Presentation and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Apr. 30, 2014 |
Basis of Presentation | ' |
(a) Basis of Presentation |
Founded in 1970 and headquartered in Atlanta, Georgia, American Software, Inc. and its subsidiaries (collectively, the “Company”) are engaged in the development, marketing, and support activities of a broad range of computer business application software products. The Company’s operations are principally in the computer software industry, and its products and services are used by customers within the United States and certain international markets. We provide our software solutions through three major business segments, which are further broken down into a total of four major product and service groups. The three business segments are (1) Supply Chain Management (SCM), (2) Enterprise Resource Planning (ERP), and (3) Information Technology (IT) Consulting. |
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| • | | The SCM segment consists of our subsidiary, Logility, Inc. (see Note 9), which provides collaborative supply chain solutions to streamline and optimize the production, distribution and management of products between trading partners and Demand Management, Inc. (“DMI”), a wholly-owned subsidiary of Logility. | | | | | | | | | | | | | | | | | | | | | |
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| • | | The ERP segment consists of (1) American Software USA, Inc., which provides purchasing and materials management, customer order processing, financial, e-commerce, Flow Manufacturing and traditional manufacturing solutions, and (2) New Generation Computing (NGC), which provides industry specific business software to both retailers and manufacturers primarily in the apparel, sewn products and furniture industries. | | | | | | | | | | | | | | | | | | | | | |
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| • | | The IT Consulting segment consists of The Proven Method, Inc., an IT staffing and consulting services firm. | | | | | | | | | | | | | | | | | | | | | |
Principles of Consolidation | ' |
(b) Principles of Consolidation |
The consolidated financial statements include the accounts of American Software, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. |
Revenue Recognition and Deferred Revenue | ' |
(c) Revenue Recognition and Deferred Revenue |
The Company recognizes revenue in accordance with the Software Revenue Recognition Topic of the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification. |
License. License revenue in connection with license agreements for standard proprietary software is recognized upon delivery of the software, provided collection is considered probable, the fee is fixed or determinable, there is evidence of an arrangement, and vendor-specific objective evidence (VSOE) exists with respect to any undelivered elements of the arrangement. For multiple-element arrangements, the Company recognizes revenue under the residual method, whereby (1) the total fair value of the undelivered elements, as indicated by VSOE, is deferred and subsequently recognized and (2) the difference between the total arrangement fee and the amount deferred for the undelivered elements is recognized as revenue related to the delivered elements. We record revenues from sales of third-party products in accordance with Principal Agent Considerations within the Revenue Recognition Topic of the FASB Accounting Standards Codification. Furthermore, we evaluate sales through our indirect channel on a case-by-case basis to determine whether the transaction should be recorded gross or net, including but not limited to assessing whether or not the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) acts as an agent or broker with compensation on a commission or fee basis. Accordingly, in most cases we record our sales through the DMI channel on a gross basis. |
Subscription and other recurring revenues include fees for access rights to software solutions that are offered under a subscription-based delivery model where the users have the right to take possession of the software. Under this model, the software applications are hosted by the Company or by a third party and the customer accesses and uses the software on an as-needed basis over the Internet or via a dedicated line. The underlying arrangements typically (i) include a single fee for the service that is billed monthly, quarterly or annually, (ii) cover a period from 36 to 60 months and (iii) provides the customer with an option to take delivery of the software at any time during or after the subscription term. In addition, subscription and other recurring revenues include subscription-based software license revenues where the customer has taken physical possession of the software for a defined period of time. Subscription revenues are recognized ratably over the subscription term because the Company is unable to establish VSOE and separate the various elements, beginning on the commencement date of each contract. As of April 30, 2014, revenue recorded under this accounting treatment has been minimal. |
Maintenance. Revenue derived from maintenance contracts primarily includes telephone consulting, product updates, and releases of new versions of products previously purchased by the customer, as well as error reporting and correction services. Maintenance contracts are typically sold for a separate fee with initial contractual periods ranging from one to three years with renewal for additional periods thereafter. Maintenance fees are generally billed annually in advance. Maintenance revenue is recognized ratably over the term of the maintenance agreement. In situations where all or a portion of the maintenance fee is bundled with the license fee, revenue/VSOE for maintenance is determined based on prices when sold separately. |
