þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Washington
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93-0962605
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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901 Fifth Avenue, Suite 1000
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98164
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Seattle, Washington
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(Zip Code)
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(Address of Principal Executive Offices)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value
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Nasdaq Stock Market LLC
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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PART I
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Item 1.
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Business
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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PART II
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Item 5.
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Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
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Item 6.
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Selected Consolidated Financial Data
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8.
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Financial Statements and Supplementary Data
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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Item 14.
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Principal Accounting Fees and Services
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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•
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superior price-performance;
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•
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open standards, including Linux-based operating systems, open file systems (
e.g
., Lustre
™
) and open programming models (
e.g.
, MPI, OpenMP and OpenACC);
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•
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upgrade paths that allow customers to leverage their investments over longer periods of time and thereby reduce total costs of ownership;
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•
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excellent energy efficiency optimized for minimum energy consumed to solution;
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•
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flexibility of processor type, memory, network configuration, storage configuration and system software tools developed towards our Adaptive Supercomputing vision; and
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•
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the Cray service experience, that brings with it a proven research and development team and a global sales and service organization dedicated to the needs of HPC users.
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•
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Compute node and storage architectures, high-speed interconnect and board integration and design
. Integration of a variety of processor, memory and network devices using a combination of custom and industry standard printed circuit boards, high-density connectors, carefully chosen transmission and storage media and optimized topologies.
|
•
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Power, packaging and cooling
. We use a variety of dense packaging techniques in order to produce systems with superior performance, socket densities and energy efficiency. This packaging combines industry standard and custom-designed technologies in the areas of printed circuit board assemblies, power distribution and liquid and air cooling.
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Item 1A. Risk Factors
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•
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our ability to secure sufficient orders for our Cray XC30 and CS-300 systems as well as upgrades and successor systems;
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•
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successfully delivering and obtaining customer acceptances of our Cray XC30 and CS-300 systems;
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•
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our ability to successfully generate revenue and profitability from opportunities developed from our YarcData, storage and data management businesses;
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•
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our ability to scale our internal processes effectively to enable growth;
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•
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the level of revenue recognized in any given period, which is affected by the very high average sales prices and limited number of significant system sales and resulting potential acceptances in any quarter, the timing of product acceptances by customers and contractual provisions affecting the timing and amount of revenue recognition;
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•
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revenue delays or losses due to customers postponing purchases to wait for future upgraded or new systems, delays in delivery of upgraded or new systems, longer than expected customer acceptance cycles or penalties resulting from system acceptance issues;
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•
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our expense levels, including research and development expense net of government funding;
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•
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our ability to successfully and timely design, integrate and secure competitive processors for our Cray XC30 and CS-300 systems and upgrades and successors systems;
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•
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our ability to secure additional government funding for future development projects;
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•
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the level of product gross profit contribution in any given period due to volume or product mix, particularly with the introduction of flexible commodity-based supercomputers, competitive factors, strategic transactions, product life cycle, currency fluctuations, acceptance penalties and component costs;
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•
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the competitiveness of our products and prices;
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•
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maintaining our product development projects on schedule and within budgetary limitations;
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•
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the level and timing of maintenance contract renewals with existing customers; and
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•
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the terms and conditions of sale or lease for our products and services.
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•
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the timely availability of acceptable components, including, but not limited to, processors, in sufficient quantities to meet customer delivery schedules at a competitive cost;
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•
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the timing and level of government funding and resources available for product acquisitions and research and development contracts, which has been, and may continue to be, adversely affected by the current economic and fiscal uncertainties, increased governmental budgetary limitations and disruptions in the operations of the U.S. government;
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•
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the introduction or announcement of competitive or key industry supplier products;
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•
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competitor pricing strategies;
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•
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price fluctuations in the processors and other commodity electronics and memory markets;
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general economic trends, including changes in levels of customer capital spending;
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•
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the availability of adequate customer facilities to install and operate new Cray systems;
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•
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currency fluctuations, international conflicts or economic crises, including the ongoing economic challenges in the United States, Japan and Europe; and
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•
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the receipt and timing of necessary export licenses.
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•
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the level of product differentiation in our Cray XC30 systems and successor systems. We need to compete successfully against HPC systems from both, large established companies and smaller companies and demonstrate the value of our balanced high bandwidth systems;
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•
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our ability to meet all customer requirements for acceptance. Even once a system has been delivered, we sometimes do not meet all of the contract requirements for customer acceptance and ongoing reliability of our systems within the provided-for acceptance period, which has resulted in contract penalties and delays in our ability to recognize revenue from system deliveries. Most often these penalties have adversely affected gross profit through the provision of additional equipment and services and/or service credits to satisfy delivery delays and performance shortfalls. The risk of contract penalties is increased when we bid for new business prior to completing development of new products when we must estimate future system performance, such as has been required with our Cray XC30, Cray XE6 and Cray XK7 systems and will be required for subsequent systems;
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•
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our ability to source competitive, key components in appropriate quantities, in a timely fashion and on acceptable terms and conditions and that meet the performance criteria required. If we underestimated our needs, we could limit the number of possible sales of these products and reduce potential revenue, or if we overestimated, we could incur inventory obsolescence charges and reduce our gross profit, as has happened in the past; and
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•
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whether potential customers delay purchases of our products because they decide to wait for successor systems or upgrades that we have announced or they believe will be available in the future.
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•
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difficulties in successfully integrating the operations, systems, technologies, products, offerings and personnel of the acquired company or companies;
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insufficient revenue to offset increased expenses associated with acquisitions;
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•
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diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from acquisitions;
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potential difficulties in completing projects associated with in-process research and development intangibles;
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•
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difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;
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•
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initial dependence on unfamiliar supply chains or relatively small supply partners; and
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the potential loss of key employees, customers, distributors, vendors and other business partners of the companies we acquire following and continuing after announcement of acquisition plans.
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•
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use a substantial portion of our cash reserves or incur debt;
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•
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issue equity securities or grant equity incentives to acquired employees that would dilute our current shareholders’ percentage ownership;
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assume liabilities, including potentially unknown liabilities;
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record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges;
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•
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incur amortization expenses related to certain intangible assets;
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•
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incur large and immediate write-offs and restructuring and other related expenses; or
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•
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become subject to intellectual property or other litigation.
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•
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Congressional failures or successes in addressing budget concerns, current economic uncertainty;
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•
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disruptions in the operations of the U.S. government;
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•
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"sequestration;”
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•
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the downgrading of U.S. government debt or the possibility of such action;
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•
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the political climate in the U.S. focusing on cutting or limiting budgets and their effect on government budgets;
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•
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the limits on federal borrowing capacity;
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•
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changes in procurement policies;
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•
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budgetary considerations including Congressional delays in completing appropriation bills as occurred in 2011, 2012, and 2013;
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•
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domestic crises;
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•
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political efforts to limit the activities of the National Security Agency, or NSA; including proposed state legislation that would limit or even criminalize doing business with the NSA for certain companies doing business with state governments; and
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international political developments, such as the downgrading of European debt.
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if a supplier does not provide components or systems that meet our specifications in sufficient quantities and with acceptable quality on time or deliver when required, then production, delivery, acceptance and revenue from our systems could be delayed and we could be subject to costly penalties even once delivered and accepted, which happened during 2011, 2012 and 2013 and has at times significantly lowered our revenue for a particular quarter or year;
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•
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if a supplier cannot provide a competitive key component (for example, due to inadequate performance or a prohibitive price) or eliminates key features from components, such as with the processors we design into our systems, our systems may be less competitive than systems using components with greater capabilities;
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•
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if an interruption of supply of our components, services or capabilities occurs because a supplier changes its technology roadmap, decides to no longer provide those products or services, increases the price of those products or services significantly or imposes reduced delivery allocations on its customers, it could take us a considerable period of time to identify and qualify alternative suppliers, to redesign our products as necessary and to begin to manufacture the redesigned components or otherwise obtain those services or capabilities. In some cases, such as with key integrated circuits and memory parts or processors, we may not be able to redesign such components or find alternate sources that we could use in any realistic timeframe;
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•
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if a supplier of a component is subject to a claim that the component infringes a third-party’s intellectual property rights, as has happened with one of our suppliers, our ability to obtain necessary components could be adversely affected or our cost to obtain such components could increase significantly;
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•
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if a supplier providing us with key research and development and design services or core technology components with respect to integrated circuit design, network communication capabilities or software is late, fails to provide
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•
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if a supplier provides us with hardware or software that contains bugs or other errors or is different from what we expected, as is occurring with a key component, our development projects and production systems may be adversely affected through reduced performance or capabilities, additional design testing and verification efforts, re-spins of integrated circuits and/or development of replacement components, and the production and sales of our systems could be delayed and systems installed at customer sites could require significant, expensive field component replacements or result in penalties;
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•
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some of our key component and service suppliers are small companies with limited financial and other resources, and consequently may be more likely to experience financial and operational difficulties than larger, well-established companies, which increases the risk that they will be unable to deliver products as needed; and
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•
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if a key supplier is acquired or has a significant business change, such as may occur with the proposed acquisition of the third-party original equipment manufacturers that supplies complete storage systems for our Sonexion product, the production and sales of our systems and services may be delayed or adversely affected, or our development programs may be delayed or may be impossible to complete.
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•
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harm to our ability to compete in relevant markets or in customer perception of our products;
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•
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unanticipated costs or adverse tax consequences;
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•
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exposure to potential liabilities to third parties or Intel, or claims for indemnification by Intel, including with respect to third-party litigation matters;
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•
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failure to successfully further develop our current products or disruption to our current or future product roadmaps and ongoing business;
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•
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delays and difficulties in receiving key components for our products from suppliers, including Intel;
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•
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loss of customers, vendors or alliances; and
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•
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failure to create shareholder value with the additional cash resources.
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•
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pay third-party infringement claims;
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discontinue manufacturing, using, or selling particular products subject to infringement claims;
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•
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discontinue using the technology or processes subject to infringement claims;
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•
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develop other technology not subject to infringement claims, which could be time-consuming and costly or may not be possible; or
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•
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license technology from the third party claiming infringement, which license may not be available on commercially reasonable terms.
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•
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removal of a director only in limited circumstances and only upon the affirmative vote of not less than two-thirds of the shares entitled to vote to elect directors;
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•
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the ability of our Board of Directors to issue up to 5,000,000 shares of preferred stock, without shareholder approval, with rights senior to those of the common stock;
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•
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no cumulative voting of shares;
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•
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the right of shareholders to call a special meeting of the shareholders only upon demand by the holders of not less than 30% of the shares entitled to vote at such a meeting;
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•
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the affirmative vote of not less than two-thirds of the outstanding shares entitled to vote on an amendment, unless the amendment was approved by a majority of our continuing directors, who are defined as directors who have either served as a director since August 31, 1995, or were nominated to be a director by the continuing directors;
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•
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special voting requirements for mergers and other business combinations, unless the proposed transaction was approved by a majority of continuing directors;
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•
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special procedures to bring matters before our shareholders at our annual shareholders’ meeting; and
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•
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special procedures to nominate members for election to our Board of Directors.
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Location of Property
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Uses of Facility
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Approximate
Square Footage
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Chippewa Falls, WI
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Manufacturing, hardware development, central service and warehouse
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213,600
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Seattle, WA
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Executive offices, hardware and software development, sales and marketing
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54,000
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St. Paul, MN
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Software development, sales and marketing
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61,900
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Milpitas, CA
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Manufacturing, warehouse and engineering
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38,500
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High
|
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Low
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||||
Year Ended December 31, 2013:
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||||
First Quarter
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$
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23.23
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$
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15.41
|
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Second Quarter
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$
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23.59
|
|
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$
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16.20
|
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Third Quarter
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$
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28.59
|
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$
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19.51
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Fourth Quarter
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$
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28.20
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$
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21.30
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Year Ended December 31, 2012:
|
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|
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||||
First Quarter
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$
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8.39
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$
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6.09
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Second Quarter
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$
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12.24
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|
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$
|
6.55
|
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Third Quarter
|
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$
|
13.56
|
|
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$
|
10.80
|
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Fourth Quarter
|
|
$
|
16.02
|
|
|
$
|
11.76
|
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Plan Category
|
|
Number of Shares of
Common Stock to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
Number of Shares of
Common Stock Available
for Future Issuance Under
Equity Compensation
Plans (excluding shares
reflected in 1st column)
|
||||
Equity compensation plans approved by shareholders(1)
|
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1,969,732
|
|
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$
|
9.53
|
|
|
3,171,322
|
|
Equity compensation plans not approved by shareholders(2)
|
|
108,337
|
|
|
$
|
4.91
|
|
|
—
|
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Total
|
|
2,078,069
|
|
|
|
|
3,171,322
|
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(1)
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The shareholders approved our 1995, 1999 and 2003 stock option plans, our 2004, 2006 and 2009 long-term equity compensation plans, our 2013 equity incentive plan and our 2001 employee stock purchase plan, as amended; the 1995, 1999 and 2003 stock option plans, our 2004, 2006 and 2009 long-term equity compensation plans have terminated and no more options, restricted shares, restricted units or stock bonus awards may be granted under those plans. Pursuant to the 2013 equity incentive plan, incentive options may be granted to employees (including officers) and nonqualified options may be granted to employees, officers, directors, agents and consultants with exercise prices at least equal to the fair market value of the underlying common stock at the time of grant. While the Board may grant options with varying vesting periods under these plans, most options granted to employees vest over four years, with 25% of the options vesting after one year and the remaining options vesting monthly over the next three years, and most option grants to non-employee directors vesting monthly over the twelve months after grant. Also pursuant to the 2013 equity incentive plan, the Board may grant restricted stock awards, stock bonus awards, stock appreciation rights, restricted stock units, performance shares and performance units to employees, directors, consultants, independent contracts and advisors. As of
December 31, 2013
, under the 2013 equity incentive plan, an aggregate of
3,171,322
shares remained available for grant as stock options or stock appreciation rights and an aggregate of
2,046,014
shares were available for restricted stock awards, stock bonus awards,
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(2)
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The shareholders did not approve the 2000 non-executive employee stock option plan. Under the 2000 non-executive employee stock option plan approved by the Board of Directors on March 30, 2000, an aggregate of 1,500,000 shares pursuant to non-qualified options could be issued to employees, agents and consultants but not to officers or directors. Otherwise, the 2000 non-executive employee stock option plan is similar to the stock option plans described in footnote (1) above. On March 30, 2010, the 2000 non-executive employee stock option plan was terminated, which ended future grants but did not affect then outstanding options. At
December 31, 2013
, under the 2000 non-executive employee stock plan we had options for 108,337 shares outstanding.
