Document and Entity Information
v4.1.212.0
Document and Entity Information
9 Months Ended
Jun. 30, 2011
Aug. 02, 2011
Document and Entity Information    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2011
Document Fiscal Year Focus 2011  
Document Fiscal Period Focus Q3  
Entity Registrant Name F5 NETWORKS INC  
Entity Central Index Key 0001048695  
Current Fiscal Year End Date --09-30  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   80,726,859

Consolidated Balance Sheets
v4.1.212.0
Consolidated Balance Sheets (USD $)
In Thousands
Jun. 30, 2011
Sep. 30, 2010
ASSETS    
Cash and cash equivalents $ 299,804 $ 168,754
Short-term investments 285,530 259,742
Accounts receivable, net of allowances of $2,821 and $4,319 154,741 112,132
Inventories 17,941 18,815
Deferred tax assets 9,197 8,767
Other current assets 30,015 37,745
Total current assets 797,228 605,955
Property and equipment, net 42,323 34,157
Long-term investments 471,567 433,570
Deferred tax assets 38,169 37,864
Goodwill 234,700 234,700
Other assets, net 13,147 15,946
Total assets 1,597,134 1,362,192
LIABILITIES AND SHAREHOLDERS' EQUITY    
Accounts payable 34,070 21,180
Accrued liabilities 59,721 61,768
Deferred revenue 255,226 204,137
Total current liabilities 349,017 287,085
Other long-term liabilities 16,300 16,153
Deferred revenue, long-term 66,649 55,256
Total long-term liabilities 82,949 71,409
Commitments and contingencies (Note 5)    
Shareholders' equity    
Preferred stock, no par value; 10,000 shares authorized, no shares outstanding    
Common stock, no par value; 200,000 shares authorized, 80,727 and 80,355 shares issued and outstanding 505,117 517,215
Accumulated other comprehensive loss (3,460) (3,241)
Retained earnings 663,511 489,724
Total shareholders' equity 1,165,168 1,003,698
Total liabilities and shareholders' equity $ 1,597,134 $ 1,362,192

Consolidated Balance Sheets (Parenthetical)
v4.1.212.0
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data
Jun. 30, 2011
Sep. 30, 2010
Consolidated Balance Sheets    
Accounts receivable, allowances $ 2,821 $ 4,319
Preferred stock, par value    
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares outstanding 0 0
Common stock, par value    
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 80,727,000 80,355,000
Common stock, shares outstanding 80,727,000 80,355,000

Consolidated Income Statements
v4.1.212.0
Consolidated Income Statements (USD $)
In Thousands, except Per Share data
3 Months Ended 9 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Net revenues        
Products $ 179,327 $ 147,393 $ 524,529 $ 396,170
Services 111,386 83,081 312,690 231,528
Total 290,713 230,474 837,219 627,698
Cost of net revenues        
Products 31,803 29,328 94,840 82,789
Services 20,645 15,251 57,244 42,335
Total 52,448 44,579 152,084 125,124
Gross profit 238,265 185,895 685,135 502,574
Operating expenses        
Sales and marketing 93,633 77,219 269,790 212,505
Research and development 35,245 30,889 102,358 86,743
General and administrative 21,126 17,658 61,656 49,627
Total 150,004 125,766 433,804 348,875
Income from operations 88,261 60,129 251,331 153,699
Other income, net 1,889 3,561 6,002 7,557
Income before income taxes 90,150 63,690 257,333 161,256
Provision for income taxes 27,601 23,195 83,546 58,338
Net income $ 62,549 $ 40,495 $ 173,787 $ 102,918
Net income per share - basic $ 0.77 $ 0.51 $ 2.15 $ 1.30
Weighted average shares - basic 80,866 79,864 80,773 79,386
Net income per share - diluted $ 0.77 $ 0.50 $ 2.13 $ 1.27
Weighted average shares - diluted 81,497 81,031 81,655 80,870

Consolidated Statement of Shareholders' Equity
v4.1.212.0
Consolidated Statement of Shareholders' Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Accumulated Other Comprehensive Income/(Loss) [Member]
Retained Earnings [Member]
Total Shareholders' Equity [Member]
Total
Balance at Sep. 30, 2010 $ 517,215 $ (3,241) $ 489,724 $ 1,003,698 $ 1,003,698
Balance, shares at Sep. 30, 2010 80,355,000       80,355,000
Exercise of employee stock options 2,197     2,197  
Exercise of employee stock options, shares 142,000        
Issuance of stock under employee stock purchase plan 18,932     18,932  
Issuance of stock under employee stock purchase plan, shares 256,000        
Issuance of restricted stock, shares 1,048,000        
Repurchase of common stock (121,526)     (121,526)  
Repurchase of common stock, shares (1,074,000)        
Tax benefit from employee stock transactions 20,686     20,686  
Stock-based compensation 67,613     67,613  
Comprehensive income:          
Net income     173,787   173,787
Foreign currency translation adjustment   (529)     (529)
Unrealized gain on securities, net of tax   310     310
Comprehensive income       173,568 173,568
Balance at Jun. 30, 2011 $ 505,117 $ (3,460) $ 663,511 $ 1,165,168 $ 1,165,168
Balance, shares at Jun. 30, 2011 80,727,000       80,727,000

