|
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Weighted Average Estimated Useful Life (In Years) | Amount | ||||
Existing technology | 7 | $ | 10.7 | ||
Customer relationships | 7 | 6.0 | |||
Trade name | 4 | 0.6 | |||
Backlog | 1 | 0.2 | |||
Non-compete agreements | 2 | 0.3 | |||
Total | 7 | $ | 17.8 |
|
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
As of June 30, 2014 | |||||||||||||||
Fixed income securities: | |||||||||||||||
Asset-backed securities | $ | 259.1 | $ | 0.1 | $ | (0.1 | ) | $ | 259.1 | ||||||
Certificates of deposit | 10.2 | — | — | 10.2 | |||||||||||
Commercial paper | 15.8 | — | — | 15.8 | |||||||||||
Corporate debt securities | 815.7 | 1.4 | (0.4 | ) | 816.7 | ||||||||||
Foreign government debt securities | 28.5 | — | — | 28.5 | |||||||||||
Government-sponsored enterprise obligations | 226.2 | — | (0.1 | ) | 226.1 | ||||||||||
U.S. government securities | 355.5 | 0.1 | — | 355.6 | |||||||||||
Total fixed income securities | 1,711.0 | 1.6 | (0.6 | ) | 1,712.0 | ||||||||||
Money market funds | 1,135.1 | — | — | 1,135.1 | |||||||||||
Mutual funds | 4.0 | 0.1 | — | 4.1 | |||||||||||
Publicly-traded equity securities | 87.0 | 6.2 | (0.2 | ) | 93.0 | ||||||||||
Total available-for-sale securities | 2,937.1 | 7.9 | (0.8 | ) | 2,944.2 | ||||||||||
Trading securities in mutual funds(*) | 16.4 | — | — | 16.4 | |||||||||||
Total | $ | 2,953.5 | $ | 7.9 | $ | (0.8 | ) | $ | 2,960.6 | ||||||
Reported as: | |||||||||||||||
Cash equivalents | $ | 1,094.6 | $ | — | $ | — | $ | 1,094.6 | |||||||
Restricted investments | 65.3 | 0.1 | — | 65.4 | |||||||||||
Short-term investments | 454.3 | 6.4 | (0.2 | ) | 460.5 | ||||||||||
Long-term investments | 1,339.3 | 1.4 | (0.6 | ) | 1,340.1 | ||||||||||
Total | $ | 2,953.5 | $ | 7.9 | $ | (0.8 | ) | $ | 2,960.6 |
(*) | Balance includes the Company's non-qualified deferred compensation plan assets. |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
As of December 31, 2013 | |||||||||||||||
Fixed income securities: | |||||||||||||||
Asset-backed securities | $ | 249.9 | $ | 0.1 | $ | (0.1 | ) | $ | 249.9 | ||||||
Certificates of deposit | 27.6 | — | — | 27.6 | |||||||||||
Commercial paper | 6.9 | — | — | 6.9 | |||||||||||
Corporate debt securities | 813.6 | 2.0 | (0.3 | ) | 815.3 | ||||||||||
Foreign government debt securities | 10.7 | — | — | 10.7 | |||||||||||
Government-sponsored enterprise obligations | 306.2 | 0.1 | (0.1 | ) | 306.2 | ||||||||||
U.S. government securities | 303.3 | 0.1 | (0.1 | ) | 303.3 | ||||||||||
Total fixed income securities | 1,718.2 | 2.3 | (0.6 | ) | 1,719.9 | ||||||||||
Money market funds | 1,043.7 | — | — | 1,043.7 | |||||||||||
Mutual funds | 3.9 | 0.1 | — | 4.0 | |||||||||||
Publicly-traded equity securities | 12.0 | 104.5 | (1.9 | ) | 114.6 | ||||||||||
Total available-for-sale securities | 2,777.8 | 106.9 | (2.5 | ) | 2,882.2 | ||||||||||
Trading securities in mutual funds(*) | 15.4 | — | — | 15.4 | |||||||||||
Total | $ | 2,793.2 | $ | 106.9 | $ | (2.5 | ) | $ | 2,897.6 | ||||||
Reported as: | |||||||||||||||
Cash equivalents | $ | 996.2 | $ | — | $ | — | $ | 996.2 | |||||||
Restricted investments | 87.5 | 0.1 | — | 87.6 | |||||||||||
Short-term investments | 459.0 | 104.9 | (2.0 | ) | 561.9 | ||||||||||
Long-term investments | 1,250.5 | 1.9 | (0.5 | ) | 1,251.9 | ||||||||||
Total | $ | 2,793.2 | $ | 106.9 | $ | (2.5 | ) | $ | 2,897.6 |
(*) | Balance includes the Company's non-qualified deferred compensation plan assets. |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
Due in less than one year | $ | 371.7 | $ | 0.2 | $ | — | $ | 371.9 | |||||||
Due between one and five years | 1,339.3 | 1.4 | (0.6 | ) | 1,340.1 | ||||||||||
Total | $ | 1,711.0 | $ | 1.6 | $ | (0.6 | ) | $ | 1,712.0 |
Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
As of June 30, 2014 | |||||||||||||||||||||||
Fixed income securities: | |||||||||||||||||||||||
Asset-backed securities(1) | $ | 61.0 | $ | (0.1 | ) | $ | 2.2 | $ | — | $ | 63.2 | $ | (0.1 | ) | |||||||||
Corporate debt securities | 297.1 | (0.4 | ) | — | — | 297.1 | (0.4 | ) | |||||||||||||||
Foreign government debt securities(2) | 16.0 | — | — | — | 16.0 | — | |||||||||||||||||
Government-sponsored enterprise obligations | 114.9 | (0.1 | ) | — | — | 114.9 | (0.1 | ) | |||||||||||||||
U.S. government securities(2) | 123.0 | — | — | — | 123.0 | — | |||||||||||||||||
Total fixed income securities | 612.0 | (0.6 | ) | 2.2 | — | 614.2 | (0.6 | ) | |||||||||||||||
Publicly-traded equity securities | 2.4 | (0.2 | ) | — | — | 2.4 | (0.2 | ) | |||||||||||||||
Total available-for-sale securities | $ | 614.4 | $ | (0.8 | ) | $ | 2.2 | $ | — | $ | 616.6 | $ | (0.8 | ) |
(1) | Balances 12 months or greater include investments that were in an immaterial unrealized loss position as of June 30, 2014. |
(2) | Balances less than 12 months include investments that were in an immaterial unrealized loss position as of June 30, 2014. |
Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
As of December 31, 2013 | |||||||||||||||||||||||
Fixed income securities: | |||||||||||||||||||||||
Asset-backed securities(1) | $ | 153.0 | $ | (0.1 | ) | $ | 0.6 | $ | — | $ | 153.6 | $ | (0.1 | ) | |||||||||
Corporate debt securities(1) | 156.1 | (0.3 | ) | 9.7 | — | 165.8 | (0.3 | ) | |||||||||||||||
Foreign government debt securities(2) | 10.0 | — | — | — | 10.0 | — | |||||||||||||||||
Government-sponsored enterprise obligations | 123.1 | (0.1 | ) | — | — | 123.1 | (0.1 | ) | |||||||||||||||
U.S. government securities | 119.7 | (0.1 | ) | — | — | 119.7 | (0.1 | ) | |||||||||||||||
Total fixed income securities | 561.9 | (0.6 | ) | 10.3 | — | 572.2 | (0.6 | ) | |||||||||||||||
Publicly-traded equity securities | 6.8 | (1.9 | ) | — | — | 6.8 | (1.9 | ) | |||||||||||||||
Total available-for-sale securities | $ | 568.7 | $ | (2.5 | ) | $ | 10.3 | $ | — | $ | 579.0 | $ | (2.5 | ) |
(1) | Balances 12 months or greater include investments that were in an immaterial unrealized loss position as of December 31, 2013. |
(2) | Balances less than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2013. |
