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Summary of Significant Accounting Policies | 12 Months Ended
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Oct. 31, 2018
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Fiscal Year End. The Company’s fiscal year ends on the Saturday nearest to October 31 and consists of 52 weeks, with the exception that approximately every five years, the Company has a 53-week year. Fiscal 2018 was a 53-week year and ended on November 3, 2018. Fiscal 2017 and 2016 were 52-week years ending on October 28, 2017 and October 29, 2016, respectively. For presentation purposes, the consolidated financial statements and accompanying notes refer to the closest calendar month end. Fiscal 2019 will be a 52-week year. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Use of Estimates. To prepare financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP), management must make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates and may result in material effects on the Company’s operating results and financial position. Foreign Currency Translation. The functional currency of the majority of the Company’s active foreign subsidiaries is the foreign subsidiary’s local currency. Assets and liabilities that are not denominated in the functional currency are remeasured into the functional currency with any related gain or loss recorded in earnings. The Company translates assets and liabilities of its non-U.S. dollar functional currency foreign operations into the U.S. dollar reporting currency at exchange rates in effect at the balance sheet date. The Company translates income and expense items of such foreign operations into the U.S. dollar reporting currency at average exchange rates for the period. Accumulated translation adjustments are reported in stockholders’ equity, as a component of accumulated other comprehensive income (loss). Foreign Currency Contracts. The Company operates internationally and is exposed to potentially adverse movements in currency exchange rates. The Company enters into hedges in the form of foreign currency forward contracts to reduce its exposure to foreign currency rate changes on non-functional currency denominated forecasted transactions and balance sheet positions. The assets or liabilities associated with the forward contracts are recorded at fair value in other current assets or accrued liabilities in the consolidated balance sheet. The accounting for gains and losses resulting from changes in fair value depends on the use of the foreign currency forward contract and whether it is designated and qualifies for hedge accounting. See Note 5. Financial Assets and Liabilities. Fair Values of Financial Instruments. The Company’s cash equivalents and foreign currency contracts are carried at fair value. The fair value of the Company’s accounts receivable and accounts payable approximates the carrying amount due to their short duration. Non-marketable equity securities are carried at cost, net of impairments. The Company performs periodic impairment analysis on these non-marketable equity securities. The carrying amount of the short-term debt approximates the estimated fair value. See Note 6. Fair Value Measures. Cash and Cash Equivalents. The Company classifies investments with original maturities of three months or less when acquired as cash equivalents. Concentration of Credit Risk. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, marketable securities, foreign currency contracts, and accounts receivable from trade customers. The Company maintains cash equivalents primarily in highly rated taxable and tax-exempt money market funds located in the U.S. and in various overseas locations. The Company sells its products worldwide primarily to customers in the global electronics market. The Company performs on-going credit evaluations of its customers’ financial condition and does not require collateral. The Company establishes reserves for potential credit losses and such losses have been within management’s expectations and have not been material in any year presented. Accounts Receivable, Net. The balances consist of accounts receivable billed and unbilled. Unbilled accounts receivable represent amounts recorded as revenue which will be invoiced within one year of the balance sheet date. The following table represents the components of accounts receivable, net:
| October 31,
| 2018 |  | 2017
| (in thousands)
Accounts receivable | $ | 495,763 |  |  | $ | 393,229 |
Unbilled accounts receivable | 64,067 |  |  | 63,080 |
Total accounts receivable | 559,830 |  |  | 456,309 |
Less allowance for doubtful accounts | (5,613 | ) |  | (5,165 | )
Total accounts receivable, net | $ | 554,217 |  |  | $ | 451,144 |
Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains allowances for doubtful accounts to reduce the Company’s receivables to their estimated net realizable value. The Company provides a general reserve on all accounts receivable based on a review of customer accounts. The following table presents the changes in the allowance for doubtful accounts:
Fiscal Year | Balance at Beginning of Period |  | Provisions |  | Write-offs(1) |  | Balance at End of Period
| (in thousands)
2018 | $ | 5,165 |  |  | $ | 3,368 |  |  | $ | (2,920 | ) |  | $ | 5,613 |
2017 | $ | 3,201 |  |  | $ | 2,149 |  |  | $ | (185 | ) |  | $ | 5,165 |
2016 | $ | 2,561 |  |  | $ | 950 |  |  | $ | (310 | ) |  | $ | 3,201 |
(1) | Balances written off, net of recoveries.
