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Balance Sheet Accounts | 3 Months Ended
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Sep. 30, 2016
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Balance Sheet Accounts |
4. | Balance Sheet Accounts
Cash and Cash Equivalents The following is a summary of cash and cash equivalents (in thousands):
|  | September 30, 2016 |  |  | June 30, 2016 |
Cash |  | $ | 97,988 |  |  | $ | 89,847 |
Cash equivalents |  |  | 4,277 |  |  |  | 4,275 |
Total cash and cash equivalents |  | $ | 102,265 |  |  | $ | 94,122 |
The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Investments with original maturities of greater than three months, but less than one year at the balance sheet date are classified as short-term investments. Inventory Valuation The Company’s inventory balances as of September 30, 2016 and June 30, 2016 were $43.4 million and $41.0 million, respectively. The Company values its inventory at lower of cost or net realizable value. 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by the age of inventory or when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand.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):
|  | September 30, 2016 |  |  | June 30, 2016 |
Finished goods |  | $ | 41,262 |  |  | $ | 38,751 |
Raw materials |  |  | 2,133 |  |  |  | 2,238 |
Total Inventory |  | $ | 43,395 |  |  | $ | 40,989 |
Property and Equipment, Net Property and equipment consist of the following (in thousands):
|  | September 30, 2016 |  |  | June 30, 2016 |
Computer equipment |  | $ | 37,618 |  |  | $ | 34,657 |
Purchased software |  |  | 5,575 |  |  |  | 5,574 |
Office equipment, furniture and fixtures |  |  | 10,374 |  |  |  | 10,385 |
Leasehold improvements |  |  | 19,395 |  |  |  | 19,342 |
Total property and equipment |  |  | 72,962 |  |  |  | 69,958 |
Less: accumulated depreciation and amortization |  |  | (42,904 | ) |  |  | (40,378 | )
Property and equipment, net |  | $ | 30,058 |  |  | $ | 29,580 |
Intangibles 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 |
September 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  | 0.22 years |  | $ | 48,000 |  |  | $ | 46,444 |  |  | $ | 1,556 |
Customer relationships |  | 0.10 years |  |  | 37,000 |  |  |  | 35,972 |  |  |  | 1,028 |
Maintenance contracts |  | 2.00 years |  |  | 17,000 |  |  |  | 9,917 |  |  |  | 7,083 |
Trademarks |  | 0.10 years |  |  | 2,500 |  |  |  | 2,431 |  |  |  | 69 |
License agreements |  | 7.00 years |  |  | 2,445 |  |  |  | 963 |  |  |  | 1,482 |
Other intangibles |  | 3.40 years |  |  | 1,382 |  |  |  | 893 |  |  |  | 489 |
Total intangibles, net |  |  |  | $ | 108,327 |  |  | $ | 96,620 |  |  | $ | 11,707 |
|  | Weighted Average |  |  |  |  |  |  |  |  |  |  |  |
|  | Remaining Amortization |  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |
|  | Period |  | Amount |  |  | Amortization |  |  | Amount |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Developed technology |  | 0.30 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 |
The following table summarizes the amortization expense of intangibles for the periods presented (in thousands):
|  | Three Months Ended |
|  | September 30, 2016 |  |  | September 30, 2015 |
Amortization in "Cost of revenues: Product" |  | $ | 3,498 |  |  | $ | 4,424 |
Amortization of intangibles |  |  | 4,142 |  |  |  | 4,467 |
Total amortization |  | $ | 7,640 |  |  | $ | 8,891 |
The amortization expense that is recognized in “Cost of revenues: Product” is comprised of amortization for developed technology, license agreements and other intangibles. Goodwill The following table summarizes goodwill for the periods presented (in thousands):
|  | September 30, 2016 |  |  | June 30, 2016 |
Balance at beginning of period |  | $ | 70,877 |  |  | $ | 70,877 |
Changes during period |  |  | — |  |  |  | — |
Balance at end of period |  | $ | 70,877 |  |  | $ | 70,877 |
Other Accrued Liabilities The following are the components of other accrued liabilities (in thousands):
|  | September 30, 2016 |  |  | June 30, 2016 |
Accrued general and administrative costs |  | $ | 4,050 |  |  | $ | 4,079 |
Restructuring |  |  | 1,754 |  |  |  | 2,522 |
Other accrued liabilities |  |  | 21,578 |  |  |  | 20,090 |
Total other accrued liabilities |  | $ | 27,382 |  |  | $ | 26,691 |
Deferred Revenue, Net Deferred revenue, net represents amounts for (i) deferred services revenue (support arrangements, professional services and training), and (ii) deferred product revenue net of the related cost of revenue when the revenue recognition criteria have not been met. The following table summarizes deferred revenue, net (in thousands):
|  | September 30, 2016 |  |  | June 30, 2016 |
Deferred maintenance |  | $ | 84,334 |  |  | $ | 83,419 |
Deferred product and other revenue |  |  | 7,903 |  |  |  | 11,441 |
Total deferred revenue, net |  |  | 92,237 |  |  |  | 94,860 |
Less: current portion |  |  | 70,697 |  |  |  | 72,934 |
