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Delaware
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32-0047154
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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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Large accelerated filer
o
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Accelerated filer
x
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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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||
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Item 1.
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Financial Statements
(Unaudited)
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Item 2.
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||
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Item 3.
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||
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Item 4.
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||
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PART II
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Item 1.
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||
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Item 1A.
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||
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Item 2.
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||
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Item 3.
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||
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Item 4.
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||
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Item 5.
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||
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Item 6.
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||
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Three Months Ended
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Six Months Ended
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||||||||||||
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December 25, 2015
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December 26, 2014
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|
December 25, 2015
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|
December 26, 2014
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||||||||
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||||||||
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Revenue
|
|
|
|
|
|
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|
||||||||
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Product
|
$
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114,996
|
|
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$
|
100,288
|
|
|
$
|
209,086
|
|
|
$
|
175,290
|
|
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Service
|
36,830
|
|
|
37,862
|
|
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69,047
|
|
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74,561
|
|
||||
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Total revenue
|
151,826
|
|
|
138,150
|
|
|
278,133
|
|
|
249,851
|
|
||||
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Cost of revenue
|
|
|
|
|
|
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|
||||||||
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Product
|
89,362
|
|
|
78,741
|
|
|
169,272
|
|
|
137,634
|
|
||||
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Service
|
21,639
|
|
|
22,600
|
|
|
39,572
|
|
|
43,036
|
|
||||
|
Total cost of revenue
|
111,001
|
|
|
101,341
|
|
|
208,844
|
|
|
180,670
|
|
||||
|
Gross profit
|
40,825
|
|
|
36,809
|
|
|
69,289
|
|
|
69,181
|
|
||||
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Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
|
Research and development
|
12,987
|
|
|
14,779
|
|
|
26,167
|
|
|
27,979
|
|
||||
|
Sales and marketing
|
13,826
|
|
|
16,780
|
|
|
26,394
|
|
|
32,641
|
|
||||
|
General and administrative
|
12,604
|
|
|
15,254
|
|
|
24,511
|
|
|
28,559
|
|
||||
|
Restructuring
|
—
|
|
|
—
|
|
|
—
|
|
|
116
|
|
||||
|
Total operating expenses
|
39,417
|
|
|
46,813
|
|
|
77,072
|
|
|
89,295
|
|
||||
|
Income (loss) from operations
|
1,408
|
|
|
(10,004
|
)
|
|
(7,783
|
)
|
|
(20,114
|
)
|
||||
|
Total other income, net:
|
|
|
|
|
|
|
|
|
|||||||
|
Interest expense, net
|
(2,027
|
)
|
|
(58
|
)
|
|
(4,056
|
)
|
|
(100
|
)
|
||||
|
Other income (expense), net
|
540
|
|
|
(247
|
)
|
|
437
|
|
|
(104
|
)
|
||||
|
Total other expense, net
|
(1,487
|
)
|
|
(305
|
)
|
|
(3,619
|
)
|
|
(204
|
)
|
||||
|
Loss before income taxes
|
(79
|
)
|
|
(10,309
|
)
|
|
(11,402
|
)
|
|
(20,318
|
)
|
||||
|
Income tax provision
|
400
|
|
|
129
|
|
|
649
|
|
|
453
|
|
||||
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Net loss
|
$
|
(479
|
)
|
|
$
|
(10,438
|
)
|
|
$
|
(12,051
|
)
|
|
$
|
(20,771
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic and diluted net loss per share
|
$
|
(0.01
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.60
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted average shares used in computing basic and diluted net loss per share
|
35,531
|
|
|
34,375
|
|
|
35,352
|
|
|
34,399
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
December 25, 2015
|
|
December 26,
2014 |
|
December 25, 2015
|
|
December 26, 2014
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net loss
|
$
|
(479
|
)
|
|
$
|
(10,438
|
)
|
|
$
|
(12,051
|
)
|
|
$
|
(20,771
|
)
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
|
Unrecognized gain on defined benefit plans, net of zero tax
|
2
|
|
|
65
|
|
|
4
|
|
|
134
|
|
||||
|
Unrealized gain on derivatives instruments, net of zero tax
|
59
|
|
|
162
|
|
|
154
|
|
|
745
|
|
||||
|
Unrealized loss (gain) on derivative instruments reclassified into income, net of zero tax
|
119
|
|
|
(376
|
)
|
|
253
|
|
|
(477
|
)
|
||||
|
Foreign currency translation adjustment, net of zero tax
|
(29
|
)
|
|
(878
|
)
|
|
378
|
|
|
(1,997
|
)
|
||||
|
Other comprehensive income (loss)
|
151
|
|
|
(1,027
|
)
|
|
789
|
|
|
(1,595
|
)
|
||||
|
Total comprehensive loss
|
$
|
(328
|
)
|
|
$
|
(11,465
|
)
|
|
$
|
(11,262
|
)
|
|
$
|
(22,366
|
)
|
|
|
December 25,
2015 |
|
June 26,
2015 |
||||
|
ASSETS
|
|
|
|
||||
|
Current assets:
|
|
|
|
||||
|
Cash and cash equivalents
|
$
|
68,410
|
|
|
$
|
67,191
|
|
|
Current portion of restricted cash
|
2,109
|
|
|
2,109
|
|
||
|
Accounts receivable, net of allowance for doubtful accounts of $558 and $190 as of December 25, 2015 and June 26, 2015, respectively
|
103,758
|
|
|
118,219
|
|
||
|
Inventories
|
66,026
|
|
|
82,832
|
|
||
|
Current portion of deferred cost of revenue
|
12,850
|
|
|
12,108
|
|
||
|
Prepaid expenses and other current assets
|
10,187
|
|
|
17,547
|
|
||
|
Total current assets
|
263,340
|
|
|
300,006
|
|
||
|
Non-current portion of restricted cash
|
2,135
|
|
|
2,251
|
|
||
|
Property and equipment, net
|
41,108
|
|
|
38,480
|
|
||
|
Goodwill and intangible assets, net
|
11,001
|
|
|
11,303
|
|
||
|
Non-current portion of deferred cost of revenue
|
11,630
|
|
|
9,648
|
|
||
|
Other non-current assets
|
27,025
|
|
|
25,896
|
|
||
|
Total assets
|
$
|
356,239
|
|
|
$
|
387,584
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|||
|
Current liabilities:
|
|
|
|
|
|||
|
Accounts payable
|
$
|
46,122
|
|
|
$
|
48,677
|
|
|
Accrued compensation
|
16,178
|
|
|
17,797
|
|
||
|
Short-term debt, net of unamortized debt issuance costs of $1,075 and $1,074 as of December 25, 2015 and June 26, 2015, respectively
|
3,978
|
|
|
3,096
|
|
||
|
