Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 28, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CRAY INC | |
Entity Central Index Key | 949,158 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 40,760,686 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 294,030 | $ 266,660 |
Restricted cash | 0 | 1,651 |
Short-term investments | 24,813 | 14,925 |
Accounts and other receivables, net | 60,482 | 124,719 |
Inventory | 121,661 | 113,655 |
Deferred tax assets | 43,425 | 38,628 |
Prepaid expenses and other current assets | 24,547 | 21,048 |
Total current assets | 568,958 | 581,286 |
Long-term restricted cash | 1,655 | 1,655 |
Long-term investment in sales-type lease, net | 15,377 | 18,317 |
Property and equipment, net | 30,800 | 31,079 |
Service spares, net | 2,802 | 3,090 |
Goodwill | 14,182 | 14,182 |
Intangible assets other than goodwill, net | 2,307 | 2,525 |
Deferred tax assets | 42,314 | 26,016 |
Other non-current assets | 10,883 | 16,025 |
TOTAL ASSETS | 689,278 | 694,175 |
Current liabilities: | ||
Accounts payable | 45,931 | 27,837 |
Accrued payroll and related expenses | 6,954 | 27,452 |
Other accrued liabilities | 13,965 | 24,079 |
Deferred revenue | 83,676 | 86,731 |
Total current liabilities | 150,526 | 166,099 |
Long-term deferred revenue | 27,573 | 33,306 |
Other non-current liabilities | 2,764 | 2,260 |
TOTAL LIABILITIES | 180,863 | 201,665 |
Shareholders’ equity: | ||
Preferred stock — Authorized and undesignated, 5,000,000 shares; no shares issued or outstanding | 0 | 0 |
Common stock and additional paid-in capital, par value $.01 per share — Authorized, 75,000,000 shares; issued and outstanding 40,769,403 and 40,693,707 shares, respectively | 614,784 | 610,279 |
Accumulated other comprehensive income | 7,504 | 7,642 |
Accumulated deficit | (113,873) | (125,411) |
TOTAL SHAREHOLDERS’ EQUITY | 508,415 | 492,510 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 689,278 | $ 694,175 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock and additional paid-in capital, par value | $ 0.01 | $ 0.01 |
Common stock and additional paid-in capital, shares authorized | 75,000,000 | 75,000,000 |
Common stock and additional paid-in capital, shares issued | 40,769,403 | 40,693,707 |
Common stock and additional paid-in capital, shares outstanding | 40,769,403 | 40,693,707 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenue: | ||
Product | $ 71,410 | $ 52,741 |
Service | 34,139 | 26,903 |
Total revenue | 105,549 | 79,644 |
Cost of revenue: | ||
Cost of product revenue | 46,178 | 40,756 |
Cost of service revenue | 19,409 | 14,852 |
Total cost of revenue | 65,587 | 55,608 |
Gross profit | 39,962 | 24,036 |
Operating expenses: | ||
Research and development, net | 25,840 | 22,187 |
Sales and marketing | 16,001 | 12,552 |
General and administrative | 7,338 | 6,140 |
Total operating expenses | 49,179 | 40,879 |
Loss from operations | (9,217) | (16,843) |
Other income (expense), net | (436) | 744 |
Interest income, net | 584 | 364 |
Loss before income taxes | (9,069) | (15,735) |
Income tax benefit | 4,056 | 6,341 |
Net loss | $ (5,013) | $ (9,394) |
Basic net loss per common share | $ (0.13) | $ (0.24) |
Diluted net loss per common share | $ (0.13) | $ (0.24) |
Basic weighted average shares outstanding | 39,651 | 39,003 |
Diluted weighted average shares outstanding | 39,651 | 39,003 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (5,013) | $ (9,394) |
Other comprehensive income (loss), net of tax: | ||
Unrealized gain (loss) on available-for-sale investments | 9 | (14) |
Foreign currency translation adjustments | 240 | 483 |
Unrealized gain on cash flow hedges | 588 | 4,320 |
Reclassification adjustments on cash flow hedges included in net loss | (975) | (70) |
Other comprehensive income (loss) | (138) | 4,719 |
Comprehensive loss | $ (5,151) | $ (4,675) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Operating activities: | ||
Net loss | $ (5,013) | $ (9,394) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 4,112 | 3,971 |
Share-based compensation expense | 2,852 | 3,173 |
Deferred income taxes | (4,440) | (3,902) |
Other | 931 | (969) |
Cash provided (used) due to changes in operating assets and liabilities: | ||
Accounts and other receivables | 63,411 | 81,341 |
Long-term investment in sales-type lease, net | 2,461 | 2,529 |
Inventory | (10,944) | (68,617) |
Prepaid expenses and other assets | 1,878 | (4,801) |
Accounts payable | 17,762 | 13,371 |
Accrued payroll and related expenses and other accrued liabilities | (30,542) | (15,049) |
Deferred revenue | (8,869) | 1,176 |
Net cash provided by operating activities | 33,599 | 2,829 |
Investing activities: | ||
Sales/maturities of available-for-sale investments | 5,020 | 8,479 |
Purchases of available-for-sale investments | (14,962) | (4,697) |
Decrease in restricted cash | 1,616 | 0 |
Purchases of property and equipment | (951) | (1,849) |
Net cash provided by (used in) investing activities | (9,277) | 1,933 |
Financing activities: | ||
Proceeds from issuance of common stock through employee stock purchase plan | 191 | 169 |
Purchase of employee restricted shares to fund related statutory tax withholding | (80) | (134) |
Proceeds from exercises of stock options | 1,491 | 362 |
Net cash provided by financing activities | 1,602 | 397 |
Effect of foreign exchange rate changes on cash and cash equivalents | 1,446 | 839 |
Net increase in cash and cash equivalents | 27,370 | 5,998 |
Cash and cash equivalents: | ||
Beginning of period | 266,660 | 112,633 |
End of period | 294,030 | 118,631 |
Supplemental disclosure of cash flow information: | ||
Cash paid for income taxes | 835 | 661 |
Non-cash investing and financing activities: | ||
Inventory transfers to fixed assets and service spares | $ 2,339 | $ 2,083 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Note 1— Basis of Presentation In these notes, Cray Inc. and its wholly-owned subsidiaries are collectively referred to as the “Company.” In the opinion of management, the accompanying Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Loss, and Statements of Cash Flows 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 Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Management believes that all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2015 . The Company’s revenue, results of operations and cash balances are likely to fluctuate significantly from quarter to quarter. These fluctuations are due to such factors as the high average sales prices and limited number of sales of the Company’s products, the timing of purchase orders and product deliveries, the revenue recognition accounting policy of generally not recognizing product revenue until customer acceptance and other contractual provisions have been fulfilled and the timing of payments for product sales, maintenance services, government research and development funding and purchases of inventory. Given the nature of the Company’s business, its revenue, receivables and other related accounts are likely to be concentrated among a relatively small number of customers. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Cray Inc. and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Revenue Recognition The Company recognizes revenue, including transactions under sales-type leases, when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Delivery does not occur until the products have been shipped or services provided to the customer, risk of loss has transferred to the customer, and, where applicable, a customer acceptance has been obtained. The sales price is not considered to be fixed or determinable until all material contingencies related to the sales have been resolved. The Company records revenue in the Condensed Consolidated Statements of Operations net of any sales, use, value added or certain excise taxes imposed by governmental authorities on specific sales transactions. In addition to the aforementioned general policy, the following are the Company’s statements of policy with regard to multiple-element arrangements and specific revenue recognition policies for each major category of revenue. Multiple-Element Arrangements. The Company commonly enters into revenue arrangements that include multiple deliverables of its product and service offerings due to the needs of its customers. Products may be delivered in phases over time periods which can be as long as five years . Maintenance services generally begin upon acceptance of the first equipment delivery and future deliveries of equipment generally have an associated maintenance period. The Company considers the maintenance period to commence upon acceptance of the product or installation in situations where a formal acceptance is not required, which may include a warranty period and accordingly allocates a portion of the arrangement consideration as a separate deliverable which is recognized as service revenue over the entire service period. Other services such as training and engineering services can be delivered as a discrete delivery or over the term of the contract. A multiple-element arrangement is separated into more than one unit of accounting if the following criteria are met: • The delivered item(s) has value to the customer on a standalone basis; and • If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. If these criteria are met for each element, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. If these criteria are not met, the arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. The Company follows a selling price hierarchy in determining the best estimate of the selling price of each deliverable. Certain products and services are sold separately in standalone arrangements for which the Company is sometimes able to determine vendor specific objective evidence, or VSOE. The Company determines VSOE based on normal pricing and discounting practices for the product or service when sold separately. When the Company is not able to establish VSOE for all deliverables in an arrangement with multiple elements, the Company attempts to establish the selling price of each remaining element based on third-party evidence, or TPE. The Company’s inability to establish VSOE is often due to a relatively small sample of customer contracts that differ in system size and contract terms which can be due to infrequently selling each element separately, not pricing products within a narrow range, or only having a limited sales history, such as in the case of certain advanced and emerging technologies. TPE is determined based on the Company’s prices or competitor prices for similar deliverables when sold separately. However, the Company is often unable to determine TPE, as the Company’s offerings usually contain a significant level of customization and differentiation from those of competitors and the Company is often unable to reliably determine what similar competitor products’ selling prices are on a standalone basis. When the Company is unable to establish selling price using VSOE or TPE, the Company uses estimated selling price, or ESP, in its allocation of arrangement consideration. The objective of ESP is to determine the price at which the Company would transact a sale if the product or service were sold on a standalone basis. In determining ESP, the Company uses the cost to provide the product or service plus a margin, or considers other factors. When using cost plus a margin, the Company considers the total cost of the product or service, including