SEC Comment Letter for QUANTUM (QMCO) — Mar 31, 2009
QUANTUM CORP /DE/ (QMCO) (CIK 0000709283)
Date: March 31, 2009 · CIK: 0000709283 · Accession: 0000000000-09-016554
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-13449
Letter
Mail Stop 4561 March 31, 2009 Richard E. Belluzzo Chief Executive Officer Quantum Corporation 1650 Technology Drive, Suite 800 San Jose, CA 95110
Re: Quantum Corporation Form 10-K for Fiscal Year Ended March 31, 2008 Filed June 13, 2008 Form 10-Q for Fiscal Quart er Ended Decemb er 31, 2008 Filed February 9, 2009 File No. 001-13449
Dear Mr. Belluzzo:
We have reviewed the above-referenced f ilings and have the following comments. If indicated, we think you should revise your document in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K for Fiscal Year Ended March 31, 2008
Cover Page 1. The cover page to your Form 10-K indicat es that you currently have registered pursuant to Section 12(b) of the Exchange Act a class of common stock titled “Quantum Corporation—DLT & Storag e Systems Group Common Stock.” We note that this class of stock appears to be a vestige of your former tracking stock structure and no longer appears to be authorized by your amended and restated
Richard E. Belluzzo Quantum Corporation March 31, 2009 Page 2 certificate of incorporation, which pr ovides only for “Common Stock” and “Preferred Stock.” Please advise.
Part I
Item 1. Business
Customers, page 7 2. We note that Dell represented 16% of your revenue in fiscal 2008. We also note the risk factor disclosure on page 12 th at a significant decline in revenue from Dell could materially and adversely a ffect you. Please tell us if you have considered including in your Form 10-K a description of your contractual arrangements with Dell, or in the abse nce of an ongoing contractual relationship, a clarification of that status and a desc riptive summary of the manner in which the parties conduct business. To the extent the parties have entered into written agreements, please analyze the basis of your determin ation that the agreement need not be filed. As applicable, discu ss the basis of your conclusions regarding the lack of substantial dependency up on any such agreement. See Item 601(b)(10)(ii)(B) of Regulation S-K. Also, please tell us if y ou are substantially dependent for purposes of Item 601(b)(10) (ii)(B) on your agreements with those contract manufacturers who are your only sour ce for certain tape drives and tape automation products, as disclosed on page 17.
Backlog, page 9 3. We note your disclosure that you do not be lieve that your backlog levels are a meaningful indicator of your future reve nues or are material to an understanding of your business. Notwithstanding your opinion regarding the utility of backlog information to investors, you may be required to disclose information concerning backlog levels. Please tell us the dollar amount of your backlog, if any, as of a date close to the time you filed your repor t and as of a comparable date in the preceding fiscal year.
Part II
Item 5. Market for the Registrant’s Co mmon Equity, Related St ockholder Matters and Issuer Purchases of Equ ity Securities, page 24 4. We note your disclosure in this section that the info rmation required regarding equity compensation plans is incorporat ed by reference from your definitive proxy statement. However, your definitive proxy statement filed on June 27,
Richard E. Belluzzo Quantum Corporation March 31, 2009 Page 3 2008 does not appear to contain the Equity Compensation Plan Information table. See Item 201(d) of Regulation S-K. Please advise.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations for Fiscal 2008, 2007 and 2006, page 28 5. We note your disclosure on page 14 that increased competition in the tape drive and tape automation markets has resulte d in lower prices and lower margins earned on tape drives and media and your disclosure on page 15 that completion among tape media suppliers has periodical ly resulted in intense, price-based competition for media sales. Please tell us if these pricing pressures have had a material impact on your results of operati ons in any of your three most recent fiscal years. It appears you should provide quantitative information about any material changes in prices that affect your operations or results materially. Additionally, to the extent changes in prices ha d a significant impact on your revenues from one period to the next, qua ntitative information regarding such an impact should be provided. See It em 303(a)(3)(iv) of Regulation S-K.
Liquidity and Capital Resources
Long-Term Debt, page 40 6. We note your disclosure regarding the cove nants on your revolving credit facility and term loan. Please explain to us what consideration you gave to disclosing the details of these covenants. See Item 303(a)(1) of Regulation S-K and Section IV.C of SEC Release 33-8350.