Current portion of deferred revenue
|
82,431
|
|
|
96,473
|
|
||
|
Other current liabilities
|
21,441
|
|
|
33,180
|
|
||
|
Total current liabilities
|
170,150
|
|
|
199,223
|
|
||
|
Long-term debt, net of unamortized debt issuance costs of $1,696 and $2,232 as of December 25, 2015 and June 26, 2015, respectively
|
66,067
|
|
|
65,581
|
|
||
|
Non-current portion of deferred revenue
|
45,267
|
|
|
43,781
|
|
||
|
Long-term income taxes payable
|
7,698
|
|
|
8,420
|
|
||
|
Retirement benefit obligations
|
9,057
|
|
|
9,330
|
|
||
|
Other non-current liabilities
|
7,943
|
|
|
7,871
|
|
||
|
Total liabilities
|
306,182
|
|
|
334,206
|
|
||
|
Commitments and contingencies (Note 24)
|
|
|
|
|
|||
|
Stockholders' equity:
|
|
|
|
|
|||
|
Preferred stock, par value $0.001 per share; 12,000 shares authorized; none outstanding
|
—
|
|
|
—
|
|
||
|
Common stock, par value $0.001 per share; 120,000 shares authorized; 37,994 shares and 37,225 shares issued at December 25, 2015 and June 26, 2015, respectively
|
38
|
|
|
37
|
|
||
|
Additional paid-in capital
|
551,438
|
|
|
543,498
|
|
||
|
Treasury stock, at cost (2,315 shares at December 25, 2015 and at June 26, 2015)
|
(22,899
|
)
|
|
(22,899
|
)
|
||
|
Accumulated other comprehensive loss
|
(4,480
|
)
|
|
(5,269
|
)
|
||
|
Accumulated deficit
|
(474,040
|
)
|
|
(461,989
|
)
|
||
|
Total stockholders' equity
|
50,057
|
|
|
53,378
|
|
||
|
Total liabilities and stockholders' equity
|
$
|
356,239
|
|
|
$
|
387,584
|
|
|
|
Six Months Ended
|
||||||
|
|
December 25, 2015
|
|
December 26,
2014 |
||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
|
Net loss
|
$
|
(12,051
|
)
|
|
$
|
(20,771
|
)
|
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|||
|
Depreciation and amortization
|
5,441
|
|
|
5,371
|
|
||
|
Share-based compensation
|
7,074
|
|
|
7,670
|
|
||
|
Assets impairment charges
|
—
|
|
|
1,100
|
|
||
|
Other
|
630
|
|
|
468
|
|
||
|
Changes in operating assets and liabilities:
|
|
|
|
|
|||
|
Accounts receivable
|
14,602
|
|
|
5,544
|
|
||
|
Inventories
|
12,725
|
|
|
(35,040
|
)
|
||
|
Deferred cost of revenue
|
(2,517
|
)
|
|
464
|
|
||
|
Prepaid expenses and other assets
|
6,255
|
|
|
8,282
|
|
||
|
Accounts payable
|
(1,768
|
)
|
|
5,222
|
|
||
|
Deferred revenue
|
(13,107
|
)
|
|
981
|
|
||
|
Other liabilities
|
(13,838
|
)
|
|
(14,556
|
)
|
||
|
Net cash provided by (used in) operating activities
|
3,446
|
|
|
(35,265
|
)
|
||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|||
|
Purchases of property and equipment
|
(4,622
|
)
|
|
(2,526
|
)
|
||
|
Other
|
116
|
|
|
(230
|
)
|
||
|
Net cash used in investing activities
|
(4,506
|
)
|
|
(2,756
|
)
|
||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|||
|
Payments of Term Loan
|
(875
|
)
|
|
—
|
|
||
|
Proceeds from draw-down of prior credit facility
|
—
|
|
|
15,000
|
|
||
|
Funding of restricted stock units withheld for taxes
|
(917
|
)
|
|
(1,205
|
)
|
||
|
Purchase of treasury stock
|
—
|
|
|
(4,222
|
)
|
||
|
Proceeds from issuance of common stock upon exercise of stock options
|
77
|
|
|
423
|
|
||
|
Proceeds from issuance of common stock under employee stock purchase plan
|
1,706
|
|
|
1,572
|
|
||
|
Proceeds from draw-down of Japan loans
|
1,615
|
|
|
—
|
|
||
|
Net cash provided by financing activities
|
1,606
|
|
|
11,568
|
|
||
|
Effect of exchange rate changes on cash
|
673
|
|
|
(3,550
|
)
|
||
|
Net increase (decrease) in cash
|
1,219
|
|
|
(30,003
|
)
|
||
|
Cash-beginning of period
|
67,191
|
|
|
109,297
|
|
||
|
Cash-end of period
|
$
|
68,410
|
|
|
$
|
79,294
|
|
|
SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION:
|
|
|
|
||||
|
Income taxes (paid) refunded
|
$
|
(338
|
)
|
|
$
|
329
|
|
|
Cash paid for interest
|
$
|
3,569
|
|
|
$
|
79
|
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
||||
|
Property and equipment purchases in accounts payable
|
$
|
1,026
|
|
|
$
|
791
|
|
|
Inventory transfers to property and equipment
|
$
|
3,430
|
|
|
$
|
3,959
|
|
|
•
|
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
|
•
|
Level 2 - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and
|
|
•
|
Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
|
|
|
|
December 25, 2015
|
|||||||||||||||
|
|
|
Carrying
|
|
Fair Value Measured Using
|
Total
|
||||||||||||
|
|
|
Value
|
|
Level 1
|
Level 2
|
Level 3
|
Balance
|
||||||||||
|
Assets
|
|
|
|
|
|
|
|
||||||||||
|
Money market funds
|
|
$
|
130
|
|
|
$
|
130
|
|
$
|
—
|
|
$
|
—
|
|
$
|
130
|
|
|
Pension investments held by insurance companies - German Plan
|
|
2,045
|
|
|
—
|
|
2,045
|
|
—
|
|
2,045
|
|
|||||
|
Pension investments held by insurance companies - Japan Plan
|
|
2,473
|
|
|
—
|
|
2,473
|
|
—
|
|
2,473
|
|
|||||
|
Derivative assets
|
|
764
|
|
|
—
|
|
764
|
|
—
|
|
764
|
|
|||||
|
Total assets measured at fair value
|
|
$
|
5,412
|
|
|
$
|
130
|
|
$
|
5,282
|
|
$
|
—
|
|
$
|
5,412
|
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||||
|
Derivative liabilities
|
|
$
|
843
|
|
|
$
|
—
|
|
$
|
843
|
|
$
|
—
|
|
$
|
843
|
|
|
Total liabilities measured at fair value
|
|
$
|
843
|
|
|
$
|
—
|
|
$
|
843
|
|
$
|
—
|
|
$
|
843
|
|
|
|
|
June 26, 2015
|
|||||||||||||||
|
|
|
Carrying
|
|
Fair Value Measured Using
|
Total
|
||||||||||||
|
|
|
Value
|
|
Level 1
|
Level 2
|
Level 3
|
Balance
|
||||||||||
|
Assets
|
|
|
|
|
|
|
|
||||||||||
|
Money market funds
|
|
$
|
130
|
|
|
$
|
130
|
|
$
|
—
|
|
$
|
—
|
|
$
|
130
|
|
|
Pension investments held by insurance companies - German Plan
|
|
2,222
|
|
|
—
|
|
2,222
|
|
—
|
|
2,222
|
|
|||||
|
Pension investments held by insurance companies - Japan Plan
|
|
2,539
|
|
|
—
|
|
2,539
|
|
—
|
|
2,539
|
|
|||||
|
Derivatives assets
|
|
6,467
|
|
|
—
|
|
6,467
|
|
—
|
|
6,467
|
|
|||||
|
Total assets measured at fair value
|
|
$
|
11,358
|
|
|
$
|
130
|
|
$
|
11,228
|
|
$
|
—
|
|
$
|
11,358
|
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||||
|
Derivative liabilities
|
|
$
|
5,443
|
|
|
$
|
—
|
|
$
|
5,443
|
|
$
|
—
|
|
$
|
5,443
|
|
|
Total liabilities measured at fair value
|
|
$
|
5,443
|
|
|
$
|
—
|
|
$
|
5,443
|
|
$
|
—
|
|
$
|
5,443
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
Location
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25, 2015
|
|
December 26, 2014
|
||||||||
|
Designated Derivatives
|
|
|
|
|
|
|
|
|
||||||||
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
||||||||
|
Foreign exchange contracts (Effective portion)
|
Amount recognized in AOCI
|
$
|
59
|
|
|
$
|
162
|
|
|
$
|
154
|
|
|
$
|
745
|
|
|
Foreign exchange contracts (Effective portion)
|
Net revenues
|
(119
|
)
|
|
883
|
|
|
(253
|
)
|
|
1,046
|
|
||||
|
Foreign exchange contracts (Effective portion)
|
Operating expenses
|
—
|
|
|
(507
|
)
|
|
—
|
|
|
(569
|
)
|
||||
|
Foreign exchange contracts (Effective portion)
|
Other income (expense), net
|
(158
|
)
|
|
8
|
|
|
(152
|
)
|
|
4
|
|
||||
|
Total
|
|
$
|
(218
|
)
|
|
$
|
546
|
|
|
$
|
(251
|
)
|
|
$
|
1,226
|
|
|
Non-designated Derivatives
|
|
|
|
|
|
|
|
|
||||||||
|
Foreign exchange contracts
|
Other income (expense), net
|
$
|
410
|
|
|
$
|
288
|
|
|
$
|
644
|
|
|
$
|
1,192
|
|
|
Total
|
|
$
|
410
|
|
|
$
|
288
|
|
|
$
|
644
|
|
|
$
|
1,192
|
|
|
Offsetting of Derivative Assets
|
||||||||||||||||||
|
|
Gross Amount Offset In the Statement of Financial Position
|
|
Gross Amounts Not Offset in the Statement of Financial Position
|
|
||||||||||||||
|
As of December 25, 2015
|
Gross Amount of Recognized Assets
|
Gross Amount Offset in the Statement of Financial Position
|
Net Amounts of Assets Presented in the Statement of Financial Position
|
Financial Instruments
|
Cash Collateral Received
|
Net Amount
|
||||||||||||
|
Derivatives
|
|
|
|
|
|
|
||||||||||||