Consolidated Statements of Cash Flows
v4.1.212.0
Consolidated Statements of Cash Flows (USD $)
In Thousands
9 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Operating activities    
Net income $ 173,787 $ 102,918
Adjustments to reconcile net income to net cash provided by operating activities:    
Realized gain on disposition of assets and investments (203) (117)
Stock-based compensation 67,613 50,991
Provisions for doubtful accounts and sales returns 453 794
Depreciation and amortization 15,715 17,923
Deferred income taxes (387) 10,659
Gain on auction rate securities put option   (1,491)
Loss on trading auction rate securities   1,491
Changes in operating assets and liabilities, net of amounts acquired:    
Accounts receivable (43,062) 3,350
Inventories 874 (3,927)
Other current assets 8,452 (10,380)
Other assets (365) (1,651)
Accounts payable and accrued liabilities 10,086 154
Deferred revenue 62,481 56,507
Net cash provided by operating activities 295,444 227,221
Investing activities    
Purchases of investments (692,812) (571,072)
Sales and maturities of investments 629,766 397,702
Investment of restricted cash (406) (26)
Acquisition of intangible assets (80)  
Purchases of property and equipment (20,544) (10,119)
Net cash used in investing activities (84,076) (183,515)
Financing activities    
Excess tax benefits from stock-based compensation 20,221 16,419
Proceeds from the exercise of stock options and purchases of stock under employee stock purchase plan 21,131 29,338
Repurchase of common stock (121,526) (55,000)
Net cash used in financing activities (80,174) (9,243)
Net increase in cash and cash equivalents 131,194 34,463
Effect of exchange rate changes on cash and cash equivalents (144) (1,487)
Cash and cash equivalents, beginning of period 168,754 110,837
Cash and cash equivalents, end of period $ 299,804 $ 143,813

Summary of Significant Accounting Policies
v4.1.212.0
Summary of Significant Accounting Policies
9 Months Ended
Jun. 30, 2011
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies
1. Summary of Significant Accounting Policies
     The Company recognizes compensation costs for awards with performance conditions when it concludes it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each balance sheet date and adjusts compensation costs based on the probability assessment.
Comprehensive Income
     Comprehensive income includes certain changes in equity that are excluded from net income. Specifically, unrealized gains (losses) on securities and foreign currency translation adjustments are included in accumulated other comprehensive loss. Comprehensive income and its components were as follows (in thousands):
                                 
    Three months ended     Nine months ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Net Income
  $ 62,549     $ 40,495     $ 173,787     $ 102,918  
Unrealized gain (loss) on securities, net of tax
    1,273       (277 )     310       (1,088 )
Foreign currency translation adjustment
    (101 )     (724 )     (529 )     (1,170 )
 
                       
Total comprehensive income
  $ 63,721     $ 39,494     $ 173,568     $ 100,660  
 
                       
 

Summary of Significant Accounting Policies (Policy)
v4.1.212.0
Summary of Significant Accounting Policies (Policy)
6 Months Ended 9 Months Ended
Mar. 31, 2011
Jun. 30, 2011
Summary of Significant Accounting Policies    
Description of Business  
Basis of Presentation  
Revenue Recognition  
Revenue Recognition
     The Company sells products through distributors, resellers, and directly to end users. Revenue is recognized provided that all of the following criteria have been met:
     Persuasive evidence of an arrangement exists. Evidence of an arrangement generally consists of a purchase order issued pursuant to the terms and conditions of a distributor, reseller or end user agreement.
     Delivery has occurred. The Company uses shipping or related documents, or written evidence of customer acceptance, when applicable, to verify delivery or completion of any performance terms.
     The sales price is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on payment terms associated with the transaction and whether the sales price is subject to refund or adjustment.
     Collectability is reasonable assured. The Company assesses collectability primarily based on the creditworthiness of the customer as determined by credit checks and related analysis, as well as the Customer's payment history.
     In certain regions where the Company does not have the ability to reasonably estimate returns, the Company defers revenue on sales to its distributors until they have received information from the channel partner indicating that the product has been sold to the end-user customer. Payment terms to domestic customers are generally net 30 days to net 45 days. Payment terms to international customers range from net 30 days to net 120 days based on normal and customary trade practices in the individual markets. The Company offers extended payment terms to certain customers, in which case, revenue is recognized when payments are due.

 

     Whenever product, training services and post-contract customer support ("PCS") elements are sold together, a portion of the sales price is allocated to each element based on their respective fair values as determined when the individual elements are sold separately. Revenue from the sale of products is recognized when the product has been shipped and the customer is obligated to pay for the product. When rights of return are present and the Company cannot estimate returns, it recognizes revenue when such rights of return lapse. Revenues for PCS are recognized on a straight-line basis over the service contract term. PCS includes a limited period of telephone support updates, repair or replacement of any failed product or component that fails during the term of the agreement, bug fixes and rights to upgrades, when and if available. Consulting services are customarily billed at fixed hourly rates, plus out-of-pocket expenses, and revenues are recognized when the consulting has been completed. Training revenue is recognized when the training has been completed.
     In October 2009, the Financial Accounting Standards Board ("FASB") amended the accounting standards for revenue recognition to remove from the scope of industry-specific software revenue recognition guidance any tangible products containing software components and non-software components that operate together to deliver the products essential functionality. In addition, the FASB amended the accounting standards for certain multiple element revenue arrangements to:
    Provide updated guidance on whether multiple elements exist, how the elements in an arrangement should be separated, and how the arrangement consideration should be allocated to the separate elements;
 
    Require an entity to allocate arrangement consideration to each element based on a selling price hierarchy, where the selling price for an element is based on vendor-specific objective evidence ("VSOE"), if available, third-party evidence ("TPE"), if available and VSOE is not available; or the best estimate of selling price ("BESP"), if neither VSOE or TPE is available; and
 