Inventories. Inventories primarily include components and parts used in emulation and prototyping hardware systems. Inventory cost is computed using standard costs, which approximate actual costs, on a first-in, first-out basis and recorded at lower of cost or net realizable value. A charge is recorded to cost of product when inventory is determined to be in excess of anticipated demand or considered obsolete. Income Taxes. The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Property and Equipment. Property and equipment is recorded at cost less accumulated depreciation. Assets, excluding land, are depreciated using the straight-line method over their estimated useful lives. Leasehold improvements are amortized using the straight-line method over the remaining term of the lease or the economic useful life of the asset, whichever is shorter. Depreciation expenses were $72.8 million, $82.8 million and $73.8 million in fiscal 2018, 2017 and 2016, respectively. Repair and maintenance costs are expensed as incurred and such costs were $45.7 million, $40.6 million and $38.8 million in fiscal 2018, 2017 and 2016, respectively. A summary of property and equipment, at cost less accumulated depreciation and amortization, as of October 31, 2018 and 2017 is as follows:
| October 31,
| 2018 |  | 2017
| (in thousands)
Computer and other equipment | $ | 604,117 |  |  | $ | 540,257 |
Buildings | 68,522 |  |  | 68,877 |
Furniture and fixtures | 61,070 |  |  | 54,882 |
Land | 18,849 |  |  | 20,414 |
Leasehold improvements | 183,430 |  |  | 153,619 |
| 935,988 |  |  | 838,049 |
Less accumulated depreciation and amortization(1) | (626,678 | ) |  | (572,035 | )
Total | $ | 309,310 |  |  | $ | 266,014 |
(1) | Accumulated depreciation and amortization includes write-offs due to retirement of fully amortized fixed assets.
The useful lives of depreciable assets are as follows:
| Useful Life in Years
Computer and other equipment | 3-5
Buildings | 30
Furniture and fixtures | 5
Leasehold improvements (average) | 5
Goodwill. Goodwill represents the excess of the aggregate purchase price over the fair value of the net tangible and identifiable intangible assets acquired by the Company. The carrying amount of goodwill is tested for impairment annually as of October 31 or more frequently if facts and circumstances warrant a review. The Company determined that it is a single reporting unit for the purpose of goodwill impairment tests. For purposes of assessing the impairment of goodwill, the Company estimates the value of the reporting unit using its market capitalization as the best evidence of fair value. This fair value is then compared to the carrying value of the reporting unit. During fiscal 2018, 2017 and 2016, there were no indicators of impairment to goodwill. Intangible Assets. Intangible assets consist of acquired technology, certain contract rights, customer relationships, trademarks and trade names, capitalized software, and in-process research and development. These intangible assets are acquired through business combinations, direct purchases, or internally developed capitalized software. Intangible assets are amortized on a straight-line basis over their estimated useful lives which range from one to ten years, except for in-process research and development (IPR&D) projects not yet completed. IPR&D assets are amortized over their estimated useful lives upon completion or are written off upon abandonment. The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets, including property and equipment and intangible assets, may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such asset group will be recovered through the undiscounted future cash flow. If the undiscounted future cash flow is less than the carrying amount of the asset group, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the asset group. The Company had no material impairment charges for long-lived assets in fiscal 2018, and none in fiscal 2017 or 2016. Restructuring Charges. During fiscal 2018, the Company recorded $12.9 million of restructuring charges for severance and benefits due to involuntary employee termination actions. The restructuring actions were undertaken to position the Company for future growth, reallocate resources to priority areas and, to a lesser extent, eliminate operational redundancy. These charges consisted primarily of severance benefits. As of October 31, 2018, there was an $8.1 million outstanding balance remaining in accounts payable and accrued liabilities in the consolidated balance sheets. The remaining balance will be paid in fiscal 2019. During fiscal 2017, the Company recorded $36.6 million of restructuring charges for severance and benefits due to involuntary employee termination actions. The restructuring actions were undertaken to position the Company for future growth, reallocate resources to priority areas, and to a