|
Fair Value Measurements at June 30, 2014 Using: | |||||||||||||||
Quoted Prices in Active Markets For Identical Assets | Significant Other Observable Remaining Inputs | Significant Other Unobservable Remaining Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Assets measured at fair value: | |||||||||||||||
Available-for-sale securities: | |||||||||||||||
Asset-backed securities | $ | — | $ | 259.1 | $ | — | $ | 259.1 | |||||||
Certificates of deposit | — | 10.2 | — | 10.2 | |||||||||||
Commercial paper | — | 15.8 | — | 15.8 | |||||||||||
Corporate debt securities | — | 816.7 | — | 816.7 | |||||||||||
Foreign government debt securities | — | 28.5 | — | 28.5 | |||||||||||
Government-sponsored enterprise obligations | — | 226.1 | — | 226.1 | |||||||||||
Money market funds(1) | 1,135.1 | — | — | 1,135.1 | |||||||||||
Mutual funds(2) | 4.1 | — | — | 4.1 | |||||||||||
Publicly-traded equity securities | 93.0 | — | — | 93.0 | |||||||||||
U.S. government securities | 304.9 | 50.7 | — | 355.6 | |||||||||||
Total available-for-sale securities | 1,537.1 | 1,407.1 | — | 2,944.2 | |||||||||||
Trading securities in mutual funds(3) | 16.4 | — | — | 16.4 | |||||||||||
Privately-held debt securities | — | — | 42.3 | 42.3 | |||||||||||
Derivative assets: | |||||||||||||||
Foreign exchange contracts | — | 3.0 | — | 3.0 | |||||||||||
Warrant on Palo Alto Networks, Inc. common stock | — | 38.8 | — | 38.8 | |||||||||||
Total assets measured at fair value | $ | 1,553.5 | $ | 1,448.9 | $ | 42.3 | $ | 3,044.7 | |||||||
Liabilities measured at fair value: | |||||||||||||||
Derivative liabilities: | |||||||||||||||
Foreign exchange contracts | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) | |||||
Total assets measured at fair value, reported as: | |||||||||||||||
Cash equivalents | $ | 1,073.9 | $ | 20.7 | $ | — | $ | 1,094.6 | |||||||
Restricted investments | 65.4 | — | — | 65.4 | |||||||||||
Short-term investments | 212.5 | 248.0 | — | 460.5 | |||||||||||
Long-term investments | 201.7 | 1,138.4 | — | 1,340.1 | |||||||||||
Prepaid expenses and other current assets | — | 41.8 | — | 41.8 | |||||||||||
Other long-term assets | — | — | 42.3 | 42.3 | |||||||||||
Total assets measured at fair value | $ | 1,553.5 | $ | 1,448.9 | $ | 42.3 | $ | 3,044.7 | |||||||
Total liabilities measured at fair value, reported as: | |||||||||||||||
Other accrued liabilities | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) |
(1) | Balance includes $61.3 million of restricted investments measured at fair market value related to the Company's D&O Trust and acquisitions related escrows. |
(2) | Balance relates to restricted investments measured at fair market value related to the Company's India Gratuity Trust. |
(3) | Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets. |
Fair Value Measurements at December 31, 2013 Using: | |||||||||||||||
Quoted Prices in Active Markets For Identical Assets | Significant Other Observable Remaining Inputs | Significant Other Unobservable Remaining Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Assets measured at fair value: | |||||||||||||||
Available-for-sale securities: | |||||||||||||||
Asset-backed securities | $ | — | $ | 249.9 | $ | — | $ | 249.9 | |||||||
Certificates of deposit | — | 27.6 | — | 27.6 | |||||||||||
Commercial paper | — | 6.9 | — | 6.9 | |||||||||||
Corporate debt securities | — | 815.3 | — | 815.3 | |||||||||||
Foreign government debt securities | — | 10.7 | — | 10.7 | |||||||||||
Government-sponsored enterprise obligations | — | 306.2 | — | 306.2 | |||||||||||
Money market funds(1) | 1,043.7 | — | — | 1,043.7 | |||||||||||
Mutual funds(2) | 4.0 | — | — | 4.0 | |||||||||||
Publicly-traded equity securities | 114.6 | — | — | 114.6 | |||||||||||
U.S. government securities | 197.2 | 106.1 | — | 303.3 | |||||||||||
Total available-for-sale securities | 1,359.5 | 1,522.7 | — | 2,882.2 | |||||||||||
Trading securities in mutual funds(3) | 15.4 | — | — | 15.4 | |||||||||||
Privately-held debt securities | — | — | 28.1 | 28.1 | |||||||||||
Derivative assets: | |||||||||||||||
Foreign exchange contracts | — | 3.0 | — | 3.0 | |||||||||||
Total assets measured at fair value | $ | 1,374.9 | $ | 1,525.7 | $ | 28.1 | $ | 2,928.7 | |||||||
Liabilities measured at fair value: | |||||||||||||||
Derivative liabilities: | |||||||||||||||
Foreign exchange contracts | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) | |||||
Total assets measured at fair value, reported as: | |||||||||||||||
Cash equivalents | $ | 965.1 | $ | 31.1 | $ | — | $ | 996.2 | |||||||
Restricted investments | 87.6 | — | — | 87.6 | |||||||||||
Short-term investments | 246.5 | 315.4 | — | 561.9 | |||||||||||
Long-term investments | 75.7 | 1,176.2 | — | 1,251.9 | |||||||||||
Prepaid expenses and other current assets | — | 3.0 | — | 3.0 | |||||||||||
Other long-term assets | — | — | 28.1 | 28.1 | |||||||||||
Total assets measured at fair value | $ | 1,374.9 | $ | 1,525.7 | $ | 28.1 | $ | 2,928.7 | |||||||
Total liabilities measured at fair value, reported as: | |||||||||||||||
Other accrued liabilities | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) |
(1) | Balance includes $83.6 million of restricted investments measured at fair market value related to the Company's D&O Trust and acquisitions related escrows. |
(2) | Balance relates to restricted investments measured at fair market value related to the Company's India Gratuity Trust. |
(3) | Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets. |
|
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Cash flow hedges | $ | 89.0 | $ | 137.6 | |||
Non-designated derivatives | 172.2 | 144.4 | |||||
Total | $ | 261.2 | $ | 282.0 |
|
Balance as of December 31, 2013 | $ | 4,057.7 | |
Additions due to business combination | 13.6 | ||
Tax reserve adjustment | 0.2 | ||
Balance as of June 30, 2014 | $ | 4,071.5 |
Gross | Accumulated Amortization | Impairments and Other Charges | Net | ||||||||||||
As of June 30, 2014 | |||||||||||||||
Intangible assets with finite lives: | |||||||||||||||
