Summary of Significant Accounting Policies | 3 Months Ended |
Sep. 30, 2013 |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies | ' |
1. Summary of Significant Accounting Policies |
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Description of Business |
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Accuray Incorporated (together with its subsidiaries, the “Company” or “Accuray”) is incorporated in Delaware. The Company designs, develops and sells advanced radiosurgery and radiation therapy systems for the treatment of tumors throughout the body. The Company conducts its business worldwide. The Company has its headquarters in Sunnyvale, California, with additional locations in other regions in the United States, Europe and Asia. |
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Basis of Presentation and Principles of Consolidation |
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The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and a variable interest entity, Compact Particle Acceleration Corporation (“CPAC”) until its deconsolidation on December 21, 2012 (for further information, see “Note 9, Investment in CPAC”). All significant inter-company transactions and balances have been eliminated in consolidation. |
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The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the periods presented. The results for the three months ended September 30, 2013 are not necessarily indicative of the results to be expected for the year ending June 30, 2014, for any other interim period or for any future year. |
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These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended June 30, 2013 included in the Company’s Annual Report on Form 10-K filed with the SEC. The Company’s significant accounting policies are described in Note 2 to those audited consolidated financial statements. |
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Reclassification |
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As a result of the deconsolidation of CPAC, the results of operations of CPAC and the losses attributable to the non-controlling interest recorded for the three month period ended September 30, 2012 have been presented as discontinued operations. Accordingly, the Company made reclassifications to its previously reported consolidated statements of operations and comprehensive loss and consolidated statement of cash flows for the three month period ended September 30, 2012. |
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Recently Issued Accounting Standards |
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In July 2013, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The guidance is effective prospectively for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The Company is currently evaluating the impact of this guidance on our consolidated financial statements. |
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Use of Estimates |
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The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures at the date of the financial statements. Key estimates and assumptions made by the Company relate to revenue recognition, business combinations and intangible asset impairment, inventories, share-based compensation expense, income taxes, loss contingencies and corporate bonus expenses and accruals. Actual results could differ materially from those estimates. |
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Concentration of Credit and Other Risks |
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The Company’s cash and cash equivalents are mainly deposited with several major financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant risk on these balances. |
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For the three months ended September 30, 2013 and 2012, there were no customers that represented 10% or more of total net revenue. At September 30, 2013, one customer accounted for 15% of the Company’s total accounts receivable. At June 30, 2013, one customer accounted for 10% of accounts receivable. |
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Accounts receivable are typically not collateralized. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. Accounts receivable are deemed past due in accordance with the contractual terms of the agreement. Accounts are charged against the allowance for doubtful accounts once collection efforts are unsuccessful. Historically, such losses have been within management’s expectations. |
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Single source suppliers presently provide the Company with several components. In most cases, if a supplier was unable to deliver these components, the Company believes that it would be able to find other sources for these components subject to any regulatory qualifications, if required. |
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Revenue Recognition |
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The Company earns revenue from the sale of products, the operation of its shared ownership program, and the provision of related services, which include post-contract customer support (“PCS”), installation services, training and other professional services. The Company records its revenues net of any value added or sales tax. For arrangements with multiple elements, the Company allocates arrangement fees to product and services based upon Vendor Specific Objective Evidence (“VSOE”) of fair value of the respective elements, Third-Party Evidence (“TPE”), or Best Estimate of Selling Price (“BESP”), using the relative selling price method. |
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Product Revenue |
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The majority of product revenue is generated from sales of CyberKnife and TomoTherapy systems. The Company sells its systems with PCS contracts, installation services, training, and at times, professional services. PCS contracts provide planned and corrective maintenance services, software updates, bug fixes, as well as call-center support. If the Company is responsible for installation, the Company recognizes revenue after installation and acceptance of the system. Otherwise, revenue is recognized upon delivery, assuming all other revenue recognition criteria are met. |
