Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jun. 30, 2015 | Jul. 29, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NETSCOUT SYSTEMS INC | |
Entity Central Index Key | 1,078,075 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | NTCT | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 100,736,954 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 94,352 | $ 104,893 |
Marketable securities | 112,857 | 101,392 |
Accounts receivable, net of allowance for doubtful accounts of $142 and $173 at June 30, 2015 and March 31, 2015, respectively | 58,496 | 82,226 |
Inventories | 12,710 | 12,130 |
Prepaid income taxes | 0 | 1,393 |
Deferred income taxes | 21,053 | 21,755 |
Prepaid expenses and other current assets | 8,425 | 13,495 |
Total current assets | 307,893 | 337,284 |
Fixed assets, net | 24,902 | 23,864 |
Goodwill | 198,222 | 197,445 |
Intangible assets, net | 48,815 | 50,180 |
Long-term marketable securities | 60,303 | 58,572 |
Other assets | 1,617 | 1,704 |
Total assets | 641,752 | 669,049 |
Current liabilities: | ||
Accounts payable | 11,203 | 13,077 |
Accrued compensation | 21,780 | 36,553 |
Accrued other | 7,509 | 14,474 |
Income taxes payable | 147 | 107 |
Deferred revenue | 108,179 | 123,422 |
Total current liabilities | 148,818 | 187,633 |
Other long-term liabilities | 1,858 | 1,995 |
Deferred tax liability | 10,653 | 10,639 |
Accrued long-term retirement benefits | 1,589 | 1,587 |
Long-term deferred revenue | 27,919 | 26,961 |
Contingent liabilities, net of current portion | 4,521 | 4,484 |
Total liabilities | $ 195,358 | $ 233,299 |
Commitments and contingencies (Note 10) | ||
Preferred stock, $0.001 par value: | ||
5,000,000 shares authorized; no shares issued or outstanding at June 30, 2015 and March 31, 2015 | $ 0 | $ 0 |
Common stock, $0.001 par value: | ||
150,000,000 shares authorized; 50,834,158 and 50,812,548 shares issued and 40,752,954 and 40,807,805 shares outstanding at June 30, 2015 and March 31, 2015, respectively | 51 | 51 |
Additional paid-in capital | 302,456 | 298,101 |
Accumulated other comprehensive loss | (2,858) | (4,645) |
Treasury stock at cost, 10,081,204 and 10,004,743 shares at June 30, 2015 and March 31, 2015, respectively | (172,683) | (169,516) |
Retained earnings | 319,428 | 311,759 |
Total stockholders’ equity | 446,394 | 435,750 |
Total liabilities and stockholders’ equity | $ 641,752 | $ 669,049 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 142 | $ 173 |
Preferred stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | ||
Preferred stock, shares outstanding (in shares) | ||
Common stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 150,000,000 | 150,000,000 |
Common stock, shares issued (in shares) | 50,834,158 | 50,812,548 |
Common stock, shares outstanding (in shares) | 40,752,954 | 40,807,805 |
Treasury stock, shares (in shares) | 10,081,204 | 10,004,743 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Revenue: | ||
Product | $ 53,593 | $ 64,366 |
Service | 47,150 | 43,486 |
Total revenue | 100,743 | 107,852 |
Cost of revenue: | ||
Product | 12,498 | 13,766 |
Service | 8,798 | 8,830 |
Total cost of revenue | 21,296 | 22,596 |
Gross profit | 79,447 | 85,256 |
Operating expenses: | ||
Research and development | 18,058 | 18,767 |
Sales and marketing | 38,092 | 37,272 |
General and administrative | 10,099 | 8,753 |
Amortization of acquired intangible assets | 809 | 862 |
Total operating expenses | 67,058 | 65,654 |
Income from operations | 12,389 | 19,602 |
Interest and other income (expense), net: | ||
Interest income | 158 | 104 |
Interest expense | (192) | (194) |
Other expense, net | (112) | (41) |
Total interest and other expense, net | (146) | (131) |
Income before income tax expense | 12,243 | 19,471 |
Income tax expense | 4,574 | 7,995 |
Net income | $ 7,669 | $ 11,476 |
Basic net income per share (in USD per share) | $ 0.19 | $ 0.28 |
Diluted net income per share (in USD per share) | $ 0.19 | $ 0.27 |
Weighted average common shares outstanding used in computing: | ||
Net income per share - basic (in shares) | 40,776 | 41,081 |
Net income per share - diluted (in shares) | 41,371 | 41,808 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 7,669 | $ 11,476 |
Other comprehensive income: | ||
Cumulative translation adjustments | 977 | (432) |
Changes in market value of investments: | ||
Changes in unrealized (losses) gains | (59) | 44 |
Total net change in market value of investments | (59) | 44 |
Changes in market value of derivatives: | ||
Changes in market value of derivatives, net of taxes of $4 and $86 | 6 | 138 |
Reclassification adjustment for net gains (losses) included in net income, net of taxes (benefits) of $460 and ($63) | 863 | (106) |
Total net change in market value of derivatives | 869 | 32 |
Other comprehensive income (loss) | 1,787 | (356) |
Total comprehensive income | $ 9,456 | $ 11,120 |
Consolidated Statements of Com6
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||
Changes in market value of derivatives, taxes | $ 4 | $ 86 |
Reclassification adjustment for net losses included in net income, benefits | $ 460 | $ (63) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from operating activities: | ||
Net income | $ 7,669 | $ 11,476 |
Adjustments to reconcile net income to cash provided by operating activities, net of the effects of acquisitions: | ||
Depreciation and amortization | 4,986 | 4,876 |
Loss on disposal of fixed assets | 10 | 0 |
Deal related compensation expense and accretion charges | 37 | 38 |
Share-based compensation expense associated with equity awards | 4,595 | 3,302 |
Net change in fair value of contingent and contractual liabilities | 0 | (9) |
Deferred income taxes | 239 | 1,409 |
Other losses | 42 | 28 |
Changes in assets and liabilities | ||
Accounts receivable | 23,729 | 27,551 |
Inventories | (1,806) | 612 |
Prepaid expenses and other assets | 6,654 | 2,053 |
Accounts payable | (1,629) | (1,558) |
Accrued compensation and other expenses | (20,955) | (11,594) |
Income taxes payable | 40 | (791) |
Deferred revenue | (14,321) | (9,193) |
Net cash provided by operating activities | 9,290 | 28,200 |
Cash flows from investing activities: | ||
Purchase of marketable securities | (32,289) | (42,506) |
Proceeds from maturity of marketable securities | 19,034 | 13,798 |
Purchase of fixed assets | (3,415) | (1,865) |
Purchase of intangible assets | (88) | (71) |
Decrease in deposits | 0 | 17 |
Net cash used in investing activities | (16,758) | (30,627) |
Cash flows from financing activities: | ||
Issuance of common stock under stock plans | 0 | 8 |
Treasury stock repurchases | (3,167) | (12,187) |
Excess tax benefit from share-based compensation awards | 0 | 1,431 |
Net cash used in financing activities | (3,167) | (10,748) |
Effect of exchange rate changes on cash and cash equivalents | 94 | 73 |
Net decrease in cash and cash equivalents | (10,541) | (13,102) |
Cash and cash equivalents, beginning of period | 104,893 | 102,076 |
Cash and cash equivalents, end of period | 94,352 | 88,974 |
Supplemental disclosures: | ||
Cash paid for income taxes | 2,967 | 6,142 |
Non-cash transactions: | ||
Transfers of inventory to fixed assets | 1,229 | 940 |
Additions to property, plant and equipment included in accounts payable | 245 | 95 |
Gross decrease in contractual liability relating to fair value adjustment | 0 | (49) |
Gross increase in contingent consideration liability relating to fair value adjustment | $ 0 | $ 40 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc., or NetScout or the Company. Certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results reported in these consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015 . Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues 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. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This ASU will be effective for the Company in the first quarter of its fiscal year 2019. Early adoption is not permitted. This ASU allows for either full retrospective or modified retrospective adoption. The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements. |
CONCENTRATION OF CREDIT RISK AN
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS | 3 Months Ended |
Jun. 30, 2015 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS | CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS Financial instruments that potentially subject us to concentration of credit risk consist primarily of investments, trade accounts receivable and accounts payable. The Company's cash, cash equivalents, and marketable securities are placed with financial institutions with high credit standings. At June 30, 2015 , no direct customers accounted for more than 10% of the accounts receivable balance, while one indirect channel partner accounted for more than 10% of the accounts receivable balance. At March 31, 2015, one direct customer accounted for more than 10% of the accounts receivable balance, while no indirect channel partner accounted for more than 10% of the accounts receivable balance. During the three months ended June 30, 2015 , no direct customer or indirect channel partner accounted for more than 10% of the Company's total revenue. During the three months ended June 30, 2014 , two direct customers accounted for more than 10% of the Company's total revenue, while no indirect channel partner accounted for more than 10% of the Company's total revenue. Historically, the Company has not experienced any significant failure of its customers to meet their payment obligations nor does the Company anticipate material non-performance by its customers in the future; accordingly, the Company does not require collateral from its customers. However, if the Company’s assumptions are incorrect, there could be an adverse impact on its allowance for doubtful accounts. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Jun. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION The following is a summary of share-based compensation expense including restricted stock units and employee stock purchases made under the Company's employee stock purchase plan (ESPP) based on estimated fair values within the applicable cost and expense lines identified below (in thousands): Three Months Ended June 30, 2015 2014 Cost of product revenue $ 102 $ 60 Cost of service revenue 373 228 Research and development 1,490 1,026 Sales and marketing 1,403 963 General and administrative 1,227 1,025 $ 4,595 $ 3,302 Employee Stock Purchase Plan – The Company maintains an ESPP for all eligible employees as described in the Company’s Annual Report on Form 10-K for the year ended March 31, 2015 . Under the ESPP, shares of the Company’s common stock may be purchased on the last day of each bi-annual offering period at 85% of the fair value on the last day of such offering period. The offering periods run from March 1st through August 31st and from September 1st through February 28th of each year. |