|
Foreign currency forward contracts
|
$
|
764
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(764
|
)
|
$
|
—
|
|
$
|
—
|
|
|
Total
|
$
|
764
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(764
|
)
|
$
|
—
|
|
$
|
—
|
|
|
As of June 26, 2015
|
|
|
|
|
|
|
||||||||||||
|
Derivatives
|
|
|
|
|
|
|
||||||||||||
|
Foreign currency forward contracts
|
$
|
6,467
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(5,443
|
)
|
$
|
—
|
|
$
|
1,024
|
|
|
Total
|
$
|
6,467
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(5,443
|
)
|
$
|
—
|
|
$
|
1,024
|
|
|
Offsetting of Derivative Liabilities
|
||||||||||||||||||
|
|
Gross Amount Offset In the Statement of Financial Position
|
|
Gross Amounts Not Offset in the Statement of Financial Position
|
|
||||||||||||||
|
As of December 25, 2015
|
Gross Amount of Recognized Liabilities
|
Gross Amount Offset in the Statement of Financial Position
|
Net Amounts of Liabilities Presented in the Statement of Financial Position
|
Financial Instruments
|
Cash Collateral Pledged
|
Net Amount
|
||||||||||||
|
Derivatives
|
|
|
|
|
|
|
||||||||||||
|
Foreign currency forward contracts
|
$
|
(843
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
764
|
|
$
|
—
|
|
$
|
(79
|
)
|
|
Total
|
$
|
(843
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
764
|
|
$
|
—
|
|
$
|
(79
|
)
|
|
As of June 26, 2015
|
|
|
|
|
|
|
||||||||||||
|
Derivatives
|
|
|
|
|
|
|
||||||||||||
|
Foreign currency forward contracts
|
$
|
(5,443
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
5,443
|
|
$
|
—
|
|
$
|
—
|
|
|
Total
|
$
|
(5,443
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
5,443
|
|
$
|
—
|
|
$
|
—
|
|
|
Fair Values of Derivative Instruments
|
||||||||||||||||||
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||
|
Location
|
|
December 25,
2015 |
|
June 26,
2015 |
|
Location
|
|
December 25,
2015 |
|
June 26,
2015 |
||||||||
|
|
||||||||||||||||||
|
Designated Derivatives:
|
||||||||||||||||||
|
Foreign exchange contracts
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
|
|
||||||||
|
Other current assets
|
|
$
|
54
|
|
|
$
|
167
|
|
|
Other current liabilities
|
|
$
|
210
|
|
|
$
|
628
|
|
|
Non- designated Derivatives:
|
||||||||||||||||||
|
Foreign exchange contracts
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
|
|
||||||||
|
Other current assets
|
|
710
|
|
|
6,300
|
|
|
Other current liabilities
|
|
633
|
|
|
4,815
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Total derivatives
|
|
$
|
764
|
|
|
$
|
6,467
|
|
|
|
|
$
|
843
|
|
|
$
|
5,443
|
|
|
|
|
Amount
|
||
|
AOCI - Beginning balance of losses
|
|
$
|
408
|
|
|
Unrecognized gain on derivatives
|
|
(154
|
)
|
|
|
Unrealized loss on derivative instruments reclassified to income
|
|
(253
|
)
|
|
|
AOCI - Ending balance of losses
|
|
$
|
1
|
|
|
|
December 25,
2015 |
|
June 26,
2015 |
||||
|
Finished goods
|
$
|
37,632
|
|
|
$
|
36,772
|
|
|
Work in process
|
8,238
|
|
|
25,562
|
|
||
|
Raw materials
|
20,156
|
|
|
20,498
|
|
||
|
Total inventories
|
$
|
66,026
|
|
|
$
|
82,832
|
|
|
|
December 25,
2015 |
|
June 26,
2015 |
||||
|
Value-added tax receivable
|
$
|
2,876
|
|
|
$
|
5,179
|
|
|
Derivatives (see Note 5)
|
764
|
|
|
6,467
|
|
||
|
Prepaid taxes
|
322
|
|
|
178
|
|
||
|
Other prepaid and current assets
|
6,225
|
|
|
5,723
|
|
||
|
Total prepaid expenses and other current assets
|
$
|
10,187
|
|
|
$
|
17,547
|
|
|
|
|
Product
|
|
Service
|
|
Total
|
||||||
|
Goodwill as of June 26, 2015
|
|
$
|
7,508
|
|
|
$
|
1,076
|
|
|
$
|
8,584
|
|
|
Goodwill arising from acquisitions
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
Goodwill as of December 25, 2015
|
|
$
|
7,508
|
|
|
$
|
1,076
|
|
|
$
|
8,584
|
|
|
Intangible Asset Class
|
|
Weighted
Average
Useful Life
(in Years)
|
|
December 25, 2015
|
||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization and Impairment
|
|
Net
|
||||||||||
|
Customer relationships
|
|
5
|
|
$
|
7,300
|
|
|
$
|
(7,300
|
)
|
|
$
|
—
|
|
|
Purchased technology
|
|
5
|
|
12,200
|
|
|
(11,850
|
)
|
|
350
|
|
|||
|
Customer backlog
|
|
(a)
|
|
10,540
|
|
|
(10,440
|
)
|
|
100
|
|
|||
|
Trademark/trade name portfolio
|
|
5
|
|
3,767
|
|
|
(3,767
|
)
|
|
—
|
|
|||
|
Patents and other
|
|
(b)
|
|
2,097
|
|
|
(130
|
)
|
|
1,967
|
|
|||
|
Total
|
|
|
|
$
|
35,904
|
|
|
$
|
(33,487
|
)
|
|
$
|
2,417
|
|
|
Intangible Asset Class
|
|
Weighted
Average
Useful Life
(in Years)
|
|
June 26, 2015
|
||||||||||
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization and Impairment
|
|
Net
|
||||||||
|
Customer relationships
|
|
5
|
|
$
|
7,300
|
|
|
$
|
(7,300
|
)
|
|
$
|
—
|
|
|
Purchased technology
|
|
5
|
|
12,200
|
|
|
(11,600
|
)
|
|
600
|
|
|||
|
Customer backlog
|
|
(a)
|
|
10,540
|
|
|
(10,388
|
)
|
|
152
|
|
|||
|
Trademark/trade name portfolio
|
|
5
|
|
3,767
|
|
|
(3,767
|
)
|
|
—
|
|
|||
|
Patents and other
|
|
(b)
|
|
2,097
|
|
|
(130
|
)
|
|
1,967
|
|
|||
|
Total
|
|
|
|
$
|
35,904
|
|
|
$
|
(33,185
|
)
|
|
$
|
2,719
|
|
|
Fiscal Year
|
Amortization
Expense
|
||
|
2016 (remaining six months)
|
$
|
390
|
|
|
2017
|
60
|
|
|
|
|
$
|
450
|
|
|
|
December 25,
2015 |
|
June 26,
2015 |
||||
|
Long-term service inventory
|
$
|
15,534
|
|
|
$
|
16,015
|
|
|
Restricted pension plan assets
|
6,512
|
|
|
6,726
|
|
||
|
Deferred tax assets
|
758
|
|
|
758
|
|
||
|
Long-term refundable deposits
|
1,785
|
|
|
1,763
|
|
||
|
Other assets
|
2,436
|
|
|
634
|
|
||
|
Total other non-current assets
|
$
|
27,025
|
|
|
$
|
25,896
|
|
|
|
December 25,
2015 |
|
June 26,
2015 |
||||
|
Accrued sales and use tax payable
|
$
|
4,381
|
|
|
$
|
8,670
|
|
|
Accrued professional services fees
|
3,385
|
|
|
3,597
|
|
||
|
Accrued warranty, current portion
|
3,373
|
|
|
3,402
|
|
||
|
Accrued interest payable
|
1,641
|
|
|
1,159
|
|
||
|
Accrued restructuring and severance
|
1,010
|
|
|
2,239
|
|
||
|
Derivatives (see Note 5)
|
843
|
|
|
5,443
|
|
||
|
Other current liabilities
|
6,808
|
|
|
8,670
|
|
||
|
Total other current liabilities
|
$
|
21,441
|
|
|
$
|
33,180
|
|
|
|
December 25,
2015 |
|
June 26,
2015 |
||||
|
Accrued warranty, non-current portion
|
$
|
1,647
|
|
|
$
|
1,374
|
|
|
Deferred rent
|
5,242
|
|
|
5,526
|
|
||
|
Other non-current liabilities
|
1,054
|
|
|
971
|
|
||
|
Total other non-current liabilities
|
$
|
7,943
|
|
|
$
|
7,871
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
December 25, 2015
|
|
December 26,
2014 |
|
December 25, 2015
|
|
December 26,
2014 |
||||||||
|
Balance at beginning of period
|
|
$
|
4,796
|
|
|
$
|
5,634
|
|
|
$
|
4,776
|
|
|
$
|
6,044
|
|
|
Current period provision
|
|
878
|
|
|
758
|
|
|
1,947
|
|
|
1,431
|
|
||||
|
Warranty expenditures incurred
|
|
(830
|
)
|
|
(1,186
|
)
|
|
(1,861
|
)
|
|
(2,362
|
)
|
||||
|
Changes in accrual for pre-existing warranties
|
|
176
|
|
|
(73
|
)
|
|
158
|
|
|
20
|
|
||||
|
Balance at end of period
|
|
$
|
5,020
|
|
|
$
|
5,133
|
|
|
$
|
5,020
|
|
|
$
|
5,133
|
|
|
•
|
issue any preferred stock;
|
|
•
|
incur or guarantee indebtedness;
|
|
•
|
create, incur, assume, or permit liens to exist;
|
|
•
|
consummate asset sales, acquisitions or mergers;
|
|
•
|
dispose of property;
|
|
•
|
pay dividends or repurchase stock;
|
|
•
|
make investments;
|
|
•
|
enter into transactions with affiliates; or
|
|
•
|
enter into or permit certain type of agreements to exist.
|
|
•
|
failure to make required payments;
|
|
•
|
material breaches of representations and warranties;
|
|
•
|
failure to comply with certain agreements or covenants;
|
|
•
|
failure to pay, or default under, certain other indebtedness;
|
|
•
|
certain events of bankruptcy and insolvency;
|
|
•
|
failure to pay certain judgments; and
|
|
•
|
a change of control.
