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Summary of Significant Accounting Policies | 12 Months Ended
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Jun. 30, 2016
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Revenue Recognition The Company's revenue is primarily derived from sales of networking products, which are tangible products containing software and non-software components that function together to deliver the tangible product's essential functionality. In addition to tangible products, the Company's sales arrangements may include other deliverables such as standalone software licenses, or service offerings. For multiple deliverable arrangements, the Company recognizes revenue in accordance with the accounting standard for multiple deliverable revenue arrangements, which provides guidance on whether multiple deliverables exist, how deliverables in an arrangement should be separated, and how consideration should be allocated. Software revenue recognition guidance is applied to the sales of the Company's standalone software products, including software upgrades and software that is not essential to the functionality of the hardware with which it is sold. Pursuant to the guidance of the accounting standard for multiple deliverable revenue arrangements, when the Company's sales arrangements contain multiple elements, such as products, software licenses, maintenance agreements, or professional services, the Company determines the standalone selling price for each element based on a selling price hierarchy. The application of the multiple deliverable revenue accounting standard does not change the units of accounting for the Company's multiple element arrangements. Under the selling price hierarchy, the selling price for each deliverable is based on the Company's vendor-specific objective evidence (“VSOE”), which is determined by a substantial majority of the Company's historical standalone sales transactions for a product or service falling within a narrow range. If VSOE is not available due to a lack of standalone sales transactions or lack of pricing within a narrow range, then third party evidence (“TPE”), as determined by the standalone pricing of competitive vendor products in similar markets, is used, if available. TPE typically is difficult to establish due to the proprietary differences of competitive products and difficulty in obtaining reliable competitive standalone pricing information. When neither VSOE nor TPE is available, the Company determines its best estimate of standalone selling price (“ESP”) for a product or service and does so by considering several factors including, but not limited to, the 12-month historical median sales price, sales channel, geography, gross margin objective, competitive product pricing, and product life cycle. In consideration of all relevant pricing factors, the Company applies management judgment to determine the Company's best estimate of selling price through consultation with and formal approval by the Company's management for all products and services for which neither VSOE nor TPE is available. Generally the standalone selling price of services is determined using VSOE and the standalone selling price of other deliverables is determined by using ESP. The Company regularly reviews VSOE, TPE and ESP for all of its products and services and maintains internal controls over the establishment and updates of these estimates. Pursuant to the software revenue recognition accounting standard, the Company continues to recognize revenue for software using the residual method for its sale of standalone software products, including optional software upgrades and other software that is not essential to the functionality of the hardware with which it is sold. After allocation of the relative selling price to each element of the arrangement, the Company recognizes revenue in accordance with the Company's policies for product, software, and service revenue recognition. The Company derives the majority of its revenue from sales of its networking equipment, with the remaining revenue generated from service fees relating to maintenance contracts, professional services, and training for its products. The Company generally recognizes product revenue from its value-added resellers, non-stocking distributors and end-user customers at the time of shipment, provided that persuasive evidence of an arrangement exists, delivery has occurred, the price of the product is fixed or determinable, and collection of the sales proceeds is reasonably assured. In instances where the criteria for revenue recognition are not met, revenue is deferred until all criteria have been met. Sales taxes collected from customers are excluded from revenues. The Company sells its products and maintenance contracts to partners in two distribution channels, or tiers. The first tier consists of a limited number of independent distributors that stock its products and sell primarily to resellers. The Company defers recognition of revenue on all sales to its stocking distributors until the distributors sell the product, as evidenced by “sales-out” reports that the distributors provide. The Company grants these distributors the right to return a portion of unsold inventory for the purpose of stock rotation and certain price protection rights. The distributor-related deferred revenue and receivables are adjusted at the time of the stock rotation return or price reduction. The Company also provides distributors with credits for changes in selling prices based on competitive conditions, and allows distributors to participate in cooperative marketing programs (See Deferred Distributors