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data protection customers. most demanding workflow environments. growing unstructured data sets. Workflow Storage We offer tape drives and media primarily based on the LTO Global Services and Warranty EMC, as well as large public cloud storage providers. products. Available Information Mr. Clarkjoined Quantum as Director of Tape Products in August 2006, upon Quantum’s acquisition of ADIC. In March 2009, he was promoted to Vice President with responsibility for various product lines, as well as business operations and OEM sales. In April 2010, he was named Senior Vice President, Tape and OEM Product Group revenue;revenue and earnings; (2) our expectation that we will continue to derive a substantial portion of our revenue from products based on tape technology; (3) our belief that our existing cash and capital resources will be sufficient to meet all currently planned expenditures, debt service and sustain our operations for at least the next 12 months; (4) our expectations regarding our ongoing efforts to control our cost structure; and (5) our expectations regarding the outcome of any litigation in which we are involvedinvolved; and (6) our business goals, objectives, key focuses, opportunities and prospects which are inherently uncertain as they are based on management’s expectations and assumptions concerning future events, and they are subject to numerous known and unknown risks and uncertainties. Readers are cautioned not to place undue reliance on these forward-looking statements, about which we speak only as of the date hereof. As a result, our actual results may differ materially from the forward-looking statements contained herein. Factors that could cause actual results to differ materially from those described herein include, but are not limited to: (1) the amount of orders received in future periods; (2) our ability to timely ship our products; (3) uncertainty regarding information technology spending and the corresponding uncertainty in the demand for our products and services; (4) our ability to maintain supplier relationships; (5) general economic, political and fiscal conditions in the U.S. and internationally; (6) our ability to successfully introduce new products; (7) our ability to capitalize on market demand; (8) our ability to achieve anticipated gross margin levels; and (9) those factors discussed under Item 1A “Risk Factors” in Part II, Item 1A.Factors.” Our forward-looking statements are not guarantees of future performance. We disclaim any obligation to update information in any forward-looking statement.globalleading expert in scale-out storage, archive and data protection, providing solutions for capturing, sharing and bigpreserving digital assets over the entire data management.lifecycle. Our customers, ranging from small businesses to large/multi-national enterprises, trust us to address their most demanding data workflow challenges. We provide solutions for storing and protecting information in physical, virtual cloud and big datacloud environments that are designed to help customers be certainBe Certain™ that they are maximizinghave an end-to-end storage foundation to maximize the value of their data over its entire lifecycle. With our solutions, customers can better adapt in a world of continuing change by keepingmaking it accessible whenever and protecting more data for a longer period of time whilewherever needed, retaining it indefinitely and reducing coststotal cost and increasing return on investment.complexity. We work closely with a broad network of distributors, value-added resellers (“VARs”), direct marketing resellers (“DMRs”), original equipment manufacturers (“OEMs”) and other suppliers to meet customers’ evolving data protection and big data management needs. Our stock is traded on the New York Stock Exchange under the symbol QTM.includefor physical, virtual and cloud environments. This includes our DXi® deduplication systems, and Scalar® automated tape libraries that optimize backup and recovery, simplify management and lower cost and our vmPROTM™ virtual server backup and disaster recovery offerings that protect virtual environments while minimizing the impact to servers and storage.software. In addition, we offer a Q-Cloud service for data center customers and we also offer software for cloud backupprovide the underlying technology platform to partners and disaster recovery of physical and virtual servers. For big data environments,end user customers to build their own clouds.provide StorNext® tieredintroduced Artico, an intelligent network-attached storage ("NAS") archive appliance that can benefit both scale-out storage and LattusTM object storage solutions designed to help maximize revenue and results by enabling customers to extract the full value from their digital assets. We have a full range of services and the global scale and scope to support our worldwide customer base.Asspecialist providing end userone-way, predictable lifecycle where the information technology (“IT”) focus was around risk mitigation. Now, companies know that their data can be a source of competitive advantage, revenue and growth. They are much more focused on the opportunity of data, so IT must save everything and make it available based on business requirements. In addition, the challenge of dealing with large data files is extending beyond a narrow set of vertical markets such as media and entertainment, government intelligence or oil and gas to commercial enterprises more broadly.with differentiatedneed their data, and incorporate new approaches to data protection and bigarchive. At the same time, these solutions must be cost-effective.management solutions, our strategy iscapture or ingest, real-time sharing and collaboration, scalability for processing and editing, intelligent protection and archiving and the ability to continue to grow the independent channel for Quantum branded solutionsdeliver high-value results and to increase revenue by offering products with superior performancemonetization opportunities. We understand these challenges and value. We plan to continue to expand and improve our product and solution offerings, with emphasis on branded disk systems, software solutions, virtual offerings, cloud solutions and next generation object storage. Usinghave a balanced approach to take advantagehistory of market opportunities and investing for growth whilemeeting them in aperiod of economic uncertainty, we are focused on revenue growth balanced with operating profit and generating cash from operations.Industry BackgroundInformation Technology (“IT”) departments face an environment of change. There is increasing focus on the economics of data as these departments not only address continued data growth but also identify solutions to store more data for longer periods of time as data becomes more valuable. With new ways to analyze and reuse data for additional revenue streams, new ideas and operational breakthroughs, IT managers are looking to ensure the organization can take full advantagesome of the information and knowledge from that data. For these reasons, data protection and big data management are important to businesses and organizations and consistently are reflected as top priorities in end user research studies.Another change that has occurred over the last several years is the emergence of new architectures and technologies that reduce costs and increase efficiency. These include data deduplication, scale-out storage, virtualization and cloud storage. The challenge is that these technologies can also introduce disruption for IT, so it takes careful planning and smart solutions to enable organizations to move forward.In the face of these changes, IT departments also confront continued constraints. Resources and budgets remain tight, which is one of the main reasons reducing data acquisition costs and ongoing operational costs is a top priority. In addition, even as they look to capitalize on new technologies and solutions, many IT managers still have to support legacy environments and applications. Finally, there is often built-in inertia or risk aversion when it comes to changing architectures or existing vendors. As a result, there is significant opportunity for storage specialists such as Quantum to assist organizations through transition.Big Data Management and Archivethis biglarge amounts of unstructured data. Generally, bigunstructured data refers to relatively new data types that produce large files, often measured in petabytes, such as video, imaging and audio. Big dataIn some cases, this also refers to large collections of small data, such as retail purchasing information, underwater photos of the ocean floor and feeds from traffic cameras that when combined, create meaning and increasingly, competitive advantage. In addition, in managing bigunstructured data, organizations are increasingly recognizing that they need efficient and cost-effective ways to archive it. We offer StorNext software and appliance-based solutions, in addition to Lattus objectObject Storage for extended online storage and tape for low cost archiving, to address this growing need for managing and archiving big data.SoftwareDesignedOur StorNext appliances leverage the power of StorNext 5 software and market-leading hardware to offer predictable high-performance file sharing and archiving in purpose-built configurations of metadata controllers, expansion appliances and disk and archive enabled libraries. StorNext 5 delivers higher levels of performance, scalability and flexibility for data-intensive environments, oura new generation of the industry’s leading scale-out shared storage file system, tiered storage and archive. Newly engineered from the ground up, StorNext software reduces5 is a complete end-to-end solution that combines file management technology with easy-to-deploy appliances to support the timeworld’s most complex and total cost of managing data for end users with large data sets and challenging distributed environments. The StorNext File System software provides high-performance shared access to data across different networks, operating systems and storage platforms.demanding workflows. In addition, our StorNext Storage ManagerTM™ software automatically copies and migrates data between different tiers of storage based on user-defined policies. The result is a highly scalable, high-performance data management solution designed to optimize the use of storage while enabling the long-term protection and recoverability of data.Our StorNext software helps businesses with big data to benefit from workflow efficiencies, automated tiered storage and policy-based archive management. Designed for open system data-intensive environments, StorNext software products allow multiple users to rapidly access a single data set, increasing productivity and storage utilization. They also transparently move data, reducing storage costs while simultaneously providing embedded data protection. For several years, organizations within rich media production and broadcasting, the federal government, life sciences and other disciplines have utilized our data management software to derive more value from their data while controlling costs. ManyOur and StorNext appliances leverage the power of StorNext software and market-leading hardware to offer predictable high-performance file sharing and archiving in purpose-built configurations of metadata controllers, expansion appliances and disk and archive enabled libraries. TheyPro Solutions are simple to deploy and architected to deliver scalable, industry-leading performance, drive lower operational costs and provide a flexible open system for enabling third party applications. These appliances also work seamlessly with traditional StorNext software and partner hardware offerings to provide additional options for building a shared storage area network (“SAN”) and scale out network-attached storage (“NAS”)scale-out NAS environment. They are intended to serve a wide range of markets, such as film editing,broadcast, post-production, video surveillance storage, DNA sequencing, corporate video and seismic processing or genome sequencingexploration, and balance the highest performance with the lowest long-term cost for sharing bigall types of unstructured data filesused in data intensive operations.object storageObject Storage solutions enables high volumes of data to be immediately available to extract valuable information at any time, and over time. The Lattus family is designed as a forever disk archiveextended online storage with wide-ranging scalability from 500 terabytes to hundreds of petabytes with predictable retrieval times for high speed file access. They decrease capital and operating costs by using drives that have lower power and cooling requirements. In addition, theyThese systems have self-healing capabilities that offer extremely high durability to ensure data is not lost and virtually eliminateseliminate unscheduled maintenance and performance degradation. Lattus has been designed to be self-migrating through innovative algorithms that simplify upgrades to new storage technologies.industry-leadingbest-in-class performance, capacity and price-performance.expandincrease the amount of backup data users can retain on traditional disk systems. The result is a cost-effective means for IT departments to store backup data on disk for months instead of days, providing high-speed restores, increasing available data recovery points and reducing media management. For disaster recovery in distributed environments, the DXi-SeriesTM™ also makes wide area network (“WAN”) replication practical because of the greatly reduced bandwidth required with data deduplication. By greatly increasing effective disk capacity, data deduplication enables users to retain backup data on fast recovery disk much longer than possible using conventional disk and significantly reduces the bandwidth needed to move data between sites. We hold a key patent in one of the most efficient methods of data deduplication, known as variable-length data deduplication.Our virtual environment offerings include vmPRO software and vmPRO appliances. We also offer vmPRO appliances that provide an integrated data protection solution designed to simplify backups in virtual environments. These appliances include both backup software and integrated storage with deduplication in a single solution for small tomedium-size businesses and remote offices. The vmPRO appliances optimize virtual machines and accelerate performance by filtering out unassigned, expired and inactive data to reduce overhead on servers, networks and storage.capabilitiesfunctionality of our tape library offerings to increase storage capacity and improve performance. Our Scalar tape automation portfolio includes a range of products, from autoloaders with one tape drive and up to sixteen cartridges to large enterprise-class libraries which can hold hundreds of drives and thousands of cartridges. Our tape libraries intelligently manage and protect business critical data in workgroup, medium size business and enterprise data center environments. With an emphasis on ease of use, management features and investment optimization, Scalar tape libraries are designed to grow with business needs. These products integrate tape drives into a system with automation technology, advanced connectivity and sophisticated management tools, including integrated media integrity analysis in tape drives and library diagnostic systems. We also offer the SuperLoader®3 autoloader designed to maximize data density and performance.iLayer™iLayerTM, which provides monitoring, alerts and proactive diagnostics, thereby reducing service calls, shortening issue resolution time and decreasing the time users spend managing their tape automation solutions. In addition, we believe the growth in archiving of unstructured data represents a substantial opportunity for tape automation systems. To capitalize on this trend and the changing role of tape automation systems in data protection, we have invested in our enterprise Scalar i6000 and midrange Scalar i500 platforms to provide increased redundancy capabilities. These platforms can be implemented on their own or in an appliance configuration with our StorNext archiving software.NAS appliances and tape drives and media. Our RDX® removable and ruggedized disk backup devices combine attributes of disk and tape, with deduplication technology offered in our RDX disk libraries. Our NAS appliance has built-in backup software and deduplication technology, designed to enable businesses to significantly reduce storage requirements and network traffic.format and added LTO-6 technology to our portfolio in fiscal 2013.format. Our LTO family of devices is designed to deliver outstanding performance, capacity and reliability, combining the advantages of linear multi-channel, bi-directional formats with enhancements in servo technology, data compression, track layout and error correction. These LTO tape drives are designed to provide midrange and enterprise customers with disaster recovery and cost-effective backup solutions.CloudWe offer a software platformhelp customers take advantage of cloud-based data protection through a highly optimized, flexible approach designed to overcome the limitations of other cloud offerings. This platform is centered on our vmPRO technology and our virtual deduplication appliance, the DXi V1000TM. Our cloud-based data protection platform leverages our expertise in data protection to deliver a highly efficient, cost-effective foundation for cloud-based backup, restore and data recovery that helps customers transition easily and practically tousing the cloud onas a tier for archive storage within StorNext storage environments, we also offer Q-Cloud services for off-site disaster recovery storage using our deduplication technology. In both cases, our customers get the benefits of the cloud such as pricing flexibility and offsite storage for disaster recovery protection, in a way that integrates with their terms and timeframe.existing applications. Our approach is based on knowledge that mostenables customers continue to use both diskthe cloud as a tier of storage, resulting in hybrid-cloud storage solutions that best fit the needs of our customers’ workflows and tape for data protection on a mix of physical and virtual servers and are more comfortable with a hybrid cloud strategy. This focus on flexibility is reflected in the benefits provided by our cloud-optimized software platform including fast restores, cost-effective disaster recovery and business continuity, significant data reduction and WAN-optimized replication.storage requirements.either big data managementscale-out or data protection and storage solutions, and our ability to provide comprehensive service and support can present us withbe a noteworthy competitive advantage to attract new customers and retain existing customers. In addition, we believe that our ability to retain long-term customer relationships and secure repeat business is frequently tied directly to our service capabilities and performance.software products.StorNext appliances. We offer this additional support coverage at a variety of response levels up to 24-hours a day, seven-days-a-week, 365-days-a-year, for customers with stringent high-availability needs. We provide support ranging from repair and replacement to 24-hour rapid exchange to on-site service support for our midrange and enterprise-class products.fromthrough our Colorado Springs, Colorado facilityservice team and for certain products, through third party service providers. In addition, we utilize various other third party service providers throughout the world to perform repair and warranty services for us to reach additional geographic areas and industries in order to provide quality services in a cost-effective manner.big datascale-out storage technologies as well as software solutions to advance these technologies for the big data managementscale-out storage and archive and the data protection markets to meet changing customer requirements. We continue to focus our efforts on software solutions and integrated software and hardware solutions that offer improvements in the efficiency and cost of storing, moving, managing and protecting large amounts of data and providing solutions for the continuing convergence between backup and archive to provide compelling solutions for our customers.big data and archivescale-out storage solutions. Research and development costs were $74.0$58.6 million, $74.3$64.4 million, and $73.0$74.0 million for fiscal 2015, 2014 and 2013, 2012 and 2011, respectively.direct marketing resellers.DMRs. Our integrated Quantum Alliance™Alliance Reseller Program provides our channel partners the option of purchasing products directly or through distribution and provides them access to a more comprehensive product line. Additionally, we sell directly to a select number of large corporate entities and government agencies.
CustomersCustomers2013, 34% of revenue in fiscal 2012 and 33% of revenue in fiscal 2011.2013. No customer accounted for 10% or more of our revenue in fiscal 2013 and 2012. In fiscal 2011, sales to Dell comprised 10% of revenue.2015, 2014 or 2013. Through our Quantum Alliance Reseller Program and our emphasis on growing our branded business, including increasing the independent channel, we are expanding our customer base and continue to distribute our products and services across a larger number of customers.softwareappliances and appliance productsworkflow solutions primarily face competition from EMC Corporation (“EMC”), International Business Machines Corporation (“IBM”), NetApp, Inc. (“NetApp”) and Spectra Logic Corporation. Our virtual solutions, vmPRO softwareother content storage vendors in the media and appliances, primarily compete with virtualization startupsentertainment industry as well as government agencies and traditional backup application vendors.departments. Our cloud solutions face competition from a large number of businesses that provide hardware, software and virtual solutions as well as companies that offer cloud services based on other technology. The Lattus object storageObject Storage solutions primarily compete with object storage solutions from other providers, ranging from startup companies to established companies, such as EMC.NetApp, Inc. (“NetApp”).NetApp. Additionally, a number of software companies that have traditionally been partners with us have deduplication features in their products and will, at times, compete with us. A number of our competitors also license technology from other competing companies.OracleSpectraLogic Corporation as well as HP through its OEM relationship with other tape automation suppliers. Competitors for entry-level and OEM tape automation business include BDT Products, Inc. and several others that supply or manufacture similar products. In addition, disk backup products are a competitive alternative to tape products and solutions. Although we have our own removable disk drive offerings, several other companies sell removable disk drives, such as Dell, HP and Imation Corporation.
ManufacturingManufacturingWe utilizea number of our products and we manufacture various other products in our own facilities. We manufacture our disk products, vmPRO appliances, StorNext appliances and certain tape automation systems and perform device and system configuration for our North American customers from our Colorado Springs, Colorado facility. In addition, we perform test and repair for these products in that same facility.certaindisk backup products, scale-out storage solutions, tape automation systems, tape devices and service parts to contract manufacturers. Tape drives used in our products are primarily sourced from Hungary and Malaysia.China. Disk drives used in our products are largely sourced from Thailand, the Philippines and China. Certain tape automation system materials and assemblies as well as certain disk system materials and assemblies are sourced in China, Malaysia, Singapore, Thailand, Mexico and the U.S.2013,2015, we hold over 400 U.S. patents and have over 10070 pending U.S. patent applications. In general, these patents have a 20-year term from the first effective filing date for each patent. We also hold a number of foreign patents and patent applications for certain of our products and technologies. Although we believe that our patents and applications have significant value, rapidly changing technology in our industry means that our future success willmay also depend heavily on the technical competence and creative skills of our employees.conduct ongoing investigations into the assertions and presently believe that either licenses are not knowingly infringing any third party patents. Should it ultimately be determined that licenses for third party patents are required, or that any licenses ultimately determinedwe will make best efforts to be required could be obtained on commercially reasonable terms. However, we cannot provide assurance thatobtain such licenses are presently obtainable, or if later determined to be required, could be obtained on commercially reasonable terms. See Item 3 “Legal Proceedings” for additional disclosures regarding on-going lawsuits alleging patent infringement.We manufacture ourWe ship mostMost of the backlog that we accumulateaccumulated during any particular fiscal quarter is shipped in the same quarter in which the backlog initially occurs. Therefore, our backlog generally grows during the first part of each fiscal quarter and shrinks during the latter part of the quarter to reach its lowest levels at the end of that same quarter, by which time significant shipments have occurred. As a result, our backlog as of the end of any fiscal quarter is not material and is not a predictor of future sales.1,6601,250 employees worldwide as of March 31, 2013.2015.athttp:at http://www.quantum.com generally when such reports are available on the Securities and Exchange Commission (“SEC”) website. The contents of our website are not incorporated into this Annual Report on Form 10-K.athttp:at http://www.sec.gov.Name Position with Quantum Jon W. GacekGacek*President and Chief Executive Officer Linda M. BreardBreard*Senior Vice President, Chief Financial Officer William C. BrittsBritts*Senior Vice President, OperationsWorldwide Sales and Global ServicesMarketingRobert S. ClarkClark*Senior Vice President, Data Protection GroupProduct OperationsShawn D. HallHall*Senior Vice President, General Counsel and Secretary Janae S. LeeLee*Senior Vice President, File System and ArchiveStrategyDon Martella Senior Vice President, Engineering Jim MuddGeoff StedmanSenior Vice President, OperationsHenrik RosendahlSenior Vice President, CloudStorNext SolutionsTed StinsonSenior Vice President, Worldwide Sales Mr. Gacek serves on the boardportfolio and now serves asportfolio. In July 2013, he was named Senior Vice President, OperationsWorldwide Sales and Global Services, with continued responsibility for Worldwide Marketing and Business Development.Marketing. Prior to Quantum, he spent 12 years at ADIC, where he held numerous leadership positions, including Executive Vice President of Worldwide Sales and Marketing, Vice President of Sales and Marketing and Director of Marketing. Before ADIC, Mr. Britts served in a number of marketing and sales positions at Raychem Corp. and its subsidiary, Elo TouchSystems.subsequently(subsequently reorganized as the Data Protection Group.Disk and Tape Backup Product Group). In January 2014, Mr. Clark assumed additional responsibility for all Quantum products in a newly named Product Operations organization. In April 2015, Mr. Clark also assumed responsibility for both Operations and Service. Prior to Quantum, Mr. Clark was at HP for 10 years in various engineering and sales positions.
Mr. Rosendahljoined Quantum as Vice President, Virtualization Systems in June 2011, upon Quantum’s acquisition of Pancetera Software, Inc. (“Pancetera”) and in April 2012 assumed responsibility for cloud solutions, becoming Senior Vice President, Cloud Solutions. Mr. Rosendahl served as Chief Executive Officer at Pancetera from January 2010 until acquired by Quantum. He was the Director of Application Virtualization at VMware, Inc. (“VMware”) from January 2008 to December 2009 and Chief Executive Officer at Thinstall, Inc., from October 2006 until its acquisition by VMware. Previously, Mr. Rosendahl held executive and senior leadership positions at several technology companies in the U.S. and Europe.
Mr. Stinsonjoined Quantum as Senior Vice President, Worldwide SalesStorNext Solutions in June 2011. Previously,March 2014. From March 2012 to February 2014, Mr. Stedman served as vice president of marketing at Tintri, Inc., and he was senior vice president and general manager of the Storage Business Unit at Harmonic, Inc. He joined Harmonic in conjunction with its acquisition of Omneon, Inc. where he spent seven years as senior vice president of worldwide marketing. Before Omneon, Mr. Stedman held marketing positions at Symantec Corporation and Veritas Software Corp., prior to its acquisition by Symantec. His most recent position there was Vice President, America Sales – Advanced Technologies, where he led the sales organization responsible for a portfolioseveral technology companies.
We continue to face risks related to economic uncertainty and slow economic growth. These transactions also create uncertainty and disruption in the market because whether a pending transaction will be completed, the timing of such a transaction and its degree of impact are often unknown. Given these factors and others, such merger and acquisition activity may materially and adversely impact our business, financial condition and results of operations. our products; and Our OEM deduplication software revenues also depend on many factors, including the success of competitive offerings, our ability to execute on our product roadmap with our OEM deduplication software partners, the effort of our OEM deduplication software partners in marketing and selling the resulting products, the market acceptance of the resulting products and changes in the competitive landscape, In addition, certain products or technologies acquired or developed by us may include “open source” software. Open source software is typically licensed for use at no initial charge. Certain open source software licenses, however, require users of the open source software to license to others any software that is based on, incorporates or interacts with, the open source software under the terms of the open source license. Although we endeavor to comply fully with such requirements, third parties could claim that we are required to license larger portions of our software than we believe we are required to license under open source software licenses. If such claims were successful, they could adversely impact our competitive position and financial results by providing our competitors with access to sensitive information that may help them develop competitive products. In addition, our use of open source software may harm our business and subject us to intellectual property claims, litigation or proceedings in the future because: tsunamis; and employment regulations. In certain product and geographic segments we heavily utilize distributors and value added resellers to perform the functions necessary to market and sell our products. To fulfill this role, the distributor must maintain an acceptable level of financial stability, creditworthiness and the ability to successfully manage business relationships with the customers it serves directly. Under our distributor agreements with these companies, each of the distributors determines the type and amount of our products that it will purchase from us and the pricing of the products that it sells to its customers. If the distributor is unable to perform in an acceptable manner, we may be required to reduce the amount of sales of our product to the distributor or terminate the relationship. We may also incur financial losses for product returns from distributors or for the failure or refusal of distributors to pay obligations owed to us. Either scenario could result in fewer of our products being available to the affected market segments, reduced levels of customer satisfaction and/or increased expenses, which could in turn have a material and adverse impact on our business, results of operations and financial condition. Our stock price has been volatile and such volatility could On On On MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Performance Graph Capital Resources." 2013. a privately held company. Disk systems and software solutions Tape automation systems Devices and media Total product revenue 2014. Service Revenue Service revenue for our data protection products experienced slight decreases in both fiscal 2015 and 2014. 2014. We also experienced expected decreases in DLT 2014 amortized. The decrease in research and development expenses compared to fiscal amortized in the first half of fiscal 2014. Other decreases from cost reduction initiatives included declines of $1.8 million in travel expenses, $0.8 million in advertising and marketing costs and $0.7 million in recruiting expenses. These decreases were partially offset by a $1.1 million increase in external service provider expense. The decrease in general and administrative $0.3 million in expensed IT equipment. Restructuring charges (benefit) related to cost of revenue Restructuring charges in operating expenses 2014. Gain on Sale of fiscal 2015. Consolidated Financial Statements. Note 11 “Income Taxes” to the Consolidated Financial Statements. Share-Based Compensation Capital Resources and Financial Condition We also paid accrued interest on the purchased notes of $0.4 million. We funded this transaction using cash on hand. Inventory Allowances The preparation of our Consolidated Financial Statements in conformity with generally accepted accounting principles (“GAAP”) in the U.S. requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. We base estimates on historical experience and on various assumptions about the future that are believed to be reasonable based on available information. Our reported financial position or results of operations may be materially different under different conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies, which are discussed below. In the event that estimates or assumptions prove to differ from actual results, adjustments are made in the current period to reflect this current information. acceptance. Product Revenue — Software Service Cost of Revenue Foreign Currency Translation and Transactions 2014 and a $0.5 million loss in fiscal 2013. Manufacturing Inventories Fair Value of Financial Instruments Concentration of Credit Risk NOTE 3: ACQUISITION Acquired IPR&D is amortized over its estimated useful life once technological feasibility is reached. If IPR&D is determined to not have technological feasibility or is abandoned, we write off the IPR&D in that period. that future period. 3.50% Notes of $0.4 million. We funded these transactions using cash on hand. Stock Purchase Plan 2015. Restricted Stock Net Income (Loss) per Share 2013. manufacturers and suppliers. On lawsuit is remote. On 5,940,849. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of our indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material impact on our operating results, financial position or cash flows. the United States is immaterial. Following are revenues attributable to each of our product groups, services and royalties (in thousands): CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We have adopted a code of ethics that applies to our principal executive officer and all members of our finance department, including the principal financial officer and principal accounting officer. This code of ethics is posted on our website. The Internet address for our website is:http://www.quantum.com, and the code of ethics may be found by clicking “About Us” from the home page and then choosing “Corporate Governance.” Copies of the code are available free upon request by a stockholder. Included in the stockholder approved plans are Advanced Digital Information Corporation’s 1999 Stock Incentive Compensation Plan was assumed by Quantum on August 22, 2006 according to the terms detailed in the Agreement and Plan of Merger dated May 2, 2006 (“Merger Agreement”). Outstanding stock options granted under this plan continue to be governed by the terms and conditions of this plan; however, the number of stock options and exercise prices of the outstanding stock options were changed in accordance with the formula in the Merger Agreement for the right to purchase Quantum common stock. The Pancetera 2008 Stock Incentive Compensation Plan was assumed by Quantum on June 13, 2011 according to the terms detailed in the Agreement and Plan of Merger dated June 13, 2011 (“Pancetera Merger Agreement”). Outstanding stock options and restricted shares granted under this plan continue to be governed by the terms and conditions of this plan; however, the number of stock options and restricted shares and exercise prices of the outstanding stock options were changed in accordance with the formula in the Pancetera Merger Agreement for the right to purchase Quantum common stock. 2015.AREWE CURRENTLY DEEMEDBELIEVE ARE IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS AND OPERATIONS. THIS ANNUAL REPORT ON FORM 10-K CONTAINS “FORWARD-LOOKING” STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. PLEASE SEE PAGE 1 OF THIS REPORT FOR ADDITIONAL DISCUSSION OF THESE FORWARD-LOOKING STATEMENTS.