|
|
|
|
Term Loan
|
||||||||||
|
|
|
Long-Term
|
|
Short-Term
|
|
Total
|
||||||
|
|
|
(in thousands)
|
||||||||||
|
|
|
|
|
|
|
|
||||||
|
Principal amount
|
|
$
|
66,938
|
|
|
$
|
1,750
|
|
|
$
|
68,688
|
|
|
Less unamortized debt issuance costs
|
|
(1,696
|
)
|
|
(1,075
|
)
|
|
(2,771
|
)
|
|||
|
|
|
$
|
65,242
|
|
|
$
|
675
|
|
|
$
|
65,917
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
December 25, 2015
|
|
December 26,
2014 |
|
December 25, 2015
|
|
December 26,
2014 |
||||||||
|
Cost of revenue
|
|
$
|
412
|
|
|
$
|
566
|
|
|
$
|
937
|
|
|
$
|
1,032
|
|
|
Research and development
|
|
495
|
|
|
659
|
|
|
1,201
|
|
|
1,218
|
|
||||
|
Sales and marketing
|
|
451
|
|
|
764
|
|
|
969
|
|
|
1,565
|
|
||||
|
General and administrative
|
|
1,809
|
|
|
2,182
|
|
|
3,967
|
|
|
3,855
|
|
||||
|
Total share-based compensation expense
|
|
$
|
3,167
|
|
|
$
|
4,171
|
|
|
$
|
7,074
|
|
|
$
|
7,670
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25,
2015 |
|
December 26,
2014 |
|
ESPP Plan shares
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
0.5%
|
|
0.2%
|
|
0.5%
|
|
0.2%
|
|
Volatility
|
|
47.0%
|
|
49.0%
|
|
47.0%
|
|
49.0%
|
|
Weighted average expected life (in years)
|
|
1.25
|
|
1.25
|
|
1.25
|
|
1.25
|
|
Expected dividend yield
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Weighted average fair value
|
|
$1.83
|
|
$3.21
|
|
$1.83
|
|
$3.20
|
|
|
Options Outstanding
|
|||||||||||
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual term
in years
|
|
Aggregate
Intrinsic
Value
|
|||||
|
|
|
|
|
|
|
|
(in thousands)
|
|||||
|
Balance at June 26, 2015
|
1,386,570
|
|
|
$
|
10.41
|
|
|
|
|
|
||
|
Options granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
|
Options exercised
|
(14,377
|
)
|
|
5.34
|
|
|
|
|
|
|||
|
Options cancelled
|
(133,271
|
)
|
|
14.15
|
|
|
|
|
|
|||
|
Balance at December 25, 2015
|
1,238,922
|
|
|
$
|
10.07
|
|
|
4.09
|
|
$
|
68
|
|
|
Vested and expected to vest at December 25, 2015
|
1,237,815
|
|
|
$
|
10.07
|
|
|
4.09
|
|
$
|
68
|
|
|
Exercisable at December 25, 2015
|
1,199,274
|
|
|
$
|
10.14
|
|
|
4.07
|
|
$
|
68
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
December 25, 2015
|
|
December 26,
2014 |
|
December 25, 2015
|
|
December 26,
2014 |
||||||||
|
RSUs shares withheld for taxes
|
80,807
|
|
|
67,435
|
|
|
171,428
|
|
|
126,201
|
|
||||
|
RSUs amounts withheld for taxes
|
$
|
433
|
|
|
$
|
650
|
|
|
$
|
914
|
|
|
$
|
1,196
|
|
|
|
|
Six Months Ended
|
||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
||||
|
Shares issued
|
|
376,569
|
|
|
209,631
|
|
||
|
Weighted-average purchase price per share
|
|
$
|
4.53
|
|
|
$
|
7.50
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25,
2015 |
|
December 26,
2014 |
||||||||
|
Numerator:
|
|
|
|
|
|
|
|
|
||||||||
|
Net loss
|
|
$
|
(479
|
)
|
|
$
|
(10,438
|
)
|
|
$
|
(12,051
|
)
|
|
$
|
(20,771
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Weighted-average common shares used in computing basic and diluted net loss per share
|
|
35,531
|
|
|
34,375
|
|
|
35,352
|
|
|
34,399
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic and diluted net loss per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.60
|
)
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25,
2015 |
|
December 26,
2014 |
||||
|
Options, RSUs, PSUs and ESPP
|
|
4,193
|
|
|
3,671
|
|
|
4,290
|
|
|
3,666
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25,
2015 |
|
December 26,
2014 |
||||||||
|
Net periodic benefit cost
|
|
|
|
|
|
|
|
|
||||||||
|
Service cost
|
|
$
|
78
|
|
|
$
|
98
|
|
|
$
|
156
|
|
|
$
|
187
|
|
|
Interest expense
|
|
70
|
|
|
105
|
|
|
142
|
|
|
215
|
|
||||
|
Expected return on plan assets
|
|
(34
|
)
|
|
(37
|
)
|
|
(69
|
)
|
|
(73
|
)
|
||||
|
Amortization of actuarial losses
|
|
2
|
|
|
65
|
|
|
4
|
|
|
134
|
|
||||
|
Net periodic benefit cost
|
|
$
|
116
|
|
|
$
|
231
|
|
|
$
|
233
|
|
|
$
|
463
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25, 2015
|
|
December 26, 2014
|
||||||||
|
Total net revenue
|
|
|
|
|
|
|
|
|
||||||||
|
Product
|
|
$
|
114,996
|
|
|
$
|
100,288
|
|
|
$
|
209,086
|
|
|
$
|
175,290
|
|
|
Service
|
|
36,830
|
|
|
37,862
|
|
|
69,047
|
|
|
74,561
|
|
||||
|
Total net revenue
|
|
$
|
151,826
|
|
|
$
|
138,150
|
|
|
$
|
278,133
|
|
|
$
|
249,851
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Operating profit from reportable segments
|
|
|
|
|
|
|
|
|
||||||||
|
Product
|
|
$
|
11,542
|
|
|
$
|
5,688
|
|
|
$
|
11,683
|
|
|
$
|
6,079
|
|
|
Service
|
|
13,736
|
|
|
14,842
|
|
|
26,666
|
|
|
29,540
|
|
||||
|
Total operating profit from reportable segments (1)
|
|
$
|
25,278
|
|
|
$
|
20,530
|
|
|
$
|
38,349
|
|
|
$
|
35,619
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25,
2015 |
|
December 26,
2014 |
||||||||
|
|
|
(in thousands)
|
||||||||||||||
|
Total reportable segments' operating profit
|
|
$
|
25,278
|
|
|
$
|
20,530
|
|
|
$
|
38,349
|
|
|
$
|
35,619
|
|
|
All other corporate charges:
|
|
|
|
|
|
|
|
|
||||||||
|
Unallocated operating expenses
|
|
18,385
|
|
|
19,993
|
|
|
34,421
|
|
|
39,836
|
|
||||
|
Restructuring and severance
|
|
730
|
|
|
3,792
|
|
|
1,674
|
|
|
4,884
|
|
||||
|
Amortization and impairment of intangibles
|
|
192
|
|
|
1,310
|
|
|
284
|
|
|
1,525
|
|
||||
|
Share-based compensation
|
|
3,167
|
|
|
4,171
|
|
|
7,074
|
|
|
7,670
|
|
||||
|
Other
|
|
1,396
|
|
|
1,268
|
|
|
2,679
|
|
|
1,818
|
|
||||
|
Total all other corporate charges
|
|
23,870
|
|
|
30,534
|
|
|
46,132
|
|
|
55,733
|
|
||||
|
Income (loss) from operations, as reported
|
|
$
|
1,408
|
|
|
$
|
(10,004
|
)
|
|
$
|
(7,783
|
)
|
|
$
|
(20,114
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25,
2015 |
|
December 26,
2014 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Americas
|
$
|
82,064
|
|
|
$
|
87,615
|
|
|
$
|
162,523
|
|
|
$
|
155,285
|
|
|
As a percent of total net revenue
|
54.1
|
%
|
|
63.4
|
%
|
|
58.4
|
%
|
|
62.2
|
%
|
||||
|
EMEA
|
18,561
|
|
|
16,864
|
|
|
44,104
|
|
|
34,477
|
|
||||
|
As a percent of total net revenue
|
12.2
|
%
|
|
12.2
|
%
|
|
15.9
|
%
|
|
13.8
|
%
|
||||
|
APJ
|
51,201
|
|
|
33,671
|
|
|
71,506
|
|
|
60,089
|
|
||||
|
As a percent of total net revenue
|
33.7
|
%
|
|
24.4
|
%
|
|
25.7
|
%
|
|
24.0
|
%
|
||||
|
Total revenue
|
$
|
151,826
|
|
|
$
|
138,150
|
|
|
$
|
278,133
|
|
|
$
|
249,851
|
|
|
•
|
Our total revenue for the three months ended
December 25, 2015
was
$151.8 million
, an increase of
$13.7 million
or
9.9%
, from the comparable period in fiscal 2015. Revenue increased
$28.3 million
or
11.3%
in the
six
months ended
December 25, 2015
from
$249.9 million
in the
six
months ended
December 26, 2014
. The increase in both the three and
six
months of fiscal 2016 compared to the same periods in fiscal 2015, were due primarily to higher products revenue, particularly in our international operations, offset by a slight reduction in service revenue. The increase in product revenue for both periods are consistent with our strategic decision to focus our investments in strategic areas of HPC and High Performance Data Analytics ("HPDA"). We have been successful in winning large strategic projects primarily for the U.S. government and have seen good traction in our HPDA business. The decrease in our service revenue for both periods is due to the lower volume of products sold over the last few years requiring service needs and the timing of professional services provided. In addition, we experienced a decline in our support revenue associated with initial product sales as our customers refresh their technology to newer generation products. The warranty period for our products is generally one to three years, as such the amount of support and maintenance revenue is expected to be lower given that products are still under warranty.
|
|
•
|
Our overall gross margin was
26.9%
in the three months ended
December 25, 2015
, an increase of
0.3
percentage points from
26.6%
in the three months ended
December 26, 2014
. The change in our overall gross margin percentage in the three months ended
December 25, 2015
was primarily due to higher product margin resulting from a higher UV mix compared to the comparable quarter last year. Our UV products typically generate a much higher margin than our other products. We also benefited from lower severance costs and impairment charges during the second quarter of fiscal 2016. We recognized an impairment charge of $0.8 million related to our decision to discontinue selling and supporting certain storage products during the second quarter of fiscal 2015.
|
|
•
|
Our overall gross margin was
24.9%
in the
six
months ended
December 25, 2015
, a decrease of
2.8
percentage points from
27.7%
in the six months ended
December 26, 2014
. The change in our overall gross margin percentage in the
six
months ended
December 25, 2015
was primarily driven by an unfavorable mix compared to the comparable period last year, with a much lower mix of service revenue, which typically has a higher gross margin. In addition, during the
six
months ended
December 25, 2015
, we were also negatively impacted as a result of one large program where we recognized revenue at a much lower margin than our typical run rate business.
|
|
•
|
Our research and development, selling and general and administrative expenses were
$39.4 million
in the three months ended
December 25, 2015
compared to
$46.8 million
in the prior year comparable quarter, a decrease of approximately
$7.4 million
. The decrease was attributed to the decline in compensation and related expenses due to reductions in
|
|
•
|
Our research and development, selling and general and administrative expenses were
$77.1 million
in the
six
months ended
December 25, 2015
compared to
$89.2 million
in the prior year comparable period, a decrease of approximately
$12.1 million
. The decrease was attributed to the decline in compensation and related expenses due to reductions in headcount along with lower spending due to tight expense controls. We also benefited from lower share-based compensation, severance and impairment charges. As indicated above, we took an impairment charge in the second quarter of 2015 related to an acquisition made in 2014. This was slightly offset by an increase in bad debt reserves.