    Eliminate the use of the residual method and require an entity to allocate arrangement consideration using the selling price hierarchy.
     The Company adopted this guidance in the first quarter of fiscal year 2011 on a prospective basis for applicable arrangements originating or materially modified after October 1, 2010. The impact of this adoption was not material to the Company's financial position and results of operations for the three and nine months ended June 30, 2011.
     The majority of the Company's products are hardware appliances which contain software essential to the overall functionality of the products. Accordingly, the Company no longer recognizes revenue on sales of these products in accordance with the industry-specific software revenue recognition guidance.
     For all transactions entered into prior to the first quarter of fiscal year 2011 and for sales of nonessential and stand-alone software after October 1, 2010, the Company allocates revenue for arrangements with multiple elements based on the software revenue recognition guidance. Software revenue recognition guidance requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair values of those elements. The fair value of an element must be based on VSOE. Where fair value of certain elements is not available, revenue is recognized on the "residual method" based on the fair value of undelivered elements. If evidence of the fair value of one or more undelivered elements does not exist, all revenue is deferred and recognized at the earlier of the delivery of those elements or the establishment of fair value of the remaining undelivered elements.
     For transactions entered into subsequent to the adoption of the amended revenue recognition standards that are multiple-element arrangements, the arrangement consideration is allocated to each element based on the relative selling prices of all of the elements in the arrangement using the fair value hierarchy in the amended revenue recognition guidance.
     Consistent with the methodology used under the previous accounting guidance, the Company establishes VSOE for its products, training services, PCS and consulting services based on the sales price charged for each element when sold separately. The sales price is discounted from the applicable list price based on various factors including the type of customer, volume of sales, geographic region and program level. The Company's list prices are generally not fair value as discounts may be given based on the factors enumerated above. The Company believes that the fair value of its consulting services is represented by the billable consulting rate per hour, based on the rates they charge customers when they purchase standalone consulting services. The price of consulting services is not based on the type of customer, volume of sales, geographic region or program level.

 

     The Company uses historical sales transactions to determine whether VSOE can be established for each of the elements. In most instances, VSOE of fair value is the sales price of actual standalone (unbundled) transactions within the past 12 month period that are priced within a reasonable range, which the Company has determined to be plus or minus 15% of the median sales price of each respective price list.
     VSOE of PCS is based on standalone sales since the Company does not provide stated renewal rates to its customers. In accordance with the Company's PCS pricing practice (supported by standalone renewal sales), renewal contracts are priced as a percentage of the undiscounted product list price. The PCS renewal percentages may vary, depending on the type and length of PCS purchased. The Company offers standard and premium PCS, and the term generally ranges from one to three years. The Company employs a bell-shaped-curve approach in evaluating VSOE of fair value of PCS. Under this approach, the Company considers VSOE of the fair value of PCS to exist when a substantial majority of its standalone PCS sales fall within a narrow range of pricing.
     The Company is typically not able to determine TPE for its products or services. TPE is determined based on competitor prices for similar elements when sold separately. Generally, the Company's go-to-market strategy differs from that of other competitive products or services in its markets and the Company's offerings contain a significant level of differentiation such that the comparable pricing of products with similar functionality cannot be obtained. Furthermore, the Company is unable to reliably determine the selling prices on a stand-alone basis of similar products offered by its competitors.
     When the Company is unable to establish selling price of its non-software elements using VSOE or TPE, the Company uses BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, cost of products, gross margin objectives, pricing practices, geographies, customer classes and distribution channels.
     The Company has established and regularly validates the VSOE of fair value and BESP for elements in its multiple element arrangements. The Company accounts for taxes collected from customers and remitted to governmental authorities on a net basis and excluded from revenues.
Goodwill  
Stock-Based Compensation  
Stock-Based Compensation
     The Company accounts for stock-based compensation using the straight-line attribution method for recognizing compensation expense. The Company recognized $22.9 million and $17.4 million of stock-based compensation expense for the three months ended June 30, 2011 and 2010, respectively, and $67.6 million and $51.0 million for the nine months ended June 30, 2011 and 2010, respectively. As of June 30, 2011, there was $55.7 million of total unrecognized stock-based compensation cost, the majority of which will be recognized over the next two years. Going forward, stock-based compensation expenses may increase as the Company issues additional equity-based awards to continue to attract and retain key employees.
     The Company issues incentive awards to its employees through stock-based compensation consisting of restricted stock units ("RSUs"). On July 29, 2011, the Company's Compensation Committee approved 833,739 RSUs to employees and executive officers pursuant to the Company's annual equity awards program. The value of RSUs is determined using the fair value method, which in this case, is based on the number of shares granted and the quoted price of the Company's common stock on the date of grant.

 