We derive the majority of our revenue from products incorporating tape technology. Our future operating results depend in part on continued market acceptance and use of products employing tape technology and decreases in the market has materially and adversely impacted our business, financial condition and operating results. In addition, if we are unable to compete with new or alternative storage technologies, our business, financial condition and operating results could be materially and adversely affected.value-added resellers, ordistributors such as Ingram Micro, Inc. and others, VARs and to direct marketing resellers such as CDW Corporation, who in turn sell our products to end users and to distributors such as Ingram Micro, Inc. and others.. The success of these sales channels is hard to predict, particularly over time, and we have no purchase commitments or long-term orders from them that assure us of any baseline sales through these channels. Several of our resellers carry competing product lines that they may promote over our products. A reseller might not continue to purchase our products or market them effectively, and each reseller determines the type and amount of our products that it will purchase from us and the pricing of the products that it sells to end user customers. Establishing new indirect sales channels is an important part of our strategy to drive growth of our branded revenue.We derive the majority may be adversely impacted and our competitive position may suffer.come fromare to a few customers, some of which are also competitors, and these customers generally have no minimum or long-term purchase commitments. The loss of, or a significant reduction in demand from, one or more key customers could materially and adversely affect our business, financial condition and operating results.weour business, financial condition and operating results could be materially and adversely affected. In addition, certain of our large customers are also our competitors, and such customers could decide to reduce or terminate their purchases of our products for competitive reasons.government.government, and funding cuts to federal spending can adversely impact our revenue. The U.S. Congress passed the American Taxpayer Relief Act of 2012 which implemented automatic spending cuts beginning March 1, 2013. TheseBetween October 1 and October 16, 2013, the U.S. government partial shutdown caused reductions, cancellations and delayed orders. Future spending cuts by the U.S. federal government could decrease revenue from sales to the federal government that could materially and adversely affect our results of operations.theintroductionthe introduction and market acceptance of new products;theseproductsthese products will continue or grow as we have anticipated;andqualityand quality specifications which must occur before customers will place large product orders; orhavehas had a material and adverse impact on our business and our financial condition, includingcondition.the potential default of various national bondssovereign debt and debt backed by individual countries, as well the politics impacting these,related political matters, which could negatively impact the U.S. and global economies and adversely affect our financial results. In addition, our ability to access capital markets may be restricted, which could have an impact on our ability to react to changing economic and business conditions and could also adversely affect our results of operations and financial condition.leastless pronounced for enterprise products. Similar to our competitors,Over time, the prices of our products may be priced lower and competitor products have decreased, but such products often incorporate new and/or different features and technologies than prior years. We face risks that customers could choose competitor products over ours due to these features and technologies or due to pricing differences. We have managed pricing pressure by reducing production costs and/or adding features to increase value to maintain a certain level of gross margin for our tape automation systems. IfHowever, certain of our costs are fixed in the short term, so we may not be able to offset price decreases or reductions in demand sufficiently to maintain our profitability. In addition, if competition further intensifies, or if there is additional industry consolidation, our sales and gross margins for tape automation systems could decline, which could materially and adversely affect our business, financial condition and results of operations.andincreasingand increasing competition in thatsuch market(s); andourproducts.our products.big data and archivescale-out storage market as a result of competitors introducing products based on new technology standards and merger and acquisition activity,market consolidation, which could materially and adversely affect our business, financial condition and results of operations.big data and archivescale-out storage market is characterized by technological innovation and advancement, including performance and scale features, and our competitors are aggressively trying to advance and develop new technologies and solutions. We face the riskIf we are unable to compete effectively in these markets and develop solutions that customers could choose competitor solutions over ours due to thesehave features and technologies. As a result of competition andtechnologies that our customers desire, including new technology standards, our sales from software solutions and appliances could decline, which could materially and adversely affect our business, financial condition and results of operations.mergermergers and acquisition activity.acquisitions among our competitors, customers and partners. Transactions such as these may impact us in a number of ways. For instance, they could result in:andincreasingand increasing competition in thatsuch market(s); andourproducts.productstypicallyproducts typically sell at higher prices than the media cartridges associated with older products;such as that which occurred with EMC’s purchaseincluding the impact of Data Domain. Our relationship with EMC changed from partner to competitor in deduplication as a result of their acquisition of Data Domain. Following this acquisition, except for the first quarter of fiscal 2011 whenacquisitions. At various times, we had significant revenue was recognized in accordance with contractual requirements, ourfrom OEM deduplication software revenue has significantly declined,and at times we had negligible revenue from OEM deduplication software, which negatively impacted our results. Any further disruptions to the factors on which our OEM deduplication software revenues dependsdepend could adversely affect our business, financial condition and operating results.such as the goodwill impairment charge in fiscal 2009, which could have a material and adverse effect on our results of operations.ItWe have been required to record material goodwill impairment charges in the past and it is possible that conditions could deteriorate due to economic or other factors that affect our business, resulting in the need to write down the carrying amount of our goodwill or long-lived assets to fair value at the time of such assessment. As a result of any impairment charge, our operating results could be materially and adversely affected.CTS Solutions and Overland StorageCrossroads Systems, Inc. described in LegalItem 3 "Legal Proceedings." While we currently believe the amount of ultimate liability, if any, with respect to any such actions will not materially affect our financial position, results of operations or liquidity, the ultimate outcome of any license discussion or litigation is uncertain. Adverse resolution of any third party infringement claim could subject us to substantial liabilities and require us to refrain from manufacturing and selling certain products. In addition, the costs incurred in intellectual property litigation can be substantial, regardless of the outcome. As a result, our business, financial condition and operating results could be materially and adversely affected.ourproducts,our products, technologies and intellectual property;sourcesoftwaresource software infringes, misappropriates or violates third party intellectual property or other rights.that are uniquerelated to businesses with international operationsour business outside of a similar scope,the U.S., any of which could, individually or in the aggregate have a material adverse effect on our business.certain ofand fulfill orders for our products and have suppliers for various components, several of which have operations located in foreign countries including China, Hungary, Japan, Malaysia, Singapore, Mexico, the Philippines and Thailand. Because of these operations, we are subject to a number of risks including:transportourtransport our products;;andglobaland global economic conditions generally;thecompensationthe compensation structure for employees in some foreign countries in the event of business downturns; andtsunamis.aretypicallyare typically shipped;weakeconomicweak economic conditions or other factors;Customerordefined as orders greater than $200,000;revenues;Declines inor software revenues;issues;Increased competition.
Foreign exchange fluctuations.For instance, for the first quarter of fiscal 2013, our financial results were below our guidance for the period in part because we were unable to close a number of larger transactions. After we reported results on July 9, 2012, our share price declined by 28%. certain of our products, in some cases we also manufacture products in-house. Managing our in-housemay retain the responsibility to purchase component inventory to support third party manufacturing capabilitiesactivities, which presents a number of risks that could materially and adversely affect our financial condition. For instance, as part of our component planning, we may place orders with or pay certain suppliers for components in advance of receipt of customer orders. We may occasionally enter into negotiated orders with vendors early in the manufacturing process of our products to ensure that we have sufficient components for our products to meet anticipated customer demand. Because the design and manufacturing process for these components can be complicated, it is possible that we could experience a design or manufacturing flaw that could delay or even prevent the production of the components for which we previously committed to pay. We also face the risk of ordering too many components, or conversely, not enough components, since supply orders are generally based on forecasts of customer orders rather than actual customer orders. In addition, in some cases, we may make non-cancelable order commitments to our suppliers for work-in-progress, supplier’s finished goods, custom sub-assemblies, discontinued (end-of-life) components and Quantum-unique raw materials that are necessary to meet our lead times for finished goods. If we cannot change or be released from supply orders, we could incur costs from the purchase of unusable components, either due to a delay in the production of the components or other supplies or as a result of inaccurately predicting supply orders in advance of customer orders. These same risks exist with our third party contract manufacturing partners. Our business and operating results could be materially and adversely affected if we incur increased costs or are unable to fulfill customer orders.Some of ourOur manufacturing, component production and service repair are outsourced to third party contract manufacturers, component suppliers and service providers. If we cannot obtain products, parts and services from these third parties in a cost effective and timely manner that meets our customers’ expectations, this could materially and adversely impact our business, financial condition and results of operations.ofexperiencingof experiencing shortages, reduced production capacity or other delays in customer deliveries that could result incustomerin customer dissatisfaction, lost sales and increased expenses, each of which could materially damage customerrelationships and result in lost revenue.servicestheyservices they provide to us. They procure inventory to build our products based upon a forecast of customer demand thatwethat we provide. We could be responsible for the financial impact on the contract manufacturer, supplier or serviceproviderservice provider of any reduction or product mix shift in the forecast relative to materials that they had alreadypurchasedalready purchased under a prior forecast. Such a variance in forecasted demand could require us to pay them for finishedgoodsfinished goods in excess of current customer demand or for excess or obsolete inventory and generally incur higher costs.Ascosts. As a result, we could experience reduced gross margins and operating losses based on these purchasecommitments.purchase commitments. With respect to service providers, although we have contracts for most of our third party repairservicerepair service vendors, the contract period may not be the same as the underlying service contract with our customer.Incustomer. In such cases, we face risks that the third party service provider may increase the cost of providing services oversubsequent periods contracted with our customer.negativelyimpactednegatively impacted by global and local economic conditions. Therefore, we may face interruptions in the supply ofproductof product components or service as a result of financial or other volatility affecting our supply chain. We couldsuffercould suffer production downtime or increased costs to procure alternate products or services as a result of the possibleinadequate financial condition of one or more of our business partners.oursupplyour supply chain and third party contract manufacturing and service business partners. Therefore, the quality of the products, parts or services may not be acceptable toourto our customers and could result in customer dissatisfaction, lost revenue and increased warranty costs. Inaddition,In addition, we have limited control over the manner in which our business partners conduct their business. Sub-tier suppliers selected by the primary third party could have process control issues or could select componentswithcomponents with latent defects that manifest over a longer period of time. We may face negative consequences or publicityaspublicity as a result of a third party’s failure to comply with applicable compliance, trade, environmental or employmentregulations. existing supplier of different products or to our own facilities without significant financial or operational impact, but there is no guarantee of our continued ability to do so.acquisitions.acquisitions and are increasing our reliance on certain third party business relationships. Our inability to successfully manage the changes that we implement and detect and address issues as they arise could disrupt our business and adversely impact our results of operations and financial condition.Our capital structure includes debt,Potential consequences For example, the outstanding $83.7 million aggregate principal amount as of havingMay 29, 2015 of our 3.50% convertible subordinated notes is payable by us on November 15, 2015. If we are unable to generate cash sufficient to meet this obligation through a refinancing or otherwise, we could default under these notes, which could cause an acceleration of our other outstanding indebtedness and could have a material effect on us. For further description of our outstanding debt, include:Requiring that wesee the section captioned "Liquidity and Capital Resources" in Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations."cashrequirements; Limiting ourcash requirements;such as limiting may be limited, including our ability to engage in mergers and acquisitions activity, which may place us at a competitivedisadvantage; Mandatorycompetitive disadvantage;certainthresholds; Increasing our vulnerabilitycertain thresholds;Making it more difficult or impossible for usLimiting our abilitybecome more volatile if certainincrease based on the trading activity of our institutional investors were to increase or decrease the number of shares they own.investors. In addition, there are other factors and events that could affect the trading prices of our common stock.sellselling pressure.combinationsandcombinations and investments by our competitors or us; and production processes are subject to safety and environmental regulations which could lead to increased costs, or otherwise adversely affect our business, financial condition and results of operations.and manufacturing processes as well as the safety of our employees and the public. Directives first introducedCurrent regulations in the European UnionU.S. and various international jurisdictions restrict the use of certain potentially hazardous materials used in electronic products and components (including lead and some flame retardants), impose a “take back” obligation on manufacturers for the financing of the collection, recovery and disposal of electrical and electronic equipment and restrict the use ofrequire extensive investigation into and disclosure regarding certain potentially hazardous materials, including lead and some flame retardants, in electronic products and components. Other jurisdictions in the U.S. and internationally have since introduced similar requirements, and we anticipate that future regulations might further restrict allowable materialsminerals used in our products, require the establishment of additional recycling or take back programs or mandate the measurement and reduction of carbon emissions into the environment.supply chain. We have implemented procedures and will likely continue to introduce new processes to comply with current and future safety and environmental legislation. However, measures taken now or in the future to comply with such legislation may adversely affect our manufacturing or personnel costs or product sales by requiring us to acquire costly equipment or materials, redesign production processes or to incur other significant expenses in adapting our manufacturing programs or waste disposal and emission management processes. Furthermore, safety or environmental claims or our failure to comply with present or future regulations could result in the assessment of damages or imposition of fines against us or the suspension of affected operations, which could have an adverse effect on our business, financial condition and results of operations.preventing corruption prevention and import and export practices, and requirements including requirementslaws applicable to U.S. government contractors. In addition, the SEC has adopted disclosure rules related to the supply of certain minerals originating from the conflict zones of the Democratic Republic of Congo or adjoining countries, and we may incurr costs to comply with such regulations and may realize other costs relating to the sourcing and availability of minerals used in our products. While we maintain a rigorous corporate ethics and compliance program, we may be subject to increased regulatory scrutiny, significant monetary fines or penalties, suspension of business opportunities or loss of jurisdictional operating rights as a result of any failure to comply with thoseregulatory requirements. If we were to be subject to a compliance investigation, we may incur increased personnel and legal costs. We may also be exposed to potential liability resulting from our business partners’partners' violation of these requirements. In addition, U.S. regulatory agencies have recently introduced new enforcement efforts that may proactively seek conduct-related information from companies operating in certain targeted industries or locations, without regard for whether potential violations have been identified. If we were to receive such an information request, we may incur increased personnel and legal costs in order to adequately review and respond to the request. Further, our U.S. and international business models are based on currently applicable regulatory requirements and exceptions. Changes in those requirements or exceptions could necessitate changes to our business model. Any of these consequences could materially and adversely impact our business and operating results.We may be sued byA cybersecurity breach could adversely affect our customersability to conduct our business, harm our reputation, expose us to significant liability or otherwise damage our financial results.resulttrusted provider of failures in our products.We face potential liability for performance problemsscale-out storage, archive and data protection products by adversely affecting the market’s perception of the security or reliability of our products because our end users employ our storage technologies for the storage and backup of important data and to satisfy regulatory requirements. Although we maintain technology errors and omissions liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed. Any imposition of liability or accrual of litigation costs that is not covered by insurance or is in excessservices. Many of our insurance coveragecustomers and partners store sensitive data on our products, and a cybersecurity breach related to our products could harm our business. In addition,reputation and potentially expose us to significant liability.could potentiallymay face claims for product liability fromthreats across our infrastructure including unauthorized access, security breaches and other system disruptions.if our products cause property damageperceive that this information is secure. A cybersecurity breach could result in unauthorized access to, loss of, or bodily injury. Although we maintain general liability insurance, our insurance may not cover potential claimsunauthorized disclosure of this typesuch information. A cybersecurity breach could expose us to litigation, indemnity obligations, government investigations and other possible liabilities. Additionally, a cyber attack, whether actual or may not be adequate to indemnify us for all liability that may be imposed. Any imposition of liability or accrual of litigation costs that is not covered by insurance or isperceived, could result in excess of our insurance coveragenegative publicity which could harm our reputation and reduce our customers’ confidence in the effectiveness of our solutions, which could materially and adversely affect our business and operating results. A breach of our security systems could also expose us to increased costs including remediation costs, disruption of operations or increased cybersecurity protection costs that may have a material adverse effect on our business.savings and benefitssynergies from the acquisition;cultures;ofacquiredof acquired technology and rights into our products and services;insuchin such markets have stronger market positions;becomeimpaired,become impaired, and/or we may incur losses from these investments;iflargeif large enough, could materially and adversely affect our liquidity; andThehas decreased during fiscal 2013, closing asranged between a low as $1.05of $0.99 on October 31, 2012.May 7, 2014 and a high of $1.81 on December 26, 2014. If the average closing price of our common stock does not exceed $1.00 per share over a consecutive thirty trading-day period, we would be non-compliant with NYSE continued listing standards. Once notified of such non-compliance by the NYSE, we would need to bring our share price and consecutive thirty trading-day average share price back above $1.00 per share within six months or the NYSE would commence suspension and delisting procedures. In addition, if our common stock price falls below the $1.00 threshold to the point where the NYSE considers the stock price to be “abnormally low,” the NYSE has the discretion to begin delisting proceeding immediately with respect to our common stock. There is no formal definition of “abnormally low” in the NYSE rules. If our common stock were delisted, the ability of our stockholders to sell any of our common stock at all would be severely, if not completely, limited, causing our stock price to decline further.materiallymaterial adverse impact on our business, financial condition and results of operations. foreign currency hedging or speculative purposes. We have used in the past, and may use in the future, foreign currency forward contracts and derivative financial instruments to hedge our exposure to foreign currency exchange rates. To the extent that we have assets or liabilities denominated in a foreign currency that are inadequately hedged or not hedged at all, we may be subject to foreign currency losses, which could be significant.2013:2015:Location Function North America San Jose, CA Corporate headquarters, research and development salesIrvine, CA Administration, sales, service, research and development, sales, serviceColorado Springs, CO Operations, service,Administration, operations management, research and development, sales, administrationLouisville, COResearch and developmentserviceEnglewood, CO Research and development, service, sales, operationsserviceMendota Heights, MN Research and development Richardson, TX Research and development Bellevue, WA Administration and sales Other North America Sales Europe Paris, France Sales and service Boehmenkirch, Germany Service Munich, Germany Sales and service Zurich, Switzerland OperationsAdministration and administrationoperationsBracknell, UK Sales and service Northampton, UK Sales and serviceServiceOther Europe Sales and service Asia Pacific Adelaide, Australia Research and development Beijing, China SalesMarketing and salesKuala Lumpur, Malaysia Administration and customerCustomer serviceSingapore City, Singapore Sales and distributionAdministration, operations management, salesOther Asia Pacific Sales OverlandJune 28, 2012, Overland Storage,February 18, 2014, Crossroads Systems, Inc. (“Overland”Crossroads”) filed a patent infringement lawsuit against Quantum in the U.S. District Court for the SouthernWestern District of California,Texas, alleging infringement of U.S. Patents 6,425,035 and 7,934,041. An amended complaint filed on April 15, 2014 also alleged infringement of U.S. patent 7,051,147. Crossroads asserts that certainwe have incorporated Crossroads' patented technology into our StorNext QX and Q-Series lines of its automated tape libraries fall within the scope of patents 6,328,766disk array products, and 6,353,581. Overland is seeking injunctive relief, as well as the recovery ofinto our Scalar libraries. Crossroads seeks unspecified monetary damages including treble damages for willful infringement.and injunctive relief. Crossroads has already dismissed all claims of infringement with respect to the StorNext QX and Q-Series products. We do not believe we infringe the Overland patents and we will defend ourselves vigorously. We do not believe there is a reasonable possibilityprobability that we will pay material damages related to this lawsuit.August 28, 2012,September 23, 2014, we filed a lawsuit against OverlandCrossroads in the U.S. District Court for the SouthernNorthern District of California foralleging patent infringementsinfringement of our patents 6,542,787; 6,498,771; 5,925,119 and 5,491,812patent 6,766,412 by the products in Overland’s NEO tape library and SnapServer product lines.Crossroad’s StrongBox VSeries Library Solution product. We are seeking injunctive relief and the recovery of monetary damages.April 12, 2013,December 4, 2014, we filedamended our complaint alleging infringement of a lawsuit against Overland insecond patent, 5,940,849, related to Crossroad's SPHiNX product line. On December 16, 2014, we withdrew the U.S. District Court for the Southern District of California, for patent infringements of our patent 7,263,596 by the products in Overland’s SnapScale product lines. We are seeking injunctive relief and the recovery of monetary damages.Compression Technology SolutionsOn September 12, 2011, Compression Technology Solutions LLC (“CTS”) filed a patentamended complaint alleging infringement lawsuit against a group of companies, consisting of Quantum, CA., Inc., EMC Corporation, Hewlett-Packard Company, International Business Machines Corp., NetApp, Inc. and Quest Software, Inc., in the U.S. District Court for the Eastern District of Missouri, alleging that certain unspecified products of the defendants, characterized as “deduplication software systems,” and, in the case of Quantum, including Quantum’s “DXi Series Deduplication software,” fall within the scope ofsecond patent, 5,414,650. CTS was seeking injunctive relief, as well as the recovery of monetary damages, including treble damages for willful infringement. We do not believe we infringe the CTS patent; we believe that the CTS patent is invalid, and we defended ourselves vigorously. In April 2012, our motion to transfer venue was granted and the lawsuit was transferred to the U.S. District Court for the Northern District of California. On May 29, 2013, our motion for summary judgment was granted, with all of the asserted claims held invalid by the District Court, and the lawsuit against Quantum and the other defendants has been dismissed with prejudice.ITEM 5. 31, 2013,29, 2015, the closing price of our common stock was $1.55$2.04 per share. The prices per share reflected in the following table represent the range of high and low sales prices of our common stock for the quarters indicated:Fiscal 2013 High Low First quarter ended June 30, 2012 $ 2.71 $ 1.78 Second quarter ended September 30, 2012 2.19 1.20 Third quarter ended December 31, 2012 1.70 1.00 Fourth quarter ended March 31, 2013 1.47 1.20 Fiscal 2012 High Low First quarter ended June 30, 2011 $ 3.53 $ 2.44 Second quarter ended September 30, 2011 3.42 1.54 Third quarter ended December 31, 2011 2.84 1.65 Fourth quarter ended March 31, 2012 2.90 2.01 Fiscal 2015 High Low First quarter ended June 30, 2014 $ 1.22 $ 0.99 Second quarter ended September 30, 2014 1.31 1.16 Third quarter ended December 31, 2014 1.81 1.02 Fourth quarter ended March 31, 2015 1.76 1.54 Fiscal 2014 High Low First quarter ended June 30, 2013 $ 1.61 $ 1.19 Second quarter ended September 30, 2013 1.75 1.34 Third quarter ended December 31, 2013 1.59 1.10 Fourth quarter ended March 31, 2014 1.43 1.13 “Convertible Subordinated Debt and Long-Term Debt”“Debt” to the Consolidated Financial Statements.31, 2013,29, 2015, there were 1,2221,152 Quantum stockholders of record, including the Depository Trust Company, which holds shares of Quantum common stock on behalf of an indeterminate number of beneficial owners. The information required by this item regarding equity compensation plans is provided in Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”20132015 for the period since March 31, 20082010 to the cumulative total return over such period of (i) the NASDAQ Composite Index and (ii) the S & P&P Computer Storage & Peripherals Index. The graph assumes an investment of $100 on March 31, 20082010 in our common stock and in each of the indices listed on the graph and reflects the change in the market price of our common stock relative to the changes in the noted indices at March 31, 2009, March 31, 2010, March 31, 2011, March 31, 2012, 2013, 2014 and March 31, 2013.2015. The performance shown below is based on historical data and is not indicative of, nor intended to forecast, future price performance of our common stock.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Quantum Corporation, the NASDAQ Composite Index,and the S&P Computer Storage & Peripherals Index