lesser extent, eliminate operational redundancy. These charges consist primarily of severance and retirement benefits. As of October 31, 2017, there was a $17.5 million outstanding balance remaining in accounts payable and accrued liabilities in the consolidated balance sheets, which was paid in fiscal 2018. During fiscal 2016, the Company recorded $9.6 million of restructuring charges for severance and benefits due to involuntary employee terminations, of which $3.9 million was paid in fiscal 2016. As of October 31, 2016, there was a $5.7 million outstanding balance remaining in accounts payable and accrued liabilities as payroll and related benefits in the consolidated balance sheets. The remaining balance was paid in fiscal 2017. Accounts Payable and Accrued Liabilities. The balance consists of:
| October 31,
| 2018 |  | 2017
| (in thousands)
Payroll and related benefits | $ | 413,307 |  |  | $ | 382,773 |
Other accrued liabilities | 79,973 |  |  | 97,119 |
Accounts payable | 85,046 |  |  | 19,954 |
Total | $ | 578,326 |  |  | $ | 499,846 |
Other Long-term Liabilities. The balance consists of:
| October 31,
| 2018 |  | 2017
| (in thousands)
Deferred compensation liability (See Note 10) | $ | 212,165 |  |  | $ | 197,542 |
Other long-term liabilities | 53,395 |  |  | 54,485 |
Total | $ | 265,560 |  |  | $ | 252,027 |
Other Comprehensive Income (Loss). Other comprehensive income (loss) (OCI) includes all changes in equity during a period, such as accumulated net translation adjustments, unrealized gain (loss) on certain foreign currency forward contracts that qualify as cash flow hedges, reclassification adjustments related to cash flow hedges and unrealized gain (loss) on investments. See Note 8. Accumulated Other Comprehensive Income (Loss). Revenue Recognition. The Company generates revenue from the sale of products that include software licenses and to a lesser extent, hardware products, maintenance and services. Time-based products revenue consists of fees associated with the licensing of the Company's software. Maintenance and service revenue consists of maintenance fees associated with perpetual licenses, hardware products, and professional services fees. Upfront products revenue includes hardware revenue consisting of sales of Field Programmable Gate Array (FPGA)-based emulation and prototyping products and perpetual software licenses. Most of the Company's customer arrangements are complex, involving hundreds of products and various license rights, bundled with post-contract customer support and additional meaningful rights that provide a complete end-to-end solution to the customer. Throughout the contract, the Company's customers are typically using a myriad of products to complete each phase of a chip design and are concurrently working on multiple chip designs, or projects, in different phases of the design. During this time, the customer looks to the Company to release state-of-the-art technology as the Company constantly invests to keep up with the rapid change, to address requested enhancements to the Company's tools to meet customer specifications, to provide support at each stage of the customer’s design, including the final manufacturing of the chip (the tape out stage), and other important services. With respect to software licenses, the Company utilizes primarily two license types:
• | Technology Subscription Licenses (TSLs). TSLs are time-based licenses for a finite term, and generally provide the customer with limited rights to receive, or to exchange certain quantities of licensed software for, unspecified future technology. The majority of the Company's arrangements are TSLs due to the nature of the business and customer requirements. In addition to the licenses, the arrangements also include: post-contract customer support, which includes providing frequent updates and upgrades to maintain the utility of the software due to rapid changes in technology; other intertwined services such as multiple copies of the tools; assistance to the Company's customers in applying the Company's technology in their development environment; and rights to remix licenses for other licenses.
• | Perpetual licenses. Perpetual licenses continue as long as the customer renews maintenance plus an additional 20 years. Perpetual licenses do not provide the customer any rights to receive, or to exchange licensed software for, unspecified future technology. Customers purchase maintenance separately for the first year and may renew annually.
For the two software license types, the Company recognizes revenue as follows:
• | TSLs. The Company typically recognizes revenue from TSL fees ratably over the term of the license period, or as customer installments become due and payable, whichever is later. Revenue attributable to TSLs is reported as “time-based products revenue” in the consolidated statements of operations.
