10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________

FORM 10-Q

____________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 4, 2015

Commission File Number: 0-18059

____________________________________________________

PTC Inc.

(Exact name of registrant as specified in its charter)

____________________________________________________

Massachusetts	04-2866152
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

140 Kendrick Street, Needham, MA 02494

(Address of principal executive offices, including zip code)

(781) 370-5000

(Registrant’s telephone number, including area code)

____________________________________________________

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  þ    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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	þ	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  þ

There were 114,168,760 shares of our common stock outstanding on August 10, 2015.

PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended July 4, 2015

		Page Number
Part I—FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Financial Statements:
	Consolidated Balance Sheets as of July 4, 2015 and September 30, 2014	3
	Consolidated Statements of Operations for the three and nine months ended July 4, 2015 and June 28, 2014	4
	Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended July 4, 2015 and June 28, 2014	5
	Consolidated Statements of Cash Flows for the nine months ended July 4, 2015 and June 28, 2014	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	44
Part II—OTHER INFORMATION
Item 1A.	Risk Factors	45
Item 6.	Exhibits	45
Signature		46

2

PART I—FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED FINANCIAL STATEMENTS

PTC Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	July 4, 2015			September 30, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	275,060		$	293,654
Accounts receivable, net of allowance for doubtful accounts of $1,030 and $1,622 at July 4, 2015 and September 30, 2014, respectively	183,144			235,688
Prepaid expenses and other current assets	148,732			171,526
Deferred tax assets	28,269			31,299
Total current assets	635,205			732,167
Property and equipment, net	65,020			67,783
Goodwill	1,071,796			1,012,527
Acquired intangible assets, net	305,527			336,873
Deferred tax assets	27,938			8,958
Other assets	41,115			41,646
Total assets	$	2,146,601		$	2,199,954
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,561		$	19,802
Accrued expenses and other current liabilities	88,732			57,536
Accrued compensation and benefits	112,350			144,875
Accrued income taxes	6,839			9,329
Deferred tax liabilities	102			854
Current portion of long term debt	43,750			25,000
Deferred revenue	371,859			369,271
Total current liabilities	638,193			626,667
Long term debt, net of current portion	580,625			586,875
Deferred tax liabilities	30,610			36,601
Deferred revenue	17,280			13,273
Other liabilities	49,570			82,649
Total liabilities	1,316,278			1,346,065
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued	—			—
Common stock, $0.01 par value; 500,000 shares authorized; 114,165 and 115,025 shares issued and outstanding at July 4, 2015 and September 30, 2014, respectively	1,142			1,150
Additional paid-in capital	1,556,308			1,597,277
Accumulated deficit	(597,060		)	(650,171		)
Accumulated other comprehensive loss	(130,067		)	(94,367		)
Total stockholders’ equity	830,323			853,889
Total liabilities and stockholders’ equity	$	2,146,601		$	2,199,954

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

PTC Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three months ended						Nine months ended
	July 4, 2015			June 28, 2014			July 4, 2015			June 28, 2014
Revenue:
License and subscription solutions	$	83,926		$	97,703		$	248,850		$	269,114
Support	165,687			172,021			516,042			508,412
Total software revenue	249,613			269,724			764,892			777,526
Professional services	53,500			66,910			177,782			212,733
Total revenue	303,113			336,634			942,674			990,259
Cost of revenue:
Cost of license and subscription solutions revenue	12,830			11,246			39,349			32,454
Cost of support revenue	20,452			21,118			63,176			62,598
Total cost of software revenue	33,282			32,364			102,525			95,052
Cost of professional services revenue	46,094			58,712			155,847			182,777
Total cost of revenue	79,376			91,076			258,372			277,829
Gross margin	223,737			245,558			684,302			712,430
Operating expenses:
Sales and marketing	86,454			91,440			256,085			261,612
Research and development	54,078			57,405			175,333			166,109
General and administrative	48,100			33,817			119,342			98,888
Amortization of acquired intangible assets	9,105			7,998			27,691			23,772
Restructuring charges	4,393			514			42,625			1,581
Total operating expenses	202,130			191,174			621,076			551,962
Operating income	21,607			54,384			63,226			160,468
Interest and other income (expense), net	(3,668		)	(2,278		)	(10,492		)	(6,724		)
Income before income taxes	17,939			52,106			52,734			153,744
Provision (Benefit) for income taxes	504			14,080			(377		)	32,305
Net income	$	17,435		$	38,026		$	53,111		$	121,439
Earnings per share—Basic	$	0.15		$	0.32		$	0.46		$	1.02
Earnings per share—Diluted	$	0.15		$	0.32		$	0.46		$	1.01
Weighted average shares outstanding—Basic	114,764			118,328			115,021			118,753
Weighted average shares outstanding—Diluted	116,025			119,901			116,330			120,573

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

PTC Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Three months ended					Nine months ended
	July 4, 2015			June 28, 2014		July 4, 2015			June 28, 2014
Net income	$	17,435		$	38,026	$	53,111		$	121,439
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0 for each period	1,201			2,364		(41,695		)	1,514
Amortization of net actuarial pension loss included in net income, net of tax of $0.1 million and $0.3 million in the third quarter of 2015 and 2014, respectively, and $0.4 million and $0.8 million in the first nine months of 2015 and 2014, respectively	1,003			528		3,081			1,575
Change in unamortized pension loss during the period related to changes in foreign currency	(190		)	91		2,915			(114		)
Total other comprehensive income (loss)	2,014			2,983		(35,699		)	2,975
Comprehensive income	$	19,449		$	41,009	$	17,412		$	124,414

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine months ended
	July 4, 2015			June 28, 2014
Cash flows from operating activities:
Net income	$	53,111		$	121,439
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	63,455			57,299
Stock-based compensation	38,135			37,862
Excess tax benefits from stock-based awards	71			(9,576		)
Other non-cash items, net	(53		)	(151		)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable	44,906			14,625
Accounts payable, accrued expenses and other current liabilities	17,433			(3,930		)
Accrued compensation and benefits	(27,462		)	(24,278		)
Deferred revenue	51,393			55,339
Accrued and deferred income taxes	(25,608		)	14,545
Other current assets and prepaid expenses	(5,109		)	4,125
Other noncurrent assets and liabilities	(17,809		)	(13,912		)
Net cash provided by operating activities	192,463			253,387
Cash flows from investing activities:
Additions to property and equipment	(20,637		)	(16,721		)
Purchases of investments	(11,000		)	—
Acquisitions of businesses, net of cash acquired	(98,411		)	(111,519		)
Net cash used by investing activities	(130,048		)	(128,240		)
Cash flows from financing activities:
Borrowings under credit facility	135,000			474,375
Repayments of borrowings under credit facility	(122,500		)	(417,500		)
Repurchases of common stock	(49,962		)	(99,915		)
Proceeds from issuance of common stock	38			801
Excess tax benefits from stock-based awards	(71		)	9,576
Credit facility origination costs	—			(4,120		)
Payments of withholding taxes in connection with vesting of stock-based awards	(29,117		)	(26,749		)
Net cash used by financing activities	(66,612		)	(63,532		)
Effect of exchange rate changes on cash and cash equivalents	(14,397		)	645
Net (decrease) increase in cash and cash equivalents	(18,594		)	62,260
Cash and cash equivalents, beginning of period	293,654			241,913
Cash and cash equivalents, end of period	$	275,060		$	304,173
Supplemental disclosure of non-cash investing activities:
Fair value of contingent consideration recorded for acquisition	$	3,800		$	13,993

The accompanying notes are an integral part of the condensed consolidated financial statements.

6

PTC Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

General

The accompanying unaudited condensed consolidated financial statements include the accounts of PTC Inc. and its wholly owned subsidiaries and have been prepared by management in accordance with accounting principles generally accepted in the United States of America and in accordance with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with our annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of our financial position, results of operations and cash flows at the dates and for the periods indicated. Unless otherwise indicated, all references to a year mean our fiscal year, which ends on September 30. The September 30, 2014 Consolidated Balance Sheet included herein is derived from our audited consolidated financial statements.

The results of operations for the nine months ended July 4, 2015 are not necessarily indicative of the results expected for the remainder of the fiscal year.

Reclassifications

Through 2014, we classified revenue in three categories: 1) license; 2) service; and 3) support. Effective with the beginning of the first quarter of 2015, we are reporting revenue as follows: 1) license and subscription solutions; 2) support; and 3) professional services. License and subscription solutions revenue includes perpetual license revenue, subscription revenue and cloud services revenue. Cloud service offerings were previously reflected in service revenue and cost of service revenue. Consulting and training service revenue and consulting and training cost of service revenue are now referred to as professional services revenue and cost of professional services revenue in the accompanying Consolidated Statements of Operations. The following revenue and costs have been reclassified in the accompanying Consolidated Statements of Operations for the three and nine months ended June 28, 2014 to conform to the current period presentation.

	Three months ended June 28, 2014		Nine months ended June 28, 2014
Reclassifications within revenue	(in millions)
From Services to L&SS	$	3.3	$	10.2
From Support to L&SS	1.7		1.8
	$	5.0	$	12.0
Reclassifications within cost of revenue
From Services to L&SS	$	3.2	$	8.9
From Support to L&SS	0.2		0.2
	$	3.4	$	9.1

Revenue Recognition

Our sources of revenue include: (1) license and subscription solutions, (2) support and (3) professional services. We record revenues in accordance with the guidance provided by ASC 985-605, Software-Revenue Recognition when the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred (generally, FOB shipping point or electronic distribution), (3) the fee is fixed or determinable, and (4) collection is probable. We exercise judgment and use estimates in connection with determining the amounts of software license and services revenues to be recognized in each accounting period. Our primary judgments involve the following:

• determining whether collection is probable;

• assessing whether the fee is fixed or determinable;

• determining whether service arrangements, including modifications and customization of the underlying software, are not essential to the functionality of the licensed software and thus would result in the revenue for license and service elements of an agreement being recorded separately; and

7

• determining the fair value of services and support elements included in multiple-element arrangements, which is the basis for allocating and deferring revenue for such services and support.

Our software is distributed primarily through our direct sales force. In addition, we have an indirect distribution channel through alliances with resellers. Revenue arrangements with resellers are recognized on a sell-through basis; that is, when we deliver the product to the end-user customer. We record consideration given to a reseller as a reduction of revenue to the extent we have recorded revenue from the reseller. We do not offer contractual rights of return, stock balancing, or price protection to our resellers, and actual product returns from them have been insignificant to date. As a result, we do not maintain reserves for reseller product returns.

At the time of each sale transaction, we must make an assessment of the collectability of the amount due from the customer. Revenue is only recognized at that time if management deems that collection is probable. In making this assessment, we consider customer credit-worthiness and historical payment experience. At that same time, we assess whether fees are fixed or determinable and free of contingencies or significant uncertainties. In assessing whether the fee is fixed or determinable, we consider the payment terms of the transaction, including transactions with payment terms that extend beyond our customary payment terms, and our collection experience in similar transactions without making concessions, among other factors. We have periodically provided financing to credit-worthy customers with payment terms up to 24 months. If the fee is determined not to be fixed or determinable, revenue is recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met. Our software license arrangements generally do not include customer acceptance provisions. However, if an arrangement includes an acceptance provision, we record revenue only upon the earlier of (1) receipt of written acceptance from the customer or (2) expiration of the acceptance period.

Generally, our contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts.

License and Subscription Solutions

License and subscription solutions revenue includes revenue from three primary sources: (1) sales of perpetual licenses, (2) subscription-based licenses, and (3) cloud services.

Under perpetual license arrangements, we generally recognize license revenue up front upon shipment to the customer. We use the residual method to recognize revenue from perpetual license software arrangements that include one or more elements to be delivered at a future date when evidence of the fair value of all undelivered elements exists, and the elements of the arrangement qualify for separate accounting as described below. Under the residual method, the fair value of the undelivered elements (i.e., support and services) based on our vendor-specific objective evidence (“VSOE”) of fair value is deferred and the remaining portion of the total arrangement fee is allocated to the delivered elements (i.e., perpetual software license). If evidence of the fair value of one or more of the undelivered elements does not exist, all revenues are deferred and recognized when delivery of all of those elements has occurred or when fair values can be established. We determine VSOE of the fair value of services and support revenue based upon our recent pricing for those elements when sold separately. For certain transactions, VSOE is determined based on a substantive renewal clause within a customer contract. Our current pricing practices are influenced primarily by product type, purchase volume, sales channel and customer location. We review services and support sold separately on a periodic basis and update, when appropriate, our VSOE of fair value for such elements to ensure that it reflects our recent pricing experience.

Subscription-based licenses include the right for a customer to use our licenses and receive related support for a specified term and revenue is recognized ratably over the term of the arrangement. When sold in arrangements with other elements, VSOE of fair value is established for the subscription-based licenses through the use of a substantive renewal clause within the customer contract for a combined annual fee that includes the term-based license and related support.

Cloud services reflect recurring revenues that include fees for hosting and application management of customers’ perpetual or subscription-based licenses. Generally, customers have the right to terminate the cloud services contract and take possession of the licenses without a significant penalty. When cloud services are sold as part of a multi-element transaction, revenue is allocated to cloud services based on VSOE, and recognized ratably over the contractual term beginning on the commencement dates of each contract, which is the date the services are made available to the customer. VSOE is established for cloud services either through a substantive stated renewal option or stated contractual overage rates, as these rates represent the value the customer is willing to pay on a standalone basis. In addition, cloud services include set-up fees, which are recognized ratably over the contract term or the expected customer life, whichever is longer.

Support

Support contracts generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates and bug fixes. Support revenue is recognized ratably over the term of the support contract on a straight-line basis.

Professional Services

8

Our software arrangements often include implementation, consulting and training services that are sold under consulting engagement contracts or as part of the software license arrangement. When we determine that such services are not essential to the functionality of the licensed software, we record revenue separately for the license and service elements of these arrangements, provided that appropriate evidence of fair value exists for the undelivered services (i.e. VSOE of fair value). We consider various factors in assessing whether a service is not essential to the functionality of the software, including if the services may be provided by independent third parties experienced in providing such services (i.e. consulting and implementation) in coordination with dedicated customer personnel, and whether the services result in significant modification or customization of the software’s functionality. When professional services qualify for separate accounting, professional services revenues under time and materials billing arrangements are recognized as the services are performed. Professional services revenues under fixed-priced contracts are generally recognized as the services are performed using a proportionate performance model with hours or costs as the input method of attribution.

When we provide professional services that are considered essential to the functionality of the software, the arrangement does not qualify for separate accounting of the license and service elements, and the license revenue is recognized together with the consulting services using the percentage-of-completion method of contract accounting. Under such arrangements, consideration is recognized as the services are performed as measured by an observable input. In these circumstances, we separate license revenue from service revenue for income statement presentation by allocating VSOE of fair value of the consulting services as service revenue, and the residual portion as license revenue. Under the percentage-of-completion method, we estimate the stage of completion of contracts with fixed or “not to exceed” fees based on hours or costs incurred to date as compared with estimated total project hours or costs at completion. Adjustments to estimates to complete are made in the periods in which facts resulting in a change become known. When total cost estimates exceed revenues, we accrue for the estimated losses when identified. The use of the proportionate performance and percentage-of-completion methods of accounting require significant judgment relative to estimating total contract costs or hours (hours being a proxy for costs), including assumptions relative to the length of time to complete the project, the nature and complexity of the work to be performed and anticipated changes in salaries and other costs.

Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in service revenue, with the offsetting expense recorded in cost of service revenue.

Training services include on-site and classroom training. Training revenues are recognized as the related training services are provided.

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved a one-year delay in the effective date. ASU 2014-09 is effective for us in our first quarter of fiscal 2019 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements.

Debt Issuance Costs

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), to simplify the required presentation of debt issuance costs. The amended guidance requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying amount of the related debt liability rather than as an asset. It is effective for financial statements issued for fiscal years beginning after December 15, 2015, our fiscal 2017, with early adoption permitted. The new guidance will be applied retrospectively to each prior period presented. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

2. Deferred Revenue and Financing Receivables

Deferred Revenue

9

Deferred revenue primarily relates to software support agreements billed to customers for which the services have not yet been provided. The liability associated with performing these services is included in deferred revenue and, if not yet paid, the related customer receivable is included in prepaid expenses and other current assets. Billed but uncollected support and subscription-related amounts included in prepaid expenses and other current assets at July 4, 2015 and September 30, 2014 were $88.8 million and $116.2 million, respectively.

Financing Receivables

We periodically provide extended payment terms to credit-worthy customers for software purchases with payment terms up to 24 months. The determination of whether to offer such payment terms is based on the size, nature and credit-worthiness of the customer, and the history of collecting amounts due, without concession, from the customer and customers generally. This determination is based on an internal credit assessment. In making this assessment, we use the Standard & Poor's (S&P) credit rating as our primary credit quality indicator, if available. If a customer, whether commercial or the U.S. Federal government, has an S&P bond rating of BBB- or above, we designate the customer as Tier 1. If a customer does not have a S&P bond rating, or has an S&P bond rating below BBB-, we base our assessment on an internal credit assessment which considers selected balance sheet, operating and liquidity measures, historical payment experience, and current business conditions within the industry or region. We designate these customers as Tier 2 or Tier 3, with Tier 3 being lower credit quality than Tier 2.

As of July 4, 2015 and September 30, 2014, amounts due from customers for contracts with original payment terms greater than twelve months (financing receivables) totaled $28.1 million and $58.1 million, respectively. Accounts receivable and prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets included current receivables from such contracts totaling $24.8 million and $44.6 million at July 4, 2015 and September 30, 2014, respectively, and other assets in the accompanying Consolidated Balance Sheets included long-term receivables from such contracts totaling $3.3 million and $13.5 million at July 4, 2015 and September 30, 2014, respectively. None of these receivables were past due as of either July 4, 2015 or September 30, 2014. Our credit risk assessment for financing receivables was as follows:

	July 4, 2015		September 30, 2014
	(in thousands)
S&P bond rating BBB-1 and above-Tier 1	$	17,143	$	41,152
Internal Credit Assessment-Tier 2	11,002		16,989
Internal Credit Assessment-Tier 3	—		—
Total financing receivables	$	28,145	$	58,141

We evaluate the need for an allowance for doubtful accounts for estimated losses resulting from the inability of these customers to make required payments. As of July 4, 2015 and September 30, 2014, we concluded that all financing receivables were collectible and no reserve for credit losses was recorded. We did not provide a reserve for credit losses or write off any uncollectible financing receivables in the nine months ended July 4, 2015 or June 28, 2014. We write off uncollectible trade and financing receivables when we have exhausted all collection avenues.

We periodically transfer future payments under certain of these contracts to third-party financial institutions on a non-recourse basis. We record such transfers as sales of the related accounts receivable when we surrender control of such receivables. We sold $3.0 million of financing receivables to third-party financial institutions in the nine months ended July 4, 2015. We sold $16.5 million of financing receivables to third-party financial institutions in the nine months ended June 28, 2014.

3. Restructuring Charges

On April 4, 2015, we committed to a plan to restructure our workforce and consolidate select facilities to realign our global workforce to increase investment in our Internet of Things business and to reduce our cost structure through organizational efficiencies in the face of significant foreign currency depreciation relative to the U.S. Dollar and a more cautious outlook on global macroeconomic conditions. The restructuring actions are expected to result in restructuring charges of up to $45 million, primarily attributable to termination benefits. In the second and third quarters of 2015, we recorded charges of $38.5 million and $3.3 million respectively, attributable to termination benefits associated with 443 employees. Additionally, in the third quarter of 2015, we recorded a charge of $1.1 million related to the closure of excess facilities. The facility charge reflects estimated costs including gross lease commitments of approximately $2.0 million, net of estimated sublease income of $0.9 million.

In September 2014, in support of integrating businesses acquired in 2014 and the continued evolution of our business model, we committed to a plan to restructure our workforce. As a result, we recorded a restructuring charge of $26.8 million in the fourth quarter of 2014 associated with severance and related costs associated with 283 employees.

10

The following table summarizes restructuring accrual activity for the nine months ended July 4, 2015:

	Employee Severance and Related Benefits			Facility Closures and Related Costs			Total
	(in thousands)
October 1, 2014	$	25,835		$	535		$	26,370
Charge to operations	41,483			1,142			42,625
Cash disbursements	(47,249		)	(528		)	(47,777		)
Foreign exchange impact	(938		)	(30		)	(968		)
Accrual, July 4, 2015	$	19,131		$	1,119		$	20,250

The accrual for facility closures and related costs is included in accrued expenses and other liabilities in the Consolidated Balance Sheets, and the accrual for employee severance and related benefits is included in accrued compensation and benefits in the Consolidated Balance Sheets.

4. Stock-based Compensation

We measure the cost of employee services received in exchange for restricted stock unit (RSU) awards based on the fair value of RSU awards on the date of grant. That cost is recognized over the period during which an employee is required to provide service in exchange for the award.

Our equity incentive plan provides for grants of nonqualified and incentive stock options, common stock, restricted stock, RSUs and stock appreciation rights to employees, directors, officers and consultants. We award RSUs as the principal equity incentive awards, including certain performance-based awards that are earned based on achievement of performance criteria established by the Compensation Committee of our Board of Directors. Each RSU represents the contingent right to receive one share of our common stock.

Our equity incentive plans are described more fully in Note K to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014.

Restricted stock unit activity for the nine months ended July 4, 2015	Shares		Weighted Average Grant Date Fair Value (Per Share)
	(in thousands)
Balance of outstanding restricted stock units October 1, 2014	4,379		$	26.87
Granted	1,860		$	38.25
Vested	(2,190	)	$	24.65
Forfeited or not earned	(374	)	$	30.52
Balance of outstanding restricted stock units July 4, 2015	3,675		$	33.58

	Restricted Stock Units
Grant Period	Performance-based (1)	Service-based (2)
	(Number of Units in thousands)
First nine months of 2015	313	1,547

_________________

(1) The performance-based RSUs were granted to employees pursuant to the terms described below.

(2) The service-based RSUs were issued to employees, including our executive officers, and our directors. Of these RSUs, approximately 212,000 will vest one year from the date of grant. Substantially all other service-based RSUs will vest in three substantially equal annual installments on or about the anniversary of the date of grant.

In the first nine months of 2015, we granted the target performance-based restricted stock units ("target RSUs") shown in the table above to senior level employees, including our executive officers. These RSUs are eligible to vest based upon our total shareholder return relative to a peer group (the “TSR units”), measured annually over a three-year period. The number of TSR units to vest over the three year period will be determined based on the performance of PTC stock relative to the stock performance of an index of PTC peer companies established as of the grant date, as determined at the end of three measurement

11

periods ending on September 30, 2015, 2016 and 2017, respectively. The shares earned for each period will vest on November 15 following each measurement period, up to a maximum of two times or one and one half times, as applicable, the number of target RSUs (up to a maximum of 590,000 shares). No vesting will occur in a period unless an annual threshold requirement is achieved. The employee must remain employed by PTC through the applicable vest date for any RSUs to vest. If the return to PTC shareholders is negative but still meets or exceeds the peer group indexed return, a maximum of 100% of the target RSUs shall vest for the measurement period. TSR units not earned in the first two year measurement periods are eligible to be earned in the third measurement period.

The weighted average fair value of the TSR units was $41.32 per target RSU on the grant date. The fair value of the TSR units was determined using a Monte Carlo simulation model, a generally accepted statistical technique used to simulate a range of possible future stock prices for PTC and the peer group. The method uses a risk-neutral framework to model future stock price movements based upon the risk-free rate of return, the volatility of each entity, and the pairwise correlations of each entity being modeled. The fair value for each simulation is the product of the payout percentage determined by PTC’s TSR rank against the peer group, the projected price of PTC stock, and a discount factor based on the risk-free rate.

The significant assumptions used in the Monte Carlo simulation model were as follows:

Average volatility of peer group	29.8	%
Risk free interest rate	0.85	%
Dividend yield	—	%

Compensation expense recorded for our stock-based awards was classified in our Consolidated Statements of Operations as follows:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Cost of license and subscription solutions revenue	$	121	$	63	$	381	$	209
Cost of support revenue	1,012		898		2,777		2,711
Cost of professional services revenue	1,317		1,549		4,510		4,436
Sales and marketing	3,430		3,065		9,383		8,583
Research and development	2,928		2,231		9,015		7,067
General and administrative	5,263		4,726		12,069		14,856
Total stock-based compensation expense	$	14,071	$	12,532	$	38,135	$	37,862

5. Earnings per Share (EPS) and Common Stock

EPS

Basic EPS is calculated by dividing net income by the weighted average number of shares outstanding during the period. Unvested restricted stock, although legally issued and outstanding, is not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and RSUs using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options, unrecognized compensation expense and any tax benefits as additional proceeds.

12

	Three months ended				Nine months ended
Calculation of Basic and Diluted EPS	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands, except per share data)
Net income	$	17,435	$	38,026	$	53,111	$	121,439
Weighted average shares outstanding—Basic	114,764		118,328		115,021		118,753
Dilutive effect of employee stock options, restricted shares and restricted stock units	1,261		1,573		1,309		1,820
Weighted average shares outstanding—Diluted	116,025		119,901		116,330		120,573
Earnings per share—Basic	$	0.15	$	0.32	$	0.46	$	1.02
Earnings per share—Diluted	$	0.15	$	0.32	$	0.46	$	1.01

RSUs of 0.1 million were outstanding during the first nine months of 2014 but were not included in the calculation of diluted EPS because the share impact of the assumed proceeds related to the weighted unamortized compensation expense exceeded the weighted average RSUs outstanding. These RSUs were excluded from the computation of diluted EPS as the effect would have been anti-dilutive.

Common Stock Repurchases

Our Articles of Organization authorize us to issue up to 500 million shares of our common stock. Our Board of Directors authorized us to repurchase up to $100 million worth of shares with cash from operations in the period October 1, 2013 through September 30, 2014. On August 4, 2014, our Board of Directors authorized us to repurchase up to an additional $600 million of our common stock from August 4, 2014 through September 30, 2017. In the third quarter and first nine months of 2014, respectively, we repurchased 1.6 million and 2.8 million shares at a cost of $60.0 million and $99.9 million. In the third quarter of 2015, we repurchased 1.2 million shares at a cost of $50.0 million. All shares of our common stock repurchased are automatically restored to the status of authorized and unissued.

On August 14, 2014, we entered into an accelerated share repurchase (“ASR”) agreement with a major financial institution (“Bank”). The ASR allowed us to buy a large number of shares immediately at a purchase price determined by an average market price over a period of time. Under the ASR, we agreed to purchase $125 million of our common stock, in total, with an initial delivery to us in August 2014 of 2.3 million shares. We settled the ASR in December 2014 and the Bank delivered to us 1.1 million shares.

6. Acquisitions

In 2014, we completed the acquisitions of Axeda (on August 11, 2014), Atego (on June 30, 2014) and ThingWorx (on December 30, 2013). In 2015, we completed the acquisition of ColdLight (on May 7, 2015). The results of operations of these acquired businesses have been included in our consolidated financial statements beginning on their respective acquisition dates.

