geographies, market conditions, competitive landscape, and pricing practices. The determination of ESP is made based on review of historical sales price, taking into consideration the Company’s go-to-market strategy. Generally, the Company uses historical net selling prices to establish ESP. The Company regularly reviews its basis for establishing VSOE, TPE and ESP.

Sales Returns, Channel Partner Programs and Incentives

The Company’s contracts generally do not provide for a right of return on any of its products. However, a limited number of contracts contain stock rotation rights. The Company records an estimate of future returns based upon these contractual rights and its historical returns experience. The Company records estimated reductions to revenues for channel partner programs and incentive offerings including special pricing agreements, promotions and other volume-based incentives. The Company also accrues for co-op marketing funds as a marketing expense if the Company receives an identifiable benefit in exchange and can reasonably estimate the fair value of the identifiable benefit received; otherwise, it is recorded as a reduction to revenues.

Research and Development and Software Development Costs:

The Company expenses research and development costs as incurred.

Software development costs incurred prior to the establishment of technological feasibility are included in research and development costs as incurred. Eligible and material software development costs are capitalized upon the establishment of technological feasibility and before the general availability of such software products, including direct labor and related overhead costs, as well as stock-based compensation. The Company has defined technological feasibility as the establishment of a working model, which typically occurs when beta testing commences. The Company capitalized approximately $5.1 million and $2.4 million of development costs in 2014 and 2013, respectively, for software products to be marketed or sold to customers. There were no such costs capitalized in 2012 as the software development costs qualifying for capitalization were insignificant. The capitalized costs are included in “Other assets” in the Company’s Consolidated Balance Sheets and are being amortized on a product-by-product basis using the straight-line method over the estimated product life, generally three years, or on the ratio of current revenues to total projected product revenues, whichever is greater. Management believes that the capitalized software costs will be recoverable from future gross profits generated by these products.

Advertising:

The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2014, 2013, and 2012 was $13.6 million, $14.9 million, and $22.3 million, respectively.

Income Taxes:

The Company accounts for income taxes under the liability method, which recognizes deferred tax assets and liabilities based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized.

The Company recognizes and measures benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a quarterly basis. Evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in income tax expense in the period in which the change is made, which could have a material impact on the Company’s effective tax rate and operating results. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Foreign Currency Translation:

Assets and liabilities of non-U.S subsidiaries, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date and income and expense accounts are translated at average exchange rates in effect during the period. The resulting translation adjustments are directly recorded to a separate component of “Accumulated other comprehensive income” on the Consolidated Balance Sheets. Foreign exchange transaction gains and losses from the remeasurement of non-functional currency denominated assets and liabilities have not been significant to date and are included in the Company’s Consolidated Statements of Operations as part of “Interest and other income (expense), net”.

As a result of the sale of the Company’s former enterprise wireless voice solutions (the “EWS”) business in December 2012 (see Note 4), which included a wholly owned Danish subsidiary with a Danish Krone functional currency, the Company recognized the associated currency translation adjustment balance of $1.1 million which effectively reduced the gain from sale of the discontinued operations.

The following table sets forth the change of foreign currency translation adjustments during each reporting period and the balances as of December 31 (in thousands):

 

 

 

2014

 

 

2013

 

 

2012

 

Beginning balance

 

$

4,219

 

 

$

3,180

 

 

$

1,841

 

Foreign currency translation adjustments

 

 

(1,422

)

 

 

1,039

 

 

 

1,339

 

Ending balance

 

$

2,797

 

 

$

4,219

 

 

$

3,180

 

Derivative Instruments:

The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For a derivative instrument designated and qualifying as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a separate component of “Accumulated other comprehensive income” in the Consolidated Statements of Stockholders’ Equity and is subsequently reclassified into earnings when the hedged exposure affects earnings. The excluded and ineffective portions of the gain or loss are reported in earnings immediately. For derivative instruments that are not designated as cash flow hedges, changes in fair value are recognized in earnings in the period of change. The Company does not hold or issue derivative financial instruments for speculative trading purposes. The Company enters into derivatives only with counterparties that are among the largest U.S. banks, ranked by assets, in order to minimize its credit risk.

Net Income Per Share:

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the additional dilution from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options, unvested restricted stock units, and performance shares. Potentially dilutive shares are excluded from the computation of diluted net income per share when their effect is antidilutive.

Fair Value Measurements:

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices for similar assets in active markets, or identical or similar assets in inactive markets, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including its marketable securities and foreign currency contracts.

The Company’s cash equivalents and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using inputs such as quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices for identical assets in active markets include money market funds. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include U.S. Treasury securities and other government agencies, corporate bonds and commercial paper. Such instruments are generally classified within Level 2 of the fair value hierarchy. Level 2 instruments are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data.

The principal market where the Company executes its foreign currency contracts is the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants and the Company’s counterparties are large money center banks and regional banks. The Company’s foreign currency contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data sources such as spot rates, interest rate differentials rates and credit default rates, which do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

In addition, the Company has facilities-related liabilities related to restructuring which were calculated based on the discounted future lease payments less sublease assumptions. This non-recurring fair value measurement is classified as a Level 3 measurement under ASC 820. The key assumptions used in the valuation model include discount rates, cash flow projections and estimated sublease income. These assumptions involve significant judgment, and are based on management’s estimate of current and forecasted market conditions and are sensitive and susceptible to change. The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable, and other accrued liabilities approximate fair value due to their short-term maturities.

Stock-Based Compensation:

The Company’s stock-based compensation programs consist of grants of stock-based awards to employees and non-employee directors, including stock options, restricted stock units and performance shares, as well as purchase rights pursuant to the Company’s Employee Stock Purchase Plan (“ESPP”). Stock-based compensation expense based on the estimated fair value of these awards is charged to operations over the requisite service period, which is generally the vesting period, including the effect of forfeitures.

The fair value of stock option and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The fair value of restricted stock units is based on the market value of the Company’s common stock on the date of grant. The fair value of a performance share with a market condition is estimated on the date of award, using a Monte Carlo simulation model to estimate the total return ranking of the Company’s stock in relation to the target index of companies over each performance period. Stock-based compensation cost on performance shares with a market condition is not adjusted for subsequent changes regardless of the level of ultimate vesting.

Recent Pronouncements:

In January 2015, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update which simplifies income statement classification by removing the concept of extraordinary items from the US GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The new standard is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect any impact on the adoption of this standard on its Consolidated Financial Statements.

In August 2014, the FASB issued an accounting standard update related to the disclosures around going concern. The new standard provides guidance around management’s responsibility to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The new standard is effective for the annual periods and interim periods within those annual periods beginning after December 15, 2016. Early application is permitted. The Company does not expect any impact on the adoption of this standard on its Consolidated Financial Statements.

In May 2014, the FASB issued an accounting standard update which provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company has not yet selected a transition method nor has it determined the impact of adoption on its Consolidated Financial Statements.

In July 2013, the FASB issued an accounting standard update which clarifies that an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The guidance is effective prospectively for reporting periods beginning after December 15, 2013. The Company adopted the guidance in 2014, and such adoption did not have a material impact on its Consolidated Financial Statements.

 

Business Combinations
Business Combinations

3. Business Combinations:

On March 1, 2013 the Company completed its acquisition of certain assets of Sentri, Inc. (“Sentri”), a privately-held services company with expertise in Microsoft technologies, for approximately $8.0 million in cash, net of approximately $0.4 million cash released from an escrow account in the three months ended September 30, 2013, as a result of a net working capital adjustment. The total purchase price was allocated to the net tangible and intangible assets based upon their fair values at March 1, 2013 with the excess amount recorded as goodwill. The financial results of Sentri have been included in the Company’s Consolidated Financial Statements from the date of acquisition. Pro forma and actual results of operations of the acquisition were not material to the Company’s Consolidated Financial Statements.

Discontinued Operations
Discontinued Operations

4. Discontinued Operations:

On December 4, 2012, the Company completed the disposition of the net assets of its enterprise wireless voice solutions (“EWS”) business to Mobile Devices Holdings, LLC, a Delaware limited liability corporation. The Company received cash consideration of approximately $50.7 million, resulting in a gain on sale of the discontinued operations, net of taxes, of $35.4 million, as reflected in its Consolidated Financial Statements for the year ended December 31, 2012. In 2013, the Company recorded an additional gain on sale of discontinued operations, net of taxes, of approximately $0.5 million as a result of the final net working capital adjustment in accordance with the purchase agreement. See Note 18 for discussion of income tax benefit on gain from sale of discontinued operations. Additional cash consideration of up to $37.5 million is payable over the next three years subject to certain conditions, including meeting certain agreed-upon EBITDA-based milestones for fiscal 2014, 2015 and 2016. These conditions were not met for the fiscal year ended December 31, 2013. Such additional cash consideration will be accounted for as a gain on sale of discontinued operations, net of taxes, when it is realized or realizable. In accordance with accounting guidance, the Company has included the results of operations of EWS in discontinued operations within the Consolidated Statements of Operations for all periods presented.

Summarized results from discontinued operations were as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Revenues

 

$

 

 

$

 

 

$

71,133

 

Income from discontinued operations

 

 

 

 

 

 

 

 

15,973

 

Income tax provision

 

 

 

 

 

 

 

 

6,085

 

Net income from discontinued operations

 

$

 

 

$

 

 

$

9,888

 

 

The carrying amounts of the net assets sold at on December 4, 2012 were as follows (in thousands):

 

 

 

Amount

 

Assets:

 

 

 

 

Cash and cash equivalents

 

$

248

 

Trade receivables, net

 

 

7,221

 

Inventories

 

 

12,659

 

Deferred taxes

 

 

(306

)

Prepaid expense and other assets

 

 

295

 

Property and equipment, net

 

 

4,301

 

Goodwill

 

 

30,872

 

Purchased intangibles, net

 

 

5,724

 

Assets sold

 

$

61,014

 

 

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

 

$

2,318

 

Accrued payroll and related liabilities

 

 

1,877

 

Deferred revenue

 

 

5,044

 

Other accrued liabilities

 

 

1,605

 

Deferred taxes

 

 

1,610

 

Liabilities transferred

 

$

12,454

 

Net assets sold

 

$

48,560

 

 

The Company recorded a gain of $35.4 million in 2012 on the sale of discontinued operations (net of taxes) which was calculated as follows (in thousands):

 

 

 

Amount

 

Cash proceeds received

 

$

50,659

 

Less: costs incurred directly attributable to the transaction

 

 

929

 

Net proceeds from sale of discontinued operations

 

 

49,730

 

Less: book value of net assets sold

 

 

48,560

 

Less: realization of foreign currency translation adjustment upon

   sale of foreign EWS subsidiary

 

 

1,141

 

Gain from sale of discontinued operations

 

 

29

 

Income tax benefit

 

 

(35,396

)

Net gain from sale of discontinued operations

 

$

35,425

 

 

Accounts Receivable Financing
Accounts Receivable Financing

5. Accounts Receivable Financing

The Company has a financing agreement with an unrelated third party financing company (the “Financing Agreement”) whereby it offers distributors and resellers direct or indirect financing on their purchases of the Company’s products and services. In return, the Company agrees to pay the financing company a fee based on a pre-defined percentage of the transaction amount financed. In certain instances, these financing arrangements result in a transfer of our receivables, without recourse, to the financing company. If the transaction meets the applicable criteria under Accounting Standards Codification (“ASC”) 860 and is accounted for as a sale of financial assets, the accounts receivable are excluded from the balance sheet upon the third party financing company’s payment remittance to the Company. In certain legal jurisdictions, the arrangement fees that involve maintenance services or products bundled with maintenance at one price do not qualify as a sale of financial assets in accordance with the authoritative guidance. Accordingly, accounts receivable related to these arrangements are accounted for as a secured borrowing in accordance with ASC 860, and the Company records a liability for any cash received, while maintaining the associated accounts receivable balance until the distributor or reseller remits payment to the third-party financing company.

In 2014, 2013 and 2012, total transactions entered pursuant to the terms of the Financing Agreement were approximately $194.4 million, $123.4 million, and $28.3 million, respectively, of which $136.0 million, $109.4 million, and $22.9 million, respectively, were related to the transfer of the financial assets arrangement. The financing of these receivables accelerated the collection of the Company’s cash and reduced its credit exposure. The amount due from the financing company as of December 31, 2014 and 2013 was approximately $28.5 million and $22.9 million, respectively, of which $20.2 million and $21.6 million, respectively, was related to the accounts receivable transferred, and is included in “Trade receivables” in the Company’s Consolidated Balance Sheets. Fees incurred pursuant to the Financing Agreement were approximately $2.6 million, $1.8 million and $0.4 million for the fiscal year ended December 31, 2014, 2013 and 2012, respectively. Those fees were recorded as a reduction to revenues in the Company’s Consolidated Statements of Operations.

Goodwill, Purchased Intangibles, and Software Development Costs
Goodwill, Purchased Intangibles, and Software Development Costs

6. Goodwill, Purchased Intangibles, and Software Development Costs:

Polycom’s business is organized around four major geographic theaters: North America, Caribbean and Latin America (“CALA”), Europe, Middle East and Africa (“EMEA”) and Asia Pacific (“APAC”), which are considered its reporting units.

In the fourth quarter of 2014, the Company performed the qualitative assessment for its four reporting units. For each reporting unit, the Company weighed the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. The reporting unit specific factors that were considered included the results of the most recent impairment tests, as well as financial performance and changes to the reporting units’ carrying amounts since the most recent impairment tests. For the industry in which the reporting units operate, the Company considered growth projections from independent sources and significant developments or transactions within the industry during 2014, where applicable. The Company concluded that each of reporting unit specific and industry factors had either a positive or neutral impact on the fair value of each of the reporting units. The Company also determined that macroeconomic factors during 2014 did not have a significant impact on the discount rates and growth rates used for the valuation performed. Based on the qualitative assessment, the Company concluded that for the four reporting units, it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and there was no indication of impairment. As a result, performing the two-step impairment test was unnecessary and that no impairment charge was required for 2014.

In the fourth quarter of 2013, the Company determined, based on its qualitative assessment, that further testing was necessary and performed a two-step goodwill impairment test to assess if a potential impairment had occurred and to measure an impairment loss, if any. The first step of the two-step test compares a reporting unit’s fair value to its carrying amount. The fair value was determined using an income approach and a market approach, each of which was weighted equally. Under the income approach, the fair value of an asset is based on the value of the estimated cash flows that the asset can be expected to generate in the future. These estimated future cash flows were discounted at rates ranging from 12 to 14 percent to arrive at their respective fair values. Under the market approach, the fair value of the unit is based on an analysis of financial data for publicly traded companies engaged in the same or similar lines of business. The carrying amount of each reporting unit was determined by assigning assets and liabilities, including goodwill, to each reporting unit. Based on the first step test, the estimated fair value of each reporting unit exceeded their respective carrying amount by more than 30%. Therefore, the second step of the two-step goodwill impairment test was not deemed necessary and no impairment charge was required for 2013.

The following table summarizes the changes in carrying amount of goodwill in each of the Company’s segments for the periods presented (in thousands):

 

 

 

Segments

 

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Total

 

Balance at December 31, 2012

 

$

302,768

 

 

$

101,882

 

 

$

149,169

 

 

$

553,819

 

Goodwill resulting from an acquisition

 

 

5,391

 

 

 

 

 

 

 

 

 

5,391

 

Foreign currency translation

 

 

 

 

 

 

 

 

250

 

 

 

250

 

Balance at December 31, 2013

 

$

308,159

 

 

$

101,882

 

 

$

149,419

 

 

$

559,460

 

Foreign currency translation

 

 

 

 

 

 

 

 

(229

)

 

 

(229

)

Balance at December 31, 2014

 

$

308,159

 

 

$

101,882

 

 

$

149,190

 

 

$

559,231

 

 

The following table sets forth details of the Company’s total purchased intangible assets and capitalized software development costs as of the following periods (in thousands):

 

 

 

December 31, 2014

 

 

December 31, 2013

 

 

 

Gross

Value

 

 

Accumulated

Amortization

& Impairment

 

 

Net Value

 

 

Gross

Value

 

 

Accumulated

Amortization

& Impairment

 

 

Net Value

 

Core and developed technology

 

$

81,178

 

 

$

(79,986

)

 

$

1,192

 

 

$

81,178

 

 

$

(76,952

)

 

$

4,226

 

Customer and partner relationships

 

 

79,525

 

 

 

(57,983

)

 

 

21,542

 

 

 

79,525

 

 

 

(48,941

)

 

 

30,584

 

Non-compete agreements

 

 

1,800

 

 

 

(1,100

)

 

 

700

 

 

 

1,800

 

 

 

(500

)

 

 

1,300

 

Trade name

 

 

3,400

 

 

 

(3,229

)

 

 

171

 

 

 

3,400

 

 

 

(3,089

)

 

 

311

 

Other

 

 

4,462

 

 

 

(4,418

)

 

 

44

 

 

 

4,462

 

 

 

(4,343

)

 

 

119

 

Finite-lived intangible assets

 

 

170,365

 

 

 

(146,716

)

 

 

23,649

 

 

 

170,365

 

 

 

(133,825

)

 

 

36,540

 

Indefinite-lived trade name

 

 

918

 

 

 

 

 

 

918

 

 

 

918

 

 

 

 

 

 

918

 

Total acquired intangible assets

 

$

171,283

 

 

$

(146,716

)

 

$

24,567

 

 

$

171,283

 

 

$

(133,825

)

 

$

37,458

 

Capitalized software development costs for products

   to be sold

 

$

7,416

 

 

$

(1,900

)

 

$

5,516

 

 

$

2,365

 

 

$

(196

)

 

$

2,169

 

 

The Company determined that a purchased trade name intangible of $0.9 million had an indefinite life as the Company expects to generate cash flows related to this asset indefinitely. No impairment charges related to the Company’s purchased intangible assets were recognized in the years ended December 31, 2014, 2013, and 2012.

The following table summarizes amortization expense recorded in the following periods (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Amortization of purchased intangibles in revenues

 

$

75

 

 

$

75

 

 

$

75

 

Amortization of purchased intangibles in cost of product revenues

 

 

3,035

 

 

 

9,361

 

 

 

7,635

 

Amortization of purchased intangibles in operating expenses

 

 

9,781

 

 

 

10,389

 

 

 

9,830

 

Total amortization expenses of purchased intangibles

 

$

12,891

 

 

$

19,825

 

 

$

17,540

 

 

Amortization expense of purchased intangibles is not allocated to the Company’s operating segments.

The estimated future amortization expense of purchased intangible assets as of December 31, 2014 is as follows (in thousands):

 

Year ending December 31,

 

Amount

 

2015

 

$

10,495

 

2016

 

 

8,484

 

2017

 

 

4,670

 

2018

 

 

 

2019

 

 

 

Total

 

$

23,649

 

 

Balance Sheet Details
Balance Sheet Details

7. Balance Sheet Details:

Trade receivables, net, consist of the following (in thousands):

 

 

 

December 31,

 

 

 

 

2014

 

 

2013

 

 

Gross accounts receivables

 

$

214,664

 

 

$

225,134

 

 

Returns and related reserves

 

 

(42,224

)

 

 

(38,938

)

 

Allowance for doubtful accounts

 

 

(3,040

)

 

 

(2,827

)

 

Total

 

$

169,400

 

 

$

183,369

 

 

 

Inventories consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Raw materials

 

$

1,496

 

 

$

2,740

 

Work in process

 

 

545

 

 

 

840

 

Finished goods

 

 

98,287

 

 

 

99,729

 

Total

 

$

100,328

 

 

$

103,309

 

 

Prepaid expenses and other current assets consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Non-trade receivables

 

$

6,547

 

 

$

9,251

 

Prepaid expenses

 

 

37,385

 

 

 

31,164

 

Derivative assets

 

 

14,342

 

 

 

6,748

 

Other current assets

 

 

2,798

 

 

 

3,189

 

Total

 

$

61,072

 

 

$

50,352

 

 

Property and equipment, net, consist of the following (in thousands):

 

 

 

 

 

December 31,

 

 

 

Estimated useful Life

 

2014

 

 

2013

 

Computer equipment and software

 

3 to 5 years

 

$

294,724

 

 

$

265,222

 

Equipment, furniture and fixtures

 

1 to 7 years

 

 

115,226

 

 

 

113,214

 

Tooling equipment

 

3 years

 

 

16,325

 

 

 

20,811

 

Leasehold improvements

 

3 to 13 years

 

 

59,663

 

 

 

59,595

 

 

 

 

 

 

485,938

 

 

 

458,842

 

Less: Accumulated depreciation and amortization

 

 

 

 

(376,743

)

 

 

(343,685

)

Total

 

 

 

$

109,195

 

 

$

115,157

 

 

Deferred revenues consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Short-term:

 

 

 

 

 

 

 

 

Service

 

$

171,355

 

 

$

170,701

 

Product

 

 

94

 

 

 

307

 

License

 

 

2,083

 

 

 

1,400

 

Total

 

$

173,532

 

 

$

172,408

 

Long-term:

 

 

 

 

 

 

 

 

Service

 

$

85,925

 

 

$

83,092

 

License

 

 

3,441

 

 

 

4,375

 

Total

 

$

89,366

 

 

$

87,467

 

 

Changes in the deferred service revenue are as follows (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Balance at beginning of period

 

$

253,793

 

 

$

241,773

 

Additions to deferred service revenue

 

 

347,896

 

 

 

354,893

 

Amortization of deferred service revenue

 

 

(344,409

)

 

 

(342,873

)

Balance at end of period

 

$

257,280

 

 

$

253,793

 

 

Other accrued liabilities consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Accrued expenses

 

$

27,523

 

 

$

22,515

 

Accrued co-op expenses

 

 

4,102

 

 

 

4,629

 

Restructuring reserves

 

 

12,207

 

 

 

11,238

 

Warranty obligations

 

 

11,613

 

 

 

9,475

 

Derivative liabilities

 

 

8,175

 

 

 

6,780

 

Employee stock purchase plan withholdings

 

 

10,658

 

 

 

10,883

 

Other accrued liabilities

 

 

11,915

 

 

 

12,224

 

Total

 

$

86,193

 

 

$

77,744

 

 

Changes in the warranty obligations are as follows (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Balance at beginning of period

 

$

9,475

 

 

$

10,475

 

Accruals for warranties issued during the period

 

 

16,753

 

 

 

16,307

 

Charges against warranty reserve during the period

 

 

(14,615

)

 

 

(17,307

)

Balance at end of period

 

$

11,613

 

 

$

9,475

 

 

Restructuring Costs
Restructuring Costs

8. Restructuring Costs:

In 2014, 2013, and 2012, the Company recorded $40.3 million, $48.5 million, and $22.0 million, respectively, related to restructuring actions that included the elimination or relocation of various positions and the consolidation and elimination of certain facilities. These actions are generally intended to streamline and focus the Company’s efforts and more properly align the Company’s cost structure with its projected future revenue streams.

The following table summarizes the activity of the Company’s restructuring reserves (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Projects

 

 

 

 

 

 

 

Severance/Other

 

 

Facilities

 

 

Discontinued

 

 

Total

 

Balance at December 31, 2011

 

$

2,486

 

 

$

454

 

 

$

 

 

 

2,940

 

Additions to the reserve, net

 

 

13,090

 

 

 

11,139

 

 

 

 

 

 

24,229

 

Interest accretion

 

 

 

 

 

591

 

 

 

 

 

 

591

 

Non-cash write-off of leasehold improvements

 

 

 

 

 

(2,796

)

 

 

 

 

 

(2,796

)

Cash payments and other usage

 

 

(14,214

)

 

 

(1,924

)

 

 

 

 

 

(16,138

)

Balance at December 31, 2012

 

$

1,362

 

 

$

7,464

 

 

$

 

 

 

8,826

 

Additions to the reserve, net

 

 

10,185

 

 

 

36,770

 

 

 

2,880

 

 

 

49,835

 

Interest accretion

 

 

 

 

 

1,461

 

 

 

 

 

 

1,461

 

Non-cash write-off of leasehold improvements

 

 

 

 

 

(3,547

)

 

 

 

 

 

(3,547

)

Cash payments and other usage

 

 

(10,404

)

 

 

(8,362

)

 

 

(2,880

)

 

 

(21,646

)

Balance at December 31, 2013

 

$

1,143

 

 

$

33,786

 

 

$

 

 

$

34,929

 

Additions to the reserve, net

 

 

11,755

 

 

 

28,524

 

 

 

 

 

 

40,279

 

Interest accretion

 

 

 

 

 

2,347

 

 

 

 

 

 

2,347

 

Non-cash write-off of leasehold improvements

 

 

 

 

 

(4,855

)

 

 

 

 

 

(4,855

)

Cash payments and other usage

 

 

(12,234

)

 

 

(18,893

)

 

 

 

 

 

(31,127

)

Balance at December  31, 2014

 

$

664

 

 

$

40,909

 

 

$

 

 

$

41,573

 

 

During 2014, management completed the reduction or elimination of certain leased facilities and the elimination of approximately six percent of the Company’s global workforce. These actions were designed to better align expenses to the Company’s revenue and gross margin profile, and position the Company for improved operating performance, pursuant to the announcement in January 2014. As a result, the Company recorded approximately $28.6 million in restructuring charges related to idle facilities upon vacating these facilities. Additions to the reserve include $2.3 million of deferred rent that was expensed in prior periods. Additionally, the Company recorded approximately $11.8 million of restructuring charges related to severance and other employee benefits in 2014.

During 2013, management completed the consolidation and elimination of certain facilities globally and the elimination of approximately four percent of the Company’s global workforce. These actions were generally intended to optimize the organization and manage expenses to gain or improve operating efficiencies and profitability. As a result, the Company recorded approximately $38.2 million in restructuring charges related to idle facilities upon vacating these facilities. Additions to the reserve include $2.8 million of deferred rent that was expensed in prior periods. Additionally, in 2013,the Company recorded approximately $10.2 million of restructuring charges related to severance and other employee benefits, and approximately $2.9 million of other restructuring charges associated with changes to the Company’s product roadmap as it focused on products and solutions with greater revenue and margin potential.  

During 2012, management completed the consolidation and elimination of certain facilities in order to gain efficiencies, including the combination of its headquarters in San Jose and Santa Clara, California into one new location in San Jose, California. As a result, the Company recorded approximately $11.7 million in restructuring charges related to idle facilities in 2012. Additions to the reserve include $2.8 million of deferred rent that was expensed in prior periods. Additionally, the Company recorded approximately $13.1 million of charges, primarily for severance and other employee benefits, related to restructuring actions approved by management in October 2011 and July 2012. The action plan approved in July 2012 resulted in the elimination of approximately four percent of our global workforce, enabling the Company to focus resources on its product development and product launch initiatives.

The Company does not expect any remaining charges related to these actions to be material. As of December 31, 2014, the restructuring reserve was primarily comprised of facilities-related liabilities. The Company calculated the fair value of its facilities-related liabilities based on the discounted future lease payments less sublease assumptions. This non-recurring fair value measurement is classified as a Level 3 measurement under ASC 820.

Debt
Debt

9. Debt:

In September 2013, the Company entered into a Credit Agreement (the “Credit Agreement”) that provides for a $250.0 million term loan (the “Term Loan”) maturing on September 13, 2018 (the “Maturity Date”), which bears interest at the Company’s option at either a base rate plus a spread of 0.50% to 1.00%, or a reserve adjusted LIBOR rate plus a spread of 1.50% to 2.00% based on the Company’s consolidated leverage ratio for the preceding four fiscal quarters.