CASH, CASH EQUIVALENTS AND MARK
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES | 3 Months Ended |
Jun. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES | CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities. Cash and cash equivalents consisted of money market instruments and cash maintained with various financial institutions at June 30, 2015 and March 31, 2015 . Marketable Securities The following is a summary of marketable securities held by NetScout at June 30, 2015 , classified as short-term and long-term (in thousands): Amortized Cost Unrealized Losses Fair Value Type of security: U.S. government and municipal obligations $ 99,792 $ (9 ) $ 99,783 Commercial paper 5,099 — 5,099 Corporate bonds 7,977 (2 ) 7,975 Total short-term marketable securities 112,868 (11 ) 112,857 U.S. government and municipal obligations 60,338 (35 ) 60,303 Total long-term marketable securities 60,338 (35 ) 60,303 Total marketable securities $ 173,206 $ (46 ) $ 173,160 The following is a summary of marketable securities held by NetScout at March 31, 2015 , classified as short-term and long-term (in thousands): Amortized Cost Unrealized Gains (Losses) Fair Value Type of security: U.S. government and municipal obligations $ 88,651 $ 3 $ 88,654 Commercial paper 5,093 2 5,095 Corporate bonds 7,644 (1 ) 7,643 Total short-term marketable securities 101,388 4 101,392 U.S. government and municipal obligations 56,683 8 56,691 Corporate bonds 1,880 1 1,881 Total long-term marketable securities 58,563 9 58,572 Total marketable securities $ 159,951 $ 13 $ 159,964 Contractual maturities of the Company’s marketable securities held at June 30, 2015 and March 31, 2015 were as follows (in thousands): June 30, March 31, Available-for-sale securities: Due in 1 year or less $ 112,857 $ 101,392 Due after 1 year through 5 years 60,303 58,572 $ 173,160 $ 159,964 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Jun. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. The following tables present the Company’s financial assets and liabilities measured on a recurring basis using the fair value hierarchy at June 30, 2015 and March 31, 2015 (in thousands): Fair Value Measurements at June 30, 2015 Level 1 Level 2 Level 3 Total ASSETS: Cash and cash equivalents $ 94,352 $ — $ — $ 94,352 U.S. government and municipal obligations 58,769 101,317 — 160,086 Commercial paper — 5,099 — 5,099 Corporate bonds 7,975 — — 7,975 Derivative financial instruments — 97 — 97 $ 161,096 $ 106,513 $ — $ 267,609 LIABILITIES: Contingent purchase consideration $ — $ — $ (4,521 ) $ (4,521 ) Derivative financial instruments — (456 ) — (456 ) $ — $ (456 ) $ (4,521 ) $ (4,977 ) Fair Value Measurements at March 31, 2015 Level 1 Level 2 Level 3 Total ASSETS: Cash and cash equivalents $ 104,893 $ — $ — $ 104,893 U.S. government and municipal obligations 46,564 98,781 — 145,345 Commercial paper — 5,095 — 5,095 Corporate bonds 9,524 — — 9,524 Derivative financial instruments — 15 — 15 $ 160,981 $ 103,891 $ — $ 264,872 LIABILITIES: Contingent purchase consideration $ — $ — $ (4,484 ) $ (4,484 ) Derivative financial instruments — (1,664 ) — (1,664 ) $ — $ (1,664 ) $ (4,484 ) $ (6,148 ) This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including marketable securities and derivative financial instruments. The Company’s Level 1 investments are classified as such because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. The Company’s Level 2 investments are classified as such because fair value is being calculated using data from similar but not identical sources, or a discounted cash flow model using the contractual interest rate as compared to the underlying interest yield curve. The Company's derivative financial instruments consist of forward foreign exchange contracts and are classified as Level 2 because the fair values of these derivatives are determined using models based on market observable inputs, including spot prices for foreign currencies and credit derivatives, as well as an interest rate factor. The Company classifies municipal obligations as level 2 because the fair values are determined using quoted prices from markets the Company considers to be inactive. Commercial paper is classified as Level 2 because the Company uses market information from similar but not identical instruments and discounted cash flow models based on interest rate yield curves to determine fair value. For further information on the Company's derivative instruments refer to Note 8. The following table sets forth a reconciliation of changes in the fair value of the Company’s Level 3 financial liability for the three months ended June 30, 2015 (in thousands): Contingent Purchase Consideration Balance at beginning of period $ (4,484 ) Increase in fair value and accretion expense (included within research and development expense) (37 ) Balance at end of period $ (4,521 ) Deal related compensation expense and accretion charges for the three months ended June 30, 2015 was $37 thousand and was included as part of earnings. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Jun. 30, 2015 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories are stated at the lower of actual cost or net realizable value. Cost is determined by using the first in, first out (FIFO) method. Inventories consist of the following (in thousands): June 30, March 31, Raw materials $ 7,241 $ 6,134 Work in process 266 17 Finished goods 5,203 5,979 $ 12,710 $ 12,130 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 3 Months Ended |
Jun. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill The Company has two reporting units: (1) Unified Service Delivery and (2) Test Optimization. At June 30, 2015 and March 31, 2015 , goodwill attributable to the Unified Service Delivery reporting unit was $195.8 million and $195.0 million , respectively. Goodwill attributable to the Test Optimization reporting unit was $2.4 million at June 30, 2015 and March 31, 2015 . Goodwill is tested for impairment at a reporting unit level at least annually, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The change in the carrying amount of goodwill for the three months ended June 30, 2015 is due to the impact of foreign currency translation adjustments related to asset balances that are recorded in currencies other than the U.S. Dollar. The changes in the carrying amount of goodwill for the three months ended June 30, 2015 are as follows (in thousands): Balance at March 31, 2015 $ 197,445 Foreign currency translation impact for the three months ended June 30, 2015 777 Balance at June 30, 2015 $ 198,222 Intangible Assets The net carrying amounts of intangible assets were $48.8 million and $ 50.2 million at June 30, 2015 and March 31, 2015 , respectively. Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. The Company amortizes intangible assets over their estimated useful lives, except for the acquired trade name which resulted from the Network General Central Corporation (Network General) acquisition, which has an indefinite life and thus is not amortized. The carrying value of the indefinite lived trade name is evaluated for potential impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets include an indefinite lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at June 30, 2015 (in thousands): Cost Accumulated Amortization Net Developed technology $ 31,005 $ (26,150 ) $ 4,855 Customer relationships 38,538 (17,691 ) 20,847 Distributor relationships 1,640 (804 ) 836 Core technology 7,177 (3,930 ) 3,247 Non-compete agreements 289 (289 ) — Other 1,031 (601 ) 430 $ 79,680 $ (49,465 ) $ 30,215 Intangible assets include an indefinite lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at March 31, 2015 (in thousands): Cost Accumulated Amortization Net Developed technology $ 30,865 $ (25,561 ) $ 5,304 Customer relationships 38,498 (16,935 ) 21,563 Distributor relationships 1,585 (711 ) 874 Core technology 7,118 (3,660 ) 3,458 Non-compete agreements 280 (280 ) — Other 943 (562 ) 381 $ 79,289 $ (47,709 ) $ 31,580 Amortization of software and core technology included as cost of product revenue was $758 thousand and $934 thousand for the three months ended June 30, 2015 and 2014, respectively. Amortization of other intangible assets included as operating expense was $847 thousand and $901 thousand for the three months ended June 30, 2015 and 2014, respectively. The following is the expected future amortization expense at June 30, 2015 for the years ending March 31 (in thousands): 2016 (remaining nine months) $ 4,864 2017 5,726 2018 4,901 2019 3,991 2020 3,510 Thereafter 7,223 $ 30,215 The weighted average amortization period of developed technology and core technology is 6.7 years. The weighted average amortization period for customer and distributor relationships is 13.3 years. The weighted average amortization period for amortizing all intangible assets is 10.1 years. |
DERIVATIVE INSTRUMENTS AND HEDG
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 3 Months Ended |