Acquisition-related costs were $2.8 million and $8.7 million for the third quarter and first nine months of 2015, respectively, and $1.3 million and $6.4 million for the third quarter and first nine months of 2014, respectively. Acquisition-related costs include direct costs of potential and completed acquisitions (e.g., investment banker fees, professional fees, including legal and valuation services) and expenses related to acquisition integration activities (e.g., professional fees, severance, and retention bonuses). In addition, subsequent adjustments to our initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition-related charges. These costs have been classified in general and administrative expenses in the accompanying Consolidated Statements of Operations.

ColdLight

On May 7, 2015, we acquired all of the ownership interest of ColdLight Solutions, LLC, a company that offered solutions for data machine learning and predictive analytics, for approximately $98.6 million in cash (net of cash acquired of $1.3 million). Up to $5 million of contingent consideration may become payable to the former owners of ColdLight if certain technology milestones are achieved within two years of the acquisition (the earn-out). If an earn-out milestone is achieved, a portion of the contingent consideration becomes earned and payable in cash after each six-month period. Up to $3.0 million of the contingent consideration can be earned in the first year and up to $2.0 million can be earned in the second year. We borrowed $100.0 million under our existing credit facility to fund the acquisition.

The acquisition of the ColdLight automated predictive analytics platform will expand our technology portfolio in the Internet of Things (IoT) market. At the time of the acquisition, ColdLight had approximately 60 employees and annualized revenues of $8.0 million. The results of operations of ColdLight have been included in our consolidated financial statements beginning on the acquisition date. Revenue and earnings of ColdLight since the acquisition date were not material.

13

The acquisition of ColdLight has been accounted for as a business combination. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using an income approach, with estimates and assumptions provided by management of ColdLight and PTC. The process for estimating the fair values of identifiable intangible assets and the contingent consideration liability requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. In connection with accounting for the business combination, we recorded a liability of $3.8 million, representing the fair value of the contingent consideration. The liability was valued using a discounted cash flow method and a probability weighted estimate of achievement of the technology milestones. The estimated undiscounted range of outcomes for the contingent consideration is $3.8 million to $5.0 million. We will assess the probability that the milestones will be met and at what level each reporting period. Any subsequent changes in the estimated fair value of the liability will be reflected in earnings until the liability is fully settled.

Based upon a preliminary valuation, the total purchase price allocation was as follows:

Purchase price allocation:	(in thousands)
Goodwill	$	85,288
Identifiable intangible assets	17,620
Cash	1,313
Other assets and liabilities, net	(516		)
Total allocation of purchase price consideration	103,705
Less: cash acquired	(1,313		)
Total purchase price allocation, net of cash acquired	$	102,392
Less: contingent consideration	(3,800		)
Net cash used to acquire ColdLight	$	98,592

The preliminary purchase price allocation resulted in $85.3 million of goodwill, which will be deductible for income tax purposes. All of the acquired goodwill was allocated to our software products segment. Intangible assets of $17.6 million includes purchased software of $13.6 million, customer relationships of $3.5 million and trademarks of $0.5 million, which are being amortized over weighted average useful lives of 10 years, 9 years and 7 years, respectively, based upon the pattern in which economic benefits related to such assets are expected to be realized.

The resulting amount of goodwill reflects our expectations of the following benefits: (1) ColdLight provides a differentiated machine learning platform for critical data analytics in our solution portfolio; (2) ColdLight’s Neuron^® product suite can automate the analytics process, reducing the dependency on manual processes; (3) ColdLight is addressing challenging aspects of data analytics aligned with the PTC / ThingWorx analytics vision; (4) ColdLight has a presence in industries outside of PTC's traditional markets which create a foundation for us to pursue opportunities in non-traditional vertical markets.

ThingWorx

In the second quarter of 2014, we acquired ThingWorx, Inc. for $111.5 million (net of cash acquired of $0.1 million). The former shareholders of ThingWorx are eligible to receive additional consideration of up to $18.0 million if certain profitability and bookings targets are achieved within two years of the acquisition (the earn-out). The earn-out is payable in cash in two installments, half of which was earned and paid in July 2015 and the remainder of which, if earned, will become payable in 2016 after the second year measurement period. In connection with accounting for the business combination, we recorded a liability representing the fair value of the contingent consideration. The liability was valued using a discounted cash flow method and a probability weighted estimate of achievement of the financial targets. We assess the probability that the targets will be met each reporting period. At July 4, 2015, we estimate that the full amount of the contingent consideration of $18.0 million will be earned. Any subsequent changes in the estimated fair value of the liability are reflected in earnings until the liability is fully settled (an increase of $2.8 million in the contingent consideration liability in the first nine months of 2015, see Note 8).

7. Goodwill and Intangible Assets

We have two operating segments: (1) Software Products and (2) Services. We assess goodwill for impairment at the reporting unit level. Our reporting units are determined based on the components of our operating segments that constitute a business for which discrete financial information is available and for which operating results are regularly reviewed by segment management. Our reporting units are the same as our operating segments. As of July 4, 2015 and September 30, 2014, goodwill and acquired intangible assets in the aggregate attributable to our software products segment were $1,314.2 million

14

and $1,283.0 million, respectively, and attributable to our services segment were $63.1 million and $66.4 million, respectively. Acquired intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We evaluate goodwill for impairment in the third quarter of our fiscal year, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting segment below its carrying value. Factors we consider important, on an overall company basis and segment basis, when applicable, that could trigger an impairment review include significant under-performance relative to historical or projected future operating results, significant changes in our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, a significant decline in our stock price for a sustained period and a reduction of our market capitalization relative to net book value. We completed our annual goodwill impairment review as of July 4, 2015 and concluded that no impairment charge was required as of that date.

To conduct these tests of goodwill, the fair value of the reporting unit is compared to its carrying value. If the reporting unit’s carrying value exceeds its fair value, we record an impairment loss equal to the difference between the carrying value of goodwill and its implied fair value. We estimate the fair values of our reporting units using discounted cash flow valuation models. Those models require estimates of future revenues, profits, capital expenditures, working capital, terminal values based on revenue multiples, and discount rates for each reporting unit. We estimate these amounts by evaluating historical trends, current budgets, operating plans and industry data. The estimated fair value of each reporting unit was more than double its carrying value as of July 4, 2015.

Goodwill and acquired intangible assets consisted of the following:

	July 4, 2015						September 30, 2014
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in thousands)
Goodwill (not amortized)					$	1,071,796					$	1,012,527
Intangible assets with finite lives (amortized) (1):
Purchased software	$	284,427	$	169,903	$	114,524	$	278,012	$	162,259	$	115,753
Capitalized software	22,877		22,877		—		22,877		22,877		—
Customer lists and relationships	350,845		166,527		184,318		360,530		147,469		213,061
Trademarks and trade names	18,573		12,221		6,352		18,479		10,964		7,515
Other	3,938		3,605		333		4,117		3,573		544
	$	680,660	$	375,133	$	305,527	$	684,015	$	347,142	$	336,873
Total goodwill and acquired intangible assets					$	1,377,323					$	1,349,400

(1) The weighted average useful lives of purchased software, customer lists and relationships, trademarks and trade names and other intangible assets with a remaining net book value are 9 years, 10 years, 9 years, and 3 years, respectively.

Goodwill

Changes in goodwill presented by reportable segment were as follows:

	Software Products Segment			Services Segment			Total
	(in thousands)
Balance, October 1, 2014	$	959,768		$	52,759		$	1,012,527
Acquisition of Axeda	(180		)	—			(180		)
Acquisition of ColdLight	85,288			—			85,288
Foreign currency translation adjustments	(25,627		)	(212		)	(25,839		)
Balance, July 4, 2015	$	1,019,249		$	52,547		$	1,071,796

Amortization of Intangible Assets

The aggregate amortization expense for intangible assets with finite lives was classified in our Consolidated Statements of Operations as follows:

15

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Amortization of acquired intangible assets	$	9,105	$	7,998	$	27,691	$	23,772
Cost of license and subscriptions solutions revenue	4,957		4,415		14,438		13,319
Total amortization expense	$	14,062	$	12,413	$	42,129	$	37,091

8. Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. Generally accepted accounting principles prescribe a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs that may be used to measure fair value:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

• Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our significant financial assets and liabilities measured at fair value on a recurring basis as of July 4, 2015 and September 30, 2014 were as follows:

	July 4, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Cash equivalents (1)	$	52,916	$	—	$	—	$	52,916
Forward contracts	—		851		—		851
	$	52,916	$	851	$	—	$	53,767
Financial liabilities:
Contingent consideration related to acquisitions	$	—	$	—	$	21,800	$	21,800
Forward contracts	—		888		—		888
	$	—	$	888	$	21,800	$	22,688

16

	September 30, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Cash equivalents (1)	$	101,113	$	—	$	—	$	101,113
Forward contracts	—		339		—		339
	$	101,113	$	339	$	—	$	101,452
Financial liabilities:
Contingent consideration related to acquisitions	$	—	$	—	$	15,191	$	15,191
Forward contracts	—		911		—		911
	$	—	$	911	$	15,191	$	16,102

______________

(1) Money market funds and time deposits.

Changes in the fair value of Level 3 contingent consideration liability associated with our acquisition of ThingWorx and ColdLight were as follows:

	Contingent Consideration
	(in thousands)
	ThingWorx		ColdLight
Balance, October 1, 2014	$	15,191	$	—
Change in present value of contingent consideration	2,809		3,800
Balance, July 4, 2015	$	18,000	$	3,800

In connection with accounting for the ThingWorx and ColdLight business combinations, we recorded a liability representing the fair value of contingent consideration payable upon achievement of certain financial targets and technology milestones. The liabilities that we recorded were valued using a discounted cash flow method and a probability weighted estimate of achievement of the targets based on inputs that are not observable in the market, which represents a level 3 measurement within the fair value hierarchy. Changes in the fair value of the contingent consideration liabilities will be reflected in acquisition-related charges in general and administrative expense until the liabilities are fully settled. Of the total, $20.5 million of the contingent consideration liabilities are included in accrued expenses and other current liabilities, with the remaining $1.3 million in other liabilities in the Consolidated Balance Sheet as of July 4, 2015.

9. Derivative Financial Instruments

Our foreign currency risk management strategy is principally designed to mitigate the future potential financial impact of changes in the value of transactions and balances denominated in foreign currency resulting from changes in foreign currency exchange rates. We enter into derivative transactions, specifically foreign currency forward contracts with maturities of up to approximately three months, to manage our exposure to fluctuations in foreign exchange rates that arise primarily from our foreign currency-denominated receivables and payables.

Generally, we do not designate foreign currency forward contracts as hedges for accounting purposes, and changes in the fair value of these instruments are recognized immediately in earnings. Because we enter into forward contracts only as an economic hedge, any gain or loss on the underlying foreign-denominated balance would be offset by the loss or gain on the forward contract. Gains and losses on forward contracts and foreign denominated receivables and payables are included in other income (expense), net.

As of July 4, 2015 and September 30, 2014, we had outstanding forward contracts with notional amounts equivalent to the following:

17

Currency Hedged	July 4, 2015		September 30, 2014
	(in thousands)
Canadian Dollar / U.S. Dollar	$	19,971	$	25,583
Euro / U.S. Dollar	77,987		61,751
British Pound / Euro	9,713		14,259
Israeli New Sheqel / U.S. Dollar	5,681		6,144
Japanese Yen / Euro	24,080		—
Swiss Franc /Euro	8,516		—
All other	10,990		9,251
Total	$	156,938	$	116,988

As of July 4, 2015 and September 30, 2014, the accompanying Consolidated Balance Sheets include a net asset of $0.9 million and $0.3 million, respectively, in prepaid expenses and other current assets, and a net liability of $0.9 million for both periods, in accrued expenses related to the fair value of our forward contracts.

Net gains and losses on foreign currency exposures are recorded in other income (expense), net and include realized and unrealized gains and losses on forward contracts. Net gains and losses on foreign currency exposures for the three and nine months ended July 4, 2015 and June 28, 2014 were as follows:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Net foreign currency losses	$	449	$	746	$	1,362	$	2,739
Net realized and unrealized loss (gain) on forward contracts (excluding the underlying foreign currency exposure being hedged)	$	741	$	1,320	$	1,122	$	(377	)

10. Segment Information

We operate within a single industry segment—computer software and related services. Operating segments as defined under GAAP are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our President and Chief Executive Officer. We have two operating and reportable segments: (1) Software Products, which includes license and related support revenue (including updates and technical support) for all our products except training-related products; and (2) Services, which includes consulting, implementation, training, cloud services, computer-based training products, including support on these products, and other services revenue. We do not allocate sales and marketing or administrative expenses to our operating segments as these activities are managed on a consolidated basis.

The revenue and operating income attributable to our operating segments are summarized as follows:

18

	Three months ended						Nine months ended
	July 4, 2015			June 28, 2014			July 4, 2015			June 28, 2014
	(in thousands)
Revenue:
Total Software Products segment revenue	$	235,371		$	258,805		$	723,313		$	748,482
Total Services segment revenue	67,742			77,829			219,361			241,777
Total revenue	$	303,113		$	336,634		$	942,674		$	990,259
Operating income: (1)
Software Products segment	$	145,016		$	166,639		$	428,533		$	479,736
Services segment	13,378			13,516			29,868			42,566
Sales and marketing expenses	(88,715		)	(91,440		)	(271,257		)	(262,085		)
General and administrative expenses	(48,072		)	(34,331		)	(123,918		)	(99,749		)
Total operating income	21,607			54,384			63,226			160,468
Interest and other income (expense), net	(3,668		)	(2,278		)	(10,492		)	(6,724		)
Income before income taxes	$	17,939		$	52,106		$	52,734		$	153,744

(1) We recorded restructuring charges of $4.4 million and $42.6 million in the third quarter and first nine months of 2015, respectively. Software Products included $1.5 million and $11.5 million respectively; Services included $0.6 million and $11.4 million, respectively; sales and marketing expenses included $2.3 million and $15.1 million, respectively; and general and administrative expenses included $(28) thousand and $4.6 million, respectively, of these restructuring charges. We recorded restructuring charges of $0.5 million in the third quarter of 2014, all of which were included in general and administrative expenses. We recorded restructuring charges of $1.6 million in the first nine months of 2014. Software Products included $0.1 million; Services included $0.2 million; sales and marketing expenses included $0.5 million; and general and administrative expenses included $0.8 million of these restructuring charges.

11. Income Taxes

In the third quarter and first nine months of 2015, our effective tax rate was a provision of 3% on pre-tax income of $17.9 million and a benefit of 1% on pre-tax income of $52.7 million, respectively, compared to a provision of 27% on pre-tax income of $52.1 million and 21% on pre-tax income of $153.7 million in the third quarter and first nine months of 2014, respectively. In the third quarter and first nine months of 2015 and 2014, our effective tax rate was lower than the 35% statutory federal income tax rate due to our corporate structure in which our foreign taxes are at a net effective tax rate lower than the U.S. rate. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland. In 2015 and 2014, the foreign rate differential predominantly relates to these Irish earnings. Our foreign rate differential in 2015 includes a rate benefit from a business realignment completed on September 30, 2014 in which intellectual property was transferred between two wholly-owned foreign subsidiaries. The realignment allows us to more efficiently manage the distribution of our products to European customers. This realignment resulted in a tax benefit of approximately $6 million and $14 million in the third quarter and first nine months of 2015, respectively. In addition, in the first nine months of 2015, we recorded a tax benefit of $3.1 million related to the reassessment of our reserve requirements, and a benefit of $1.4 million in conjunction with the reorganization of our Atego U.S. subsidiaries. Additionally, our provision reflects a $2.1 million tax benefit related to a retroactive extension of the U.S. research and development tax credit enacted in the first quarter of 2015. This benefit was offset by a corresponding provision to increase our U.S. valuation allowance.

Additionally, in the first nine months of 2014, our effective tax rate was lower than the 35% statutory federal income tax rate due to the reversal of a portion of our valuation allowance against net deferred tax assets. In the second quarter of 2014, our acquisition of ThingWorx was accounted for as a business combination and we recorded the fair value of assets and liabilities acquired, including finite-lived acquired intangible assets totaling $32.1 million and net deferred tax liabilities of $8.9 million, primarily related to the tax effect of the acquired intangible assets that are not deductible for income tax purposes. These net deferred tax liabilities reduced our net deferred tax asset balance and resulted in a tax benefit of $8.9 million recorded in the second quarter of 2014 to decrease our valuation allowance in the U.S. As the decrease in the valuation allowance was not part of the accounting for the business combination (the fair value of the assets acquired and liabilities assumed), it was recorded as an income tax benefit.

As of July 4, 2015 and September 30, 2014, we had unrecognized tax benefits of $11.9 million and $15.0 million, respectively. If all of our unrecognized tax benefits as of July 4, 2015 were to become recognizable in the future, we would

19

record a benefit to the income tax provision of $10.3 million which would be partially offset by an increase in the U.S. valuation allowance of $3.9 million. 

Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $4 million as audits close and statutes of limitations expire.

We follow the with-and-without approach for the direct effects of windfall tax deductions to determine the timing of the recognition of benefits for windfall tax deductions.  In the third quarter and first nine months of 2014, we recorded windfall tax benefits of $1.5 million and $9.6 million, respectively, to additional paid-in capital.

12. Debt

Credit Agreement

In September 2014, we entered into a multi-currency credit facility with a syndicate of sixteen banks for which JPMorgan Chase Bank, N.A. acts as Administrative Agent. We expect to use the credit facility for general corporate purposes, including acquisitions of businesses, share repurchases and working capital requirements. As of July 4, 2015, the fair value of our credit facility approximates our book value.

The credit facility consists of a $500 million term loan and a $1 billion revolving loan commitment, and may be increased by an additional $250 million (in the form of revolving loans or term loans, or a combination thereof) if the existing or additional lenders are willing to make such increased commitments. The revolving loan commitment does not require amortization of principal. The term loan requires prepayment of principal at the end of each calendar quarter. The revolving loan and term loan may be repaid in whole or in part prior to the scheduled maturity dates at our option without penalty or premium. The credit facility matures on September 15, 2019, when remaining amounts outstanding will be due and payable in full. We are required to make principal payments under the term loan of $25 million, $50 million, $50 million, $75 million and $300 million in 2015, 2016, 2017, 2018 and 2019, respectively.

PTC is the sole borrower under the credit facility. The obligations under the credit facility are guaranteed by PTC’s material domestic subsidiaries and 65% of the voting equity interests of PTC’s material first-tier foreign subsidiaries are pledged as collateral for the obligations.

As of July 4, 2015, we had $624.4 million outstanding under the credit facility comprised of a $481.3 million term loan and a $143.1 million revolving loan. Loans under the credit facility bear interest at variable rates which reset every 30 to 180 days depending on the rate and period selected by PTC as described below. As of July 4, 2015, the annual rate on the term and revolving loan was 1.6875% (which will reset on September 17, 2015 for the term loan and $43.1 million of the revolving loan, and on August 6, 2015 for the remaining $100 million of the revolving loan). Interest rates on borrowings outstanding under the credit facility range from 1.25% to 1.5% above an adjusted LIBO rate for Eurodollar-based borrowings or would range from 0.25% to 0.5% above the defined base rate (the greater of the Prime Rate, the Federal Funds Effective Rate plus 0.005%, or an adjusted LIBO rate plus 1%) for base rate borrowings, in each case based upon PTC’s leverage ratio. Additionally, PTC may borrow certain foreign currencies at rates set in the same range above the respective London interbank offered interest rates for those currencies, based on PTC’s leverage ratio. A quarterly commitment fee on the undrawn portion of the credit facility is required, ranging from 0.175% to 0.25% per annum, based upon PTC’s leverage ratio.

The credit facility limits PTC’s and its subsidiaries’ ability to, among other things: incur additional indebtedness; incur liens or guarantee obligations; pay dividends (other than to PTC) and make other distributions; make investments and enter into joint ventures; dispose of assets; and engage in transactions with affiliates, except on an arms-length basis. Under the credit facility, PTC and its material domestic subsidiaries may not invest cash or property in, or loan to, PTC’s foreign subsidiaries in aggregate amounts exceeding $75 million for any purpose and an additional $150 million for acquisitions of businesses. In addition, under the credit facility, PTC and its subsidiaries must maintain the following financial ratios:

• a leverage ratio, defined as consolidated funded indebtedness to consolidated trailing four quarters EBITDA, of no greater than 3.00 to 1.00 at any time; and

• a fixed charge coverage ratio, defined as the ratio of consolidated trailing four quarters EBITDA less consolidated capital expenditures to consolidated fixed charges, of no less than 3.50 to 1.00 at any time.

As of July 4, 2015, our leverage ratio was 2.31 to 1.00, our fixed charge coverage ratio was 7.25 to 1.00 and we were in compliance with all financial and operating covenants of the credit facility. As of July 4, 2015, we had $190 million available to borrow under the revolving loan portion of our credit facility, the availability of which is limited based on financial covenants in the facility.

20

Any failure to comply with the financial or operating covenants of the credit facility would prevent PTC from being able to borrow additional funds, and would constitute a default, permitting the lenders to, among other things, accelerate the amounts outstanding, including all accrued interest and unpaid fees, under the credit facility and to terminate the credit facility. A change in control of PTC, as defined in the agreement, also constitutes an event of default, permitting the lenders to accelerate the indebtedness and terminate the credit facility.

13. Commitments and Contingencies

Legal and Regulatory Matters

China Investigation

We have, since making a voluntary disclosure to the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), been cooperating to provide information to those agencies concerning expenditures by our business partners and our China business, including for travel and entertainment, that apparently benefited employees of customers regarded as state owned enterprises in China. This matter involves issues regarding compliance with laws, including the U.S. Foreign Corrupt Practices Act. Negotiations with the SEC and DOJ to reach a resolution of the investigation have begun but have not been concluded. Resolution of this matter is likely to include fines and penalties. In the third quarter, we recorded a liability of $13.6 million associated with pending discussions with these agencies to resolve this matter. This is the minimum amount of liability we expect to incur if we are able to reach a settlement in this matter, and does not include any amounts associated with potential fines that might be imposed by either or both of the SEC and DOJ, which amounts would increase our liability and could be significant. There can be no assurance that we will reach a settlement with these agencies or that the cost of such settlements, if reached, would not materially exceed the existing accrual. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.

Legal Proceedings

We are subject to various other legal proceedings and claims that arise in the ordinary course of business. We do not believe that resolving the legal proceedings and claims that we are currently subject to will have a material adverse impact on our financial condition, results of operations or cash flows. However, the results of legal proceedings cannot be predicted with certainty. Should any of these legal proceedings and claims be resolved against us, the operating results for a particular reporting period could be adversely affected.

Accruals

With respect to legal proceedings and claims, we record an accrual for a contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. For legal proceedings and claims for which the likelihood that a liability has been incurred is more than remote but less than probable, we estimate the range of possible outcomes. As of July 4, 2015, we had a legal proceedings and claims accrual of $15.9 million, including an accrual of $13.6 million for the China investigation.

Guarantees and Indemnification Obligations

We enter into standard indemnification agreements in the ordinary course of our business. Pursuant to such agreements with our business partners or customers, we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to our products, as well as claims relating to property damage or personal injury resulting from the performance of services by us or our subcontractors. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and we accordingly believe the estimated fair value of liabilities under these agreements is immaterial.

We warrant that our software products will perform in all material respects in accordance with our standard published specifications in effect at the time of delivery of the licensed products for a specified period of time. Additionally, we generally warrant that our consulting services will be performed consistent with generally accepted industry standards. In most cases, liability for these warranties is capped. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history; however, we have not incurred significant cost under our product or services warranties. As a result, we believe the estimated fair value of these liabilities is immaterial.

14. Pension Plans

Our pension plans are described in more detail in Note M to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. In the first nine months of 2015, we contributed $20 million to a non-U.S. pension plan.

21

Termination of U.S. Pension Plan

We maintain a U.S. defined benefit pension plan (the Plan) that covers certain persons who were employees of Computervision Corporation (acquired by us in 1998). Benefits under the Plan were frozen in 1990. In the second quarter of 2014, we began the process of terminating the Plan. In the third quarter of 2014, we provided notice to plan participants of our intent to terminate the plan effective August 1, 2014 and in the second quarter of 2015 we provided a notice of plan benefits to participants. In March 2015, we received a favorable determination letter from the Internal Revenue Service with respect to the termination, and we expect to complete the termination process by September 30, 2015. In August 2015, lump sum distributions totaling $45 million were made to selected participants from plan assets in settlement of their liabilities and we purchased annuity contracts with an insurer for approximately $90 million to cover remaining liabilities of the plan including benefits for retirees currently receiving payments and vested participants who did not elect to receive a lump sum. In connection with settling the liabilities, we contributed $26 million to fully fund the Plan.

In the fourth quarter, upon settlement of the liabilities, we expect to recognize a settlement loss of $66 million, $47 million net of tax, including unamortized losses in accumulated other comprehensive income, based on the projected benefit obligations and assets measured as of the dates the settlements occur.

15. Subsequent Events

Contingent Earn-Out Payment

The ThingWorx contingent earn-out first year payment criteria were attained in the third quarter of fiscal 2015. As such, $9 million of the total contingent consideration was paid on July 17, 2015.

Termination of U.S. Pension Plan

In August 2015, lump sum distributions totaling $45 million were made to selected participants from plan assets in settlement of their liabilities and we purchased annuity contracts with an insurer for approximately $90 million to cover remaining liabilities of the plan. In connection with settling the liabilities, we contributed $26 million to fully fund the Plan.

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q that are not historic facts, including statements about our future financial and growth expectations, the development of our products and markets and adoption of our solutions and future purchases by customers, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that the macroeconomic and/or global manufacturing climates may not improve or may deteriorate, the possibility that customers may not purchase our solutions when or at the rates we expect, the possibility that our businesses, including our Internet of Things (IoT) and SLM businesses, may not expand and/or generate the revenue we expect, the possibility that market size and growth estimates may be incorrect and that we may be unable to grow our business at or in excess of market growth rates, the possibility that new products released and planned products, including IoT enabled core products, may not generate the revenue we expect or be released as we expect, the possibility that foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense, the possibility that we may not achieve the license and subscription solutions (L&SS), support or professional services revenue that we expect, which could result in a different mix of revenue between L&SS, support and professional services and could impact our EPS results, the possibility that our customers may purchase more of our solutions as subscriptions than we expect, which would adversely affect near-term revenue, operating margins and EPS, the possibility that sales of our solutions as subscriptions may not have the longer-term positive effect on revenue that we expect, the possibility that we may be unable to expand our services partner ecosystem or improve services margins as we expect, the possibility that our workforce realignment may adversely affect our operations, the possibility that we may be unable to generate sufficient operating cash flow to return 40% of free cash flow to shareholders or that other uses of cash could preclude share repurchases, and the possibility that amounts in excess of the current accrual may be assessed against PTC in connection with the resolution of our investigation in China and that any such resolution may have collateral effects on our business in China, the U.S. or elsewhere; as well as other risks and uncertainties described below throughout or referenced in Part II, Item 1A. Risk Factors of this report.

