PURE STORAGE, INC. The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with the (1) unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2020 . This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue," and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, impacts on our business and general economic conditions due to the COVID-19 pandemic, those identified herein, and those discussed in the section titled "Risk Factors", set forth in Part II, Item 1A of this Form 10-Q and in our otherSEC filings. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Our fiscal year end is the first Sunday afterJanuary 30 . Overview Data is foundational to our customers' digital transformation and we are focused on delivering innovative and disruptive technology and data storage solutions that enable customers to maximize the value of their data. We started with the vision of making flash storage available to enterprise organizations everywhere and established an entirely new customer experience including our innovative Evergreen Storage subscription that radically simplified storage ownership and reduced total cost of ownership for our customers. Our solutions serve data workloads on-premise, in the cloud, or hybrid environments and include mission-critical production, test/development, analytics, disaster recovery, and backup/recovery. Our Modern Data Experience vision begins with our portfolio of products and subscription services that is transforming and modernizing storage operations for our customers. Our Modern Data Experience vision extends to an innovative and highly-integrated data platform of products and subscription services, consisting of Cloud Data Infrastructure (integrated hardware and software appliances which run in on-premise data centers), Cloud Data Services (software services which run natively in major public cloud infrastructures), and Cloud Data Management (software hosted data management services to manage our entire platform).The Modern Data Experience is based on four key pillars: Fast Matters, Cloud Everywhere, Simple is Smart, and Subscription to Innovation. Fast Matters - Speed is critical to customer experience and engagement, and therefore, we design our high-performance solutions to allow applications, analytics, and development to move and execute quickly in order for our customers to make impactful decisions. We redefine fast by delivering low-latency, high bandwidth, and maximum density technologies. For example, accelerating core applications enables rapid response and deployment which reduces costs while increasing enterprise resilience. Cloud Everywhere - Providing our customers the opportunity to transform their data management to a full or hybrid cloud model. This model reduces costs and adds agility through an API-defined platform, a consistent on-premise and public cloud experience, seamless data mobility and comprehensive data protection. This multi-cloud environment delivers increased flexibility, fast global recovery, and minimized application downtime through automated response. Simple is Smart - From day one, our storage solutions are designed to be simple, allowing our customers to reduce time spent managing the storage platform including issue resolution. Our storage dashboards present real-time and intuitive platform analytics; meanwhile, AI-based optimization proactively analyzes future workloads and global network issues to limit unforeseen infrastructure problems. 26 -------------------------------------------------------------------------------- Table of Contents Subscription to Innovation - Delivering a subscription with low total cost of ownership, eliminating the need for forklift hardware replacements, and providing customizable capacity and mobility, whether on-premise, in the cloud or hybrid cloud. We expect our subscription services sales to continue to grow faster than sales of our integrated appliances as a result of our customers choosing to consume our technologies as a service including Evergreen Storage, Pure as-a-Service and Cloud Data Services subscription services. Coronavirus (COVID-19) We continue to actively monitor, evaluate and respond to developments relating to the Coronavirus (COVID-19) pandemic. The global pandemic has resulted in significant global social and business disruption and economic contraction. Our business and our financial results during the first quarter of fiscal 2021 benefited from increased customer demand of mission critical IT needs arising in response to the unprecedented pandemic. We fulfilled these orders without significant delays and supply shortages based on the resilience of our global supply chain and manufacturing operations. Partially offsetting this tailwind, we saw an increase in opportunities in our pipeline that were expected to close during the quarter but did not close. We also experienced lower demand levels in certain international countries that are significantly impacted by the pandemic. Operating expenses during the first quarter of fiscal 2021 were also lower as a result of impacts of COVID-19 in the areas