     The Company recognizes compensation expense for only the portion of restricted stock units that are expected to vest. Therefore, the Company applies estimated forfeiture rates that are derived from historical employee termination behavior. Based on historical differences with forfeitures of stock-based awards granted to the Company's executive officers and Board of Directors versus grants awarded to all other employees, the Company has developed separate forfeiture expectations for these two groups. The Company's estimated forfeiture rate in the third quarter of fiscal year 2011 is 2.7% for grants awarded to the Company's executive officers and Board of Directors, and 9.7% for grants awarded to all other employees. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.
     In August 2010, the Company granted 181,334 and 83,000 RSUs to certain current executive officers as part of the annual equity and retention awards programs, respectively. Fifty percent of the aggregate number of RSUs granted as part of the annual equity awards program vest in equal quarterly increments over three years, until such portion of the grant is fully vested on August 1, 2013. One-sixth of the annual equity awards RSU grant, or a portion thereof, was subject to the Company achieving specified quarterly revenue and EBITDA goals during the period beginning in the fourth quarter of fiscal year 2010 through the third quarter of fiscal year 2011. In each case, 50% of the quarterly performance stock grant is based on achieving at least 80% of the quarterly revenue goal and the other 50% is based on achieving at least 80% of the quarterly EBITDA goal. The quarterly performance stock grant is paid linearly above 80% of the targeted goals. At least 100% of both goals must be attained in order for the quarterly performance stock grant to be awarded over 100%. Each goal is evaluated individually and subject to the 80% achievement threshold and 100% over-achievement threshold. The remaining 33.33% of this annual equity awards RSU grant shall be subject to performance based vesting for each of the four quarter periods beginning with the fourth quarters of fiscal years 2011 and 2012 (16.66% in each period). The Compensation Committee of the Board of Directors will set applicable performance targets and vesting formulas for each of these periods. All RSUs granted as part of the retention awards program fully vest on August 1, 2013.
     In August 2009, the Company granted 420,000 RSUs to certain current executive officers. Fifty percent of the aggregate number of RSUs granted at such time vest in equal quarterly increments over two years, until such portion of the grant is fully vested on August 1, 2011. Twenty-five percent of the RSU grant, or a portion thereof, was subject to the Company achieving specified quarterly revenue and EBITDA goals during the period beginning in the fourth quarter of fiscal year 2009 through the third quarter of fiscal year 2010 and the remaining twenty-five percent was subject to the Company achieving specified quarterly revenue and EBITDA goals during the period beginning in the fourth quarter of fiscal year 2010 through the third quarter of fiscal year 2011. In each case, 50% of the quarterly performance stock grant is based on achieving at least 80% of the quarterly revenue goal and the other 50% is based on achieving at least 80% of the quarterly EBITDA goal. The quarterly performance stock grant is paid linearly above 80% of the targeted goals. At least 100% of both goals must be attained in order for the quarterly performance stock grant to be awarded over 100%. Each goal is evaluated individually and subject to the 80% achievement threshold and 100% over-achievement threshold.
     The Company recognizes compensation costs for awards with performance conditions when it concludes it is probable that the performance condition will be achieved. The Company reassesses the probability of vesting at each balance sheet date and adjusts compensation costs based on the probability assessment.
Common Stock Repurchase  
Earnings Per Share  
Earnings Per Share
     Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. The Company's nonvested restricted stock awards and restricted stock units do not have nonforfeitable rights to dividends or dividend equivalents.
     The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
                                 
    Three months ended     Nine months ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Numerator
                               
Net income
  $ 62,549     $ 40,495     $ 173,787     $ 102,918  
 
                       
Denominator
                               
Weighted average shares outstanding basic
    80,866       79,864       80,773       79,386  
Dilutive effect of common shares from stock options and restricted stock units
    631       1,167       882       1,484  
 
                       
Weighted average shares outstanding diluted
    81,497       81,031       81,655       80,870  
 
                       
Basic net income per share
  $ 0.77     $ 0.51     $ 2.15     $ 1.30  
 
                       
Diluted net income per share
  $ 0.77     $ 0.50     $ 2.13     $ 1.27  
 
                       
     An immaterial amount of common shares potentially issuable from stock options for the three and nine months ended June 30, 2011 and 2010, are excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of common stock for the respective periods.
Comprehensive Income  

Comprehensive Income

 

Comprehensive income includes certain changes in equity that are excluded from net income. Specifically, unrealized gains (losses) on securities and foreign currency translation adjustments are included in accumulated other comprehensive loss. Comprehensive income and its components were as follows (in thousands):

 

 

 

        Three months ended

                 June 30,                

         Nine months ended

                 June 30,                

 

       2011      

       2010      

       2011      

       2010      

Net Income

   $  62,549

   $  40,495

  $  173,787

   $ 102,918

Unrealized gain (loss) on securities, net of tax

          1,273

            (277)

              310

        (1,088)

Foreign currency translation adjustment

             (101)

             (724

              (529

          (1,170

Total comprehensive income

   $  63,721

   $  39,494

  $  173,568

   $ 100,660

 


Summary of Significant Accounting Policies (Tables)
v4.1.212.0
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Jun. 30, 2011
Summary of Significant Accounting Policies  
Schedule of Computation of Basic and Diluted Net Income per Share
                                 
    Three months ended     Nine months ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Numerator
                               
Net income
  $ 62,549     $ 40,495     $ 173,787     $ 102,918  
 
                       
Denominator
                               
Weighted average shares outstanding — basic
    80,866       79,864       80,773       79,386  
Dilutive effect of common shares from stock options and restricted stock units
    631       1,167       882       1,484  
 
                       
Weighted average shares outstanding — diluted
    81,497       81,031       81,655       80,870  
 
                       
Basic net income per share
  $ 0.77     $ 0.51     $ 2.15     $ 1.30  
 
                       
Diluted net income per share
  $ 0.77     $ 0.50     $ 2.13     $ 1.27  
 
                       
Schedule of Comprehensive Income and its Components
                                 
    Three months ended     Nine months ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Net Income
  $ 62,549     $ 40,495     $ 173,787     $ 102,918  
Unrealized gain (loss) on securities, net of tax
    1,273       (277 )     310       (1,088 )
Foreign currency translation adjustment
    (101 )     (724 )     (529 )     (1,170 )
 
                       
Total comprehensive income
  $ 63,721     $ 39,494     $ 173,568     $ 100,660  
 
                       

