o
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Title of each class
|
Name of exchange on which registered
|
Ordinary shares, NIS 0.01 nominal value
|
NASDAQ Global Select Market
|
Page
|
|
F-2
|
|
F-3 – F-5
|
|
F-6 – F-7
|
|
F-8
|
|
F-9 – F-11
|
|
F-12 – F-13
|
|
F-14 – F-52
|
·
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets,
|
·
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
|
·
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
/s/ KOST FOERER GABBAY & KASIERER
|
|
Tel-Aviv, Israel
|
KOST FORER GABBAY & KASIERER
|
August 3, 2011
|
A Member of Ernst & Young Global
|
/s/ KOST FOERER GABBAY & KASIERER
|
|
Tel-Aviv, Israel
|
KOST FORER GABBAY & KASIERER
|
August 3, 2011
|
A Member of Ernst & Young Global
|
December 31,
|
||||||||
2009
|
2010
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 414,085 | $ | 551,777 | ||||
Marketable securities
|
469,913 | 537,718 | ||||||
Trade receivables (net of allowances for doubtful accounts and sales reserves of $19,335 and
$21,170 at December 31, 2009 and 2010, respectively)
|
283,668 | 283,192 | ||||||
Prepaid expenses and other current assets
|
34,544 | 44,247 | ||||||
Total current assets
|
1,202,210 | 1,416,934 | ||||||
LONG-TERM ASSETS:
|
||||||||
Marketable securities
|
963,001 | 1,325,451 | ||||||
Property and equipment, net
|
38,936 | 37,065 | ||||||
Severance pay fund
|
6,314 | 6,532 | ||||||
Deferred tax asset, net
|
16,307 | 18,122 | ||||||
Other intangible assets, net
|
114,192 | 66,765 | ||||||
Goodwill
|
708,458 | 717,052 | ||||||
Other assets
|
20,176 | 17,381 | ||||||
Total long-term assets
|
1,867,384 | 2,188,368 | ||||||
Total assets
|
$ | 3,069,594 | $ | 3,605,302 |
December 31,
|
||||||||
2009
|
2010
|
|||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Trade payables
|
$ | 8,860 | $ | 9,927 | ||||
Employee and payroll accruals
|
67,167 | 80,814 | ||||||
Deferred revenues
|
384,255 | 424,158 | ||||||
Accrued expenses and other liabilities
|
92,984 | 148,363 | ||||||
Total current liabilities
|
553,266 | 663,262 | ||||||
LONG-TERM LIABILITIES:
|
||||||||
Deferred revenues
|
41,005 | 40,394 | ||||||
Income tax accrual
|
132,908 | 169,370 | ||||||
Deferred tax liability
|
11,636 | 1,721 | ||||||
Accrued severance pay
|
11,061 | 11,224 | ||||||
196,610 | 222,709 | |||||||
Total liabilities
|
749,876 | 885,971 | ||||||
SHAREHOLDERS’ EQUITY:
|
||||||||
Share capital -
|
||||||||
Preferred shares, NIS 0.01 par value, 5,000,000 shares authorized at December 31, 2009
and 2010; no shares issued and outstanding at December 31, 2009 and 2010
|
- | - | ||||||
Deferred shares, NIS 1 par value, 10 shares authorized at December 31, 2009
and 2010; 1 share issued and outstanding at December 31, 2009 and 2010
|
- | - | ||||||
Ordinary shares, NIS 0.01 par value, 500,000,000 shares authorized at December 31, 2009
and 2010; 261,223,970 shares issued at December 31, 2009 and 2010; 209,099,392 and 208,414,687 shares outstanding
at December 31, 2009 and 2010, respectively
|
774 | 774 | ||||||
Additional paid-in capital
|
527,874 | 580,276 | ||||||
Treasury shares at cost - 52,124,578 and 52,809,283 Ordinary shares at December 31, 2009 and 2010, respectively
|
(1,199,752 | ) | (1,306,382 | ) | ||||
Accumulated other comprehensive income
|
12,555 | 15,584 | ||||||
Retained earnings
|
2,978,267 | 3,429,079 | ||||||
Total shareholders’ equity
|
2,319,718 | 2,719,331 | ||||||
Total liabilities and shareholders’ equity
|
$ | 3,069,594 | $ | 3,605,302 |
Year ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
Revenues:
|
||||||||||||
Products and licenses
|
$ | 338,317 | $ | 361,633 | $ | 444,400 | ||||||
Software updates, maintenance and services
|
470,173 | 562,784 | 653,468 | |||||||||
Total revenues
|
808,490 | 924,417 | 1,097,868 | |||||||||
