10-K 1 tibx1130201310k.htm 10-K TIBX 11.30.2013 10K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________
FORM 10-K 
_____________________________________________________________
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2013
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                      to                                     
Commission file number: 000-26579 
_____________________________________________________________
TIBCO SOFTWARE INC.
(Exact name of registrant as specified in its charter)
Delaware
77-0449727
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3303 Hillview Avenue, Palo Alto, CA 94304
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (650) 846-1000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.001 par value per share
The NASDAQ Global Select Market
(Title of class)
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
_____________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x     No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨    No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
 
Accelerated filer
¨
 
Non-accelerated filer
¨
 
Smaller reporting company 
¨
 
  
 
(Do not check if a smaller reporting company)
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
The aggregate market value of the voting stock held by non-affiliates of the registrant (based upon the closing sale price of such shares on the NASDAQ Global Select Market on June 2, 2013) was approximately $2.7 billion. Shares of common stock held by each executive officer and director and by each entity that owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of January 20, 2014, there were 162,624,055 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2014 Annual Meeting of Stockholders to be held on April 3, 2014 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.



TIBCO SOFTWARE INC.
For the Fiscal Year Ended November 30, 2013
TABLE OF CONTENTS
 
 
 
Page No.
 
PART I
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART IV
 
 
 
 
 
 
 
 



Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as “projects,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “strategy,” “continue,” “will,” “estimate,” “forecast” and similar words and expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including, but not limited to, the factors set forth under Item 1A. “Risk Factors.” All forward-looking statements and reasons why results may differ included in this Annual Report on Form 10-K are made as of the date hereof, and we assume no obligation to update any such forward-looking statements or reasons why actual results may differ.

PART I
 
ITEM 1.
BUSINESS
Overview
TIBCO Software Inc. ("TIBCO," the "Company," "we" or "us"), a Delaware corporation, is a leading independent provider of infrastructure and business intelligence software. Our software platform enables customers to create flexible, event-driven applications and deliver real-time, actionable insights. We do this by:
Integrating and orchestrating software components known as "services," stand alone applications, and various other streams of information;
Automating and optimizing business processes that span customers’ and partners’ operations;
Analyzing data, especially through visual models, to better understand business behaviors;
Detecting and interpreting significant patterns among streams of relevant business and system events; and
Enabling collaboration among and between people and systems in the enterprise.
We provide these capabilities across a range of environments including physical and virtualized hardware, standards-based and proprietary, computing grids and public or private clouds.
Using our software, customers have the ability to capture the right information, at the right time and act on it preemptively for a competitive advantage—what we call "the two-second advantage". As the backbone of real-time data movement and business process execution across the enterprise, TIBCO’s software is uniquely capable of correlating, in real-time, information about an organization’s operations and performance with information about expected behavior and business rules. This correlation of real-time events with expected behaviors allows a company to anticipate customer needs, capitalize on new opportunities, and avoid potential problems in a faster and more beneficial way than through more traditional, transaction-oriented applications. Our solutions help customers operate their business more efficiently, better capitalize on opportunities to increase revenue and market share and extend the life of past investments made.
We are the successor to a portion of the business of Teknekron Software Systems, Inc. ("Teknekron"). Teknekron developed software, known as The Information Bus® ("TIB") technology, for the integration and delivery of market data, such as stock quotes, news and other financial information, in trading rooms of large banks and financial services institutions. In 1992, Teknekron expanded its development efforts to include solutions designed to enable complex and disparate manufacturing equipment and software applications, primarily in the semiconductor fabrication market, to communicate within the factory environment. Teknekron was acquired by Reuters Group PLC ("Reuters"), the global information company, in 1994. Following the acquisition, continued development of the TIB® technology was undertaken to expand its use in the financial services markets.
In January 1997, TIBCO was established as an entity separate from Teknekron. We were formed to create and market software solutions for use in the integration of business information, processes and applications. In connection with our establishment as a separate entity, Reuters transferred to us certain assets and liabilities related to our business and granted to us a royalty-free license to the intellectual property from which some of our messaging software products originated.

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Trademarks
TIBCO, TIBCO Software, Information Bus, TIB, two-second advantage, Spotfire, Nimbus, Loyalty Lab, LogLogic, Extended Results, StreamBase and Maporama are the trademarks or registered trademarks of TIBCO Software Inc. in the United States and other countries. This Annual Report on Form 10-K also refers to the trademarks of other companies.
Products
We offer a wide range of software products that can be sold individually to solve specific technical challenges, but the emphasis of our product development and sales efforts is to create products that interoperate and can be sold together as a suite to enable businesses to be more cost-effective, agile and efficient. We divide our products into three major groups: integration and core infrastructure; business optimization; and process automation and collaboration.
Integration and core infrastructure: Our software helps organizations integrate their disparate systems and move towards a more flexible infrastructure comprised of services or discrete data components that can be assembled, orchestrated and reused. Such services can be invoked from across the business and aggregated with other such services to create "infrastructure applications" that span technological, organizational and geographic boundaries and are often more flexible, efficient and effective than traditional packaged applications. Our software enables the creation, management and virtualization of heterogeneous services and provides a unified environment for policy and service management. Our software gives companies the flexibility to do these things using the standards or technologies that best meet their needs in specific situations without replacing existing technologies or committing to any one technology across the enterprise. We provide data governance software that ensures such services and underlying data can be trusted, in order to make the enterprise more efficient and mitigate risks.
Business optimization: Our software tracks large volumes of real-time events as they occur and applies sophisticated rules in order to identify patterns that signify problems, threats and opportunities, and can automatically initiate appropriate notifications or adaptations of processes. Our software also makes it easy for anyone in an organization to instantly visualize, interact with, and share data analyses. Our flexible and easy-to-use platform utilizes in-memory technology and a direct query access approach to speed the analysis of big data, while also leveraging real-time event monitoring and predictive models. This helps line-level employees perform their jobs, helps managers identify and analyze problems and aberrations, and gives executives the power to spot opportunities and risks faster than the competition.
Process automation and collaboration: Our software helps organizations better coordinate both the manual and automated process flows that span their business and enables employees to collaborate in real-time using social media. This software can coordinate the human and electronic resources inside a business and its network of customers and partners (this use of our products is often referred to as BPM, or business process management, software). Our products aid in the entire process lifecycle, from process discovery to process design, deployment, and automation and include important capabilities in process governance and operational support. Our products not only automate routine tasks and exception handling, but orchestrate long-lived activities and transactions that cut across organizational and geographical boundaries. Our software enables organizations to provide a higher level of customer satisfaction, retain customers, maximize partnerships with other businesses and out-execute their competitors.
Our products are currently licensed by companies worldwide in diverse industries such as financial services, telecommunications, energy, retail, life sciences, manufacturing, transportation, government and insurance and business services. We sell our products through a direct sales force and through alliances with other software vendors, resellers and systems integrators.
Services
Professional Services
Our professional services offerings include a wide range of consulting services such as systems planning and design, installation and systems integration for the rapid deployment of TIBCO products. We offer our professional services with the initial deployment of our products as well as on an ongoing basis to address the continuing needs of our customers. Our professional services staff is located throughout the Americas; Europe, the Middle East and Africa ("EMEA"); and Asia Pacific and Japan ("APJ"), enabling us to perform installations and respond to customer demands rapidly across our global customer base. Many of our professional services employees have advanced degrees, substantial TIBCO experience and industry expertise in systems architecture and design; additionally, many also have domain expertise in energy, financial services, logistics, life sciences, manufacturing, telecommunications and other industries.

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We also have relationships with system integrators, resellers, professional service organizations and business partners including Accenture, Capgemini, Cognizant, Deloitte Consulting, HP, HCL Technologies, Infosys Technologies, Tata Consultancy Services and Wipro, who participate in the deployment of our products to customers. These relationships help promote TIBCO products and provide additional technical expertise to enable us to provide the full range of professional services our customers require to deploy our products.
Maintenance and Support
We offer a suite of software support and maintenance options that are designed to meet the needs of our diverse customer base. These support options include 24 hour coverage that is available seven days a week, 365 days a year, to meet the needs of our global customers. To accomplish this level of support we have established a worldwide support organization with major support centers in Palo Alto, California; Chapel Hill, North Carolina; London and Swindon, England; Woy Woy, Australia; Beijing, China; and Pune, India. These centers, working in conjunction with several smaller support offices located throughout the Americas, EMEA and APJ, provide seamless support across the globe on a 24/7 basis.
In addition to support teams around the globe, we have a customer support website that provides our customers with the ability to submit service requests, receive confirmations on opened service requests and obtain current status on these requests. Additionally, the customer support website provides access to our support procedures, escalation numbers and late breaking news ("LBN"). LBN is used to provide updates and new information about our products. It also provides customers with information on generally known problems and suggested solutions or workarounds that may be available.
Training
We provide a comprehensive and global training program for customers and partners through regional technical learning centers, customer dedicated training, live online training, and self-paced eLearning. Training is available at our main office in Palo Alto, California and at major training centers in Atlanta, Georgia; Maidenhead, England; Munich, Germany; Sydney, Australia; Pune, India and Singapore. Additionally, we offer a variety of flexible programs designed to meet the training needs of individuals and companies. Our Educational Services group has the capability to develop efficient and effective training solutions to address the specific needs of individual customers and partners. Our curriculum leads to an industry recognized technical certification in core TIBCO technologies.
Hosted Services
We have various hosted service offerings. We offer these services in a cloud deployment model where our software runs on third party infrastructure components such as servers, storage and network devices. The fees we receive for these services include subscription and maintenance and support fees.
Sales
We currently market our software and services primarily through a direct sales organization complemented by indirect sales channels. Our direct sales force is located throughout the Americas, EMEA and APJ and operates globally through our foreign subsidiaries.
Our revenue consists of license and service and maintenance fees from our customers and distributors. License fees represented approximately 38%, 40% and 41% of our total revenue in fiscal years 2013, 2012 and 2011, respectively. Revenue from service and maintenance represented approximately 62%, 60% and 59% of our total revenue in fiscal years 2013, 2012 and 2011, respectively.
Sales to customers outside the United States totaled $513.7 million, representing 48% of our total revenue in fiscal year 2013. For a geographic breakdown of our revenue and property and equipment, see Note 21 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Marketing
Our marketing efforts are focused on building brand awareness for TIBCO and driving demand for our products and services. We do this through an extensive mix of marketing activities to reach our target audience, which includes executive-level decision-makers, IT managers and individual developers and business users within an organization. We organize our marketing efforts around major campaign themes as a way to ensure consistent messaging and an integrated set of programs and activities. We utilize a wide mix of marketing channels and tools including Internet marketing, direct marketing, print advertising, public relations, trade shows, speaking engagements, field events and an annual user conference as a way to engage and inform our customers and prospects. We conduct primary and secondary research to better understand the needs of

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the markets we compete in and the customers we serve. We also frequently interact with the analyst community to stay informed of changing market trends and the competitive environment. Our marketing group produces a comprehensive array of collateral to articulate our key messages and value propositions, as well as to enable our field sales force to effectively position our products and services.
Seasonality and Quarterly Order Flow
Our business is subject to variations throughout the year due to seasonal factors in the United States and worldwide. These factors include fewer selling days during the summer vacation season, the impact of the December holidays and a slowdown in capital expenditures by our customers after calendar year-end (during our first fiscal quarter). These factors typically constrain sales activity in our first and third fiscal quarters compared to the rest of the year, and they make quarter-to-quarter comparisons of our operating results less meaningful.
Additionally, a substantial portion of our product license orders are usually received in the last month of each fiscal quarter, with a concentration of such orders in the final two weeks of the quarter. We typically ship product licenses shortly after the receipt of an order and may have license orders that have not shipped at the end of any given quarter. Because the amount of such product license orders may vary, the amount, if any, of such orders at the end of a particular quarter is not a reliable predictor of our future performance.
Competition
The market for our products and services is extremely competitive and subject to rapid change. While we offer a comprehensive suite of integration solutions and believe we are a market leader among infrastructure software companies, we compete with various providers of infrastructure software including IBM, Oracle and SAP, generally, as well as other companies with respect to only certain of the business lines we operate. We offer a complete suite of infrastructure software products, but IBM, Oracle and SAP offer products outside our segment and routinely bundle their broader set of products with their infrastructure software products. We expect additional competition from other established and emerging companies. In addition, we may face pricing pressures from our current competitors and new market entrants in the future. We believe that the competitive factors affecting the market for our products and services include product functionality and features, quality of professional services offerings, performance and price, ease of product implementation, quality of customer support services, customer training and documentation, and vendor and product reputation. The relative importance of each of these factors depends upon the specific customer environment. We believe that our products and services currently compete favorably with respect to such factors. However, we may not be able to maintain our competitive position against current and potential competitors.
Research and Development
Our success is heavily dependent upon our ability to develop new products and technologies and to enhance our existing products. We expect that a majority of our research and development activities will focus on enhancing and extending our TIBCO products and that such enhancements and new products will be developed internally. However, as part of our development strategy, we may also license or acquire externally developed technologies for inclusion in our product solutions. We expect that we will continue to commit significant resources to product development in the future. Product development costs are recorded as research and development expenses. Our research and development expenses, including stock-based compensation expense, were $170.9 million, $154.5 million and $143.2 million in fiscal years 2013, 2012 and 2011, respectively. To date, product development costs have been expensed as incurred, with the exception of immaterial costs related to hosted services, because the time period between achieving technological feasibility for a product and the general availability of such product has typically been very short.
Proprietary Technology
Our success is dependent upon our proprietary software technology. We believe that factors such as the technological and creative skills of our personnel, product enhancements and new product developments are all essential to establishing and maintaining a technology leadership position. We hold numerous United States and foreign patents and have several pending patent applications. We additionally license some patents from Reuters on a royalty-free basis. These patent rights notwithstanding, we currently rely primarily on trade secret rights, copyright and trademark laws, and nondisclosure and other contractual agreements to protect our technology. We enter into confidentiality and/or license agreements with our employees, distributors and customers, and limit access to and distribution of our software, documentation and other proprietary information. Despite these protective measures, third parties could still copy and use our products or otherwise misappropriate our technology.

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Furthermore, third parties might independently develop competing technologies that include the same functionality or features, or otherwise are substantially equivalent or superior to our technologies. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited in certain foreign countries where we operate. Our business could suffer serious harm if we fail to protect our proprietary technology.

Employees
As of November 30, 2013, we employed 3,856 persons, including 1,026 in sales and marketing, 852 in research and development, 377 in general and administrative and 1,601 in professional services and technical support. Of our 3,856 employees, 1,846 were located in the Americas, 842 in EMEA and 1,168 in APJ. Our success is highly dependent on our ability to attract and retain qualified employees. Competition for employees is intense in the software industry. To date, we believe we have been successful in our efforts to recruit qualified employees, but there is no assurance that we will continue to be as successful in the future.
Available Information
Our principal internet address is www.tibco.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are filed electronically with the United States Securities and Exchange Commission (the "SEC"). Such reports and other information filed by us with the SEC are available, free of charge, on the Investor Information page of our website at http://www.tibco.com/company/investor-info as soon as reasonable practicable after we file such reports on the SEC website. The public may read and copy any materials we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the references to the URLs for these websites are intended to be inactive textual references only.
 