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|
12/31/2008
|
|
12/31/2009
|
|
12/31/2010
|
|
12/31/2011
|
|
12/31/2012
|
|
12/31/2013
|
|
Cray Inc.
|
100.0
|
|
308.7
|
|
344.7
|
|
311.1
|
|
766.8
|
|
1,320.2
|
|
Nasdaq Stock Market (U.S.)
|
100.0
|
|
143.7
|
|
170.2
|
|
171.1
|
|
202.4
|
|
281.9
|
|
Nasdaq Computer Manufacturer Stocks
|
100.0
|
|
219.6
|
|
313.5
|
|
367.8
|
|
467.5
|
|
538.6
|
|
|
12/31/2008
|
|
12/31/2009
|
|
12/31/2010
|
|
12/31/2011
|
|
12/31/2012
|
|
12/31/2013
|
|
Cray Inc.
|
100.0
|
|
308.7
|
|
344.7
|
|
311.1
|
|
766.8
|
|
1,320.2
|
|
Nasdaq US Benchmark TR Index
|
100.0
|
|
129.3
|
|
151.9
|
|
152.4
|
|
177.5
|
|
236.9
|
|
ICB: 9572 Computer Hardware
|
100.0
|
|
187.9
|
|
232.2
|
|
243.4
|
|
291.8
|
|
343.3
|
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
|
(In thousands, except for per share data)
|
||||||||||||||||||
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Product revenue
|
|
$
|
436,330
|
|
|
$
|
353,767
|
|
|
$
|
155,561
|
|
|
$
|
239,085
|
|
|
$
|
199,114
|
|
Service revenue
|
|
89,419
|
|
|
67,291
|
|
|
80,485
|
|
|
80,303
|
|
|
84,933
|
|
|||||
Total revenue
|
|
525,749
|
|
|
421,058
|
|
|
236,046
|
|
|
319,388
|
|
|
284,047
|
|
|||||
Cost of product revenue
|
|
298,244
|
|
|
231,237
|
|
|
101,000
|
|
|
155,027
|
|
|
130,444
|
|
|||||
Cost of service revenue
|
|
43,179
|
|
|
38,643
|
|
|
40,680
|
|
|
54,404
|
|
|
47,719
|
|
|||||
Total cost of revenue
|
|
341,423
|
|
|
269,880
|
|
|
141,680
|
|
|
209,431
|
|
|
178,163
|
|
|||||
Gross profit
|
|
184,326
|
|
|
151,178
|
|
|
94,366
|
|
|
109,957
|
|
|
105,884
|
|
|||||
Research and development, net
|
|
87,728
|
|
|
64,303
|
|
|
49,452
|
|
|
43,618
|
|
|
62,947
|
|
|||||
Sales and marketing
|
|
51,345
|
|
|
37,180
|
|
|
26,134
|
|
|
31,085
|
|
|
26,601
|
|
|||||
General and administrative
|
|
23,603
|
|
|
20,707
|
|
|
15,840
|
|
|
17,767
|
|
|
16,579
|
|
|||||
Restructuring
|
|
—
|
|
|
—
|
|
|
1,783
|
|
|
—
|
|
|
—
|
|
|||||
Operating expenses
|
|
162,676
|
|
|
122,190
|
|
|
93,209
|
|
|
92,470
|
|
|
106,127
|
|
|||||
Net gain on sale of interconnect hardware development program
|
|
—
|
|
|
139,068
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Income (loss) from operations
|
|
21,650
|
|
|
168,056
|
|
|
1,157
|
|
|
17,487
|
|
|
(243
|
)
|
|||||
Other income (expense), net
|
|
(1,378
|
)
|
|
472
|
|
|
(989
|
)
|
|
(766
|
)
|
|
(430
|
)
|
|||||
Interest income (expense), net
|
|
757
|
|
|
204
|
|
|
(33
|
)
|
|
219
|
|
|
(805
|
)
|
|||||
Income (loss) before income taxes
|
|
21,029
|
|
|
168,732
|
|
|
135
|
|
|
16,940
|
|
|
(1,478
|
)
|
|||||
Benefit (provision) for income taxes
|
|
11,194
|
|
|
(7,491
|
)
|
|
14,194
|
|
|
(1,878
|
)
|
|
874
|
|
|||||
Net income (loss)
|
|
$
|
32,223
|
|
|
$
|
161,241
|
|
|
$
|
14,329
|
|
|
$
|
15,062
|
|
|
$
|
(604
|
)
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
$
|
0.85
|
|
|
$
|
4.42
|
|
|
$
|
0.41
|
|
|
$
|
0.44
|
|
|
$
|
(0.02
|
)
|
Diluted
|
|
$
|
0.81
|
|
|
$
|
4.27
|
|
|
$
|
0.40
|
|
|
$
|
0.43
|
|
|
$
|
(0.02
|
)
|
Weighted average outstanding shares:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
37,832
|
|
|
36,509
|
|
|
35,122
|
|
|
34,313
|
|
|
33,559
|
|
|||||
Diluted
|
|
39,776
|
|
|
37,789
|
|
|
36,072
|
|
|
35,278
|
|
|
33,559
|
|
|||||
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating activities
|
|
$
|
(87,350
|
)
|
|
$
|
156,892
|
|
|
$
|
(3,823
|
)
|
|
$
|
(49,164
|
)
|
|
$
|
66,684
|
|
Investing activities
|
|
27,211
|
|
|
37,694
|
|
|
(4,779
|
)
|
|
500
|
|
|
(7,682
|
)
|
|||||
Financing activities
|
|
(93
|
)
|
|
7,827
|
|
|
1,462
|
|
|
933
|
|
|
(27,209
|
)
|
|||||
Depreciation and amortization
|
|
14,242
|
|
|
8,652
|
|
|
8,601
|
|
|
9,431
|
|
|
8,454
|
|
|||||
Purchases of property and equipment
|
|
13,136
|
|
|
10,843
|
|
|
4,916
|
|
|
3,736
|
|
|
7,581
|
|
|||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents, restricted cash and investments
|
|
$
|
220,449
|
|
|
$
|
323,205
|
|
|
$
|
54,187
|
|
|
$
|
61,295
|
|
|
$
|
113,178
|
|
Working capital
|
|
334,928
|
|
|
283,352
|
|
|
137,733
|
|
|
125,377
|
|
|
98,759
|
|
|||||
Total assets
|
|
603,366
|
|
|
510,314
|
|
|
283,099
|
|
|
260,628
|
|
|
223,660
|
|
|||||
Shareholders’ equity
|
|
375,587
|
|
|
340,546
|
|
|
166,814
|
|
|
145,821
|
|
|
124,163
|
|
•
|
Supercomputing with many-core commodity processors driving increasing scalability requirements;
|
•
|
Increased micro-architectural diversity, including increased usage of many-core processors and accelerators, as the rate of per-core performance increases slows;
|
•
|
Data needs growing much faster than computational needs;
|
•
|
Technology innovations in storage allowing for faster data access such as NVRAM and SSDs;
|
•
|
The commoditization of HPC hardware, particularly processors and interconnect systems;
|
•
|
Electrical power requirements becoming a design constraint and driver in total cost of ownership determinations;
|
•
|
Increasing use of analytics technologies (Hadoop and Graph) in both the HPC and big data markets;
|
•
|
The growing commoditization of software, including plentiful building blocks and more capable open source software; and
|
•
|
Cloud computing for cost-effective computing on loosely-coupled HPC applications.
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Product revenue
|
|
$
|
436,330
|
|
|
$
|
353,767
|
|
|
$
|
155,561
|
|
Less: Cost of product revenue
|
|
298,244
|
|
|
231,237
|
|
|
101,000
|
|
|||
Product gross profit
|
|
$
|
138,086
|
|
|
$
|
122,530
|
|
|
$
|
54,561
|
|
Product gross profit percentage
|
|
32%
|
|
35%
|
|
35%
|
||||||
|
|
|
|
|
|
|
||||||
Service revenue
|
|
$
|
89,419
|
|
|
$
|
67,291
|
|
|
$
|
80,485
|
|
Less: Cost of service revenue
|
|
43,179
|
|
|
38,643
|
|
|
40,680
|
|
|||
Service gross profit
|
|
$
|
46,240
|
|
|
$
|
28,648
|
|
|
$
|
39,805
|
|
Service gross profit percentage
|
|
52%
|
|
43%
|
|
49%
|
||||||
|
|
|
|
|
|
|
||||||
Total revenue
|
|
$
|
525,749
|
|
|
$
|
421,058
|
|
|
$
|
236,046
|
|
Less: Total cost of revenue
|
|
341,423
|
|
|
269,880
|
|
|
141,680
|
|
|||
Total gross profit
|
|
$
|
184,326
|
|
|
$
|
151,178
|
|
|
$
|
94,366
|
|
Total gross profit percentage
|
|
35%
|
|
36%
|
|
40%
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Gross research and development expenses
|
|
$
|
92,469
|
|
|
$
|
86,305
|
|
|
$
|
76,993
|
|
Less: Amounts included in cost of revenue
|
|
(3,741
|
)
|
|
(1,080
|
)
|
|
(410
|
)
|
|||
Less: Reimbursed research and development (excludes amounts in revenue)
|
|
(1,000
|
)
|
|
(20,922
|
)
|
|
(27,131
|
)
|
|||
Net research and development expenses
|
|
$
|
87,728
|
|
|
$
|
64,303
|
|
|
$
|
49,452
|
|
Percentage of total revenue
|
|
17%
|
|
15%
|
|
21%
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Sales and marketing
|
|
$
|
51,345
|
|
|
$
|
37,180
|
|
|
$
|
26,134
|
|
Percentage of total revenue
|
|
10%
|
|
9%
|
|
11%
|
||||||
General and administrative
|
|
$
|
23,603
|
|
|
$
|
20,707
|
|
|
$
|
15,840
|
|
Percentage of total revenue
|
|
4%
|
|
5%
|
|
7%
|
||||||
Restructuring
|
|
—
|
|
—
|
|
1,783
|
||||||
Percentage of total revenue
|
|
—
|
|
—
|
|
1%
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Interest income
|
|
$
|
894
|
|
|
$
|
397
|
|
|
$
|
229
|
|
Interest expense
|
|
(137
|
)
|
|
(193
|
)
|
|
(262
|
)
|
|||
Net interest income (expense)
|
|
$
|
757
|
|
|
$
|
204
|
|
|
$
|
(33
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Net income before income taxes
|
|
$
|
21,029
|
|
|
$
|
168,732
|
|
|
$
|
135
|
|
Tax benefit (expense)
|
|
11,194
|
|
|
(7,491
|
)
|
|
14,194
|
|
|||
Net income
|
|
$
|
32,223
|
|
|
$
|
161,241
|
|
|
$
|
14,329
|
|
Effective tax rate
|
|
53
|
%
|
|
(4
|
)%
|
|
10,514
|
%
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Operating Activities
|
|
$
|
(87,350
|
)
|
|
$
|
156,892
|
|
|
$
|
(3,823
|
)
|
Investing Activities
|
|
27,211
|
|
|
37,694
|
|
|
(4,779
|
)
|
|||
Financing Activities
|
|
(93
|
)
|
|
7,827
|
|
|
1,462
|
|
|
|
Amounts Committed by Year
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
1 Year
|
|
Years 2-3
|
|
Years 4-5
|
|
Thereafter
|
||||||||||
Development agreements
|
|
$
|
4,510
|
|
|
$
|
4,268
|
|
|
$
|
242
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating leases
|
|
17,917
|
|
|
4,120
|
|
|
7,243
|
|
|
4,525
|
|
|
2,029
|
|
|||||
Total contractual cash obligations
|
|
$
|
22,427
|
|
|
$
|
8,388
|
|
|
$
|
7,485
|
|
|
$
|
4,525
|
|
|
$
|
2,029
|
|
•
|
The delivered item(s) has value to the customer on a standalone basis; and
|
•
|
If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control.
|
•
|
It is commensurate with either of the following:
|
•
|
Our performance to achieve the milestone; or
|
•
|
The enhancement of value of the delivered item or items as a result of a specific outcome resulting from our performance to achieve the milestone.
|
•
|
It relates solely to past performance.
|
•
|
It is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement.
|
|
|
|
Consolidated Balance Sheets at December 31, 2013 and December 31, 2012
|
|
F-1
|
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011
|
|
F-2
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
|
|
F-3
|
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013, 2012 and 2011
|
|
F-4
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
|
|
F-5
|
Notes to Consolidated Financial Statements
|
|
F-6
|
Report of Independent Registered Public Accounting Firm
|
|
F-28
|
* The Financial Statements are located following page F-1.
|
|
|
|
CRAY INC.
|
||
|
|
|
By
|
|
/s/ P
ETER
J. U
NGARO
|
|
|
Peter J. Ungaro
|
|
|
Chief Executive Officer and President
|
|
|
|
Signature
|
|
Title
|
|
|
|
By /s/ P
ETER
J. U
NGARO
|
|
Chief Executive Officer, President and Director
|
Peter J. Ungaro
|
|
(Principal Executive Officer)
|
|
|
|
By /s/ B
RIAN
C. H
ENRY
|
|
Chief Financial Officer and Executive Vice President
|
Brian C. Henry
|
|
(Principal Financial Officer)
|
|
|
|
By /s/ C
HARLES
D. F
AIRCHILD
|
|
Chief Accounting Officer, Controller and Vice President
|
Charles D. Fairchild
|
|
(Principal Accounting Officer)
|
|
|
|
By /s/ P
RITHVIRAJ
B
ANJEREE
|
|
Director
|
Prithviraj Banjeree
|
|
|
|
|
|
By /s/ J
OHN
B. J
ONES
, J
R
.