Operating expenses: *)
|
||||||||||||
Cost of products and licenses **)
|
34,648 | 61,495 | 75,426 | |||||||||
Cost of software updates, maintenance and services **)
|
33,407 | 43,551 | 55,721 | |||||||||
Amortization of technology
|
24,554 | 28,224 | 32,826 | |||||||||
Total cost of revenues
|
92,609 | 133,270 | 163,973 | |||||||||
Research and development
|
91,629 | 89,743 | 105,748 | |||||||||
Selling and marketing
|
214,439 | 220,877 | 235,301 | |||||||||
General and administrative
|
53,313 | 56,409 | 57,244 | |||||||||
Restructuring and other acquisition related costs
|
- | 9,101 | 588 | |||||||||
Total operating expenses
|
451,990 | 509,400 | 562,854 | |||||||||
Operating income
|
356,500 | 415,017 | 535,014 | |||||||||
Financial income, net
|
40,876 | 32,058 | 30,164 | |||||||||
Other than temporary impairment, net of gain on sale of marketable securities previously impaired
|
(11,221 | ) | (1,277 | ) | (785 | ) | ||||||
Income before taxes on income
|
386,155 | 445,798 | 564,393 | |||||||||
Taxes on income
|
62,189 | 88,275 | 111,567 | |||||||||
Net income
|
$ | 323,966 | $ | 357,523 | $ | 452,826 | ||||||
Basic earnings per Ordinary share
|
$ | 1.51 | $ | 1.71 | $ | 2.18 | ||||||
Diluted earnings per Ordinary share
|
$ | 1.50 | $ | 1.68 | $ | 2.13 | ||||||
*) Includes stock-based compensation to employees in the following items:
|
||||||||||||
Cost of products and licenses
|
$ | 48 | $ | 47 | $ | 49 | ||||||
Cost of software updates, maintenance and services
|
684 | 641 | 984 | |||||||||
Research and development
|
5,037 | 6,649 | 7,325 | |||||||||
Selling and marketing
|
6,855 | 5,032 | 7,279 | |||||||||
General and administrative
|
19,703 | 18,538 | 19,543 |
**)
|
Not including amortization of technology shown separately below.
|
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Treasury
|
other
|
Total
|
Total
|
||||||||||||||||||||||||
Share
|
paid-in
|
shares
|
comprehensive
|
Retained
|
comprehensive
|
shareholders'
|
||||||||||||||||||||||
capital
|
capital
|
at cost
|
income (loss)
|
earnings
|
income
|
equity
|
||||||||||||||||||||||
Balance as of December 31, 2007
|
$ | 774 | $ | 464,330 | $ | (907,022 | ) | $ | 1,233 | $ | 2,297,640 | $ | 1,856,955 | |||||||||||||||
Tax benefit related to exercise of stock options
|
- | 13,019 | - | - | - | 13,019 | ||||||||||||||||||||||
Issuance of treasury shares under stock plans,
upon exercise of options and vesting of restricted stock units
(2,402,792 Ordinary shares net of 29,383 for taxes)
|
- | (6,268 | ) | 41,314 | - | - | 35,046 | |||||||||||||||||||||
Treasury shares at cost (10,914,008 Ordinary shares)
|
- | - | (239,542 | ) | - | - | (239,542 | ) | ||||||||||||||||||||
Stock-based compensation expense related to employees
|
- | 32,327 | - | - | - | 32,327 | ||||||||||||||||||||||
Comprehensive income, net of tax -
|
||||||||||||||||||||||||||||
Reclassification adjustments to income on
marketable securities, net of $ 403 tax
|
- | - | - | 1,091 | - | $ | 1,091 | 1,091 | ||||||||||||||||||||
Other than temporary impairment on
marketable securities, net of $2,272 tax
|
- | - | - | 8,949 | - | 8,949 | 8,949 | |||||||||||||||||||||
Unrealized losses on marketable securities,
net of $ (4,304) tax
|
- | - | - | (15,946 | ) | - | (15,946 | ) | (15,946 | ) | ||||||||||||||||||
Net income
|
- | - | - | - | 323,966 | 323,966 | 323,966 | |||||||||||||||||||||
Total comprehensive income
|
$ | 318,060 | ||||||||||||||||||||||||||
Balance as of December 31, 2008
|
$ | 774 | $ | 503,408 | $ | (1,105,250 | ) | $ | (4,673 | ) | $ | 2,621,606 | $ | 2,015,865 | ||||||||||||||
Unrealized losses on marketable securities, net of $ 1,255 tax
|
$ | (4,673 | ) | |||||||||||||||||||||||||
Accumulated other comprehensive loss as of December 31, 2008
|