of reduced travel, marketing costs, and personnel costs. The global economic contraction due to COVID-19 has created significant uncertainty and is expected to have an adverse impact on our sales growth during fiscal 2021, however, we are not able to currently estimate the ultimate impact. Components of Results of Operations Revenue We derive revenue primarily from the sale of our FlashArray and FlashBlade products and Evergreen Storage, Pure as-a-Service and Cloud Data Services subscription services. Subscription services also include our professional services offerings such as installation and implementation consulting services. Provided that all other revenue recognition criteria have been met, we typically recognize product revenue upon transfer of control to our customers and the satisfaction of our performance obligations. Products are typically shipped directly by us to customers, and our channel partners do not stock our inventory. We expect our product revenue may vary from period to period based on, among other things, the timing and size of orders and delivery of products and the impact of significant transactions. We recognize revenue from Evergreen Storage subscription services agreements and Pure as-a-Service ratably over the contractual service period and professional services as delivered. We expect our subscription services revenue to increase as we add new customers and our existing customers renew and expand their consumption and service levels. Cost of Revenue Cost of product revenue primarily consists of costs paid to our third-party contract manufacturers, which includes the costs of our raw material components, and personnel costs associated with our manufacturing operations. Personnel costs consist of salaries, bonuses and stock-based compensation expense. Our cost of product revenue also includes allocated overhead costs, inventory write-offs, amortization of intangible assets pertaining to developed technology, and freight. Allocated overhead costs consist of certain employee benefits and facilities-related costs. We expect our cost of product revenue to increase in absolute dollars as our product revenue increases. 27 -------------------------------------------------------------------------------- Table of Contents Cost of subscription services revenue primarily consists of personnel costs associated with delivering our subscription and professional services, part replacements, allocated overhead costs and depreciation of infrastructure used to deliver our subscription services. We expect our cost of subscription services revenue to increase in absolute dollars, as our subscription services revenue increases. Operating Expenses Our operating expenses consist of research and development, sales and marketing, general and administrative expenses and restructuring and other expenses. Salaries and personnel-related costs, including stock-based compensation expense, are the most significant component of each category of operating expenses. Operating expenses also include allocated overhead costs for employee benefits and facilities-related costs. Research and Development. Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, depreciation associated with assets acquired for research and development, third-party engineering and contractor support costs, as well as allocated overhead. We expect our research and development expense to increase in absolute dollars and increase slightly as a percentage of revenue, as we continue to invest in new and existing technologies. Sales and Marketing. Sales and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, travel and entertainment expenses as well as allocated overhead. Marketing programs consist of advertising, events, corporate communications and brand-building activities. We expect our sales and marketing expense to increase in absolute dollars and it may decrease as a percentage of revenue. We intend to continue expanding our sales force and increasing investments with our channel partners. We believe these costs will be offset by efficiencies as we scale. General and Administrative. General and administrative expenses consist primarily of compensation and related expenses for administrative functions including finance, legal, human resources, IT and fees for third-party professional services as well as amortization of intangible assets pertaining to defensive technology patents and allocated overhead. We expect our general and administrative expense to increase in absolute dollars and it may increase slightly as a percentage of revenue, as we continue to invest in the growth of our business. Other Income (Expense), Net Other income (expense), net consists primarily of interest income related to cash, cash equivalents and marketable securities, interest expense related to convertible senior notes and gains (losses) from foreign currency transactions. Provision for Income Taxes Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and state income taxes inthe United States . We have recorded noU.S. federal current income tax and provided a full valuation allowance forU.S. deferred tax assets, which includes net operating loss carryforwards and tax credits related primarily to research and development. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that the assets will not be realized based on our history of losses. 28 -------------------------------------------------------------------------------- Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented in dollars and as a percentage of total revenue (dollars in thousands, unaudited): Revenue First Quarter of Fiscal Change 2020 2021 $ % (dollars in thousands, unaudited) Product revenue$ 238,741 $ 246,939 $ 8,198 3 % Subscription services revenue 87,959 120,180 32,221 37 % Total revenue$ 326,700 $ 367,119 $ 40,419 12 % Total sales or bookings of our products and subscription services during the first quarter of fiscal 2021 increased approximately 24% compared to the first quarter of fiscal 2020. Total sales or bookings includes orders that have not been fulfilled and are cancellable are excluded from the remaining performance obligation. Total revenue increased by$40.4 million , or 12%, during the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020. The increase in total sales and revenue was largely driven by an increase in sales of our Evergreen Storage subscription services, and sales of our unified subscription that includes Pure as-a-Service and Cloud Block Store . Sales of FlashArray//C and FlashBlade, and repeat sales to existing customers contributed to the growth of product revenue during first quarter of fiscal 2021. During the first quarter of fiscal year 2021, total revenue inthe United States grew 15% from$228.9 million to$264.1 million year over year and total rest of the world revenue grew 5% from$97.8 million to$103.0 million year over year. For further details on revenues by geography, see Note 15 of Part I, Item 1 of this Quarterly Report on Form 10-Q. Deferred Revenue Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue including performance obligations pertaining to subscription services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the condensed consolidated balance sheet dates. Changes in total deferred revenue during the periods presented are as follows (in thousands, unaudited): First Quarter of Fiscal 2020 2021 Beginning balance$ 535,920 $ 697,288 Additions 117,894 131,734
Recognition of deferred revenue (89,584) (122,962) Ending balance
$ 564,230 $ 706,060
Revenue recognized during the first quarter of fiscal 2020 and 2021, from
deferred revenue at the beginning of each respective period was
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Remaining Performance Obligations
Total contracted but not recognized revenue was $912.0 million at the end of the
first quarter of fiscal 2021. Contracted but not recognized revenue consists of
both deferred revenue and non-cancelable amounts that are expected to be
invoiced and recognized as revenue in future periods. For orders that are
contracted but have not been fulfilled and that can be canceled by customers,
the order values are excluded from remaining performance obligations. Of the
$912.0 million contracted but not recognized revenue at the end of the first
quarter of fiscal 2021, we expect to recognize approximately 42% over the next
12 months, and the remainder thereafter.
Cost of Revenue and Gross Margin
First Quarter of Fiscal Change
2020 2021 $ %
(dollars in thousands, unaudited)
Product cost of revenue $ 75,615 $ 68,289 $ (7,326) (10) %
Stock-based compensation 977 996 19 2 %
Total product cost of revenue $ 76,592 $ 69,285 $ (7,307) (10) %
% Product revenue 32 % 28 %
Subscription services cost of revenue
$ 7,847 26 % Stock-based compensation 3,951 3,392 (559) (14) % Total subscription services cost of revenue$ 33,721 $ 41,009 $ 7,288 22 % % of Subscription services revenue 38 % 34 % Total cost of revenue$ 110,313 $ 110,294 $ (19) - % % of Total revenue 34 % 30 % Product gross margin 68 % 72 % Subscription services gross margin 62 % 66 % Total gross margin 66 % 70 % Product gross margin benefited during the first quarter of fiscal 2021 primarily from sales of larger FlashArray systems. The increase in subscription services cost of revenue was primarily attributable to higher costs in our customer support organization. The increase in subscription services gross margin was driven by increased renewals in Evergreen subscriptions. Operating Expenses Research and Development First Quarter of Fiscal Change 2020 2021 $ % (dollars in thousands, unaudited) Research and development$ 76,830 $ 83,735 $ 6,905 9 % Stock-based compensation 28,245 28,711 466 2 % Total expenses$ 105,075 $ 112,446 $ 7,371 7 % % of Total revenue 32 % 31 % 30