Unregistered Securities Sold in Fiscal 2013On October 31, 2012, we issued $60 million aggregate principal amount
20092011 to 20132015 should be read together with our Consolidated Financial Statements contained in this Annual Report on Form 10-K. We have certain items that affect the comparability of the selected financial information. Fiscal 2010 results included a $12.9 million gain on debt extinguishment, net of costs. Fiscal 2009 results included $11.0 million of royalty revenue from a legal settlement and a $339.0 million goodwill impairment charge.For the year ended March 31, (In thousands, except per share data) 2013 2012 2011 2010 2009 Statement of Operations Data: Total revenue $ 587,572 $ 652,370 $ 672,270 $ 681,427 $ 808,972 Total cost of revenue 346,921 378,535 389,288 401,390 504,658 Gross margin 240,651 273,835 282,982 280,037 304,314 Income (loss) from operations (42,700 ) 5,192 24,704 29,309 (329,925 ) Net income (loss) (52,419 ) (8,809 ) 4,541 16,634 (358,264 ) Basic net income (loss) per share (0.22 ) (0.04 ) 0.02 0.08 (1.71 ) Diluted net income (loss) per share (0.22 ) (0.04 ) 0.02 0.02 (1.71 ) As of March 31, 2013 2012 2011 2010 2009 Balance Sheet Data: Total assets $ 371,140 $ 395,348 $ 430,965 $ 504,143 $ 549,369 Short-term debt — — 1,067 23,983 4,000 Long-term debt 205,000 184,495 238,267 305,899 404,000 For the year ended March 31, (In thousands, except per share data) 2015 2014 2013 2012 2011 Statement of Operations Data: Total revenue $ 553,095 $ 553,165 $ 587,439 $ 651,987 $ 673,094 Total cost of revenue 308,409 313,545 346,878 378,542 389,288 Gross margin 244,686 239,620 240,561 273,445 283,806 Income (loss) from operations 14,397 (11,799 ) (42,460 ) 4,745 25,861 Net income (loss) 16,760 (21,474 ) (52,179 ) (9,256 ) 5,698 Basic net income (loss) per share 0.07 (0.09 ) (0.22 ) (0.04 ) 0.03 Diluted net income (loss) per share 0.06 (0.09 ) (0.22 ) (0.04 ) 0.02 As of March 31, 2015 2014 2013 2012 2011 Balance Sheet Data: Total assets $ 358,755 $ 361,798 $ 368,882 $ 393,223 $ 429,223 Short-term debt 83,735 — — — 1,067 Long-term debt 70,000 203,735 205,000 184,495 238,267 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS globalis a leading expert in scale-out storage, archive and data protection, providing solutions for capturing, sharing and bigpreserving digital assets over the entire data management.lifecycle. Our customers, ranging from small businesses to major enterprises, have trusted us to address their most demanding data workflow challenges. We provide solutions for storing and protecting information in physical, virtual cloud and big datacloud environments that are designed to help customers be certainBe Certain™ they are maximizinghave an end-to-end storage foundation to maximize the value of their data over its entire lifecycle. With our solutions, customers can better adapt in a world of continuing change by keepingmaking it accessible whenever and protecting more data for a longer period of time whilewherever needed, retaining it indefinitely and reducing coststotal cost and increasing return on investment.complexity. We work closely with a broad network of distributors, value-added resellers (“VARs”), direct marketing resellers (“DMRs”), original equipment manufacturers (“OEMs”) and other suppliers to meet customers’ evolving data protection and big data management needs. Our stock is traded on the New York Stock Exchange under the symbol QTM.BusinessWe offer a comprehensive range of solutions for data protection and big data management challenges that provide performance and value to end user customers of all sizes, from small businesses to multinational enterprises. We believe our combination of expertise, innovation and platform independence enables us to solve scale-out storage and data protection and big data management issueschallenges more easily, cost-effectively and securely.securely than competitive offerings. We earn our revenue from the sale of products, systems and services through an array of channel partners and our sales force to reach end user customers of all sizes.force. Our products are sold under both the Quantum brand name and the names of various OEM customers. TheyOur scale-out storage solutions include DXiStorNext® software, StorNext appliances, StorNext Pro™ Solutions, Lattus™ extended online storage systems and Q-Cloud®TM Archive and are designed to help customers manage large unstructured data sets in an information workflow, encompassing high-performance ingest, real-time collaboration, scalable processing, intelligent protection and high-value monetization. Our data protection solutions include DXi® deduplication backup systems for high speedand Scalar® automated tape libraries that optimize backup and recovery, simplify management and reliability, Scalar® tape automation products forlower cost. Our vmPRO™ virtual server backup and disaster recovery offerings protect virtual environments while minimizing the impact on servers and long-term data retention, StorNext® data management software and appliances, Lattus™ object storage solutions for high-performance big data file sharing and archiving and vmPRO™ solutions for protecting virtual machine data. We also offer cloud solutions for cloud-based backup, fast restore, data recovery and business continuity.storage. In addition, we also offer software for cloud backup and disaster recovery of physical and virtual servers. We have a full range of services and the global scale and scope to support our worldwide customer base.Asspecialist providing end usersolution targeted for sporting event media and entertainment customers, with differentiateda solution that enables customers to more easily investigate and combat cyber-attacks and a solution that optimizes workflows for the oil and gas industry. Reflecting our expansion into video surveillance, we announced the certification of a combined solution using StorNext to store large amounts of video files while optimizing system performance.bigStorNext QXS-5600, a high-capacity, high-density disk array that provides cost-effective storage for customers for a wide variety of applications. In the second quarter, we acquired Symform, Inc.'s cloud storage services platform and development team, gaining technology and expertise we plan to leverage in future scale-out storage and data protection offerings. In the fourth quarter, we announced three new Q-Cloud public cloud solutions that enable our customers to leverage Quantum's intelligent data management software to integrate the cloud into multi-tier, hybrid storage architectures for demanding workloads and to realize the full benefits of the cloud without requiring modification to existing applications or processes.our strategy is to continue to grow the independent channeldesigned for Quantum branded solutions andmanaging data across its entire life cycle in demanding environments.offering products with superior performance and value. We have implemented a number of initiatives in an effort to drive branded revenue growth. One key initiative for fiscal 2013 was to increase revenue from our disk systems and software solutions products. Another key area of focus for fiscal 2013 was our marketing and awareness campaign. A third initiative was to continue to introduce new products and enhanced offerings in the significant growth markets of disk and software for the data protection and big data and archive markets as well as strategic enhancements and offerings in the tape automation market while continuing to provide service and support to new and existing customers.We started fiscal 2013 with the objectives of increasing total revenue, having operating profit and generating cash from operations. These objectives assumed the market for tape automation systems and tape drives would be approximately the same as fiscal 2012 and the market for disk systems and software solutions would grow compared to fiscal 2012. We experienced difficult market conditions during fiscal 2013, especially for products and solutions based on tape technology. Market analysts estimated the overall demand in tape market decreased approximately 20% in the first half of fiscal 2013. During that period we had a 17% decline in our tape automation systems revenue which caused a significant negative impact to both total revenue and operating profit. In addition, our disk systems and software revenue decreased in the first quarter of fiscal 2013 as a result of economic weakness in Europe, and large orders decreased due to customer caution from economic uncertainty. During the second half of fiscal 2013, we believe there was continued weakness in the storage market as a result of economic uncertainty regarding the fiscal cliff in the U.S., and companies continued to be cautious with their purchasing decisions. We believe global economic conditions also caused end users to continue to reduce or delay spending, resulting in lower than expected sales, particularly in Asia and Europe, in the fourth quarter of fiscal 2013.In the second quarter of fiscal 2013, we met our objective of increasing revenue for disk systems and software revenue for the quarter, achieving record revenue in this category. This revenue growth continued in the third quarter of fiscal 2013, increasing disk systems and software solutions revenue from the third quarter of fiscal 2012, ending fiscal 2013 with record annual revenue from disk systems and software solutions. We believe this revenue increase reflects the market opportunity, the strength of our DXi and StorNext product portfolios and continued innovation in these product families in addition to achieving better sales traction in the channel and improved sales productivity.We expected and experienced sequential improvement in tape automation systems revenue from year-end IT budget spending and the release of LTO-6 technology in the third quarter of fiscal 2013. We introduced LTO-6 tape drives and tape automation systems in certain of our products in December 2012, which contributed to increased tape automation revenue from the second quarter of fiscal 2013 and sales of products with LTO-6 technology contributed incremental tape automation revenue in the fourth quarter of fiscal 2013 compared to the third quarter of fiscal 2013. Overall, we believe we retained our market share leadership in open tape systems automation due to the smaller percentage decrease in branded tape automation systems revenue than the estimated decrease in overall market demand. Branded tape automation revenue decreased 13% in fiscal 2013 while OEM tape automation revenue decreased 20%.We continued our focus on training our sales team and engaging with channel partners to take advantage of sales opportunities across our portfolio. We had stronger new customer acquisition in fiscal 2013 than in fiscal 2012 which we believe was due in part to increased end user and channel partner awareness as a result of our marketing and awareness campaign in the first half of fiscal 2013. In addition, we introduced several new products for big data environments during fiscal 2013, including Lattus–X and Lattus–M, the first products in our object storage solutions family for big data environments, and several StorNext appliances. We also expanded our data protection product portfolio with the introduction of DXi6800, enhancements and upgrades to enterprise disk, vmPRO software and enterprise tape in addition to releasing our Q-Cloud solution for cloud backup and disaster recovery which leverages our DXi and vmPRO technology.Given the tape revenue decrease in the first half of fiscal 2013 compared to the first half of fiscal 2012, its impact on operating profit, and the use of cash in operations, we recognized the need for and implemented cost controls and spending reductions in the third and fourth quarters of fiscal 2013. As a result, our financial performance in the third quarter of fiscal 2013 improved from the second quarter of fiscal 2013, contributing to decreased operating loss and generating cash from operations. These cost controls resulted in additional decreases in operating expenses and we generated more cash from operations in the fourth quarter of fiscal 2013 than the third quarter of fiscal 2013. The sequential improvement in our financial results in the third quarter of fiscal 2013 also reflects the leverage in our business model where revenue growth quickly leads to improved operating results.We continued to improve our capital structure during fiscal 2013. We issued $70 million of convertible subordinated notes and amended the Wells Fargo credit agreement to decrease the line of credit and modify certain covenants with terms that are financially more beneficial and provide additional flexibility to run our business.We believe our product portfolio is the strongest it has been since we became a systems company and that it positions us well to continue to add customers and increase revenue in the next fiscal year. We plan to continue to expand and improveexpanding our product and solution offerings, with emphasisparticularly in scale-out storage, focusing on branded disk systems, softwarekey vertical markets to which our solutions virtual offerings, cloud solutionsare well-suited and next generation object storage. Using a balanced approachcapitalizing on new go-to-market partnerships.take advantagepay off the outstanding balance of market opportunitiesthe 3.50% convertible subordinated notes due November 15, 2015 (“3.50% notes”), operate the business and investing forfund additional growth while in a period of economic uncertainty, we are focused on revenue growth balanced with operating profitopportunities. For additional information regarding our 3.50% notes, refer to the section below captioned "Liquidity and generating cash from operations.$587.6$553.1 million in fiscal 2013,2015, which is essentially flat compared to fiscal 2014. This is the net result of increased revenue from scale-out storage solutions, disk backup systems and service, offset by decreased tape automation systems and devices and media revenue and a 10% decrease$15.0 million royalty received in fiscal 2014 in connection with finalizing an intellectual property agreement that is not expected to recur. We had record revenue from scale-out storage solutions due to increased branded revenue in all geographies - Asia-Pacific (APAC), Europe, the Middle East and Africa (EMEA) and North America. Our total branded product and service revenue increased 7% from fiscal 2012 primarily due to decreased market demand for products based on tape technology Product revenue from OEM customers decreased 18%2014 and revenue from branded products decreased 10% both primarily due to decreased revenue from tape automation systems. Ourour continued efforts to increase revenue from disk systems and software solutions resulted in record annual revenue for this revenue category and a 4% increase from fiscal 2012. Service revenue was unchanged from fiscal 2012, while royalty revenue decreased 21% from fiscal 2012 as expected. Our focus on growing theour branded business during the fiscal year is reflected in thea greater proportion of non-royalty revenue from our branded business, atproducts and services, which grew to 88% in fiscal 2015 compared to 84% in fiscal 2014 and 83% in fiscal 2013, compared to 81% in fiscal 2012 and 79% in fiscal 2011.decreased 100increased 90 basis points from fiscal 20122014 to 41.0% largely44.2%, the net result of higher service revenue driven by the growth in scale-out storage and the improvements we have made in our business model over the past year-and-a -half, offset by lower royalty revenue. Operating expenses decreased $20.9 million, or 8%, from fiscal 2014 primarily due to cost controls and spending reductions that were implemented over the past year. Restructuring charges decreased product revenue and a correspondingby $9.5 million compared to fiscal 2014, primarily related to lower product gross margin as well as a $12.2 million decrease in royalty revenue, partially offset by increased service gross margin. Some of our costs of goods sold are relatively fixed in the short term; therefore, revenue increases or decreases can have a material impact on the gross margin rate. Operating expenses increased $13.2 million, or 5% from fiscal 2012, primarily from restructuring charges in the second half of fiscal 2013 for severance and benefits. Compensation and benefits also decreased due to right-size our workforcereduced staffing levels. Intangible amortization expense decreased due to certain intangibles becoming fully amortized during fiscal 2015. Our operating results improved by $26.2 million, from a loss of $11.8 million in orderfiscal 2014 to align spending with revised revenue expectations. We had a $42.7$14.4 million lossof income from operations in fiscal 2013 compared to operating2015.$5.2$21.5 million in fiscal 2012.Interest expense decreased 22%2014 to $8.3 million primarily due to principal payments in the prior year and to a lesser extent from decreased debt amortization expense as a resultnet income of debt refinancings in calendar 2012. During fiscal 2013, we issued $70 million of subordinated convertible debt, using $49.5 million of the proceeds to fully repay the balance on the revolving credit line. We continued to generate cash from operating activities, with $7.7$16.8 million in fiscal 2013 compared to $45.72015, which included a gain of $13.6 million resulting from the sale of our investment in fiscal 2012. 2012 AND 2011For the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue Product revenue $ 399,043 67.9 % $ 451,340 69.2 % $ 456,903 68.0 % $ (52,297 ) (11.6 )% $ (5,563 ) (1.2 )% Service revenue 144,037 24.5 % 144,364 22.1 % 151,095 22.5 % (327 ) (0.2 )% (6,731 ) (4.5 )% Royalty revenue 44,492 7.6 % 56,666 8.7 % 64,272 9.5 % (12,174 ) (21.5 )% (7,606 ) (11.8 )% Total revenue $ 587,572 100.0 % $ 652,370 100.0 % $ 672,270 100.0 % $ (64,798 ) (9.9 )% $ (19,900 ) (3.0 )% For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Product revenue $ 355,579 64.3 % $ 348,318 63.0 % $ 398,910 67.9 % $ 7,261 2.1 % $ (50,592 ) (12.7 )% Service revenue 155,674 28.1 % 147,199 26.6 % 144,037 24.5 % 8,475 5.8 % 3,162 2.2 % Royalty revenue 41,842 7.6 % 57,648 10.4 % 44,492 7.6 % (15,806 ) (27.4 )% 13,156 29.6 % Total revenue $ 553,095 100.0 % $ 553,165 100.0 % $ 587,439 100.0 % $ (70 ) — % $ (34,274 ) (5.8 )% 2013 decreased2015 remained relatively flat compared to fiscal 2014. Revenue from fiscal 2012, reflectingscale-out storage solutions, disk backup systems and service revenue increased. These increases were offset by decreases in OEM and branded tape automation systems revenue, royalty revenue as well as branded devices and media revenue. The decrease in royalty revenue was primarily due to a decline$15.0 million royalty in connection with an intellectual property agreement received in the prior year.automation market, economic uncertainty and a decrease in large orders, or orders over $200,000. These factors impacted revenueproducts. Revenue from branded data protection products and services the most, with a $39.8decreased $13.7 million, or 9%4%, decrease from fiscal 2012.2014, largely due to decreases in tape automation systems and media revenue. Data protection products include our tape automation systems, disk backup systems and devices and media offerings. The market for big data management and archive continued to grow, and revenueRevenue from branded big data and archive productsscale-out storage solutions and services increased 18%,$43.4 million, or $7.8 million,74%, from fiscal 2012, partially offsetting the decreased revenue from data protection products. Big data management and archive products2014 largely due to increased sales of our StorNext appliances. Scale-out storage solutions include StorNext software, StorNext appliances, StorNext Pro Solutions and Lattus objectextended online storage solutions. In addition, OEM product and service revenue, which primarily comprises tape automation systems, decreased $20.6$14.0 million from fiscal 2014.19%, and royalty revenue decreased $12.2 million, or 21%10%, from fiscal 2012.Total2013. Revenue from branded scale-out storage solutions products and services increased $6.5 million, or 12%, from fiscal 2013. OEM product and service revenue decreased $12.4 from fiscal 2013. Royalty revenue increased $13.2 million from fiscal 2013.20122015 compared to fiscal 20112014. The increase in product revenue was primarily due to expected reductions in OEM and royalty revenue. The largest decreases in OEM revenue were from lower deduplication software, tape automation products, devices and service revenue. Partially offsetting these decreases were increased sales of scale-out storage solutions; revenue from disk backup systems also increased. These increases were partially offset by decreased sales of OEM and branded disktape automation systems and software solutionsdevices and media. Revenue from sales of branded products increased 8% in fiscal 2012.Product RevenueFor the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue $ 124,074 21.1 % $ 119,044 18.2 % $ 110,678 16.5 % $ 5,030 4.2 % $ 8,366 7.6 % 206,112 35.1 % 245,030 37.6 % 254,153 37.8 % (38,918 ) (15.9 )% (9,123 ) (3.6 )% 68,857 11.7 % 87,266 13.4 % 92,072 13.7 % (18,409 ) (21.1 )% (4,806 ) (5.2 )% $ 399,043 67.9 % $ 451,340 69.2 % $ 456,903 68.0 % $ (52,297 ) (11.6 )% $ (5,563 ) (1.2 )% Fiscal 2013 Compared2015, and sales of products to Fiscal 2012Productour OEM customers decreased 20% compared to fiscal 2014.12%13% in 2014 from fiscal 2012,2013, primarily due to decreased sales of tape automation systems followed by lower revenue from devices and media,disk backup systems, partially offset by increased revenue from disk systemsscale-out storage solutions and software solutions.devices and media. Revenue from sales of branded products decreased 10% and OEM product revenue decreased 18% in fiscal 2013 compared to fiscal 2012, both12% primarily due to lower sales of disk backup systems followed by tape automation systems.systems decreases, and OEM product revenue decreased 14% in fiscal 2014 compared to fiscal 2013 largely due to decreased tape automation revenue. For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Tape automation systems $ 152,205 27.6 % $ 174,438 31.5 % $ 206,112 35.1 % $ (22,233 ) (12.7 )% $ (31,674 ) (15.4 )% Disk backup systems* 54,845 9.9 % 50,217 9.1 % 74,255 12.6 % 4,628 9.2 % (24,038 ) (32.4 )% Devices and media 62,642 11.3 % 70,680 12.8 % 68,724 11.7 % (8,038 ) (11.4 )% 1,956 2.8 % Scale-out storage solutions* 85,887 15.5 % 52,983 9.6 % 49,819 8.4 % 32,904 62.1 % 3,164 6.4 % Total product revenue $ 355,579 64.3 % $ 348,318 63.0 % $ 398,910 67.8 % $ 7,261 2.1 % $ (50,592 ) (12.7 )% Our4% from 2012, resulting in record annual revenue in this revenue category. Revenue increases wereduring fiscal 2015 primarily fromdue to increased sales of our StorNext appliances leadingappliances. Revenue from Lattus extended online storage and StorNext Pro Solutions products also increased, partially offset by a decrease in StorNext standalone software revenue. During fiscal 2015, we experienced an increase in large scale-out storage solutions orders over $200,000.record revenue for branded software solutions, and we also had recordFiscal 2013midrangeenterprise DXi products. The first StorNext appliances were introducedsystems in fiscal 2012 and we added a number of productsaddition to the StorNext appliance family during fiscal 2013. Revenue fromdecreased midrange disk systems increased 11% from the prior year; however, we believe our midrange disk systems cannibalized some revenue from enterprise disk solutions due to the capabilities of our newest midrange disk product.revenue. We had lower enterprise and midrange disk system revenue primarily due to fewer large orders, or orders over $200,000, during fiscal 2013.The decrease in tape automation systems revenue in fiscal 2013 compared to fiscal 2012 was due to approximately $20 million decreases in both branded and OEM tape automation system sales. Midrange tape automation sales decreased the most, with 15% and 17% decreases, respectively, of branded midrange and OEM midrange tape automation systems revenue. Enterprise systems and entry-level sales of tape automation systems had similar revenue decreases from fiscal 2012. As noted above, demand for tape automation products decreased approximately 20% during the first half of fiscal 2013. Revenue from OEM tape automation systems decreased 20% while branded tape automation systems revenue decreased 13%, an indication that we gained market share in the branded tape business during fiscal 2013.decreased as expectedincreased modestly from fiscal 2012 largely2013 primarily due to decreasedincreased branded media sales in addition to lowerincreased revenue from devices. These revenue decreases were primarily overall market declines. Higher than typical media sales during fiscal 2012 due to inventories being increased in response to concerns of supply disruptions following the March 2011 earthquake and tsunami in Japan also contributed to the decreased media revenue in fiscal 2013 compared to the prior year.Fiscal 2012 Compared to Fiscal 2011Product revenue decreased slightly from fiscal 2011, primarily due to decreased sales of tape automation systems and devices and media, mostly offset by increased revenue from disk systems and software solutions. Revenue from sales of branded products increased 3% in fiscal 2012StorNext appliances compared to fiscal 2011 primarily due to increased sales of disk systems and software solutions.We introduced new disk products, a new product line of StorNext appliances and released upgrades to both disk systems and to software solutions in fiscal 2012, all of which contributed to fiscal 2012 revenue. We continued our efforts to expand engagement with our channel partners to increase sales of disk systems and software solutions. Revenue from disk systems and software solutions increased 8% to $119.0 million in fiscal 2012 compared to fiscal 2011, primarily due to increased midrange disk product sales followed by the addition of StorNext appliances. Midrange disk systems revenue increases were primarily due to the addition of revenue from our DXi6701 and DXi6702 products. Tempering these increases was an expected decrease in OEM deduplication software revenue due to our primary OEM deduplication software customer becoming a competitor in fiscal 2010 and revenue recognized in accordance with contractual requirements in fiscal 2011 that was not repeated.Tape automation systems sales decreased $9.1 million, or 4%, in fiscal 2012 compared to fiscal 2011. This decrease was primarily due to expected declines in OEM revenue, followed by decreased branded enterprise and entry-level tape automation systems revenue.Product revenue from devices, including tape drives and removable hard drives, and non-royalty media sales decreased 5% to $87.3 million primarily due to anticipated decreases in sales of older branded and OEM device technologies that reached, or are nearing, end of life. Largely offsetting the decrease was an increase in branded media revenue primarily due to the March 2011 earthquake and tsunami in Japan and resulting concern of shortages and supply disruption in the market. We continue to be strategic with media sales and have chosen to not pursue opportunities that do not provide sufficient margins.includes revenue from salesis primarily comprised of hardware service contracts, product repair, installation and professional services. Sales of hardware service contractswhich are typically purchased by our customers to extend the warranty or to provide faster service response time, or both. Service revenue was relatively unchangedincreased in both fiscal 20132015 and 2014 primarily due to a decreased volume of OEM product repair services that was offset by growth inincreased revenue from branded service contracts associated withfor our StorNext appliances. 4% to $144.4 million in fiscal 2012 compared to2015 and increased in fiscal 2011 primarily due to lower hardware service contract revenues from end of service life on higher revenue service contracts for certain legacy branded tape automation products and to a lesser extent from decreased OEM product repair services. Service contracts on certain newer technology branded products provide lower revenue than service contracts on older technology branded products nearing end of service life. OEM service revenue decreases are2014 primarily due to a number of our device products that reached end of service life$15.0 million royalty received in connection with an intellectual property agreement in fiscal 2011 and fiscal 2012.Royalty Revenue®Tape media royalties decreased 21%, or $12.2 million, fromin both fiscal 2012 due2015 and 2014 as customers chose to lower media unit sales sold by media licensees, largely due to an expected decrease in market demand for LTO media. In addition, royalties from DLT media continued to decrease as expected due to many companies no longer choosing tonot use this older technology.Royalty revenue declined 12%, or $7.6 million, in fiscal 2012 primarily due to expected decreases of maturing DLT media unit sales by media licensees. Royalties from LTO media decreased 4% in fiscal 2012 primarily due to decreased LTO media unit sales by media licensees.For the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Margin Margin
Rate Margin Margin
Rate Margin Margin