The Company entered into the Credit Agreement in conjunction with and for purposes of funding purchases of the Company’s common stock pursuant to a $250.0 million modified “Dutch Auction” self-tender offer announced in September 2013. See Note 15 for further details. The Term Loan is payable in quarterly installments of principal equal to approximately $1.6 million which began on December 31, 2013, with the remaining outstanding principal amount of the Term Loan being due and payable on the Maturity Date. The Company may prepay the Term Loan, in whole or in part, at any time without premium or penalty. Amounts repaid or prepaid may not be reborrowed. The Term Loan is secured by substantially all the assets of the Company and certain domestic subsidiaries of the Company that are guarantors under the Credit Agreement, subject to certain exceptions and limitations.

The Credit Agreement contains customary affirmative and negative covenants, and financial covenants consisting of a consolidated fixed charge coverage ratio and a consolidated secured leverage ratio. The Company was in compliance with these covenants as of December 31, 2014. The Credit Agreement also includes customary events of default, the occurrence of which could result in the acceleration of the obligations under the Credit Agreement. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Credit Agreement at a per annum rate equal to 2.00% above the applicable interest rate for any overdue principal and 2.00% above the rate applicable for base rate loans for any other overdue amounts.

At December 31, 2014, the weighted average interest rate on the Term Loan was 2.04%, the accrued interest on the Term Loan was $0.4 million, and the current and noncurrent portion of the outstanding Term Loan was $6.3 million and $235.9 million, respectively.  

The following table summarizes interest expense recognized related to the Term Loan for the periods presented (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Contractual interest expense

 

$

4,940

 

 

$

1,605

 

 

$

 

Amortization of debt issuance costs

 

 

533

 

 

 

178

 

 

 

 

Total

 

$

5,473

 

 

$

1,783

 

 

$

 

 

Investments
Investments

10. Investments:

The Company had cash and cash equivalents of $443.1 million and $392.6 million at December 31, 2014 and 2013, respectively. Cash and cash equivalents generally consist of cash in banks, as well as highly liquid investments in money market funds, time deposits, savings accounts, commercial paper, and corporate debt securities.

The Company’s U.S. government securities mostly comprised of direct U.S. Treasury obligations that are guaranteed by the U.S. government and U.S. government agency securities are mostly comprised of U.S. government agency instruments, including mortgage-backed securities. The Company’s Non-U.S. government securities are mostly comprised of non-U.S. government instruments, including state, municipal and foreign government securities. To ensure that the investment portfolio is sufficiently diversified, the Company’s investment policy requires that a certain percentage of the Company’s portfolio be invested in these types of securities.

The Company’s corporate debt securities are comprised of publicly-traded domestic and foreign corporate debt securities. The Company does not purchase auction rate securities, and investments are in instruments that meet high quality credit rating standards, as specified in the Company’s investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issuer or type of instrument.

At December 31, 2014, the Company’s long-term investments had contractual maturities of one to two years.

In addition, the Company has short-term and long-term investments in debt securities which are summarized as follows: (in thousands):

 

 

 

Cost Basis

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Balances at December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments-Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

26,930

 

 

$

7

 

 

$

(2

)

 

$

26,935

 

U.S. government agency securities

 

 

59,336

 

 

 

7

 

 

 

(6

)

 

 

59,337

 

Non-U.S. government securities

 

 

8,764

 

 

 

2

 

 

 

 

 

 

8,766

 

Corporate debt securities

 

 

90,782

 

 

 

10

 

 

 

(47

)

 

 

90,745

 

Total investments - short-term

 

$

185,812

 

 

$

26

 

 

$

(55

)

 

$

185,783

 

Investments-Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

25,320

 

 

$

4

 

 

$

(10

)

 

$

25,314

 

U.S. government agency securities

 

 

17,369

 

 

 

1

 

 

 

(14

)

 

 

17,356

 

Corporate debt securities

 

 

16,540

 

 

 

2

 

 

 

(15

)

 

 

16,527

 

Total investments - long-term

 

$

59,229

 

 

$

7

 

 

$

(39

)

 

$

59,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments-Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

19,792

 

 

$

9

 

 

$

 

 

$

19,801

 

U.S. government agency securities

 

 

38,388

 

 

 

16

 

 

 

(3

)

 

 

38,401

 

Non-U.S. government securities

 

 

13,734

 

 

 

10

 

 

 

 

 

 

13,744

 

Corporate debt securities

 

 

62,720

 

 

 

22

 

 

 

(4

)

 

 

62,738

 

Total investments - short-term

 

$

134,634

 

 

$

57

 

 

$

(7

)

 

$

134,684

 

Investments-Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

12,252

 

 

$

8

 

 

$

 

 

$

12,260

 

U.S. government agency securities

 

 

30,627

 

 

 

12

 

 

 

(3

)

 

 

30,636

 

Non-U.S. government securities

 

 

2,305

 

 

 

4

 

 

 

 

 

 

2,309

 

Corporate debt securities

 

 

11,152

 

 

 

15

 

 

 

 

 

 

11,167

 

Total investments - long-term

 

$

56,336

 

 

$

39

 

 

$

(3

)

 

$

56,372

 

Unrealized Losses

The following table summarizes the fair value and gross unrealized losses of the Company’s investments, including those securities that are categorized as cash equivalents, with unrealized losses, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2014 and 2013 (in thousands):

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

Gross

Unrealized

Losses

 

December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

22,355

 

 

$

(12

)

 

$

 

 

$

 

 

$

22,355

 

 

$

(12

)

U.S. government agency securities

 

 

27,348

 

 

 

(20

)

 

 

 

 

 

 

 

 

27,348

 

 

 

(20

)

Corporate debt securities

 

 

59,667

 

 

 

(62

)

 

 

 

 

 

 

 

 

59,667

 

 

 

(62

)

Total investments

 

$

109,370

 

 

$

(94

)

 

$

 

 

$

 

 

$

109,370

 

 

$

(94

)

December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

5,533

 

 

$

(6

)

 

$

 

 

$

 

 

$

5,533

 

 

$

(6

)

Corporate debt securities

 

 

9,837

 

 

 

(3

)

 

 

1,504

 

 

 

(1

)

 

 

11,341

 

 

 

(4

)

Total investments

 

$

15,370

 

 

$

(9

)

 

$

1,504

 

 

$

(1

)

 

$

16,874

 

 

$

(10

)

 

In 2014 and 2013, there were no investments in the Company’s portfolio that were other-than temporarily impaired and the Company did not incur any material realized net gains or losses in the years ended December 31, 2014, 2013 and 2012.

 

Fair Value Measurements
Fair Value Measurements

11. Fair Value Measurements:

The tables below set forth the Company’s recurring fair value measurements for the periods presented (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements at

December 31, 2014 Using

 

Description

 

Total

 

 

Quoted Prices in Active

Markets for

Identical Assets

 

 

Significant Other

Observable Inputs

 

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

1,395

 

 

$

1,395

 

 

$

 

Commercial paper

 

 

7,549

 

 

 

 

 

 

7,549

 

Short-term investments

 

 

185,783

 

 

 

 

 

 

185,783

 

Long-term investments

 

 

59,197

 

 

 

 

 

 

59,197

 

Total fixed income available-for-sale

   securities

 

$

253,924

 

 

$

1,395

 

 

$

252,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (a)

 

$

14,342

 

 

$

 

 

$

14,342

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (b)

 

$

8,175

 

 

$

 

 

$

8,175

 

 

 

 

 

 

 

 

 

Fair Value Measurements at

December 31, 2013 Using

 

Description

 

Total

 

 

Quoted Prices in Active

Markets for

Identical Assets

 

 

Significant Other

Observable Inputs

 

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

17,596

 

 

$

17,596

 

 

$

 

Commercial paper

 

 

2,499

 

 

 

 

 

 

2,499

 

Short-term investments

 

 

134,684

 

 

 

 

 

 

134,684

 

Long-term investments

 

 

56,372

 

 

 

 

 

 

56,372

 

Total fixed income available-for-sale

   securities

 

$

211,151

 

 

$

17,596

 

 

$

193,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (a)

 

$

6,748

 

 

$

 

 

$

6,748

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (b)

 

$

6,780

 

 

$

 

 

$

6,780

 

 

(a)

Included in short-term derivative asset as “Prepaid expenses and other current assets” on the Company’s Consolidated Balance Sheets.

(b)

Included in short-term derivative liability as “Other accrued liabilities” on the Company’s Consolidated Balance Sheets.

There have been no transfers between Level 1 and Level 2 in 2014 and 2013. The Company does not hold any investments classified as Level 3 as of December 31, 2014 and 2013.

In addition, the Company has facilities-related liabilities related to restructuring which were calculated based on the discounted future lease payments less sublease assumptions. This non-recurring fair value measurement is classified as a Level 3 measurement under ASC 820. See Note 8 Restructuring Costs for further details.

The Company’s Term Loan under its Credit Agreement is classified within Level 2 instruments as the borrowings are not actively traded and have a variable interest rate structure based upon market rates currently available to the Company for debt with similar terms and maturities. See Note 9. The Company has elected not to record its Term Loan at fair value, but has measured it at fair value for disclosure purpose. At December 31, 2014 and 2013, the estimated fair value of the Term Loan was approximately $234.9 million and $247.5 million, respectively, using observable market inputs.

Business Risks and Credit Concentration
Business Risks and Credit Concentration

12. Business Risks and Credit Concentration:

The Company sells products and services which serve the communications equipment market globally. Substantially all of the Company’s revenues are derived from sales of its products and their related services. A substantial majority of the Company’s revenue is from value-added resellers, distributors and service providers. In 2014, 2013 and 2012, one channel partner, ScanSource Communications (“ScanSource”), accounted for 17 %, 16%, and 14%, respectively, of the Company’s total revenues.

The Company subcontracts the manufacture of most of its products to Celestica Inc. (“Celestica”), Askey Computer Corporation (“Askey”), Foxconn Technology Group (“Foxconn”) and VTech Holding Ltd. (“VTech”), which are all third-party contract manufacturers. The Company uses Celestica’s facilities in Thailand and China, and Askey’s, Foxconn’s and VTech’s facilities in China and should there be any disruption in services due to natural disaster, terrorist acts, quarantines or other disruptions associated with infectious diseases, or economic or political difficulties in any of these countries or in Asia or for any other reason, such disruption would harm its business and results of operations. While the Company had begun to develop secondary manufacturing sources for certain products, Celestica’s facilities are currently the manufacturer for substantially all of these products, which means the Company is essentially sole-sourced for the manufacturing of such products, and if Celestica experiences an interruption in operations, suffers from capacity constraints, which may include constraints based on production demands from the Company as it grows its business, or is otherwise unable to meet the Company’s current or future production requirements the Company would experience a delay or inability to ship its products, which would have an immediate negative impact on its revenues. Moreover, any incapacitation of any of the Company’s or its subcontractors’ manufacturing sites, due to destruction, natural disaster or similar events could result in a loss of product inventory. As a result of any of the foregoing, the Company may not be able to meet demand for its products, which could negatively affect revenues in the quarter of the disruption or longer depending upon the magnitude of the event, and could harm its reputation.

The Company markets its products to distributors and end-users throughout the world. Management performs ongoing credit evaluations of the Company’s customers and maintains an allowance for potential credit losses. The Company’s credit risk may increase with the expansion of Polycom’s product offerings as customers place larger orders for initial stocking orders and its growth in emerging markets. There can be no assurance that the Company’s credit loss experience will remain at or near historical levels. At December 31, 2014 and 2013, one customer, ScanSource, accounted for 19% and 11% respectively, of total gross accounts receivable.

The Company has purchased licenses for technology incorporated in its products. The value of these long-term assets is monitored for any impairment and if it is determined that a write-down is necessary, this charge could have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows. There were no such charges in 2014, 2013 and 2012.

 

Commitments and Contingencies
Commitments and Contingencies

13. Commitments and Contingencies:

Litigation and SEC Investigation:

From time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. The Company expects that the number and significance of these matters will increase as business expands. In particular, the Company faces an increasing number of patent and other intellectual property claims as the number of products and competitors in Polycom’s industry grows and the functionality of video, voice, data and web conferencing products overlap. Any claims or proceedings against the Company, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require the Company to enter into royalty or licensing agreements which, if required, may not be available on terms favorable to the Company or at all. If management believes that a loss arising from these matters is probable and can be reasonably estimated, the Company will record a reserve for the loss. As additional information becomes available, any potential liability related to these matters is assessed and the estimates revised. Based on currently available information, management does not believe that the ultimate outcomes of these unresolved matters, individually and in the aggregate, are likely to have a material adverse effect on the Company’s financial position, liquidity or results of operations. However, litigation is subject to inherent uncertainties, and the Company’s view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position and results of operations or liquidity for the period in which the unfavorable outcome occurs or becomes probable, and potentially in future periods.

In 2014, the Company recorded $3.1 million in “Litigation reserves and payments” on its Consolidated Statements of Operations related to on-going litigation matters, which have not yet been settled.

On July 23, 2013, the Company announced that Andrew M. Miller had resigned from the positions of Chief Executive Officer and President of Polycom and from Polycom’s Board of Directors. The Company disclosed that Mr. Miller’s resignation came after a review by the Audit Committee of certain expense submissions by Mr. Miller, where the Audit Committee found certain irregularities in the submissions, for which Mr. Miller had accepted responsibility. Specifically, the Audit Committee determined that Mr. Miller improperly submitted personal expenses to Polycom for payment as business expenses and, in doing so, submitted to Polycom false information about the nature and purpose of expenses.

SEC Investigation. As previously disclosed, the Company has been cooperating with the Enforcement Staff of the Securities and Exchange Commission (“SEC”) in connection with its investigation focused on Mr. Miller's expenses and his resignation. After discussions with the Enforcement Staff, the Company recently made an offer of settlement to resolve the matter, which is subject to the SEC’s approval.  The proposed settlement would be entered into by Polycom without admitting or denying the SEC’s findings and will resolve alleged violations of certain provisions of the Securities Exchange Act of 1934 and related rules.  Under the terms of the proposed settlement, the Company would pay $750,000 in a civil penalty, which has been fully reserved for in its Consolidated Financial Statements, and agree not to commit or cause any violations of certain provisions of the Securities Exchange Act of 1934 and related rules.  There is no assurance that the proposal will be approved by the SEC.

Class Action Lawsuit. On July 26, 2013, a purported shareholder class action, initially captioned Neal v. Polycom Inc., et al., Case No. 3:13-cv-03476-SC, and presently captioned Nathanson v. Polycom, Inc., et al., Case No. 3:13-cv-03476-SC, was filed in the United States District Court for the Northern District of California against the Company and certain of its current and former officers and directors. On December 13, 2013, the Court appointed a lead plaintiff and approved lead and liaison counsel. On February 24, 2014, the lead plaintiff filed a first amended complaint. The amended complaint alleges that, between January 20, 2011 and July 23, 2013, the Company issued materially false and misleading statements or failed to disclose information regarding the Company’s business, operational and compliance policies, including with respect to its former Chief Executive Officer’s expense submissions and the Company’s internal controls. The lawsuit further alleges that the Company’s financial statements were materially false and misleading. The amended complaint alleges violations of the federal securities laws and seeks unspecified compensatory damages and other relief. The defendants filed motions to dismiss the amended complaint. At this time, we are unable to estimate any range of reasonably possible loss relating to the securities class action.

Derivative Lawsuits. On August 21, 2013 and October 16, 2013, two purported shareholder derivative suits, captioned Saraceni v. Miller, et al., Case No. 5:13-cv-03880, and Donnelly v. Miller, et al., Case No. 5:13-cv-04810, respectively, were filed in the United States District Court for the Northern District of California against certain of the Company’s current and former officers and directors. On October 31, 2013, these two federal derivative actions were consolidated into In re Polycom, Inc. Derivative Litigation, Lead Case No. 3:13-cv-03880. Plaintiffs filed a first amended complaint on April 4, 2014. On January 13, 2015, the Court dismissed the first amended complaint and granted plaintiffs leave to file a second amended complaint.

On November 22, 2013 and December 13, 2013, two purported shareholder derivative suits, captioned Ware v. Miller, et al., Case No. 1-13-cv-256608, and Clem v. Miller, et al., Case No. 1-13-cv-257664, respectively, were filed in the Superior Court of California, County of Santa Clara, against certain of the Company’s current and former officers and directors. On January 31, 2014, these two California state derivative actions were consolidated into In re Polycom, Inc. Derivative Shareholder Litigation, Lead Case No. 1-13-cv-256608. The Court has stayed the California state derivative litigation pending resolution of both the federal derivative lawsuit and the federal securities class action.

The Federal and California state consolidated derivative lawsuits purport to assert claims on behalf of the Company, which is named as a nominal defendant in the actions. The complaints (including the dismissed federal derivative complaint) allege claims for breach of fiduciary duty, unjust enrichment, and corporate waste, and allege certain defendants failed to maintain adequate internal controls and issued, or authorized the issuance of, materially false and misleading statements, including with respect to the Company’s former Chief Executive Officer’s expense submissions and the Company’s internal controls. The complaints further allege that certain defendants approved an unjustified separation agreement and caused the Company to repurchase its own stock at artificially inflated prices. The complaints seek unspecified compensatory damages, corporate governance reforms, and other relief. At this time, we are unable to estimate any range of reasonably possible loss relating to the derivative actions.

Standby Letters of Credit:

The Company has standby letters of credit totaling approximately $7.2 million, and $7.3 million at December 31, 2014, and 2013, respectively.

Leases:

The Company leases certain office facilities and equipment under noncancelable operating leases expiring between 2015 and 2023. As of December 31, 2014, the following future minimum lease payments are due under the current lease obligations (in thousands). In addition to these minimum lease payments, the Company is contractually obligated under the majority of its operating leases to pay certain operating expenses during the term of the lease such as maintenance, taxes and insurance.

 

 

 

Gross

 

 

 

 

 

 

Net

 

 

 

 

Minimum

 

 

Estimated

 

 

Minimum

 

 

 

 

Lease

 

 

Sublease

 

 

Lease

 

 

Year Ending December 31,

 

Payments

 

 

Receipts

 

 

Payments

 

 

2015

 

$

31,864

 

 

$

(1,808

)

 

$

30,056

 

 

2016

 

 

25,681

 

 

 

(1,683

)

 

 

23,998

 

 

2017

 

 

23,122

 

 

 

(1,338

)

 

 

21,784

 

 

2018

 

 

18,595

 

 

 

(1,050

)

 

 

17,545

 

 

2019

 

 

18,231

 

 

 

(1,016

)

 

 

17,215

 

 

Thereafter

 

 

35,252

 

 

 

(1,135

)

 

 

34,117

 

 

Total

 

$

152,745

 

 

$

(8,030

)

 

$

144,715

 

 

 

Rent expense, including the effect of any future rent escalations or rent holiday periods, is recognized on a straight-line basis over the term of the lease, which is deemed to commence upon the Company gaining access and control of the facility. Rent expense for the years ended December 31, 2014, 2013, and 2012 was $26.8 million, $32.2 million, and $32.8 million, respectively.  

 

Foreign Currency Derivatives
Foreign Currency Derivatives

14. Foreign Currency Derivatives:

The Company maintains a foreign currency risk management program that is designed to reduce the volatility of the Company’s economic value from the effects of unanticipated currency fluctuations. International operations generate both revenues and costs denominated in foreign currencies. The Company’s policy is to hedge significant foreign currency revenues and costs to improve margin visibility and reduce earnings volatility associated with unexpected changes in currency.

Non-Designated Hedges

The Company hedges its net foreign currency monetary assets and liabilities monthly, primarily resulting from foreign currency denominated receivables and payables with foreign exchange forward contracts to reduce the risk that the Company’s earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These derivative instruments are carried at fair value with changes in the fair value recorded as interest and other income (expense), net. These derivative instruments do not subject the Company to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset remeasurement gains and losses on the hedged assets and liabilities. The Company executes non-designated foreign exchange forward contracts primarily denominated in Euros, British Pounds, Israeli Shekels, Brazilian Reals, Chinese Yuan, Japanese Yen, and Mexican Pesos.

The following table summarizes the Company’s notional position by currency, and approximate U.S. dollar equivalent, at December 31, 2014 of the outstanding non-designated hedges (foreign currency and dollar amounts in thousands):

 

 

 

Original Maturities of 360 Days or Less

 

Original Maturities of Greater than 360 Days

 

 

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

 

Brazilian Real

 

 

10,747

 

 

$

4,046

 

 

Buy

 

 

 

 

 

 

 

 

 

Brazilian Real

 

 

21,858

 

 

$

8,251

 

 

Sell

 

 

 

 

 

 

 

 

 

Chinese Yuan

 

 

92,276

 

 

$

14,727

 

 

Buy

 

 

 

 

 

 

 

 

 

Chinese Yuan

 

 

85,309

 

 

$

13,672

 

 

Sell

 

 

 

 

 

 

 

 

 

Euro

 

 

28,862

 

 

$

36,641

 

 

Buy

 

 

 

 

 

 

 

 

 

Euro

 

 

71,418

 

 

$

92,866

 

 

Sell

 

 

 

 

 

 

 

 

 

British Pound

 

 

27,036

 

 

$

43,558

 

 

Buy

 

 

 

 

 

 

 

 

 

British Pound

 

 

28,399

 

 

$

46,465

 

 

Sell

 

 

 

 

 

 

 

 

 

Israeli Shekel

 

 

45,706

 

 

$

12,749

 

 

Buy

 

 

 

 

 

 

 

 

 

Israeli Shekel

 

 

39,479

 

 

$

10,146

 

 

Sell

 

 

 

 

 

 

 

 

 

Japanese Yen

 

 

464,897

 

 

$

3,889

 

 

Buy

 

 

 

 

 

 

 

 

 

Japanese Yen

 

 

799,492

 

 

$

6,724

 

 

Sell

 

 

 

 

 

 

 

 

 

Mexican Peso

 

 

15,906

 

 

$

1,080

 

 

Buy

 

 

 

 

 

 

 

 

 

Mexican Peso

 

 

34,004

 

 

$

2,367

 

 

Sell

 

 

 

 

 

 

 

 

 

 

The following table shows the effect of the Company’s non-designated hedges in the Consolidated Statements of Operations for the periods presented (in thousands):

 

Derivatives Not Designated as Hedging

Instruments

 

Location of Gain or (Loss)

Recognized in Income on Derivative

 

Amount of Gain or (Loss)

Recognized in Income on Derivative

 

 

 

Year Ended December 31, 2014

 

Foreign exchange contracts

 

Interest and other income (expense), net

 

$

6,708

 

 

 

Year Ended December 31, 2013

 

Foreign exchange contracts

 

Interest and other income (expense), net

 

$

(411

)

 

 

Year Ended December 31, 2012

 

Foreign exchange contracts

 

Interest and other income (expense), net

 

$

(412

)

 

Cash Flow Hedges

The Company’s foreign exchange risk management program objective is to reduce volatility in the Company’s economic value from unanticipated foreign currency fluctuations. The Company designates forward contracts as cash flow hedges of foreign currency revenues and expenses, primarily the Chinese Yuan, Euro, British Pound and Israeli Shekel. All foreign exchange contracts are carried at fair value on the Consolidated Balance Sheets and the maximum duration of foreign exchange forward contracts do not exceed thirteen months. Speculation is prohibited by policy.

To receive hedge accounting treatment, all cash flow hedging relationships are formally designated at hedge inception, and tested both prospectively and retrospectively to ensure the forward contracts are highly effective in offsetting changes to future cash flows on the hedged transactions. The Company records effective spot to spot changes in these cash flow hedges in “Accumulated other comprehensive income” until they are reclassified to revenue, cost of revenues, or operating expenses together with the hedged transaction. The time value on forward contracts is excluded from effectiveness testing and recorded in “Interest and other income (expense), net” over the life of the contract together with any ineffective portion of the hedge.

The following tables show the effect of the Company’s derivative instruments designated as cash flow hedges in the Consolidated Statements of Operations for the periods presented (in thousands):

 

 

 

Gain or (Loss) Recognized in

OCI-Effective

Portion

 

 

Location of Gain or (Loss) Reclassified from OCI into Income-Effective Portion

 

Gain or (Loss) Reclassified from OCI

into Income-Effective Portion

 

 

Location of Gain or (Loss) Recognized-Ineffective Portion and Amount Excluded from

Effectiveness Testing

 

Gain or (Loss) Recognized-Ineffective Portion and Amount Excluded from Effectiveness

Testing (a)

 

 

 

Year Ended December 31, 2014

 

Foreign exchange

   contracts

 

$

3,627

 

 

Product revenues

 

$

1,170

 

 

Interest and other income (expense), net

 

$

109

 

 

 

 

 

 

 

Cost of revenues

 

 

320

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

772

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and

   development

 

 

86

 

 

 

 

 

 

 

 

 

 

 

 

 

General and

   administrative

 

 

(7

)

 

 

 

 

 

 

 

 

$

3,627

 

 

 

 

$

2,341

 

 

 

 

$

109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

   contracts

 

$

1,374

 

 

Product revenues

 

$

207

 

 

Interest and other income (expense), net

 

$

368

 

 

 

 

 

 

 

Cost of revenues

 

 

279

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

233

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and

   development

 

 

1,425

 

 

 

 

 

 

 

 

 

 

 

 

 

General and

   administrative

 

 

164

 

 

 

 

 

 

 

 

 

$

1,374

 

 

 

 

$

2,308

 

 

 

 

$

368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

   contracts

 

$

1,018

 

 

Product revenues

 

$

7,133

 

 

Interest and other income (expense), net

 

$

42

 

 

 

 

 

 

 

Cost of revenues

 

 

(607

)

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

(974

)

 

 

 

 

 

 

 

 

 

 

 

 

Research and

   development

 

 

(774

)

 

 

 

 

 

 

 

 

 

 

 

 

General and

   administrative

 

 

(1,044

)

 

 

 

 

 

 

 

 

$

1,018

 

 

 

 

$

3,734

 

 

 

 

$

42

 

 

(a)

For the year ended December 31, 2014 and 2013, there were no gains or losses for the ineffective portion. For the year ended December 31, 2012, the loss recorded for the ineffective portion and the gain recorded for the excluded time value portion of the hedge was immaterial.  

As of December 31, 2014, the Company estimated all values reported in accumulated other comprehensive income will be reclassified to income within the next twelve months.

In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the related hedge gains and losses on the cash flow hedge would be immediately reclassified to “Interest and other income (expense), net” on the Consolidated Statements of Operations. For the years ended December 31, 2014, 2013 and 2012, there were no such gains or losses.

The following table summarizes the Company’s notional position by currency, and approximate U.S. dollar equivalent, at December 31, 2014 of the outstanding cash flow hedges, all of which are carried at fair value on the Consolidated Balance Sheet (foreign currency and dollar amounts in thousands):

 

 

 

Original Maturities

of 360 Days or Less

 

Original Maturities

of Greater than 360 Days

 

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

Chinese Yuan

 

 

75,140

 

 

$

11,909

 

 

Buy

 

 

62,600

 

 

$

9,781

 

 

Buy

Euro

 

 

17,185

 

 

$

22,583

 

 

Buy

 

 

11,700

 

 

$

14,412

 

 

Buy

Euro

 

 

37,976

 

 

$

49,729

 

 

Sell

 

 

36,800

 

 

$

45,330

 

 

Sell

British Pound

 

 

12,297

 

 

$

20,142

 

 

Buy

 

 

13,300

 

 

$

20,713

 

 

Buy

British Pound

 

 

14,659

 

 

$

23,998

 

 

Sell

 

 

19,100

 

 

$

29,746

 

 

Sell

Israeli Shekel

 

 

51,666

 

 

$

14,471

 

 

Buy

 

 

44,400

 

 

$

11,429

 

 

Buy

 

The estimates of fair value are based on applicable and commonly quoted prices and prevailing financial market information as of December 31, 2014. See Note 11 for additional information on the fair value measurements for all financial assets and liabilities, including derivative assets and derivative liabilities that are measured at fair value in the Consolidated Financial Statements on a recurring basis. The following table sets forth the Company’s derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets for the periods presented (in thousands):

 

 

December 31, 2014

 

 

December 31, 2013

 

 

Fair Value of

Derivatives  Designated

as Hedge Instruments

 

 

Fair Value of Derivatives

Not Designated as Hedge

Instruments

 

 

Fair Value of

Derivatives Designated

as Hedge Instruments

 

 

Fair Value of Derivatives

Not Designated as Hedge

Instruments

 

Derivative assets (a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

5,501

 

 

$

8,841

 

 

$

4,457

 

 

$

2,291

 

Derivative liabilities (b):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

4,041

 

 

$

4,134

 

 

$

4,235

 

 

$

2,545

 

 

(a)

All derivative assets are recorded as ”Prepaid expenses and other current assets” in the Consolidated Balance Sheets.

