Note 13 - Restatements | 3 Months Ended |
Mar. 31, 2013 |
Accounting Changes and Error Corrections [Abstract] | ' |
Accounting Changes and Error Corrections [Text Block] | ' |
13. Restatements |
|
Quarterly financial statements as of and for the quarter ended March 31, 2013 |
|
Subsequent to the initial filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, we have restated herein our unaudited interim condensed consolidated financial statements as of and for the quarter ended March 31, 2013 to reflect certain corrections in the manner in which we recognize revenue related to certain sales transactions that impacted the first quarter of 2013. The errors identified by the Company in its revenue recognition practices are described below: |
|
| ● | For certain sales transactions, the Company entered into an extended maintenance and warranty arrangement that included a fixed fee to cover products owned by the customer at the date of execution of the arrangement as well as extended maintenance and warranty coverage on any additional products purchased by the customers over the multi-year term of the applicable arrangement. The Company did not properly defer revenues on the additional product purchases to correctly account for the fixed fee, multi-year extended maintenance and warranty arrangement. As a result, the Company improperly recognized product revenues when the additional products were shipped rather than deferring a portion of the consideration and recognizing the related revenues over the remaining term of the applicable fixed fee, multi-year extended maintenance and warranty arrangement. | | | | | | | | | | |
|
| ● | For certain other sales transactions, the Company (i) recognized product revenues prematurely in advance of delivering certain product functionality or other deliverables that were committed to be provided to the customers or (ii) recognized product revenues prematurely based on an incorrect assessment of certain multiple-element arrangement sales transactions that included professional services that were provided based on a purchase order that was separate from the product purchase order but that was negotiated concurrently with the customer. | | | | | | | | | | |
|
| ● | The Company entered into a sales arrangement that included extended payment terms beyond the Company’s customary terms. Revenue for this transaction should have been, but was not, recognized when the payments became due, as opposed to when the products were shipped. | | | | | | | | | | |
| | | | | | | | | | | | |
| | These corrections in our revenue recognition resulted in the movements of revenue between accounting periods, and do not have any impact on the total revenue to be recognized over the life of the applicable arrangements. | | | | | | | | | | |
|
The previously filed interim condensed consolidated financial statements for the quarter ended March 31, 2013 have been restated to reflect the correction of these errors, which impact revenue from products, revenue from services and current deferred revenue. All other adjustments relate to the applicable income tax effects of these errors as well as the correction of other cumulative tax errors which existed as of March 31, 2013. Such other cumulative tax errors resulted in $639,000 of out-of-period adjustments which increased the Company’s income tax benefit for the quarter ended March 31, 2013, and increased prepaid expenses and other assets, other assets, and other liabilities by amounts shown in the following table. |
|
Restated condensed consolidated balance sheet amounts |
|
| | As of March 31, 2013 | |
| | As Previously | | | Restatement | | | | | |
| | Reported | | | Adjustments | | | Restated | |
| | (in thousands) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Prepaid expenses and other current assets | | $ | 43,790 | | | $ | 2,567 | | | $ | 46,357 | |
Total current assets | | | 385,038 | | | | 2,567 | | | | 387,605 | |
| | | | | | | | | | | | |
Other assets | | | 11,814 | | | | 1,809 | | | | 13,623 | |
Total assets | | | 836,780 | | | | 4,376 | | | | 841,156 | |
| | | | | | | | | | | | |
Deferred revenues - current | | | 65,280 | | | | 1,323 | | | | 66,603 | |
Total current liabilities | | | 121,933 | | | | 1,323 | | | | 123,256 | |
| | | | | | | | | | | | |
Other liabilities | | | 33,646 | | | | 3,338 | | | | 36,984 | |