Revenue, Net of Cost of Sales to Distributors, below in this footnote for additional information). The Company maintains estimated accruals and allowances for these exposures based upon the Company's historical experience. In connection with cooperative advertising programs, if the Company does not meet the criteria for recognizing the expense as marketing expense the costs are recorded as a reduction to revenue in the same period that the related revenue is recorded. The second tier of the distribution channel consists of a non-stocking distributors and value-added resellers that sell directly to end-users. For product sales to non-stocking distributors and value-added resellers, the Company does not grant return privileges, except for defective products during the warranty period, nor does the Company grant pricing credits. Accordingly, the Company recognizes revenue upon transfer of title and risk of loss or damage, generally upon shipment. In connection with cooperative advertising programs and certain price protection rights that may occur under contractual arrangements with its resellers, if the Company does not meet the criteria for recognizing the expense as marketing expense, the costs are recorded as a reduction to revenue in the same period that the related revenue is recorded. Allowance for Product Returns The Company provides an allowance for product returns based on its historical returns, analysis of credit memo data and its return policies. The allowance includes the estimates for product allowances from end customers as well as stock rotations and other returns from the Company’s stocking distributors for which it has billed the customer for the product but has yet to recognize revenue. The allowance for product returns is a reduction of accounts receivable. If the historical data that the Company uses to calculate the estimated product returns and allowances does not properly reflect future levels of product returns, these estimates will be revised, thus resulting in an impact on future net revenue. The allowance for product returns estimate is also impacted by the timing of the actual product return from the customer. The Company estimates and adjusts this allowance at each balance sheet date. The following table is a summary of our allowance for product returns (in thousands).
Description |  | Balance at beginning of period |  |  | Additions |  |  | (Deductions) |  |  | Balance at end of period |
Year Ended June 30, 2016: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for product returns |  | $ | 1,080 |  |  | $ | 3,478 |  |  | $ | (2,949 | ) |  | $ | 1,609 |
Year Ended June 30, 2015: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for product returns |  |  | 2,700 |  |  |  | 3,306 |  |  |  | (4,926 | ) |  |  | 1,080 |
Year Ended June 30, 2014: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for product returns |  | $ | 777 |  |  | $ | 3,063 |  |  | $ | (1,140 | ) |  | $ | 2,700 |
Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts which reflects its best estimate of potentially uncollectible trade receivables. The allowance is based on both specific and general reserves. The Company continually monitors and evaluates the collectability of its trade receivables based on a combination of factors. It records specific allowances for bad debts in general and administrative expense when it becomes aware of a specific customer’s inability to meet its financial obligation to the Company, such as in the case of bankruptcy filings or deterioration of financial position. Estimates are used in determining the allowances for all other customers based on factors such as current trends in the length of time the receivables are past due and historical collection experience. The Company mitigates some collection risk by requiring most of its customers in the Asia-Pacific region, excluding Japan and Australia, to pay cash in advance or secure letters of credit when placing an order with the Company. The following table is a summary of the allowance for doubtful accounts (in thousands).
Description |  | Balance at beginning of period |  |  | Charges to bad debt expenses |  |  | Deductions (1) |  |  | Balance at end of period |
Year Ended June 30, 2016: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 1,316 |  |  | $ | 834 |  |  | $ | (502 | ) |  | $ | 1,648 |
Year Ended June 30, 2015: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  |  | 918 |  |  |  | 940 |  |  |  | (542 | ) |  |  | 1,316 |
Year Ended June 30, 2014: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 475 |  |  | $ | 468 |  |  | $ | (25 | ) |  | $ | 918 |
(1) | Uncollectible accounts written off, net of recoveries
Concentrations The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting of accounts receivable and short-term investments. The Company does not invest an amount exceeding 10% of its combined cash or cash equivalents in the securities of any one obligor or maker, except for obligations of the United States government, obligations of United States government agencies and money market accounts. The Company performs ongoing credit evaluations of its customers and generally does not require collateral in exchange for credit. The following table sets forth major customers accounting for 10% or more of our net revenue:
|  | Year Ended |
|  | June 30, 2016 |  |  | June 30, 2015 |  |  | June 30, 2014 |
Tech Data Corporation |  |  | 17 | % |  |  | 15 | % |  |  | 11 | %
Westcon Group Inc. |  |  | 14 | % |  |  | 15 | % |  |  | 11 | %
Jenne |  |  | 14 | % |  | * |  |  | * |
* | Less than 10% of net revenue
The following table sets forth major customers accounting for 10% or more of our accounts receivable balance.