|
|
•
|
Total headcount as of
December 25, 2015
was 1,082, which reflected a net reduction of 18 employees or approximately 2%, from 1,100 as of
December 26, 2014
primarily due to cost reduction actions occurring over the last fiscal year.
|
|
•
|
During the three and
six
months ended
December 25, 2015
, we incurred approximately
$0.8 million
and
$1.7 million
, respectively, of severance charges associated with planned cost reductions. During the three and
six
months ended
December 26, 2014
, we incurred approximately
$3.8 million
and
$4.8 million
, respectively, of severance charges associated with planned cost reductions.
|
|
•
|
Interest expense, net was approximately
$2.0 million
and
$4.1 million
for the three and six months ended
December 25, 2015
compared to
$0.1 million
and
$0.1 million
in the comparable three and six month periods in
December 26, 2014
. As indicated above, On
January 27, 2015
, we entered into a credit agreement providing an aggregate principal amount of
$70.0 million
with a term of
three and a half years
, bearing interest at the LIBO Rate (as defined in the Credit Agreement), subject to a
1.0%
minimum, plus
9.0%
per annum.
|
|
•
|
Net loss for the three months ended
December 25, 2015
was
$0.5 million
, or a reduction of $9.9 million compared to a net loss of
$10.4 million
in the comparable quarter last year. Net loss for the
six
months ended
December 25, 2015
was
$12.1 million
or a reduction of
$8.7 million
compared to the net loss of
$20.8 million
for the
six
months ended
December 26, 2014
. The decrease in net loss for both the three and six month periods ended
December 25, 2015
compared to the comparable periods last year was primarily driven by higher revenue and lower operating expenses, which was offset by higher interest expense due to the Term Loan obtained in January 2015.
|
|
•
|
We continue to streamline our operations and maintain tight controls over spending in order to help achieve our long-term operating targets and goals, as well as to enable increased new investment in new products and emerging technologies.
|
|
|
Three Months Ended
|
Change
|
|
Six Months Ended
|
Change
|
||||||||||||
|
|
December 25,
2015 |
|
December 26,
2014 |
|
December 25,
2015 |
|
December 26,
2014 |
||||||||||
|
|
($ in thousands)
|
|
|
($ in millions)
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net revenue from products:
|
114,996
|
|
|
100,288
|
|
14,708
|
|
209,086
|
|
|
175,290
|
|
33,796
|
||||
|
As a percent of total net revenue
|
75.7
|
%
|
|
72.6
|
%
|
3.1 ppts
|
|
75.2
|
%
|
|
70.2
|
%
|
5.0 ppts
|
||||
|
Net revenue from services
|
36,830
|
|
|
37,862
|
|
(1,032)
|
|
69,047
|
|
|
74,561
|
|
(5,514)
|
||||
|
As a percent of total net revenue
|
24.3
|
%
|
|
27.4
|
%
|
(3.1) ppts
|
|
24.8
|
%
|
|
29.8
|
%
|
(5.0) ppts
|
||||
|
Total net revenue
|
$
|
151,826
|
|
|
$
|
138,150
|
|
$13,676
|
|
$
|
278,133
|
|
|
$
|
249,851
|
|
$28,282
|
|
|
Three Months Ended
|
|
Change
|
|
Six Months Ended
|
|
Change
|
||||||||||||
|
|
December 25,
2015 |
|
December 26,
2014 |
|
|
December 25,
2015 |
|
December 26,
2014 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Americas
|
$
|
82,064
|
|
|
$
|
87,615
|
|
|
$(5,551)
|
|
$
|
162,523
|
|
|
$
|
155,285
|
|
|
$7,238
|
|
As a percent of total net revenue
|
54.1
|
%
|
|
63.4
|
%
|
|
(9.3) ppts
|
|
58.4
|
%
|
|
62.2
|
%
|
|
(3.8) ppts
|
||||
|
EMEA
|
18,561
|
|
|
16,864
|
|
|
1,697
|
|
44,104
|
|
|
34,477
|
|
|
9,627
|
||||
|
As a percent of total net revenue
|
12.2
|
%
|
|
12.2
|
%
|
|
—%
|
|
15.9
|
%
|
|
13.8
|
%
|
|
2.1 ppts
|
||||
|
APJ
|
51,201
|
|
|
33,671
|
|
|
17,530
|
|
71,506
|
|
|
60,089
|
|
|
11,417
|
||||
|
As a percent of total net revenue
|
33.7
|
%
|
|
24.4
|
%
|
|
9.3 ppts
|
|
25.7
|
%
|
|
24.0
|
%
|
|
1.7 ppts
|
||||
|
Total revenue
|
$
|
151,826
|
|
|
$
|
138,150
|
|
|
$13,676
|
|
$
|
278,133
|
|
|
$
|
249,851
|
|
|
$28,282
|
|
|
|
Three Months Ended
|
|
Change
|
|
Six Months Ended
|
|
Change
|
||||||||||||||||||||
|
|
|
December 25, 2015
|
|
December 26, 2014
|
|
$
|
|
%
|
|
December 25, 2015
|
|
December 26, 2014
|
|
$
|
|
%
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total cost of revenue
|
|
$
|
111,001
|
|
|
$
|
101,341
|
|
|
$
|
9,660
|
|
|
9.5%
|
|
$
|
208,844
|
|
|
$
|
180,670
|
|
|
$
|
28,174
|
|
|
15.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total gross profit
|
|
$
|
40,825
|
|
|
$
|
36,809
|
|
|
$
|
4,016
|
|
|
10.9%
|
|
$
|
69,289
|
|
|
$
|
69,181
|
|
|
$
|
108
|
|
|
0.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total gross margin
|
|
26.9
|
%
|
|
26.6
|
%
|
|
|
|
0.3 ppts
|
|
24.9
|
%
|
|
27.7
|
%
|
|
|
|
(2.8) ppts
|
||||||||
|
|
|
Three Months Ended
|
|
Change
|
|
Six Months Ended
|
|
Change
|
|||||||||||||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Research and development
|
|
$
|
12,987
|
|
|
$
|
14,779
|
|
|
$
|
(1,792
|
)
|
(12.1
|
)%
|
|
$
|
26,167
|
|
|
$
|
27,979
|
|
|
$
|
(1,812
|
)
|
(6.5)%
|
|
Sales and marketing
|
|
13,826
|
|
|
16,780
|
|
|
(2,954
|
)
|
(17.6
|
)%
|
|
26,394
|
|
|
32,641
|
|
|
(6,247
|
)
|
(19.1)%
|
||||||
|
General and administrative
|
|
12,604
|
|
|
15,254
|
|
|
(2,650
|
)
|
(17.4
|
)%
|
|
24,511
|
|
|
28,559
|
|
|
(4,048
|
)
|
(14.2)%
|
||||||
|
Restructuring
|
|
—
|
|
|
—
|
|
|
—
|
|
N/A
|
|
|
—
|
|
|
116
|
|
|
(116
|
)
|
(100.0)%
|
||||||
|
Total operating expense
|
|
$
|
39,417
|
|
|
$
|
46,813
|
|
|
$
|
(7,396
|
)
|
(15.8
|
)%
|
|
$
|
77,072
|
|
|
$
|
89,295
|
|
|
$
|
(12,223
|
)
|
(13.7)%
|
|
|
Three Months Ended
|
|
Change
|
|
Six Months Ended
|
|
Change
|
|||||||||||||||||||
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Interest expense, net
|
$
|
(2,027
|
)
|
|
$
|
(58
|
)
|
|
$
|
(1,969
|
)
|
3,394.8
|
%
|
|
$
|
(4,056
|
)
|
|
$
|
(100
|
)
|
|
$
|
(3,956
|
)
|
3,956.0%
|
|
Other income (expense), net
|
540
|
|
|
(247
|
)
|
|
787
|
|
(318.6
|
)%
|
|
437
|
|
|
(104
|
)
|
|
541
|
|
(520.2)%
|
||||||
|
Total other (expense) income, net
|
$
|
(1,487
|
)
|
|
$
|
(305
|
)
|
|
$
|
(1,182
|
)
|
387.5
|
%
|
|
$
|
(3,619
|
)
|
|
$
|
(204
|
)
|
|
$
|
(3,415
|
)
|
1,674.0%
|
|
|
Three Months Ended
|
|
Change
|
|
Six Months Ended
|
|
Change
|
|||||||||||||||||||
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Income tax provision
|
$
|
400
|
|
|
$
|
129
|
|
|
$
|
271
|
|
210.1
|
%
|
|
$
|
649
|
|
|
$
|
453
|
|
|
$
|
196
|
|
43.3%
|
|
|
|
Three Months Ended
|
|
Change
|
|
Six Months Ended
|
|
Change
|
||||||||||||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|
December 25, 2015
|
|
December 26, 2014
|
|
$
|
%
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net revenue
|
|
$
|
114,996
|
|
|
$
|
100,288
|
|
|
$
|
14,708
|
|
14.7%
|
|
$
|
209,086
|
|
|
$
|
175,290
|
|
|
$
|
33,796
|
|
19.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Operating profit
|
|
$
|
11,542
|
|
|
$
|
5,688
|
|
|
$
|
5,854
|
|
102.9%
|
|
$
|
11,683
|
|
|
$
|
6,079
|
|
|
$
|
5,604
|
|
92.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Operating margin
|
|
10.0
|
%
|
|
5.7
|
%
|
|
|
4.3 ppts
|
|
5.6
|
%
|
|
3.5
|
%
|
|
|
2.1 ppts
|
||||||||
|
|
|
Three Months Ended
|
|
Change
|
|
Six Months Ended
|
|
Change
|
||||||||||||||||||
|
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
|
December 25,
2015 |
|
December 26,
2014 |
|
$
|
%
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net revenue
|
|
$
|
36,830
|
|
|
$
|
37,862
|
|
|
$
|
(1,032
|
)
|
(2.7)%
|
|
$
|
69,047
|
|
|
$
|
74,561
|
|
|
$
|
(5,514
|
)
|
(7.4)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Operating profit
|
|
$
|
13,736
|
|
|
$
|
14,842
|
|
|
(1,106
|
)
|
(7.5)%
|
|
$
|
26,666
|
|
|
$
|
29,540
|
|
|
$
|
(2,874
|
)
|
(9.7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Operating margin
|
|
37.3
|
%
|
|
39.2
|
%
|
|
|
(1.9) ppts
|
|
38.6
|
%
|
|
39.6
|
%
|
|
|
(1.0) ppts
|
||||||||
|
|
Six Months Ended
|
||||||
|
|
December 25, 2015
|
|
December 26, 2014
|
||||
|
Consolidated statements of cash flows data:
|
|
|
|
||||
|
Net cash provided by (used in) operating activities
|
$
|
3,446
|
|
|
$
|
(35,265
|
)
|
|
Net cash used in investing activities
|
(4,506
|
)
|
|
(2,756
|
)
|
||
|
Net cash provided by financing activities
|
1,606
|
|
|
11,568
|
|
||
|
Effect of exchange rate changes on cash and cash equivalents
|
673
|
|
|
(3,550
|
)
|
||
|
Net increase (decrease) in cash
|
$
|
1,219
|
|
|
$
|
(30,003
|
)
|
|
|
|
|
|
||||
|
•
|
Revenue recognition;
|
|
•
|
Share-based compensation;
|
|
•
|
Inventory valuation;
|
|
•
|
Impairment of intangibles and long-lived assets;
|
|
•
|
Impairment of goodwill;
|
|
•
|
Retirement benefit obligations; and
|
|
•
|
Accounting for income taxes.