|
|
Director
|
John B. Jones, Jr.
|
|
|
|
|
|
By /s/ S
TEPHEN
C. K
IELY
|
|
Director
|
Stephen C. Kiely
|
|
|
|
|
|
By /s/ F
RANK
L. L
EDERMAN
|
|
Director
|
Frank L. Lederman
|
|
|
|
|
|
By /s/ S
ALLY
G. N
ARODICK
|
|
Director
|
Sally G. Narodick
|
|
|
|
|
|
By /s/ D
ANIEL
C. R
EGIS
|
|
Director
|
Daniel C. Regis
|
|
|
|
|
|
By /s/ S
TEPHEN
C. R
ICHARDS
|
|
Director
|
Stephen C. Richards
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
|
|
|
||||||
|
|
|
|
Form
|
|
File No.
|
|
Filing
Date
|
|
Exhibit/
Annex
|
|
Filed
Herewith
|
|
2.1
|
|
Asset Purchase Agreement between Intel Corporation and the Company, dated April 24, 2012
|
|
8-K
|
|
000-26820
|
|
04/25/12
|
|
2.1
|
|
|
|
2.2
|
|
Agreement and Plan of Merger by and among Astro Acquisition Corp., Appro International, Inc., the Shareholders' Agent and the Company, dated November 8, 2012
|
|
8-K
|
|
000-26820
|
|
11/09/12
|
|
2.1
|
|
|
|
3.1
|
|
Restated Articles of Incorporation
|
|
8-K
|
|
000-26820
|
|
06/08/06
|
|
3.3
|
|
|
|
3.2
|
|
Amended and Restated Bylaws
|
|
8-K
|
|
000-26820
|
|
02/12/07
|
|
3.1
|
|
|
|
3.3
|
|
First Amendment to Amended and Restated Bylaws
|
|
8-K
|
|
000-26820
|
|
04/19/12
|
|
3.1
|
|
|
|
10.0*
|
|
1999 Stock Option Plan
|
|
S-8
|
|
333-57970
|
|
03/30/01
|
|
4.1
|
|
|
|
10.1*
|
|
2000 Non-Executive Employee Stock Option Plan
|
|
S-8
|
|
333-57970
|
|
03/30/01
|
|
4.2
|
|
|
|
10.2*
|
|
Amended and Restated 2001 Employee Stock Purchase Plan
|
|
10-K
|
|
000-26820
|
|
03/04/11
|
|
10.28
|
|
|
|
10.3*
|
|
2003 Stock Option Plan
|
|
DEF
14A
|
|
000-26820
|
|
03/31/03
|
|
A
|
|
|
|
10.4*
|
|
2004 Long-Term Equity Compensation Plan
|
|
DEF
14A
|
|
000-26820
|
|
03/24/04
|
|
B
|
|
|
|
10.5*
|
|
2006 Long-Term Equity Compensation Plan
|
|
DEF
14A
|
|
000-26820
|
|
04/28/06
|
|
B
|
|
|
|
10.6*
|
|
2009 Long-Term Equity Compensation Plan
|
|
DEF
14A
|
|
000-26820
|
|
03/31/09
|
|
A
|
|
|
|
10.7*
|
|
2013 Equity Incentive Plan
|
|
DEF
14A
|
|
000-26820
|
|
04/24/13
|
|
A
|
|
|
|
10.8*
|
|
Form of Officer Non-Qualified Stock Option Agreement
|
|
10-K
|
|
000-26820
|
|
04/01/05
|
|
10.32
|
|
|
|
10.9*
|
|
Form of Officer Incentive Stock Option Agreement
|
|
10-K
|
|
000-26820
|
|
04/01/05
|
|
10.33
|
|
|
|
10.10*
|
|
Form of Employee Restricted Stock Agreement
|
|
10-K
|
|
000-26820
|
|
03/09/07
|
|
10.11
|
|
|
|
10.11*
|
|
Form of Director Restricted Stock Agreement
|
|
8-K
|
|
000-26820
|
|
06/08/06
|
|
10.1
|
|
|
|
10.12*
|
|
Form of 2013 Equity Incentive Plan Notice of Stock Option Grant and Stock Option Award Agreement
|
|
8-K
|
|
000-26820
|
|
07/03/13
|
|
99.1
|
|
|
|
10.13*
|
|
Form of 2013 Equity Incentive Plan Notice of Restricted Stock Award and Restricted Stock Purchase Agreement
|
|
8-K
|
|
000-26820
|
|
07/03/13
|
|
99.2
|
|
|
|
10.14*
|
|
Letter Agreement between the Company and Peter J. Ungaro, dated March 4, 2005
|
|
8-K
|
|
000-26820
|
|
03/08/05
|
|
10.1
|
|
|
|
10.15*
|
|
Offer Letter between the Company and Margaret A. Williams, dated April 14, 2005
|
|
8-K
|
|
000-26820
|
|
05/09/05
|
|
10.1
|
|
|
|
10.16*
|
|
Offer Letter between the Company and Brian C. Henry, dated May 16, 2005
|
|
10-Q
|
|
000-26820
|
|
11/09/05
|
|
10.1
|
|
|
|
10.17*
|
|
Offer Letter between the Company and Arvind Parthasarathi, dated January 13, 2012
|
|
10-Q
|
|
000-26820
|
|
04/26/12
|
|
10.1
|
|
|
|
10.18*
|
|
Offer Letter between the Company and William C. Blake, dated March 26, 2012
|
|
10-Q
|
|
000-26820
|
|
04/26/12
|
|
10.2
|
|
|
|
10.19*
|
|
Form of Management Retention Agreement entered into with executive officers prior to September 27, 2011 (including Annex A-1 and Annex A-2 applicable only to Peter J. Ungaro and Brian C. Henry)
|
|
8-K
|
|
000-26820
|
|
12/22/08
|
|
10.1
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
|
|
|
||||||
|
|
|
|
Form
|
|
File No.
|
|
Filing
Date
|
|
Exhibit/
Annex
|
|
Filed
Herewith
|
|
10.20*
|
|
Form of Management Retention Agreement entered into with executive officers from September 27, 2011 forward
|
|
|
|
|
|
|
|
|
|
X
|
|
10.21*
|
|
Executive Severance Policy, as adopted on December 13, 2010
|
|
8-K
|
|
000-26820
|
|
12/17/10
|
|
10.1
|
|
|
|
10.22*
|
|
2013 Executive Bonus Plan
|
|
|
|
|
|
|
|
|
|
X
|
|
10.23*
|
|
Summary sheet setting forth amended compensation arrangements for non-employee Directors
|
|
|
|
|
|
|
|
|
|
X
|
|
10.24*
|
|
Form of Indemnification Agreement
|
|
8-K
|
|
000-26820
|
|
02/08/11
|
|
10.1
|
|
|
|
10.25
|
|
Lease Agreement between 900 Fourth Avenue Property LLC and the Company, dated as of August 11, 2008
|
|
8-K
|
|
000-26820
|
|
08/29/08
|
|
10.1
|
|
|
|
10.26
|
|
Development Building and Conference Center Lease Agreement between Northern Lights Semiconductor Corporation and the Company, dated as of February 1, 2008
|
|
8-K
|
|
000-26820
|
|
02/01/08
|
|
10.1
|
|
|
|
10.27
|
|
Lease Agreement between NEA Galtier, LLC and the Company, dated as of July 2, 2009
|
|
8-K
|
|
000-26820
|
|
07/16/09
|
|
10.1
|
|
|
|
10.28
|
|
Technology Agreement between Silicon Graphics, Inc. and the Company, effective as of March 31, 2000
|
|
10-Q
|
|
000-26820
|
|
05/15/00
|
|
10.3
|
|
|
|
10.29
|
|
Amendment No. 2 to the Technology Agreement between Silicon Graphics, Inc. and the Company, dated as of March 30, 2007
|
|
10-Q
|
|
000-26820
|
|
08/07/07
|
|
10.1
|
|
|
|
10.30
|
|
Amendment No. 3 to the Technology Agreement between Silicon Graphics, Inc. and the Company, dated as of March, 28, 2008
|
|
8-K
|
|
000-26820
|
|
04/08/08
|
|
10.1
|
|
|
|
10.31
|
|
Intellectual Property Agreement between Intel Corporation and the Company, dated May 2, 2012
|
|
8-K
|
|
000-26820
|
|
05/03/12
|
|
10.1
|
|
|
|
10.32
|
|
Loan and Security Agreement between Silicon Valley Bank and the Company, dated September 13, 2010
|
|
8-K
|
|
000-26820
|
|
09/17/10
|
|
10.1
|
|
|
|
10.33
|
|
Amendment No. 1 to Loan and Security Agreement between Silicon Valley Bank and the Company, dated June 21, 2011
|
|
10-K
|
|
000-26820
|
|
02/27/12
|
|
10.48
|
|
|
|
10.34
|
|
Restated Credit Agreement between Wells Fargo Bank, National Association and the Company, dated October 1, 2012
|
|
10-Q
|
|
000-26820
|
|
11/9/12
|
|
10.1
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
|
|
|
||||||
|
|
|
|
Form
|
|
File No.
|
|
Filing
Date
|
|
Exhibit/
Annex
|
|
Filed
Herewith
|
|
10.35
|
|
First Amendment to Restated Credit Agreement between Wells Fargo Bank, National Association and the Company, dated October 15, 2013
|
|
|
|
|
|
|
|
|
|
X
|
|
21.1
|
|
Subsidiaries of the Company
|
|
|
|
|
|
|
|
|
|
X
|
|
23.1
|
|
Consent of Peterson Sullivan LLP, Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
X
|
|
24.1
|
|
Power of Attorney for directors and officers (included on the signature page of this report)
|
|
|
|
|
|
|
|
|
|
X
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Mr. Ungaro, Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
X
|
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Mr. Henry, Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
X
|
|
32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350 by the Chief Executive Officer and the Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
X
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
X
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
|
X
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
*
|
Management contract or compensatory plan or arrangement.