Jun. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES NetScout operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The exposures result from costs that are denominated in currencies other than the U.S. Dollar, primarily the Euro, British Pound, Canadian Dollar, and Indian Rupee. The Company manages its foreign cash flow risk by hedging forecasted cash flows for operating expenses denominated in foreign currencies for up to twelve months, within specified guidelines through the use of forward contracts. The Company enters into foreign currency exchange contracts to hedge cash flow exposures from costs that are denominated in currencies other than the U.S. Dollar. These hedges are designated as cash flow hedges at inception. All of the Company’s derivative instruments are utilized for risk management purposes, and the Company does not use derivatives for speculative trading purposes. These contracts will mature over the next twelve months and are expected to impact earnings on or before maturity. The notional amounts and fair values of derivative instruments in the consolidated balance sheets at June 30, 2015 and March 31, 2015 were as follows (in thousands): Notional Amounts (a) Prepaid Expenses and Other Current Assets Accrued Other June 30, March 31, June 30, March 31, June 30, March 31, Derivatives Designated as Hedging Instruments: Forward contracts $ 19,014 $ 20,203 $ 97 $ 15 $ 456 $ 1,664 (a) Notional amounts represent the gross contract/notional amount of the derivatives outstanding. The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the three months ended June 30, 2015 and 2014 (in thousands): Derivatives in Cash Flow Hedging Relationships Effective Portion Ineffective Portion Gain (Loss) Recognized in OCI on Derivative (a) Gain (Loss) Reclassified from Accumulated OCI into Income (b) Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) (c) June 30, 2015 June 30, 2014 Location June 30, 2015 June 30, 2014 Location June 30, 2015 June 30, 2014 Forward contracts $ 10 $ (224 ) Research and development $ 47 $ 10 Research and development $ 34 $ 63 Sales and marketing 1,276 159 Sales and marketing (14 ) 4 $ 10 $ (224 ) $ 1,323 $ 169 $ 20 $ 67 (a) The amount represents the change in fair value of derivative contracts due to changes in spot rates. (b) The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings. (c) The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and therefore recognized in earnings. No gains or losses were reclassified as a result of discontinuance of cash flow hedges. |
LONG-TERM DEBT
LONG-TERM DEBT | 3 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | LONG-TERM DEBT On November 22, 2011, the Company entered into a credit facility (the Credit Agreement) with a syndicate of lenders led by KeyBank National Association (KeyBank) providing the Company with a $250 million revolving credit facility, which may be increased to $300 million at any time up to 90 days before maturity. The revolving credit facility includes a swing line loan sub-facility of up to $10 million and a letter of credit sub-facility of up to $10 million . The credit facility under the Credit Agreement matures on November 21, 2016 . At June 30, 2015 , there were no amounts outstanding under this credit facility. At the Company’s election, revolving loans under the Credit Agreement bear interest at either (a) a rate per annum equal to the highest of (1) KeyBank’s prime rate, (2) 0.50% in excess of the federal funds effective rate, or (3) one hundred (100.00) basis points in excess of the London Interbank Offered Rate (LIBOR) for one-month interest periods, or the Base Rate; or (b) the one-, two-, three-, or six-month per annum LIBOR, as selected by the Company, multiplied by the statutory reserve adjustment, or collectively, the Eurodollar Rate, in each case plus an applicable margin. Swing line loans will bear interest at the Base Rate plus the applicable Base Rate margin. The applicable margin depends on the Company’s leverage ratio, ranging from 100 basis points for Base Rate loans and 200 basis points for Eurodollar Rate loans if the Company’s consolidated leverage ratio is 2.50 to 1.00 or higher, down to 25 basis points for Base Rate loans and 125 basis points for Eurodollar Rate loans if the Company’s consolidated leverage ratio is 1.00 to 1.00 or less. The Company may prepay loans under the Credit Agreement at any time, without penalty, subject to certain notice requirements. Debt is recorded at the amount drawn on the revolving credit facility plus interest based on floating rates reflective of changes in the market which approximates fair value. The loans are guaranteed by each of the Company’s domestic subsidiaries and are collateralized by all of the assets of the Company and its domestic subsidiaries, as well as 65% of the capital stock of the Company’s foreign subsidiaries directly owned by the Company and its domestic subsidiaries. The Credit Agreement generally prohibits any other liens on the assets of the Company and its subsidiaries, subject to certain exceptions as described in the Credit Agreement. The Credit Agreement contains certain covenants applicable to the Company and its subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes (including material mergers and dispositions of assets), dividends and distributions, capital expenditures, investments (including material acquisitions and investments in foreign subsidiaries), transactions with affiliates, sale-leaseback transactions, hedge agreements, payment of junior financing, material changes in business, and other limitations customary in senior secured credit facilities. In addition, the Company is required to maintain certain consolidated leverage and interest coverage ratios as well as a minimum liquidity amount. At June 30, 2015 , the Company was in compliance with all of these covenants. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Acquisition related – The Company has one contingent liability related to the acquisition of Simena, LLC (Simena) in November 2011 for future consideration to be paid to the former seller which had an initial fair value of $8.0 million at the time of acquisition. At June 30, 2015 , the present value of the future consideration was $4.5 million . Legal – From time to time, NetScout is subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, the amount of ultimate expense with respect to any current legal proceedings and claims, if determined adversely, will not have a significant adverse effect on the Company’s financial condition, results of operations or cash flows. |
TREASURY STOCK
TREASURY STOCK | 3 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
TREASURY STOCK | TREASURY STOCK On April 22, 2014, the Company's board of directors approved a stock repurchase program. This program authorizes management to make additional repurchases of NetScout outstanding common stock of up to $100 million . The share repurchase authorization does not have an expiration date and the pace and timing of repurchases will depend on factors such as cash generation from operations, cash requirements for acquisitions, economic and market conditions, stock price and legal and regulatory requirements. Through June 30, 2015 , the Company has repurchased 824,452 shares totaling $34.3 million in the open market under this stock repurchase plan. At June 30, 2015 , $65.7 million of common stock remained available to be purchased under the plan. The Company repurchased 67,752 shares for $2.8 million under the program during the three months ended June 30, 2015. In connection with the vesting and release of the restriction on previously vested shares of restricted stock units, the Company repurchased 8,709 shares for $381 thousand related to minimum statutory tax withholding requirements on these restricted stock units during the three months ended June 30, 2015 . These repurchase transactions do not fall under the repurchase program described above, and therefore do not reduce the amount that is available for repurchase under that program. On May 19, 2015, the Company’s board of directors approved a new share repurchase program, conditional upon the completion of the Company's planned acquisition of Danaher Corporation's (Danaher) Communications Business. This new program will enable the Company to repurchase up to 20 million shares of its common stock. This plan became effective on July 14, 2015 upon the completion of the acquisition and replaces the Company's existing open market stock repurchase program. For additional information regarding the acquisition of Danaher's Communications Business, see Note 16 of the Company's Notes to Consolidated Financial Statements. |
NET INCOME PER SHARE
NET INCOME PER SHARE | 3 Months Ended |
Jun. 30, 2015 | |
Earnings Per Share [Abstract] | |
NET INCOME PER SHARE | NET INCOME PER SHARE Calculations of the basic and diluted net income per share and potential common shares are as follows (in thousands, except for per share data): Three Months Ended June 30, 2015 2014 Numerator: Net income $ 7,669 $ 11,476 Denominator: Denominator for basic net income per share - weighted average common shares outstanding 40,776 41,081 Dilutive common equivalent shares: Weighted average stock options — 17 Weighted average restricted stock units 595 710 Denominator for diluted net income per share - weighted average shares outstanding 41,371 41,808 Net income per share: Basic net income per share $ 0.19 $ 0.28 Diluted net income per share $ 0.19 $ 0.27 The following table sets forth restricted stock units excluded from the calculation of diluted net income per share, since their inclusion would be antidilutive (in thousands): Three Months Ended June 30, 2015 2014 Restricted stock units 19 — Basic EPS is calculated by dividing net income by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic earnings per share. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and restricted stock units using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options, unrecognized compensation expense and any tax benefits as additional proceeds. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company's effective income tax rates were 37.4% and 41.1% for the three months ended June 30, 2015 and 2014 , respectively. Generally, the effective tax rates differ from statutory rates due to the impact of the domestic production activities deduction, research and development credits if enacted, the impact of state taxes, income generated in jurisdictions that have a different tax rate than the U.S. statutory rate, and losses not benefited in certain foreign jurisdictions. The effective tax rate for the three months ended June 30, 2015 is lower than the effective rate for the three months ended June 30, 2014 primarily due to interim accounting treatment of certain foreign losses for which the benefit was not previously realized. |
SEGMENT AND GEOGRAPHIC INFORMAT
SEGMENT AND GEOGRAPHIC INFORMATION | 3 Months Ended |
Jun. 30, 2015 | |
Segment Reporting [Abstract] | |