|
|
•
|
substantially greater market presence and greater name recognition;
|
|
•
|
substantially greater financial, technical, research and development, sales and marketing, manufacturing, distribution and other resources;
|
|
•
|
longer operating histories;
|
|
•
|
a broader offering of products and services;
|
|
•
|
more established relationships with customers, suppliers and other technology companies; and
|
|
•
|
the ability to acquire technologies or consolidate with other companies in the industry to compete more effectively.
|
|
•
|
fluctuations in the buying patterns and sizes of customer orders from one quarter to the next;
|
|
•
|
increased competition causing us to sell our products or services at low margins;
|
|
•
|
location and timing requirements for the delivery of our products and services;
|
|
•
|
lengthy acceptance cycles of our products by certain customers;
|
|
•
|
development or product delivery delays, delays in obtaining necessary components from our suppliers, or delays resulting from contractual provisions or other reasons;
|
|
•
|
customer delays in the acceptance of our product once delivered;
|
|
•
|
addition of new customers or loss of existing customers;
|
|
•
|
gross margin pressures from the sales of products and services due to discounted pricing, especially to our largest customers;
|
|
•
|
lack of reliability of our estimates to forecast sales and trends in our business to generate a sales pipeline;
|
|
•
|
uncertainty regarding our sales pipeline and resulting customer contracts; our ability to align our product and service offerings and cost structure with customer needs;
|
|
•
|
our ability to reduce operating expenses and total costs in procurement, which may involve delays in the anticipated timing of activities related to our cost savings plans and higher than expected or unanticipated costs to implement the plans;
|
|
•
|
changes in the mix of products sold due to differences in profitability among our products;
|
|
•
|
write-off of excess and obsolete inventory;
|
|
•
|
impairment and shortening of the useful life of assets;
|
|
•
|
unexpected changes in the price for, and the availability of, components from our suppliers;
|
|
•
|
our ability to enhance our products with new and better designs and functionality;
|
|
•
|
our ability to timely bring new capabilities to market combining our products and technologies with those produced by our strategic partners and original equipment manufacturers ("OEMs") to address new market opportunities;
|
|
•
|
costs associated with obtaining components to satisfy customer demand;
|
|
•
|
productivity and growth of our sales force;
|
|
•
|
actions taken by our competitors, such as new product announcements or introductions or changes in pricing;
|
|
•
|
market acceptance of newer products,
|
|
•
|
technology regulatory compliance, certification and intellectual property issues associated with our products;
|
|
•
|
the payment of unexpected legal fees and potential damages or settlements resulting from protecting or defending our intellectual property or other matters;
|
|
•
|
the payment of significant damages, settlements or contractual penalties resulting from faulty or malfunctioning products or the provision of services unsatisfactory to our customers;
|
|
•
|
compliance costs associated with new laws, rules and regulations, including environmental regulations;
|
|
•
|
the payment of unexpected intellectual property licensing royalties to third parties who successfully assert that our product(s) infringe their intellectual property rights;
|
|
•
|
the departure and acquisition of key management and other personnel; and
|
|
•
|
general economic trends, including changes in information technology spending or geopolitical events such as war or incidents of terrorism.
|
|
•
|
supporting multiple languages;
|
|
•
|
recruiting sales and technical support personnel internationally with the skills to design, manufacture, sell and support our products;
|
|
•
|
complying with governmental regulations, including obtaining required import or export approval for our products;
|
|
•
|
increased complexity and costs of managing international operations;
|
|
•
|
increased exposure to foreign currency exchange rate fluctuations;
|
|
•
|
commercial laws and business practices that favor local competition;
|
|
•
|
longer sales cycles and manufacturing lead times;
|
|
•
|
financial risks such as longer payment cycles and difficulties in collecting accounts receivable;
|
|
•
|
difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner;
|
|
•
|
ineffective legal protection of intellectual property rights;
|
|
•
|
more complicated logistics and distribution arrangements;
|
|
•
|
additional taxes and penalties;
|
|
•
|
inadequate local infrastructure that could result in business disruptions;
|
|
•
|
global political and economic instability; and
|
|
•
|
other factors beyond our control such as natural disasters, terrorism, civil unrest, war and infectious diseases.
|
|
•
|
price and volume fluctuations in the overall stock market;
|
|
•
|
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
|
|
•
|
actual or anticipated fluctuations in our operating results;
|
|
•
|
changes in operating performance and stock market valuations of other technology companies generally, or those that sell enterprise computing products in particular;
|
|
•
|
changes in financial estimates by any securities analysts who follow our company, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our stock;
|
|
•
|
rating downgrades by any securities analysts who follow our company;
|
|
•
|
the public's response to our press releases or other public announcements, including our filings with the SEC;
|
|
•
|
increases in the total short position in our common stock;
|
|
•
|
announcements by us or our competitors of significant technical innovations, customer wins or losses, acquisitions, strategic partnerships, joint ventures or capital commitments;
|
|
•
|
introduction of technologies or product enhancements that reduce the need for our products;
|
|
•
|
market conditions or trends in our industry or the economy as a whole;
|
|
•
|
the loss of one or more key customers;
|
|
•
|
the loss of key personnel;
|
|
•
|
the development and sustainability of an active trading market for our common stock;
|
|
•
|
lawsuits threatened or filed against us;
|
|
•
|
future sales of our common stock by our officers, directors and significant stockholders; and
|
|
•
|
other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
|
|
•
|
issue any preferred stock;
|
|
•
|
incur or guarantee indebtedness;
|
|
•
|
create, incur, assume, or permit liens to exist;
|
|
•
|
consummate asset sales, acquisitions or mergers;
|
|
•
|
dispose of property;
|
|
•
|
pay dividends or repurchase stock;
|
|
•
|
make investments;
|
|
•
|
enter into transactions with affiliates; or
|
|
•
|
enter into or permit certain types of other agreements to exist.
|
|
•
|
failure to make required payments;
|
|
•
|
material breaches of representations and warranties;
|
|
•
|
failure to comply with certain agreements or covenants;
|
|
•
|
failure to pay, or default under, certain other indebtedness;
|
|
•
|
certain events of bankruptcy and insolvency;
|
|
•
|
failure to pay certain judgments; and
|
|
•
|
a change of control.
|
|
•
|
the acquired products may fail to achieve projected sales or operating margin targets;
|
|
•
|
the acquired business, asset or technology may not further our business strategy or we may not realize expected synergies or cost savings;
|
|
•
|
we might overpay for the acquired business, asset or technology;
|
|
•
|
we might experience difficulties integrating the acquired assets, technologies, operations or personnel or retaining the key personnel of the acquired company;
|
|
•
|
disruption of ongoing business, including diversion of management's attention;
|
|
•
|
we might experience difficulties entering and competing in new product or geographic markets in which we are not experienced;
|
|
•
|
assumption of unknown liabilities, including tax and litigation or problems with product quality, and the related expenses and diversion of resources;
|
|
•
|
potential downward pressure on operating margins due to lower operating margins of acquired businesses, increased headcount costs and other expenses associated with adding and supporting new products;
|
|
•
|
potential negative impact on our relationships with customers, distributors and business partners; and
|
|
•
|
potential negative impact on our earnings per share/negative impact on our earnings resulting from the application of ASC No. 805,
Business Combinations
, which became applicable to us in January 2009.
|
|
•
|
limitations on persons authorized to call a special meeting of stockholders;
|
|
•
|
our stockholders may take action only at a meeting of stockholders and not by written consent;
|
|
•
|
our certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; and
|
|
•
|
advance notice procedures required for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filing Date
|
|
Filed
Herewith
|
||||
|
|
Form
|
|
Ex. No.
|
|
File No.
|
|
||||||
|
10.1
|
|
2014 Omnibus Incentive Plan, as amended
|
|
|
|
|
|
|
|
|
|
X
|
|
10.2
|
|
Employment Letter Agreement between the Registrant and Mekonnen Asrat, as amended
|
|
|
|
|
|
|
|
|
|
X
|
|
31.1
|
|
Certification of Principal Executive Officer furnished pursuant to Rule 13a-14(a) or Rule
15d-14(a).