Summary of Significant Accounting Policies (Narrative) (Details)
v4.1.212.0
Summary of Significant Accounting Policies (Narrative) (Details) (USD $)
0 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 10 Months Ended 12 Months Ended 9 Months Ended 0 Months Ended 1 Months Ended
Aug. 02, 2011
Aug. 31, 2009
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Jul. 29, 2011
Sep. 30, 2010
Jun. 30, 2011
Minimum [Member]
Jun. 30, 2011
Maximum [Member]
Oct. 22, 2008
October 22, 2008 Program [Member]
Oct. 26, 2010
October 26, 2010 Program [Member]
Aug. 31, 2011
Annual Equity Program [Member]
Aug. 31, 2011
Retention Awards Program [Member]
Payment terms to domestic customers                 30 45        
Payment terms to international customers                 30 120        
Sales price of actual standalone (unbundled) transactions, reasonable range         15.00%                  
PCS renewal terms, renewal period                 1 3        
Stock-based compensation     $ 22,900,000 $ 17,400,000 $ 67,613,000 $ 50,991,000                
Unrecognized stock-based compensation cost     55,700,000   55,700,000                  
Unrecognized stock-based compensation cost, period for recognition, years         2                  
Restricted stock units awarded to employees and executive officers pursuant to the company's annual equity and retention awards programs   420,000         833,739           181,334 83,000
Restricted stock units awarded to executive officers   420,000         833,739           181,334 83,000
Common stock repurchase, authorized amount                     200,000,000 200,000,000    
Common stock repurchase, remaining authorized repurchase amount $ 110,200,000             $ 37,600,000            
Common stock, repurchased and retired, shares 5,666,566                          
Common stock repurchase, average repurchase price $ 51.09                          

Summary of Significant Accounting Policies (Schedule of Computation of Basic and Diluted Net Income per Share) (Details)
v4.1.212.0
Summary of Significant Accounting Policies (Schedule of Computation of Basic and Diluted Net Income per Share) (Details) (USD $)
In Thousands, except Per Share data
3 Months Ended 9 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Summary of Significant Accounting Policies        
Net income $ 62,549 $ 40,495 $ 173,787 $ 102,918
Weighted average shares outstanding - basic 80,866 79,864 80,773 79,386
Dilutive effect of common shares from stock options and restricted stock units 631 1,167 882 1,484
Weighted average shares outstanding - diluted 81,497 81,031 81,655 80,870
Basic net income per share $ 0.77 $ 0.51 $ 2.15 $ 1.30
Diluted net income per share $ 0.77 $ 0.50 $ 2.13 $ 1.27

Summary of Significant Accounting Policies (Schedule of Comprehensive Income and Its Components) (Details)
v4.1.212.0
Summary of Significant Accounting Policies (Schedule of Comprehensive Income and Its Components) (Details) (USD $)
In Thousands
3 Months Ended 9 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Summary of Significant Accounting Policies        
Net Income $ 62,549 $ 40,495 $ 173,787 $ 102,918
Unrealized gain on securities, net of tax 1,273 (277) 310 (1,088)
Foreign currency translation adjustment (101) (724) (529) (1,170)
Comprehensive income $ 63,721 $ 39,494 $ 173,568 $ 100,660

Fair Value Measurements
v4.1.212.0
Fair Value Measurements
9 Months Ended
Jun. 30, 2011
Fair Value Measurements  
Fair Value Measurements

2. Fair Value Measurements

 

In accordance with the authoritative guidance on fair value measurements and disclosure under GAAP, the Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity, and the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances and expands disclosure about fair value measurements.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit price.

 

The levels of fair value hierarchy are:

 

Level 1: Quoted prices in active markets for identical assets and liabilities at the measurement date.

 

 

                                                                                             

 

 

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Unobservable inputs for which there is little or no market data available. These inputs reflect management's assumptions of what market participants would use in pricing the asset or liability.

 

       Level 1 investments are valued based on quoted market prices in active markets and include the Company's cash equivalent investments. Level 2 investments, which include investments that are valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, include the Company's corporate bonds and notes, municipal bonds and notes, U.S. government securities and U.S. government agency securities. Fair values for the Company's level 2 investments are based on similar assets without applying significant judgments. In addition, all of the Company's level 2 investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.
 

A financial instrument's level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

 

The Company's financial assets measured at fair value on a recurring basis subject to the disclosure requirements at June 30, 2011, were as follows (in thousands):

 

         

 

     Fair Value Measurements at Reporting Date Using

 

 

 

 

 

  Quoted Prices in

Active Markets for

Identical Securities

         (Level 1)      

       Significant

            Other Observable

           Inputs

         (Level 2)   

    Significant

  Unobservable

        Inputs

      (Level 3)    

 

  Fair Value at

      June 30,

         2011        

Cash equivalents

$             132,226

       $             —

$              —

    $  132,226

Short-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            111,223

                 —

        111,223

Available-for-sale securities — municipal bonds and notes

                          —

              79,540

                 —

           79,540

Available-for-sale securities — U.S. government securities

                          —

                    799

                 —

                799

Available-for-sale securities — U.S. government agency securities

                          —

              93,968

                 —

           93,968

Long-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            154,424

                 —

        154,424

Available-for-sale securities — municipal bonds and notes

                          —

              24,320

                 —

           24,320

Available-for-sale securities — U.S. government agency securities

                          —

            279,833

                 —

        279,833

Available-for-sale securities — auction rate securities

                          —

                       —

        12,990

            12,990

Total

$             132,226

       $  744,107

$      12,990

    $  889,323

 

The Company's financial assets measured at fair value on a recurring basis subject to the disclosure requirements at September 30, 2010, were as follows (in thousands):

 

         

 

     Fair Value Measurements at Reporting Date Using                                                

 