|  | Year Ended |
|  | June 30, 2016 |  |  | June 30, 2015 |  |  | June 30, 2014 |
Westcon Group Inc. |  |  | 19 | % |  |  | 27 | % |  |  | 19 | %
Tech Data Corporation |  |  | 11 | % |  | * |  |  |  | 13 | %
* | Less than 10% of accounts receivable
Inventory Valuation The Company's inventory balance as of June 30, 2016 and 2015 was $41.0 million and $58.0 million, respectively. The Company values its inventory at lower of cost or market. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company has established inventory allowances primarily determined by the age of inventory or when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Any written down or obsolete inventory subsequently sold has not had a material impact on gross margin for any of the periods disclosed. The following is a summary of our inventory by category (in thousands).
|  | June 30, 2016 |  |  | June 30, 2015 |
Finished goods |  | $ | 38,751 |  |  | $ | 55,301 |
Raw materials |  |  | 2,238 |  |  |  | 2,713 |
Total Inventory |  | $ | 40,989 |  |  | $ | 58,014 |
Cash Equivalents, Short-Term Investments and Marketable Securities The following is a summary of Cash and Available-for-Sale Securities (in thousands)
|  | June 30, 2016 |  |  | June 30, 2015 |
Cash |  | $ | 89,847 |  |  | $ | 71,455 |
Cash equivalents |  | $ | 4,275 |  |  | $ | 4,770 |
Total available-for-sale |  | $ | 4,275 |  |  | $ | 4,770 |
Total cash, cash equivalents and available for sale securities |  | $ | 94,122 |  |  | $ | 76,225 |
Available-for-Sale Securities The following is a summary of available-for-sale securities (in thousands):
|  |  |  |  |  |  |  |  |  | Unrealized |  |  | Unrealized |
|  | Amortized |  |  |  |  |  |  | Holding |  |  | Holding |
|  | Cost |  |  | Fair Value |  |  | Gains |  |  | Losses |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 4,275 |  |  | $ | 4,275 |  |  | $ | — |  |  | $ | — |
|  | $ | 4,275 |  |  | $ | 4,275 |  |  | $ | — |  |  | $ | — |
Classified as: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 4,275 |  |  | $ | 4,275 |  |  | $ | — |  |  | $ | — |
|  | $ | 4,275 |  |  | $ | 4,275 |  |  | $ | — |  |  | $ | — |
June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 4,770 |  |  | $ | 4,770 |  |  | $ | — |  |  | $ | — |
|  | $ | 4,770 |  |  | $ | 4,770 |  |  | $ | — |  |  | $ | — |
Classified as: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 4,770 |  |  | $ | 4,770 |  |  | $ | — |  |  | $ | — |
|  | $ | 4,770 |  |  | $ | 4,770 |  |  | $ | — |  |  | $ | — |
The Company did not have any available-for sale investments in debt securities at June 30, 2016. The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Investments with maturities of greater than three months, but less than one year at the balance sheet date are classified as Short-term Investments. Investments with maturities of greater than one year at balance sheet date are classified as Marketable Securities. Except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market funds, the Company diversifies its investments by limiting its holdings with any individual issuer. Investments include available-for-sale investment-grade debt securities that the Company carries at fair value. The Company accumulates unrealized gains and losses on the Company's available-for-sale debt securities, net of tax, in accumulated other comprehensive income in the stockholders' equity section of its balance sheets. Such an unrealized gain or loss does not reduce net income for the applicable accounting period. If the fair value of an available-for-sale debt instrument is less than its amortized cost basis, an other-than-temporary impairment is triggered in circumstances where (1) the Company intends to sell the instrument, (2) it is more likely than not that the Company will be required to sell the instrument before recovery of its amortized cost basis, or (3) the Company does not expect to recover the entire amortized cost basis of the instrument (that is, a credit loss exists). If the Company intends to sell or it is more likely than not that the Company will be required to sell the available-for-sale debt instrument before recovery of its amortized cost basis, the Company recognizes a other-than-temporary impairment in earnings