SEGMENT AND GEOGRAPHIC INFORMATION | SEGMENT AND GEOGRAPHIC INFORMATION The Company reports revenues and income under one reportable segment. The consolidated financial information is used by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company manages its business in the following geographic areas: United States, Europe, Asia and the rest of the world. In accordance with United States export control regulations, the Company does not sell or do business with countries subject to economic sanctions and export controls. Total revenue by geography is as follows (in thousands): Three Months Ended June 30, 2015 2014 United States $ 78,273 $ 86,018 Europe 12,607 9,046 Asia 3,532 6,717 Rest of the world 6,331 6,071 $ 100,743 $ 107,852 The United States revenue includes sales to resellers in the United States. These resellers fulfill customer orders and may subsequently ship the Company’s products to international locations. The Company reports these shipments as United States revenue since the Company ships the products to a United States location. A majority of revenue attributable to locations outside of the United States is a result of export sales. Substantially all of the Company’s identifiable assets are located in the United States. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS A member of the Company’s Board of Directors also serves as a member of the board of directors for EMC, Corp. (EMC) and therefore, the Company considers sales to EMC to be a related party transaction. The Company recognized $79 thousand in revenue from EMC during the three months ended June 30, 2015 in the ordinary course of business. Another member of the Company’s Board of Directors also serves as a Section 16 officer of State Street Corporation (State Street) and therefore, the Company considers sales to State Street to be a related party transaction. The Company recognized $60 thousand in revenue from State Street during the three months ended June 30, 2015 in the ordinary course of business. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On July 14, 2015 (Closing Date), the Company completed the acquisition of the Communications Business of Danaher, which included certain assets, liabilities, technology and employees within Tektronix Communications, Arbor Networks and certain portions of the Fluke Networks Enterprise business. The acquisition was structured as a Reverse Morris Trust transaction (the Transaction) under which the total equity consideration was $2.3 billion based on issuing approximately 62.5 million new shares of NetScout common stock to the existing common unit holders of Potomac Holding LLC (Newco), based on the July 13, 2015 NetScout common stock closing share price of $36.89 per share. The Transaction will be accounted for under the acquisition method of accounting with the operations of the Communications Business included in the Company’s operating results from the date of acquisition. The acquisition method of accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The Company is in the process of obtaining valuations of acquired intangible assets and certain acquisition related liabilities in connection with this Transaction. The table below represents a preliminary purchase price allocation for the acquisition of the Communications Business, based on that business’s financial information and valuation models as of December 31, 2014 (in thousands): Purchase Price allocation: Total equity consideration $ 2,305,612 (1) Less: Equity consideration for replacement awards (22,188 ) (2) Estimated Purchase Price 2,283,424 Estimated fair value of assets acquired and liabilities assumed: Cash 7,412 Accounts Receivable 204,342 Inventories 85,500 Prepaid Expenses and Other Assets 16,361 Property, Plant and Equipment 32,043 Trademarks 47,700 Customer Relationships 735,700 Developed Technology 230,800 Other Intangible Assets 83,300 Accounts Payable (48,759 ) Accrued Compensation (28,275 ) Accrued Other (76,311 ) Deferred Revenue (131,886 ) Accrued Retirement Benefits (7,412 ) Deferred Tax Liabilities (375,129 ) Goodwill 1,508,038 (1) Represents approximately 62.5 million new shares (plus cash in lieu of fractional shares) of NetScout common stock issued to the existing common unit holders of Newco based on the July 13, 2015 NetScout common stock closing share price of $36.89 per share. (2) Represents the value of certain outstanding Danaher equity awards held by Newco employees for which continuing employees will receive value after the closing date. A portion of this amount relates to awards that have been modified such that the awards will vest in Danaher shares after the Closing Date. These future compensation amounts will be settled in shares other than shares of the acquired business. The balance of this amount also represents future compensation expense and relates to a cash award to be paid by NetScout to acquired Newco employees on the later of the first anniversary of the transaction closing date or August 4, 2016. The cash payment by NetScout will be reimbursed by Danaher. These items are further described in that certain Employee Matters Agreement dated July 14, 2015 by and among NetScout Systems, Inc., Danaher Corporation and Potomac Holding LLC and have been accounted for separately from the Communications Business Acquisition. In connection with RBC Capital Markets’ services as NetScout’s financial advisor, NetScout has agreed to pay RBC Capital Markets an aggregate fee of $11.0 million , a portion of which was payable upon delivery of RBC Capital Markets’ opinion and $9.5 million of which was contingent upon consummation of the Mergers. NetScout also has agreed to reimburse RBC Capital Markets for expenses reasonably incurred in connection with RBC Capital Markets’ services and to indemnify RBC Capital Markets and related persons against certain liabilities, including liabilities under the federal securities laws, arising out of RBC Capital Markets’ engagement. The Company has incurred $3.4 million in acquisition related costs during the three months ended June 30, 2015. Pursuant to the previously disclosed Agreement and Plan of Merger and Reorganization, dated October 12, 2014, by and among the Company, Danaher, Newco, RS Merger Sub I, Inc. and RS Merger Sub II, LLC (Merger Agreement), the Company agreed to appoint to the Company’s Board one individual designated by Danaher, effective on the closing date of the Transactions. Danaher designated, and the Board elected, James A. Lico as a Class I director. The Merger Agreement requires that, subject to the Board’s fiduciary duties, the Board nominate Mr. Lico as a director nominee for election to the Board at the Company’s 2015 annual meeting of stockholders, to serve until the Company’s 2018 meeting of stockholders and until his successor is duly elected and qualified. Mr. Lico is Danaher’s Executive Vice President and is a holder of Danaher common stock. In the Transactions, Mr. Lico was eligible to participate in the exchange offer being conducted by Danaher in connection with the Transactions on the same terms as all other Danaher stockholders. In connection with the Transactions, the Company entered into or assumed obligations under various ancillary agreements with Danaher or a subsidiary of Danaher, including a Commercial Lease Agreement and a Transition Services Agreement. Under the Commercial Lease Agreement, in addition to paying all costs and expenses relating to the premises, the Company is obligated to pay Danaher or one of its subsidiaries base rent during the first two lease years of $984,000 per annum and during the third lease year, of $3,000,000 per annum. The Transitions Services Agreement provides for payment for services on a schedule-by-schedule basis, and the terms and costs of such services vary. On July 14, 2015, the Company entered into a certain credit facility with a syndicate of lenders pursuant to a Credit Agreement (Credit Agreement), dated as of July 14, 2015, by and among: the Company; JPMorgan Chase Bank, N.A. (JPMorgan), as administrative agent and collateral agent; J.P. Morgan Securities LLC, KeyBanc Capital Markets, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners; Santander Bank, N.A., SunTrust Bank, N.A. and U.S. Bank National Association, as co-documentation agents; and the lenders party thereto. The Credit Agreement provides for a five-year $800,000,000 senior secured revolving credit facility, including a letter of credit sub-facility of up to $50,000,000 . The Company may elect to use the new credit facility for working capital purposes or repurchase up to 20 million shares of common stock under the Company's common stock repurchase plan. The commitments under the Credit Agreement will expire on July 14, 2020, and any outstanding loans will be due on that date. Subsequent to the credit facility closing, the Company drew down $250 million to support general working capital requirements as well as to help finance the repurchase of NetScout’s common stock under its recently approved 20 million share common stock repurchase plan. At the Company’s election, revolving loans under the Credit Agreement bear interest at either (a) a Base Rate per annum equal to the greatest of (1) JPMorgan’s prime rate, (2) 0.50% in excess of the federal funds effective rate, or (3) an adjusted LIBO rate plus 1% ; or (b) such adjusted LIBO rate (for the interest period selected by the Company), in each case plus an applicable margin. For the initial period until the Company has delivered financial statements for the quarter ended March 31, 2016, the applicable margin will be 1.75% per annum for LIBOR loans and 0.75% per annum for Base Rate loans, and thereafter the applicable margin will vary depending on the Company’s leverage ratio, ranging from 1.00% per annum for Base Rate loans and 2.00% per annum for LIBOR loans if the Company’s consolidated leverage ratio is greater than 2.50 to 1.00, down to 0.25% per annum for Base Rate loans and 1.25% per annum for LIBOR loans if the Company’s consolidated leverage ratio is equal to or less than 1.00 to 1.00. The Company’s consolidated leverage ratio is the ratio of its total funded debt compared to its consolidated adjusted EBITDA. Consolidated adjusted EBITDA includes certain adjustments, including, without limitation, adjustments relating to extraordinary, unusual or non-recurring charges, certain restructuring charges, non-cash charges, certain transaction costs and expenses and certain pro forma adjustments in connection with material acquisitions and dispositions, all as set forth in detail in the definition of Consolidated EBITDA in the Credit Agreement. Commitment fees will accrue on the daily unused amount of the credit facility. For the initial period until the Company has delivered financial statements for the quarter ended March 31, 2016, the commitment fee will be 0.20% per annum, and thereafter the commitment fee will vary depending on the Company’s consolidated leverage ratio, ranging from 0.35% per annum if the Company’s consolidated leverage ratio is greater than 2.50 to 1.00, down to 0.20% per annum if the Company’s consolidated leverage ratio is equal to or less than 1.00 to 1.00. Letter of credit participation fees are payable to each lender on the amount of such lender’s letter of credit exposure, during the period from the closing