 

 

 

 

    Quoted Prices in

Active Markets for

Identical Securities

          (Level 1)     

        Significant

            Other Observable

            Inputs

          (Level 2)   

    Significant

  Unobservable

        Inputs

      (Level 3)   

 

   Fair Value at

  September 30,

         2010        

Cash equivalents

$                26,987

       $             —

$              —

    $     26,987

Short-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            120,124

                 —

        120,124

Available-for-sale securities — municipal bonds and notes

                          —

              77,063

                 —

           77,063

Available-for-sale securities — U.S. government agency securities

                          —

              62,555

                 —

           62,555

Long-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            174,053

                 —

        174,053

Available-for-sale securities — municipal bonds and notes

                          —

              22,094

                 —

           22,094

Available-for-sale securities — U.S. government agency securities

                          —

            221,380

                 —

        221,380

Available-for-sale securities — auction rate securities

                          —

                       —

        16,043

            16,043

Total

$                26,987

       $  677,269

$      16,043

    $  720,299

 

 

                                                                                             

 

 

Due to the auction failures of the Company's auction rate securities ("ARS") that began in the second quarter of fiscal year 2008, there are still no quoted prices in active markets for similar assets as of June 30, 2011. Therefore, the Company has classified its ARS as level 3 financial assets. The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3) (in thousands):

 

         

 

 

        Three months ended

                 June 30,                

         Nine months ended

                 June 30,                

 

       2011      

       2010      

       2011      

       2010      

Balance, beginning of period

   $  16,380

   $  37,453

   $  16,043

   $  41,595

Total losses realized or unrealized:

 

 

 

 

Included in earnings (other income, net)

                —

          1,510

                —

          1,491

Included in other comprehensive income

             610

              (61)

             947

             347

Recognition of put option to earnings

                —

        (1,510)

                —

        (1,491)

Settlements

        (4,000)

      (21,500)

        (4,000)

      (26,050)

Transfers into and/or out of level 3

                 —

                 —

                 —

                 —

Balance, end of period

   $  12,990

   $  15,892

   $  12,990

   $  15,892

Gains (losses) attributable to assets still held as of end of period

             610

              (61)

             947

             347

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable or there is limited market activity such that the determination of fair value requires significant judgment or estimation. Level 3 investment securities primarily include certain ARS for which there was a decrease in the observation of market pricing. At June 30, 2011, the values of these securities were estimated primarily using discounted cash flow analysis that incorporated transaction details such as contractual terms, maturity, timing and amount of future cash flows, as well as assumptions about liquidity and credit valuation adjustments of marketplace participants at June 30, 2011.

 

The Company uses the fair value hierarchy for financial assets and liabilities. The Company's non-financial assets and liabilities, which include goodwill, intangible assets, and long-lived assets, are not required to be carried at fair value on a recurring basis. These non-financial assets and liabilities are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when impairment is recognized. The Company reviews goodwill and intangible assets for impairment annually, during the second quarter of each fiscal year, or as circumstances indicate the possibility of impairment. The Company monitors the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate its carrying amount may not be recoverable. During the nine months ended June 30, 2011, the Company did not recognize any impairment charges related to goodwill, intangible assets, or long-lived assets.


Fair Value Measurements (Tables)
v4.1.212.0
Fair Value Measurements (Tables)
9 Months Ended 12 Months Ended
Jun. 30, 2011
Sep. 30, 2010
Fair Value Measurements    
Schedule of Financial Assets Measured at Fair Value on a Recurring Basis
         

 

     Fair Value Measurements at Reporting Date Using

 

 

 

 

 

  Quoted Prices in

Active Markets for

Identical Securities

         (Level 1)      

       Significant

            Other Observable

           Inputs

         (Level 2)   

    Significant

  Unobservable

        Inputs

      (Level 3)    

 

  Fair Value at

      June 30,

         2011        

Cash equivalents

$             132,226

       $             —

$              —

    $  132,226

Short-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            111,223

                 —

        111,223

Available-for-sale securities — municipal bonds and notes

                          —

              79,540

                 —

           79,540

Available-for-sale securities — U.S. government securities

                          —

                    799

                 —

                799

Available-for-sale securities — U.S. government agency securities

                          —

              93,968

                 —

           93,968

Long-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            154,424

                 —

        154,424

Available-for-sale securities — municipal bonds and notes

                          —

              24,320

                 —

           24,320

Available-for-sale securities — U.S. government agency securities

                          —

            279,833

                 —

        279,833

Available-for-sale securities — auction rate securities

                          —

                       —

        12,990

            12,990

Total

$             132,226

       $  744,107

$      12,990

    $  889,323

         

 

     Fair Value Measurements at Reporting Date Using                                                

 

 

 

 

 

    Quoted Prices in

Active Markets for

Identical Securities

          (Level 1)     

        Significant

            Other Observable

            Inputs

          (Level 2)   

    Significant

  Unobservable

        Inputs

      (Level 3)   

 

   Fair Value at

  September 30,

         2010        

Cash equivalents

$                26,987

       $             —

$              —

    $     26,987

Short-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            120,124

                 —

        120,124

Available-for-sale securities — municipal bonds and notes

                          —

              77,063

                 —

           77,063

Available-for-sale securities — U.S. government agency securities

                          —

              62,555

                 —

           62,555

Long-term investments

 

 

 

 