equal to the entire difference between the debt instruments' amortized cost basis and its fair value. For available-for-sale debt instruments that are considered other-than-temporarily impaired due to the existence of a credit loss, if the Company does not intend to sell and it is not more likely than not that the Company will be required to sell the instrument before recovery of its remaining amortized cost basis (amortized cost basis less any current-period credit loss), the Company separates the amount of the impairment into the amount that is credit related and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the debt instrument's amortized cost basis and the present value of its expected future cash flows. The remaining difference between the debt instrument's fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income. The Company determines the basis of the cost of a security sold or the amount reclassified out of accumulated other comprehensive income into earnings using the specific identification method. Realized gains or losses recognized on the sale of investments were not significant for fiscal 2016, 2015 or 2014. As of June 30, 2016 and June 30, 2015, the Company did not hold any investment securities. For investments that were in an unrealized loss position as of June 30, 2014, the Company recorded an other-than-temporary impairment loss of $158,000 during the year ended June 30, 2014. Fair Value of Financial Instruments A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:
| · | Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities;
| · | Level 2 Inputs - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and
| · | Level 3 Inputs - unobservable inputs reflecting the Company's own assumptions in measuring the asset or liability at fair value.
The Company did not hold any financial liabilities that required measurement at fair value on a recurring basis. The following table presents the Company’s fair value hierarchy for its financial assets measured at fair value on a recurring basis (in thousands):
June 30, 2016 |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 4,275 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,275 |
Total |  | $ | 4,275 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,275 |
June 30, 2015 |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 4,770 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,770 |
Total |  | $ | 4,770 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,770 |
Level 2 investments: the Company includes U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, and state, municipal and provincial obligations for which quoted prices are available as Level 2. There were no transfers of assets or liabilities between Level 1 and Level 2 during the fiscal years 2016 or 2015. The fair value of the borrowings under the credit facility is estimated based on valuations provided by alternative pricing sources supported by observable inputs which are considered Level 2. The carrying amount and estimated fair value of the Company’s total long-term indebtedness, including current portion was $55.5 million and $66.9 million as of June 30, 2016 and 2015, respectively. Level 3 investments: The Company did not hold any Level 3 investments. Certain of the Company's assets, including intangible assets and goodwill are measured at fair value on a non-recurring basis if impairment is indicated. There were no impairments recorded for the fiscal years 2016 or 2015. Long-Lived Assets Long-lived assets include (a) property and equipment, (b) goodwill and intangible assets, and (c) other assets. Property and equipment, goodwill and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable. If such facts and circumstances exist, the Company assesses the recoverability of these assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. The Company reduces the carrying value of service inventory to net realizable value based on expected quantities needed to satisfy contractual service requirements of customers. (a) Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of one to four years are used for computer equipment and software. Estimated useful lives of three to seven years are used for office equipment, furniture and fixtures. Depreciation and amortization of leasehold improvements is computed using the lesser of the useful life or lease terms (ranging from two to ten years). Property and equipment consist of the following (in thousands):
