Document_And_Entity_Informatio
Document And Entity Information | 3 Months Ended | |
Mar. 31, 2013 | Apr. 30, 2013 | |
Document And Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'DOT HILL SYSTEMS CORP | ' |
Entity Central Index Key | '0001042783 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-13 | ' |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Amendment Flag | 'false | ' |
Entity Common Stock, Shares Outstanding | ' | 58,615,969 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
ASSETS | ' | ' |
Cash and cash equivalents | $40,297 | $40,315 |
Accounts receivable, net | 22,484 | 25,025 |
Inventories | 4,944 | 5,037 |
Prepaid expenses and other assets | 5,960 | 5,810 |
Total current assets | 73,685 | 76,187 |
Property and equipment, net | 7,645 | 7,147 |
Other assets | 679 | 603 |
Total assets | 82,009 | 83,937 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ' | ' |
Accounts payable | 23,055 | 22,659 |
Accrued compensation | 3,443 | 4,863 |
Accrued expenses | 6,888 | 8,690 |
Deferred revenue | 3,559 | 2,889 |
Credit facility borrowings | 2,800 | 2,800 |
Total current liabilities | 39,745 | 41,901 |
Other long-term liabilities | 3,385 | 3,261 |
Total liabilities | 43,130 | 45,162 |
Commitments and Contingencies (Note 9) | ' | ' |
Stockholders' Equity: | ' | ' |
Preferred stock, $.001 par value, 10,000 shares authorized, zero shares issued and outstanding at December 31, 2012 and March 31, 2013 | 0 | 0 |
Common stock, $.001 par value, 100,000 shares authorized, 58,265 and 58,617 shares issued and outstanding at December 31, 2012 and March 31, 2013, respectively | 58 | 58 |
Additional paid-in capital | 327,516 | 326,575 |
Accumulated other comprehensive loss | -3,389 | -3,533 |
Accumulated deficit | -285,306 | -284,325 |
Total stockholders' equity | 38,879 | 38,775 |
Total liabilities and stockholders' equity | $82,009 | $83,937 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 58,617,000 | 58,265,000 |
Common stock, shares outstanding | 58,617,000 | 58,265,000 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements Of Comprehensive Loss (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2013 | Mar. 31, 2012 |
NET REVENUE | $44,480 | $54,598 |
COST OF GOODS SOLD | 30,040 | 39,033 |
GROSS PROFIT | 14,440 | 15,565 |
OPERATING EXPENSES: | ' | ' |
Research and development | 8,713 | 9,197 |
Sales and marketing | 3,108 | 3,477 |
General and administrative | 3,137 | 2,834 |
Total operating expenses | 14,958 | 15,508 |
OPERATING INCOME (LOSS) | -518 | 57 |
OTHER INCOME: | ' | ' |
Interest income (expense), net | -7 | 8 |
Other Income, net | -1 | 4 |
Total other income (expense), net | -8 | 12 |
INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS | -526 | 69 |
INCOME TAX EXPENSE (BENEFIT) | 34 | -91 |
INCOME (LOSS) FROM CONTINUING OPERATIONS | -560 | 160 |
LOSS FROM DISCONTINUED OPERATIONS | -421 | -2,028 |
NET LOSS | -981 | -1,868 |
NET EARNINGS (LOSS) PER SHARE: | ' | ' |
Basic and diluted earnings (loss) per share from continuing operations | ($0.01) | $0 |
Loss per share from discontinued operations | ($0.01) | ($0.04) |
Basic and diluted (in usd per share) | ($0.02) | ($0.03) |
WEIGHTED AVERAGE SHARES USED TO CALCULATE NET INCOME (LOSS) PER SHARE: | ' | ' |
Weighted Average Number of Shares Outstanding, Basic | 58,001 | 56,030 |
Weighted Average Number of Shares Outstanding, Diluted | 58,001 | 56,558 |
COMPREHENSIVE LOSS: | ' | ' |
NET LOSS | -981 | -1,868 |
Foreign currency translation adjustment | 144 | 75 |
Comprehensive loss | ($837) | ($1,793) |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements Of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2013 | Mar. 31, 2012 |
Cash Flows From Operating Activities: | ' | ' |
Net loss | ($981) | ($1,868) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ' | ' |
Depreciation and amortization | 709 | 1,085 |
Stock-based compensation expense | 668 | 1,142 |
Write-off of property and equipment | 0 | 123 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 2,521 | -3,469 |
Inventories | 91 | 496 |
Prepaid expenses and other assets | -266 | -5,250 |
Accounts payable | 456 | 4,543 |
Accrued compensation and other expenses | -3,074 | -875 |
Deferred revenue | 682 | -96 |
Other long-term liabilities | 142 | -118 |
Net cash (used in) provided by operating activities | 948 | -4,287 |
Cash Flows From Investing Activities: | ' | ' |
Purchases of property and equipment | -1,195 | -327 |
Net cash used in investing activities | -1,195 | -327 |
Cash Flows From Financing Activities: | ' | ' |
Principal payment of note payable | 0 | -71 |
Payments on bank borrowings | -2,800 | 0 |
Proceeds from bank borrowings | 2,800 | 0 |
Shares withheld for tax purposes | -114 | -401 |
Proceeds from sale of stock to employees | 387 | 448 |
Net cash (used in) provided by financing activities | 273 | -24 |
Effect of Exchange Rate Changes on Cash and Cash Equivalents | -44 | -83 |
Net (Decrease) Increase in Cash and Cash Equivalents | -18 | -4,721 |
Cash and Cash Equivalents, beginning of period | 40,315 | 46,168 |
Cash and Cash Equivalents, end of period | 40,297 | 41,447 |
Supplemental Disclosures of Non-Cash Investing Activities: | ' | ' |
Property and equipment acquired but not yet paid | 489 | 855 |
Supplemental Cash Flow Data: | ' | ' |
Cash paid for income taxes | $17 | $34 |
Summary_Of_Significant_Account
Summary Of Significant Accounting Policies | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Accounting Policies [Abstract] | ' | |||||||
Summary Of Significant Accounting Policies | ' | |||||||
Summary of Significant Accounting Policies | ||||||||
Basis of Presentation | ||||||||
The financial statements of Dot Hill Systems Corp. (referred to herein as Dot Hill, we, our or us) contained herein are unaudited and in the opinion of management contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented. The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions to Securities and Exchange Commission, or SEC, Form 10-Q and Article 10 of SEC Regulation S-X. They do not include all of the information and disclosures required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for future quarters or the year ending December 31, 2013. | ||||||||
2012 amounts in our unaudited condensed consolidated financial statements have been retrospectively adjusted for discontinued operations. See Note 3. | ||||||||
Use of Accounting Estimates | ||||||||
The preparation of our unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition, inventory valuation, recurring and specific issue warranty obligations, the valuation and recognition of stock-based compensation expense, and the valuation of long-lived assets. In addition, we have other accounting policies that involve estimates such as the determination of useful lives of long-lived assets, accruals for restructuring, and income taxes, including the valuation allowance for deferred tax assets. Actual results may differ from these estimates and such differences could be material. | ||||||||
Revenue Recognition | ||||||||
We derive our revenue from sales of our hardware products, software and services. | ||||||||
Hardware | ||||||||
Hardware product revenue consists of revenue from sales of our AssuredSAN storage systems that is integrated with industry standard hardware which is essential to the functionality of the integrated system product. We recognize hardware product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the price is fixed or determinable; and (iv) collectability is reasonably assured. Revenue is recognized for hardware product sales upon transfer of title and risk of loss to the customer and in addition, upon installation for certain of our AssuredUVS appliance products. We record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on historical sales returns, analysis of credit memo data and other factors known at the time. If actual future returns and pricing adjustments differ from past experience and our estimates, additional revenue reserves may be required. | ||||||||
Software | ||||||||
In accordance with the specific guidance for recognizing software revenue, where applicable, we recognize revenue from perpetual software licenses at the inception of the license term assuming all revenue recognition criteria have been met. We use the relative method to allocate revenue to software licenses at the inception of the license term when vendor-specific objective evidence, or VSOE, of fair value for all unspecified software updates and enhancements related to our products through service contracts is available. We have established VSOE for the fair value of our support services as measured by the stated renewal prices paid by our customers when the services are sold separately on a standalone basis. | ||||||||