(b)

All derivative liabilities are recorded as ”Other accrued liabilities” in the Consolidated Balance Sheets.

Offsetting Derivative Assets and Liabilities

The Company has entered into master netting arrangements with each of its derivative counterparties. These arrangements afford the right to net derivative assets against liabilities with the same counterparty. Under certain default provisions, the Company has the right to setoff any other amounts payable to the payee whether or not arising under this agreement. As a result of the netting provisions, the Company’s maximum amount of loss under derivative transactions due to credit risk is limited to the net amounts due from the counterparties under the derivative contracts. Although netting is permitted, it is currently the Company’s policy and practice to record all derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets.

The following table sets forth the offsetting of derivative assets for the periods presented (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the

Consolidated Balance Sheets

 

 

 

Gross Amounts of

Recognized Assets

 

 

Gross Amounts

Offset in the Consolidated

Balance Sheets

 

 

Net Amounts Of Assets

Presented In the

Consolidated Balance Sheets

 

 

Financial

Instruments

 

 

Cash

Collateral

Pledged

 

 

Net

Amount

 

As of December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

14,342

 

 

$

 

 

$

14,342

 

 

$

(8,175

)

 

$

 

 

$

6,167

 

As of December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

6,748

 

 

$

 

 

$

6,748

 

 

$

(5,643

)

 

$

 

 

$

1,105

 

 

The following table sets forth the offsetting of derivative liabilities for the periods presented (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the

Consolidated Balance Sheets

 

 

 

Gross Amounts of

Recognized Liabilities

 

 

Gross Amounts

Offset in the

Consolidated

Balance Sheets

 

 

Net Amounts Of Liabilities Presented In the Consolidated Balance Sheets

 

 

Financial

Instruments

 

 

Cash

Collateral

Pledged

 

 

Net

Amount

 

As of December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

8,175

 

 

$

 

 

$

8,175

 

 

$

(8,175

)

 

$

 

 

$

 

As of December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

6,780

 

 

$

 

 

$

6,780

 

 

$

(5,643

)

 

$

 

 

$

1,137

 

 

Stockholders' Equity
Stockholders' Equity

15. Stockholders’ Equity:

Share Repurchase Programs:

From time to time, the Company’s Board of Directors has approved plans under which the Company may at its discretion purchase shares of its common stock in the open market or through privately negotiated transactions. In July 2014, the Company announced that its Board of Directors had approved a new share repurchase plan (“the 2014 repurchase plan”) under which the Company may at its discretion purchase shares in the open market with an aggregate value of up to $200.0 million. The Company expects to execute this new authorization over the next two years and to fund the share repurchases through cash on hand and future cash flow from operations. In 2014, the Company purchased 3.8 million shares of common stock for cash of $50.0 million from the open market and received 1.5 million shares upon settlement of the accelerated share repurchase contracts as discussed below. In 2013, the Company purchased 45.2 million shares of common stock for cash of $502.3 million, including the shares purchased through a tender offer and an accelerated share repurchase programs as discussed below. The purchase price for the shares of the Company’s stock repurchased is recorded as a reduction to stockholders’ equity. The excess of the cost of treasury stock that is retired over its par value and the portion allocated to additional paid-in capital based on the calculated average price in equity is recorded as a charge to retained earnings.

In September 2013, the Company announced that its Board of Directors had authorized the repurchase of $400.0 million, or approximately 20 percent, of the Company’s outstanding common stock (“Return of Capital Program”), through a $250.0 million modified “Dutch Auction” self-tender offer (the “Tender Offer”) and subsequent open market purchases or privately negotiated transactions. The Company funded the program with $150.0 million in cash and its $250.0 million Term Loan (see Note 9).

Modified “Dutch Auction” Self-Tender Offer

The Tender Offer expired on October 30, 2013. The Company accepted for payment an aggregate of 27.4 million shares of its common stock at a purchase price of $10.40 per share, for an aggregate cost of approximately $285.4 million, excluding fees and expenses relating to the Tender Offer. The excess of the purchase price over the fair value on the date the shares were tendered was not material and no charge was recorded in the Company’s Consolidated Statements of Operations. The costs associated with the Tender Offer were accounted for as an adjustment to the stockholders’ equity.

Accelerated Share Repurchase Agreements

On December 4, 2013, the Company entered into separate accelerated share repurchase (“ASR”) agreements with two financial institutions to repurchase an aggregate of $114.6 million of common stock as part of the last phase of the Company’s $400.0 million Return of Capital Program. Under the terms of the ASR agreements, the Company paid an aggregate $114.6 million of cash and received an initial delivery of approximately 8.0 million shares in December 2013. The ASR contracts were settled in June 2014, whereby the Company received an additional 1.5 million shares upon settlement. The aggregate 9.5 million shares ultimately purchased under the ASR program was determined based on the Company’s volume-weighted average stock price (“VWAP”) less an agreed upon discount during the term of the transactions. Total shares repurchased were immediately retired upon delivery and accounted for as a reduction to stockholders’ equity. The costs associated with the ASR transactions were recorded as an adjustment to the stockholders’ equity. Additionally, the Company accounted for the ASR transactions as repurchases of common stock for the purpose of calculating its earnings per share when the shares were received.  

Accumulated Other Comprehensive Income:

The following table summarizes the changes in accumulated other comprehensive income, net of tax, by component for the periods presented (in thousands). The tax effects were not shown separately, as the impacts were not material.

 

 

 

Unrealized

Gains and

Losses on

Cash Flow

Hedges

 

 

Unrealized Gains

and Losses on

Available-for-

Sale Securities

 

 

Foreign Currency

Translation

 

 

Total

 

Balance as of December 31, 2012

 

$

1,014

 

 

$

2

 

 

$

3,180

 

 

$

4,196

 

Other comprehensive income (loss) before

   reclassifications

 

 

1,374

 

 

 

18

 

 

 

1,039

 

 

 

2,431

 

Amounts reclassified from accumulated

   other comprehensive income (a)

 

 

(2,308

)

 

 

53

 

 

 

 

 

 

(2,255

)

Net current-period other comprehensive

   income (loss)

 

 

(934

)

 

 

71

 

 

 

1,039

 

 

 

176

 

Balance as of December 31, 2013

 

$

80

 

 

$

73

 

 

$

4,219

 

 

$

4,372

 

Other comprehensive income (loss) before

   reclassifications

 

 

3,627

 

 

 

(115

)

 

 

(1,422

)

 

 

2,090

 

Amounts reclassified from accumulated

   other comprehensive income (a)

 

 

(2,341

)

 

 

(10

)

 

 

 

 

 

(2,351

)

Net current-period other comprehensive

   income (loss)

 

 

1,286

 

 

 

(125

)

 

 

(1,422

)

 

 

(261

)

Balance as of December 31, 2014

 

$

1,366

 

 

$

(52

)

 

$

2,797

 

 

$

4,111

 

 

(a)

See Note 14 for details of gains and losses, net of taxes, reclassified out of accumulated other comprehensive income into net income related to cash flow hedges and each line item of net income affected by the reclassification. Gains and losses related to available-for-sale securities were reclassified into interest and other income (expense), net in the Consolidated Statements of Operations, net of taxes.

 

Stock-Based Employee Benefit Plans
Stock-Based Employee Benefit Plans

16. Stock-Based Employee Benefit Plans:

Equity Incentive Plans

Polycom’s equity incentive plans provide for, among other award types, stock options, restricted stock units, and performance shares to be granted to employees and non-employee directors. On May 26, 2011, stockholders approved the 2011 Equity Incentive Plan (“2011 Plan”) and reserved for issuance under the 2011 Plan 19,800,000 shares, terminating any remaining shares available for grant under the 2004 Equity Incentive Plan (“2004 Plan”) as of such date. On June 5, 2013, shareholders approved the addition of 10,500,000 shares to the available shares for issuance under the 2011 Plan. Additionally, to the extent any shares, not to exceed 13,636,548 shares, would have been returned to our 2004 Plan after May 26, 2011, on account of the expiration, cancellation or forfeiture of awards granted under our 1996 Stock Incentive Plan or the 2004 Plan, those shares instead have been added to the reserve of shares available under the 2011 Plan.

Activity under the above plans for the year ended December 31, 2014 was as follows:

 

 

 

Shares

Available for

Grant (1)

 

Balances, December 31, 2013

 

 

14,272,794

 

Performance shares granted (2)

 

 

(1,122,849

)

Performance shares forfeited

 

 

2,199,968

 

Restricted stock units granted

 

 

(4,705,549

)

Restricted stock units forfeited

 

 

2,471,450

 

Options granted

 

 

 

Options forfeited

 

 

90,156

 

Options forfeited under ViVu Plan (3)

 

 

(70

)

Options expired

 

 

233,532

 

Balances, December 31, 2014

 

 

13,439,432

 

 

(1)

For purposes of this table, shares are counted on a fungible basis (i.e., at a higher multiplier than one-for-one) for full value award activity.

(2)

Includes 25,666 additional shares (39,526 shares applying the applicable fungible ratio) resulting from above target performance.

(3)

The Company acquired the outstanding unvested stock options under the ViVu, Inc. 2008 Equity Incentive Plan as a result of its acquisition of ViVu, Inc. in 2011.

Stock Options:

Under the terms of the 2004 Plan and the 2011 Plan, options may not be granted at prices lower than fair market value at the date of grant. Options granted expire seven years from the date of grant and are only exercisable upon vesting. The Company settles employee stock option exercises with newly issued common shares. In 2012, the Company granted 479,571 non-qualified stock options to certain employees. The weighted-average estimated fair value of those options was $4.45 per share. Per the terms of the 2012 option grant, 50% of the options vested on the one year anniversary of the grant date and the remaining 50% vested on the second anniversary of the grant date. There were no stock options granted in 2014 and 2013.

Activity under the stock option plans for the year ended December 31, 2014 was as follows:

 

 

 

Outstanding Options

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Weighted Avg

Exercise Price

 

 

Weighted Avg

Contractual

Term (Years)

 

 

Aggregate

Intrinsic

Value (in

thousands)

 

Balances, December 31, 2013

 

 

697,218

 

 

$

13.64

 

 

 

 

 

 

 

 

 

Options granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercised

 

 

(133,037

)

 

$

11.37

 

 

 

 

 

 

 

 

 

Options forfeited

 

 

(90,156

)

 

$

14.50

 

 

 

 

 

 

 

 

 

Options expired

 

 

(233,532

)

 

$

16.67

 

 

 

 

 

 

 

 

 

Balances, December 31, 2014

 

 

240,493

 

 

$

11.62

 

 

 

3.92

 

 

$

451,780

 

All stock options granted were fully vested and exercisable as of December 31, 2014. The total pre-tax intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $0.2 million, $0.3 million and $3.1 million, respectively.

The options outstanding and currently exercisable by exercise price at December 31, 2014 are as follows:

 

 

 

 

 

Stock Options Outstanding and Exercisable

 

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Weighted

Average

Remaining

Contractual

Life (Yrs)

 

 

Weighted Average

Exercise Price

 

 

$

0.75

 

 

 

42

 

 

 

5.05

 

 

$

0.75

 

 

$

11.61

 

 

 

220,502

 

 

 

4.27

 

 

$

11.61

 

 

$11.67 - $11.80

 

 

 

19,949

 

 

 

0.15

 

 

$

11.77

 

 

 

 

 

 

 

240,493

 

 

 

3.92

 

 

$

11.62

 

 

 

As of December 31, 2013, and 2012, 525,180, and 963,873 outstanding options were exercisable at a weighted average exercise price of $14.31, and $13.22, respectively. As of December 31, 2014, total compensation cost related to stock options not yet recognized was immaterial.

Performance Shares and Restricted Stock Units:

The Compensation Committee of the Board of Directors may also grant performance shares and restricted stock units (“RSUs”) under the 2011 Plan to officers, non-employee directors, and certain other employees as a component of the Company’s broad-based equity compensation program. Performance shares represent a commitment by the Company to deliver shares of Polycom common stock at a future point in time, subject to the fulfillment by the Company of pre-defined performance criteria. Such awards will be earned only if performance targets over the performance periods established by or under the direction of the Compensation Committee are met. The number of performance shares subject to vesting is determined at the end of a given performance period. Generally, if the performance criteria are deemed achieved, performance shares will vest from one to three years from the anniversary of the grant date. RSUs are time-based awards that generally vest over a period of one to three years from the date of grant.

The Company granted performance shares to certain employees and executives, which contain a market condition based on Total Shareholder Return (TSR) and which measure the Company’s relative performance against the NASDAQ Composite Index. Such performance shares will be delivered in common stock at the end of the vesting period based on the Company’s actual performance compared to the target performance criteria and may equal from zero percent (0%) to one hundred fifty percent (150%) of the target award. The fair value of a performance share with a market condition is estimated on the date of award, using a Monte Carlo simulation model to estimate the total return ranking of the Company’s stock among the NASDAQ Composite Index companies over each performance period.

The Company also granted RSUs. The fair value of RSUs is based on the closing market price of the Company’s common stock on the date of award. The awards will be delivered in common stock at the end of each vesting period. Stock-based compensation expense for the RSUs is recognized using the graded vesting method.

In addition, the Company granted non-employee directors annual awards of RSUs. The awards vest quarterly over approximately one year from the date of grant. The fair value of these awards is the closing market price of the Company’s common stock on the date of grant. Stock-based compensation expense for these awards is amortized over six months from the date of grant due to voluntary termination provisions contained in the underlying agreements.

The following table summarizes the changes in unvested performance shares and RSUs and non-employee director RSUs for 2014:

 

 

 

Number of

Shares (1)

 

 

Weighted Average

Grant Date

Fair Value

 

Unvested shares at December 31, 2013

 

 

9,205,462

 

 

$

12.59

 

Performance shares granted (2)

 

 

729,122

 

 

$

13.64

 

Restricted stock units granted (3)

 

 

3,055,551

 

 

$

12.96

 

Performance shares vested and issued

 

 

(164,995

)

 

$

9.60

 

Restricted stock units vested and issued

 

 

(3,302,419

)

 

$

13.48

 

Performance shares forfeited

 

 

(1,232,780

)

 

$

14.66

 

Restricted stock units forfeited

 

 

(1,464,250

)

 

$

12.01

 

Unvested shares at December 31, 2014

 

 

6,825,691

 

 

$

12.26

 

 

(1)

For the purposes of this table, shares are counted on a one-for-one basis, not on a fungible share counting basis.

(2)

Includes 25,666 additional shares resulting from above target performance.

(3)

Includes 140,000 restricted stock units granted to non-employee directors.

As of December 31, 2014, there was approximately $37.5 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted-average period of one year. The total fair value of shares vested in 2014, 2013, and 2012 was $46.1 million, $44.2 million, and $43.4 million, respectively.

Employee Stock Purchase Plan:

During the third quarter of 2011, the Company revised the administration of its Employee Stock Purchase Plan (“ESPP”) from a six-month offering and purchase period to a two-year offering period with four six-month purchase periods. Under the current ESPP, the Company can grant stock purchase rights to all eligible employees during a two-year offering period with purchase dates at the end of each six-month purchase period (each January and July). Participants lock in a purchase price per share at the beginning of the offering period upon plan enrollment. If the stock price on any subsequent offering period enrollment date is less than the lock-in price, the ESPP has a reset feature that automatically withdraws and re-enrolls participants into a new two-year offering period. Further, the ESPP permits participants to increase or decrease contribution elections at the end of a purchase period for future purchase periods within the same offering period. Shares are purchased through employees’ payroll deductions, currently up to a maximum of 15% of employees’ compensation, at purchase prices equal to 85% of the lesser of the fair market value of the Company’s common stock at either the date of the employee’s entrance to the offering period or the purchase date. No participant may purchase more than $25,000 worth of common stock in any one calendar year period, or 10,000 shares of common stock on any one purchase date. As of December 31, 2014, there were 11,315,067 shares available to be issued under the ESPP. A total of 2,944,069 shares, 2,904,287 shares, and 1,867,683 shares were purchased in 2014, 2013, and 2012, respectively, at an average per share price of $7.55, $7.41, and $11.24, respectively.

During the three months ended March 31, 2012 and September 30, 2012, the Company modified the terms of certain existing awards under its ESPP as a result of the reset feature of the ESPP plan, and incurred a resultant cumulative $20.6 million of incremental expense to be recognized over the vesting term. Approximately $1.6 million, $8.8 million, and $10.2 million of the incremental expense was recognized in 2014, 2013, and 2012, respectively. Modification as a result of the reset feature of the ESPP plan occurred again during the three months ended September 30, 2013, while the resulting incremental expense was not material.

Stock-Based Compensation Expense:

The following table summarizes stock-based compensation expense recorded and its allocation within the Consolidated Statements of Operations for the periods presented (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Cost of sales - product

 

$

2,463

 

 

$

2,892

 

 

$

3,593

 

Cost of sales - service

 

 

4,293

 

 

 

5,852

 

 

 

6,611

 

Stock-based compensation expense included in cost of sales

 

 

6,756

 

 

 

8,744

 

 

 

10,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

14,893

 

 

 

26,570

 

 

 

36,791

 

Research and development

 

 

10,299

 

 

 

15,634

 

 

 

20,195

 

General and administrative

 

 

16,012

 

 

 

13,517

 

 

 

21,571

 

Stock-based compensation expense included in operating expenses

 

 

41,204

 

 

 

55,721

 

 

 

78,557

 

Stock-based compensation expense

 

 

47,960

 

 

 

64,465

 

 

 

88,761

 

Less: tax benefit

 

 

9,492

 

 

 

11,174

 

 

 

21,880

 

Stock-based compensation expense related to employee

   equity awards and employee stock purchases, net of tax

 

$

38,468

 

 

$

53,291

 

 

$

66,881

 

 

Stock-based compensation expense is not allocated to segments because it is separately maintained at the corporate level. As the stock-based compensation expense recognized in the Consolidated Statements of Operations is based on awards ultimately expected to vest, such amounts have been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant based on the Company’s historical experience and revised in subsequent periods if actual forfeitures differ from those estimates. During the three months ended March 31, 2014, the Company performed its annual review of assumptions, which resulted in an increase in the forfeiture rate. The effect of the change in the forfeiture rate decreased stock-based compensation expense by approximately $1.8 million which decreased the Company’s net loss by approximately $1.4 million or $0.01 per share in the three months ended March 31, 2014. There was no material impact in the remaining period of 2014. Additionally, during the three months ended March 31, 2014, the Company recorded a benefit of $2.1 million related to actual forfeitures of awards granted to former officers, and there was no such benefit recorded in the remaining period of 2014.

Valuation Assumptions of Stock Options and Stock Purchase Rights:

The weighted-average estimated fair value of stock options granted in 2012 was $4.45 per share. The Company did not grant any stock options in 2014 and 2013. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

 

 

 

2012

 

Expected volatility

 

 

51.24

%

Risk-free interest rate

 

 

0.5

%

Expected dividends

 

 

0.0

%

Expected life (yrs)

 

 

3.70

 

 

The estimated fair value per share of employee stock purchase rights granted pursuant to ESPP in 2014, 2013, and 2012 ranged from $2.80 to $4.48, from $2.60 to $4.57, and from $2.69 to $8.4, respectively, and was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

 

 

 

2014

 

2013

 

2012

 

Expected volatility

 

26.47-32.18%

 

42.40-48.89%

 

48.27-61.78%

 

Risk-free interest rate

 

0.05-0.47%

 

0.08-0.35%

 

0.09-0.24%

 

Expected dividends

 

0.0%

 

0.0%

 

 

0.0%

 

Expected life (yrs)

 

0.5-2.0

 

0.5-2.0

 

0.5-2.0

 

 

The fair value of stock options and employee stock purchase rights is recognized as expense using the graded vesting method.

The Company computed its expected volatility assumption based on blended volatility (50% historical volatility and 50% implied volatility). The selection of the blended volatility assumption was based upon the Company’s assessment that blended volatility is more representative of the Company’s future stock price trends as it weighs in the longer term historical volatility with the near term future implied volatility.

The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of the Company’s employee stock options and stock purchase rights.

The dividend yield assumption is based on the Company’s history of not paying dividends and no future expectations of dividend payouts.

The expected life of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules, and expectations of future employee behavior as influenced by changes to the terms of the Company’s stock-based awards. The expected life of employee stock purchase rights represents the contractual terms of the underlying program.

Employee Benefit Plan
Employee Benefit Plan

17. Employee Benefit Plan:

The Company has a defined contribution benefit plan under Section 401(k) of the Internal Revenue Code (the “Polycom 401(k) Plan”), which covers substantially all U.S. employees. Eligible employees may elect to contribute pre-tax amounts to the Polycom 401(k) Plan, through payroll deductions, subject to certain limitations. The Company does not offer its own stock as an investment option in the Polycom 401(k) Plan. The Company matches in cash 50% of the first 6% of compensation employees contribute to the Polycom 401(k) Plan, up to a certain maximum per participating employee per year. All matching contributions are 100% vested immediately.

The Company’s contributions to the Polycom 401(k) Plan totaled approximately $2.8 million, $3.0 million, $3.0 million in 2014, 2013, and 2012, respectively.

Income Taxes
Income Taxes

 

 

18. Income Taxes:

Income tax expense (benefit) consists of the following (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Income tax expense from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(2,843

)

 

$

(953

)

 

$

44,569

 

State

 

 

(235

)

 

 

(72

)

 

 

3,283

 

Foreign

 

 

8,352

 

 

 

8,604

 

 

 

9,488

 

 

 

$

5,274

 

 

$

7,579

 

 

$

57,340

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(2,562

)

 

$

(10,715

)

 

$

(13,372

)

State

 

 

(273

)

 

 

(818

)

 

 

(1,308

)

Foreign

 

 

(1,483

)

 

 

285

 

 

 

(3,193

)

 

 

$

(4,318

)

 

$

(11,248

)

 

$

(17,873

)

Total income tax expense (benefit) from continuing

   operations

 

$

956

 

 

$

(3,669

)

 

$

39,467

 

Income tax expense (benefit) from discontinued operations

 

$

 

 

$

96

 

 

$

(29,311

)

 

Included in income tax benefit from discontinued operations in 2012 is a tax benefit of $35.4 million recorded on the sale of the Company’s EWS business, as discussed in Note 4.

Income from continuing operations before income taxes is categorized geographically as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

United States

 

$

(2,317

)

 

$

(17,823

)

 

$

(37,025

)

Foreign

 

 

45,332

 

 

 

(4,381

)

 

 

39,523

 

Total income (loss) from continuing operations before

   income taxes

 

$

43,015

 

 

$

(22,204

)

 

$

2,498

 

 

The Company’s tax provision from continuing operations differs from the provision computed using statutory tax rates as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Federal tax at statutory rate

 

$

15,055

 

 

$

(7,771

)

 

$

2,194

 

State taxes, net of federal benefit

 

 

(508

)

 

 

(1,571

)

 

 

2,354

 

Non-deductible share-based compensation expense

 

 

(346

)

 

 

2,900

 

 

 

6,143

 

Foreign income at tax rates different than U.S. rates

 

 

(14,025

)

 

 

7,104

 

 

 

(10,176

)

Changes in reserves for uncertain tax positions

 

 

(756

)

 

 

(2,497

)

 

 

(3,926

)

Research and development tax credit

 

 

(1,898

)

 

 

(4,243

)

 

 

(268

)

Domestic production activities deduction

 

 

(22

)

 

 

(757

)

 

 

(1,136

)

Gain on intercompany debt

 

 

 

 

 

 

 

 

36,163

 

Non-deductible executive compensation expense

 

 

778

 

 

 

460

 

 

 

358

 

Subpart F income

 

 

679

 

 

 

716

 

 

 

657

 

Non-deductible acquisition and divestiture costs

 

 

(4

)

 

 

(355

)

 

 

4,782

 

Sale of intellectual property

 

 

2,115

 

 

 

2,947

 

 

 

2,356

 

Foreign tax credit

 

 

(317

)

 

 

(359

)

 

 

(264

)

Other

 

 

205

 

 

 

(243

)

 

 

230

 

Tax provision (benefit)

 

$

956

 

 

$

(3,669

)

 

$

39,467

 

 

During 2012, the Company implemented a global restructuring program that was designed to accommodate the trend toward more software and virtual based solutions versus a traditional hardware distribution model. As part of the restructuring, $38.8 million in federal and state taxes were recorded in 2012 on the financing of the global restructuring.

The tax effects of temporary differences that give rise to the deferred tax assets (liabilities) are presented below (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Property and equipment, net, principally due to difference in

   depreciation

 

$

7,534

 

 

$

6,508

 

Capitalized research and development costs

 

 

 

 

 

425

 

Acquired intangibles

 

 

4,490

 

 

 

3,742

 

Inventory

 

 

5,685

 

 

 

6,910

 

Restructuring reserves

 

 

13,722

 

 

 

10,214

 

Deferred revenue

 

 

10,964

 

 

 

13,699

 

Other reserves

 

 

20,400

 

 

 

17,570

 

Share-based compensation

 

 

11,910

 

 

 

15,906

 

Net operating loss and capital loss carryforwards

 

 

2,535

 

 

 

2,511

 

Tax credit carryforwards

 

 

21,237

 

 

 

16,457

 

Deferred tax asset

 

 

98,477

 

 

 

93,942

 

Capitalized research and development costs

 

 

(766

)

 

 

 

Acquired intangibles

 

 

(1,843

)

 

 

(2,249

)

Deferred tax asset before valuation allowance

 

$

95,868

 

 

$

91,693

 

Valuation allowance

 

 

(3,216

)

 

 

(3,359

)

Deferred tax asset, net of valuation allowance

 

$

92,652

 

 

$

88,334

 

As of December 31, 2014, the Company had approximately $1.4 million in tax effected net operating loss carryforwards, $1.1 million in tax effected capital loss carryforwards, and $21.2 million in tax effected credit carryforwards. All of the net operating loss carryforwards and $0.1 million in credits relate to acquisitions and, as a result, are limited in the amount that can be recognized in any one year. The capital loss and net operating loss carryforward assets and tax credit carryforwards begin to expire in 2015. Included in the net deferred tax asset balance is a $3.2 million valuation allowance, $2.7 million of which relates to research credits in a jurisdiction with a history of credits in excess of taxable profits, and $0.5 million of which relates to foreign tax credit carryforwards.

The Company provides for U.S. income taxes on the earnings of foreign subsidiaries unless they are considered permanently invested outside of the U.S. At December 31, 2014, the cumulative amount of earnings upon which U.S. income tax has not been provided is approximately $339.6 million. It is not practicable to determine the income tax liability that might be incurred if these earnings were to be repatriated to the U.S.

 

Excess tax benefits associated with stock option exercises are credited to stockholders’ equity. The reduction of income taxes payable resulting from the exercise of employee stock options and other employee stock programs that was credited to stockholders’ equity was approximately $5.1 million for the year ended December 31, 2012.