Available-for-sale securities — corporate bonds and notes

                          —

            174,053

                 —

        174,053

Available-for-sale securities — municipal bonds and notes

                          —

              22,094

                 —

           22,094

Available-for-sale securities — U.S. government agency securities

                          —

            221,380

                 —

        221,380

Available-for-sale securities — auction rate securities

                          —

                       —

        16,043

            16,043

Total

$                26,987

       $  677,269

$      16,043

    $  720,299

Schedule of Reconciliation of Items Measured at Fair Value on a Recurring Basis that Used Significant Unobservable Inputs (Level 3)
         

 

 

        Three months ended

                 June 30,                

         Nine months ended

                 June 30,                

 

       2011      

       2010      

       2011      

       2010      

Balance, beginning of period

   $  16,380

   $  37,453

   $  16,043

   $  41,595

Total losses realized or unrealized:

 

 

 

 

Included in earnings (other income, net)

                —

          1,510

                —

          1,491

Included in other comprehensive income

             610

              (61)

             947

             347

Recognition of put option to earnings

                —

        (1,510)

                —

        (1,491)

Settlements

        (4,000)

      (21,500)

        (4,000)

      (26,050)

Transfers into and/or out of level 3

                 —

                 —

                 —

                 —

Balance, end of period

   $  12,990

   $  15,892

   $  12,990

   $  15,892

Gains (losses) attributable to assets still held as of end of period

             610

              (61)

             947

             347

 

Fair Value Measurements (Schedule of Financial Assets Measured at Fair Value on a Recurring Basis) (Details)
v4.1.212.0
Fair Value Measurements (Schedule of Financial Assets Measured at Fair Value on a Recurring Basis) (Details) (USD $)
In Thousands
Jun. 30, 2011
Sep. 30, 2010
Cash equivalents, fair value $ 132,226 $ 26,987
Investments, fair value 757,097  
Financial assets measured at fair value on a recurring basis, total 889,323 720,299
Short-Term Investments [Member] | Corporate Bonds and Notes [Member]
   
Investments, fair value 111,223 120,124
Short-Term Investments [Member] | Corporate Bonds and Notes [Member] | Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Investments, fair value    
Short-Term Investments [Member] | Corporate Bonds and Notes [Member] | Significant Other Observable Inputs (Level 2) [Member]
   
Investments, fair value 111,223 120,124
Short-Term Investments [Member] | Corporate Bonds and Notes [Member] | Significant Unobservable Inputs (Level 3) [Member]
   
Investments, fair value    
Short-Term Investments [Member] | Municipal Bonds and Notes [Member]
   
Investments, fair value 79,540 77,063
Short-Term Investments [Member] | Municipal Bonds and Notes [Member] | Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Investments, fair value    
Short-Term Investments [Member] | Municipal Bonds and Notes [Member] | Significant Other Observable Inputs (Level 2) [Member]
   
Investments, fair value 79,540 77,063
Short-Term Investments [Member] | Municipal Bonds and Notes [Member] | Significant Unobservable Inputs (Level 3) [Member]
   
Investments, fair value    
Short-Term Investments [Member] | US Government Agencies Securities [Member]
   
Investments, fair value 799 62,555
Short-Term Investments [Member] | US Government Agencies Securities [Member] | Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Investments, fair value    
Short-Term Investments [Member] | US Government Agencies Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
   
Investments, fair value 799 62,555
Short-Term Investments [Member] | US Government Agencies Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | Corporate Bonds and Notes [Member]
   
Investments, fair value 154,424 174,053
Long-Term Investments [Member] | Corporate Bonds and Notes [Member] | Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | Corporate Bonds and Notes [Member] | Significant Other Observable Inputs (Level 2) [Member]
   
Investments, fair value 154,424 174,053
Long-Term Investments [Member] | Corporate Bonds and Notes [Member] | Significant Unobservable Inputs (Level 3) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | Municipal Bonds and Notes [Member]
   
Investments, fair value 24,320 22,094
Long-Term Investments [Member] | Municipal Bonds and Notes [Member] | Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | Municipal Bonds and Notes [Member] | Significant Other Observable Inputs (Level 2) [Member]
   
Investments, fair value 24,320 22,094
Long-Term Investments [Member] | Municipal Bonds and Notes [Member] | Significant Unobservable Inputs (Level 3) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | US Government Agencies Securities [Member]
   
Investments, fair value 279,833 221,380
Long-Term Investments [Member] | US Government Agencies Securities [Member] | Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | US Government Agencies Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
   
Investments, fair value 279,833 221,380
Long-Term Investments [Member] | US Government Agencies Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | Auction Rate Securities [Member]
   
Investments, fair value 12,990 16,043
Long-Term Investments [Member] | Auction Rate Securities [Member] | Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | Auction Rate Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
   
Investments, fair value    
Long-Term Investments [Member] | Auction Rate Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
   
Investments, fair value 12,990 16,043
Quoted Prices in Active Markets for Identical Securities (Level 1) [Member]
   
Cash equivalents, fair value 132,226 26,987
Financial assets measured at fair value on a recurring basis, total 132,226 26,987
Significant Other Observable Inputs (Level 2) [Member]
   
Cash equivalents, fair value    
Financial assets measured at fair value on a recurring basis, total 744,107 677,269
Significant Unobservable Inputs (Level 3) [Member]
   
Cash equivalents, fair value    
Financial assets measured at fair value on a recurring basis, total $ 12,990 $ 16,043