customer-specific and geographic factors. The Company also considers the historical margins of the product or service on previous contracts and several factors including any changes to pricing methodologies, competitiveness of products and services and cost drivers that would cause future margins to differ from historical margins. Products . The Company most often recognizes revenue from sales of products upon customer acceptance of the system. Where formal acceptance is not required, the Company recognizes revenue upon delivery or installation. When the product is part of a multiple element arrangement, the Company allocates a portion of the arrangement consideration to product revenue based on estimates of selling price. Services . Maintenance services are provided under separate maintenance contracts with customers. These contracts generally provide for maintenance services for one year , although some are for multi-year periods, often with prepayments for the term of the contract. The Company considers the maintenance period to commence upon acceptance of the product, or installation of the product where a formal acceptance is not required, which may include a warranty period. When service is part of a multiple element arrangement, the Company allocates a portion of the arrangement consideration to maintenance service revenue based on estimates of selling price. Maintenance contracts that are billed in advance of revenue recognition are recorded as deferred revenue. Maintenance revenue is recognized ratably over the term of the maintenance contract. Revenue from engineering services is recognized as services are performed. Project Revenue . Revenue from design and build contracts is recognized under the percentage-of-completion, or POC, method. Under the POC method, revenue is recognized based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are recorded in income in the period in which the circumstances that gave rise to the revision become known by management. The Company performs ongoing profitability analyses of its contracts accounted for under the POC method in order to determine whether the latest estimates of revenue, costs and extent of progress require updating. If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately. The Company records revenue from certain research and development contracts which include milestones using the milestone method if the milestones are determined to be substantive. A milestone is considered to be substantive if management believes there is substantive uncertainty that it will be achieved and the milestone consideration meets all of the following criteria: • It is commensurate with either of the following: • The Company's performance to achieve the milestone; or • The enhancement of value of the delivered item or items as a result of a specific outcome resulting from the Company's performance to achieve the milestone. • It relates solely to past performance. • It is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. The individual milestones are determined to be substantive or non-substantive in their entirety and milestone consideration is not bifurcated. Revenue from projects is classified as Product Revenue or Service Revenue, based on the nature of the work performed. Nonmonetary Transactions . The Company values and records nonmonetary transactions at the fair value of the asset surrendered unless the fair value of the asset received is more clearly evident, in which case the fair value of the asset received is used. |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | Note 2— New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Adoption of ASU 2014-09 was initially required for fiscal and interim reporting periods beginning after December 15, 2016 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. In August 2015, FASB issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date: Topic 606 (ASU 2015-14) that deferred the effective date of ASU 2014-09 by one year. Application of the new revenue standard is permitted for fiscal and interim reporting periods beginning after December 15, 2016 and required for fiscal and interim reporting periods beginning after December 15, 2017. The Company is currently evaluating the potential impact of the pending adoption of ASU 2014-09 on its consolidated financial statements. In July 2015, FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory: Topic 330 (ASU 2015-11). Topic 330 currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU 2015-11 requires that inventory measured using either the FIFO or average cost method be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Adoption of ASU 2015-11 is required for fiscal reporting periods beginning after December 15, 2016, including interim reporting periods within those fiscal years. The Company does not expect the adoption of ASU 2015-11 to have a material impact on its consolidated financial statements. In November 2015, FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes: Topic 740 (ASU 2015-17). Current GAAP requires the deferred taxes for each jurisdiction to be presented as a net current asset or liability and net noncurrent asset or liability. This requires a jurisdiction-by-jurisdiction analysis based on the classification of the assets and liabilities to which the underlying temporary differences relate, or, in the case of loss or credit carryforwards, based on the period in which the attribute is expected to be realized. Any valuation allowance is then required to be allocated on a pro rata basis, by jurisdiction, between current and noncurrent deferred tax assets. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction. Adoption of ASU 2015-17 is required for fiscal reporting periods beginning after December 15, 2016, including interim reporting periods within those fiscal years, and either prospective or retrospective application is permitted. Early adoption of ASU 2015-17 is permitted. At the time of adoption, all of the Company’s deferred tax assets and liabilities, along with any related valuation allowance, will be classified as noncurrent on its Consolidated Balance Sheet. Currently, the Company does not plan to early-adopt ASU 2015-17. In January 2016, FASB issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities: Topic 825 (ASU 2016-01). The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. Adoption of ASU 2016-01 is required for fiscal reporting periods beginning after December 15, 2017, including interim reporting periods within those fiscal years. The Company is currently evaluating the potential impact of the pending adoption of ASU 2016-01 on its consolidated financial statements. In February 2016, FASB issued Accounting Standards Update No. 2016-02, Leases: Topic 842 (ASU 2016-02) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Under the new guidance, leases will continue to be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statement of Operations. Lessor accounting is largely unchanged under ASU 2016-02. Adoption of ASU 2016-02 is required for fiscal reporting periods beginning after December 15, 2018, including interim reporting periods within those fiscal years with early adoption being permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently evaluating the potential impact of the pending adoption of ASU 2016-02 on its consolidated financial statements. In March 2016, FASB issued Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The updated guidance simplifies and changes how companies account for certain aspects of share-based payment awards to employees, including accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of certain items in the statement of cash flows. Adoption of ASU 2016-09 is required for fiscal reporting periods beginning after December 15, 2016, including interim reporting periods within those fiscal years with early adoption being permitted. The Company early-adopted ASU 2016-09 at the beginning of the first quarter of 2016. At the time of adoption, the Company recognized $16.6 million in deferred tax assets for all excess tax benefits that had not been previously recognized because the related tax deduction had not reduced taxes payable. This was accomplished through a cumulative-effect adjustment to accumulated deficit. All excess tax benefits and all tax deficiencies generated in the current and future periods will be recorded as income tax benefit or expense in the Company’s Consolidated Statement of Operations in the reporting period in which they occur. This will result in increased volatility in the Company's effective tax rate. The Company has determined that none of the other provisions of ASU 2016-09 will have a significant impact on its consolidated financial statements. The table below shows the accumulated deficit activity for the three months ended March 31, 2016 (in thousands): Accumulated Deficit BALANCE, December 31, 2015 $ (125,411 ) Purchase of employee restricted shares to fund related statutory tax withholding (49 ) Cumulative-effect adjustment resulting from adoption of ASU 2016-09 16,600 Net Loss (5,013 ) BALANCE, March 31, 2016 $ (113,873 ) |
Fair Value Measurement
Fair Value Measurement | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | Note 3— Fair Value Measurement Based on the observability of the inputs used in the valuation techniques used to determine the fair value of certain financial assets and liabilities, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The following table presents information about the Company’s financial assets and liabilities that have been measured at fair value as of March 31, 2016 , and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands): Description Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Assets: Cash and cash equivalents and restricted cash $ 295,685 $ 295,685 $ — Available-for-sale investments (1) 24,813 24,813 — Foreign currency exchange contracts (2) 9,749 — 9,749 Assets measured at fair value at March 31, 2016 $ 330,247 $ 320,498 $ 9,749 Liabilities: Foreign currency exchange contracts (3) 490 — 490 Liabilities measured at fair value at March 31, 2016 $ 490 $ — $ 490 (1) Included in “Short-term investments” on the Company’s Condensed Consolidated Balance Sheets. (2) Included in “Prepaid expenses and other current assets” and “Other non-current assets” on the Company’s Condensed Consolidated Balance Sheets. (3) Included in “Other accrued liabilities” and “Other non-current liabilities” on the Company’s Condensed Consolidated Balance Sheets. Foreign Currency Derivatives The Company may enter into foreign currency derivatives to hedge future cash receipts on certain sales transactions that are payable in foreign currencies. As of March 31, 2016 and December 31, 2015 , the Company had outstanding foreign currency exchange contracts that were designated and accounted for as cash flow hedges of anticipated future cash receipts on sales contracts payable in foreign currencies. The outstanding notional amounts were approximately (in millions): March 31, 2016 December 31, 2015 British Pounds (GBP) 50.7 39.2 Euros (EUR) 10.4 6.0 Swiss Francs (CHF) 33.0 33.0 The Company had hedged foreign currency exposure related to these designated cash flow hedges of approximately $127.5 million and $107.3 million as of March 31, 2016 and December 31, 2015 , respectively. As of March 31, 2016 and December 31, 2015 , the Company had outstanding foreign currency exchange contracts that had been dedesignated for the purposes of hedge