Item 8. Financial Statements and Supplementary Data
Note 3: Summary of Significant Accounting Policies
Service Parts for Maintenance, page 59 7. You indicate service parts for maintena nce are used to support warranty and repair services. Consider ing the nature of these a ssets, please explain how you considered the accounting model describe d in Q&A number 12 of TIS Section 2140 of the AICPA Technical Questions. We also note that the service parts for maintenance are amortized over their estimated useful life of eight years. Please tell us why you believe that it is appropriate to amortize the cost of these parts over the expected period in which they are used, as opposed to recording the cost of parts in the periods in wh ich they are actually used.
Richard E. Belluzzo Quantum Corporation March 31, 2009 Page 4 Part IV
Item 11. Executive Compensation (incorporat ed by reference from Def 14A filed on June 27, 2008)
Compensation Discussion and Analysis, page 19 8. Your disclosure indicates that in determ ining awards under each of your elements of executive compensation, your compensati on committee considers, in part, the individual performance of your named execu tive officers. However, in discussing the compensation paid to each of your officers other than your CEO, your disclosure fails to explain how your compensation committee assessed individual performance. For example, the disclosu re on page 21 indicates that the base salaries of Mr. Hall and Ms. Barrett we re increased in fiscal 2008 partly to recognize their individual perf ormance, but it does not id entify the particular tasks or performance standards that were cons idered in making the decision to increase these salaries. Please explain how your compensation committee assesses the individual performance of your name d executive officers when making compensation decisions.
Equity Compensation, page 23 9. Although you provide general information regarding policies relating to your long-term equity compensation, your disclo sure should also provide substantive analysis and insight into how the comp ensation committee determined the actual award amounts. With a view toward providing expanded disclosure in future filings, please tell us how the compensation committee determined the specific equity awards made to your named executive officers in fiscal 2008. For example, please identify the company a nd individual performance criteria that were considered in making the awards. Please also explain how each officer’s outstanding equity awards and the pr ojected impact of their awards on stockholder dilution and burn rate imp acted the size of their 2008 awards.
Item 15. Exhibits, Financial Statement Schedules
Exhibits 31.1 & 31.2 10. In both your CEO and CFO’s certifications, the introductory text of paragraph 4 includes an incorrect cita tion for the definition of “disclosure controls and procedures,” which is defined in Exchange Act Rules 13a- 15(e) and 15d- 15(e) . Please advise.
Richard E. Belluzzo Quantum Corporation March 31, 2009 Page 5 Form 10-Q for Fiscal Quarter Ended December 31, 2008
Part I – Financial Information
Item 1. Financial Statements
Note 6. Goodwill and Intangible Assets, page 5 11. We note you performed an interim impairment test on both your goodwill and your intangible and other long-lived assets. Please tell us the order in which you performed your impairment tests.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Estimates and Policies, page 35 12. We note your disclosure on page 6 that there could be adjustments to your goodwill impairment charge when you have completed the impairment test. In addition, you disclose on page 7 that you concluded your long-lived assets were not impaired at December 31, 2008. Please tell us what consideration you gave to quantitative and qualitative disclosure of the sensitivity of your goodwill and long-lived asset valuations to changes in your methodologies or assumptions. See Section V of SEC Release 33-8350.
* * * * * * *
Please respond to these comments within 10 business days or tell us when you will provide us with a response. Please submit all correspondence and supplemental materials on EDGAR as required by Rule 101 of Regulation S-T. If you amend your filings, you may wish to provide us with mark ed copies of any amendment to expedite our review. Please furnish a cover letter that keys your response to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review. Please understand that we may have addi tional comments after reviewing any amendment and your response to our comments.
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes all in formation required under the Securities Exchange Act of 1934 and th at they have provided all information investors require for an informed invest ment decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
Richard E. Belluzzo Quantum Corporation March 31, 2009 Page 6 In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in the filing;
• staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
• the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
You may contact Jennifer F ugario, Staff Accountant, at (202) 551-3482 or Mark Shannon, Staff Accountant, at (202) 551-3299 if you have any questions regarding comments on the financial statements and re lated matters. Please address questions regarding all other comments to Matthew Cr ispino, Staff Attorne y, at (202) 551-3456 or Mark P. Shuman, Branch Chief - Legal, at (202) 551-3462. If you need further assistance, you may cont act me at (202) 551-3226.