ITEM 1A.
RISK FACTORS
In addition to the factors discussed elsewhere in this Form 10-K, the following risk factors, as well as other factors of which we may be unaware or do not currently view as significant, could materially and adversely affect our future operating results and could cause actual events to differ materially from those predicted in the forward-looking statements we make about our business.

Our future revenue is unpredictable, and we expect our quarterly operating results to fluctuate, which may cause our stock price to decline.
As a result of the evolving nature of the markets in which we compete and the size of our customer agreements, we have difficulty accurately forecasting our revenue in any given period. In addition to the factors discussed elsewhere in this section, a number of factors may cause our revenue to fall short of our expectations, or those of stock market analysts and investors, or cause fluctuations in our operating results, including:
the relatively long sales cycles for many of our products;
the timing of our new products or product enhancements or any delays in such introductions;
the delay or deferral of customer implementation of our products;
changes in customer budgets and decision making processes that could affect both the timing and size of any transaction;
reduced spending in the industries that license our products;
our ability to execute in our marketing and sales strategies since implementing changes to our sales organization;
our dependence on large deals, which, if such deals do not close, can greatly impact revenues for a particular quarter;
the timing, size and mix of orders from customers;
the deferral of license revenue to future periods due to the timing of the execution of an agreement or our ability to deliver the products;
changes in our business model;
the impact of our provision of services and customer-required contractual terms on our recognition of license revenue;
any unanticipated difficulty we encounter in integrating acquired businesses, products or technologies;
the tendency of some of our customers to wait until the end of a fiscal quarter or our fiscal year before placing an order in the hope of obtaining more favorable terms;
adverse economic or market conditions;

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the amount and timing of operating costs and capital expenditures relating to the expansion of our operations and the evaluation of strategic transactions; and
changes in accounting rules, such as recording expenses for employee stock option grants and tax accounting, including accounting for uncertain tax positions.

A substantial portion of our product license orders are usually received in the last month of each fiscal quarter, with a concentration of such orders in the final two weeks of the quarter. While we typically ship product licenses shortly after the receipt of an order, we may have license orders that have not shipped at the end of any given quarter. Because the amount of such product license orders may vary, the amount, if any, of such orders at the end of a particular quarter is not a reliable predictor of our future performance.

Because it is difficult for us to predict our quarterly operating results, period-to-period comparisons of our operating results may not be a good indication of our future performance. If, as a result of these difficulties, our revenues and operating results do not meet the expectations of our investors or securities analysts or fall below guidance we may provide to the market, the price of our common stock may decline.

Uneven growth and periods of contraction in the infrastructure software market have caused our revenue to decline in the past and could cause our revenue or results of operations to fall below expectations in the future.
We earn a substantial portion of our revenue from licenses of our infrastructure software, including application integration software and sales of related services. Our future financial performance will depend on continued growth in the number of organizations demanding software and services for application integration and information delivery and companies seeking outside vendors to develop, manage and maintain this software for their critical applications. Lower spending by corporate and governmental customers around the world, which has had a disproportionate impact on information technology spending, has led to a reduction in sales in the past and may continue to do so in the future. Many of our potential customers have made significant investments in internally developed systems and would incur significant costs in switching to third-party products, which may substantially inhibit the growth of the market for infrastructure software. If the market fails to grow, or grows more slowly than we expect, our sales will be adversely affected. Also, even if corporate and governmental spending increases and companies make greater investments in information technology and infrastructure software, our revenue may not grow at the same pace.

Economic and market conditions have in the past adversely affected, and may in the future adversely affect, our operating results.
We are subject to risks arising from adverse changes and uncertainty in domestic and global economies. For example, past domestic and global economic downturns resulted in reduced demand for information technology, including enterprise software and services. The direction and relative strength of the global economy continues to be uncertain and volatile, and could be adversely affected by, among other things, additional failures of the U.S. government to raise the debt ceiling resulting in a government shut down and reductions in U.S. government spending, concerns regarding Europe's potential sovereign-debt crisis and other potential financial issues affecting the European economy, unrest in the Middle East, further slowing of the Chinese economy, tightening in the credit markets, downturns in the financial industry, and other geopolitical factors, and makes it difficult for us to forecast operating results and to make decisions about future investments. We cannot predict the duration of these economic conditions or the impact they may have on our customers or business. Information technology spending has historically declined or been postponed as general economic and market conditions have worsened. During challenging and uncertain economic times and in tight credit markets, many customers delay or reduce technology purchases. Contract negotiations may become more protracted or difficult if customers institute additional internal approvals for technology purchases or require more negotiation of contract terms and conditions. These economic conditions, and uncertainty as to the general direction of the macroeconomic environment, are beyond our control and could result in reductions in sales of our products, longer sales cycles, difficulties in collection of accounts receivable or delayed payments, slower adoption of new technologies, increased price competition and reductions in the rate at which our customers renew their maintenance agreements and procure consulting services.

Our success depends on our ability to overcome significant competition.
The market for our products and services is extremely competitive and subject to rapid change. We compete with a variety of large and small providers of infrastructure, integration, business optimization and process automation and collaboration software, including companies such as IBM, Oracle and SAP generally, as well as other companies with respect to only certain of the business lines in which we operate. We also face competition for certain aspects of our product and service offerings from major systems integrators, and our customers have alternatives to our proprietary software from open source software providers that provide software and intellectual property, typically without charging license fees, or from other

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competitors offering products through alternative business models, such as software as a service. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition, and larger customer bases than we do. This may allow our present or future competitors to develop products comparable or superior to those we offer; adapt more quickly than we do to new technologies, evolving industry trends or customer requirements; execute more effectively on their marketing and sales strategies and leverage their internal relationships; and devote greater resources to the development, promotion and sale of their products than we do. For example, some of our competitors offer products outside our segment and routinely bundle these products with their infrastructure software products. Also, some of our competitors are expanding their competitive product offerings and strengthening their market position through increases in capital expenditures for internal research and development. Accordingly, we may not be able to compete effectively in our markets or against existing and future competitors, which could adversely affect our business and operating results.

Additionally, consolidation in the software industry has been a trend in recent years and is continuing at a rapid pace. Our current and potential competitors could make additional strategic acquisitions, consolidate their operations, or establish cooperative relationships among themselves or with other solution providers, allowing them to broaden their offerings of products and solutions and more effectively address the needs of our prospective customers, including acting as sole-source vendors for our customers. If any of this were to occur, it could adversely affect our business and operating results.

Our strategy contemplates future acquisitions, which may present risks including our incurring unanticipated expenses or additional debt, difficulty in integrating our operations, competition from other potential acquirors, financing challenges and dilution to our stockholders and may harm our operating results.
Our success depends in part on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. We have acquired and expect to continue to acquire complementary businesses, products and technologies as part of our corporate strategy. In this regard, we have made a number of strategic acquisitions in recent years. We do not know if we will be able to complete any future acquisitions or whether we will be able to successfully integrate any acquired business, operate it profitably or retain its key employees or customers. Acquiring any new business, product or technology could be expensive and time-consuming, disrupt our ongoing business and financial performance, distract our management, increase our debt to finance such acquisition, increase our capital expenditures to support such new business and require us to manage larger and more complex operations. Therefore, we may not be able, either immediately post-acquisition or ever, to replicate the pre-acquisition revenues achieved by companies that we acquire or achieve the benefits of the acquisition we anticipated in valuing the businesses, products or technologies we acquire. Furthermore, the costs of integrating acquired companies in international transactions can be particularly high, due to, among other things, local laws and regulations. If we are unable to integrate any newly acquired entity, products or technology effectively, our business, financial condition and operating results could suffer. In addition, any amortization or impairment of acquired intangible assets, stock-based compensation or other charges resulting from the costs of acquisitions could harm our operating results.

In addition, we may face competition for acquisition targets from larger and more established companies with greater financial resources. Therefore, we may engage in discussions for, and incur expenses and fees for, acquisitions that do not ultimately occur. This could result in a diversion of our management's time and increased expenses.

Also, in order to finance any acquisition, we may need to raise additional funds through public or private financings or use our cash reserves. In that event, we may not be able to raise additional funds or we could be forced to obtain equity or debt financing on terms that are not favorable to us or that result in dilution to our stockholders. Use of our cash reserves for acquisitions could limit our financial flexibility in the future. The terms of existing or future loan agreements may place limits on our ability to incur additional debt to finance acquisitions. Further, if we finance an acquisition by issuing shares of stock or other rights with respect to our capital stock, our existing stockholders would be diluted and earnings per share may decrease. If we are not able to acquire strategically attractive businesses, products or technologies, we may not be able to remain competitive in our industry or achieve our overall growth plans.

We may not be able to achieve our key initiatives and grow our business as anticipated.
While we currently intend to grow our business by pursuing key initiatives to: broaden our product platform through internal development and acquisitions; increase our sales capacity by expanding our direct sales organization and developing our channel partnerships; expand our product offerings to new vertical markets; and employ marketing programs to increase awareness of our company and our products among existing and prospective customers, we cannot assure you that we will be able to achieve these key initiatives. Our success depends on our ability to: appropriately manage our expenses as we grow our organization; identify or acquire companies or assets at attractive valuations; enter into beneficial channel relationships;

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develop new products; and successfully execute our marketing and sales strategies. If we are not able to execute on these actions, our business may not grow as we anticipated, and our operating results could be adversely affected.

If we cannot successfully recruit, retain and integrate highly skilled employees, we may not be able to execute our business strategy effectively.
If we fail to retain and recruit key management, sales and other skilled employees, our business and our ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer. As we grow, we must invest significantly in building our sales, marketing and engineering groups. Competition for these people in the software industry is intense, and we may not be able to successfully recruit, train or retain qualified personnel. We are competing against companies with greater financial resources and name recognition for these employees, and as such, there is no assurance that we will be able to meet our hiring needs or hire the most qualified candidates. In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including equity compensation. Our equity compensation program includes performance-based restricted stock units that contain performance conditions relating to our financial performance that make the future value of those awards uncertain. If the anticipated value of such performance-based awards is not earned, if our total compensation package is not viewed as competitive, or if we do not obtain stockholder approval to continue granting equity awards that we believe are necessary to remain competitive, our ability to attract, retain, and motivate executives and key employees could be weakened. The success of our business is also heavily dependent on the leadership of our key management personnel, including Vivek Ranadivé, our Chairman and Chief Executive Officer. The loss of one or more key employees could adversely affect our continued operations.
 
In addition, we must successfully integrate new employees into our operations and generate sufficient revenues to justify the costs associated with these employees. If we fail to successfully integrate employees or to generate the revenue necessary to justify employee-related expenses, we may be forced to reduce our headcount, which could force us to incur significant expenses and could harm our business and operating results.

Our intellectual property or proprietary rights could be misappropriated, which could force us to become involved in expensive and time-consuming litigation and could harm our business and results of operations.
We regard our intellectual property as critical to our success. Accordingly, we rely upon a combination of copyrights, service marks, trademarks, trade secret rights, patents, confidentiality agreements and licensing agreements to protect our intellectual property. Despite these protections, a third party could misappropriate our intellectual property. Any misappropriation of our proprietary information by third parties could harm our business, financial condition and operating results.

In addition, the laws of some countries do not provide the same level of protection of our proprietary information as do the laws of the United States. If our proprietary information or material were misappropriated or challenged, we might have to engage in litigation to protect it. We might not succeed in protecting our proprietary information if we initiate intellectual property litigation, and, in any event, such litigation would be expensive and time-consuming, could divert our management's attention away from running our business and could seriously harm our business.

Claims by others that our products may infringe their intellectual property rights may cause us to incur unexpected costs or prevent us from selling our products.
Third parties may claim that certain of our products infringe their patents or other intellectual property rights. In addition, our use of open source software components in our products may make us vulnerable to claims that our products infringe third-party intellectual property rights, in particular because many of the open source software components we may incorporate with our products may be developed by numerous independent parties over whom we exercise no supervision or control. "Open source software" is software that is covered by a license agreement which permits the user to liberally copy, modify and distribute the software, typically free of charge. Further, because patent applications in the United States and many other countries are not publicly disclosed at the time of filing, applications covering technology used in our software products may have been filed without our knowledge. We may be subject to legal proceedings and claims from time to time, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us or our licensees in connection with their use of our products. Our software license agreements typically provide for indemnification of our customers for intellectual property infringement claims. Intellectual property litigation, with or without merit, is expensive and time consuming, could cause product shipment delays and could divert our management's attention away from running our business and seriously harm our business. If we were to discover that our products violated the intellectual property rights of others, we would have to obtain licenses from these parties, which could require the payment of royalty or licensing fees, in order to continue marketing our products without substantial reengineering. We might not be able to obtain the necessary licenses on acceptable terms or at all, and if we could not obtain such licenses, we might not be able to reengineer our products

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successfully or in a timely fashion. If we fail to address any infringement issues successfully, we would be forced to incur significant costs, including damages and potentially satisfying indemnification obligations that we have to our customers, and we could be prevented from selling certain of our products.

We operate internationally and face risks attendant to those operations.
We earn a significant portion of our total revenues from international sales generated through our foreign direct and indirect operations. As a result of these sales operations, we face a variety of risks, including:

local political and economic instability;
tariffs, quotas and trade barriers and other varying regulatory or contractual requirements or limitations;
the engagement of activities by our employees, contractors, partners and agents, especially in countries with developing economies, that are prohibited by international and local trade and labor laws and other laws prohibiting corrupt payments to government officials, including the Foreign Corrupt Practices Act, the UK Bribery Act of 2010 and export control laws, in spite of our policies and procedures designed to ensure compliance with these laws;
restrictions on the transfer of funds, including with respect to restrictions on our ability to repatriate foreign cash to the United States at favorable tax rates;
currency exchange rate fluctuations;
overlapping tax regimes;
increased expense of developing, testing and making localized versions of our products;
managing our international operations; and
longer payment cycles and credit and collectibility risk on our trade receivables.

Any of these factors, either individually or in combination, could materially impact our international operations and adversely affect our business as a whole.

Increases in services revenue may decrease overall margins or affect timing of revenue recognition.
We have historically realized, and may continue in the future to realize, an increasingly high percentage of our revenue from consulting services, which has a lower profit margin than license or maintenance revenue. As a result, if consulting and training services revenue increases as a percentage of total revenue, our overall profit margin may decrease, which could impact our stock price. 

Additionally, our customers license our software in a number of ways, including as perpetual licenses and as hosted services. We provide hosted service offerings that are made available in a cloud deployment model, and we recognize revenue from these services ratably over the term of a subscription period. Any broad-based change in market trends or our business model and pricing policies, or any significant increase in the percentage of our business generated from such a subscription model, could cause certain revenues to be recognized over time as opposed to upfront, which could delay revenue recognition and have a negative impact on our operating results.