accounting treatment. The outstanding notional amounts were approximately (in millions): March 31, 2016 December 31, 2015 British Pounds (GBP) 17.9 31.5 Euros (EUR) 3.8 3.8 Swiss Francs (CHF) 0.3 0.3 Japanese Yen (JPY) — 274.0 The foreign currency exposure related to these contracts was approximately $32.4 million as of March 31, 2016 and $55.6 million as of December 31, 2015 . Unrealized gains or losses related to these dedesignated contracts are recorded in the Condensed Consolidated Statement of Operations and are generally offset by foreign currency adjustments on related receivables. These foreign currency exchange contracts are considered to be economic hedges. Cash receipts associated with the hedged contracts are expected to be received from 2016 through 2020, during which time the revenue on the associated sales contracts is expected to be recognized, or in the case of receivables denominated in a foreign currency, the receivables balances will be collected. Any gain or loss on hedged foreign currency will be recognized at the time of customer acceptance, or in the case of receivables denominated in a foreign currency, over the period during which hedged receivables denominated in a foreign currency are outstanding. Fair values of derivative instruments designated as cash flow hedges (in thousands): Hedge Classification Balance Sheet Location Fair Value Fair Value Foreign currency exchange contracts Prepaid expenses and other current assets $ 7,360 $ 3,956 Foreign currency exchange contracts Other non-current assets 314 5,183 Foreign currency exchange contracts Other accrued liabilities (73 ) — Foreign currency exchange contracts Other non-current liabilities (382 ) (2 ) Total fair value of derivative instruments designated as cash flow hedges $ 7,219 $ 9,137 Fair values of derivative instruments not designated as cash flow hedges (in thousands): Hedge Classification Balance Sheet Location Fair Value Fair Value Foreign currency exchange contracts Prepaid expenses and other current assets $ 1,141 $ 1,807 Foreign currency exchange contracts Other non-current assets 934 656 Foreign currency exchange contracts Other accrued liabilities (35 ) (1 ) Foreign currency exchange contracts Other non-current liabilities — — Total fair value of derivative instruments not designated as cash flow hedges $ 2,040 $ 2,462 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 3 Months Ended |
Mar. 31, 2016 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income | Note 4— Accumulated Other Comprehensive Income The following table shows the impact on product revenue of reclassification adjustments from accumulated other comprehensive income resulting from hedged foreign currency transactions recorded by the Company for the three months ended March 31, 2016 and 2015 (in thousands). The gross reclassification adjustments increased product revenue for the three months ended March 31, 2016 and 2015 . Three Months Ended 2016 2015 Gross of tax reclassifications $ 1,626 $ 117 Net of tax reclassifications $ 975 $ 70 The following tables show the changes in accumulated other comprehensive income by component for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended March 31, 2016 Unrealized Gain (Loss) on Investments Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ (8 ) $ 1,675 $ 5,975 $ 7,642 Current-period change, net of tax 9 240 (387 ) (138 ) Ending balance $ 1 $ 1,915 $ 5,588 $ 7,504 Income tax expense (benefit) associated with current-period change $ 6 $ (7 ) $ (251 ) $ (252 ) Three Months Ended March 31, 2015 Unrealized Gain (Loss) on Investments Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ 12 $ 2,069 $ 4,422 $ 6,503 Current-period change, net of tax (14 ) 483 4,250 4,719 Ending balance $ (2 ) $ 2,552 $ 8,672 $ 11,222 Income tax expense (benefit) associated with current-period change $ (10 ) $ (328 ) $ 2,824 $ 2,486 |
Loss Per Share ("EPS")
Loss Per Share ("EPS") | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Loss Per Share (EPS) | Note 5— Loss Per Share ("EPS") Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares, excluding unvested restricted stock, outstanding during the period. Diluted EPS is computed by dividing net loss available to common shareholders by the weighted average number of common and potential common shares outstanding during the period, which includes the additional dilution related to conversion of stock options, unvested restricted stock and unvested restricted stock units as computed under the treasury stock method. For the three months ended March 31, 2016 and 2015 , outstanding stock options, unvested restricted stock and unvested restricted stock units were antidilutive because of the net losses and, as such, their effect has not been included in the calculation of basic or diluted net loss per share. For the three months ended March 31, 2016 and 2015 , potential gross common shares of 2.6 million and 2.9 million , respectively, were antidilutive and not included in computing diluted EPS. An additional 1.2 million and 1.5 million performance vesting restricted stock and performance vesting restricted stock units were excluded from the computation of potential common shares for the three months ended March 31, 2016 and 2015 , respectively, because the conditions for vesting had not been met as of the balance sheet date. |
Investments
Investments | 3 Months Ended |
Mar. 31, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Note 6— Investments The Company’s investments in debt securities with maturities at purchase greater than three months are classified as "available-for-sale." Changes in fair value are reflected in other comprehensive income (loss). The carrying amounts of the Company’s investments in available-for-sale securities as of March 31, 2016 are shown in the table below (in thousands): Unrealized Cost Gains Fair Value Short-term available-for-sale securities $ 24,812 $ 1 $ 24,813 The carrying amounts of the Company’s investments in available-for-sale securities as of December 31, 2015 are shown in the table below (in thousands): Unrealized Cost Losses Fair Value Short-term available-for-sale securities $ 14,939 $ (14 ) $ 14,925 |
Accounts and Other Receivables,
Accounts and Other Receivables, Net | 3 Months Ended |
Mar. 31, 2016 | |
Receivables [Abstract] | |
Accounts and Other Receivables, Net | Note 7— Accounts and Other Receivables, Net Net accounts and other receivables consisted of the following (in thousands): March 31, 2016 December 31, 2015 Trade accounts receivable $ 34,667 $ 83,750 Unbilled receivables 9,533 7,685 Advance billings 3,106 11,637 Short-term investment in sales-type lease 9,838 10,004 Other receivables 3,453 11,662 60,597 124,738 Allowance for doubtful accounts (115 ) (19 ) Accounts and other receivables, net $ 60,482 $ 124,719 Unbilled receivables represent amounts where the Company has recognized revenue in advance of the contractual billing terms. Advance billings represent billings made based on contractual terms for which revenue has not been recognized. As of March 31, 2016 and December 31, 2015 , accounts receivable included $18.7 million and $44.2 million , respectively, that resulted from sales to the U.S. government and system acquisitions primarily funded by the U.S. government ("U.S. Government"). Of these amounts, $2.2 million were unbilled as of March 31, 2016 and December 31, 2015 , respectively, based upon contractual billing arrangements with these customers. As of March 31, 2016 , two non-U.S. Government customers accounted for 35% of total accounts and other receivables. As of December 31, 2015 , one non-U.S. Government customer accounted for 18% of total accounts and other receivables. |
Sales-type leases
Sales-type leases | 3 Months Ended |
Mar. 31, 2016 | |
Leases [Abstract] | |
Sales-type lease | Note 8— Sales-type Lease The Company has a sales-type lease with one of its customers. Under the terms of the arrangement, the Company has agreed to provide a high performance computing solution to the customer for a term of four years, beginning at the customer's acceptance of the system. The lease is designated in British Pounds and the Company has entered into certain foreign currency exchange contracts that act as an economic hedge for the foreign currency exposure associated with this arrangement. The following table shows the components of the net investment in the sales-type lease as of March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 December 31, 2015 Total minimum lease payments to be received $ 32,689 $ 36,863 Less: executory costs (6,593 ) (7,434 ) Net minimum lease payments receivable 26,096 29,429 Less: unearned income (881 ) (1,108 ) Net investment in sales-type lease 25,215 28,321 Less: long-term investment in sales-type lease (15,377 ) (18,317 ) Investment in sales-type lease included in accounts and other receivables $ 9,838 $ 10,004 As of March 31, 2016 , minimum lease payments for each of the succeeding three fiscal years are as follows (in thousands): 2016 (less than 1 year) $ 9,807 2017 13,075 2018 9,807 Total minimum lease payments to be received $ 32,689 |
Inventory
Inventory | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 9— Inventory Inventory consisted of the following (in thousands): March 31, 2016 December 31, 2015 Components and subassemblies $ 37,058 $ 20,806 Work in process 44,265 43,071 Finished goods 40,338 49,778 Total $ 121,661 $ 113,655 Finished goods inventory of $15.7 million and $49.5 million was located at customer sites pending acceptance as of March 31, 2016 and December 31, 2015 , respectively. At March 31, 2016 , two customers accounted for $36.1 million of finished goods inventory, and at December 31, 2015 , three customers accounted for $41.7 million of finished goods inventory. During the three months ended March 31, 2016 , the Company wrote off $0.6 million of inventory. There were no inventory write offs during the three months ended March 31, 2015 . |
Deferred Revenue
Deferred Revenue | 3 Months Ended |
Mar. 31, 2016 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred Revenue | Note 10— Deferred Revenue Deferred revenue consisted of the following (in thousands): March 31, 2016 December 31, 2015 Deferred product revenue $ 12,143 $ 22,215 Deferred service revenue 99,106 97,822 Total deferred revenue 111,249 120,037 Less: long-term deferred revenue (27,573 ) (33,306 ) Deferred revenue in current liabilities $ 83,676 $ 86,731 As of March 31, 2016 and December 31, 2015 , the U.S. Government accounted for $63.7 million and $57.7 million , respectively, of total deferred revenue. As of March 31, 2016 and December 31, 2015 , no non-U.S. Government customers accounted for more than 10% of total deferred revenue. |
Share-Based Compensation
Share-Based Compensation | 3 Months Ended |
Mar. 31, 2016 | |
Share-based Compensation [Abstract] | |