date of the Credit Agreement to but excluding the date which is the later of (i) the date on which such lender’s commitment terminates or (ii) the date on which such lender ceases to have any letter of credit exposure, at a rate per annum equal to the applicable margin for LIBOR loans. Additionally, the Company will pay a fronting fee to each issuing bank in amounts to be agreed to between the Company and the applicable issuing bank. Interest on Base Rate loans is payable at the end of each calendar quarter. Interest on LIBOR loans is payable at the end of each interest rate period or at the end of each three -month interval within an interest rate period if the period is longer than three months. The Company may also prepay loans under the Credit Agreement at any time, without penalty, subject to certain notice requirements. The loans and other obligations under the credit facility are (a) guaranteed by each of the Company’s wholly-owned material domestic restricted subsidiaries, subject to certain exceptions, and (b) are secured by substantially all of the assets of the Company and the subsidiary guarantors, including a pledge of all the capital stock of material subsidiaries held directly by the Company and the subsidiary guarantors (which pledge, in the case of any foreign subsidiary, is limited to 65% of the voting stock), subject to certain customary exceptions and limitations. The Credit Agreement generally prohibits any other liens on the assets of the Company and its restricted subsidiaries, subject to certain exceptions as described in the Credit Agreement. The Credit Agreement contains certain covenants applicable to the Company and its restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, including sale-leaseback transactions, speculative hedge agreements, payment of junior financing, changes in business and other limitations customary in senior secured credit facilities. In addition, the Company is required to maintain certain consolidated leverage and interest coverage ratios. These covenants and limitations are more fully described in the Credit Agreement. The Credit Agreement provides that events of default will exist in certain circumstances, including failure to make payment of principal or interest on the loans when required, failure to perform certain obligations under the Credit Agreement and related documents, defaults under certain other indebtedness, certain insolvency events, certain events arising under ERISA, a change of control and certain other events. Upon an event of default, the administrative agent with the consent of, or at the request of, the holders of more than 50% in principal amount of the loans and commitments may terminate the commitments and accelerate the maturity of the loans and enforce certain other remedies under the Credit Agreement and the other loan documents. In connection with the Company’s revolving credit facility described above, effective as of the Closing Date, the Company terminated its existing term loan and revolving credit facility pursuant to the Credit and Security Agreement, dated as of November 22, 2011, by and among NetScout Systems, Inc., KeyBank National Association, as joint lead arranger, sole book runner and administrative agent, Wells Fargo Bank, National Association, as joint lead arranger and co-syndication agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arranger, Bank of America, N.A., as co-syndication agent, and Silicon Valley Bank and Comerica Bank, as co-documentation agents, and the Lenders party thereto. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc., or NetScout or the Company. Certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results reported in these consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015 . |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues 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. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This ASU will be effective for the Company in the first quarter of its fiscal year 2019. Early adoption is not permitted. This ASU allows for either full retrospective or modified retrospective adoption. The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements. |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Share-Based Compensation Expense | The following is a summary of share-based compensation expense including restricted stock units and employee stock purchases made under the Company's employee stock purchase plan (ESPP) based on estimated fair values within the applicable cost and expense lines identified below (in thousands): Three Months Ended June 30, 2015 2014 Cost of product revenue $ 102 $ 60 Cost of service revenue 373 228 Research and development 1,490 1,026 Sales and marketing 1,403 963 General and administrative 1,227 1,025 $ 4,595 $ 3,302 |
CASH, CASH EQUIVALENTS AND MA26
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of Marketable Securities | The following is a summary of marketable securities held by NetScout at June 30, 2015 , classified as short-term and long-term (in thousands): Amortized Cost Unrealized Losses Fair Value Type of security: U.S. government and municipal obligations $ 99,792 $ (9 ) $ 99,783 Commercial paper 5,099 — 5,099 Corporate bonds 7,977 (2 ) 7,975 Total short-term marketable securities 112,868 (11 ) 112,857 U.S. government and municipal obligations 60,338 (35 ) 60,303 Total long-term marketable securities 60,338 (35 ) 60,303 Total marketable securities $ 173,206 $ (46 ) $ 173,160 The following is a summary of marketable securities held by NetScout at March 31, 2015 , classified as short-term and long-term (in thousands): Amortized Cost Unrealized Gains (Losses) Fair Value Type of security: U.S. government and municipal obligations $ 88,651 $ 3 $ 88,654 Commercial paper 5,093 2 5,095 Corporate bonds 7,644 (1 ) 7,643 Total short-term marketable securities 101,388 4 101,392 U.S. government and municipal obligations 56,683 8 56,691 Corporate bonds 1,880 1 1,881 Total long-term marketable securities 58,563 9 58,572 Total marketable securities $ 159,951 $ 13 $ 159,964 |
Summary of Contractual Maturities of Marketable Securities | Contractual maturities of the Company’s marketable securities held at June 30, 2015 and March 31, 2015 were as follows (in thousands): June 30, March 31, Available-for-sale securities: Due in 1 year or less $ 112,857 $ 101,392 Due after 1 year through 5 years 60,303 58,572 $ 173,160 $ 159,964 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Schedule of Financial Assets and Liabilities | The following tables present the Company’s financial assets and liabilities measured on a recurring basis using the fair value hierarchy at June 30, 2015 and March 31, 2015 (in thousands): Fair Value Measurements at June 30, 2015 Level 1 Level 2 Level 3 Total ASSETS: Cash and cash equivalents $ 94,352 $ — $ — $ 94,352 U.S. government and municipal obligations 58,769 101,317 — 160,086 Commercial paper — 5,099 — 5,099 Corporate bonds 7,975 — — 7,975 Derivative financial instruments — 97 — 97 $ 161,096 $ 106,513 $ — $ 267,609 LIABILITIES: Contingent purchase consideration $ — $ — $ (4,521 ) $ (4,521 ) Derivative financial instruments — (456 ) — (456 ) $ — $ (456 ) $ (4,521 ) $ (4,977 ) Fair Value Measurements at March 31, 2015 Level 1 Level 2 Level 3 Total ASSETS: Cash and cash equivalents $ 104,893 $ — $ — $ 104,893 U.S. government and municipal obligations 46,564 98,781 — 145,345 Commercial paper — 5,095 — 5,095 Corporate bonds 9,524 — — 9,524 Derivative financial instruments — 15 — 15 $ 160,981 $ 103,891 $ — $ 264,872 LIABILITIES: Contingent purchase consideration $ — $ — $ (4,484 ) $ (4,484 ) Derivative financial instruments — (1,664 ) — (1,664 ) $ — $ (1,664 ) $ (4,484 ) $ (6,148 ) |
Schedule of Reconciliation of Changes in Fair Value of Level III Financial Assets | The following table sets forth a reconciliation of changes in the fair value of the Company’s Level 3 financial liability for the three months ended June 30, 2015 (in thousands): Contingent Purchase Consideration Balance at beginning of period $ (4,484 ) Increase in fair value and accretion expense (included within research and development expense) (37 ) Balance at end of period $ (4,521 ) |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of the following (in thousands): June 30, March 31, Raw materials $ 7,241 $ 6,134 Work in process 266 17 Finished goods 5,203 5,979 $ 12,710 $ 12,130 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Changes in Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the three months ended June 30, 2015 are as follows (in thousands): Balance at March 31, 2015 $ 197,445 Foreign currency translation impact for the three months ended June 30, 2015 777 Balance at June 30, 2015 $ 198,222 |
Schedule of Intangible Assets | Intangible assets include an indefinite lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at June 30, 2015 (in thousands): Cost Accumulated Amortization Net Developed technology $ 31,005 $ (26,150 ) $ 4,855 Customer relationships 38,538 (17,691 ) 20,847 Distributor relationships 1,640 (804 ) 836 Core technology 7,177 (3,930 ) 3,247 Non-compete agreements 289 (289 ) — Other 1,031 (601 ) 430 $ 79,680 $ (49,465 ) $ 30,215 Intangible assets include an indefinite lived trade name with a carrying value of $18.6 million and the following amortizable intangible assets at March 31, 2015 (in thousands): Cost Accumulated Amortization Net Developed technology $ 30,865 $ (25,561 ) $ 5,304 Customer relationships 38,498 (16,935 ) 21,563 Distributor relationships 1,585 (711 ) 874 Core technology 7,118 (3,660 ) 3,458 Non-compete agreements 280 (280 ) — Other 943 (562 ) 381 $ 79,289 $ (47,709 ) $ 31,580 |
Schedule of Expected Future Amortization Expense | The following is the expected future amortization expense at June 30, 2015 for the years ending March 31 (in thousands): 2016 (remaining nine months) $ 4,864 2017 5,726 2018 4,901 2019 3,991 2020 3,510 Thereafter 7,223 $ 30,215 |
DERIVATIVE INSTRUMENTS AND HE30
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of Notional Amounts and Fair Values of Derivative Instruments on Consolidated Balance Sheet | The notional amounts and fair values of derivative instruments in the consolidated balance sheets at June 30, 2015 and March 31, 2015 were as follows (in thousands): Notional Amounts (a) Prepaid Expenses and Other Current Assets Accrued Other June 30, March 31, June 30, March 31, June 30, March 31, Derivatives Designated as Hedging Instruments: Forward contracts $ 19,014 $ 20,203 $ 97 $ 15 $ 456 $ 1,664 (a) Notional amounts represent the gross contract/notional amount of the derivatives outstanding. |