$ | (4,673 | ) |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Treasury
|
other
|
Total
|
Total
|
||||||||||||||||||||||||
Share
|
paid-in
|
shares
|
comprehensive
|
Retained
|
comprehensive
|
shareholders'
|
||||||||||||||||||||||
capital
|
capital
|
at cost
|
income (loss)
|
earnings
|
income
|
equity
|
||||||||||||||||||||||
Balance as of December 31, 2008
|
$ | 774 | $ | 503,408 | $ | (1,105,250 | ) | $ | (4,673 | ) | $ | 2,621,606 | $ | 2,015,865 | ||||||||||||||
Tax benefit related to exercise of stock options
|
- | 7,502 | - | - | - | 7,502 | ||||||||||||||||||||||
Issuance of treasury shares under stock plans, upon
exercise of options and vesting of restricted stock units (6,871,250
Ordinary shares net of 43,805 for taxes)
|
- | (13,943 | ) | 107,783 | - | (862 | ) | 92,978 | ||||||||||||||||||||
Treasury shares at cost (7,814,140 Ordinary shares)
|
- | - | (202,285 | ) | - | - | (202,285 | ) | ||||||||||||||||||||
Stock-based compensation expense related to employees
|
- | 30,907 | - | - | - | 30,907 | ||||||||||||||||||||||
Comprehensive income, net of tax -
|
||||||||||||||||||||||||||||
Reclassification adjustments to income on marketable
securities, net of $ (122) tax
|
- | - | - | 104 | - | $ | 104 | 104 | ||||||||||||||||||||
Other than temporary impairment, net of $ 669 tax
|
- | - | - | 2,523 | - | 2,523 | 2,523 | |||||||||||||||||||||
Unrealized gain on marketable securities, net of $ 4,747 tax
|
- | - | - | 14,601 | - | 14,601 | 14,601 | |||||||||||||||||||||
Net income
|
- | - | - | - | 357,523 | 357,523 | 357,523 | |||||||||||||||||||||
Total comprehensive income
|
$ | 374,751 | ||||||||||||||||||||||||||
Balance as of December 31, 2009
|
$ | 774 | $ | 527,874 | $ | (1,199,752 | ) | $ | 12,555 | $ | 2,978,267 | $ | 2,319,718 | |||||||||||||||
Unrealized gain on marketable securities, net of $ 4,039 tax
|
$ | 12,555 | ||||||||||||||||||||||||||
Accumulated other comprehensive income as of December 31, 2009
|
$ | 12,555 |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Treasury
|
other
|
Total
|
Total
|
||||||||||||||||||||||||
Share
|
paid-in
|
shares
|
comprehensive
|
Retained
|
comprehensive
|
shareholders'
|
||||||||||||||||||||||
capital
|
capital
|
at cost
|
income
|
earnings
|
income
|
equity
|
||||||||||||||||||||||
Balance as of December 31, 2009
|
$ | 774 | $ | 527,874 | $ | (1,199,752 | ) | $ | 12,555 | $ | 2,978,267 | $ | 2,319,718 | |||||||||||||||
Tax benefit related to exercise of stock options
|
- | 4,763 | - | - | - | 4,763 | ||||||||||||||||||||||
Issuance of treasury shares under stock plans, upon exercise of
options and vesting of restricted stock units
(4,965,581 Ordinary shares net of 61,149 for taxes)
|
- | 12,459 | 93,370 | - | (2,014 | ) | 103,815 | |||||||||||||||||||||
Treasury shares at cost (5,650,169 Ordinary shares)
|
- | (200,000 | ) | - | (200,000 | ) | ||||||||||||||||||||||
Stock-based compensation expense related to employees
|
35,180 | - | - | - | 35,180 | |||||||||||||||||||||||
Comprehensive income, net of tax -
|
- | - | - | - | 35,180 | |||||||||||||||||||||||
Reclassification adjustments to income on marketable securities, net of $(244) tax
|
- | - | - | (974 | ) | - | $ | (974 | ) | (974 | ) | |||||||||||||||||
Other than temporary impairment, net of $147 tax
|
- | - | - | 785 | - | 785 | 785 | |||||||||||||||||||||
Unrealized gain on marketable securities, net of $967 tax
|
- | - | - | 3,218 | - | 3,218 | 3,218 | |||||||||||||||||||||
Net income
|
- | - | - | 452,826 | 452,826 | 452,826 | ||||||||||||||||||||||
Total comprehensive income
|
$ | 455,855 | ||||||||||||||||||||||||||
Balance as of December 31, 2010
|
$ | 774 | $ | 580,276 | $ | (1,306,382 | ) | $ | 15,584 | $ | 3,429,079 | $ | 2,719,331 | |||||||||||||||
Unrealized gain on marketable securities, net of $ 4,909 tax