Services. Revenue derived from services primarily includes consulting, implementation, and training. Fees are primarily billed under time and materials arrangements and are recognized as services are performed. In accordance with the other presentation matters within the Revenue Recognition Topic of the FASB Accounting Standards Codification, the Company recognizes amounts received for reimbursement of travel and other out-of-pocket expenses incurred as revenue in the consolidated statements of operations under services and other. Reimbursements received from customers for out-of-pocket expenses were recorded in revenues and totaled approximately $2,273,000, $2,239,000, and $1,903,000 for 2014, 2013 and 2012, respectively. |
Indirect Channel Revenue. We recognize revenues for sales made through indirect channels principally when the distributor makes the sale to an end-user, when the license fee is fixed or determinable, the license fee is nonrefundable, and the sale meets all other conditions for revenue recognition. |
Deferred Revenue. Deferred revenue represents advance payments or billings for software licenses, services, and maintenance billed in advance of the time revenue is recognized. |
Sales Taxes. We account for sales taxes collected from customers on a net basis. |
Unbilled Accounts Receivable. The unbilled receivable balance consists of amounts generated from license fee and services revenues. At April 30, 2014 and 2013, unbilled license fees were approximately $1.1 million, respectively, and unbilled services revenues were approximately $2.2 million and $2.7 million, respectively. Unbilled license fee accounts receivable represents revenue that has been recognized but under the terms of the license agreement, which include specified payment terms that are considered normal and customary, certain payments have not yet been invoiced to the customers. Unbilled services revenues primarily occur due to the timing of the respective billings, which occur subsequent to the end of each reporting period. |
Cost of Revenues | ' |
(d) Cost of Revenues |
Cost of revenues for licenses includes amortization of capitalized computer software development costs, salaries and benefits and value-added reseller (VAR) commissions. Costs for maintenance and services revenues include the cost of personnel to conduct implementations, customer support and consulting, and other personnel-related expenses as well as agent commission expenses related to maintenance revenues generated by the indirect channel. Commission costs for maintenance are deferred and amortized over the related maintenance term. |
Cash Equivalents | ' |
(e) Cash Equivalents |
Cash equivalents of $51.6 million and $37.7 million at April 30, 2014 and 2013, respectively, consist of overnight repurchase agreements and money market deposit accounts. The Company considers all such investments with original maturities of three months or less to be cash equivalents for purposes of the consolidated statements of cash flows. |
Concentrations of Credit Risk | ' |
(f) Concentrations of Credit Risk |
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, short- and long-term investments and accounts receivable. The Company maintains cash and cash equivalents and short- and long-term investments with various financial institutions. The Company’s sales are primarily to companies located in North America and Europe. The Company performs periodic credit evaluations of its customers’ financial condition and does not require collateral. Accounts receivable are due principally from companies under stated contract terms. |
Returns and Allowances | ' |
(g) Returns and Allowances |
The Company has not experienced significant returns or warranty claims to date and, as a result, the allowance for the cost of returns and product warranty claims at April 30, 2014 or 2013 is not significant. |
The Company records an allowance for doubtful accounts based on the historical experience of write-offs and a detailed assessment of accounts receivable. The total amounts of (recovery)/expense to operations were approximately $(56,000), $216,000, and $238,000 for 2014, 2013, and 2012, respectively, which are included in general and administrative expenses in the accompanying consolidated statements of operations. In estimating the allowance for doubtful accounts, management considers the age of the accounts receivable, the Company’s historical write-offs, and the credit worthiness of the customer, among other factors. Should any of these factors change, the estimates made by management will also change accordingly, which could affect the level of the Company’s future provision for doubtful accounts. Uncollectible accounts are written off when it is determined that the specific balance is not collectible. |
Investments | ' |
(h) Investments |
Investments consist of commercial paper, corporate bonds, government securities, certificates of deposits and marketable equity securities. The Company accounts for its investments in accordance with the Investments—Debt and Equity Securities Topic of the FASB Accounting Standards Codification. The Company has classified its investment portfolio as “trading.” “Trading” securities are bought and held principally for the purpose of selling them in the near term and are recorded at fair value. Unrealized gains and losses on trading securities are included in the determination of net earnings. For the purposes of computing realized gains and losses, cost is identified on a specific identification basis. Investments with maturities less than one year as of the balance sheet date are classified as short-term investments and those that mature greater than one year are classified as long-term investments. |