Rate Product margin $ 131,769 33.0 % $ 160,964 35.7 % $ 162,528 35.6 % $ (29,195 ) (18.1 )% $ (1,564 ) (1.0 )% Service margin 64,390 44.7 % 55,905 38.7 % 56,784 37.6 % 8,485 15.2 % (879 ) (1.5 )% Royalty margin 44,492 100.0 % 56,666 100.0 % 64,272 100.0 % (12,174 ) (21.5 )% (7,606 ) (11.8 )% Gross margin $ 240,651 41.0 % $ 273,835 * 42.0 % $ 282,982 * 42.1 % $ (33,184 ) (12.1 )% $ (9,147 ) (3.2 )% For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Margin Margin Margin Margin Margin Product margin $ 117,900 33.2 % $ 111,242 31.9 % $ 131,636 33.0 % $ 6,658 130 $ (20,394 ) (110 ) Service margin 84,944 54.6 % 71,269 48.4 % 64,433 44.7 % 13,675 620 6,836 370 Royalty margin 41,842 100.0 % 57,648 100.0 % 44,492 100.0 % (15,806 ) — 13,156 — Gross margin $ 244,686 44.2 % $ 239,620 * 43.3 % $ 240,561 41.0 % $ 5,066 90 $ (941 ) 230 20122014 total gross margin includes a $0.3 million restructuring benefit related to cost of revenue and fiscal 2011 total gross margin includes $0.6$0.5 million of restructuring chargesexpense related to cost of revenue.Fiscal 2013 Compared to Fiscal 201210090 basis point decrease in gross margin percentage compared to fiscal 2012 was primarily due to decreased product revenue and a corresponding lower product gross margin as well as a $12.2 million decrease in royalty revenue, partially offset by increased service gross margin. Some of our costs of goods sold are relatively fixed in the short term; therefore, revenue increases or decreases can have a material impact on the gross margin rate.Fiscal 2012 Compared to Fiscal 2011The 10 basis point decreaseincrease in gross margin percentage in fiscal 20122015 compared to fiscal 20112014 was primarily driven by an increase in the service gross margin rates and to a lesser extent, product gross margin rates. The improvement in the overall gross margin rate reflects the impact of the changes we have implemented in our operations, repair and service business models, partially offset by the decline in royalty revenue.largely offsetting factors. Gross margin decreasedthe $13.2 million net increase in royalty revenue, and to a lesser extent, due to less high margin revenuethe improvements in our service delivery model. These increases were partially offset by decreases in our product mix,margin, largely fromas a result of decreased OEM deduplication software revenue and royaltyproduct revenue. Both OEM deduplication software and royalty revenue provide among the highest margins20132015 Compared to Fiscal 2012$29.2$20.4 million, or 18%15%, compared to fiscal 2012,2013, and our product gross margin rate decreased 270110 basis points primarily due to a 12%13% decrease in product revenue. As noted above, somerevenue which was mostly offset by decreased costs as a result of our productseveral items. Product material costs of goods sold are relatively fixed indecreased the short term; therefore, product revenue increases or decreases impactmost, commensurate with the product gross margin rate. The change in the mix of products sold, as described abovedecrease in product revenue, and we also contributedhad decreased freight costs as a result of fewer shipments. A number of expenses decreased compared to fiscal 2013 as a result of cost reduction initiatives that began in the second half of fiscal 2013 and continued throughout fiscal 2014. The most significant decreased product margins in fiscal 2013. In addition, we had an increase incost as a result of these initiatives was compensation and benefits expense from reduced staffing levels in fiscal 2013 comparedaddition to fiscal 2012 primarily duedecreased facility expenses from additional reductions to investment in our software support team.warehouse footprint. We also had an increase in the manufacturing inventory allowance in fiscal 2013 compared to the prior year largely due to more products nearing end of life. Partially offsetting these factors was lower intangible amortization in fiscal 2013 due to2014 from certain intangible assets becoming fully amortized in fiscal 2013 and fiscal 2012, decreased facility expense from reducing our warehouse footprint and lower freight expense as a result of fewer shipments compared to fiscal 2012.Fiscal 2012 Compared to Fiscal 2011Product gross margin dollars decreased 1% in fiscal 2012 compared to fiscal 2011 primarily due to the 1% decrease in product revenue. However, product gross margin percentage improved slightlyfrom fiscal 2011. The product gross margin increase was primarily due to a $7.1 million decrease in intangible amortization in fiscal 2012, mostly offset by the decrease in high margin OEM deduplication software revenue compared to fiscal 2011.Fiscal 2013 Compared to Fiscal 2012$8.5$13.7 million, or 15%19%, in fiscal 2015 compared to fiscal 2012,2014, and service gross margin percentage increased 600620 basis points whilecompared to fiscal 2014 on a 6% increase in service revenue was unchanged.revenue. Service gross margin dollars increased $6.8 million, or 11%, in fiscal 2014 compared to fiscal 2013, and service gross margin percentage increased 370 basis points on a 2% increase in service revenue. The increase in service gross margin rate in both periods was primarily due to reduced costs acrossas a result of continued improvements to our service delivery model, from a decreased volume of repairsincluding outsourcing geographies with lower service and in part due to bringing repair of certain product lines in-house. The more significant cost decreases in fiscal 2013 compared to fiscal 2012 were for compensation and benefits, external service providers, third party warehouse and service materials. Compensation and benefits decreased due to reduced staffing requirements from decreased repair volumes. External service provider expense decreased due to a combination of having repair of certain product lines in-house for the full fiscal year, decreased repair volumes and negotiating lower rates on the renewalsimproving utilization of contracts with certainour service providers in fiscal 2012. Third party warehouse expenses decreased due to efforts to reduceteam and service parts inventory levels including reduced usage of third party warehouses. Service material decreases were primarily due to lower repair volumes compared to the prior year.inventories. In addition, our service activities continue to reflect a larger proportion of branded products under contract, which have margins that are relatively higher margins than margins for OEM repair services. For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Research and development $ 58,618 10.6 % $ 64,375 11.6 % $ 73,960 12.6 % $ (5,757 ) (8.9 )% $ (9,585 ) (13.0 )% 20122015 Compared to Fiscal 20112014Service gross margin dollars decreased $0.9 million, or approximately 2%, in fiscal 2012 compared to fiscal 2011. Our service gross margin percentage increased 110 basis points to 38.7% in fiscal 2012, largely due to decreased external provider expenses and inventory allowance expense. External service provider expense decreased due to a combination of bringing repair of additional product lines in-house and negotiating lower rates on the renewals of contracts with certain service providers in fiscal 2012. We had higher inventory allowance expense in fiscal 2011 due to end of service life plans for several products. In addition, our service activities for fiscal 2012 reflected a greater proportion of revenue from branded products under contract, which have relatively higher margins than margins for OEM repair services.Research and Development ExpensesFor the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue Research and development $ 73,960 12.6 % $ 74,365 11.4 % $ 73,008 10.9 % $ (405) (0.5) % $ 1,357 1.9 % Fiscal 2013 Compared to Fiscal 201220122014 was the net resultprimarily due to implementing cost controls and spending reductions that resulted in a $4.7 million decrease in compensation and benefits from reduced staffing levels. Additionally, there was a $1.2 million decrease in depreciation expense due to declining capital expenditures.the implementation ofFiscal 2013the second half of fiscal 2013, including restructuring actions that decreased headcount, wea $6.6 million decrease in compensation and benefits from reduced staffing levels due to focusing investments in scale-out storage technology while continuing to invest in targeted future generation tape and disk technology. We also had a decrease of $1.5 million in external service provider expense and a decrease of $0.9 million in depreciation expense due to equipment becoming fully depreciated. Additionally, there was a $0.3 million decrease in project material expenses due to the nature of projects under development and specific development activities in the prior year periods that were not repeated at the same levels and a $0.3 million decrease in expensed equipment. For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Sales and marketing $ 113,954 20.6 % $ 118,771 21.5 % $ 136,873 23.3 % $ (4,817 ) (4.1 )% $ (18,102 ) (13.2 )% also had smaller decreases in several other areas including travel expenses, dues and subscriptions and facilities expense. In addition, we had a $0.6 million decrease in project materials as a result of the types of products under development and related testing material requirements compared to the prior year. Mostly offsetting these decreases, we had a $0.9 million increase in depreciation expense due to laboratory testing equipment purchases and a $0.6 million increase in use of external service providers, primarily for next generation LTO product development.Fiscal 2012 Compared to Fiscal 2011The increase in research and development expenses for fiscal 2012 was primarily due to a $1.7 million increase in compensation and benefits from investment in our disk systems software and hardware and our virtual systems engineering teams to support new product development efforts. Partially offsetting this increase was a $0.5 million decrease in travel expenses compared to the prior year.Sales and Marketing ExpensesFor the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue Sales and marketing $ 137,041 23.3 % $ 130,938 20.1 % $ 122,768 18.3 % $ 6,103 4.7 % $ 8,170 6.7 % Fiscal 2013 Compared to Fiscal 2012The increase in sales and marketing expense in fiscal 2013reduced revenue compared to fiscal 2012 was primarily due to a $5.6 million increase in compensation and benefits from growing our branded sales force and marketing team in the first half of fiscal 2013. In addition, weWe had a $2.2 million net increase in advertising and marketing expenses and a $0.7 million increase in external service provider expense due to our awareness campaign and expanded advertising programs in the first half of fiscal 2013 intended to increase current and future demand for our products and services. As noted above, these efforts contributed to the stronger new customer acquisition in fiscal 2013. These increases were partially offset by a $3.6$2.1 million decrease in intangible amortization due to certain intangibles becoming fully amortized. For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 General and administrative $ 56,513 10.2 % $ 57,865 10.5 % $ 62,017 10.6 % $ (1,352 ) (2.3 )% $ (4,152 ) (6.7 )% 20122015 Compared to Fiscal 2011Sales and marketing expenses increased in fiscal 2012 primarily due to a $7.2 million increase in compensation and benefits, including commissions. Commissions increased due to increased branded product revenue and salaries and benefits increased largely due to growing our branded sales force. In addition, travel expenses increased $1.0 million due in part to increased airfare and fuel costs, incremental travel by our sales engineers to support customer sales and increased travel for sales training events to expand our position with existing and new channel partners to drive future growth.General and Administrative ExpensesFor the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue General and administrative $ 62,179 10.6 % $ 62,910 9.6 % $ 59,460 8.8 % $ (731) (1.2) % $ 3,450 5.8 % Fiscal 2013 Compared to Fiscal 2012expenses from fiscal 2012expense was primarily due to a $1.6 million decrease in facility-related expenses from vacating portions of various facilities in fiscal 2014 and continuing into fiscal 2015. Additionally, we had a $0.8 million decrease in depreciation expense due to declining capital expenditures. These decreases were partially offset by a $0.9 million increase in legal and advisory fees, primarily due to costs related to intellectual property matters and costs related to activities and inquiries of Starboard Value LP incurred during fiscal 2015.from reduced headcountlargely as a result of restructuring actions taken in the second half of fiscal 2013.We may incur higher than typical legal costs in fiscal 2014 to defend ourselves while patent infringement lawsuits are ongoing. We do not believe there is a reasonable possibility that we will pay material damages related to these lawsuits. These lawsuits are discussed in more detail in Note 13 “Commitments and Contingencies” under Legal Proceedings.Fiscal 2012 Compared to Fiscal 2011The increase in general and administrative expenses was primarily due to a $2.2 million increase in compensation and benefits primarily from increaseddecreased staffing as well as reduced stock compensation expense due to equity grants relateda modification to promotions and merit increases. In addition, we had $1.4extend the post-retirement exercise period for certain options in the first quarter of fiscal 2013 that was not repeated. Other cost decreases included $0.8 million in credits infacility expenses from consolidating facilities during fiscal 2011 primarily2014, $0.5 million due to accounts receivable recoveriesa refund of prior IT claims, $0.4 million in depreciation expense, $0.3 million in external service provider expense and a litigation settlement that were not repeated. For the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue $ — — % $ (300 ) 0.0 % $ 602 0.1 % $ 300 100.0 % $ (902 ) (149.8 )% 10,171 1.7 % 1,930 0.3 % 3,042 0.5 % 8,241 n/m (1,112 ) (36.6 )% Total restructuring charges $ 10,171 1.7 % $ 1,630 0.2 % $ 3,644 0.5 % $ 8,541 n/m $ (2,014 ) (55.3 )% For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Restructuring charges related to
cost of revenue$ — — % $ 539 0.1 % $ — — % $ (539 ) (100.0 )% $ 539 n/a 1,666 0.3 % 10,675 1.9 % 10,171 1.7 % (9,009 ) (84.4 )% 504 5.0 % Total restructuring charges $ 1,666 0.3 % $ 11,214 2.0 % $ 10,171 1.7 % $ (9,548 ) (85.1 )% $ 1,043 10.3 % actions are stepsplans have been undertaken to reduce costs in an effort to return to consistent profitability. Given the tape revenue decreaseprofitability and generate cash from operations. Restructuring actions in fiscal 2015 were largely due to further consolidating our facilities in the first half ofU.S.2013, its impact on operating profit and the use of cash in operations, we recognized the need for and implemented restructuring plans in the second half of fiscal 2013. In fiscal 2011 and 2012, restructuring actions2014 were largely due to consolidate operations supporting our business were the result of strategic management decisions. decisions to outsource our manufacturing and further consolidate repair and service operations, in addition to reducing research and development, sales and marketing and administrative activities and teams to align our workforce with our continuing operations plans.20132015 Compared to Fiscal 2012The increase in restructuring201420132015 compared to the prior year wasfiscal 2014 primarily due to a $6.7 million increase indecreased severance and benefits expense from eliminating more positionsrestructuring and facility restructuring charges. Severance and benefits restructuring charges decreased $5.7 million in both the U.S. and internationally across most functions of the business to align spending with revenue expectations. Facility restructuring expense increased $1.6 millionfiscal 2015 compared to fiscal 20122014 primarily due to accruing remaining lease expense relatedstrategic management decisions to the portionoutsource our manufacturing operations and further consolidate production and service activities in fiscal 2014. Facility restructuring charges decreased $3.1 million in fiscal 2015 compared to fiscal 2014 primarily due to vacating a majority of a U.S. facility that was vacatedour manufacturing and warehouse facilities in the fourth quarter ofU.S. in fiscal 2013.20122014 Compared to Fiscal 2011The decrease2013inlargely attributable to our decision to outsource our manufacturing operations. Facility restructuring charges increased $2.4 million from fiscal 2012 was2013 primarily due to vacating a $2.0majority of our manufacturing and warehouse facilities, all of which are in the U.S. Other restructuring charges increased $0.8 million decrease in severance chargesprimarily due to fewer positions eliminated during the year as a result of strategic management decisions and a $0.9 million decrease in restructuring charges related to cost of revenuesales incurred as a result of our manufacturing outsourcing decision. These were partially offset by a $2.1 million decrease in severance charges largely due to lower actual costs than estimated to exit a supplier relationship. Partially offsetting these decreases washigher average severance charge per position in the prior year as a $0.9 million increase in facility restructuring charges due to negotiating a $0.3 million settlement for a lease liability on a vacated facility in India in fiscal 2012result of the specific job type, tenure and $0.6 million in credits in fiscal 2011 primarily due to negotiating settlements for lease liabilities for amounts lower thangeographies of the outstanding lease contracts.positions eliminated.PatentsFor the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue Gain on sale of patents $ — — % $ 1,500 0.2 % $ — — % $ (1,500) (100.0) % $ 1,500 n/a During fiscal 2012, weAssets For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Gain on sale of assets $ 462 0.1 % $ 267 0.0 % $ — — % $ 195 73.0 % $ 267 n/a $1.5$0.5 million gain on the sale of patents. Underassets primarily due to the patent sale agreement, we retain a royalty-free license for these patents. We may enter into similar transactionsof IP addresses in the future.For the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue Other income and (expense) $ (216) 0.0 % $ (118) 0.0 % $ 1,199 0.2 % $ (98) (83.1) % $ (1,317) (109.8) % For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Other income and (expense) $ 13,836 2.5 % $ 1,296 0.2 % $ (216 ) 0.0 % $ 12,540 967.6 % $ 1,512 n/m Other expense2013 was relatively unchanged from fiscal 2012. Other income and expense decreased $1.3 million in fiscal 20122015 compared to fiscal 20112014 was primarily due to a $1.6$12.8 million net decreaseincrease in investment gains from fiscal 2011, largely due to a $13.6 million gain on the sale of our investment in a privately held company in fiscal 2015.from private technology venture limited partnerships thatin fiscal 2014 compared to foreign currency losses in fiscal 2013. The foreign currency gains in fiscal 2014 were not repeated. In addition, we hadprimarily attributable to a $0.4 million net increase in foreign exchange losses primarily due tostrengthening of the U.S. dollar strengthening against the euro in fiscal 2012. These were partially offset by $0.9 million in fees for an amendment to our senior secured credit agreement in fiscal 2011 that were not repeated.Interest ExpenseFor the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue Interest expense $ 8,342 1.4 % $ 10,686 1.6 % $ 20,163 3.0 % $ (2,344) (21.9) % $ (9,477) (47.0) % Fiscal 2013 Compared to Fiscal 2012Interest expense decreased from fiscal 2012 primarily due to principal payments in the prior year that reduced the outstanding debt balanceAustralian dollar. The foreign currency losses in fiscal 2013 compared to fiscal 2012. We also had a lower average interest rate during fiscal 2013 than the prior year that contributed to decreased interest expense. In addition, the debt refinancing in March 2012 to a revolving credit facility that had lower debt issuance costs than the prior credit facility decreased amortization of debt issuance costs in fiscal 2013 compared to fiscal 2012.Fiscal 2012 Compared to Fiscal 2011Interest expense decreased in fiscal 2012 compared to fiscal 2011 primarilywere largely due to decreased average interest rates from refinancing subordinated term debt that had a 12% interest rate with 3.5% convertible subordinated notes issued in November 2010. In addition, we had a lower senior secured term debt balance in fiscal 2012 than fiscal 2011 which also contributed to decreased interest expense.In addition tostrengthening of the items noted above, interestU.S. dollar against the euro. For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Interest expense $ 9,460 1.7 % $ 9,754 1.8 % $ 8,342 1.4 % $ (294 ) (3.0 )% $ 1,412 16.9 % “Convertible Subordinated Debt and Long-Term Debt”“Debt” to the Consolidated Financial Statements.
Interest expense decreased in fiscal 2015 from fiscal 2014 due to the purchase of $50.0 million of aggregate principal amount of 3.50% convertible subordinated notes in January 2015. Interest expense increased in fiscal 2014 from fiscal 2013 primarily due to refinancing our revolving debt balance in the third quarter of fiscal 2013 with 4.50% convertible subordinated notes. These convertible subordinated notes have a higher interest rate and a larger principal balance.For the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
revenue % of
revenue % of
revenue Loss on debt extinguishment $ — —% $ (2,310 ) (0.4)% $ (1,186 ) (0.2 )% $ 2,310 100.0 % $ (1,124 ) (94.8 )% For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Loss on debt extinguishment $ 1,295 0.2 % $ — — % $ — — % $ 1,295 n/a $ — n/a Duringfourth quarterpurchase of fiscal 2012, we fully repaid our senior secured term loan with Credit Suisse using cash on hand and borrowings$50.0 million of $49.5 million from a new credit facility with Wells Fargo.aggregate principal amount of the 3.50% convertible subordinated notes for $51.0 million. In connection with this transaction, we recorded a loss on debt extinguishment we wrote off $2.3of $1.3 million comprised of the loss of $1.0 million from the notes purchased and a write-off of $0.3 million of unamortized debt costs related to the Credit Suisse credit agreement.During the third quarter of fiscal 2011, we fully repaid outstanding subordinated term loans by issuing $135 million aggregate principal of 3.50% convertible subordinatedpurchased notes. In connection with this debt extinguishment, we wrote off $1.2 million of unamortized debt costs relatedFor further information, refer to Note 7 “Debt” to the subordinated term loans.For the year ended March 31, Change (dollars in thousands) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 % of
pre-tax loss % of
pre-tax loss % of
pre-tax income Income tax provision $ 1,161 (2.3 )% $ 887 (11.2 )% $ 13 0.3 % $ 274 30.9 % $ 874 n/m For the year ended March 31, Change (dollars in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 % of
pre-tax income % of
pre-tax loss % of
pre-tax loss Income tax provision $ 718 4.1 % $1,217 (6.0 )% $ 1,161 (2.3 )% $ (499 ) (41.0 )% $ 56 4.8% $0.3 million increasedecrease in income tax expense in fiscal 2013 compared to fiscal 2012provision was primarily due to higherlower foreign taxes. The $0.9 million increase in tax expensetaxes in fiscal 20122015 compared to fiscal 20112014. Income tax provision was primarily due to the releaseessentially unchanged in fiscal 2011 of $0.9 million in tax liabilities in foreign jurisdictions that were not repeated.2014 compared to fiscal 2013. Tax expense in fiscal 20132015, 2014 and fiscal 20122013 was primarily comprised of foreign income taxes and state taxes. Tax expense in fiscal 2011 was primarily comprisedFor additional information, including a reconciliation of foreign income taxes and state taxes, offset by the release ofeffective tax liabilities in foreign jurisdictions duerate, refer to a favorable settlement and expiration of statutes of limitation.For the year ended March 31, Change 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Cost of revenue $ 3,775 $ 7,583 $ 14,662 $ (3,808 ) (50.2 )% $ (7,079 ) (48.3 )% Research and development — — 200 — — % (200 ) (100.0 )% Sales and marketing 9,524 13,128 13,419 (3,604 ) (27.5 )% (291 ) (2.2 )% General and administrative — 32 100 (32 ) (100.0 )% (68 ) (68.0 )% $ 13,299 $ 20,743 $ 28,381 $ (7,444 ) (35.9 )% $ (7,638 ) (26.9 )% For the year ended March 31, Change 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Cost of revenue $ 913 $ 1,476 $ 3,775 $ (563 ) (38.1 )% $ (2,299 ) (60.9 )% Sales and marketing 2,784 7,426 9,524 (4,642 ) (62.5 )% (2,098 ) (22.0 )% $ 3,697 $ 8,902 $ 13,299 $ (5,205 ) (58.5 )% $ (4,397 ) (33.1 )% decreaseddecreases in intangible asset amortization in fiscal 20132015 and 20122014 compared to the respective prior years was due to certain intangible assets becoming fully amortized. Refer to Note 5 “Intangible Assets and Goodwill” to the Consolidated Financial Statements for further information regarding our amortizable intangible assets.For the year ended March 31, Change 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Cost of revenue $ 2,389 $ 2,203 $ 1,768 $ 186 8.4 % $ 435 24.6 % Research and development 3,665 3,250 2,486 415 12.8 % 764 30.7 % Sales and marketing 4,699 4,048 3,121 651 16.1 % 927 29.7 % General and administrative 4,386 4,236 3,046 150 3.5 % 1,190 39.1 % $ 15,139 $ 13,737 $ 10,421 $ 1,402 10.2 % $ 3,316 31.8 % For the year ended March 31, Change 2015 2014 2013 2015 vs. 2014 2014 vs. 2013 Cost of revenue $ 1,489 $ 1,963 $ 2,389 $ (474 ) (24.1 )% $ (426 ) (17.8 )% Research and development 2,559 3,430 3,665 (871 ) (25.4 )% (235 ) (6.4 )% Sales and marketing 3,506 4,097 4,699 (591 ) (14.4 )% (602 ) (12.8 )% General and administrative 4,029 3,969 4,386 60 1.5 % (417 ) (9.5 )% $ 11,583 $ 13,459 $ 15,139 $ (1,876 ) (13.9 )% $ (1,680 ) (11.1 )% increasedecrease in share-based compensation in fiscal 20132015 was primarily due to $2.5a $1.3 million decrease in the restricted stock expense resulting from a lower fair value of incremental RSUrestricted stock units. We also had a $0.4 million decrease in stock purchase plan expense largely for merit awards grantedas a result of decreased headcount.2013share-based compensation in fiscal 2014 was primarily due to sales and marketing and research and development team members. This increase was partially offset by a $0.9 million decrease in option expense fromdue to option modifications in fiscal 2012 due2013 that were not repeated in addition to existing options becoming fully vested during fiscal 2013 and a $0.2 million decrease in expense related to the employee stock purchase plan (“ESPP”) due to lower stock prices than fiscal 2012.The increase in share-based compensation expense in fiscal 2012 compared to fiscal 2011 was primarily due to a $3.7 million increase in expense related to restricted stock units due to more restricted stock units granted for employee merit increases at a higher grant-date stock price in fiscal 2012 than fiscal 2011. In addition we2014. We also had a $0.6 million increasedecrease in stock purchase plan expense related to the ESPP due to increased participation ina combination of decreased employee contributions as a result of reduced staffing from fiscal 2012. This was partially offset by a $1.0 million decrease in expense related to options due to more options vesting in fiscal 2012 than were replaced by new option grants.Recent Accounting PronouncementsSee Recent Accounting Pronouncements in Note 2 “Summary2013 and lower stock prices.As of or for the year ended March 31, (In thousands) 2013 2012 2011 Cash and cash equivalents $ 68,976 $ 51,261 $ 76,010 Net income (loss) (52,419 ) (8,809 ) 4,541 Net cash provided by operating activities 7,735 45,660 52,327 Net cash used in investing activities (10,908 ) (21,974 ) (10,103 ) Net cash provided by (used in) financing activities 20,975 (48,353 ) (81,286 ) Fiscal 2013The $60.2 million difference between reported net loss and cash provided by operating activities during fiscal 2013 was primarily due to $52.1 million in non-cash items, the largest of which were share-based compensation, amortization, depreciation and service parts lower of cost or market adjustment. In addition, we had an $11.7 million decrease in accounts receivable primarily due to lower revenue and service billings in the fourth quarter of fiscal 2013 than the fourth quarter of fiscal 2012. This was partially offset by an $8.6 million decrease in accounts payable primarily due to decreased purchases and the timing of payments.Cash used in investing activities was primarily due to $10.1 million of property and equipment purchases and $2.2 million used to purchase other investments. Equipment purchases were primarily for engineering equipment and testing hardware to support product development activities and equipment to update our network. We also made leasehold improvements to a location we started leasing in the first quarter of fiscal 2013. Other investment purchases we made were in private technology companies with products or features complementary to Quantum products and our strategy.Cash provided by financing activities during fiscal 2013 was primarily due to $18.2 million in net borrowings from issuing convertible subordinated debt and repaying our line of credit balance from a portion of the convertible debt proceeds. In addition, we received $4.8 million from the exercise of stock options and issuance of shares under the employee stock purchase plan, partially offset by $2.0 million paid for taxes due upon vesting of restricted stock.Fiscal 2012The $54.5 million difference between reported net loss and cash provided by operating activities in fiscal 2012 was primarily due to $60.4 million of non-cash expenses, including amortization, share-based compensation, depreciation and service parts lower of cost or market adjustment. In addition, we had an $8.1 million increase in deferred revenue primarily due to increased sales of service contracts. Partially offsetting these was a $21.4 million use of cash from increased manufacturing inventories primarily due to purchasing materials to build and configure new products and securing hard disk drives in light of supply constraints from flooding in Thailand earlier in the fiscal year.Cash used in investing activities during fiscal 2012 was primarily due to $11.4 million in purchases of property and equipment and $8.2 million of cash paid, net of cash acquired, for our acquisition of Pancetera. Equipment purchases were primarily for engineering equipment and testing hardware to support product development activities.Cash used in financing activities during fiscal 2012 was primarily due to net debt repayments of $55.8 million, including $104.3 million to fully repay our senior secured term debt. We refinanced a portion of the senior secured term debt with a new revolving credit facility in fiscal 2012. Partially offsetting cash used in financing activities was $10.4 million in proceeds received from the exercise of stock options and issuance of shares under the employee stock purchase plan.Fiscal 2011The $47.8 million difference between reported net income and cash provided by operating activities in fiscal 2011 was primarily due to $67.5 million of non-cash expenses, including amortization, service parts lower of cost or market adjustment, depreciation and share-based compensation. These noncash expenses were partially offset by a $14.9 million increase in accounts receivable primarily due to increased sales of products and service billings in the fourth quarter of fiscal 2011 compared to the fourth quarter of fiscal 2010.Cash used in investing activities during fiscal 2011 was primarily due to $12.3 million in purchases of property and equipment. Equipment purchases were primarily for engineering test equipment to support product development activities.Cash used in financing activities during fiscal 2011 was primarily due to net debt repayments of $95.5 million, including $81.7 million of principal on our senior secured term debt. We refinanced subordinated term loans with 3.50% convertible subordinated debt in fiscal 2011, and the repayment of this long-term debt was offset by borrowings of convertible subordinated debt. In addition, we received $16.5 million from the issuance of common stock.