 

As a result of certain employment and capital investment actions, the Company’s income in certain foreign countries is subject to reduced tax rates. A portion of these tax incentives will expire in 2015, and the majority of the remaining tax incentives will expire in 2016. The income tax benefit attributable to tax incentives was estimated to be $3.1 million ($0.02 per share) in 2014, of which approximately $0.2 million is based on tax incentives that will expire at the end of fiscal 2015. As of December 31, 2013 and December 31, 2012, the income tax benefits attributable to tax incentives were estimated to be $1.7 million and $6.5 million ($0.01 and $0.04 per share) for each of the respective years.

In 2014 and 2013, the Company recorded reserve reductions of $0.9 million and $2.4 million, respectively, all of which were due to the expiration of statutes of limitation in both the U.S and foreign jurisdictions. In 2012, the Company recorded reserve reductions of $10.0 million, $0.8 million of which was paid in settlement of a multi-year state tax audit, and $5.7 million of which was due to a reduction in unrecognized tax benefits for research credits from acquired companies. The expiration of statutes of limitation in both the U.S. and foreign jurisdictions also resulted in reserve releases of $3.5 million.

The aggregate changes in the balance of the Company’s gross unrecognized tax benefits were as follows for the periods indicated (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Beginning balance

 

$

22,012

 

 

$

23,049

 

 

$

32,408

 

Additions based on tax positions taken during a prior period

 

 

 

 

 

 

 

 

304

 

Reductions based on tax positions taken during a prior

   period

 

 

 

 

 

 

 

 

(5,690

)

Additions based on tax positions taken during the current

   period

 

 

531

 

 

 

1,414

 

 

 

310

 

Reductions related to settlement of tax matters

 

 

 

 

 

 

 

 

(807

)

Reductions related to a lapse of applicable statue of

   limitations

 

 

(901

)

 

 

(2,451

)

 

 

(3,476

)

Ending balance

 

$

21,642

 

 

$

22,012

 

 

$

23,049

 

 

The unrecognized tax benefits would affect income tax expense if recognized. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2014 and December 31, 2013, the Company had approximately $1.6 million and $1.5 million, respectively, of accrued interest and penalties related to uncertain tax positions.

By the end of 2015, uncertain tax positions may be reduced as a result of a lapse of the applicable statutes of limitations or the resolutions of ongoing audits in various jurisdictions. The Company anticipates that the reduction in 2015 will approximate $0.6 million and the reserve releases would be recorded as adjustments to tax expense in the period released.

The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2011. Foreign income tax matters for most foreign jurisdictions have been concluded for years through 2008, except India which is concluded through March 2007, and Brazil, China, Israel, Singapore and the United Kingdom, which have been concluded for years through 2009 and France which has been concluded for years through 2010.

Net Income (Loss) Per Share
Net Income (Loss) Per Share

19. Net Income (Loss) Per Share:

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per-share amounts):

 

 

 

Year ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

42,059

 

 

$

(18,535

)

 

$

(36,969

)

Income from discontinued operations, net of taxes

 

 

 

 

 

 

 

 

9,888

 

Gain from sale of discontinued operations, net of taxes

 

 

 

 

 

459

 

 

 

35,425

 

Net income (loss)

 

$

42,059

 

 

$

(18,076

)

 

$

8,344

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

 

136,801

 

 

 

167,272

 

 

 

176,878

 

Effect of dilutive potential common shares

 

 

5,204

 

 

 

 

 

 

 

Weighted average shares outstanding, diluted

 

 

142,005

 

 

 

167,272

 

 

 

176,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share from continuing operations

 

$

0.31

 

 

$

(0.11

)

 

$

(0.21

)

Income per share from discontinued operations, net of

   taxes

 

 

 

 

 

 

 

 

0.06

 

Gain per share from sale of discontinued operations, net

   of taxes

 

 

 

 

 

 

 

 

0.20

 

Basic net income (loss) per share

 

$

0.31

 

 

$

(0.11

)

 

$

0.05

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share from continuing operations

 

$

0.30

 

 

$

(0.11

)

 

$

(0.21

)

Income per share from discontinued operations, net of

   taxes

 

 

 

 

 

 

 

 

0.06

 

Gain per share from sale of discontinued operations, net

   of taxes

 

 

 

 

 

 

 

 

0.20

 

Diluted net income (loss) per share

 

$

0.30

 

 

$

(0.11

)

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Antidilutive employee stock-based awards, excluded

 

 

213

 

 

 

5,045

 

 

 

4,998

 

 

The basic and diluted weighted average shares outstanding for 2013 reflected the 27.4 million shares of common stock repurchased and retired in October 2013 pursuant to the Tender Offer program and the initial delivery of 8.0 million shares of common stock repurchased and retired in December 2013 pursuant to the ASR agreements. The basic and diluted weighted average shares outstanding for 2014 reflected the additional 1.5 million shares that the Company received in June 2014 upon settlement of the ASR agreements. See Note 15 for further information.  

Diluted shares outstanding include the dilutive effect of in-the-money employee equity share options, unvested performance shares, restricted stock units, and stock purchase rights under ESPP. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Potentially dilutive shares are excluded from the computation of diluted net income (loss) per share when their effect is antidilutive.

 

Business Segment Information
Business Segment Information

20. Business Segment Information:

The Company conducts its business globally and is managed geographically in three segments: (1) Americas, which consist of North America and CALA reporting units, (2) EMEA and (3) APAC. The segments are determined in accordance with how management views and evaluates the Company’s business and allocates its resources, and based on the criteria as outlined in the authoritative guidance.

Segment Revenue and Profit

Segment revenues consist of product and service revenues. Product revenues are attributed to a segment based on the ordering location of the customer. For internal reporting purposes and determination of segment contribution margins, geographic segment product revenues may differ slightly from actual geographic revenues due to internal revenue allocations between the Company’s segments. Service revenues are generally attributed to a segment based on the end-user’s location where services are performed. A significant portion of each segment’s expenses arise from shared services and infrastructure that Polycom has historically allocated to the segments in order to realize economies of scale and to use resources efficiently.

Segment contribution margin includes all geographic segment revenues less the related cost of sales and direct sales and marketing expenses. Management allocates some infrastructure costs, such as facilities and IT costs, in determining segment contribution margins. Contribution margin is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include corporate manufacturing costs, sales and marketing costs other than direct sales and marketing expenses, research and development expenses, general and administrative costs, such as legal and accounting, stock-based compensation costs, transaction-related costs, amortization of purchased intangibles, restructuring costs and interest and other income (expense), net.

Segment Data

The results of the reportable segments are derived directly from Polycom’s management reporting system. The results are based on Polycom’s method of internal reporting and are not reported in conformity with accounting principles generally accepted in the United States. Management measures the performance of each segment based on several metrics, including contribution margin as defined above. Asset data, with the exception of gross accounts receivable, is not reviewed by management at the segment level.

Financial information for each reportable geographical segment as of and for the fiscal years ended December 31, 2014, 2013, and 2012, based on the Company’s internal management system and as utilized by the Company’s Chief Operating Decision Maker (“CODM”), its Chief Executive Officer, is as follows (in thousands):

 

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Total

 

2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

662,533

 

 

$

349,821

 

 

$

332,800

 

 

$

1,345,154

 

% of total revenue

 

 

49

%

 

 

26

%

 

 

25

%

 

 

100

%

Contribution margin

 

$

270,265

 

 

$

150,426

 

 

$

140,365

 

 

$

561,056

 

% of segment revenue

 

 

41

%

 

 

43

%

 

 

42

%

 

 

42

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

694,522

 

 

$

338,035

 

 

$

335,832

 

 

$

1,368,389

 

% of total revenue

 

 

50

%

 

 

25

%

 

 

25

%

 

 

100

%

Contribution margin

 

$

270,786

 

 

$

142,686

 

 

$

136,462

 

 

$

549,934

 

% of segment revenue

 

 

39

%

 

 

42

%

 

 

41

%

 

 

40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

689,099

 

 

$

345,723

 

 

$

357,806

 

 

$

1,392,628

 

% of total revenue

 

 

49

%

 

 

25

%

 

 

26

%

 

 

100

%

Contribution margin

 

$

281,229

 

 

$

138,886

 

 

$

147,699

 

 

$

567,814

 

% of segment revenue

 

 

41

%

 

 

40

%

 

 

41

%

 

 

41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross accounts receivable

 

$

88,316

 

 

$

62,540

 

 

$

63,808

 

 

$

214,664

 

% of total gross accounts receivable

 

 

41

%

 

 

29

%

 

 

30

%

 

 

100

%

At December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross accounts receivable

 

$

86,243

 

 

$

71,970

 

 

$

66,921

 

 

$

225,134

 

% of total gross accounts receivable

 

 

38

%

 

 

32

%

 

 

30

%

 

 

100

%

 

*The United States and China, individually, accounted for more than 10% of the Company’s revenues in 2014, 2013 and 2012. Net revenues in the United States were $565.9 million, $589.6 million, and $583.0 million for the years ended December 31, 2014, 2013, and 2012, respectively. Net revenues in China were $144.7 million, $147.3 million, and $159.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. During 2014, 2013, and 2012, one customer, ScanSource, accounted for 17%, 16%, and 14%, respectively, of the Company’s revenues. At December 31, 2014, 2013, ScanSource accounted for 19% and 11%, respectively, of total gross accounts receivable.

The following tables set forth the reconciliation of segment information to Polycom consolidated totals (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Segment contribution margin

 

$

561,056

 

 

$

549,934

 

 

$

567,814

 

Corporate and unallocated costs

 

 

(409,700

)

 

 

(430,471

)

 

 

(418,465

)

Stock-based compensation expense

 

 

(47,960

)

 

 

(64,465

)

 

 

(88,761

)

Effect of stock-based compensation cost on warranty

   expense

 

 

(494

)

 

 

(547

)

 

 

(669

)

Amortization of purchased intangibles

 

 

(12,816

)

 

 

(19,750

)

 

 

(17,465

)

Restructuring costs

 

 

(40,347

)

 

 

(48,470

)

 

 

(22,024

)

Litigation reserves and payments

 

 

(3,130

)

 

 

 

 

 

 

Transaction-related costs

 

 

(156

)

 

 

(3,424

)

 

 

(14,064

)

Interest and other income (expense), net

 

 

(3,438

)

 

 

(5,011

)

 

 

(3,868

)

Income (loss) from continuing operations before

   provision for (benefit from) income taxes

 

$

43,015

 

 

$

(22,204

)

 

$

2,498

 

 

The following table sets forth the Company’s revenues by groups of similar products and services as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

UC group systems

 

$

868,311

 

 

$

904,923

 

 

$

956,153

 

UC personal devices

 

 

236,781

 

 

 

219,103

 

 

 

180,939

 

UC platform

 

 

240,062

 

 

 

244,363

 

 

 

255,536

 

Total

 

$

1,345,154

 

 

$

1,368,389

 

 

$

1,392,628

 

 

The Company’s fixed assets, net of accumulated depreciation, are located in the following geographical areas (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

United States

 

$

78,692

 

 

$

79,345

 

EMEA

 

 

11,254

 

 

 

13,036

 

APAC

 

 

17,663

 

 

 

21,403

 

Other

 

 

1,586

 

 

 

1,373

 

Total

 

$

109,195

 

 

$

115,157

 

 

No single country outside of the United States has more than 10% of total net fixed assets as of December 31, 2014 and 2013.

Valuation And Qualifying Accounts
Valuation And Qualifying Accounts

FINANCIAL STATEMENT SCHEDULE—SCHEDULE II

POLYCOM, INC.

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

 

 

 

Balance at

Beginning

of Year

 

 

Additions

 

 

Deductions

 

 

Balance at

End of

Year

 

Year ended December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

2,827

 

 

$

600

 

 

$

(387

)

 

$

3,040

 

Sales returns and allowances

 

$

34,654

 

 

$

86,649

 

 

$

(83,953

)

 

$

37,350

 

Income tax valuation allowances

 

$

3,359

 

 

$

 

 

$

(143

)

 

$

3,216

 

Year ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

2,921

 

 

$

 

 

$

(94

)

 

$

2,827

 

Sales returns and allowances

 

$

37,422

 

 

$

93,101

 

 

$

(95,869

)

 

$

34,654

 

Income tax valuation allowances

 

$

3,161

 

 

$

460

 

 

$

(262

)

 

$

3,359

 

Year ended December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

1,732

 

 

$

1,189

 

 

$

 

 

$

2,921

 

Sales returns and allowances

 

$

30,602

 

 

$

91,356

 

 

$

(84,536

)

 

$

37,422

 

Income tax valuation allowances

 

$

3,301

 

 

$

 

 

$

(140

)

 

$

3,161

 

 

Description of Business and Basis of Presentation (Policies)

Description of Business:

Polycom, Inc. (“Polycom” or “the Company”) is a leading global provider of high-quality, easy-to-use communication solutions that enable enterprise, government, education and healthcare customers to more effectively collaborate over distance, time zones and organizational boundaries. The Company’s solutions are built on architectures that enable unified video, voice and content communications.

Polycom was incorporated in the state of Delaware in December 1990 and trades on the NASDAQ Global Select Market under the ticker symbol “PLCM”.

Principles of Accounting and Consolidation:

These Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

 

Use of Estimates:

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements. Actual results could differ from those estimates.

Summary of Significant Accounting Policies: (Policies)

Cash and Cash Equivalents:

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Investments:

Investments are classified as short-term or long-term based on their remaining maturities. The Company’s short-term and long-term investments as of December 31, 2014 are comprised of U.S. and non-U.S. government securities, U.S. agency securities and corporate debt securities. All investments are held in the Company’s name at a limited number of major financial institutions. At December 31, 2014 and 2013, all of the Company’s investments were classified as available-for-sale and unrealized gains and losses on investments are recorded as a separate component of “Accumulated other comprehensive income” in the Consolidated Statements of Stockholders’ Equity. The Company reviews the individual securities in its portfolio to determine whether a decline in a security’s fair value below the amortized cost basis is other-than-temporary. If the decline in fair value is considered to be other-than-temporary, the cost basis of the individual security is written down to its fair value as a new cost basis. If the investments are sold at a loss or are considered to have other-than-temporarily declined in value, the amount of the loss or write-down is accounted for as a realized loss and included in earnings. The specific identification method is used to determine the cost of securities disposed of, with realized gains and losses reflected in “Interest and other income (expense), net” in the Consolidated Statements of Operations.

Allowance for Doubtful Accounts:

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company regularly performs credit evaluations of its customers' financial condition and considers factors such as historical experience, credit quality, age of the accounts receivable balances, and geographic or country-specific risks and economic conditions that may affect a customer's ability to pay. The allowance for doubtful accounts is reviewed quarterly and adjusted if necessary based on the Company's assessment of its customers' abilities to pay. If the financial conditions of the Company’s customers were to deteriorate, adversely affecting their abilities to make payments, additional allowances would be required.

Inventories:

Inventories are valued at the lower of cost or market with cost computed on a first-in, first-out (FIFO) basis. Consideration is given to obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value. The Company records write-downs for excess and obsolete inventory equal to the difference between the carrying value of inventory and the estimated future selling price based upon assumptions about future product life-cycles, product demand and market conditions. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Property and Equipment:

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally from one to seven years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the related assets, typically three to thirteen years. Disposals of capital equipment are recorded by removing the costs and accumulated depreciation from the accounts and gains or losses on disposals are included in “Interest and other income (expense), net” in the Consolidated Statements of Operations.

Goodwill:

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is regularly reviewed for potential impairment. The Company reviews goodwill for impairment annually during the fourth quarter of each calendar year, or whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. The Company performs an initial qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, after the initial qualitative assessment, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed; however, if the Company concludes otherwise, then the Company is required to perform a two-step impairment test to assess if a potential impairment has occurred and measure an impairment loss, if any. For further discussion of goodwill and its impairment review, see Note 6.

Long-Lived Assets:

Purchased intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from several months to six years. Purchased intangible assets determined to have indefinite useful lives are not amortized. Long-lived assets, including purchased intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset or group of assets and their eventual disposition. The Company periodically assesses the remaining useful lives of long-lived assets. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or estimated fair value less costs to sell.

Guarantees:

Warranty

The Company provides for the estimated costs of product warranties at the time revenue is recognized. The specific terms and conditions of those warranties vary depending upon the product sold. In the case of hardware products, warranties generally start from the delivery date and continue for one year. Software products generally carry a 90-day warranty from the date of purchase. The Company’s liability under warranties on software products is to provide a corrected copy of any portion of the software found not to be in substantial compliance with the agreed upon specifications. Factors that affect the Company’s warranty obligation include product failure rates, material usage and service delivery costs incurred in correcting product failures. The Company assesses the adequacy of the recorded warranty liabilities every quarter and makes adjustments to the liability if necessary.

Deferred Services Revenue

The Company offers maintenance contracts for sale on most of its products which allow for customers to receive service and support in addition to, or subsequent to, the expiration of the contractual product warranty. The Company also provides managed services to its customers under contractual arrangements. The Company recognizes the maintenance and managed services revenues from these contracts over the life of the service contract.

Officer and Director Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, the Company has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited; however, the Company has a director and officer insurance policy that mitigates the Company’s exposure and enables the Company to recover a portion of any future amounts paid. As a result of the Company’s insurance policy coverage, the Company believes the estimated fair value of these indemnification obligations is not material.

Other Indemnifications

As is customary in the Company’s industry, as provided for in local law in the U.S. and other jurisdictions, the Company’s standard contracts provide remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of its products. From time to time, the Company indemnifies customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of its products and services. In addition, from time to time the Company also provides protection to customers against claims related to undiscovered liabilities, additional product liabilities or environmental obligations.

Revenue Recognition:

The Company recognizes revenue when persuasive evidence of an arrangement exists, title and risk of loss have transferred, product payment is not contingent upon performance of installation or service obligations, the price is fixed or determinable, and collectability is reasonably assured. In instances where final acceptance of the product or service is specified by the customer, revenue is deferred until all acceptance criteria have been met. Additionally, the Company recognizes maintenance service revenues on its hardware and software products ratably over the service periods of one to five years, and other services upon the completion of installation or professional services provided.

Most of the Company’s products are integrated with software that is essential to the functionality of the equipment. Additionally, the Company provides unspecified software upgrades and enhancements related to most of these products through maintenance contracts.

A multiple-element arrangement includes the sale of one or more tangible product offerings with one or more associated services offerings, each of which are individually considered separate units of accounting. The Company allocates revenue to each element in a multiple-element arrangement based upon the relative selling price of each deliverable. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor specific objective evidence (“VSOE”) of selling price, if it exists, or third party evidence (“TPE”) of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses its best estimate of selling price (“ESP”) for that deliverable. Revenue allocated to each element is then recognized when the other revenue recognition criteria are met for each element.

VSOE is established based on the Company’s standard pricing and discounting practices for the specific product or service when sold separately. In determining VSOE, the Company requires that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range.

When VSOE cannot be established, the Company attempts to establish the selling price of each element based on TPE. TPE is determined based on competitor prices for similar deliverables when sold separately.

When the Company is unable to establish the selling price using VSOE or TPE, the Company uses ESP in its allocation of revenue for the arrangement. ESP represents the price at which the Company would transact a sale if the element were sold on a stand-alone basis. The Company determines ESP for a product by considering multiple factors including, but not limited to, geographies, market conditions, competitive landscape, and pricing practices. The determination of ESP is made based on review of historical sales price, taking into consideration the Company’s go-to-market strategy. Generally, the Company uses historical net selling prices to establish ESP. The Company regularly reviews its basis for establishing VSOE, TPE and ESP.

Sales Returns, Channel Partner Programs and Incentives

The Company’s contracts generally do not provide for a right of return on any of its products. However, a limited number of contracts contain stock rotation rights. The Company records an estimate of future returns based upon these contractual rights and its historical returns experience. The Company records estimated reductions to revenues for channel partner programs and incentive offerings including special pricing agreements, promotions and other volume-based incentives. The Company also accrues for co-op marketing funds as a marketing expense if the Company receives an identifiable benefit in exchange and can reasonably estimate the fair value of the identifiable benefit received; otherwise, it is recorded as a reduction to revenues.

Research and Development and Software Development Costs:

The Company expenses research and development costs as incurred.

Software development costs incurred prior to the establishment of technological feasibility are included in research and development costs as incurred. Eligible and material software development costs are capitalized upon the establishment of technological feasibility and before the general availability of such software products, including direct labor and related overhead costs, as well as stock-based compensation. The Company has defined technological feasibility as the establishment of a working model, which typically occurs when beta testing commences. The Company capitalized approximately $5.1 million and $2.4 million of development costs in 2014 and 2013, respectively, for software products to be marketed or sold to customers. There were no such costs capitalized in 2012 as the software development costs qualifying for capitalization were insignificant. The capitalized costs are included in “Other assets” in the Company’s Consolidated Balance Sheets and are being amortized on a product-by-product basis using the straight-line method over the estimated product life, generally three years, or on the ratio of current revenues to total projected product revenues, whichever is greater. Management believes that the capitalized software costs will be recoverable from future gross profits generated by these products.

Advertising:

The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2014, 2013, and 2012 was $13.6 million, $14.9 million, and $22.3 million, respectively.

Income Taxes:

The Company accounts for income taxes under the liability method, which recognizes deferred tax assets and liabilities based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized.

The Company recognizes and measures benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. Significant judgment is required to evaluate uncertain tax positions. The Company evaluates its uncertain tax positions on a quarterly basis. Evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in income tax expense in the period in which the change is made, which could have a material impact on the Company’s effective tax rate and operating results. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Foreign Currency Translation:

Assets and liabilities of non-U.S subsidiaries, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date and income and expense accounts are translated at average exchange rates in effect during the period. The resulting translation adjustments are directly recorded to a separate component of “Accumulated other comprehensive income” on the Consolidated Balance Sheets. Foreign exchange transaction gains and losses from the remeasurement of non-functional currency denominated assets and liabilities have not been significant to date and are included in the Company’s Consolidated Statements of Operations as part of “Interest and other income (expense), net”.

As a result of the sale of the Company’s former enterprise wireless voice solutions (the “EWS”) business in December 2012 (see Note 4), which included a wholly owned Danish subsidiary with a Danish Krone functional currency, the Company recognized the associated currency translation adjustment balance of $1.1 million which effectively reduced the gain from sale of the discontinued operations.

The following table sets forth the change of foreign currency translation adjustments during each reporting period and the balances as of December 31 (in thousands):

 

 

 

2014

 

 

2013

 

 

2012

 

Beginning balance

 

$

4,219

 

 

$

3,180

 

 

$

1,841

 

Foreign currency translation adjustments

 

 

(1,422

)

 

 

1,039

 

 

 

1,339

 

Ending balance

 

$

2,797

 

 

$

4,219

 

 

$

3,180

 

 

Derivative Instruments:

The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For a derivative instrument designated and qualifying as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a separate component of “Accumulated other comprehensive income” in the Consolidated Statements of Stockholders’ Equity and is subsequently reclassified into earnings when the hedged exposure affects earnings. The excluded and ineffective portions of the gain or loss are reported in earnings immediately. For derivative instruments that are not designated as cash flow hedges, changes in fair value are recognized in earnings in the period of change. The Company does not hold or issue derivative financial instruments for speculative trading purposes. The Company enters into derivatives only with counterparties that are among the largest U.S. banks, ranked by assets, in order to minimize its credit risk.

Net Income Per Share:

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the additional dilution from potential issuance of common stock, such as stock issuable pursuant to the exercise of stock options, unvested restricted stock units, and performance shares. Potentially dilutive shares are excluded from the computation of diluted net income per share when their effect is antidilutive.

Fair Value Measurements:

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices for similar assets in active markets, or identical or similar assets in inactive markets, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including its marketable securities and foreign currency contracts.

The Company’s cash equivalents and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using inputs such as quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices for identical assets in active markets include money market funds. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include U.S. Treasury securities and other government agencies, corporate bonds and commercial paper. Such instruments are generally classified within Level 2 of the fair value hierarchy. Level 2 instruments are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data.

The principal market where the Company executes its foreign currency contracts is the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants and the Company’s counterparties are large money center banks and regional banks. The Company’s foreign currency contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data sources such as spot rates, interest rate differentials rates and credit default rates, which do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

In addition, the Company has facilities-related liabilities related to restructuring which were calculated based on the discounted future lease payments less sublease assumptions. This non-recurring fair value measurement is classified as a Level 3 measurement under ASC 820. The key assumptions used in the valuation model include discount rates, cash flow projections and estimated sublease income. These assumptions involve significant judgment, and are based on management’s estimate of current and forecasted market conditions and are sensitive and susceptible to change. The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable, and other accrued liabilities approximate fair value due to their short-term maturities.

Stock-Based Compensation:

The Company’s stock-based compensation programs consist of grants of stock-based awards to employees and non-employee directors, including stock options, restricted stock units and performance shares, as well as purchase rights pursuant to the Company’s Employee Stock Purchase Plan (“ESPP”). Stock-based compensation expense based on the estimated fair value of these awards is charged to operations over the requisite service period, which is generally the vesting period, including the effect of forfeitures.

The fair value of stock option and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The fair value of restricted stock units is based on the market value of the Company’s common stock on the date of grant. The fair value of a performance share with a market condition is estimated on the date of award, using a Monte Carlo simulation model to estimate the total return ranking of the Company’s stock in relation to the target index of companies over each performance period. Stock-based compensation cost on performance shares with a market condition is not adjusted for subsequent changes regardless of the level of ultimate vesting.

Recent Pronouncements:

In January 2015, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update which simplifies income statement classification by removing the concept of extraordinary items from the US GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The new standard is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect any impact on the adoption of this standard on its Consolidated Financial Statements.

In August 2014, the FASB issued an accounting standard update related to the disclosures around going concern. The new standard provides guidance around management’s responsibility to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The new standard is effective for the annual periods and interim periods within those annual periods beginning after December 15, 2016. Early application is permitted. The Company does not expect any impact on the adoption of this standard on its Consolidated Financial Statements.

In May 2014, the FASB issued an accounting standard update which provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance is effective for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company has not yet selected a transition method nor has it determined the impact of adoption on its Consolidated Financial Statements.

In July 2013, the FASB issued an accounting standard update which clarifies that an unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The guidance is effective prospectively for reporting periods beginning after December 15, 2013. The Company adopted the guidance in 2014, and such adoption did not have a material impact on its Consolidated Financial Statements.