Furniture, Equipment, and Purchased Computer Software | ' |
(i) Furniture, Equipment, and Purchased Computer Software |
Furniture, equipment and purchased computer software are recorded at cost, less accumulated depreciation and amortization. Depreciation of buildings, computer equipment, purchased computer software, office furniture and equipment is calculated using the straight-line method based upon the estimated useful lives of the assets (three years for computer equipment and software, seven years for office furniture and equipment and thirty years for buildings). Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the assets or the related lease term, whichever is shorter. Depreciation and amortization expense on buildings, furniture, equipment and purchased computer software was $1,056,000, $1,076,000, and $1,183,000 in 2014, 2013 and 2012, respectively. |
Capitalized Computer Software Development Costs | ' |
(j) Capitalized Computer Software Development Costs |
The Company capitalizes certain computer software development costs in accordance with the FASB Accounting Standards Codification Costs of Software to be Sold, Leased or Marketed Topic. Costs incurred internally to create a computer software product or to develop an enhancement to an existing product are charged to expense when incurred as research and development expense until technological feasibility for the respective product is established. Thereafter, all software development costs are capitalized and reported at the lower of unamortized cost or net realizable value. Capitalization ceases when the product or enhancement is available for general release to customers. The Company makes ongoing evaluations of the recoverability of its capitalized software projects by comparing the net amount capitalized for each product to the estimated net realizable value of the product. If such evaluations indicate that the unamortized software development costs exceed the net realizable value, the Company writes off the amount by which the unamortized software development costs exceed net realizable value. Capitalized computer software development costs are being amortized ratably based on the projected revenues associated with the related software or on a straight-line basis over three years, whichever method results in a higher level of amortization. Amortization of capitalized computer software development costs is included in the cost of license revenues in the consolidated statements of operations. |
Total Expenditures and Amortization. Total expenditures for capitalized computer software development costs, total research and development expense, and total amortization of capitalized computer software development costs are as follows: |
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| | Years ended April 30, | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | 2012 | | | | | | | | | | | | | |
| | (in thousands) | | | | | | | | | | | | | |
Total capitalized computer software development costs | | $ | 2,949 | | | $ | 3,418 | | | $ | 2,731 | | | | | | | | | | | | | |
Total research and development expense | | | 9,074 | | | | 8,882 | | | | 8,226 | | | | | | | | | | | | | |
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Total research and development expense and capitalized computer software-development costs | | $ | 12,023 | | | $ | 12,300 | | | $ | 10,957 | | | | | | | | | | | | | |
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Total amortization of capitalized computer software development costs | | $ | 925 | | | $ | 2,501 | | | $ | 2,502 | | | | | | | | | | | | | |
Capitalized computer software development costs consist of the following at April 30, 2014 and 2013 (in thousands): |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | |
Capitalized computer software development costs | | $ | 19,321 | | | $ | 16,372 | | | | | | | | | | | | | | | | | |
Accumulated amortization | | | (8,589 | ) | | | (7,664 | ) | | | | | | | | | | | | | | | | |
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| | $ | 10,732 | | | $ | 8,708 | | | | | | | | | | | | | | | | | |
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Of the Company’s capitalized software projects that are currently completed and being amortized, the Company expects amortization expense for the next five years to be as follows (in thousands): |
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2015 | | $ | 3,588 | | | | | | | | | | | | | | | | | | | | | |
2016 | | | 3,588 | | | | | | | | | | | | | | | | | | | | | |
2017 | | | 3,288 | | | | | | | | | | | | | | | | | | | | | |
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| | $ | 10,464 | | | | | | | | | | | | | | | | | | | | | |
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Acquisition-Related Intangible Assets (exclusive of Logility's treasury stock repurchases) | ' |
(k) Acquisition-Related Intangible Assets (exclusive of Logility’s treasury stock repurchases) |