Specific long-term software contracts may contain multiple deliverables including software licenses, services, training and post-contract support for which we have not established VSOE for the fair value of any of the elements. Under specific guidance for recognizing software revenue, we begin recognizing revenue upon the delivery of all the elements except post-contract support (PCS). We defer all the direct and incremental costs related to the deliverables in these contracts until delivery of all the elements except PCS. The deferred revenue and costs are amortized over the contractual PCS support periods. | ||||||||
During the preparation of the Company's consolidated financial statements for the year ended December 31, 2012 and the accounting analysis for the renewal of a long-term software contract, the Company determined that it had applied an inappropriate revenue recognition methodology to one of its long-term software contracts in 2010, 2011 and during the first three quarters of 2012. The Company recorded revenue as royalty payments were received on this contract and should have deferred all the revenue and direct and incremental costs until all the deliverables, except PCS, were delivered in 2012. This resulted in an overstatement of $0.6 million of revenue and $0.4 million of costs for the three months ended March 31, 2012, which was corrected in the fourth quarter of 2012. | ||||||||
Service | ||||||||
Our service revenue primarily includes out-of-warranty repairs and product maintenance contracts. Out-of warranty repairs primarily consist of product repair services performed by our contract manufacturers for those customers that allowed their original product warranty to expire without purchasing one of our higher level support service plans. Revenue from these out-of-warranty repairs, and the associated cost of sales, is recognized in the period these services are provided. Service revenue also consists of product maintenance contracts purchased by our customers as an extension of our standard warranty. Revenue from our product maintenance contracts is deferred and recognized ratably over the contract term, generally 12 to 36 months. Net revenue derived from services was less than 10% of total revenue for all periods presented. | ||||||||
Revenue Recognition for Arrangements with Multiple Deliverables | ||||||||
For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software services, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, we use a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) VSOE of fair value, (ii) third-party evidence of selling price, or TPE, and (iii) best estimate of the selling price, or ESP. VSOE generally exists only when we sell the deliverable separately and represents the actual price charged by us for that deliverable. ESPs reflect our best estimates of what the selling prices of elements would be if they were sold regularly on a standalone basis. | ||||||||
From time to time, we enter into arrangements with customers that include acceptance criteria. In such instances, we defer all revenue on the arrangement until customer acceptance is obtained or the acceptance clause lapses. | ||||||||
Revenue Recognition for Sales to Channel Partners | ||||||||
On sales to channel partners, we evaluate whether fees are considered fixed or determinable by considering a number of factors, including our ability to estimate returns, payment terms and our relationship and past history with the particular channel partner. If fees are not considered fixed or determinable at the time of sale to a channel partner, revenue recognition is deferred until there is persuasive evidence indicating the product has sold through to an end-user. Persuasive evidence of sell-through may include reports from channel partners documenting sell-through activity or data indicating an order has shipped to an end-user. | ||||||||
Deferred Revenue | ||||||||
We defer revenue on upfront nonrefundable payments from our customers and recognize it ratably over the term of the agreement, unless the payment is in exchange for products delivered that represent the culmination of a separate earnings process. When we provide consideration to a customer, we recognize the value of that consideration as a reduction in net revenue. We may be required to maintain inventory with certain of our largest OEM customers, which we refer to as hubbing arrangements. Pursuant to these arrangements we deliver products to a customer or a designated third-party warehouse based upon the customer’s projected needs, but do not recognize product revenue unless and until the customer has removed our product from the warehouse to incorporate into its end products. | ||||||||
Concentration of Customers and Suppliers | ||||||||
A majority of our net revenue is derived from a limited number of customers. We currently have two customers that account for more than 10% of our total net revenue: Hewlett Packard, or HP, and Tektronix, Inc., or Tektronix. Our agreements with our original equipment manufacturers, or OEM, partners do not contain any minimum purchase commitments, do not obligate our OEM partners to purchase their storage solutions exclusively from us and may be terminated at any time upon notice from the applicable partner. | ||||||||
Net revenue by major customer is as follows (as a percentage of total net revenue): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2013 | |||||||
HP | 61 | % | 63 | % | ||||
Tektronix | 19 | % | 12 | % | ||||
Other customers less than 10% | 20 | % | 25 | % | ||||
Total | 100 | % | 100 | % | ||||
HP continues to account for a significant percentage of our sales. If our relationship with HP were disrupted or declined significantly, we would lose a substantial portion of our anticipated net revenue and our business could be materially harmed. We cannot guarantee that our relationship with HP or our other customers will expand or not otherwise be disrupted. | ||||||||
We expect that the sale of our products to a limited number of customers will continue to account for a high percentage of net revenue for the foreseeable future. Our Product Purchase Agreement with HP, as amended, terminates on October 30, 2016. HP also holds warrants to purchase 1,602,489 shares of our common stock at an exercise price of $2.40 per share, expiring on October 30, 2016. | ||||||||
We currently rely on a limited number of contract manufacturing partners to produce substantially all of our products. As a result, should any of our current manufacturing partners, such as Foxconn Technology Group, or parts suppliers not produce and deliver inventory for us to sell on a timely basis, operating results may be adversely impacted. | ||||||||
Cash and Cash Equivalents | ||||||||
We classify investments as cash equivalents if they are readily convertible to cash and have original maturities of three months or less at the time of acquisition. Cash and cash equivalents consist primarily of money market mutual funds issued or managed in the United States. As of December 31, 2012 and March 31, 2013, the carrying value of cash and cash equivalents approximates fair value due to the short period of time to maturity. | ||||||||
As of March 31, 2013, $2.7 million of the $40.3 million of cash, cash equivalents, and marketable securities was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we could be required to accrue and pay taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations. | ||||||||
Allowance for Doubtful Accounts | ||||||||
We establish an allowance for doubtful accounts for accounts receivable amounts that may not be collectible. We determine the allowance for doubtful accounts based on the aging of our accounts receivable balances and an analysis of our historical experience of bad debt write-offs. | ||||||||
Balance sheet details are as follows, (in thousands): | ||||||||
March 31, | March 31, | |||||||
2012 | 2013 | |||||||
Balance, beginning of the year | $ | 203 | $ | 240 | ||||
Recoveries | — | (9 | ) | |||||
Balance, quarter ended | $ | 203 | $ | 231 | ||||
Long-lived Asset Impairment | ||||||||