Technologies and patents | $ | 592.0 | $ | (470.5 | ) | $ | (30.5 | ) | $ | 91.0 | |||||
Customer contracts, support agreements, and related relationships | 80.3 | (64.7 | ) | (2.2 | ) | 13.4 | |||||||||
Other | 19.9 | (19.0 | ) | — | 0.9 | ||||||||||
Total purchased intangible assets | $ | 692.2 | $ | (554.2 | ) | $ | (32.7 | ) | $ | 105.3 | |||||
As of December 31, 2013 | |||||||||||||||
Intangible assets with finite lives: | |||||||||||||||
Technologies and patents | $ | 581.4 | $ | (453.4 | ) | $ | (30.5 | ) | $ | 97.5 | |||||
Customer contracts, support agreements, and related relationships | 74.3 | (62.7 | ) | (2.2 | ) | 9.4 | |||||||||
Total purchased intangible assets | $ | 655.7 | $ | (516.1 | ) | $ | (32.7 | ) | $ | 106.9 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Cost of revenues | $ | 8.4 | $ | 6.5 | $ | 16.6 | $ | 12.8 | |||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 1.1 | 0.9 | 2.1 | 1.8 | |||||||||||
General and administrative | 0.3 | 0.3 | 0.6 | 0.6 | |||||||||||
Total operating expenses | 1.4 | 1.2 | 2.7 | 2.4 | |||||||||||
Total | $ | 9.8 | $ | 7.7 | $ | 19.3 | $ | 15.2 |
Years Ending December 31, | Amount | ||
Remainder of 2014 | $ | 19.5 | |
2015 | 35.3 | ||
2016 | 21.1 | ||
2017 | 13.0 | ||
2018 | 6.1 | ||
Thereafter | 10.3 | ||
Total | $ | 105.3 |
|
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Production materials | $ | 46.5 | $ | 51.3 | |||
Finished goods | 0.6 | 1.4 | |||||
Inventories | $ | 47.1 | $ | 52.7 |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Privately-held investments | $ | 72.0 | $ | 57.2 | |||
Licensed software | 9.5 | 90.4 | |||||
Federal income tax receivable | 20.0 | 20.0 | |||||
Financed customer receivable | 19.6 | 19.9 | |||||
Inventory | 11.7 | 15.2 | |||||
Prepaid costs, deposits, and other | 33.7 | 31.1 | |||||
Other long-term assets | $ | 166.5 | $ | 233.8 |
Balance as of December 31, 2013 | $ | 28.0 | |
Provisions made during the period | 14.6 | ||
Actual costs incurred during the period | (14.0 | ) | |
Balance as of June 30, 2014 | $ | 28.6 |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Deferred product revenue: | |||||||
Undelivered product commitments and other product deferrals | $ | 182.5 | $ | 184.9 | |||
Distributor inventory and other sell-through items | 127.0 | 118.7 | |||||
Deferred gross product revenue | 309.5 | 303.6 | |||||
Deferred cost of product revenue | (58.4 | ) | (58.6 | ) | |||
Deferred product revenue, net | 251.1 | 245.0 | |||||
Deferred service revenue | 922.2 | 824.3 | |||||
Total | $ | 1,173.3 | $ | 1,069.3 | |||
Reported as: | |||||||
Current | $ | 803.2 | $ | 705.8 | |||
Long-term | 370.1 | 363.5 | |||||
Total | $ | 1,173.3 | $ | 1,069.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest income | $ | 2.1 | $ | 1.7 | $ | 4.2 | $ | 3.8 | |||||||
Interest expense | (17.8 | ) | (14.9 | ) | (33.3 | ) | (29.2 | ) | |||||||
Net gain on legal settlement | 195.3 | — | 195.3 | — | |||||||||||
Net gain on investments | 0.8 | 1.5 | 167.0 | 3.8 | |||||||||||
Other | (1.8 | ) | (0.9 | ) | (0.4 | ) | (1.1 | ) | |||||||
Other income (expense), net | $ | 178.6 | $ | (12.6 | ) | $ | 332.8 | $ | (22.7 | ) |
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Severance | $ | 10.2 | $ | 0.8 | $ | 38.5 | $ | 5.2 | |||||||
Facilities | 37.6 | 7.7 | 37.8 | 10.3 | |||||||||||
Contract terminations | 1.5 | 0.3 | 2.3 | 1.0 | |||||||||||
Total restructuring charges | 49.3 | 8.8 | 78.6 | 16.5 | |||||||||||
Asset impairment and write-downs | 22.7 | — | 115.8 | — | |||||||||||
Total restructuring and other charges | $ | 72.0 | $ | 8.8 | $ | 194.4 | $ | 16.5 | |||||||
Reported as: | |||||||||||||||
Cost of revenues | $ | 13.8 | $ | 0.8 | $ | 22.2 | $ | 1.5 | |||||||
Restructuring and other charges | 58.2 | 8.0 | 172.2 | 15.0 | |||||||||||
Total | $ | 72.0 | $ | 8.8 | $ | 194.4 | $ | 16.5 |
December 31, 2013 | Charges | Cash Payments | Non-cash Settlements and Other | June 30, 2014 | |||||||||||||||
Severance | $ | 5.6 | $ | 38.5 | $ | (34.4 | ) | $ | (0.8 | ) | $ | 8.9 | |||||||
Facilities | 5.1 | 37.8 | (1.7 | ) | 9.7 | 50.9 | |||||||||||||
Contract terminations and other | 7.1 | 2.3 | (8.3 | ) | (0.8 | ) | 0.3 | ||||||||||||
Total | $ | 17.8 | $ | 78.6 | $ | (44.4 | ) | $ | 8.1 | $ | 60.1 |
|
As of June 30, 2014 | ||||||
Amount | Effective Interest Rates | |||||
Senior notes: | ||||||
3.10% fixed-rate notes, due 2016 ("2016 Notes") | $ | 300.0 | 3.25 | % | ||
4.60% fixed-rate notes, due 2021 ("2021 Notes") | 300.0 | 4.69 | % | |||
4.50% fixed-rate notes, due 2024 ("2024 Notes") | 350.0 | 4.63 | % | |||
5.95% fixed-rate notes, due 2041 ("2041 Notes") | 400.0 | 6.03 | % | |||
Total senior notes | 1,350.0 | |||||
Unaccreted discount | (1.1 | ) | ||||
Total | $ | 1,348.9 |
|
Unrealized Gains (Losses) on Available-for- Sale Securities(1) | Unrealized Gains (Losses) on Cash Flow Hedges(2) | Foreign Currency Translation Adjustments | Total | ||||||||||||
Balance as of December 31, 2013 | $ | 66.2 | $ | 2.2 | $ | (3.8 | ) | $ | 64.6 | ||||||
Other comprehensive gain before reclassifications | 48.4 | 3.2 | 3.9 | 55.5 | |||||||||||
Amount reclassified from accumulated other comprehensive income | (103.8 | ) | (3.2 | ) | — | (107.0 | ) | ||||||||
Net other comprehensive loss | (55.4 | ) | — | 3.9 | (51.5 | ) | |||||||||
Balance as of June 30, 2014 | $ | 10.8 | $ | 2.2 | $ | 0.1 | $ | 13.1 |
(1) | The reclassifications out of accumulated other comprehensive income during the six months ended June 30, 2014 for realized gains on available-for-sale securities of $103.8 million are included in other income (expense), net, in the Condensed Consolidated Statements of Operations. |
(2) | The reclassifications out of accumulated other comprehensive income during the six months ended June 30, 2014 for realized gains on cash flow hedges are included within cost of revenues of $0.4 million, research and development of $0.5 million, sales and marketing of $1.7 million, and general and administrative of $0.6 million for which the hedged transactions relate in the Condensed Consolidated Statements of Operations. |
|
Outstanding Options | ||||||||||||
Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | |||||||||
Balance as of December 31, 2013 | 23.1 | $ | 25.15 | |||||||||
Canceled | (0.5 | ) | 30.38 | |||||||||
Exercised | (4.7 | ) | 20.25 | |||||||||
Expired | (3.1 | ) | 28.87 | |||||||||
Balance as of June 30, 2014 | 14.8 | $ | 25.75 | 2.0 | $ | 38.4 | ||||||
As of June 30, 2014: | ||||||||||||
Vested and expected-to-vest options | 14.7 | $ | 25.88 | 2.0 | $ | 36.4 | ||||||
Exercisable options | 13.5 | $ | 26.49 | 1.7 | $ | 25.1 |
Outstanding RSUs, RSAs, and PSAs | ||||||||||||
Number of Shares | Weighted Average Grant-Date Fair Value per Share | Weighted Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | |||||||||
Balance as of December 31, 2013 | 25.4 | $ | 23.44 | |||||||||
RSUs granted (1)(4) | 8.2 | 23.09 | ||||||||||
RSUs assumed (2) | 0.4 | 22.66 | ||||||||||
RSAs assumed (2) | 0.9 | 22.66 | ||||||||||
PSAs granted (3)(4) | 0.8 | 25.59 | ||||||||||
PSAs assumed (2) | 0.2 | 22.66 | ||||||||||
RSUs vested | (5.3 | ) | 23.65 | |||||||||
RSAs vested | (0.7 | ) | 19.59 | |||||||||
PSAs vested | (1.0 | ) | 38.10 | |||||||||
RSUs canceled | (1.5 | ) | 21.91 | |||||||||
PSAs canceled | (2.3 | ) | 32.39 | |||||||||
Balance as of June 30, 2014 | 25.1 | 22.06 | 1.5 | $ | 615.3 |
(1) | Includes service-based and market-based RSUs granted under the 2006 Plan according to its terms. |
(2) | RSUs, RSAs, and PSAs assumed in connection with the acquisition of WANDL. |
(3) | The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by the Compensation Committee are achieved at target is 0.4 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is 0 to 0.8 million shares. |
(4) | On February 20, 2014, the Company announced its intention to initiate a quarterly cash dividend of $0.10 per share of common stock in the third quarter of 2014. As a result of the Company's announcement, the grant date fair value of RSUs and PSAs granted after the announcement date were reduced by the present value of the dividends expected to be paid on the underlying shares of common stock during the requisite and derived service period as these awards are not entitled to receive dividends until vested. On July 22, 2014, the Company announced a quarterly cash dividend of $0.10 per share of common stock payable on September 23, 2014 to stockholders of record as of the close of business on September 2, 2014. |
Six Months Ended June 30, | |||
2014 | 2013 | ||
ESPP (1): | |||
Volatility | 33% | 36% | |
Risk-free interest rate | 0.1% | 0.1% | |
Expected life (years) | 0.5 | 0.5 | |
Dividend yield | — | — | |
Weighted-average fair value per share | $6.37 | $5.63 | |
Market-based RSUs (2): | |||
Volatility | 36% | — | |
Risk-free interest rate | 1.6% | — | |
Dividend yield | 0% - 1.5% | — | |
Weighted-average fair value per share | $18.28 | — |
(1) | The Black-Scholes-Merton option-pricing model is utilized to estimate the fair value of ESPP. |
(2) | The fair value of market-based RSUs utilizes a Monte Carlo valuation methodology. The Company amortizes the fair value of these awards over the derived service period adjusted for estimated forfeitures for each separately vesting tranche of the award. Provided that the derived service is rendered, the total fair value of the market-based RSUs at the date of grant is recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Cost of revenues - Product | $ | 1.3 | $ | 1.2 | $ | 2.6 | $ | 2.1 | |||||||
Cost of revenues - Service | 3.1 | 3.5 | 7.1 | 8.1 | |||||||||||
Research and development | 31.6 | 33.0 | 63.7 | 56.6 | |||||||||||
Sales and marketing | 14.4 | 18.1 | 29.0 | 32.6 | |||||||||||
General and administrative | 8.9 | 5.7 | 17.7 | 12.0 | |||||||||||
Total | $ | 59.3 | $ | 61.5 | $ | 120.1 | $ | 111.4 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Stock options | $ | 3.7 | $ | 7.7 | $ | 8.8 | $ | 17.2 | |||||||
RSUs, RSAs, and PSAs | 51.9 | 49.3 | 103.7 | 86.3 | |||||||||||
ESPP | 3.7 | 4.5 | 7.6 | 7.9 | |||||||||||
Total | $ | 59.3 | $ | 61.5 | $ | 120.1 | $ | 111.4 |
Unrecognized Compensation Cost | Weighted Average Period (In Years) | ||||
Stock options | $ | 20.8 | 1.6 | ||
RSUs, RSAs, and PSAs | $ | 368.3 | 2.1 |
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Routing | $ | 617.8 | $ | 577.5 | $ | 1,167.6 | $ | 1,091.2 | |||||||
Switching | 199.8 | 160.2 | 391.8 | 291.7 | |||||||||||
Security | 111.6 | 126.1 | 245.8 | 262.7 | |||||||||||
Total product | 929.2 | 863.8 | 1,805.2 | 1,645.6 | |||||||||||
Total service | 300.3 | 286.9 | 594.4 | 564.3 | |||||||||||
Total | $ | 1,229.5 | $ | 1,150.7 | $ | 2,399.6 | $ | 2,209.9 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Americas: | |||||||||||||||
United States | $ | 660.7 | $ | 610.2 | $ | 1,284.4 | $ | 1,157.2 | |||||||
Other | 50.3 | 64.9 | 108.1 | 110.0 | |||||||||||
Total Americas | 711.0 | 675.1 | 1,392.5 | 1,267.2 | |||||||||||
Europe, Middle East, and Africa | 324.8 | 300.9 | 620.5 | 591.5 | |||||||||||
Asia Pacific | 193.7 | 174.7 | 386.6 | 351.2 | |||||||||||
Total | $ | 1,229.5 | $ | 1,150.7 | $ | 2,399.6 | $ | 2,209.9 |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
United States | $ | 805.4 | $ | 801.3 | |||
International | 84.5 | 81.0 | |||||
Property and equipment, net | $ | 889.9 | $ | 882.3 |
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Tax on gain of equity investments, net of valuation allowance release of $24.7 | $ | — | $ | — | $ | 35.6 | $ | — | |||||||
Benefit from restructuring costs | $ | (25.1 | ) | $ | — | $ | (55.9 | ) | $ | — | |||||
Tax on gain from legal settlement | $ | 44.7 | $ | — | $ | 44.7 | $ | — | |||||||
Section 199 deduction | $ | — | $ | (20.3 | ) | $ | — | $ | (20.3 | ) | |||||
Tax settlement with Internal Revenue Service ("IRS") | $ | — | $ | — | $ | — | $ | (27.8 | ) | ||||||
Reinstatement of the U.S. federal R&D tax credit | $ | — | $ | — | $ | — | $ | (15.2 | ) |
|
|
As of | |||
June 30, 2014 | |||
Goodwill | $ | 160.4 | |
Deferred revenue | (45.6 | ) | |
Intangible assets | 6.0 | ||
Other, net | 3.9 | ||
Total net assets | $ | 124.7 |
|
|
Weighted Average Estimated Useful Life (In Years) | Amount | ||||