“Convertible Subordinated Debt and Long-Term Debt”“Debt” to the Consolidated Financial Statements.$205$153.7 million of convertible subordinated debt outstanding in addition to a line of credit under thea Wells Fargo Credit agreement, inclusive of amendments (“WF credit agreement”). The $135$153.7 million aggregate principal amount outstandingof convertible subordinated debt is comprised of $83.7 million of 3.50% convertible subordinated notes is due November 15, 2015 the terms of which are governed by an agreement dated November 15, 2010 between Quantum and U.S. Bank National Association (“3.50% notes”). The and $70 million aggregate principal amount outstanding of 4.50% convertible subordinated notes further described below is due November 15, 2017 the terms of which are governed by an agreement dated October 31, 2012 between Quantum and U.S. Bank National Association (“4.50% notes”). Both the 3.50% notes and the 4.50% notes have required semi-annual interest payments.Duringpayments and no early call provisions. Interest payments related to the third quarter of fiscal 2013, we issued $70 million aggregate principal amount of convertible subordinated notes. This was comprised of $60 million aggregate principal amount issued on October 31, 2012,3.50% notes and an additional $10 million aggregate principal amount issued on November 6, 2012 pursuant to an over-allotment provision. These4.50% notes are convertible into shares of our common stock at a conversion rate of 607.1645 shares per $1,000 principal amount, a conversion price of approximately $1.65 per share. We may not redeem the notes prior to their maturity date although investors may convert the 4.50% notes into Quantum common stock until November 14, 2017 at their option. In addition, since purchasers are qualified institutional investors, as defined in Rule 144A under the Securities Act of 1933 (“Securities Act”), the 4.50% notes have not been registered under the Securities Act. We pay 4.50% interest per annum on the principal amount of the 4.50% notes semi-annuallypaid on May 15 and November 15 of each year beginning in May 2013. Interest began to accrue on October 31, 2012. The 4.50% notes are subordinated to any existing indebtedness and other liabilities.year. We incurred and capitalized $2.3paid $5.1 million of fees forinterest on the 3.50% notes and $3.2 million of interest on the 4.50% notes which are included in other long-term assets in our Consolidated Balance Sheets. The fees are amortizedfiscal 2015.interest expense over the termpurchase $50.0 million of aggregate principal amount of the 3.50% notes for $51.0 million. In connection with this transaction, we recorded a loss on debt extinguishment of $1.3 million comprised of the loss of $1.0 million from the notes we purchased and a write-off of $0.3 million of unamortized debt costs related to the purchased notes.maximum borrowing amount is the lesser of $55 million or the amount of the monthly borrowing base. The WF credit agreement matures March 29, 2017 so long as an amount sufficient to repay the 3.50% notes is available for borrowing under the WF credit agreement or is deposited in a WF controlled account prior to August 16, 2015. Otherwise, the WF credit agreement matures on August 16, 2015 if our 3.50% notes remain outstanding on that date.2015. Quarterly, we are required to pay a 0.375% commitment fee on undrawn amounts under the revolving credit facility. There is a blanket lien on all of our assets under the WF credit agreement in addition to certain financial and reporting covenants. On October 31, 2012, we repaid all outstanding borrowings under the WF credit agreement with $49.5 million of the proceeds from the 4.50% notes. We have letters of credit totaling $1.1$1.0 million, reducing the maximum amount available to borrow to $53.9 millionby this amount at March 31, 2013.May 29, 2015. As of March 31, 2013,May 29, 2015, and during fiscal 2015, we were in compliance with all covenants and had no outstanding balance on the line of credit.There were two primary amendments madeduring fiscal 2013. On June 28, 2012,or (2) the LIBOR rate plus an applicable margin ranging from 2.0% and 2.5%, based on availability levels under the WF credit agreement was amendedagreement. The base rate is defined in order to allow the assignment of one third of the total revolver commitment to Silicon Valley Bank. This amendment also made certain other conforming and related modifications, including changes to the average liquidity requirements.With the completion of the convertible debt offering in the third quarter of fiscal 2013, we requested an amendment to the WF credit agreement.to decrease the line of credit and modify certaincontains customary covenants, including cross-default provisions, as well as financial covenants. An amendment was completed on January 31, 2013. The averageAverage liquidity covenant was eliminated.must exceed $15 million each month. The fixed charge coverage ratio covenant is applicable only in fiscal quarters in which liquidity is below $16.5 million and decreased fromrequired to be greater than 1.2 to 1.1 for the 12 month period ending on the last day of any fiscal quartermonth in which the covenant is applicable. The liquidity requirement toThis covenant is applicable only in months in which borrowings exceed $5 million at any time during the month and was not applicable in fiscal 2015. To avoid triggering mandatory field audits decreased fromand Wells Fargo controlling our cash receipts, we must maintain liquidity of at least $20 million to $18.5 million commencing January 31, 2013 and will remain at this level for the remaining termall times. Repurchases of the credit agreement. Both thesubordinated convertible notes is allowed as long as we have a proforma fixed coverage ratio of 1.5 and liquidity of $25 million. The fixed charge coverage ratio, average liquidity and liquidity are defined in the WF credit agreement andand/or amendments. Certain schedules in the January 31, 2013 amendment. In addition, compliance certificatescertificate must be filed monthly if borrowings exceed $15 million,$5 million; otherwise they are to be filed quarterly. The fixed charge coverage ratio was not applicable for the fourth quarterbig data and archivescale-out storage markets. We implemented cost reduction initiatives in the third quarter of fiscal 2013 and additional spending control programs in the fourth quarter of fiscal 2013 in an effort to better align spending with revenue expectations. We cannot provide assurance that the actions we are currently undertaking, have taken in the past or any actions we may take in the future will ensure a consistent, sustainable and sufficient level of net income and positive cash flow from operating activities to fund, sustain or grow our business. Certain events that are beyond our control, including prevailing economic, competitive and industry conditions, as well as various legal and other disputes, may prevent us from achieving these financial objectives. Any inability to achieve consistent and sustainable net income and cash flow could result in:(i)(i) Restrictions on our ability to manage or fund our existing operations, which could result in a material and adverse effect on our future results of operations and financial condition. (ii) Unwillingness on the part of the lenders to do any of the following: Any lack of renewal, waiver, or amendment, if needed, could result in the revolving credit line becoming unavailable to us and any amounts outstanding becoming immediately due and payable.(iii) Further impairment of our financial flexibility, which could require us to raise additional funding in the capital markets sooner than we otherwise would, and on terms less favorable to us, if available at all. As of or for the year ended March 31, (In thousands) 2015 2014 2013 Cash and cash equivalents $ 67,948 $ 99,125 $ 68,976 Net income (loss) 16,760 (21,474 ) (52,179 ) Net cash provided by operating activities 6,034 35,474 7,735 Net cash provided by (used in) investing activities 11,641 (6,649 ) (10,908 ) Net cash provided by (used in) financing activities (48,641 ) 1,285 20,975 certainour manufacturing functions.operations. Under these arrangements, the contract manufacturer procures inventory to manufacture products based upon our forecast of customer demand. We have similar arrangements with certain other suppliers. We are responsible for the financial impact on the supplier or contract manufacturer of any reduction or product mix shift in the forecast relative to materials that the supplierthird party had already purchased under a prior forecast. Such a variance in forecasted demand could require a cash payment for inventory in excess of current customer demand or for costs of excess or obsolete inventory. As of March 31, 2013,2015, we had issued non-cancelable purchase commitments for $22.3$46.0 million to purchase inventory from our contract manufacturers and suppliers.2013, there was2015, $87.9 million remainingremained under our authorization to repurchase Quantum common stock.this authorization. No stock repurchases were made during the fiscal years ended March 31, 2013, 2012 and 2011.2015, 2014 or 2013. Our ability to repurchase our common stock is restricted unless we meet certain thresholds under the terms of the WF credit agreement.20132015 (in thousands):Payments Due by Period Less than
1 year 1 – 3 years 3 – 5 years More than
5 years Total Convertible subordinated debt $ 7,875 $ 150,750 $ 76,300 $ — $ 234,925 Purchase obligations 22,308 — — — 22,308 Operating leases 10,027 17,195 10,642 13,415 51,279 Total contractual cash obligations $ 40,210 $ 167,945 $ 86,942 $ 13,415 $ 308,512 Payments Due by Period 1 – 3 years 3 –5 years Total Convertible subordinated debt $ 89,811 $ 76,300 $ — $ — $ 166,111 Purchase obligations 46,019 — — — 46,019 Operating leases: Lease payments 9,107 12,734 9,555 4,459 35,855 Sublease rental income (587 ) (1,895 ) (1,852 ) (813 ) (5,147 ) Total operating leases 8,520 10,839 7,703 3,646 30,708 Total contractual cash obligations $ 144,350 $ 87,139 $ 7,703 $ 3,646 $ 242,838 $29.9$12.4 million in interest payments on our various debt obligations. As of March 31, 2013,2015, we had $5.1 million of long-term tax liabilities for uncertain tax positions, for which we cannot make a reasonably reliable estimate of when payments are likely to occur. (“ESP”) and allocating revenue based on the relative selling prices in arrangements with multiple deliverables, including assessing whether we have vendor-specific objective evidence (“VSOE”) or third-party evidence of selling price (“TPE”) for each deliverable; the interpretation of non-standard terms and conditions in sales agreements; assessments of future price adjustments, such as rebates, price protection and future product returns and estimates for contractual licensee fees.ESPestimated selling price following the relative selling price hierarchy. Additionally, we sometimes use judgment in order to determine the appropriate timing of revenue recognition and to assess whether any software and nonsoftwarenon-software components function together to deliver a tangible product’s essential functionality in order to ensure the arrangement is properly accounted for as software or hardware revenue.ESPbest estimate of selling price (“BESP”) and (3) allocate the total arrangement consideration using the relative selling price method. When VSOE cannot be established we attempt to establish the selling price of each element based on TPE. TPE is determined based on competitor prices for largely interchangeable products when sold separately. When we are unable to establish selling price using VSOE or TPE, we use ESP.BESP. We use judgment to determine ESP,BESP, which is the price at which we would transact a sale if the product or service were regularly sold on a standalone basis. In this determination we consider our discounting and internal pricing practices, external market conditions and competitive positioning for similar offerings.Impairment of Long-lived Assets and GoodwillWe apply judgment when reviewing amortizable intangible and other long-lived assets (“long-lived assets”) and goodwill for impairment, including when evaluating potential impairment indicators. Indicators we consider include adverse changes in the economy or business climate that could affect the value of our long-lived assets or goodwill, overall financial performance such as negative or declining cash flows or operating income, changes in our business strategy, product mix or to the long-term economic outlook, a sustained decrease in our stock price and, in the case of goodwill, testing long-lived assets for recoverability. In addition, we evaluate on the basis of the weight of evidence the significance of identified events and circumstances along with how they could affect the relationship between the reporting unit's fair value and carrying amount, including positive mitigating events and circumstances.We use an undiscounted cash flow approach to evaluate our long-lived assets for recoverability when there are impairment indicators. Estimates of future cash flows require significant judgments about the future and include company forecasts and our expectations of future use of our long-lived assets, both of which may be impacted by market conditions. Other critical estimates include determining the asset group or groups within our long-lived assets, the primary asset of an asset group and the primary asset’s useful life. During fiscal 2013, we early adopted the accounting guidance that allows entities the option to perform a qualitative assessment to determine whether it is more likely than not an indefinite-lived asset is impaired.In addition to comparing the carrying value of the reporting unit to its fair value, because we have negative book value, we perform a qualitative analysis to determine whether it is not more likely than not that the fair value of goodwill is less than its carrying amount. If we determine it is more likely than not that the fair value of goodwill is less than its carrying amount, then a second step must be performed to quantify the amount of goodwill impairment, if any, requiring additional assumptions and judgments.If the second step of a goodwill impairment test is required, the following assumptions and estimates may be used by management in an income approach analysis. We derive discounted cash flows using estimates and assumptions about the future. Other significant assumptions may include: expected future revenue growth rates, operating profit margins, working capital levels, asset lives used to generate future cash flows, a discount rate, a terminal value multiple, income tax rates and utilization of net operating loss tax carryforwards. These assumptions are developed using current market conditions as well as internal projections. Inherent in our development of cash flow projections for the income approach used in an impairment test are assumptions and estimates derived from a review of our operating results, approved business plans, expected growth, cost of capital and income tax rates. We also make certain assumptions about future economic conditions, applicable interest rates and other market data.Fair Value of Assets Acquired and Liabilities Assumed in a Business CombinationWe use judgment when applying the various accounting principles to measure the fair value of assets acquired and liabilities assumed in a business combination. There are matters that are inherently uncertain when making estimates used to determine fair value where there are not active markets for these assets and liabilities. In addition, different estimates reasonably could be used and changes in the estimate that are reasonably possible could materially impact the resulting valuation and the financial statements. For example, judgments have been required to determine fair values of amortizable intangible assets, in-process research and development and the resulting amount of goodwill. Significant estimates and assumptions we make to estimate fair value of these acquired assets include:Planned product roadmaps, including the primary feature sets of new products;Expected efforts and associated costs required to integrate technologies acquired into new products;Assessed importance of in-process research and development to our overall development plan;Estimated values and rates of a market participant;Estimated future cash flows of current and future products; andEstimated discount rate applied to future cash flows.In addition, the estimated future life of purchased technology intangibles impacts future financial statements. We believe the assumptions and estimates used and the resulting fair values are reasonable.equivalents. In addition, changesequivalents, which consisted solely of money market funds in fiscal 2015 and 2014. During both fiscal 2015 and 2014, interest rates on these funds were under 1.0% and we earned a negligible amount of interest income, thus a hypothetical 100 basis point decrease in interest rates affectwould have an insignificant impact on interest expense onincome.in fiscal 2012 affected interest expense on borrowings under the Credit Suisse credit agreement. Ourour convertible subordinated notes have fixed interest rates, thus a hypothetical 100 basis point increase in interest rates would not impact interest expenseexpense.these borrowings.Our cash equivalents consisted solelyour earnings. We make a number of money market funds during fiscal 2013 and fiscal 2012. During fiscal 2013 and fiscal 2012, interest rates on these funds were under 1.0%, andestimates in conducting hedging. In the event those estimates differ significantly from actual results, we earned negligible amounts in interest income.At March 31, 2013 we had no outstanding borrowings with variable interest rates, thus a hypothetical 100 basis point increase in interest rates would not impact interest expense.During fiscal 2012, interest accrued on our CS credit agreement at our option, based on either, a prime rate plus a marginPagePage Quantum Corporation – Financial Statements 4546474849505176stockholders'stockholders’ deficit present fairly, in all material respects, the financial position of Quantum Corporation and its subsidiariesat March 31, 201331,2015 and March 31, 2012,2014, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 20132015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying indexpresents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidatedfinancial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2013,2015, based on criteria established inInternal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company'sCompany’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management'sManagement’s Report on Internal Control over Financial Reporting, appearing under Itemitem 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company'sCompany’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.7, 201312, 2015March 31,
2013March 31,
2012Assets Current assets: Cash and cash equivalents $ 68,976 $ 51,261 Restricted cash 3,023 4,230 Accounts receivable, net of allowance for doubtful accounts of $62 and $217, respectively 99,093 110,840 Manufacturing inventories 53,075 61,111 Service parts inventories 35,368 39,050 Other current assets 12,192 14,729 Total current assets 271,727 281,221 Long-term assets: Property and equipment, less accumulated depreciation 21,456 25,440 Intangible assets, less accumulated amortization 12,813 26,112 Goodwill 55,613 55,613 Other long-term assets 9,531 6,962 Total long-term assets 99,413 114,127 $ 371,140 $ 395,348 Liabilities and Stockholders’ Deficit Current liabilities: Accounts payable $ 47,634 $ 56,304 Accrued warranty 7,520 7,586 Deferred revenue, current 91,108 93,441 Accrued restructuring charges 4,756 1,752 Accrued compensation 30,311 31,971 Other accrued liabilities 20,188 18,999 Total current liabilities 201,517 210,053 Long-term liabilities: Deferred revenue, long-term 38,393 36,430 Long-term debt — 49,495 Convertible subordinated debt 205,000 135,000 Other long-term liabilities 7,812 11,050 Total long-term liabilities 251,205 231,975 Commitments and contingencies Stockholders’ deficit: Preferred stock: Preferred stock, 20,000 shares authorized; no shares issued as of March 31, 2013 and March 31, 2012 — — Common stock: Common stock, $0.01 par value; 1,000,000 shares authorized; 243,080 and 236,402 shares issued and outstanding as of March 31, 2013 and 2012, respectively 2,431 2,364 Capital in excess of par value 427,611 409,770 Accumulated deficit (517,816 ) (465,397 ) Accumulated other comprehensive income 6,192 6,583 Stockholders’ deficit (81,582 ) (46,680 ) $ 371,140 $ 395,348 March 31, 2015 March 31, 2014 Assets Current assets: Cash and cash equivalents $ 67,948 $ 99,125 Restricted cash 2,621 2,760 Accounts receivable, net of allowance for doubtful accounts of $27 and $88, respectively 124,159 101,605 Manufacturing inventories 50,274 34,815 Service parts inventories 24,640 25,629 Other current assets 12,332 10,161 Total current assets 281,974 274,095 Long-term assets: Property and equipment, less accumulated depreciation 14,653 17,574 Intangible assets, less accumulated amortization 731 3,911 Goodwill 55,613 55,613 Other long-term assets 5,784 10,605 Total long-term assets 76,781 87,703 $ 358,755 $ 361,798 Liabilities and Stockholders’ Deficit Current liabilities: Accounts payable $ 54,367 $ 41,792 Accrued warranty 4,219 6,116 Deferred revenue, current 95,899 98,098 Accrued restructuring charges, current 3,855 4,345 Convertible subordinated debt, current 83,735 — Accrued compensation 35,414 25,036 Other accrued liabilities 20,740 15,168 Total current liabilities 298,229 190,555 Long-term liabilities: Deferred revenue, long-term 39,532 40,054 Accrued restructuring charges, long-term 991 4,023 Convertible subordinated debt, long-term 70,000 203,735 Other long-term liabilities 10,441 10,831 Total long-term liabilities 120,964 258,643 Commitments and contingencies — — Stockholders’ deficit: Preferred stock: Preferred stock, 20,000 shares authorized; no shares issued as of March 31, 2015 and 2014 — — Common stock: Common stock, $0.01 par value; 1,000,000 shares authorized; 258,208 and 250,410 shares issued and outstanding at March 31, 2015 and March 31, 2014, respectively 2,582 2,504 Capital in excess of par 456,411 443,547 Accumulated deficit (523,311 ) (540,071 ) Accumulated other comprehensive income 3,880 6,620 Stockholders’ deficit (60,438 ) (87,400 ) $ 358,755 $ 361,798 For the year ended March 31, 2013 2012 2011 Product revenue $ 399,043 $ 451,340 $ 456,903 Service revenue 144,037 144,364 151,095 Royalty revenue 44,492 56,666 64,272 Total revenue 587,572 652,370 672,270 Product cost of revenue 267,274 290,376 294,375 Service cost of revenue 79,647 88,459 94,311 Restructuring charges (benefit) related to cost of revenue — (300 ) 602 Total cost of revenue 346,921 378,535 389,288 Gross margin 240,651 273,835 282,982 Operating expenses: Research and development 73,960 74,365 73,008 Sales and marketing 137,041 130,938 122,768 General and administrative 62,179 62,910 59,460 Restructuring charges 10,171 1,930 3,042 Total operating expenses 283,351 270,143 258,278 Gain on sale of patents — 1,500 — Income (loss) from operations (42,700 ) 5,192 24,704 Other income and expense (216 ) (118 ) 1,199 Interest expense (8,342 ) (10,686 ) (20,163 ) Loss on debt extinguishment — (2,310 ) (1,186 ) Income (loss) before income taxes (51,258 ) (7,922 ) 4,554 Income tax provision 1,161 887 13 Net income (loss) $ (52,419 ) $ (8,809 ) $ 4,541 Basic and diluted net income (loss) per share $ (0.22 ) $ (0.04 ) $ 0.02 Weighted average shares: Basic 239,855 232,599 220,888 Diluted 239,855 232,599 229,738 For the year ended March 31, 2015 2014 2013 Product revenue $ 355,579 $ 348,318 $ 398,910 Service revenue 155,674 147,199 144,037 Royalty revenue 41,842 57,648 44,492 Total revenue 553,095 553,165 587,439 Product cost of revenue 237,679 237,076 267,274 Service cost of revenue 70,730 75,930 79,604 Restructuring charges related to cost of revenue — 539 — Total cost of revenue 308,409 313,545 346,878 Gross margin 244,686 239,620 240,561 Operating expenses: Research and development 58,618 64,375 73,960 Sales and marketing 113,954 118,771 136,873 General and administrative 56,513 57,865 62,017 Restructuring charges 1,666 10,675 10,171 Total operating expenses 230,751 251,686 283,021 Gain on sale of assets 462 267 — Income (loss) from operations 14,397 (11,799 ) (42,460 ) Other income and expense 13,836 1,296 (216 ) Interest expense (9,460 ) (9,754 ) (8,342 ) Loss on debt extinguishment (1,295 ) — — Income (loss) before income taxes 17,478 (20,257 ) (51,018 ) Income tax provision 718 1,217 1,161 Net income (loss) $ 16,760 $ (21,474 ) $ (52,179 ) Basic net income (loss) per share $ 0.07 $ (0.09 ) $ (0.22 ) Diluted net income (loss) per share 0.06 (0.09 ) (0.22 ) Weighted average shares: Basic 254,665 247,024 239,855 Diluted 260,027 247,024 239,855 For the year ended March 31, 2013 2012 2011 Net income (loss) $ (52,419 ) $ (8,809 ) $ 4,541 Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments (583 ) (513 ) 1,083 Net unrealized gain (loss) on revaluation of long-term intercompany balances, net of taxes of $51, $(52) and $(37), respectively 192 (197 ) (139 ) Total other comprehensive income (loss) (391 ) (710 ) 944 Total comprehensive income (loss) $ (52,810 ) $ (9,519 ) $ 5,485 For the year ended March 31, 2015 2014 2013 Net income (loss) $ 16,760 $ (21,474 ) $ (52,179 ) Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments (3,490 ) 679 (583 ) Net unrealized gain (loss) on revaluation of long-term intercompany balances, net of taxes of $200, $(67) and $51, respectively 750 (251 ) 192 Total other comprehensive income (loss) (2,740 ) 428 (391 ) Total comprehensive income (loss) $ 14,020 $ (21,046 ) $ (52,570 ) For the year ended March 31, 2013 2012 2011 Cash flows from operating activities: Net income (loss) $ (52,419 ) $ (8,809 ) $ 4,541 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 12,413 11,774 11,657 Amortization 14,646 23,101 30,304 Service parts lower of cost or market adjustment 10,081 10,736 13,796 Loss on debt extinguishment — 2,310 1,186 Deferred income taxes (142 ) (1,280 ) (184 ) Share-based compensation 15,139 13,737 10,421 Other non-cash writeoffs — — 302 Changes in assets and liabilities, net of effect of acquisition: Accounts receivable 11,747 4,134 (14,935 ) Manufacturing inventories (2,098 ) (21,373 ) (1,460 ) Service parts inventories 3,735 3,642 1,955 Accounts payable (8,630 ) 4,107 (1,466 ) Accrued warranty (66 ) 552 1,150 Deferred revenue (370 ) 8,073 (3,876 ) Accrued restructuring charges 3,009 (2,284 ) 227 Accrued compensation (1,452 ) 810 (302 ) Other assets and liabilities 2,142 (3,570 ) (989 ) Net cash provided by operating activities 7,735 45,660 52,327 Cash flows from investing activities: Purchases of property and equipment (10,099 ) (11,414 ) (12,339 ) (Increase) decrease in restricted cash 1,113 (2,505 ) 32 Purchase of other investments (2,169 ) — — Return of principal from other investments 247 97 2,204 Payment for business acquisition, net of cash acquired — (8,152 ) — Net cash used in investing activities (10,908 ) (21,974 ) (10,103 ) Cash flows from financing activities: Borrowings of long-term debt, net — 48,535 — Repayments of long-term debt (49,495 ) (104,334 ) (203,449 ) Borrowings of convertible subordinated debt, net 67,701 — 130,022 Repayments of convertible subordinated debt — — (22,099 ) Payment of taxes due upon vesting of restricted stock (2,036 ) (2,944 ) (2,307 ) Proceeds from issuance of common stock 4,805 10,390 16,547 Net cash provided by (used in) financing activities 20,975 (48,353 ) (81,286 ) Effect of exchange rate changes on cash and cash equivalents (87 ) (82 ) 125 Net increase (decrease) in cash and cash equivalents 17,715 (24,749 ) (38,937 ) Cash and cash equivalents at beginning of period 51,261 76,010 114,947 Cash and cash equivalents at end of period $ 68,976 $ 51,261 $ 76,010 Supplemental disclosure of cash flow information: Fair value of common stock issued for business combination $ — $ 2,767 $ — Purchases of property and equipment included in accounts payable 354 1,902 — Cash paid during the year for: Interest 5,672 8,266 16,478 Income taxes, net of refunds 2,596 1,857 1,868 For the year ended March 31, 2015 2014 2013 Cash flows from operating activities: Net income (loss) $ 16,760 $ (21,474 ) $ (52,179 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 8,281 10,713 12,413 Amortization of intangible assets 3,697 8,902 13,299 Amortization and write off of debt issuance costs 1,896 1,634 1,347 Service parts lower of cost or market adjustment 3,698 11,307 10,081 Deferred income taxes (160 ) 36 (142 ) Share-based compensation 11,583 13,459 15,139 Gain on sale of assets (462 ) — — Gain on sale of other investments (13,574 ) — — Changes in assets and liabilities, net of effect of acquisition: Accounts receivable (22,554 ) (4,770 ) 11,880 Manufacturing inventories (19,688 ) 13,352 (2,098 ) Service parts inventories (1,010 ) 2,675 3,735 Accounts payable 12,849 (5,881 ) (8,630 ) Accrued warranty (1,897 ) (1,404 ) (66 ) Deferred revenue (2,721 ) 8,651 (370 ) Accrued restructuring charges (3,548 ) 3,619 3,009 Accrued compensation 11,318 (6,140 ) (1,663 ) Other assets and liabilities 1,566 795 1,980 Net cash provided by operating activities 6,034 35,474 7,735 Cash flows from investing activities: Purchases of property and equipment (3,241 ) (5,957 ) (10,099 ) Proceeds from sale of assets 462 — — Change in restricted cash (250 ) 426 1,113 Purchases of other investments (22 ) (1,118 ) (2,169 ) Return of principal from other investments 112 — 247 Proceeds from sale of other investments 15,097 — — Payment for business acquisition, net of cash acquired (517 ) — — Net cash provided by (used in) investing activities 11,641 (6,649 ) (10,908 ) Cash flows from financing activities: Repayments of long-term debt — — (49,495 ) Borrowings of convertible subordinated debt, net — — 67,701 Repayments of convertible subordinated debt (50,000 ) (1,265 ) — Payment of taxes due upon vesting of restricted stock (2,378 ) (1,880 ) (2,036 ) Proceeds from issuance of common stock 3,737 4,430 4,805 Net cash provided by (used in) financing activities (48,641 ) 1,285 20,975 Effect of exchange rate changes on cash and cash equivalents (211 ) 39 (87 ) Net increase (decrease) in cash and cash equivalents (31,177 ) 30,149 17,715 Cash and cash equivalents at beginning of period 99,125 68,976 51,261 Cash and cash equivalents at end of period $ 67,948 $ 99,125 $ 68,976 Supplemental disclosure of cash flow information: Proceeds from sale of other investments included in other assets $ 1,564 $ — $ — Purchases of property and equipment included in accounts payable 429 649 354 Cash paid during the year for: Interest 8,498 8,247 5,672 Income taxes, net of refunds 750 574 2,596 Common Stock Capital