Acquisition-related intangible assets are stated at historical cost and include acquired software and certain other intangible assets with definite lives. The intangible assets are being amortized over a period ranging from two to six years. For 2014, total amortization expense related to acquisition-related intangible assets was approximately $561,000, with $472,000 included in operating expense and $88,000 included in cost of license fees in the accompanying consolidated statements of operations. Total amortization expense related to acquisition-related intangible assets was approximately $501,000 and $535,000 for 2013 and 2012, respectively, and is included in operating expense in the accompanying consolidated statements of operations. |
Acquisition-Related Intangible Assets consist of the following at April 30, 2014 and 2013 (in thousands): |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | |
Current technology | | $ | 1,842 | | | $ | 1,370 | | | | | | | | | | | | | | | | | |
Customer relationships | | | 790 | | | | 790 | | | | | | | | | | | | | | | | | |
Trademarks | | | 76 | | | | 76 | | | | | | | | | | | | | | | | | |
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| | | 2,708 | | | | 2,236 | | | | | | | | | | | | | | | | | |
Accumulated amortization | | | (2,180 | ) | | | (1,619 | ) | | | | | | | | | | | | | | | | |
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| | $ | 528 | | | $ | 617 | | | | | | | | | | | | | | | | | |
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The Company expects amortization expense for the next five years to be as follows based on intangible assets as of April 30, 2014 (in thousands): |
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2015 | | $ | 263 | | | | | | | | | | | | | | | | | | | | | |
2016 | | | 118 | | | | | | | | | | | | | | | | | | | | | |
2017 | | | 118 | | | | | | | | | | | | | | | | | | | | | |
2018 | | | 29 | | | | | | | | | | | | | | | | | | | | | |
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| | $ | 528 | | | | | | | | | | | | | | | | | | | | | |
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Goodwill and Other Intangibles | ' |
(l) Goodwill and Other Intangibles |
Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually in accordance with the Intangibles-Goodwill and Other Topic of the FASB Accounting Standards Codification. The Company evaluates the carrying value of goodwill annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. |
In September 2011, the FASB issued an accounting standards update amending the guidance on the annual testing of goodwill for impairment. The update allows entities to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. If a greater than 50 percent likelihood exists that the fair value is less than the carrying amount then it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. |
The Company adopted the new guidance during the fourth quarter of fiscal 2012 and after considering such qualitative factors as macroeconomic conditions, industry and market conditions, overall financial performance and other Company-specific factors such as potential changes in strategy, the Company determined that it was not more likely than not that any impairment to goodwill occurred during the year ended April 30, 2014. Consequently, the Company was not required to perform the remaining two-step quantitative goodwill impairment test. |
Intangible assets with estimable useful lives are required to be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with the Property, Plant, and Equipment Topic of the FASB Accounting Standards Codification. |
Goodwill consisted of the following by segment (in thousands): |
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| | Enterprise Resource | | | Supply Chain | | | IT | | | Total | | | | | | | | | |
Planning* | Management** | Consulting | | | | | | | | |
Balance at April 30, 2012 and 2013 | | $ | 1,812 | | | $ | 10,789 | | | $ | — | | | $ | 12,601 | | | | | | | | | |
Goodwill related to the Taylor Manufacturing Systems, USA, LLC Acquisition | | | — | | | | 1,218 | | | | — | | | | 1,218 | | | | | | | | | |
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Balance at April 30, 2014 | | $ | 1,812 | | | $ | 12,007 | | | $ | — | | | $ | 13,819 | | | | | | | | | |
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* | Goodwill related to New Generation Computing, Inc. | | | | | | | | | | | | | | | | | | | | | | | |
** | Goodwill related to Logility, Inc. and Demand Management, Inc. | | | | | | | | | | | | | | | | | | | | | | | |
Intangible Assets (including Acquisition-Related Intangible Assets) consisted of the following by segment (in thousands): |
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| | Enterprise Resource | | | Supply Chain | | | IT | | | Total | | | | | | | | | |
Planning | Management | Consulting | | | | | | | | |
Balance at April 30, 2012 | | $ | — | | | $ | 1,263 | | | $ | — | | | $ | 1,263 | | | | | | | | | |
Amortization expense | | | — | | | | (576 | ) | | | — | | | | (576 | ) | | | | | | | | |
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Balance at April 30, 2013 | | | — | | | | 687 | | | | — | | | | 687 | | | | | | | | | |
Intangibles related to the Taylor Manufacturing Systems, USA, LLC Acquisition | | | — | | | | 472 | | | | — | | | | 472 | | | | | | | | | |
Amortization expense | | | — | | | | (625 | ) | | | — | | | | (625 | ) | | | | | | | | |
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0 | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at April 30, 2014 | | $ | — | | | $ | 534 | | | $ | — | | | $ | 534 | | | | | | | | | |
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Goodwill and intangible assets include the effects of applying purchase accounting resulting from Logility’s stock repurchases in prior years. Total amortization expense related to Logility Stock Buy-back Step Acquisition and purchased software was approximately $64,000, $75,000 and $82,000 for 2014, 2013 and 2012, respectively. For purposes of the disclosure above, amounts related to the buyback of Logility stock are presented as a component of the SCM segment. |