Summary of Significant Accounting Policies: (Tables)
Change of Foreign Currency Translation Adjustments

The following table sets forth the change of foreign currency translation adjustments during each reporting period and the balances as of December 31 (in thousands):

 

 

 

2014

 

 

2013

 

 

2012

 

Beginning balance

 

$

4,219

 

 

$

3,180

 

 

$

1,841

 

Foreign currency translation adjustments

 

 

(1,422

)

 

 

1,039

 

 

 

1,339

 

Ending balance

 

$

2,797

 

 

$

4,219

 

 

$

3,180

 

 

Discontinued Operations (Tables)
Discontinued Operations

Summarized results from discontinued operations were as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Revenues

 

$

 

 

$

 

 

$

71,133

 

Income from discontinued operations

 

 

 

 

 

 

 

 

15,973

 

Income tax provision

 

 

 

 

 

 

 

 

6,085

 

Net income from discontinued operations

 

$

 

 

$

 

 

$

9,888

 

 

The carrying amounts of the net assets sold at on December 4, 2012 were as follows (in thousands):

 

 

 

Amount

 

Assets:

 

 

 

 

Cash and cash equivalents

 

$

248

 

Trade receivables, net

 

 

7,221

 

Inventories

 

 

12,659

 

Deferred taxes

 

 

(306

)

Prepaid expense and other assets

 

 

295

 

Property and equipment, net

 

 

4,301

 

Goodwill

 

 

30,872

 

Purchased intangibles, net

 

 

5,724

 

Assets sold

 

$

61,014

 

 

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

 

$

2,318

 

Accrued payroll and related liabilities

 

 

1,877

 

Deferred revenue

 

 

5,044

 

Other accrued liabilities

 

 

1,605

 

Deferred taxes

 

 

1,610

 

Liabilities transferred

 

$

12,454

 

Net assets sold

 

$

48,560

 

 

The Company recorded a gain of $35.4 million in 2012 on the sale of discontinued operations (net of taxes) which was calculated as follows (in thousands):

 

 

 

Amount

 

Cash proceeds received

 

$

50,659

 

Less: costs incurred directly attributable to the transaction

 

 

929

 

Net proceeds from sale of discontinued operations

 

 

49,730

 

Less: book value of net assets sold

 

 

48,560

 

Less: realization of foreign currency translation adjustment upon

   sale of foreign EWS subsidiary

 

 

1,141

 

Gain from sale of discontinued operations

 

 

29

 

Income tax benefit

 

 

(35,396

)

Net gain from sale of discontinued operations

 

$

35,425

 

 

Goodwill, Purchased Intangibles, and Software Development Costs (Tables)

The following table summarizes the changes in carrying amount of goodwill in each of the Company’s segments for the periods presented (in thousands):

 

 

 

Segments

 

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Total

 

Balance at December 31, 2012

 

$

302,768

 

 

$

101,882

 

 

$

149,169

 

 

$

553,819

 

Goodwill resulting from an acquisition

 

 

5,391

 

 

 

 

 

 

 

 

 

5,391

 

Foreign currency translation

 

 

 

 

 

 

 

 

250

 

 

 

250

 

Balance at December 31, 2013

 

$

308,159

 

 

$

101,882

 

 

$

149,419

 

 

$

559,460

 

Foreign currency translation

 

 

 

 

 

 

 

 

(229

)

 

 

(229

)

Balance at December 31, 2014

 

$

308,159

 

 

$

101,882

 

 

$

149,190

 

 

$

559,231

 

 

The following table sets forth details of the Company’s total purchased intangible assets and capitalized software development costs as of the following periods (in thousands):

 

 

 

December 31, 2014

 

 

December 31, 2013

 

 

 

Gross

Value

 

 

Accumulated

Amortization

& Impairment

 

 

Net Value

 

 

Gross

Value

 

 

Accumulated

Amortization

& Impairment

 

 

Net Value

 

Core and developed technology

 

$

81,178

 

 

$

(79,986

)

 

$

1,192

 

 

$

81,178

 

 

$

(76,952

)

 

$

4,226

 

Customer and partner relationships

 

 

79,525

 

 

 

(57,983

)

 

 

21,542

 

 

 

79,525

 

 

 

(48,941

)

 

 

30,584

 

Non-compete agreements

 

 

1,800

 

 

 

(1,100

)

 

 

700

 

 

 

1,800

 

 

 

(500

)

 

 

1,300

 

Trade name

 

 

3,400

 

 

 

(3,229

)

 

 

171

 

 

 

3,400

 

 

 

(3,089

)

 

 

311

 

Other

 

 

4,462

 

 

 

(4,418

)

 

 

44

 

 

 

4,462

 

 

 

(4,343

)

 

 

119

 

Finite-lived intangible assets

 

 

170,365

 

 

 

(146,716

)

 

 

23,649

 

 

 

170,365

 

 

 

(133,825

)

 

 

36,540

 

Indefinite-lived trade name

 

 

918

 

 

 

 

 

 

918

 

 

 

918

 

 

 

 

 

 

918

 

Total acquired intangible assets

 

$

171,283

 

 

$

(146,716

)

 

$

24,567

 

 

$

171,283

 

 

$

(133,825

)

 

$

37,458

 

Capitalized software development costs for products

   to be sold

 

$

7,416

 

 

$

(1,900

)

 

$

5,516

 

 

$

2,365

 

 

$

(196

)

 

$

2,169

 

 

The following table summarizes amortization expense recorded in the following periods (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Amortization of purchased intangibles in revenues

 

$

75

 

 

$

75

 

 

$

75

 

Amortization of purchased intangibles in cost of product revenues

 

 

3,035

 

 

 

9,361

 

 

 

7,635

 

Amortization of purchased intangibles in operating expenses

 

 

9,781

 

 

 

10,389

 

 

 

9,830

 

Total amortization expenses of purchased intangibles

 

$

12,891

 

 

$

19,825

 

 

$

17,540

 

 

The estimated future amortization expense of purchased intangible assets as of December 31, 2014 is as follows (in thousands):

 

Year ending December 31,

 

Amount

 

2015

 

$

10,495

 

2016

 

 

8,484

 

2017

 

 

4,670

 

2018

 

 

 

2019

 

 

 

Total

 

$

23,649

 

 

Balance Sheet Details (Tables)

Trade receivables, net, consist of the following (in thousands):

 

 

 

December 31,

 

 

 

 

2014

 

 

2013

 

 

Gross accounts receivables

 

$

214,664

 

 

$

225,134

 

 

Returns and related reserves

 

 

(42,224

)

 

 

(38,938

)

 

Allowance for doubtful accounts

 

 

(3,040

)

 

 

(2,827

)

 

Total

 

$

169,400

 

 

$

183,369

 

 

 

Inventories consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Raw materials

 

$

1,496

 

 

$

2,740

 

Work in process

 

 

545

 

 

 

840

 

Finished goods

 

 

98,287

 

 

 

99,729

 

Total

 

$

100,328

 

 

$

103,309

 

 

Prepaid expenses and other current assets consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Non-trade receivables

 

$

6,547

 

 

$

9,251

 

Prepaid expenses

 

 

37,385

 

 

 

31,164

 

Derivative assets

 

 

14,342

 

 

 

6,748

 

Other current assets

 

 

2,798

 

 

 

3,189

 

Total

 

$

61,072

 

 

$

50,352

 

 

Property and equipment, net, consist of the following (in thousands):

 

 

 

 

 

December 31,

 

 

 

Estimated useful Life

 

2014

 

 

2013

 

Computer equipment and software

 

3 to 5 years

 

$

294,724

 

 

$

265,222

 

Equipment, furniture and fixtures

 

1 to 7 years

 

 

115,226

 

 

 

113,214

 

Tooling equipment

 

3 years

 

 

16,325

 

 

 

20,811

 

Leasehold improvements

 

3 to 13 years

 

 

59,663

 

 

 

59,595

 

 

 

 

 

 

485,938

 

 

 

458,842

 

Less: Accumulated depreciation and amortization

 

 

 

 

(376,743

)

 

 

(343,685

)

Total

 

 

 

$

109,195

 

 

$

115,157

 

 

Deferred revenues consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Short-term:

 

 

 

 

 

 

 

 

Service

 

$

171,355

 

 

$

170,701

 

Product

 

 

94

 

 

 

307

 

License

 

 

2,083

 

 

 

1,400

 

Total

 

$

173,532

 

 

$

172,408

 

Long-term:

 

 

 

 

 

 

 

 

Service

 

$

85,925

 

 

$

83,092

 

License

 

 

3,441

 

 

 

4,375

 

Total

 

$

89,366

 

 

$

87,467

 

 

Changes in the deferred service revenue are as follows (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Balance at beginning of period

 

$

253,793

 

 

$

241,773

 

Additions to deferred service revenue

 

 

347,896

 

 

 

354,893

 

Amortization of deferred service revenue

 

 

(344,409

)

 

 

(342,873

)

Balance at end of period

 

$

257,280

 

 

$

253,793

 

 

Other accrued liabilities consist of the following (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Accrued expenses

 

$

27,523

 

 

$

22,515

 

Accrued co-op expenses

 

 

4,102

 

 

 

4,629

 

Restructuring reserves

 

 

12,207

 

 

 

11,238

 

Warranty obligations

 

 

11,613

 

 

 

9,475

 

Derivative liabilities

 

 

8,175

 

 

 

6,780

 

Employee stock purchase plan withholdings

 

 

10,658

 

 

 

10,883

 

Other accrued liabilities

 

 

11,915

 

 

 

12,224

 

Total

 

$

86,193

 

 

$

77,744

 

 

Changes in the warranty obligations are as follows (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Balance at beginning of period

 

$

9,475

 

 

$

10,475

 

Accruals for warranties issued during the period

 

 

16,753

 

 

 

16,307

 

Charges against warranty reserve during the period

 

 

(14,615

)

 

 

(17,307

)

Balance at end of period

 

$

11,613

 

 

$

9,475

 

 

Restructuring Costs (Tables)
Summary of Activity of Restructuring Reserves

The following table summarizes the activity of the Company’s restructuring reserves (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Projects

 

 

 

 

 

 

 

Severance/Other

 

 

Facilities

 

 

Discontinued

 

 

Total

 

Balance at December 31, 2011

 

$

2,486

 

 

$

454

 

 

$

 

 

 

2,940

 

Additions to the reserve, net

 

 

13,090

 

 

 

11,139

 

 

 

 

 

 

24,229

 

Interest accretion

 

 

 

 

 

591

 

 

 

 

 

 

591

 

Non-cash write-off of leasehold improvements

 

 

 

 

 

(2,796

)

 

 

 

 

 

(2,796

)

Cash payments and other usage

 

 

(14,214

)

 

 

(1,924

)

 

 

 

 

 

(16,138

)

Balance at December 31, 2012

 

$

1,362

 

 

$

7,464

 

 

$

 

 

 

8,826

 

Additions to the reserve, net

 

 

10,185

 

 

 

36,770

 

 

 

2,880

 

 

 

49,835

 

Interest accretion

 

 

 

 

 

1,461

 

 

 

 

 

 

1,461

 

Non-cash write-off of leasehold improvements

 

 

 

 

 

(3,547

)

 

 

 

 

 

(3,547

)

Cash payments and other usage

 

 

(10,404

)

 

 

(8,362

)

 

 

(2,880

)

 

 

(21,646

)

Balance at December 31, 2013

 

$

1,143

 

 

$

33,786

 

 

$

 

 

$

34,929

 

Additions to the reserve, net

 

 

11,755

 

 

 

28,524

 

 

 

 

 

 

40,279

 

Interest accretion

 

 

 

 

 

2,347

 

 

 

 

 

 

2,347

 

Non-cash write-off of leasehold improvements

 

 

 

 

 

(4,855

)

 

 

 

 

 

(4,855

)

Cash payments and other usage

 

 

(12,234

)

 

 

(18,893

)

 

 

 

 

 

(31,127

)

Balance at December  31, 2014

 

$

664

 

 

$

40,909

 

 

$

 

 

$

41,573

 

 

Debt (Tables)
Interest Expense Recognized Related to Term Loan

The following table summarizes interest expense recognized related to the Term Loan for the periods presented (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Contractual interest expense

 

$

4,940

 

 

$

1,605

 

 

$

 

Amortization of debt issuance costs

 

 

533

 

 

 

178

 

 

 

 

Total

 

$

5,473

 

 

$

1,783

 

 

$

 

 

Investments (Tables)

In addition, the Company has short-term and long-term investments in debt securities which are summarized as follows: (in thousands):

 

 

 

Cost Basis

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Balances at December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments-Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

26,930

 

 

$

7

 

 

$

(2

)

 

$

26,935

 

U.S. government agency securities

 

 

59,336

 

 

 

7

 

 

 

(6

)

 

 

59,337

 

Non-U.S. government securities

 

 

8,764

 

 

 

2

 

 

 

 

 

 

8,766

 

Corporate debt securities

 

 

90,782

 

 

 

10

 

 

 

(47

)

 

 

90,745

 

Total investments - short-term

 

$

185,812

 

 

$

26

 

 

$

(55

)

 

$

185,783

 

Investments-Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

25,320

 

 

$

4

 

 

$

(10

)

 

$

25,314

 

U.S. government agency securities

 

 

17,369

 

 

 

1

 

 

 

(14

)

 

 

17,356

 

Corporate debt securities

 

 

16,540

 

 

 

2

 

 

 

(15

)

 

 

16,527

 

Total investments - long-term

 

$

59,229

 

 

$

7

 

 

$

(39

)

 

$

59,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments-Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

19,792

 

 

$

9

 

 

$

 

 

$

19,801

 

U.S. government agency securities

 

 

38,388

 

 

 

16

 

 

 

(3

)

 

 

38,401

 

Non-U.S. government securities

 

 

13,734

 

 

 

10

 

 

 

 

 

 

13,744

 

Corporate debt securities

 

 

62,720

 

 

 

22

 

 

 

(4

)

 

 

62,738

 

Total investments - short-term

 

$

134,634

 

 

$

57

 

 

$

(7

)

 

$

134,684

 

Investments-Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

12,252

 

 

$

8

 

 

$

 

 

$

12,260

 

U.S. government agency securities

 

 

30,627

 

 

 

12

 

 

 

(3

)

 

 

30,636

 

Non-U.S. government securities

 

 

2,305

 

 

 

4

 

 

 

 

 

 

2,309

 

Corporate debt securities

 

 

11,152

 

 

 

15

 

 

 

 

 

 

11,167

 

Total investments - long-term

 

$

56,336

 

 

$

39

 

 

$

(3

)

 

$

56,372

 

 

The following table summarizes the fair value and gross unrealized losses of the Company’s investments, including those securities that are categorized as cash equivalents, with unrealized losses, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2014 and 2013 (in thousands):

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

Gross

Unrealized

Losses

 

December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

22,355

 

 

$

(12

)

 

$

 

 

$

 

 

$

22,355

 

 

$

(12

)

U.S. government agency securities

 

 

27,348

 

 

 

(20

)

 

 

 

 

 

 

 

 

27,348

 

 

 

(20

)

Corporate debt securities

 

 

59,667

 

 

 

(62

)

 

 

 

 

 

 

 

 

59,667

 

 

 

(62

)

Total investments

 

$

109,370

 

 

$

(94

)

 

$

 

 

$

 

 

$

109,370

 

 

$

(94

)

December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

5,533

 

 

$

(6

)

 

$

 

 

$

 

 

$

5,533

 

 

$

(6

)

Corporate debt securities

 

 

9,837

 

 

 

(3

)

 

 

1,504

 

 

 

(1

)

 

 

11,341

 

 

 

(4

)

Total investments

 

$

15,370

 

 

$

(9

)

 

$

1,504

 

 

$

(1

)

 

$

16,874

 

 

$

(10

)

 

Fair Value Measurements (Tables)
Schedule of Fair Value of Marketable Securities and Foreign Currency Contracts

The tables below set forth the Company’s recurring fair value measurements for the periods presented (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements at

December 31, 2014 Using

 

Description

 

Total

 

 

Quoted Prices in Active

Markets for

Identical Assets

 

 

Significant Other

Observable Inputs

 

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

1,395

 

 

$

1,395

 

 

$

 

Commercial paper

 

 

7,549

 

 

 

 

 

 

7,549

 

Short-term investments

 

 

185,783

 

 

 

 

 

 

185,783

 

Long-term investments

 

 

59,197

 

 

 

 

 

 

59,197

 

Total fixed income available-for-sale

   securities

 

$

253,924

 

 

$

1,395

 

 

$

252,529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (a)

 

$

14,342

 

 

$

 

 

$

14,342

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (b)

 

$

8,175

 

 

$

 

 

$

8,175

 

 

 

 

 

 

 

 

 

Fair Value Measurements at

December 31, 2013 Using

 

Description

 

Total

 

 

Quoted Prices in Active

Markets for

Identical Assets

 

 

Significant Other

Observable Inputs

 

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

17,596

 

 

$

17,596

 

 

$

 

Commercial paper

 

 

2,499

 

 

 

 

 

 

2,499

 

Short-term investments

 

 

134,684

 

 

 

 

 

 

134,684

 

Long-term investments

 

 

56,372

 

 

 

 

 

 

56,372

 

Total fixed income available-for-sale

   securities

 

$

211,151

 

 

$

17,596

 

 

$

193,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (a)

 

$

6,748

 

 

$

 

 

$

6,748

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts (b)

 

$

6,780

 

 

$

 

 

$

6,780

 

 

(a)

Included in short-term derivative asset as “Prepaid expenses and other current assets” on the Company’s Consolidated Balance Sheets.

(b)

Included in short-term derivative liability as “Other accrued liabilities” on the Company’s Consolidated Balance Sheets.

Commitments and Contingencies (Tables)
Future Minimum Lease Payments Under Operating Lease

The Company leases certain office facilities and equipment under noncancelable operating leases expiring between 2015 and 2023. As of December 31, 2014, the following future minimum lease payments are due under the current lease obligations (in thousands). In addition to these minimum lease payments, the Company is contractually obligated under the majority of its operating leases to pay certain operating expenses during the term of the lease such as maintenance, taxes and insurance.

 

 

 

Gross

 

 

 

 

 

 

Net

 

 

 

 

Minimum

 

 

Estimated

 

 

Minimum

 

 

 

 

Lease

 

 

Sublease

 

 

Lease

 

 

Year Ending December 31,

 

Payments

 

 

Receipts

 

 

Payments

 

 

2015

 

$

31,864

 

 

$

(1,808

)

 

$

30,056

 

 

2016

 

 

25,681

 

 

 

(1,683

)

 

 

23,998

 

 

2017

 

 

23,122

 

 

 

(1,338

)

 

 

21,784

 

 

2018

 

 

18,595

 

 

 

(1,050

)

 

 

17,545

 

 

2019

 

 

18,231

 

 

 

(1,016

)

 

 

17,215

 

 

Thereafter

 

 

35,252

 

 

 

(1,135

)

 

 

34,117

 

 

Total

 

$

152,745

 

 

$

(8,030

)

 

$

144,715

 

 

 

Foreign Currency Derivatives (Tables)

The following table sets forth the Company’s derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets for the periods presented (in thousands):

 

December 31, 2014

 

 

December 31, 2013

 

 

Fair Value of

Derivatives  Designated

as Hedge Instruments

 

 

Fair Value of Derivatives

Not Designated as Hedge

Instruments

 

 

Fair Value of

Derivatives Designated

as Hedge Instruments

 

 

Fair Value of Derivatives

Not Designated as Hedge

Instruments

 

Derivative assets (a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

5,501

 

 

$

8,841

 

 

$

4,457

 

 

$

2,291

 

Derivative liabilities (b):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

$

4,041

 

 

$

4,134

 

 

$

4,235

 

 

$

2,545

 

 

The following table sets forth the offsetting of derivative assets for the periods presented (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the

Consolidated Balance Sheets

 

 

 

Gross Amounts of

Recognized Assets

 

 

Gross Amounts

Offset in the Consolidated

Balance Sheets

 

 

Net Amounts Of Assets

Presented In the

Consolidated Balance Sheets

 

 

Financial

Instruments

 

 

Cash

Collateral

Pledged

 

 

Net

Amount

 

As of December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

14,342

 

 

$

 

 

$

14,342

 

 

$

(8,175

)

 

$

 

 

$

6,167

 

As of December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

6,748

 

 

$

 

 

$

6,748

 

 

$

(5,643

)

 

$

 

 

$

1,105

 

 

The following table sets forth the offsetting of derivative liabilities for the periods presented (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Amounts Not Offset in the

Consolidated Balance Sheets

 

 

 

Gross Amounts of

Recognized Liabilities

 

 

Gross Amounts

Offset in the

Consolidated

Balance Sheets

 

 

Net Amounts Of Liabilities Presented In the Consolidated Balance Sheets

 

 

Financial

Instruments

 

 

Cash

Collateral

Pledged

 

 

Net

Amount

 

As of December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

8,175

 

 

$

 

 

$

8,175

 

 

$

(8,175

)

 

$

 

 

$

 

As of December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

6,780

 

 

$

 

 

$

6,780

 

 

$

(5,643

)

 

$

 

 

$

1,137

 

 

The following table summarizes the Company’s notional position by currency, and approximate U.S. dollar equivalent, at December 31, 2014 of the outstanding cash flow hedges, all of which are carried at fair value on the Consolidated Balance Sheet (foreign currency and dollar amounts in thousands):

 

 

 

Original Maturities

of 360 Days or Less

 

Original Maturities

of Greater than 360 Days

 

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

Chinese Yuan

 

 

75,140

 

 

$

11,909

 

 

Buy

 

 

62,600

 

 

$

9,781

 

 

Buy

Euro

 

 

17,185

 

 

$

22,583

 

 

Buy

 

 

11,700

 

 

$

14,412

 

 

Buy

Euro

 

 

37,976

 

 

$

49,729

 

 

Sell

 

 

36,800

 

 

$

45,330

 

 

Sell

British Pound

 

 

12,297

 

 

$

20,142

 

 

Buy

 

 

13,300

 

 

$

20,713

 

 

Buy

British Pound

 

 

14,659

 

 

$

23,998

 

 

Sell

 

 

19,100

 

 

$

29,746

 

 

Sell

Israeli Shekel

 

 

51,666

 

 

$

14,471

 

 

Buy

 

 

44,400

 

 

$

11,429

 

 

Buy

 

The following tables show the effect of the Company’s derivative instruments designated as cash flow hedges in the Consolidated Statements of Operations for the periods presented (in thousands):

 

 

 

Gain or (Loss) Recognized in

OCI-Effective

Portion

 

 

Location of Gain or (Loss) Reclassified from OCI into Income-Effective Portion

 

Gain or (Loss) Reclassified from OCI

into Income-Effective Portion

 

 

Location of Gain or (Loss) Recognized-Ineffective Portion and Amount Excluded from

Effectiveness Testing

 

Gain or (Loss) Recognized-Ineffective Portion and Amount Excluded from Effectiveness

Testing (a)

 

 

 

Year Ended December 31, 2014

 

Foreign exchange

   contracts

 

$

3,627

 

 

Product revenues

 

$

1,170

 

 

Interest and other income (expense), net

 

$

109

 

 

 

 

 

 

 

Cost of revenues

 

 

320

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

772

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and

   development

 

 

86

 

 

 

 

 

 

 

 

 

 

 

 

 

General and

   administrative

 

 

(7

)

 

 

 

 

 

 

 

 

$

3,627

 

 

 

 

$

2,341

 

 

 

 

$

109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

   contracts

 

$

1,374

 

 

Product revenues

 

$

207

 

 

Interest and other income (expense), net

 

$

368

 

 

 

 

 

 

 

Cost of revenues

 

 

279

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

233

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and

   development

 

 

1,425

 

 

 

 

 

 

 

 

 

 

 

 

 

General and

   administrative

 

 

164

 

 

 

 

 

 

 

 

 

$

1,374

 

 

 

 

$

2,308

 

 

 

 

$

368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

   contracts

 

$

1,018

 

 

Product revenues

 

$

7,133

 

 

Interest and other income (expense), net

 

$

42

 

 

 

 

 

 

 

Cost of revenues

 

 

(607

)

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

(974

)

 

 

 

 

 

 

 

 

 

 

 

 

Research and

   development

 

 

(774

)

 

 

 

 

 

 

 

 

 

 

 

 

General and

   administrative

 

 

(1,044

)

 

 

 

 

 

 

 

 

$

1,018

 

 

 

 

$

3,734

 

 

 

 

$

42

 

 

(a)

For the year ended December 31, 2014 and 2013, there were no gains or losses for the ineffective portion. For the year ended December 31, 2012, the loss recorded for the ineffective portion and the gain recorded for the excluded time value portion of the hedge was immaterial.  

The following table summarizes the Company’s notional position by currency, and approximate U.S. dollar equivalent, at December 31, 2014 of the outstanding non-designated hedges (foreign currency and dollar amounts in thousands):

 

 

 

Original Maturities of 360 Days or Less

 

Original Maturities of Greater than 360 Days

 

 

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

 

Foreign

Currency

 

 

USD

Equivalent

 

 

Positions

 

Brazilian Real

 

 

10,747

 

 

$

4,046

 

 

Buy

 

 

 

 

 

 

 

 

 

Brazilian Real

 

 

21,858

 

 

$

8,251

 

 

Sell

 

 

 

 

 

 

 

 

 

Chinese Yuan

 

 

92,276

 

 

$

14,727

 

 

Buy

 

 

 

 

 

 

 

 

 

Chinese Yuan

 

 

85,309

 

 

$

13,672

 

 

Sell

 

 

 

 

 

 

 

 

 

Euro

 

 

28,862

 

 

$

36,641

 

 

Buy

 

 

 

 

 

 

 

 

 

Euro

 

 

71,418

 

 

$

92,866

 

 

Sell

 

 

 

 

 

 

 

 

 

British Pound

 

 

27,036

 

 

$

43,558

 

 

Buy

 

 

 

 

 

 

 

 

 

British Pound

 

 

28,399

 

 

$

46,465

 

 

Sell

 

 

 

 

 

 

 

 

 

Israeli Shekel

 

 

45,706

 

 

$

12,749

 

 

Buy

 

 

 

 

 

 

 

 

 

Israeli Shekel

 

 

39,479

 

 

$

10,146

 

 

Sell

 

 

 

 

 

 

 

 

 

Japanese Yen

 

 

464,897

 

 

$

3,889

 

 

Buy

 

 

 

 

 

 

 

 

 

Japanese Yen

 

 

799,492

 

 

$

6,724

 

 

Sell

 

 

 

 

 

 

 

 

 

Mexican Peso

 

 

15,906

 

 

$

1,080

 

 

Buy

 

 

 

 

 

 

 

 

 

Mexican Peso

 

 

34,004

 

 

$

2,367

 

 

Sell

 

 

 

 

 

 

 

 

 

 

The following table shows the effect of the Company’s non-designated hedges in the Consolidated Statements of Operations for the periods presented (in thousands):

 

Derivatives Not Designated as Hedging

Instruments

 

Location of Gain or (Loss)

Recognized in Income on Derivative

 

Amount of Gain or (Loss)

Recognized in Income on Derivative

 

 

 

Year Ended December 31, 2014

 

Foreign exchange contracts

 

Interest and other income (expense), net

 

$

6,708

 

 

 

Year Ended December 31, 2013

 

Foreign exchange contracts

 

Interest and other income (expense), net

 

$

(411

)

 

 

Year Ended December 31, 2012

 

Foreign exchange contracts

 

Interest and other income (expense), net

 

$

(412

)

 

Stockholders' Equity (Tables)
Changes in Accumulated Other Comprehensive Income (Loss) by Component

The following table summarizes the changes in accumulated other comprehensive income, net of tax, by component for the periods presented (in thousands). The tax effects were not shown separately, as the impacts were not material.

 

 

 

Unrealized

Gains and

Losses on

Cash Flow

Hedges

 

 

Unrealized Gains

and Losses on

Available-for-

Sale Securities

 

 

Foreign Currency

Translation

 

 

Total

 

Balance as of December 31, 2012

 

$

1,014

 

 

$

2

 

 

$

3,180

 

 

$

4,196

 

Other comprehensive income (loss) before

   reclassifications

 

 

1,374

 

 

 

18

 

 

 

1,039

 

 

 

2,431

 

Amounts reclassified from accumulated

   other comprehensive income (a)

 

 

(2,308

)

 

 

53

 

 

 

 

 

 

(2,255

)

Net current-period other comprehensive

   income (loss)

 

 

(934

)

 

 

71

 

 

 

1,039

 

 

 

176

 

Balance as of December 31, 2013

 

$

80

 

 

$

73

 

 

$

4,219

 

 

$

4,372

 

Other comprehensive income (loss) before

   reclassifications

 

 

3,627

 

 

 

(115

)

 

 

(1,422

)

 

 

2,090

 

Amounts reclassified from accumulated

   other comprehensive income (a)

 

 

(2,341

)

 

 

(10

)

 

 

 

 

 

(2,351

)

Net current-period other comprehensive

   income (loss)

 

 

1,286

 

 

 

(125

)

 

 

(1,422

)

 

 

(261

)

Balance as of December 31, 2014

 

$

1,366

 

 

$

(52

)

 

$

2,797

 

 

$

4,111

 

 

Stock-Based Employee Benefit Plans (Tables)

Activity under the above plans for the year ended December 31, 2014 was as follows:

 

 

 

Shares

Available for

Grant (1)

 

Balances, December 31, 2013

 

 

14,272,794

 

Performance shares granted (2)

 

 

(1,122,849

)

Performance shares forfeited

 

 

2,199,968

 

Restricted stock units granted

 

 

(4,705,549

)

Restricted stock units forfeited

 

 

2,471,450

 

Options granted

 

 

 

Options forfeited

 

 

90,156

 

Options forfeited under ViVu Plan (3)

 

 

(70

)

Options expired

 

 

233,532

 

Balances, December 31, 2014

 

 

13,439,432

 

 

(1)

For purposes of this table, shares are counted on a fungible basis (i.e., at a higher multiplier than one-for-one) for full value award activity.