Fair Value Measurements (Schedule of Reconciliation of Items Measured at Fair Value on a Recurring Basis that Used Significant Unobservable Inputs (Level 3)) (Details)
v4.1.212.0
Fair Value Measurements (Schedule of Reconciliation of Items Measured at Fair Value on a Recurring Basis that Used Significant Unobservable Inputs (Level 3)) (Details) (USD $)
In Thousands
3 Months Ended 9 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
Fair Value Measurements        
Balance, beginning of period $ 16,380 $ 37,453 $ 16,043 $ 41,595
Total losses realized or unrealized: Included in earnings (other income, net)   1,510   1,491
Total losses realized or unrealized: Included in other comprehensive income 610 (61) 947 347
Recognition of put options to earnings   (1,510)   (1,491)
Settlements (4,000) (21,500) (4,000) (26,050)
Transfers into and/or out of level 3        
Balance, end of period 12,990 15,892 12,990 15,892
Gains attributable to assets still held as of end of period $ 610 $ (61) $ 947 $ 347

Short-Term and Long-Term Investments
v4.1.212.0
Short-Term and Long-Term Investments
9 Months Ended
Jun. 30, 2011
Short-Term and Long-Term Investments  
Short-Term and Long-Term Investments

3. Short-Term and Long-Term Investments

 

Short-term investments consist of the following (in thousands):

 

 

 

June 30, 2011

    Cost or

  Amortized

      Cost     

     Gross

Unrealized

     Gains    

     Gross

Unrealized

     Losses    

 

 

  Fair Value

Corporate bonds and notes

                 $     110,859

    $  371

     $     (7)

                  $     111,223

Municipal bonds and notes

       79,494

           58

          (12)

       79,540

U.S. government securities

             799

            —

           —

             799

U.S. government agency securities

                            93,935

            50

           (17

                            93,968

 

                 $     285,087

    $  479

     $   (36

                  $     285,530

 

 

 

September 30, 2010

    Cost or

  Amortized

      Cost     

     Gross

Unrealized

     Gains    

     Gross

Unrealized

     Losses    

 

 

  Fair Value

 

 

 

 

 

Corporate bonds and notes

                 $     119,829

    $  318

     $   (23)

                  $     120,124

Municipal bonds and notes

       76,886

         182

            (5)

       77,063

U.S. government agency securities

                            62,390

          165

             —

                            62,555

 

                 $     259,105

    $  665

     $   (28

                  $     259,742

 

                                                                                             

 

 

 

Long-term investments consist of the following (in thousands):

 

 

 

June 30, 2011

    Cost or

  Amortized

      Cost     

     Gross

Unrealized

     Gains    

     Gross

Unrealized

     Losses    

 

 

  Fair Value

Corporate bonds and notes

                 $     153,433

   $ 1,041

  $        (50)

                  $     154,424

Municipal bonds and notes

       24,183

         137

              —

       24,320

Auction rate securities

       15,000

            —

       (2,010)

       12,990

U.S. government agency securities

                          279,498

          405

              (70

                          279,833

 

                 $     472,114

   $ 1,583

  $   (2,130

                  $     471,567

 

 

 

September 30, 2010

    Cost or

  Amortized

      Cost     

     Gross

Unrealized

     Gains    

     Gross

Unrealized

     Losses    

 

 

  Fair Value

Corporate bonds and notes

                 $     172,493

   $  1,582

  $        (22)

                  $     174,053

Municipal bonds and notes

       22,045

             67

            (18)

       22,094

Auction rate securities

       19,000

             —

       (2,957)

       16,043

U.S. government agency securities

                          221,262

            200

              (82

                          221,380

 

                 $     434,800

   $  1,849

  $   (3,079

                  $     433,570

 

The amortized cost and fair value of fixed maturities at June 30, 2011, by contractual years-to-maturity, are presented below (in thousands):

 

 

 

 

    Cost or

  Amortized

      Cost     

 

 

  Fair Value

One year or less

                 $     285,087

                  $     285,530

Over one year

                          472,114

                          471,567

 

                 $     757,201

                  $     757,097

 

The cost or amortized cost values of the Company's fixed maturities include $15.0 million and $19.0 million of available-for-sale ARS as of June 30, 2011 and September 30, 2010, respectively.

 

The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of June 30, 2011 (in thousands):

 

             

 

        Less Than 12 Months      

       12 Months or Greater     

                    Total                   

 

 

June 30, 2011

 

         Fair

       Value      

       Gross

   Unrealized

       Losses     

 

         Fair

       Value      

       Gross

   Unrealized

       Losses     

 

         Fair

       Value      

       Gross

   Unrealized

       Losses     

Corporate bonds and notes

  $     29,580

     $     (56)

   $     3,209

    $          (1)

  $     32,789

    $        (57)

Municipal bonds and notes

           7,174

            (12)

                —

                —

           7,174

              (12)

Auction rate securities

                 —

              —

        12,990

        (2,010)

         12,990

        (2,010)

U.S. government agency securities

          79,130

             (87

                 —

                 —

          79,130

               (87

Total

  $  115,884

     $  (155

   $  16,199

    $  (2,011

  $  132,083

    $  (2,166

 

The Company invests in securities that are rated investment grade or better. The unrealized losses on investments for the first nine months of fiscal year 2011 were primarily caused by reductions in the values of the ARS due to the illiquid markets and were partially offset by unrealized gains related to interest rate decreases.

 

ARS are variable-rate debt securities. The Company limits its investments in ARS to securities that carry an AAA/A- (or equivalent) rating from recognized rating agencies and limits the amount of credit exposure to any one issuer. At the time of the Company's initial investment and at the date of this report, all ARS were in compliance with the Company's investment policy. In the past, the auction process allowed investors to obtain immediate liquidity if so desired by selling the securities at their face amounts. Liquidity for these securities has historically been provided by an auction process that resets interest rates on these investments on average every 7-35 days. However, as has been reported in the financial press, the disruptions in the credit markets adversely affected the auction market for these types of securities.

 

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