-------------------------------------------------------------------------------- Table of Contents Research and development expense increased by$7.4 million , or 7%, during the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020, as we continue to innovate and develop technologies to both enhance and expand our solution portfolio. The increase was primarily driven by a$12.8 million increase in employee compensation and related costs, partially offset by a$6.0 million decrease in depreciation expense due to revising our estimated useful lives of test equipment, and certain computer equipment and software. Sales and Marketing First Quarter of Fiscal Change 2020 2021 $ % (dollars in thousands, unaudited) Sales and marketing$ 148,312 $ 157,161 $ 8,849 6 % Stock-based compensation 18,314 16,272 (2,042) (11) % Total expenses$ 166,626 $ 173,433 $ 6,807 4 % % of Total revenue 51 % 47 % Sales and marketing expense increased by$6.8 million , or 4%, during the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020, as we continue to grow our sales force and expand our international presence. The increase was primarily driven by a$10.8 million increase in employee compensation and related costs, which included a$4.2 million increase in sales commission expense. The increase was partially offset by a$6.6 million decrease in travel and related costs primarily due to COVID-19 restrictions. General and Administrative First Quarter of Fiscal Change 2020 2021 $ % (dollars in thousands, unaudited) General and administrative$ 31,440 $ 31,802 $ 362 1 % Stock-based compensation 10,670 9,323 (1,347) (13) % Total expenses$ 42,110 $ 41,125 $ (985) (2) % % of Total revenue 13 % 11 % Restructuring and Other First Quarter of Fiscal Change 2020 2021 $ (dollars in thousands, unaudited) Restructuring and other $ -$ 14,702 $ 14,702 % of Total revenue - % 4 % InFebruary 2020 and prior to the effects of the COVID-19 pandemic, we effected a workforce realignment plan as part of an effort to streamline our operations. We estimated approximately$6.5 million of restructuring costs related to one-time involuntary termination benefit costs, of which$5.8 million was recognized in the first quarter of fiscal 2021. We expect to recognize the remaining costs associated with the plan of termination in the second quarter of fiscal 2021. The liability for unpaid amounts at the end of the first quarter was not material. During the first quarter of fiscal 2021, we incurred incremental costs of$8.9 million directly related to the COVID-19 pandemic. These costs primarily included the write-off of marketing commitments no longer deemed to have value for the remainder of fiscal 2021 and estimated non-recoverable costs for internal events that could not be held. 31 --------------------------------------------------------------------------------
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Other Income (Expense), Net
First Quarter of Fiscal Change
2020 2021 $
(dollars in thousands, unaudited)
Other income (expense), net $ (1,816) $ (3,416) $ (1,600)
% of Total Revenue (1) % (1) %
Provision for Income Taxes
First Quarter of Fiscal Change
2020 2021 $ %
(dollars in thousands, unaudited)
Provision for income taxes $ 1,096 $ 2,297 $ 1,201 110 %
% of Total revenue - % 1 %
The provision for income taxes increased during the first quarter of fiscal 2021
compared to the first quarter of fiscal 2020, primarily attributable to an
increase in foreign income taxes.
Liquidity and Capital Resources
At the end of the first quarter of fiscal 2021, we had cash, cash equivalents
and marketable securities of $1,274.1 million . Our cash and cash equivalents
primarily consist of bank deposits and money market accounts. Our marketable
securities generally consist of highly rated debt instruments of the U.S.
government and its agencies, debt instruments of highly rated corporations, debt
instruments issued by foreign governments, and asset-backed securities.
We believe our existing cash, cash equivalents and marketable securities will be
sufficient to fund our operating and capital needs for at least the next 12
months. Our liquidity and working capital needs could be negatively impacted by
the COVID-19 pandemic and global economic recession which may result in reduced
sales, and our customers or partners being unable to fulfill their payment
obligations to us. We may continue to enter into arrangements to acquire or
invest in complementary businesses, services and technologies, including
intellectual property rights and may seek additional equity or debt financing in
the future.
Convertible Senior Notes
In April 2018 , we issued $575.0 million of 0.125% convertible senior notes due
2023 (the Notes), in a private placement and received proceeds of $562.1
million , after deducting the underwriters' discounts and commissions. The Notes
are unsecured obligations that do not contain any financial covenants or
restrictions on the payments of dividends, the incurrence of indebtedness, or
the issuance or repurchase of securities by us or any of our subsidiaries. The
Notes mature on April 15, 2023 unless repurchased or redeemed by us or converted
in accordance with their terms prior to the maturity date. The Notes are
convertible for up to 21,884,155 shares of our common stock at an initial
conversion rate of approximately 38.0594 shares of common stock per $1,000
principal amount, which is equal to an initial conversion price of approximately
$26.27 per share of common stock, subject to adjustment.