S i n c e r e l y ,
C r a i g W i l s o n Senior Assistant Chief Accountant
Show Raw Text
Mail Stop 4561
March 31, 2009
Richard E. Belluzzo
Chief Executive Officer
Quantum Corporation
1650 Technology Drive, Suite 800
San Jose, CA 95110
Re: Quantum Corporation
Form 10-K for Fiscal Year Ended March 31, 2008
Filed June 13, 2008
Form 10-Q for Fiscal Quart er Ended Decemb er 31, 2008
Filed February 9, 2009
File No. 001-13449
Dear Mr. Belluzzo:
We have reviewed the above-referenced f ilings and have the following comments.
If indicated, we think you should revise your document in response to these comments.
If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In
some of our comments, we may ask you to provide us with supplemental information so
we may better understand your disclosure. After reviewing this information, we may
raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K for Fiscal Year Ended March 31, 2008
Cover Page
1. The cover page to your Form 10-K indicat es that you currently have registered
pursuant to Section 12(b) of the Exchange Act a class of common stock titled
“Quantum Corporation—DLT & Storag e Systems Group Common Stock.” We
note that this class of stock appears to be a vestige of your former tracking stock
structure and no longer appears to be authorized by your amended and restated
Richard E. Belluzzo
Quantum Corporation
March 31, 2009 Page 2
certificate of incorporation, which pr ovides only for “Common Stock” and
“Preferred Stock.” Please advise.
Part I
Item 1. Business
Customers, page 7
2. We note that Dell represented 16% of your revenue in fiscal 2008. We also note
the risk factor disclosure on page 12 th at a significant decline in revenue from
Dell could materially and adversely a ffect you. Please tell us if you have
considered including in your Form 10-K a description of your contractual
arrangements with Dell, or in the abse nce of an ongoing contractual relationship,
a clarification of that status and a desc riptive summary of the manner in which the
parties conduct business. To the extent the parties have entered into written
agreements, please analyze the basis of your determin ation that the agreement
need not be filed. As applicable, discu ss the basis of your conclusions regarding
the lack of substantial dependency up on any such agreement. See Item
601(b)(10)(ii)(B) of Regulation S-K. Also, please tell us if y ou are substantially
dependent for purposes of Item 601(b)(10) (ii)(B) on your agreements with those
contract manufacturers who are your only sour ce for certain tape drives and tape
automation products, as disclosed on page 17.
Backlog, page 9
3. We note your disclosure that you do not be lieve that your backlog levels are a
meaningful indicator of your future reve nues or are material to an understanding
of your business. Notwithstanding your opinion regarding the utility of backlog information to investors, you may be required to disclose information concerning backlog levels. Please tell us the dollar amount of your backlog, if any, as of a
date close to the time you filed your repor t and as of a comparable date in the
preceding fiscal year.
Part II
Item 5. Market for the Registrant’s Co mmon Equity, Related St ockholder Matters and
Issuer Purchases of Equ ity Securities, page 24
4. We note your disclosure in this section that the info rmation required regarding
equity compensation plans is incorporat ed by reference from your definitive
proxy statement. However, your definitive proxy statement filed on June 27,
Richard E. Belluzzo
Quantum Corporation
March 31, 2009 Page 3
2008 does not appear to contain the Equity Compensation Plan Information table.
See Item 201(d) of Regulation S-K. Please advise.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations for Fiscal 2008, 2007 and 2006, page 28
5. We note your disclosure on page 14 that increased competition in the tape drive and tape automation markets has resulte d in lower prices and lower margins
earned on tape drives and media and your disclosure on page 15 that completion
among tape media suppliers has periodical ly resulted in intense, price-based
competition for media sales. Please tell us if these pricing pressures have had a material impact on your results of operati ons in any of your three most recent
fiscal years. It appears you should provide quantitative information about any material changes in prices that affect your operations or results materially.
Additionally, to the extent changes in prices ha d a significant impact on your
revenues from one period to the next, qua ntitative information regarding such an
impact should be provided. See It em 303(a)(3)(iv) of Regulation S-K.
Liquidity and Capital Resources
Long-Term Debt, page 40
6. We note your disclosure regarding the cove nants on your revolving credit facility
and term loan. Please explain to us what consideration you gave to disclosing the
details of these covenants. See Item 303(a)(1) of Regulation S-K and Section
IV.C of SEC Release 33-8350.