• | Perpetual licenses. The Company recognizes revenue from perpetual licenses in full upon shipment of the software if payment terms require the customer to pay at least 75% of the license fee and 100% of the maintenance fee within one year from shipment and all other revenue recognition criteria are met. Revenue attributable to these perpetual licenses is reported as “upfront products revenue” in the consolidated statements of operations. For perpetual licenses in which less than 75% of the license fee and 100% of the maintenance fee is payable within one year from shipment, the Company recognizes revenue as customer installments become due and payable. Such revenue is reported as “time-based products revenue” in the consolidated statements of operations.
The Company's maintenance and service revenue primarily consists of maintenance fees associated with perpetual licenses and hardware products, and professional services fees. The Company recognizes revenue from maintenance arrangements ratably over the maintenance period to the extent cash has been received or fees become due and payable, and recognizes revenue from professional services and training fees as such services are performed and accepted by the customers as needed. Revenue attributable to maintenance, professional services and training is reported as “maintenance and service revenue” in the consolidated statements of operations. Hardware revenue consists of sales of FPGA-based emulation and prototyping products. The Company recognizes revenue from sales of hardware products in full upon shipment if all other revenue recognition criteria are met. Revenue attributable to these sales is reported as “upfront products revenue” in the consolidated statements of operations. Infrequently, the Company enters into certain license arrangements wherein licenses are provided for a finite term without any other services or rights, including rights to receive, or to exchange licensed software for, unspecified future technology. The Company recognizes revenue from these term licenses in full upon shipment of the software and when all other revenue recognition criteria are met. The Company also enters into arrangements in which portions of revenue are contingent upon the occurrence of uncertain future events, such as royalty arrangements. The Company refers to this revenue as “contingent revenue.” Contingent revenue is recognized if and when the event that removes the contingency occurs. Such revenue is reported as “time-based products revenue” in the consolidated statements of operations. These arrangements are not material to the Company’s total revenue. The Company infrequently enters into multiple-element arrangements that contain both software and non-software deliverables such as hardware. The Company has determined that the software and non-software deliverables in the Company’s contracts are separate units of accounting. The Company recognizes revenue for the separate units of accounting when all revenue recognition criteria are met. Revenue allocated to hardware units of accounting is recognized upon shipment when all other revenue recognition criteria are met. Revenue allocated to software units of accounting is recognized depending on the software license type (TSL or perpetual license). Such arrangements have not had a material effect on the Company’s consolidated financial statements and are not expected to have a material effect in future periods. The Company also enters into arrangements to deliver software products, either alone or together with other products or services, that require significant modification or customization of the software. The Company accounts for such arrangements using the percentage of completion method as the Company has the ability to make reasonably dependable estimates that relate to the extent of progress toward completion, contract revenues and costs. The Company measures the progress towards completion using the labor hours incurred to complete the project. Revenue attributable to these arrangements is reported as “maintenance and service revenue” in the consolidated statements of operations. The Company determines the fair value of each element in multiple element software arrangements that only contain software and software-related deliverables based on vendor-specific objective evidence (VSOE). The Company limits assessment of VSOE of fair value for each element to the price charged when such element is sold separately. The Company has analyzed all of the elements included in multiple-element software arrangements and has determined that the Company has sufficient VSOE to allocate revenue to the maintenance components of the Company’s perpetual license products and to professional services. Accordingly, assuming all other revenue recognition criteria are met, the Company recognizes license revenue from perpetual licenses upon delivery using the residual method, recognizes revenue from maintenance ratably over the maintenance term, and recognizes revenue from professional services as services are performed and accepted by the customer. With respect to TSL arrangements, due to the complexity of the tools, the complexity of the arrangement terms and intertwined services, the license, maintenance and other services are not separable and are considered as a combined unit. Additionally, the Company does not have sufficient VSOE of fair value to allocate the fee between these services. Therefore, the Company recognizes revenue from TSLs ratably over the term of the license, assuming all other revenue recognition criteria are met. Revenue recognition involves certain judgments. Specifically, in connection with each transaction involving the Company’s products, the Company must evaluate whether: (1) persuasive evidence of an arrangement exists, (2) delivery of software or services has occurred, (3) the fee for such software or services is fixed or determinable, and (4) collectability is probable. All four of these criteria must be met in order for the Company to recognize revenue with respect to a particular arrangement. The Company applies these revenue recognition criteria as follows:
• | Persuasive Evidence of an Arrangement Exists. Prior to recognizing revenue on an arrangement, the Company’s customary policy is to have a written contract, signed by both the customer and by the Company or a purchase order from those customers that have previously negotiated a standard end-user license arrangement or purchase agreement.