|
$ | 15,584 | ||||||||||||||||||||||||||
Accumulated other comprehensive income
as of December 31, 2010
|
$ | 15,584 |
Year ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 323,966 | $ | 357,523 | $ | 452,826 | ||||||
Adjustments required to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization of property and equipment
|
8,648 | 8,885 | 6,890 | |||||||||
Amortization of premium and accretion of discount on marketable securities, net
|
3,099 | 8,414 | 14,428 | |||||||||
Other than temporary impairment net of gain on sale of marketable securities previously impaired
|
11,221 | 1,277 | 785 | |||||||||
Realized loss (gain) on sale of marketable securities, net
|
1,494 | 1,896 | (974 | ) | ||||||||
Amortization of intangible assets
|
36,982 | 50,653 | 51,876 | |||||||||
Stock-based compensation
|
32,327 | 30,907 | 35,180 | |||||||||
Foreign currency on amount due to Protect Data shareholders
|
(463 | ) | - | - | ||||||||
Deferred income taxes, net
|
(14,034 | ) | (11,386 | ) | (11,674 | ) | ||||||
Decrease (increase) in trade receivables, net of allowances for doubtful accounts and sales reserves
|
(50,256 | ) | (11,256 | ) | 536 | |||||||
Decrease (increase) in prepaid expenses and other current assets and other assets
|
(3,521 | ) | 1,285 | (5,742 | ) | |||||||
Increase (decrease) in trade payables
|
744 | (2,405 | ) | 789 | ||||||||
Increase in employees and payroll accruals
|
1,289 | 20,163 | 13,647 | |||||||||
Increase in accrued expenses and other liabilities
|
38,423 | 63,026 | 97,178 | |||||||||
Increase in deferred revenues
|
57,104 | 46,006 | 37,649 | |||||||||
Excess tax benefit from stock-based compensation
|
(13,019 | ) | (7,502 | ) | (4,763 | ) | ||||||
Increase (decrease) in accrued severance pay, net
|
25 | (379 | ) | (55 | ) | |||||||
Net cash provided by operating activities
|
434,029 | 557,107 | 688,576 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Cash paid in conjunction with acquisitions, net of acquired cash
|
- | (58,787 | ) | (13,957 | ) | |||||||
Payments made in connection with prior years acquisitions
|
(8,579 | ) | - | - | ||||||||
Proceeds from maturity of marketable securities
|
311,134 | 427,660 | 605,725 | |||||||||
Proceeds from sale of marketable securities
|
259,803 | 27,006 | 44,096 | |||||||||
Investment in marketable securities
|
(736,781 | ) | (1,002,305 | ) | (1,090,416 | ) | ||||||
Investment in short term deposits
|
(26,302 | ) | - | - | ||||||||
Proceeds from maturity of short term deposits
|
- | 26,302 | - | |||||||||
Purchase of property and equipment
|
(8,301 | ) | (4,283 | ) | (4,910 | ) | ||||||
Net cash used in investing activities
|
(209,026 | ) | (584,407 | ) | (459,462 | ) |
Year ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from issuance of shares under stock purchase plan and upon exercise of options
|
35,046 | 92,978 | 103,815 | |||||||||
Purchase of treasury shares at cost
|
(239,542 | ) | (202,285 | ) | (200,000 | ) | ||||||
Excess tax benefit from stock-based compensation
|
13,019 | 7,502 | 4,763 | |||||||||
Net cash used in financing activities
|
(191,477 | ) | (101,805 | ) | (91,422 | ) | ||||||
Increase (decrease) in cash and cash equivalents
|
33,526 | (129,105 | ) | 137,692 | ||||||||
Cash and cash equivalents at the beginning of the year
|
509,664 | 543,190 | 414,085 | |||||||||
Cash and cash equivalents at the end of the year
|
$ | 543,190 | $ | 414,085 | $ | 551,777 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid during the year for income taxes
|
$ | 63,251 | $ | 55,440 | $ | 59,945 | ||||||
Supplemental disclosures of non cash financing and investing activities
|
||||||||||||
Net change in unrealized gain (loss) on marketable securities
|
$ | (7,535 | ) | $ | 22,521 | $ | 3,899 |
NOTE 1:-
|
GENERAL
|
|
a.