in Excess of
Par ValueAccumulated
DeficitAccumulated
Other
Comprehensive
IncomeShares Amount Total Balances as of March 31, 2010 214,946 $ 2,149 $ 361,374 $ (461,129 ) $ 6,349 $ (91,257 ) Net income — — — 4,541 — 4,541 Foreign currency translation adjustments — — — — 1,083 1,083 Net unrealized loss on revaluation of long-term intercompany balance, net of tax of $(37) — — — — (139 ) (139 ) Shares issued under employee stock purchase plan 3,234 32 3,912 — — 3,944 Shares issued under employee stock incentive plans, net 9,131 92 10,204 — — 10,296 Share-based compensation expense — — 10,421 — — 10,421 Balances as of March 31, 2011 227,311 2,273 385,911 (456,588 ) 7,293 (61,111 ) Net loss — — — (8,809 ) — (8,809 ) Foreign currency translation adjustments — — — — (513 ) (513 ) Net unrealized loss on revaluation of long-term intercompany balance, net of tax of $(52) — — — — (197 ) (197 ) Shares issued under employee stock purchase plan 3,036 31 5,012 — — 5,043 Shares issued under employee stock incentive plans, net 5,084 51 2,352 — — 2,403 Shares issued in connection with business acquisition 971 9 2,758 — — 2,767 Share-based compensation expense — — 13,737 — — 13,737 Balances as of March 31, 2012 236,402 2,364 409,770 (465,397 ) 6,583 (46,680 ) Net loss — — — (52,419 ) — (52,419 ) Foreign currency translation adjustments — — — — (583 ) (583 ) Net unrealized gain on revaluation of long-term intercompany balance, net of tax of $51 — — — — 192 192 Shares issued under employee stock purchase plan 3,783 38 4,402 — — 4,440 Shares issued under employee stock incentive plans, net 2,895 29 (1,700 ) — — (1,671 ) Share-based compensation expense — — 15,139 — — 15,139 Balances as of March 31, 2013 243,080 $ 2,431 $ 427,611 $ (517,816 ) $ 6,192 $ (81,582 ) Common Stock Total Shares Amount Balances as of March 31, 2012 236,402 $ 2,364 $ 409,770 $ (466,418 ) $ 6,583 $ (47,701 ) Net loss — — — (52,179 ) — (52,179 ) Foreign currency translation adjustments — — — — (583 ) (583 ) Net unrealized gain on revaluation of long-term
intercompany balance, net of tax of $51— — — — 192 192 Shares issued under employee stock
purchase plan3,783 38 4,402 — — 4,440 Shares issued under employee stock incentive
plans, net2,895 29 (1,700 ) — — (1,671 ) Share-based compensation expense — — 15,139 — — 15,139 Balances as of March 31, 2013 243,080 2,431 427,611 (518,597 ) 6,192 (82,363 ) Net loss — — — (21,474 ) — (21,474 ) Foreign currency translation adjustments — — — — 679 679 Net unrealized loss on revaluation of long-term
intercompany balance, net of tax of $(67)— — — — (251 ) (251 ) Shares issued under employee stock
purchase plan3,220 32 3,424 — — 3,456 Shares issued under employee stock incentive
plans, net4,110 41 (947 ) — — (906 ) Share-based compensation expense — — 13,459 — — 13,459 Balances as of March 31, 2014 250,410 2,504 443,547 (540,071 ) 6,620 (87,400 ) Net income — — — 16,760 — 16,760 Foreign currency translation adjustments — — — — (3,490 ) (3,490 ) Net unrealized gain on revaluation of long-term
intercompany balance, net of tax of $200— — — — 750 750 Shares issued under employee stock
purchase plan2,790 28 2,865 — — 2,893 Shares issued under employee stock incentive
plans, net5,008 50 (1,584 ) — — (1,534 ) Share-based compensation expense — — 11,583 — — 11,583 Balances as of March 31, 2015 258,208 $ 2,582 $ 456,411 $ (523,311 ) $ 3,880 $ (60,438 ) founded in 1980, is a globalleading expert in scale-out storage, archive and data protection, providing solutions for capturing, sharing, transforming and bigpreserving digital assets over the entire data management.lifecycle. Our customers, ranging from small businesses to large/multi-national enterprises, trust us to address their most demanding content workflow challenges. We provide solutions for storing and protecting information in physical, virtual cloud and big datacloud environments that are designed to help customers be certainBe Certain™ they are maximizinghave an end-to-end storage foundation to maximize the value of their data over its entire lifecycle. With our solutions, customers can better adapt in a world of continuing change by keepingmaking it accessible whenever and protecting more data for a longer period of time whilewherever needed, retaining indefinitely and reducing coststotal cost and increasing return on investment.complexity. We work closely with a broad network of distributors, value-added resellers (“VARs”), direct marketing resellers (“DMRs”), original equipment manufacturers (“OEMs”) and other suppliers to meet customers’ evolving data protection and big data management needs. Our stock is traded on the New York Stock Exchange under the symbol QTM.On June 13, 2011, we acquired Pancetera Software, Inc. (“Pancetera”), and Pancetera’s results of operations are included in our Consolidated Statements of Operations from that date. All intercompany accounts and transactions have been eliminated. Several prior period amounts have been reclassified to conform to current period presentation in the Consolidated Balance Sheets. Deferred income taxes in current assets has been reclassified into other current assets. Amortizable intangible assets, less accumulated amortization and in-process research and development have been combined and reclassified into intangible assets, less accumulated amortization. Income taxes payable has been reclassified into other accrued liabilities, and deferred income taxes in long-term liabilities has been reclassified into other long-term liabilities. In addition, in the Consolidated Statements of Cash Flows prior period income taxes payable has been reclassified into other assets and liabilities to conform to current period presentation. These reclassifications had no impact on total assets, income (loss) from operations, net income (loss) or net cash provided by operating activities.collectibilitycollectability is reasonably assured. Royalty revenue is recognized when earned or amounts can be reasonably estimated.acceptance, which typically occurs after delivery and installation are completed.Software revenue is generally recognized upon shipment or electronic delivery and when vendor-specific objective evidence (“VSOE”) of fair value for undelivered elements exists. arrangements with multiple elements, the residual method is used to determine the amount of productproducts, we generally recognize revenue to be recognized. Under the residual method, the VSOE of fair value for the undelivered elements is deferred and the remaining portionupon delivery of the arrangement consideration is recognized as product revenue, assuming all other revenue recognition criteria of appropriate revenue guidance have been met.software. Revenue from post-contract customer support agreements, which entitle software customers to both telephone support and any unspecified upgrades and enhancements during the term of the agreement, is classified as product revenue and recognized ratably over the term of the support agreement.products, installation, professional services and out-of-warranty repairs.products. For customer field support agreements, revenue equal to the separately stated price of these service contracts for our hardware products is initially deferred and recognized as revenue ratably over the contract period. Installation and professional services are not considered essential to the functionality of our products as these services do not alter the product capabilities, do not require specialized skills and may be performed by our customers or other vendors. Installation and professional services are recognized upon completion. Out-of-warranty repair revenue is recognized upon completion of the repair.Multiple Element ArrangementsFor multiple deliverable revenue arrangements with customers which are not subject to software revenue guidance, we separate the deliverables based on specific criteria, assign an estimated selling price to each deliverable based on the selling price hierarchy using VSOE, third-party evidence of selling price (“TPE”) or estimated selling price (“ESP”) and allocate the total arrangement consideration using the relative selling price method. When VSOE cannot be established we attempt to establish the selling price of each element based on TPE. TPE is determined based on competitor prices for largely interchangeable products when sold separately. When we are unable to establish selling price using VSOE or TPE, we use ESP. For ESP, we consider our discounting and internal pricing practices. Additionally, for certain transactions we evaluate whether any undelivered elements are essential to the functionality of the delivered elements in order to determine the appropriate timing of revenue recognition. If specific criteria are not met, the arrangement is accounted for as one unitof accounting which results in revenue being deferred until the earlier of when such criteria are met, when the last undelivered element is delivered or ratably over the contract term as appropriate.contract, installation, integration and repair services.contract. These estimates are based upon a variety of factors, including the nature of the support activity and the level of infrastructure required to support the activities from which we earn service revenue. In the event our service business changes, our estimates of cost of service revenue may be impacted. Service cost of revenue excludes costs associated with basic warranty support on new products.$16.0$12.3 million, $20.3$13.6 million and $22.2$16.0 million in fiscal 2015, 2014 and 2013, 2012 and 2011, respectively.2012was $7.6 million, $8.4 million and 2011 was $8.2 million, $4.3 million and $5.0 million, respectively.account for share-based compensation usinguse the Black-Scholes stock option pricing model to estimate the fair value of share-basedstock option awards at the date of grant. TheFor awards that contain market conditions, we use a Monte-Carlo simulation model to estimate the fair value of share-based awards. Both the Black-Scholes model requiresand Monte-Carlo models require the use of highly subjective assumptions, including expected life, expected volatility and expected risk-free rate of return. Other reasonable assumptions in either model could provide differing results. We calculate a forfeiture rate to estimate the share-based awards that will ultimately vest based on types of awards and historical experience. Additionally, for awards which are performance based, we make estimates as to the probability of the underlying performance being achieved.$0.5$0.2 million lossgain in fiscal 2013, a $0.1 million loss in fiscal 2012 and2015, a $0.3 million gain in fiscal 2011.balancesthatbalances that serve as cash collateral in connection with various items including insurance requirements, value added taxes, ongoing tax audits and leases in certain countries.these investments individually represent voting ownership interests of less than 20%.we are deemed to have influence. Ownership interests in these limited partnerships are accounted for under the equity method unless our interest is so minor (typically less than 5%) that we have virtually no influence over the partnership operating and financial policies, in which case the cost method is used.collectibilitycollectability of outstanding accounts receivable. We record bad debt expense in general and administrative expenses.1one to 3three years and earn revenue by providing enhanced and extended warranty and repair service during and beyond this warranty period. Service parts inventories consist of both component parts, which are primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary basis while the defective unit is being repaired. Defective parts returned from customers that can be repaired are repaired and put back into service parts inventories at their faircurrent carrying value. We record adjustments to reduce the carrying value of service parts inventory to its net realizable value, and we dispose of parts with no use and a net realizable value of zero. Factors influencing these adjustments include product life cycles, end of service life plans and volume of enhanced or extended warranty service contracts. Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from our estimates.Machinery and equipment 3 to 5 years Computer equipment 3 to 5 years ERP software 10 years Other software 3 years Furniture and fixtures 5 years Other office equipment 5 years Leasehold improvements Life of lease lifelives of amortizable intangible and other long-lived assets (“long-lived assets”) quarterly and review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. The company operates as a single reporting unit for business and operating purposes, and our impairment evaluation also treats the company as a single asset group. Impairment indicators we consider include a significant decrease in the market price of our long-lived asset group, adverse changes in the extent or manner in which our long-lived assets are being used, adverse changes in the business climate that could affect the value of our long-lived assets, a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of our long-lived assets and an expectation that it is more likely than not our long-lived assets will be sold or otherwise disposed of significantly before the end of their previously estimated useful life. If we identify impairment indicators, we evaluate recoverability using an undiscounted cash flow approach. Estimates of future cash flows incorporate company forecasts and our expectations of future use of our long-lived assets, and these factors are impacted by market conditions. If impairment is indicated, an impairment charge is recorded to write the long-lived assets down to their estimated fair value.disk systemsscale-out storage solutions may carry service agreements with customers that choose to extend or upgrade the warranty service. We provide repair services from our facility in Colorado Springs, Colorado as well as multiple third party providers inside and outside of the U.S. We use a combination of internal resources and third party service providers to supply field service and support. We continue to evaluate repair sites, and any resulting actions taken may affect the future costs of repair. If the actual costs were to differ significantly from our estimates, we would record the impact of these unforeseen costs or cost reductions in subsequent periods.20132015 and 2012,2014, there was $87.9 million remaining on our authorization to repurchase Quantum common stock. Our ability to repurchase our common stock is restricted unless we meet certain thresholds under the terms of theour Wells Fargo credit agreement (“WF credit agreement”).agreement.Level 1: Quoted (observable) market prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1, 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 asset or liability. Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. As of March 31, 2013 2012 Money market funds $ 32,394 $ 37,776 As of March 31, 2015 2014 Money market funds $ 34,278 $ 93,077 in-process research and development (“IPR&D”) and goodwill. We did not record impairments to any non-financial assets in fiscal 20132015 or fiscal 2012.2014. We do not have any non-financial liabilities measured and recorded at fair value on a non-recurring basis.We havefor which we are obligated to repay the carrying value, unless the holder agrees to a lesser amount.were comprised primarily of convertible subordinated debt at March 31, 2015 and 2014. The carrying value and fair value of these financial liabilitiesbased on quoted market prices in less active markets (level 2 fair value measurement) were as follows (in thousands): As of March 31, 2013 2012 Carrying Value Fair Value Carrying Value Fair Value Convertible subordinated debt(1) $ 205,000 $ 194,639 $ 135,000 $ 136,350 Senior secured revolving debt(2) — — 49,495 49,495 ____________________(1)Fair value based on quoted market prices (level 1).(2)Fair value based on outstanding borrowings and market interest rates (level 2). As of March 31, 2015 2014 Carrying Value Fair Value Carrying Value Fair Value Convertible subordinated debt $ 153,735 $ 166,551 $ 203,735 $ 203,820 2013 compared to 34% of revenue in fiscal 2012 and 33% of revenue in fiscal 2011.2013. We had no customers that comprised 10% or greater of revenue in fiscal 20132015, fiscal 2014 or fiscal 2012. Sales to our largest customer, Dell Inc. (“Dell”), were 10%2013.Intangibles — Goodwill and OtherIncome Taxes (Topic 350)740): Testing Indefinite-Lived Intangible Assets for ImpairmentPresentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2012-02”2013-11”). ASU 2012-02 provides entities the option to perform a qualitative assessment to determine whether it is more likely than not an indefinite-lived asset is impaired, similar to the goodwill impairment testing guidance. If2013-11 requires an entity determinesto present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the fair valueuncertain tax position would reduce the NOL or other carryforward under the tax law of the indefinite-livedapplicable jurisdiction and (2) the entity intends to use the deferred tax asset isfor that purpose. ASU 2013-11 does not more likely than not impaired, then no additional testing is required.require new recurring disclosures. ASU 2012-02 also provides examples of changes in events and circumstances that an entity should consider for impairment indicators in interim periods. ASU 2012-022013-11 is effective for fiscal years, and interim periods within those years, beginning after SeptemberDecember 15, 2012 and may be early adopted.2013. We early adopted ASU 2012-022013-11 prospectively in the fourthfirst quarter of fiscal 2013 and adoption2015. Adoption did not impact our statements of financial position or results of operations.March 2013,May 2014, the Financial Accounting Standards BoardFASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“FASB”ASU 2014-09”) issued Accounting Standards Update 2013-05,Foreign Currency Matters (Topic 830): Parent’s Accounting for. ASU 2014-09 requires entities to recognize revenue through the Cumulative Translation Adjustment uponDerecognitionapplication of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensusfive-step model, which includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations. ASU 2014-09 will become effective for us beginning April 1, 2017, or fiscal 2018. We are currently evaluating the guidance to determine the potential impact on our financial condition, results of operations, cash flows and financial statement disclosures.Emerging Issues Task Force)issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Topic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2013-05”2014-15”). ASU 2013-05 clarifies2014-15 requires that whenmanagement assess an entity’s ability to continue as a parent reporting entity ceasesgoing concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. We plan to haveadopt ASU 2014-15 as of the end of our fiscal year ending March 31, 2017 and do not anticipate adoption will impact our statements of financial position or results of operations.controlling financial interest in a subsidiary or group of assets that is a business withina foreign entity, the parent is required to apply the guidance in ASC 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment shouldrecognized debt liability be released into net income only if the sale or transfer resultspresented in the complete or substantially complete liquidationbalance sheet as a direct deduction from the carrying amount of the foreign entity in which the subsidiary or group of assets had resided.that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2013-052015-03. ASU 2015-03 is effective prospectivelyfor financial statements issued for fiscal years and interim reporting periods within those years beginning after December 15, 2013.2015, and interim periods within those fiscal years. Early adoption is permitted; however, if an entity electspermitted. We plan to early adopt ASU 2013-05, it should be applied as of2015-03 beginning April 1, 2015 and we will reclassify debt issuance costs from other current and long-term assets to convertible subordinated debt on the beginning of the entity’s fiscal year of adoption. Prior periods should not be adjusted. WeConsolidated Balance Sheets; we do not otherwise anticipate adoption of ASU 2013-05 will materially impact our statements of financial position or results of operations.In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-02—Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period, disclosure of these significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income is required. For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to disclosures that provide additional detail about those amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. Early adoption is permitted. We do not anticipate adoption of ASU 2013-02 will materially impact our statements of financial position or results of operations.June 13, 2011, in orderJuly 29, 2014, we acquired a majority of the assets of Symform, Inc., a Washington corporation, for cash of approximately $0.5 million. The assets, consisting primarily of Symform technology, were recorded as purchased technology and are expected to enhance our productcloud software capabilities and service offerings for data protection and technology portfolio we acquired Pancetera pursuantscale-out storage. This acquisition was recorded as a business combination and the effect was not material to a statutory merger in exchange for approximately $11.0 million, comprised of $8.2 million in cash and $2.8 million in Quantum common stock. We acquired all outstanding shares of Pancetera and assumed all of Pancetera’s outstanding unvested stock options according to the option exchange ratio defined in the merger agreement with Pancetera. We also assumed unvested restricted Pancetera common stock in accordance with the merger agreement. Pancetera’sour financial position, results of operations are included in our Consolidated Statements of Operations and Cash Flows from the June 13, 2011 acquisition date.The acquisition was recorded under the acquisition method of accounting, resulting in the purchase price being allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill. The allocation of assets acquired and liabilities assumed is set forth below (in thousands):Current assets $ 46 Property and equipment 37 Amortizable intangible assets 1,795 In-process research and development 349 Goodwill 8,843 Current liabilities (116 ) Total purchase price $ 10,954 In performing our purchase price allocation, we considered, among other factors, our intention for future use of acquired assets, analyses of historical financial performance and estimates of future performance of Pancetera’s existing and future products. The fair value of current assets, property and equipment and current liabilities was based on market prices at the acquisition date. The fair value of amortizable intangible assets and IPR&D was based, in part, on a valuation using a discountedor cash flow approach and other valuation techniques as well as management’s estimates and assumptions.The amortizable intangible assets are all related to developed technology and are included in purchased technology within Note 5 “Intangible Assets and Goodwill.” Purchased technology, which comprises products that have reached technological feasibility, was primarily related to SmartRead®. SmartRead is patented technology, primarily comprised of a set of algorithms that reduce storage input-output when performing maintenance tasks such as backup, replication or migration of virtual machines. Pancetera products containing the SmartRead technology included SmartViewTM and SmartMotionTM, which have been rebranded as vmPRO software solutions. Purchased technology intangible assets also include a combination of Pancetera processes, patents and trade secrets related to the design and development of these products. This proprietary know-how can be leveraged to develop new technology and improve our products. The SmartRead purchased technology intangible asset has an amortization period of four years.IPR&D represents incomplete Pancetera research and development projects that had not reached technological feasibility as of the acquisition date. Due to the nature of IPR&D, the expected life is indeterminate and we periodically evaluate for attainment of technological feasibility or impairment. Technological feasibility is established when an enterprise has completed all planning, designing, coding and testing activities that are necessary to establish that a product can be produced to meet its design specifications including functions, features and technical performance requirements. The value assigned to IPR&D was determined by considering the importance of each project to our overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows using a discount rate of 18% to their present value based on the percentage of completion of the IPR&D projects. During fiscal 2013, $0.2 million of IPR&D reached technological feasibility, was transferred to amortizable purchased technology intangible assets and is being amortized over its estimated useful life of four years.The goodwill as a result of this acquisition is not expected to be deductible for tax purposes. In addition, we incurred acquisition expenses of $0.3 million during fiscal 2012 which were included in general and administrative expense in our Consolidated Statements of Operations.
flows.As of March 31, 2013 2012 Cash $ 39,605 $ 17,715 Money market funds 32,394 37,776 $ 71,999 $ 55,491 Manufacturing inventories consisted of (in thousands): As of March 31, 2013 2012 Finished goods $ 19,480 $ 22,122 Work in process 8,633 5,781 Materials and purchased parts 24,962 33,208 $ 53,075 $ 61,111 Service parts inventories consisted of (in thousands): As of March 31, 2013 2012 Finished goods $ 19,750 $ 19,202 Component parts 15,618 19,848 $ 35,368 $ 39,050 Property and equipment consisted of (in thousands): As of March 31, 2013 2012 Machinery and equipment $ 149,245 $ 162,182 Furniture and fixtures 6,521 7,045 Leasehold improvements 19,734 23,348 175,500 192,575 Less: accumulated depreciation (154,044 ) (167,135 ) $ 21,456 $ 25,440 As of March 31, 2015 2014 Cash $ 36,291 $ 8,808 Money market funds 34,278 93,077 $ 70,569 $ 101,885 As of March 31, 2015 2014 Finished goods $ 28,022 $ 18,069 Work in process 58 1,056 Materials and purchased parts 22,194 15,690 $ 50,274 $ 34,815 As of March 31, 2015 2014 Finished goods $ 18,143 $ 17,926 Component parts 6,497 7,703 $ 24,640 $ 25,629 As of March 31, 2015 2014 Machinery and equipment $ 122,339 $ 119,783 Furniture and fixtures 5,816 6,127 Leasehold improvements 20,309 20,116 148,464 146,026 Less: accumulated depreciation (133,811 ) (128,452 ) $ 14,653 $ 17,574 growththatgrowth that was expected to continue for an extended period of time;software,scale-out storage solutions, in particular, have long development cycles; theseproductsthese products have experienced long product life cycles; andbig data and archivescale-out storage solutions and, therefore, toextendto extend the lives of these technologies.Purchased technology 6.2 Trademarks 6.0 Customer lists 7.28.0All intangible assets 6.66.72013, 20122015, 2014 and 20112013 follows (in thousands): For the year ended March 31, 2013 2012 2011 Purchased technology $ 3,775 $ 7,583 $ 14,862 Trademarks 244 700 810 Non-compete agreements — 32 100 Customer lists 9,280 12,428 12,609 $ 13,299 $ 20,743 $ 28,381 For the year ended March 31, 2015 2014 2013 Purchased technology $ 913 $ 1,476 $ 3,775 Trademarks — — 244 Customer lists 2,784 7,426 9,280 $ 3,697 $ 8,902 $ 13,299 As of March 31, 2013 2012 Gross
Amount Accumulated
Amortization Net
AmountGross
Amount Accumulated
Amortization Net
AmountPurchased technology $ 180,613 $ (178,168 ) $ 2,445 $ 182,922 $ (176,893 ) $ 6,029 Trademarks 3,900 (3,900 ) — 3,900 (3,656 ) 244 Customer lists 105,719 (95,509 ) 10,210 106,419 (86,929 ) 19,490 In-process research and development 158 — 158 349 — 349 $ 290,390 $ (277,577 ) $ 12,813 $ 293,590 $ (267,478 ) $ 26,112 As of March 31, 2015 2014 Purchased technology $ 179,992 $ (179,261 ) $ 731 $ 179,475 $ (178,348 ) $ 1,127 Trademarks 3,900 (3,900 ) — 3,900 (3,900 ) — Customer lists 66,219 (66,219 ) — 76,019 (73,235 ) 2,784 $ 250,111 $ (249,380 ) $ 731 $ 259,394 $ (255,483 ) $ 3,911 Amortization Fiscal 2014 $ 8,896 Fiscal 2015 3,589 Fiscal 2016 138 Fiscal 2017 32 Total as of March 31, 2013 $ 12,655 Amortization Fiscal 2016 $ 280 Fiscal 2017 175 Fiscal 2018 138 Fiscal 2019 103 Fiscal 2020 35 Total as of March 31, 2015 $ 731 2013, 20122015, 2014 and 2011.2013. In fiscal 20132015 and fiscal 2012,2014, we wrote off $3.2$9.8 million and $30.9$31.0 million, respectively, of fully amortized intangible assets related to fiscal 2002 and 2003prior acquisitions. In-process research and development of $0.2$0.1 million reached technological feasibility during fiscal 2013,2014, was transferred to amortizable purchased technology intangible assets and is being amortized over its estimated useful life.