Existing technology | 7 | $ | 10.7 | ||
Customer relationships | 7 | 6.0 | |||
Trade name | 4 | 0.6 | |||
Backlog | 1 | 0.2 | |||
Non-compete agreements | 2 | 0.3 | |||
Total | 7 | $ | 17.8 |
|
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
As of June 30, 2014 | |||||||||||||||
Fixed income securities: | |||||||||||||||
Asset-backed securities | $ | 259.1 | $ | 0.1 | $ | (0.1 | ) | $ | 259.1 | ||||||
Certificates of deposit | 10.2 | — | — | 10.2 | |||||||||||
Commercial paper | 15.8 | — | — | 15.8 | |||||||||||
Corporate debt securities | 815.7 | 1.4 | (0.4 | ) | 816.7 | ||||||||||
Foreign government debt securities | 28.5 | — | — | 28.5 | |||||||||||
Government-sponsored enterprise obligations | 226.2 | — | (0.1 | ) | 226.1 | ||||||||||
U.S. government securities | 355.5 | 0.1 | — | 355.6 | |||||||||||
Total fixed income securities | 1,711.0 | 1.6 | (0.6 | ) | 1,712.0 | ||||||||||
Money market funds | 1,135.1 | — | — | 1,135.1 | |||||||||||
Mutual funds | 4.0 | 0.1 | — | 4.1 | |||||||||||
Publicly-traded equity securities | 87.0 | 6.2 | (0.2 | ) | 93.0 | ||||||||||
Total available-for-sale securities | 2,937.1 | 7.9 | (0.8 | ) | 2,944.2 | ||||||||||
Trading securities in mutual funds(*) | 16.4 | — | — | 16.4 | |||||||||||
Total | $ | 2,953.5 | $ | 7.9 | $ | (0.8 | ) | $ | 2,960.6 | ||||||
Reported as: | |||||||||||||||
Cash equivalents | $ | 1,094.6 | $ | — | $ | — | $ | 1,094.6 | |||||||
Restricted investments | 65.3 | 0.1 | — | 65.4 | |||||||||||
Short-term investments | 454.3 | 6.4 | (0.2 | ) | 460.5 | ||||||||||
Long-term investments | 1,339.3 | 1.4 | (0.6 | ) | 1,340.1 | ||||||||||
Total | $ | 2,953.5 | $ | 7.9 | $ | (0.8 | ) | $ | 2,960.6 |
(*) | Balance includes the Company's non-qualified deferred compensation plan assets. |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
As of December 31, 2013 | |||||||||||||||
Fixed income securities: | |||||||||||||||
Asset-backed securities | $ | 249.9 | $ | 0.1 | $ | (0.1 | ) | $ | 249.9 | ||||||
Certificates of deposit | 27.6 | — | — | 27.6 | |||||||||||
Commercial paper | 6.9 | — | — | 6.9 | |||||||||||
Corporate debt securities | 813.6 | 2.0 | (0.3 | ) | 815.3 | ||||||||||
Foreign government debt securities | 10.7 | — | — | 10.7 | |||||||||||
Government-sponsored enterprise obligations | 306.2 | 0.1 | (0.1 | ) | 306.2 | ||||||||||
U.S. government securities | 303.3 | 0.1 | (0.1 | ) | 303.3 | ||||||||||
Total fixed income securities | 1,718.2 | 2.3 | (0.6 | ) | 1,719.9 | ||||||||||
Money market funds | 1,043.7 | — | — | 1,043.7 | |||||||||||
Mutual funds | 3.9 | 0.1 | — | 4.0 | |||||||||||
Publicly-traded equity securities | 12.0 | 104.5 | (1.9 | ) | 114.6 | ||||||||||
Total available-for-sale securities | 2,777.8 | 106.9 | (2.5 | ) | 2,882.2 | ||||||||||
Trading securities in mutual funds(*) | 15.4 | — | — | 15.4 | |||||||||||
Total | $ | 2,793.2 | $ | 106.9 | $ | (2.5 | ) | $ | 2,897.6 | ||||||
Reported as: | |||||||||||||||
Cash equivalents | $ | 996.2 | $ | — | $ | — | $ | 996.2 | |||||||
Restricted investments | 87.5 | 0.1 | — | 87.6 | |||||||||||
Short-term investments | 459.0 | 104.9 | (2.0 | ) | 561.9 | ||||||||||
Long-term investments | 1,250.5 | 1.9 | (0.5 | ) | 1,251.9 | ||||||||||
Total | $ | 2,793.2 | $ | 106.9 | $ | (2.5 | ) | $ | 2,897.6 |
(*) | Balance includes the Company's non-qualified deferred compensation plan assets. |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
Due in less than one year | $ | 371.7 | $ | 0.2 | $ | — | $ | 371.9 | |||||||
Due between one and five years | 1,339.3 | 1.4 | (0.6 | ) | 1,340.1 | ||||||||||
Total | $ | 1,711.0 | $ | 1.6 | $ | (0.6 | ) | $ | 1,712.0 |
Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
As of June 30, 2014 | |||||||||||||||||||||||
Fixed income securities: | |||||||||||||||||||||||
Asset-backed securities(1) | $ | 61.0 | $ | (0.1 | ) | $ | 2.2 | $ | — | $ | 63.2 | $ | (0.1 | ) | |||||||||
Corporate debt securities | 297.1 | (0.4 | ) | — | — | 297.1 | (0.4 | ) | |||||||||||||||
Foreign government debt securities(2) | 16.0 | — | — | — | 16.0 | — | |||||||||||||||||
Government-sponsored enterprise obligations | 114.9 | (0.1 | ) | — | — | 114.9 | (0.1 | ) | |||||||||||||||
U.S. government securities(2) | 123.0 | — | — | — | 123.0 | — | |||||||||||||||||
Total fixed income securities | 612.0 | (0.6 | ) | 2.2 | — | 614.2 | (0.6 | ) | |||||||||||||||
Publicly-traded equity securities | 2.4 | (0.2 | ) | — | — | 2.4 | (0.2 | ) | |||||||||||||||
Total available-for-sale securities | $ | 614.4 | $ | (0.8 | ) | $ | 2.2 | $ | — | $ | 616.6 | $ | (0.8 | ) |
(1) | Balances 12 months or greater include investments that were in an immaterial unrealized loss position as of June 30, 2014. |
(2) | Balances less than 12 months include investments that were in an immaterial unrealized loss position as of June 30, 2014. |
Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
As of December 31, 2013 | |||||||||||||||||||||||
Fixed income securities: | |||||||||||||||||||||||
Asset-backed securities(1) | $ | 153.0 | $ | (0.1 | ) | $ | 0.6 | $ | — | $ | 153.6 | $ | (0.1 | ) | |||||||||
Corporate debt securities(1) | 156.1 | (0.3 | ) | 9.7 | — | 165.8 | (0.3 | ) | |||||||||||||||
Foreign government debt securities(2) | 10.0 | — | — | — | 10.0 | — | |||||||||||||||||
Government-sponsored enterprise obligations | 123.1 | (0.1 | ) | — | — | 123.1 | (0.1 | ) | |||||||||||||||
U.S. government securities | 119.7 | (0.1 | ) | — | — | 119.7 | (0.1 | ) | |||||||||||||||
Total fixed income securities | 561.9 | (0.6 | ) | 10.3 | — | 572.2 | (0.6 | ) | |||||||||||||||
Publicly-traded equity securities | 6.8 | (1.9 | ) | — | — | 6.8 | (1.9 | ) | |||||||||||||||
Total available-for-sale securities | $ | 568.7 | $ | (2.5 | ) | $ | 10.3 | $ | — | $ | 579.0 | $ | (2.5 | ) |
(1) | Balances 12 months or greater include investments that were in an immaterial unrealized loss position as of December 31, 2013. |
(2) | Balances less than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2013. |
|
Fair Value Measurements at June 30, 2014 Using: | |||||||||||||||