Share-Based Compensation | Note 12— Share-Based Compensation The Company accounts for its share-based compensation based on an estimate of fair value of the grant on the date of grant. In determining the fair value of stock options, the Company uses the Black-Scholes option pricing model. The following key weighted average assumptions were employed in the calculation for the three month periods ended March 31, 2016 and March 31, 2015 : Three Months Ended March 31, 2016 Three Months Ended March 31, 2015 Risk-free interest rate 1.06% 1.36% Expected dividend yield —% —% Volatility 51.62% 50.71% Expected life 4.0 years 4.0 years Weighted average Black-Scholes value of options granted $16.90 $12.04 The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company does not anticipate declaring dividends in the foreseeable future. Volatility is based on historical data. The expected life of an option is based on the assumption that options will be exercised, on average, about two years after vesting occurs. The Company recognizes compensation expense for only the portion of options that are expected to vest. Therefore, management applies an estimated forfeiture rate that is derived from historical employee termination data and adjusted for expected future employee turnover rates. The estimated forfeiture rate applied to the Company's stock option grants during the three months ended March 31, 2016 and 2015 was 8.0% . If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods. The Company’s stock price volatility, option lives and expected forfeiture rates involve management’s best estimates at the time of such determination, which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the vesting period or requisite service period of the option. The Company typically issues stock options with a four year vesting period (the requisite service period) and amortizes the fair value of stock options (stock compensation cost) ratably over the requisite service period. A summary of the Company’s year-to-date stock option activity and related information follows: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Outstanding at December 31, 2015 1,948,475 $ 14.83 Grants 15,000 $ 41.51 Exercises (122,327 ) $ 12.19 Canceled and forfeited (325 ) $ 5.32 Outstanding at March 31, 2016 1,840,823 $ 15.22 6.1 Exercisable at March 31, 2016 1,291,208 $ 10.66 5.1 Available for grant at March 31, 2016 1,540,533 As of March 31, 2016 , there was $49.1 million of aggregate intrinsic value of outstanding stock options, including $40.3 million of aggregate intrinsic value of exercisable stock options. Intrinsic value represents the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of its first quarter of 2016 and the exercise price, multiplied by the number of shares of common stock underlying the stock options) that would have been received by the option holders had all option holders exercised their options on March 31, 2016 . During the three months ended March 31, 2016 , stock options covering 122,327 shares of common stock with a total intrinsic value of $3.5 million were exercised. During the three months ended March 31, 2015 , stock options covering 59,007 shares of common stock with a total intrinsic value of $1.6 million were exercised. The fair value of unvested restricted stock and unvested restricted stock units is based on the market price of a share of the Company’s common stock on the date of grant and is amortized over the vesting period. A summary of the Company’s unvested restricted stock grants and changes during the three months ended March 31, 2016 is as follows: Service Vesting Restricted Shares Performance Vesting Restricted Shares Total Restricted Shares Shares Weighted Average Grant Date Fair Value Shares Weighted Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2015 516,443 $ 24.12 585,500 $ 15.07 1,101,943 $ 19.31 Granted — $ — — $ — — $ — Forfeited (1,250 ) $ 40.95 (37,000 ) $ 14.24 (38,250 ) $ 15.11 Vested (5,500 ) $ 19.93 — $ — (5,500 ) $ 19.93 Outstanding at March 31, 2016 509,693 $ 24.13 548,500 $ 15.13 1,058,193 $ 19.46 The estimated forfeiture rate applied to the Company's service vesting restricted share grants during the three months ended March 31, 2015 was 8% . The aggregate fair value of restricted stock vested during the three months ended March 31, 2016 was $0.2 million . The aggregate fair value of restricted stock vested during the three months ended March 31, 2015 was $0.5 million . The performance vesting restricted shares are subject to performance measures that are currently not considered "probable" of attainment and as such, no compensation cost has been recorded for these shares. The performance vesting restricted shares are eligible to vest in 2016 and 2017 . A summary of the Company’s unvested restricted stock unit grants and changes during the three months ended March 31, 2016 is as follows: Service Vesting Restricted Stock Units Performance Vesting Restricted Stock Units Total Restricted Stock Units Units Weighted Average Grant Date Fair Value Units Weighted Units Weighted Average Grant Date Fair Value Outstanding at December 31, 2015 273,050 $ 29.75 632,700 $ 30.04 905,750 $ 29.95 Granted 18,500 $ 39.96 23,585 $ 42.65 42,085 $ 41.47 Forfeited — $ — — $ — — $ — Vested — $ — — $ — — $ — Outstanding at March 31, 2016 291,550 $ 30.40 656,285 $ 30.49 947,835 $ 30.46 The estimated forfeiture rate applied to the Company's service vesting restricted stock unit grants during the three months ended March 31, 2016 was 8.0% . Restricted stock units are not outstanding shares and do not have any voting or dividend rights. At the time of vesting, a share of common stock representing each restricted stock unit vested will be issued by the Company. The performance vesting restricted stock units are subject to performance measures that are currently not considered "probable" of attainment and as such, no compensation cost has been recorded for these units. The performance vesting restricted stock units are eligible to vest between 2017 and 2020 . Including performance-based equity awards, the Company had $43.4 million of total unrecognized compensation cost related to unvested stock options, unvested restricted stock and unvested restricted stock units as of March 31, 2016 . Excluding the $28.3 million of unrecognized compensation cost related to unvested restricted stock and unvested restricted stock units that are subject to performance measures that are currently not considered "probable" of attainment, unrecognized compensation cost is $15.1 million . No compensation expense is recognized for unvested restricted stock or unvested restricted stock units subject to performance measures that are not considered "probable" of attainment. Unrecognized compensation cost related to unvested stock options and unvested non-performance-based restricted stock is expected to be recognized over a weighted average period of 2.6 years. The following table sets forth the gross share-based compensation cost resulting from stock options, unvested restricted stock and unvested restricted stock units that were recorded in the Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended 2016 2015 Cost of product revenue $ 82 $ 70 Cost of service revenue 68 66 Research and development, net 949 873 Sales and marketing 835 938 General and administrative 918 1,226 Total $ 2,852 $ 3,173 The Company also has an employee stock purchase plan, or ESPP, which allows employees to purchase shares of the Company’s common stock at 95% of fair market value on the fourth business day after the end of each offering period. The ESPP is deemed non-compensatory and therefore is not subject to the fair value provisions. |
Taxes
Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Taxes | Note 13— Taxes The Company’s effective tax rates for the three months ended March 31, 2016 and 2015 were as follows: Three Months Ended 2016 2015 Effective Tax Rates 45% 40% The primary reason for the difference between the expected statutory tax rate of 35% and the actual tax rate of 45% for the three months ended March 31, 2016 was due to excess tax benefits, in the amount of $1.0 million , that were recognized by the Company as a result of the adoption of ASU 2016-09. Excess tax benefits arise when tax deductions recognized by the Company with respect to share-based compensation exceed the compensation cost attributable to share-based compensation that was recognized in the Company’s consolidated financial statements. Prior to the adoption of ASU 2016-09 excess tax benefits did not impact the Company’s effective tax rate. The primary reason for the difference between the expected statutory tax rate of 35% and the actual tax rate of 40% for the three months ended March 31, 2015 was state and foreign taxes. The Company continues to provide a valuation allowance against specific U.S. deferred tax assets and a valuation allowance against deferred tax assets arising in a limited number of foreign jurisdictions as the realization of such assets is not considered to be more likely than not at this time. No changes were required to previously recorded valuation allowances as a result of the adoption of ASU 2016-09. In a future period the Company's assessment of the realizability of its deferred tax assets and therefore the appropriateness of the valuation allowance could change based on an assessment of all available evidence, both positive and negative in that future period. If the Company's conclusion about the realizability of its deferred tax assets and therefore the appropriateness of the valuation allowance changes in a future period it could record a substantial tax provision or benefit in the Condensed Consolidated Statement of Operations when that occurs. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | Note 14— Segment Information The Company has the following reportable segments: Supercomputing (formerly HPC Systems), Storage and Data Management, Maintenance and Support, and Engineering Services and Other. The Company’s reportable segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, who is the Chief Operating Decision Maker, in determining how to allocate the Company’s resources and evaluate performance. The segments are determined based on several factors, including the Company’s internal operating structure, the manner in which the Company’s operations are managed, client base, similar economic characteristics and the availability of separate financial information. Supercomputing Supercomputing includes a suite of highly advanced, tightly integrated and cluster supercomputer systems which are used by large research and engineering centers in universities, government laboratories, and commercial institutions. Supercomputing also includes the ongoing maintenance of these systems as well as system analysts. Storage and Data Management Storage and Data Management offers the Cray Sonexion and Tiered Adaptive Storage solution as well as other third-party storage products and their ongoing maintenance as well as system analysts. Maintenance and Support Maintenance and Support provides ongoing maintenance of Cray supercomputers, big data storage and analytics systems, as well as system analysts. Engineering Services and Other Included within Engineering Services and Other are the Company’s analytics business and Custom Engineering. The following table presents revenues and gross margin for the Company’s operating segments for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended 2016 2015 Revenue: Supercomputing $ 84,728 $ 59,830 Storage and Data Management 13,467 15,194 Maintenance and Support 26,803 22,953 Engineering Services and Other 7,354 4,620 Elimination of inter-segment revenue (26,803 ) (22,953 ) Total revenue $ 105,549 $ 79,644 Gross Profit: Supercomputing $ 32,039 $ 19,424 Storage and Data Management 4,846 3,721 Maintenance and Support 11,654 11,324 Engineering Services and Other 3,077 891 Elimination of inter-segment gross profit (11,654 ) (11,324 ) Total gross profit $ 39,962 $ 24,036 Revenue and cost of revenue is the only discrete financial information the Company prepares for its segments. Other financial results or assets are not separated by segment. The Company’s geographic operations outside the United States include sales and service offices in Europe and the Middle East, South America, Asia Pacific and Canada. The following data represents the Company’s revenue for the United States and all other countries, which is determined based upon a customer’s geographic location (in thousands): United States Other Countries Total 2016 2015 2016 2015 2016 2015 Three months ended March 31, Product revenue $ 33,878 $ 31,564 $ 37,532 $ 21,177 $ 71,410 $ 52,741 Service revenue 24,270 18,919 9,869 7,984 34,139 26,903 Total revenue $ 58,148 $ 50,483 $ 47,401 $ 29,161 $ 105,549 $ 79,644 Sales to the U.S. Government totaled approximately $52.7 million for the three months ended March 31, 2016 , compared to approximately $47.8 million for the three months ended March 31, 2015 . For the three months ended March 31, 2016 , two non-U.S. Government customers accounted for 33% of total revenue, while revenue in Australia and the UK accounted for 36% of total revenue. For the three months ended March 31, 2015 , one non-U.S. Government customer accounted for 14% of total revenue and revenue in India accounted for 19% of total revenue. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Note 15— Subsequent Events On April 21, 2016, the Company entered into a new operating lease for facilities in Bloomington, Minnesota that will principally be staffed with teams from software development, sales and service. This new lease will replace the Company's existing lease in St. Paul, Minnesota. The new lease is for a minimum period of eight years beginning on May 1, 2017. Minimum contractual obligations under the new lease total $31.9 million . The Company paid an early termination fee of approximately $2.3 million to terminate its existing lease in St. Paul, Minnesota. This amount will be expensed in the second quarter of 2016. The Company received a lease incentive of $2.3 million as part of its new lease agreement to cover the termination fee, which will be amortized over the term of the new lease. |
Contingencies Contingencies
Contingencies Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | Note 11— Contingencies A customer has recently experienced significant reliability issues with a high-value third party component in its Cray system after several years of use. Similar issues have not been seen at other customer sites with the same components. The Company is working with the customer and vendor to identify the root cause. While the Company may incur little to no cost to resolve this matter, it is reasonably possible the Company could incur a material loss under its multi-year service arrangement. The Company is currently unable to estimate an amount or range of loss because this matter involves significant uncertainties. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Cray Inc. and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue, including transactions under sales-type leases, when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Delivery does not occur until the products have been shipped or services provided to the customer, risk of loss has transferred to the customer, and, where applicable, a customer acceptance has been obtained. The sales price is not considered to be fixed or determinable until all material contingencies related to the sales have been resolved. The Company records revenue in the Condensed Consolidated Statements of Operations net of any sales, use, value added or certain excise taxes imposed by governmental authorities on specific sales transactions. In addition to the aforementioned general policy, the following are the Company’s statements of policy with regard to multiple-element arrangements and specific revenue recognition policies for each major category of revenue. Multiple-Element Arrangements. The Company commonly enters into revenue arrangements that include multiple deliverables of its product and service offerings due to the needs of its customers. Products may be delivered in phases over time periods which can be as long as five years . Maintenance services generally begin upon acceptance of the first equipment delivery and future deliveries of equipment generally have an associated maintenance period. The Company considers the maintenance period to commence upon acceptance of the product or installation in situations where a formal acceptance is not required, which may include a warranty period and accordingly allocates a portion of the arrangement consideration as a separate deliverable which is recognized as service revenue over the entire service period. Other services such as training and engineering services can be delivered as a discrete delivery or over the term of the contract. A multiple-element arrangement is separated into more than one unit of accounting if the following criteria are met: • The delivered item(s) has value to the customer on a standalone basis; and • If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. If these criteria are met for each element, the arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price. If these criteria are not met, the arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. The Company follows a selling price hierarchy in determining the best estimate of the selling price of each deliverable. Certain products and services are sold separately in standalone arrangements for which the Company is sometimes able to determine vendor specific objective evidence, or VSOE. The Company determines VSOE based on normal pricing and discounting practices for the product or service when sold separately. When the Company is not able to establish VSOE for all deliverables in an arrangement with multiple elements, the Company attempts to establish the selling price of each remaining element based on third-party evidence, or TPE. The Company’s inability to establish VSOE is often due to a relatively small sample of customer contracts that differ in system size and contract terms which can be due to infrequently selling each element separately, not pricing products within a narrow range, or only having a limited sales history, such as in the case of certain advanced and emerging technologies. TPE is determined based on the Company’s prices or competitor prices for similar deliverables when sold separately. However, the Company is often unable to determine TPE, as the Company’s offerings usually contain a significant level of customization and differentiation from those of competitors and the Company is often unable to reliably determine what similar competitor products’ selling prices are on a standalone basis. When the Company is unable to establish selling price using VSOE or TPE, the Company uses estimated selling price, or ESP, in its allocation of arrangement consideration. The objective of ESP is to determine the price at which the Company would transact a sale if the product or service were sold on a standalone basis. In determining ESP, the Company uses the cost to provide the product or service plus a margin, or considers other factors. When using cost plus a margin, the Company considers the total cost of the product or service, including customer-specific and geographic factors. The Company also considers the historical margins of the product or service on previous contracts and several factors including any changes to pricing methodologies, competitiveness of products and services and cost drivers that would cause future margins to differ from historical margins. Products . The Company most often recognizes revenue from sales of products upon customer acceptance of the system. Where formal acceptance is not required, the Company recognizes revenue upon delivery or installation. When the product is part of a multiple element arrangement, the Company allocates a portion of the arrangement consideration to product revenue based on estimates of selling price. Services . Maintenance services are provided under separate maintenance contracts with customers. These contracts generally provide for maintenance services for one year , although some are for multi-year periods, often with prepayments for the term of the contract. The Company considers the maintenance period to commence upon acceptance of the product, or installation of the product where a formal acceptance is not required, which may include a warranty period. When service is part of a multiple element arrangement, the Company allocates a portion of the arrangement consideration to maintenance service revenue based on estimates of selling price. Maintenance contracts that are billed in advance of revenue recognition are recorded as deferred revenue. Maintenance revenue is recognized ratably over the term of the maintenance contract. Revenue from engineering services is recognized as services are performed. Project Revenue . Revenue from design and build contracts is recognized under the percentage-of-completion, or POC, method. Under the POC method, revenue is recognized based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. If circumstances arise that change the original estimates of revenues, costs, or extent of progress toward completion, revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are recorded in income in the period in which the circumstances that gave rise to the revision become known by management. The Company performs ongoing profitability analyses of its contracts accounted for under the POC method in order to determine whether the latest estimates of revenue, costs and extent of progress require updating. If at any time these estimates indicate that the contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately. The Company records revenue from certain research and development contracts which include milestones using the milestone method if the milestones are determined to be substantive. A milestone is considered to be substantive if management believes there is substantive uncertainty that it will be achieved and the milestone consideration meets all of the following criteria: • It is commensurate with either of the following: • The Company's performance to achieve the milestone; or • The enhancement of value of the delivered item or items as a result of a specific outcome resulting from the Company's performance to achieve the milestone. • It relates solely to past performance. • It is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. The individual milestones are determined to be substantive or non-substantive in their entirety and milestone consideration is not bifurcated. Revenue from projects is classified as Product Revenue or Service Revenue, based on the nature of the work performed. Nonmonetary Transactions . The Company values and records nonmonetary transactions at the fair value of the asset surrendered unless the fair value of the asset received is more clearly evident, in which case the fair value of the asset received is used |