|
Check Point Software Technologies Ltd. (“Check Point Ltd.”), an Israeli corporation, and its subsidiaries (collectively, the "Company" or “Check Point”), are engaged in developing, marketing and supporting software and combined hardware and software products and services, by offering network security, data security and management solutions for enterprise networks and service providers.
|
|
b.
|
During 2010 and 2009, approximately 35% of the Company’s revenues were derived from the same two channel partners, 18% from one channel partner and 17% from the other. During 2008, approximately 30% of the Company’s revenues were derived from the same two channel partners, 16% from one channel partner and 14% from the other. Trade receivable balances from these two channel partners aggregated $ 101,094 and $ 114,801 as of December 31, 2009 and December 31, 2010, respectively.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
a.
|
Use of estimates:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
b.
|
Financial statements in United States dollars:
|
|
c.
|
Principles of consolidation:
|
|
d.
|
Cash equivalents:
|
|
e.
|
Investments in marketable securities:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
f.
|
Property and equipment:
|
%
|
||
Computers and peripheral equipment
|
33-50
|
|
Office furniture and equipment
|
10-20
|
|
Building
|
4
|
|
Leasehold improvements
|
The shorter of term of the lease or the useful life of the asset
|
|
g.
|
Goodwill and other intangible assets:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
h.
|
Business Combinations
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
i.
|
Research and development costs:
|
|
j.
|
Revenue recognition:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
k.
|
Cost of revenues:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
l.
|
Severance pay:
|
|
m.
|
Employee benefit plan:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
n.
|
Income taxes:
|
|
o.
|
Advertising expenses:
|
|
p.
|
Concentrations of credit risk:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
q.
|
Derivatives and hedging:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
r.
|
Basic and diluted earnings per share:
|
|
s.
|
Accounting for stock-based compensation:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Year ended
December 31,
|
||||||||||||
Employee Stock Options
|
2008
|
2009
|
2010
|
|||||||||
Expected volatility
|
38.57 | % | 35.00 | % | 30.54 | % | ||||||
Risk-free interest rate
|
3.05 | % | 2.61 | % | 1.63 | % | ||||||
Dividend yield
|
0.0 | % | 0.0 | % | 0.0 | % | ||||||
Expected term from vesting date (years)
|
3.55 | 3.62 | 2.97 | |||||||||
Employee Stock Purchase Plan
|
||||||||||||
Expected volatility
|
31.15 | % | 46.90 | % | 20.20 | % | ||||||
Risk-free interest rate
|
1.92 | % | 0.31 | % | 0.16 | % | ||||||
Dividend yield
|
0.0 | % | 0.0 | % | 0.0 | % | ||||||
Expected term (years)
|
0.5 | 0.5 | 0.5 |
|
t.
|
Fair value of financial instruments:
|
|
Level 1 -
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
Level 2 -
|
Include other inputs that are directly or indirectly observable in the marketplace.
|
|
Level 3 -
|
Unobservable inputs which are supported by little or no market activity.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
u.
|
Comprehensive income:
|
|
v.
|
Treasury stock:
|
|
w.
|
Impact of recently issued accounting standards:
|
NOTE 3:-
|
ACQUISITIONS
|
|
a.