Business Overview

PTC Inc. develops and delivers technology solutions, comprised of software and services, that transform the way our customers create, operate and service their products for a smart, connected world.

Our solutions and software products address the challenges our customers face in the following areas:

•Computer-Aided Design (CAD)

Effective and collaborative product design across the globe.

•Product Lifecycle Management (PLM)

Efficient and consistent management of product development from concept to retirement across functional processes and distributed teams.

•Application Lifecycle Management (ALM)

Management of global software development from concept to delivery.

•Service Lifecycle Management (SLM)

Planning and delivery of service, and analysis of product intelligence at the point of service.

•Internet of Things (IoT)

Enabling connectivity and development of software applications for smart, connected products.

Executive Overview

Results for the third quarter

Revenue was down year over year due to changes within our business as well as external factors, including a challenging macroeconomic environment and an increase in the strength of the U.S. Dollar relative to international currencies, most notably the Euro and the Yen.

23

	Three Months Ended					Constant Currency Change
	July 4, 2015		June 28, 2014
Revenue					Change
	(in millions)
License and Subscription Solutions	$	83.9	$	97.7	(14%)	(7%)
Support	165.7		172.0		(4%)	6%
Total Software	249.6		269.7		(7%)	2%
Professional Services	53.5		66.9		(20%)	(10%)
Total	$	303.1	$	336.6	(10%)	(1%)

• Software revenue declined due to unfavorable currency movements and fewer large deals in the quarter than in the prior year. We believe that challenging macroeconomic conditions, particularly in the Americas and China, impacted our ability to close large deals in our core business.

• Professional services revenue declined primarily due to a shift of services to our partners in accordance with our margin improvement strategy.

• We delivered strong growth in our Internet of Things business, closing a number of significant deals with large, industrial companies that are adopting our platform for their IoT initiatives. Three of our eight largest deals in the quarter were IoT deals and IoT license revenue represented more than 20% of our total license and subscription solutions (L&SS) revenue.

• Subscription solutions bookings in the quarter comprised 16% of our L&SS bookings, and included three large IoT deals that came in as perpetual license transactions, compared to 21% in the third quarter of 2014 when we had two significant subscription bookings, including one mega deal, in our core business.

• Approximately 60% of our revenue in the third quarter of 2015 came from recurring revenue streams (subscription solutions and support), compared to approximately 53% in the year-ago period.

• We had 8 large deals (which we define as a L&SS booking greater than $1 million from an individual customer in a quarter) in the third quarter of 2015, compared to 21 in the third quarter of 2014. Many of our largest customers are multinational companies that rely heavily on exports, so the strengthening of the U.S. Dollar could be negatively impacting their businesses and their willingness to spend.

From a geographic perspective, we believe macroeconomic challenges in the Americas are impacting our ability to close large CAD and ePLM deals, which, given the maturity of these markets, tend to be more cyclical. However, strong performance in our IoT business and solid performance in our SLM business more than offset our weaker results in CAD and ePLM and enabled us to deliver 13% software revenue growth in the Americas. In Europe, we saw modest software revenue growth on a constant currency basis, again driven by IoT and SLM with declines in CAD and ePLM against a tough third quarter of 2014 comparison when we had more large deals in the region. Pacific Rim software revenue declined modestly due to weak results in CAD and SLM, which we believe were primarily due to the overall economic slowdown in China. Japan software revenue was down from the third quarter of 2014 due to weak results in CAD, ePLM and SLM, also owing to a tough comparison with the prior year.

	Three Months Ended			Constant Currency Change
	July 4, 2015	June 28, 2014
Other Operating Measures			Change
Operating Margin	7.1%	16.2%
EPS	$0.15	$0.32	(53%)	(19%)
Non-GAAP Operating Margin(1)	24.1%	24.2%
Non-GAAP EPS(1)	$0.53	$0.53	¯	21%
(1) Non-GAAP measures are reconciled to GAAP results under Results of Operations - Non-GAAP Measures below.

GAAP and non-GAAP operating income reflect lower revenue, offset by reductions in operating expenses driven by cost savings from restructuring and by lower incentive compensation accruals. Additionally, our GAAP earnings include a $14 million accrual associated with the pending China matter and restructuring charges of $4 million. Currency movements reduced GAAP EPS by approximately $0.11. Both GAAP and non-GAAP EPS benefited from a lower tax rate.

We ended the quarter with a cash balance of $275 million. We generated $87 million of cash from operations in the third quarter of 2015 and we drew down $94 million (net of $6 million of repayments) on our credit facility to fund the acquisition of ColdLight for $99 million (net of cash acquired). Additionally, we repurchased $50 million of shares in the quarter. At July 4,

24

2015, the balance outstanding under our credit facility was $624 million and we had $190 million available to borrow under the revolving loan portion of our credit facility.

Future Expectations, Strategies and Risks

Uncertainty about the economic environment, volatility in foreign currency exchange rates and our transition to subscription-based sales continue to be headwinds for revenue growth. Due to deterioration in currency exchange rates and uncertainty regarding macroeconomic conditions beyond our initial expectations for 2015, we expect 2015 revenue and non-GAAP earnings will be below our previous guidance.

If economic conditions deteriorate further, or if foreign currency exchange rates relative to the U.S. Dollar differ significantly from our current assumed rates, future results could differ materially from our targets. Additionally, if a greater percentage of our customers purchase our solutions as subscriptions than we expect, it may have an adverse impact on revenue, operating margin, cash flow and EPS growth relative to our targets and historical results.

Our 2015 targets exclude settlement losses related to the termination of our U.S. pension plan. While we expect to complete the termination process by September 30, 2015, the amount of the losses will vary based on the timing of the settlement payments and the projected benefit obligations and assets in the plan measured as of the dates the settlements occur. We currently estimate the pre-tax settlement losses to be approximately $66 million.

Our results have been impacted, and we expect will continue to be impacted, by our ability to close large transactions. The amount of revenue, particularly L&SS revenue, attributable to large transactions, and the number of such transactions, varies significantly from quarter to quarter based on customer purchasing decisions and macroeconomic conditions. Our growth rates have become increasingly dependent on adoption of our solutions by large direct customers. Such transactions tend to be larger in size and may have long lead times as they often follow a lengthy product selection and evaluation process. This may cause volatility in our results.

Impact of an Investigation in China

We have, since making a voluntary disclosure to the U.S. Securities and Exchange Commission (SEC) and the Department of Justice, been cooperating to provide information to those agencies concerning expenditures by our business partners and our China business, including for travel and entertainment, that apparently benefited employees of customers regarded as state owned enterprises in China. This matter involves issues regarding compliance with laws, including the U.S. Foreign Corrupt Practices Act.

In the third quarter of 2015, we recorded a liability of $13.6 million associated with pending discussions with the SEC and the Department of Justice to resolve this matter. This is the minimum amount of liability we expect to incur if we are able to reach a settlement in this matter, and does not include any amounts associated with potential fines that might be imposed by either or both of the SEC and DOJ, which amounts would increase our liability and could be significant. There can be no assurance that we will reach a settlement with these agencies or that the cost of such settlements, if reached, would not materially exceed the existing accrual. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.

Results of Operations

The following table shows the financial measures that we consider the most significant indicators of the performance of our business. In addition to operating income, operating margin, and diluted earnings per share as calculated under generally accepted accounting principles (“GAAP”), the table also includes non-GAAP operating income, operating margin, and diluted earnings per share for the reported periods. We discuss the non-GAAP measures in detail, including items excluded from the measures, and provide a reconciliation to the comparable GAAP measures under Non-GAAP Measures below.

25

	Three months ended						Percent Change 2014 to 2015				Nine months ended						Percent Change 2014 to 2015
	July 4, 2015			June 28, 2014			Actual		Constant Currency		July 4, 2015			June 28, 2014			Actual		Constant Currency
	(Dollar amounts in millions, except per share data)
License and subscriptions solutions	$	83.9		$	97.7		(14	)%	(7	)%	$	248.9		$	269.1		(8	)%	(1	)%
Support	165.7			172.0			(4	)%	6	%	516.0			508.4			2	%	9	%
Total software revenue	249.6			269.7			(7	)%	2	%	764.9			777.5			(2	)%	5	%
Professional services	53.5			66.9			(20	)%	(10	)%	177.8			212.7			(16	)%	(9	)%
Total revenue	303.1			336.6			(10	)%	(1	)%	942.7			990.3			(5	)%	2	%
Total cost of revenue	79.4			91.1			(13	)%			258.4			277.8			(7	)%
Gross margin	223.7			245.6			(9	)%			684.3			712.4			(4	)%
Operating expenses	202.1			191.2			6	%			621.1			552.0			13	%
Total costs and expenses (1)	281.5			282.3			—	%	6	%	879.4			829.8			6	%	11	%
Operating income (1)	$	21.6		$	54.4		(60	)%	(37	)%	$	63.2		$	160.5		(61	)%	(43	)%
Non-GAAP operating income (1)	$	73.2		$	81.4		(10	)%	8	%	$	216.8		$	243.8		(11	)%	4	%
Operating margin (1)	7.1		%	16.2		%					6.7		%	16.2		%
Non-GAAP operating margin (1)	24.1		%	24.2		%					22.9		%	24.6		%
Diluted earnings per share (2)	$	0.15		$	0.32						$	0.46		$	1.01
Non-GAAP diluted earnings per share (2)	$	0.53		$	0.53						$	1.57		$	1.51
Cash flow from operations	$	86.8		$	106.4						$	192.5		$	253.4
(1) Costs and expenses for the three and nine months ended July 4, 2015 included restructuring charges of $4.4 million and $42.6 million, respectively, compared to $0.5 million and $1.6 million for the three and nine months ended June 28, 2014, respectively. Costs and expenses for the three and nine months ended July 4, 2015 included acquisition and pension plan termination related charges of $4.8 million and $14.1 million, respectively, compared to $1.5 million and $6.8 million for the three and nine months ended June 28, 2014, respectively. Costs and expenses in the three and nine months ended July 4, 2015 includes $13.6 million of expense for a legal settlement accrual. These charges have been excluded from non-GAAP operating income.
(2) Income taxes for non-GAAP diluted earnings per share reflect the tax effects of non-GAAP adjustments which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments described in Non-GAAP Measures. In the fourth quarter of 2012, a valuation allowance was established against our U.S. net deferred tax assets. Similarly, in the fourth quarter of 2014, valuation allowances were established against our foreign net deferred tax assets in two foreign jurisdictions. As the U.S. and the two foreign jurisdictions are profitable on a non-GAAP basis, the 2015 and 2014 non-GAAP tax provision is being calculated assuming there is no valuation allowance in these jurisdictions. Our non-GAAP tax provision in the first quarter of 2015 includes a $2.1 million tax benefit related to a retroactive extension of the research and development tax credit enacted in that quarter. Our non-GAAP tax provision excludes a non-cash tax benefit of $8.9 million in the second quarter of 2014 related to the release of a portion of the valuation allowance as a result of deferred tax liabilities established for the acquisition of ThingWorx. This benefit has been excluded from non-GAAP diluted earnings per share.

Subscriptions Solutions Measures

Subscription Solutions

With recent acquisitions and the introduction of subscription-based pricing for most of our products, we expect subscription-based bookings to comprise a growing percentage of our overall bookings over time. Revenue is generally recognized differently for the sale of a perpetual license and the sale of a subscription solution. Under a perpetual software license, revenue is recognized at the time of sale, while for a subscription solution, revenue is deferred and recognized ratably over the subscription term. Given this difference in revenue recognition, we are using the subscription solutions bookings and L&SS bookings metrics described below to gauge the health of our business for internal planning and forecasting purposes.

Subscription Solutions Bookings

We use Subscription Solutions bookings to approximate the bookings amount we estimate would have been recorded if all customers had purchased subscription solutions as perpetual licenses. For this metric, we multiply the annualized contract value (ACV) of a new subscription solutions booking (or purchase) by 2. The ACV of a new subscription solutions booking is calculated by dividing the total value of a new subscription solutions booking by the term of the contract (in days) and multiplying that result by 365, unless the term is less than one year, in which case the contract value equals the ACV. Because Subscription Solutions bookings is a metric we use to approximate the value of subscription solution sales if sold as perpetual licenses, this metric does not represent the actual revenue amount that will be recognized with respect to subscription solution sales or that would have been recognized if the sale had been of a perpetual license.

26

L&SS Bookings

L&SS bookings are new Subscriptions Solutions bookings (calculated as described above) plus our perpetual license sales recognized in the period.

Impact of Foreign Currency Exchange on Results of Operations

Approximately two-thirds of our revenue and half of our expenses are transacted in currencies other than the U.S. Dollar. Because we report our results of operations in U.S. Dollars, currency translation, particularly changes in the Euro and Yen relative to the U.S. Dollar, affects our reported results. If actual results for the third quarter and first nine months of 2015 had been converted into U.S. Dollars based on the foreign currency exchange rates in effect for the third quarter and first nine months of 2014, revenue would have been higher by $30.7 million and $68.7 million, respectively, costs and expenses would have been higher by $17.8 million and $40.6 million, respectively, and operating income would have been higher by $12.9 million and $28.1 million, respectively. Our constant currency disclosures are calculated by multiplying the actual results for the first nine months of 2015 by the exchange rates in effect for the first nine months of 2014.

Revenue from Acquired Businesses

In 2015, we completed the acquisition of ColdLight (on May 7, 2015). In 2014, we completed the acquisitions of Axeda (on August 11, 2014), Atego (on June 30, 2014) and ThingWorx (on December 30, 2013). The results of operations of these acquired businesses have been included in our consolidated financial statements beginning on their respective acquisition dates. Axeda and Atego collectively added 4% to our revenue in both the third quarter and first nine months of 2015.

Reclassifications

Through 2014, we classified revenue in three categories: 1) license; 2) service; and 3) support. Because we introduced subscription-based licenses in 2015, we have revised our revenue reporting. Effective with the beginning of the first quarter of 2015, we report revenue as follows: 1) license and subscription solutions (L&SS); 2) support; and 3) professional services. License and subscription solutions revenue includes perpetual license revenue, subscription revenue and cloud services revenue. Cloud service offerings were previously reflected in service revenue and cost of service revenue. Consulting and training service revenue and consulting and training cost of service revenue are now referred to as professional services revenue and cost of professional services revenue. The discussion that follows reflects our revised reporting structure.

Revenue

We report our revenue by line of business (license and subscriptions solutions (L&SS), support and professional services), by solution area (CAD, ePLM, SLM and IoT) and by geographic region (Americas, Europe, Pacific Rim and Japan). Results include combined revenue from direct sales and our channel.

CAD revenue includes PTC Creo^® and PTC Mathcad^®.

Extended PLM (ePLM) revenue includes our PLM solutions (primarily PTC Windchill^®) and our ALM solutions (primarily PTC Integrity^™ ) and Atego^®.

SLM revenue includes PTC Arbortext^® and PTC Servigistics^® products.

IoT revenue includes ThingWorx,^® Axeda^® and ColdLight ^® products.

Revenue by Line of Business	% of Total Revenue
	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
L&SS	28	%	29	%	26	%	27	%
Support	55	%	51	%	55	%	51	%
Professional services	18	%	20	%	19	%	22	%

27

Revenue by Solution	Three months ended								Nine months ended
					Percent Change								Percent Change
	July 4, 2015		June 28, 2014		Actual		Constant Currency		July 4, 2015		June 28, 2014		Actual		Constant Currency
	(Dollar amounts in millions)
CAD
L&SS	$	26.7	$	45.9	(42	)%	(36	)%	$	91.4	$	118.0	(22	)%	(16	)%
Support	88.3		97.2		(9	)%	2	%	278.0		287.0		(3	)%	5	%
Total software revenue	115.0		143.1		(20	)%	(10	)%	369.4		405.0		(9	)%	(1	)%
Professional services	4.8		6.0		(19	)%	(9	)%	14.9		18.4		(19	)%	(11	)%
Total revenue	$	119.7	$	149.0	(20	)%	(10	)%	$	384.3	$	423.4	(9	)%	(2	)%
ePLM
L&SS	$	29.4	$	41.6	(29	)%	(21	)%	$	93.2	$	117.6	(21	)%	(14	)%
Support	58.5		57.4		2	%	11	%	181.0		169.4		7	%	13	%
Total software revenue	87.8		99.0		(11	)%	(2	)%	274.2		287.1		(4	)%	2	%
Professional services	35.0		46.9		(25	)%	(15	)%	120.0		148.7		(19	)%	(12	)%
Total revenue	$	122.8	$	145.9	(16	)%	(6	)%	$	394.3	$	435.7	(10	)%	(3	)%
SLM
L&SS	$	8.8	$	9.7	(10	)%	(4	)%	$	29.5	$	32.7	(10	)%	(6	)%
Support	17.6		17.5		1	%	8	%	53.6		51.9		3	%	8	%
Total software revenue	26.4		27.2		(3	)%	3	%	83.1		84.7		(2	)%	2	%
Professional services	12.8		14.0		(9	)%	(2	)%	40.7		45.6		(11	)%	(6	)%
Total revenue	$	39.2	$	41.3	(5	)%	2	%	$	123.7	$	130.2	(5	)%	(1	)%
IoT
L&SS	$	19.1	$	0.4					$	34.8	$	0.8
Support	1.3		—						3.5		—
Total software revenue	20.5		0.4						38.2		0.8
Professional services	0.9		0.1						2.1		0.2
Total revenue	$	21.4	$	0.5					$	40.3	$	1.0

License and Subscription Solutions Revenue

The decrease in L&SS revenue in the third quarter of 2015 and first nine months of 2015 was due primarily to changes in currency exchange rates and lower large deal revenue. In the third quarter of 2015, compared to the year-ago period, organic L&SS revenue (excluding revenue from Axeda and Atego) was down 23% (down 16% on a constant currency basis). In the first nine months of 2015, compared to the year-ago period, organic L&SS revenue was down 16% (10% on a constant currency basis). Subscription solutions bookings in the first nine months of 2015 were 16% of our license and subscription solutions (L&SS) bookings compared to 10% in the first nine months of 2014.

Support Revenue

Support revenue is composed of contracts to maintain new and/or previously purchased perpetual licenses. Subscription-based licenses include the right for a customer to use our software and receive related support for a specified term, for which revenue is recognized ratably over the term of the contract. Subscription-based revenue (including support) is included in L&SS revenue. We saw steady growth in support revenue in 2014 and through 2015 to date on a constant currency basis. Support revenue in the third quarter and first nine months of 2015 benefited from perpetual license revenue growth in 2014 and year-over year increases in support pricing.

Foreign currency exchange rate movements reduced support revenue by $17.1 million and $36.1 million in the third quarter and first nine months of 2015, respectively, compared to the third quarter and first nine months of 2014.

Professional Services Revenue

Consulting and training services engagements typically result from sales of new licenses and subscription solutions, particularly of our ePLM and SLM solutions. The decline in professional services revenue in the third quarter and first nine

28

months of 2015 was due in part to strong growth in bookings by our service partners, which is in line with our strategy for professional services revenue to trend flat-to-down over time as we expand our service partner program under which service engagements are referred to third party service providers. Additionally, over time, we anticipate implementing solutions that require less services. As a result, we do not expect that the amount of professional services we deliver will increase proportionately with L&SS revenue increases. Consulting revenue typically represents approximately 85% of total professional services revenue and training revenue typically represents approximately 15%. Our consulting service revenue in the third quarter and first nine months of 2015 was down 23% and 19%, compared to the third quarter and first nine months of 2014. Year over year, training revenue decreased 1% in both the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014.

CAD Revenue

In the third quarter and first nine months of 2015, L&SS revenue from new Creo^® seats, modules and upgrades, which accounts for over 80% of CAD L&SS revenue, declined 42% and 17%, respectively, compared to the third quarter and first nine months of 2014, driven by fewer large deals, a weak macroeconomic environment that we believe has impacted spending among discrete manufacturing customers, and the effect of foreign currency exchange rates. Fiscal 2014 benefited from a Creo product cycle in which customers upgraded to the most recent version. With the maturing of this product cycle, we expect CAD license revenue for 2015 will be lower than 2014.

CAD channel revenue, which represents approximately 40% of total CAD revenue, was down 12% in the third quarter of 2015 compared to the year-ago period, but up modestly on a constant currency basis. Channel L&SS revenue was down 19% year over year (11% on a constant currency basis). In the first nine months of 2015, compared to the first nine months of 2014, CAD channel revenue was down 4%, but was up 5% on a constant currency basis.

Extended PLM Revenue

The decrease in ePLM L&SS revenue in the third quarter of 2015 reflects a 40% decline in PLM revenue, partially offset by a 56% increase in ALM revenue. PLM results in the third quarter of 2015 reflect lower large deal revenue, particularly as compared to a strong third quarter in 2014. The decrease in ePLM L&SS revenue in the first nine months of 2015 reflects a 24% decline in PLM revenue and a 2% decline in ALM revenue. The same economic conditions that contributed adversely to CAD revenue had a similar effect on ePLM.

SLM Revenue

We remain encouraged by our SLM pipeline. While we have seen variability in the revenue contribution from SLM, we believe that leveraging customer relationships in our installed base where penetration of our SLM solutions is still in the early stages and the introduction of new connected SLM applications will drive future SLM solutions revenue growth.

IoT Revenue

IoT revenue is attributable to our acquisitions of ThingWorx and Axeda in the second quarter and fourth quarter, respectively, of fiscal 2014. We believe our leadership position within the application enablement platforms space, combined with an ability to sell IoT solutions to new and existing PTC customers, will enable us to achieve significant growth rates in this business going forward. Sales of our IoT products contributed 23% to our current quarter reported L&SS revenue, which included three large perpetual license IoT deals.

Bookings from Individual Customers

We believe the amount of large deals is an important measure of the strength of our business. We define large deals as greater than $1 million of L&SS bookings from a customer during the quarter, which we believe more accurately reflects incremental new software business in a given quarter. Previously we defined large deals as more than $1 million of license and service revenue recognized from a customer during a quarter. We also track mega deals, which we now define as greater than $5 million of L&SS bookings from a customer in a quarter. There were no mega deals in the third quarter of 2015 and one mega deal in the third quarter of 2014. There was one mega deal in the first nine months of 2015 and four mega deals in the first nine months of 2014. In recent quarters, large deals have represented 30% to 40% of our total L&SS bookings, with the third quarter of 2015 lower than the average at less than 30% and the third quarter of 2014 greater than 50%. We believe that challenging macroeconomic conditions, particularly in the Americas and China, impacted our ability to close large deals in our core business in the third quarter of 2015.

For the third quarters of 2015 and 2014, there were 8 customers and 21 customers with L&SS bookings greater than $1 million, respectively, with average bookings per customer of $2.6 million and $3.0 million, respectively. We continue to have a strong pipeline of large deals that we are working on worldwide, though the timing of closing and the size of large deals may be affected by the overall health of the manufacturing economy, among other factors.

29

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in millions)
L&SS bookings greater than $1 million from individual customers in a quarter (1)	$	20.7	$	63.4	$	75.7	$	128.7
(1) We define L&SS bookings as new subscription solutions ACV multiplied by two, plus perpetual license revenue, as described in "Executive Overview, Subscription Solutions".

Revenue by Geographic Region

	Three months ended				Percent Change				Nine months ended				Percent Change
	July 4, 2015		June 28, 2014		Actual		Constant Currency		July 4, 2015		June 28, 2014		Actual		Constant Currency
	(Dollar amounts in millions)
Revenue by region:
Americas	$	134.4	$	130.4	3	%	4	%	$	402.3	$	403.6	—	%	—	%
Europe	$	109.5	$	130.7	(16	)%	2	%	$	348.1	$	385.7	(10	)%	4	%
Pacific Rim	$	33.0	$	36.4	(10	)%	(8	)%	$	101.7	$	107.0	(5	)%	(3	)%
Japan	$	26.2	$	39.2	(33	)%	(21	)%	$	90.5	$	93.9	(4	)%	11	%

	Three months ended				Nine months ended
	April 4, 2015		March 29, 2014		July 4, 2015		June 28, 2014
Revenue by region as a % of total revenue:
Americas	44	%	39	%	43	%	41	%
Europe	36	%	39	%	37	%	39	%
Pacific Rim	11	%	11	%	11	%	11	%
Japan	9	%	12	%	10	%	9	%

Americas

The increase in revenue in the Americas in the third quarter of 2015 compared to the third quarter of 2014 consisted of an increase of 29% ($8.1 million) in L&SS revenue and an increase of 6% ($4.5 million) in support revenue, partially offset by a decrease of 28% ($8.6 million) in professional services revenue. The decrease in revenue in the Americas in the first nine months of 2015 compared to the first nine months of 2014 consisted of a decrease of 2% ($2.3 million) in L&SS revenue and a decrease of 18% ($17.4 million) in professional services revenue, partially offset by an increase of 9% ($18.4 million) in support revenue. On an organic basis, revenue in the Americas decreased 4% in the third quarter and 6% in the first nine months of 2015, compared to the third quarter and first nine months of 2014. We had two mega deals in the Americas in the first nine months of 2014. We did not have any mega deals in the Americas in the third quarter and first nine months of 2015.

Europe

Revenue in Europe in the third quarter of 2015 compared to the third quarter of 2014 consisted of a decrease in L&SS revenue of 23% ($7.7 million), 7% on a constant currency basis, a decrease in support revenue of 13% ($8.8 million), an increase of 7% on a constant currency basis, and a decrease in professional services revenue of 17% ($4.6 million), an increase of 2% on a constant currency basis. Revenue in Europe in the first nine months of 2015 compared to the first nine months of 2014 consisted of a decrease in L&SS revenue of 15% ($13.9 million), 2% on a constant currency basis, a decrease in support revenue of 5% ($10.7 million), an increase of 8% on a constant currency basis, and a decrease in professional services revenue of 16% ($13 million), 3% on a constant currency basis. We had one mega deal in Europe in the third quarter and two in the first nine months of 2014. We did not have any mega deals in Europe in the third quarter and first nine months of 2015.

Changes in foreign currency exchange rates, particularly the Euro, reduced revenue in Europe by $24.3 million and $51.1 million in the third quarter of and first nine months 2015, respectively, as compared to the third quarter and first nine months of 2014.

Pacific Rim

30

Revenue in the Pacific Rim in the third quarter of 2015 compared to the third quarter of 2014 reflected a decrease of 10% ($1.8 million) in L&SS revenue, a decrease of 25% ($1.5 million) in professional services revenue, and a decrease in support revenue of 1% ($0.1 million). Revenue in the Pacific Rim in the first nine months of 2015 compared to the first nine months of 2014 reflected a decrease of 31% ($6.7 million) in professional services revenue and a decrease of 4% ($1.9 million) in L&SS revenue, partially offset by an increase in support revenue of 9% ($3.4 million).