Quoted Prices in Active Markets For Identical Assets | Significant Other Observable Remaining Inputs | Significant Other Unobservable Remaining Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Assets measured at fair value: | |||||||||||||||
Available-for-sale securities: | |||||||||||||||
Asset-backed securities | $ | — | $ | 259.1 | $ | — | $ | 259.1 | |||||||
Certificates of deposit | — | 10.2 | — | 10.2 | |||||||||||
Commercial paper | — | 15.8 | — | 15.8 | |||||||||||
Corporate debt securities | — | 816.7 | — | 816.7 | |||||||||||
Foreign government debt securities | — | 28.5 | — | 28.5 | |||||||||||
Government-sponsored enterprise obligations | — | 226.1 | — | 226.1 | |||||||||||
Money market funds(1) | 1,135.1 | — | — | 1,135.1 | |||||||||||
Mutual funds(2) | 4.1 | — | — | 4.1 | |||||||||||
Publicly-traded equity securities | 93.0 | — | — | 93.0 | |||||||||||
U.S. government securities | 304.9 | 50.7 | — | 355.6 | |||||||||||
Total available-for-sale securities | 1,537.1 | 1,407.1 | — | 2,944.2 | |||||||||||
Trading securities in mutual funds(3) | 16.4 | — | — | 16.4 | |||||||||||
Privately-held debt securities | — | — | 42.3 | 42.3 | |||||||||||
Derivative assets: | |||||||||||||||
Foreign exchange contracts | — | 3.0 | — | 3.0 | |||||||||||
Warrant on Palo Alto Networks, Inc. common stock | — | 38.8 | — | 38.8 | |||||||||||
Total assets measured at fair value | $ | 1,553.5 | $ | 1,448.9 | $ | 42.3 | $ | 3,044.7 | |||||||
Liabilities measured at fair value: | |||||||||||||||
Derivative liabilities: | |||||||||||||||
Foreign exchange contracts | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) | |||||
Total assets measured at fair value, reported as: | |||||||||||||||
Cash equivalents | $ | 1,073.9 | $ | 20.7 | $ | — | $ | 1,094.6 | |||||||
Restricted investments | 65.4 | — | — | 65.4 | |||||||||||
Short-term investments | 212.5 | 248.0 | — | 460.5 | |||||||||||
Long-term investments | 201.7 | 1,138.4 | — | 1,340.1 | |||||||||||
Prepaid expenses and other current assets | — | 41.8 | — | 41.8 | |||||||||||
Other long-term assets | — | — | 42.3 | 42.3 | |||||||||||
Total assets measured at fair value | $ | 1,553.5 | $ | 1,448.9 | $ | 42.3 | $ | 3,044.7 | |||||||
Total liabilities measured at fair value, reported as: | |||||||||||||||
Other accrued liabilities | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.2 | ) | $ | — | $ | (0.2 | ) |
(1) | Balance includes $61.3 million of restricted investments measured at fair market value related to the Company's D&O Trust and acquisitions related escrows. |
(2) | Balance relates to restricted investments measured at fair market value related to the Company's India Gratuity Trust. |
(3) | Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets. |
Fair Value Measurements at December 31, 2013 Using: | |||||||||||||||
Quoted Prices in Active Markets For Identical Assets | Significant Other Observable Remaining Inputs | Significant Other Unobservable Remaining Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Assets measured at fair value: | |||||||||||||||
Available-for-sale securities: | |||||||||||||||
Asset-backed securities | $ | — | $ | 249.9 | $ | — | $ | 249.9 | |||||||
Certificates of deposit | — | 27.6 | — | 27.6 | |||||||||||
Commercial paper | — | 6.9 | — | 6.9 | |||||||||||
Corporate debt securities | — | 815.3 | — | 815.3 | |||||||||||
Foreign government debt securities | — | 10.7 | — | 10.7 | |||||||||||
Government-sponsored enterprise obligations | — | 306.2 | — | 306.2 | |||||||||||
Money market funds(1) | 1,043.7 | — | — | 1,043.7 | |||||||||||
Mutual funds(2) | 4.0 | — | — | 4.0 | |||||||||||
Publicly-traded equity securities | 114.6 | — | — | 114.6 | |||||||||||
U.S. government securities | 197.2 | 106.1 | — | 303.3 | |||||||||||
Total available-for-sale securities | 1,359.5 | 1,522.7 | — | 2,882.2 | |||||||||||
Trading securities in mutual funds(3) | 15.4 | — | — | 15.4 | |||||||||||
Privately-held debt securities | — | — | 28.1 | 28.1 | |||||||||||
Derivative assets: | |||||||||||||||
Foreign exchange contracts | — | 3.0 | — | 3.0 | |||||||||||
Total assets measured at fair value | $ | 1,374.9 | $ | 1,525.7 | $ | 28.1 | $ | 2,928.7 | |||||||
Liabilities measured at fair value: | |||||||||||||||
Derivative liabilities: | |||||||||||||||
Foreign exchange contracts | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) | |||||
Total assets measured at fair value, reported as: | |||||||||||||||
Cash equivalents | $ | 965.1 | $ | 31.1 | $ | — | $ | 996.2 | |||||||
Restricted investments | 87.6 | — | — | 87.6 | |||||||||||
Short-term investments | 246.5 | 315.4 | — | 561.9 | |||||||||||
Long-term investments | 75.7 | 1,176.2 | — | 1,251.9 | |||||||||||
Prepaid expenses and other current assets | — | 3.0 | — | 3.0 | |||||||||||
Other long-term assets | — | — | 28.1 | 28.1 | |||||||||||
Total assets measured at fair value | $ | 1,374.9 | $ | 1,525.7 | $ | 28.1 | $ | 2,928.7 | |||||||
Total liabilities measured at fair value, reported as: | |||||||||||||||
Other accrued liabilities | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) | |||||
Total liabilities measured at fair value | $ | — | $ | (0.7 | ) | $ | — | $ | (0.7 | ) |
(1) | Balance includes $83.6 million of restricted investments measured at fair market value related to the Company's D&O Trust and acquisitions related escrows. |
(2) | Balance relates to restricted investments measured at fair market value related to the Company's India Gratuity Trust. |
(3) | Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets. |
|
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Cash flow hedges | $ | 89.0 | $ | 137.6 | |||
Non-designated derivatives | 172.2 | 144.4 | |||||
Total | $ | 261.2 | $ | 282.0 |
|
Balance as of December 31, 2013 | $ | 4,057.7 | |
Additions due to business combination | 13.6 | ||
Tax reserve adjustment | 0.2 | ||
Balance as of June 30, 2014 | $ | 4,071.5 |
Gross | Accumulated Amortization | Impairments and Other Charges | Net | ||||||||||||
As of June 30, 2014 | |||||||||||||||
Intangible assets with finite lives: | |||||||||||||||