|
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
ASSETS
|
||||||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
192,633
|
|
|
$
|
253,065
|
|
Short-term investments
|
|
14,048
|
|
|
52,563
|
|
||
Accounts and other receivables, net
|
|
182,527
|
|
|
13,440
|
|
||
Inventory
|
|
95,129
|
|
|
89,796
|
|
||
Prepaid expenses and other current assets
|
|
20,999
|
|
|
11,823
|
|
||
Total current assets
|
|
505,336
|
|
|
420,687
|
|
||
Long-term restricted cash
|
|
13,768
|
|
|
—
|
|
||
Long-term investments
|
|
—
|
|
|
17,577
|
|
||
Property and equipment, net
|
|
30,278
|
|
|
25,543
|
|
||
Service inventory, net
|
|
1,828
|
|
|
1,490
|
|
||
Goodwill
|
|
14,182
|
|
|
14,182
|
|
||
Intangible assets other than goodwill, net
|
|
6,362
|
|
|
7,981
|
|
||
Deferred tax asset
|
|
19,206
|
|
|
10,041
|
|
||
Other non-current assets
|
|
12,406
|
|
|
12,813
|
|
||
TOTAL ASSETS
|
|
$
|
603,366
|
|
|
$
|
510,314
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
34,225
|
|
|
$
|
34,732
|
|
Accrued payroll and related expenses
|
|
22,470
|
|
|
25,927
|
|
||
Other accrued liabilities
|
|
22,225
|
|
|
8,616
|
|
||
Deferred revenue
|
|
91,488
|
|
|
68,060
|
|
||
Total current liabilities
|
|
170,408
|
|
|
137,335
|
|
||
Long-term deferred revenue
|
|
50,477
|
|
|
29,254
|
|
||
Other non-current liabilities
|
|
6,894
|
|
|
3,179
|
|
||
TOTAL LIABILITIES
|
|
227,779
|
|
|
169,768
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
|
||||
Preferred stock — Authorized and undesignated, 5,000,000 shares; no shares issued or outstanding
|
|
—
|
|
|
—
|
|
||
Common stock and additional paid-in capital, par value $.01 per share — Authorized, 75,000,000 shares; issued and outstanding 40,469,854 and 39,435,215 shares, respectively
|
|
586,243
|
|
|
577,938
|
|
||
Accumulated other comprehensive income
|
|
853
|
|
|
5,181
|
|
||
Accumulated deficit
|
|
(211,509
|
)
|
|
(242,573
|
)
|
||
TOTAL SHAREHOLDERS’ EQUITY
|
|
375,587
|
|
|
340,546
|
|
||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
603,366
|
|
|
$
|
510,314
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Revenue:
|
|
|
|
|
|
|
||||||
Product
|
|
$
|
436,330
|
|
|
$
|
353,767
|
|
|
$
|
155,561
|
|
Service
|
|
89,419
|
|
|
67,291
|
|
|
80,485
|
|
|||
Total revenue
|
|
525,749
|
|
|
421,058
|
|
|
236,046
|
|
|||
Cost of revenue:
|
|
|
|
|
|
|
||||||
Cost of product revenue
|
|
298,244
|
|
|
231,237
|
|
|
101,000
|
|
|||
Cost of service revenue
|
|
43,179
|
|
|
38,643
|
|
|
40,680
|
|
|||
Total cost of revenue
|
|
341,423
|
|
|
269,880
|
|
|
141,680
|
|
|||
Gross profit
|
|
184,326
|
|
|
151,178
|
|
|
94,366
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
||||||
Research and development, net
|
|
87,728
|
|
|
64,303
|
|
|
49,452
|
|
|||
Sales and marketing
|
|
51,345
|
|
|
37,180
|
|
|
26,134
|
|
|||
General and administrative
|
|
23,603
|
|
|
20,707
|
|
|
15,840
|
|
|||
Restructuring
|
|
—
|
|
|
—
|
|
|
1,783
|
|
|||
Total operating expenses
|
|
162,676
|
|
|
122,190
|
|
|
93,209
|
|
|||
Net gain on sale of interconnect hardware development program
|
|
—
|
|
|
139,068
|
|
|
—
|
|
|||
Income from operations
|
|
21,650
|
|
|
168,056
|
|
|
1,157
|
|
|||
Other income (expense), net
|
|
(1,378
|
)
|
|
472
|
|
|
(989
|
)
|
|||
Interest income (expense), net
|
|
757
|
|
|
204
|
|
|
(33
|
)
|
|||
Income before income taxes
|
|
21,029
|
|
|
168,732
|
|
|
135
|
|
|||
Income tax benefit (expense)
|
|
11,194
|
|
|
(7,491
|
)
|
|
14,194
|
|
|||
Net income
|
|
$
|
32,223
|
|
|
$
|
161,241
|
|
|
$
|
14,329
|
|
Basic net income per common share
|
|
$
|
0.85
|
|
|
$
|
4.42
|
|
|
$
|
0.41
|
|
Diluted net income per common share
|
|
$
|
0.81
|
|
|
$
|
4.27
|
|
|
$
|
0.40
|
|
Basic weighted average shares outstanding
|
|
37,832
|
|
|
36,509
|
|
|
35,122
|
|
|||
Diluted weighted average shares outstanding
|
|
39,776
|
|
|
37,789
|
|
|
36,072
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Net income
|
|
$
|
32,223
|
|
|
$
|
161,241
|
|
|
$
|
14,329
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Unrealized gain (loss) on available-for-sale investments
|
|
46
|
|
|
(46
|
)
|
|
—
|
|
|||
Foreign currency translation adjustments
|
|
(1,044
|
)
|
|
(43
|
)
|
|
785
|
|
|||
Unrealized gain (loss) on cash flow hedges
|
|
(4,292
|
)
|
|
(824
|
)
|
|
1,055
|
|
|||
Reclassification adjustments on cash flow hedges included in net income
|
|
962
|
|
|
(386
|
)
|
|
(266
|
)
|
|||
Other comprehensive income (loss)
|
|
(4,328
|
)
|
|
(1,299
|
)
|
|
1,574
|
|
|||
Comprehensive income
|
|
$
|
27,895
|
|
|
$
|
159,942
|
|
|
$
|
15,903
|
|
|
|
Common Stock
and Additional
Paid In Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total
|
|||||||||||
|
|
Number
of Shares
|
|
Amount
|
|
||||||||||||||
BALANCE, December 31, 2010
|
|
36,068
|
|
|
$
|
559,058
|
|
|
$
|
4,906
|
|
|
$
|
(418,143
|
)
|
|
$
|
145,821
|
|
Issuance of shares under employee stock purchase plan
|
|
65
|
|
|
372
|
|
|
|
|
|
|
372
|
|
||||||
Exercise of stock options
|
|
248
|
|
|
1,090
|
|
|
|
|
|
|
1,090
|
|
||||||
Restricted shares issued for compensation, net of forfeitures
|
|
382
|
|
|
—
|
|
|
|
|
|
|
—
|
|
||||||
Share-based compensation
|
|
—
|
|
|
3,628
|
|
|
|
|
|
|
3,628
|
|
||||||
Other comprehensive income
|
|
|
|
|
|
1,574
|
|
|
|
|
1,574
|
|
|||||||
Net income
|
|
|
|
|
|
|
|
14,329
|
|
|
14,329
|
|
|||||||
BALANCE, December 31, 2011
|
|
36,763
|
|
|
$
|
564,148
|
|
|
$
|
6,480
|
|
|
$
|
(403,814
|
)
|
|
$
|
166,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Issuance of shares under employee stock purchase plan
|
|
38
|
|
|
397
|
|
|
|
|
|
|
397
|
|
||||||
Exercise of stock options
|
|
1,346
|
|
|
7,430
|
|
|
|
|
|
|
7,430
|
|
||||||
Restricted shares issued for compensation, net of forfeitures
|
|
1,288
|
|
|
—
|
|
|
|
|
|
|
—
|
|
||||||
Share-based compensation
|
|
—
|
|
|
5,963
|
|
|
|
|
|
|
5,963
|
|
||||||
Other comprehensive loss
|
|
|
|
|
|
(1,299
|
)
|
|
|
|
(1,299
|
)
|
|||||||
Net income
|
|
|
|
|
|
|
|
161,241
|
|
|
161,241
|
|
|||||||
BALANCE, December 31, 2012
|
|
39,435
|
|
|
$
|
577,938
|
|
|
$
|
5,181
|
|
|
$
|
(242,573
|
)
|
|
$
|
340,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Issuance of shares under employee stock purchase plan
|
|
25
|
|
|
517
|
|
|
|
|
|
|
517
|
|
||||||
Exercise of stock options
|
|
495
|
|
|
3,161
|
|
|
|
|
|
|
3,161
|
|
||||||
Restricted shares issued for compensation, net of forfeitures and taxes
|
|
515
|
|
|
(2,612
|
)
|
|
|
|
(1,159
|
)
|
|
(3,771
|
)
|
|||||
Share-based compensation
|
|
—
|
|
|
7,239
|
|
|
|
|
|
|
7,239
|
|
||||||
Other comprehensive loss
|
|
|
|
|
|
(4,328
|
)
|
|
|
|
(4,328
|
)
|
|||||||
Net income
|
|
|
|
|
|
|
|
32,223
|
|
|
32,223
|
|
|||||||
BALANCE, December 31, 2013
|
|
40,470
|
|
|
$
|
586,243
|
|
|
$
|
853
|
|
|
$
|
(211,509
|
)
|
|
$
|
375,587
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
32,223
|
|
|
$
|
161,241
|
|
|
$
|
14,329
|
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
14,242
|
|
|
8,652
|
|
|
8,601
|
|
|||
Accretion and amortization on available for sale investments
|
|
1,977
|
|
|
—
|
|
|
—
|
|
|||
Loss on disposal of fixed assets
|
|
42
|
|
|
128
|
|
|
503
|
|
|||
Net gain on sale of interconnect hardware development program
|
|
—
|
|
|
(139,068
|
)
|
|
—
|
|
|||
Share-based compensation expense
|
|
7,239
|
|
|
5,963
|
|
|
3,628
|
|
|||
Inventory write-down
|
|
917
|
|
|
2,329
|
|
|
—
|
|
|||
Deferred income taxes
|
|
(13,175
|
)
|
|
3,020
|
|
|
(14,396
|
)
|
|||
Cash (used in) provided by operations due to changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts and other receivables
|
|
(169,753
|
)
|
|
60,744
|
|
|
34,180
|
|
|||
Inventory
|
|
(10,780
|
)
|
|
7,004
|
|
|
(50,950
|
)
|
|||
Prepaid expenses and other assets
|
|
(2,670
|
)
|
|
1,763
|
|
|
(2,275
|
)
|
|||
Accounts payable
|
|
(509
|
)
|
|
(6,489
|
)
|
|
18,099
|
|
|||
Accrued payroll and related expenses and other accrued liabilities
|
|
4,721
|
|
|
15,202
|
|
|
(9,493
|
)
|
|||
Other non-current liabilities
|
|
3,701
|
|
|
492
|
|
|
(71
|
)
|
|||
Deferred revenue
|
|
44,475
|
|
|
35,911
|
|
|
(5,978
|
)
|
|||
Net cash (used in) provided by operating activities
|
|
(87,350
|
)
|
|
156,892
|
|
|
(3,823
|
)
|
|||
Investing activities:
|
|
|
|
|
|
|
||||||
Sales and maturities of available-for-sale investments
|
|
139,277
|
|
|
—
|
|
|
—
|
|
|||
Purchases of available-for-sale investments
|
|
(85,162
|
)
|
|
(70,218
|
)
|
|
—
|
|
|||
Change in restricted cash
|
|
(13,768
|
)
|
|
3,776
|
|
|
137
|
|
|||
Proceeds from the sale of interconnect hardware development program, net
|
|
—
|
|
|
139,225
|
|
|
—
|
|
|||
Cash used in acquisition, net of cash acquired
|
|
—
|
|
|
(24,246
|
)
|
|
—
|
|
|||
Purchases of property and equipment
|
|
(13,136
|
)
|
|
(10,843
|
)
|
|
(4,916
|
)
|
|||
Net cash provided by (used in) investing activities
|
|
27,211
|
|
|
37,694
|
|
|
(4,779
|
)
|
|||
Financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock through employee stock purchase plan
|
|
517
|
|
|
397
|
|
|
372
|
|
|||
Purchase of employee restricted shares to fund related statutory withholding
|
|
(3,771
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from exercise of options
|
|
3,161
|
|
|
7,430
|
|
|
1,090
|
|
|||
Net cash (used in) provided by financing activities
|
|
(93
|
)
|
|
7,827
|
|
|
1,462
|
|
|||
Effect of foreign exchange rate changes on cash and cash equivalents
|
|
(200
|
)
|
|
241
|
|
|
170
|
|
|||
Net (decrease) increase in cash and cash equivalents
|
|
(60,432
|
)
|
|
202,654
|
|
|
(6,970
|
)
|
|||
Cash and cash equivalents:
|
|
|
|
|
|
|
||||||
Beginning of period
|
|
253,065
|
|
|
50,411
|
|
|
57,381
|
|
|||
End of period
|
|
$
|
192,633
|
|
|
$
|
253,065
|
|
|
$
|
50,411
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
||||||
Cash paid for interest
|
|
$
|
3
|
|
|
$
|
90
|
|
|
$
|
98
|
|
Cash paid for income taxes
|
|
2,611
|
|
|
2,804
|
|
|
1,495
|
|
|||
Non-cash investing and financing activities:
|
|
|
|
|
|
|
||||||
Inventory transfers to fixed assets and service inventory
|
|
$
|
4,530
|
|
|
$
|
6,278
|
|
|
$
|
2,310
|
|
•
|
The delivered item(s) has value to the customer on a standalone basis; and
|
•
|
If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company.
|
•
|
It is commensurate with either of the following:
|
•
|
The Company's performance to achieve the milestone; or
|
•
|
The enhancement of value of the delivered item or items as a result of a specific outcome resulting from the Company's performance to achieve the milestone.
|
•
|
It relates solely to past performance.
|
•
|
It is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement.
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Accumulated unrealized net loss on available-for-sale investments
|
|
$
|
—
|
|
|
$
|
(46
|
)
|
|
$
|
—
|
|
Accumulated currency translation adjustments
|
|
3,257
|
|
|
4,301
|
|
|
4,344
|
|
|||
Accumulated unrealized net gain (loss) on cash flow hedges
|
|
(2,404
|
)
|
|
926
|
|
|
2,136
|
|
|||
Accumulated other comprehensive income
|
|
$
|
853
|
|
|
$
|
5,181
|
|
|
$
|
6,480
|
|
Cash
|
$
|
635
|
|
Inventories
|
7,526
|
|
|
Other tangible assets
|
5,702
|
|
|
Deferred revenue
|
(2,400
|
)
|
|
Accounts payable
|
(2,918
|
)
|
|
Deferred tax liabilities
|
(3,685
|
)
|
|
Other liabilities assumed
|
(2,061
|
)
|
|
Net tangible assets
|
2,799
|
|
|
|
|
||
Trademarks
|
300
|
|
|
Developed technology
|
5,400
|
|
|
Customer relationships
|
1,800
|
|
|
Non-compete agreements
|
400
|
|
|
Goodwill
|
14,182
|
|
|
Total net assets acquired
|
$
|
24,881
|
|
|
|
|
|
Useful Life
|
||
Intangible Asset Class
|
|
Fair Value
|
|
(in Years)
|
||
Trademarks
|
|
$
|
300
|
|
|
5
|
Developed technology
|
|
$
|
5,400
|
|
|
3
|
Customer relationships
|
|
$
|
1,800
|
|
|
10
|
Non-compete agreements
|
|
$
|
400
|
|
|
2
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Revenue
|
$
|
494,369
|
|
|
$
|
291,409
|
|
|
|
|
|
||||
Net income
|
$
|
161,985
|
|
|
$
|
10,487
|
|
|
December 31, 2013
|
||||||||
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
||||||
Trademarks
|
$
|
300
|
|
$
|
67
|
|
$
|
233
|
|
Developed technology
|
5,400
|
|
2,000
|
|
3,400
|
|
|||
Customer relationships
|
1,800
|
|
200
|
|
1,600
|
|
|||
Non-compete agreements
|
400
|
|
222
|
|
178
|
|
|||
Total
|
$
|
7,900
|
|
$
|
2,489
|
|
$
|
5,411
|
|
|
December 31, 2012
|
||||||||
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
||||||
Trademarks
|
$
|
300
|
|
$
|
7
|
|
$
|
293
|
|
Developed technology
|
5,400
|
|
200
|
|
5,200
|
|
|||
Customer relationships
|
1,800
|
|
20
|
|
1,780
|
|
|||
Non-compete agreements
|
400
|
|
22
|
|
378
|
|
|||
Total
|
$
|
7,900
|
|
$
|
249
|
|
$
|
7,651
|
|
2014
|
$
|
2,218
|
|
2015
|
1,840
|
|
|
2016
|
240
|
|
|
2017
|
233
|
|
|
2018
|
180
|
|
|
|
$
|
4,711
|
|
Description
|
|
Fair Value
as of December 31, 2013 |
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
||||||
Assets:
|
|
|
|
|
|
|
||||||
Cash, cash equivalents and restricted cash
|
|
$
|
206,401
|
|
|
$
|
206,401
|
|
|
$
|
—
|
|
Short-term investments
|
|
14,048
|
|
|
14,048
|
|
|
—
|
|
|||
Foreign exchange forward contracts (2)
|
|
1,730
|
|
|
—
|
|
|
1,730
|
|
|||
Assets measured at fair value at December 31, 2013
|
|
$
|
222,179
|
|
|
$
|
220,449
|
|
|
$
|
1,730
|
|
Liabilities:
|
|
|
|
|
|
|
||||||
Foreign exchange forward contracts (3)
|
|
7,237
|
|
|
—
|
|
|
7,237
|
|
|||
Liabilities measured at fair value at December 31, 2013
|
|
$
|
7,237
|
|
|
$
|
—
|
|
|
$
|
7,237
|
|
Description
|
|
Fair Value
as of December 31, 2012 |
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
||||||
Assets:
|
|
|
|
|
|
|
||||||
Cash, cash equivalents and restricted cash
|
|
$
|
253,065
|
|
|
$
|
253,065
|
|
|
$
|
—
|
|
Available for sale investments (1)
|
|
70,140
|
|
|
70,140
|
|
|
—
|
|
|||
Foreign exchange forward contracts (2)
|
|
1,101
|
|
|
—
|
|
|
1,101
|
|
|||
Assets measured at fair value at December 31, 2012
|
|
$
|
324,306
|
|
|
$
|
323,205
|
|
|
$
|
1,101
|
|
Liabilities:
|
|
|
|
|
|
|
||||||
Foreign exchange forward contracts (3)
|
|
651
|
|
|
—
|
|
|
651
|
|
|||
Liabilities measured at fair value at December 31, 2012
|
|
$
|
651
|
|
|
$
|
—
|
|
|
$
|
651
|
|
(1)
|
Included in "Short-term investments" and "Long-term investments" on the Company's Consolidated Balance Sheets.