Revenue from China, which has historically represented 4% to 5% of our total revenue, was 4% of revenue in both the third quarter and first nine months of 2015, compared to 5% of revenue in both the third quarter and first nine months of 2014, and decreased 27% and 19% in the third quarter and first nine months of 2015, respectively, as compared to the third quarter and first nine months of 2014. As noted above, we believe this was due to the weak Chinese economy.

Japan

Revenue in Japan in the third quarter of 2015 compared to the third quarter of 2014 reflected a decrease of 63% ($12.4 million) in L&SS revenue and a decrease in support revenue of 11% ($1.8 million), partially offset by an increase of 45% ($1.3 million) in professional services revenue. Year over year, on a constant currency basis, in the third quarter of 2015, L&SS revenue was down 57%, support revenue was up 5% and professional services revenue was up 70%. Revenue in Japan in the first nine months of 2015 compared to the first nine months of 2014 reflected a decrease of 7% ($2.2 million) in L&SS revenue and a decrease in support revenue of 7% ($3.5 million), partially offset by an increase of 18% ($2.2 million) in professional services revenue. Year over year, on a constant currency basis, in the first nine months of 2015, L&SS revenue was up 8%, support revenue was up 7% and professional services revenue was up 36%. We had one mega deal in Japan in the second quarter of 2015. We did not have any mega deals in Japan in the first nine months of 2014.

Changes in the Yen to U.S. Dollar exchange rate reduced revenue in Japan by $4.6 million and $13.5 million in the third quarter and first nine months of 2015, respectively, compared to the third quarter and first nine months of 2014.

Gross Margin	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
Gross margin	$	223.7		$	245.6		(9	)%	$	684.3		$	712.4		(4	)%
Non-GAAP gross margin	231.8			252.5			(8	)%	709.3			733.1			(3	)%
Gross margin as a % of revenue:
License and subscription solutions	84.7		%	88.5		%			84.2		%	87.9		%
Support	87.7		%	87.7		%			87.8		%	87.7		%
Professional services	13.8		%	12.3		%			12.3		%	14.0		%
Gross margin as a % of total revenue	73.8		%	72.9		%			72.6		%	71.9		%
Non-GAAP gross margin as a % of total revenue	76.3		%	75.0		%			75.0		%	74.0		%

The declines in L&SS solutions gross margin in the third quarter and first nine months of 2015, compared to the same periods in 2014, were due to a higher mix of cloud services revenue, which has lower margins than license revenue. On a percentage basis, our increase in total gross margin was driven by our mix of software business, which was 82% of total revenue in the third quarter and 81% in the first nine months of 2015, up from 80% and 79% in the year ago periods, respectively, while professional services revenue comprised 18% of our total revenue in the third quarter and 19% in the first nine months of 2015 compared to 20% in the third quarter and 22% in the first nine months of 2014.

31

	Three months ended						Nine months ended
	July 4, 2015		June 28, 2014		Percent Change		July 4, 2015		June 28, 2014		Percent Change
	(Dollar amounts in millions)
Costs and expenses:
Cost of L&SS revenue	$	12.8	$	11.2	14	%	$	39.3	$	32.5	21	%
Cost of support revenue	20.5		21.1		(3	)%	63.2		62.6		1	%
Cost of professional services revenue	46.1		58.7		(21	)%	155.8		182.8		(15	)%
Sales and marketing	86.5		91.4		(5	)%	256.1		261.6		(2	)%
Research and development	54.1		57.4		(6	)%	175.3		166.1		6	%
General and administrative	48.1		33.8		42	%	119.3		98.9		21	%
Amortization of acquired intangible assets	9.1		8.0		14	%	27.7		23.8		16	%
Restructuring charge	4.4		0.5				42.6		1.6
Total costs and expenses (1)	$	281.5	$	282.3	—	%	$	879.4	$	829.8	6	%
Total headcount at end of period	5,965		6,126		(3	)%

(1) On a constant currency basis, compared to the year-ago period, total costs and expenses for the third quarter and first nine months of 2015 increased 6% and 11%, respectively.

Costs and expenses in the third quarter and first nine months of 2015, compared to the third quarter and first nine months 2014, increased primarily as a result of the following:

• restructuring charges of $42.6 million recorded in the first nine months of 2015 compared to $1.6 million in the first nine months of 2014;

• costs from acquired businesses (Axeda, Atego, and ColdLight added approximately 330 employees at the date of the acquisitions);

•investments we are making in our Internet of Things business;

• a litigation accrual of $13.6 million recorded in the third quarter of 2015 related to our previously disclosed China investigation;

• company-wide merit pay increases totaling approximately $12 million on an annualized basis, which were effective February 1, 2014; and

• acquisition and pension termination-related costs, which were $7.3 million higher for the nine month period.

The increases above were partially offset by decreases due to:

• cost savings resulting from restructuring actions in 2014 and 2015;

• foreign currency rates which favorably impacted costs and expenses in the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014 by $17.8 million and $40.6 million, respectively; and

• a decrease in cash-based incentive compensation of $11.4 million in the first nine months of 2015 compared to the first nine months of 2014.

Cost of License and Subscription Solutions Revenue	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
Cost of L&SS revenue	$	12.8		$	11.2		14	%	$	39.3		$	32.5		21	%
% of total revenue	4		%	3		%			4		%	3		%
% of total L&SS revenue	15		%	12		%			16		%	12		%
L&SS headcount at end of period	107			60			78	%

Our cost of L&SS revenue consists of fixed and variable costs associated with reproducing and distributing software and documentation, as well as royalties paid to third parties for technology embedded in or licensed with our software products,

32

amortization of intangible assets associated with acquired products and costs to perform and support our cloud services business. Cost of L&SS revenue as a percent of L&SS revenue can vary depending on product mix sold, the effect of fixed and variable royalties, and the level of amortization of acquired software intangible assets. Amortization of acquired purchased software totaled $5.0 million and $4.4 million in the third quarters of 2015 and 2014, respectively, and $14.4 million and $13.3 million in the first nine months of 2015 and 2014, respectively. Costs to perform cloud services were $5.1 million and $3.1 million in the third quarters of 2015 and 2014, respectively, and $14.5 million and $8.7 million in the first nine months of 2015 and 2014, respectively, which increase is attributable to our acquisition of Axeda. L&SS headcount at the end of the third quarter of 2015 included approximately 25 employees added from acquired businesses.

Cost of Support Revenue	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
Cost of support revenue	$	20.5		$	21.1		(3	)%	$	63.2		$	62.6		1	%
% of total revenue	7		%	6		%			7		%	6		%
% of total support revenue	12		%	12		%			12		%	12		%
Support headcount at end of period	652			638			2	%

Our cost of support revenue includes costs such as salaries, benefits, and computer equipment and facilities associated with customer support and the release of support updates (including related royalty costs). In the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014, total compensation, benefit costs and travel expenses decreased 8% ($1.2 million) and 1% ($0.6 million), respectively. Support headcount at the end of the third quarter of 2015 included approximately 20 employees added from acquired businesses.

Cost of Professional Services Revenue	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
Cost of professional services revenue	$	46.1		$	58.7		(21	)%	$	155.8		$	182.8		(15	)%
% of total revenue	15		%	17		%			17		%	18		%
% of total professional services revenue	86		%	88		%			88		%	86		%
Professional services headcount at end of period	1,115			1,336			(17	)%

Our cost of professional services revenue includes costs such as salaries, benefits, and computer equipment and facilities for our training and consulting personnel, and third-party subcontractor fees. In the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014, total compensation, benefit costs and travel expenses were down 24% ($10.7 million) and 22% ($20.3 million), respectively, and the cost of third-party consulting services was lower by $0.8 million and $2.9 million, respectively. The decrease in both compensation-related costs and third-party consulting services is due to lower professional services revenue. Professional services headcount at the end of the third quarter of 2015 included approximately 45 employees added from acquired businesses.

Sales and Marketing	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
Sales and marketing	$	86.5		$	91.4		(5	)%	$	256.1		$	261.6		(2	)%
% of total revenue	29		%	27		%			27		%	26		%
Sales and marketing headcount at end of period	1,391			1,387			—	%

Our sales and marketing expenses primarily include salaries and benefits, sales commissions, advertising and marketing programs, travel and facility costs. In the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014, total compensation, benefit costs and travel expenses were lower by 10% ($7.5 million) and 4% ($8.3 million), respectively including lower commissions and cash-based incentive compensation. Sales and marketing headcount at the end of the third quarter of 2015 included approximately 65 employees added from acquired businesses. In the third quarter

33

of 2015, compared to the third quarter of 2014, marketing costs were higher by $1.8 million due to increased costs associated with our IoT business including the LiveWorx and PTC Live events. 

Research and Development	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
Research and development	$	54.1		$	57.4		(6	)%	$	175.3		$	166.1		6	%
% of total revenue	18		%	17		%			19		%	17		%
Research and development headcount at end of period	2,010			2,068			(3	)%

Our research and development expenses consist principally of salaries and benefits, costs of computer equipment and facility expenses. Major research and development activities include developing new releases and updates of our software that enhance functionality and developing new products or features. In the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014, total compensation, benefit costs and travel expenses were lower by 9% ($4.2 million) and higher by 4% ($5.3 million), respectively. Research and development headcount at the end of the third quarter of 2015 included approximately 100 employees added from acquired businesses.

General and Administrative	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
General and administrative	$	48.1		$	33.8		42	%	$	119.3		$	98.9		21	%
% of total revenue	16		%	10		%			13		%	10		%
General and administrative headcount at end of period	689			637			8	%

Our general and administrative expenses include the costs of our corporate, finance, information technology, human resources, legal and administrative functions, as well as acquisition-related charges, bad debt expense and outside professional services, including accounting and legal fees. The increase in general and administrative costs in the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014, was primarily attributable to a $13.6 million accrual recorded in the third quarter of 2015 related to the our China investigation as described in Executive Overview. Additionally, general and administrative costs in the third quarter and first nine months of 2015, compared to the third quarter and first nine months of 2014, include an increase of salary, benefit costs and travel expenses of $0.2 million and $4.6 million, respectively, offset by a decrease in performance-based bonus and stock-based compensation of $1.8 million and $6.4 million, respectively. Acquisition-related and pension termination-related costs were higher by $3.3 million and $7.3 million in the third quarter and first nine months of 2015, respectively, compared to the third quarter and first nine months of 2014, and costs for outside professional services were lower by $1.1 million in the third quarter of 2015 compared to the third quarter of 2014. General and administrative headcount at the end of the third quarter of 2015 included approximately 15 employees added from acquired businesses.

Amortization of Acquired Intangible Assets	Three months ended								Nine months ended
	July 4, 2015			June 28, 2014			Percent Change		July 4, 2015			June 28, 2014			Percent Change
	(Dollar amounts in millions)
Amortization of acquired intangible assets	$	9.1		$	8.0		14	%	$	27.7		$	23.8		16	%
% of total revenue	3		%	2		%			3		%	2		%

Amortization of acquired intangible assets reflects the amortization of acquired non-product related intangible assets, primarily customer and trademark-related intangible assets, recorded in connection with completed acquisitions. The increase in amortization of acquired intangible assets in the third quarter and first nine months of 2015 is due to our acquisitions of Axeda, Atego and ThingWorx.

34

Restructuring Charges	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in millions)
Restructuring charges	$	4.4	$	0.5	$	42.6	$	1.6

On April 4, 2015, we committed to a plan to restructure our global workforce and consolidate select facilities to increase investment in our Internet of Things business and to reduce our cost structure through organizational efficiencies in the face of significant foreign currency depreciation relative to the U.S. Dollar and a more cautious outlook on global macroeconomic conditions. The restructuring actions resulted in charges of $4.4 million in the third quarter of 2015, including $1.1 million of facility related charges and $3.3 million of employee related termination costs. For the first nine months of 2015 restructuring charges were $42.6 million, primarily related to termination benefits associated with 443 employees. We expect that this reorganization will result in net annualized expense reductions of approximately $30 million.

In the first nine months of 2015, we made cash payments related to restructuring charges of $48 million, compared to $19 million in the first nine months of 2014. At July 4, 2015, accrued restructuring was $20 million, substantially all of which we expect to pay within the next twelve months, the majority of which will be paid in the fourth quarter of 2015.

Restructuring charges recorded in the first nine months of 2014 were primarily associated with the completion of actions initiated in the fourth quarter of 2013.

Interest and Other Income (Expense), net	Three months ended						Nine months ended
	July 4, 2015			June 28, 2014			July 4, 2015			June 28, 2014
	(in millions)
Interest income	$	0.8		$	0.7		$	2.8		$	2.3
Interest expense	(3.6		)	(2.0		)	(10.9		)	(5.4		)
Other income (expense), net	(0.9		)	(1.0		)	(2.5		)	(3.6		)
Total interest and other income (expense), net	$	(3.7	)	$	(2.3	)	$	(10.5	)	$	(6.7	)

Interest and other income (expense), net includes interest income, interest expense, foreign currency net losses and other non-operating gains and losses. Foreign currency net losses include costs of forward contracts, certain realized and unrealized foreign currency transaction gains or losses, and foreign exchange gains or losses resulting from the required period-end currency re-measurement of the assets and liabilities of our subsidiaries that use the U.S. Dollar as their functional currency. Because a large portion of our revenue and expenses is transacted in foreign currencies, we engage in transactions involving the use of foreign currency forward contracts, primarily in the Euro and Canadian Dollar, to reduce our exposure to fluctuations in foreign exchange rates. The increase in interest expense in the third quarter and first nine months of 2015 compared to the third quarter and first nine months of 2014 was due to higher amounts outstanding under our credit facility. We had $624 million outstanding under the facility at July 4, 2015, compared to $315 million at June 28, 2014.

Income Taxes	Three months ended						Nine months ended
	July 4, 2015			June 28, 2014			July 4, 2015			June 28, 2014
	(Dollar amounts in millions)
Pre-tax income	$	17.9		$	52.1		$	52.7		$	153.7
Tax (benefit) provision	0.5			14.1			(0.4		)	32.3
Effective income tax rate	3		%	27		%	(1		)%	21		%

In the third quarter and first nine months of 2015, our effective tax rate was lower than the 35% statutory federal income tax rate due to our corporate structure in which our foreign taxes are at a net effective tax rate lower than the U.S. rate. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland. In 2015 and 2014, the foreign rate differential predominantly relates to these Irish earnings. In addition, on September 30, 2014, we executed a business realignment in which intellectual property was transferred between two wholly-owned foreign subsidiaries. The realignment allows us to more efficiently manage the distribution of our products to European customers. We expect this realignment to result in an annual tax benefit of approximately $15 million to $20 million for the next several years, declining annually thereafter through 2021. This realignment resulted in a tax benefit of approximately $6 million and $14 million in the third quarter and first nine months of 2015, respectively. In the first nine months of 2015, we recorded a tax benefit of $3.1 million

35

related to the reassessment of our reserve requirements, and a benefit of $1.4 million in conjunction with the reorganization of our Atego U.S. subsidiaries. Additionally, our provision in the first quarter of 2015 reflected a $2.1 million tax benefit related to a retroactive extension of the research and development tax credit enacted in the first quarter of 2015. This benefit was offset by a corresponding provision to increase our U.S. valuation allowance.

Additionally, in the first nine months of 2014, our effective tax rate was lower than the 35% statutory federal income tax rate due to the reversal of a portion of our valuation allowance against net deferred tax assets. In the second quarter of 2014, our acquisition of ThingWorx was accounted for as a business combination and we recorded the fair value of assets and liabilities acquired, including finite-lived acquired intangible assets totaling $32.1 million and net deferred tax liabilities of $8.9 million, primarily related to the tax effect of the acquired intangible assets that are not deductible for income tax purposes. These net deferred tax liabilities reduced our net deferred tax asset balance and resulted in a tax benefit of $8.9 million recorded in the second quarter of 2014 to decrease our valuation allowance in the U.S. As the decrease in the valuation allowance was not part of the accounting for the business combination (the fair value of the assets acquired and liabilities assumed), it was recorded as an income tax benefit.

We have concluded, based on the weight of available evidence, that a full valuation allowance continues to be required against our U.S. net deferred tax assets as they are not more likely than not to be realized in the future. We will continue to reassess our valuation allowance requirements each financial reporting period.

In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the Internal Revenue Service in the United States. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, limitations on net operating losses and tax credits. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in material changes in our estimates.

Our future effective income tax rate may be materially impacted by the amount of income taxes associated with our foreign earnings, which are taxed at rates different from the U.S. federal statutory income tax rate, as well as the timing and extent of the realization of deferred tax assets and changes in the tax law. Further, our tax rate may fluctuate within a fiscal year, including from quarter to quarter, due to items arising from discrete events, including settlements of tax audits and assessments, the resolution or identification of tax position uncertainties, and acquisitions of other companies.

Non-GAAP Measures

The non-GAAP measures presented in the discussion of our results of operations and the respective most directly comparable GAAP measures are:

• non-GAAP revenue—GAAP revenue

• non-GAAP gross margin—GAAP gross margin

• non-GAAP operating income—GAAP operating income

• non-GAAP operating margin—GAAP operating margin

• non-GAAP net income—GAAP net income

• non-GAAP diluted earnings per share—GAAP diluted earnings per share

The non-GAAP measures exclude fair value adjustments related to acquired deferred revenue, stock-based compensation expense, amortization of acquired intangible assets expense, acquisition-related charges, restructuring charges, pension plan termination costs, a litigation accrual associated with our previously disclosed China investigation, identified discrete charges included in non-operating other income (expense), net and the related tax effects of the preceding items, and any other identified tax items. These items are normally included in the comparable measures calculated and presented in accordance with GAAP. Our management excludes these items when evaluating our ongoing performance and/or predicting our earnings trends, and therefore excludes them when presenting non-GAAP financial measures. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.

Fair value of acquired deferred revenue and deferred costs are purchase accounting adjustments to record acquired deferred revenue and deferred costs at their fair values.

Stock-based compensation expense is a non-cash expense relating to stock-based awards issued to executive officers, employees and outside directors, primarily consisting of restricted stock units.

Amortization of acquired intangible assets expense is a non-cash expense that is impacted by the timing and magnitude of our acquisitions.

Charges included in general and administrative expenses include acquisition-related charges, pension plan termination-related costs, and a litigation accrual associated with our previously disclosed China investigation. Acquisition-related charges

36

include direct costs of potential and completed acquisitions and expenses related to acquisition integration activities, including transaction fees, due diligence costs, severance and professional fees. In addition, subsequent adjustments to our initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition-related charges. These costs are not considered part of our normal operations as the occurrence and amount will vary depending on the timing and size of acquisitions. In the second quarter of 2014, we began the process of terminating a U.S. pension plan. Costs associated with the termination are not considered part of our ongoing operations. In the third quarter of 2015, we recorded a charge of $13.6 million for a litigation accrual associated with our previously disclosed China investigation.

Restructuring charges are costs incurred in a period related to strategies to reduce costs and to realign our business, including costs related to employee terminations and costs of excess facilities.

We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals (communicated internally and externally) for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures.

The items excluded from the non-GAAP measures often have a material impact on our financial results and such items often recur. Accordingly, the non-GAAP measures included in this Quarterly Report should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with GAAP. The following tables reconcile each of these non-GAAP measures to its most closely comparable GAAP measure on our financial statements.

	Three months ended					Nine months ended
	July 4, 2015			June 28, 2014		July 4, 2015			June 28, 2014
	(in millions, except per share amounts)
GAAP revenue	$	303.1		$	336.6	$	942.7		$	990.3
Fair value of acquired deferred revenue	0.8			—		3.3			—
Non-GAAP revenue	$	303.9		$	336.6	$	946.0		$	990.3
GAAP gross margin	$	223.7		$	245.6	$	684.3		$	712.4
Fair value of acquired deferred revenue	0.8			—		3.3			—
Fair value of acquired deferred costs	(0.1		)	—		(0.4		)	—
Stock-based compensation	2.5			2.5		7.7			7.4
Amortization of acquired intangible assets included in cost of revenue	5.0			4.4		14.4			13.3
Non-GAAP gross margin	$	231.8		$	252.5	$	709.3		$	733.1
GAAP operating income	$	21.6		$	54.4	$	63.2		$	160.5
Fair value of acquired deferred revenue	0.8			—		3.3			—
Fair value of acquired deferred costs	(0.1		)	—		(0.4		)	—
Stock-based compensation	14.1			12.5		38.1			37.9
Amortization of acquired intangible assets included in cost of revenue	5.0			4.4		14.4			13.3
Amortization of acquired intangible assets	9.1			8.0		27.7			23.8
Acquisition related charges included in general and administrative expenses	2.8			1.5		8.7			6.8
US pension plan termination-related costs	2.0			—		5.4			—
Pending legal settlement accrual	13.6			—		13.6			—
Restructuring charge	4.4			0.5		42.6			1.6
Non-GAAP operating income	$	73.2		$	81.4	$	216.8		$	243.8
GAAP net income	$	17.4		$	38.0	$	53.1		$	121.4
Fair value of acquired deferred revenue	0.8			—		3.3			—
Fair value of acquired deferred costs	(0.1		)	—		(0.4		)	—
Stock-based compensation	14.1			12.5		38.1			37.9

37

Amortization of acquired intangible assets included in cost of revenue	5.0			4.4			14.4			13.3
Amortization of acquired intangible assets	9.1			8.0			27.7			23.8
Acquisition related charges included in general and administrative expenses	2.8			1.5			8.7			6.8
US pension plan termination-related costs	2.0			—			5.4			—
Pending legal settlement accrual	13.6			—			13.6			—
Restructuring charges	4.4			0.5			42.6			1.6
Income tax adjustments (1)	(7.3		)	(1.3		)	(24.6		)	(23.1		)
Non-GAAP net income	$	61.8		$	63.7		$	182.1		$	181.8
GAAP diluted earnings per share	$	0.15		$	0.32		$	0.46		$	1.01
Fair value of acquired deferred revenue	0.01			—			0.03			—
Fair value of acquired deferred costs	—			—			—			—
Stock-based compensation	0.12			0.10			0.33			0.31
Amortization of acquired intangible assets	0.12			0.10			0.36			0.31
Acquisition related charges included in general and administrative expenses	0.02			0.01			0.07			0.06
US pension plan termination-related costs	0.02			—			0.05			—
Pending legal settlement accrual	0.12			—			0.12			—
Restructuring charges	0.04			—			0.37			0.01
Income tax adjustments (1)	(0.06		)	(0.01		)	(0.21		)	(0.19		)
Non-GAAP diluted earnings per share	$	0.53		$	0.53		$	1.57		$	1.51

38

Operating margin impact of non-GAAP adjustments:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
GAAP operating margin	7.1	%	16.2	%	6.7	%	16.2	%
Fair value of acquired deferred revenue	0.3	%	—	%	0.4	%	—	%
Fair value of acquired deferred costs	—	%	—	%	—	%	—	%
Stock-based compensation	4.6	%	3.7	%	4.0	%	3.8	%
Amortization of acquired intangible assets	4.6	%	3.7	%	4.5	%	3.7	%
Acquisition related charges included in general and administrative expenses	0.9	%	0.5	%	0.9	%	0.7	%
US pension plan termination-related costs	0.7	%	—	%	0.6	%	—	%
Pending legal settlement accrual	4.5	%	—	%	1.4	%	—	%
Restructuring charges	1.4	%	0.2	%	4.5	%	0.2	%
Non-GAAP operating margin	24.1	%	24.2	%	22.9	%	24.6	%

(1) Income taxes for non-GAAP diluted earnings per share reflect the tax effects of non-GAAP adjustments which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments described in Non-GAAP Measures. In the fourth quarter of 2012, a valuation allowance was established against our U.S. net deferred tax assets. Similarly, in the fourth quarter of 2014, valuation allowances were established against our foreign net deferred tax assets in two foreign jurisdictions. As the U.S. and the two foreign jurisdictions are profitable on a non-GAAP basis, the 2015 and 2014 non-GAAP tax provision is being calculated assuming there is no valuation allowance in these jurisdictions. Our non-GAAP tax provision in the first quarter of 2015 reflects a $2.1 million tax benefit related to a retroactive extension of the research and development tax credit enacted in the first quarter of 2015. The third quarter of 2014 included a non-cash tax benefit of $8.9 million related to the release of a portion of the valuation allowance as a result of deferred tax liabilities established for the acquisition of ThingWorx. This benefit has been excluded from our non-GAAP tax results.

Critical Accounting Policies and Estimates

The financial information included in Item 1 reflects no material changes in our critical accounting policies and estimates as set forth under the heading Critical Accounting Policies and Estimates in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2014 Annual Report on Form 10-K. Our revenue recognition policy is outlined below. Our revenue recognition policy, in addition to the critical accounting policies described in our 2014 Annual Report on Form 10-K, are the most important accounting judgments and estimates that we made in preparing our financial statements.

Revenue Recognition

Our sources of revenue include: (1) license and subscription solutions, (2) support, and (3) professional services. We record revenues in accordance with the guidance provided by ASC 985-605, Software-Revenue Recognition when the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred (generally, FOB shipping point or electronic distribution), (3) the fee is fixed or determinable, and (4) collection is probable. We exercise judgment and use estimates in connection with determining the amounts of software license and services revenues to be recognized in each accounting period. Our primary judgments involve the following:

• determining whether collection is probable;

• assessing whether the fee is fixed or determinable;

• determining whether service arrangements, including modifications and customization of the underlying software, are not essential to the functionality of the licensed software and thus would result in the revenue for license and service elements of an agreement being recorded separately; and

• determining the fair value of services and support elements included in multiple-element arrangements, which is the basis for allocating and deferring revenue for such services and support.

Our software is distributed primarily through our direct sales force. In addition, we have an indirect distribution channel through alliances with resellers. Revenue arrangements with resellers are recognized on a sell-through basis; that is, when we

39

deliver the product to the end-user customer. We record consideration given to a reseller as a reduction of revenue to the extent we have recorded revenue from the reseller. We do not offer contractual rights of return, stock balancing, or price protection to our resellers, and actual product returns from them have been insignificant to date. As a result, we do not maintain reserves for reseller product returns.

At the time of each sale transaction, we must make an assessment of the collectability of the amount due from the customer. Revenue is only recognized at that time if management deems that collection is probable. In making this assessment, we consider customer credit-worthiness and historical payment experience. At that same time, we assess whether fees are fixed or determinable and free of contingencies or significant uncertainties. In assessing whether the fee is fixed or determinable, we consider the payment terms of the transaction, including transactions with payment terms that extend beyond our customary payment terms, and our collection experience in similar transactions without making concessions, among other factors. We have periodically provided financing to credit-worthy customers with payment terms up to 24 months. If the fee is determined not to be fixed or determinable, revenue is recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met. Our software license arrangements generally do not include customer acceptance provisions. However, if an arrangement includes an acceptance provision, we record revenue only upon the earlier of (1) receipt of written acceptance from the customer or (2) expiration of the acceptance period.

Generally, our contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts.

License and Subscription Solutions

License and subscription solutions revenue includes revenue from three primary sources: (1) sales of perpetual licenses, (2) subscription-based licenses, and (3) cloud services.

