Balance Sheet Accounts

Cash, Cash Equivalents, Short-Term Investments and Marketable Securities

Summary of Cash and Available-for-Sale Securities (in thousands)



	September 30, 2014		June 30, 2014
Cash	$	71,190	$	72,623

Cash equivalents	$	2,877	$	567
Short-term investments	30,395		32,692
Total available-for-sale	$	33,272	$	33,259

Total cash, cash equivalents and available for sale securities	$	104,462	$	105,882

Available-for-Sale Securities

The following is a summary of available-for-sale securities (in thousands):



	Amortized Cost		Fair Value		Unrealized Holding Gains		Unrealized Holding Losses
September 30, 2014
Money market funds	$	2,877	$	2,877	$	—	$	—
U.S. corporate debt securities	30,338		30,395		57		—
	$	33,215	$	33,272	$	57	$	—
Classified as:
Cash equivalents	$	2,877	$	2,877	$	—	$	—
Short-term investments	30,338		30,395		57		—
	$	33,215	$	33,272	$	57	$	—
June 30, 2014
Money market funds	$	567	$	567	$	—	$	—
U.S. corporate debt securities	32,578		32,692		114		—
	$	33,145	$	33,259	$	114	$	—
Classified as:
Cash equivalents	$	567	$	567	$	—	$	—
Short-term investments	32,578		32,692		114		—
Marketable securities	—		—		—		—
	$	33,145	$	33,259	$	114	$	—

The amortized cost and estimated fair value of available-for-sale investments in debt securities at September 30, 2014, by contractual maturity, were as follows (in thousands):



	Amortized Cost		Fair Value
Due in 1 year or less	$	23,312	$	23,363
Due in 1-2 years	6,024		6,027
Due in 2-5 years	1,002		1,005
Total investments in available for sale debt securities	$	30,338	$	30,395

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. Investments with maturities of greater than one year at balance sheet date which the Company intends to hold for longer than one year are classified as Marketable Securities.

The Company accumulates unrealized gains and losses on the Company's available-for-sale debt securities, net of tax, in accumulated other comprehensive income (loss) in the stockholders' equity section of its balance sheets. 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).

The Company determines the basis of the cost of a security sold or the amount reclassified out of accumulated other comprehensive income (loss) into earnings using the specific identification method. As of September 30, 2014, four out of eighteen investment securities had unrealized losses. For investments that were in an unrealized loss position as of September 30, 2014, the other-than-temporary impairment loss was immaterial during the three months ended September 30, 2014. The Company did not have any other-than temporary impairment loss for the three months ended September 30, 2013.

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 at September 30, 2014 and June 30, 2014, respectively (in thousands):



	September 30, 2014		June 30, 2014
Deferred services	$	87,012	$	89,657
Deferred product and other revenue	7,555		8,020
Total deferred revenue	94,567		97,677
Less: current portion	72,599		74,735
Non-current deferred revenue, net	$	21,968	$	22,942

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):



	Three Months Ended
	September 30, 2014			September 30, 2013
Balance beginning of period	$	89,657		$	38,003
New support arrangements	28,539			13,343
Recognition of support revenue	(31,184		)	(14,255		)
Balance end of period	87,012			37,091
Less: current portion	65,044			28,935
Non-current deferred revenue	$	21,968		$	8,156

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 sheet. The amount shown as “Deferred distributors revenue, net of cost of sales to distributors” represents the deferred gross margin on sales to distributors based on contractual pricing.

The following table summarizes deferred distributors revenue, net of cost of sales to distributors at September 30, 2014 and June 30, 2014, respectively (in thousands):



	September 30, 2014			June 30, 2014
Deferred distributors revenue	$	34,206		$	40,715
Deferred cost of sales to distributors	(8,146		)	(8,723		)
Deferred distributors revenue, net of cost of sales to distributors	$	26,060		$	31,992

Debt

The Company's debt is comprised of the following:



		September 30, 2014
Current portion of long-term debt:
Term Loan		6,500
Revolving Facility		24,000
Current portion of long-term debt		30,500

Long-term debt, less current portion:
Term Loan		55,250
Revolving Facility		35,000
Total long-term debt, less current portion		90,250
Total debt		120,750

On October 31, 2013, the Company entered into a Credit Agreement (the “Credit Agreement”) which provides for a $60 million five-year revolving credit facility (the “Revolving Facility”) and a $65 million five-year term loan (the “Term Loan”) and together with the Revolving Facility (the “Senior Secured Credit Facilities”). The proceeds from the Term Loan were used to pay a portion of the purchase price in the acquisition of all of the issued and outstanding capital stock of Enterasys. The company also drew $35 million of the Revolving Facility to pay a portion of the purchase price and subsequently drew $24 million in the first quarter of fiscal 2015 to fund working capital requirements. Such additional draw of $24 million was repaid as of the filing date of this Form 10-Q.

Guarantees and Product Warranties

Upon issuance of a standard product warranty, the Company discloses and recognizes a liability for the obligation it assumes under the warranty. 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 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. The following table summarizes the activity related to the Company’s product warranty liability during the three months ended September 30, 2014 and 2013:



	Three Months Ended
	September 30, 2014			September 30, 2013
Balance beginning of period	$	7,551		$	3,296
New warranties issued	2,265			1,304
Warranty expenditures	(1,927		)	(1,160		)
Balance end of period	$	7,889		$	3,440

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.

Concentrations

The Company may be subject to concentration of credit risk as a result of certain financial instruments consisting principally of marketable investments and accounts receivable. The Company has placed its investments with high-credit quality issuers. The Company does not invest an amount exceeding 10% of its combined cash, cash equivalents, short-term investments and marketable securities 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 following table sets forth major customers accounting for 10% or more of our net revenue:



	Three Months Ended
	September 30, 2014	September 30, 2013
Tech Data	14%	*
Westcon Group Inc.	13%	18%
Scansource, Inc.	*	14%

* Less than 10% of revenue