Changes in foreign currency exchange rates could negatively affect our operating results.
In addition to receiving revenue and incurring expenses in U.S. dollars, we also receive revenue and incur expenses in approximately twenty-five foreign currencies. As a result of these international sales and operations, our revenue, expenses and net income are impacted by foreign exchange rate fluctuations against the U.S. dollar. For example, any strengthening of the U.S. dollar against foreign currencies would result in lower revenues from our international sales when sales are translated into U.S. dollars, although these decreases may be partially offset by lower operating expenses. Additionally, customers in foreign countries that incur higher costs due to the strengthening of the U.S. dollar may elect to delay payments or default on credit extended to them. Any material delay or default in our collection of significant accounts could have a negative effect on our results of operations. Additionally, any strengthening of the U.S. dollar could require us to offer discounts, reduce pricing or offer other incentives to mitigate any negative effects on demand from such rise in the U.S. dollar. Further, in the event that the U.S. dollar weakens compared to foreign currencies, we may incur higher operating expenses in those locations and, therefore, our business, financial condition and operating results could suffer. As our international operations continue to grow, or if large fluctuations in foreign exchange rates continue, our revenue, operating expenses and income may be adversely affected.

We enter into foreign currency forward contracts, the majority of which mature within approximately one month, in an effort to manage our exposure from changes in value of certain foreign currency denominated net assets and liabilities. Our foreign currency forward contracts are intended to reduce, but do not eliminate, the impact of currency exchange rate movements. For example, we do not execute forward contracts in all currencies in which we conduct business. In addition, our hedging program may not reduce the impact of short-term or long-term volatility in foreign exchange rates. Accordingly,

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amounts denominated in such foreign currencies may fluctuate in value and produce significant earnings and cash flow volatility.

We may not be able to successfully offer products and enhancements that respond to emerging technological trends and customers' needs.
If we are not successful in developing enhancements to existing products and new products in a timely manner, achieving customer acceptance for our existing and new product offerings or generating higher average selling prices, our gross margins may decline, and our business and operating results may suffer. Furthermore, any of our new product offerings or significant enhancements to current product offerings could cause some customers to delay making new or additional purchases while they fully evaluate any new offerings we might have introduced to the market, which in turn may slow sales and adversely affect operating results for an indeterminate period of time. Also, we may not execute successfully on our product plans because of errors in product planning or timing or acceptance by the marketplace, technical hurdles that we fail to overcome in a timely fashion or a lack of appropriate resources. This could result in competitors providing those solutions before we do and loss of market share, net sales and earnings.  

The inability to upsell to our current customers or the loss of any significant customer could harm our business and cause our stock price to decline.
We do not have long-term sales contracts with any of our customers. Our customers may choose not to purchase our products or not to use our services in the future. As a result, a customer that generates substantial revenue for us in one period may not be a source of revenue in subsequent periods. Any inability on our part to upsell to and generate revenues from our existing customers or the loss of a significant customer could adversely affect our business and operating results.

The use of open source software in our products may expose us to additional risks.
Certain open source software is licensed pursuant to license agreements that require a user who distributes the open source software as a component of the user's software to disclose publicly part or all of the source code to the user's software. This effectively renders what was previously proprietary software open source software. As competition in our markets increases, we must strive to be cost-effective in our product development activities. Many features we may wish to add to our products in the future may be available as open source software and our development team may wish to make use of this software to reduce development costs and speed up the development process. While we carefully monitor the use of all open source software and try to ensure that no open source software is used in such a way as to require us to disclose the source code to the related product, such use could inadvertently occur. Additionally, if a third party has incorporated certain types of open source software into its software but has failed to disclose the presence of such open source software and we embed that third party software into one or more of our products, we could, under certain circumstances, be required to disclose the source code to our product. This could have a material adverse effect on our business.

Market acceptance of new platforms, standards and technologies may require us to undergo the expense of developing and maintaining compatible product solutions.
Our software products can be licensed for use with a variety of platforms, standards and technologies, and we are constantly evaluating the feasibility of adding new platforms, standards and technologies. There may be future or existing platforms, standards and technologies that achieve popularity in the marketplace which may not be architecturally compatible with our software products. In addition, the effort and expense of developing, testing and maintaining software products will increase as more platforms, standards and technologies achieve market acceptance within our target markets. If we are unable to achieve market acceptance of our software products or adapt to new platforms, standards and technologies, our sales and revenues will be adversely affected.

Developing and maintaining different software products could place a significant strain on our resources and software product release schedules, which could harm our revenue and financial condition. If we are not able to develop software for accepted platforms, standards and technologies, our license and service revenues and our gross margins could be adversely affected. In addition, if the platforms, standards and technologies we have developed software for are not accepted, our license and service revenues and our gross margins could be adversely affected.

Any unauthorized, and potentially improper, actions of our personnel could adversely affect our business, operating results and financial condition.
 The recognition of our revenue depends on, among other things, the terms negotiated in our contracts with our customers. Our personnel may act outside of their authority and negotiate additional terms without our knowledge. We have implemented policies to help prevent and discourage such conduct, but there can be no assurance that such policies will be

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followed. For instance, in the event that our sales personnel negotiate terms that do not appear in the contract and of which we are unaware, whether such additional terms are written or verbal, we could be prevented from recognizing revenue in accordance with our plans. Furthermore, depending on when we learn of unauthorized actions and the size of the transactions involved, we may have to restate revenue for a previously reported period, which would seriously harm our business, operating results and financial condition.

Our stock price may be volatile, which could cause investors to incur significant losses.
The stock market in general and the stock prices of technology companies in particular, have experienced volatility which has often been unrelated to the operating performance of any particular company or companies. Some of the factors that may affect our common stock price other than our operating results include:

uncertainty about global economic or political conditions;
general volatility in the capital markets;
business developments by us or our competitors, including material acquisitions or dispositions and strategic investments;
industry developments and announcements by us or our competitors;
changes in estimates and recommendations by securities analysts;
speculation in the press or investment community; and
changes in the accounting rules.

During our fiscal year 2013, our stock price fluctuated between a low of $18.18 and a high of $27.15. If market or industry-based fluctuations continue, our stock price could decline in the future regardless of our actual operating performance and investors could incur significant losses.

We may incur impairments to goodwill, intangible or long-lived assets.
We review our goodwill, intangible and long-lived assets for impairment annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.
Significant negative industry or economic trends, a decline in the market price of our common stock, reduced estimates of future cash flows or disruptions to our business could indicate that goodwill, intangible or long-lived assets might be impaired. If, in any period, our stock price decreases to the point where our market capitalization is less than our book value, this too could indicate a potential impairment and we may be required to record an impairment charge in that period.
Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely on projections of future operating performance. We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results. Additionally, if our analysis results in an impairment to our goodwill, we would be required to record a non-cash charge to earnings in our financial statements during a period in which such impairment is determined to exist.
Any of these factors could have a negative impact on our operating results.

Our debt agreements contain certain restrictions that may limit our ability to operate our business.
The agreements governing some of our debt contain, and any other future debt agreement we enter into may contain, restrictive covenants that limit our ability to operate our business, including, in each case subject to certain exceptions, restrictions on our ability to:

incur indebtedness;
incur indebtedness at the subsidiary level;
grant liens;
enter into certain mergers or sell all or substantially all of our assets;
make certain payments on our equity, including paying dividends;
make dispositions;
make investments;
change our business;
enter into transactions with our affiliates; and
enter into certain restrictive agreements.


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In addition, our debt agreements contain financial covenants and additional affirmative and negative covenants. Our ability to comply with these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. If we are not able to comply with all of these covenants for any reason and we have debt outstanding at the time of such failure, some or all of our outstanding debt could become immediately due and payable and the incurrence of additional debt under the credit facilities would not be allowed. If our cash is utilized to repay any outstanding debt, depending on the amount of debt outstanding, we could experience an immediate and significant reduction in working capital available to operate our business. In the event of an acceleration of our debt obligations, we may also not have, and may not be able to obtain, sufficient funds to make any accelerated payments, including under our convertible senior notes.

As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise be beneficial to us, such as strategic acquisitions or joint ventures.

The conversion provisions of our convertible senior notes require us to deliver cash and, in certain circumstances, common stock upon conversion and could dilute the ownership interests of stockholders. In addition, the increase in our debt level from the issuance of the convertible senior notes could adversely affect our liquidity and impede our ability to raise additional capital which may also be affected by the tightening of the capital markets.
In April 2012, we issued $600.0 million aggregate principal amount of convertible senior notes due 2032 (the "Notes"). All of the Notes were outstanding as of November 30, 2013. The Note holders can convert the Notes, under certain circumstances, into cash in an amount generally equal to the lesser of the conversion value and the principal amount of each Note and, for any conversion value greater than the principal amount, into shares of common stock at any time before the Notes mature or we redeem or repurchase them. Upon certain dates (May 5, 2017, May 1, 2022, and May 1, 2027) or the occurrence of certain events including a change in control, the Note holders can require us to repurchase some or all of the Notes.

Upon any conversion of the Notes, we would be required to make cash payments up to the principal amount of any converted Notes. Additionally, our basic earnings per share would be expected to decrease to the extent we are required to issue shares upon conversion because such underlying shares would be included in the basic earnings per share calculation and the conversion would result in dilution to our stockholders. Any new issuance of equity securities, including the issuance of shares upon the conversion of the Notes, could dilute the interests of our then-existing stockholders, including holders who receive shares upon conversion of their Notes, and could decrease the trading price of our common stock and the Notes.

Given that events constituting a "fundamental change" can trigger repurchase obligations, the existence of such repurchase obligations may delay or discourage a merger, acquisition, or other consolidation.

Our ability to service our debt obligations, make cash payments upon conversion and meet our repurchase or repayment obligations of the Notes will depend upon our future performance, which is subject to economic, competitive, financial, and other factors affecting our industry and operations, some of which are beyond our control. Further, we may not be able to generate sufficient cash flows to enable us to meet our expenses and service our debt, as well as to meet any cash conversion, repurchase or repayment obligations of the Notes. This could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate. If we are unable to meet the obligations out of cash flows from operations or other available funds, we may need to raise additional funds through public or private debt or equity financings. We may not be able to borrow money or sell more of our equity securities to meet our cash needs for various reasons, including the tightening of the capital markets. Even if we are able to do so, it may not be on terms that are favorable or reasonable to us. Any of these events could reduce the availability of cash flow to us to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes, which could have an adverse effect on our business, operating results and financial condition.

Any losses we incur as a result of our exposure to the credit risk of our customers and partners could harm our results of operations.
We monitor individual customer payment capability in granting credit arrangements, seek to limit credit to amounts we believe the customers can pay, and maintain reserves we believe are adequate to cover exposure for doubtful accounts. As we have grown our revenue and customer base, our exposure to credit risk has increased. Any material losses we incur as a result of customer defaults could have an adverse effect on our business, operating results and financial condition.


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We may have exposure to additional tax liabilities.
As a multinational corporation, we are subject to income taxes in the United States and various foreign jurisdictions. Significant judgment is required in determining our global provision for income taxes and other tax liabilities. Any change in the geographical allocation of our business could adversely affect our tax rates to the extent the shift is weighted towards jurisdictions with higher tax rates.

In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. Our income tax returns are routinely subject to audits by tax authorities and those authorities often disagree with positions taken by us on our tax returns. Although we regularly assess the likelihood of adverse outcomes resulting from these examinations to determine our estimates of uncertain tax positions, a final determination of tax audits or tax disputes could have an adverse effect on our results of operations and financial condition.

We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes in the United States and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income taxes and may have exposure to additional non-income tax liabilities which could have an adverse effect on our results of operations and financial condition.

In addition, our future effective tax rates could be unfavorably affected by changes in tax rates, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws or their interpretation. Such changes could have a material adverse effect on our results of operations and financial condition.

We may be subject to increased income taxes, and other restrictions and limitations, if we were to decide to repatriate any of our foreign cash balances to the United States.
As of November 30, 2013, we held approximately $315.7 million, or 48%, of our cash and cash equivalents outside of the United States. We use our foreign cash by reinvesting it into our foreign operations. Our current intention is to continue to reinvest the majority of our earnings from foreign operations. Our current plans do not anticipate a need to repatriate cash to fund our domestic operations. In the event cash from foreign operations is needed to fund operations in the U.S. or our foreign cash balance continues to grow such that we are unable to reinvest such cash outside of the United States, it may become increasingly likely that we would repatriate some of our foreign cash balances to the United States. In such event, we would be subject to additional income taxes in the United States.

Additionally, if we were to repatriate foreign cash to the United States, we would use a portion of our domestic net operating loss carryforward which could result in us being subject to cash income taxes on the earnings of our domestic business sooner than would otherwise have been the case.

Any of these scenarios may subject us to costs, restrictions and/or limitations that result in us being unable to use our cash in the manner we desire, which may have a material adverse effect on our results of operations and financial condition.
Changes in existing financial accounting standards or practices, or taxation rules or practices may adversely affect our results of operations.
Changes in existing accounting or taxation rules or practices, new accounting pronouncements or taxation rules, or varying interpretations of current accounting pronouncements or taxation practice could have a significant adverse effect on our results of operations or the manner in which we conduct our business. Further, such changes could potentially affect our reporting of transactions completed before such changes are effective. A change in existing financial accounting standards or practices may even retroactively adversely affect previously reported transactions.

In addition, the Financial Accounting Standards Board is currently working with the International Accounting Standards Board ("IASB") to converge certain accounting principles and to facilitate more comparable financial reporting between companies that are required to follow GAAP and those that are required to follow International Financial Reporting Standards ("IFRS"). These projects may result in different accounting principles under GAAP, which may have a material impact on the way in which we report financial results in areas including, but not limited to, principles for recognizing revenue, lease accounting, and financial statement presentation. A change in accounting principles from GAAP to IFRS may have a material impact on our financial statements should IFRS be incorporated into the financial reporting system for U.S. companies.


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The outcome of litigation pending against us could require us to expend significant resources and could harm our business and financial resources.
Note 14 to our Consolidated Financial Statements included in this Annual Report on Form 10-K describes the litigation pending against us and our directors and officers. The uncertainty associated with substantial unresolved lawsuits or future lawsuits could harm our business, financial condition and reputation. The defense of the lawsuits could result in the diversion of our management's time and attention away from business operations, which could harm our business. Negative developments with respect to the lawsuits could cause our stock price to decline. In addition, although we are unable to determine the amount, if any, that we may be required to pay in connection with the resolution of the current lawsuits or any future lawsuit by settlement or otherwise, any such payment could seriously harm our financial condition and liquidity.