We periodically review the recoverability of the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. An impairment in the carrying value of an asset group is recognized whenever anticipated future undiscounted cash flows from an asset group are estimated to be less than its carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. | ||||||||
Recent Accounting Pronouncements | ||||||||
From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective will not have a material impact on our results of operations and financial position. | ||||||||
In February 2013, the FASB issued Accounting Standards Update 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU 2013-02"). This update requires presentation of reclassifications from accumulated other comprehensive income by component to net income either on the face of the income statement or in a single footnote, but does not require any new information to be disclosed. This update is effective for the interim and annual periods beginning after December 15, 2012. The Company has adopted ASU 2013-2 as of the Company's interim period ending March 31, 2013. The adoption of this update has not had any impact on the Company's financial statements as the Company has not had any reclassifications from accumulated other comprehensive income to net income. Other comprehensive income in each period is comprised solely of foreign currency translation adjustments. |
Earnings_Per_Share
Earnings Per Share | 3 Months Ended | |||||||||||||
Mar. 31, 2013 | ||||||||||||||
Earnings Per Share [Abstract] | ' | |||||||||||||
Earnings Per Share | ' | |||||||||||||
Earnings Per Share | ||||||||||||||
Basic earnings per share, for both continuing and discontinued operations, is calculated by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share, for both continuing and discontinued operations, is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock outstanding during the period and including the dilutive effect of common stock that would be issued assuming conversion or exercise of outstanding warrants, stock options, share based compensation awards and other dilutive securities. No such items were included in the computation of diluted loss per share in the three months ended March 31, 2013 because we incurred a net loss in the period and the effect of inclusion would have been anti-dilutive. | ||||||||||||||
The following is a reconciliation of weighted-average shares outstanding used in the calculation of basic and diluted earnings from continuing operations per share for the three months ended March 31, 2013 (in thousands, except per share data): | ||||||||||||||
Three Months Ended | ||||||||||||||
March 31, 2012 | March 31, 2013 | |||||||||||||
Income (loss) from continuing operations | $ | 160 | $ | (560 | ) | |||||||||
Basic weighted-average common shares outstanding | 56,030 | 58,001 | ||||||||||||
Assumed exercise of dilutive stock options and restricted stock | 528 | — | ||||||||||||
Diluted weighted-average common shares outstanding | 56,558 | 58,001 | ||||||||||||
Income (loss) from continuing operations: | ||||||||||||||
Basic earnings per share | $ | — | $ | (0.01 | ) | |||||||||
Diluted earnings per share | $ | — | $ | (0.01 | ) | |||||||||
Outstanding equity awards not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive were as follows: | ||||||||||||||
March 31, 2012 | March 31, 2013 | |||||||||||||
Number of | Range of | Number of | Range of | |||||||||||
Potential | Exercise Prices | Potential | Exercise Prices | |||||||||||
Shares | Shares | |||||||||||||
Stock options | 9,312,258 | $1.55 - $16.36 | 9,159,312 | $0.47 - $16.36 | ||||||||||
Unvested stock awards | 1,147,085 | $ | — | 508,221 | $ | — | ||||||||
Warrants | 1,602,489 | $ | 2.4 | 1,602,489 | $ | 2.4 | ||||||||
Discontinued_Operations
Discontinued Operations | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Discontinued Operations and Disposal Groups [Abstract] | ' | |||||||
Discontinued Operations | ' | |||||||
Discontinued Operations | ||||||||
During 2011, our primary AssuredUVS customer informed us that the AssuredUVS software would no longer be a component of its business strategy, which would result in a significant decline in revenues for the Company. In February 2012, our Board of Directors approved a plan to exit our AssuredUVS business and close down our Israel Technology Development Center. During the second quarter of 2012, we explored the potential sale of the AssuredUVS business, but were unsuccessful in locating a buyer and ended efforts to sell the business or its component assets as of June 30, 2012. The AssuredUVS business is now recorded in discontinued operations, since we have ceased all significant ongoing operational activities as of September 30, 2012. | ||||||||
The following is a summary of the components of loss from discontinued operations for the three months ended March 31, 2012 and 2013 (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, 2012 | March 31, 2013 | |||||||
Net revenue | $ | 146 | $ | 20 | ||||
Cost of goods sold | 537 | 131 | ||||||
Gross loss | (391 | ) | (111 | ) | ||||
Operating expenses: | ||||||||
Research and development | 745 | — | ||||||
Sales and marketing | 56 | — | ||||||
General and administrative | 178 | 320 | ||||||
Restructuring charge (recovery) | 657 | (10 | ) | |||||
Total operating expenses | 1,636 | 310 | ||||||
Operating loss | (2,027 | ) | (421 | ) | ||||
Other income (expense), net | (1 | ) | — | |||||
Loss from discontinued operations | $ | (2,028 | ) | $ | (421 | ) | ||
The activity in 2013 is limited to the continued support of certain maintenance contracts entered into prior to shutting down the Israel Technology Development Center, as well as the resolution of a dispute with the former primary AssuredUVS customer (see Note 9). |
Inventories
Inventories | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Inventory Disclosure [Abstract] | ' | |||||||
Inventories | ' | |||||||
Inventories | ||||||||
The components of inventories consist of the following (in thousands): | ||||||||
December 31, | March 31, | |||||||
2012 | 2013 | |||||||
Purchased parts and materials | $ | 3,051 | $ | 3,277 | ||||
Finished goods | 1,986 | 1,667 | ||||||
Total inventory | $ | 5,037 | $ | 4,944 | ||||
Inventories are valued at the lower of cost (first-in, first-out method) or market value. The valuation of production inventory requires us to estimate excess or obsolete inventory. The determination of excess or obsolete inventory requires us to estimate the future demand for our products. Our markets are volatile, subject to technological risks and price changes and inventory reduction programs by our customers. In addition, we are required to make last time buys of certain components on occasion. These factors result in a risk that we will forecast incorrectly and purchase excess inventories of particular products or have commitments to purchase excess inventory components from our suppliers. As a result, actual demand will differ from forecasts, and such a difference has in the past and may in the future have a material effect on our financial statements. Any write downs to inventory due to the existence of excess quantities, physical obsolescence, changes in pricing, damage, or other causes establish a new cost basis for the inventory. When we sell or dispose of reserved inventory the new cost basis is charged to cost of sales. Service inventory is amortized ratably over the estimated life of the related product series. |
Intangible_Assets
Intangible Assets | 3 Months Ended | |||||||||||||
Mar. 31, 2013 | ||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | |||||||||||||
Intangible Assets | ' | |||||||||||||
Intangible Assets | ||||||||||||||
Identifiable intangible assets are as follows (in thousands), as of December 31, 2012 and March 31, 2013: | ||||||||||||||
Estimated Useful | Gross | Accumulated | Net | |||||||||||
Life | Amortization | |||||||||||||
RaidCore technology | 4 years | $ | 4,256 | $ | (4,256 | ) | $ | — | ||||||
Total intangible assets | $ | 4,256 | $ | (4,256 | ) | $ | — | |||||||
Amortization expense related to intangible assets totaled $0.4 million and $0.0 million for the three months ended March 31, 2012 and 2013, respectively, including $0.2 million and $0.0 million, for the three months ended March 31, 2012 and 2013, respectively, for discontinued operations. |
Product_Warranties