Summary of Effect of Foreign Exchange Forward Contracts on OCI and Results of Operations | The following table provides the effect foreign exchange forward contracts had on other comprehensive income (loss) (OCI) and results of operations for the three months ended June 30, 2015 and 2014 (in thousands): Derivatives in Cash Flow Hedging Relationships Effective Portion Ineffective Portion Gain (Loss) Recognized in OCI on Derivative (a) Gain (Loss) Reclassified from Accumulated OCI into Income (b) Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) (c) June 30, 2015 June 30, 2014 Location June 30, 2015 June 30, 2014 Location June 30, 2015 June 30, 2014 Forward contracts $ 10 $ (224 ) Research and development $ 47 $ 10 Research and development $ 34 $ 63 Sales and marketing 1,276 159 Sales and marketing (14 ) 4 $ 10 $ (224 ) $ 1,323 $ 169 $ 20 $ 67 (a) The amount represents the change in fair value of derivative contracts due to changes in spot rates. (b) The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings. (c) The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and therefore recognized in earnings. No gains or losses were reclassified as a result of discontinuance of cash flow hedges. |
NET INCOME PER SHARE (Tables)
NET INCOME PER SHARE (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Earnings Per Share [Abstract] | |
Schedule of Calculations of the Basic and Diluted Net Income Per Share and Potential Common Shares | Calculations of the basic and diluted net income per share and potential common shares are as follows (in thousands, except for per share data): Three Months Ended June 30, 2015 2014 Numerator: Net income $ 7,669 $ 11,476 Denominator: Denominator for basic net income per share - weighted average common shares outstanding 40,776 41,081 Dilutive common equivalent shares: Weighted average stock options — 17 Weighted average restricted stock units 595 710 Denominator for diluted net income per share - weighted average shares outstanding 41,371 41,808 Net income per share: Basic net income per share $ 0.19 $ 0.28 Diluted net income per share $ 0.19 $ 0.27 |
Summary of Antidilutive Securities Excluded from Computation of Diluted EPS | The following table sets forth restricted stock units excluded from the calculation of diluted net income per share, since their inclusion would be antidilutive (in thousands): Three Months Ended June 30, 2015 2014 Restricted stock units 19 — |
SEGMENT AND GEOGRAPHIC INFORM32
SEGMENT AND GEOGRAPHIC INFORMATION (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Segment Reporting [Abstract] | |
Summary of Total Revenue by Geography | Total revenue by geography is as follows (in thousands): Three Months Ended June 30, 2015 2014 United States $ 78,273 $ 86,018 Europe 12,607 9,046 Asia 3,532 6,717 Rest of the world 6,331 6,071 $ 100,743 $ 107,852 |
SUBSEQUENT EVENTS (Tables)
SUBSEQUENT EVENTS (Tables) | 3 Months Ended |
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
Schedule of Preliminary Purchase Price Allocation for the Acquisition of the Communications Business | The table below represents a preliminary purchase price allocation for the acquisition of the Communications Business, based on that business’s financial information and valuation models as of December 31, 2014 (in thousands): Purchase Price allocation: Total equity consideration $ 2,305,612 (1) Less: Equity consideration for replacement awards (22,188 ) (2) Estimated Purchase Price 2,283,424 Estimated fair value of assets acquired and liabilities assumed: Cash 7,412 Accounts Receivable 204,342 Inventories 85,500 Prepaid Expenses and Other Assets 16,361 Property, Plant and Equipment 32,043 Trademarks 47,700 Customer Relationships 735,700 Developed Technology 230,800 Other Intangible Assets 83,300 Accounts Payable (48,759 ) Accrued Compensation (28,275 ) Accrued Other (76,311 ) Deferred Revenue (131,886 ) Accrued Retirement Benefits (7,412 ) Deferred Tax Liabilities (375,129 ) Goodwill 1,508,038 (1) Represents approximately 62.5 million new shares (plus cash in lieu of fractional shares) of NetScout common stock issued to the existing common unit holders of Newco based on the July 13, 2015 NetScout common stock closing share price of $36.89 per share. (2) Represents the value of certain outstanding Danaher equity awards held by Newco employees for which continuing employees will receive value after the closing date. A portion of this amount relates to awards that have been modified such that the awards will vest in Danaher shares after the Closing Date. These future compensation amounts will be settled in shares other than shares of the acquired business. The balance of this amount also represents future compensation expense and relates to a cash award to be paid by NetScout to acquired Newco employees on the later of the first anniversary of the transaction closing date or August 4, 2016. The cash payment by NetScout will be reimbursed by Danaher. These items are further described in that certain Employee Matters Agreement dated July 14, 2015 by and among NetScout Systems, Inc., Danaher Corporation and Potomac Holding LLC and have been accounted for separately from the Communications Business Acquisition. |
CONCENTRATION OF CREDIT RISK 34
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS - Narrative (Details) - Customer Concentration Risk - Customer | 3 Months Ended | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | Mar. 31, 2015 | |
Indirect Customer | Accounts receivable | |||
Concentration Risk [Line Items] | |||
Number of customers contributing to more than 10% of total revenue | 1 | 0 | |
Indirect Customer | Sales Revenue | |||
Concentration Risk [Line Items] | |||
Number of customers contributing to more than 10% of total revenue | 0 | 0 | |
Direct Customer | Accounts receivable | |||
Concentration Risk [Line Items] | |||
Number of customers contributing to more than 10% of total revenue | 0 | 1 | |
Direct Customer | Sales Revenue | |||
Concentration Risk [Line Items] | |||
Number of customers contributing to more than 10% of total revenue | 0 | 2 | |
Minimum | Indirect Customer | Accounts receivable | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 10.00% | 10.00% | |
Minimum | Indirect Customer | Sales Revenue | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 10.00% | 10.00% | |
Minimum | Direct Customer | Accounts receivable | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 10.00% | 10.00% | |
Minimum | Direct Customer | Sales Revenue | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 10.00% | 10.00% |
SHARE-BASED COMPENSATION - Summ
SHARE-BASED COMPENSATION - Summary of Share-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | $ 4,595 | $ 3,302 |
Cost of product revenue | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 102 | 60 |
Cost of service revenue | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 373 | 228 |
Research and development | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 1,490 | 1,026 |
Sales and marketing | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | 1,403 | 963 |
General and administrative | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Share-based compensation expense | $ 1,227 | $ 1,025 |
SHARE-BASED COMPENSATION - Narr
SHARE-BASED COMPENSATION - Narrative (Details) | 3 Months Ended |
Jun. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Percentage of common stock price for employees | 85.00% |
CASH, CASH EQUIVALENTS AND MA37
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES - Summary of Marketable Securities (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 |
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | $ 173,206 | $ 159,951 |
Unrealized Gains (Losses) | (46) | 13 |
Fair Value | 173,160 | 159,964 |
U.S. government and municipal obligations | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fair Value | 160,086 | 145,345 |
Commercial paper | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fair Value | 5,099 | 5,095 |
Corporate bonds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fair Value | 7,975 | 9,524 |
Short-term marketable securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 112,868 | 101,388 |
Unrealized Gains (Losses) | (11) | 4 |
Fair Value | 112,857 | 101,392 |
Short-term marketable securities | U.S. government and municipal obligations | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 99,792 | 88,651 |
Unrealized Gains (Losses) | (9) | 3 |
Fair Value | 99,783 | 88,654 |
Short-term marketable securities | Commercial paper | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 5,099 | 5,093 |
Unrealized Gains (Losses) | 0 | 2 |
Fair Value | 5,099 | 5,095 |
Short-term marketable securities | Corporate bonds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 7,977 | 7,644 |
Unrealized Gains (Losses) | (2) | (1) |
Fair Value | 7,975 | 7,643 |
Long-term marketable securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 60,338 | 58,563 |
Unrealized Gains (Losses) | (35) | 9 |
Fair Value | 60,303 | 58,572 |
Long-term marketable securities | U.S. government and municipal obligations | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 60,338 | 56,683 |
Unrealized Gains (Losses) | (35) | 8 |
Fair Value | $ 60,303 | 56,691 |
Long-term marketable securities | Corporate bonds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized Cost | 1,880 | |
Unrealized Gains (Losses) | 1 | |
Fair Value | $ 1,881 |
CASH, CASH EQUIVALENTS AND MA38
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES - Summary of Contractual Maturities of Marketable Securities (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 |
Available-for-sale securities: | ||
Due in 1 year or less | $ 112,857 | $ 101,392 |
Due after 1 year through 5 years | 60,303 | 58,572 |
Fair Value | $ 173,160 | $ 159,964 |
FAIR VALUE MEASUREMENTS - Sched
FAIR VALUE MEASUREMENTS - Schedule of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 |
ASSETS: | ||
Cash and cash equivalents | $ 94,352 | $ 104,893 |
Marketable securities | 173,160 | 159,964 |
Derivative financial instruments | 97 | 15 |
Total assets | 267,609 | 264,872 |
LIABILITIES: | ||
Contingent purchase consideration | (4,521) | (4,484) |
Derivative financial instruments | (456) | (1,664) |
Total liabilities | (4,977) | (6,148) |
U.S. government and municipal obligations | ||
ASSETS: | ||
Marketable securities | 160,086 | 145,345 |
Commercial paper | ||
ASSETS: | ||
Marketable securities | 5,099 | 5,095 |
Corporate bonds | ||
ASSETS: | ||
Marketable securities | 7,975 | 9,524 |