Aspects of our business are subject to privacy concerns and a variety of U.S. and international laws regarding data protection.
Aspects of our business are subject to federal, state and international laws regarding privacy and protection of user data. For example, in the United States, regulations such as the Gramm-Leach-Bliley Act of 1999 (as amended or supplemented), which protects and restricts the use of consumer credit and financial information, and the Health Insurance Portability and Accountability Act of 1996 (as amended or supplemented), which regulates the use and disclosure of personal health information, impose significant requirements and obligations on businesses that may affect the use and adoption of our service. The European Union has also adopted a data privacy directive that requires member states to impose restrictions on the collection and use of personal data that, in some respects, are far more stringent, and impose more significant burdens on subject businesses, than current privacy standards in the United States. We post our privacy policies and practices concerning the use and disclosure of user data on our website. Any failure by us to comply with our posted privacy policies or other federal, state or international privacy-related or data protection laws and regulations could result in proceedings against us by governmental entities or others which could harm our business, operating results and financial condition.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines and penalties, a governmental order requiring that we change our data practices could result, which in turn could harm our business, operating results and financial condition. Compliance with these regulations may involve significant costs or require changes in business practices that result in reduced revenue. Noncompliance could result in penalties being imposed on us or orders that we cease conducting the noncompliant activity.

We face a variety of risks in doing business with the U.S. and foreign governments, various state and local governments, and agencies, including risks related to the procurement process, budget constraints and cycles, termination of contracts and audits.
Our customers include the U.S. government and a number of state and local governments or agencies. There are a variety of risks in doing business with government entities, including:
Procurement. Contracting with public sector customers is highly competitive and can be time-consuming and expensive, requiring that we incur significant up-front time and expense without any assurance that we will win a contract.
Budgetary Constraints and Cycles. Demand and payment for our products and services are impacted by public sector budgetary cycles and funding availability, with funding reductions or delays adversely impacting public sector demand for our products and services.
Termination of Contracts. Public sector customers often have contractual or other legal rights to terminate current contracts for convenience or due to a default. If a contract is terminated for convenience, which can occur if the customer's needs change, we may only be able to collect payment for products or services delivered prior to termination and settlement expenses. If a contract is terminated because of default, we may not recover even those amounts, and we may be liable for excess costs incurred by the customer for procuring alternative products or services.
Audits. The U.S. government and state and local governments and agencies routinely investigate and audit government contractors for compliance with a variety of complex laws, regulations, and contract provisions relating to the formation, administration or performance of government contracts, including provisions governing reports of and remittances of fees based on sales under government contracts, price protection, compliance with socio-economic policies, and other terms that are particular to government contracts. If, as a result of an audit or review, it is determined that we have failed to comply with such laws, regulations or contract provisions, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, refunds of a portion of fees received, suspension of payments, cost associated with the triggering of price reduction clauses, fines and suspensions or debarment from future government business, and we may suffer harm to our reputation if we are found to have violated terms of our government contracts.


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Our customers also include a number of foreign governments and agencies. Similar procurement, budgetary, contract and audit risks also apply to our doing business with these foreign entities. In addition, compliance with complex regulations and contracting provisions in a variety of jurisdictions can be expensive and consume significant management resources. In certain jurisdictions our ability to win business may be constrained by political and other factors unrelated to our competitive position in the market. Each of these difficulties could adversely affect our business and results of operations.

Our software may have defects or errors that could lead to a loss of revenues or product liability claims.
Our products and platforms use complex technologies and, despite extensive testing and quality control procedures, may contain defects or errors, especially when first introduced or when new versions or enhancements are released. If defects or errors are discovered after commercial release of either new versions or enhancements of our products and platforms:

potential customers may delay purchases;
customers may react negatively, which could reduce future sales;
our reputation in the marketplace may be damaged;
we may have to defend against product liability claims;
we may be required to indemnify our customers, distributors, original equipment manufacturers or other resellers;
we may incur additional service and warranty costs; and
we may have to divert additional development resources to correct the defects and errors, which may result in the delay of new product releases or upgrades.

If any or all of the foregoing occur, we may lose revenues, incur higher operating expenses and lose market share, any of which could severely harm our financial condition and operating results.

Any failure by us to meet the requirements of current or newly-targeted customers may have a detrimental impact on our business or operating results.
We may wish to expand our customer base into markets in which we have limited experience. In some cases, customers in different markets, such as financial services or government, have specific regulatory or other requirements which we must meet. For example, in order to maintain contracts with the United States government, we must comply with specific rules and regulations relating to and that govern such contracts. Government contracts are generally subject to audits and investigations which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business. If we fail to meet such requirements in the future, we could be subject to civil or criminal liability or a reduction of revenue which could harm our business, operating results and financial condition.

Compliance with changing regulations of corporate governance and public disclosure may result in additional expenses.
Because we are a publicly-traded company, we are subject to certain federal, state and other rules and regulations, including those required by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, new regulations promulgated by the SEC and the rules of the NASDAQ Marketplace. These and other laws relating to corporate governance and public disclosure have increased our general and administrative expenses. These new or changed laws, regulations and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards result in different outcomes from those intended by regulatory or governing bodies, our business may be harmed.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
Section 404 of the Sarbanes-Oxley Act requires that management report annually on the effectiveness of our internal control over financial reporting and identify any material weaknesses in our internal control and financial reporting environment. If management identifies any material weaknesses, their correction could require remedial measures which could be costly and time-consuming. In addition, the presence of material weaknesses could result in financial statement errors which in turn could require us to restate our financial statements. Any identification by us or our independent registered public

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accounting firm of material weaknesses, even if quickly remedied, could damage investor confidence in the accuracy and completeness of our financial reports, which could affect our stock price and potentially subject us to litigation.

The continuous process of maintaining and adapting our internal controls and complying with Section 404 is expensive and time-consuming, and requires significant management attention. We cannot be sure that our internal control measures will continue to provide adequate control over our financial processes and reporting and ensure compliance with Section 404. Any failure by us to comply with Section 404 could subject us to a variety of administrative sanctions and harm our reputation, which could reduce our stock price.

Natural or other disasters could disrupt our business and result in loss of revenue or in higher expenses.
Natural disasters, terrorist activities and other business disruptions could seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate headquarters and many of our operations are located in California, a seismically active region. In addition, many of our current and potential customers are concentrated in a few geographic areas. A natural disaster in one of these regions could have a material adverse impact on our U.S. and foreign operations, operating results and financial condition. Further, any unanticipated business disruption caused by Internet security threats, damage to global communication networks or otherwise could have a material adverse impact on our operating results.

Some provisions in our certificate of incorporation and bylaws, as well as our stockholder rights plan, may have anti-takeover effects.
We have a stockholder rights plan providing for one right for each outstanding share of our common stock. Each right, when exercisable, entitles the registered holder to purchase certain securities at a specified purchase price. The rights plan may have the anti-takeover effect of causing substantial dilution to a person or group that attempts to acquire TIBCO on terms not approved by our Board of Directors. The existence of the rights plan could limit the price that certain investors might be willing to pay in the future for shares of our common stock and could discourage, delay or prevent a merger or acquisition that stockholders may consider favorable. In addition, provisions of our current certificate of incorporation and bylaws, as well as Delaware corporate law, could make it more difficult for a third party to acquire us without the support of our Board of Directors, even if doing so would be beneficial in the short term to our stockholders.  

ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
 
ITEM 2.
PROPERTIES
Our principal administrative, sales, marketing, service and research and development facilities are located in a four building campus totaling approximately 292,000 square feet in Palo Alto, California, which we purchased in June 2003. In connection with the purchase, we entered into a 51-year lease of the land upon which the buildings are located. Further information on the terms of the building acquisition can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operation" and Note 7 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
In addition to our Palo Alto campus and other facilities in the United States, we lease facilities in Maidenhead and London, England, to serve as our EMEA headquarters; as well as Rotterdam, Netherlands; Pune, India; Munich, Germany; Paris, France; Gothenburg, Sweden; and Sydney, Australia; which are primarily used for sales, field support or research and development. We also lease facilities in approximately 60 other cities throughout the world. Lease terms range from month-to-month on certain offices to ten years on certain direct leases. We are continuously evaluating the adequacy of existing facilities and additional facilities in new cities, and we believe that suitable additional space will be available in the future on commercially reasonable terms as needed.
 
ITEM 3.
LEGAL PROCEEDINGS
See Note 14 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for information responsive to this item.
 
ITEM 4.
MINE SAFETY DISCLOSURES
Not Applicable.

16


PART II
 
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted on the NASDAQ Global Select Market ("NASDAQ") under the symbol "TIBX." The following table presents the high and low intra-day sale prices of our common stock on NASDAQ during the fiscal quarters indicated:
 
Fiscal Year 2013
 
High
 
Low
First quarter ended March 3, 2013
 
$
25.44

 
$
18.95

Second quarter ended June 2, 2013
 
$
24.02

 
$
18.18

Third quarter ended September 1, 2013
 
$
25.76

 
$
19.92

Fourth quarter ended November 30, 2013
 
$
27.15

 
$
22.71

Fiscal Year 2012
 
 
 
 
First quarter ended March 4, 2012
 
$
29.95

 
$
20.04

Second quarter ended June 3, 2012
 
$
34.67

 
$
25.26

Third quarter ended September 2, 2012
 
$
30.78

 
$
25.00

Fourth quarter ended November 30, 2012
 
$
32.95

 
$
23.58

Holders of Record
As of January 20, 2014, there were approximately 1,852 stockholders of record of our common stock.
Dividends
We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. In addition, our revolving credit facility restricts our ability to pay cash dividends, unless there is no default under the facility and our consolidated leverage ratio is less than 2.75:1.00 after giving effect to such dividend. This consolidated leverage ratio decreases to 2.50:1.00 with respect to the second fiscal quarter of our fiscal year 2014.
Equity Compensation Plan Information
For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report on Form 10-K.


17


Performance Graph
The following graph compares the five-year cumulative total return to stockholders on our common stock for the period ending November 30, 2013, with the cumulative total return of the NASDAQ Composite Index and the S&P Information Technology Index. The graph assumes that $100.00 was invested on November 30, 2008 in each of our common stock, the NASDAQ Composite Index and the S&P Information Technology Index, and that all dividends were reinvested. No cash dividends have been declared or paid on our common stock. The comparisons in the table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common stock.
 
 
 
As of November 30,
 
 
2008
 
2009
 
2010
 
2011
 
2012
 
2013
TIBCO Software Inc.
 
$
100.00

 
$
177.69

 
$
405.79

 
$
566.12

 
$
517.56

 
$
499.38

NASDAQ Composite Index
 
$
100.00

 
$
141.56

 
$
166.07

 
$
175.98

 
$
205.31

 
$
273.14

S&P Information Technology Index
 
$
100.00

 
$
155.82

 
$
172.27

 
$
187.34

 
$
213.27

 
$
262.95


Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On April 26, 2013, we announced that our Board of Directors approved a new stock repurchase program pursuant to which we may repurchase up to $300.0 million of our outstanding common stock from time to time in the open market or through privately negotiated transactions. In connection with the approval of this program, our Board of Directors also terminated our previous $300.0 million stock repurchase program from March 2012, and the remaining authorized amount of approximately $75.8 million under the March 2012 stock repurchase program was canceled. As of November 30, 2013, the remaining authorized amount for stock repurchases under the April 2013 stock repurchase program was approximately $240.7 million.

18


The following table provides information about the repurchase of our common stock during the three months ended November 30, 2013 (in thousands, except per share data):
 
Period
 
Total Number of
Shares Purchased
 
Average Price
Paid per Share
 
Total Number of Shares Purchased as Part of  Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet Be  Purchased Under the Plans or Programs
September 1 – September 30
 

 
$

 

 
$
266,183

October 1 – October 31
 
1,000

 
$
25.45

 

 
$
240,731

November 1 – November 30
 

 
$

 

 
$
240,731

Total
 
1,000

 
$
25.45

 

 
 

19


ITEM 6.
SELECTED FINANCIAL DATA
The selected consolidated financial data below have been derived from our audited financial statements. The following table should be read in conjunction with "Management’s Discussion and Analysis of Financial Condition and Results of Operation" and our Consolidated Financial Statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The historical results presented below are not indicative of any future results.
All amounts presented in the table below are stated in thousands, except for per share data.
 
 
 
Year Ended November 30,
 
 
2013
 
2012
 
2011
 
2010
 
2009
Selected Consolidated Statements of Operations Data:
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
 
License
 
$
405,471

 
$
410,306

 
$
377,618

 
$
301,532

 
$
247,237

Service and maintenance
 
664,479

 
614,307

 
542,628

 
452,475

 
374,151

Total revenue
 
1,069,950

 
1,024,613

 
920,246

 
754,007

 
621,388

Cost of revenue:
 
 
 
 
 
 
 
 
 
 
License
 
47,324

 
41,363

 
35,309

 
35,325

 
28,252

Service and maintenance
 
260,121

 
241,452

 
212,066

 
162,468

 
130,800

Total cost of revenue
 
307,445

 
282,815

 
247,375

 
197,793

 
159,052

Gross profit
 
762,505

 
741,798

 
672,871

 
556,214

 
462,336

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research and development
 
170,922

 
154,535

 
143,173

 
124,654

 
108,691

Sales and marketing
 
348,302

 
317,001

 
285,366

 
240,357

 
204,212

General and administrative
 
65,950

 
70,868

 
59,990

 
49,260

 
46,666

Amortization of acquired intangible assets
 
18,852

 
19,654

 
19,149

 
16,414

 
14,165

Acquisition related and other
 
1,509

 
2,672

 
1,840

 
3,421

 

Restructuring charges
 
12,553

 
(648
)
 
8,926

 
6,953

 

Total operating expenses
 
618,088

 
564,082

 
518,444

 
441,059

 
373,734

Income from operations
 
144,417

 
177,716

 
154,427

 
115,155

 
88,602

Interest and other income (expense), net
 
521

 
994

 
(472
)
 
(160
)
 
3,983

Interest expense
 
(34,330
)
 
(23,396
)
 
(4,020
)
 
(4,123
)
 
(2,968
)
Income before income taxes
 
110,608

 
155,314

 
149,935

 
110,872

 
89,617

Provision for income taxes
 
26,400

 
33,200

 
37,300

 
32,401

 
27,097

Net Income
 
84,208

 
122,114

 
112,635

 
78,471

 
62,520

Less: Net income attributable to noncontrolling interest
 
188

 
107

 
229

 
383

 
218

Net income attributable to TIBCO Software Inc.
 