Non-current deferred revenue, net |  | $ | 21,540 |  |  | $ | 21,926 |
The Company offers for sale to its customers, renewable support arrangements that range from one to five years. Deferred support revenue is included within deferred revenue, net within the services category above. The change in the Company’s deferred support revenue balance in relation to these arrangements was as follows (in thousands):
|  | For the three months ended |
|  | September 30, 2016 |  |  | September 30, 2015 |
Balance beginning of period |  | $ | 83,419 |  |  | $ | 87,441 |
New maintenance arrangements |  |  | 28,745 |  |  |  | 27,046 |
Recognition of maintenance revenue |  |  | (27,830 | ) |  |  | (29,232 | )
Balance end of period |  |  | 84,334 |  |  |  | 85,255 |
Less: current portion |  |  | 62,794 |  |  |  | 63,310 |
Non-current deferred revenue |  | $ | 21,540 |  |  | $ | 21,945 |
Deferred Distributors Revenue, Net of Cost of Sales to Distributors The Company records revenue from its distributors on a sell-through basis, recording deferred revenue and deferred cost of sales associated with all sales transactions to its distributors in “Deferred distributors revenue, net of cost of sales to distributors” in the liability section of its condensed consolidated balance sheets. The amount shown as “Deferred distributors revenue, net of cost of sales to distributors” represents the deferred gross profit on sales to distributors based on contractual pricing. The following table summarizes deferred distributors revenue, net of cost of sales to distributors (in thousands):
|  | September 30, 2016 |  |  | June 30, 2016 |
Deferred distributors revenue |  | $ | 38,780 |  |  | $ | 35,138 |
Deferred cost of sales to distributors |  |  | (8,551 | ) |  |  | (8,321 | )
Deferred distributors revenue, net of cost of sales to distributors |  | $ | 30,229 |  |  | $ | 26,817 |
Debt The Company’s debt is comprised of the following (in thousands):
|  | September 30, 2016 |  |  | June 30, 2016 |
Current portion of long-term debt: |  |  |  |  |  |  |  |
Term Loan |  | $ | 19,269 |  |  | $ | 17,628 |
Current portion of long-term debt |  | $ | 19,269 |  |  | $ | 17,628 |
Long-term debt, less current portion: |  |  |  |  |  |  |  |
Term Loan |  | $ | 22,621 |  |  | $ | 27,446 |
Revolving Facility |  |  | 10,000 |  |  |  | 10,000 |
Total long-term debt, less current portion |  |  | 32,621 |  |  |  | 37,446 |
Total debt |  | $ | 51,890 |  |  | $ | 55,074 |
During fiscal 2015, the Company amended its credit agreement which provides for a five-year revolving credit facility for up to $50.0 million (the “Revolving Facility”) and a $65.0 million five-year term loan (the “Term Loan”) and together with the Revolving Facility the (“Senior Secured Credit Facilities, as amended”). The Senior Secured Credit Facilities, as amended contains, among others, certain financial covenants that require the Company to maintain defined minimum financial ratios which may limit the Company’s availability to borrowings under the Revolving Facility. As of September 30, 2016, the Company had $27.1 million of availability under the Revolving Facility. The Company had $1.0 million of outstanding letters of credit as of September 30, 2016. On October 28, 2016 the Company entered into an Amended and Restated Credit Agreement by and among the Company, as borrower, the several banks and other financial institutions or entities party thereto as lenders, and Silicon Valley Bank, as administrative agent and collateral agent. For information with respect to the terms of this agreement refer to Subsequent Events in Note 13 of Condensed Consolidated Financial Statements. 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. 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 three months ended September 30, 2016 and 2015 (in thousands):
|  | Three Months Ended |
|  | September 30, 2016 |  |  | September 30, 2015 |
Balance beginning of period |  | $ | 9,600 |  |  | $ | 8,676 |
New warranties issued |  |  | 928 |  |  |  | 2,564 |
Warranty expenditures |  |  | (1,908 | ) |  |  | (1,996 | )
Balance end of period |  | $ | 8,620 |  |  | $ | 9,244 |
To facilitate sales of its products in the normal course of business, 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. 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. 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 for three months ended September 30, 2016 and 2015, were immaterial. 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:
|  | For the three months ended |
|  | September 30, 2016 |  |  | September 30, 2015 |
Tech Data Corporation |  |  | 17% |  |  |  | 12% |
Jenne |  |  | 16% |  |  |  | 11% |
Avnet |  |  | 13% |  |  | * |
Westcon Group Inc. |  |  | 11% |  |  |  | 16% |
Scansource, Inc. |  | * |  |  |  | 13% |
* | Less than 10% of net revenue
The following customers account for more than 10% of our accounts receivable outstanding as of September 30, 2016, Westcon Group Inc. 17% and Tech Data Corporation 11%.

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