• | Delivery Has Occurred. The Company delivers its products to its customers electronically or physically. For electronic deliveries, delivery occurs when the Company provides access to its customers to take immediate possession of the software through downloading it to the customer’s hardware. For physical deliveries, the standard transfer terms are typically Freight on Board (FOB) shipping point. The Company generally ships its products or license keys promptly after acceptance of customer orders. However, a number of factors can affect the timing of product shipments and, as a result, timing of revenue recognition, including the delivery dates requested by customers and the Company's operational capacity to fulfill product orders at the end of a fiscal quarter.
• | The Fee is Fixed or Determinable. The Company’s determination that an arrangement fee is fixed or determinable depends principally on the arrangement’s payment terms. The Company’s standard payment terms for perpetual licenses require 75% or more of the license fee and 100% of the maintenance fee to be paid within one year. If the arrangement includes these terms, the Company regards the fee as fixed or determinable, and recognizes all license revenue under the arrangement in full upon delivery (assuming all other revenue recognition criteria are met). If the arrangement does not include these terms, the Company does not consider the fee to be fixed or determinable and generally recognizes revenue when customer installments are due and payable. In the case of a TSL, because of the right to exchange products or receive unspecified future technology and because VSOE for maintenance services does not exist for a TSL, the Company recognizes revenue ratably over the term of the license, but not in advance of when customers’ installments become due and payable.
• | Collectability is Probable. The Company judges collectability of the arrangement fees on a customer-by-customer basis pursuant to its credit review policy. The Company typically sells to customers with whom it has a history of successful collection. For a new customer, or when an existing customer substantially expands its commitments, the Company evaluates the customer’s financial position and ability to pay and typically assigns a credit limit based on that review. The Company increases the credit limit only after it has established a successful collection history with the customer. If the Company determines at any time that collectability is not probable under a particular arrangement based upon its credit review process or the customer’s payment history, the Company recognizes revenue under that arrangement as customer payments are actually received.
Warranties and Indemnities. The Company generally warrants its products to be free from defects in media and to substantially conform to material specifications for a period of 90 days for software products and for up to six months for hardware systems. In certain cases, the Company also provides its customers with limited indemnification with respect to claims that their use of the Company’s software products infringes on United States patents, copyrights, trademarks or trade secrets. The Company is unable to estimate the potential impact of these commitments on the future results of operations. To date, the Company has not been required to pay any material warranty claims. Net Income Per Share. The Company computes basic income per share by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share reflects the dilution from potential common shares outstanding such as stock options and unvested restricted stock units and awards during the period using the treasury stock method. The table below reconciles the weighted average common shares used to calculate basic net income per share with the weighted average common shares used to calculate diluted net income per share:
| Year Ended October 31,
| 2018 |  | 2017 |  | 2016
| (in thousands, except per share amounts)
Numerator: |  |  |  |  |
Net income | $ | 432,518 |  |  | $ | 136,563 |  |  | $ | 266,826 |
Denominator: |  |  |  |  |
Weighted average common shares for basic net income per share | 149,036 |  |  | 150,457 |  |  | 152,017 |
Dilutive effect of common share equivalents from equity-based compensation | 4,357 |  |  | 4,417 |  |  | 2,704 |
Weighted average common shares for diluted net income per share | 153,393 |  |  | 154,874 |  |  | 154,721 |
Net income per share: |  |  |  |  |
Basic | $ | 2.90 |  |  | $ | 0.91 |  |  | $ | 1.76 |
Diluted | $ | 2.82 |  |  | $ | 0.88 |  |  | $ | 1.73 |
Anti-dilutive employee stock-based awards excluded(1) | 850 |  |  | 345 |  |  | 1,971 |
(1) | These stock options and unvested restricted stock units were anti-dilutive for the respective periods and are excluded in calculating diluted net income per share. While such awards were anti-dilutive for the respective periods, they could be dilutive in the future.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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