Total liabilities | | | 366,181 | | | | 4,661 | | | | 370,842 | |
| | | | | | | | | | | | |
Retained earnings | | | 125,401 | | | | (285 | ) | | | 125,116 | |
Total shareholders’ equity | | | 470,599 | | | | (285 | ) | | | 470,314 | |
Total liabilities and shareholders’ equity | | $ | 836,780 | | | $ | 4,376 | | | $ | 841,156 | |
|
Restated condensed consolidated statement of operations amounts |
|
| | For the Three Months Ended March 31, 2013 | |
| | As Previously | | | Restatement | | | | | |
| | Reported | | | Adjustments | | | Restated | |
| | (in thousands, except per share data) | |
| | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | |
Products | | $ | 96,636 | | | $ | (1,125 | ) | | $ | 95,511 | |
Services | | | 26,147 | | | | (199 | ) | | | 25,948 | |
Total revenues | | | 122,783 | | | | (1,324 | ) | | | 121,459 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Income from operations | | | 10,092 | | | | (1,324 | ) | | | 8,768 | |
Income before income taxes | | | 8,356 | | | | (1,324 | ) | | | 7,032 | |
Income tax expense (benefit) | | | 251 | | | | (1,039 | ) | | | (788 | ) |
Net income | | | 8,105 | | | | (285 | ) | | | 7,820 | |
Earnings per share: | | | | | | | | | | | | |
Basic | | $ | 0.11 | | | $ | (0.01 | ) | | $ | 0.1 | |
Diluted | | $ | 0.11 | | | $ | (0.01 | ) | | $ | 0.1 | |
|
Restated condensed consolidated statements of comprehensive income amounts |
|
| | For the Three Months Ended March 31, 2013 | |
| | As Previously | | | Restatement | | | Restated | |
Reported | Adjustments |
| | (in thousands) | |
| | | | | | | | | | | | |
Net Income | | $ | 8,105 | | | $ | (285 | ) | | $ | 7,820 | |
Comprehensive Income | | $ | 7,927 | | | $ | (286 | ) | | $ | 7,641 | |
|
Restated condensed consolidated statements of cash flows amounts |
|
The correction of the errors described above did not impact our total cash flows from operating activities, investing activities or financing activities within our consolidated statement of cash flows, but did result in corrections of the following line items within cash flows from operations activities: |
|
| | For the Three Months Ended March 31, 2013 | |
| | As Previously | | | Restatement | | | Restated | |
Reported | Adjustments |
| | (in thousands) | |
| | | | | | | | | | | | |
Net Income | | $ | 8,105 | | | $ | (285 | ) | | $ | 7,820 | |
Deferred Income Taxes | | | (1,561 | ) | | | (252 | ) | | | (1,813 | ) |
Prepaid Expenses and Other Current Assets | | | (1,387 | ) | | | (2,567 | ) | | | (3,954 | ) |
Other Assets | | | 48 | | | | 1,691 | | | | 1,739 | |
Deferred Revenues | | | 1,091 | | | | 1,323 | | | | 2,414 | |
Other Liabilities | | | 2,941 | | | | 90 | | | | 3,031 | |
|
Quarterly financial statements as of and for the quarter ended March 31, 2012 |
|
In our 2012 Form 10-K, we restated, among other previously issued financial statements, our consolidated financial statements for the quarter ended March 31, 2012 to reflect certain corrections in the manner in which we recognized revenue related to our warranty and software maintenance contracts, including a previous implied warranty and software maintenance arrangement with one of our customers. Specifically, we made the following two corrections to our revenue recognition practices to properly report revenue in prior periods: |
|
| ● | Accounting Practice Errors – We now recognize revenue related to our warranty and software maintenance contracts on the effective date of each such contract rather than in the first calendar month following the effective date of the contract as though the warranty and maintenance period commenced on the first day of such month. We also now recognize revenue related to back maintenance fees when evidence of an arrangement exists rather than commencing in the first calendar month following the effective date of the contract as though the warranty and maintenance period commenced on the first day of such month. | | | | | | | | | | |
|