Technologies and patents | $ | 592.0 | $ | (470.5 | ) | $ | (30.5 | ) | $ | 91.0 | |||||
Customer contracts, support agreements, and related relationships | 80.3 | (64.7 | ) | (2.2 | ) | 13.4 | |||||||||
Other | 19.9 | (19.0 | ) | — | 0.9 | ||||||||||
Total purchased intangible assets | $ | 692.2 | $ | (554.2 | ) | $ | (32.7 | ) | $ | 105.3 | |||||
As of December 31, 2013 | |||||||||||||||
Intangible assets with finite lives: | |||||||||||||||
Technologies and patents | $ | 581.4 | $ | (453.4 | ) | $ | (30.5 | ) | $ | 97.5 | |||||
Customer contracts, support agreements, and related relationships | 74.3 | (62.7 | ) | (2.2 | ) | 9.4 | |||||||||
Total purchased intangible assets | $ | 655.7 | $ | (516.1 | ) | $ | (32.7 | ) | $ | 106.9 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Cost of revenues | $ | 8.4 | $ | 6.5 | $ | 16.6 | $ | 12.8 | |||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 1.1 | 0.9 | 2.1 | 1.8 | |||||||||||
General and administrative | 0.3 | 0.3 | 0.6 | 0.6 | |||||||||||
Total operating expenses | 1.4 | 1.2 | 2.7 | 2.4 | |||||||||||
Total | $ | 9.8 | $ | 7.7 | $ | 19.3 | $ | 15.2 |
Years Ending December 31, | Amount | ||
Remainder of 2014 | $ | 19.5 | |
2015 | 35.3 | ||
2016 | 21.1 | ||
2017 | 13.0 | ||
2018 | 6.1 | ||
Thereafter | 10.3 | ||
Total | $ | 105.3 |
|
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Production materials | $ | 46.5 | $ | 51.3 | |||
Finished goods | 0.6 | 1.4 | |||||
Inventories | $ | 47.1 | $ | 52.7 |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Privately-held investments | $ | 72.0 | $ | 57.2 | |||
Licensed software | 9.5 | 90.4 | |||||
Federal income tax receivable | 20.0 | 20.0 | |||||
Financed customer receivable | 19.6 | 19.9 | |||||
Inventory | 11.7 | 15.2 | |||||
Prepaid costs, deposits, and other | 33.7 | 31.1 | |||||
Other long-term assets | $ | 166.5 | $ | 233.8 |
Balance as of December 31, 2013 | $ | 28.0 | |
Provisions made during the period | 14.6 | ||
Actual costs incurred during the period | (14.0 | ) | |
Balance as of June 30, 2014 | $ | 28.6 |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Deferred product revenue: | |||||||
Undelivered product commitments and other product deferrals | $ | 182.5 | $ | 184.9 | |||
Distributor inventory and other sell-through items | 127.0 | 118.7 | |||||
Deferred gross product revenue | 309.5 | 303.6 | |||||
Deferred cost of product revenue | (58.4 | ) | (58.6 | ) | |||
Deferred product revenue, net | 251.1 | 245.0 | |||||
Deferred service revenue | 922.2 | 824.3 | |||||
Total | $ | 1,173.3 | $ | 1,069.3 | |||
Reported as: | |||||||
Current | $ | 803.2 | $ | 705.8 | |||
Long-term | 370.1 | 363.5 | |||||
Total | $ | 1,173.3 | $ | 1,069.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest income | $ | 2.1 | $ | 1.7 | $ | 4.2 | $ | 3.8 | |||||||
Interest expense | (17.8 | ) | (14.9 | ) | (33.3 | ) | (29.2 | ) | |||||||
Net gain on legal settlement | 195.3 | — | 195.3 | — | |||||||||||
Net gain on investments | 0.8 | 1.5 | 167.0 | 3.8 | |||||||||||
Other | (1.8 | ) | (0.9 | ) | (0.4 | ) | (1.1 | ) | |||||||
Other income (expense), net | $ | 178.6 | $ | (12.6 | ) | $ | 332.8 | $ | (22.7 | ) |
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Severance | $ | 10.2 | $ | 0.8 | $ | 38.5 | $ | 5.2 | |||||||
Facilities | 37.6 | 7.7 | 37.8 | 10.3 | |||||||||||
Contract terminations | 1.5 | 0.3 | 2.3 | 1.0 | |||||||||||
Total restructuring charges | 49.3 | 8.8 | 78.6 | 16.5 | |||||||||||
Asset impairment and write-downs | 22.7 | — | 115.8 | — | |||||||||||
Total restructuring and other charges | $ | 72.0 | $ | 8.8 | $ | 194.4 | $ | 16.5 | |||||||
Reported as: | |||||||||||||||
Cost of revenues | $ | 13.8 | $ | 0.8 | $ | 22.2 | $ | 1.5 | |||||||
Restructuring and other charges | 58.2 | 8.0 | 172.2 | 15.0 | |||||||||||
Total | $ | 72.0 | $ | 8.8 | $ | 194.4 | $ | 16.5 |
December 31, 2013 | Charges | Cash Payments | Non-cash Settlements and Other | June 30, 2014 | |||||||||||||||
Severance | $ | 5.6 | $ | 38.5 | $ | (34.4 | ) | $ | (0.8 | ) | $ | 8.9 | |||||||
Facilities | 5.1 | 37.8 | (1.7 | ) | 9.7 | 50.9 | |||||||||||||
Contract terminations and other | 7.1 | 2.3 | (8.3 | ) | (0.8 | ) | 0.3 | ||||||||||||
Total | $ | 17.8 | $ | 78.6 | $ | (44.4 | ) | $ | 8.1 | $ | 60.1 |
|
As of June 30, 2014 | ||||||
Amount | Effective Interest Rates | |||||
Senior notes: | ||||||
3.10% fixed-rate notes, due 2016 ("2016 Notes") | $ | 300.0 | 3.25 | % | ||
4.60% fixed-rate notes, due 2021 ("2021 Notes") | 300.0 | 4.69 | % | |||
4.50% fixed-rate notes, due 2024 ("2024 Notes") | 350.0 | 4.63 | % | |||
5.95% fixed-rate notes, due 2041 ("2041 Notes") | 400.0 | 6.03 | % | |||
Total senior notes | 1,350.0 | |||||
Unaccreted discount | (1.1 | ) | ||||
Total | $ | 1,348.9 |
|
Unrealized Gains (Losses) on Available-for- Sale Securities(1) | Unrealized Gains (Losses) on Cash Flow Hedges(2) | Foreign Currency Translation Adjustments | Total | ||||||||||||
Balance as of December 31, 2013 | $ | 66.2 | $ | 2.2 | $ | (3.8 | ) | $ | 64.6 | ||||||
Other comprehensive gain before reclassifications | 48.4 | 3.2 | 3.9 | 55.5 | |||||||||||
Amount reclassified from accumulated other comprehensive income | (103.8 | ) | (3.2 | ) | — | (107.0 | ) | ||||||||
Net other comprehensive loss | (55.4 | ) | — | 3.9 | (51.5 | ) | |||||||||
Balance as of June 30, 2014 | $ | 10.8 | $ | 2.2 | $ | 0.1 | $ | 13.1 |
(1) | The reclassifications out of accumulated other comprehensive income during the six months ended June 30, 2014 for realized gains on available-for-sale securities of $103.8 million are included in other income (expense), net, in the Condensed Consolidated Statements of Operations. |
(2) | The reclassifications out of accumulated other comprehensive income during the six months ended June 30, 2014 for realized gains on cash flow hedges are included within cost of revenues of $0.4 million, research and development of $0.5 million, sales and marketing of $1.7 million, and general and administrative of $0.6 million for which the hedged transactions relate in the Condensed Consolidated Statements of Operations. |
|
Outstanding Options | ||||||||||||
Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | |||||||||
Balance as of December 31, 2013 | 23.1 | $ | 25.15 | |||||||||
Canceled | (0.5 | ) | 30.38 | |||||||||
Exercised | (4.7 | ) | 20.25 | |||||||||
Expired | (3.1 | ) | 28.87 | |||||||||
Balance as of June 30, 2014 | 14.8 | $ | 25.75 | 2.0 | $ | 38.4 | ||||||
As of June 30, 2014: | ||||||||||||
Vested and expected-to-vest options | 14.7 | $ | 25.88 | 2.0 | $ | 36.4 | ||||||
Exercisable options | 13.5 | $ | 26.49 | 1.7 | $ | 25.1 |
Outstanding RSUs, RSAs, and PSAs | ||||||||||||
Number of Shares | Weighted Average Grant-Date Fair Value per Share | Weighted Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value | |||||||||
Balance as of December 31, 2013 | 25.4 | $ | 23.44 | |||||||||
RSUs granted (1)(4) | 8.2 | 23.09 | ||||||||||
RSUs assumed (2) | 0.4 | 22.66 | ||||||||||
RSAs assumed (2) | 0.9 | 22.66 | ||||||||||
PSAs granted (3)(4) | 0.8 | 25.59 | ||||||||||
PSAs assumed (2) | 0.2 | 22.66 | ||||||||||
RSUs vested | (5.3 | ) | 23.65 | |||||||||
RSAs vested | (0.7 | ) | 19.59 | |||||||||
PSAs vested | (1.0 | ) | 38.10 | |||||||||
RSUs canceled | (1.5 | ) | 21.91 | |||||||||
PSAs canceled | (2.3 | ) | 32.39 | |||||||||
Balance as of June 30, 2014 | 25.1 | 22.06 | 1.5 | $ | 615.3 |
(1) | Includes service-based and market-based RSUs granted under the 2006 Plan according to its terms. |
(2) | RSUs, RSAs, and PSAs assumed in connection with the acquisition of WANDL. |
(3) | The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by the Compensation Committee are achieved at target is 0.4 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is 0 to 0.8 million shares. |
(4) | On February 20, 2014, the Company announced its intention to initiate a quarterly cash dividend of $0.10 per share of common stock in the third quarter of 2014. As a result of the Company's announcement, the grant date fair value of RSUs and PSAs granted after the announcement date were reduced by the present value of the dividends expected to be paid on the underlying shares of common stock during the requisite and derived service period as these awards are not entitled to receive dividends until vested. On July 22, 2014, the Company announced a quarterly cash dividend of $0.10 per share of common stock payable on September 23, 2014 to stockholders of record as of the close of business on September 2, 2014. |
Six Months Ended June 30, | |||
2014 | 2013 | ||
ESPP (1): | |||
Volatility | 33% | 36% | |
Risk-free interest rate | 0.1% | 0.1% | |
Expected life (years) | 0.5 | 0.5 | |
Dividend yield | — | — | |
Weighted-average fair value per share | $6.37 | $5.63 | |
Market-based RSUs (2): | |||
Volatility | 36% | — | |
Risk-free interest rate | 1.6% | — | |
Dividend yield | 0% - 1.5% | — | |
Weighted-average fair value per share | $18.28 | — |
(1) | The Black-Scholes-Merton option-pricing model is utilized to estimate the fair value of ESPP. |
(2) | The fair value of market-based RSUs utilizes a Monte Carlo valuation methodology. The Company amortizes the fair value of these awards over the derived service period adjusted for estimated forfeitures for each separately vesting tranche of the award. Provided that the derived service is rendered, the total fair value of the market-based RSUs at the date of grant is recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Cost of revenues - Product | $ | 1.3 | $ | 1.2 | $ | 2.6 | $ | 2.1 | |||||||
Cost of revenues - Service | 3.1 | 3.5 | 7.1 | 8.1 | |||||||||||
Research and development | 31.6 | 33.0 | 63.7 | 56.6 | |||||||||||
Sales and marketing | 14.4 | 18.1 | 29.0 | 32.6 | |||||||||||
General and administrative | 8.9 | 5.7 | 17.7 | 12.0 | |||||||||||
Total | $ | 59.3 | $ | 61.5 | $ | 120.1 | $ | 111.4 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Stock options | $ | 3.7 | $ | 7.7 | $ | 8.8 | $ | 17.2 | |||||||
RSUs, RSAs, and PSAs | 51.9 | 49.3 | 103.7 | 86.3 | |||||||||||
ESPP | 3.7 | 4.5 | 7.6 | 7.9 | |||||||||||
Total | $ | 59.3 | $ | 61.5 | $ | 120.1 | $ | 111.4 |
Unrecognized Compensation Cost | Weighted Average Period (In Years) | ||||
Stock options | $ | 20.8 | 1.6 | ||
RSUs, RSAs, and PSAs | $ | 368.3 | 2.1 |
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Routing | $ | 617.8 | $ | 577.5 | $ | 1,167.6 | $ | 1,091.2 | |||||||
Switching | 199.8 | 160.2 | 391.8 | 291.7 | |||||||||||
Security | 111.6 | 126.1 | 245.8 | 262.7 | |||||||||||
Total product | 929.2 | 863.8 | 1,805.2 | 1,645.6 | |||||||||||
Total service | 300.3 | 286.9 | 594.4 | 564.3 | |||||||||||
Total | $ | 1,229.5 | $ | 1,150.7 | $ | 2,399.6 | $ | 2,209.9 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Americas: | |||||||||||||||
United States | $ | 660.7 | $ | 610.2 | $ | 1,284.4 | $ | 1,157.2 | |||||||
Other | 50.3 | 64.9 | 108.1 | 110.0 | |||||||||||
Total Americas | 711.0 | 675.1 | 1,392.5 | 1,267.2 | |||||||||||
Europe, Middle East, and Africa | 324.8 | 300.9 | 620.5 | 591.5 | |||||||||||
Asia Pacific | 193.7 | 174.7 | 386.6 | 351.2 | |||||||||||
Total | $ | 1,229.5 | $ | 1,150.7 | $ | 2,399.6 | $ | 2,209.9 |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
United States | $ | 805.4 | $ | 801.3 | |||
International | 84.5 | 81.0 | |||||
Property and equipment, net | $ | 889.9 | $ | 882.3 |
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Tax on gain of equity investments, net of valuation allowance release of $24.7 | $ | — | $ | — | $ | 35.6 | $ | — | |||||||
Benefit from restructuring costs | $ | (25.1 | ) | $ | — | $ | (55.9 | ) | $ | — | |||||
Tax on gain from legal settlement | $ | 44.7 | $ | — | $ | 44.7 | $ | — | |||||||
Section 199 deduction | $ | — | $ | (20.3 | ) | $ | — | $ | (20.3 | ) | |||||
Tax settlement with Internal Revenue Service ("IRS") | $ | — | $ | — | $ | — | $ | (27.8 | ) | ||||||
Reinstatement of the U.S. federal R&D tax credit | $ | — | $ | — | $ | — | $ | (15.2 | ) |
|
As of | |||
June 30, 2014 | |||
Goodwill | $ | 160.4 | |
Deferred revenue | (45.6 | ) | |
Intangible assets | 6.0 | ||
Other, net | 3.9 | ||
Total net assets | $ | 124.7 |
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