Product Warranties | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Product Warranties Disclosures [Abstract] | ' | |||||||
Product Warranties | ' | |||||||
Product Warranties | ||||||||
Our standard warranty provides that if our systems do not function to published specifications, we will repair or replace the defective component or system without charge generally for a period of approximately three years. We generally extend to our customers the warranties provided to us by our suppliers, and accordingly, the majority of our warranty obligations to customers are typically intended to be covered by corresponding supplier warranties. For warranty costs not covered by our suppliers, we provide for estimated warranty costs in the period the revenue is recognized. Estimated liabilities for product warranties are included in accrued expenses. | ||||||||
During 2009, we discovered a quality issue associated with certain power supply devices provided by a long-term component supplier, which resulted in a higher than expected level of power supply failures to us and our customers. A significant customer of ours was impacted by this issue, and provided us with an estimation of the additional costs it would incur related to the customer’s internal overhead costs, in addition to third-party direct costs. A final settlement with this material customer was reached during the second quarter of 2012. The estimated remaining liability is approximately $0.2 million as of March 31, 2013, which relates to costs for extension of warranty coverage on these units. While our estimated liability relating to failed power supply units is subject to some uncertainty until final settlement, based on our current expectation of sales volumes with this material customer, we do not believe the incurrence of an additional loss is either probable or reasonably possible at this time. | ||||||||
Our component supplier continued to re-work and distribute to our customer the affected population of power supplies at no cost to us. During 2011, as the claims from our customer became clearer, we commenced negotiations with our component supplier for fair and reasonable costs that we have and are likely to incur through the warranty period associated with this component failure. Pursuant to the final settlement agreement, the supplier agreed to cash consideration of $1.2 million, of which we received $1.1 million subsequent to the signing of the settlement agreement, with the remaining $0.1 million to be received in one remaining installment during 2013. Additionally, our supplier committed to product rebates and/or price concessions on product orders for a period of 39 months from the execution of the settlement agreement, in return for our agreement to release our supplier from all obligations relating to the power supply failures known by us to date. This agreement is not subject to any required future purchases. | ||||||||
In addition, we have commenced discussions with our General Liability and Errors and Omissions Insurance and underwriters and will continue to pursue our rights to cover any damages we incur and that are not reimbursed by our supplier. The insurance company has issued a reservation of rights letter to us and at this time, it is not possible to estimate to what extent the residual amounts, if any, we will be covered by our carrier. As of March 31, 2013 we have not assumed or recorded any insurance reimbursement. | ||||||||
Our warranty accrual and cost activity is as follows (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2013 | |||||||
Balance, beginning of period | $ | 6,871 | $ | 4,455 | ||||
Charges to operations | 368 | 118 | ||||||
Deductions for payments made | (309 | ) | (1,021 | ) | ||||
Changes in estimates | — | (809 | ) | |||||
Balance, end of period | $ | 6,930 | $ | 2,743 | ||||
During the first quarter of 2013, we were able to negotiate more favorable rates with a third-party service provider. Accordingly, we adjusted our warranty accrual by $0.8 million to reflect this change. |
Credit_Facilities
Credit Facilities | 3 Months Ended |
Mar. 31, 2013 | |
Line of Credit Facility [Abstract] | ' |
Credit Facilities | ' |
Credit Facilities | |
We maintain a credit facility with Silicon Valley Bank for cash advances of up to an aggregate of $30 million based upon an advance rate dependent on certain concentration limits within eligible accounts receivable. These limitations exclude certain eligible customer receivables if an individual customer account balance exceeds 25, 50 or 70 percent of the total eligible accounts receivable, depending on the customer, as defined by our Loan and Security Agreement with Silicon Valley Bank. Borrowings under the credit facility bear interest at the prime rate and are secured by substantially all of our accounts receivable, deposit and securities accounts. The agreement provides for a negative pledge on our inventory and intellectual property, subject to certain exceptions, and contains usual and customary covenants for an arrangement of its type, including an obligation that we maintain at all times a net worth, as defined in the agreement, of $50 million (subject to certain increases). The agreement also includes provisions to increase the financing facility by $20 million subject to our meeting certain requirements, including $40 million in borrowing base for the immediately preceding 90 days, and Silicon Valley Bank locating a lender willing to finance the additional facility. In addition, if our cash and cash equivalents net of the total amount outstanding under the credit facility fall below $20 million (measured on a rolling three-month basis), the interest rate will increase to prime plus 1% and additional restrictions will apply. The maturity date of the credit facility is July 21, 2015. As of March 31, 2013, there was $2.8 million outstanding under the Silicon Valley Bank line of credit. There was $17.7 million available for borrowing under the agreement as of March 31, 2013. We are currently in compliance with all covenant requirements. |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2013 | ||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | |||||||||||||||||||
Fair Value Measurements | ' | |||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||
Assets Measured at Fair Value on a Recurring Basis | ||||||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | December 31, | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
2012 | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cash and cash equivalents | $ | 40,315 | $ | 40,315 | $ | — | $ | — | $ | — | ||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | March 31, | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
2013 | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cash and cash equivalents | $ | 40,297 | $ | 40,297 | $ | — | $ | — | $ | — | ||||||||||
The short-term nature of our financial instruments expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market interest rates. There were no transfers between Level I and Level II inputs for any of our assets measured on a recurring basis during the reporting period. | ||||||||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||||||||
The Company’s financial instruments consist of cash and cash equivalents, and credit facility borrowings. The following disclosures relate to financial instruments for which the ending balances at December 31, 2012 and March 31, 2013, are not carried at fair value in their entirety on the Unaudited Condensed Consolidated Balance Sheets. These tables present the carrying value and fair value, by fair value hierarchy, of our financial instruments, excluding cash and cash equivalents at December 31, 2012 and March 31, 2013, respectively (in thousands). | ||||||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | December 31, 2012 | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
Credit facility borrowings | $ | 2,800 | $ | — | $ | 2,800 | $ | — | $ | — | ||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | March 31, 2013 | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
Credit facility borrowings | $ | 2,800 | $ | — | $ | 2,800 | $ | — | $ | — | ||||||||||
The short-term nature of our financial instruments expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market interest rates. |
Commitments_And_Contingencies
Commitments And Contingencies | 3 Months Ended |
Mar. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments And Contingencies | ' |