(2)

Includes 25,666 additional shares (39,526 shares applying the applicable fungible ratio) resulting from above target performance.

(3)

The Company acquired the outstanding unvested stock options under the ViVu, Inc. 2008 Equity Incentive Plan as a result of its acquisition of ViVu, Inc. in 2011.

The options outstanding and currently exercisable by exercise price at December 31, 2014 are as follows:

 

 

 

 

 

Stock Options Outstanding and Exercisable

 

 

Range of Exercise Price

 

 

Number Outstanding

 

 

Weighted

Average

Remaining

Contractual

Life (Yrs)

 

 

Weighted Average

Exercise Price

 

 

$

0.75

 

 

 

42

 

 

 

5.05

 

 

$

0.75

 

 

$

11.61

 

 

 

220,502

 

 

 

4.27

 

 

$

11.61

 

 

$11.67 - $11.80

 

 

 

19,949

 

 

 

0.15

 

 

$

11.77

 

 

 

 

 

 

 

240,493

 

 

 

3.92

 

 

$

11.62

 

 

 

The following table summarizes the changes in unvested performance shares and RSUs and non-employee director RSUs for 2014:

 

 

 

Number of

Shares (1)

 

 

Weighted Average

Grant Date

Fair Value

 

Unvested shares at December 31, 2013

 

 

9,205,462

 

 

$

12.59

 

Performance shares granted (2)

 

 

729,122

 

 

$

13.64

 

Restricted stock units granted (3)

 

 

3,055,551

 

 

$

12.96

 

Performance shares vested and issued

 

 

(164,995

)

 

$

9.60

 

Restricted stock units vested and issued

 

 

(3,302,419

)

 

$

13.48

 

Performance shares forfeited

 

 

(1,232,780

)

 

$

14.66

 

Restricted stock units forfeited

 

 

(1,464,250

)

 

$

12.01

 

Unvested shares at December 31, 2014

 

 

6,825,691

 

 

$

12.26

 

 

(1)

For the purposes of this table, shares are counted on a one-for-one basis, not on a fungible share counting basis.

(2)

Includes 25,666 additional shares resulting from above target performance.

(3)

Includes 140,000 restricted stock units granted to non-employee directors.

The following table summarizes stock-based compensation expense recorded and its allocation within the Consolidated Statements of Operations for the periods presented (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Cost of sales - product

 

$

2,463

 

 

$

2,892

 

 

$

3,593

 

Cost of sales - service

 

 

4,293

 

 

 

5,852

 

 

 

6,611

 

Stock-based compensation expense included in cost of sales

 

 

6,756

 

 

 

8,744

 

 

 

10,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

14,893

 

 

 

26,570

 

 

 

36,791

 

Research and development

 

 

10,299

 

 

 

15,634

 

 

 

20,195

 

General and administrative

 

 

16,012

 

 

 

13,517

 

 

 

21,571

 

Stock-based compensation expense included in operating expenses

 

 

41,204

 

 

 

55,721

 

 

 

78,557

 

Stock-based compensation expense

 

 

47,960

 

 

 

64,465

 

 

 

88,761

 

Less: tax benefit

 

 

9,492

 

 

 

11,174

 

 

 

21,880

 

Stock-based compensation expense related to employee

   equity awards and employee stock purchases, net of tax

 

$

38,468

 

 

$

53,291

 

 

$

66,881

 

 

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

 

 

2012

 

Expected volatility

 

 

51.24

%

Risk-free interest rate

 

 

0.5

%

Expected dividends

 

 

0.0

%

Expected life (yrs)

 

 

3.70

 

 

The estimated fair value per share of employee stock purchase rights granted pursuant to ESPP in 2014, 2013, and 2012 ranged from $2.80 to $4.48, from $2.60 to $4.57, and from $2.69 to $8.4, respectively, and was estimated on the date of grant using the Black-Scholes option valuation model based on the following assumptions:

 

 

 

2014

 

2013

 

2012

 

Expected volatility

 

26.47-32.18%

 

42.40-48.89%

 

48.27-61.78%

 

Risk-free interest rate

 

0.05-0.47%

 

0.08-0.35%

 

0.09-0.24%

 

Expected dividends

 

0.0%

 

0.0%

 

 

0.0%

 

Expected life (yrs)

 

0.5-2.0

 

0.5-2.0

 

0.5-2.0

 

 

Activity under the stock option plans for the year ended December 31, 2014 was as follows:

 

 

 

Outstanding Options

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Weighted Avg

Exercise Price

 

 

Weighted Avg

Contractual

Term (Years)

 

 

Aggregate

Intrinsic

Value (in

thousands)

 

Balances, December 31, 2013

 

 

697,218

 

 

$

13.64

 

 

 

 

 

 

 

 

 

Options granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercised

 

 

(133,037

)

 

$

11.37

 

 

 

 

 

 

 

 

 

Options forfeited

 

 

(90,156

)

 

$

14.50

 

 

 

 

 

 

 

 

 

Options expired

 

 

(233,532

)

 

$

16.67

 

 

 

 

 

 

 

 

 

Balances, December 31, 2014

 

 

240,493

 

 

$

11.62

 

 

 

3.92

 

 

$

451,780

 

 

Income Taxes (Tables)

Income tax expense (benefit) consists of the following (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Income tax expense from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(2,843

)

 

$

(953

)

 

$

44,569

 

State

 

 

(235

)

 

 

(72

)

 

 

3,283

 

Foreign

 

 

8,352

 

 

 

8,604

 

 

 

9,488

 

 

 

$

5,274

 

 

$

7,579

 

 

$

57,340

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(2,562

)

 

$

(10,715

)

 

$

(13,372

)

State

 

 

(273

)

 

 

(818

)

 

 

(1,308

)

Foreign

 

 

(1,483

)

 

 

285

 

 

 

(3,193

)

 

 

$

(4,318

)

 

$

(11,248

)

 

$

(17,873

)

Total income tax expense (benefit) from continuing

   operations

 

$

956

 

 

$

(3,669

)

 

$

39,467

 

Income tax expense (benefit) from discontinued operations

 

$

 

 

$

96

 

 

$

(29,311

)

 

Income from continuing operations before income taxes is categorized geographically as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

United States

 

$

(2,317

)

 

$

(17,823

)

 

$

(37,025

)

Foreign

 

 

45,332

 

 

 

(4,381

)

 

 

39,523

 

Total income (loss) from continuing operations before

   income taxes

 

$

43,015

 

 

$

(22,204

)

 

$

2,498

 

 

The Company’s tax provision from continuing operations differs from the provision computed using statutory tax rates as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Federal tax at statutory rate

 

$

15,055

 

 

$

(7,771

)

 

$

2,194

 

State taxes, net of federal benefit

 

 

(508

)

 

 

(1,571

)

 

 

2,354

 

Non-deductible share-based compensation expense

 

 

(346

)

 

 

2,900

 

 

 

6,143

 

Foreign income at tax rates different than U.S. rates

 

 

(14,025

)

 

 

7,104

 

 

 

(10,176

)

Changes in reserves for uncertain tax positions

 

 

(756

)

 

 

(2,497

)

 

 

(3,926

)

Research and development tax credit

 

 

(1,898

)

 

 

(4,243

)

 

 

(268

)

Domestic production activities deduction

 

 

(22

)

 

 

(757

)

 

 

(1,136

)

Gain on intercompany debt

 

 

 

 

 

 

 

 

36,163

 

Non-deductible executive compensation expense

 

 

778

 

 

 

460

 

 

 

358

 

Subpart F income

 

 

679

 

 

 

716

 

 

 

657

 

Non-deductible acquisition and divestiture costs

 

 

(4

)

 

 

(355

)

 

 

4,782

 

Sale of intellectual property

 

 

2,115

 

 

 

2,947

 

 

 

2,356

 

Foreign tax credit

 

 

(317

)

 

 

(359

)

 

 

(264

)

Other

 

 

205

 

 

 

(243

)

 

 

230

 

Tax provision (benefit)

 

$

956

 

 

$

(3,669

)

 

$

39,467

 

 

The tax effects of temporary differences that give rise to the deferred tax assets (liabilities) are presented below (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

Property and equipment, net, principally due to difference in

   depreciation

 

$

7,534

 

 

$

6,508

 

Capitalized research and development costs

 

 

 

 

 

425

 

Acquired intangibles

 

 

4,490

 

 

 

3,742

 

Inventory

 

 

5,685

 

 

 

6,910

 

Restructuring reserves

 

 

13,722

 

 

 

10,214

 

Deferred revenue

 

 

10,964

 

 

 

13,699

 

Other reserves

 

 

20,400

 

 

 

17,570

 

Share-based compensation

 

 

11,910

 

 

 

15,906

 

Net operating loss and capital loss carryforwards

 

 

2,535

 

 

 

2,511

 

Tax credit carryforwards

 

 

21,237

 

 

 

16,457

 

Deferred tax asset

 

 

98,477

 

 

 

93,942

 

Capitalized research and development costs

 

 

(766

)

 

 

 

Acquired intangibles

 

 

(1,843

)

 

 

(2,249

)

Deferred tax asset before valuation allowance

 

$

95,868

 

 

$

91,693

 

Valuation allowance

 

 

(3,216

)

 

 

(3,359

)

Deferred tax asset, net of valuation allowance

 

$

92,652

 

 

$

88,334

 

 

The aggregate changes in the balance of the Company’s gross unrecognized tax benefits were as follows for the periods indicated (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Beginning balance

 

$

22,012

 

 

$

23,049

 

 

$

32,408

 

Additions based on tax positions taken during a prior period

 

 

 

 

 

 

 

 

304

 

Reductions based on tax positions taken during a prior

   period

 

 

 

 

 

 

 

 

(5,690

)

Additions based on tax positions taken during the current

   period

 

 

531

 

 

 

1,414

 

 

 

310

 

Reductions related to settlement of tax matters

 

 

 

 

 

 

 

 

(807

)

Reductions related to a lapse of applicable statue of

   limitations

 

 

(901

)

 

 

(2,451

)

 

 

(3,476

)

Ending balance

 

$

21,642

 

 

$

22,012

 

 

$

23,049

 

 

Net Income (Loss) Per Share (Tables)
Reconciliation of Numerator and Denominator of Basic and Diluted Net Income Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per-share amounts):

 

 

 

Year ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

42,059

 

 

$

(18,535

)

 

$

(36,969

)

Income from discontinued operations, net of taxes

 

 

 

 

 

 

 

 

9,888

 

Gain from sale of discontinued operations, net of taxes

 

 

 

 

 

459

 

 

 

35,425

 

Net income (loss)

 

$

42,059

 

 

$

(18,076

)

 

$

8,344

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

 

136,801

 

 

 

167,272

 

 

 

176,878

 

Effect of dilutive potential common shares

 

 

5,204

 

 

 

 

 

 

 

Weighted average shares outstanding, diluted

 

 

142,005

 

 

 

167,272

 

 

 

176,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share from continuing operations

 

$

0.31

 

 

$

(0.11

)

 

$

(0.21

)

Income per share from discontinued operations, net of

   taxes

 

 

 

 

 

 

 

 

0.06

 

Gain per share from sale of discontinued operations, net

   of taxes

 

 

 

 

 

 

 

 

0.20

 

Basic net income (loss) per share

 

$

0.31

 

 

$

(0.11

)

 

$

0.05

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share from continuing operations

 

$

0.30

 

 

$

(0.11

)

 

$

(0.21

)

Income per share from discontinued operations, net of

   taxes

 

 

 

 

 

 

 

 

0.06

 

Gain per share from sale of discontinued operations, net

   of taxes

 

 

 

 

 

 

 

 

0.20

 

Diluted net income (loss) per share

 

$

0.30

 

 

$

(0.11

)

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Antidilutive employee stock-based awards, excluded

 

 

213

 

 

 

5,045

 

 

 

4,998

 

 

Business Segment Information (Tables)

Financial information for each reportable geographical segment as of and for the fiscal years ended December 31, 2014, 2013, and 2012, based on the Company’s internal management system and as utilized by the Company’s Chief Operating Decision Maker (“CODM”), its Chief Executive Officer, is as follows (in thousands):

 

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Total

 

2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

662,533

 

 

$

349,821

 

 

$

332,800

 

 

$

1,345,154

 

% of total revenue

 

 

49

%

 

 

26

%

 

 

25

%

 

 

100

%

Contribution margin

 

$

270,265

 

 

$

150,426

 

 

$

140,365

 

 

$

561,056

 

% of segment revenue

 

 

41

%

 

 

43

%

 

 

42

%

 

 

42

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

694,522

 

 

$

338,035

 

 

$

335,832

 

 

$

1,368,389

 

% of total revenue

 

 

50

%

 

 

25

%

 

 

25

%

 

 

100

%

Contribution margin

 

$

270,786

 

 

$

142,686

 

 

$

136,462

 

 

$

549,934

 

% of segment revenue

 

 

39

%

 

 

42

%

 

 

41

%

 

 

40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

689,099

 

 

$

345,723

 

 

$

357,806

 

 

$

1,392,628

 

% of total revenue

 

 

49

%

 

 

25

%

 

 

26

%

 

 

100

%

Contribution margin

 

$

281,229

 

 

$

138,886

 

 

$

147,699

 

 

$

567,814

 

% of segment revenue

 

 

41

%

 

 

40

%

 

 

41

%

 

 

41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross accounts receivable

 

$

88,316

 

 

$

62,540

 

 

$

63,808

 

 

$

214,664

 

% of total gross accounts receivable

 

 

41

%

 

 

29

%

 

 

30

%

 

 

100

%

At December 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross accounts receivable

 

$

86,243

 

 

$

71,970

 

 

$

66,921

 

 

$

225,134

 

% of total gross accounts receivable

 

 

38

%

 

 

32

%

 

 

30

%

 

 

100

%

 

The following tables set forth the reconciliation of segment information to Polycom consolidated totals (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Segment contribution margin

 

$

561,056

 

 

$

549,934

 

 

$

567,814

 

Corporate and unallocated costs

 

 

(409,700

)

 

 

(430,471

)

 

 

(418,465

)

Stock-based compensation expense

 

 

(47,960

)

 

 

(64,465

)

 

 

(88,761

)

Effect of stock-based compensation cost on warranty

   expense

 

 

(494

)

 

 

(547

)

 

 

(669

)

Amortization of purchased intangibles

 

 

(12,816

)

 

 

(19,750

)

 

 

(17,465

)

Restructuring costs

 

 

(40,347

)

 

 

(48,470

)

 

 

(22,024

)

Litigation reserves and payments

 

 

(3,130

)

 

 

 

 

 

 

Transaction-related costs

 

 

(156

)

 

 

(3,424

)

 

 

(14,064

)

Interest and other income (expense), net

 

 

(3,438

)

 

 

(5,011

)

 

 

(3,868

)

Income (loss) from continuing operations before

   provision for (benefit from) income taxes

 

$

43,015

 

 

$

(22,204

)

 

$

2,498

 

 

The following table sets forth the Company’s revenues by groups of similar products and services as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2014

 

 

2013

 

 

2012

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

UC group systems

 

$

868,311

 

 

$

904,923

 

 

$

956,153

 

UC personal devices

 

 

236,781

 

 

 

219,103

 

 

 

180,939

 

UC platform

 

 

240,062

 

 

 

244,363

 

 

 

255,536

 

Total

 

$

1,345,154

 

 

$

1,368,389

 

 

$

1,392,628

 

 

The Company’s fixed assets, net of accumulated depreciation, are located in the following geographical areas (in thousands):

 

 

 

December 31,

 

 

 

2014

 

 

2013

 

United States

 

$

78,692

 

 

$

79,345

 

EMEA

 

 

11,254

 

 

 

13,036

 

APAC

 

 

17,663

 

 

 

21,403

 

Other

 

 

1,586

 

 

 

1,373

 

Total

 

$

109,195

 

 

$

115,157

 

 

Summary of Significant Accounting Policies - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Capitalized software development costs
$ 5,100,000 
$ 2,400,000 
$ 0 
Advertising expense
13,600,000 
14,900,000 
22,300,000 
Measuring benefits for uncertain tax positions more likely than not of being sustained upon audit, threshold percentage
50.00% 
 
 
Currency translation adjustment
 
 
$ 1,141,000 
Hardware Products
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Warranty period
1 year 
 
 
Software Products
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Warranty period
90 days 
 
 
Minimum
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Property and equipment, estimated useful life, years
1 year 
 
 
Minimum |
Hardware Products
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Service period of recognizing maintenance service revenue, years
1 year 
 
 
Minimum |
Software Products
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Service period of recognizing maintenance service revenue, years
1 year 
 
 
Maximum
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Property and equipment, estimated useful life, years
7 years 
 
 
Intangible assets with finite lives, estimated economic lives, years
6 years 
 
 
Maximum |
Hardware Products
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Service period of recognizing maintenance service revenue, years
5 years 
 
 
Maximum |
Software Products
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Service period of recognizing maintenance service revenue, years
5 years 
 
 
Leasehold Improvements |
Minimum
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Property and equipment, estimated useful life, years
3 years 
 
 
Leasehold Improvements |
Maximum
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Property and equipment, estimated useful life, years
13 years 
 
 
Software and Software Development Costs
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
Intangible assets with finite lives, estimated economic lives, years
3 years 
 
 
Summary of Significant Accounting Policies - Foreign Currency Translation Adjustment (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounting Policies [Abstract]
 
 
 
Beginning balance
$ 4,219 
$ 3,180 
$ 1,841 
Foreign currency translation adjustments
(1,422)
1,039 
1,339 
Ending balance
$ 2,797 
$ 4,219 
$ 3,180 
Business Combination - Additional Information (Details) (USD $)
0 Months Ended 12 Months Ended
Mar. 1, 2013
Dec. 31, 2013
Dec. 31, 2012
Business Combinations [Abstract]
 
 
 
Net cash paid in acquisitions
 
$ 7,974,000 
$ 4,583,000 
Cash received from net working capital adjustment
$ 400,000 
 
 
Discontinued Operations - Additional Information (Details) (USD $)
0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Dec. 4, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 4, 2012
Mobile Devices Holdings LLC
Dec. 31, 2014
Mobile Devices Holdings LLC
Maximum
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
 
 
 
 
 
Cash proceeds received
 
 
$ 50,659,000 
$ 50,700,000 
 
Gain from sale of discontinued operations, net of taxes
35,425,000 
459,000 
35,425,000 
 
 
Additional cash consideration payable over the next four years subject to certain conditions, including meeting certain agreed-upon EBITDA-based milestones
 
 
 
 
$ 37,500,000 
Discontinued Operations - Schedule of Discontinued Operations (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Disclosure Schedule Of Discontinued Operations [Abstract]
 
 
 
Revenues
    
    
$ 71,133 
Income from discontinued operations
   
   
15,973 
Income tax provision
   
   
6,085 
Net income from discontinued operations
    
    
$ 9,888 
Discontinued Operations - Schedule of Carrying Amounts of Net Assets Sold (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 4, 2012
Disclosure Schedule Of Carrying Amounts Of Net Assets Sold [Abstract]
 
 
Cash and cash equivalents
 
$ 248 
Trade receivables, net
 
7,221 
Inventories
 
12,659 
Deferred taxes
 
(306)
Prepaid expense and other assets
 
295 
Property and equipment, net
 
4,301 
Goodwill
 
30,872 
Purchased intangibles, net
 
5,724 
Assets sold
 
61,014 
Accounts payable
 
2,318 
Accrued payroll and related liabilities
 
1,877 
Deferred revenue
 
5,044 
Other accrued liabilities
 
1,605 
Deferred taxes
 
1,610 
Liabilities transferred
 
12,454 
Net assets sold
$ 48,560 
$ 48,560 
Discontinued Operations - Gain from Sale of Discontinued Operations (Details) (USD $)
In Thousands, unless otherwise specified
0 Months Ended 12 Months Ended
Dec. 4, 2012
Dec. 31, 2013
Dec. 31, 2012
Disclosure Gain From Sale Of Discontinued Operations [Abstract]
 
 
 
Cash proceeds received
 
 
$ 50,659 
Less: costs incurred directly attributable to the transaction
 
 
929 
Net proceeds from sale of discontinued operations
 
 
49,730 
Less: book value of net assets sold
48,560 
 
48,560 
Currency translation adjustment
 
 
1,141 
Gain from sale of discontinued operations
 
 
29 
Income tax benefit
 
 
(35,396)
Net gain from sale of discontinued operations
$ 35,425 
$ 459 
$ 35,425 
Accounts Receivable Financing - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounts Notes And Loans Receivable [Line Items]
 
 
 
Amount of total outstanding accounts receivable under a financing arrangement
$ 194.4 
$ 123.4 
$ 28.3 
Amount due from the financing company
28.5 
22.9 
 
Fees incurred pursuant to the factoring agreement
2.6 
1.8 
0.4 
Transfer Of Financial Assets Under Financing Arrangement
 
 
 
Accounts Notes And Loans Receivable [Line Items]
 
 
 
Amount of total outstanding accounts receivable under a financing arrangement
136.0 
109.4 
22.9 
Amount due from the financing company
$ 20.2 
$ 21.6 
 
Goodwill, Purchased Intangibles, and Software Development Costs - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Site
Dec. 31, 2013
Site
Dec. 31, 2012
Acquired Intangible Assets [Line Items]
 
 
 
Number of reporting units
 
Goodwill, Impairment Loss
$ 0 
$ 0 
 
Purchased indefinite lived intangibles
918,000 
918,000 
 
Impairment charges related to purchase of intangible assets
$ 0 
$ 0 
$ 0 
Minimum
 
 
 
Acquired Intangible Assets [Line Items]
 
 
 
Estimated future cash flows discounted rates
 
12.00% 
 
Percentage of estimated fair value in excess of carrying value
 
30.00% 
 
Maximum
 
 
 
Acquired Intangible Assets [Line Items]
 
 
 
Estimated future cash flows discounted rates
 
14.00% 
 
Goodwill, Purchased Intangibles, and Software Development Costs - Schedule of Goodwill by Segment (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Goodwill [Line Items]
 
 
Beginning Balance
$ 559,460 
$ 553,819 
Goodwill resulting from an acquisition
 
5,391 
Foreign currency translation
(229)
250 
Ending Balance
559,231 
559,460 
Americas
 
 
Goodwill [Line Items]
 
 
Beginning Balance
 
302,768 
Goodwill resulting from an acquisition
 
5,391 
Ending Balance
308,159 
308,159 
EMEA
 
 
Goodwill [Line Items]
 
 
Beginning Balance
101,882 
101,882 
Foreign currency translation
Ending Balance
101,882 
101,882 
APAC
 
 
Goodwill [Line Items]
 
 
Beginning Balance
149,419 
149,169 
Foreign currency translation
(229)
250 
Ending Balance
$ 149,190 
$ 149,419 
Goodwill, Purchased Intangibles, and Software Development Costs - Schedule of Purchased Intangible Assets by Major Class (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Acquired And Internally Developed Finite Lived Intangible Assets [Line Items]
 
 
Finite Lived Intangible Assets, Gross Value
$ 170,365 
$ 170,365 
Finite Lived Intangible Assets, Accumulated Amortization and Impairment
(146,716)
(133,825)
Finite Lived Intangible Assets, Net Value
23,649 
36,540 
Indefinite-lived trade name
918 
918 
Total intangible assets, Gross Value
171,283 
171,283 
Total intangible assets, Accumulated Amortization and Impairment
(146,716)
(133,825)
Purchased intangibles, net
24,567 
37,458 
Capitalized software development costs for products to be sold, Gross Value
7,416 
2,365 
Capitalized software development costs for products to be sold, Accumulated Amortization & Impairment
(1,900)
(196)
Capitalized software development costs for products to be sold, Net Value
5,516 
2,169 
Core and developed technology
 
 
Acquired And Internally Developed Finite Lived Intangible Assets [Line Items]
 
 
Finite Lived Intangible Assets, Gross Value
81,178 
81,178 
Finite Lived Intangible Assets, Accumulated Amortization and Impairment
(79,986)
(76,952)
Finite Lived Intangible Assets, Net Value
1,192 
4,226 
Customer and partner relationships
 
 
Acquired And Internally Developed Finite Lived Intangible Assets [Line Items]
 
 
Finite Lived Intangible Assets, Gross Value
79,525 
79,525 
Finite Lived Intangible Assets, Accumulated Amortization and Impairment
(57,983)
(48,941)
Finite Lived Intangible Assets, Net Value
21,542 
30,584 
Non-compete agreement
 
 
Acquired And Internally Developed Finite Lived Intangible Assets [Line Items]
 
 
Finite Lived Intangible Assets, Gross Value
1,800 
1,800 
Finite Lived Intangible Assets, Accumulated Amortization and Impairment
(1,100)
(500)
Finite Lived Intangible Assets, Net Value
700 
1,300 
Trade name
 
 
Acquired And Internally Developed Finite Lived Intangible Assets [Line Items]
 
 
Finite Lived Intangible Assets, Gross Value
3,400 
3,400 
Finite Lived Intangible Assets, Accumulated Amortization and Impairment
(3,229)
(3,089)
Finite Lived Intangible Assets, Net Value
171 
311 
Other
 
 
Acquired And Internally Developed Finite Lived Intangible Assets [Line Items]
 
 
Finite Lived Intangible Assets, Gross Value
4,462 
4,462 
Finite Lived Intangible Assets, Accumulated Amortization and Impairment
(4,418)
(4,343)
Finite Lived Intangible Assets, Net Value
$ 44 
$ 119 
Goodwill, Purchased Intangibles, and Software Development Costs - Summary of Amortization Expenses (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
 
Amortization of purchased intangibles in revenues
$ 75 
$ 75 
$ 75 
Amortization of purchased intangibles in cost of product revenues
3,035 
9,361 
7,635 
Amortization of purchased intangibles
9,781 
10,389 
9,830 
Total amortization expenses of purchased intangibles
$ 12,891 
$ 19,825 
$ 17,540 
Goodwill, Purchased Intangibles, and Software Development Costs - Estimated Future Amortization Expense of Purchased Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
2015
$ 10,495 
 
2016
8,484 
 
2017
4,670 
 
Total
$ 23,649 
$ 36,540 
Balance Sheet Details - Schedule of Trade Receivables (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Receivables [Abstract]
 
 
Gross accounts receivables
$ 214,664 
$ 225,134 
Returns and related reserves
(42,224)
(38,938)
Allowance for doubtful accounts
(3,040)
(2,827)
Total
$ 169,400 
$ 183,369 
Balance Sheet Details - Schedule of Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Inventory Disclosure [Abstract]
 
 
Raw materials
$ 1,496 
$ 2,740 
Work in process
545 
840 
Finished goods
98,287 
99,729 
Total
$ 100,328 
$ 103,309 
Balance Sheet Details - Prepaid Expenses and Other Current Assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]
 