Holders may surrender their Notes for conversion at their option at any time
prior to the close of business on the business day immediately preceding October
15, 2022 , only under specific circumstances. On or after October 15, 2022 until
the close of business on the second scheduled trading day immediately preceding
the maturity date, holders may convert all or any portion of their Notes at any
time regardless of the foregoing conditions. Upon conversion, holders will
receive cash, shares of our common stock, or a combination of cash and shares of
our common stock, at our election. We intend to settle the principal of the
Notes in cash. See further discussion in Note 6 in Part I, Item 1 of this
report.
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Share Repurchase Program
In August 2019 , our board of directors approved the repurchase of up to $150.0
million of our common stock. The authorization allows us to repurchase shares of
our common stock opportunistically and will be funded from available working
capital. Repurchases may be made at management's discretion from time to time on
the open market through privately negotiated transactions, transactions
structured through investment banking institutions, block purchase techniques,
10b5-1 trading plans, or a combination of the foregoing. The share repurchase
program does not obligate us to acquire any of our common stock, has no end
date, and may be suspended or discontinued by us at any time without prior
notice. During the first quarter of fiscal 2021, we repurchased and retired
5,959,430 shares of common stock at an average purchase price of $11.75 per
share for an aggregate repurchase price of $70.0 million . Approximately
$65.0 million remained under our share repurchase authorization as of the end of
the first quarter of fiscal 2021.
Letters of Credit
At the end of fiscal 2020 and the end of the first quarter of fiscal 2021, we
had letters of credit in the aggregate amount of $11.5 million , in connection
with our facility leases. The letters of credit are collateralized by restricted
cash and mature on various dates through August 2029 .
The following table summarizes our cash flows for the periods presented (in
thousands, unaudited):
First Quarter of Fiscal
2020 2021
Net cash provided by operating activities $ 6,642 $ 35,103
Net cash used in investing activities$ (198,553) $
(8,911)
Net cash provided by (used in) financing activities
Operating Activities
Net cash provided by operating activities during the first quarter of fiscal
2020 and 2021 was primarily driven by cash collections from sales of our product
and subscription services, partially offset by payments to our contract
manufacturers, employee compensation, and general corporate operating
expenditures.
Investing Activities
Net cash used in investing activities during the first quarter of fiscal 2021 is
primarily driven by capital expenditures and net purchases of marketable
securities, partially offset by maturities of marketable securities.
Net cash used in investing activities during the first quarter of fiscal 2020 is
primarily drive by net purchases of marketable securities, acquisition of
Compuverde and capital expenditures.
Financing Activities
Net cash used in financing activities during the first quarter of fiscal 2021 is
primarily driven by share repurchases, partially offset by proceeds from
exercise of stock options and issuance of common stock from ESPP.
Net cash provided by financing activities during the first quarter of fiscal
2020 is primarily driven by proceeds from exercise of stock options and issuance
of common stock from ESPP, partially offset by repayment of debt assumed in
connection with acquisition of Compuverde.
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Contractual Obligations and Commitments
Except as set forth in Notes 7 to 9 of Part I, Item 1 of this Quarterly Report
on Form 10-Q, there have been no material changes to our non-cancelable
contractual obligations and commitments disclosed in our Annual Report on 10-K
for fiscal 2020. As events continue to evolve and additional information becomes
available in regards to the COVID-19 pandemic, our contractual obligations and
commitments may be impacted in future periods.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses, and related disclosures. We evaluate our
estimates and assumptions on an ongoing basis. Our estimates are based on
historical experience and various other assumptions that we believe to be
reasonable under the circumstances. Our actual results could differ from these
estimates.
Refer to Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q for the
summary of significant accounting policies. In addition, see "Critical
Accounting Policies and Estimates" in our latest 10-K. There have been no
material changes to our critical accounting policies and estimates since our
10-K filed on March 27, 2020 , except for the change in estimate of the useful
life for certain property and equipment.
Available Information
Our website is located at www.purestorage.com, and our investor relations
website is located at investor.purestorage.com. The following filings will be
available through our investor relations website free of charge after we file
them with the SEC : Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
and our Proxy Statements for our annual meetings of stockholders. We will also
provide a link to the section of the SEC's website at www.sec.gov that has all
of our public filings, including Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our
Proxy Statements, and other ownership related filings.