|  | June 30, 2016 |  |  | June 30, 2015 |
Computer equipment |  | $ | 34,657 |  |  | $ | 32,753 |
Purchased software |  |  | 5,574 |  |  |  | 5,425 |
Office equipment, furniture and fixtures |  |  | 10,385 |  |  |  | 10,908 |
Leasehold improvements |  |  | 19,342 |  |  |  | 24,293 |
Total property and equipment |  |  | 69,958 |  |  |  | 73,379 |
Less: accumulated depreciation and amortization |  |  | (40,378 | ) |  |  | (33,517 | )
Property and equipment, net |  | $ | 29,580 |  |  | $ | 39,862 |
(b) Goodwill and Intangibles As part of the acquisition of Enterasys, the Company acquired $70.9 million in goodwill which has been allocated to the Company's only reportable segment, the development and marketing of network infrastructure equipment. The following table reflects the changes in the carrying amount of goodwill (in thousands):
|  | June 30, |  |  | June 30, |
|  | 2016 |  |  | 2015 |
Balance at beginning of period |  | $ | 70,877 |  |  | $ | 70,877 |
Changes during period |  |  | — |  |  |  | — |
Balance at end of period |  | $ | 70,877 |  |  | $ | 70,877 |
The following tables summarize the components of gross and net intangible asset balances (dollars in thousands):
|  | Weighted Average |  |  |  |  |  |  |  |  |  |  |  |
|  | Remaining Amortization |  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |
|  | Period |  | Amount |  |  | Amortization |  |  | Amount |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  | 0.20 years |  | $ | 48,000 |  |  | $ | 43,028 |  |  | $ | 4,972 |
Customer relationships |  | 0.30 years |  |  | 37,000 |  |  |  | 32,889 |  |  |  | 4,111 |
Maintenance contracts |  | 2.30 years |  |  | 17,000 |  |  |  | 9,067 |  |  |  | 7,933 |
Trademarks |  | 0.30 years |  |  | 2,500 |  |  |  | 2,222 |  |  |  | 278 |
License agreements |  | 9.70 years |  |  | 3,413 |  |  |  | 1,473 |  |  |  | 1,940 |
Other intangibles |  | 3.70 years |  |  | 1,428 |  |  |  | 900 |  |  |  | 528 |
Total intangibles, net |  |  |  | $ | 109,341 |  |  | $ | 89,579 |  |  | $ | 19,762 |
|  | Weighted Average |  |  |  |  |  |  |  |  |  |  |  |
|  | Remaining Amortization |  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |
|  | Period |  | Amount |  |  | Amortization |  |  | Amount |
June 30, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  | 1.20 years |  | $ | 48,000 |  |  | $ | 28,194 |  |  | $ | 19,806 |
Customer relationships |  | 1.30 years |  |  | 37,000 |  |  |  | 20,556 |  |  |  | 16,444 |
Maintenance contracts |  | 3.30 years |  |  | 17,000 |  |  |  | 5,667 |  |  |  | 11,333 |
Trademarks |  | 1.30 years |  |  | 2,500 |  |  |  | 1,389 |  |  |  | 1,111 |
Order backlog |  | 0.30 years |  |  | 7,400 |  |  |  | 6,967 |  |  |  | 433 |
License agreements |  | 10.20 years |  |  | 10,924 |  |  |  | 8,620 |  |  |  | 2,304 |
Other intangibles |  | 3.80 years |  |  | 2,684 |  |  |  | 1,983 |  |  |  | 701 |
Total intangibles, net |  |  |  | $ | 125,508 |  |  | $ | 73,376 |  |  | $ | 52,132 |
The following table summarizes the amortization expense of intangibles for the periods presented (in thousands):
|  | Year Ended |
|  | June 30, 2016 |  |  | June 30, 2015 |  |  | June 30, 2014 |
Amortization in "Cost of revenue for products" |  | $ | 15,369 |  |  | $ | 18,082 |  |  | $ | 12,060 |
Amortization of intangibles |  |  | 17,001 |  |  |  | 17,869 |  |  |  | 16,711 |
Total amortization |  | $ | 32,370 |  |  | $ | 35,951 |  |  | $ | 28,771 |
The amortization expense that is recognized in "Cost of revenues for products" is comprised of amortization for developed technology, license agreements and other intangibles. The estimated future amortization expense to be recorded for each of the next five years is as follows (in thousands):
For the fiscal year ending: |  |  |  |
2017 |  | $ | 13,323 |
2018 |  |  | 3,724 |
2019 |  |  | 1,457 |
2020 |  |  | 264 |
2021 |  |  | 139 |
Thereafter, |  |  | 855 |
Total |  | $ | 19,762 |