$
84,020

 
$
122,007

 
$
112,406

 
$
78,088

 
$
62,302

Net income per share attributable to TIBCO Software Inc.:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.52

 
$
0.76

 
$
0.70

 
$
0.49

 
$
0.37

Diluted
 
$
0.50

 
$
0.72

 
$
0.65

 
$
0.46

 
$
0.36

Shares used in computing net income per share attributable to TIBCO Software Inc.:
 
 
 
 
 
 
 
 
 
 
Basic
 
160,963

 
160,330

 
161,469

 
160,959

 
168,970

Diluted
 
167,848

 
169,698

 
173,272

 
170,953

 
172,328

 


20


 
 
As of November 30,
 
 
2013
 
2012
 
2011
 
2010
 
2009
Selected Consolidated Balance Sheets Data:
 
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and short-term investments
 
$
745,951

 
$
761,720

 
$
308,373

 
$
245,493

 
$
292,836

Working capital
 
624,923

 
600,509

 
192,263

 
168,853

 
218,055

Total assets
 
2,006,113

 
1,946,908

 
1,332,938

 
1,204,999

 
1,166,339

Total long-term debt
 
540,022

 
524,466

 
65,711

 
38,108

 
42,525

Total TIBCO Software Inc. stockholders’ equity
 
952,217

 
905,174

 
848,066

 
808,568

 
796,749



21


ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements relate to expectations concerning future events or matters that are not historical facts. Words such as "projects," "believes," "anticipates," "plans," "expects," "intends," "strategy," "continue," "will," "estimate," "forecast" and similar words and expressions are intended to identify forward-looking statements, although these words are not the only means of identifying these statements. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including, but not limited to, the factors set forth under Item 1A. "Risk Factors." This discussion should be read in conjunction with our Consolidated Financial Statements and accompanying notes which appear elsewhere in this Annual Report on Form 10-K. All forward-looking statements and reasons why results may differ included in this Annual Report on Form 10-K are made as of the date hereof, and we assume no obligation to update any such forward-looking statements or reasons why actual results may differ.
Executive Overview
Our products are currently licensed by companies worldwide in diverse industries such as financial services, telecommunications, energy, retail, life sciences, manufacturing, transportation, government, insurance, and business services. We sell our products through a direct sales force and through alliances with leading software vendors and system integrators.
Our revenue consists primarily of license and maintenance fees from our customers, distributors and partners (including system integrators, resellers, professional service organizations and business partners) who embed our software in their products. In addition, we receive fees from our customers for providing consulting services.
Our revenue is generally derived from a diverse customer base. No single customer represented greater than 10% of our total revenue in fiscal years 2013, 2012 or 2011. As of November 30, 2013 and 2012, no single customer had a balance in excess of 10% of our net accounts receivable. We establish allowances for doubtful accounts based on our evaluation of collectibility and an allowance for returns and discounts based on specifically identified credits and historical experience.
For the fiscal year ended November 30, 2013, we recorded total revenue of $1,070.0 million, an increase of 4% over fiscal year 2012. License revenue was $405.5 million, a decrease of 1% over the previous year. In addition, we generated cash flow from operations of $206.0 million, for a decrease of 13% year-over-year. Diluted earnings per share under generally accepted accounting principles in the United States of America ("GAAP") was $0.50 in fiscal year 2013 as compared to $0.72 for fiscal year 2012 for a decrease of 30%. We ended fiscal year 2013 with $746.0 million in cash, cash equivalents and short-term investments, while also having spent approximately $130.7 million to repurchase shares of our common stock during fiscal year 2013.
We have an active acquisition program. In fiscal year 2013, we acquired Extended Results, Inc (“Extended Results”), a provider of mobile business intelligence software and services, StreamBase Systems, Inc. (“StreamBase”), a provider of high performance event processing and real-time analytics software and Maporama Solutions (“Maporama”), a provider of location intelligence and geospatial analytics solutions. In fiscal years 2012 and 2011, we acquired a total of three businesses.
We currently intend to grow our business by pursuing key initiatives to: broaden our product platform through internal development and acquisitions; increase our sales capacity by expanding our direct sales organization and developing our channel partnerships; expand our product offerings to new vertical markets; and employ marketing programs to increase awareness of us and our products among existing and prospective customers. Whether or not we are successful depends on our ability to: appropriately manage our expenses as we grow our organization; identify or acquire companies or assets at attractive valuations; enter into beneficial channel relationships; develop new products; and successfully execute our marketing and sales strategies.
Critical Accounting Policies, Judgments and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that can have a significant impact on the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or

22


conditions. On a regular basis we evaluate our estimates, assumptions and judgments and make changes accordingly. We also discuss our critical accounting estimates with the Audit Committee of our Board of Directors. We believe that the estimates, assumptions and judgments involved in revenue recognition, allowances for doubtful accounts, returns and discounts, stock-based compensation, business combination, impairment of goodwill, intangible and long-lived assets and accounting for income taxes have the greatest potential impact on our Consolidated Financial Statements, so we consider these to be our critical accounting policies.
We discuss below the critical accounting estimates associated with these policies. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results. For further information on our significant accounting policies, see Note 2 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Revenue Recognition.    License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been shipped or electronically delivered, the license fee is fixed or determinable and collection of the resulting receivable is probable. When contracts contain multiple software and software-related elements (for example, software license, maintenance and professional services) wherein Vendor-Specific Objective Evidence ("VSOE") exists for all undelivered elements, we account for the delivered elements in accordance with the "Residual Method." VSOE of fair value for maintenance and support is established by a stated renewal rate, if substantive, included in the license arrangement or rates charged in stand-alone sales of maintenance and support. VSOE of fair value of consulting and training services is based upon stand-alone sales of those services.

Provided all other revenue criteria are met, the upfront, minimum, non-refundable license fees from original equipment manufacturer ("OEM") customers are recognized upon delivery, and on-going royalty fees are recognized upon reports of units shipped. Revenue on shipments to resellers is recognized when all revenue criteria are met, including evidence of sell-through to the end-user, and is recorded net of related costs to the resellers. Revenue from subscription license agreements, which include software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period.

Maintenance revenue consists of fees for providing software updates on a when-and-if available basis and technical support for software products ("post-contract customer support" or "PCS"). Maintenance revenue is recognized ratably over the term of the agreement. Payments received in advance of services performed are deferred.

Professional services revenue consists primarily of revenue received for assisting with the implementation of our software, on-site support, training and other consulting services. Many customers who license our software also enter into separate professional services arrangements with us. In determining whether professional services revenue should be accounted for separately from license revenue, we evaluate whether the professional services are considered essential to the functionality of the software using factors such as the nature of our software products; whether they are ready for use by the customer upon receipt; the nature of our implementation services, which typically do not involve significant customization to or development of the underlying software code; the availability of services from other vendors; whether the timing of payments for license revenue is coincident with performance of services; and whether milestones or acceptance criteria exist that affect the realizability of the software license fee. Substantially all of our professional services arrangements are billed on a time and materials basis and, accordingly, are recognized as the services are performed. Contracts with fixed or not-to-exceed fees are recognized on a proportional performance model based on actual services performed. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. Training revenue is recognized as training services are delivered. Payments received in advance of consulting or training services performed are deferred and recognized when the related services are performed. Work performed and expenses incurred in advance of invoicing are recorded as unbilled receivables. These amounts are billed in the subsequent month. Allowances for estimated future returns and discounts are provided for upon recognition of revenue.

For arrangements that do not qualify for separate accounting for the license and professional services revenues, including arrangements that involve significant modification or customization of the software, that include milestones or customer specific acceptance criteria that may affect collection of the software license fees or where payment for the software license is tied to the performance of professional services, software license revenue is generally recognized together with the professional services revenue using either the percentage-of-completion or completed-contract method. The completed contract method is used for contracts where there is a risk over final acceptance by the customer or for contracts that are short term in nature. Under the percentage-of-completion method, revenue recognized is equal to the ratio of costs expended to date to the anticipated total contract costs, based on current estimates of costs to complete the project. If there are milestones or acceptance provisions associated with the contract, the revenue recognized will not exceed the most recent milestone achieved or

23


acceptance obtained. If the total estimated costs to complete a project exceed the total contract amount, indicating a loss, the entire anticipated loss would be recognized in the current period.

We enter into multiple element revenue arrangements in which a customer may purchase a combination of software licenses, hosting services, maintenance, professional services and hardware. If a tangible hardware product includes software, we determine if the tangible hardware and the software work together to deliver the product's essential functionality. If so, the entire product is accounted for as a non-software deliverable; otherwise the hardware product and the software are accounted for separately. For multiple element arrangements that contain non-software related elements, for example our hosting services, we allocate revenue to each non-software element based upon the relative selling price of each, and if software and software-related elements are also included in the arrangement, to those elements as a group based on our estimated selling price ("ESP") for the group. When applying the relative selling price method, we determine the selling price for each deliverable using VSOE of selling price, if applicable, or by using third-party evidence ("TPE") of the selling price. If neither VSOE nor TPE of selling price exist for a deliverable, we use our ESP for multiple element arrangements that include non-software components. The objective of ESP is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. We determine ESP by considering multiple factors, including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives and pricing practices. ESP is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element.
We show revenue from sales of software licenses and hardware as license revenue, and revenue from maintenance, professional services and hosting as services and maintenance revenue in our Consolidated Statements of Operations. Revenue recognized from hardware sales represents less than 3% of total revenue.
Allowances for Doubtful Accounts, Returns and Discounts.    We establish allowances for doubtful accounts, returns and discounts based on our review of credit profiles of our customers, contractual terms and conditions, current economic trends and historical payment, return and discount experience. We reassess the allowances for doubtful accounts, returns and discounts each period. Historically, our actual uncollectible accounts, returns, discounts and credits have been consistent with these provisions. However, unexpected events or significant future changes in trends could result in a material impact to our future statements of operations and of cash flows. If we made different judgments or utilized different estimates for any period, material differences in the amount and timing of revenue or bad debt expense recognized could result. Our allowances for doubtful accounts, returns and discounts as a percentage of net revenues were less than 1% in each of fiscal years 2013, 2012 and 2011. See Note 6 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for a summary of activities during the years reported.
Stock-Based Compensation.    We utilize the Black-Scholes option pricing model for determining the estimated fair value of our share-based awards. The Black-Scholes model requires the use of subjective and complex assumptions to determine the fair value of share-based awards, including the option’s expected term and the price volatility of the underlying stock. We determined that a blend of implied volatility and historical volatility is more reflective of the market conditions and a better indicator of expected volatility than historical volatility alone. The fair value of the awards that are ultimately expected to vest is recognized over the requisite service periods typically on a straight-line basis in our Consolidated Statements of Operations. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Since fiscal year 2010, we have granted performance-based restricted stock units ("PRSUs") to our section 16 officers and certain other employees. We recognize the stock-based compensation expense for our PRSUs based on the probability of achieving certain performance criteria, as defined in the PRSU agreements. We then estimate the most probable period in which the performance criteria will be met, if at all, and recognize the expense using the graded vesting attribution method over the remaining recognition period. Due to the long-term nature of the performance goals, assessing the probability of achieving these goals is a subjective process that requires judgment. To the extent we revise this estimate in the future, our share-based compensation cost could be materially impacted in the quarter of revision, as well as in the following quarters. Refer to Note 2 and Note 16 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further details.
A deferred tax asset is recorded over the vesting period as stock compensation cost is recorded. Our ability to realize the deferred tax asset is ultimately based on the actual value of the stock-based awards upon release of the restricted stock unit. If the actual value is lower than the fair value determined on the date of grant, it would result in an increase to our income tax expense for the portion of the deferred tax asset that cannot be realized.
Business Combinations.    We allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed, as well as to in-process research and development, based upon their estimated fair values at

24


the acquisition date. The purchase price allocation process requires our management to make significant estimates and assumptions at the acquisition date with respect to the fair value of:

intangible assets acquired from the acquiree;
software license updates and product support obligations assumed from the acquiree;
tax assets and liabilities assumed from the acquiree;
stock awards assumed from the acquiree that are included in the purchase price; and
pre-acquisition obligations and contingencies assumed from the acquiree.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.
Impairment of Goodwill, Intangible Assets and Long-Lived Assets.    Our goodwill and intangible assets result from our business acquisitions. Goodwill and intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment at least annually or as circumstances indicate their value may no longer be recoverable. We do not carry any intangible assets with indefinite useful lives other than goodwill. We perform our annual impairment test at the end of the fiscal year. As we operate our business in one reporting unit, our goodwill is tested for impairment at the enterprise level. To assess if goodwill is impaired, we first perform a qualitative assessment to determine whether further impairment testing is necessary. If, as a result of the qualitative assessment, we consider it more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, we perform a quantitative impairment test in a two-step process. For the first step, we screen for impairment, and if any possible impairment exists, we undertake a second step of measuring such impairment by performing discounted cash flow analyses. These analyses are based on cash flow assumptions that are consistent with the plans and estimates being used to manage our business. In the first step, we review the carrying amount of our reporting unit at enterprise level compared to the "fair value" of the enterprise based on quoted market prices of our common stock. An excess carrying value to fair value would indicate that goodwill may be impaired. If we determined that goodwill may be impaired, then we would compare the "implied fair value" of the goodwill. We periodically re-evaluate our business and have determined that we continue to operate in one segment, which we consider our sole reporting unit. If our assumptions change in the future, we may be required to record impairment charges to reduce the carrying value of our goodwill. Changes in the valuation of goodwill could materially impact our operating results and financial position.
We evaluate the recoverability of our long-lived assets including amortizable intangible and tangible assets in accordance with authoritative guidance. When events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable, we recognize such impairment in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. Our acquired intangible assets with definite useful lives are amortized on a straight line basis over their useful lives, and periodically tested for impairment. As of November 30, 2013, we had $582.1 million of goodwill, $101.1 million of property and equipment and $119.4 million of acquired intangible assets. If our estimates or the related assumptions change in the future, we may be required to record impairment charges to reduce the carrying value of these assets. Changes in the valuation of long-lived assets could materially impact our operating results and financial position.
To date, there have been no impairments of goodwill, intangibles and long-lived assets.
Accounting for Income Taxes.   We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

As part of the process of preparing our Consolidated Financial Statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposures, if any, under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in current taxes payable and deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets.
We account for uncertain tax issues pursuant to authoritative guidance based on a two-step approach to recognize and measure uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, whether or not under audit, including contemplated resolution of any related appeals or litigation processes. If the first step is met, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be sustained upon ultimate settlement. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, or refinement of estimates due to new information. To the extent that the final outcome of these matters is different than the

25


amounts recorded, such differences will impact our tax provision in our Consolidated Statements of Operations in the period in which such determination is made.
We assess the likelihood that we will be able to realize our deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. The available positive evidence at November 30, 2013 included historical operating profits and a projection of future income.
As of November 30, 2013, we believed that the amount of deferred tax assets recorded on our balance sheet would ultimately be realized on a more-likely-than-not basis. However, should there be a change in our ability to realize our deferred tax assets, our tax provision would increase in the period in which we determine that it is more likely than not that we cannot realize our deferred tax assets.
U.S. income taxes and foreign withholding taxes have not been provided for on a cumulative total of $331.9 million of undistributed earnings for certain non-U.S. subsidiaries. With the exception of our subsidiaries in the United Kingdom and Japan, net undistributed earnings of our foreign subsidiaries are considered to be indefinitely reinvested, and accordingly, no provision for U.S. income taxes has been provided thereon. We have sufficient cash reserves in the U.S. and do not intend to repatriate our foreign earnings. We intend to use the undistributed foreign earnings for acquisitions, local operations expansion and to meet local operating working capital needs. Upon distribution of these earnings in the form of dividends or otherwise, we will be subject to U.S. income taxes net of available foreign tax credits associated with these earnings. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable at this time.
See Note 19 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

26



Results of Operations
The following table presents certain Consolidated Statements of Operations data as percentages of total revenue for the periods indicated:

 
 
Year Ended November 30,
 
 
2013
 
2012
 
2011
Revenue:
 
 
 
 
 
 
License
 
38
 %
 
40
 %
 
41
 %
Service and maintenance
 
62

 
60

 
59

Total revenue
 
100

 
100

 
100

Cost of revenue:
 
 
 
 
 
 
License
 
5

 
4

 
4

Service and maintenance
 
24

 
24

 
23

Total cost of revenue
 
29

 
28

 
27

Gross profit
 
71

 
72

 
73

Operating expenses:
 
 
 
 
 
 
Research and development
 
16

 
15

 
16

Sales and marketing
 
33

 
31

 
31

General and administrative
 
6

 
7

 
6

Amortization of acquired intangible assets
 
2

 
2

 
2

Acquisition related and other
 

 

 

Restructuring charges
 
1

 

 
1

Total operating expenses
 
58

 
55

 
56

Income from operations
 
13

 
17

 
17

Interest income
 

 

 

Interest expense
 
(3
)
 
(2
)
 
(1
)
Other income (expense), net
 

 

 

Income before provision for income taxes
 
10

 
15

 
16

Provision for income taxes
 
2

 
3

 
4

Net income
 
8

 
12

 
12

Less: Net income attributable to noncontrolling interest
 

 

 

Net income attributable to TIBCO Software Inc.
 