|
(2)
|
Included in “Prepaid expenses and other current assets” and “Other non-current assets” on the Company’s Consolidated Balance Sheets.
|
(3)
|
Included in “Other accrued liabilities” and “Other non-current liabilities” on the Company’s Consolidated Balance Sheets.
|
|
|
Year Ended
December 31, |
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
|
|
|
|
|
|
||||||
Gross of Tax Reclassifications
|
|
$
|
(1,604
|
)
|
|
$
|
643
|
|
|
$
|
443
|
|
Net of Tax Reclassifications
|
|
$
|
(962
|
)
|
|
$
|
386
|
|
|
$
|
266
|
|
Year Ended December 31, 2013
|
|||||||||||||||
|
Unrealized Gain/(Loss) on Investments
|
|
Foreign Currency Translation Adjustments
|
|
Unrealized Gain/(Loss) on Cash Flow Hedges
|
|
Accumulated Other Comprehensive Income
|
||||||||
Beginning balance
|
$
|
(46
|
)
|
|
$
|
4,301
|
|
|
$
|
926
|
|
|
$
|
5,181
|
|
Current-period change, net of tax
|
$
|
46
|
|
|
$
|
(1,044
|
)
|
|
$
|
(3,330
|
)
|
|
$
|
(4,328
|
)
|
Ending balance
|
$
|
—
|
|
|
$
|
3,257
|
|
|
$
|
(2,404
|
)
|
|
$
|
853
|
|
|
|
|
|
|
|
|
|
||||||||
Income tax associated with current-period change
|
$
|
31
|
|
|
$
|
27
|
|
|
$
|
(2,390
|
)
|
|
$
|
(2,332
|
)
|
|
|
|
|
Unrealized
|
|
|
||||||
|
Due in
|
Cost
|
|
Gains (Losses)
|
|
Fair Value
|
||||||
Short-term available-for-sale securities
|
2013
|
$
|
52,650
|
|
|
$
|
(87
|
)
|
|
$
|
52,563
|
|
Long-term available-for-sale securities
|
2014
|
17,567
|
|
|
10
|
|
|
17,577
|
|
|||
Total
|
|
$
|
70,217
|
|
|
$
|
(77
|
)
|
|
$
|
70,140
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Trade accounts receivable
|
|
$
|
169,417
|
|
|
$
|
9,596
|
|
Unbilled receivables
|
|
9,075
|
|
|
415
|
|
||
Advance billings
|
|
2,141
|
|
|
278
|
|
||
Other receivables
|
|
2,051
|
|
|
3,156
|
|
||
|
|
182,684
|
|
|
13,445
|
|
||
Allowance for doubtful accounts
|
|
(157
|
)
|
|
(5
|
)
|
||
Accounts and other receivables, net
|
|
$
|
182,527
|
|
|
$
|
13,440
|
|
|
|
December 31
|
||||||
|
|
2013
|
|
2012
|
||||
Components and subassemblies
|
|
$
|
46,339
|
|
|
$
|
21,865
|
|
Work in process
|
|
23,618
|
|
|
11,245
|
|
||
Finished goods
|
|
25,172
|
|
|
56,686
|
|
||
|
|
$
|
95,129
|
|
|
$
|
89,796
|
|
|
|
December 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Land
|
|
$
|
203
|
|
|
$
|
131
|
|
Buildings
|
|
17,022
|
|
|
13,885
|
|
||
Furniture and equipment
|
|
14,443
|
|
|
14,068
|
|
||
Computer equipment
|
|
91,475
|
|
|
80,698
|
|
||
Leasehold improvements
|
|
1,276
|
|
|
420
|
|
||
|
|
124,419
|
|
|
109,202
|
|
||
Accumulated depreciation and amortization
|
|
(94,141
|
)
|
|
(83,659
|
)
|
||
Property and equipment, net
|
|
$
|
30,278
|
|
|
$
|
25,543
|
|
|
|
December 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Service inventory
|
|
$
|
16,613
|
|
|
$
|
15,641
|
|
Accumulated depreciation
|
|
(14,785
|
)
|
|
(14,151
|
)
|
||
Service inventory, net
|
|
$
|
1,828
|
|
|
$
|
1,490
|
|
|
|
December 31
|
||||||
|
|
2013
|
|
2012
|
||||
Deferred product revenue
|
|
$
|
54,065
|
|
|
$
|
36,848
|
|
Deferred service revenue
|
|
87,900
|
|
|
60,466
|
|
||
Total deferred revenue
|
|
141,965
|
|
|
97,314
|
|
||
Less long-term deferred revenue
|
|
(50,477
|
)
|
|
(29,254
|
)
|
||
Deferred revenue in current liabilities
|
|
$
|
91,488
|
|
|
$
|
68,060
|
|
|
|
Operating
Leases
|
|
Development
Agreements
|
||||
2014
|
|
$
|
4,120
|
|
|
$
|
4,268
|
|
2015
|
|
3,596
|
|
|
217
|
|
||
2016
|
|
3,647
|
|
|
25
|
|
||
2017
|
|
2,991
|
|
|
—
|
|
||
2018
|
|
1,534
|
|
|
—
|
|
||
Thereafter
|
|
2,029
|
|
|
—
|
|
||
Minimum contractual commitments
|
|
$
|
17,917
|
|
|
$
|
4,510
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Current provision (benefit):
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
484
|
|
|
$
|
1,162
|
|
|
$
|
(106
|
)
|
State
|
|
696
|
|
|
2,768
|
|
|
37
|
|
|||
Foreign
|
|
801
|
|
|
541
|
|
|
271
|
|
|||
Total current provision
|
|
1,981
|
|
|
4,471
|
|
|
202
|
|
|||
Deferred (benefit) provision:
|
|
|
|
|
|
|
||||||
Federal
|
|
(13,160
|
)
|
|
1,362
|
|
|
(12,935
|
)
|
|||
State
|
|
(327
|
)
|
|
1,415
|
|
|
(936
|
)
|
|||
Foreign
|
|
312
|
|
|
243
|
|
|
(525
|
)
|
|||
Total deferred (benefit) provision
|
|
(13,175
|
)
|
|
3,020
|
|
|
(14,396
|
)
|
|||
Total (benefit) provision for income taxes
|
|
$
|
(11,194
|
)
|
|
$
|
7,491
|
|
|
$
|
(14,194
|
)
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Income tax provision at statutory rate
|
|
$
|
7,360
|
|
|
$
|
59,056
|
|
|
$
|
47
|
|
State taxes, net of federal benefit
|
|
369
|
|
|
4,183
|
|
|
(972
|
)
|
|||
Foreign income taxes
|
|
(749
|
)
|
|
(518
|
)
|
|
(406
|
)
|
|||
Stock compensation adjustment
|
|
(8,419
|
)
|
|
—
|
|
|
—
|
|
|||
Deemed dividends for U.S. income tax purposes
|
|
477
|
|
|
2,352
|
|
|
338
|
|
|||
Nondeductible expenses
|
|
208
|
|
|
549
|
|
|
242
|
|
|||
Liquidation of subsidiary
|
|
—
|
|
|
(30,704
|
)
|
|
—
|
|
|||
Disallowed compensation
|
|
19
|
|
|
492
|
|
|
—
|
|
|||
Research and development tax credit
|
|
(5,736
|
)
|
|
—
|
|
|
(1,524
|
)
|
|||
Effect of change in valuation allowance on deferred tax assets
|
|
(4,723
|
)
|
|
(27,919
|
)
|
|
(11,919
|
)
|
|||
Effective income tax provision (benefit)
|
|
$
|
(11,194
|
)
|
|
$
|
7,491
|
|
|
$
|
(14,194
|
)
|
|
|
December 31,
|
||||||
|
|
2013
|
|
2012
|
||||
Current:
|
|
|
|
|
||||
Deferred Income Tax Assets
|
|
|
|
|
||||
Inventory
|
|
$
|
3,388
|
|
|
$
|
5,397
|
|
Accrued compensation
|
|
460
|
|
|
912
|
|
||
Deferred revenue
|
|
12,100
|
|
|
6,185
|
|
||
Net operating loss carryforwards
|
|
5,922
|
|
|
3,467
|
|
||
Other
|
|
8,120
|
|
|
1,092
|
|
||
Gross current deferred tax assets
|
|
29,990
|
|
|
17,053
|
|
||
Valuation allowance
|
|
(20,107
|
)
|
|
(13,970
|
)
|
||
Current deferred tax assets
|
|
9,883
|
|
|
3,083
|
|
||
Deferred Income Tax Liabilities
|
|
|
|
|
||||
Other
|
|
(688
|
)
|
|
—
|
|
||
Current deferred tax liabilities
|
|
(688
|
)
|
|
—
|
|
||
Net current deferred tax assets
|
|
$
|
9,195
|
|
|
$
|
3,083
|
|
Long-Term:
|
|
|
|
|
||||
Deferred Income Tax Assets
|
|
|
|
|
||||
Property and equipment
|
|
$
|
328
|
|
|
$
|
411
|
|
Research and experimentation credit carryforwards
|
|
23,941
|
|
|
18,301
|
|
||
Net operating loss carryforwards
|
|
47,154
|
|
|
59,039
|
|
||
Goodwill
|
|
628
|
|
|
912
|
|
||
Other
|
|
10,161
|
|
|
5,563
|
|
||
Gross long-term deferred tax assets
|
|
82,212
|
|
|
84,226
|
|
||
Valuation allowance
|
|
(57,687
|
)
|
|
(68,547
|
)
|
||
Long-term deferred tax assets
|
|
24,525
|
|
|
15,679
|
|
||
Deferred Income Tax Liabilities
|
|
|
|
|
||||
Property and equipment
|
|
(1,905
|
)
|
|
(1,363
|
)
|
||
Intangible assets
|
|
(2,059
|
)
|
|
(3,002
|
)
|
||
Other
|
|
(1,355
|
)
|
|
(1,273
|
)
|
||
Long-term deferred tax liabilities
|
|
(5,319
|
)
|
|
(5,638
|
)
|
||
Net long-term deferred tax asset
|
|
$
|
19,206
|
|
|
$
|
10,041
|
|
Balance at December 31, 2010
|
$
|
20
|
|
Lapse of statute of limitations
|
(20
|
)
|
|
Balance at December 31, 2011
|
$
|
—
|
|
Increase related to current year income tax positions
|
470
|
|
|
Balance at December 31, 2012
|
$
|
470
|
|
Decrease related to prior year income tax positions
|
(268
|
)
|
|
Balance at December 31, 2013
|
$
|
202
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Risk-free interest rate
|
|
0.98
|
%
|
|
0.56
|
%
|
|
0.67
|
%
|
|||
Expected dividend yield
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Volatility
|
|
50.45
|
%
|
|
74.84
|
%
|
|
74.37
|
%
|
|||
Expected life (in years)
|
|
4.0
|
|
|
4.0
|
|
|
4.0
|
|
|||
Weighted average Black-Scholes value of options granted
|
|
$
|
8.22
|
|
|
$
|
6.56
|
|
|
$
|
3.34
|
|
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted Average Remaining
Contractual
Term (Years)
|
|||
Outstanding at January 1, 2011
|
|
3,445,710
|
|
|
$
|
6.20
|
|
|
|
Granted
|
|
476,500
|
|
|
6.08
|
|
|
|
|
Exercised
|
|
(248,271
|
)
|
|
4.39
|
|
|
|
|
Canceled and forfeited
|
|
(256,019
|
)
|
|
6.65
|
|
|
|
|
Outstanding at December 31, 2011
|
|
3,417,920
|
|
|
6.28
|
|
|
|
|
Granted
|
|
359,500
|
|
|
11.90
|
|
|
|
|
Exercised
|
|
(1,346,326
|
)
|
|
5.52
|
|
|
|
|
Canceled and forfeited
|
|
(137,589
|
)
|
|
11.35
|
|
|
|
|
Outstanding at December 31, 2012
|
|
2,293,505
|
|
|
7.31
|
|
|
|
|
Granted
|
|
346,360
|
|
|
20.65
|
|
|
|
|
Exercised
|
|
(495,221
|
)
|
|
6.38
|
|
|
|
|
Canceled and forfeited
|
|
(66,575
|
)
|
|
21.97
|
|
|
|
|
Outstanding at December 31, 2013
|
|
2,078,069
|
|
|
9.29
|
|
|
7.0
|
|
Exercisable at December 31, 2013
|
|
1,233,951
|
|
|
6.35
|
|
|
5.9
|
|
Available for grant at December 31, 2013
|
|
3,171,322
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|||
Outstanding at January 1, 2011
|
|
1,380,491
|
|
|
$
|
4.77
|
|
Granted
|
|
513,587
|
|
|
6.04
|
|
|
Forfeited
|
|
(146,677
|
)
|
|
5.29
|
|
|
Vested
|
|
(444,987
|
)
|
|
4.03
|
|
|
Outstanding at December 31, 2011
|
|
1,302,414
|
|
|
5.47
|
|
|
Granted
|
|
1,316,447
|
|
|
11.99
|
|
|
Forfeited
|
|
(31,771
|
)
|
|
7.64
|
|
|
Vested
|
|
(384,352
|
)
|
|
5.86
|
|
|
Outstanding at December 31, 2012
|
|
2,202,738
|
|
|
9.27
|
|
|
Granted
|
|
755,979
|
|
|
20.93
|
|
|
Forfeited
|
|
(75,437
|
)
|
|
14.48
|
|
|
Vested
|
|
(661,580
|
)
|
|
6.22
|
|
|
Outstanding at December 31, 2013
|
|
2,221,700
|
|
|
13.97
|
|
|
|
Outstanding Options
|
|
Exercisable Options
|
||||||||||||
Range of Exercise
Prices per Share
|
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Life (Years)
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise
Price
|
||||||
$ 0.00 - $ 4.00
|
|
348,488
|
|
|
5.3
|
|
$
|
3.72
|
|
|
348,488
|
|
|
$
|
3.72
|
|
$ 4.01 - $ 6.00
|
|
352,269
|
|
|
6.1
|
|
$
|
5.47
|
|
|
296,668
|
|
|
$
|
5.47
|
|
$ 6.01 - $ 8.00
|
|
564,801
|
|
|
6.8
|
|
$
|
6.28
|
|
|
343,010
|
|
|
$
|
6.40
|
|
$ 8.01 - $ 50.28
|
|
812,511
|
|
|
8.3
|
|
$
|
15.42
|
|
|
245,785
|
|
|
$
|
11.09
|
|
$ 0.00 - $ 50.28
|
|
2,078,069
|
|
|
7.0
|
|
$
|
9.29
|
|
|
1,233,951
|
|
|
$
|
6.35
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Cost of product revenue