Under perpetual license arrangements, we generally recognize license revenue up front upon shipment to the customer. We use the residual method to recognize revenue from perpetual license software arrangements that include one or more elements to be delivered at a future date when evidence of the fair value of all undelivered elements exists, and the elements of the arrangement qualify for separate accounting as described below. Under the residual method, the fair value of the undelivered elements (i.e., support and services) based on our vendor-specific objective evidence (“VSOE”) of fair value is deferred and the remaining portion of the total arrangement fee is allocated to the delivered elements (i.e., perpetual software license). If evidence of the fair value of one or more of the undelivered elements does not exist, all revenues are deferred and recognized when delivery of all of those elements has occurred or when fair values can be established. We determine VSOE of the fair value of services and support revenue based upon our recent pricing for those elements when sold separately. For certain transactions, VSOE is determined based on a substantive renewal clause within a customer contract. Our current pricing practices are influenced primarily by product type, purchase volume, sales channel and customer location. We review services and support sold separately on a periodic basis and update, when appropriate, our VSOE of fair value for such elements to ensure that it reflects our recent pricing experience.

Subscription-based licenses include the right for a customer to use our licenses and receive related support for a specified term and revenue is recognized ratably over the term of the arrangement. When sold in arrangements with other elements, VSOE of fair value is established for the subscription-based licenses through the use of a substantive renewal clause within the customer contract for a combined annual fee that includes the term-based license and related support.

Cloud services reflect recurring revenues that include fees for hosting and application management of customers’ perpetual or subscription-based licenses. Generally, customers have the right to terminate the cloud services contract and take possession of the licenses without a significant penalty. When cloud services are sold as part of a multi-element transaction, revenue is allocated to cloud services based on VSOE, and recognized ratably over the contractual term beginning on the commencement dates of each contract, which is the date the services are made available to the customer. VSOE is established for cloud services either through a substantive stated renewal option or stated contractual overage rates, as these rates represent the value the customer is willing to pay on a standalone basis. In addition, cloud services include set-up fees, which are recognized ratably over the contract term or the expected customer life, whichever is longer.

Support

Support contracts generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates and bug fixes. Support revenue is recognized ratably over the term of the support contract on a straight-line basis.

Professional Services

Our software arrangements often include implementation, consulting and training services that are sold under consulting engagement contracts or as part of the software license arrangement. When we determine that such services are not essential to the functionality of the licensed software, we record revenue separately for the license and service elements of these arrangements, provided that appropriate evidence of fair value exists for the undelivered services (i.e. VSOE of fair value). We

40

consider various factors in assessing whether a service is not essential to the functionality of the software, including if the services may be provided by independent third parties experienced in providing such services (i.e. consulting and implementation) in coordination with dedicated customer personnel, and whether the services result in significant modification or customization of the software’s functionality. When professional services qualify for separate accounting, professional services revenues under time and materials billing arrangements are recognized as the services are performed. Professional services revenues under fixed-priced contracts are generally recognized as the services are performed using a proportionate performance model with hours or costs as the input method of attribution.

When we provide professional services that are considered essential to the functionality of the software, the arrangement does not qualify for separate accounting of the license and service elements, and the license revenue is recognized together with the consulting services using the percentage-of-completion method of contract accounting. Under such arrangements, consideration is recognized as the services are performed as measured by an observable input. In these circumstances, we separate license revenue from service revenue for income statement presentation by allocating VSOE of fair value of the consulting services as service revenue, and the residual portion as license revenue. Under the percentage-of-completion method, we estimate the stage of completion of contracts with fixed or “not to exceed” fees based on hours or costs incurred to date as compared with estimated total project hours or costs at completion. Adjustments to estimates to complete are made in the periods in which facts resulting in a change become known. When total cost estimates exceed revenues, we accrue for the estimated losses when identified. The use of the proportionate performance and percentage-of-completion methods of accounting require significant judgment relative to estimating total contract costs or hours (hours being a proxy for costs), including assumptions relative to the length of time to complete the project, the nature and complexity of the work to be performed and anticipated changes in salaries and other costs.

Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in service revenue, with the offsetting expense recorded in cost of service revenue.

Training services include on-site and classroom training. Training revenues are recognized as the related training services are provided.

Recent Accounting Pronouncements

In accordance with recently issued accounting pronouncements, we will be required to comply with certain changes in accounting rules and regulations.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved a one-year delay in the effective date. ASU 2014-09 is effective for us in our first quarter of fiscal 2019 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements.

Liquidity and Capital Resources

41

	July 4, 2015			June 28, 2014
	(in thousands)
Cash and cash equivalents	$	275,060		$	304,173
Amounts below are for the nine months ended:
Cash provided by operating activities	$	192,463		$	253,387
Cash used by investing activities	(130,048		)	(128,240		)
Cash used by financing activities	(66,612		)	(63,532		)

Cash and cash equivalents

We invest our cash with highly rated financial institutions and in diversified domestic and international money market mutual funds. Cash and cash equivalents include highly liquid investments with original maturities of three months or less. At July 4, 2015, cash and cash equivalents totaled $275.1 million, down from $293.7 million at September 30, 2014, reflecting $192 million in operating cash flow, $13 million of net amounts borrowed under our credit facility ($135 million borrowed to finance working capital requirements, net of $123 million of repayments), offset by $98 million to acquire ColdLight, $50 million for share repurchases, $21 million used for capital expenditures, and $29 million used to pay withholding taxes on stock-based awards that vested in the period.

Cash provided by operating activities

Cash provided by operating activities was $192.5 million in the first nine months of 2015, compared to $253.4 million in the first nine months of 2014. The decrease is primarily due to lower earnings, restructuring payments which were higher by $29 million, and $9 million more of funding to pension plans. Net income for the first nine months of 2015 and 2014 was $53.1 million and $121.4 million, respectively. Accounts receivable days sales outstanding was 55 days at the end of the third quarter of 2015 compared to 60 days as of September 30, 2014 and 61 days at the end of the third quarter of 2014.

We periodically provide financing with payment terms up to 24 months to credit-worthy customers for software purchases. As of July 4, 2015 and September 30, 2014, amounts due from customers for contracts with original payment terms greater than twelve months (financing receivables) totaled $28.1 million and $58.1 million, respectively, compared to $61.3 million at June 28, 2014.

Cash used by investing activities

	Nine months ended
	July 4, 2015			June 28, 2014
	(in thousands)
Cash used by investing activities included the following:
Additions to property and equipment	$	(20,637	)	$	(16,721	)
Purchases of investments	(11,000		)	—
Acquisitions of businesses, net of cash acquired	(98,411		)	(111,519		)
	$	(130,048	)	$	(128,240	)

In the third quarter of 2015, we used cash of $98.6 million (net of cash acquired) to acquire ColdLight. In the second quarter of 2014, we used cash of $111.5 million (net of cash acquired) to acquire ThingWorx, Inc. In the first nine months of 2015, we made minority investments in preferred stock of strategic companies of $11 million. Our expenditures for property and equipment consist primarily of computer equipment, software, office equipment and facility improvements.

Cash used by financing activities

42

	Nine months ended
	July 4, 2015			June 28, 2014
	(in thousands)
Cash used by financing activities included the following:
Net borrowings under our credit facility	$	12,500		$	56,875
Repurchases of common stock	(49,962		)	(99,915		)
Payments of withholding taxes in connection with vesting of stock-based awards	(29,117		)	(26,749		)
Proceeds from issuance of common stock	38			801
Excess tax benefits from stock-based awards	(71		)	9,576
Credit facility origination costs	—			(4,120		)
	$	(66,612	)	$	(63,532	)

On May 6, 2015, we borrowed $100 million under the credit facility to acquire ColdLight. Additionally, in the first quarter of 2015, we borrowed $35 million for working capital requirements. We repaid $122.5 million of borrowings in the first nine months of 2015. Borrowings under our credit facility in the first nine months of 2014 reflect $110 million borrowed to finance the acquisition of ThingWorx, partially offset by $50 million of repayments.

Credit Facility

In September 2014, we entered into a multi-currency credit facility with a syndicate of sixteen banks for which JPMorgan Chase Bank, N.A. acts as Administrative Agent. We expect to use the credit facility for general corporate purposes, including acquisitions of businesses, share repurchases and working capital requirements. As of July 4, 2015, the balance outstanding under the credit facility was $624.4 million, our leverage ratio was 2.31 to 1.00, our fixed charge coverage ratio was 7.25 to 1.00 and we were in compliance with all financial and operating covenants of the credit facility. As of July 4, 2015, we had $190 million available to borrow under the revolving loan portion of our credit facility. Pursuant to the credit facility, our share repurchases are limited to $50 million per year if our leverage ratio exceeds 2.75 to 1.00.

The credit facility consists of a $500 million term loan and a $1 billion revolving loan commitment, and may be increased by an additional $250 million (in the form of revolving loans or term loans, or a combination thereof) if the existing or additional lenders are willing to make such increased commitments. The revolving loan commitment does not require amortization of principal. The term loan requires prepayment of principal at the end of each calendar quarter. The revolving loan and term loan may be repaid in whole or in part prior to the scheduled maturity dates at our option without penalty or premium. The credit facility matures on September 15, 2019, when remaining amounts outstanding will be due and payable in full. We are required to make principal payments under the term loan of $25 million, $50 million, $50 million, $75 million and $300 million in 2015, 2016, 2017, 2018 and 2019, respectively.

For a description of additional terms and conditions of the credit facility, including limitations on our ability to undertake certain actions, see Note 12. Debt in the Notes to Consolidated Financial Statements in this Form 10-Q.

Share Repurchases

Our Articles of Organization authorize us to issue up to 500 million shares of our common stock. Our Board of Directors had authorized us to repurchase up to $100 million worth of shares with cash from operations in the period October 1, 2013 through September 30, 2014. On August 4, 2014, our Board of Directors authorized us to repurchase up to an additional $600 million of our common stock from August 4, 2014 through September 30, 2017.

On August 14, 2014, we entered into an accelerated share repurchase (“ASR”) agreement with a major financial institution (“Bank”). The ASR allowed us to buy a large number of shares immediately at a purchase price determined by an average market price over a period of time. Under the ASR, we agreed to purchase $125 million of our common stock, in total, with an initial delivery to us in August 2014 of 2.3 million shares. We settled the ASR in December 2014 and the Bank delivered to us 1.1 million shares. Over time, our goal is to return 40% of free cash flow (cash provided by operating activities less capital expenditures) to shareholders through share repurchases. In the third quarter of 2015 we repurchased 1.2 million shares at a cost of $50.0 million. In the third quarter and first nine months of 2014, we repurchased 2.8 million shares at a cost of $99.9 million. All shares of our common stock repurchased are automatically restored to the status of authorized and unissued.

43

Future Expectations

We believe that existing cash and cash equivalents, together with cash generated from operations, and amounts available under our credit facility will be sufficient to meet our working capital and capital expenditure requirements through at least the next twelve months and to meet our known long-term capital requirements.

We evaluate possible strategic transactions on an ongoing basis and at any given time may be engaged in discussions or negotiations with respect to possible strategic transactions. Our expected uses of cash could change, our cash position could be reduced and we may incur additional debt obligations to the extent we complete additional acquisitions.

As described in Note 14 Pension Plans in the Notes to Consolidated Financial Statements in this Form 10-Q, we have substantially completed termination of our U.S. pension plan. In August 2015, we contributed $26 million to the plan to complete the termination.

At July 4, 2015, we had cash and cash equivalents of $27.5 million in the United States, $117.7 million in Europe, $92.4 million in the Pacific Rim (including India), $21.2 million in Japan and $16.2 million in other non-U.S. countries. As of July 4, 2015, we had an outstanding intercompany loan receivable of $29.6 million. This amount can be repaid with cash generated by our foreign subsidiaries and repatriated to the U.S. without future tax cost. Additionally, we are evaluating several feasible strategies that could be employed to repatriate foreign earnings at minimal tax cost.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our market risk exposure as described in Item 7A: Quantitative and Qualitative Disclosures about Market Risk of our 2014 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

Our management maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), as appropriate, to allow for timely decisions regarding required disclosure.

We evaluated, under the supervision and with the participation of management, including our principal executive and principal financial officers, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of July 4, 2015.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended July 4, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

44

PART II—OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to other information set forth in this report, you should carefully consider the factors described in Part I. Item 1A. Risk Factors in our 2014 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. The risks described in our 2014 Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 6. EXHIBITS

2.1	Agreement and Plan of Merger dated as of May 4, 2015 by and among PTC Inc., Cedar Acquisition LLC, ColdLight Solutions, LLC, and Cedar Holder Representative, LLC., as the Security Holder Representative (filed as Exhibit 2.1 to our Current Report on Form 8-K dated May 5, 2015 (File No. 0-18059) and incorporated herein by reference).
3.1(a)	Restated Articles of Organization of PTC Inc. adopted February 4, 1993 (filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 1996 (File No. 0-18059) and incorporated herein by reference).
3.1(b)	Articles of Amendment to Restated Articles of Organization adopted February 9, 1996 (filed as Exhibit 4.1(b) to our Registration Statement on Form S-8 (Registration No. 333-01297) and incorporated herein by reference).
3.1(c)	Articles of Amendment to Restated Articles of Organization adopted February 13, 1997 (filed as Exhibit 4.1(b) to our Registration Statement on Form S-8 (Registration No. 333-22169) and incorporated herein by reference).
3.1(d)	Articles of Amendment to Restated Articles of Organization adopted February 10, 2000 (filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2000 (File No. 0-18059) and incorporated herein by reference).
3.1(e)	Certificate of Vote of Directors establishing Series A Junior Participating Preferred Stock (filed as Exhibit 3.1(e) to our Annual Report on Form 10-K for the fiscal year ended September 30, 2000 (File No. 0-18059) and incorporated herein by reference).
3.1(f)	Articles of Amendment to Restated Articles of Organization adopted February 28, 2006 (filed as Exhibit 3.1(f) to our Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2006 (File No. 0-18059) and incorporated herein by reference).
3.1(g)	Articles of Amendment to Restated Articles of Organization adopted January 28, 2013 (filed as Exhibit 3.1(g) to our Quarterly Report in Form 10-Q for the fiscal quarter ended December 29, 2012 (File No. 0-18059) and incorporated herein by reference).
3.2	By-Laws, as amended and restated, of PTC Inc. (filed as Exhibit 3.2 to our Quarterly Report in Form 10-Q for the fiscal quarter ended March 29, 2014 (File No. 0-18059) and incorporated herein by reference).
10.1	Amendment dated August 4, 2015 to Amended and Restated Executive Agreement between James Heppelmann and PTC Inc. dated May 10, 2010 (filed as Exhibit 10.1 to our Current Report on Form 8-K dated August 7, 2015 (File No. 0-18059) and incorporated herein by reference).
10.2	Form of Amendment dated August 5, 2015 to Executive Agreement between PTC Inc. and each of Barry Cohen, Andrew Miller, Robert Ranaldi, Anthony DiBona, Matthew Cohen and Aaron von Staats (filed as Exhibit 10.1 to our Current Report on Form 8-K dated August 7, 2015 (File No. 0-18059) and incorporated herein by reference).
31.1	Certification of the Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).
31.2	Certification of the Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).
32*	Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350.
101	The following materials from PTC Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 4, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of July 4, 2015 and September 30, 2014; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended July 4, 2015 and June 28, 2014; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended July 4, 2015 and June 28, 2014; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended July 4, 2015 and June 28, 2014; and (v) Notes to Condensed Consolidated Financial Statements.

_________________

* Indicates that the exhibit is being furnished, not filed, with this report.

45

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PTC Inc.
By:	/s/ ANDREW MILLER
	Andrew Miller Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: August 11, 2015

46

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, James Heppelmann, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PTC Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 11, 2015	/S/ JAMES HEPPELMANN
		James Heppelmann
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Andrew Miller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PTC Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 11, 2015	/S/ ANDREW MILLER
		Andrew Miller
		Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of PTC Inc. (the “Company”) certifies that, to his knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended July 4, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 11, 2015	/S/ JAMES HEPPELMANN
		James Heppelmann President and Chief Executive Officer
Date:	August 11, 2015	/S/ ANDREW MILLER
		Andrew Miller
		Executive Vice President and Chief Financial Officer

XML

Stock-based Compensation (Schedule of Classification of Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Total stock-based compensation expense	$ 14,071	$ 12,532	$ 38,135	$ 37,862
Cost of License Revenue
Total stock-based compensation expense	121	63	381	209
Cost of Service Revenue
Total stock-based compensation expense	1,317	1,549	4,510	4,436
Cost of Support Revenue
Total stock-based compensation expense	1,012	898	2,777	2,711
Sales and Marketing
Total stock-based compensation expense	3,430	3,065	9,383	8,583
Research and Development
Total stock-based compensation expense	2,928	2,231	9,015	7,067
General and Administrative
Total stock-based compensation expense	$ 5,263	$ 4,726	$ 12,069	$ 14,856

XML

Commitments and Contingencies (Details) $ in Millions	Jul. 04, 2015 USD ($)
Pending Litigation
Loss Contingencies [Line Items]
Loss contingency accrual	$ 15.9
CHINA
Loss Contingencies [Line Items]
Loss contingency accrual	$ 13.6

XML

Derivative Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands	Jul. 04, 2015	Sep. 30, 2014
Forward contracts	$ 851	$ 339
Forward contracts	888	911
Level 2
Forward contracts	851	339
Forward contracts	$ 888	$ 911

XML

Pension Plans (Details) - USD ($) $ in Millions		9 Months Ended
	Aug. 11, 2015	Jul. 04, 2015	Sep. 30, 2015
Foreign Pension Plan, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Contributions by Employer		$ 20
United States Pension Plan of US Entity [Member] | Subsequent Event [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Contributions by Employer	$ 26
Scenario, Forecast [Member]
Defined Benefit Plan Disclosure [Line Items]
Accumulated Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Net of Tax			$ 47
Scenario, Forecast [Member] | United States Pension Plan of US Entity [Member]
Defined Benefit Plan Disclosure [Line Items]
Losses resulting from settlement of liabilities			$ 66
annuity payment [Member] | Subsequent Event [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Description of Settlements and Curtailments	90
lump sum payment [Member] | Subsequent Event [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Description of Settlements and Curtailments	$ 45

XML

Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jul. 04, 2015	Jul. 04, 2015	Sep. 30, 2014
Goodwill [Line Items]
Goodwill	$ 1,071,796	$ 1,071,796	$ 1,012,527
Goodwill, Translation and Purchase Accounting Adjustments		(25,839)
Segment, Software Products [Member]
Goodwill [Line Items]
Goodwill	1,019,249	1,019,249	959,768
Goodwill, Translation and Purchase Accounting Adjustments		(25,627)
Segment, Services [Member]
Goodwill [Line Items]
Goodwill	52,547	52,547	$ 52,759
Goodwill, Translation and Purchase Accounting Adjustments		(212)
Acquired entity name: Axeda [Member]
Goodwill [Line Items]
Goodwill, Acquired During Period		(180)
Acquired entity name: Axeda [Member] | Segment, Software Products [Member]
Goodwill [Line Items]
Goodwill, Acquired During Period		(180)
Acquired entity name: Axeda [Member] | Segment, Services [Member]
Goodwill [Line Items]
Goodwill, Acquired During Period		0
Acquired entity name: ColdLight [Member]
Goodwill [Line Items]
Goodwill, Acquired During Period	$ 85,288	85,288
Acquired entity name: ColdLight [Member] | Segment, Software Products [Member]
Goodwill [Line Items]
Goodwill, Acquired During Period		$ 85,288

XML

Basis of Presentation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Error Corrections and Prior Period Adjustments Restatement [Line Items]
License and subscription solutions	$ 83,926	$ 97,703	$ 248,850	$ 269,114
Professional services	53,500	66,910	177,782	212,733
Support	165,687	172,021	516,042	508,412
Total revenue	303,113	336,634	942,674	990,259
Cost of license and subscription solutions revenue	12,830	11,246	39,349	32,454
Cost of professional services revenue	$ 46,094	58,712	$ 155,847	182,777
Reclassification Adjustment
Error Corrections and Prior Period Adjustments Restatement [Line Items]
License and subscription solutions		5,000		12,000
Cost of license and subscription solutions revenue		3,400		9,100
Reclassification Adjustment | From Services to L&SS
Error Corrections and Prior Period Adjustments Restatement [Line Items]
License and subscription solutions		3,300		10,200
Cost of license and subscription solutions revenue		3,200		8,900
Reclassification Adjustment | From Support to L&SS
Error Corrections and Prior Period Adjustments Restatement [Line Items]
License and subscription solutions		1,700		1,800
Cost of license and subscription solutions revenue		$ 200		$ 200

XML

Restructuring Charges (Tables)

9 Months Ended

Jul. 04, 2015

Restructuring [Abstract]

Restructuring Accrual Activity

The following table summarizes restructuring accrual activity for the nine months ended July 4, 2015:

	Employee Severance and Related Benefits			Facility Closures and Related Costs			Total
	(in thousands)
October 1, 2014	$	25,835		$	535		$	26,370
Charge to operations	41,483			1,142			42,625
Cash disbursements	(47,249		)	(528		)	(47,777		)
Foreign exchange impact	(938		)	(30		)	(968		)
Accrual, July 4, 2015	$	19,131		$	1,119		$	20,250

XML

Derivative Financial Instruments (Derivative Instruments and Hedging Activities Disclosures) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Net foreign currency losses	$ 449	$ 746	$ 1,362	$ 2,739
Net realized and unrealized loss (gain) on forward contracts (excluding the underlying foreign currency exposure being hedged)	$ 741	$ 1,320	$ 1,122	$ (377)

XML

Acquisition (Business Combination) (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended		12 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Mar. 29, 2014	Jul. 04, 2015	Jun. 28, 2014	May. 06, 2017	May. 06, 2016	Sep. 30, 2015
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Acquisition-related cost	$ 2,800	$ 1,300		$ 8,700	$ 6,400
Payments to Acquire Businesses, Net of Cash Acquired				98,411	111,519
Borrowings under credit facility				135,000	$ 474,375
Acquired entity name: ColdLight [Member]
Acquired entity Name
Goodwill, Acquired During Period	$ 85,288			85,288
Business Acquisition, Effective Date of Acquisition	May 07, 2015
Finite-lived Intangible Assets Acquired	$ 17,620
Business Combination, Contingent Consideration Arrangements, Change in Range of Outcomes, Contingent Consideration, Liability, Value, Low	3,800
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Payments to Acquire Businesses, Net of Cash Acquired	98,592
Cash Acquired from Acquisition	1,313
Business Combination, Consideration Transferred	102,392
business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value High	5,000			5,000
Contingent consideration	3,800			3,800
Increase in estimated fair value of liability				3,800
Business acquisition, acquired net assets excluding goodwill, intangible assets and cash	(516)
acquired entity name-ThingWorx [Member]
Acquired entity Name
Finite-lived Intangible Assets Acquired			$ 32,100
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Payments to Acquire Businesses, Net of Cash Acquired			111,500
Cash Acquired from Acquisition			$ 100
business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value High	18,000			18,000
Increase in estimated fair value of liability				$ 2,809
Computer Software, Intangible Asset [Member]
Acquired entity Name
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life				9 years
Computer Software, Intangible Asset [Member] | Acquired entity name: ColdLight [Member]
Acquired entity Name
Finite-lived Intangible Assets Acquired	$ 13,600
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	10 years
Customer Lists [Member]
Acquired entity Name
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life				10 years
Customer Lists [Member] | Acquired entity name: ColdLight [Member]
Acquired entity Name
Finite-lived Intangible Assets Acquired	$ 3,500
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	9 years
Trademarks and Trade Names [Member] | Acquired entity name: ColdLight [Member]
Acquired entity Name
Finite-lived Intangible Assets Acquired	$ 500
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	7 years
Number of Employees, Total [Member] | Acquired entity name: ColdLight [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Business Acquisition, Description of Acquired Entity, Number of Employee Acquired	60
Scenario, Forecast [Member] | Acquired entity name: ColdLight [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities [Abstract]
Max contingent consideration can be earned						$ 2,000	$ 3,000
Business Acquisition, Revenue Reported by Acquired Entity for Last Annual Period								$ 8,000

XML

Stock-based Compensation (Schedule of Restricted Stock Unit Activity) (Details) - Jul. 04, 2015		shares / unit $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Weighted Average Volatility Rate		29.80%
Common stock issuable per restricted stock unit, Shares | shares / unit		1
Weighted Average Grant Date Fair Value (Per Share)
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate		0.85%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate		0.00%
Restricted Stock Units (RSUs)
Shares
Balance of outstanding restricted stock units, beginning, Shares		4,379,000
Granted, Shares		1,860,000
Vested, Shares		(2,190,000)
Forfeited or not earned, Shares		(374,000)
Balance of outstanding restricted stock units, ending, Shares		3,675,000
Weighted Average Grant Date Fair Value (Per Share)
Balance of outstanding restricted stock units, beginning (in USD per share) | $ / shares		$ 26.87
Granted (in USD per share) | $ / shares		38.25
Vested (in USD per share) | $ / shares		24.65
Forfeited or not earned (in USD per share) | $ / shares		30.52
Balance of outstanding restricted stock units, ending (in USD per share) | $ / shares		$ 33.58
Time-based Award [Member] | Vest in one year [member] | Restricted Stock Units (RSUs)
Shares
Granted, Shares	[1]	212,000

[1] The performance-based RSUs were granted to employees

XML

Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended
	Jul. 04, 2015	Jan. 03, 2015	Jun. 28, 2014	Mar. 29, 2014	Jul. 04, 2015	Jun. 28, 2014	Sep. 30, 2014
Income Tax Disclosure [Line Items]
Effective income tax rate	3.00%		27.00%		(1.00%)	21.00%
Income before income taxes	$ 17,939		$ 52,106		$ 52,734	$ 153,744
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount	6,000				14,000
Unrecognized Tax Benefits, Increase Resulting from Prior Period Tax Positions					3,100
Deferred Other Tax Expense (Benefit)		$ 1,400
Effective Income Tax Rate Reconciliation, Tax Credit, Research, Amount		$ 2,100
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		35.00%
Deferred Tax Liabilities, Intangible Assets				$ 8,900
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount				(8,900)
Unrecognized tax benefits	11,900				11,900		$ 15,000
Income tax provision upon recognition of unrecognized tax benefit	10,300				10,300
Unrecognized tax benefits that would impact valuation allowance	3,900				3,900
Potentail reduction in unrecognized tax benefits and accrued interest over next 12 months	$ (4,000)				$ (4,000)
Adjustments to additional paid in capital, income tax benefit from share-based compensation			$ 1,500			$ 9,600
acquired entity name-ThingWorx [Member]
Income Tax Disclosure [Line Items]
Finite-lived Intangible Assets Acquired				$ 32,100

XML

Fair Value Measurements (Financial Assets And Liabilities Measured At Fair Value On Recurring Basis) (Details) - USD ($) $ in Thousands	9 Months Ended
	Jul. 04, 2015	Sep. 30, 2014
Financial assets:
Cash equivalents—Level 1	$ 52,916	$ 101,113
Forward contracts	851	339
Financial assets, fair value	53,767	101,452
Financial liabilities:
Forward contracts	888	911
Contingent Consideration Liability, Fair Value Disclosure	21,800	15,191
Liabilities, Fair Value Disclosure, Recurring	22,688	16,102
Level 1
Financial assets:
Cash equivalents—Level 1	52,916	101,113
Forward contracts	0	0
Financial assets, fair value	52,916	101,113
Financial liabilities:
Forward contracts	0	0
Contingent Consideration Liability, Fair Value Disclosure	0	0
Liabilities, Fair Value Disclosure, Recurring	0	0
Level 2
Financial assets:
Cash equivalents—Level 1	0	0
Forward contracts	851	339
Financial assets, fair value	851	339
Financial liabilities:
Forward contracts	888	911
Contingent Consideration Liability, Fair Value Disclosure	0	0
Liabilities, Fair Value Disclosure, Recurring	888	911
Fair Value, Inputs, Level 3 [Member]
Financial assets:
Cash equivalents—Level 1	0	0
Forward contracts	0	0
Financial assets, fair value	0	0
Financial liabilities:
Forward contracts	0	0
Contingent Consideration Liability, Fair Value Disclosure	21,800	15,191
Liabilities, Fair Value Disclosure, Recurring	21,800	15,191
Current portion [Member]
Financial liabilities:
Contingent Consideration Liability, Fair Value Disclosure	0
acquired entity name-ThingWorx [Member]
Financial liabilities:
Contingent Consideration Liability, Fair Value Disclosure	18,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability	2,809
Acquired entity name: ColdLight [Member]
Financial liabilities:
Contingent Consideration Liability, Fair Value Disclosure	3,800
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability	3,800
Acquired entity name: ColdLight [Member] | Fair Value, Inputs, Level 3 [Member]
Financial liabilities:
Contingent Consideration Liability, Fair Value Disclosure		$ 0
Non-current portion [Member] [Member]
Financial liabilities:
Contingent Consideration Liability, Fair Value Disclosure	$ 1,300

XML

Deferred Revenue and Financing Receivables

9 Months Ended

Jul. 04, 2015

Deferred Revenue And Financing Receivables [Abstract]

Deferred Revenue and Financing Receivables

Deferred Revenue and Financing Receivables

Deferred Revenue

Deferred revenue primarily relates to software support agreements billed to customers for which the services have not yet been provided. The liability associated with performing these services is included in deferred revenue and, if not yet paid, the related customer receivable is included in prepaid expenses and other current assets. Billed but uncollected support and subscription-related amounts included in prepaid expenses and other current assets at July 4, 2015 and September 30, 2014 were $88.8 million and $116.2 million, respectively.