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Service Revenue |
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Service revenue is generated primarily from PCS (warranty period services and post warranty services), installation services, training, and professional services. PCS revenue is deferred and recognized over the service period. Installation service revenue is recognized concurrent with system revenue. Training and professional service revenues that are not deemed essential to the functionality of the systems are recognized as such services are performed. |
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Costs associated with service revenue are expensed when incurred, except when those costs are related to system upgrades where revenue recognition has been deferred. In those cases, the costs are deferred and are recognized over the period of revenue recognition. |
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Shared Ownership Program |
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The Company also enters into arrangements under its shared ownership program with certain customers. These arrangements typically have a term of five years and provide the customer an option to purchase the system during the contractual term at pre-determined prices. Under the terms of this program, the Company retains title to its system, while the customer has use of the system. The Company generally receives a minimum monthly payment and earns additional revenues from the customer based upon its use of the system which are included in product revenue in the condensed consolidated statements of operations and comprehensive loss. |
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Long-Term Construction and Manufacturing Contracts |
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The Company recognizes revenue and cost of revenue related to long-term construction and manufacturing contracts using contract accounting on the cost-to-cost percentage-of-completion or the completed contract method. The Company records such revenue under other revenue and cost of such revenue under cost of other revenue in the condensed consolidated statements of operations and comprehensive loss. Any loss provision identified from the total contract in the period is recorded as an increase to cost of revenue. |
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Net Loss Per Common Share |
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Basic and diluted net loss per share is computed by dividing net loss attributable to stockholders by the weighted average number of common shares outstanding during the period. |
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A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share attributable to stockholders follows (in thousands): |
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| | Three Months Ended | |
| | September 30, | |
| | 2013 | | 2012 | |
Numerator: | | | | | |
Loss from operations used in computing loss per share from continuing operations | | $ | (15,533 | ) | $ | (21,930 | ) |
Loss from discontinued operations used in computing loss per share from discontinued operations | | $ | — | | $ | (2,200 | ) |
Net loss used in computing net loss per share | | $ | (15,533 | ) | $ | (24,130 | ) |
Denominator: | | | | | |
Weighted average shares used in computing basic and diluted loss per share | | 74,700 | | 71,995 | |
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The potential dilutive shares of the Company’s common stock resulting from the assumed exercise of outstanding stock options, the vesting of Restricted Stock Units (RSUs), Market Stock Units (MSUs) and Performance-based Stock Units (PSUs), and the purchase of shares under the Employee Stock Purchase Plan (ESPP), as determined under the treasury stock method, are excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive. The 3.75% Convertible Senior Notes due August 1, 2016 (the “3.75% Convertible Notes”) and the 3.50% Convertible Senior Notes due February 1, 2018 (the “3.50% Convertible Notes”) are included in the calculation of diluted net income per share if their inclusion is dilutive under the if-converted method. For the three months ended September 30, 2013 and 2012, the potential dilutive shares under the Convertible Notes were excluded from the calculation of diluted net loss per share as their inclusion would be anti-dilutive. The following table sets forth all potentially dilutive securities excluded from the computation in the table above because their effect would have been anti-dilutive (in thousands): |
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| | As at | | | |
| | September 30, | | | |
| | 2013 | | 2012 | | | |
Stock options | | 4,436 | | 7,703 | | | |
Restricted Stock Units | | 3,011 | | 2,007 | | | |
3.75% Convertible Notes | | 10,560 | | 10,560 | | | |
3.50% Convertible Notes | | 21,576 | | — | | | |
| | 39,583 | | 20,270 | | | |
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Segment Information |
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The Company has determined that it operates in only one segment, as it only reports profit and loss information on an aggregate basis to its chief operating decision maker. Revenue by geographic region is based on the shipping addresses of the Company’s customers. The following summarizes revenue by geographic region (in thousands): |
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| | Three Months Ended | |
| | September 30, | |
| | 2013 | | 2012 | |
Americas | | $ | 39,253 | | $ | 35,811 | |
Europe, Middle East, India and Africa | | 18,766 | | 25,118 | |
Asia (excluding Japan) | | 7,299 | | 15,121 | |
Japan | | 11,323 | | 6,698 | |
Total | | $ | 76,641 | | $ | 82,748 | |
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Information regarding geographic areas in which the Company has long lived assets (includes all tangible assets) is as follows (in thousands): |
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| | September 30, | | June 30, | |
| | 2013 | | 2013 | |
Americas | | $ | 31,987 | | $ | 31,797 | |
Europe, Middle East, India and Africa | | 1,373 | | 1,431 | |
Asia (excluding Japan) | | 463 | | 498 | |
Japan | | 905 | | 1,007 | |
Total | | $ | 34,728 | | $ | 34,733 | |
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