|
|
$
|
135
|
|
|
$
|
57
|
|
|
$
|
177
|
|
Cost of service revenue
|
|
229
|
|
|
258
|
|
|
369
|
|
|||
Research and development
|
|
1,480
|
|
|
1,327
|
|
|
784
|
|
|||
Sales and marketing
|
|
2,230
|
|
|
1,717
|
|
|
490
|
|
|||
General and administrative
|
|
3,165
|
|
|
2,604
|
|
|
1,808
|
|
|||
Total share-based compensation expense
|
|
$
|
7,239
|
|
|
$
|
5,963
|
|
|
$
|
3,628
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Revenue:
|
|
|
|
|
|
|
||||||
HPC Systems
|
|
$
|
369,623
|
|
|
$
|
298,255
|
|
|
$
|
139,590
|
|
Maintenance and Support
|
|
77,842
|
|
|
62,244
|
|
|
62,386
|
|
|||
Storage and Data Management
|
|
63,887
|
|
|
50,246
|
|
|
7,197
|
|
|||
Engineering Services and Other
|
|
14,397
|
|
|
10,313
|
|
|
26,873
|
|
|||
Total revenue
|
|
$
|
525,749
|
|
|
$
|
421,058
|
|
|
$
|
236,046
|
|
Cost of Revenue:
|
|
|
|
|
|
|
||||||
HPC Systems
|
|
$
|
259,167
|
|
|
$
|
193,296
|
|
|
$
|
90,686
|
|
Maintenance and Support
|
|
39,233
|
|
|
36,510
|
|
|
31,558
|
|
|||
Storage and Data Management
|
|
38,165
|
|
|
35,642
|
|
|
6,557
|
|
|||
Engineering Services and Other
|
|
4,858
|
|
|
4,432
|
|
|
12,879
|
|
|||
Total cost of revenue
|
|
$
|
341,423
|
|
|
$
|
269,880
|
|
|
$
|
141,680
|
|
Gross Profit:
|
|
|
|
|
|
|
||||||
HPC Systems
|
|
$
|
110,456
|
|
|
$
|
104,959
|
|
|
$
|
48,904
|
|
Maintenance and Support
|
|
38,609
|
|
|
25,734
|
|
|
30,828
|
|
|||
Storage and Data Management
|
|
25,722
|
|
|
14,604
|
|
|
640
|
|
|||
Engineering Services and Other
|
|
9,539
|
|
|
5,881
|
|
|
13,994
|
|
|||
Total gross profit
|
|
$
|
184,326
|
|
|
$
|
151,178
|
|
|
$
|
94,366
|
|
|
|
United
States
|
|
All
Other
Countries
|
|
Total
|
||||||
For the year ended December 31, 2013:
|
|
|
|
|
|
|
||||||
Product revenue
|
|
$
|
297,583
|
|
|
$
|
138,747
|
|
|
$
|
436,330
|
|
Service revenue
|
|
$
|
62,072
|
|
|
$
|
27,347
|
|
|
$
|
89,419
|
|
Long-lived assets
|
|
$
|
58,910
|
|
|
$
|
6,146
|
|
|
$
|
65,056
|
|
For the year ended December 31, 2012:
|
|
|
|
|
|
|
||||||
Product revenue
|
|
$
|
301,162
|
|
|
$
|
52,605
|
|
|
$
|
353,767
|
|
Service revenue
|
|
$
|
42,359
|
|
|
$
|
24,932
|
|
|
$
|
67,291
|
|
Long-lived assets
|
|
$
|
57,549
|
|
|
$
|
4,460
|
|
|
$
|
62,009
|
|
For the year ended December 31, 2011:
|
|
|
|
|
|
|
||||||
Product revenue
|
|
$
|
95,929
|
|
|
$
|
59,632
|
|
|
$
|
155,561
|
|
Service revenue
|
|
$
|
56,660
|
|
|
$
|
23,825
|
|
|
$
|
80,485
|
|
Long-lived assets
|
|
$
|
28,281
|
|
|
$
|
4,085
|
|
|
$
|
32,366
|
|
|
|
|
||||||||||
|
|
2013
|
|
2012
|
|
2011
|
||||||
Gross research and development expenses
|
|
$
|
92,469
|
|
|
$
|
86,305
|
|
|
$
|
76,993
|
|
Less: Amounts included in cost of revenue
|
|
(3,741
|
)
|
|
(1,080
|
)
|
|
(410
|
)
|
|||
Less: Reimbursed research and development (excludes amounts in revenue)
|
|
(1,000
|
)
|
|
(20,922
|
)
|
|
(27,131
|
)
|
|||
Net research and development expenses
|
|
$
|
87,728
|
|
|
$
|
64,303
|
|
|
$
|
49,452
|
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Interest income
|
|
$
|
894
|
|
|
$
|
397
|
|
|
$
|
229
|
|
Interest expense
|
|
(137
|
)
|
|
(193
|
)
|
|
(262
|
)
|
|||
Net interest income (expense)
|
|
$
|
757
|
|
|
$
|
204
|
|
|
$
|
(33
|
)
|
|
|
2013
|
2012
|
|||||||||||||||||||||||||||||
For the Quarter Ended
|
|
3/31
|
|
6/30
|
|
9/30
|
|
12/31
|
|
3/31
|
|
6/30
|
|
9/30
|
|
12/31
|
||||||||||||||||
Revenue
|
|
$
|
79,547
|
|
|
$
|
84,467
|
|
|
$
|
54,366
|
|
|
$
|
307,369
|
|
|
$
|
112,307
|
|
|
$
|
84,183
|
|
|
$
|
35,739
|
|
|
$
|
188,829
|
|
Cost of revenue
|
|
55,397
|
|
|
57,666
|
|
|
33,940
|
|
|
194,420
|
|
|
67,151
|
|
|
49,688
|
|
|
18,407
|
|
|
134,634
|
|
||||||||
Gross profit
|
|
24,150
|
|
|
26,801
|
|
|
20,426
|
|
|
112,949
|
|
|
45,156
|
|
|
34,495
|
|
|
17,332
|
|
|
54,195
|
|
||||||||
Research and development, net
|
|
20,226
|
|
|
19,968
|
|
|
21,555
|
|
|
25,979
|
|
|
23,750
|
|
|
6,893
|
|
|
15,483
|
|
|
18,177
|
|
||||||||
Sales and marketing
|
|
11,143
|
|
|
11,550
|
|
|
11,480
|
|
|
17,172
|
|
|
7,873
|
|
|
10,233
|
|
|
6,495
|
|
|
12,579
|
|
||||||||
General and administrative
|
|
5,485
|
|
|
5,085
|
|
|
4,970
|
|
|
8,063
|
|
|
5,130
|
|
|
4,971
|
|
|
3,324
|
|
|
7,282
|
|
||||||||
Net income (loss)
|
|
(7,609
|
)
|
|
(150
|
)
|
|
(11,025
|
)
|
|
51,007
|
|
|
4,964
|
|
|
147,422
|
|
|
(5,151
|
)
|
|
14,006
|
|
||||||||
Net income (loss) per common share, basic
|
|
$
|
(0.20
|
)
|
|
$
|
—
|
|
|
$
|
(0.29
|
)
|
|
$
|
1.33
|
|
|
$
|
0.14
|
|
|
$
|
4.05
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.38
|
|
Net income (loss) per common share, diluted
|
|
$
|
(0.20
|
)
|
|
$
|
—
|
|
|
$
|
(0.29
|
)
|
|
$
|
1.27
|
|
|
$
|
0.13
|
|
|
$
|
3.90
|
|
|
$
|
(0.14
|
)
|
|
$
|
0.36
|
|
Description
|
|
Balance at
Beginning
of Period
|
|
Charge/(Benefit)
to Expense
|
|
Deductions
|
|
Balance at
End of
Period
|
||||||||
Year ended December 31, 2011:
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
123
|
|
|
$
|
(13
|
)
|
|
$
|
—
|
|
|
$
|
110
|
|
Year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
110
|
|
|
$
|
(62
|
)
|
|
$
|
(43
|
)
|
|
$
|
5
|
|
Year ended December 31, 2013:
|
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
|
$
|
5
|
|
|
$
|
179
|
|
|
$
|
(27
|
)
|
|
$
|
157
|
|
(1)
|
The Company does not have any warranty liabilities.
|
(2)
|
Deductions represent uncollectible accounts written off, net of recoveries.
|
1.
|
Term of Agreement
. This Agreement shall commence on the date hereof and shall continue in effect until (a) your employment with the Company is terminated by you or the Company (i) other than in connection with a Potential Change of Control or a Change of Control pursuant to which you become entitled to receive the compensation and benefits described in Section 4(b), or (ii) pursuant to written agreement between the Company and you, or (b) the commencement of the twenty-fifth (25) month following the occurrence of a Change of Control.
|
2.
|
Definitions
. As used in this Agreement:
|
(a)
|
“
Beneficial Owner
” has the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
|
(b)
|
“
Cause
” means a termination of employment resulting from a good faith determination by the Board of Directors that:
|
(i)
|
you have willfully failed or refused in a material respect to follow reasonable policies or directives established by the Board of Directors or the Chief Executive Officer or willfully failed or refused to attend to material duties or obligations of your office (other than any such failure resulting from your incapacity due to physical or mental illness), which you have failed to correct within a reasonable period following written notice to you from the Chief Executive Officer or the Chairman of the Board that specifically identifies the manner in which you have not so performed your material duties and obligations, or
|
(ii)
|
there has been an act by you involving wrongful misconduct, including without limitation a conviction of or the entering into a plea of guilty or
nolo contendere
to a felony, which has a demonstrably adverse impact on or has caused material damage to the Company, or which constitutes a material misappropriation of the assets of the Company; or
|
(iii)
|
you have engaged in an unauthorized disclosure of confidential information which has a demonstrably adverse impact on or has caused material damage to the Company; or
|
(iv)
|
you, while employed by the Company, have performed services for another company or person which competes with the Company, without the prior written approval of the Chief Executive Officer of the Company; or
|
(c)
|
“
Change of Control
” of the Company means and includes each and all of the following:
|
(i)
|
The consummation of a merger, consolidation, share exchange or other reorganization of the Company with any other entity, other than a merger, consolidation, share exchange or reorganization which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger, consolidation, share exchange or reorganization;
|
(ii)
|
The consummation of a sale, lease, exchange or other disposition (in one transaction or a series of related transactions) of all, or substantially all, of the Company’s assets;
|
(iv)
|
The acquisition by any means by any Person as Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities except pursuant to a negotiated agreement with the Company pursuant to which such securities are purchased from the Company; or
|
(v)
|
At any time during any twenty-four (24) month period the individuals who at the beginning of such period constituted the Board (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof, provided, however, that the term “Incumbent Director” shall also include each new director elected during such twenty-four (24) month period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office.
|
(d)
|
“
COBRA
” means 29 U.S. Code, Sections 1161 through 1168, as amended.
|
(e)
|
“
Code
” means the Internal Revenue Code of 1986, as amended from time to time.
|
(f)
|
“
Company
” means Cray Inc., a Washington corporation, and if the context reasonably requires, any subsidiary of the Company, and any successor as provided in Section 8.
|
(g)
|
“
Compensation
” means the sum of (i) one year of base salary, at the highest per pay period base salary rate that you were paid by the Company in the twelve (12)-month period prior to the date of the Notice of Termination plus (ii) your 100% target incentive award under the Company’s annual cash incentive plan and any other cash incentive or bonus awards approved by the Board for the calendar year in which your Date of Termination occurs (assuming for this purpose that all conditions to payment at 100% of target awards and of other awards and bonuses, if any, have
|
(h)
|
“
Disability
” has the meaning given such term in the Company’s disability plans as in effect immediately prior to the earlier of a Potential Change of Control, if any, or Change of Control.