Financing Receivables

We periodically provide extended payment terms to credit-worthy customers for software purchases with payment terms up to 24 months. The determination of whether to offer such payment terms is based on the size, nature and credit-worthiness of the customer, and the history of collecting amounts due, without concession, from the customer and customers generally. This determination is based on an internal credit assessment. In making this assessment, we use the Standard & Poor's (S&P) credit rating as our primary credit quality indicator, if available. If a customer, whether commercial or the U.S. Federal government, has an S&P bond rating of BBB- or above, we designate the customer as Tier 1. If a customer does not have a S&P bond rating, or has an S&P bond rating below BBB-, we base our assessment on an internal credit assessment which considers selected balance sheet, operating and liquidity measures, historical payment experience, and current business conditions within the industry or region. We designate these customers as Tier 2 or Tier 3, with Tier 3 being lower credit quality than Tier 2.

As of July 4, 2015 and September 30, 2014, amounts due from customers for contracts with original payment terms greater than twelve months (financing receivables) totaled $28.1 million and $58.1 million, respectively. Accounts receivable and prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets included current receivables from such contracts totaling $24.8 million and $44.6 million at July 4, 2015 and September 30, 2014, respectively, and other assets in the accompanying Consolidated Balance Sheets included long-term receivables from such contracts totaling $3.3 million and $13.5 million at July 4, 2015 and September 30, 2014, respectively. None of these receivables were past due as of either July 4, 2015 or September 30, 2014. Our credit risk assessment for financing receivables was as follows:

	July 4, 2015		September 30, 2014
	(in thousands)
S&P bond rating BBB-1 and above-Tier 1	$	17,143	$	41,152
Internal Credit Assessment-Tier 2	11,002		16,989
Internal Credit Assessment-Tier 3	—		—
Total financing receivables	$	28,145	$	58,141

We evaluate the need for an allowance for doubtful accounts for estimated losses resulting from the inability of these customers to make required payments. As of July 4, 2015 and September 30, 2014, we concluded that all financing receivables were collectible and no reserve for credit losses was recorded. We did not provide a reserve for credit losses or write off any uncollectible financing receivables in the nine months ended July 4, 2015 or June 28, 2014. We write off uncollectible trade and financing receivables when we have exhausted all collection avenues.

We periodically transfer future payments under certain of these contracts to third-party financial institutions on a non-recourse basis. We record such transfers as sales of the related accounts receivable when we surrender control of such receivables. We sold $3.0 million of financing receivables to third-party financial institutions in the nine months ended July 4, 2015. We sold $16.5 million of financing receivables to third-party financial institutions in the nine months ended June 28, 2014.

XML

Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands	Jul. 04, 2015	Sep. 30, 2014
Intangible Assets, Net (Including Goodwill)	$ 1,377,323	$ 1,349,400
Segment Software Products
Intangible Assets, Net (Including Goodwill)	1,314,200	1,283,000
Segment Services
Intangible Assets, Net (Including Goodwill)	$ 63,100	$ 66,400

XML

Goodwill and Intangible Assets (Tables)

9 Months Ended

Jul. 04, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

Changes in goodwill presented by reportable segment were as follows:

	Software Products Segment			Services Segment			Total
	(in thousands)
Balance, October 1, 2014	$	959,768		$	52,759		$	1,012,527
Acquisition of Axeda	(180		)	—			(180		)
Acquisition of ColdLight	85,288			—			85,288
Foreign currency translation adjustments	(25,627		)	(212		)	(25,839		)
Balance, July 4, 2015	$	1,019,249		$	52,547		$	1,071,796

Goodwill and Acquired Intangible Assets

Goodwill and acquired intangible assets consisted of the following:

	July 4, 2015						September 30, 2014
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in thousands)
Goodwill (not amortized)					$	1,071,796					$	1,012,527
Intangible assets with finite lives (amortized) (1):
Purchased software	$	284,427	$	169,903	$	114,524	$	278,012	$	162,259	$	115,753
Capitalized software	22,877		22,877		—		22,877		22,877		—
Customer lists and relationships	350,845		166,527		184,318		360,530		147,469		213,061
Trademarks and trade names	18,573		12,221		6,352		18,479		10,964		7,515
Other	3,938		3,605		333		4,117		3,573		544
	$	680,660	$	375,133	$	305,527	$	684,015	$	347,142	$	336,873
Total goodwill and acquired intangible assets					$	1,377,323					$	1,349,400

(1) The weighted average useful lives of purchased software, customer lists and relationships, trademarks and trade names and other intangible assets with a remaining net book value are 9 years, 10 years, 9 years, and 3 years, respectively.

Amortization of Intangible Assets

The aggregate amortization expense for intangible assets with finite lives was classified in our Consolidated Statements of Operations as follows:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Amortization of acquired intangible assets	$	9,105	$	7,998	$	27,691	$	23,772
Cost of license and subscriptions solutions revenue	4,957		4,415		14,438		13,319
Total amortization expense	$	14,062	$	12,413	$	42,129	$	37,091

XML

Acquisition Acquisitions (Tables)

9 Months Ended

Jul. 04, 2015

Acquisitions [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Based upon a preliminary valuation, the total purchase price allocation was as follows:

Purchase price allocation:	(in thousands)
Goodwill	$	85,288
Identifiable intangible assets	17,620
Cash	1,313
Other assets and liabilities, net	(516		)
Total allocation of purchase price consideration	103,705
Less: cash acquired	(1,313		)
Total purchase price allocation, net of cash acquired	$	102,392
Less: contingent consideration	(3,800		)
Net cash used to acquire ColdLight	$	98,592

XML

Subsequent Events (Details) - Subsequent Event [Member] - USD ($) $ in Millions	Aug. 11, 2015	Jul. 17, 2015
acquired entity name-ThingWorx [Member]
Subsequent Event [Line Items]
payment of contingent consideration		$ 9
United States Pension Plan of US Entity [Member]
Subsequent Event [Line Items]
Defined Benefit Plan, Contributions by Employer	$ 26
lump sum payment [Member]
Subsequent Event [Line Items]
Defined Benefit Plan, Settlements, Benefit Obligation	45
annuity payment [Member]
Subsequent Event [Line Items]
Defined Benefit Plan, Settlements, Benefit Obligation	$ 90

XML

Goodwill and Intangible Assets (Goodwill and Acquired Intangible Assets) (Details) - USD ($) $ in Thousands		9 Months Ended
		Jul. 04, 2015	Sep. 30, 2014
Goodwill (not amortized), Net Book Value		$ 1,071,796	$ 1,012,527
Intangible assets with finite lives (amortized), Gross Carrying Amount	[1]	680,660	684,015
Intangible assets with finite lives (amortized), Accumulated Amortization	[1]	375,133	347,142
Intangible assets with finite lives (amortized), Net Book Value	[1]	305,527	336,873
Intangible Assets, Net (Including Goodwill)		1,377,323	1,349,400
Purchased Software
Intangible assets with finite lives (amortized), Gross Carrying Amount		284,427	278,012
Intangible assets with finite lives (amortized), Accumulated Amortization		169,903	162,259
Intangible assets with finite lives (amortized), Net Book Value	[1]	$ 114,524	115,753
Acquired finite-lived intangible asset, weighted average useful life		9 years
Capitalized Software
Intangible assets with finite lives (amortized), Gross Carrying Amount		$ 22,877	22,877
Intangible assets with finite lives (amortized), Accumulated Amortization		22,877	22,877
Intangible assets with finite lives (amortized), Net Book Value	[1]	0	0
Customer Lists and Relationships
Intangible assets with finite lives (amortized), Gross Carrying Amount		350,845	360,530
Intangible assets with finite lives (amortized), Accumulated Amortization		166,527	147,469
Intangible assets with finite lives (amortized), Net Book Value	[1]	$ 184,318	213,061
Acquired finite-lived intangible asset, weighted average useful life		10 years
Trademarks and Trade Names
Intangible assets with finite lives (amortized), Gross Carrying Amount		$ 18,573	18,479
Intangible assets with finite lives (amortized), Accumulated Amortization		12,221	10,964
Intangible assets with finite lives (amortized), Net Book Value	[1]	$ 6,352	7,515
Acquired finite-lived intangible asset, weighted average useful life		9 years
Other
Intangible assets with finite lives (amortized), Gross Carrying Amount		$ 3,938	4,117
Intangible assets with finite lives (amortized), Accumulated Amortization		3,605	3,573
Intangible assets with finite lives (amortized), Net Book Value	[1]	$ 333	$ 544
Acquired finite-lived intangible asset, weighted average useful life		3 years

[1] The weighted average useful lives of purchased software, customer lists and relationships, trademarks and trade names and other intangible assets with a remaining net book value are 9 years, 10 years, 9 years, and 3 years, respectively.

XML

Fair Value Measurements (Tables)

9 Months Ended

Jul. 04, 2015

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping

Our significant financial assets and liabilities measured at fair value on a recurring basis as of July 4, 2015 and September 30, 2014 were as follows:

	July 4, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Cash equivalents (1)	$	52,916	$	—	$	—	$	52,916
Forward contracts	—		851		—		851
	$	52,916	$	851	$	—	$	53,767
Financial liabilities:
Contingent consideration related to acquisitions	$	—	$	—	$	21,800	$	21,800
Forward contracts	—		888		—		888
	$	—	$	888	$	21,800	$	22,688

	September 30, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Cash equivalents (1)	$	101,113	$	—	$	—	$	101,113
Forward contracts	—		339		—		339
	$	101,113	$	339	$	—	$	101,452
Financial liabilities:
Contingent consideration related to acquisitions	$	—	$	—	$	15,191	$	15,191
Forward contracts	—		911		—		911
	$	—	$	911	$	15,191	$	16,102

______________

(1) Money market funds and time deposits.

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

Changes in the fair value of Level 3 contingent consideration liability associated with our acquisition of ThingWorx and ColdLight were as follows:

	Contingent Consideration
	(in thousands)
	ThingWorx		ColdLight
Balance, October 1, 2014	$	15,191	$	—
Change in present value of contingent consideration	2,809		3,800
Balance, July 4, 2015	$	18,000	$	3,800

XML

Derivative Financial Instruments (Tables)

9 Months Ended

Jul. 04, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notional Amounts of Outstanding Forward Contracts

As of July 4, 2015 and September 30, 2014, we had outstanding forward contracts with notional amounts equivalent to the following:

Currency Hedged	July 4, 2015		September 30, 2014
	(in thousands)
Canadian Dollar / U.S. Dollar	$	19,971	$	25,583
Euro / U.S. Dollar	77,987		61,751
British Pound / Euro	9,713		14,259
Israeli New Sheqel / U.S. Dollar	5,681		6,144
Japanese Yen / Euro	24,080		—
Swiss Franc /Euro	8,516		—
All other	10,990		9,251
Total	$	156,938	$	116,988

Net Gains and Losses on Foreign Currency Exposures

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Net foreign currency losses	$	449	$	746	$	1,362	$	2,739
Net realized and unrealized loss (gain) on forward contracts (excluding the underlying foreign currency exposure being hedged)	$	741	$	1,320	$	1,122	$	(377	)

XML

Basis of Presentation

9 Months Ended

Jul. 04, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

General

The accompanying unaudited condensed consolidated financial statements include the accounts of PTC Inc. and its wholly owned subsidiaries and have been prepared by management in accordance with accounting principles generally accepted in the United States of America and in accordance with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with our annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of our financial position, results of operations and cash flows at the dates and for the periods indicated. Unless otherwise indicated, all references to a year mean our fiscal year, which ends on September 30. The September 30, 2014 Consolidated Balance Sheet included herein is derived from our audited consolidated financial statements.

The results of operations for the nine months ended July 4, 2015 are not necessarily indicative of the results expected for the remainder of the fiscal year.

Reclassifications

Through 2014, we classified revenue in three categories: 1) license; 2) service; and 3) support. Effective with the beginning of the first quarter of 2015, we are reporting revenue as follows: 1) license and subscription solutions; 2) support; and 3) professional services. License and subscription solutions revenue includes perpetual license revenue, subscription revenue and cloud services revenue. Cloud service offerings were previously reflected in service revenue and cost of service revenue. Consulting and training service revenue and consulting and training cost of service revenue are now referred to as professional services revenue and cost of professional services revenue in the accompanying Consolidated Statements of Operations. The following revenue and costs have been reclassified in the accompanying Consolidated Statements of Operations for the three and nine months ended June 28, 2014 to conform to the current period presentation.

	Three months ended June 28, 2014		Nine months ended June 28, 2014
Reclassifications within revenue	(in millions)
From Services to L&SS	$	3.3	$	10.2
From Support to L&SS	1.7		1.8
	$	5.0	$	12.0
Reclassifications within cost of revenue
From Services to L&SS	$	3.2	$	8.9
From Support to L&SS	0.2		0.2
	$	3.4	$	9.1

Revenue Recognition

Our sources of revenue include: (1) license and subscription solutions, (2) support and (3) professional services. We record revenues in accordance with the guidance provided by ASC 985-605, Software-Revenue Recognition when the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred (generally, FOB shipping point or electronic distribution), (3) the fee is fixed or determinable, and (4) collection is probable. We exercise judgment and use estimates in connection with determining the amounts of software license and services revenues to be recognized in each accounting period. Our primary judgments involve the following:

• determining whether collection is probable;

• assessing whether the fee is fixed or determinable;

• determining whether service arrangements, including modifications and customization of the underlying software, are not essential to the functionality of the licensed software and thus would result in the revenue for license and service elements of an agreement being recorded separately; and

• determining the fair value of services and support elements included in multiple-element arrangements, which is the basis for allocating and deferring revenue for such services and support.

Our software is distributed primarily through our direct sales force. In addition, we have an indirect distribution channel through alliances with resellers. Revenue arrangements with resellers are recognized on a sell-through basis; that is, when we deliver the product to the end-user customer. We record consideration given to a reseller as a reduction of revenue to the extent we have recorded revenue from the reseller. We do not offer contractual rights of return, stock balancing, or price protection to our resellers, and actual product returns from them have been insignificant to date. As a result, we do not maintain reserves for reseller product returns.

At the time of each sale transaction, we must make an assessment of the collectability of the amount due from the customer. Revenue is only recognized at that time if management deems that collection is probable. In making this assessment, we consider customer credit-worthiness and historical payment experience. At that same time, we assess whether fees are fixed or determinable and free of contingencies or significant uncertainties. In assessing whether the fee is fixed or determinable, we consider the payment terms of the transaction, including transactions with payment terms that extend beyond our customary payment terms, and our collection experience in similar transactions without making concessions, among other factors. We have periodically provided financing to credit-worthy customers with payment terms up to 24 months. If the fee is determined not to be fixed or determinable, revenue is recognized only as payments become due from the customer, provided that all other revenue recognition criteria are met. Our software license arrangements generally do not include customer acceptance provisions. However, if an arrangement includes an acceptance provision, we record revenue only upon the earlier of (1) receipt of written acceptance from the customer or (2) expiration of the acceptance period.

Generally, our contracts are accounted for individually. However, when contracts are closely interrelated and dependent on each other, it may be necessary to account for two or more contracts as one to reflect the substance of the group of contracts.

License and Subscription Solutions

License and subscription solutions revenue includes revenue from three primary sources: (1) sales of perpetual licenses, (2) subscription-based licenses, and (3) cloud services.

Under perpetual license arrangements, we generally recognize license revenue up front upon shipment to the customer. We use the residual method to recognize revenue from perpetual license software arrangements that include one or more elements to be delivered at a future date when evidence of the fair value of all undelivered elements exists, and the elements of the arrangement qualify for separate accounting as described below. Under the residual method, the fair value of the undelivered elements (i.e., support and services) based on our vendor-specific objective evidence (“VSOE”) of fair value is deferred and the remaining portion of the total arrangement fee is allocated to the delivered elements (i.e., perpetual software license). If evidence of the fair value of one or more of the undelivered elements does not exist, all revenues are deferred and recognized when delivery of all of those elements has occurred or when fair values can be established. We determine VSOE of the fair value of services and support revenue based upon our recent pricing for those elements when sold separately. For certain transactions, VSOE is determined based on a substantive renewal clause within a customer contract. Our current pricing practices are influenced primarily by product type, purchase volume, sales channel and customer location. We review services and support sold separately on a periodic basis and update, when appropriate, our VSOE of fair value for such elements to ensure that it reflects our recent pricing experience.

Subscription-based licenses include the right for a customer to use our licenses and receive related support for a specified term and revenue is recognized ratably over the term of the arrangement. When sold in arrangements with other elements, VSOE of fair value is established for the subscription-based licenses through the use of a substantive renewal clause within the customer contract for a combined annual fee that includes the term-based license and related support.

Cloud services reflect recurring revenues that include fees for hosting and application management of customers’ perpetual or subscription-based licenses. Generally, customers have the right to terminate the cloud services contract and take possession of the licenses without a significant penalty. When cloud services are sold as part of a multi-element transaction, revenue is allocated to cloud services based on VSOE, and recognized ratably over the contractual term beginning on the commencement dates of each contract, which is the date the services are made available to the customer. VSOE is established for cloud services either through a substantive stated renewal option or stated contractual overage rates, as these rates represent the value the customer is willing to pay on a standalone basis. In addition, cloud services include set-up fees, which are recognized ratably over the contract term or the expected customer life, whichever is longer.

Support

Support contracts generally include rights to unspecified upgrades (when and if available), telephone and internet-based support, updates and bug fixes. Support revenue is recognized ratably over the term of the support contract on a straight-line basis.

Professional Services

Our software arrangements often include implementation, consulting and training services that are sold under consulting engagement contracts or as part of the software license arrangement. When we determine that such services are not essential to the functionality of the licensed software, we record revenue separately for the license and service elements of these arrangements, provided that appropriate evidence of fair value exists for the undelivered services (i.e. VSOE of fair value). We consider various factors in assessing whether a service is not essential to the functionality of the software, including if the services may be provided by independent third parties experienced in providing such services (i.e. consulting and implementation) in coordination with dedicated customer personnel, and whether the services result in significant modification or customization of the software’s functionality. When professional services qualify for separate accounting, professional services revenues under time and materials billing arrangements are recognized as the services are performed. Professional services revenues under fixed-priced contracts are generally recognized as the services are performed using a proportionate performance model with hours or costs as the input method of attribution.

When we provide professional services that are considered essential to the functionality of the software, the arrangement does not qualify for separate accounting of the license and service elements, and the license revenue is recognized together with the consulting services using the percentage-of-completion method of contract accounting. Under such arrangements, consideration is recognized as the services are performed as measured by an observable input. In these circumstances, we separate license revenue from service revenue for income statement presentation by allocating VSOE of fair value of the consulting services as service revenue, and the residual portion as license revenue. Under the percentage-of-completion method, we estimate the stage of completion of contracts with fixed or “not to exceed” fees based on hours or costs incurred to date as compared with estimated total project hours or costs at completion. Adjustments to estimates to complete are made in the periods in which facts resulting in a change become known. When total cost estimates exceed revenues, we accrue for the estimated losses when identified. The use of the proportionate performance and percentage-of-completion methods of accounting require significant judgment relative to estimating total contract costs or hours (hours being a proxy for costs), including assumptions relative to the length of time to complete the project, the nature and complexity of the work to be performed and anticipated changes in salaries and other costs.

Reimbursements of out-of-pocket expenditures incurred in connection with providing consulting services are included in service revenue, with the offsetting expense recorded in cost of service revenue.

Training services include on-site and classroom training. Training revenues are recognized as the related training services are provided.

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved a one-year delay in the effective date. ASU 2014-09 is effective for us in our first quarter of fiscal 2019 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements.

Debt Issuance Costs

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), to simplify the required presentation of debt issuance costs. The amended guidance requires that debt issuance costs be presented in the balance sheet as a direct reduction from the carrying amount of the related debt liability rather than as an asset. It is effective for financial statements issued for fiscal years beginning after December 15, 2015, our fiscal 2017, with early adoption permitted. The new guidance will be applied retrospectively to each prior period presented. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

XML

Segment Information (Tables)

9 Months Ended

Jul. 04, 2015

Segment Reporting [Abstract]

Revenue and Operating Income

The revenue and operating income attributable to our operating segments are summarized as follows:

	Three months ended						Nine months ended
	July 4, 2015			June 28, 2014			July 4, 2015			June 28, 2014
	(in thousands)
Revenue:
Total Software Products segment revenue	$	235,371		$	258,805		$	723,313		$	748,482
Total Services segment revenue	67,742			77,829			219,361			241,777
Total revenue	$	303,113		$	336,634		$	942,674		$	990,259
Operating income: (1)
Software Products segment	$	145,016		$	166,639		$	428,533		$	479,736
Services segment	13,378			13,516			29,868			42,566
Sales and marketing expenses	(88,715		)	(91,440		)	(271,257		)	(262,085		)
General and administrative expenses	(48,072		)	(34,331		)	(123,918		)	(99,749		)
Total operating income	21,607			54,384			63,226			160,468
Interest and other income (expense), net	(3,668		)	(2,278		)	(10,492		)	(6,724		)
Income before income taxes	$	17,939		$	52,106		$	52,734		$	153,744

(1)

XML

Earnings per Share (EPS) and Common Stock (Earnings per Share Basic and Diluted) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Earnings Per Share and Common Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount				100
Net income	$ 17,435	$ 38,026	$ 53,111	$ 121,439
Weighted average shares outstanding—Basic (in shares)	114,764	118,328	115,021	118,753
Dilutive effect of employee stock options, restricted shares and restricted stock units (in shares)	1,261	1,573	1,309	1,820
Weighted average shares outstanding—Diluted (in shares)	116,025	119,901	116,330	120,573
Earnings per share—Basic (in USD per share)	$ 0.15	$ 0.32	$ 0.46	$ 1.02
Earnings per share—Diluted (in USD per share)	$ 0.15	$ 0.32	$ 0.46	$ 1.01

XML

Debt (Details) $ in Millions	9 Months Ended
	Jul. 04, 2015 USD ($)	Sep. 17, 2015 USD ($)	Aug. 06, 2015 USD ($)
Debt Instrument [Line Items]
Additional borrowing capacity on credit facility if agreed to by lenders	$ 250.0
Line of Credit Facility, Interest Rate at Period End	1.6875%
Voting interest in foreign subsidiaries pledged against credit facility	65.00%
Investment limit in foreign subsidiaries	$ 75.0
Cash investment limit for acquisition of business	$ 150.0
Maximum leverage ratio allowed under debt covenant	3.00
Minimum fixed charge coverage ratio allowed under debt covenant	3.50
Leverage ratio, actual	2.31
Fixed charge coverage ratio, actual	7.25
Line of Credit Facility, Remaining Borrowing Capacity	$ 190.0
Minimum
Debt Instrument [Line Items]
Line of Credit Facility, Variable Interest Rate, Length of Time Between Updates	30 days
Maximum
Debt Instrument [Line Items]
Line of Credit Facility, Variable Interest Rate, Length of Time Between Updates	180 days
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility amount	$ 1,000.0
Borrowings outstanding	$ 143.1
Long-term Debt, Percentage Bearing Variable Interest, Amount		$ 43.1	$ 100.0
Line of Credit [Member]
Debt Instrument [Line Items]
Component of Base Rate, Basis Spread on Federal Funds Effective Rate	0.005%
Component of Base Rate, Basis Spread on Adjusted LIBOR	1.00%
Line of Credit [Member] | Minimum
Debt Instrument [Line Items]
Credit facility commitment fees percentage	0.175%
Line of Credit [Member] | Maximum
Debt Instrument [Line Items]
Credit facility commitment fees percentage	0.25%
Secured Debt [Member]
Debt Instrument [Line Items]
Credit facility amount	$ 500.0
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months	25.0
Long-term Debt	481.3
Repayments of principal in 2016	50.0
Repayments of principal in 2017	50.0
Repayments of principal in 2018	75.0
Repayments of principal in 2019	300.0
Debt, Long-term and Short-term, Combined Amount	$ 624.4
London Interbank Offered Rate (LIBOR) [Member] | Line of Credit [Member] | Minimum
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.25%
London Interbank Offered Rate (LIBOR) [Member] | Line of Credit [Member] | Maximum
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Base Rate [Member] | Line of Credit [Member] | Minimum
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.25%
Base Rate [Member] | Line of Credit [Member] | Maximum
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.50%

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 04, 2015	Sep. 30, 2014
ASSETS
Cash and cash equivalents	$ 275,060	$ 293,654
Accounts receivable, net of allowance for doubtful accounts of $1,030 and $1,622 at July 4, 2015 and September 30, 2014, respectively	183,144	235,688
Prepaid expenses and other current assets	148,732	171,526
Deferred tax assets	28,269	31,299
Total current assets	635,205	732,167
Property and equipment, net	65,020	67,783
Goodwill	1,071,796	1,012,527
Acquired intangible assets, net	305,527	336,873
Deferred tax assets	27,938	8,958
Other assets	41,115	41,646
Total assets	2,146,601	2,199,954
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	14,561	19,802
Accrued expenses and other current liabilities	88,732	57,536
Accrued compensation and benefits	112,350	144,875
Accrued income taxes	6,839	9,329
Deferred tax liabilities	102	854
Current portion of long term debt	43,750	25,000
Deferred revenue	371,859	369,271
Total current liabilities	638,193	626,667
Long term debt, net of current portion	580,625	586,875
Deferred tax liabilities	30,610	36,601
Deferred revenue	17,280	13,273
Other liabilities	49,570	82,649
Total liabilities	$ 1,316,278	$ 1,346,065
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued	$ 0	$ 0
Common stock, $0.01 par value; 500,000 shares authorized; 114,165 and 115,025 shares issued and outstanding at July 4, 2015 and September 30, 2014, respectively	1,142	1,150
Additional paid-in capital	1,556,308	1,597,277
Accumulated deficit	(597,060)	(650,171)
Accumulated other comprehensive loss	(130,067)	(94,367)
Total stockholders’ equity	830,323	853,889
Total liabilities and stockholders’ equity	$ 2,146,601	$ 2,199,954

XML

Goodwill and Intangible Assets (Amortization of Intangible Assets) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of acquired intangible assets	$ 9,105	$ 7,998	$ 27,691	$ 23,772
Cost of license and subscriptions solutions revenue	4,957	4,415	14,438	13,319
Total amortization expense	$ 14,062	$ 12,413	$ 42,129	$ 37,091

XML

Consolidated Statements Of Comprehensive Income (Parentheticals) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Statement of Comprehensive Income [Abstract]
Tax related to other comprehensive income, pension tax	$ 0.1	$ 0.3	$ 0.4	$ 0.8

XML

Restructuring Charges (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Jul. 04, 2015	Sep. 30, 2014	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Restructuring Reserve [Roll Forward]
October 1, 2014				$ 26,370
Charge to operations	$ 4,393	$ 26,800	$ 514	42,625	$ 1,581
Cash disbursements				(47,777)
Foreign exchange impact				(968)
Accrual, July 4, 2015	20,250	26,370		20,250
Employee Severance and Related Benefits
Restructuring Reserve [Roll Forward]
October 1, 2014				25,835
Charge to operations				41,483
Cash disbursements				(47,249)
Foreign exchange impact				(938)
Accrual, July 4, 2015	19,131	25,835		19,131
Facility Closures and Related Costs
Restructuring Reserve [Roll Forward]
October 1, 2014				535
Charge to operations	1,100			1,142
Operating Leases, Rent Expense, Minimum Rentals	2,000
Operating Leases, Rent Expense, Sublease Rentals	(900)
Cash disbursements				(528)
Foreign exchange impact				(30)
Accrual, July 4, 2015	$ 1,119	$ 535		$ 1,119

XML

Subsequent Events Subsequent Events (Notes)

9 Months Ended

Jul. 04, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

15. Subsequent Events

Contingent Earn-Out Payment

The ThingWorx contingent earn-out first year payment criteria were attained in the third quarter of fiscal 2015. As such, $9 million of the total contingent consideration was paid on July 17, 2015.