(c) Other Assets Other assets primarily consists of service inventory and long term deposits. The Company holds service inventory to support customers who have purchased service contracts with a hardware replacement element, as well as to support our warranty program. See Inventory Valuation above in this footnote for additional information. The Company held service inventory of $16.0 million and $18.1 million as of June 30, 2016 and 2015, respectively. Deferred Revenue, Net Deferred revenue, net represents amounts for (i) deferred maintenance revenue and (ii) deferred product revenue net of the related cost of revenue and other (professional services and training) when the revenue recognition criteria have not been met. The following table summarizes deferred revenue (in thousands):
|  | June 30, 2016 |  |  | June 30, 2015 |
Deferred maintenance revenue |  | $ | 83,419 |  |  | $ | 87,441 |
Deferred product and other revenue |  |  | 11,441 |  |  |  | 12,341 |
Total deferred revenue, net |  |  | 94,860 |  |  |  | 99,782 |
Less: current portion |  |  | 72,934 |  |  |  | 76,551 |
Non-current deferred revenue, net |  | $ | 21,926 |  |  | $ | 23,231 |
The Company offers for sale to its customers, renewable support arrangements, including extended warranty contracts that range generally from one to five years. Deferred support revenue is included within deferred revenue, net within the maintenance revenue category above. The change in the Company’s deferred maintenance revenue balance in relation to these arrangements was as follows (in thousands):
|  | Year Ended |
|  | June 30, 2016 |  |  | June 30, 2015 |
Balance beginning of period |  | $ | 87,441 |  |  | $ | 89,657 |
New maintenance arrangements |  |  | 110,192 |  |  |  | 119,906 |
Recognition of maintenance revenue |  |  | (114,214 | ) |  |  | (122,122 | )
Balance end of period |  |  | 83,419 |  |  |  | 87,441 |
Less: current portion |  |  | 61,493 |  |  |  | 64,210 |
Non-current deferred revenue |  | $ | 21,926 |  |  | $ | 23,231 |
Deferred Distributors Revenue, Net of Cost of Sales to Distributors At the time of shipment to distributors, the Company records a trade receivable at the contractual discount to list selling price since there is a legally enforceable obligation from the distributor to pay on a current basis for product delivered. The Company relieves inventory for the carrying value of goods shipped since legal title has passed to the distributor, and the Company records deferred revenue and deferred cost of sales in “Deferred distributors revenue, net of cost of sales to distributors” in the liability section of its consolidated balance sheets. Deferred distributors revenue, net of cost of sales to distributors effectively represents the gross margin on the sale to the distributor; however, the amount of gross margin the Company recognizes in future periods will frequently be less than the originally recorded deferred distributors revenue, net of cost of sales to distributors as a result of price concessions negotiated at time of sell-through to end customers. The Company sells each item in its product catalog to all of its distributors worldwide at contractually discounted prices. However, distributors resell the Company’s products to end customers at a very broad range of individually negotiated price points based on customer, product, quantity, geography, and other competitive conditions which results in the Company remitting back to the distributors a portion of their original purchase price after the resale transaction is completed. Thus, a portion of the deferred revenue balance represents a portion of distributors’ original purchase price that will be remitted back to the distributors in the future. The wide range and variability of negotiated price credits granted to distributors does not allow the Company to accurately estimate the portion of the balance in the deferred revenue that will be remitted to the distributors. Therefore, the Company does not reduce deferred revenue by anticipated future price credits; instead, price credits are recorded against revenue when incurred, which is generally at the time the distributor sells the product. The following table summarizes deferred distributors revenue, net of cost of sales to distributors (in thousands):
|  | June 30, 2016 |  |  | June 30, 2015 |