|
(i)
|
“
Good Reason
” means a material negative change in the employment relationship between you and the Company, unless you otherwise agree, including without limitation:
|
(i)
|
a material reduction in your base salary in effect immediately prior to the earlier of a Potential Change of Control, if any, or Change of Control, which for purposes of this Agreement means a reduction by more than 5% (whether in one or a series of reductions) compared to your applicable base salary before the first such reduction;
|
(ii)
|
a material reduction in your annual target award opportunity under the Company’s annual cash incentive plan, which shall be deemed to include reductions that would reduce your total target compensation (including base salary but excluding the value of any equity component) by more than 5% compared to your total target compensation for the immediately preceding year (including base salary but excluding the value of any equity component);
|
(iii)
|
a material diminution of your status, title, position(s) or responsibilities from your status, title, position(s) and responsibilities (including reporting responsibilities) as in effect immediately prior to the earlier of the Potential Change of Control, if any, or Change of Control, or the assignment to you of any substantive duties or responsibilities which are inconsistent with such status, title, position(s) or responsibilities (in either case other than isolated, insubstantial or inadvertent actions which are remedied promptly after notice);
|
(iv)
|
a request by the Company for you to relocate (except for office relocations that would not increase your one-way commute by more than 25 miles), or a change of your customary office location which results in substantially increased air or other travel compared to such travel during the twelve (12) month period immediately prior to the earlier of a Potential Change of Control, if any, or Change of Control (an increase for a reasonably sustained period of 25% per week and/or 25% of the time shall be deemed to be substantially increased travel, excluding increased travel for temporary projects or arrangements, and it being understood that in general you can expect to travel at least 25% of the time); or
|
(i)
|
the discontinuance of, or a reduction in, benefit plans or other policies of the Company intended to benefit the Company’s employees in which you participated immediately prior to the earlier of a Potential Change of Control, if any, or Change of Control where the consequence to you is a material overall reduction in benefits, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan or plans) has been made with respect to such plans, or the failure by the Company to continue your participation therein (or in such substitute or alternative plans) on a basis not materially less favorable, both in terms of the amounts of benefits provided and the level of your participation relative to other participants, as existed immediately prior to the earlier of a Potential Change of Control, if any, or Change of Control; or
|
(vi)
|
the failure of the Company to obtain the assumption of the Agreement as required by Section 8.
|
(A)
|
it agrees with your Notice of Termination, in which event Good Reason shall be deemed to have occurred,
|
(B)
|
it intends to correct fully the circumstances giving rise to the claim of Good Reason and within thirty (30)-days of the receipt of the Notice of Termination, it corrects, rescinds or otherwise substantially reverses the circumstances supporting your claim for termination for Good Reason, in which event “Good Reason” shall be deemed not to have occurred, or
|
(C)
|
a dispute exists concerning whether Good Reason exists, and Sections 3(d) and 9(i) shall apply to such dispute.
|
(j)
|
“
Person
” has the meaning given such term in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act, but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as Trustee).
|
(k)
|
“
Potential Change of Control
” of the Company means the occurrence of any of the following:
|
(i)
|
the Company enters into an agreement, the consummation of which would result in the occurrence of a Change of Control of the Company;
|
(ii)
|
any Person or the Company publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change of Control of the Company; or
|
(iii)
|
the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change of Control of the Company has occurred.
|
(l)
|
“
Retirement
” means your voluntary termination of employment on or after your 65th birthday, or at an earlier age pursuant to a written agreement between you and the Company with respect to retirement.
|
(m)
|
“
Specified Employee
” has the meaning given such term in Section 409A of the Code and the final regulations thereunder, as in effect from time to time (“Final 409A Regulations”), provided, however, that, as permitted in the Final 409A Regulations, the Company’s Specified Employees and the application of the six (6)-month delay rule of Section 409A(a)(2)(B)(i) of the Code shall be determined in accordance with rules adopted by the Board, which shall be applied consistently, with respect to all nonqualified deferred compensation arrangements of the Company, including this Agreement and similar agreements with other officers of the Company.
|
(a)
|
Any purported termination by the Company or by you shall be communicated by written Notice of Termination to the other party hereto.
|
(b)
|
For purposes of this Agreement, a “
Notice of Termination
” shall mean a notice in writing which indicates the specific termination provision(s) in this Agreement relied upon, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision(s) so indicated, and sets forth the applicable Date of Termination.
|
(c)
|
For purposes of this Agreement, the “
Date of Termination
” means, unless the Company and you agree to a different Date of Termination:
|
(ii)
|
if your employment is terminated by the Company for Cause, the date on which a Notice of Termination is given unless a subsequent Date of Termination is specified in such Notice,
|
(iii)
|
if your employment is terminated by the Company other than for Cause, or if your employment is terminated by you without a claim of Good Reason, the date specified in the Notice of Termination, or
|
(iv)
|
if you claim that you are terminating your employment for Good Reason, the date thirty (30) days after the date on which the Notice of Termination is given, unless:
|
(A)
|
an earlier Date of Termination has been specified or designated by the Company either in advance of, or after, receiving such Notice of Termination, pursuant to clauses (c)(ii) or (c)(iii) above, or
|
(B)
|
there is a dispute about whether Good Reason exists, in which case the Date of Termination shall be determined as set forth in Section 3(d) below.
|
(e)
|
Notwithstanding anything to the contrary in this Agreement, (i) if at any time before the Date of Termination determined pursuant to this Agreement with respect to any purported termination by you of your employment with the Company, there exists a good faith basis for the Company to terminate your employment for Cause, then the Company may, regardless of whether or not you have given Notice of Termination for Good Reason and regardless of whether or not Good Reason exists, terminate your employment for Cause, in which event you shall not be entitled to the compensation and benefits provided in this Agreement, and (ii) if you die or your employment is terminated based on Disability after you have given Notice of Termination for Good Reason and before the Date of Termination specified in that Notice of Termination and if it is subsequently finally determined that Good Reason existed at the time your employment terminated, then termination of your employment shall be deemed to have occurred for Good Reason (and not due to your death or Disability), and you shall be entitled to the compensation and benefits provided in Section 4.
|
4.
|
Termination and Resulting Compensation and Benefits
.
|
(a)
|
If, after the occurrence of a Potential Change of Control (and during the pendency of a Change of Control resulting from such Potential Change of Control), concurrent with a Change of Control, or within twenty-four (24) months after a Change of Control, your employment by the Company shall be terminated by the Company without Cause or due to Disability or death, or you terminate your employment for Good Reason, then you or your estate shall be entitled to receive the following:
|
(i)
|
Your full base salary through the Date of Termination to be paid pursuant to the Company’s standard payroll procedures, subject to Section 8, if applicable;
|
(ii)
|
Your accrued vacation pay, if any, which shall be paid in accordance with the Company’s practice for paying accrued vacation to terminating employees; and
|
(iii)
|
All amounts payable under the Company’s annual cash incentive plan for the calendar year immediately prior to the year in which the Date of Termination occurs which have not been paid to you on or before the Date of Termination,
provided
, if the Board has not yet approved the payment of any such amount for the prior calendar year by the date of your Notice of Termination, you will be paid your 100% target award under the Company’s annual cash incentive plan for that prior calendar year (in calculating such awards it shall be assumed for this purpose that all conditions to payment at 100% of target awards have been satisfied), with such amounts to be paid on the earlier of the date on which the non-terminated officers of the Company receive their payments under the cash incentive plan for such preceding calendar year or March 15 of the year in which the Date of Termination occurs; and
|
(iv)
|
All other compensation and benefits earned but not yet paid at the Date of Termination and all benefits as may be provided under the Company’s insurance and other benefit plans, programs and arrangements that provide you with the greatest of the benefits in effect immediately prior to the Potential Change of Control, if any, or the Change of Control or as in effect on the date of the Notice of Termination, such compensation and benefits to be paid or provided in the normal course pursuant to such plans, programs and arrangements.
|
(b)
|
If, after the occurrence of a Potential Change of Control (and during the pendency of a Change of Control resulting from such Potential Change of Control), concurrent with a Change of Control, or within twenty-four (24) months after a Change of Control, your employment by the Company shall be terminated by the Company without Cause, or you terminate your employment for Good Reason, then you, in addition to the payments specified in Section 4(a), shall be entitled to receive the following from the Company in lieu of any other severance compensation or benefits:
|
(i)
|
As severance pay and in lieu of any further salary for periods subsequent to the Date of Termination, an amount of cash in a single lump sum equal to two times your Compensation (“Termination Payment”), subject to the provisions of Section 8; and
|
(ii)
|
The following benefits:
|
(A)
|
For a period of up to eighteen (18) months from your Date of Termination, if you elect to continue coverage under COBRA for medical, dental, vision and orthodontia benefits that you and any dependents were receiving immediately prior to the Date of Termination, the Company will pay the entire cost of the COBRA coverage you had last elected for yourself, your spouse and your dependents under the Company’s medical, dental, vision and orthodontia plans prior to the date of the Notice of Termination or any lesser level of such benefits that you elect, and
|
(B)
|
The Company will reimburse you for the cost of an individual term life insurance policy on you for the period from the Date of Termination up to twenty-four (24) months with coverage up to the coverage amount provided by the Company to you immediately prior to the Notice of Termination of employment or, if greater, provided immediately prior to the Potential Change of Control, if any, or the Change of Control (currently a maximum of $500,000); if you cannot reasonably obtain such a life insurance policy for reasons of insurability, then, pursuant and subject to the limitations of the Company’s group insurance plan then in effect, which may include a lower level of insurance coverage and a shorter term, you may elect to convert your group coverage to individual coverage and the Company will pay the cost thereof, such conversion being effectuated no later than the time limits then applicable under the Company’s group insurance plan (currently thirty-one (31) days following the Date of Termination);
provided
that you shall submit appropriate evidence of such insurance and the premiums you paid within three (3) months of obtaining such insurance, and the Company shall reimburse you in the normal course for reimbursement of expenses and in any event within 3 (three) months of receipt of the appropriate documentation and information,
|
(C)
|
Each of the benefits identified in this Section 4(b)(ii) will be provided for a period ending on the earlier of (I) with respect to the payment or reimbursement of COBRA premiums for medical, dental, vision and orthodontia coverage, a period of no more than the eighteen (18) month COBRA period from the Date of Termination, and with respect to the life insurance benefits, for a period of no more than twenty-four (24) months from the Date of Termination, or (II) when you are employed by an employer (including the Company) that provides medical, dental, vision, orthodontia and/or life insurance benefits, as the case may be, and you are eligible to receive any such benefits. You hereby agree to notify the Company promptly if you accept employment with another employer and to provide the Company with relevant information regarding the benefits provided by such employer; and
|
(iii)
|
The Company agrees that, in addition to the Termination Payment, all outstanding stock options previously granted to you prior to the Change of Control (including any options issued in substitution or assumption of such options as a result of a Change of Control), whether vested or unvested, shall immediately have their vesting accelerated upon such termination, and such options shall be exercisable for the full number of shares covered thereby (including any portion not previously vested) and all such outstanding options shall be exercisable at any time before the earliest of (A) the respective expiration dates of the options, assuming that your employment had not been terminated, (B) the tenth (10
th
) anniversary of the original date of grant of
|
(iv)
|
If you hold any restricted shares of the Company’s common stock (including any restricted shares issued in substitution or assumption of such shares as a result of a Change of Control), then the vesting of such shares shall be accelerated to the extent, if at all, provided by the terms of the agreement governing such restricted shares; and
|
(v)
|
The Company will pay for outplacement services (Lee Hecht Harrison LLC Executive Transition Services or equivalent) with the Key Executive Level program for the Chief Executive Officer, the Chief Financial Officer and Senior Vice Presidents and the ProSearch 6 program for Vice Presidents) for a period ending the earliest of (A) when you complete the outplacement services program, (B) when you accept employment with another employer, provided that you commence such outplacement services within six (6) months following your Date of Termination. If the Company reimburses you for the expense of such services, you shall submit the expense to the Company within three (3) months of your receipt of the statement for such services and the Company shall reimburse you in the normal course for reimbursement of expenses and in any event within three (3) months of receipt of the statement and all other appropriate documentation and information.
|
(c)
|
The payments provided for in Section 4(b)(i) shall be made not later than the fifth (5
th
)
business day after you execute and deliver the agreement and release required under Section 5 and the expiration of required revocation periods contained therein,
provided
,
however
, that if authorization of payment of such amount at that time or the actual payment of such amount at that time would cause such payment to be subject to Section 409A of the Code, the payment will be made as set forth in Section 8, and provided further that, if the amount of such payment due on the fifth (5
th
) business day following your execution and delivery of the agreement and release required under Section 5 and the lapse of any revocation period following such release cannot be finally determined on or before that payment date, the Company shall pay to you on such date an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the fifteenth (15th) day after you return the executed agreement and release under Section 5 and the revocation period has expired. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, you shall be obligated to repay such excess amount on the fifth (5
th
) business day after receipt of written demand by the Company, together with interest at the rate provided in Section 1274(b)(2)(B) of the Code. At the time that payments are made under this Section, the Company will provide you with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including any opinions or other advice the Company received from Tax Counsel, outside counsel, auditors or consultants.
|
(d)
|
If the Company terminates your employment for Cause or, except as set forth in Section 4(a) for Disability or death, your employment is terminated due to Disability, death or retirement, or you voluntarily resign without Good Reason, then this Agreement does not apply and any payments due you or your estate shall be pursuant to applicable law or other applicable insurance and benefit plans, programs, arrangements and policies of the Company.
|
5.
|
Conditions to Payments
. Before making any payments and providing any benefits specified in Sections 4(b), the Company has the right to require you to execute and return to the Company no later than the March 1 of the year following the year in which your Date of Terminations occurs the Company’s standard termination agreement and general release and any required revocation or waiting period shall have expired. The Company shall deliver in good faith its standard agreement and general release as soon as is reasonably practicable but no later than ten (10) business days following receipt of your Notice of Termination (unless mutually extended by you and the Company).
|
6.
|
No Mitigation
. You shall not be required to mitigate the amount of any payment provided for in Section 4 hereof by seeking other employment or otherwise, nor, except as set forth in Section 4(b)(ii), shall the amount of such payment be reduced by reason of compensation or other income you receive for services rendered after your termination of employment with the Company.
|
7.
|
Company's Successors
. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, to expressly assume and agree to perform the obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Section 7, "Company" includes any successor to its business or assets as aforesaid which executes and delivers this Agreement or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.
|
8.
|
Section 409A
. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under this Agreement by reason of your separation from service when you are a Specified Employee, then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(iv) (payment of employment taxes), the following shall apply:
|
(a)
|
If the payment or distribution is payable in a lump sum, your right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of your death or the first (1
st
) day of the seventh (7
th
) month following your separation from service; and
|
(b)
|
If the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six (6)-month period immediately following your separation from service will be accumulated and your right to receive payment or distribution of such accumulated amount will be delayed until the earlier of your death or the first (1
st
) day of the seventh (7
th
) month following your separation from service, whereupon the accumulated amount will be paid or distributed to you, or to your estate, and the normal payment or distribution schedule for any remaining payments or distributions will resume.
|
9.
|
Miscellaneous
.
|
(a)
|
Notices
. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or five (5) business days after deposit with postal authorities transmitted by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company at its corporate headquarters, attention of the General Counsel, and to you at the addresses set forth on the last page of this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
|
(b)
|
Amendment or Waiver
. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing by you and the Company. No waiver of either party at any time of the breach of, or lack of compliance with, any conditions or provisions of this Agreement shall be deemed a waiver of the provisions or conditions hereof.
|
(c)
|
Sole Agreement
. This Agreement represents the entire agreement between you and the Company with respect to the matters set forth herein and supersedes and replaces all prior agreements with respect to the subject matter of this Agreement in their entirety. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement have been made by either party that are not set forth expressly herein.
|
(d)
|
Employee's Successors
. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts are still payable to you hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of the Agreement to your devisee, legatee or other designee or, if there be no such designees, to your estate.
|
(e)
|
Fees and Expenses.