|
On April 14, 2009, the Company completed the acquisition of the security appliance business of Nokia Corporation (“Nokia”). Prior to the completion of the acquisition, Check Point had collaborated with Nokia’s security appliance business over the past decade to deliver enterprise security solutions. Since completing the acquisition, the Company has been building upon this collaboration and the synergies between the Company and Nokia’s security appliance business to provide an extended security appliance portfolio that is developed, manufactured and supported by Check Point. Total purchase price was $54,037. A significant amount of the acquisition was recorded as goodwill due to the synergies and previous collaboration with Nokia.
|
Accounts receivable
|
$ | 27,674 | ||
Inventory
|
7,575 | |||
Other assets
|
8,148 | |||
Accounts payable and other liabilities
|
(21,703 | ) | ||
Deferred revenues
|
(48,457 | ) | ||
Intangible assets
|
36,944 | |||
Goodwill (tax deductible)
|
43,856 | |||
Total purchase price
|
$ | 54,037 |
Fair value
|
Useful life
|
||||
Customer relationships (1)
|
$ | 11,909 |
2 years
|
||
Core technology (2)
|
20,058 |
3 years
|
|||
In-Process research and development (3)
|
2,741 | ||||
Backlog
|
1,280 |
0.5 years
|
|||
Trade names (4)
|
956 |
3 years
|
|||
Total intangible assets
|
$ | 36,944 |
NOTE 3:-
|
ACQUISITIONS (Cont.)
|
(1)
|
Customer relationships represent the underlying relationships and agreements with Nokia’s installed customer base and is amortized over 2 years using the accelerated method.
|
(2)
|
Core technology represents a combination of Nokia processes, patents and trade secrets related to the design and development of its products. This proprietary know-how can be leveraged to develop new technology and improve the Company’s products.
|
(3)
|
In-process research and development (“IPR&D”) represents incomplete Nokia research and development projects that had not reached technological feasibility and had no alternative future use as of the date of the acquisition. The asset was fully amortized in 2010 as the Company abandoned the development efforts.
|
(4)
|
Trade names value represents the recognition value of Nokia’s brand name as a result of advertising expenditures for customer relations and the technological development to provide consistent, leading edge products and a strong research and development commitment by the Company.
|
Year ended December 31
|
||||||||
2008
|
2009
|
|||||||
Unaudited
|
Unaudited
|
|||||||
Revenues(*)
|
$ | 1,006,204 | $ | 971,993 | ||||
Net income
|
$ | 355,035 | $ | 368,788 | ||||
Basic earnings per share
|
$ | 1.66 | $ | 1.76 | ||||
Diluted earnings per share
|
$ | 1.64 | $ | 1.74 |
(*)
|
Nokia revenues prior to the acquisition date were denominated in currencies other than the US dollar; such revenues were re-measured into US dollars in accordance with ASC 830.
|
NOTE 3:-
|
ACQUISITIONS (Cont.)
|
|
b.
|
In June 2010, the Company acquired Liquid Machines, Inc. a leader in data security for a cash consideration of $ 13,957. Under the acquisition method of accounting, the total consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values. The excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets was recorded as goodwill. As part of the allocation $ 4,449 was allocated to amortizable intangible assets (technology and customer relationships) that are being amortized over their estimated useful lives of three to six years and the residual was recorded as goodwill in the amount of $ 8,594. The results of the aforementioned acquisition are included with that of the Company for the period subsequent to the acquisition date and are immaterial to the consolidated results. The acquisition did not have a material effect on pro forma financial data.
|
NOTE 4:-
|
MARKETABLE SECURITIES
|
December 31,
|
||||||||||||||||||||||||||||||||
2009
|
2010
|
|||||||||||||||||||||||||||||||
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair
value
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair
value
|
|||||||||||||||||||||||||
Government and corporate debentures - fixed interest rate
|
$ | 193,902 | $ | 2,643 | $ | (134 | ) | $ | 196,411 | $ | 313,939 | $ | 2,372 | $ | (85 | ) | $ | 316,226 | ||||||||||||||
Government-sponsored enterprises
|
239,609 | 605 | (562 | ) | 239,652 | 142,496 | 504 | (100 | ) | 142,900 | ||||||||||||||||||||||
Structured notes (*)
|
12,128 | - | (38 | ) | 12,090 | - | - | - | - | |||||||||||||||||||||||
Government and corporate debentures - floating interest rate
|
21,764 | 7 | (11 | ) | 21,760 | 78,505 | 97 | (10 | ) | 78,592 | ||||||||||||||||||||||
$ | 467,403 | $ | 3,255 | $ | (745 | ) | $ | 469,913 | $ | 534,940 | $ | 2,973 | $ | (195 | ) | $ | 537,718 |
NOTE 4:-
|
MARKETABLE SECURITIES (Cont.)