Deferred distributors revenue |  | $ | 35,138 |  |  | $ | 53,366 |
Deferred cost of sales to distributors |  |  | (8,321 | ) |  |  | (12,491 | )
Deferred distributors revenue, net of cost of sales to distributors |  | $ | 26,817 |  |  | $ | 40,875 |
Debt The Company's debt is comprised of the following (in thousands):
|  | June 30, 2016 |  |  | June 30, 2015 |
Current portion of long-term debt: |  |  |  |  |  |  |  |
Term Loan |  | $ | 17,875 |  |  | $ | 11,375 |
Current portion of long-term debt |  | $ | 17,875 |  |  | $ | 11,375 |
Long-term debt, less current portion: |  |  |  |  |  |  |  |
Term Loan |  | $ | 27,625 |  |  | $ | 45,500 |
Revolving Facility |  |  | 10,000 |  |  |  | 10,000 |
Total long-term debt, less current portion |  |  | 37,625 |  |  |  | 55,500 |
Total debt |  | $ | 55,500 |  |  | $ | 66,875 |
The Company's debt repayment schedule by period is as follows (in thousands):
For the fiscal year ending: |  |  |  |
2017 |  | $ | 17,875 |
2018 |  |  | 21,938 |
2019 |  |  | 15,687 |
Total |  | $ | 55,500 |
On October 31, 2013, the Company entered into a credit agreement which provides for a $60 million five-year Revolving Facility and a $65 million five-year Term Loan (together the “Senior Secured Credit Facilities”). The Company used the proceeds from the Term Loan and also drew $35 million of the Revolving Facility for the purchase of all of the issued and outstanding capital stock of Enterasys. The Company has availability of borrowings from the Revolving Facility of $34.1 million as of June 30, 2016. In the fourth quarter of fiscal 2015, the Company amended the Senior Secured Credit Facilities. The amendment, among other items, reduced the lenders commitment by $10.0 million to a total of $115.0 million. The amended commitment provides for a $50 million five-year Revolving Facility. Borrowings under the Senior Secured Credit Facilities, as amended, bear interest, at the Company's election, at a rate per annum equal to an agreed to applicable margin plus (a) the higher of the prime rate in effect on such day or the federal funds effective rate in effect on such day plus 0.75% or (b) an adjusted Libor rate. In addition, the Company is required to pay a quarterly commitment fee of between 0.375% and 0.50% (currently 0.375%) on the unused portion of the Revolving Facility based on the Company’s Consolidated Leverage Ratio. Principal installments are payable on the Term Loan in varying percentages quarterly starting December 31, 2013 and to the extent not previously paid, all outstanding balances are to be paid at maturity. If not repaid before maturity, the draws on the Revolving Facility shall be repaid on the original maturity date. The Senior Secured Credit Facilities, as amended, are secured by substantially all of the Company’s assets and are jointly and severally guaranteed by the Company and certain of its subsidiaries. The Senior Secured Credit Facilities, as amended contain financial covenants that require the Company to maintain a minimum Consolidated Fixed Charge Coverage Ratio and a Consolidated Quick Ratio and a maximum Consolidated Leverage Ratio as well as several other financial and non-financial covenants and restrictions that limit the Company’s ability to incur additional indebtedness, create liens upon any of its property, merge, consolidate or sell all or substantially all of its assets, etc. These covenants, which are described more fully in the Senior Secured Credit Facilities, as amended, (incorporated herein by reference on Form 8-K) to which reference is made for a complete statement of the covenants, are subject to certain exceptions. The Company is in compliance with its covenants. The Senior Secured Credit Facilities, as amended, also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation or warranty made by the Company is false or misleading in any material respect, certain insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the occurrence of certain ERISA events, the invalidity of the loan documents or a change in control of the Company. The amounts outstanding under the Senior Secured Credit Facilities, as amended, may be accelerated upon certain events of default. Financing costs incurred in connection with obtaining