Level 1 | ||
ASSETS: | ||
Cash and cash equivalents | 94,352 | 104,893 |
Derivative financial instruments | 0 | 0 |
Total assets | 161,096 | 160,981 |
LIABILITIES: | ||
Contingent purchase consideration | 0 | 0 |
Derivative financial instruments | 0 | 0 |
Total liabilities | 0 | 0 |
Level 1 | U.S. government and municipal obligations | ||
ASSETS: | ||
Marketable securities | 58,769 | 46,564 |
Level 1 | Commercial paper | ||
ASSETS: | ||
Marketable securities | 0 | 0 |
Level 1 | Corporate bonds | ||
ASSETS: | ||
Marketable securities | 7,975 | 9,524 |
Level 2 | ||
ASSETS: | ||
Cash and cash equivalents | 0 | 0 |
Derivative financial instruments | 97 | 15 |
Total assets | 106,513 | 103,891 |
LIABILITIES: | ||
Contingent purchase consideration | 0 | 0 |
Derivative financial instruments | (456) | (1,664) |
Total liabilities | (456) | (1,664) |
Level 2 | U.S. government and municipal obligations | ||
ASSETS: | ||
Marketable securities | 101,317 | 98,781 |
Level 2 | Commercial paper | ||
ASSETS: | ||
Marketable securities | 5,099 | 5,095 |
Level 2 | Corporate bonds | ||
ASSETS: | ||
Marketable securities | 0 | 0 |
Level 3 | ||
ASSETS: | ||
Cash and cash equivalents | 0 | 0 |
Derivative financial instruments | 0 | 0 |
Total assets | 0 | 0 |
LIABILITIES: | ||
Contingent purchase consideration | (4,521) | (4,484) |
Derivative financial instruments | 0 | 0 |
Total liabilities | (4,521) | (4,484) |
Level 3 | U.S. government and municipal obligations | ||
ASSETS: | ||
Marketable securities | 0 | 0 |
Level 3 | Commercial paper | ||
ASSETS: | ||
Marketable securities | 0 | 0 |
Level 3 | Corporate bonds | ||
ASSETS: | ||
Marketable securities | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS - Sch40
FAIR VALUE MEASUREMENTS - Schedule of Reconciliation of Changes in Fair Value of Level III Financial Assets (Details) - Fair value, measurements, recurring - Contingent Purchase Consideration $ in Thousands | 3 Months Ended |
Jun. 30, 2015USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Balance at beginning of period | $ (4,484) |
Increase in fair value and accretion expense (included within research and development expense) | (37) |
Balance at end of period | $ (4,521) |
FAIR VALUE MEASUREMENTS - Narra
FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Fair Value Disclosures [Abstract] | ||
Deal related compensation expense, accretion charges and changes related to settlements of contractual non-compliance liabilities | $ 37 | $ 38 |
INVENTORIES - Schedule of Inven
INVENTORIES - Schedule of Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 7,241 | $ 6,134 |
Work in process | 266 | 17 |
Finished goods | 5,203 | 5,979 |
Total inventories | $ 12,710 | $ 12,130 |
GOODWILL AND INTANGIBLE ASSET43
GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) $ in Thousands | 3 Months Ended | ||
Jun. 30, 2015USD ($)reporting_unit | Jun. 30, 2014USD ($) | Mar. 31, 2015USD ($) | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Number of reporting units | reporting_unit | 2 | ||
Goodwill | $ 198,222 | $ 197,445 | |
Carrying value of intangible assets | 48,815 | 50,180 | |
Amortization expenses | $ 809 | $ 862 | |
Weighted average useful life of acquired intangible assets | 10 years 1 month 6 days | ||
Acquired software and core technology | Included as cost of product revenue | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Amortization expenses | $ 758 | 934 | |
Other acquired intangible assets | Included as operating expense | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Amortization expenses | $ 847 | $ 901 | |
Developed and core technology | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted average useful life of acquired intangible assets | 6 years 8 months 12 days | ||
Customer relationships | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted average useful life of acquired intangible assets | 13 years 3 months 18 days | ||
Trade name | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Indefinite-lived intangible assets | $ 18,600 | 18,600 | |
Unified Service Delivery | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Goodwill | 195,800 | 195,000 | |
Test Optimization | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Goodwill | $ 2,400 | $ 2,400 |
GOODWILL AND INTANGIBLE ASSET44
GOODWILL AND INTANGIBLE ASSETS - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands | 3 Months Ended |
Jun. 30, 2015USD ($) | |
Goodwill [Roll Forward] | |
Balance at March 31, 2015 | $ 197,445 |
Foreign currency translation impact for the three months ended June 30, 2015 | 777 |
Balance at June 30, 2015 | $ 198,222 |
GOODWILL AND INTANGIBLE ASSET45
GOODWILL AND INTANGIBLE ASSETS - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 |
Finite-Lived Intangible Assets [Line Items] | ||
Cost | $ 79,680 | $ 79,289 |
Accumulated Amortization | (49,465) | (47,709) |
Net | 30,215 | 31,580 |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 31,005 | 30,865 |
Accumulated Amortization | (26,150) | (25,561) |
Net | 4,855 | 5,304 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 38,538 | 38,498 |
Accumulated Amortization | (17,691) | (16,935) |
Net | 20,847 | 21,563 |
Distributor relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 1,640 | 1,585 |
Accumulated Amortization | (804) | (711) |
Net | 836 | 874 |
Core technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 7,177 | 7,118 |
Accumulated Amortization | (3,930) | (3,660) |
Net | 3,247 | 3,458 |
Non-compete agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 289 | 280 |
Accumulated Amortization | (289) | (280) |
Net | 0 | 0 |
Other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 1,031 | 943 |
Accumulated Amortization | (601) | (562) |
Net | $ 430 | $ 381 |
GOODWILL AND INTANGIBLE ASSET46
GOODWILL AND INTANGIBLE ASSETS - Schedule of Expected Future Amortization Expense (Details) $ in Thousands | Jun. 30, 2015USD ($) |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |
2016 (remaining nine months) | $ 4,864 |
2,017 | 5,726 |
2,018 | 4,901 |
2,019 | 3,991 |
2,020 | 3,510 |
Thereafter | 7,223 |
Total | $ 30,215 |
DERIVATIVE INSTRUMENTS AND HE47
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Narrative (Details) | 3 Months Ended |
Jun. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Managing period of hedging forecasted cash flows for operating expenses denominated in foreign currencies | 12 months |
Contract maturity period | 12 months |
DERIVATIVE INSTRUMENTS AND HE48
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Notional Amounts and Fair Values of Derivative Instruments on Consolidated Balance Sheet (Details) - Forward contracts - USD ($) $ in Thousands | Jun. 30, 2015 | Mar. 31, 2015 | |
Derivatives, Fair Value [Line Items] | |||
Notional Amounts | [1] | $ 19,014 | $ 20,203 |
Prepaid Expenses and Other Current Assets | |||
Derivatives, Fair Value [Line Items] | |||
Prepaid Expenses and Other Current Assets | 97 | 15 | |
Accrued Other | |||
Derivatives, Fair Value [Line Items] | |||
Accrued Other | $ 456 | $ 1,664 | |
[1] | Notional amounts represent the gross contract/notional amount of the derivatives outstanding. |
DERIVATIVE INSTRUMENTS AND HE49
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Effect of Foreign Exchange Forward Contracts on Other Comprehensive Income and Results of Operations (Details) - Forward contracts - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | ||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (Loss) Recognized in OCI on Derivative | [1] | $ 10 | $ (224) |
Gain (Loss) Reclassified from Accumulated OCI into Income | [2] | 1,323 | 169 |
Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) | [3] | 20 | 67 |
Research and development | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (Loss) Reclassified from Accumulated OCI into Income | [2] | 47 | 10 |
Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) | [3] | 34 | 63 |
Sales and marketing | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Gain (Loss) Reclassified from Accumulated OCI into Income | [2] | 1,276 | 159 |
Gain (Loss) Recognized in Income (Amount Excluded from Effectiveness Testing) | [3] | $ (14) | $ 4 |
[1] | The amount represents the change in fair value of derivative contracts due to changes in spot rates. | ||
[2] | The amount represents reclassification from other comprehensive income to earnings that occurs when the hedged item affects earnings. | ||
[3] | The amount represents the change in fair value of derivative contracts due to changes in the difference between the spot price and forward price that is excluded from the assessment of hedge effectiveness and therefore recognized in earnings. No gains or losses were reclassified as a result of discontinuance of cash flow hedges. |
DERIVATIVE INSTRUMENTS AND HE50
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Summary of Effect of Foreign Exchange Forward Contracts on Other Comprehensive Income and Results of Operations (Footnote) (Details) | 3 Months Ended |
Jun. 30, 2015USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Reclassified gain (loss) as a result of discontinuance of cash flow hedges | $ 0 |
LONG-TERM DEBT - Narrative (Det
LONG-TERM DEBT - Narrative (Details) | Nov. 22, 2011USD ($) | Jun. 30, 2015USD ($) |
Debt Instrument [Line Items] | ||
Revolving credit facility outstanding amount | $ 250,000,000 | $ 0 |
Increase in revolving credit facility outstanding amount | $ 300,000,000 | |
Term for increase in revolving credit facility before maturity date, days | 90 days | |
Line of credit facility, maturity | Nov. 21, 2016 | |
Percentage of capital stock of foreign subsidiaries used as guarantee | 65.00% | |
Federal funds effective rate | ||
Debt Instrument [Line Items] | ||
Interest rate in excess of effective rate | 0.50% | |
LIBOR | ||
Debt Instrument [Line Items] | ||
Margin over applicable interest rate | 1.00% | |
Maximum | ||
Debt Instrument [Line Items] | ||
Leverage ratio | 1 | |
Maximum | Base rate loans | ||
Debt Instrument [Line Items] | ||
Margin over applicable interest rate | 1.00% | |
Maximum | Eurodollar rate loans | ||
Debt Instrument [Line Items] | ||
Margin over applicable interest rate | 2.00% | |
Minimum | ||
Debt Instrument [Line Items] | ||
Leverage ratio | 2.50 | |
Minimum | Base rate loans | ||
Debt Instrument [Line Items] | ||
Margin over applicable interest rate | 0.25% | |
Minimum | Eurodollar rate loans | ||
Debt Instrument [Line Items] | ||
Margin over applicable interest rate | 1.25% | |
Swing line loan sub-facility | Maximum | ||
Debt Instrument [Line Items] | ||
Revolving credit facility outstanding amount | $ 10,000,000 | |