GoodwillGoodwill Goodwill Accumulated
Impairment Losses Net Amount Balance March 31, 2011 $ 385,770 $ (339,000 ) $ 46,770 Pancetera acquisition 8,843 — 8,843 Balance March 31, 2012 and March 31, 2013 $ 394,613 $ (339,000 ) $ 55,613 Goodwill Net Amount Balances as of March 31, 2015 and March 31, 2014 $ 394,613 $ (339,000 ) $ 55,613 2013, 20122015, 2014 and 20112013 did not indicate any impairment of our goodwill in fiscal 2013, 20122015, 2014 and 2011.2013. For the year ended March 31, 2013 2012 Beginning balance $ 7,586 $ 7,034 Additional warranties issued 9,632 9,973 Adjustments for warranties issued in prior fiscal years 1,070 1,956 Settlements (10,768 ) (11,377 ) Ending balance $ 7,520 $ 7,586 For the year ended March 31, 2015 2014 Beginning balance $ 6,116 $ 7,520 Additional warranties issued 6,146 8,508 Adjustments for warranties issued in prior fiscal years (185 ) (228 ) Settlements (7,858 ) (9,684 ) Ending balance $ 4,219 $ 6,116 1one to 3three years. A provision for estimated future costs and estimated returns for creditrepair or replacement relating to warranty is recorded when products are shipped and revenue recognized. Our estimate of future costs to satisfy warranty obligations is primarily based on historical trends and, if believed to be significantly different from historical trends, estimates of future failure rates and future costs of repair. Future costs of repair include materials consumed in the repair, labor and overhead amounts necessary to perform the repair. If we determine in a future period that either actual failure rates or actual costs of repair were to differ from our estimates, we record the impact in subsequent periods. If future actual costs of repair were to differ significantly from our estimates, we would record the impact of these unforeseen costthose differences in subsequent periods.CONVERTIBLE SUBORDINATED DEBT AND LONG-TERM DEBTOur debt consisted of the following (in thousands): As of March 31, 2013 2012 Convertible subordinated debt $ 205,000 $ 135,000 Senior secured revolving debt — 49,495 $ 205,000 $ 184,495 $5.0$5 million of loan fees in fiscal 2011 for the 3.50% notes which are included in other long-termcurrent assets in our Consolidated Balance Sheets. These fees are amortized to interest expense over the term of the notes.4.375% NotesJuly 30, 2010,March 11, 2014, we entered into a private transaction with a note holder to purchase $1.3 million of aggregate principal amount of notes for $1.3 million. On January 28, 2015, we entered into a private transaction with a note holder to purchase $50 million of aggregate principal amount for $51 million . In connection with this transaction, we recorded a loss on debt extinguishment of $1.3 million comprised of the loss of $1 million from the notes purchased and a write-off of $0.3 million of unamortized debt issuance costs related to the purchased notes. We also paid $22.1 million plus $0.5 million in accrued and unpaid interest to redeemon the 4.375% convertible subordinatedpurchased notes outstanding at that date in accordance with the contractual terms at maturity. These notes matured August 1, 2010.Long-Term Debtsenior secured credit agreement with Credit Suisse (“CS credit agreement”) by entering into a senior secured credit agreement (“WF credit agreement”) with Wells Fargo Capital Finance, LLC providing a senior secured revolving credit facility up to $75 million, subsequently amended to $55 million (“WF credit agreement”). The WF credit agreement matures March 29, 2017, or August 16, 2015 if our 3.50% notes remain outstanding on that date. Quarterly, we are required to pay a 0.375% commitment fee on undrawn amounts under the revolving credit facility. There is a blanket lien on all of our assets under the WF credit agreement in addition to certain financial and reporting covenants.We borrowed $49.5 million on March 29, 2012 to repay all borrowings under the CS credit agreement. Amounts borrowed are included in long-term debt on the Consolidated Balance Sheets.LLC. We incurred and capitalized $1.0 million of fees related to the WF credit agreement which are included in other long-term assets in our Consolidated Balance Sheets. These fees are being amortized to interest expense over the term of the WF credit agreement.There were two primary amendments made toagreement in the WF credit agreement during fiscal 2013. Consolidated Statements of Operations .June 28, 2012,April 24, 2014, the WF credit agreement was amended to allow us to use proceeds from the credit agreement to repay the convertible subordinated notes so long as we have a fixed charge coverage ratio of 1.5 and liquidity of $25 million. The amendment also impacted the available line, maturity date and certain covenants and compliance obligations which are reflected below. In addition, there were amendments in orderfiscal 2013 and fiscal 2014, including an amendment to allow the assignment of one third of the total revolver commitment to Silicon Valley Bank. This amendment also made certainBank and other conforming and related modifications, including changes to the average liquidity requirements.On January 31, 2013,modifications.wasas amended, we have the ability to decrease the line of credit and modify certain covenants. The maximum borrowing amount decreased toborrow the lesser of $55$75 million or the amount of the monthly borrowing base under a senior secured revolving credit facility. The WF credit agreement matures March 29, 2017 so long as an amount sufficient to repay the 3.50% notes is available for borrowing under the WF credit agreement or is deposited in a WF controlled account prior to August 16, 2015. Otherwise, the WF credit agreement matures on August 16, 2015. Quarterly, we are required to pay a .375% commitment fee on undrawn amounts under the revolving credit facility.will remainreporting covenants. We have letters of credit totaling $1 million, reducing the maximum amount available to borrow by this amount at this level forMarch 31, 2015.remaining term ofWF credit agreement or (2) the LIBOR rate plus an applicable margin ranging from 2.0% and 2.5%, based on availability levels under the WF credit agreement. The averagebase rate is defined in the WF credit agreement.covenant was eliminated.must exceed $15 million each month. The fixed charge coverage ratio covenant is applicable only in fiscal quarters in which liquidity is below $16.5 million and decreased fromrequired to be greater than 1.2 to 1.1 for the 12 month period ending on the last day of any fiscal quartermonth in which the covenant is applicable. The liquidity requirement toThis covenant is applicable only in months in which borrowings exceed $5 million at any time during the month and was not applicable in fiscal 2015. To avoid triggering mandatory field audits decreased fromand Wells Fargo controlling our cash receipts, we must maintain liquidity of at least $20 million to $18.5 million commencing January 31, 2013 and will remain at this level for the remaining term of the credit agreement. Both theall times. The fixed charge coverage ratio, average liquidity and liquidity are defined in the WF credit agreement andand/or amendments. Certain schedules in the January 31, 2013 amendment.In addition, compliance certificatescertificate must be filed monthly if borrowings exceed $15 million,$5 million; otherwise they are to be filed quarterly. The fixed charge coverage ratio was not applicable for the fourth quarter of fiscal 2013 because our liquidity level exceeded the contractual threshold.On October 31, 2012, we repaid all outstanding borrowings under the WF credit agreement with $49.5 million of the proceeds from the 4.50% notes. We have letters of credit totaling $1.1 million, reducing the amount available to borrow to $53.9 million at March 31, 2013. 2013,2015, and during fiscal 2015, we were in compliance with all covenants and had no outstanding balance on the line of credit.Credit Suisse Credit AgreementOn July 12, 2007, we refinanced a prior credit facility by entering into a senior secured credit agreement with Credit Suisse providing a $50 million revolving credit facility and a $400 million senior secured term loan. We borrowed $400 million on the term loan to repay all borrowings under a prior credit facility used to fund the Advanced Digital Information Corporation acquisition. We incurred and capitalized $8.1 million of loan fees related to the CS credit agreement which were included in other long-term assets in our Consolidated Balance Sheets. These fees were amortized to interest expense over the respective loan terms. Interest accrued on the term loan at our option based on either, a prime rate plus a margin of 2.5%, or a LIBOR rate plus a margin of 3.5%. During fiscal 2011, we made principal payments of $81.7 million on the CS credit agreement term loan, and in fiscal 2012 we made principal payments of $104.3 million to fully extinguish the term loan and CS credit agreement.Subordinated Term LoansOn November 15, 2010, we paid $121.7 million plus $1.8 million in accrued and unpaid interest to settle subordinated term loans with EMC International Company. As a result of the voluntary prepayment in full of these term loans, we have satisfied all of our obligations under these loans. We funded this payment using proceeds from the 3.50% convertible subordinated notes.Loss on Debt ExtinguishmentIn fiscal 2012, in connection with fully extinguishing the CS term loan and credit agreement on March 29, 2012, we wrote off $2.3 million of unamortized debt costs related to the CS term loan and credit agreement.In fiscal 2011, in connection with the repayment of our subordinated term loans on November 15, 2010, we wrote off $1.2 million of unamortized debt costs related to these term loans.20132015 follows (in thousands): Debt Maturity Fiscal 2014 to fiscal 2015 $ — Fiscal 2016 135,000 Fiscal 2017 — Fiscal 2018 70,000 Total as of March 31, 2013 $ 205,000 Debt Maturity Fiscal 2016 $ 83,735 Fiscal 2017 — Fiscal 2018 70,000 Total as of March 31, 2015 $ 153,735 Our restructuring actions are steps undertaken to reduce costs in an effort to return to consistent profitability. In fiscal 2013, 2012 and 2011, restructuring actions to consolidate operations supporting our business were the result of strategic management decisions. 2013, 20122015, 2014 and 20112013 (in thousands):For the year ended March 31, 2013 2012 2011 Severance and benefits $ 8,251 $ 1,585 $ 3,580 Facilities 1,920 345 (538 ) Other — (300 ) 602 $ 10,171 $ 1,630 $ 3,644 For the year ended March 31, 2015 2014 2013 Restructuring expense related to cost of revenue $ — $ 539 $ — Restructuring expense in operating expense 1,666 10,675 10,171 $ 1,666 $ 11,214 $ 10,171 For the year ended March 31, 2015 2014 2013 Severance and benefits $ 406 $ 6,139 $ 8,251 Facilities 1,250 4,303 1,920 Other 10 772 — $ 1,666 $ 11,214 $ 10,171 Fiscal 2012Restructuring charges in fiscal 2012 were primarily due to severance and benefits expenses Severance and
benefits Facilities Other Total Balance as of March 31, 2010 $ 494 $ 3,301 $ — $ 3,795 Restructuring costs 3,586 307 602 4,495 Restructuring charge reversal (6 ) (845 ) — (851 ) Cash payments (1,189 ) (1,920 ) — (3,109 ) Non-cash charges and other — — (302 ) (302 ) Balance as of March 31, 2011 2,885 843 300 4,028 Restructuring costs 1,864 345 — 2,209 Restructuring charge reversal (279 ) — (300 ) (579 ) Cash payments (3,181 ) (748 ) — (3,929 ) Assumed restructuring liability 23 — — 23 Balance as of March 31, 2012 1,312 440 — 1,752 Restructuring costs 8,815 1,920 — 10,735 Restructuring charge reversal (564 ) — — (564 ) Cash payments (6,852 ) (315 ) — (7,167 ) Balance as of March 31, 2013 $ 2,711 $ 2,045 $ — $ 4,756 Estimated timing of future payouts: Fiscal 2014 $ 2,711 $ 310 $ — $ 3,021 Fiscal 2015 to 2019 — 1,735 — 1,735 $ 2,711 $ 2,045 $ — $ 4,756 Facilities Other Total Balance as of March 31, 2012 $ 1,312 $ 440 $ — $ 1,752 Restructuring costs 8,815 1,920 — 10,735 Restructuring charge reversal (564 ) — — (564 ) Cash payments (6,852 ) (315 ) — (7,167 ) Balance as of March 31, 2013 2,711 2,045 — 4,756 Restructuring costs 7,522 4,392 772 12,686 Restructuring charge reversal (1,383 ) (89 ) — (1,472 ) Cash payments (7,276 ) (607 ) (702 ) (8,585 ) Other non-cash — 983 — 983 Balance as of March 31, 2014 1,574 6,724 70 8,368 Restructuring costs 749 1,680 13 2,442 Restructuring charge reversal (343 ) (430 ) (3 ) (776 ) Cash payments (1,791 ) (3,617 ) (80 ) (5,488 ) Other non-cash — 300 — 300 Balance as of March 31, 2015 $ 189 $ 4,657 $ — $ 4,846 Estimated timing of future payouts: Facilities Total Fiscal 2016 $ 75 $ 3,780 $ 3,855 Fiscal 2017 to 2021 114 877 991 $ 189 $ 4,657 $ 4,846 The $4.8 millionaccrual as of March 31, 2013 is comprised of both severance and benefits obligations and facilities obligations. The majority of the severance and benefits obligations are expected to be paid during the first half of fiscal 2014, with the remainder paid in the second half of fiscal 2014. The amounts accrued for vacant facilitiesaccruals will be paid over theirin accordance with the respective facility lease terms which continue through fiscal 2019.Additional charges may be incurred in the future related to these restructurings, particularly if the actual costs associated with restructured activitiesand amounts above are higher than estimated. Until we achieve sustained profitability, we may incur additional charges in the future related to additional cost reduction initiatives. Future charges that we may incur associated with future cost reductions are not estimable at this time.During fiscal 2013, our stockholders an amendment to rename the 1993 Long-Term Incentive Plan to the 2012 Long-Term Incentive Plan (the “Plan”) and retire the 2003 Nonemployee Directors Equity Incentive Plan, merging it into the Plan and transferring all outstanding shares to the Plan. As part of this amendment our stockholders approved an additional 13.2which had 34.3 million shares for issuance and transferred 2.5 million shares available for issuance from the 1993 Long-Term Incentive Plan and 2003 Nonemployee Directors Equity Incentive Plan as of August 14, 2012. In addition, as ofauthorized at March 31, 2013, 2.4 million shares were transferred to the Plan that otherwise would have been returned to the 1993 Long-Term Incentive Plan or 2003 Nonemployee Directors Equity Incentive Plan after August 14, 2012 in accordance with the amendment. These actions combined to bring the total shares authorized under the Plan to 42.3 million shares.2015. There were 17.512.9 million shares available for grant and 24.618.7 million stock options and restricted shares that were outstanding under the Plan as of March 31, 2013,2015, which expire at various times through JuneApril 2018.No stock options were granted in fiscal 2013. Stock options granted in fiscal 2012 and 2011 generally vest over three to four years and have contractual terms of seven years. twothree to threefour years. Stock option and restricted stock grants to nonemployee directors typically vest over one year. Both stock options and restricted stock units granted under the Plan are subject to forfeiture if employment terminates. During fiscal 2012, we assumed outstanding unvested options and unvested restricted sharesvestedvest over one to four years and expiredexpire seven to ten years after the grant date, and restricted stock granted under the Other Plans generally vestedvests over one to threefour years. The Other Plans have been terminated, and outstanding stock options and restricted stock units granted and assumed remain outstanding and continue to be governed by the terms and conditions of the respective Other Plan. Stock options and restricted stock granted under the Other Plans are subject to forfeiture if employment terminates. Stock options under the Other Plans were granted at prices determined by the Board of Directors, but at not less than the fair market value, and stock options assumed were governed by the respective acquisition agreement. Stock options under the Other Plans expire at various times through June 2021. During fiscal 2013, our stockholders approved a 6.0 million share increase to the maximum number of shares that may be issued under the Purchase Plan from 51.8 million shares to 57.8 million shares. As of March 31, 2013, 52.7 million shares had been issued. The Purchase Plan allows a maximum amount of two million shares to be purchased in any six month offering period. Employees purchased 3.82.8 million shares, 3.03.2 million shares and 3.23.8 million shares of common stock under the Purchase Plan in fiscal 2013, 20122015, 2014 and 2011,2013, respectively. The weighted-average price of stock purchased under the Purchase Plan was $1.17, $1.66$1.04, $1.07 and $1.22$1.17 in fiscal 2013, 20122015, 2014 and 2011,2013, respectively. There were 5.15.6 million shares available for issuance as of March 31, 2013. The weighted-average estimated fair values and the assumptions used in calculating fair values for stock options granted under the Plan during each fiscal period are as follows:For the year ended March 31, 2013 2012 2011 Stock option life (in years) n/a 4.0 4.2 Risk-free interest rate n/a 1.57 % 2.02 % Stock price volatility n/a 112.33 % 106.75 % Weighted-average grant date fair value n/a $ 1.91 $ 1.96 The weighted-average fair value of stock options assumed from Pancetera, as well as the weighted-average assumptions used in calculating these values were based on estimates at the acquisition date as follows:Option life (in years)5.2Risk-free interest rate1.65%Stock price volatility100.93%Weighted-average fair value$ 2.67The assumed options have a 10 year contractual life from the original grant date.For the year ended March 31, 2013 2012 2011 Option life (in years) 0.50 0.50 0.50 Risk-free interest rate 0.13 % 0.06 % 0.19 % Stock price volatility 69.73 % 70.29 % 68.56 % Weighted-average grant date fair value $ 0.48 $ 0.82 $ 0.72 For the year ended March 31, 2015 2014 2013 Option life (in years) 0.5 0.5 0.5 Risk-free interest rate 0.07 % 0.07 % 0.13 % Stock price volatility 36.58 % 43.71 % 69.73 % Weighted-average grant date fair value $ 0.36 $ 0.40 $ 0.48 For the year ended March 31, 2013 2012 2011 Share-based compensation expense: Cost of revenue $ 2,389 $ 2,203 $ 1,768 Research and development 3,665 3,250 2,486 Sales and marketing 4,699 4,048 3,121 General and administrative 4,386 4,236 3,046 Total share-based compensation expense $ 15,139 $ 13,737 $ 10,421 For the year ended March 31, 2015 2014 2013 Share-based compensation expense: Cost of revenue $ 1,489 $ 1,963 $ 2,389 Research and development 2,559 3,430 3,665 Sales and marketing 3,506 4,097 4,699 General and administrative 4,029 3,969 4,386 Total share-based compensation expense $ 11,583 $ 13,459 $ 15,139 For the year ended March 31, 2015 2014 2013 Share-based compensation by type of award: Stock options $ 617 $ 826 $ 1,681 Restricted stock 10,102 11,356 11,630 Stock purchase plan 864 1,277 1,828 Total share-based compensation expense $ 11,583 $ 13,459 $ 15,139 For the year ended March 31, 2013 2012 2011 Share-based compensation by type of award: Stock options $ 1,681 $ 2,622 $ 3,586 Restricted stock 11,630 9,053 5,329 Stock purchase plan 1,828 2,062 1,506 Total share-based compensation expense $ 15,139 $ 13,737 $ 10,421 20132015 and 20122014 was not material. During fiscal 2013, 20122015, 2014 and 2011,2013, no tax benefit was realized for the tax deduction from stock option exercises and other awards due to tax benefit carryforwards and tax ordering requirements.2013,2015, there was $1.6less than $0.1 million of total unrecognized compensation cost related to stock options granted under our plans. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.9 years.less than one year. Total intrinsic value of stock options exercised for the years ended March 31, 2015, 2014 and 2013 2012 and 2011 was $0.3$0.4 million, $3.7$0.4 million and $8.9$0.3 million, respectively. We settle stock option exercises by issuing additional common shares.2013,2015, there was $16.8$12.4 million of total unrecognized compensation cost related to nonvested restricted stock. The unrecognized compensation cost for restricted stock is expected to be recognized over a weighted-average period of 1.71.6 years. Total fair value of awards releasedvested during the years ended March 31, 2015, 2014 and 2013 2012 and 2011 was $7.4$7.7 million, $9.4$6.2 million and $7.5$7.4 million, respectively, based on the fair value of our common stock on the date of award release.award's vest date. We issue additional common shares upon vesting of restricted stock units. Stock Options Weighted-
Average
Exercise Price Weighted-
Average
Remaining
Contractual Term Aggregate
Intrinsic ValueOutstanding as of March 31, 2010 31,329 $ 2.40 Granted 204 2.66 Exercised (6,634 ) 1.90 Forfeited (1,747 ) 2.05 Expired (1,072 ) 5.56 Outstanding as of March 31, 2011 22,080 2.43 Granted and assumed 1,619 2.33 Exercised (2,982 ) 1.79 Forfeited (619 ) 1.90 Expired (704 ) 8.25 Outstanding as of March 31, 2012 19,394 2.32 Exercised (379 ) 0.96 Forfeited (406 ) 2.43 Expired (2,559 ) 3.65 Outstanding as of March 31, 2013 16,050 $ 2.14 1.95 $ 1,592 Vested and expected to vest at March 31, 2013 15,974 $ 2.14 1.93 $ 1,591 Exercisable as of March 31, 2013 15,200 $ 2.12 1.77 $ 1,558 Stock Options Outstanding as of March 31, 2014 7,997 $ 1.78 Exercised (866 ) 0.97 Forfeited (117 ) 2.14 Expired (2,070 ) 2.83 Outstanding as of March 31, 2015 4,944 $ 1.47 1.72 $ 2,039 Vested and expected to vest at March 31, 2015 4,944 $ 1.47 1.72 $ 2,039 Exercisable as of March 31, 2015 4,916 $ 1.46 1.71 $ 2,039 20132015 (stock options in thousands)thousands):Range of Exercise Prices Stock Options
Outstanding Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual Life
(Years) Stock Options
Exercisable Weighted-
Average
Exercise
Price$ 0.11 - $ 0.63 182 $ 0.54 5.63 133 $ 0.50 $ 0.77 - $ 0.98 4,644 0.98 2.90 4,639 0.98 $ 1.00 - $ 1.42 655 1.22 2.59 648 1.22 $ 1.52 - $ 2.21 4,344 2.02 0.57 4,342 2.02 $ 2.30 - $ 3.42 3,922 2.90 2.66 3,135 2.98 $ 3.43 - $ 4.00 2,303 3.81 0.95 2,303 3.81 16,050 $ 2.14 1.95 15,200 $ 2.12 Range of Exercise Prices $0.11 — $0.63 52 $ 0.49 3.20 52 $ 0.49 $0.77 — $0.98 3,019 0.98 1.25 3,019 0.98 $1.00 — $1.35 233 1.15 1.26 233 1.15 $1.61 — $2.17 204 1.80 0.43 204 1.80 $2.52 — $2.93 1,436 2.53 2.90 1,408 2.53 4,944 $ 1.47 1.72 4,916 $ 1.46 20132015 to June 2021 for stock options outstanding at March 31, 2013.2015. Prices for stock options exercised during the three-year period ended March 31, 2013,2015, ranged from $0.11 to $3.86.$2.08. Shares Weighted-Average
Grant Date
Fair ValueNonvested at March 31, 2010 5,135 $ 1.64 Granted 5,757 1.95 Vested (3,665 ) 1.60 Forfeited (587 ) 1.45 Nonvested at March 31, 2011 6,640 1.95 Granted and assumed 6,669 3.14 Vested (3,058 ) 1.88 Forfeited (1,390 ) 2.73 Nonvested at March 31, 2012 8,861 2.75 Granted 5,514 1.98 Vested (3,566 ) 2.55 Forfeited (922 ) 2.30 Nonvested at March 31, 2013 9,887 $ 2.43 Shares Nonvested as March 31, 2014 12,108 $ 1.80 Granted 10,348 1.24 Vested (6,013 ) 2.10 Forfeited (2,652 ) 1.35 Nonvested as March 31, 2015 13,791 $ 1.34 $2.8$2.4 million, $3.0$2.6 million and $2.6$2.8 million in fiscal 2015, 2014 and 2013, 2012 and 2011, respectively.2013, 20122015, 2014 and 20112013 follows (in thousands):For the year ended March 31, 2013 2012 2011 U.S. $ (53,180 ) $ (8,589 ) $ 271 Foreign 1,922 667 4,283 $ (51,258 ) $ (7,922 ) $ 4,554 For the year ended March 31, 2015 2014 2013 U.S $ 13,507 $ (22,549 ) $ (52,940 ) Foreign 3,971 2,292 1,922 $ 17,478 $ (20,257 ) $ (51,018 ) For the year ended March 31, 2013 2012 2011 Federal: Current $ — $ — $ (302 ) State: Current 231 301 446 Foreign: Current 1,090 1,847 74 Deferred (160 ) (1,261 ) (205 ) Total foreign 930 586 (131 ) Income tax provision $ 1,161 $ 887 $ 13 For the year ended March 31, 2015 2014 2013 Federal: $ (138 ) $ — $ — State: Current 125 76 231 Foreign: Current 890 1,096 1,090 Deferred (159 ) 45 (160 ) Total foreign 731 1,141 930 Income tax provision $ 718 $ 1,217 $ 1,161 For the year ended March 31, 2013 2012 2011 Expense (benefit) at federal statutory rate $ (17,940 ) $ (2,773 ) $ 1,594 State taxes 300 301 380 Unbenefited losses and credits 18,799 3,471 (1,235 ) Net release of contingent tax reserves (130 ) (176 ) (466 ) Other 132 64 (260 ) $ 1,161 $ 887 $ 13 For the year ended March 31, 2015 2014 2013 Expense (benefit) at federal statutory rate $ 6,117 $ (7,090 ) $ (17,856 ) State taxes 125 76 300 Unbenefited (benefited) losses and credits (4,727 ) 7,974 18,715 Contingent tax reserves 103 460 (130 ) Foreign rate differential (778 ) (218 ) 120 Other (122 ) 15 12 $ 718 $ 1,217 $ 1,161 As of March 31, 2013 2012 Deferred tax assets: Inventory valuation method $ 3,870 $ 6,429 Accrued warranty expense 2,873 3,072 Distribution reserves 1,407 2,377 Loss carryforwards 72,969 54,162 Foreign tax and research and development credit carryforwards 206,764 221,459 Restructuring charge accruals 1,810 710 Other accruals and reserves not currently deductible for tax purposes 34,824 35,177 Depreciation and amortization methods — 4,824 324,517 328,210 Less valuation allowance (269,373 ) (252,402 ) Deferred tax asset $ 55,144 $ 75,808 Deferred tax liabilities: Depreciation $ (6,466 ) $ — Acquired intangibles (2,664 ) (10,186 ) Tax on unremitted foreign earnings (15,679 ) (15,712 ) Other (29,492 ) (49,179 ) Deferred tax liability $ (54,301 ) $ (75,077 ) Net deferred tax asset $ 843 $ 731 As of March 31, 2015 2014 Deferred tax assets: Inventory valuation method $ 1,588 $ 1,742 Accrued warranty expense 1,624 2,336 Distribution reserves 4,283 1,950 Loss carryforwards 75,262 81,012 Tax credits 185,578 191,372 Restructuring charge accruals 1,866 3,191 Other accruals and reserves not currently deductible for tax purposes 34,490 32,465 304,691 314,068 Less valuation allowance (252,475 ) (261,337 ) Deferred tax asset $ 52,216 $ 52,731 Deferred tax liabilities: Depreciation $ (4,302 ) $ (3,570 ) Acquired intangibles (4,920 ) (2,794 ) Tax on unremitted foreign earnings (15,968 ) (17,245 ) Other (26,093 ) (28,330 ) Deferred tax liability $ (51,283 ) $ (51,939 ) Net deferred tax asset $ 933 $ 792 For the year ended March 31, 2013 2012 2011 Beginning balance $ 32,744 $ 33,012 $ 33,292 Settlement and effective settlements with tax authorities and related remeasurements (60 ) (255 ) (357 ) Lapse of statute of limitations (135 ) (105 ) (228 ) Increase in balances related to tax positions taken in prior period — 92 82 Increases in balances related to tax positions taken during current period — — 223 Ending balance $ 32,549 $ 32,744 $ 33,012 For the year ended March 31, 2015 2014 2013 Beginning balance $ 32,449 $ 32,549 $ 32,744 Settlement and effective settlements with tax authorities and related remeasurements — (488 ) (60 ) Lapse of statute of limitations — — (135 ) Increase in balances related to tax positions taken in prior period — 388 — Ending balance $ 32,449 $ 32,449 $ 32,549 2013, we recorded a net decrease2015, excluding interest and penalties, there was no change in our unrecognized tax benefits. Including interest and penalties, the total unrecognized tax benefit at March 31, 20132015 was $33.5 million, all of which, if recognized, would favorably affect the effective tax rate. At March 31, 20132015 accrued interest and penalties totaled $0.9$1.1 million. Our practice is to recognize interest and penalties related to income tax matters in income tax provision in the Consolidated Statements of Operations. Unrecognized tax benefits, including interest and penalties, were recorded in other long-term liabilities in the Consolidated Balance Sheets.2013,2015, we had federal net operating loss and tax credit carryforwards of approximately $252.9$259.3 million and $152.4$140.0 million, respectively. Our federal net operating loss carryforwards include $33.6 million attributable to excess tax deductions from stock option exercises, and are not included in the deferred tax assets shown above. The benefit of these loss carryforwards will be credited to equity when realized. The net operating loss and tax credit carryforwards expire in varying amounts beginning in fiscal 20142016 if not previously utilized, the utilization of which is limited under the tax law ownership change provision. These carryforwards include $15.6$11.1 million of acquired net operating losses and $10.8$10.7 million of credits.During fiscal 2013, we issuedWe have 4.50% convertible subordinated notes which are convertible at the option of the holders at any time prior to maturity into shares of Quantum common stock at a conversion price of $1.65 per share. We also have 3.50% convertible subordinated notes which are convertible at the option of the holders at any time prior to maturity into shares of Quantum common stock at a conversion price of $4.33 per share. Both the 4.50% and the 3.50% notes, if converted, would increase shares outstanding.On 23, 2009, we issued a warrant to EMC Corporation to purchase 10 million shares of our common stock at a $0.38 per share exercise price. Only in the event of a change of control of Quantum will this warrant vest and be exercisable. The warrant expires seven years from the date of issuance or three years after change of control, whichever occurs first. Due to these terms, no share-based compensation expense related to this warrant has been recorded to date.setsets forth the computation of basic and diluted net income (loss) per share (in thousands, except per-share data):For the year ended March 31, 2013 2012 2011 Net income (loss) $ (52,419 ) $ (8,809 ) $ 4,541 Weighted average shares and common share equivalents (“CSE”): Basic 239,855 232,599 220,888 Dilutive CSE from stock plans — — 8,815 Dilutive CSE from purchase plan — — 35 Diluted 239,855 232,599 229,738 Basic and diluted net income (loss) per share $ (0.22 ) $ (0.04 ) $ 0.02 For the year ended March 31, 2015 2014 2013 Numerator: Net income (loss) $ 16,760 $ (21,474 ) $ (52,179 ) Denominator: Weighted average shares: Basic 254,665 247,024 239,855 Dilutive shares from stock plans 5,362 — — Diluted 260,027 247,024 239,855 Basic net income (loss) per share $ 0.07 $ (0.09 ) $ (0.22 ) Diluted net income (loss) per share 0.06 (0.09 ) (0.22 ) excludedexclude the following because the effect would have been antidilutive:2012there were 29.0 million, 31.1 million and 2011, 31.2 million, 31.2 million and 11.6 millionrespectively, of weighted equivalentaverage sharesrespectively, of related to the 3.50% convertible subordinated notes that were excluded. In addition, forFor fiscal 2015, 2014 and 2013, 17.6$5.3 million, $5.7 million and $5.7 million, respectively, of related interest expense was excluded.equivalentaverage shares ofrelated to the 4.50% of convertible subordinated notes that were excluded.17.32.4 million, 11.512.8 million and 10.417.3 million weighted average shares in fiscal 2013,20122015, 2014 and 20112013, respectively, were excluded.10.1less than 0.1 million, 5.111.0 million, and 49,00010.1 million weighted average shares for fiscal 2013,20122015, 2014 and 2011,2013, respectively, were excluded.$26.3$18.8 million of lease payments and $4.9 million of sublease rental income for this Colorado Springs campus.$11.5$7.0 million in fiscal 2013 and $12.72015, $10.3 million in both fiscal 20122014 and 2011.$11.3 million in fiscal 2013. Sublease income was immaterial in fiscal 2013, 20122015, 2014 and 2011. Lease Payments For the year ending March 31, 2014 $ 10,027 2015 9,507 2016 7,688 2017 5,423 2018 5,219 Thereafter 13,415 $ 51,279 Lease Payments Sublease Rental Income Total For the year ending March 31, 2016 $ 9,107 $ (587 ) $ 8,520 2017 6,610 (959 ) 5,651 2018 6,124 (936 ) 5,188 2019 5,523 (909 ) 4,614 2020 4,032 (943 ) 3,089 Thereafter 4,459 (813 ) 3,646 $ 35,855 $ (5,147 ) $ 30,708 certainour manufacturing functions.operations. Under these arrangements, the contract manufacturer procures inventory to manufacture products based upon our forecast of customer demand. We have similar arrangements with certain other suppliers. We are responsible for the financial impact on the supplier or contract manufacturer of any reduction or product mix shift in the forecast relative to materials that the contract manufacturerthird party had already purchased under a prior forecast. Such a variance in forecasted demand could require a cash payment for finished goodsinventory in excess of current customer demand or for costs of excess or obsolete inventory. As of March 31, 2013 and 2012,2015, we had issued non-cancelable purchase commitments for $22.3$46.0 million and $34.3 million, respectively, to purchase finished goodsinventory from our contract manufacturers.OverlandJune 28, 2012, Overland Storage,February 18, 2014, Crossroads Systems, Inc. (“Overland”Crossroads”) filed a patent infringement lawsuit against Quantum in the U.S. District Court for the SouthernWestern District of California,Texas, alleging infringement of U.S. Patents 6,425,035 and 7,934,041. An amended complaint filed on April 15, 2014 also alleged infringement of U.S. patent 7,051,147. Crossroads asserts that certainwe have incorporated Crossroads' patented technology into our StorNext QX and Q-Series lines of its automated tape libraries fall within the scope of patents 6,328,766disk array products, and 6,353,581. Overland is seeking injunctive relief, as well as the recovery ofinto our Scalar libraries. Crossroads seeks unspecified monetary damages including treble damages for willful infringement.and injunctive relief. Crossroads has already dismissed all claims of infringement with respect to the StorNext QX and Q-Series products. We do not believe we infringe the Overland patents and we will defend ourselves vigorously. We do not believe there is a reasonable possibilityprobability that we will pay material damages related to this lawsuit.
