5.	Balance Sheet Accounts

Cash and Cash Equivalents

The following is a summary of cash and cash equivalents (in thousands):

	December 31, 2016		June 30, 2016
Cash	$	99,506	$	89,847
Cash equivalents		4,280		4,275

Total cash and cash equivalents	$	103,786	$	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 December 31, 2016 and June 30, 2016 were $47.4 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by the age of inventory or when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand.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.

Inventory consists of the following (in thousands):

	December 31, 2016		June 30, 2016
Finished goods	$	45,679	$	38,751
Raw materials		1,715		2,238
Total Inventory	$	47,394	$	40,989

Property and Equipment, Net

Property and equipment consist of the following (in thousands):

	December 31, 2016			June 30, 2016
Computer equipment	$	35,547		$	34,657
Purchased software		10,013			5,574
Office equipment, furniture and fixtures		10,302			10,385
Leasehold improvements		21,601			19,342
Total property and equipment		77,463			69,958
Less: accumulated depreciation and amortization		(46,864	)		(40,378	)
Property and equipment, net	$	30,599		$	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
December 31, 2016
Developed technology	5.69 years	$	55,500	$	41,165	$	14,335
Customer relationships	3.84 years		40,400		37,142		3,258
Maintenance contracts	1.84 years		17,000		10,767		6,233
Trademarks	4.84 years		5,100		2,586		2,514
License agreements	6.80 years		2,445		984		1,461
Other intangibles	3.20 years		1,382		929		453
Total intangibles, net with finite lives			121,827		93,573		28,254
In-process research and development, with indefinite life			1,600		-		1,600
Total intangibles, net		$	123,427	$	93,573	$	29,854

	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 amortization expense of intangibles for the periods presented is summarized below (in thousands):

	Three Months Ended				Six Months Ended
	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Amortization in "Cost of revenues: Product"	$	1,720	$	3,852	$	5,276	$	8,276
Amortization of intangibles		2,175		4,251		6,317		8,718
Total amortization	$	3,895	$	8,103	$	11,593	$	16,994

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):

	December 31, 2016		June 30, 2016
Balance at beginning of period	$	70,877	$	70,877
Additions during period		9,836		—
Balance at end of period	$	80,713	$	70,877

During the three months ended December 31, 2016, the Company completed the acquisition of certain assets and liabilities from Zebra resulting in an additional $9.8 million of goodwill. See Note 2 for additional information related to the acquisition.

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, 2016		June 30, 2016
Deferred maintenance	$	84,595	$	83,419
Deferred maintenance assumed due to acquisition		13,533		-
Deferred product and other revenue		7,795		11,441
Total deferred revenue, net		105,923		94,860
Less: current portion		81,404		72,934
Non-current deferred revenue, net	$	24,519	$	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):

	Three Months Ended						Six Months Ended
	December 31, 2016			December 31, 2015			December 31, 2016			December 31, 2015
Balance beginning of period	$	84,334		$	85,255		$	83,419		$	87,441
Deferred maintenance assumed due to acquisition		13,533			-			13,533			-
New maintenance arrangements		33,765			29,773			62,510			56,819
Recognition of maintenance revenue		(33,504	)		(30,322	)		(61,334	)		(59,554	)
Balance end of period		98,128			84,706			98,128			84,706
Less: current portion		73,609			63,201			73,609			63,201
Non-current deferred revenue	$	24,519		$	21,505		$	24,519		$	21,505

Deferred Distributors Revenue, Net of Cost of Sales to Distributors

The Company records revenue from its stocking distributors on a sell-through basis, recording deferred revenue and deferred cost of sales associated with all sales transactions to these 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):

	December 31, 2016			June 30, 2016
Deferred distributors revenue	$	54,471		$	35,138
Deferred cost of sales to distributors		(13,138	)		(8,321	)
Deferred distributors revenue, net of cost of sales to distributors	$	41,333		$	26,817

Debt

The Company’s debt is comprised of the following (in thousands):

	December 31, 2016		June 30, 2016
Current portion of long-term debt:
Term Loan	$	10,020	$	17,628
Current portion of long-term debt	$	10,020	$	17,628

Long-term debt, less current portion:
Term Loan	$	77,127	$	27,446
Revolving Facility		10,000		10,000
Total long-term debt, less current portion		87,127		37,446
Total debt	$	97,147	$	55,074

During the three months ended December 31, 2016, the Company entered into an Amended and Restated Credit Agreement (the “Credit Facility, as amended”) with Silicon Valley Bank, JPMorgan Chase Bank, N.A., Bank of America, N.A., Cadence Bank, N.A., and Comerica Bank (collectively, the “Lenders”). The Credit Facility, as amended provides for a five-year $90.5 million term loan (“Term Loan”) and a five-year $50.0 million revolving credit facility (“Revolver”), which includes a $5.0 million swing line loan sub facility and a $10.0 million letter of credit sub facility. The Credit Facility, as amended among other things, amends and restates the Company’s existing credit facility. The Credit Facility, as amended is collateralized by substantially all of the assets of the Company.

Borrowings under the Term Loan bear interest, at our option, at a rate equal to either the LIBOR rate (subject to a 0.0% LIBOR floor), plus an applicable margin (currently 3.25% per annum based on a stated consolidated leverage ratio) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum based on our consolidated leverage ratio). Borrowings under the Revolver bear interest, at the Company’s option, at a rate equal to either the LIBOR rate (subject to a 0.0% LIBOR floor), plus an applicable margin (currently 3.25% per annum based on a stated consolidated leverage ratio) or the adjusted base rate, plus an applicable margin (currently 1.25% per annum based on a stated consolidated leverage ratio). The Revolver has a commitment fee payable on the undrawn amount ranging from 0.375% to 0.50% per annum based upon a stated consolidated leverage ratio.

The Company had $23.7 million of availability under the Revolver as of December 31, 2016. The Company had $0.9 million of outstanding letters of credit under the Revolver as of December 31, 2016.

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 December 31, 2016 and 2015 (in thousands):

	Three Months Ended						Six Months Ended
	December 31, 2016			December 31, 2015			December 31, 2016			December 31, 2015
Balance beginning of period	$	8,620		$	9,244		$	9,600		$	8,676
Warranties assumed due to acquisition		2,034			-			2,034			-
New warranties issued		1,176			2,956			2,104			5,520
Warranty expenditures		(1,602	)		(1,785	)		(3,510	)		(3,781	)
Balance end of period	$	10,228		$	10,415		$	10,228		$	10,415

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 and six months ended December 31, 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:

	Three Months Ended				Six Months Ended
	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Tech Data Corporation		16%		19%		16%		16%
Jenne		14%		12%		15%		11%
Westcon Group Inc.		13%		14%		12%		15%
Avnet	*		*			11%	*

*	Less than 10% of net revenue

The following customers account for more than 10% of our accounts receivable outstanding as of December 31, 2016, Westcon Group Inc. 17% and Tech Data Corporation 11%.