Termination of U.S. Pension Plan

In August 2015, lump sum distributions totaling $45 million were made to selected participants from plan assets in settlement of their liabilities and we purchased annuity contracts with an insurer for approximately $90 million to cover remaining liabilities of the plan. In connection with settling the liabilities, we contributed $26 million to fully fund the Plan.

XML

Restructuring Charges (Narrative) (Details) $ in Thousands	3 Months Ended				9 Months Ended
	Jul. 04, 2015 USD ($)	Apr. 04, 2015 USD ($)	Sep. 30, 2014 USD ($) employees	Jun. 28, 2014 USD ($)	Jul. 04, 2015 USD ($) employees	Jun. 28, 2014 USD ($)
Restructuring Cost and Reserve [Line Items]
Expected restructuring charges	$ 45,000				$ 45,000
Charge to operations	4,393		$ 26,800	$ 514	$ 42,625	$ 1,581
Restructuring and Related Cost, Number of Positions Eliminated | employees			283		443
Employee Severance and Related Benefits
Restructuring Cost and Reserve [Line Items]
Severance Costs	3,300	$ 38,500
Charge to operations					$ 41,483
Facility Closures and Related Costs
Restructuring Cost and Reserve [Line Items]
Charge to operations	$ 1,100				$ 1,142

XML

Deferred Revenue and Financing Receivables (Tables)

9 Months Ended

Jul. 04, 2015

Deferred Revenue And Financing Receivables [Abstract]

Credit Risk Assessment for Financing Receivables

Our credit risk assessment for financing receivables was as follows:

	July 4, 2015		September 30, 2014
	(in thousands)
S&P bond rating BBB-1 and above-Tier 1	$	17,143	$	41,152
Internal Credit Assessment-Tier 2	11,002		16,989
Internal Credit Assessment-Tier 3	—		—
Total financing receivables	$	28,145	$	58,141

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014
Cash flows from operating activities:
Net income	$ 53,111	$ 121,439
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	63,455	57,299
Stock-based compensation	38,135	37,862
Excess tax benefits from stock-based awards	71	(9,576)
Other non-cash items, net	(53)	(151)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable	44,906	14,625
Accounts payable, accrued expenses and other current liabilities	17,433	(3,930)
Accrued compensation and benefits	(27,462)	(24,278)
Deferred revenue	51,393	55,339
Accrued and deferred income taxes	(25,608)	14,545
Other current assets and prepaid expenses	(5,109)	4,125
Other noncurrent assets and liabilities	(17,809)	(13,912)
Net cash provided by operating activities	192,463	253,387
Cash flows from investing activities:
Additions to property and equipment	(20,637)	(16,721)
Purchases of investments	(11,000)	0
Acquisitions of businesses, net of cash acquired	(98,411)	(111,519)
Net cash used by investing activities	(130,048)	(128,240)
Cash flows from financing activities:
Borrowings under credit facility	135,000	474,375
Repayments of borrowings under credit facility	(122,500)	(417,500)
Repurchases of common stock	(49,962)	(99,915)
Proceeds from issuance of common stock	38	801
Excess tax benefits from stock-based awards	(71)	9,576
Credit facility origination costs	0	(4,120)
Payments of withholding taxes in connection with vesting of stock-based awards	(29,117)	(26,749)
Net cash used by financing activities	(66,612)	(63,532)
Effect of exchange rate changes on cash and cash equivalents	(14,397)	645
Net (decrease) increase in cash and cash equivalents	(18,594)	62,260
Cash and cash equivalents, beginning of period	293,654	241,913
Cash and cash equivalents, end of period	275,060	304,173
Supplemental disclosure of non-cash investing activities:
Fair value of contingent consideration recorded for acquisition	$ 3,800	$ 13,993

XML

Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jul. 04, 2015	Sep. 30, 2014
Current assets:
Allowance for doubtful accounts	$ 1,030	$ 1,622
Stockholders’ equity:
Preferred stock, par value (in USD per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	114,165,000	115,025,000
Common stock, shares outstanding	114,165,000	115,025,000

XML

Segment Information

9 Months Ended

Jul. 04, 2015

Segment Reporting [Abstract]

Segment Information

Segment Information

We operate within a single industry segment—computer software and related services. Operating segments as defined under GAAP are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our President and Chief Executive Officer. We have two operating and reportable segments: (1) Software Products, which includes license and related support revenue (including updates and technical support) for all our products except training-related products; and (2) Services, which includes consulting, implementation, training, cloud services, computer-based training products, including support on these products, and other services revenue. We do not allocate sales and marketing or administrative expenses to our operating segments as these activities are managed on a consolidated basis.

The revenue and operating income attributable to our operating segments are summarized as follows:

	Three months ended						Nine months ended
	July 4, 2015			June 28, 2014			July 4, 2015			June 28, 2014
	(in thousands)
Revenue:
Total Software Products segment revenue	$	235,371		$	258,805		$	723,313		$	748,482
Total Services segment revenue	67,742			77,829			219,361			241,777
Total revenue	$	303,113		$	336,634		$	942,674		$	990,259
Operating income: (1)
Software Products segment	$	145,016		$	166,639		$	428,533		$	479,736
Services segment	13,378			13,516			29,868			42,566
Sales and marketing expenses	(88,715		)	(91,440		)	(271,257		)	(262,085		)
General and administrative expenses	(48,072		)	(34,331		)	(123,918		)	(99,749		)
Total operating income	21,607			54,384			63,226			160,468
Interest and other income (expense), net	(3,668		)	(2,278		)	(10,492		)	(6,724		)
Income before income taxes	$	17,939		$	52,106		$	52,734		$	153,744

(1) We recorded restructuring charges of $4.4 million and $42.6 million in the third quarter and first nine months of 2015, respectively. Software Products included $1.5 million and $11.5 million respectively; Services included $0.6 million and $11.4 million, respectively; sales and marketing expenses included $2.3 million and $15.1 million, respectively; and general and administrative expenses included $(28) thousand and $4.6 million, respectively, of these restructuring charges. We recorded restructuring charges of $0.5 million in the third quarter of 2014, all of which were included in general and administrative expenses. We recorded restructuring charges of $1.6 million in the first nine months of 2014. Software Products included $0.1 million; Services included $0.2 million; sales and marketing expenses included $0.5 million; and general and administrative expenses included $0.8 million of these restructuring charges.

XML

Document and Entity Information - shares	9 Months Ended
	Jul. 04, 2015	Aug. 10, 2015
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 04, 2015
Entity Registrant Name	PTC Inc.
Entity Central Index Key	0000857005
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	114,164,621	114,168,760

XML

Income Taxes

9 Months Ended

Jul. 04, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

In the third quarter and first nine months of 2015, our effective tax rate was a provision of 3% on pre-tax income of $17.9 million and a benefit of 1% on pre-tax income of $52.7 million, respectively, compared to a provision of 27% on pre-tax income of $52.1 million and 21% on pre-tax income of $153.7 million in the third quarter and first nine months of 2014, respectively. In the third quarter and first nine months of 2015 and 2014, our effective tax rate was lower than the 35% statutory federal income tax rate due to our corporate structure in which our foreign taxes are at a net effective tax rate lower than the U.S. rate. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland. In 2015 and 2014, the foreign rate differential predominantly relates to these Irish earnings. Our foreign rate differential in 2015 includes a rate benefit from a business realignment completed on September 30, 2014 in which intellectual property was transferred between two wholly-owned foreign subsidiaries. The realignment allows us to more efficiently manage the distribution of our products to European customers. This realignment resulted in a tax benefit of approximately $6 million and $14 million in the third quarter and first nine months of 2015, respectively. In addition, in the first nine months of 2015, we recorded a tax benefit of $3.1 million related to the reassessment of our reserve requirements, and a benefit of $1.4 million in conjunction with the reorganization of our Atego U.S. subsidiaries. Additionally, our provision reflects a $2.1 million tax benefit related to a retroactive extension of the U.S. research and development tax credit enacted in the first quarter of 2015. This benefit was offset by a corresponding provision to increase our U.S. valuation allowance.

Additionally, in the first nine months of 2014, our effective tax rate was lower than the 35% statutory federal income tax rate due to the reversal of a portion of our valuation allowance against net deferred tax assets. In the second quarter of 2014, our acquisition of ThingWorx was accounted for as a business combination and we recorded the fair value of assets and liabilities acquired, including finite-lived acquired intangible assets totaling $32.1 million and net deferred tax liabilities of $8.9 million, primarily related to the tax effect of the acquired intangible assets that are not deductible for income tax purposes. These net deferred tax liabilities reduced our net deferred tax asset balance and resulted in a tax benefit of $8.9 million recorded in the second quarter of 2014 to decrease our valuation allowance in the U.S. As the decrease in the valuation allowance was not part of the accounting for the business combination (the fair value of the assets acquired and liabilities assumed), it was recorded as an income tax benefit.

As of July 4, 2015 and September 30, 2014, we had unrecognized tax benefits of $11.9 million and $15.0 million, respectively. If all of our unrecognized tax benefits as of July 4, 2015 were to become recognizable in the future, we would record a benefit to the income tax provision of $10.3 million which would be partially offset by an increase in the U.S. valuation allowance of $3.9 million. 

Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $4 million as audits close and statutes of limitations expire.

We follow the with-and-without approach for the direct effects of windfall tax deductions to determine the timing of the recognition of benefits for windfall tax deductions.  In the third quarter and first nine months of 2014, we recorded windfall tax benefits of $1.5 million and $9.6 million, respectively, to additional paid-in capital.

XML

Consolidated Statements Of Operations - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Revenue:
License and subscription solutions		$ 83,926	$ 97,703	$ 248,850	$ 269,114
Support		165,687	172,021	516,042	508,412
License and Maintenance Revenue		249,613	269,724	764,892	777,526
Professional services		53,500	66,910	177,782	212,733
Total revenue		303,113	336,634	942,674	990,259
Cost of revenue:
Cost of license and subscription solutions revenue		12,830	11,246	39,349	32,454
Cost of support revenue		20,452	21,118	63,176	62,598
Total cost of software revenue		33,282	32,364	102,525	95,052
Cost of professional services revenue		46,094	58,712	155,847	182,777
Total cost of revenue		79,376	91,076	258,372	277,829
Gross margin		223,737	245,558	684,302	712,430
Operating expenses:
Sales and marketing		86,454	91,440	256,085	261,612
Research and development		54,078	57,405	175,333	166,109
General and administrative		48,100	33,817	119,342	98,888
Amortization of acquired intangible assets		9,105	7,998	27,691	23,772
Restructuring charges		4,393	514	42,625	1,581
Total operating expenses		202,130	191,174	621,076	551,962
Operating income	[1]	21,607	54,384	63,226	160,468
Interest and other income (expense), net		(3,668)	(2,278)	(10,492)	(6,724)
Income before income taxes		17,939	52,106	52,734	153,744
Provision (Benefit) for income taxes		504	14,080	(377)	32,305
Net income		$ 17,435	$ 38,026	$ 53,111	$ 121,439
Earnings per share—Basic (in USD per share)		$ 0.15	$ 0.32	$ 0.46	$ 1.02
Earnings per share—Diluted (in USD per share)		$ 0.15	$ 0.32	$ 0.46	$ 1.01
Weighted average shares outstanding—Basic (in shares)		114,764	118,328	115,021	118,753
Weighted average shares outstanding—Diluted (in shares)		116,025	119,901	116,330	120,573

[1] {F|ahBzfndlYmZpbGluZ3MtaHJkcmoLEgZYTUxEb2MiXlhCUkxEb2NHZW5JbmZvOmRiNWE2ODQwZTBlMjQzNDQ4Yzg3MzM3MTI3NGJhNDI4fFRleHRTZWxlY3Rpb246NDJFQzQ1NEZCRkE1QjIzNzlFMzE5ODZERTQyQUMxNDgM}

XML

Earnings per Share (EPS) and Common Stock

9 Months Ended

Jul. 04, 2015

Earnings Per Share and Common Stock

Earnings per Share (EPS) and Common Stock

Earnings per Share (EPS) and Common Stock

EPS

Basic EPS is calculated by dividing net income by the weighted average number of shares outstanding during the period. Unvested restricted stock, although legally issued and outstanding, is not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and RSUs using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options, unrecognized compensation expense and any tax benefits as additional proceeds.

	Three months ended				Nine months ended
Calculation of Basic and Diluted EPS	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands, except per share data)
Net income	$	17,435	$	38,026	$	53,111	$	121,439
Weighted average shares outstanding—Basic	114,764		118,328		115,021		118,753
Dilutive effect of employee stock options, restricted shares and restricted stock units	1,261		1,573		1,309		1,820
Weighted average shares outstanding—Diluted	116,025		119,901		116,330		120,573
Earnings per share—Basic	$	0.15	$	0.32	$	0.46	$	1.02
Earnings per share—Diluted	$	0.15	$	0.32	$	0.46	$	1.01

RSUs of 0.1 million were outstanding during the first nine months of 2014 but were not included in the calculation of diluted EPS because the share impact of the assumed proceeds related to the weighted unamortized compensation expense exceeded the weighted average RSUs outstanding. These RSUs were excluded from the computation of diluted EPS as the effect would have been anti-dilutive.

Common Stock Repurchases

Our Articles of Organization authorize us to issue up to 500 million shares of our common stock. Our Board of Directors authorized us to repurchase up to $100 million worth of shares with cash from operations in the period October 1, 2013 through September 30, 2014. On August 4, 2014, our Board of Directors authorized us to repurchase up to an additional $600 million of our common stock from August 4, 2014 through September 30, 2017. In the third quarter and first nine months of 2014, respectively, we repurchased 1.6 million and 2.8 million shares at a cost of $60.0 million and $99.9 million. In the third quarter of 2015, we repurchased 1.2 million shares at a cost of $50.0 million. All shares of our common stock repurchased are automatically restored to the status of authorized and unissued.

On August 14, 2014, we entered into an accelerated share repurchase (“ASR”) agreement with a major financial institution (“Bank”). The ASR allowed us to buy a large number of shares immediately at a purchase price determined by an average market price over a period of time. Under the ASR, we agreed to purchase $125 million of our common stock, in total, with an initial delivery to us in August 2014 of 2.3 million shares. We settled the ASR in December 2014 and the Bank delivered to us 1.1 million shares.

XML

Stock-based Compensation

9 Months Ended

Jul. 04, 2015

Share-based Compensation, Allocation and Classification in Financial Statements [Abstract]

Stock-Based Compensation

Stock-based Compensation

We measure the cost of employee services received in exchange for restricted stock unit (RSU) awards based on the fair value of RSU awards on the date of grant. That cost is recognized over the period during which an employee is required to provide service in exchange for the award.

Our equity incentive plan provides for grants of nonqualified and incentive stock options, common stock, restricted stock, RSUs and stock appreciation rights to employees, directors, officers and consultants. We award RSUs as the principal equity incentive awards, including certain performance-based awards that are earned based on achievement of performance criteria established by the Compensation Committee of our Board of Directors. Each RSU represents the contingent right to receive one share of our common stock.

Our equity incentive plans are described more fully in Note K to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014.

Restricted stock unit activity for the nine months ended July 4, 2015	Shares		Weighted Average Grant Date Fair Value (Per Share)
	(in thousands)
Balance of outstanding restricted stock units October 1, 2014	4,379		$	26.87
Granted	1,860		$	38.25
Vested	(2,190	)	$	24.65
Forfeited or not earned	(374	)	$	30.52
Balance of outstanding restricted stock units July 4, 2015	3,675		$	33.58

	Restricted Stock Units
Grant Period	Performance-based (1)	Service-based (2)
	(Number of Units in thousands)
First nine months of 2015	313	1,547

_________________

(1) The performance-based RSUs were granted to employees pursuant to the terms described below.

(2) The service-based RSUs were issued to employees, including our executive officers, and our directors. Of these RSUs, approximately 212,000 will vest one year from the date of grant. Substantially all other service-based RSUs will vest in three substantially equal annual installments on or about the anniversary of the date of grant.

In the first nine months of 2015, we granted the target performance-based restricted stock units ("target RSUs") shown in the table above to senior level employees, including our executive officers. These RSUs are eligible to vest based upon our total shareholder return relative to a peer group (the “TSR units”), measured annually over a three-year period. The number of TSR units to vest over the three year period will be determined based on the performance of PTC stock relative to the stock performance of an index of PTC peer companies established as of the grant date, as determined at the end of three measurement periods ending on September 30, 2015, 2016 and 2017, respectively. The shares earned for each period will vest on November 15 following each measurement period, up to a maximum of two times or one and one half times, as applicable, the number of target RSUs (up to a maximum of 590,000 shares). No vesting will occur in a period unless an annual threshold requirement is achieved. The employee must remain employed by PTC through the applicable vest date for any RSUs to vest. If the return to PTC shareholders is negative but still meets or exceeds the peer group indexed return, a maximum of 100% of the target RSUs shall vest for the measurement period. TSR units not earned in the first two year measurement periods are eligible to be earned in the third measurement period.

The weighted average fair value of the TSR units was $41.32 per target RSU on the grant date. The fair value of the TSR units was determined using a Monte Carlo simulation model, a generally accepted statistical technique used to simulate a range of possible future stock prices for PTC and the peer group. The method uses a risk-neutral framework to model future stock price movements based upon the risk-free rate of return, the volatility of each entity, and the pairwise correlations of each entity being modeled. The fair value for each simulation is the product of the payout percentage determined by PTC’s TSR rank against the peer group, the projected price of PTC stock, and a discount factor based on the risk-free rate.

The significant assumptions used in the Monte Carlo simulation model were as follows:

Average volatility of peer group	29.8	%
Risk free interest rate	0.85	%
Dividend yield	—	%

Compensation expense recorded for our stock-based awards was classified in our Consolidated Statements of Operations as follows:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Cost of license and subscription solutions revenue	$	121	$	63	$	381	$	209
Cost of support revenue	1,012		898		2,777		2,711
Cost of professional services revenue	1,317		1,549		4,510		4,436
Sales and marketing	3,430		3,065		9,383		8,583
Research and development	2,928		2,231		9,015		7,067
General and administrative	5,263		4,726		12,069		14,856
Total stock-based compensation expense	$	14,071	$	12,532	$	38,135	$	37,862

XML

Basis of Presentation Reclassifications (Tables)

9 Months Ended

Jul. 04, 2015

Accounting Policies [Abstract]

Reclassifications [Table Text Block]

The following revenue and costs have been reclassified in the accompanying Consolidated Statements of Operations for the three and nine months ended June 28, 2014 to conform to the current period presentation.

	Three months ended June 28, 2014		Nine months ended June 28, 2014
Reclassifications within revenue	(in millions)
From Services to L&SS	$	3.3	$	10.2
From Support to L&SS	1.7		1.8
	$	5.0	$	12.0
Reclassifications within cost of revenue
From Services to L&SS	$	3.2	$	8.9
From Support to L&SS	0.2		0.2
	$	3.4	$	9.1

XML

Debt

9 Months Ended

Jul. 04, 2015

Debt Disclosure [Abstract]

Debt

Debt

Credit Agreement

In September 2014, we entered into a multi-currency credit facility with a syndicate of sixteen banks for which JPMorgan Chase Bank, N.A. acts as Administrative Agent. We expect to use the credit facility for general corporate purposes, including acquisitions of businesses, share repurchases and working capital requirements. As of July 4, 2015, the fair value of our credit facility approximates our book value.

The credit facility consists of a $500 million term loan and a $1 billion revolving loan commitment, and may be increased by an additional $250 million (in the form of revolving loans or term loans, or a combination thereof) if the existing or additional lenders are willing to make such increased commitments. The revolving loan commitment does not require amortization of principal. The term loan requires prepayment of principal at the end of each calendar quarter. The revolving loan and term loan may be repaid in whole or in part prior to the scheduled maturity dates at our option without penalty or premium. The credit facility matures on September 15, 2019, when remaining amounts outstanding will be due and payable in full. We are required to make principal payments under the term loan of $25 million, $50 million, $50 million, $75 million and $300 million in 2015, 2016, 2017, 2018 and 2019, respectively.

PTC is the sole borrower under the credit facility. The obligations under the credit facility are guaranteed by PTC’s material domestic subsidiaries and 65% of the voting equity interests of PTC’s material first-tier foreign subsidiaries are pledged as collateral for the obligations.

As of July 4, 2015, we had $624.4 million outstanding under the credit facility comprised of a $481.3 million term loan and a $143.1 million revolving loan. Loans under the credit facility bear interest at variable rates which reset every 30 to 180 days depending on the rate and period selected by PTC as described below. As of July 4, 2015, the annual rate on the term and revolving loan was 1.6875% (which will reset on September 17, 2015 for the term loan and $43.1 million of the revolving loan, and on August 6, 2015 for the remaining $100 million of the revolving loan). Interest rates on borrowings outstanding under the credit facility range from 1.25% to 1.5% above an adjusted LIBO rate for Eurodollar-based borrowings or would range from 0.25% to 0.5% above the defined base rate (the greater of the Prime Rate, the Federal Funds Effective Rate plus 0.005%, or an adjusted LIBO rate plus 1%) for base rate borrowings, in each case based upon PTC’s leverage ratio. Additionally, PTC may borrow certain foreign currencies at rates set in the same range above the respective London interbank offered interest rates for those currencies, based on PTC’s leverage ratio. A quarterly commitment fee on the undrawn portion of the credit facility is required, ranging from 0.175% to 0.25% per annum, based upon PTC’s leverage ratio.

The credit facility limits PTC’s and its subsidiaries’ ability to, among other things: incur additional indebtedness; incur liens or guarantee obligations; pay dividends (other than to PTC) and make other distributions; make investments and enter into joint ventures; dispose of assets; and engage in transactions with affiliates, except on an arms-length basis. Under the credit facility, PTC and its material domestic subsidiaries may not invest cash or property in, or loan to, PTC’s foreign subsidiaries in aggregate amounts exceeding $75 million for any purpose and an additional $150 million for acquisitions of businesses. In addition, under the credit facility, PTC and its subsidiaries must maintain the following financial ratios:

• a leverage ratio, defined as consolidated funded indebtedness to consolidated trailing four quarters EBITDA, of no greater than 3.00 to 1.00 at any time; and

• a fixed charge coverage ratio, defined as the ratio of consolidated trailing four quarters EBITDA less consolidated capital expenditures to consolidated fixed charges, of no less than 3.50 to 1.00 at any time.

As of July 4, 2015, our leverage ratio was 2.31 to 1.00, our fixed charge coverage ratio was 7.25 to 1.00 and we were in compliance with all financial and operating covenants of the credit facility. As of July 4, 2015, we had $190 million available to borrow under the revolving loan portion of our credit facility, the availability of which is limited based on financial covenants in the facility.

Any failure to comply with the financial or operating covenants of the credit facility would prevent PTC from being able to borrow additional funds, and would constitute a default, permitting the lenders to, among other things, accelerate the amounts outstanding, including all accrued interest and unpaid fees, under the credit facility and to terminate the credit facility. A change in control of PTC, as defined in the agreement, also constitutes an event of default, permitting the lenders to accelerate the indebtedness and terminate the credit facility.