8
 %
 
12
 %
 
12
 %
Our Consolidated Results of Operations have included incremental revenue and expenses related to the acquisitions of Extended Results, StreamBase and Maporama in fiscal year 2013, LogLogic in fiscal year 2012, and Nimbus and Loyalty Lab in fiscal year 2011. In connection with these acquisitions, we have incurred additional expenses, including amortization of intangible assets and acquired technology, stock-based compensation, personnel and related costs, facility and infrastructure costs, and other charges.
All amounts presented in the tables in the Results of Operations are stated in thousands of dollars, except percentages and unless otherwise stated.

Total Revenue
Our total revenue consisted primarily of license, service and maintenance fees from our customers, distributors and partners.
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Total revenue
 
$
1,069,950

 
$
1,024,613

 
$
920,246

 
4
%
 
11
%

27


Total revenue in fiscal year 2013 compared to fiscal year 2012 increased by $45.3 million or 4%. The increase was primarily due to a $50.2 million or 8% increase in service and maintenance revenue. Geographically, we experienced growth in total revenue from the Americas region in fiscal year 2013 where total revenue increased by $54.2 million or 10%.
Total revenue in fiscal year 2012 compared to fiscal year 2011 increased by $104.4 million or 11%. The increase was primarily due to a $71.7 million or 13% increase in service and maintenance revenue and $32.7 million or 9% increase in license revenue. Geographically, we experienced growth in total revenue from all regions in fiscal year 2012. Our total revenue increased by $46.1 million or 9% in Americas, $43.5 million or 13% in EMEA and $14.7 million or 17% in APJ in fiscal year 2012.
We had no single customer that accounted for more than 10% of total revenue in fiscal years 2013, 2012 or 2011. Our products are licensed by companies worldwide in diverse industries, including financial services, telecommunications, energy, retail, life sciences, manufacturing, transportation, government, insurance, and business services sectors.
See Note 21 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on total revenue by region.
License Revenue
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
License revenue
 
$
405,471

 
$
410,306

 
$
377,618

 
(1
)%
 
9
%
Percentage of total revenue
 
38
%
 
40
%
 
41
%
 
 
 
 
We license a wide range of products to customers in various industries and geographic regions. License revenue decreased by $4.8 million or 1% in fiscal year 2013 compared to fiscal year 2012. The decrease consisted of a $11.9 million decrease in integration and core infrastructure and a $11.5 million decrease in process automation and collaboration, partially offset by an $18.6 million increase in business optimization. License revenue increased by $32.7 million or 9% in fiscal year 2012 compared to fiscal year 2011. The increase consisted of a $33.6 million increase in business optimization and a $5.1 million increase in process automation and collaboration, partially offset by a $6.0 million decrease in integration and core infrastructure.
Our license revenue in fiscal years 2013, 2012 and 2011 was derived as follows:
 
 
 
Year Ended November 30,
 
 
2013
 
2012
 
2011
Integration and core infrastructure
 
47
%
 
50
%
 
56
%
Business optimization
 
44

 
39

 
33

Process automation and collaboration
 
9

 
11

 
11

Total license revenue
 
100
%
 
100
%
 
100
%

Our license revenue in a particular period is dependent upon the timing, number and size of license deals. Selected data about our license deals recognized for the respective periods is summarized as follows:
 
 
 
Year Ended November 30,
 
 
2013
 
2012
 
2011
Number of license deals of $1.0 million or more
 
73

 
81

 
84

Number of license deals of $0.1 million or more
 
584

 
568

 
534

Average size of license deals of $0.1 million or more (in millions)
 
$
0.6

 
$
0.7

 
$
0.7


28


Cost of License Revenue
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Cost of license revenue
 
$
47,324

 
$
41,363

 
$
35,309

 
14
%
 
17
%
Percentage of total revenue
 
4
%
 
4
%
 
4
%
 
 
 
 
Percentage of license revenue
 
12
%
 
10
%
 
9
%
 
 
 
 
Cost of license revenue mainly consisted of amortization of developed technologies and royalty costs acquired through acquisitions. The $6.0 million or 14% increase in fiscal year 2013 compared to fiscal year 2012 resulted primarily from a $2.1 million increase in cost of goods sold, a $2.0 million increase in amortization of developed technologies and a $1.2 million increase in royalty costs. The $6.1 million or 17% increase in fiscal year 2012 compared to fiscal year 2011 resulted primarily from a $3.9 million increase in royalty costs and a $1.0 million increase in cost of goods sold.
Service and Maintenance Revenue and Costs
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Service and maintenance revenue
 
$
664,479

 
$
614,307

 
$
542,628

 
8
%
 
13
%
Percentage of total revenue
 
62
%
 
60
%
 
59
%
 
 
 
 
Cost of service and maintenance revenue
 
$
260,121

 
$
241,452

 
$
212,066

 
8
%
 
14
%
Percentage of total revenue
 
24
%
 
24
%
 
23
%
 
 
 
 
Percentage of service and maintenance revenue
 
39
%
 
39
%
 
39
%
 
 
 
 
Service and maintenance revenue increased by $50.2 million or 8% in fiscal year 2013 compared to fiscal year 2012. The increase in fiscal year 2013 was the result of a $32.6 million increase in maintenance revenue and a $17.5 million increase in consulting and training services revenue. Service and maintenance revenue increased by $71.7 million or 13% in fiscal year 2012 compared to fiscal year 2011. The increase in fiscal year 2012 was the result of a $37.4 million increase in maintenance revenue and a $34.3 million increase in consulting and training services revenue. Maintenance revenue increased primarily due to continued growth in our installed software base in fiscal years 2013 and 2012. In both fiscal year 2013 and 2012, consulting revenue increased due to an increase in both the number and size of engagements, reflecting our increased focus on providing more services to our customers.
Cost of service and maintenance revenue consisted primarily of compensation and other related expenses for consultants, customer support personnel and third-party contractors associated with providing consulting services and stock-based compensation expense. The $18.7 million or 8% increase in fiscal year 2013 compared to fiscal year 2012 resulted primarily from an increase of $13.2 million in employee-related expenses and an increase of $1.4 million in subcontractor costs. Increased employee-related expenses were primarily due to an increase in professional services and customer support staff.
The $29.4 million or 14% increase in fiscal year 2012 compared to fiscal year 2011 resulted primarily from an increase of $25.7 million in employee-related expenses, an increase of $2.5 million in travel expenses and an increase of $1.7 million in facilities expenses, which were partially offset by a decrease of $3.4 million in subcontractors costs. Increased employee-related expenses were primarily due to an increase in professional services and customer support staff.
Research and Development Expenses
Research and development expenses consisted primarily of employee-related expenses, including salaries, benefits, stock-based compensation expenses, bonus and third-party contractor fees and related costs associated with the development and enhancement of our products.
 

29


 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Research and development expenses
 
$
170,922

 
$
154,535

 
$
143,173

 
11
%
 
8
%
Percentage of total revenue
 
16
%
 
15
%
 
16
%
 
 
 
 
Total research and development expenses increased by $16.4 million or 11% in fiscal year 2013 compared to fiscal year 2012, primarily due to a $9.7 million increase in employee-related expenses and a $5.3 million increase in subcontractor costs. The increase in employee-related expenses and subcontractor costs was due to the expansion of our research and development operations.
Total research and development expenses increased by $11.4 million or 8% in fiscal year 2012 compared to fiscal year 2011, primarily due to a $5.6 million increase in employee-related expenses and a $4.7 million increase in subcontractor costs. The increase in employee-related expenses was primarily due to an increase in headcount. The increase in subcontractor costs was due to the expansion of our research and development operations.
Sales and Marketing Expenses
Sales and marketing expenses consisted primarily of employee-related expenses, including salaries, sales commissions, benefits, stock-based compensation expenses, bonus, related costs of our direct sales force and marketing staff and the cost of marketing programs, including customer conferences, promotional materials, trade shows, advertising and related travel expenses.
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Sales and marketing expenses
 
$
348,302

 
$
317,001

 
$
285,366

 
10
%
 
11
%
Percentage of total revenue
 
33
%
 
31
%
 
31
%
 
 
 
 
Total sales and marketing expenses increased by $31.3 million or 10% in fiscal year 2013 compared to fiscal year 2012, primarily due to a $25.0 million increase in employee-related expenses, a $1.6 million increase in travel expenses, and a $1.2 million increase in marketing programs. The increase in employee-related expenses was primarily due to an increase in headcount. The increase in travel and marketing expenses was due to increased sales and marketing activities.
Total sales and marketing expenses increased by $31.6 million or 11% in fiscal year 2012 compared to fiscal year 2011, primarily due to a $21.7 million increase in employee-related expenses, a $5.4 million increase in travel expenses, a $2.6 million increase in marketing programs. The increase in employee-related expenses was primarily due to an increase in headcount. The increase in travel and marketing expenses was due to increased sales and marketing activities.
General and Administrative Expenses
General and administrative expenses consisted primarily of employee-related expenses, including salaries, stock-based compensation expenses, benefits, bonus, third-party contractor fees and related costs for general corporate functions such as executive, legal, finance, accounting and human resources.
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
General and administrative expenses
 
$
65,950

 
$
70,868

 
$
59,990

 
(7
)%
 
18
%
Percentage of total revenue
 
6
%
 
7
%
 
6
%
 
 
 
 
Total general and administrative expenses decreased by $4.9 million or 7% in fiscal year 2013 compared to fiscal year 2012, primarily due to a $5.7 million decrease in employee-related expenses offset by a $1.5 million increase in fees and charges. The decrease in employee-related expenses was due to lower stock-based compensation expenses discussed further in the subsection entitled "Stock-Based Compensation" below.
Total general and administrative expenses increased by $10.9 million or 18% in fiscal year 2012 compared to fiscal year 2011, primarily due to a $6.4 million increase in employee-related expenses and a $2.8 million increase in third party services.

30


Amortization of Acquired Intangible Assets
Intangible assets acquired through corporate acquisitions are comprised of the estimated value of developed technologies, patents, trademarks, established customer bases and non-compete agreements, as well as maintenance and OEM customer royalty agreements. Amortization of developed technologies is recorded as a cost of revenue, and amortization of other acquired intangibles is included in operating expenses.

 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Amortization of acquired intangible assets:
 
 
 
 
 
 
 
 
 
 
In cost of revenue
 
$
17,930

 
$
15,899

 
$
15,512

 
 
 
 
In operating expenses
 
18,852

 
19,654

 
19,149

 
 
 
 
Total amortization expenses
 
$
36,782

 
$
35,553

 
$
34,661

 
3
%
 
3
%
Percentage of total revenue
 
3
%
 
3
%
 
4
%
 
 
 
 
Amortization expenses increased by $1.2 million or 3% in fiscal year 2013 compared to fiscal year 2012. The increase in amortization expenses in fiscal year 2013 was primarily due to intangible assets acquired through our acquisitions in fiscal year 2013 of Extended Results, StreamBase and Maporama. Amortization expenses increased by $0.9 million or 3% in fiscal year 2012 compared to fiscal year 2011. The increases in amortization expenses in fiscal year 2012 were primarily due to intangible assets acquired through our acquisition in fiscal year 2012 of LogLogic. See Note 8 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on acquired intangible assets.

Acquisition Related and Other Expenses
Acquisition related and other expenses consisted of costs incurred after the issuance of a definitive term sheet for a particular transaction (whether or not such transaction is ultimately completed, remains in-process or is not completed) and included legal, banker, accounting and other advisory fees of third parties and severance costs for employees of the acquired company that are terminated within 90 days of the acquisition date.

 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Acquisition related and other expenses
 
 
 
 
 
 
 
 
 
 
Transitional and other employee related costs
 
$
157

 
$
1,116

 
$
37

 
 
 
 
Professional services fees and other
 
1,352

 
1,556

 
1,803

 
 
 
 
Total acquisition related and other expenses
 
$
1,509

 
$
2,672

 
$
1,840

 
(44
)%
 
45
%
Percentage of total revenue
 
%
 
%
 
%
 
 
 
 
Restructuring Charges
Restructuring charges were primarily related to severance for employee terminations, excess facilities and other corporate actions aimed at increasing efficiencies and reducing redundancy costs, including those arising from past acquisitions.
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Restructuring charges
 
$
12,553

 
$
(648
)
 
$
8,926

 
2,037
%
 
(107
)%
Percentage of total revenue
 
1
%
 
%
 
1
%
 
 
 
 
During fiscal year 2013, we recorded $12.6 million in restructuring charges related to our 2013 restructuring plan. During fiscal year 2012, we recorded a $0.6 million adjustment in restructuring charges related to our 2011 restructuring plan due to changes in estimates. During fiscal year 2011, we recorded $8.9 million in restructuring charges related to our 2011 restructuring plan and our 2010 restructuring plan. Also see Note 9 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion on restructuring charges.