 
Non-trade receivables
$ 6,547 
$ 9,251 
Prepaid expenses
37,385 
31,164 
Derivative assets
14,342 
6,748 
Other current assets
2,798 
3,189 
Total
$ 61,072 
$ 50,352 
Balance Sheet Details - Schedule of Property and Equipment (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Minimum
Dec. 31, 2014
Maximum
Dec. 31, 2014
Computer Equipment And Software
Dec. 31, 2013
Computer Equipment And Software
Dec. 31, 2014
Computer Equipment And Software
Minimum
Dec. 31, 2014
Computer Equipment And Software
Maximum
Dec. 31, 2014
Equipment Furniture And Fixtures
Dec. 31, 2013
Equipment Furniture And Fixtures
Dec. 31, 2014
Equipment Furniture And Fixtures
Minimum
Dec. 31, 2014
Equipment Furniture And Fixtures
Maximum
Dec. 31, 2014
Tooling Equipment
Dec. 31, 2013
Tooling Equipment
Dec. 31, 2014
Tooling Equipment
Maximum
Dec. 31, 2014
Leasehold Improvements
Dec. 31, 2013
Leasehold Improvements
Dec. 31, 2014
Leasehold Improvements
Minimum
Dec. 31, 2014
Leasehold Improvements
Maximum
Property Plant And Equipment [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, estimated useful life, years
 
 
1 year 
7 years 
 
 
3 years 
5 years 
 
 
1 year 
7 years 
 
 
3 years 
 
 
3 years 
13 years 
Property and equipment, gross
$ 485,938 
$ 458,842 
 
 
$ 294,724 
$ 265,222 
 
 
$ 115,226 
$ 113,214 
 
 
$ 16,325 
$ 20,811 
 
$ 59,663 
$ 59,595 
 
 
Less: Accumulated depreciation and amortization
(376,743)
(343,685)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
$ 109,195 
$ 115,157 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Details - Schedule of Deferred Revenues (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred Revenue Arrangement [Line Items]
 
 
Short-term deferred revenue
$ 173,532 
$ 172,408 
Long-term deferred revenue
89,366 
87,467 
Software Service, Support and Maintenance Arrangement
 
 
Deferred Revenue Arrangement [Line Items]
 
 
Short-term deferred revenue
171,355 
170,701 
Long-term deferred revenue
85,925 
83,092 
Software License Arrangement
 
 
Deferred Revenue Arrangement [Line Items]
 
 
Short-term deferred revenue
2,083 
1,400 
Long-term deferred revenue
3,441 
4,375 
Product
 
 
Deferred Revenue Arrangement [Line Items]
 
 
Short-term deferred revenue
$ 94 
$ 307 
Balance Sheet Details - Changes in Deferred Services Revenue (Details) (Software Service, Support and Maintenance Arrangement, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Software Service, Support and Maintenance Arrangement
 
 
Deferred Revenue Arrangement [Line Items]
 
 
Balance at beginning of period
$ 253,793 
$ 241,773 
Additions to deferred service revenue
347,896 
354,893 
Amortization of deferred service revenue
(344,409)
(342,873)
Balance at end of period
$ 257,280 
$ 253,793 
Balance Sheet Details - Schedule of Other Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Payables And Accruals [Abstract]
 
 
 
Accrued expenses
$ 27,523 
$ 22,515 
 
Accrued co-op expenses
4,102 
4,629 
 
Restructuring reserves
12,207 
11,238 
 
Warranty obligations
11,613 
9,475 
10,475 
Derivative liabilities
8,175 
6,780 
 
Employee stock purchase plan withholdings
10,658 
10,883 
 
Other accrued liabilities
11,915 
12,224 
 
Total
$ 86,193 
$ 77,744 
 
Balance Sheet Details - Changes in Warranty Obligation (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Guarantees [Abstract]
 
 
Balance at beginning of period
$ 9,475 
$ 10,475 
Accruals for warranties issued during the period
16,753 
16,307 
Charges against warranty reserve during the period
(14,615)
(17,307)
Balance at end of period
$ 11,613 
$ 9,475 
Restructuring Costs - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Restructuring Cost And Reserve [Line Items]
 
 
 
Restructuring costs
$ 40,347,000 
$ 48,470,000 
$ 22,024,000 
Global workforce elimination percentage under restructuring plan
6.00% 
4.00% 
4.00% 
Additions to the reserve
40,279,000 
49,835,000 
24,229,000 
Other Restructuring Costs
 
2,900,000 
 
Deferred Rent
 
 
 
Restructuring Cost And Reserve [Line Items]
 
 
 
Additions to the reserve
2,300,000 
2,800,000 
2,800,000 
Idle Facility
 
 
 
Restructuring Cost And Reserve [Line Items]
 
 
 
Additions to the reserve
28,600,000 
38,200,000 
11,700,000 
Severance / Other
 
 
 
Restructuring Cost And Reserve [Line Items]
 
 
 
Additions to the reserve
$ 11,800,000 
$ 10,200,000 
$ 13,100,000 
Restructuring Costs - Summary of Activity of Restructuring Reserves (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Restructuring Cost And Reserve [Line Items]
 
 
 
Beginning balance
$ 34,929 
$ 8,826 
$ 2,940 
Additions to the reserve, net
40,279 
49,835 
24,229 
Interest accretion
2,347 
1,461 
591 
Non-cash write-off of leasehold improvements
(4,855)
(3,547)
(2,796)
Cash payments and other usage
(31,127)
(21,646)
(16,138)
Ending balance
41,573 
34,929 
8,826 
Severance / Other
 
 
 
Restructuring Cost And Reserve [Line Items]
 
 
 
Beginning balance
1,143 
1,362 
2,486 
Additions to the reserve, net
11,755 
10,185 
13,090 
Cash payments and other usage
(12,234)
(10,404)
(14,214)
Ending balance
664 
1,143 
1,362 
Facilities
 
 
 
Restructuring Cost And Reserve [Line Items]
 
 
 
Beginning balance
33,786 
7,464 
454 
Additions to the reserve, net
28,524 
36,770 
11,139 
Interest accretion
2,347 
1,461 
591 
Non-cash write-off of leasehold improvements
(4,855)
(3,547)
(2,796)
Cash payments and other usage
(18,893)
(8,362)
(1,924)
Ending balance
40,909 
33,786 
7,464 
Projects Discontinued
 
 
 
Restructuring Cost And Reserve [Line Items]
 
 
 
Additions to the reserve, net
 
2,880 
 
Cash payments and other usage
 
$ (2,880)
 
Debt - Additional Information (Details) (USD $)
0 Months Ended 12 Months Ended
Sep. 13, 2013
Dec. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Debt Instrument [Line Items]
 
 
 
 
Term loan
$ 250,000,000 
 
 
$ 250,000,000 
Maturity date of term loan
Sep. 13, 2018 
 
 
 
Debt instrument description of variable rate basis
 
a $250.0 million term loan (the “Term Loan”) maturing on September 13, 2018 (the “Maturity Date”), which bears interest at the Company’s option at either a base rate plus a spread of 0.50% to 1.00%, or a reserve adjusted LIBOR rate plus a spread of 1.50% to 2.00% based on the Company’s consolidated leverage ratio for the preceding four fiscal quarters. 
 
 
Term loan quarterly installments
 
1,600,000 
 
 
Default interest rate applicable for any overdue principal
 
2.00% 
 
 
Default interest rate for base rate loans for any other overdue amounts
 
2.00% 
 
 
Weighted average interest rate
 
2.04% 
 
 
Accrued interest on Term loan
 
400,000 
 
 
Term loan, current
 
6,250,000 
6,250,000 
 
Long-term debt
 
$ 235,938,000 
$ 242,188,000 
 
Base Rate |
Minimum
 
 
 
 
Debt Instrument [Line Items]
 
 
 
 
Term loan interest rate, applicable margin
0.50% 
 
 
 
Base Rate |
Maximum
 
 
 
 
Debt Instrument [Line Items]
 
 
 
 
Term loan interest rate, applicable margin
1.00% 
 
 
 
LIBOR rate plus |
Minimum
 
 
 
 
Debt Instrument [Line Items]
 
 
 
 
Term loan interest rate, applicable margin
1.50% 
 
 
 
LIBOR rate plus |
Maximum
 
 
 
 
Debt Instrument [Line Items]
 
 
 
 
Term loan interest rate, applicable margin
2.00% 
 
 
 
Debt - Interest Expenses Recognized (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Debt Disclosure [Abstract]
 
 
 
Contractual interest expense
$ 4,940 
$ 1,605 
    
Amortization of debt issuance costs
533 
178 
   
Total
$ 5,473 
$ 1,783 
    
Investments - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Investments Debt And Equity Securities [Abstract]
 
 
 
 
Cash and cash equivalents
$ 443,132,000 
$ 392,629,000 
$ 477,073,000 
$ 375,441,000 
Long-term investments, contractual maturity period, minimum
1 year 
 
 
 
Long-term investments, contractual maturity period, maximum
2 years 
 
 
 
Investments other than temporarily impaired
 
 
Material realized gains (losses), net
$ 0 
$ 0 
$ 0 
 
Investments - Short-Term and Long-Term Investments in Debt Securities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Schedule Of Available For Sale Securities [Line Items]
 
 
Short-term investments
$ 185,783 
$ 134,684 
Long-term investments
59,197 
56,372 
Short-term Investments
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
185,812 
134,634 
Unrealized Gains
26 
57 
Unrealized Losses
(55)
(7)
Short-term investments
185,783 
134,684 
Short-term Investments |
U.S. Government Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
26,930 
19,792 
Unrealized Gains
Unrealized Losses
(2)
 
Short-term investments
26,935 
19,801 
Short-term Investments |
U.S. Government Agency Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
59,336 
38,388 
Unrealized Gains
16 
Unrealized Losses
(6)
(3)
Short-term investments
59,337 
38,401 
Short-term Investments |
Non-U.S. Government Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
8,764 
13,734 
Unrealized Gains
10 
Short-term investments
8,766 
13,744 
Short-term Investments |
Corporate Debt Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
90,782 
62,720 
Unrealized Gains
10 
22 
Unrealized Losses
(47)
(4)
Short-term investments
90,745 
62,738 
Long Term Investments
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
59,229 
56,336 
Unrealized Gains
39 
Unrealized Losses
(39)
(3)
Long-term investments
59,197 
56,372 
Long Term Investments |
U.S. Government Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
25,320 
12,252 
Unrealized Gains
Unrealized Losses
(10)
 
Long-term investments
25,314 
12,260 
Long Term Investments |
U.S. Government Agency Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
17,369 
30,627 
Unrealized Gains
12 
Unrealized Losses
(14)
(3)
Long-term investments
17,356 
30,636 
Long Term Investments |
Non-U.S. Government Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
 
2,305 
Unrealized Gains
 
Long-term investments
 
2,309 
Long Term Investments |
Corporate Debt Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Cost Basis
16,540 
11,152 
Unrealized Gains
15 
Unrealized Losses
(15)
 
Long-term investments
$ 16,527 
$ 11,167 
Investments - Schedule of Investment in Unrealized Loss Position (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Schedule Of Available For Sale Securities [Line Items]
 
 
Fair Value, Less than 12 Months
$ 109,370 
$ 15,370 
Gross Unrealized Losses, Less than 12 Months
(94)
(9)
Fair Value, 12 Months or Greater
 
1,504 
Gross Unrealized Losses, 12 Months or Greater
 
(1)
Total Fair Value
109,370 
16,874 
Total Gross Unrealized Losses
(94)
(10)
U.S. Government Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Fair Value, Less than 12 Months
22,355 
 
Gross Unrealized Losses, Less than 12 Months
(12)
 
Total Fair Value
22,355 
 
Total Gross Unrealized Losses
(12)
 
U.S. Government Agency Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Fair Value, Less than 12 Months
27,348 
5,533 
Gross Unrealized Losses, Less than 12 Months
(20)
(6)
Total Fair Value
27,348 
5,533 
Total Gross Unrealized Losses
(20)
(6)
Corporate Debt Securities
 
 
Schedule Of Available For Sale Securities [Line Items]
 
 
Fair Value, Less than 12 Months
59,667 
9,837 
Gross Unrealized Losses, Less than 12 Months
(62)
(3)
Fair Value, 12 Months or Greater
 
1,504 
Gross Unrealized Losses, 12 Months or Greater
 
(1)
Total Fair Value
59,667 
11,341 
Total Gross Unrealized Losses
$ (62)
$ (4)
Fair Value Measurements - Schedule of Fair Value of Marketable Securities and Foreign Currency Contracts (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
$ 253,924 
$ 211,151 
Foreign currency forward contracts, Assets
14,342 1
6,748 1
Foreign currency forward contracts, Liabilities
8,175 2
6,780 2
Money market funds
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
1,395 
17,596 
Commercial paper
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
7,549 
2,499 
Quoted Prices in Active Markets for Identical Assets, Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
1,395 
17,596 
Quoted Prices in Active Markets for Identical Assets, Level 1 |
Money market funds
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
1,395 
17,596 
Significant Other Observable Inputs, Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
252,529 
193,555 
Foreign currency forward contracts, Assets
14,342 1
6,748 1
Foreign currency forward contracts, Liabilities
8,175 2
6,780 2
Significant Other Observable Inputs, Level 2 |
Commercial paper
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
7,549 
2,499 
Short-term Investments
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
185,783 
134,684 
Short-term Investments |
Significant Other Observable Inputs, Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
185,783 
134,684 
Long-term investments
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
59,197 
56,372 
Long-term investments |
Significant Other Observable Inputs, Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fixed income available-for-sale securities
$ 59,197 
$ 56,372 
Fair Value Measurements - Additional Information (Details) (USD $)
Dec. 31, 2014
Dec. 31, 2013
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Fair value transfers between Level 1 and Level 2
$ 0 
$ 0 
Fair value of Term Loan
234,900,000 
247,500,000 
Level 3
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Investments holdings
$ 0 
$ 0 
Business Risks and Credit Concentration - Additional Information (Detail) (Customer Concentration Risk, ScanSource Communications)
12 Months Ended
Dec. 31, 2014
Customer
Dec. 31, 2013
Customer
Dec. 31, 2012
Customer
Total Net Revenues
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk percentage
17.00% 
16.00% 
14.00% 
Number of customer partners contributing more than 10% of total revenues
Accounts Receivable
 
 
 
Concentration Risk [Line Items]
 
 
 
Concentration risk percentage
19.00% 
11.00% 
 
Number of customer accounted for more than 10% of gross accounts receivable
 
Commitments and Contingencies - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Commitment And Contingencies [Line Items]
 
 
 
Litigation reserves and payments
$ 3,130,000 
 
 
Litigation reserves
750,000 
 
 
Operating leases expiration term
2015 and 2023 
 
 
Rent expense
26,800,000 
32,200,000 
32,800,000 
Standby Letters of Credit
 
 
 
Commitment And Contingencies [Line Items]
 
 
 
Letters of credit outstanding amount
$ 7,200,000 
$ 7,300,000 
 
Commitments and Contingencies - Future Minimum Lease Payments Under Operating Lease (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Gross Minimum Lease Payments
 
Gross Minimum Lease Payments, 2015
$ 31,864 
Gross Minimum Lease Payments, 2016
25,681 
Gross Minimum Lease Payments, 2017
23,122 
Gross Minimum Lease Payments, 2018
18,595 
Gross Minimum Lease Payments, 2019
18,231 
Gross Minimum Lease Payments, Thereafter
35,252 
Total Gross Minimum Lease Payments
152,745 
Estimated Sublease Receipts
 
Estimated Sublease Receipts, 2015
(1,808)
Estimated Sublease Receipts, 2016
(1,683)
Estimated Sublease Receipts, 2017
(1,338)
Estimated Sublease Receipts, 2018
(1,050)
Estimated Sublease Receipts, 2019
(1,016)
Estimated Sublease Receipts, Thereafter
(1,135)
Total Estimated Sublease Receipts
(8,030)
Net Minimum Lease Payments
 
Net Minimum Lease Payments, 2015
30,056 
Net Minimum Lease Payments, 2016
23,998 
Net Minimum Lease Payments, 2017
21,784 
Net Minimum Lease Payments, 2018
17,545 
Net Minimum Lease Payments, 2019
17,215 
Net Minimum Lease Payments, Thereafter
34,117 
Total Net Minimum Lease Payments
$ 144,715 
Foreign Currency Derivatives - Notional Position by Currency of Outstanding Non-designated Hedges (Details) (Not Designated as Hedging Instrument, Original Maturities of 360 Days or Less)
In Thousands, unless otherwise specified
Dec. 31, 2014
Buy
Brazilian Real
USD ($)
Dec. 31, 2014
Buy
Brazilian Real
BRL
Dec. 31, 2014
Buy
Chinese Yuan
USD ($)
Dec. 31, 2014
Buy
Chinese Yuan
CNY
Dec. 31, 2014
Buy
Euro Member Countries, Euro
USD ($)
Dec. 31, 2014
Buy
Euro Member Countries, Euro
EUR (€)
Dec. 31, 2014
Buy
British Pound
USD ($)
Dec. 31, 2014
Buy
British Pound
GBP (£)
Dec. 31, 2014
Buy
Israeli Shekel
USD ($)
Dec. 31, 2014
Buy
Israeli Shekel
ILS
Dec. 31, 2014
Buy
Japanese Yen
USD ($)
Dec. 31, 2014
Buy
Japanese Yen
JPY (¥)
Dec. 31, 2014
Buy
Mexican Peso
USD ($)
Dec. 31, 2014
Buy
Mexican Peso
MXN ($)
Dec. 31, 2014
Sell
Brazilian Real
USD ($)
Dec. 31, 2014
Sell
Brazilian Real
BRL
Dec. 31, 2014
Sell
Chinese Yuan
USD ($)
Dec. 31, 2014
Sell
Chinese Yuan
CNY
Dec. 31, 2014
Sell
Euro Member Countries, Euro
USD ($)
Dec. 31, 2014
Sell
Euro Member Countries, Euro
EUR (€)
Dec. 31, 2014
Sell
British Pound
USD ($)
Dec. 31, 2014
Sell
British Pound
GBP (£)
Dec. 31, 2014
Sell
Israeli Shekel
USD ($)
Dec. 31, 2014
Sell
Israeli Shekel
ILS
Dec. 31, 2014
Sell
Japanese Yen
USD ($)
Dec. 31, 2014
Sell
Japanese Yen
JPY (¥)
Dec. 31, 2014
Sell
Mexican Peso
USD ($)
Dec. 31, 2014
Sell
Mexican Peso
MXN ($)
Derivative [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notional amount of foreign currency
$ 4,046 
 10,747 
$ 14,727 
 92,276 
$ 36,641 
€ 28,862 
$ 43,558 
£ 27,036 
$ 12,749 
 45,706 
$ 3,889 
¥ 464,897 
$ 1,080 
$ 15,906 
$ 8,251 
 21,858 
$ 13,672 
 85,309 
$ 92,866 
€ 71,418 
$ 46,465 
£ 28,399 
$ 10,146 
 39,479 
$ 6,724 
¥ 799,492 
$ 2,367 
$ 34,004 
Foreign Currency Derivatives - Effect of Non-Designated Hedges in Condensed Consolidated Statements of Operations (Details) (Interest and other income (expense), net, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Interest and other income (expense), net
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Amount of Gain or (Loss) Recognized in Income on Derivative
$ 6,708 
$ (411)
$ (412)
Foreign Currency Derivatives - Additional Information (Details)
12 Months Ended
Dec. 31, 2014
Derivative Instruments And Hedging Activities Disclosure [Abstract]
 
Maximum duration of foreign exchange forward contracts designated as cash flow hedges
13 months 
Foreign Currency Derivatives - Effect of Derivative Instruments Designated as Cash Flow Hedges in Condensed Consolidated Statements of Operations (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Derivative Instruments Gain Loss [Line Items]
 
 
 
Foreign exchange contracts, Gain or (loss) recognized in OCI-effective portion, total
$ 3,627 
$ 1,374 
$ 1,018 
Gain or (loss) reclassified from OCI into income- effective portion, total
2,341 
2,308 
3,734 
Gain or (Loss) Recognized-Ineffective Portion and Amount Excluded from Effectiveness Testing
109 1
368 1
42 1
Product revenues
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Gain or (loss) reclassified from OCI into income- effective portion, total
1,170 
207 
7,133 
Cost of revenues
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Gain or (loss) reclassified from OCI into income- effective portion, total
320 
279 
(607)
Sales and marketing
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Gain or (loss) reclassified from OCI into income- effective portion, total
772 
233 
(974)
Research and development
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Gain or (loss) reclassified from OCI into income- effective portion, total
86 
1,425 
(774)
General and administrative
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Gain or (loss) reclassified from OCI into income- effective portion, total
(7)
164 
(1,044)
Interest and other income (expense), net
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Gain or (Loss) Recognized-Ineffective Portion and Amount Excluded from Effectiveness Testing
109 1
368 1
42 1
Foreign exchange contract
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
Foreign exchange contracts, Gain or (loss) recognized in OCI-effective portion, total
$ 3,627 
$ 1,374 
$ 1,018 
Effect of Derivative Instruments Designated as Cash Flow Hedges in Condensed Consolidated Statements of Operations (Parenthetical) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Derivative Instruments And Hedging Activities Disclosure [Abstract]
 
 
Unrealized Gain (Loss) in income due to ineffectiveness
$ 0 
$ 0 
Foreign Currency Derivatives - Notional Position by Currency of Outstanding Cash Flow Hedges (Details) (Cash Flow Hedging)
In Thousands, unless otherwise specified
Dec. 31, 2014
Buy
Chinese Yuan
Original Maturities of 360 Days or Less
USD ($)
Dec. 31, 2014
Buy
Chinese Yuan
Original Maturities of 360 Days or Less
CNY
Dec. 31, 2014
Buy
Chinese Yuan
Original Maturities of Greater than 360 Days
USD ($)
Dec. 31, 2014
Buy
Chinese Yuan
Original Maturities of Greater than 360 Days
CNY
Dec. 31, 2014
Buy
Euro Member Countries, Euro
Original Maturities of 360 Days or Less
USD ($)
Dec. 31, 2014
Buy
Euro Member Countries, Euro
Original Maturities of 360 Days or Less
EUR (€)
Dec. 31, 2014
Buy
Euro Member Countries, Euro
Original Maturities of Greater than 360 Days
USD ($)
Dec. 31, 2014
Buy
Euro Member Countries, Euro
Original Maturities of Greater than 360 Days
EUR (€)
Dec. 31, 2014
Buy
British Pound
Original Maturities of 360 Days or Less
USD ($)
Dec. 31, 2014
Buy
British Pound
Original Maturities of 360 Days or Less
GBP (£)
Dec. 31, 2014
Buy
British Pound
Original Maturities of Greater than 360 Days
USD ($)
Dec. 31, 2014
Buy
British Pound
Original Maturities of Greater than 360 Days
GBP (£)
Dec. 31, 2014
Buy
Israeli Shekel
Original Maturities of 360 Days or Less
USD ($)
Dec. 31, 2014
Buy
Israeli Shekel
Original Maturities of 360 Days or Less
ILS
Dec. 31, 2014
Buy
Israeli Shekel
Original Maturities of Greater than 360 Days
USD ($)
Dec. 31, 2014
Buy
Israeli Shekel
Original Maturities of Greater than 360 Days
ILS
Dec. 31, 2014
Sell
Euro Member Countries, Euro
Original Maturities of 360 Days or Less
USD ($)
Dec. 31, 2014
Sell
Euro Member Countries, Euro
Original Maturities of 360 Days or Less
EUR (€)
Dec. 31, 2014
Sell
Euro Member Countries, Euro
Original Maturities of Greater than 360 Days
USD ($)
Dec. 31, 2014
Sell
Euro Member Countries, Euro
Original Maturities of Greater than 360 Days
EUR (€)
Dec. 31, 2014
Sell
British Pound
Original Maturities of 360 Days or Less
USD ($)
Dec. 31, 2014
Sell
British Pound
Original Maturities of 360 Days or Less
GBP (£)
Dec. 31, 2014
Sell
British Pound
Original Maturities of Greater than 360 Days
USD ($)
Dec. 31, 2014
Sell
British Pound
Original Maturities of Greater than 360 Days
GBP (£)
Derivative [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notional amount of foreign currency
$ 11,909 
 75,140 
$ 9,781 
 62,600 
$ 22,583 
€ 17,185 
$ 14,412 
€ 11,700 
$ 20,142 
£ 12,297 
$ 20,713 
£ 13,300 
$ 14,471 
 51,666 
$ 11,429 
 44,400 
$ 49,729 
€ 37,976 
$ 45,330 
€ 36,800 
$ 23,998 
£ 14,659 
$ 29,746 
£ 19,100 
Foreign Currency Derivatives - Derivative Instruments Measured at Gross Fair Value as Reflected in Condensed Consolidated Balance Sheets (Details) (Foreign exchange contract, USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Derivatives Fair Value [Line Items]
 
 
Derivative assets
$ 14,342 
$ 6,748 
Derivative liabilities
8,175 
6,780 
Designated as Hedge Instruments
 
 
Derivatives Fair Value [Line Items]
 
 
Derivative assets
5,501 1
4,457 1
Derivative liabilities
4,041 2
4,235 2
Not Designated as Hedging Instrument
 
 
Derivatives Fair Value [Line Items]
 
 
Derivative assets
8,841 1
2,291 1
Derivative liabilities
$ 4,134 2
$ 2,545 2
Foreign Currency Derivatives - Offsetting of Derivative Assets (Details) (Foreign exchange contract, USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Foreign exchange contract
 
 
Offsetting Assets [Line Items]
 
 
Gross Amounts of Recognized Assets
$ 14,342 
$ 6,748 
Net Amounts Of Assets Presented In the Consolidated Balance Sheets
14,342 
6,748 
Gross Amounts of Assets Not Offset in the Consolidated Balance Sheets, Financial Instruments
(8,175)
(5,643)
Gross Amounts Not Offset in the Consolidated Balance Sheets, Net Amount
$ 6,167 
$ 1,105 
Foreign Currency Derivatives - Offsetting of Derivative Liabilities (Details) (Foreign exchange contract, USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Foreign exchange contract
 
 
Offsetting Liabilities [Line Items]
 
 
Gross Amounts of Recognized Liabilities
$ 8,175 
$ 6,780 
Net Amounts Of Liabilities Presented In the Consolidated Balance Sheets
8,175 
6,780 
Gross Amounts of Liabilities Not Offset in the Consolidated Balance Sheets, Financial Instruments
(8,175)
(5,643)
Gross Amounts Not Offset in the Consolidated Balance Sheets, Net Amount
 
$ 1,137 
Stockholders' Equity - Share Repurchase Programs - Additional Information (Details) (USD $)
1 Months Ended 3 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 3 Months Ended 7 Months Ended 12 Months Ended 0 Months Ended
Oct. 31, 2013
Sep. 30, 2013
Jun. 30, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Sep. 13, 2013
Dec. 4, 2013
Accelerated Share Repurchase Agreements
Dec. 31, 2013
Accelerated Share Repurchase Agreements
Jun. 30, 2014
Accelerated Share Repurchase Agreements
Jun. 30, 2014
Accelerated Share Repurchase Agreements
Dec. 31, 2014
Stock Repurchase Program
Dec. 31, 2013
Stock Repurchase Program
Jul. 31, 2014
Stock Repurchase Program
Oct. 30, 2013
Tender Offer
Sep. 30, 2013
Tender Offer
Share Repurchases Program [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase of common stock, shares
27,400,000 
 
1,500,000 
 
 
 
 
 
8,000,000 
1,500,000 
9,500,000 
3,800,000 
45,200,000 
 
27,400,000 
 
Purchase of common stock, value
 
 
 
$ 64,762,000 
$ 487,180,000 
$ 67,901,000 
 
$ 114,600,000 
 
 
 
$ 50,000,000 
$ 502,300,000 
 
$ 285,400,000 
 
Shares repurchase authorized amount
 
400,000,000 
 
 
 
 
 
 
 
 
 
 
 
