5.	Balance Sheet Accounts

Cash, Cash Equivalents and Marketable Securities

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

	December 31, 2017		June 30, 2017
Cash	$	122,608	$	126,159
Cash equivalents		4,500		4,291
Total cash and cash equivalents		127,108		130,450
Marketable securities (consisting of available-for-sale securities)		1,104		—
Total cash, cash equivalents and marketable securities	$	128,212	$	130,450

The Company considers highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Marketable securities are recorded in “Prepaid expense and other current assets” in the accompanying condensed consolidated balance sheet as these original maturities are greater than three months, but less than one year at the balance sheet date. Marketable securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss” in the accompanying condensed consolidated balance sheets.

Inventories

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the demand of inventory or when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand.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.

Inventories consist of the following (in thousands):

	December 31, 2017		June 30, 2017
			(As Adjusted)
Finished goods	$	67,244	$	46,620
Raw materials		16,133		790
Total Inventories	$	83,377	$	47,410

Property and Equipment, Net

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

	December 31, 2017			June 30, 2017
Computers and equipment	$	63,539		$	34,716
Purchased software		16,329			11,785
Office equipment, furniture and fixtures		17,272			10,852
Leasehold improvements		29,319			23,046
Total property and equipment		126,459			80,399
Less: accumulated depreciation and amortization		(57,894	)		(50,159	)
Property and equipment, net	$	68,565		$	30,240

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, 2017
Developed technology	4.5 years	$	116,000	$	48,334	$	67,666
Customer relationships	3.9 years		51,410		38,674		12,736
Maintenance contracts	0.8 years		17,000		14,166		2,834
Trademarks	3.9 years		9,100		3,411		5,689
Backlogs	— years		1,800		1,800		—
License agreements	6.1 years		2,445		1,255		1,190
Other intangibles	2.2 years		1,382		1,072		310
Total intangibles, net with finite lives			199,137		108,712		90,425
In-process research and development, with indefinite life			2,500		—		2,500
Total intangibles, net		$	201,637	$	108,712	$	92,925

	Weighted Average
	Remaining Amortization	Gross Carrying		Accumulated		Net Carrying
	Period	Amount		Amortization		Amount
June 30, 2017
Developed technology	5.3 years	$	55,400	$	42,689	$	12,711
Customer relationships	3.3 years		40,300		37,567		2,733
Maintenance contracts	1.3 years		17,000		12,467		4,533
Trademarks	4.3 years		5,100		2,846		2,254
License agreements	6.4 years		2,445		1,120		1,325
Other intangibles	2.7 years		1,382		1,001		381
Total intangibles, net with finite lives			121,627		97,690		23,937
In-process research and development, with indefinite life			1,400		—		1,400
Total intangibles, net		$	123,027	$	97,690	$	25,337

During the six months ended December 31, 2017, in-process research and development of $1.4 million was reclassified to developed technology upon completion of the project and is being amortized over its estimated useful life.

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

	Three Months Ended				Six Months Ended
	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
Amortization in “Cost of revenues: Product”	$	3,866	$	1,720	$	6,663	$	5,276
Amortization of intangibles		2,746		2,175		4,360		6,317
Total amortization	$	6,612	$	3,895	$	11,023	$	11,593

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, 2017
Balance as of June 30, 2017	$	80,216
Additions due to acquisitions		50,772
Balance at end of period	$	130,988

During the six months ended December 31, 2017, the Company completed acquisitions of the Campus Fabric Business and the Data Center Business, resulting in an additional goodwill of $34.0 million and $16.8 million, respectively. See Note 2 for additional information related to the acquisitions.

Deferred Revenue

The Company offers for sale to its customers, renewable support arrangements that range from one to five years as well as deferred revenue for professional and training services.

Debt

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

	December 31, 2017			June 30, 2017
Current portion of long-term debt:
Term Loan	$	22,964		$	12,444
Less: unamortized debt issuance costs		(538	)		(164	)
Current portion of long-term debt	$	22,426		$	12,280

Long-term debt, less current portion:
Term Loan	$	152,062		$	71,268
Revolver		10,000			10,000
Less: unamortized debt issuance costs		(1,350	)		(846	)
Total long-term debt, less current portion		160,712			80,422
Total debt	$	183,138		$	92,702

In connection with the closing of Campus Fabric Business discussed in Note 2, the Company entered into the Second Amendment to the Amended and Restated Credit Agreement (“Second Amendment”), which amended the Amended and Restated Credit Agreement, dated as of October 28, 2016 (the “Credit Facility, as amended”), by and among the Company, as borrower, Silicon Valley Bank, as administrative agent and collateral agent, and lenders. Among other things, the Second Amendment (i) increased the amount of the available borrowing under the Credit Facility from $140.5 million to $243.7 million, composed of (a) the five-year term loan (“Term Loan”) in a principal amount of up to $183.7 million and (b) the five-year revolving credit facility (“Revolver”) in a principal amount of up to $60.0 million, (ii) extends the maturity date under the existing Term Loan and the termination date under the existing Revolver, (iii) provides for an uncommitted additional incremental loan facility in the principal amount of up to $50.0 million (“Incremental Facility”), and (iv) joins certain additional banks, financial institutions and institutional lenders as lenders pursuant to the terms of the Credit Facility, as amended. On July 14, 2017, the Company borrowed $80.0 million under the Term Loan which was used to fund the purchase of Campus Fabric Business.

In connection with the closing of the acquisition of the Data Center Business discussed in Note 2, the Company entered into the Third Amendment to the Credit Facility (the “Third Amendment”) on October 26, 2017. Among other things, the Third Amendment (i) amends the negative covenant governing dispositions to increase the general dispositions basket for the fiscal year of the Company ending June 30, 2018, and (ii) amends certain definitions and provisions to update certain references to the Brocade Purchase Agreement (as defined above). On the Brocade Closing Date, the Company borrowed $20.0 million on the Term Loan to partially fund the acquisition of the Data Center Business.

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 the Company’s 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 $1.2 million of outstanding letters of credit and $48.8 million of availability under the Revolver as of December 31, 2017.

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 and six months ended December 31, 2017 and 2016 (in thousands):

	Three Months Ended						Six Months Ended
	December 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
				(As adjusted)						(As adjusted)
Balance beginning of period	$	13,499		$	9,017		$	10,584		$	9,998
Warranties assumed due to acquisition		526			2,034			3,682			2,034
New warranties issued		1,657			1,176			3,929			2,104
Warranty expenditures		(2,672	)		(1,437	)		(5,185	)		(3,346	)
Balance end of period	$	13,010		$	10,790		$	13,010		$	10,790

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.

Other long-term liabilities

The following is a summary of long-term liabilities (in thousands):

	December 31, 2017		June 30, 2017
Acquisition related deferred payments, less current portion	$	15,037	$	—
Acquisition-related contingent consideration obligations, less current portion		36,130		—
Other		13,180		8,526
Total other accrued liabilities	$	64,347	$	8,526

Advertising

All advertising costs are expensed as incurred. Advertising expenses for three and six months ended December 31, 2017 and 2016, 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 marketable securities. 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, 2017	December 31, 2016	December 31, 2017	December 31, 2016
		(As adjusted)		(As adjusted)
Westcon Group Inc.	14%	12%	15%	12%
Tech Data Corporation	12%	15%	12%	16%
Jenne Corporation	*	13%	10%	14%
Avnet	*	*	*	10%

*Less than 10% of net revenue

The following customers account for more than 10% of the Company’s accounts receivable outstanding as of December 31, 2017, Westcon Group 24%, Tech Data 21% and Avnet 11%.