Investments | The Company’s investments in debt securities with maturities at purchase greater than three months are classified as "available-for-sale." Changes in fair value are reflected in other comprehensive income (loss). |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Company's financial assets and liabilities measured at fair value and the hierarchy of the valuation inputs | The following table presents information about the Company’s financial assets and liabilities that have been measured at fair value as of March 31, 2016 , and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands): Description Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Assets: Cash and cash equivalents and restricted cash $ 295,685 $ 295,685 $ — Available-for-sale investments (1) 24,813 24,813 — Foreign currency exchange contracts (2) 9,749 — 9,749 Assets measured at fair value at March 31, 2016 $ 330,247 $ 320,498 $ 9,749 Liabilities: Foreign currency exchange contracts (3) 490 — 490 Liabilities measured at fair value at March 31, 2016 $ 490 $ — $ 490 (1) Included in “Short-term investments” on the Company’s Condensed Consolidated Balance Sheets. (2) Included in “Prepaid expenses and other current assets” and “Other non-current assets” on the Company’s Condensed Consolidated Balance Sheets. (3) Included in “Other accrued liabilities” and “Other non-current liabilities” on the Company’s Condensed Consolidated Balance Sheets. |
Schedule of notional amounts of outstanding derivative positions | As of March 31, 2016 and December 31, 2015 , the Company had outstanding foreign currency exchange contracts that were designated and accounted for as cash flow hedges of anticipated future cash receipts on sales contracts payable in foreign currencies. The outstanding notional amounts were approximately (in millions): March 31, 2016 December 31, 2015 British Pounds (GBP) 50.7 39.2 Euros (EUR) 10.4 6.0 Swiss Francs (CHF) 33.0 33.0 The Company had hedged foreign currency exposure related to these designated cash flow hedges of approximately $127.5 million and $107.3 million as of March 31, 2016 and December 31, 2015 , respectively. As of March 31, 2016 and December 31, 2015 , the Company had outstanding foreign currency exchange contracts that had been dedesignated for the purposes of hedge accounting treatment. The outstanding notional amounts were approximately (in millions): March 31, 2016 December 31, 2015 British Pounds (GBP) 17.9 31.5 Euros (EUR) 3.8 3.8 Swiss Francs (CHF) 0.3 0.3 Japanese Yen (JPY) — 274.0 |
Fair values of derivative instruments and balance sheet location | Fair values of derivative instruments designated as cash flow hedges (in thousands): Hedge Classification Balance Sheet Location Fair Value Fair Value Foreign currency exchange contracts Prepaid expenses and other current assets $ 7,360 $ 3,956 Foreign currency exchange contracts Other non-current assets 314 5,183 Foreign currency exchange contracts Other accrued liabilities (73 ) — Foreign currency exchange contracts Other non-current liabilities (382 ) (2 ) Total fair value of derivative instruments designated as cash flow hedges $ 7,219 $ 9,137 Fair values of derivative instruments not designated as cash flow hedges (in thousands): Hedge Classification Balance Sheet Location Fair Value Fair Value Foreign currency exchange contracts Prepaid expenses and other current assets $ 1,141 $ 1,807 Foreign currency exchange contracts Other non-current assets 934 656 Foreign currency exchange contracts Other accrued liabilities (35 ) (1 ) Foreign currency exchange contracts Other non-current liabilities — — Total fair value of derivative instruments not designated as cash flow hedges $ 2,040 $ 2,462 |
Accumulated Other Comprehensi24
Accumulated Other Comprehensive Income (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Reclassification from Accumulated Other Comprehensive Income (Loss) | The following table shows the impact on product revenue of reclassification adjustments from accumulated other comprehensive income resulting from hedged foreign currency transactions recorded by the Company for the three months ended March 31, 2016 and 2015 (in thousands). The gross reclassification adjustments increased product revenue for the three months ended March 31, 2016 and 2015 . Three Months Ended 2016 2015 Gross of tax reclassifications $ 1,626 $ 117 Net of tax reclassifications $ 975 $ 70 |
Schedule of Accumulated Other Comprehensive Income (Loss) | The following tables show the changes in accumulated other comprehensive income by component for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended March 31, 2016 Unrealized Gain (Loss) on Investments Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ (8 ) $ 1,675 $ 5,975 $ 7,642 Current-period change, net of tax 9 240 (387 ) (138 ) Ending balance $ 1 $ 1,915 $ 5,588 $ 7,504 Income tax expense (benefit) associated with current-period change $ 6 $ (7 ) $ (251 ) $ (252 ) Three Months Ended March 31, 2015 Unrealized Gain (Loss) on Investments Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ 12 $ 2,069 $ 4,422 $ 6,503 Current-period change, net of tax (14 ) 483 4,250 4,719 Ending balance $ (2 ) $ 2,552 $ 8,672 $ 11,222 Income tax expense (benefit) associated with current-period change $ (10 ) $ (328 ) $ 2,824 $ 2,486 |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | The carrying amounts of the Company’s investments in available-for-sale securities as of March 31, 2016 are shown in the table below (in thousands): Unrealized Cost Gains Fair Value Short-term available-for-sale securities $ 24,812 $ 1 $ 24,813 The carrying amounts of the Company’s investments in available-for-sale securities as of December 31, 2015 are shown in the table below (in thousands): Unrealized Cost Losses Fair Value Short-term available-for-sale securities $ 14,939 $ (14 ) $ 14,925 |
Accounts and Other Receivable26
Accounts and Other Receivables, Net (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Receivables [Abstract] | |
Accounts and Other Receivables, Net | Net accounts and other receivables consisted of the following (in thousands): March 31, 2016 December 31, 2015 Trade accounts receivable $ 34,667 $ 83,750 Unbilled receivables 9,533 7,685 Advance billings 3,106 11,637 Short-term investment in sales-type lease 9,838 10,004 Other receivables 3,453 11,662 60,597 124,738 Allowance for doubtful accounts (115 ) (19 ) Accounts and other receivables, net $ 60,482 $ 124,719 |
Sales-type leases (Tables)
Sales-type leases (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Leases [Abstract] | |
Components of the Net Investment in the Sales-type Lease | The following table shows the components of the net investment in the sales-type lease as of March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 December 31, 2015 Total minimum lease payments to be received $ 32,689 $ 36,863 Less: executory costs (6,593 ) (7,434 ) Net minimum lease payments receivable 26,096 29,429 Less: unearned income (881 ) (1,108 ) Net investment in sales-type lease 25,215 28,321 Less: long-term investment in sales-type lease (15,377 ) (18,317 ) Investment in sales-type lease included in accounts and other receivables $ 9,838 $ 10,004 |
Minimum Lease Payments to be Received for Each of the Next Four Fiscal Years | As of March 31, 2016 , minimum lease payments for each of the succeeding three fiscal years are as follows (in thousands): 2016 (less than 1 year) $ 9,807 2017 13,075 2018 9,807 Total minimum lease payments to be received $ 32,689 |
Inventory (Tables)
Inventory (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory consisted of the following (in thousands): March 31, 2016 December 31, 2015 Components and subassemblies $ 37,058 $ 20,806 Work in process 44,265 43,071 Finished goods 40,338 49,778 Total $ 121,661 $ 113,655 |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred revenue | Deferred revenue consisted of the following (in thousands): March 31, 2016 December 31, 2015 Deferred product revenue $ 12,143 $ 22,215 Deferred service revenue 99,106 97,822 Total deferred revenue 111,249 120,037 Less: long-term deferred revenue (27,573 ) (33,306 ) Deferred revenue in current liabilities $ 83,676 $ 86,731 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Share-based Compensation [Abstract] | |
Key weighted average assumptions used in determining fair value | The following key weighted average assumptions were employed in the calculation for the three month periods ended March 31, 2016 and March 31, 2015 : Three Months Ended March 31, 2016 Three Months Ended March 31, 2015 Risk-free interest rate 1.06% 1.36% Expected dividend yield —% —% Volatility 51.62% 50.71% Expected life 4.0 years 4.0 years Weighted average Black-Scholes value of options granted $16.90 $12.04 |
Stock option activity | A summary of the Company’s year-to-date stock option activity and related information follows: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Outstanding at December 31, 2015 1,948,475 $ 14.83 Grants 15,000 $ 41.51 Exercises (122,327 ) $ 12.19 Canceled and forfeited (325 ) $ 5.32 Outstanding at March 31, 2016 1,840,823 $ 15.22 6.1 Exercisable at March 31, 2016 1,291,208 $ 10.66 5.1 Available for grant at March 31, 2016 1,540,533 |
Restricted stock activity | A summary of the Company’s unvested restricted stock grants and changes during the three months ended March 31, 2016 is as follows: Service Vesting Restricted Shares Performance Vesting Restricted Shares Total Restricted Shares Shares Weighted Average Grant Date Fair Value Shares Weighted Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2015 516,443 $ 24.12 585,500 $ 15.07 1,101,943 $ 19.31 Granted — $ — — $ — — $ — Forfeited (1,250 ) $ 40.95 (37,000 ) $ 14.24 (38,250 ) $ 15.11 Vested (5,500 ) $ 19.93 — $ — (5,500 ) $ 19.93 Outstanding at March 31, 2016 509,693 $ 24.13 548,500 $ 15.13 1,058,193 $ 19.46 A summary of the Company’s unvested restricted stock unit grants and changes during the three months ended March 31, 2016 is as follows: Service Vesting Restricted Stock Units Performance Vesting Restricted Stock Units Total Restricted Stock Units Units Weighted Average Grant Date Fair Value Units Weighted Units Weighted Average Grant Date Fair Value Outstanding at December 31, 2015 273,050 $ 29.75 632,700 $ 30.04 905,750 $ 29.95 Granted 18,500 $ 39.96 23,585 $ 42.65 42,085 $ 41.47 Forfeited — $ — — $ — — $ — Vested — $ — — $ — — $ — Outstanding at March 31, 2016 291,550 $ 30.40 656,285 $ 30.49 947,835 $ 30.46 |
Gross share-based compensation cost recorded in the condensed consolidated statements of operations | The following table sets forth the gross share-based compensation cost resulting from stock options, unvested restricted stock and unvested restricted stock units that were recorded in the Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended 2016 2015 Cost of product revenue $ 82 $ 70 Cost of service revenue 68 66 Research and development, net 949 873 Sales and marketing 835 938 General and administrative 918 1,226 Total $ 2,852 $ 3,173 |
Taxes (Tables)
Taxes (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate Reconciliation | The Company’s effective tax rates for the three months ended March 31, 2016 and 2015 were as follows: Three Months Ended 2016 2015 Effective Tax Rates 45% 40% |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Information on operating segments | The following table presents revenues and gross margin for the Company’s operating segments for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended 2016 2015 Revenue: Supercomputing $ 84,728 $ 59,830 Storage and Data Management 13,467 15,194 Maintenance and Support 26,803 22,953 Engineering Services and Other 7,354 4,620 Elimination of inter-segment revenue (26,803 ) (22,953 ) Total revenue $ 105,549 $ 79,644 Gross Profit: Supercomputing $ 32,039 $ 19,424 Storage and Data Management 4,846 3,721 Maintenance and Support 11,654 11,324 Engineering Services and Other 3,077 891 Elimination of inter-segment gross profit (11,654 ) (11,324 ) Total gross profit $ 39,962 $ 24,036 |