31


Stock-Based Compensation
The stock-based compensation expenses included in our statements of operations corresponding to the same functional lines as cash compensation paid to the same employees in the respective departments are as follows:
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Stock-based compensation expenses:
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
$
9,186

 
$
5,142

 
$
4,715

 
 
 
 
Research and development
 
15,888

 
15,131

 
11,441

 
 
 
 
Sales and marketing
 
17,479

 
21,211

 
17,206

 
 
 
 
General and administrative
 
11,082

 
19,662

 
15,505

 
 
 
 
Total
 
$
53,635

 
$
61,146

 
$
48,867

 
(12
)%
 
25
%
Percentage of total revenue
 
5
%
 
6
%
 
5
%
 
 
 
 
Total stock-based compensation expenses decreased by $7.5 million or 12% in fiscal year 2013 compared to fiscal year 2012. The decrease is due to a $16.3 million decrease in stock-based compensation expenses related to performance-based restricted stock units ("PRSUs") and a $2.8 million decrease related to stock options, offset by a $11.5 million increase in stock-based compensation expenses related to service-based stock awards. The stock-based compensation expense recorded to date of $3.1 million that related to PRSUs granted in 2012 was reversed in the third quarter of fiscal year 2013 as it is improbable that certain performance criteria for vesting of these awards will be achieved.
Total stock-based compensation expenses increased by $12.3 million or 25% in fiscal year 2012 compared to fiscal year 2011. The increase is due to a $7.7 million increase in stock-based compensation expenses related to PRSUs and a $4.9 million increase in stock-based compensation expenses related to service-based stock awards.
Interest Income
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Interest income
 
$
938

 
$
1,109

 
$
1,374

 
(15
)%
 
(19
)%
Percentage of total revenue
 
%
 
%
 
%
 
 
 
 
Interest income decreased 15% in fiscal year 2013 compared to fiscal year 2012 and decreased 19% in fiscal year 2012 compared to fiscal year 2011, primarily due to lower returns from investments.
Interest Expense
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Interest expense
 
$
(34,330
)
 
$
(23,396
)
 
$
(4,020
)
 
47
%
 
482
%
Percentage of total revenue
 
(3
)%
 
(2
)%
 
(1
)%
 
 
 
 
Interest expense is primarily related to the outstanding borrowings under our convertible senior notes, our mortgage note, which was paid in full in May 2013, and any outstanding borrowings under our credit facility. See Note 10 and 11 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further detail on the credit facility, mortgage note and the convertible senior notes.
Interest expense increased by $10.9 million in fiscal year 2013 compared to fiscal year 2012. Interest expense increased by $19.4 million in fiscal year 2012 compared to fiscal year 2011. The increase in each of fiscal year 2013 and fiscal year 2012 was primarily due to the $600.0 million convertible senior notes we issued in April 2012 with an interest rate of 2.25%.

32


Other Income (Expense), net
Other income (expense), net, included foreign exchange gain (loss), realized gains and losses on investments and other miscellaneous income and expense items.
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Other income (expense):
 
 
 
 
 
 
 
 
 
 
Foreign exchange gain (loss)
 
$
(711
)
 
$
(685
)
 
$
(1,916
)
 
 
 
 
Realized gain (loss) on investments
 
298

 
485

 
31

 
 
 
 
Other income (expense), net
 
(4
)
 
85

 
39

 
 
 
 
Total other income (expense), net
 
$
(417
)
 
$
(115
)
 
$
(1,846
)
 
263
%
 
(94
)%
Percentage of total revenue
 
%
 
%
 
%
 
 
 
 
Income Taxes
 
 
 
Year Ended November 30,
 
Percentage Change
 
 
2013
 
2012
 
2011
 
2012
to 2013
 
2011
to 2012
Provision for (benefit from) income tax
 
$
26,400

 
$
33,200

 
$
37,300

 
(20
)%
 
(11
)%
Effective tax rate
 
24
%
 
21
%
 
25
%
 
 
 


The effective tax rate was 24%, 21% and 25% in fiscal years 2013, 2012 and 2011, respectively. The effective tax rate in fiscal years 2013, 2012 and 2011 differed from the statutory rate of 35% primarily due to the benefits resulting from research and development credits, the geographic allocation of the business, foreign income taxed at rates lower than the U.S. statutory rate, domestic manufacturing incentives and state income tax expense which was partially offset in certain years by the impact of certain stock-based compensation charges.
In fiscal year 2013, a discrete tax provision of $11.8 million was accrued to adjust taxes provided for the prior years' reserve for uncertain tax positions and withholding taxes in jurisdictions where we do not expect to benefit from a foreign tax credit. In fiscal year 2013, we recorded an out-of-period adjustment of $2.2 million related to a tax benefit that was not recorded during fiscal year 2012.
In fiscal year 2012, a discrete tax provision of $2.7 million was accrued to adjust taxes provided for the prior years' reserve for uncertain tax positions and withholding taxes in jurisdictions where we do not expect to benefit from a foreign tax credit.
In fiscal year 2011, a $3.2 million tax benefit was recorded primarily related to lapses of statutes of limitations and reinstatement of federal research and development credit.
On January 2, 2013, the American Taxpayer Relief Act of 2012 (H.R. 8 as amended) was signed into law which extended the federal research and development credit through December 31, 2013. The federal research and development credit was reinstated retroactively to January 1, 2012. We recognized $3.3 million of the retroactive tax benefit of the federal research and development credit for the eleven months ended November 30, 2012 in fiscal year 2013.
We expect to use the single sales factor apportionment for California state taxation, which is expected to lower our future taxable state income. This reduction in taxable income may affect the extent to which we can benefit from $14.3 million (net of reserve for uncertain tax positions) in research and development credit carryforwards and $4.8 million in net operating loss carryforwards. If we determine that it is more likely than not that we will not be able to fully utilize these carryforwards, we will recognize a valuation allowance against the related deferred tax assets.

In fiscal year 2013, the amount of gross unrecognized tax benefits increased by $34.3 million primarily due to current period transfer pricing exposures. The total amount of gross unrecognized tax benefits was $89.7 million as of November 30, 2013, of which $73.5 million would benefit tax expense if realized. We elected to include interest expense and penalties accrued on unrecognized tax benefits as a component of our income tax expense. Due to the uncertainty of tax audit outcomes and the timing of tax audit settlements, we are unable to estimate the changes to our unrecognized tax benefits over the next twelve months.

33


See Note 19 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Liquidity and Capital Resources
Current Cash Flows
As of November 30, 2013, we had cash and cash equivalents totaling $662.1 million, representing a decrease of $65.2 million from November 30, 2012. As of November 30, 2013, $315.7 million of our cash and cash equivalents were held by our foreign subsidiaries. Our current intention is to reinvest the majority of our earnings from foreign operations. Our current plans do not anticipate a need to repatriate cash to fund our domestic operations. In the event cash from foreign operations is needed to fund operations in the U.S., we would be subject to additional income taxes in the U.S. reduced by any foreign taxes paid on these earnings.
Net cash provided by operating activities in fiscal year 2013 was $206.0 million, resulting from net income of $84.2 million, adjusted for $106.7 million in non-cash charges and a $15.1 million net change in assets and liabilities. The non-cash charges included depreciation and amortization, stock-based compensation, tax benefits related to stock benefit plans, deferred income tax and other non-cash adjustments, less excess tax benefits from stock-based compensation recorded in financing activities. Net change in assets and liabilities included an increase in accrued liabilities and restructuring costs, an increase in accounts payable and a decrease in accounts receivable, partially offset by an increase in prepaid expenses and other assets and a decrease in deferred revenue.
To the extent that non-cash items increase or decrease our future operating results, there will be no corresponding impact on our cash flows. After excluding the effects of these non-cash charges, the primary changes in cash flows relating to operating activities result from changes in working capital. Our primary source of operating cash flows is the collection of accounts receivable from our customers, including maintenance which is typically invoiced annually in advance. Our operating cash flows are also impacted by the timing of payments to our vendors for accounts payable and other liabilities. We generally pay our vendors and service providers in accordance with the invoice terms and conditions. The timing of cash payments in future periods will be impacted by the terms of accounts payable arrangements.
Net cash used in investing activities was $143.7 million in fiscal year 2013, resulting primarily from cash used, net of cash acquired, of $74.9 million for the Extended Results, StreamBase and Maporama acquisitions, net cash used for purchases of short-term investments in marketable securities of $48.1 million, $19.3 million in capital expenditures and $1.2 million in restricted cash pledged as security.
Net cash used in financing activities was $130.5 million in fiscal year 2013, resulting primarily from the repurchase of our shares of common stock in an amount totaling $130.7 million, $35.7 million in net payments on debt and $13.3 million in withholding taxes related to restricted stock net share settlement, partially offset by $30.7 million cash received from the exercise of stock options and the sale of stock under our employee stock purchase program and $18.5 million in excess tax benefits from stock-based compensation.
In April 2012, we issued convertible senior notes (the "Notes") with an aggregate principal amount of $600.0 million due in 2032. We used approximately $121.0 million of the net proceeds from the offering to fund the purchase of approximately 3.6 million shares of our common stock concurrently with the offering of the Notes and approximately $150.0 million of the net proceeds to repay indebtedness outstanding under the 2011 Credit Facility, which was originally incurred to fund repurchases of our common stock and our acquisition of LogLogic.
On April 26, 2013, we announced that our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $300.0 million of our outstanding common stock from time to time in the open market or through privately negotiated transactions. In connection with the approval of this program, our Board of Directors also terminated our previous $300.0 million stock repurchase program from March 2012, and the remaining authorized amount of $75.8 million under the March 2012 stock repurchase program available for repurchasing common stock was canceled.
In fiscal year 2013, we repurchased 6.0 million shares of our outstanding common stock at an average price of $21.63 per share pursuant to the stock repurchase programs, for an aggregate purchase price of $130.7 million. As of November 30, 2013, the remaining authorized amount for stock repurchases under the April 2013 stock repurchase program was approximately $240.7 million.
We currently anticipate that our operating expenses will grow in absolute dollars for the foreseeable future, and we intend to fund our operating expenses primarily through cash flows from operations. We believe that our current cash, cash equivalents and short-term investments and amounts available under our line of credit together with expected cash flows from operations will be sufficient to meet our anticipated cash requirements for working capital, capital expenditures, and currently

34


approved stock repurchases for at least the next twelve months. Should demand for our products and services significantly decline over the next twelve months, the available cash provided by operations could be adversely impacted.

Convertible Senior Notes

In April 2012, we issued convertible senior notes in an aggregate principal amount of $600.0 million due May 1, 2032 (the "Notes"). The Notes bear interest at a rate of 2.25% per annum. The Notes do not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us. Each $1,000 principal amount of Notes is initially convertible, at the option of the holders, at a rate of 19.7750 shares of our common stock, which represents an initial conversion price of approximately $50.57 per share, which is subject to adjustment upon the occurrence of certain events specified in the indenture. On conversion of a Note, we will deliver cash in an amount generally equal to the lesser of the conversion value and the principal amount of each Note and, for any conversion value greater than the principal amount, we will deliver shares of common stock. Holders may convert Notes prior to February 1, 2032, and other than during the period from February 1, 2017 to May 5, 2017, under the following circumstances: (1) if the Notes are called for redemption, at any time prior to the redemption date; (2) during any fiscal quarter commencing after the fiscal quarter ending on September 2, 2012, if our last reported sale price of a share of common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (3) during any five consecutive trading day period when the trading price per $1,000 principal amount of Notes is less than 98% of the product of the last reported sale price of a share of common stock and the conversion rate; and (4) upon the occurrence of certain distributions or corporate events as specified in the indenture governing the Notes. From February 1, 2017 to May 5, 2017, and from February 1, 2032 until the maturity date, holders may convert Notes at any time, regardless of the foregoing circumstances.

After May 5, 2017, we may redeem for cash all or part of the Notes. The redemption price will be equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest. Holders may require us to repurchase all or a portion of their Notes on May 5, 2017, May 1, 2022 and May 1, 2027 in cash at a price equal to the principal amount, plus accrued and unpaid interest.

Upon the occurrence of a fundamental change under the indenture for the Notes, such as in the event of a change in control, the holders may require us to repurchase all or a portion of their Notes at the principal amount of the Notes plus accrued and unpaid interest. Following certain corporate transactions that constitute a change of control, the conversion rate may increase for a holder who elects to convert the Notes. Upon conversion, we will deliver an amount of cash and a number of shares of common stock, if any, equal to the sum of the daily settlement amounts for each daily volume weighted average price in the 35 day observation period for such Note as determined pursuant to the indenture for the Notes.
Credit Facility

In December 2011, we and one of our subsidiaries entered into an Amended and Restated Credit Agreement (the "2011 Credit Facility"). The 2011 Credit Facility matures on December 19, 2016 and provides for borrowings of up to $250.0 million with a sublimit for swing line loans of up to $10.0 million and standby letters of credit in a face amount of up to $50.0 million. We have an option to request that the lenders increase the available commitments by up to an additional $100.0 million for total borrowings of up to $350.0 million. In May 2012, we amended certain covenants and other terms of the 2011 Credit Facility.

Revolving loans accrue interest at a per annum rate based on, at our option, either (i) the base rate plus a margin ranging from 0.25% to 1.25%, depending on TIBCO's consolidated leverage ratio or (ii) the LIBOR rate plus a margin ranging from 1.25% to 2.25%, depending on TIBCO's consolidated leverage ratio, for various interest periods. The base rate is defined as the highest of (i) the administrative agent's prime rate, (ii) the federal funds rate plus a margin equal to 0.50%, and (iii) the LIBOR rate for a one month interest period plus a margin of 1.00%. We are also obligated to pay commitment fees for the unused amount of the 2011 Credit Facility, letter of credit fees and other customary fees. Loan origination fees and issuance costs of approximately $3.4 million were incurred since consummation of the 2011 Credit Facility which will be amortized through interest expense over a period of five years. Under certain circumstances, a default interest rate of 2.00% above the applicable interest rate will apply on all obligations during the existence of an event of default under the 2011 Credit Facility.

We must maintain a minimum consolidated interest coverage ratio of 3.5:1.0 and a maximum consolidated leverage ratio of 3.00:1.00 in addition to other customary affirmative and negative covenants. The maximum consolidated leverage ratio decreases to 2.75:1.00 with respect to the second fiscal quarter of our fiscal year 2014. We had no borrowings outstanding under our credit facility as of November 30, 2013.

35



As of November 30, 2013, we were in compliance with all covenants under this facility.
Line of Credit

We also have a $10.0 million revolving line of credit that matures in June 2014 (the "Line of Credit"). The revolving Line of Credit is available for cash borrowings and for the issuance of letters of credit up to $10.0 million. The Line of Credit, as amended, contains financial covenants substantially identical to those of the 2011 Credit Facility, as well as other customary affirmative and negative covenants. As of November 30, 2013 we had a total of $1.6 million outstanding with respect to letters of credit in connection with sales and lease transactions.

As of November 30, 2013, we were in compliance with all covenants under the Line of Credit.