|
|
|
|
|
|
|
|
|
|
X
|
|
31.2
|
|
Certification of Principal Financial Officer furnished pursuant to Rule 13a-14(a) or Rule
15d-14(a).
|
|
|
|
|
|
|
|
|
|
X
|
|
32.1
|
|
Certifications of Principal Executive Officer and Principal Financial Officer furnished pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)
|
|
|
|
|
|
|
|
|
|
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.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
X
|
|
** XBRL (eXtensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
|
||||
|
|
|
|
|
|
SILICON GRAPHICS INTERNATIONAL CORP.
|
|
|
|
|
|
|
|
By:
|
/s/ MEKONNEN P. ASRAT
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Mekonnen P. Asrat
Chief Financial Officer
(Principal Financial Officer)
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1)
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POSITION
. You will serve in an executive capacity and shall perform the duties of SVP & CFO as commonly associated with this position, and as required by the Company’s Chief Executive Officer (the “
CEO
”). Initially, your responsibilities will include finance and accounting functions for the company. Partnering with the CEO and senior management, you will be a critical player in driving the evolution of the company’s business model and generating returns to stakeholders. Moreover, you will interact frequently with the company’s board of directors and numerous external constituencies to help communicate the company’s plan and progress against key strategic, financial and shareholder return objectives. You will report to the CEO. Of course, the Company may change your position, duties, and work location from time to time in its discretion subject to the terms of this offer letter agreement.
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2)
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COMPENSATION.
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a)
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Base Salary.
Your annual base salary will be $300,000, less standard payroll deductions and withholdings. You will be paid bi-weekly in accordance with Company practice and policy.
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b)
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Performance Bonus
. In addition, you are eligible to earn a semi-annual performance bonus target of $105,000 ($210,000 annually), based upon the Company’s performance with respect to applicable performance targets, which are expected to include revenue and profitability targets. Any such bonus payment shall be deemed earned upon the fulfillment of targets and your continued employment through the bonus payment date, and shall be paid within a reasonable period of time, but not later than 45 days, after the end of the fiscal half. The Company will determine in its sole discretion whether the performance targets have been achieved, whether you have earned a bonus, and the amount of any earned bonus.
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c)
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Review of Compensation.
Your base salary and bonus eligibility will be reviewed on an annual or more frequent basis by the Compensation Committee and are subject to change in the discretion of the Compensation Committee, subject to the terms of this offer letter agreement.
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3)
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EQUITY AWARD.
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a)
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Equity Grants.
Subject to Compensation Committee approval, the Company will grant you 56,250 restricted stock units (the “Restricted Stock Unit Award”) with the right to receive the Company’s common stock pursuant to the Company’s Employee Equity Incentive Plan (the “
Plan
”). In addition, subject to
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b)
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Vesting Schedule.
The Restricted Stock Unit Award will be subject to a four-year vesting period that requires your continuous service to the Company as an employee or consultant (as defined in the Plan and the Stock Unit Award Agreement), with 25% vesting upon completion of the one year anniversary in this role of continuous service as an employee or consultant, and an additional 6.25% of such Restricted Stock Unit Award vesting for each 3 months of continuous service as an employee or consultant after such year. The Performance Restricted Stock Unit Award will be eligible to be earned upon achievement of certain performance criteria following the completion of the SGI’s audited financial statements for the 2016 fiscal year and the approval of the Compensation Committee of the Board. The Performance Restricted Stock Unit Award, if earned, will vest as to 25% upon the completion of the one year anniversary in this role of continuous service as an employee, and an additional 6.25% of such Performance Restricted Stock Unit Award vesting for each 3 months of continuous service as an employee or consultant after such year. The actual number of shares subject to the Performance Restricted Stock Unit Award may range from 50% to 150% of the target award amount depending on the level actually achieved.
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c)
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Governing Documents.
The Restricted Stock Unit Award will be governed in full by the terms and conditions of the Plan and the Restricted Stock Unit Award Agreement. The Performance Restricted Stock Unit Award will be governed in full by the terms and conditions of the Plan and the Performance Restricted Stock Unit Award Agreement.
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4)
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EMPLOYEE BENEFITS.
You will be eligible to participate in the Company’s standard employee benefit plans provided by the Company to its executive employees generally in accordance with the terms and conditions of the plans and applicable policies that may be in effect from time to time, and including but not limited to group health insurance coverage, disability insurance, life insurance, ESPP, 401(k) Plan, and paid holidays. You will be eligible for reimbursement of your legitimate and documented business expenses incurred in connection with your employment, pursuant to the Company’s standard reimbursement expense policy and practices. The Company may modify its benefits programs and policies from time to time in its discretion.
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5)
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PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
. As a condition of your employment, you were required to sign and abide by the Company’s Proprietary Information and Inventions Agreement (the “
Non-Disclosure Agreement
”), attached hereto as Exhibit A.
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6)
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SERVICE AS EMPLOYEE; OUTSIDE ACTIVITIES
.
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a)
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Location and Duties.
You will work at the Company’s corporate facility currently located in Milpitas, California, subject to necessary business travel. During your employment with the Company, you will devote your best efforts and substantially all of your business time and attention (except for vacation periods and reasonable periods of illness or other incapacity permitted by the Company’s general employment policies) to the business of the Company.
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b)
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Company Policies.
Your employment relationship with the Company shall also be governed by the general employment policies and practices of the Company, including but not limited to the policies contained in the Company’s Employee Handbook (except that if the terms of this letter differ from or are in conflict with the Company’s general employment policies or practices, this letter will control), and you will be required to abide by such general employment policies and practices of the Company.
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c)
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Other Activities.
Throughout your employment with the Company, you may engage in civic and not-for-profit activities so long as such activities do not interfere with the performance of your duties hereunder or present a conflict of interest with the Company. Subject to the restrictions set forth herein and only with the prior written consent of the Board, you may serve as a director of other corporations and may devote a reasonable amount of your time to other types of business or public activities not expressly mentioned in this paragraph.
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d)
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Conflict of Interest.
During your employment by the Company, except on behalf of the Company, you will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant for or on behalf of any other person, corporation, firm, partnership or other entity whatsoever known by you to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that you may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange.
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7)
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AT-WILL EMPLOYMENT RELATIONSHIP.
Your employment relationship with the Company is at-will. Accordingly, both you and the Company may terminate the employment relationship at any time, with or without Cause (as defined below), and with or without advance notice.
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8)
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DEFINITIONS
.
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a)
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Definition of “Cause.”
For purposes of this offer letter agreement, “Cause” is defined as one or more of the following events: (i) the indictment or conviction for a felony or other crime, or any misdemeanor involving moral turpitude; (ii) the commission of any other act or omission involving fraud or intentional deceit with respect to the Company or any of its affiliates or any of their directors, stockholders, partners or members; (iii) any act or omission involving dishonesty that causes material injury to the Company or any of its affiliates or any of their directors, stockholders, partners or members; (iv) gross negligence with respect to the Company or any of its subsidiaries; (v) willful misconduct with respect to the Company or any of its subsidiaries; (vi) any other material breach of your contractual, statutory, or common law obligations to the Company; provided, however, that, it shall only be deemed Cause pursuant to clause (vi) if you are given written notice describing the basis of Cause and, if the event is reasonably susceptible of cure, you fail to cure within thirty (30) days.
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b)
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Definition of “Good Reason.”
For purposes of this offer letter agreement, “Good Reason” is defined as one or more of the following conditions that occur without your written consent: (i) the assignment to you, or the removal from you, of any duties or responsibilities that results in the material diminution of your authority, duties or responsibilities as SVP, WW Sales, including a Change in Control that results in your no longer serving as the SVP, WW Sales or any similar position; (ii) a material reduction by the Company of your base salary; (iii) the Company’s material breach of its obligations to you under this offer letter agreement; or (iv) your office relocation to a location more than fifty miles from your then present location provided however that, it shall only be deemed Good Reason pursuant to the foregoing definition if (x) the Company is given written notice from you within ninety (90) days following the first occurrence of a condition that you consider to constitute Good Reason describing the condition and fails to remedy such condition within thirty (30) days following such written notice, and (y) you resign from employment within ninety (90) days following the end of the period within which the Company was entitled to remedy the condition constituting Good Reason but failed to do so.
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c)
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Definition of “Change in Control.”
For purposes of this offer letter agreement, “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of either of the following events:
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i)
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There is consummated (A) a merger, consolidation or similar transaction involving (directly or indirectly) the Company or (B) a tender offer or exchange offer addressed to the stockholders of the Company and, in either event, immediately after the consummation of such merger, consolidation or similar transaction or such tender or exchange offer, the stockholders of the Company immediately prior thereto do not own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their ownership of the outstanding voting securities of the Company immediately prior to such transaction; or
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ii)
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There is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition.
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9)
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CHANGE IN CONTROL SEVERANCE BENEFITS
. If, within 12 months following a Change in Control, your employment is terminated by the Company without Cause, or by you for Good Reason; and you sign, date, return to the Company and allow to become effective a release of all claims in a form satisfactory to the Company in its sole discretion (the “
Release
”); then in lieu of any Severance Benefits set forth in Section 10 herein, you shall be entitled to receive the following severance benefits (the “
Change in Control Severance Benefits
”); provided that you must execute and return the Release on or before the date specified by the Company in the prescribed form (the “
Release Deadline
”). The Release Deadline will in no event be later than fifty (50) days after your employment is terminated. If you fail to return the Release on or before the Release Deadline, or if you revoke the Release, then you will not be entitled to the benefits described in this Section 9. The severance payments will commence within sixty (60) days after your employment is terminated and, once they commence, will include any unpaid amounts accrued from the date your employment is terminated. However, if the sixty (60) day period described in the preceding sentence spans two calendar years, then the payments will in any event begin in the second calendar year.