XML

Fair Value Measurements

9 Months Ended

Jul. 04, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. Generally accepted accounting principles prescribe a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs that may be used to measure fair value:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

• Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our significant financial assets and liabilities measured at fair value on a recurring basis as of July 4, 2015 and September 30, 2014 were as follows:

	July 4, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Cash equivalents (1)	$	52,916	$	—	$	—	$	52,916
Forward contracts	—		851		—		851
	$	52,916	$	851	$	—	$	53,767
Financial liabilities:
Contingent consideration related to acquisitions	$	—	$	—	$	21,800	$	21,800
Forward contracts	—		888		—		888
	$	—	$	888	$	21,800	$	22,688

	September 30, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial assets:
Cash equivalents (1)	$	101,113	$	—	$	—	$	101,113
Forward contracts	—		339		—		339
	$	101,113	$	339	$	—	$	101,452
Financial liabilities:
Contingent consideration related to acquisitions	$	—	$	—	$	15,191	$	15,191
Forward contracts	—		911		—		911
	$	—	$	911	$	15,191	$	16,102

______________

(1) Money market funds and time deposits.

Changes in the fair value of Level 3 contingent consideration liability associated with our acquisition of ThingWorx and ColdLight were as follows:

	Contingent Consideration
	(in thousands)
	ThingWorx		ColdLight
Balance, October 1, 2014	$	15,191	$	—
Change in present value of contingent consideration	2,809		3,800
Balance, July 4, 2015	$	18,000	$	3,800

In connection with accounting for the ThingWorx and ColdLight business combinations, we recorded a liability representing the fair value of contingent consideration payable upon achievement of certain financial targets and technology milestones. The liabilities that we recorded were valued using a discounted cash flow method and a probability weighted estimate of achievement of the targets based on inputs that are not observable in the market, which represents a level 3 measurement within the fair value hierarchy. Changes in the fair value of the contingent consideration liabilities will be reflected in acquisition-related charges in general and administrative expense until the liabilities are fully settled. Of the total, $20.5 million of the contingent consideration liabilities are included in accrued expenses and other current liabilities, with the remaining $1.3 million in other liabilities in the Consolidated Balance Sheet as of July 4, 2015.

XML

Acquisition

9 Months Ended

Jul. 04, 2015

Business Combinations [Abstract]

Acquisition

Acquisitions

In 2014, we completed the acquisitions of Axeda (on August 11, 2014), Atego (on June 30, 2014) and ThingWorx (on December 30, 2013). In 2015, we completed the acquisition of ColdLight (on May 7, 2015). The results of operations of these acquired businesses have been included in our consolidated financial statements beginning on their respective acquisition dates.

Acquisition-related costs were $2.8 million and $8.7 million for the third quarter and first nine months of 2015, respectively, and $1.3 million and $6.4 million for the third quarter and first nine months of 2014, respectively. Acquisition-related costs include direct costs of potential and completed acquisitions (e.g., investment banker fees, professional fees, including legal and valuation services) and expenses related to acquisition integration activities (e.g., professional fees, severance, and retention bonuses). In addition, subsequent adjustments to our initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition-related charges. These costs have been classified in general and administrative expenses in the accompanying Consolidated Statements of Operations.

ColdLight

On May 7, 2015, we acquired all of the ownership interest of ColdLight Solutions, LLC, a company that offered solutions for data machine learning and predictive analytics, for approximately $98.6 million in cash (net of cash acquired of $1.3 million). Up to $5 million of contingent consideration may become payable to the former owners of ColdLight if certain technology milestones are achieved within two years of the acquisition (the earn-out). If an earn-out milestone is achieved, a portion of the contingent consideration becomes earned and payable in cash after each six-month period. Up to $3.0 million of the contingent consideration can be earned in the first year and up to $2.0 million can be earned in the second year. We borrowed $100.0 million under our existing credit facility to fund the acquisition.

The acquisition of the ColdLight automated predictive analytics platform will expand our technology portfolio in the Internet of Things (IoT) market. At the time of the acquisition, ColdLight had approximately 60 employees and annualized revenues of $8.0 million. The results of operations of ColdLight have been included in our consolidated financial statements beginning on the acquisition date. Revenue and earnings of ColdLight since the acquisition date were not material.

The acquisition of ColdLight has been accounted for as a business combination. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using an income approach, with estimates and assumptions provided by management of ColdLight and PTC. The process for estimating the fair values of identifiable intangible assets and the contingent consideration liability requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. In connection with accounting for the business combination, we recorded a liability of $3.8 million, representing the fair value of the contingent consideration. The liability was valued using a discounted cash flow method and a probability weighted estimate of achievement of the technology milestones. The estimated undiscounted range of outcomes for the contingent consideration is $3.8 million to $5.0 million. We will assess the probability that the milestones will be met and at what level each reporting period. Any subsequent changes in the estimated fair value of the liability will be reflected in earnings until the liability is fully settled.

Based upon a preliminary valuation, the total purchase price allocation was as follows:

Purchase price allocation:	(in thousands)
Goodwill	$	85,288
Identifiable intangible assets	17,620
Cash	1,313
Other assets and liabilities, net	(516		)
Total allocation of purchase price consideration	103,705
Less: cash acquired	(1,313		)
Total purchase price allocation, net of cash acquired	$	102,392
Less: contingent consideration	(3,800		)
Net cash used to acquire ColdLight	$	98,592

The preliminary purchase price allocation resulted in $85.3 million of goodwill, which will be deductible for income tax purposes. All of the acquired goodwill was allocated to our software products segment. Intangible assets of $17.6 million includes purchased software of $13.6 million, customer relationships of $3.5 million and trademarks of $0.5 million, which are being amortized over weighted average useful lives of 10 years, 9 years and 7 years, respectively, based upon the pattern in which economic benefits related to such assets are expected to be realized.

The resulting amount of goodwill reflects our expectations of the following benefits: (1) ColdLight provides a differentiated machine learning platform for critical data analytics in our solution portfolio; (2) ColdLight’s Neuron^® product suite can automate the analytics process, reducing the dependency on manual processes; (3) ColdLight is addressing challenging aspects of data analytics aligned with the PTC / ThingWorx analytics vision; (4) ColdLight has a presence in industries outside of PTC's traditional markets which create a foundation for us to pursue opportunities in non-traditional vertical markets.

ThingWorx

In the second quarter of 2014, we acquired ThingWorx, Inc. for $111.5 million (net of cash acquired of $0.1 million). The former shareholders of ThingWorx are eligible to receive additional consideration of up to $18.0 million if certain profitability and bookings targets are achieved within two years of the acquisition (the earn-out). The earn-out is payable in cash in two installments, half of which was earned and paid in July 2015 and the remainder of which, if earned, will become payable in 2016 after the second year measurement period. In connection with accounting for the business combination, we recorded a liability representing the fair value of the contingent consideration. The liability was valued using a discounted cash flow method and a probability weighted estimate of achievement of the financial targets. We assess the probability that the targets will be met each reporting period. At July 4, 2015, we estimate that the full amount of the contingent consideration of $18.0 million will be earned. Any subsequent changes in the estimated fair value of the liability are reflected in earnings until the liability is fully settled (an increase of $2.8 million in the contingent consideration liability in the first nine months of 2015, see Note 8).

XML

Goodwill and Intangible Assets

9 Months Ended

Jul. 04, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

We have two operating segments: (1) Software Products and (2) Services. We assess goodwill for impairment at the reporting unit level. Our reporting units are determined based on the components of our operating segments that constitute a business for which discrete financial information is available and for which operating results are regularly reviewed by segment management. Our reporting units are the same as our operating segments. As of July 4, 2015 and September 30, 2014, goodwill and acquired intangible assets in the aggregate attributable to our software products segment were $1,314.2 million and $1,283.0 million, respectively, and attributable to our services segment were $63.1 million and $66.4 million, respectively. Acquired intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We evaluate goodwill for impairment in the third quarter of our fiscal year, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting segment below its carrying value. Factors we consider important, on an overall company basis and segment basis, when applicable, that could trigger an impairment review include significant under-performance relative to historical or projected future operating results, significant changes in our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, a significant decline in our stock price for a sustained period and a reduction of our market capitalization relative to net book value. We completed our annual goodwill impairment review as of July 4, 2015 and concluded that no impairment charge was required as of that date.

To conduct these tests of goodwill, the fair value of the reporting unit is compared to its carrying value. If the reporting unit’s carrying value exceeds its fair value, we record an impairment loss equal to the difference between the carrying value of goodwill and its implied fair value. We estimate the fair values of our reporting units using discounted cash flow valuation models. Those models require estimates of future revenues, profits, capital expenditures, working capital, terminal values based on revenue multiples, and discount rates for each reporting unit. We estimate these amounts by evaluating historical trends, current budgets, operating plans and industry data. The estimated fair value of each reporting unit was more than double its carrying value as of July 4, 2015.

Goodwill and acquired intangible assets consisted of the following:

	July 4, 2015						September 30, 2014
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in thousands)
Goodwill (not amortized)					$	1,071,796					$	1,012,527
Intangible assets with finite lives (amortized) (1):
Purchased software	$	284,427	$	169,903	$	114,524	$	278,012	$	162,259	$	115,753
Capitalized software	22,877		22,877		—		22,877		22,877		—
Customer lists and relationships	350,845		166,527		184,318		360,530		147,469		213,061
Trademarks and trade names	18,573		12,221		6,352		18,479		10,964		7,515
Other	3,938		3,605		333		4,117		3,573		544
	$	680,660	$	375,133	$	305,527	$	684,015	$	347,142	$	336,873
Total goodwill and acquired intangible assets					$	1,377,323					$	1,349,400

(1) The weighted average useful lives of purchased software, customer lists and relationships, trademarks and trade names and other intangible assets with a remaining net book value are 9 years, 10 years, 9 years, and 3 years, respectively.

Goodwill

Changes in goodwill presented by reportable segment were as follows:

	Software Products Segment			Services Segment			Total
	(in thousands)
Balance, October 1, 2014	$	959,768		$	52,759		$	1,012,527
Acquisition of Axeda	(180		)	—			(180		)
Acquisition of ColdLight	85,288			—			85,288
Foreign currency translation adjustments	(25,627		)	(212		)	(25,839		)
Balance, July 4, 2015	$	1,019,249		$	52,547		$	1,071,796

Amortization of Intangible Assets

The aggregate amortization expense for intangible assets with finite lives was classified in our Consolidated Statements of Operations as follows:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Amortization of acquired intangible assets	$	9,105	$	7,998	$	27,691	$	23,772
Cost of license and subscriptions solutions revenue	4,957		4,415		14,438		13,319
Total amortization expense	$	14,062	$	12,413	$	42,129	$	37,091

XML

Derivative Financial Instruments

9 Months Ended

Jul. 04, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Our foreign currency risk management strategy is principally designed to mitigate the future potential financial impact of changes in the value of transactions and balances denominated in foreign currency resulting from changes in foreign currency exchange rates. We enter into derivative transactions, specifically foreign currency forward contracts with maturities of up to approximately three months, to manage our exposure to fluctuations in foreign exchange rates that arise primarily from our foreign currency-denominated receivables and payables.

Generally, we do not designate foreign currency forward contracts as hedges for accounting purposes, and changes in the fair value of these instruments are recognized immediately in earnings. Because we enter into forward contracts only as an economic hedge, any gain or loss on the underlying foreign-denominated balance would be offset by the loss or gain on the forward contract. Gains and losses on forward contracts and foreign denominated receivables and payables are included in other income (expense), net.

As of July 4, 2015 and September 30, 2014, we had outstanding forward contracts with notional amounts equivalent to the following:

Currency Hedged	July 4, 2015		September 30, 2014
	(in thousands)
Canadian Dollar / U.S. Dollar	$	19,971	$	25,583
Euro / U.S. Dollar	77,987		61,751
British Pound / Euro	9,713		14,259
Israeli New Sheqel / U.S. Dollar	5,681		6,144
Japanese Yen / Euro	24,080		—
Swiss Franc /Euro	8,516		—
All other	10,990		9,251
Total	$	156,938	$	116,988

As of July 4, 2015 and September 30, 2014, the accompanying Consolidated Balance Sheets include a net asset of $0.9 million and $0.3 million, respectively, in prepaid expenses and other current assets, and a net liability of $0.9 million for both periods, in accrued expenses related to the fair value of our forward contracts.

Net gains and losses on foreign currency exposures are recorded in other income (expense), net and include realized and unrealized gains and losses on forward contracts. Net gains and losses on foreign currency exposures for the three and nine months ended July 4, 2015 and June 28, 2014 were as follows:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Net foreign currency losses	$	449	$	746	$	1,362	$	2,739
Net realized and unrealized loss (gain) on forward contracts (excluding the underlying foreign currency exposure being hedged)	$	741	$	1,320	$	1,122	$	(377	)

XML

Deferred Revenue and Financing Receivables (Details) - USD ($) $ in Thousands	9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Sep. 30, 2014
Deferred Revenue and Financing Receivables [Line Items]
Financing Receivable, Net	$ 28,145		$ 58,141
Maximum payment terms on software purchases for credit-worthy customers (in months)	24 months
Reserve for credit losses	$ 0		0
Sale of finance receivable	3,000	$ 16,500
S&P bond rating BBB-1 and above-Tier 1
Deferred Revenue and Financing Receivables [Line Items]
Financing Receivable, Net	17,143		41,152
Internal Credit Assessment-Tier 2
Deferred Revenue and Financing Receivables [Line Items]
Financing Receivable, Net	11,002		16,989
Internal Credit Assessment-Tier 3
Deferred Revenue and Financing Receivables [Line Items]
Financing Receivable, Net	0		0
Accounts Receivable
Deferred Revenue and Financing Receivables [Line Items]
Current receivables from contracts	24,800		44,600
Other Assets
Deferred Revenue and Financing Receivables [Line Items]
Billed but uncollected maintenance receivable	88,800		116,200
Long-term receivables from contracts	$ 3,300		$ 13,500

XML

Segment Information (Revenue and Operating Income) (Details) $ in Thousands		3 Months Ended			9 Months Ended
		Jul. 04, 2015 USD ($)	Sep. 30, 2014 USD ($)	Jun. 28, 2014 USD ($)	Jul. 04, 2015 USD ($) segments	Jun. 28, 2014 USD ($)
Number of operating and reportable segments | segments					2
Revenue		$ 303,113		$ 336,634	$ 942,674	$ 990,259
Operating income	[1]	21,607		54,384	63,226	160,468
Sales and marketing expenses	[1]	(88,715)		(91,440)	(271,257)	(262,085)
General and administrative expenses	[1]	(48,072)		(34,331)	(123,918)	(99,749)
Interest and other income (expense), net		(3,668)		(2,278)	(10,492)	(6,724)
Income before income taxes		17,939		52,106	52,734	153,744
Restructuring charges		4,393	$ 26,800	514	42,625	1,581
Segment Software Products
Revenue		235,371		258,805	723,313	748,482
Operating income	[1]	145,016		166,639	428,533	479,736
Restructuring charges		1,500			11,500	100
Segment Services
Revenue		67,742		77,829	219,361	241,777
Operating income	[1]	13,378		$ 13,516	29,868	42,566
Restructuring charges		600			11,400	200
Sales and Marketing
Restructuring charges		2,300			15,100	500
General and Administrative
Restructuring charges		$ (28)			$ 4,600	$ 800

[1] {F|ahBzfndlYmZpbGluZ3MtaHJkcmoLEgZYTUxEb2MiXlhCUkxEb2NHZW5JbmZvOmRiNWE2ODQwZTBlMjQzNDQ4Yzg3MzM3MTI3NGJhNDI4fFRleHRTZWxlY3Rpb246NDJFQzQ1NEZCRkE1QjIzNzlFMzE5ODZERTQyQUMxNDgM}

XML

Pension Plans (Notes)

9 Months Ended

Jul. 04, 2015

Compensation and Retirement Disclosure [Abstract]

Pension Plans

14. Pension Plans

Our pension plans are described in more detail in Note M to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. In the first nine months of 2015, we contributed $20 million to a non-U.S. pension plan.

Termination of U.S. Pension Plan

We maintain a U.S. defined benefit pension plan (the Plan) that covers certain persons who were employees of Computervision Corporation (acquired by us in 1998). Benefits under the Plan were frozen in 1990. In the second quarter of 2014, we began the process of terminating the Plan. In the third quarter of 2014, we provided notice to plan participants of our intent to terminate the plan effective August 1, 2014 and in the second quarter of 2015 we provided a notice of plan benefits to participants. In March 2015, we received a favorable determination letter from the Internal Revenue Service with respect to the termination, and we expect to complete the termination process by September 30, 2015. In August 2015, lump sum distributions totaling $45 million were made to selected participants from plan assets in settlement of their liabilities and we purchased annuity contracts with an insurer for approximately $90 million to cover remaining liabilities of the plan including benefits for retirees currently receiving payments and vested participants who did not elect to receive a lump sum. In connection with settling the liabilities, we contributed $26 million to fully fund the Plan.

In the fourth quarter, upon settlement of the liabilities, we expect to recognize a settlement loss of $66 million, $47 million net of tax, including unamortized losses in accumulated other comprehensive income, based on the projected benefit obligations and assets measured as of the dates the settlements occur.

XML

Stock-based Compensation (Tables)

9 Months Ended

Jul. 04, 2015

Share-based Compensation, Allocation and Classification in Financial Statements [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Average volatility of peer group	29.8	%
Risk free interest rate	0.85	%
Dividend yield	—	%

Schedule of Restricted Stock and Restricted Stock Unit Activity

Restricted stock unit activity for the nine months ended July 4, 2015	Shares		Weighted Average Grant Date Fair Value (Per Share)
	(in thousands)
Balance of outstanding restricted stock units October 1, 2014	4,379		$	26.87
Granted	1,860		$	38.25
Vested	(2,190	)	$	24.65
Forfeited or not earned	(374	)	$	30.52
Balance of outstanding restricted stock units July 4, 2015	3,675		$	33.58

Schedule of Restricted Stock Unit Grants for the Period

	Restricted Stock Units
Grant Period	Performance-based (1)	Service-based (2)
	(Number of Units in thousands)
First nine months of 2015	313	1,547

_________________

(1) The performance-based RSUs were granted to employees pursuant to the terms described below.

(2) The service-based RSUs were issued to employees, including our executive officers, and our directors. Of these RSUs, approximately 212,000 will vest one year from the date of grant. Substantially all other service-based RSUs will vest in three substantially equal annual installments

Schedule of Classification of Compensation Expense

Compensation expense recorded for our stock-based awards was classified in our Consolidated Statements of Operations as follows:

	Three months ended				Nine months ended
	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands)
Cost of license and subscription solutions revenue	$	121	$	63	$	381	$	209
Cost of support revenue	1,012		898		2,777		2,711
Cost of professional services revenue	1,317		1,549		4,510		4,436
Sales and marketing	3,430		3,065		9,383		8,583
Research and development	2,928		2,231		9,015		7,067
General and administrative	5,263		4,726		12,069		14,856
Total stock-based compensation expense	$	14,071	$	12,532	$	38,135	$	37,862

XML

Derivative Financial Instruments (Notional Amounts Of Outstanding Forward Contracts) (Details) - Forward Contracts - USD ($) $ in Thousands	Jul. 04, 2015	Sep. 30, 2014
Notional amounts	$ 156,938	$ 116,988
Canadian Dollar / U.S. Dollar
Notional amounts	19,971	25,583
Euro / U.S. Dollar
Notional amounts	77,987	61,751
British Pound / Euro
Notional amounts	9,713	14,259
Israeli New Sheqel / U.S. Dollar
Notional amounts	5,681	6,144
Japanese Yen / Euro
Notional amounts	24,080	0
Swiss Franc / Euro
Notional amounts	8,516	0
All other
Notional amounts	$ 10,990	$ 9,251

XML

Earnings per Share (EPS) and Common Stock (Narrative) (Details) - USD ($)	3 Months Ended				9 Months Ended
	Jul. 04, 2015	Jan. 03, 2015	Sep. 30, 2014	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014	Aug. 14, 2014	Aug. 04, 2014
Earnings Per Share and Common Stock
Stock option excluded from computation of EPS, shares						100,000
Common stock, shares authorized	500,000,000		500,000,000		500,000,000
Stock Repurchase Program, Authorized Amount			$ 100,000,000					$ 600,000,000
Accelerated Share Repurchases, Settlement (Payment) or Receipt							$ 125,000,000
Stock repurchased during period, shares	1,200,000	1,100,000	2,300,000	1,600,000		2,800,000
Repurchases of common stock	$ 50,000,000			$ 60,000,000	$ 49,962,000	$ 99,915,000

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 04, 2015	Jun. 28, 2014	Jul. 04, 2015	Jun. 28, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 17,435	$ 38,026	$ 53,111	$ 121,439
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0 for each period	1,201	2,364	(41,695)	1,514
Amortization of net actuarial pension loss included in net income, net of tax of $0.1 million and $0.3 million in the third quarter of 2015 and 2014, respectively, and $0.4 million and $0.8 million in the first nine months of 2015 and 2014, respectively	1,003	528	3,081	1,575
Change in unamortized pension loss during the period related to changes in foreign currency	(190)	91	2,915	(114)
Total other comprehensive income (loss)	2,014	2,983	(35,699)	2,975
Comprehensive income	$ 19,449	$ 41,009	$ 17,412	$ 124,414

XML

Restructuring Charges

9 Months Ended

Jul. 04, 2015

Restructuring [Abstract]

Restructuring Charges

Restructuring Charges

On April 4, 2015, we committed to a plan to restructure our workforce and consolidate select facilities to realign our global workforce to increase investment in our Internet of Things business and to reduce our cost structure through organizational efficiencies in the face of significant foreign currency depreciation relative to the U.S. Dollar and a more cautious outlook on global macroeconomic conditions. The restructuring actions are expected to result in restructuring charges of up to $45 million, primarily attributable to termination benefits. In the second and third quarters of 2015, we recorded charges of $38.5 million and $3.3 million respectively, attributable to termination benefits associated with 443 employees. Additionally, in the third quarter of 2015, we recorded a charge of $1.1 million related to the closure of excess facilities. The facility charge reflects estimated costs including gross lease commitments of approximately $2.0 million, net of estimated sublease income of $0.9 million.

In September 2014, in support of integrating businesses acquired in 2014 and the continued evolution of our business model, we committed to a plan to restructure our workforce. As a result, we recorded a restructuring charge of $26.8 million in the fourth quarter of 2014 associated with severance and related costs associated with 283 employees.

The following table summarizes restructuring accrual activity for the nine months ended July 4, 2015:

	Employee Severance and Related Benefits			Facility Closures and Related Costs			Total
	(in thousands)
October 1, 2014	$	25,835		$	535		$	26,370
Charge to operations	41,483			1,142			42,625
Cash disbursements	(47,249		)	(528		)	(47,777		)
Foreign exchange impact	(938		)	(30		)	(968		)
Accrual, July 4, 2015	$	19,131		$	1,119		$	20,250

The accrual for facility closures and related costs is included in accrued expenses and other liabilities in the Consolidated Balance Sheets, and the accrual for employee severance and related benefits is included in accrued compensation and benefits in the Consolidated Balance Sheets.

XML

Earnings per Share (EPS) and Common Stock (Tables)

9 Months Ended

Jul. 04, 2015

Earnings Per Share and Common Stock

Earnings per Share Basic and Diluted

	Three months ended				Nine months ended
Calculation of Basic and Diluted EPS	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
	(in thousands, except per share data)
Net income	$	17,435	$	38,026	$	53,111	$	121,439
Weighted average shares outstanding—Basic	114,764		118,328		115,021		118,753
Dilutive effect of employee stock options, restricted shares and restricted stock units	1,261		1,573		1,309		1,820
Weighted average shares outstanding—Diluted	116,025		119,901		116,330		120,573
Earnings per share—Basic	$	0.15	$	0.32	$	0.46	$	1.02
Earnings per share—Diluted	$	0.15	$	0.32	$	0.46	$	1.01

XML

Stock-based Compensation (Schedule of Restricted Stock Unit Grants For The Period) (Details) - 9 months ended Jul. 04, 2015 - Restricted Stock Units (RSUs)		installment $ / shares shares
Granted, shares		1,860,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares		$ 38.25
Performance-Based
Granted, shares	[1]	313,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares		$ 41.32
Time-Based
Granted, shares	[2]	1,547,000
Time-Based | Vest in 3 Equal Installments on November 15, 2015, November 15, 2016 and November 15, 2017
Number of equal annual installments | installment		3
Maximum [Member] | Performance-Based
Granted, shares	[1]	590,000

[1] The performance-based RSUs were granted to employees

[2] The service-based RSUs were issued to employees, including our executive officers, and our directors. Of these RSUs, approximately 212,000 will vest one year from the date of grant. Substantially all other service-based RSUs will vest in three substantially equal annual installments

XML

Commitments and Contingencies

9 Months Ended

Jul. 04, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal and Regulatory Matters

China Investigation

We have, since making a voluntary disclosure to the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), been cooperating to provide information to those agencies concerning expenditures by our business partners and our China business, including for travel and entertainment, that apparently benefited employees of customers regarded as state owned enterprises in China. This matter involves issues regarding compliance with laws, including the U.S. Foreign Corrupt Practices Act. Negotiations with the SEC and DOJ to reach a resolution of the investigation have begun but have not been concluded. Resolution of this matter is likely to include fines and penalties. In the third quarter, we recorded a liability of $13.6 million associated with pending discussions with these agencies to resolve this matter. This is the minimum amount of liability we expect to incur if we are able to reach a settlement in this matter, and does not include any amounts associated with potential fines that might be imposed by either or both of the SEC and DOJ, which amounts would increase our liability and could be significant. There can be no assurance that we will reach a settlement with these agencies or that the cost of such settlements, if reached, would not materially exceed the existing accrual. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.

Legal Proceedings

We are subject to various other legal proceedings and claims that arise in the ordinary course of business. We do not believe that resolving the legal proceedings and claims that we are currently subject to will have a material adverse impact on our financial condition, results of operations or cash flows. However, the results of legal proceedings cannot be predicted with certainty. Should any of these legal proceedings and claims be resolved against us, the operating results for a particular reporting period could be adversely affected.

Accruals

With respect to legal proceedings and claims, we record an accrual for a contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. For legal proceedings and claims for which the likelihood that a liability has been incurred is more than remote but less than probable, we estimate the range of possible outcomes. As of July 4, 2015, we had a legal proceedings and claims accrual of $15.9 million, including an accrual of $13.6 million for the China investigation.

Guarantees and Indemnification Obligations

We enter into standard indemnification agreements in the ordinary course of our business. Pursuant to such agreements with our business partners or customers, we indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to our products, as well as claims relating to property damage or personal injury resulting from the performance of services by us or our subcontractors. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and we accordingly believe the estimated fair value of liabilities under these agreements is immaterial.

We warrant that our software products will perform in all material respects in accordance with our standard published specifications in effect at the time of delivery of the licensed products for a specified period of time. Additionally, we generally warrant that our consulting services will be performed consistent with generally accepted industry standards. In most cases, liability for these warranties is capped. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history; however, we have not incurred significant cost under our product or services warranties. As a result, we believe the estimated fair value of these liabilities is immaterial.