On August 28, 2012,September 23, 2014, we filed a lawsuit against OverlandCrossroads in the U.S. District Court for the SouthernNorthern District of California foralleging patent infringementsinfringement of our patents 6,542,787; 6,498,771; 5,925,119 and 5,491,812patent 6,766,412 by the products in Overland’s NEO tape library and SnapServer product lines.Crossroad’s StrongBox VSeries Library Solution product. We are seeking injunctive relief and the recovery of monetary damages.April 12, 2013,December 4, 2014, we filedamended our complaint alleging infringement of a lawsuit against Overland insecond patent, 5,940,849, related to Crossroad's SPHiNX product line. On December 16, 2014, we withdrew the U.S. District Court for the Southern District of California, for patent infringements of our patent 7,263,596 by the products in Overland’s SnapScale product lines. We are seeking injunctive relief and the recovery of monetary damages.Compression Technology SolutionsOn September 12, 2011, Compression Technology Solutions LLC (“CTS”) filed a patentamended complaint alleging infringement lawsuit against a group of companies, consisting of Quantum, CA., Inc., EMC Corporation, Hewlett-Packard Company, International Business Machines Corp., NetApp, Inc. and Quest Software, Inc., in the U.S. District Court for the Eastern District of Missouri, alleging that certain unspecified products of the defendants, characterized as “deduplication software systems,” and, in the case of Quantum, including Quantum’s “DXi Series Deduplication software,” fall within the scope ofsecond patent, 5,414,650. CTS was seeking injunctive relief, as well as the recovery of monetary damages, including treble damages for willful infringement. We do not believe we infringe the CTS patent; we believe that the CTS patent is invalid, and we defended ourselves vigorously. In April 2012, our motion to transfer venue was granted and the lawsuit was transferred to the U.S. District Court for the Northern District of California. On May 29, 2013, our motion for summary judgment was granted, with all of the asserted claims held invalid by the District Court, and the lawsuit against Quantum and the other defendants has been dismissed with prejudice.20132015 and 2012,2014, we did not record a liability associated with these guarantees, as we have little or no history of costs associated with such indemnification requirements. Contingent liabilities associated with product liability may be mitigated by insurance coverage that we maintain.AND CUSTOMER INFORMATIONAs of and for the year ended March 31, 2013 2012 2011 Revenue Long-Lived
Assets Revenue Long-Lived
Assets Revenue Long-Lived
AssetsAmericas $ 378,623 $ 20,182 $ 411,517 $ 23,738 $ 430,125 $ 23,596 Europe 151,700 756 177,661 1,030 179,519 787 Asia Pacific 57,249 518 63,192 672 62,626 597 $ 587,572 $ 21,456 $ 652,370 $ 25,440 $ 672,270 $ 24,980 As of and for the year ended March 31, 2015 2014 2013 Revenue Revenue Revenue Americas $ 14,063 $ 340,811 $ 16,759 $ 359,259 $ 20,182 $ 378,514 Europe 421 152,186 524 143,508 756 151,676 Asia Pacific 169 60,098 291 50,398 518 57,249 $ 14,653 $ 553,095 $ 17,574 $ 553,165 $ 21,456 $ 587,439 No customer accounted10% or moreAmericas regions outside of our revenue in fiscal 2013 and 2012. Dell accounted for $68.7 million and 10% of revenue in fiscal 2011.For the year ended March 31, 2013 2012 2011 Disk systems and software solutions $ 124,074 $ 119,044 $ 110,678 Tape automation systems 206,112 245,030 254,153 Devices and media 68,857 87,266 92,072 Service 144,037 144,364 151,095 Royalty 44,492 56,666 64,272 Total revenue $ 587,572 $ 652,370 $ 672,270 For the year ended March 31, 2015 2014 2013 Tape automation systems $ 152,205 $ 174,438 $ 206,112 Disk backup systems* 54,845 50,217 74,255 Devices and media 62,642 70,680 68,724 Scale-out storage solutions* 85,887 52,983 49,819 Service 155,674 147,199 144,037 Royalty 41,842 57,648 44,492 Total revenue $ 553,095 $ 553,165 $ 587,439 For the year ended March 31, 2013 (In thousands, except per share data) 1st
Quarter 2nd
Quarter 3rd
Quarter 4th
QuarterRevenue $ 140,879 $ 147,340 $ 159,395 $ 139,958 Gross margin 55,795 59,224 68,028 57,604 Net loss (17,498 ) (12,268 ) (8,146 ) (14,507 ) Basic and diluted net loss per share (0.07 ) (0.05 ) (0.04 ) (0.06 ) For the year ended March 31, 2012 1st
Quarter2nd
Quarter3rd
Quarter4th
QuarterRevenue $ 153,535 $ 165,039 $ 173,492 $ 160,304 Gross margin 63,262 71,611 73,717 65,245 Net income (loss) (5,226 ) 3,561 3,914 (11,058 ) Basic and diluted net income (loss) per share (0.02 ) 0.01 0.02 (0.05 ) For the year ended March 31, 2015 (In thousands, except per share data) Revenue $ 128,128 $ 135,106 $ 142,063 $ 147,798 Gross margin 55,526 61,929 65,067 62,164 Net income (loss) (4,324 ) 1,248 6,931 12,905 Basic net income (loss) per share (0.02 ) 0.00 0.03 0.05 Diluted net income (loss) per share (0.02 ) 0.00 0.03 0.04 For the year ended March 31, 2014 Revenue $ 147,849 $ 131,479 $ 145,869 $ 127,968 Gross margin 69,835 56,392 61,373 52,020 Net income (loss) 3,281 (7,893 ) (2,458 ) (14,404 ) Basic and diluted net income (loss) per share 0.01 (0.03 ) (0.01 ) (0.06 ) NOTE 16: SUBSEQUENT EVENTOn May 8, 2013, we entered into an intellectual property agreement with Microsoft Corporation (“Microsoft”). Under this agreement, the parties each provide the other with broad patent protection across their respective product lines. In addition, Microsoft agreed to make a one-time cash paymentBalance at
beginning of
periodNet additions
(releases)
charged to
expenseDeductions (i) Balance at end
of periodFor the year ended: March 31, 2013 $ 217 $ 3 $ (158 ) $ 62 March 31, 2012 403 (125 ) (61 ) 217 March 31, 2011 798 (502 ) 107 403 Deductions (i) For the year ended: March 31, 2015 $ 88 $ 40 $ (101 ) $ 27 March 31, 2014 62 (39 ) 65 88 March 31, 2013 217 3 (158 ) 62
____________________(i)Uncollectible accounts written off, net of recoveries.ITEM 9. Management20132015 based on the guidelines establishedcriteria for effective control over financial reporting described inInternal Control –- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, 20132015 to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.2013,2015, as set forth at the beginning of Part II, Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.20132015 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.20132015 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended March 31, 2013.2015. For information pertaining to our executive officers, refer to the section captioned “Executive Officers of Quantum Corporation” section of Part I,& Management Team”, Item 1 "Business" of this Annual Report on Form 10-K.athttp:at http://www.quantum.com, where they may be found by clicking “About Us” from the home page and then choosing “Investor Relations” and then “Corporateathttp:at http://www.quantum.com, where they may be found by clicking “About Us” from the home page and then choosing “Investor Relations” and then “Corporate Governance.” Copies of these committee charters are available free upon request by a stockholder.20132015 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended March 31, 2013.2015.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Year ended March 31, 2013 (a)
Number of
securities to be
issued upon
exercise of
outstanding stock
options, warrants
and rightsWeighted-
average
exercise price
of outstanding
stock options,
warrants and
rightsNumber of
securities
remaining
available
for future
issuance under
equity
compensation plans
(excluding shares
reflected in column
(a))Equity compensation plans approved by stockholders(1) 24,581 $ 1.31 19,610 Equity compensation plans not approved by stockholders(2), (3) 1,356 $ 1.53 — 25,937 $ 1.32 19,610 As of March 31, 2015 18,698 $ 0.31 12,935 36 $ 0.76 — 18,734 $ 0.31 12,935
____________________(1) 9.913.8 million restricted stock units with a zero purchase price. The weighted average exercise price of outstanding stock options for stockholder approved plans is $2.20.(2) (3) 5.15.6 million shares available for issuance that has been approved by stockholders.20132015 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended March 31, 2013.2015.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 20132015 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended March 31, 2013.2015.20132015 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended March 31, 2013. 1650 Technology Drive, Suite 800 San Jose, California 95110(408) 944-44501. 2. Incorporated by Reference Exhibit
Number Exhibit Description Form File No. Exhibit(s) Filing Date 2.1 Agreement and Plan of Merger by and between Registrant, Pancetera Software, Inc., Quarry Acquisition Corporation and Henrik Rosendahl as the stockholder representative, dated June 13, 2011. 10-Q 001-13449 10.8 August 9, 2011 3.1 Amended and Restated Certificate of Incorporation of Registrant. 8-K 001-13449 3.1 August 16, 2007 3.2 Amended and Restated By-laws of Registrant, as amended. 8-K 001-13449 3.1 December 5, 2008 3.3 Certificate of Designation of Rights, Preferences and Privileges of Series B Junior Participating Preferred Stock. S-3 333-109587 4.7 October 9, 2003 3.4 Certification of Amendment to the Bylaws of Quantum Corporation, as adopted on January 20, 2010. 8-K 001-13449 3.1 January 26, 2010 4.1 Indenture for 3.50% Convertible Senior Subordinated Notes due 2015, between the Registrant and U.S. Bank National Association, as trustee, dated November 15, 2010, including the form of 3.50% Convertible Senior Subordinated Note due 2015. 8-K 001-13449 4.1 November 15, 2010 4.2 Indenture for 4.50% Convertible Senior Subordinated Notes due 2017, between the Registrant and U.S. Bank National Association, as trustee, dated October 31, 2012, including the form of 4.50% Convertible Senior Subordinated Note due 2017. 8-K 001-13449 4.1 October 31, 2012 10.1 Form of Indemnification Agreement between Registrant and the Named Executive Officers and Directors. * 8-K 001-13449 10.4 April 4, 2007 10.2 Chief Executive Change of Control Agreement between Registrant and Jon W. Gacek. * 8-K 001-13449 10.3 April 5, 2011 10.3 Form of Officer Change of Control Agreement between Registrant and each of Registrant’s Executive Officers (Other than the Executive Chairman and the CEO). * 8-K 001-13449 10.5 April 5, 2011 10.4 Form of Amended and Restated Director Change of Control Agreement between Registrant and the Directors (Other than the Executive Chairman and the CEO). * 8-K 001-13449 10.2 May 10, 2011 10.5 Quantum Corporation 2012 Long-Term Incentive Plan. * 8-K 001-13449 10.1 August 21, 2012 10.6 Form of Restricted Stock Unit Agreement (U.S. Employees), under the Quantum Corporation 2012 Long-Term Incentive Plan. * 10-Q/A 001-13449 10.2 February 15, 2013 10.7 Form of Restricted Stock Unit Agreement (Non-U.S. Employees), under the Quantum Corporation 2012 Long-Term Incentive Plan. * 10-Q/A 001-13449 10.3 February 15, 2013 10.8 Form of Restricted Stock Unit Agreement (Directors), under the Quantum Corporation 2012 Long-Term Incentive Plan. * 10-Q/A 001-13449 10.4 February 15, 2013 10.9 Quantum Corporation Employee Stock Purchase Plan. * 8-K 001-13449 10.2 August 21, 2012 10.10 Quantum Corporation Executive Officer Incentive Plan. * 8-K 001-13449 10.3 August 21, 2012 10.11 Advanced Digital Information Corporation Amended and Restated 1999 Stock Incentive Plan. * S-8 001-13449 4.4 August 25, 2006 10.12 Employment Offer Letter, dated March 31, 2011, between Registrant and Jon W. Gacek. * 8-K 001-13449 10.1 April 5, 2011 10.13 Amendment to Employment Offer Letter between Registrant and Jon W. Gacek. * 10-Q 001-13449 10.1 February 8, 2013 10.14 Employment Offer Letter, dated August 31, 2006, between Registrant and William C. Britts. * 8-K 001-13449 10.1 September 7, 2006 Incorporated by Reference Exhibit Description Form File No. Exhibit(s) Filing Date 2.1 Agreement and Plan of Merger by and between Registrant, Pancetera Software, Inc., Quarry Acquisition Corporation and Henrik Rosendahl as the stockholder representative, dated June 13, 2011. 10-Q 001-13449 10.8 August 9, 2011 3.1 Amended and Restated Certificate of Incorporation of Registrant. 8-K 001-13449 3.1 August 16, 2007 3.2 Amended and Restated By-laws of Registrant, as amended. 8-K 001-13449 3.1 December 5, 2008 3.3 Certificate of Designation of Rights, Preferences and Privileges of Series B Junior Participating Preferred Stock. S-3 333-109587 4.7 October 9, 2003 3.4 Certification of Amendment to the Bylaws of Quantum Corporation, as adopted on January 20, 2010. 8-K 001-13449 3.1 January 26, 2010 4.1 Indenture for 3.50% Convertible Senior Subordinated Notes due 2015, between the Registrant and U.S. Bank National Association, as trustee, dated November 15, 2010, including the form of 3.50% Convertible Senior Subordinated Note due 2015. 8-K 001-13449 4.1 November 15, 2010 4.2 Indenture for 4.50% Convertible Senior Subordinated Notes due 2017, between the Registrant and U.S. Bank National Association, as trustee, dated October 31, 2012, including the form of 4.50% Convertible Senior Subordinated Note due 2017. 8-K 001-13449 4.1 October 31, 2012 10.1 Form of Indemnification Agreement between Registrant and the Named Executive Officers and Directors. * 8-K 001-13449 10.4 April 4, 2007 10.2 Chief Executive Change of Control Agreement between Registrant and Jon W. Gacek. * 8-K 001-13449 10.3 April 5, 2011 10.3 Form of Officer Change of Control Agreement between Registrant and each of Registrant’s Executive Officers (Other than the Executive Chairman and the CEO). * 8-K 001-13449 10.5 April 5, 2011 10.4 Form of Amended and Restated Director Change of Control Agreement between Registrant and the Directors (Other than the Executive Chairman and the CEO). * 8-K 001-13449 10.2 May 10, 2011 10.5 Quantum Corporation 2012 Long-Term Incentive Plan as amended.* 8-K 001-13449 10.1 September 9, 2014 10.6 Form of Restricted Stock Unit Agreement (U.S. Employees), under the Quantum Corporation 2012 Long-Term Incentive Plan. * 10-Q/A 001-13449 10.2 February 15, 2013 10.7 Form of Restricted Stock Unit Agreement (Non-U.S. Employees), under the Quantum Corporation 2012 Long-Term Incentive Plan. * 10-Q/A 001-13449 10.3 February 15, 2013 10.8 Form of Restricted Stock Unit Agreement (Directors), under the Quantum Corporation 2012 Long-Term Incentive Plan. * 10-Q/A 001-13449 10.4 February 15, 2013 10.9 Quantum Corporation Employee Stock Purchase Plan, as amended. *‡ 10.10 Quantum Corporation Executive Officer Incentive Plan. *‡ Incorporated by Reference Exhibit Description Form File No. Exhibit(s) Filing Date 10.11 Advanced Digital Information Corporation Amended and Restated 1999 Stock Incentive Plan. * S-8 001-13449 4.4 August 25, 2006 10.12 Employment Offer Letter, dated March 31, 2011, between Registrant and Jon W. Gacek. * 8-K 001-13449 10.1 April 5, 2011 10.13 Amendment to Employment Offer Letter between Registrant and Jon W. Gacek. * 10-Q 001-13449 10.1 February 8, 2013 10.14 Employment Offer Letter, dated August 31, 2006, between Registrant and William C. Britts. * 8-K 001-13449 10.1 September 7, 2006 10.15 Amendment to Employment Offer Letter between Registrant and William C. Britts. * 10-Q 001-13449 10.6 November 7, 2008 10.16 Amendment to Employment Offer Letter between Registrant and William C. Britts. * 10-Q 001-13449 10.3 February 5, 2010 10.17 Offer Letter of Mr. David A. Krall, dated August 11, 2011. * 8-K 001-13449 10.1 August 22, 2011 10.18 Offer Letter, dated May 2, 2011, between Registrant and David E. Roberson. * 8-K 001-13449 10.1 May 10, 2011 10.19 Offer Letter, dated August 20, 2007, between Registrant and Paul Auvil. * 8-K 001-13449 10.1 August 29, 2007 10.20 Offer Letter, dated August 7, 2013, between Registrant and Mr. Philip Black.* 10-Q 001-13449 10.2 November 12, 2013 10.21 Offer Letter, dated August 7, 2013, between Registrant and Louis DiNardo.* 10-Q 001-13449 10.3 November 12, 2013 10.22 Offer Letter, dated August 7, 2013, between Registrant and Gregg J. Powers.* 10-Q 001-13449 10.4 November 12, 2013 10.23 Offer Letter, dated August 29, 2014, between Registrant and Dale L. Fuller.*‡ 10.24 Offer Letter, dated May 1, 2015, between Registrant and Robert J. Andersen.*‡ 10.25 Form of Agreement to Advance Legal Fees between the Registrant and certain of its Executive Officers.*‡ 10.26 Credit Agreement, dated March 29, 2012, by and among the Registrant, Wells Fargo Capital Finance, LLC, as Administrative Agent, and the Lenders party thereto. 10-K 001-13449 10.22 June 14, 2012 10.27 Security Agreement, dated March 29, 2012, among the Registrant and Wells Fargo Capital Finance, LLC. 8-K 001-13449 10.2 April 2, 2012 10.28 First Amendment to Credit Agreement, dated June 28, 2012, among Registrant, the lenders identified therein, and Wells Fargo Capital Finance, LLC, as the administrative agent for the lenders. 8-K 001-13449 10.1 June 28, 2012 10.29 Fourth Amendment to Credit Agreement and First Amendment to Security Agreement, dated January 31, 2013, among Registrant, the lenders identified therein, and Wells Fargo Capital Finance, LLC, as the administrative agent for the lenders. 8-K 001-13449 10.1 February 6, 2013 10.30 Consent and Fifth Amendment to Credit Agreement, dated February 6, 2014, by and among Wells Fargo Capital Finance, LLC, as administrative agent, the lenders that are parties thereto, and Quantum Corporation 8-K 001-13449 10.1 April 29, 2014 Incorporated by Reference Exhibit
Number Exhibit Description Form File No. Exhibit(s) Filing Date 10.15 Amendment to Employment Offer Letter between Registrant and William C. Britts. * 10-Q 001-13449 10.6 November 7, 2008 10.16 Amendment to Employment Offer Letter between Registrant and William C. Britts. * 10-Q 001-13449 10.3 February 5, 2010 10.17 Offer Letter, dated May 25, 2007, between Registrant and Joseph A. Marengi. * 8-K 001-13449 10.1 May 25, 2007 10.18 Offer Letter of Mr. David A. Krall, dated August 11, 2011. * 8-K 001-13449 10.1 August 22, 2011 10.19 Offer Letter, dated May 2, 2011, between Registrant and David E. Roberson. * 8-K 001-13449 10.1 May 10, 2011 10.20 Offer Letter, dated August 20, 2007, between Registrant and Paul Auvil. * 8-K 001-13449 10.1 August 29, 2007 10.21 Credit Agreement, dated March 29, 2012, by and among the Registrant, Wells Fargo Capital Finance, LLC, as Administrative Agent, and the Lenders party thereto. 10-K 001-13449 10.22 June 14, 2012 10.22 Security Agreement, dated March 29, 2012, among the Registrant and Wells Fargo Capital Finance, LLC. 8-K 001-13449 10.2 April 2, 2012 10.23 First Amendment to Credit Agreement, dated June 28, 2012, among Registrant, the lenders identified therein, and Wells Fargo Capital Finance, LLC, as the administrative agent for the lenders. 8-K 001-13449 10.1 June 28, 2012 10.24 Fourth Amendment to Credit Agreement and First Amendment to Security Agreement, dated January 31, 2013, among Registrant, the lenders identified therein, and Wells Fargo Capital Finance, LLC, as the administrative agent for the lenders. 8-K 001-13449 10.1 February 6, 2013 10.25 Agreement for Purchase and Sale of Real Property, dated as November 18, 2005, among Registrant, SELCO Service Corporation and CS/Federal Drive LLC, as amended by Amendments 1 through 6. 8-K 001-13449 10.1 February 10, 2006 10.26 Lease Agreement, dated February 6, 2006, between Registrant and CS/Federal Drive AB LLC (for Building A). 8-K 001-13449 10.2 February 10, 2006 10.27 Lease Agreement, dated February 6, 2006, between Registrant and CS/Federal Drive AB LLC (for Building B). 8-K 001-13449 10.3 February 10, 2006 10.28 Lease Agreement, dated February 6, 2006, between Registrant and CS/Federal Drive AB LLC (for Building C). 8-K 001-13449 10.4 February 10, 2006 10.29 Patent Cross License Agreement, dated February 27, 2006, between Registrant and Storage Technology Corporation. 8-K 001-13449 10.1 March 3, 2006 10.30 Tax Sharing and Indemnity Agreement by and among Registrant, Maxtor Corporation and Insula Corporation, dated April 2, 2001. 8-K 001-13449 10.1 December 29, 2004 10.31 Mutual General Release and Global Settlement Agreement, dated as of December 23, 2004, between Maxtor Corporation and Registrant. 10-Q 001-13449 10.4 February 2, 2005 10.32 Warrant Purchase Agreement, dated as of June 3, 2009, by and between Quantum Corporation and EMC Corporation. 8-K 001-13449 10.1 June 9, 2009 10.33 First Amendment to the Purchase Agreement, dated as of June 17, 2009, by and between Quantum Corporation and EMC Corporation. 8-K 001-13449 10.1 June 23, 2009 10.34 Agreement, dated as of May 13, 2013, by and among Registrant, Starboard Value LP, and certain of its affiliates. 8-K 001-13449 10.1 May 14, 2013 12.1 Ratio of Earnings to Fixed Charges. ‡ Incorporated by Reference Exhibit Description Form File No. Exhibit(s) Filing Date 10.31 Sixth Amendment to Credit Agreement and Second Amendment to Security Agreement, dated April 24, 2014, by and among Wells Fargo Capital Finance, LLC, as administrative agent, the lenders that are parties thereto, and Quantum Corporation. 8-K 001-13449 10.2 April 29, 2014 10.32 Agreement for Purchase and Sale of Real Property, dated as November 18, 2005, among Registrant, SELCO Service Corporation and CS/Federal Drive LLC, as amended by Amendments 1 through 6. 8-K 001-13449 10.1 February 10, 2006 10.33 Lease Agreement, dated February 6, 2006, between Registrant and CS/Federal Drive AB LLC (for Building A). 8-K 001-13449 10.2 February 10, 2006 10.34 Lease Agreement, dated February 6, 2006, between Registrant and CS/Federal Drive AB LLC (for Building B). 8-K 001-13449 10.3 February 10, 2006 10.35 First Amendment dated August 1, 2010 to Lease Agreement between Registrant and CS/Federal Drive AB LLC (for Building B). ‡ 10.36 Lease Agreement, dated February 6, 2006, between Registrant and CS/Federal Drive AB LLC (for Building C). 8-K 001-13449 10.4 February 10, 2006 10.37 First Amendment dated August 1, 2010 to Lease Agreement between Registrant and CS/Federal Drive AB LLC (for Building C). ‡ 10.38 Patent Cross License Agreement, dated February 27, 2006, between Registrant and Storage Technology Corporation. 8-K 001-13449 10.1 March 3, 2006 10.39 Warrant Purchase Agreement, dated as of June 3, 2009, by and between Quantum Corporation and EMC Corporation. 8-K 001-13449 10.1 June 9, 2009 10.40 First Amendment to the Purchase Agreement, dated as of June 17, 2009, by and between Quantum Corporation and EMC Corporation. 8-K 001-13449 10.1 June 23, 2009 10.41 Agreement, dated as of May 13, 2013, by and among Registrant, Starboard Value LP, and certain of its affiliates. 8-K 001-13449 10.1 May 14, 2013 10.42 Agreement, dated as of July 28, 2014, by and among Registrant and Starboard Value L.P. and certain of its affiliates 8-K 001-13449 10.1 July 29, 2014 12.1 Ratio of Earnings to Fixed Charges. ‡ 21 Quantum Subsidiaries. ‡ 23 Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP. ‡ 24 Power of Attorney (see signature page). 31.1 Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. ‡ 31.2 Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. ‡ 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002. † 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002. † 101.INS XBRL Instance Document. †† Incorporated by ReferenceExhibitNumberExhibit DescriptionFormFile No.Exhibit(s)Filing Date21Quantum Subsidiaries. ‡23Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP. ‡24Power of Attorney (see signature page).31.1Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. ‡31.2Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. ‡32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002. †32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002. †101.INSXBRL Instance Document. ††101.SCH XBRL Taxonomy Extension Schema Document. †† 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. †† 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. †† 101.LAB XBRL Taxonomy Extension Label Linkbase Document. †† 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. †† ____________________* Indicates management contract or compensatory plan, contract or arrangement. ‡ Filed herewith. † Furnished herewith. †† XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. QUANTUM CORPORATION /s/ LINDA M. BREARD Linda M. Breard Chief Financial Officer (Principal Financial and Chief Accounting Officer) Date: June 7, 201312, 20157, 2013.12, 2015.Signature Title /s/ JON W. GACEK Director, President and Chief Executive Officer Jon W. Gacek (Principal Executive Officer) /s/ LINDA M. BREARD Chief Financial Officer Linda M. Breard (Principal Financial and Chief Accounting Officer) /s/ ROBERT J. ANDERSEN Director Robert J. Andersen /s/ PAUL R. AUVIL III Director Paul R. Auvil III /s/ MICHAEL A. BROWNPHILIP BLACKDirector Michael A. BrownPhilip Black /s/ THOMAS S. BUCHSBAUMLOUIS DINARDODirector Thomas S. BuchsbaumLouis DiNardo /s/ ELIZABETH A. FETTERDALE L. FULLERDirector Elizabeth A. FetterDale L. Fuller /s/ DAVID A. KRALL Director David A. Krall /s/ JOSEPH A. MARENGIGREGG J. POWERSDirector Joseph A. MarengiGregg J. Powers /s/ DAVID E. ROBERSON Director David E. Roberson /s/ JEFFREY C. SMITHDirectorJeffrey C. Smith84