Commitments and Contingencies | |
We are involved in certain legal actions and claims from time to time arising in the ordinary course of business. Management believes that the outcome of such litigation and claims could have a material effect on our financial statements. Historically, the outcome of such litigation and claims has not had a material adverse effect on our financial condition or results of operations. | |
In January 2012, Dot Hill filed an arbitration claim against a customer for unpaid money owed to Dot Hill under the OEM and License Agreement entered into by the parties in July 2010 (the “Agreement”). Pursuant to the Agreement, the customer licensed portions of our UVS software and bundled it with its hardware and software. Our customer was required to pay licensing and support fees under the Agreement. However, during the second calendar quarter of 2011, the customer stopped making payments. Our customer filed a counter claim for $0.6 million, primarily for damages and reimbursement of specific amounts paid under the Agreement. The case was heard at arbitration, which was completed in March 2013, and a judgment was issued in April 2013. We have recorded a liability in the amount of the settlement as of March 31, 2013 totaling $0.1 million, included in accrued expenses in the accompanying unaudited condensed consolidated balance sheet. |
Segment_Information
Segment Information | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Segment Reporting [Abstract] | ' | |||||||
Segment Information | ' | |||||||
Segment Information | ||||||||
Operating segments, as defined Accounting Standard Codification, or ASC, 280 Segment Reporting, are components of an enterprise for which separate financial information is available and is evaluated regularly by the Chief Operating Decision Maker, or CODM, in deciding how to allocate resources and in assessing performance. ASC 280 also requires disclosures about products and services, geographic areas and significant customers. | ||||||||
As a result of our decision to exit our AssuredUVS line of business, and close down our Israel Technology Development Center during the first quarter of 2012 (see Note 3), our CODM now operates our business in one reportable operating segment. Prior year information has been recast to conform to current year presentation, excluding discontinued operations. | ||||||||
Geographic Revenues | ||||||||
Net revenue is recorded in the geographic area in which the sale is originated. Information concerning principal geographic areas in which we operate is as follows (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2013 | |||||||
Net revenue: | ||||||||
United States | $ | 54,087 | $ | 44,164 | ||||
Europe, Middle East and Africa | 5 | 1 | ||||||
Asia | 506 | 315 | ||||||
Total net revenue | $ | 54,598 | $ | 44,480 | ||||
Summary_Of_Significant_Account1
Summary Of Significant Accounting Policies (Policies) | 3 Months Ended | |||||
Mar. 31, 2013 | ||||||
Accounting Policies [Abstract] | ' | |||||
Basis of Presentation | ' | |||||
Basis of Presentation | ||||||
The financial statements of Dot Hill Systems Corp. (referred to herein as Dot Hill, we, our or us) contained herein are unaudited and in the opinion of management contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented. The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions to Securities and Exchange Commission, or SEC, Form 10-Q and Article 10 of SEC Regulation S-X. They do not include all of the information and disclosures required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for future quarters or the year ending December 31, 2013. | ||||||
2012 amounts in our unaudited condensed consolidated financial statements have been retrospectively adjusted for discontinued operations. | ||||||
Use of Accounting Estimates | ' | |||||
Use of Accounting Estimates | ||||||
The preparation of our unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting periods. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition, inventory valuation, recurring and specific issue warranty obligations, the valuation and recognition of stock-based compensation expense, and the valuation of long-lived assets. In addition, we have other accounting policies that involve estimates such as the determination of useful lives of long-lived assets, accruals for restructuring, and income taxes, including the valuation allowance for deferred tax assets. Actual results may differ from these estimates and such differences could be material. | ||||||
Revenue Recognition | ' | |||||
Revenue Recognition | ||||||
We derive our revenue from sales of our hardware products, software and services. | ||||||
Hardware | ||||||
Hardware product revenue consists of revenue from sales of our AssuredSAN storage systems that is integrated with industry standard hardware which is essential to the functionality of the integrated system product. We recognize hardware product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the price is fixed or determinable; and (iv) collectability is reasonably assured. Revenue is recognized for hardware product sales upon transfer of title and risk of loss to the customer and in addition, upon installation for certain of our AssuredUVS appliance products. We record reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on historical sales returns, analysis of credit memo data and other factors known at the time. If actual future returns and pricing adjustments differ from past experience and our estimates, additional revenue reserves may be required. | ||||||
Software | ||||||
In accordance with the specific guidance for recognizing software revenue, where applicable, we recognize revenue from perpetual software licenses at the inception of the license term assuming all revenue recognition criteria have been met. We use the relative method to allocate revenue to software licenses at the inception of the license term when vendor-specific objective evidence, or VSOE, of fair value for all unspecified software updates and enhancements related to our products through service contracts is available. We have established VSOE for the fair value of our support services as measured by the stated renewal prices paid by our customers when the services are sold separately on a standalone basis. | ||||||
Specific long-term software contracts may contain multiple deliverables including software licenses, services, training and post-contract support for which we have not established VSOE for the fair value of any of the elements. Under specific guidance for recognizing software revenue, we begin recognizing revenue upon the delivery of all the elements except post-contract support (PCS). We defer all the direct and incremental costs related to the deliverables in these contracts until delivery of all the elements except PCS. The deferred revenue and costs are amortized over the contractual PCS support periods. | ||||||
During the preparation of the Company's consolidated financial statements for the year ended December 31, 2012 and the accounting analysis for the renewal of a long-term software contract, the Company determined that it had applied an inappropriate revenue recognition methodology to one of its long-term software contracts in 2010, 2011 and during the first three quarters of 2012. The Company recorded revenue as royalty payments were received on this contract and should have deferred all the revenue and direct and incremental costs until all the deliverables, except PCS, were delivered in 2012. This resulted in an overstatement of $0.6 million of revenue and $0.4 million of costs for the three months ended March 31, 2012, which was corrected in the fourth quarter of 2012. | ||||||
Service | ||||||
Our service revenue primarily includes out-of-warranty repairs and product maintenance contracts. Out-of warranty repairs primarily consist of product repair services performed by our contract manufacturers for those customers that allowed their original product warranty to expire without purchasing one of our higher level support service plans. Revenue from these out-of-warranty repairs, and the associated cost of sales, is recognized in the period these services are provided. Service revenue also consists of product maintenance contracts purchased by our customers as an extension of our standard warranty. Revenue from our product maintenance contracts is deferred and recognized ratably over the contract term, generally 12 to 36 months. Net revenue derived from services was less than 10% of total revenue for all periods presented. | ||||||