Mortgage Note

In May 2013, we repaid the outstanding balance on our mortgage note of $34.7 million in full.
Guarantee Credit Line
We have a revolving guarantee credit line of approximately $16.3 million available for issuance of bank guarantees denominated in foreign currency. Issued bank guarantees were approximately $13.7 million and $12.5 million in fiscal years 2013 and 2012, respectively, and were collateralized by pledging the equivalent amount under restricted cash as required under our guarantee credit line. Other various contractual commitments also require us to pledge cash as security under restricted cash. As of November 30, 2013 and 2012, we had restricted cash of $15.7 million and $14.6 million, respectively, which is included in Other Assets on our Consolidated Balance Sheets.
Commitments
In June 2003, we purchased our corporate headquarters with a $54.0 million mortgage note to lower our operating costs. The mortgage note payable carried a 20-year amortization and a fixed annual interest rate of 5.50%. In May 2013, we repaid the outstanding balance on our mortgage note of $34.7 million in full.
In conjunction with the purchase of our corporate headquarters, we entered into a 51-year lease of the land upon which the property is located. The lease was paid in advance for a total of $28.0 million, but is subject to adjustments every ten years based upon changes in fair market value of the land. Currently, we are negotiating the first adjustment under the lease and expect a rent increase that will take effect in April 2014. We have the option to prepay any rent increases due as a result of a change in fair market value.

As of November 30, 2013, our contractual commitments associated with indebtedness, lease obligations and restructuring are as follows (in thousands):
 
 
 
Total
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
Operating commitments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt principal
 
$
600,000

 
$

 
$

 
$

 
$
600,000

 
$

 
$

Debt interest
 
47,250

 
13,500

 
13,500

 
13,500

 
6,750

 

 

Operating leases(1)
 
40,290

 
10,568

 
7,512

 
7,272

 
5,851

 
4,749

 
4,338

Total commitments
 
$
687,540

 
$
24,068

 
$
21,012

 
$
20,772

 
$
612,601

 
$
4,749

 
$
4,338

 
(1)
Operating leases include future minimum rent payments, net of estimated sublease income of $5.6 million, for facilities that we have vacated pursuant to our restructuring activities.
The obligations disclosed above do not include contractual obligations recorded on our balance sheet as current liabilities except for the current portion of long-term debt. The expected timing of payment amounts of the obligations discussed above is estimated based on current information. Timing and actual amounts paid may differ depending on the timing of receipt of goods or services, market prices or changes to agreed-upon amounts for some obligations.

36


Future minimum lease payments under restructured non-cancelable operating leases as of November 30, 2013 are included in Accrued Restructuring Costs on our Consolidated Balance Sheets. See also Note 9 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on accrued restructuring costs.
The above commitment table does not include approximately $55.7 million of long-term income tax liabilities recorded in accounting for uncertainty in income taxes due to the fact that we are unable to reasonably estimate the timing of these potential future payments.
Indemnification
Our software license agreements typically provide for indemnification of customers for intellectual property infringement claims. To date, no such claims have been filed against us. We also warrant to customers that our software products operate substantially in accordance with the software product’s specifications. Historically, minimal costs have been incurred related to product warranties, and, as such, no accruals for warranty costs have been made. In addition, we indemnify our officers and directors under the terms of indemnity agreements entered into with them, as well as pursuant to our certificate of incorporation, bylaws and applicable provisions of Delaware law.
To date, we have incurred costs for the payment of legal fees in connection with the legal proceedings detailed in Note 14 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
As of November 30, 2013, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Recent Accounting Pronouncements
Recent accounting pronouncements are detailed in Note 2 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the impact of foreign currency fluctuations and interest rate changes.
Foreign Currency Risk
We conduct business in the Americas, EMEA and APJ. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or changes in economic conditions in foreign markets. While the majority of our transactions are currently made in U.S. dollars, we transact business in approximately 25 foreign currencies worldwide, of which the most significant to our operations in fiscal year 2013 are the Euro, British pound, Australian dollar, and Japanese yen. We enter into forward contracts with financial institutions to manage our currency exposure related to certain net assets and liabilities denominated in foreign currencies, and these forward contracts are generally settled monthly. We do not enter into derivative financial instruments for speculative purposes.
We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to translation gains or losses, which are recorded net as a component of other comprehensive income.

37


As of November 30, 2013, we had the following forward contracts outstanding (in thousands):
 
 
 
Notional
Value
Local Currency
 
Notional
Value
USD
 
Fair Value
Gain (Loss)
USD
Forward contracts sold:
 
 
 
 
 
 
Australian dollar
 
4,800

 
$
4,368

 
120

British pound
 
8,700

 
14,238

 
(270
)
Canadian dollar
 
500

 
471

 
6

Euro
 
30,000

 
40,764

 
86

Japanese yen
 
465,000

 
4,540

 
263

Polish zloty
 
1,400

 
452

 
7

Swedish krona
 

 

 
(34
)
Swiss franc
 
1,000

 
1,103

 
(11
)
New Taiwan dollar
 
31,000

 
1,047

 

Forward contracts bought:
 
 
 
 
 
 
Brazilian real
 
1,800

 
771

 
(45
)
Indian rupee
 
55,300

 
885

 
(10
)
South African rand
 
4,900

 
481

 
(8
)
South Korean won
 
306,000

 
289

 

 
 
 
 
 
 
$
104

 
 
 
Notional
Value
Local Currency
 
Notional
Value
Euro
 
Fair Value
Gain (Loss)
USD
Forward contracts bought:
 
 
 
 
 
 
United States dollar
 
10,500

 
7,728

 
$
(26
)
 
 
 
 
 
 
$
(26
)
Interest Rate Risk
Our investment policy is designed to protect and preserve invested funds by limiting default, market and investment risk. Our exposure to market rate risk for changes in interest rates relates primarily to our investments and interest paid on our credit facility.

Currently, we maintain our cash in current accounts or money market funds or short-term investments in marketable securities. In general, money market funds are not considered to be subject to interest rate risk because the interest paid on such funds fluctuates with the prevailing interest rate. Our short-term investments are predominately held in marketable securities with maturities of less than one year with limited exposure to changes in market interest rates. As of November 30, 2013, a hypothetical 100 basis point increase in interest rates would not have a material impact on the fair value of our short-term investments.
Interest on borrowings under the 2011 Credit Facility is based at specified margins above either LIBOR or the base rate defined in the 2011 Credit Facility, whereas the interest rate on our Notes is fixed over its term. Our exposure to interest rate risk under the 2011 Credit Facility will depend on the extent to which we utilize such facility. As of November 30, 2013, the 2011 Credit Facility had a borrowing capacity of $250.0 million and had no outstanding borrowings. A hypothetical 100 basis point increase in the LIBOR or Prime Rate-based interest rate on the 2011 Credit Facility would result in an increase in our interest expense by $1.0 million per year for every $100.0 million borrowed under our revolving credit line. For a discussion of our 2011 Credit Facility and Notes, see Notes 10 and 11 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
 
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Consolidated Financial Statements that appears on page F-1 of this Annual Report on Form 10-K. The Report of Independent Registered Public Accounting Firm from PricewaterhouseCoopers LLP, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements listed in the Index to Consolidated

38


Financial Statements, which appear beginning on page F-2 of this Annual Report on Form 10-K, are incorporated by reference into this Item 8.
 
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
 
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.    Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, the design of a control system must reflect that there are resource constraints, thus, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Report on Internal Control over Financial Reporting.    Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Our internal control over financial reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, including the possibility of human error and the circumvention or overriding of controls, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We assessed the effectiveness of our internal control over financial reporting as of November 30, 2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on the results of our assessment using those criteria, management concluded that our internal control over financial reporting was effective as of November 30, 2013.
The effectiveness of our internal control over financial reporting as of November 30, 2013, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears on page F-2 of this Annual Report on Form 10-K.

39


Changes in Internal Control over Financial Reporting.    There were no changes in our internal control over financial reporting that occurred during the fourth quarter of fiscal year 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B.
OTHER INFORMATION
None.

40


PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as set forth below, the information required by this Item is incorporated by reference to the sections entitled "Board of Directors," "Election of Directors," and "Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement for the 2014 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended November 30, 2013 (the "2014 Proxy Statement").
Executive Officers
The name of and certain information regarding each of our current executive officers as of November 30, 2013 are set forth below.
Vivek Y. Ranadivé, age 56, has served as our Chairman and Chief Executive Officer since our inception. Mr. Ranadivé founded Teknekron Software Systems, Inc., our predecessor company, in 1985.
William R. Hughes, age 53, has served as our Executive Vice President, General Counsel and Secretary since July 2004 and has served in various capacities with us since September 1999. Between 1989 and his joining TIBCO in 1999, Mr. Hughes held several in-house legal positions in the technology industry in Europe and the United States. Prior to 1989, Mr. Hughes worked in private practice in the areas of corporate, finance and intellectual property law.
Thomas Laffey, age 58, has served as our Executive Vice President, Products and Technology since June 2005 and has served in various capacities with us since April 2002. Prior to joining TIBCO, Mr. Laffey was a co-founder of Talarian Corporation, a provider of middleware, where he was responsible for engineering and product direction.
Matthew D. Langdon, age 41, has served as our Senior Vice President, Chief Financial Officer since July 2013 and has served in various capacities with us since January 2003. Prior to joining TIBCO, Mr. Langdon worked in product management at Siebel Systems Inc., investment management at an affiliate of Bass Brothers Enterprises, and investment banking at Donaldson, Lufkin & Jenrette Securities Corporation.
Peter Lee, age 47, served as our Executive Vice President, Analytics and Customer Loyalty from July 2013 until January 2014, and also served in various capacities with us since August 2009. Prior to joining TIBCO, Mr. Lee served as co-founder and CEO of DataSynapse, a provider of enterprise grid and cloud computing software. He also worked in investment banking at J.P. Morgan and strategy consulting at Deloitte International. On January 24, 2014, Mr. Lee left the company for personal reasons.
Ram Menon, age 48, has served as our Executive Vice President, President of Social Computing since January 2012 and has served in various capacities with us since July 1999. Prior to joining TIBCO, Mr. Menon was with Accenture, a global consulting firm, where he specialized in supply chain and e-commerce strategy consulting with Global 1000 companies.
Murray D. Rode, age 49, has served as our Executive Vice President, Chief Operating Officer since January 2009 and has served in various capacities with us since February 1995. Prior to joining TIBCO, Mr. Rode was a management consultant with a major international consulting firm, where he specialized in the areas of technology strategy and planning, business process re-engineering and project management.
Murat Sonmez, age 50, has served as our Executive Vice President, Global Field Operations since April 2007 and has served in various capacities with us since October 2003 and from January 1994 to July 2002. From August 2002 to September 2003, Mr. Sonmez served as Executive Vice President, Operations at Centrata, a utility computing software firm.
Brent Hogenson, age 52, has served as our Vice President, Corporate Controller since April 2012 and prior to that was our Interim Corporate Controller since November 2011. From 2009 to 2010, Mr. Hogenson was Chief Financial Officer of Americas for Autonomy, Inc., a software company. From 2003 to 2009, Mr. Hogenson was Vice President of Finance, Corporate Controller of Interwoven, Inc., a software company.
Code of Ethics
We have adopted a Code of Ethics for Chief Executive and Senior Financial Officers that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Corporate Controller and all others performing similar functions. The Code of Ethics is available on our website at http://www.tibco.com/company/investor-info/corporate-governance/code-ethics.jsp. If we make any substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the code to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Corporate

41


Controller or others providing similar functions, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.
 
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the sections entitled "Compensation Discussion and Analysis," "Election of Directors—Fiscal Year 2013 Director Compensation," "Board of Directors—Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report" in our 2014 Proxy Statement.
 
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference to the section entitled "Security Ownership of Certain Beneficial Owners and Management" in our 2014 Proxy Statement.
The information required by this item regarding equity compensation plans is incorporated by reference to the section entitled "Executive Compensation—Equity Compensation Plan Information" in our 2014 Proxy Statement.
 
ITEM 13.
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Party Transactions
The information required by this item regarding certain relationships and related party transactions is incorporated by reference to the section entitled "Board of Directors Related Party Transactions Policy and Procedures" in our 2014 Proxy Statement.
Director Independence
The information required by this item regarding director independence is incorporated by reference to the section entitled "Board of Directors Director Independence and Presiding Director" in our 2014 Proxy Statement.
 
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to the section entitled "Ratification of Appointment of Independent Auditors—Fees Paid to the Independent Auditors" and "Ratification of Appointment of Independent Auditors—Audit Committee Pre-Approval of Audit and Non-Audit Services of the Independent Auditor" in our 2014 Proxy Statement.

42


PART IV
 
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this Annual Report on Form 10-K:
1.
Financial Statements.    Please see the accompanying Index to the Consolidated Financial Statements, which appears on page F-1 of this Annual Report on Form 10-K. The Report of Independent Registered Public Accounting Firm, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements listed in the Index to the Consolidated Financial Statements, which appear beginning on page F-2 of this Annual Report on Form 10-K, are incorporated by reference into Item 8 above.
2.
Financial Statement Schedules.    Financial Statement Schedules have been omitted because the information required to be set forth therein is either not applicable or is included in the Consolidated Financial Statements or the Notes to Consolidated Financial Statements.
3.
Exhibits.    See Item 15(b) below. Each management contract and compensatory plan or arrangement required to be filed has been identified.
(b)
Exhibits.    The exhibits listed on the accompanying Exhibit Index immediately following the signature page are filed as part of, or are incorporated by reference into, this Annual Report on Form 10-K.
(c)
Financial Statement Schedules.    Reference is made to Item 15(a)(2) above.

43




TIBCO SOFTWARE INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
 


F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
TIBCO Software Inc.:
In our opinion, the consolidated financial statements listed in the accompanying index, present fairly, in all material respects, the financial position of TIBCO Software Inc. and its subsidiaries at November 30, 2013 and November 30, 2012, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/    PRICEWATERHOUSECOOPERS LLP
San Jose, California
January 29, 2014


F-2


TIBCO SOFTWARE INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
 
 
 
November 30,
 
 
2013
 
2012
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
662,109

 
$
727,309

Short-term investments
 
83,842

 
34,411

Accounts receivable, net of allowances of $5,145 and $5,606
 
231,194

 
234,100

Prepaid expenses and other current assets
 
74,725

 
61,174

Total current assets
 
1,051,870

 
1,056,994

Property and equipment, net
 
101,050

 
98,474

Goodwill
 
582,091

 
532,290

Acquired intangible assets, net
 
119,418

 
123,261

Long-term deferred income tax assets
 
78,853

 
64,549

Other assets
 
72,831

 
71,340

Total assets
 
$
2,006,113

 
$
1,946,908

Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
37,701

 
$
22,809

Accrued liabilities
 
125,112

 
133,596

Accrued restructuring costs
 
5,819

 
893

Deferred revenue
 
258,315

 
263,476

Current portion of long-term debt
 

 
35,711

Total current liabilities
 
426,947

 
456,485

Accrued restructuring costs, less current portion
 
87

 
643

Long-term deferred revenue
 
24,036

 
25,543

Long-term deferred income tax liabilities
 
1,334

 
3,208

Long-term income tax liabilities
 
55,733

 
26,263

Other long-term liabilities
 
4,701

 
4,015

Convertible senior notes, net
 
540,022

 
524,466

Total liabilities
 
1,052,860

 
1,040,623

Commitments and contingencies (Note 13)