200,000,000 
 
250,000,000 
Percentage of outstanding common stock repurchase
 
20.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payments for repurchase of common stock
 
150,000,000 
 
64,811,000 
515,022,000 
67,901,000 
 
 
 
 
 
 
 
 
 
 
Term loan
 
$ 250,000,000 
 
 
 
 
$ 250,000,000 
 
 
 
 
 
 
 
 
 
Cost of shares repurchased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 10.40 
 
Tender Offer expiration date
 
 
 
 
Oct. 31, 2013 
 
 
 
 
 
 
 
 
 
Oct. 30, 2013 
 
Stockholders' Equity - Changes in Accumulated Other Comprehensive Income (Loss) by Component (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
 
Accumulated Other Comprehensive Income (Loss), Beginning balance
$ 4,372 
$ 4,196 
 
Other comprehensive income (loss) before reclassifications
2,090 
2,431 
 
Amounts reclassified from accumulated other comprehensive income
(2,351)1
(2,255)1
 
Net current-period other comprehensive income (loss)
(261)
176 
(1,414)
Accumulated Other Comprehensive Income (loss) , Ending balance
4,111 
4,372 
4,196 
Unrealized Gains and Losses on Cash Flow Hedges
 
 
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
 
Accumulated Other Comprehensive Income (Loss), Beginning balance
80 
1,014 
 
Other comprehensive income (loss) before reclassifications
3,627 
1,374 
 
Amounts reclassified from accumulated other comprehensive income
(2,341)1
(2,308)1
 
Net current-period other comprehensive income (loss)
1,286 
(934)
 
Accumulated Other Comprehensive Income (loss) , Ending balance
1,366 
80 
 
Unrealized Gains and Losses on Available-for-Sale Securities
 
 
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
 
Accumulated Other Comprehensive Income (Loss), Beginning balance
73 
 
Other comprehensive income (loss) before reclassifications
(115)
18 
 
Amounts reclassified from accumulated other comprehensive income
(10)1
53 1
 
Net current-period other comprehensive income (loss)
(125)
71 
 
Accumulated Other Comprehensive Income (loss) , Ending balance
(52)
73 
 
Foreign Currency Translation
 
 
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
 
Accumulated Other Comprehensive Income (Loss), Beginning balance
4,219 
3,180 
 
Other comprehensive income (loss) before reclassifications
(1,422)
1,039 
 
Net current-period other comprehensive income (loss)
(1,422)
1,039 
 
Accumulated Other Comprehensive Income (loss) , Ending balance
$ 2,797 
$ 4,219 
 
Stock-Based Employee Benefit Plans - Equity Incentive Plans - Additional Information (Details)
0 Months Ended
Jun. 5, 2013
May 26, 2011
May 26, 2011
2004 or 1996 Equity Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Shares reserved for issuance under the 2011 equity incentive plan, post stock split
 
19,800,000 
 
Expired Cancelled or Forfeited Shares of Past Plans Added To Reserve of 2011 Plan Post Split Maximum
 
 
13,636,548 
Additional shares reserved for issuance under the 2011 equity incentive plan, post stock split
10,500,000 
 
 
Stock-Based Employee Benefit Plans - Activity Under Share-Based Compensation Equity Incentive Plans (Details)
12 Months Ended
Dec. 31, 2014
Shares Available for Grant
 
Shares Available for Grant, Beginning Balance
14,272,794 1
Performance shares granted
(1,122,849)1 2
Performance shares forfeited
2,199,968 1
Restricted stock units granted
(4,705,549)1
Restricted stock units forfeited
2,471,450 1
Options forfeited
90,156 1
Options expired
233,532 1
Shares Available for Grant, Ending Balance
13,439,432 1
Vivu Plan
 
Shares Available for Grant
 
Options forfeited
(70)1 3
Stock-Based Employee Benefit Plans - Activity Under Share-Based Compensation Equity Incentive Plans (Parenthetical) (Details)
Dec. 31, 2014
Dec. 31, 2013
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
Additional common stock shares issued
25,666 
 
Additional common stock shares issued
135,204,948 
135,159,966 
Fungible Ratio
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
Additional common stock shares issued
39,526 
 
Stock-Based Employee Benefit Plans - Stock Options - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Total pre-tax intrinsic value of options exercised
$ 200,000 
$ 300,000 
$ 3,100,000 
Stock options exercisable
 
525,180 
963,873 
Stock options exercisable, weighted average exercise price
 
$ 14.31 
$ 13.22 
Stock Option Plans
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Stock options granted expiry period
7 years 
 
 
Stock options granted
 
Compensation cost not yet recognized
$ 0 
 
 
Stock Option Plans |
Nonqualified Stock Options
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Non-qualified stock option shares to certain employees
 
 
479,571 
Terms of Option Grant
 
 
50% of the options vested on the one year anniversary of the grant date and the remaining 50% vested on the second anniversary of the grant date 
Weighted-average estimated fair value of non-qualified stock options granted
 
 
$ 4.45 
Stock-Based Employee Benefit Plans - Activity Under Share-Based Compensation Stock Option Plans (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Outstanding Number of Shares
 
Outstanding Options, Number of Shares, Beginning Balance
697,218 
Options exercised
(133,037)
Options forfeited
(90,156)1
Options expired
(233,532)1
Outstanding Options, Number of Shares, Ending Balance
240,493 
Options Weighted Avg Exercise Price
 
Options Weighted Avg Exercise Price, Beginning Balances
$ 13.64 
Options exercised
$ 11.37 
Options forfeited
$ 14.50 
Options expired
$ 16.67 
Options Weighted Avg Exercise Price, Ending Balances
$ 11.62 
Options Weighted Avg Contractual Term (Years), Ending Balances
3 years 11 months 1 day 
Options Aggregate Intrinsic Value, Ending Balances
$ 451,780 
Stock-Based Employee Benefit Plans - Options Outstanding and Exercisable by Range of Exercise Price (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
 
Stock Options Number Outstanding
240,493 
Stock Options Exercisable Weighted Average Remaining Contractual Life (Yrs)
3 years 11 months 1 day 
Weighted Average Exercise Price
$ 11.62 
$0.75
 
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
 
Stock Options Number Outstanding
42 
Stock Options Exercisable Weighted Average Remaining Contractual Life (Yrs)
5 years 18 days 
Weighted Average Exercise Price
$ 0.75 
$11.61
 
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
 
Stock Options Number Outstanding
220,502 
Stock Options Exercisable Weighted Average Remaining Contractual Life (Yrs)
4 years 3 months 7 days 
Weighted Average Exercise Price
$ 11.61 
$11.67 - $11.80
 
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
 
Range of Exercise Price, Lower range
$ 11.67 
Range of Exercise Price, Upper range
$ 11.80 
Stock Options Number Outstanding
19,949 
Stock Options Exercisable Weighted Average Remaining Contractual Life (Yrs)
1 month 24 days 
Weighted Average Exercise Price
$ 11.77 
Stock-Based Employee Benefit Plans - Performance Shares and Restricted Stock Units - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Performance Shares
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Award target performance rate, low
0.00% 
 
 
Award target performance rate, high
150.00% 
 
 
Unvested Shares
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Compensation cost not yet recognized
$ 37,500,000 
 
 
Compensation cost not yet recognized, period for recognition
1 year 
 
 
Total fair value of shares vested
$ 46,100,000 
$ 44,200,000 
$ 43,400,000 
Minimum |
Performance Shares
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Vesting period (in years)
1 year 
 
 
Maximum |
Performance Shares
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Vesting period (in years)
3 years 
 
 
Stock-Based Employee Benefit Plans - Changes in Unvested Performance Shares and Restricted Stock Units and Non-Employee Director Restricted Stock Units (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Performance Shares
Dec. 31, 2014
Restricted Stock Units (RSUs)
Number of shares
 
 
 
 
Unvested Shares Beginning Balance
6,825,691 1
9,205,462 1
 
 
Performance shares granted
 
 
729,122 1 2
3,055,551 1 3
Performance shares vested and issued
 
 
(164,995)1
(3,302,419)1
Performance shares forfeited
 
 
(1,232,780)1
(1,464,250)1
Unvested Shares Ending Balance
6,825,691 1
9,205,462 1
 
 
Weighted Avg Grant Date Fair Value
 
 
 
 
Weighted Avg Grant Date Fair Value, Beginning Balance
$ 12.26 
$ 12.59 
 
 
Granted, Weighted Avg Grant Date Fair Value
 
 
$ 13.64 2
$ 12.96 3
Vested and issued, Weighted Avg Grant Date Fair Value
 
 
$ 9.60 
$ 13.48 
Forfeited, Weighted Avg Grant Date Fair Value
 
 
$ 14.66 
$ 12.01 
Weighted Avg Grant Date Fair Value, Ending Balance
$ 12.26 
$ 12.59 
 
 
Stock-Based Employee Benefit Plans - Changes in Unvested Performance Shares and Restricted Stock Units and Non-Employee Director Restricted Stock Units (Parenthetical) (Details)
12 Months Ended
Dec. 31, 2014
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
 
Restricted stock units granted to non-employee directors
140,000 
Additional common stock shares issued
25,666 
Stock-Based Employee Benefit Plans - Stock Option Plans and Employee Stock Purchase Plan - Additional Information (Details) (USD $)
3 Months Ended 12 Months Ended
Sep. 30, 2012
Mar. 31, 2012
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
 
Number of shares approved and available under the Employee Stock Purchase Plan
 
 
13,439,432 1
14,272,794 1
 
Employee Stock Purchase Plan
 
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
 
Purchase period
 
 
6 months 
 
 
Offering period
 
 
2 years 
 
 
Maximum percentage of employees' compensation deductions
 
 
15.00% 
 
 
Discount from market price
 
 
85.00% 
 
 
Maximum worth of shares per employee
 
 
$ 25,000 
 
 
Maximum number of shares per employee
 
 
10,000 
 
 
Number of shares approved and available under the Employee Stock Purchase Plan
 
 
11,315,067 
 
 
Shares purchased under employee stock purchase plan, shares
 
 
2,944,069 
2,904,287 
1,867,683 
Average price per share for shares purchased
 
 
$ 7.55 
$ 7.41 
$ 11.24 
Cumulative incremental expenses incurred
20,600,000 
20,600,000 
 
 
 
Incremental expenses recognized
 
 
$ 1,600,000 
$ 8,800,000 
$ 10,200,000 
Stock-Based Employee Benefit Plans - Summary and Allocation of Stock-Based Compensation Expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
$ 47,960 
$ 64,465 
$ 88,761 
Less: tax benefit
9,492 
11,174 
21,880 
Stock-based compensation expense related to employee equity awards and employee stock purchases, net of tax
38,468 
53,291 
66,881 
Cost of sales - product
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
2,463 
2,892 
3,593 
Cost of sales - service
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
4,293 
5,852 
6,611 
Cost of revenues
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
6,756 
8,744 
10,204 
Sales and marketing
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
14,893 
26,570 
36,791 
Research and development
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
10,299 
15,634 
20,195 
General and administrative
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
16,012 
13,517 
21,571 
Operating Expenses
 
 
 
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
$ 41,204 
$ 55,721 
$ 78,557 
Stock-Based Employee Benefit Plans - Stock-Based Compensation Expense - Additional Information (Details) (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2014
Dec. 31, 2014
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
 
 
Effect of change in forfeiture rate decreased stock compensation expense
$ 1,800,000 
 
Net loss decreased due to cumulative effect of changes in forfeiture rates on all unvested awards
1,400,000 
 
Loss per share decreased due to cumulative effect of changes in forfeiture rates on all unvested awards
$ 0.01 
 
Actual forfeitures of awards granted to former officers
$ 2,100,000 
$ 0 
Stock-Based Employee Benefit Plans - Valuation Assumptions of Stock Options and Stock Purchase Rights - Additional Information (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Employee Stock Purchase Plan |
Minimum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Weighted average estimated fair value of share granted
$ 2.80 
$ 2.60 
$ 2.69 
Employee Stock Purchase Plan |
Maximum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Weighted average estimated fair value of share granted
$ 4.48 
$ 4.57 
$ 8.4 
Employee Stock Option
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Weighted average estimated fair value of share granted
$ 4.45 
 
 
Historical Volatility |
Nonqualified Stock Option Plan And Employee Stock Purchase
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Blended volatility
50.00% 
 
 
Implied Volatility |
Nonqualified Stock Option Plan And Employee Stock Purchase
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Blended volatility
50.00% 
 
 
Stock-Based Employee Benefit Plans - Significant Assumptions Used to Estimate Fair Value of Employee Stock Options (Details) (Employee Stock Option)
12 Months Ended
Dec. 31, 2012
Employee Stock Option
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
Expected volatility
51.24% 
Risk-free interest rate
0.50% 
Expected dividends
0.00% 
Expected life (yrs)
3 years 8 months 12 days 
Stock-Based Employee Benefit Plans - Significant Assumptions Used to Estimate Fair Value of Employee Stock Purchase Plan (Details) (Employee Stock Purchase Plan)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected volatility, minimum
26.47% 
42.40% 
48.27% 
Expected volatility, maximum
32.18% 
48.89% 
61.78% 
Risk-free interest rate, minimum
0.05% 
0.08% 
0.09% 
Risk-free interest rate, maximum
0.47% 
0.35% 
0.24% 
Expected dividends
0.00% 
0.00% 
 
Minimum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected life (yrs)
6 months 
6 months 
6 months 
Maximum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected life (yrs)
2 years 
2 years 
2 years 
Employee Benefit Plan - Additional Information (Details) (401(k) Plan, USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
401(k) Plan
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
Cash matching percentage of matching contribution on rate of compensation employee's compensation
50.00% 
 
 
Rate of compensation employees' contribution serving as base for matching contribution
6.00% 
 
 
Employer's matching contribution vested percentage
100.00% 
 
 
Company's contribution to employee benefit plans
$ 2.8 
$ 3.0 
$ 3.0 
Income Taxes - Components of Income Tax Expense (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income tax expense from continuing operations
 
 
 
Federal
$ (2,843)
$ (953)
$ 44,569 
State
(235)
(72)
3,283 
Foreign
8,352 
8,604 
9,488 
Total current
5,274 
7,579 
57,340 
Federal
(2,562)
(10,715)
(13,372)
State
(273)
(818)
(1,308)
Foreign
(1,483)
285 
(3,193)
Total deferred
(4,318)
(11,248)
(17,873)
Total income tax expense (benefit) from continuing operations
956 
(3,669)
39,467 
Income tax expense (benefit) from discontinued operations
 
$ 96 
$ (29,311)
Income Taxes - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Information [Line Items]
 
 
 
Income tax (benefit) expense from sale of discontinued operations
 
 
$ (35,396,000)
Federal and state taxes recorded on financing of the global restructuring
 
 
38,800,000 
Net operating losses
1,400,000 
 
 
Capital loss carry-forwards
1,100,000 
 
 
Tax credit carryforwards
21,237,000 
16,457,000 
 
Net operating loss carryforwards credit relate to acquisitions
100,000 
 
 
Valuation allowance related to operating losses and credits
3,216,000 
3,359,000 
 
Deferred tax assets, tax credit carryforwards, research
2,700,000 
 
 
Deferred tax assets, tax credit carryforwards, foreign
500,000 
 
 
Cumulative amount of earnings upon which U.S. income tax has not been provided
339,600,000 
 
 
Reductions of income taxes payable resulting from exercise of employee stock options and other employee stock programs
 
 
5,100,000 
Income tax benefit attributable to tax incentives
3,100,000 
1,700,000 
6,500,000 
income tax benefit attributable to tax incentives, per share
$ 0.02 
$ 0.01 
$ 0.04 
Recorded reserve releases
 
 
10,000,000 
Accrued interest and penalties related to uncertain tax positions
1,600,000 
1,500,000 
 
Anticipated reduction in uncertain tax positions
600,000 
 
 
Expiring at the end of Fiscal 2015
 
 
 
Income Tax Information [Line Items]
 
 
 
Income tax benefit attributable to tax incentives
200,000 
 
 
U.S. And Foreign Jurisdictions
 
 
 
Income Tax Information [Line Items]
 
 
 
Recorded reserve releases
900,000 
2,400,000 
3,500,000 
Multi-Year Tax Audits
 
 
 
Income Tax Information [Line Items]
 
 
 
Recorded reserve releases
 
 
800,000 
Reduction In Unrecognized Tax Benefit For Research Credits
 
 
 
Income Tax Information [Line Items]
 
 
 
Recorded reserve releases
 
 
$ 5,700,000 
Income Taxes - Sources of Income Before Provision for Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
United States
$ (2,317)
$ (17,823)
$ (37,025)
Foreign
45,332 
(4,381)
39,523 
Income (loss) from continuing operations before provision for (benefit from) income taxes
$ 43,015 
$ (22,204)
$ 2,498 
Income Taxes - Reconciliation of Tax Provision Computed Using Statutory Rates to Effective Income Tax Provision (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Federal tax at statutory rate
$ 15,055 
$ (7,771)
$ 2,194 
State taxes, net of federal benefit
(508)
(1,571)
2,354 
Non-deductible share-based compensation expense
(346)
2,900 
6,143 
Foreign income at tax rates different than U.S. rates
(14,025)
7,104 
(10,176)
Changes in reserves for uncertain tax positions
(756)
(2,497)
(3,926)
Research and development tax credit
(1,898)
(4,243)
(268)
Domestic production activities deduction
(22)
(757)
(1,136)
Gain on intercompany debt
 
 
36,163 
Non-deductible executive compensation expense
778 
460 
358 
Subpart F income
679 
716 
657 
Non-deductible acquisition and divestiture costs
(4)
(355)
4,782 
Sale of intellectual property
2,115 
2,947 
2,356 
Foreign tax credit
(317)
(359)
(264)
Other
205 
(243)
230 
Total income tax expense (benefit) from continuing operations
$ 956 
$ (3,669)
$ 39,467 
Income Taxes - Summary of Temporary Differences Resulting in Deferred Tax Assets (Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]
 
 
Property and equipment, net, principally due to difference in depreciation
$ 7,534 
$ 6,508 
Capitalized research and development costs
 
425 
Acquired intangibles
4,490 
3,742 
Inventory
5,685 
6,910 
Restructuring reserves
13,722 
10,214 
Deferred revenue
10,964 
13,699 
Other reserves
20,400 
17,570 
Share-based compensation
11,910 
15,906 
Net operating loss and capital loss carryforwards
2,535 
2,511 
Tax credit carryforwards
21,237 
16,457 
Deferred tax asset
98,477 
93,942 
Capitalized research and development costs
(766)
 
Acquired intangibles
(1,843)
(2,249)
Deferred tax asset before valuation allowance
95,868 
91,693 
Valuation allowance
(3,216)
(3,359)
Deferred tax asset, net of valuation allowance
$ 92,652 
$ 88,334 
Income Taxes - Aggregate Changes in Gross Unrecognized Tax Benefits (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Beginning balance
$ 22,012 
$ 23,049 
$ 32,408 
Additions based on tax positions taken during a prior period
 
 
304 
Reductions based on tax positions taken during a prior period
 
 
(5,690)
Additions based on tax positions taken during the current period
531 
1,414 
310 
Reductions related to settlement of tax matters
 
 
(807)
Reductions related to a lapse of applicable statue of limitations
(901)
(2,451)
(3,476)
Ending balance
$ 21,642 
$ 22,012 
$ 23,049 
Net Income (Loss) Per Share - Reconciliation of Numerator and Denominator of Basic and Diluted Net Income Per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
0 Months Ended 12 Months Ended
Dec. 4, 2012
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Numerator
 
 
 
 
Net income (loss) from continuing operations
 
$ 42,059 
$ (18,535)
$ (36,969)
Income from discontinued operations, net of taxes
 
 
 
9,888 
Gain from sale of discontinued operations, net of taxes
35,425 
 
459 
35,425 
Net income (loss)
 
$ 42,059 
$ (18,076)
$ 8,344 
Denominator
 
 
 
 
Weighted average shares outstanding, basic
 
136,801 
167,272 
176,878 
Effect of dilutive potential common shares
 
5,204 
 
 
Weighted average shares outstanding, diluted
 
142,005 
167,272 
176,878 
Basic net income (loss) per share:
 
 
 
 
Net income (loss) per share from continuing operations
 
$ 0.31 
$ (0.11)
$ (0.21)
Income per share from discontinued operations, net of taxes
 
 
 
$ 0.06 
Gain per share from sale of discontinued operations, net of taxes
 
 
 
$ 0.20 
Basic net income (loss) per share
 
$ 0.31 
$ (0.11)
$ 0.05 
Diluted net income (loss) per share:
 
 
 
 
Net income (loss) per share from continuing operations
 
$ 0.30 
$ (0.11)
$ (0.21)
Income per share from discontinued operations, net of taxes
 
 
 
$ 0.06 
Gain per share from sale of discontinued operations, net of taxes
 
 
 
$ 0.20 
Diluted net income (loss) per share
 
$ 0.30 
$ (0.11)
$ 0.05 
Antidilutive employee stock-based awards, excluded
 
213 
5,045 
4,998 
Net Income (Loss) Per Share Disclosures - Additional Information (Details)
1 Months Ended 3 Months Ended 12 Months Ended
Oct. 31, 2013
Jun. 30, 2014
Dec. 31, 2013
Shares Repurchased Through Agreements Included From Computation Of Earnings Per Share [Line Items]
 
 
 
Purchase of common stock, shares
27,400,000 
1,500,000 
 
Tender Offer expiration date
 
 
Oct. 31, 2013 
Accelerated Share Repurchase Agreements
 
 
 
Shares Repurchased Through Agreements Included From Computation Of Earnings Per Share [Line Items]
 
 
 
Purchase of common stock, shares
 
 
8,000,000 
Business Segment Information - Additional Information (Details)
12 Months Ended
Dec. 31, 2014
Location
Dec. 31, 2013
Segment Reporting [Abstract]
 
 
Business organized number of geographical theatres (area)
 
Number of foreign countries holding more than 10% of total net fixed assets
No single country outside of the United States has more than 10% of total net fixed assets 
No single country outside of the United States has more than 10% of total net fixed assets 
Business Segment Information - Financial Information by Reportable Segment (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment Reporting Information [Line Items]
 
 
 
Revenue
$ 1,345,154 
$ 1,368,389 
$ 1,392,628 
% of total revenue
100.00% 
100.00% 
100.00% 
Contribution margin
561,056 
549,934 
567,814 
% of segment revenue
42.00% 
40.00% 
41.00% 
Gross accounts receivables
214,664 
225,134 
 
% of total gross accounts receivable
100.00% 
100.00% 
 
Americas
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Revenue
662,533 
694,522 
689,099 
% of total revenue
49.00% 
50.00% 
49.00% 
Contribution margin
270,265 
270,786 
281,229 
% of segment revenue
41.00% 
39.00% 
41.00% 
Gross accounts receivables
88,316 
86,243 
 
% of total gross accounts receivable
41.00% 
38.00% 
 
EMEA
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Revenue
349,821 
338,035 
345,723 
% of total revenue
26.00% 
25.00% 
25.00% 
Contribution margin
150,426 
142,686 
138,886 
% of segment revenue
43.00% 
42.00% 
40.00% 
Gross accounts receivables
62,540 
71,970 
 
% of total gross accounts receivable
29.00% 
32.00% 
 
APAC
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Revenue
332,800 
335,832 
357,806 
% of total revenue
25.00% 
25.00% 
26.00% 
Contribution margin
140,365 
136,462 
147,699 
% of segment revenue
42.00% 
41.00% 
41.00% 
Gross accounts receivables
$ 63,808 
$ 66,921 
 
% of total gross accounts receivable
30.00% 
30.00% 
 
Business Segment Information - Financial Information by Reportable Segment (Parenthetical) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment Reporting Information [Line Items]
 
 
 
Revenue
$ 1,345,154 
$ 1,368,389 
$ 1,392,628 
Customer Concentration Risk |
United States
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Revenue
565,900 
589,600 
583,000 
Customer Concentration Risk |
China
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Revenue
$ 144,700 
$ 147,300 
$ 159,300 
Customer Concentration Risk |
Total Net Revenues |
ScanSource Communications
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Concentration risk percentage
17.00% 
16.00% 
14.00% 
Number of customer accounted for more than 10% of gross accounts receivable
Customer Concentration Risk |
Accounts Receivable |
ScanSource Communications
 
 
 
Segment Reporting Information [Line Items]
 
 
 
Concentration risk percentage
19.00% 
11.00% 
 
Number of customer accounted for more than 10% of gross accounts receivable
 
Business Segment Information - Reconciliation of Segment Information to Consolidated Totals (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment Reporting [Abstract]
 
 
 
Segment contribution margin
$ 561,056 
$ 549,934 
$ 567,814 
Corporate and unallocated costs
(409,700)
(430,471)
(418,465)
Stock-based compensation expense
(47,960)
(64,465)
(88,761)
Effect of stock-based compensation cost on warranty expense
(494)
(547)
(669)
Amortization of purchased intangibles
(12,816)
(19,750)
(17,465)
Restructuring costs
(40,347)
(48,470)
(22,024)
Litigation reserves and payments
(3,130)
 
 
Transaction-related costs
(156)
(3,424)
(14,064)
Interest and other income (expense), net
(3,438)
(5,011)
(3,868)
Income (loss) from continuing operations before provision for (benefit from) income taxes
$ 43,015 
$ (22,204)
$ 2,498 
Business Segment Information - Revenues by Groups of Similar Products and Services (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Entity Wide Information Revenue From External Customer [Line Items]
 
 
 
Net Revenues
$ 1,345,154 
$ 1,368,389 
$ 1,392,628 
UC Group Systems
 
 
 
Entity Wide Information Revenue From External Customer [Line Items]
 
 
 
Net Revenues
868,311 
904,923 
956,153 
UC Personal Devices
 
 
 
Entity Wide Information Revenue From External Customer [Line Items]
 
 
 
Net Revenues
236,781 
219,103 
180,939 
UC Platform
 
 
 
Entity Wide Information Revenue From External Customer [Line Items]
 
 
 
Net Revenues
$ 240,062 
$ 244,363 
$ 255,536 
Fixed Assets, Net of Accumulated Depreciation by Geographical Area (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Segment Reporting Information [Line Items]
 
 
Property and equipment, net
$ 109,195 
$ 115,157 
United States
 
 
Segment Reporting Information [Line Items]
 
 
Property and equipment, net
78,692 
79,345 
EMEA
 
 
Segment Reporting Information [Line Items]
 
 
Property and equipment, net
11,254 
13,036 
APAC
 
 
Segment Reporting Information [Line Items]
 
 
Property and equipment, net
17,663 
21,403 
Other
 
 
Segment Reporting Information [Line Items]
 
 
Property and equipment, net
$ 1,586 
$ 1,373 
Valuation and Qualifying Accounts (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Allowance for doubtful accounts
 
 
 
Valuation And Qualifying Accounts Disclosure [Line Items]
 
 
 
Balance at Beginning of Year
$ 2,827 
$ 2,921 
$ 1,732 
Additions
600 
 
1,189 
Deductions
(387)
(94)
 
Balance at End of Year
3,040 
2,827 
2,921 
Sales returns and allowances
 
 
 
Valuation And Qualifying Accounts Disclosure [Line Items]
 
 
 
Balance at Beginning of Year
34,654 
37,422 
30,602 
Additions
86,649 
93,101 
91,356 
Deductions
(83,953)
(95,869)
(84,536)
Balance at End of Year
37,350 
34,654 
37,422 
Income tax valuation allowance
 
 
 
Valuation And Qualifying Accounts Disclosure [Line Items]
 
 
 
Balance at Beginning of Year
3,359 
3,161 
3,301 
Additions
 
460 
 
Deductions
(143)
(262)
(140)
Balance at End of Year
$ 3,216 
$ 3,359 
$ 3,161