Revenue Recognition for Arrangements with Multiple Deliverables | ||||||
For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software services, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, we use a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) VSOE of fair value, (ii) third-party evidence of selling price, or TPE, and (iii) best estimate of the selling price, or ESP. VSOE generally exists only when we sell the deliverable separately and represents the actual price charged by us for that deliverable. ESPs reflect our best estimates of what the selling prices of elements would be if they were sold regularly on a standalone basis. | ||||||
From time to time, we enter into arrangements with customers that include acceptance criteria. In such instances, we defer all revenue on the arrangement until customer acceptance is obtained or the acceptance clause lapses. | ||||||
Revenue Recognition for Sales to Channel Partners | ||||||
On sales to channel partners, we evaluate whether fees are considered fixed or determinable by considering a number of factors, including our ability to estimate returns, payment terms and our relationship and past history with the particular channel partner. If fees are not considered fixed or determinable at the time of sale to a channel partner, revenue recognition is deferred until there is persuasive evidence indicating the product has sold through to an end-user. Persuasive evidence of sell-through may include reports from channel partners documenting sell-through activity or data indicating an order has shipped to an end-user. | ||||||
Deferred Revenue | ||||||
We defer revenue on upfront nonrefundable payments from our customers and recognize it ratably over the term of the agreement, unless the payment is in exchange for products delivered that represent the culmination of a separate earnings process. When we provide consideration to a customer, we recognize the value of that consideration as a reduction in net revenue. We may be required to maintain inventory with certain of our largest OEM customers, which we refer to as hubbing arrangements. Pursuant to these arrangements we deliver products to a customer or a designated third-party warehouse based upon the customer’s projected needs, but do not recognize product revenue unless and until the customer has removed our product from the warehouse to incorporate into its end products. | ||||||
Concentration of Customers and Suppliers | ' | |||||
Concentration of Customers and Suppliers | ||||||
A majority of our net revenue is derived from a limited number of customers. We currently have two customers that account for more than 10% of our total net revenue: Hewlett Packard, or HP, and Tektronix, Inc., or Tektronix. Our agreements with our original equipment manufacturers, or OEM, partners do not contain any minimum purchase commitments, do not obligate our OEM partners to purchase their storage solutions exclusively from us and may be terminated at any time upon notice from the applicable partner. | ||||||
Net revenue by major customer is as follows (as a percentage of total net revenue): | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2012 | 2013 | |||||
HP | 61 | % | 63 | % | ||
Tektronix | 19 | % | 12 | % | ||
Other customers less than 10% | 20 | % | 25 | % | ||
Total | 100 | % | 100 | % | ||
HP continues to account for a significant percentage of our sales. If our relationship with HP were disrupted or declined significantly, we would lose a substantial portion of our anticipated net revenue and our business could be materially harmed. We cannot guarantee that our relationship with HP or our other customers will expand or not otherwise be disrupted. | ||||||
We expect that the sale of our products to a limited number of customers will continue to account for a high percentage of net revenue for the foreseeable future. Our Product Purchase Agreement with HP, as amended, terminates on October 30, 2016. HP also holds warrants to purchase 1,602,489 shares of our common stock at an exercise price of $2.40 per share, expiring on October 30, 2016. | ||||||
We currently rely on a limited number of contract manufacturing partners to produce substantially all of our products. As a result, should any of our current manufacturing partners, such as Foxconn Technology Group, or parts suppliers not produce and deliver inventory for us to sell on a timely basis, operating results may be adversely impacted. | ||||||
Cash and Cash Equivalents | ' | |||||
Cash and Cash Equivalents | ||||||
We classify investments as cash equivalents if they are readily convertible to cash and have original maturities of three months or less at the time of acquisition. Cash and cash equivalents consist primarily of money market mutual funds issued or managed in the United States. As of December 31, 2012 and March 31, 2013, the carrying value of cash and cash equivalents approximates fair value due to the short period of time to maturity. | ||||||
As of March 31, 2013, $2.7 million of the $40.3 million of cash, cash equivalents, and marketable securities was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we could be required to accrue and pay taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations. | ||||||
Allowance for Doubtful Accounts | ' | |||||
Allowance for Doubtful Accounts | ||||||
We establish an allowance for doubtful accounts for accounts receivable amounts that may not be collectible. We determine the allowance for doubtful accounts based on the aging of our accounts receivable balances and an analysis of our historical experience of bad debt write-offs. | ||||||
Long-lived Asset Impairment | ' | |||||
Long-lived Asset Impairment | ||||||
We periodically review the recoverability of the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. An impairment in the carrying value of an asset group is recognized whenever anticipated future undiscounted cash flows from an asset group are estimated to be less than its carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. | ||||||
Recent Accounting Pronouncements | ' | |||||
Recent Accounting Pronouncements | ||||||
From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective will not have a material impact on our results of operations and financial position. | ||||||
In February 2013, the FASB issued Accounting Standards Update 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU 2013-02"). This update requires presentation of reclassifications from accumulated other comprehensive income by component to net income either on the face of the income statement or in a single footnote, but does not require any new information to be disclosed. This update is effective for the interim and annual periods beginning after December 15, 2012. The Company has adopted ASU 2013-2 as of the Company's interim period ending March 31, 2013. The adoption of this update has not had any impact on the Company's financial statements as the Company has not had any reclassifications from accumulated other comprehensive income to net income. Other comprehensive income in each period is comprised solely of foreign currency translation adjustments. |
Summary_Of_Significant_Account2
Summary Of Significant Accounting Policies (Tables) | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Accounting Policies [Abstract] | ' | |||||||
Net revenue by major customer | ' | |||||||
Net revenue by major customer is as follows (as a percentage of total net revenue): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2013 | |||||||
HP | 61 | % | 63 | % | ||||
Tektronix | 19 | % | 12 | % | ||||
Other customers less than 10% | 20 | % | 25 | % | ||||
Total | 100 | % | 100 | % | ||||
Allowance for doubtful accounts | ' | |||||||
Balance sheet details are as follows, (in thousands): | ||||||||
March 31, | March 31, | |||||||
2012 | 2013 | |||||||
Balance, beginning of the year | $ | 203 | $ | 240 | ||||
Recoveries | — | (9 | ) | |||||
Balance, quarter ended | $ | 203 | $ | 231 | ||||
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2013 | ||||||||||||||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ' | |||||||||||||
Schedule of Weighted Average Number of Shares [Table Text Block] | ' | |||||||||||||
Three Months Ended | ||||||||||||||