| ● | Implied Arrangement Error - We now cease to defer revenue for any implied warranty and software maintenance arrangement upon the receipt from the applicable customer of the first substantive contract for extended warranty and software maintenance services, and we will recognize the applicable previously deferred revenue related to the implied arrangement, provided all other revenue recognition criteria have been met. The Company’s historical practice was to continue to defer revenue for implied warranty and software maintenance arrangements (despite the receipt of an initial substantive extended warranty and software maintenance contract) until we could establish a pattern that we were able to enforce our warranty and software maintenance contracts as evidenced by, among other items, (i) the consistent receipt of extended renewal orders from the specific customer for warranty and software maintenance services and (ii) senior management’s assertion that warranty and software maintenance services would not be provided to the customer if existing contracts were canceled or were not renewed. | | | | | | | | | | |
|
The 2012 changes in our revenue recognition practices resulted in movements of revenue between accounting periods, and do not have any impact on the total revenue to be recognized over the life of a warranty and software maintenance contract or arrangement, although the timing of the recognition of such revenue commences earlier and ends earlier than would be the case under the Company’s previously used accounting treatment. |
|
This Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2013 (this “Form 10-Q/A”) reflects the impact of the prior restatement on the applicable unaudited quarterly financial information for the three months ended March 31, 2012. Our previously filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 has not been and will not be amended. |
|
Certain line items included in this Form 10-Q/A have been restated to reflect the corrections of these errors, which impact revenues from products, revenues from services and deferred revenues (current and non-current). All other adjustments related to the applicable income tax effects of these errors. The following tables reconcile the amounts as originally reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 to the corresponding amounts as restated and included in Note 15, Restatement, in our 2012 Form 10-K and as reported herein. |
|
Restated consolidated statement of operations amounts |
|
| | For the Three Months Ended | |
31-Mar-12 |
| | As Previously | | | Restatement | | | | | |
| | Reported | | | Adjustments | | | Restated | |
| | (in thousands, except per share data) | |
Revenues: | | | | | | | | | | | | |
Products | | | | | | | | | | | | |
Implied arrangement error | | $ | — | | | $ | 564 | | | $ | — | |
| | | 69,043 | | | | 564 | | | | 69,607 | |
| | | | | | | | | | | | |
Services | | | | | | | | | | | | |
Accounting practice error | | | — | | | | 688 | | | | — | |
Implied arrangement error | | | — | | | | (237 | ) | | | — | |
| | | 16,600 | | | | 451 | | | | 17,051 | |
| | | | | | | | | | | | |
Total revenues | | | 85,643 | | | | 1,015 | | | | 86,658 | |
Income from operations | | | 7,287 | | | | 1,015 | | | | 8,302 | |
Income before income taxes | | | 5,597 | | | | 1,015 | | | | 6,612 | |
Income tax expense | | | 1,215 | | | | 230 | | | | 1,445 | |
Net income | | | 4,382 | | | | 785 | | | | 5,167 | |
Earnings per share: | | | | | | | | | | | | |
Basic | | $ | 0.06 | | | $ | 0.01 | | | $ | 0.07 | |
Diluted | | $ | 0.06 | | | $ | 0.01 | | | $ | 0.07 | |
|
Restated consolidated statements of comprehensive income amounts |
|
| | For the Three Months Ended | |
31-Mar-12 |
| | As | | | Restatement | | | Restated | |
Previously | Adjustments |
Reported | |
| | (in thousands) | |
| | | | | | | | | | | | |
Net income | | $ | 4,382 | | | $ | 785 | | | $ | 5,167 | |
Comprehensive income | | $ | 5,169 | | | $ | 785 | | | $ | 5,954 | |
|
Restated consolidated statements of cash flows amounts |
|
The correction of the errors described above did not impact our total cash flows from operating activities, investing activities or financing activities within our consolidated statement of cash flows, but did result in corrections of the following line items within cash flows from operating activities: |
|
| | For the Three Months Ended | |
31-Mar-12 |
| | As | | | Restatement | | | Restated | |
Previously | Adjustments |
Reported | |
| | (in thousands) | |
| | | | | | | | | | | | |
Net income | | $ | 4,382 | | | $ | 785 | | | $ | 5,167 | |
Accrued expenses and other | | | 4,389 | | | | 230 | | | | 4,619 | |
Deferred revenues | | | 5,896 | | | | (1,015 | ) | | | 4,881 | |
|