Except as otherwise specifically set forth in this Agreement, each party shall bear its own costs and attorney’s fees that have been incurred. Notwithstanding the preceding, the Company shall pay, upon receipt of reasonable documentation, all legal fees and related expenses incurred by you, at least monthly, in connection with any legal proceedings, whether instituted by the Company or you, relating to the interpretation or enforcement of this Agreement as a result of (i) your termination under circumstances described in Sections 4(b) (including all such fees and expenses, if any, incurred in your contesting or disputing in good faith any such termination) or (ii) your seeking to obtain or enforce in good faith any right or benefit provided by this Agreement,
provided
, that if you instituted the proceeding and a finding (no longer subject to appeal) is entered that you instituted the proceeding in bad faith, you shall pay all of your costs and expenses, including attorneys’ fees and disbursements and reimburse the Company for any and all attorneys’ fees and disbursements the Company had paid on your behalf.
|
(f)
|
Survival.
The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 4, 5, 8, 9(e) and 9(i) of this Agreement shall survive termination of this Agreement.
|
(g)
|
Funding
. This Agreement shall be funded from the Company's general assets.
|
(h)
|
Validity
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.
|
(i)
|
Litigation
. Any dispute or controversy arising under or in connection with this Agreement shall be settled by litigation in a court of competent jurisdiction located in Seattle, Washington, and all parties consent to the jurisdiction and venue of such courts.
|
(j)
|
Applicable Law
. This Agreement shall be interpreted and enforced in accordance with the internal laws of the State of Washington without reference to its conflicts of laws provisions.
|
(k)
|
Counterparts
. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.
|
A.
|
In May the court decides that X had Good Reason What compensation and benefits does X receive?
|
I.
|
Purpose
|
II.
|
Definitions
|
III.
|
Eligibility
|
IV.
|
Administration
|
1.
|
Administrator
- This Plan shall be administered by the Committee in accordance with Plan provisions.
|
2.
|
Authority
- The Committee shall have all powers and discretion necessary or appropriate to interpret and administer the Plan and to control its operation. Such authority includes selecting Participants in the Plan, determining Bonus Targets for each Participant, determining Performance Measures and Bonus Formulas to score performance, determining which Participants shall be granted Bonus Awards, and determining the form and manner in which Bonus Awards will be made (which may include elective or mandatory deferral alternatives).
|
3.
|
Decisions Binding
- All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
|
4.
|
Delegation by Committee
- The Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority and powers under the Plan to one or more directors and/or officers of the Company; provided, however, that the Committee shall review and approve all recommendations for any payments pursuant to the Plan prior to such payments being made.
|
5.
|
Term of Plan
- Once approved by the Committee, this Plan shall be effective at the start of the Performance Period. Once approved, this Plan shall continue until the earlier of: 1) the end of the Performance Period; 2) termination of the Plan as described in the “Amendment and Termination Provisions” section below; or 3) termination of Participant from the Company’s employ, with respect to that Participant.
|
V.
|
Bonus Provisions
|
1.
|
Performance Period
|
2.
|
Executives who will be Participants for the Performance Period
|
3.
|
Bonus Target for each Participant
|
4.
|
Performance Targets for each Participant
|
5.
|
Bonus Formulas for each Participant
|
VI.
|
Bonus Award Determination
|
1.
|
The effects of currency fluctuation
|
2.
|
Any or all items excluded, or that could be excluded, from the calculation of non-GAAP earnings as reflected in any Company press release or 8-K filing relating to an earnings announcement
|
3.
|
Asset write-downs
|
4.
|
Litigation or claim judgments or settlements
|
5.
|
The effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results
|
6.
|
Accruals for reorganization and restructuring programs
|
7.
|
Any other extraordinary or non-operational items
|
8.
|
Acquisition or disposition costs
|
9.
|
The gain or losses as a result of a Board approved acquisition or disposition, including current year impact on bonus year targets planned without consideration of the transaction.
|
VII.
|
Right to Receive Payment
|
1.
|
Plan Unfunded and Unsecured
-
Each Bonus Award under this Plan shall be paid solely from the general assets of the Company. This Plan is unfunded and unsecured; nothing in this Plan shall be construed to create a trust or to establish or evidence any Participant’s claim of any right to, or form of, payment of a Bonus other than as an unsecured general creditor with respect to any payment to which he/she may be entitled.
|
2.
|
Termination of Employment
- Except as may otherwise be provided for in the “Bonus Award Payments” section below, in the event a Participant terminates employment with the Company prior to the end of a Performance Period, he/she shall not be entitled to payment of a Bonus Award for the applicable Performance Period pursuant to this Plan; provided that this provision shall not affect any amounts that may be due Participant under the Company’s Executive Severance Policy or other applicable policy or agreement).
|
VIII.
|
Bonus Award Payments
|
1.
|
Timing
-The Company shall distribute Bonus Awards to Participants as soon as is administratively practicable following the determination and written certification of the Committee for a Performance Period, but in no event later than March 15 of the year following the end of the fiscal year for which the Committee determines the Bonus Award.
|
2.
|
Active Employment
- Payment of a Bonus Award requires that Participant be an active employee on the Company’s payroll no later than October 1, 2013 and remain active until the last day of the Performance Period, subject to subsection 4. below. The Committee may make exceptions to the active employment requirement in the case of retirement, death or disability, or in the case of a corporate change in control, in each case determined on its own merits by the Committee.
|
3.
|
Manner of Payment
- Bonus Awards will be payable in cash as a single lump sum, subject to all applicable taxes and contributions required by law to be withheld in accordance with procedures established by the Company. Bonus Awards for Participants who become eligible after the first day of the Performance Period will be prorated accordingly.
|
4.
|
Change in Status
- A Participant whose change in status or move to part time results in he/she being ineligible to participate in this Plan in a Performance Period may receive a prorated Bonus Award, at the sole discretion of the Committee. A Participant whose change in reporting responsibilities results in he/she being ineligible to participate in this Plan in a Performance Period may receive a modified Bonus Award, at the sole discretion of the Committee. No Participant shall have any right to a prorated or modified Bonus Award, and the method in which a Bonus Award may be prorated or modified shall be determined by the Committee in its sole discretion.
|
5.
|
Recoupment of Bonus Award -
If the Company’s
reported financial or operating results become subject to a material restatement, the Committee may require Participant to pay to the Company an amount corresponding to the Bonus Award that Participant received under this Plan, or a portion of such award, that the Committee determines would not have been paid if Company results as originally published had been equal to Company results as subsequently restated. Any requirement or claim to recoup a Bonus Award must be made, if at all, within five (5) years after the date the amount claimed was originally paid by the Company.
|
6.
|
Code Section 409A
- It is intended that this Plan comply with the requirements of Code Section 409A so that none of the Bonus Award payments to be provided under this Plan will be subject to the additional tax imposed under Code Section 409A. Any ambiguities will be interpreted to so comply.
|
IX.
|
Amendment and Termination Provisions
|
1.
|
Amendment, Modification, Suspension, Termination, or Reinstatement of Plan
- The Board of Directors or the Committee may amend, modify, suspend, terminate or reinstate this Plan, in whole or in part, at any time, including adopting amendments deemed necessary or desirable to correct any defect or to supply omitted data, to reconcile any inconsistency in this Plan or in any Bonus Award granted hereunder or to adapt the Plan, including, but not limited to, Performance Measures under this Plan, to material changed circumstances (as determined by the Committee in its sole discretion)
|
2.
|
Plan Variations for non-U.S. Participants
- For Participants employed outside the United States, the Company may vary the provisions of this Plan as deemed appropriate to conform with, as required by or made desirable by, local laws, practices and procedures.
|
X.
|
General Provisions
|
1.
|
Non-transferability of Awards
- No Bonus Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution, or to the limited extent provided in the prior subsection. All rights with respect to a Bonus Award granted to a Participant shall be available during his or her lifetime only to the Participant.
|
2.
|
No Additional Participant Rights
- Employees selected to participate in this Plan shall not have any right to be retained in the Company’s employ, and the right of the Company to dismiss such Participant or to terminate any arrangement pursuant to which any such Participant provides services to the Company, with or without cause, is specifically reserved. No person shall have claim to a Bonus Award under this Plan, except as otherwise provided for herein, or to continued participation under this Plan. There is no obligation for uniformity of treatment of Participants under this Plan. The benefits provided for Participants under this Plan shall be in addition to and shall in no way preclude other forms of compensation to or in respect of such Participants.
|
3.
|
Successors -
All
obligations of the Company under this Plan with respect to Bonus Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business or assets of the Company.
|
4.
|
Indemnification
- Each member of the Company’s Board of Directors and each Committee member shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him/her in connection with or resulting from any claim, action, suit, or proceeding to which he/she may be a party or in which he/she may be involved by reason of any action taken or failure to act under the Plan or any award, and (ii) from any and all amounts paid by him/her in settlement thereof, with the Company's approval, or paid by him/her in satisfaction of any judgment in any such claim, action, suit or proceeding against him/her, provided he/she shall give the Company an opportunity, at its own expense, to handle and defend the same before he/she undertakes to handle and defend it on his/her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.
|
5.
|
Severability -
The provisions of this Plan are severable. If a court of competent jurisdiction rules that any provision of this Agreement is invalid or unenforceable, the court’s ruling will not affect the validity and enforceability of the other provisions of this Plan.
|
6.
|
Requirements of Law -
Bonus awards granted under this Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
|
7.
|
Governing Law -
The validity, interpretation, construction and performance of the Plan and awards under it shall be governed and interpreted in accordance with the laws of the State of Washington.
|
XI.
|
Certification
|
•
|
Board: $25,000 annual fee, paid quarterly
|
•
|
Audit Committee: $15,000 annual fee, paid quarterly
|
•
|
Compensation Committee: $10,000 annual fee, paid quarterly
|
•
|
Corporate Governance Committee: $5,000 annual fee, paid quarterly
|
•
|
Strategic Technology Committee: $5,000 annual fee, paid quarterly
|
Parent /Subsidiary Name
|
Country/State
|
Cray Inc. (parent)
|
U.S./Washington State
|
Appro International, Inc.
|
U.S./California State
|
Appro Federal, Inc.
|
U.S./California State
|
Appro Korea, Inc.
|
Korea
|
CCH1 LLC
|
U.S./Washington State
|
CCH2 LLC
|
U.S./Washington State
|
Cray Australia Pty. Ltd.
|
Australia
|
Cray Brazil, Inc.
|
U.S./Washington State
|
Cray Computadores do Brasil Ltda.
|
Brazil
|
Cray Canada ULC
|
Canada
|
Cray China Limited
|
Hong Kong
|
Cray Computing Equipment (Beijing) Co., Ltd.
|
China
|
Cray Computer Finland Oy
|
Finland
|
Cray Computer SARL
|
France
|
Cray Computer Deutschland GmbH
|
Germany
|
Cray Holding Inc.
|
U.S./Washington State
|
Cray Supercomputers (India) Private Limited
|
India
|
Cray Supercomputers (Israel) Ltd.
|
Israel
|
Cray Italy S.r.l.
|
Italy
|
Cray Japan, Inc.
|
U.S./Washington State
|
Cray Korea, Inc.
|
U.S./Washington State
|
Cray Netherlands B.V.
|
Netherlands
|
Cray Computer Spain, S.L.
|
Spain
|
Cray-Tera Sweden AB
|
Sweden
|
Cray Computer GmbH
|
Switzerland
|
Cray Taiwan, Inc.
|
U.S./Washington State
|
Cray U.K. Limited
|
United Kingdom
|
YarcData LLC
|
U.S./Washington State
|
|
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 13, 2014
|
/s/ PETER J. UNGARO
|
|
|
Peter J. Ungaro
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 13, 2014
|
/s/ BRIAN C. HENRY
|
|
|
Brian C. Henry
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Date:
|
February 13, 2014
|
/s/ PETER J. UNGARO
|
|
|
Peter J. Ungaro
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
Date:
|
February 13, 2014
|
/s/ BRIAN C. HENRY
|
|
|
Brian C. Henry
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|