We webcast our earnings calls and certain events we participate in or host with
members of the investment community on our investor relations website.
Additionally, we provide notifications of news or announcements regarding our
financial performance, including SEC filings, investor events, press and
earnings releases, social media accounts (Twitter, Facebook and LinkedIn), and
blogs as part of our investor relations website. Investors and others can
receive notifications of new information posted on our investor relations
website in real time by signing up for email alerts and RSS feeds. Further
corporate governance information, including our certificate of incorporation,
bylaws, governance guidelines, board committee charters, and code of conduct, is
also available on our investor relations website under the heading "Corporate
Governance." The content of our websites are not incorporated by reference into
this Quarterly Report on Form 10-Q or in any other report or document we file
with the SEC , and any references to our websites are intended to be inactive
textual references only.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We have operations both within the United States and internationally, and we are
exposed to market risk in the ordinary course of our business.
Interest Rate Risk
Our cash, cash equivalents and marketable securities primarily consist of bank
deposits and money market accounts, U.S. government notes and U.S. agency notes,
asset-backed securities, and highly rated corporate debt. At the end of the
first quarter of fiscal 2021 we had cash, cash equivalents and marketable
securities of $1,274.1 million . The carrying amount of our cash equivalents
reasonably approximates fair value, due to the short maturities of these
instruments. The primary objectives of our investment activities are the
preservation of capital, the fulfillment of liquidity needs and the fiduciary
control of cash and investments. We do not enter into investments for trading or
speculative purposes. Our investments are exposed to market risk due to
fluctuation in interest rates, which may affect our interest income and the fair
value of our investments.
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We considered the historical volatility of short-term interest rates and
determined that it was reasonably possible that an adverse change of 100 basis
points could be experienced in the near term. A hypothetical 1.00% (100 basis
points) increase in interest rates would have resulted in a decrease in the fair
value of our marketable securities of approximately $10.2 million at the end of
the first quarter of fiscal 2021.
Foreign Currency Exchange Risk
Our sales contracts are primarily denominated in U.S. dollars with a
proportionally small number of contracts denominated in foreign currencies. A
portion of our operating expenses are incurred outside the United States and
denominated in foreign currencies and are subject to fluctuations due to changes
in foreign currency exchange rates, particularly changes in the British pound
and Euro. Additionally, fluctuations in foreign currency exchange rates may
cause us to recognize transaction gains and losses in our statement of
operations. Given the impact of foreign currency exchange rates has not been
material to our historical operating results, we have not entered into any
derivative or hedging transactions, but we may do so in the future if our
exposure to foreign currency exchange should become more significant.
We considered the historical trends in currency exchange rates and determined
that it was reasonably possible that adverse changes in exchange rates of 10%
for all currencies could be experienced in the near term. These reasonably
possible adverse changes in exchange rates of 10% were applied to total monetary
assets and liabilities denominated in currencies other than U.S. dollar at the
end of the first quarter of fiscal 2021 to compute the adverse impact these
changes would have had on our loss before income taxes in the near term. These
changes would have resulted in an adverse impact on loss before provision for
income taxes of approximately $7.9 million at the end of the first quarter of
fiscal 2021.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act), as of the end of the period covered by this report. Based on such
evaluation, our CEO and CFO concluded that, at the end of the first quarter of
fiscal 2021, our disclosure controls and procedures were designed at a
reasonable assurance level and were effective to provide reasonable assurance
that information we are required to disclose in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to our management, including our CEO
and CFO, as appropriate, to allow timely decisions regarding required
disclosure.
Changes in Internal Control over Financial Reporting
During the first quarter of fiscal 2021 there were no changes in our internal
control over financial reporting identified in connection with the evaluation
required by Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred
during the first quarter of fiscal 2021 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures and internal
control over financial reporting, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives. In addition,
the design of disclosure controls and procedures and internal control over
financial reporting must reflect the fact that there are resource constraints
and that management is required to apply judgment in evaluating the benefits of
possible controls and procedures relative to their costs.
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