March 31, 2012 | March 31, 2013 | |||||||||||||
Income (loss) from continuing operations | $ | 160 | $ | (560 | ) | |||||||||
Basic weighted-average common shares outstanding | 56,030 | 58,001 | ||||||||||||
Assumed exercise of dilutive stock options and restricted stock | 528 | — | ||||||||||||
Diluted weighted-average common shares outstanding | 56,558 | 58,001 | ||||||||||||
Income (loss) from continuing operations: | ||||||||||||||
Basic earnings per share | $ | — | $ | (0.01 | ) | |||||||||
Diluted earnings per share | $ | — | $ | (0.01 | ) | |||||||||
Outstanding equity awards not included in calculation of diluted net loss per share | ' | |||||||||||||
Outstanding equity awards not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive were as follows: | ||||||||||||||
March 31, 2012 | March 31, 2013 | |||||||||||||
Number of | Range of | Number of | Range of | |||||||||||
Potential | Exercise Prices | Potential | Exercise Prices | |||||||||||
Shares | Shares | |||||||||||||
Stock options | 9,312,258 | $1.55 - $16.36 | 9,159,312 | $0.47 - $16.36 | ||||||||||
Unvested stock awards | 1,147,085 | $ | — | 508,221 | $ | — | ||||||||
Warrants | 1,602,489 | $ | 2.4 | 1,602,489 | $ | 2.4 | ||||||||
Discontinued_Operations_Tables
Discontinued Operations (Tables) | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Discontinued Operations and Disposal Groups [Abstract] | ' | |||||||
Summary of the components of loss from discontinued operations | ' | |||||||
The following is a summary of the components of loss from discontinued operations for the three months ended March 31, 2012 and 2013 (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, 2012 | March 31, 2013 | |||||||
Net revenue | $ | 146 | $ | 20 | ||||
Cost of goods sold | 537 | 131 | ||||||
Gross loss | (391 | ) | (111 | ) | ||||
Operating expenses: | ||||||||
Research and development | 745 | — | ||||||
Sales and marketing | 56 | — | ||||||
General and administrative | 178 | 320 | ||||||
Restructuring charge (recovery) | 657 | (10 | ) | |||||
Total operating expenses | 1,636 | 310 | ||||||
Operating loss | (2,027 | ) | (421 | ) | ||||
Other income (expense), net | (1 | ) | — | |||||
Loss from discontinued operations | $ | (2,028 | ) | $ | (421 | ) | ||
The activity in 2013 is limited to the continued support of certain maintenance contracts entered into prior to shutting down the Israel Technology Development Center, as well as the resolution of a dispute with the former primary AssuredUVS customer (see Note 9). |
Inventories_Tables
Inventories (Tables) | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Inventory Disclosure [Abstract] | ' | |||||||
Components of inventory | ' | |||||||
The components of inventories consist of the following (in thousands): | ||||||||
December 31, | March 31, | |||||||
2012 | 2013 | |||||||
Purchased parts and materials | $ | 3,051 | $ | 3,277 | ||||
Finished goods | 1,986 | 1,667 | ||||||
Total inventory | $ | 5,037 | $ | 4,944 | ||||
Intangible_Assets_Tables
Intangible Assets (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2013 | ||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | |||||||||||||
Schedule of identifiable intangible assets | ' | |||||||||||||
Estimated Useful | Gross | Accumulated | Net | |||||||||||
Life | Amortization | |||||||||||||
RaidCore technology | 4 years | $ | 4,256 | $ | (4,256 | ) | $ | — | ||||||
Total intangible assets | $ | 4,256 | $ | (4,256 | ) | $ | — | |||||||
Product_Warranties_Tables
Product Warranties (Tables) | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Product Warranties Disclosures [Abstract] | ' | |||||||
Warranty Accrual and Cost Activity | ' | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2013 | |||||||
Balance, beginning of period | $ | 6,871 | $ | 4,455 | ||||
Charges to operations | 368 | 118 | ||||||
Deductions for payments made | (309 | ) | (1,021 | ) | ||||
Changes in estimates | — | (809 | ) | |||||
Balance, end of period | $ | 6,930 | $ | 2,743 | ||||
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2013 | ||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | |||||||||||||||||||
Assets Measured at Fair Value on a Recurring Basis | ' | |||||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | December 31, 2012 | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
Credit facility borrowings | $ | 2,800 | $ | — | $ | 2,800 | $ | — | $ | — | ||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | March 31, 2013 | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
Credit facility borrowings | $ | 2,800 | $ | — | $ | 2,800 | $ | — | $ | — | ||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | December 31, | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
2012 | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cash and cash equivalents | $ | 40,315 | $ | 40,315 | $ | — | $ | — | $ | — | ||||||||||
Fair Value Measurements Using | ||||||||||||||||||||
Description | March 31, | Quoted Prices for Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total (Losses) | |||||||||||||||
2013 | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cash and cash equivalents | $ | 40,297 | $ | 40,297 | $ | — | $ | — | $ | — | ||||||||||
Segment_Information_Tables
Segment Information (Tables) | 3 Months Ended | |||||||
Mar. 31, 2013 | ||||||||
Segment Reporting [Abstract] | ' | |||||||
Net revenue by geographic area | ' | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2012 | 2013 | |||||||
Net revenue: | ||||||||
United States | $ | 54,087 | $ | 44,164 | ||||
Europe, Middle East and Africa | 5 | 1 | ||||||
Asia | 506 | 315 | ||||||
Total net revenue | $ | 54,598 | $ | 44,480 | ||||
Summary_Of_Significant_Account3
Summary Of Significant Accounting Policies (Concentration of Customers and Suppliers) (Details) | 3 Months Ended | |
Mar. 31, 2013 | Mar. 31, 2012 | |
customer | ||
Major customers | ' | ' |
Number of major customers | 2 | ' |
Concentration risk, percentage of total net revenues | 100.00% | 100.00% |
Sales Revenue, Goods, Net [Member] | Customer Concentration Risk [Member] | HP | ' | ' |
Major customers | ' | ' |
Concentration risk, percentage of total net revenues | 63.00% | 61.00% |
Sales Revenue, Goods, Net [Member] | Customer Concentration Risk [Member] | Tektronix | ' | ' |
Major customers | ' | ' |
Concentration risk, percentage of total net revenues | 12.00% | 19.00% |
Sales Revenue, Goods, Net [Member] | Customer Concentration Risk [Member] | Other customers less than 10% | ' | ' |
Major customers | ' | ' |
Concentration risk, percentage of total net revenues | 25.00% | 20.00% |
Common Stock [Member] | HP | ' | ' |
Major customers | ' | ' |
Warrants to purchase shares of our common stock | 1,602,489 | ' |
Warrants, exercise price | 2.4 | ' |
Summary_Of_Significant_Account4
Summary Of Significant Accounting Policies (Allowance for Doubtful Accounts) (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2013 | Mar. 31, 2012 |
Allowance for Doubtful Accounts Receivable [Roll Forward] | ' | ' |
Balance, beginning of the year | $240 | $203 |
Recoveries | -9 | 0 |
Balance, quarter ended | $231 | $203 |
Summary_Of_Significant_Account5
Summary Of Significant Accounting Policies (Revenue Recognition) (Details) (USD $) | Mar. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2012 | Mar. 31, 2012 |
Minimum [Member] | Maximum [Member] | Net Revenue Derived From Services [Member] | Net Revenue Derived From Services [Member] | Revenue Recognition, Software [Member] | |||||
Deferred Revenue Arrangement [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Noninterest-bearing Deposit Liabilities, Foreign | $2,700,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Overstatement of revenue | ' | ' | ' | ' | ' | ' | ' | ' | 600,000 |
Overstatement of costs | ' | ' | ' | ' | ' | ' | ' | ' | 400,000 |
Product maintenance contract term | ' | ' | ' | ' | '12 months | '36 months | ' | ' | ' |
Maximum percentage of total revenue | ' | ' | ' | ' | ' | ' | 10.00% | 10.00% | ' |
Cash and cash equivalents | $40,297,000 | $40,315,000 | $41,447,000 | $46,168,000 | ' | ' | ' | ' | ' |
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2013 | Mar. 31, 2012 | |
Outstanding equity awards not included in the calculation of diluted net loss per share: | ' | ' |
Number of equity awards not included in the calculation of diluted net loss per share | 0 | ' |
Stock options | ' | ' |
Outstanding equity awards not included in the calculation of diluted net loss per share: | ' | ' |