long-term financing are deferred and amortized over the term of the related indebtedness or credit agreement. The Company incurred $1.3 million of financing costs related to the initial Senior Secured Credit Facilities during the year ended June 30, 2014. During the year ended June 30, 2015, in conjunction with the amending of the Senior Secured Credit Facilities noted above, the Company incurred an additional $0.5 million of costs. Amortization of deferred financing costs is included in "Interest expense" in the consolidated statements of operations, totaled $0.5 million, $0.4 million and $0.2 million in fiscal years 2016, 2015 and 2014, respectively. The Company had $0.9 million of outstanding letters of credit as of June 30, 2016 and 2015. Guarantees and Product Warranties Networking products may contain undetected hardware or software errors when new products or new versions or updates of existing products are released to the marketplace. In the past, we had experienced such errors in connection with products and product updates. The Company’s standard hardware warranty period is typically 12 months from the date of shipment to end-users and 90 days for software. For certain access products, the Company offers a limited lifetime hardware warranty commencing on the date of shipment from the Company and ending five (5) years following the Company’s announcement of the end of sale of such product. Upon shipment of products to its customers, the Company estimates expenses for the cost to repair or replace products that may be returned under warranty and accrue a liability in cost of product revenue for this amount. The determination of the Company’s warranty requirements is based on actual historical experience with the product or product family, estimates of repair and replacement costs and any product warranty problems that are identified after shipment. The Company estimates and adjusts these accruals at each balance sheet date in accordance with changes in these factors. Upon issuance of a standard product warranty, the Company discloses and recognizes a liability for the obligations it assumes under the product warranty. The following table summarizes the activity related to the Company’s product warranty liability during the following period (in thousands):
|  | Year Ended |
|  | June 30, 2016 |  |  | June 30, 2015 |
Balance beginning of period |  | $ | 8,676 |  |  | $ | 7,551 |
New warranties issued |  |  | 8,176 |  |  |  | 8,822 |
Warranty expenditures |  |  | (7,252 | ) |  |  | (7,697 | )
Balance end of period |  | $ | 9,600 |  |  | $ | 8,676 |
In the normal course of business to facilitate sales of its products, the Company indemnifies its resellers and end-user customers with respect to certain matters. The Company has agreed to hold the customer harmless against losses arising from a breach of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. It is not possible to estimate the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on its operating results or financial position. Other Accrued Liabilities The following are the components of other accrued liabilities (in thousands):
|  | June 30, 2016 |  |  | June 30, 2015 |
Accrued general and administrative costs |  | $ | 4,079 |  |  | $ | 1,204 |
Restructuring |  |  | 2,522 |  |  |  | 5,854 |
Other accrued liabilities |  |  | 20,090 |  |  |  | 25,565 |
Total other accrued liabilities |  | $ | 26,691 |  |  | $ | 32,623 |
Advertising Cooperative advertising expenses are recorded as marketing expenses to the extent that an advertising benefit separate from the revenue transaction can be identified and the cash paid does not exceed the fair value of that advertising benefit received. Cooperative advertising obligations with customers are accrued and the costs expensed at the time the related revenue is recognized. If the Company does not meet the criteria for recognizing such cooperative advertising obligations as marketing expense, the costs are recorded as a reduction of revenue. All other advertising costs are expensed as incurred. Advertising expenses were $0.3 million, $0.5 million and $0.5 million in fiscal years 2016, 2015 and 2014, respectively.

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