Revenue by geographic location | The following data represents the Company’s revenue for the United States and all other countries, which is determined based upon a customer’s geographic location (in thousands): United States Other Countries Total 2016 2015 2016 2015 2016 2015 Three months ended March 31, Product revenue $ 33,878 $ 31,564 $ 37,532 $ 21,177 $ 71,410 $ 52,741 Service revenue 24,270 18,919 9,869 7,984 34,139 26,903 Total revenue $ 58,148 $ 50,483 $ 47,401 $ 29,161 $ 105,549 $ 79,644 |
Basis of Presentation (Details)
Basis of Presentation (Details) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Product delivery period | 5 years |
Maintenance services period | 1 year |
Fair Value Measurement (Details
Fair Value Measurement (Details) $ in Thousands | Mar. 31, 2016USD ($) | |
Assets: | ||
Cash and cash equivalents and restricted cash | $ 295,685 | |
Available-for-sale investments | 24,813 | [1] |
Foreign currency exchange contracts | 9,749 | [2] |
Assets measured at fair value at March 31, 2016 | 330,247 | |
Foreign currency exchange contracts | 490 | [3] |
Liabilities measured at fair value at March 31, 2016 | 490 | |
Quoted Prices in Active Markets (Level 1) | ||
Assets: | ||
Cash and cash equivalents and restricted cash | 295,685 | |
Available-for-sale investments | 24,813 | [1] |
Foreign currency exchange contracts | 0 | [2] |
Assets measured at fair value at March 31, 2016 | 320,498 | |
Foreign currency exchange contracts | 0 | [3] |
Liabilities measured at fair value at March 31, 2016 | 0 | |
Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Cash and cash equivalents and restricted cash | 0 | |
Available-for-sale investments | 0 | [1] |
Foreign currency exchange contracts | 9,749 | [2] |
Assets measured at fair value at March 31, 2016 | 9,749 | |
Foreign currency exchange contracts | 490 | [3] |
Liabilities measured at fair value at March 31, 2016 | $ 490 | |
[1] | Included in “Short-term investments” on the Company’s Condensed Consolidated Balance Sheets. | |
[2] | Included in “Prepaid expenses and other current assets” and “Other non-current assets” on the Company’s Condensed Consolidated Balance Sheets. | |
[3] | Included in “Other accrued liabilities” and “Other non-current liabilities” on the Company’s Condensed Consolidated Balance Sheets. |
Fair Value Measurement Outstand
Fair Value Measurement Outstanding notional amounts of forward contracts (Details) € in Millions, ¥ in Millions, £ in Millions, SFr in Millions | Mar. 31, 2016EUR (€) | Mar. 31, 2016JPY (¥) | Mar. 31, 2016CHF (SFr) | Mar. 31, 2016GBP (£) | Dec. 31, 2015EUR (€) | Dec. 31, 2015JPY (¥) | Dec. 31, 2015CHF (SFr) | Dec. 31, 2015GBP (£) |
Not Designated as Hedging Instrument | ||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Derivative, notional amount | € 3.8 | ¥ 0 | SFr 0.3 | £ 17.9 | € 3.8 | ¥ 274 | SFr 0.3 | £ 31.5 |
Designated as Hedging Instrument | ||||||||
Derivatives, Fair Value [Line Items] | ||||||||
Derivative, notional amount | € 10.4 | SFr 33 | £ 50.7 | € 6 | SFr 33 | £ 39.2 |
Fair Value Measurement Narrativ
Fair Value Measurement Narrative (Details) - USD ($) $ in Millions | Mar. 31, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Hedged Foreign Currency Exposure | $ 127.5 | $ 107.3 |
Foreign Currency Exposure on Dedesignated Foreign Currency Contracts | $ 32.4 | $ 55.6 |
Fair Value Measurement Derivati
Fair Value Measurement Derivatives (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 | |
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | [1] | $ 9,749 | |
Foreign currency exchange contracts | [2] | (490) | |
Not Designated as Hedging Instrument | |||
Derivatives, Fair Value [Line Items] | |||
Total fair value of derivative instruments not designated as cash flow hedges | 2,040 | $ 2,462 | |
Not Designated as Hedging Instrument | Prepaid expenses and other current assets | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | 1,141 | 1,807 | |
Not Designated as Hedging Instrument | Other non-current assets | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | 934 | 656 | |
Not Designated as Hedging Instrument | Other accrued liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | (35) | (1) | |
Not Designated as Hedging Instrument | Other non-current liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | 0 | 0 | |
Designated as Hedging Instrument | |||
Derivatives, Fair Value [Line Items] | |||
Total fair value of derivative instruments designated as cash flow hedges | 7,219 | 9,137 | |
Designated as Hedging Instrument | Prepaid expenses and other current assets | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | 7,360 | 3,956 | |
Designated as Hedging Instrument | Other non-current assets | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | 314 | 5,183 | |
Designated as Hedging Instrument | Other accrued liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | (73) | 0 | |
Designated as Hedging Instrument | Other non-current liabilities | |||
Derivatives, Fair Value [Line Items] | |||
Foreign currency exchange contracts | $ (382) | $ (2) | |
[1] | Included in “Prepaid expenses and other current assets” and “Other non-current assets” on the Company’s Condensed Consolidated Balance Sheets. | ||
[2] | Included in “Other accrued liabilities” and “Other non-current liabilities” on the Company’s Condensed Consolidated Balance Sheets. |
Accumulated Other Comprehensi38
Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Gross of tax reclassifications | $ 1,626 | $ 117 | ||
Net of tax reclassifications | 975 | 70 | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 7,504 | 11,222 | $ 7,642 | $ 6,503 |
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | 240 | 483 | ||
Other Comprehensive Income (Loss), Net of Tax | (138) | 4,719 | ||
Other Comprehensive Income (Loss), Tax | (252) | 2,486 | ||
Accumulated Net Unrealized Investment Gain (Loss) [Member] | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 1 | (2) | (8) | 12 |
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax | 9 | (14) | ||
Other Comprehensive Income (Loss), Tax | 6 | (10) | ||
Accumulated Translation Adjustment [Member] | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 1,915 | 2,552 | 1,675 | 2,069 |
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | 240 | 483 | ||
Other Comprehensive Income (Loss), Tax | (7) | (328) | ||
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member] | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | 5,588 | 8,672 | $ 5,975 | $ 4,422 |
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax | (387) | 4,250 | ||
Other Comprehensive Income (Loss), Tax | $ (251) | $ 2,824 |
Loss Per Share ("EPS") (Details
Loss Per Share ("EPS") (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Time-vesting Shares | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 2.6 | 2.9 |
Performance Vesting Restricted Shares | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1.2 | 1.5 |
Investments (Details)
Investments (Details) - Short-term available-for-sale securities - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, amortized cost | $ 24,812 | $ 14,939 |
Available-for-sale securities, gross unrealized gain (loss) | 1 | (14) |
Available-for-sale securities | $ 24,813 | $ 14,925 |
Accounts and Other Receivable41
Accounts and Other Receivables, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 60,597 | $ 124,738 |
Net accounts and other receivables | ||
Allowance for doubtful accounts | (115) | (19) |
Accounts and other receivables, net | 60,482 | 124,719 |
Trade accounts receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | 34,667 | 83,750 |
Unbilled Receivables [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | 9,533 | 7,685 |
Advance billings | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | 3,106 | 11,637 |
Short-term investment in sales-type lease | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | 9,838 | 10,004 |
Other receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 3,453 | $ 11,662 |
Accounts and Other Receivable42
Accounts and Other Receivables, Net Narrative (Details) $ in Thousands | Mar. 31, 2016USD ($)Customers | Dec. 31, 2015USD ($)Customers |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 60,597 | $ 124,738 |
U.S. government agencies and customers | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 18,700 | $ 44,200 |
Accounts receivable | Non-U.S. government customers | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Non-U.S. government customers that individually accounted for more than 10% of total, number | Customers | 2 | 1 |
Non-U.S. government customers that individually accounted for more than 10% of total accounts and other receivables, percentage | 35.00% | 18.00% |
Unbilled receivables | U.S. government agencies and customers | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 2,200 | $ 2,200 |
Sales-type leases (Details)
Sales-type leases (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Leases [Abstract] | ||
Total minimum lease payments to be received | $ 32,689 | $ 36,863 |
Less: executory costs | (6,593) | (7,434) |
Net minimum lease payments receivable | 26,096 | 29,429 |
Less: unearned income | (881) | (1,108) |
Net investment in sales-type lease | 25,215 | 28,321 |
Less: long-term investment in sales-type lease | (15,377) | (18,317) |
Investment in sales-type lease included in accounts and other receivables | 9,838 | $ 10,004 |
Capital Leases, Future Minimum Payments Receivable, Fiscal Year Maturity [Abstract] | ||
Capital Leases, Future Minimum Payments Receivable, Next Twelve Months | 9,807 | |
Capital Leases, Future Minimum Payments, Receivable in Two Years | 13,075 | |
Capital Leases, Future Minimum Payments, Receivable in Three Years | 9,807 | |
Capital Leases, Future Minimum Payments Receivable | $ 32,689 |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Components and subassemblies | $ 37,058 | $ 20,806 |
Work in process | 44,265 | 43,071 |
Finished goods | 40,338 | 49,778 |
Total | $ 121,661 | $ 113,655 |
Inventory Narrative (Details)
Inventory Narrative (Details) | 3 Months Ended | ||
Mar. 31, 2016USD ($)Customers | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($)Customers | |
Inventory [Line Items] | |||
Finished goods inventory located at customer sites pending acceptance | $ 15,700,000 | $ 49,500,000 | |
Inventory write-down | $ 600,000 | $ 0 | |
Finished goods inventory | |||
Inventory [Line Items] | |||
Number of customer that individually accounted for more than 10% of finished goods inventory | Customers | 2 | 3 | |
Amount of total finished goods inventory from customers that individually accounted for more than 10% of total finished goods inventory | $ 36,100,000 | $ 41,700,000 |
Deferred Revenue (Details)
Deferred Revenue (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Deferred revenue | ||
Total deferred revenue | $ 111,249 | $ 120,037 |
Less: long-term deferred revenue | (27,573) | (33,306) |
Deferred revenue in current liabilities | 83,676 | 86,731 |
Deferred product revenue | ||
Deferred revenue | ||
Total deferred revenue | 12,143 | 22,215 |
Deferred service revenue | ||
Deferred revenue | ||
Total deferred revenue | $ 99,106 | $ 97,822 |
Deferred Revenue Narrative (Det
Deferred Revenue Narrative (Details) $ in Thousands | Mar. 31, 2016USD ($)Customers | Dec. 31, 2015USD ($)Customers |
Deferred Revenue Arrangement [Line Items] | ||
Deferred Revenue | $ 111,249 | $ 120,037 |
U.S. government agencies and customers | ||