Item 8. Financial Statements and Supplementary Data
Note 3: Summary of Significant Accounting Policies
Service Parts for Maintenance, page 59
7. You indicate service parts for maintena nce are used to support warranty and
repair services. Consider ing the nature of these a ssets, please explain how you
considered the accounting model describe d in Q&A number 12 of TIS Section
2140 of the AICPA Technical Questions. We also note that the service parts for maintenance are amortized over their estimated useful life of eight years. Please
tell us why you believe that it is appropriate to amortize the cost of these parts over the expected period in which they are used, as opposed to recording the cost
of parts in the periods in wh ich they are actually used.
Richard E. Belluzzo
Quantum Corporation
March 31, 2009 Page 4
Part IV
Item 11. Executive Compensation (incorporat ed by reference from Def 14A filed on
June 27, 2008)
Compensation Discussion and Analysis, page 19
8. Your disclosure indicates that in determ ining awards under each of your elements
of executive compensation, your compensati on committee considers, in part, the
individual performance of your named execu tive officers. However, in discussing
the compensation paid to each of your officers other than your CEO, your disclosure fails to explain how your compensation committee assessed individual
performance. For example, the disclosu re on page 21 indicates that the base
salaries of Mr. Hall and Ms. Barrett we re increased in fiscal 2008 partly to
recognize their individual perf ormance, but it does not id entify the particular tasks
or performance standards that were cons idered in making the decision to increase
these salaries. Please explain how your compensation committee assesses the individual performance of your name d executive officers when making
compensation decisions.
Equity Compensation, page 23
9. Although you provide general information regarding policies relating to your
long-term equity compensation, your disclo sure should also provide substantive
analysis and insight into how the comp ensation committee determined the actual
award amounts. With a view toward providing expanded disclosure in future
filings, please tell us how the compensation committee determined the specific equity awards made to your named executive officers in fiscal 2008. For example, please identify the company a nd individual performance criteria that
were considered in making the awards. Please also explain how each officer’s outstanding equity awards and the pr ojected impact of their awards on
stockholder dilution and burn rate imp acted the size of their 2008 awards.
Item 15. Exhibits, Financial Statement Schedules
Exhibits 31.1 & 31.2
10. In both your CEO and CFO’s certifications, the introductory text of paragraph 4
includes an incorrect cita tion for the definition of “disclosure controls and
procedures,” which is defined in Exchange Act Rules 13a- 15(e) and 15d- 15(e) .
Please advise.
Richard E. Belluzzo
Quantum Corporation
March 31, 2009 Page 5
Form 10-Q for Fiscal Quarter Ended December 31, 2008
Part I – Financial Information
Item 1. Financial Statements
Note 6. Goodwill and Intangible Assets, page 5
11. We note you performed an interim impairment test on both your goodwill and your intangible and other long-lived assets. Please tell us the order in which you
performed your impairment tests.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Estimates and Policies, page 35
12. We note your disclosure on page 6 that there could be adjustments to your
goodwill impairment charge when you have completed the impairment test. In addition, you disclose on page 7 that you concluded your long-lived assets were not impaired at December 31, 2008. Please tell us what consideration you gave
to quantitative and qualitative disclosure of the sensitivity of your goodwill and long-lived asset valuations to changes in your methodologies or assumptions. See
Section V of SEC Release 33-8350.
* * * * * * *
Please respond to these comments within 10 business days or tell us when you
will provide us with a response. Please submit all correspondence and supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. If you amend your
filings, you may wish to provide us with mark ed copies of any amendment to expedite
our review. Please furnish a cover letter that keys your response to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review.
Please understand that we may have addi tional comments after reviewing any
amendment and your response to our comments.
We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
Richard E. Belluzzo
Quantum Corporation
March 31, 2009 Page 6
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in the
filing;
• staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
• the company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
You may contact Jennifer F ugario, Staff Accountant, at (202) 551-3482 or Mark
Shannon, Staff Accountant, at (202) 551-3299 if you have any questions regarding
comments on the financial statements and re lated matters. Please address questions
regarding all other comments to Matthew Cr ispino, Staff Attorne y, at (202) 551-3456 or
Mark P. Shuman, Branch Chief - Legal, at (202) 551-3462. If you need further
assistance, you may cont act me at (202) 551-3226.
S i n c e r e l y ,
C r a i g W i l s o n
Senior Assistant Chief Accountant