Letter of credit sub-facility | Maximum | ||
Debt Instrument [Line Items] | ||
Revolving credit facility outstanding amount | $ 10,000,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Narrative (Details) $ in Thousands | Jun. 30, 2015USD ($)liability | Mar. 31, 2015USD ($) | Nov. 30, 2011USD ($) |
Commitments and Contingencies Disclosure [Line Items] | |||
Fair value of contingent liability | $ 4,521 | $ 4,484 | |
Simena LLC | |||
Commitments and Contingencies Disclosure [Line Items] | |||
Number of contingent liabilities recorded | liability | 1 | ||
Fair value of contingent liability | $ 8,000 | ||
Simena LLC | Present value of future consideration | |||
Commitments and Contingencies Disclosure [Line Items] | |||
Fair value of contingent liability | $ 4,500 |
TREASURY STOCK - Narrative (Det
TREASURY STOCK - Narrative (Details) - USD ($) | 3 Months Ended | 14 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Apr. 22, 2014 | |
Equity, Class of Treasury Stock [Line Items] | ||||
Shares repurchased during the period, value | $ 3,167,000 | $ 12,187,000 | ||
Share Repurchase Program, April 2014 | ||||
Equity, Class of Treasury Stock [Line Items] | ||||
Stock repurchase program, authorized amount up to | $ 100,000,000 | |||
Shares repurchased during the period (in shares) | 67,752 | 824,452 | ||
Shares repurchased during the period, value | $ 2,800,000 | $ 34,300,000 | ||
Remaining stock authorized to repurchase under stock repurchase program | $ 65,700,000 | $ 65,700,000 | ||
Restricted stock units | ||||
Equity, Class of Treasury Stock [Line Items] | ||||
Shares repurchased during the period (in shares) | 8,709 | |||
Shares repurchased during the period, value | $ 381,000 |
NET INCOME PER SHARE - Schedule
NET INCOME PER SHARE - Schedule of Calculations of Basic and Diluted Net Income Per Share and Potential Common Shares (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Numerator: | ||
Net income | $ 7,669 | $ 11,476 |
Denominator: | ||
Denominator for basic net income per share - weighted average common shares outstanding (in shares) | 40,776 | 41,081 |
Dilutive common equivalent shares: | ||
Weighted average stock options (in shares) | 0 | 17 |
Weighted average restricted stock units (in shares) | 595 | 710 |
Denominator for diluted net income per share - weighted average shares outstanding (in shares) | 41,371 | 41,808 |
Net income per share: | ||
Basic net income per share (in USD per share) | $ 0.19 | $ 0.28 |
Diluted net income per share (in USD per share) | $ 0.19 | $ 0.27 |
NET INCOME PER SHARE - Summary
NET INCOME PER SHARE - Summary of Antidilutive Securities Excluded from Computation of Diluted EPS (Details) - shares shares in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Restricted stock units (in shares) | 19 | 0 |
INCOME TAXES - Narrative (Detai
INCOME TAXES - Narrative (Details) | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Income Tax Disclosure [Abstract] | ||
Estimated annual effective tax rate | 37.40% | 41.10% |
SEGMENT AND GEOGRAPHIC INFORM57
SEGMENT AND GEOGRAPHIC INFORMATION - Narrative (Details) | 3 Months Ended |
Jun. 30, 2015Segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
SEGMENT AND GEOGRAPHIC INFORM58
SEGMENT AND GEOGRAPHIC INFORMATION - Summary of Total Revenue by Geography (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Segment Reporting Information [Line Items] | ||
Total revenue | $ 100,743 | $ 107,852 |
United States | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 78,273 | 86,018 |
Europe | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 12,607 | 9,046 |
Asia | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 3,532 | 6,717 |
Rest of the world | ||
Segment Reporting Information [Line Items] | ||
Total revenue | $ 6,331 | $ 6,071 |
RELATED PARTY TRANSACTIONS - Na
RELATED PARTY TRANSACTIONS - Narrative (Details) - Member of board of directors $ in Thousands | 3 Months Ended |
Jun. 30, 2015USD ($) | |
EMC, Corp. | |
Related Party Transaction [Line Items] | |
Revenue | $ 79 |
State Street [Member] | |
Related Party Transaction [Line Items] | |
Revenue | $ 60 |
SUBSEQUENT EVENTS - Narrative (
SUBSEQUENT EVENTS - Narrative (Details) | Apr. 01, 2016 | Jul. 14, 2015USD ($)shares | Jun. 30, 2015USD ($) | Jul. 13, 2015$ / shares | Oct. 12, 2014USD ($)board_member | Nov. 22, 2011USD ($) |
Business Acquisition [Line Items] | ||||||
Base rent, first year | $ 984,000 | |||||
Base rent, second year | 984,000 | |||||
Base rent, third year | $ 3,000,000 | |||||
Credit facility | $ 300,000,000 | |||||
Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Leverage ratio | 1 | |||||
Minimum | ||||||
Business Acquisition [Line Items] | ||||||
Leverage ratio | 2.50 | |||||
Communications Business | ||||||
Business Acquisition [Line Items] | ||||||
Acquisition related costs | $ 3,400,000 | |||||
Danaher | Communications Business | Member of board of directors | ||||||
Business Acquisition [Line Items] | ||||||
Number of board members designated by Danaher | board_member | 1 | |||||
Subsequent Event | Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Leverage ratio | 2.50 | |||||
Subsequent Event | Maximum | Forecast | ||||||
Business Acquisition [Line Items] | ||||||
Leverage ratio | 2.50 | |||||
Subsequent Event | Minimum | ||||||
Business Acquisition [Line Items] | ||||||
Leverage ratio | 1 | |||||
Subsequent Event | Minimum | Forecast | ||||||
Business Acquisition [Line Items] | ||||||
Leverage ratio | 1 | |||||
Subsequent Event | Common Stock Repurchase Plan | ||||||
Business Acquisition [Line Items] | ||||||
Stock authorized to repurchase under stock repurchase program (in shares) | shares | 20,000,000 | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | ||||||
Business Acquisition [Line Items] | ||||||
Credit facility | $ 800,000,000 | |||||
Amount drawn against credit facility | $ 250,000,000 | |||||
Commitment fee percentage | 0.20% | |||||
Debt default, acceleration clause, required consent percentage | 50.00% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | Maximum | Foreign Subsidiaries | ||||||
Business Acquisition [Line Items] | ||||||
Voting stock pledge limit for any foreign subsidiary | 65.00% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | Maximum | Forecast | ||||||
Business Acquisition [Line Items] | ||||||
Commitment fee percentage | 0.35% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | Minimum | Forecast | ||||||
Business Acquisition [Line Items] | ||||||
Commitment fee percentage | 0.20% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | Federal funds effective rate | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 0.50% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | LIBOR | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 1.00% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | LIBOR | LIBOR loans | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 1.75% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | LIBOR | LIBOR loans | Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 2.00% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | LIBOR | LIBOR loans | Minimum | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 1.25% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | Base rate | Base rate loans | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 0.75% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | Base rate | Base rate loans | Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 1.00% | |||||
Subsequent Event | Senior secured revolving credit facility | Line of credit | Base rate | Base rate loans | Minimum | ||||||
Business Acquisition [Line Items] | ||||||
Variable interest rate | 0.25% | |||||
Subsequent Event | Letter of credit sub-facility | Line of credit | ||||||
Business Acquisition [Line Items] | ||||||
Credit facility | $ 50,000,000 | |||||
Subsequent Event | Communications Business | ||||||
Business Acquisition [Line Items] | ||||||
Total equity consideration | 2,305,612,000 | |||||
Transaction fee | 11,000,000 | |||||
Amount payable contingent upon consummation of Mergers | $ 9,500,000 | |||||
Subsequent Event | Common stock | ||||||
Business Acquisition [Line Items] | ||||||
Share price (in dollars per share) | $ / shares | $ 36.89 | |||||
Subsequent Event | Common stock | Newco | Communications Business | ||||||
Business Acquisition [Line Items] | ||||||
Shares issued in business acquisition (in shares) | shares | 62,500,000 |
SUBSEQUENT EVENTS - Schedule of
SUBSEQUENT EVENTS - Schedule of Preliminary Purchase Price Allocation for the Acquisition of the Communications Business (Details) - USD ($) $ in Thousands | Jul. 14, 2015 | Jun. 30, 2015 | Mar. 31, 2015 |
Business Acquisition [Line Items] | |||
Goodwill | $ 198,222 | $ 197,445 | |
Subsequent Event | Communications Business | |||
Business Acquisition [Line Items] | |||
Equity consideration | $ 2,305,612 | ||
Estimated Purchase Price | 2,283,424 | ||
Cash | 7,412 | ||
Accounts Receivable | 204,342 | ||
Inventories | 85,500 | ||
Prepaid Expenses and Other Assets | 16,361 | ||
Property, Plant and Equipment | 32,043 | ||
Accounts Payable | (48,759) | ||
Accrued Compensation | (28,275) | ||
Accrued Other | (76,311) | ||
Deferred Revenue | (131,886) | ||
Accrued Retirement Benefits | (7,412) | ||
Deferred Tax Liabilities | (375,129) | ||
Goodwill | 1,508,038 | ||
Subsequent Event | Communications Business | Customer Relationships | |||
Business Acquisition [Line Items] | |||
Finite-Lived Intangibles | 735,700 | ||
Subsequent Event | Communications Business | Developed Technology | |||
Business Acquisition [Line Items] | |||
Finite-Lived Intangibles | 230,800 | ||
Subsequent Event | Communications Business | Other Intangible Assets | |||
Business Acquisition [Line Items] | |||
Finite-Lived Intangibles | 83,300 | ||
Subsequent Event | Communications Business | Trademarks | |||
Business Acquisition [Line Items] | |||
Indefinite-Lived Intangible Assets | 47,700 | ||
Subsequent Event | Communications Business | Replacement Awards | |||
Business Acquisition [Line Items] | |||
Equity consideration | $ (22,188) |
SUBSEQUENT EVENTS - Schedule 62
SUBSEQUENT EVENTS - Schedule of Preliminary Purchase Price Allocation for the Acquisition of the Communications Business (Footnote) (Details) - Subsequent Event - Common stock - $ / shares shares in Millions | Jul. 14, 2015 | Jul. 13, 2015 |
Business Acquisition [Line Items] | ||
Share price (in dollars per share) | $ 36.89 | |
Newco | Communications Business | ||
Business Acquisition [Line Items] | ||
Shares issued in business acquisition (in shares) | 62.5 |