SEC Filings

10-Q
CRAY INC filed this Form 10-Q on 10/30/2018
Entire Document
 


A summary of the Company’s unvested restricted stock unit grants and changes during the nine months ended September 30, 2018 is as follows:
 
 
Service Vesting Restricted Stock Units
 
Performance Vesting Restricted Stock Units
 
Total Restricted Stock Units
 
 
Units
 
Weighted
Average
Grant Date
Fair Value
 
Units
 
Weighted
Average
Grant Date
Fair Value
 
Units
 
Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017
 
988,023

 
$
21.29

 
482,485

 
$
30.13

 
1,470,508

 
$
24.19

Granted
 
499,681

 
$
26.00

 

 
$

 
499,681

 
$
26.00

Forfeited
 
(57,412
)
 
$
21.44

 

 
$

 
(57,412
)
 
$
21.44

Vested
 
(252,813
)
 
$
22.57

 

 
$

 
(252,813
)
 
$
22.57

Outstanding at September 30, 2018
 
1,177,479

 
$
23.00

 
482,485

 
$
30.13

 
1,659,964

 
$
25.07

The estimated forfeiture rate applied to the Company’s service vesting restricted stock unit grants during the three and nine months ended September 30, 2018 and 2017, was 8.0%. The aggregate fair value of restricted stock units vested during the three and nine months ended September 30, 2018, was $0.6 million and $5.7 million, respectively. The aggregate fair value of restricted stock units vested during the three and nine months ended September 30, 2017, was $0.6 million and $2.2 million, respectively. Restricted stock units are not outstanding shares and do not have any voting or dividend rights. At the time of vesting, a share of common stock representing each restricted stock unit vested will be issued by the Company. The performance vesting restricted stock units are subject to performance measures that are currently not considered “probable” of attainment and as such, no compensation cost has been recorded for these units. The performance measures are based on Company performance for fiscal years 2018 and 2019.
Including performance-based equity awards, the Company had $37.6 million of total unrecognized compensation cost related to unvested stock options, unvested restricted stock and unvested restricted stock units as of September 30, 2018. Excluding the $14.5 million of unrecognized compensation cost related to unvested restricted stock units that are subject to performance measures that are currently not considered “probable” of attainment, unrecognized compensation cost is $23.1 million. No compensation expense is recognized for unvested restricted stock units subject to performance measures that are not considered “probable” of attainment. Unrecognized compensation cost related to unvested stock options and unvested non-performance-based restricted stock is expected to be recognized over a weighted average period of 3.0 years.
The following table sets forth the gross share-based compensation cost resulting from stock options, unvested restricted stock and unvested restricted stock units that were recorded in the Company’s Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Cost of product revenue
 
$
88

 
$
73

 
$
304

 
$
189

Cost of service revenue
 
112

 
59

 
312

 
194

Research and development, net
 
1,139

 
798

 
3,100

 
2,596

Sales and marketing
 
937

 
650

 
2,415

 
1,850

General and administrative
 
1,238

 
1,005

 
3,517

 
2,814

Total
 
$
3,514

 
$
2,585

 
$
9,648

 
$
7,643

Note 13— Taxes
The Company’s effective tax rates for the three and nine months ended September 30, 2018 and 2017 were as follows:
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Effective tax rates
 
(1)%
 
39%
 
(1)%
 
37%
The difference between the expected statutory tax rate of 21% and the actual tax rate of (1)% for the three and nine months ended September 30, 2018 was attributable to the Company’s decision to continue to provide a full valuation allowance against the Company’s U.S. federal deferred tax assets offset, in part, by foreign taxes. The primary reason for the difference between the

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