Number of equity awards not included in the calculation of diluted net loss per share | 9,159,312 | 9,312,258 |
Range of exercise prices, lower limit | $0.47 | $1.55 |
Range of exercise prices, upper limit | $16.36 | $16.36 |
Unvested restricted stock awards | ' | ' |
Outstanding equity awards not included in the calculation of diluted net loss per share: | ' | ' |
Number of equity awards not included in the calculation of diluted net loss per share | 508,221 | 1,147,085 |
Warrant [Member] | ' | ' |
Outstanding equity awards not included in the calculation of diluted net loss per share: | ' | ' |
Number of equity awards not included in the calculation of diluted net loss per share | 1,602,489 | 1,602,489 |
Warrants, exercise price | 2.4 | 2.4 |
Earnings_Per_Share_Calculation
Earnings Per Share (Calculation of basic and diluted EPS) (Details) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2013 | Mar. 31, 2012 |
Earnings Per Share [Abstract] | ' | ' |
Income (Loss) from Continuing Operations Attributable to Parent | ($560) | $160 |
Weighted Average Number of Shares Outstanding, Basic | 58,001 | 56,030 |
Incremental Common Shares Attributable to Share-based Payment Arrangements | 0 | 528 |
Weighted Average Number of Shares Outstanding, Diluted | 58,001 | 56,558 |
Earnings Per Share, Basic | ($0.01) | $0 |
Earnings Per Share, Diluted | ($0.01) | $0 |
Discontinued_Operations_Detail
Discontinued Operations (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2013 | Mar. 31, 2012 |
Operating expenses: | ' | ' |
Loss from discontinued operations | ($421) | ($2,028) |
AssuredUVS [Member] | ' | ' |
Loss from discontinued operations | ' | ' |
Net revenue | 20 | 146 |
Cost of goods sold | 131 | 537 |
Gross profit | -111 | -391 |
Operating expenses: | ' | ' |
Research and development | 0 | 745 |
Sales and marketing | 0 | 56 |
General and administrative | 320 | 178 |
Restructuring charge | -10 | 657 |
Total operating expenses | 310 | 1,636 |
Operating loss | -421 | -2,027 |
Other income (expense), net | 0 | -1 |
Loss from discontinued operations | ($421) | ($2,028) |
Inventories_Details
Inventories (Details) (USD $) | Mar. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Inventory Disclosure [Abstract] | ' | ' |
Purchased parts and materials | $3,277 | $3,051 |
Finished goods | 1,667 | 1,986 |
Total inventory | $4,944 | $5,037 |
Intangible_Assets_Details
Intangible Assets (Details) (USD $) | 3 Months Ended | 3 Months Ended | |||||
Mar. 31, 2013 | Mar. 31, 2012 | Dec. 31, 2012 | Mar. 31, 2013 | Mar. 31, 2012 | Mar. 31, 2013 | Dec. 31, 2012 | |
Discontinued Pperations [Member] | Discontinued Pperations [Member] | RaidCore Technology [Member] | RaidCore Technology [Member] | ||||
Finite-Lived Intangible Assets | ' | ' | ' | ' | ' | ' | ' |
Estimated Useful Life | ' | ' | ' | ' | ' | '4 years | '4 years |
Gross | $4,256,000 | ' | $4,256,000 | ' | ' | $4,256,000 | $4,256,000 |
Accumulated Amortization | -4,256,000 | ' | -4,256,000 | ' | ' | -4,256,000 | -4,256,000 |
Net | 0 | ' | 0 | ' | ' | 0 | 0 |
Amortization of intangible assets | $0 | $400,000 | ' | $0 | $200,000 | ' | ' |
Product_Warranties_Details
Product Warranties (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2013 | Mar. 31, 2012 | Mar. 31, 2013 | Jun. 30, 2012 | |
Product Liability Contingency [Line Items] | ' | ' | ' | ' |
Maximum product warranty term | '3 years | ' | ' | ' |
Warranty accrual | $2,743,000 | $6,930,000 | $2,743,000 | ' |
Reimbursement receivable | ' | ' | ' | 1,200,000 |
Cash received pursuant to settlement | ' | ' | 1,100,000 | ' |
Remaining reimbursement receivable after payment | 100,000 | ' | 100,000 | ' |
Period of product rebates/price concessions under settlement agreement | '39 months | ' | ' | ' |
Movement in Standard Product Warranty Accrual [Roll Forward] | ' | ' | ' | ' |
Balance, beginning of period | 4,455,000 | 6,871,000 | 6,930,000 | ' |
Charges to operations | 118,000 | 368,000 | ' | ' |
Deductions for costs incurred | -1,021,000 | -309,000 | ' | ' |
Changes in estimates | -809,000 | 0 | ' | ' |
Balance, end of period | 2,743,000 | 6,930,000 | 2,743,000 | ' |
Power supply devices | ' | ' | ' | ' |
Product Liability Contingency [Line Items] | ' | ' | ' | ' |
Estimated product warranty liability | $200,000 | ' | $200,000 | ' |
Credit_Facilities_Details
Credit Facilities (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2013 | Dec. 31, 2012 | |
Credit Facility [Line Items] | ' | ' |
Letters of credit outstanding | $2,800,000 | $2,800,000 |
Line of Credit Facility, Covenant Compliance | '. We are currently in compliance with all covenant requirements. | ' |
Line of Credit Facility, Interest Rate Description | 'prime rate | ' |
Line of Credit Facility, Collateral | ' and are secured by substantially all of our accounts receivable, deposit and securities accounts. The agreement provides for a negative pledge on our inventory and intellectual property, subject to certain exceptions | ' |
Silicon Valley Bank | ' | ' |
Credit Facility [Line Items] | ' | ' |
Line of Credit Facility, Remaining Borrowing Capacity | 17,700,000 | ' |
Credit facility | Silicon Valley Bank | ' | ' |
Credit Facility [Line Items] | ' | ' |
Borrowing capacity | 30,000,000 | ' |
Minimum net worth requirement | 50,000,000 | ' |
Line of Credit Facility, Covenant Terms, Borrowing Base, Possible Increase | 20,000,000 | ' |
Period for borrowing base requirement | '90 days | ' |
Cash and cash equivalents, net of amount outstanding under credit agreement | 20,000,000 | ' |
Variable rate basis | 'prime | ' |
Interest rate over prime | 1.00% | ' |
Letters of credit | Silicon Valley Bank | ' | ' |
Credit Facility [Line Items] | ' | ' |
Letters of credit outstanding | 2,800,000 | ' |
Threshold One [Member] | ' | ' |
Credit Facility [Line Items] | ' | ' |
Customer accounts receivable concentration limit | 25.00% | ' |
Threshold Two [Member] | ' | ' |
Credit Facility [Line Items] | ' | ' |
Customer accounts receivable concentration limit | 50.00% | ' |
Threshold Three [Member] | ' | ' |
Credit Facility [Line Items] | ' | ' |
Customer accounts receivable concentration limit | 70.00% | ' |
Required Borrowing Base Immediately Preceeding 90 Days [Member] | Credit facility | Silicon Valley Bank | ' | ' |
Credit Facility [Line Items] | ' | ' |
Borrowing base requirement | $40,000,000 | ' |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2013 | Dec. 31, 2012 | |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Letters of credit outstanding | $2,800,000 | $2,800,000 |
Total | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Cash and cash equivalents | 40,297,000 | 40,315,000 |
Level 1 | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Line of Credit Facility, Fair Value of Amount Outstanding | 0 | 0 |
Level 2 | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Line of Credit Facility, Fair Value of Amount Outstanding | 2,800,000 | 2,800,000 |
Level 3 | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Line of Credit Facility, Fair Value of Amount Outstanding | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Assets, Fair Value Adjustment | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 1 | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Cash and cash equivalents | 40,297,000 | 40,315,000 |
Fair Value, Measurements, Recurring [Member] | Level 2 | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Cash and cash equivalents | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 3 | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ' |
Cash and cash equivalents | $0 | $0 |
Commitments_And_Contingencies_
Commitments And Contingencies Commitments And Contingencies (Details) (USD $) | 3 Months Ended |
In Millions, unless otherwise specified | Mar. 31, 2013 |
Loss Contingencies [Line Items] | ' |
Loss Contingency, Damages Sought, Value | $0.60 |
Initial estimate of potential exposure, minimum | $0.10 |
Segment_Information_Details
Segment Information (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2013 | Mar. 31, 2012 |
segment | ||
Segment Reporting Information [Line Items] | ' | ' |
Number of reportable segments | 1 | ' |
Net revenue | $44,480 | $54,598 |
United States | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Net revenue | 44,164 | 54,087 |
Europe | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Net revenue | 1 | 5 |
Asia | ' | ' |
Segment Reporting Information [Line Items] | ' | ' |
Net revenue | $315 | $506 |