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a)
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Accelerated Vesting
. All unvested stock options and restricted stock units referred to herein and any subsequent grants of stock options, restricted stock units or any other equity awards granted under current or future plans shall become fully vested upon the closing of a Change in Control of the Company;
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b)
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Severance Pay
. You will be eligible to receive severance pay in the total amount equal to the sum of (i) twelve (12) months of your base salary in effect as of the employment termination date (ii) the full amount of your annual performance bonus at target, and (iii) the prorated amount of your annual performance bonus
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c)
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COBRA Benefits
. If you timely elect and continue to remain eligible for continued group health insurance coverage under federal COBRA law or, if applicable, state insurance laws (collectively, “
COBRA
”), the Company will pay your COBRA premiums sufficient to continue your group health insurance coverage at the same level in effect as of your employment termination date (including dependent coverage, if applicable) for twelve (12) months after the employment termination date; provided that, the Company’s obligation to pay your COBRA premiums will cease earlier if you become eligible for group health insurance coverage through a new employer and you must provide prompt written notice to the Company if you become eligible for group health insurance coverage through a new employer within twelve (12) months after your employment termination date. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Services Act), the Company shall instead provide you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would otherwise be required to pay to continue your group health coverage in effect from the date of your termination of employment, which payments shall be made regardless of whether you elect COBRA continuation coverage and shall end on the earlier of (x) the date on which you obtain other employment and (y) twelve (12) months after your employment termination date.
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10)
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SEVERANCE BENEFITS
. If, at any time other than during the twelve (12) month period following a Change in Control, your employment is terminated by the Company without Cause, or by you for Good Reason; and if you sign, date, return to the Company and allow to become effective the Release; then you shall be entitled to receive the following severance benefits (the “
Severance Benefits
”); provided that you must execute and return the Release on or before the Release Deadline. If you fail to return the Release on or before the Release Deadline, or if you revoke the Release, then you will not be entitled to the benefits in this Section 10. The severance payments will commence within sixty (60) days after your employment is terminated and, once they commence, will include any unpaid amounts accrued from the date your employment is terminated. However, if the sixty (60) day period described in the preceding sentence spans two calendar years, then the payments will in any event begin in the second calendar year.
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a)
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Severance Pay.
You will be eligible to receive severance pay in the total amount equal to the sum of (i) twelve (12) months of your base salary in effect as of the employment termination date, and (ii) the full amount of your annual performance bonus at target, and (iii) the prorated amount of your annual performance bonus at target for the year in which the termination occurred. The severance pay will be subject to required payroll deductions and withholdings, and will be paid in twenty-six (26) equal installments over a period of twelve (12) months, with such payments made on the Company’s normal payroll schedule; and
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b)
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COBRA Benefits.
If you timely elect and continue to remain eligible for COBRA, the Company will pay your COBRA premiums sufficient to continue your group health insurance coverage at the same level in effect as of your employment termination date (including dependent coverage, if applicable) for twelve(12) months after the employment termination date; provided that, the Company’s obligation to pay your COBRA premiums will cease earlier if you become eligible for group health insurance coverage through a new employer and you must provide prompt written notice to the Board if you become eligible for group health insurance coverage through a new employer within twelve(12) months after your employment termination date. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Services Act), the Company shall instead provide you a taxable monthly payment in an amount equal to the monthly COBRA premium that you would otherwise be required to pay to continue
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11)
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CONDITIONS TO ELIGIBILITY TO SEVERANCE BENEFITS OR CHANGE IN CONTROL SEVERANCE BENEFITS.
Notwithstanding the foregoing, you will not be eligible for the Severance Benefits or the Change in Control Severance Benefits if: (A) your employment is terminated for Cause, or if you resign for any reason that does not qualify as Good Reason; or (B) in the event that you materially breach the Non-Disclosure Agreement, the Release of claims, or any other obligations you owe to the Company after termination of your employment (including but not limited to the provisions of the Non-Disclosure Agreement), and the Company’s obligation to provide the Severance Benefits or the Change in Control Benefits (or to continue to provide such benefits) will cease immediately and in full as of the date of your breach.
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12)
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DEFERRED COMPENSATION
. Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “
Code
”) and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”). Severance benefits shall not commence until you have a “separation from service” for purposes of Section 409A. Each installment of severance benefits is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if such exemptions are not available and you are, upon separation from service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits payments shall be delayed until the earlier of (i) six (6) months and one day after your separation from service and (ii) your death. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this paragraph shall be paid to you or your beneficiary in one lump sum (without interest). Any termination of your employment is intended to constitute a “separation from service” and will be determined consistent with the rules relating to a “separation from service” as such term is defined in Treasury Regulation Section 1.409A-1. It is intended that each installment of the payments provided hereunder constitute separate “payments” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision will be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Agreement is determined to be subject to Section 409A of the Code, the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses), in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which you incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.
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13)
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EXCISE TAX.
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a)
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Reduced Amount
. Anything in this agreement to the contrary notwithstanding, if any payment or benefit that you would receive pursuant to this offer letter agreement or otherwise (“
Payment
”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “
Excise Tax
”), then such Payment shall be equal to the Reduced Amount (defined below). The “
Reduced Amount
” shall be either (y) the largest
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b)
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Order of Reduction
. Any reduction shall be made in the following manner: first a pro rata reduction of (i) cash payments subject to Section 409A of the Code as deferred compensation and (ii) cash payments not subject to Section 409A of the Code, and second a pro rata cancellation of (i) equity-based compensation subject to Section 409A of the Code as deferred compensation and (ii) equity-based compensation not subject to Section 409A of the Code. Reduction in either cash payments or equity compensation benefits shall be made prorata between and among benefits which are subject to Section 409A of the Code and benefits which are exempt from Section 409A of the Code. Any reduction in the Payment that is required shall occur in such manner as will provide you with the greatest economic benefit. If more than one manner of reduction necessary to arrive at the Reduced Amount yields the greatest economic benefit, then payments and benefits shall be reduced pro rata.
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c)
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Accounting Firm.
The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Payment Event shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group affecting the Payment Event, a nationally recognized accounting firm appointed by the Board and reasonably approved by you shall make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.
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d)
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Calculations
. The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and you within fifteen (15) calendar days after the date on which your right to a Payment is triggered (if requested at that time by the Company or you) or such other time or times as requested by the Company or you. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and you with an opinion reasonably acceptable to you that no Excise Tax will be imposed with respect to such Payment. The Company shall be entitled to rely upon the accounting firm’s determinations, which shall be final and binding.
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14)
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DISPUTE RESOLUTION.
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a)
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Arbitration Agreement.
To ensure the rapid and economical resolution of disputes that may arise in connection with your employment, you and the Company agree that any and all disputes, claims, or causes of action, in law or equity, arising from or relating to the enforcement, breach, performance, execution, or interpretation of this agreement, your employment, or the termination of your employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in San Francisco, California conducted before a single neutral arbitrator by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) or its successor, under the then applicable JAMS rules for the resolution of employment disputes.
By agreeing to this arbitration procedure, both you and the Company waive the right to resolve any such dispute through a trial by jury or judge or by administrative proceeding.
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b)
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Arbitrator Authority.
The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential findings and conclusions and a statement of the award. All claims, disputes, or causes of action under this Agreement, whether by you or the Company,
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c)
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Fees and Injunctive Relief.
The Company shall pay all of JAMS’ arbitration fees. The parties agree that the arbitrator shall award reasonable attorneys’ fees and costs to the prevailing party in any action brought hereunder to the extent that such an award would be consistent with applicable law. The arbitrator shall have discretion to determine the prevailing party in an arbitration where multiple claims may be at issue. Nothing in this letter agreement shall prevent either you or the Company from obtaining injunctive relief in court if necessary to prevent irreparable harm pending the conclusion of any arbitration.
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d)
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Federal Arbitration Act.
This agreement is made under the provisions of the Federal Arbitration Act (9 U.S.C., Sections 1-14) (“FAA”) and will be construed and governed accordingly. It is the parties' intention that both the procedural and the substantive provisions of the FAA shall apply.
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15)
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MISCELLANEOUS.
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a)
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General Provisions.
This letter, including the attached Non-Disclosure Agreement, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to the subject matter hereof. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other agreements, promises, warranties or representations concerning its subject matter. Changes in your employment terms, other than those expressly reserved herein to the Company’s discretion, only can be made in a writing signed by a duly-authorized member of the Company and you. This letter agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this letter agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this letter agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This letter agreement shall be construed and enforced in accordance with the laws of the State of California without regard to conflicts of law principles. Any ambiguity in this letter agreement shall not be construed against either party as the drafter. Any waiver of a breach of this letter agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This letter agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile signatures shall be equivalent to original signatures.
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b)
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Legal Right to Work
. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.
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16)
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ACCEPTANCE
. Please sign this letter and return to me as soon as possible to accept the terms set forth herein.
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1.
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I have reviewed this quarterly report on Form 10-Q of Silicon Graphics International Corp.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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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;
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(b)
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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;
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(c)
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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
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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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
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(b)
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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.
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/s/ Jorge Titinger
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Jorge Titinger
President and Chief Executive Officer
(Principal Financial Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Silicon Graphics International Corp.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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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;
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(b)
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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;
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(c)
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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
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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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
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(b)
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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.
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/s/ Mekonnen P. Asrat
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Mekonnen P. Asrat
Chief Financial Officer
(Principal Financial Officer)
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(1)
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The Report, to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Jorge Titinger
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/s/ Mekonnen P. Asrat
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Jorge Titinger
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Mekonnen P. Asrat
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President and Chief Executive Officer
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Chief Financial Officer
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(Principal Executive Officer)
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(Principal Financial Officer)
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