Deferred Revenue Arrangement [Line Items] | ||
Deferred Revenue | $ 63,700 | $ 57,700 |
Deferred Revenue | Non-U.S. government customers | ||
Deferred Revenue Arrangement [Line Items] | ||
Non-U.S. government customers that individually accounted for more than 10% of total, number | Customers | 0 | 0 |
Non-U.S. government customers that individually accounted for more than 10% of total deferred revenue, percentage | 10.00% | 10.00% |
Share-Based Compensation Assump
Share-Based Compensation Assumptions (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Key weighted average assumptions used in determining fair value | ||
Risk-free interest rate (percent) | 1.06% | 1.36% |
Expected dividend yield (percent) | 0.00% | 0.00% |
Volatility (percent) | 51.62% | 50.71% |
Expected life | 4 years | 4 years |
Weighted average Black-Scholes value of options granted (usd per share) | $ 16.90 | $ 12.04 |
Share-Based Compensation Option
Share-Based Compensation Option Activity (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Options | ||
Outstanding beginning balance (In Shares) | 1,948,475 | |
Grants (In Shares) | 15,000 | |
Exercises (In Shares) | (122,327) | (59,007) |
Cancellations (In Shares) | (325) | |
Outstanding ending balance (In Shares) | 1,840,823 | |
Exercisable ending balance (In Shares) | 1,291,208 | |
Available for grant ending balance (In Shares) | 1,540,533 | |
Weighted Average Exercise Price | ||
Outstanding beginning balance (Per Share) | $ 14.83 | |
Grants (Per Share) | 41.51 | |
Exercises (Per Share) | 12.19 | |
Cancellations (Per Share) | 5.32 | |
Outstanding ending balance (Per Share) | 15.22 | |
Exercisable ending balance (Per Share) | $ 10.66 | |
Weighted Average Remaining Contractual Term | ||
Outstanding ending balance | 6 years 1 month 6 days | |
Exercisable ending balance | 5 years 1 month 6 days |
Share-Based Compensation Restri
Share-Based Compensation Restricted Stock (Details) | 3 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Restricted Stock [Member] | |
Shares | |
Outstanding beginning balance (In Shares) | shares | 1,101,943 |
Granted (In Shares) | shares | 0 |
Forfeited (In Shares) | shares | (38,250) |
Vested (In Shares) | shares | (5,500) |
Outstanding ending balance (In Shares) | shares | 1,058,193 |
Weighted Average Grant Date Fair Value | |
Outstanding beginning balance (Per Share) | $ / shares | $ 19.31 |
Granted (Per Share) | $ / shares | 0 |
Forfeited (Per Share) | $ / shares | 15.11 |
Vested (Per Share) | $ / shares | 19.93 |
Outstanding ending balance (Per Share) | $ / shares | $ 19.46 |
Restricted Stock [Member] | Service Vesting Restricted Shares | |
Shares | |
Outstanding beginning balance (In Shares) | shares | 516,443 |
Granted (In Shares) | shares | 0 |
Forfeited (In Shares) | shares | (1,250) |
Vested (In Shares) | shares | (5,500) |
Outstanding ending balance (In Shares) | shares | 509,693 |
Weighted Average Grant Date Fair Value | |
Outstanding beginning balance (Per Share) | $ / shares | $ 24.12 |
Granted (Per Share) | $ / shares | 0 |
Forfeited (Per Share) | $ / shares | 40.95 |
Vested (Per Share) | $ / shares | 19.93 |
Outstanding ending balance (Per Share) | $ / shares | $ 24.13 |
Restricted Stock [Member] | Performance Vesting Restricted Shares | |
Shares | |
Outstanding beginning balance (In Shares) | shares | 585,500 |
Granted (In Shares) | shares | 0 |
Forfeited (In Shares) | shares | (37,000) |
Vested (In Shares) | shares | 0 |
Outstanding ending balance (In Shares) | shares | 548,500 |
Weighted Average Grant Date Fair Value | |
Outstanding beginning balance (Per Share) | $ / shares | $ 15.07 |
Granted (Per Share) | $ / shares | 0 |
Forfeited (Per Share) | $ / shares | 14.24 |
Vested (Per Share) | $ / shares | 0 |
Outstanding ending balance (Per Share) | $ / shares | $ 15.13 |
Restricted Stock Units (RSUs) [Member] | |
Shares | |
Outstanding beginning balance (In Shares) | shares | 905,750 |
Granted (In Shares) | shares | 42,085 |
Forfeited (In Shares) | shares | 0 |
Vested (In Shares) | shares | 0 |
Outstanding ending balance (In Shares) | shares | 947,835 |
Weighted Average Grant Date Fair Value | |
Outstanding beginning balance (Per Share) | $ / shares | $ 29.95 |
Granted (Per Share) | $ / shares | 41.47 |
Forfeited (Per Share) | $ / shares | 0 |
Vested (Per Share) | $ / shares | 0 |
Outstanding ending balance (Per Share) | $ / shares | $ 30.46 |
Restricted Stock Units (RSUs) [Member] | Performance Vesting Restricted Shares | |
Shares | |
Outstanding beginning balance (In Shares) | shares | 632,700 |
Granted (In Shares) | shares | 23,585 |
Forfeited (In Shares) | shares | 0 |
Vested (In Shares) | shares | 0 |
Outstanding ending balance (In Shares) | shares | 656,285 |
Weighted Average Grant Date Fair Value | |
Outstanding beginning balance (Per Share) | $ / shares | $ 30.04 |
Granted (Per Share) | $ / shares | 42.65 |
Forfeited (Per Share) | $ / shares | 0 |
Vested (Per Share) | $ / shares | 0 |
Outstanding ending balance (Per Share) | $ / shares | $ 30.49 |
Restricted Stock Units (RSUs) [Member] | Time-vesting Shares | |
Shares | |
Outstanding beginning balance (In Shares) | shares | 273,050 |
Granted (In Shares) | shares | 18,500 |
Forfeited (In Shares) | shares | 0 |
Vested (In Shares) | shares | 0 |
Outstanding ending balance (In Shares) | shares | 291,550 |
Weighted Average Grant Date Fair Value | |
Outstanding beginning balance (Per Share) | $ / shares | $ 29.75 |
Granted (Per Share) | $ / shares | 39.96 |
Forfeited (Per Share) | $ / shares | 0 |
Vested (Per Share) | $ / shares | 0 |
Outstanding ending balance (Per Share) | $ / shares | $ 30.40 |
Share-Based Compensation Compen
Share-Based Compensation Compensation Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | $ 2,852 | $ 3,173 |
Cost of Product Revenue [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | 82 | 70 |
Cost of Service Revenue [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | 68 | 66 |
Research and Development Expense [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | 949 | 873 |
Selling and Marketing Expense [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | 835 | 938 |
General and Administrative Expense [Member] | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Allocated Share-based Compensation Expense | $ 918 | $ 1,226 |
Share-Based Compensation Narrat
Share-Based Compensation Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share Based Compensation Arrangement By Share Based Payment Award Market Price Offering Date | 95.00% | |
Estimated forfeiture rate for restricted stock units | 8.00% | |
Expected average period options will be exercised after vesting | 2 years | |
Estimated forfeiture rate for stock options | 8.00% | 8.00% |
Vesting period for stock options | 4 years | |
Aggregate intrinsic value of outstanding stock option (In USD) | $ 49.1 | |
Aggregate intrinsic value of exercisable stock option (In USD) | $ 40.3 | |
Exercises (In Shares) | 122,327 | 59,007 |
Total intrinsic value of shares exercised (In USD) | $ 3.5 | $ 1.6 |
Estimated forfeiture rate for restricted stock | 8.00% | |
Aggregate fair value of restricted stock vested (In USD) | 0.2 | $ 0.5 |
Unrecognized compensation cost (In USD) | 43.4 | |
Unrecognized compensation cost for performance vesting restricted stock subject to performance measures which are not considered probable to vest (In USD) | 28.3 | |
Share-based compensation, nonvested awards, compensation cost not yet recognized, excluding performance vesting restricted stock (In USD) | $ 15.1 | |
Unrecognized compensation cost, weighted average period for recognition | 2 years 7 months 6 days | |
Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period for performance-vesting restricted stock units | 2,020 | |
Vesting period for performance-vesting restricted stock | 2,017 | |
Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period for performance-vesting restricted stock units | 2,017 | |
Vesting period for performance-vesting restricted stock | 2,016 |
Taxes (Details)
Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Effective Tax Rates (percent) | 45.00% | 40.00% |
Expected statutory tax rate (percent) | 35.00% | 35.00% |
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount | $ 1 |
Segment Information Business Se
Segment Information Business Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Information of Operating Segments | ||
Revenue: | $ 105,549 | $ 79,644 |
Gross Profit: | 39,962 | 24,036 |
Supercomputing | ||
Information of Operating Segments | ||
Revenue: | 84,728 | 59,830 |
Gross Profit: | 32,039 | 19,424 |
Storage and Data Management | ||
Information of Operating Segments | ||
Revenue: | 13,467 | 15,194 |
Gross Profit: | 4,846 | 3,721 |
Maintenance and Support | ||
Information of Operating Segments | ||
Revenue: | 26,803 | 22,953 |
Gross Profit: | 11,654 | 11,324 |
Engineering Services and Other | ||
Information of Operating Segments | ||
Revenue: | 7,354 | 4,620 |
Gross Profit: | 3,077 | 891 |
Elimination of inter-segment revenue | ||
Information of Operating Segments | ||
Revenue: | (26,803) | (22,953) |
Gross Profit: | $ (11,654) | $ (11,324) |
Segment Information Geographic
Segment Information Geographic Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Segment Reporting Information [Line Items] | ||
Revenue | $ 105,549 | $ 79,644 |
Product revenue | ||
Segment Reporting Information [Line Items] | ||
Revenue | 71,410 | 52,741 |
Service revenue | ||
Segment Reporting Information [Line Items] | ||
Revenue | 34,139 | 26,903 |
UNITED STATES | ||
Segment Reporting Information [Line Items] | ||
Revenue | 58,148 | 50,483 |
UNITED STATES | Product revenue | ||
Segment Reporting Information [Line Items] | ||
Revenue | 33,878 | 31,564 |
UNITED STATES | Service revenue | ||
Segment Reporting Information [Line Items] | ||
Revenue | 24,270 | 18,919 |
Other Countries | ||
Segment Reporting Information [Line Items] | ||
Revenue | 47,401 | 29,161 |
Other Countries | Product revenue | ||
Segment Reporting Information [Line Items] | ||
Revenue | 37,532 | 21,177 |
Other Countries | Service revenue | ||
Segment Reporting Information [Line Items] | ||
Revenue | $ 9,869 | $ 7,984 |
Segment Information Narrative (
Segment Information Narrative (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016USD ($)Customers | Mar. 31, 2015USD ($)Customers | |
Revenue, Major Customer [Line Items] | ||
Revenue | $ 105,549 | $ 79,644 |
U.S. government agencies and customers | ||
Revenue, Major Customer [Line Items] | ||
Revenue | $ 52,700 | $ 47,800 |
Revenue [Member] | ||
Revenue, Major Customer [Line Items] | ||
Non-U.S. government customers that individually accounted for more than 10% of total, number | Customers | 2 | 1 |
Non-U.S. government customers that individually accounted for more than 10% of total revenue, percentage | 33.00% | 14.00% |
Australia and the UK [Domain] | Revenue [Member] | ||
Revenue, Major Customer [Line Items] | ||
Non-U.S. government customers that individually accounted for more than 10% of total revenue, percentage | 36.00% | |
INDIA | Revenue [Member] | ||
Revenue, Major Customer [Line Items] | ||
Non-U.S. government customers that individually accounted for more than 10% of total revenue, percentage | 19.00% |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] $ in Millions | Apr. 21, 2016USD ($) |
Subsequent Event [Line Items] | |
Commitments and Contingencies | $ 31.9 |
Termination of Lease, Early Termination Fee | 2.3 |
Termination of Lease, Early Termination Fee Reimbursed by New Landlord | $ 2.3 |