|
December 31,
|
||||||||||||||||||||||||||||||||
2009
|
2010
|
|||||||||||||||||||||||||||||||
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair
value
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair
value
|
|||||||||||||||||||||||||
Government and corporate debentures -
fixed interest rate
|
$ | 726,117 | $ | 13,823 | $ | (1,342 | ) | $ | 738,598 | $ | 990,454 | $ | 18,421 | $ | (1,731 | ) | $ | 1,007,144 | ||||||||||||||
Government-sponsored enterprises
|
93,049 | 1,551 | (267 | ) | 94,333 | 189,085 | 1,366 | (552 | ) | 189,899 | ||||||||||||||||||||||
Government and corporate debentures -
floating interest rate
|
120,976 | 459 | (140 | ) | 121,295 | 120,206 | 297 | (85 | ) | 120,418 | ||||||||||||||||||||||
Mortgage and asset backed securities
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Auction rate securities (**)
|
8,775 | - | - | 8,775 | 7,990 | - | - | 7,990 | ||||||||||||||||||||||||
$ | 948,917 | $ | 15,833 | $ | (1,749 | ) | $ | 963,001 | $ | 1,307,735 | $ | 20,084 | $ | (2,368 | ) | $ | 1,325,451 |
December 31, 2009
|
||||||||||||||||||||||||
Investments with continuous unrealized losses for less than 12 months
|
Investments with continuous unrealized losses for 12 months or greater
|
Total Investments with continuous unrealized losses
|
||||||||||||||||||||||
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
|||||||||||||||||||
Government and corporate debentures -
fixed interest rate
|
$ | 260,225 | $ | (1,475 | ) | $ | - | $ | - | $ | 260,225 | $ | (1,475 | ) | ||||||||||
Government-sponsored enterprises
|
155,577 | (830 | ) | - | - | 155,577 | (830 | ) | ||||||||||||||||
Structured note (*)
|
12,090 | (38 | ) | - | - | 12,090 | (38 | ) | ||||||||||||||||
Government and corporate debentures -
floating interest rate
|
45,107 | (151 | ) | - | - | 45,107 | (151 | ) | ||||||||||||||||
$ | 472,999 | $ | (2,494 | ) | $ | - | $ | - | $ | 472,999 | $ | (2,494 | ) |
NOTE 4:-
|
MARKETABLE SECURITIES (Cont.)
|
December 31, 2010
|
||||||||||||||||||||||||
Investments with continuous unrealized losses for less than 12 months
|
Investments with continuous unrealized losses for 12 months or greater
|
Total Investments with continuous unrealized losses
|
||||||||||||||||||||||
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
|||||||||||||||||||
Government and corporate debentures - fixed interest rate
|
$ | 195,784 | $ | (1,816 | ) | $ | - | $ | - | $ | 195,784 | $ | (1,816 | ) | ||||||||||
Government-sponsored enterprises
|
122,574 | (649 | ) | 4,999 | (3 | ) | 127,572 | (652 | ) | |||||||||||||||
Government and corporate debentures - floating interest rate
|
58,632 | (47 | ) | 15,834 | (48 | ) | 74,467 | (95 | ) | |||||||||||||||
$ | 376,990 | $ | (2,512 | ) | $ | 20,833 | $ | (51 | ) | $ | 397,823 | $ | (2,563 | ) |
|
(*)
|
The structured note as of December 31, 2009, is comprised solely of an inverse floating interest rate bond, which matured during March 2010. Inverse floating rate bonds are bonds where the coupon varies inversely with changes in specified interest rates or indices (for example, LIBOR).
|
|
(**)
|
The balance is comprised of four auction rate securities, which have suffered from failed auctions since September 2007. As a result of the auction failures these auction rate securities do not have a readily determinable market value. As such, since 2008, the Company obtained a third party valuation to determine the fair values of these securities (see Note 5).
|