Balance Sheet Accounts

Cash, Cash Equivalents, Short-Term Investments

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



	December 31, 2014		June 30, 2014
Cash	$	88,021	$	72,623

Cash equivalents	$	951	$	567
Short-term investments	20,321		32,692
Total available-for-sale	$	21,272	$	33,259

Total cash, cash equivalents and available for sale securities	$	109,293	$	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
December 31, 2014
Money market funds	$	951	$	951	$	—	$	—
U.S. corporate debt securities	20,317		20,321		4		—
	$	21,268	$	21,272	$	4	$	—
Classified as:
Cash equivalents	$	951	$	951	$	—	$	—
Short-term investments	20,317		20,321		4		—
	$	21,268	$	21,272	$	4	$	—
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		—
	$	33,145	$	33,259	$	114	$	—

The amortized cost and estimated fair value of available-for-sale investments in debt securities at December 31, 2014, by contractual maturity, were as follows (in thousands):



	Amortized Cost		Fair Value
Due in 1 year or less	$	20,317	$	20,321
Total investments in available for sale debt securities	$	20,317	$	20,321

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.

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. The Company recorded an other-than temporary impairment loss of $148,000 during the six months ended December 31, 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 (in thousands):



	December 31, 2014		June 30, 2014
Deferred services	$	91,373	$	89,657
Deferred product and other revenue	6,920		8,020
Total deferred revenue	98,293		97,677
Less: current portion	74,353		74,735
Non-current deferred revenue, net	$	23,940	$	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						Six Months Ended
	December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
Balance beginning of period	$	87,012		$	37,091		$	89,657		$	38,003
Assumed from acquisition	—			35,879			—			35,879
New support arrangements	35,517			33,146			64,056			46,489
Recognition of support revenue	(31,156		)	(24,631		)	(62,340		)	(38,886		)
Balance end of period	91,373			81,485			91,373			81,485
Less: current portion	67,433			63,150			67,433			63,150
Non-current deferred revenue	$	23,940		$	18,335		$	23,940		$	18,335

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 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):



	December 31, 2014			June 30, 2014
Deferred distributors revenue	$	40,901		$	40,715
Deferred cost of sales to distributors	(9,729		)	(8,723		)
Deferred distributors revenue, net of cost of sales to distributors	$	31,172		$	31,992

Debt

The Company's debt is comprised of the following:



	December 31, 2014		June 30, 2014
Current portion of long-term debt:
Term Loan	$	8,125	$	5,688
Revolving Facility	—		24,000
Current portion of long-term debt	$	8,125	$	29,688

Long-term debt, less current portion:
Term Loan	$	52,000	$	56,875
Revolving Facility	29,000		35,000
Total long-term debt, less current portion	81,000		91,875
Total debt	$	89,125	$	121,563

On October 31, 2013, the Company entered into a Credit Agreement (the “Credit Agreement”) which provides for a five-year revolving credit facility for up to $60 million (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”). During the three months ended December 31, 2014, the Company amended the Credit Agreement and among other things modified certain financial covenants governing quick and leverage ratios. 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 of Enterasys and subsequently drew $24 million in the first quarter of fiscal 2015 to fund working capital requirements. Such additional draw of $24 million and an additional $6 million of the Revolving Facility were repaid during second fiscal quarter of 2015.

The Credit Agreement 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 December 31, 2014, the Company had $17.4 million of availability under the Revolving Facility.

The Company had $1.0 million of outstanding letters of credit as of December 31, 2014.

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 and six months ended December 31, 2014 and 2013:



	Three Months Ended						Six Months Ended
	December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
Balance beginning of period	$	7,889		$	3,440		$	7,551		$	3,296
Assumed from acquisition	—			3,732			—			3,732
New warranties issued	1,683			1,654			3,948			2,958
Warranty expenditures	(1,727		)	(1,347		)	(3,654		)	(2,507		)
Balance end of period	$	7,845		$	7,479		$	7,845		$	7,479

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. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is not estimable. We have not recorded a liability related to these indemnification and guarantee provisions and our guarantee and indemnification arrangements have not had any significant impact on our consolidated financial statements to date.

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		Six Months Ended
	December 31, 2014	December 31, 2013	December 31, 2014	December 31, 2013
Techdata	15%	*	15%	*
Westcon Group Inc.	13%	10%	13%	12%


* Less than 10% of net revenue