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Intangible assets related to Logility Stock Buy-back Step Acquisition and purchased software consist of the following (in thousands): |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | | | |
Distribution Channel | | $ | 75 | | | $ | 75 | | | | | | | | | | | | | | | | | |
Customer Relationships | | | 477 | | | | 477 | | | | | | | | | | | | | | | | | |
Trademarks | | | 155 | | | | 155 | | | | | | | | | | | | | | | | | |
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| | | 707 | | | | 707 | | | | | | | | | | | | | | | | | |
Accumulated amortization | | | (701 | ) | | | (637 | ) | | | | | | | | | | | | | | | | |
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| | $ | 6 | | | $ | 70 | | | | | | | | | | | | | | | | | |
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The Company expects related amortization expense to be $6 thousand, for fiscal 2015 based on intangible assets as of April 30, 2014. |
Income Taxes | ' |
(m) Income Taxes |
The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. |
Use of Estimates | ' |
(n) Use of Estimates |
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including, but not limited to those related to VSOE, bad debts, capitalized software costs, goodwill, intangible asset impairment, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could differ materially from these estimates under different assumptions or conditions. |
Stock Compensation Plans | ' |
(o) Stock Compensation Plans |
The Company has four stock-based employee compensation plans under which options to purchase common stock of the Company were outstanding as of April 30, 2014. Those plans are described more fully in Note 7. In addition to two American Software plans, effective July 9, 2009, the Company adopted the Logility, Inc. 1997 Stock Plan and Logility, Inc. 2007 Stock Plan as equity plans of the Company in conjunction with the Company’s acquisition of the shares of Logility common stock it did not previously own. |
The Company recorded stock option compensation cost of approximately $1,509,000, $1,476,000 and $1,287,000 and related income tax benefits of approximately $496,000, $436,000 and $339,000 for the fiscal years ended April 30, 2014, 2013 and 2012, respectively. Stock-based compensation expense on current year grants is recorded on a straight-line basis over the vesting period for the entire award directly to additional paid-in capital. |
Cash flows resulting from the tax benefits generated by tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as financing cash flows. During the years ended April 30, 2014, 2013 and 2012, the Company realized tax benefits from stock options generated in previous and current periods resulting in approximately $611,000, $131,000 and $616,000 of gross excess tax benefits which are included as a component of cash flows from financing activities in the accompanying 2014, 2013 and 2012 consolidated statements of cash flows, respectively. |
Impairment of Long-Lived Assets | ' |
(p) Impairment of Long-Lived Assets |
The Company reviews long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. |
Comprehensive Income | ' |
(q) Comprehensive Income |
The Comprehensive Income Topic of the FASB Accounting Standards Codification establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. |
The Company did not have any other comprehensive income items for 2014, 2013, or 2012. |
Earnings per Common Share | ' |
(r) Earnings per Common Share |
The Company has two classes of common stock of which Class B common shares are convertible into Class A common shares at any time, on a one-for-one basis. Under the Company’s Articles of Incorporation, if dividends are declared, holders of Class A common shares shall receive a $.05 dividend per share prior to the Class B common shares receiving any dividend and holders of Class A common shares shall receive a dividend at least equal to Class B common shares dividends on a per share basis. As a result, the Company has computed the earnings per share in compliance with the Earnings Per Share Topic of the FASB Accounting Standards Codification, which requires companies that have multiple classes of equity securities to use the “two-class” method in computing earnings per share. |
For the Company’s basic earnings per share calculation, the Company uses the “two-class” method. Basic earnings per share are calculated by dividing net earnings attributable to each class of common stock by the weighted average number of shares outstanding. All undistributed earnings are allocated evenly between Class A and B common shares in the earnings per share calculation to the extent that earnings equal or exceed $.05 per share. This allocation is based on management’s judgment after considering the dividend rights of the two-classes of common stock, the control of the Class B shareholders and the convertibility rights of the Class B shares to Class A shares. Due to Class B shares converting to Class A shares during the period, the distributed net earnings for Class B shares is calculated using the weighted average common shares outstanding during the period. |
Diluted earnings per share is calculated similarly to basic earnings per share, except that the calculation includes the dilutive effect of the assumed exercise of options issuable under the Company’s stock incentive plans. For the Company’s diluted earnings per share calculation for Class A shares, the Company uses the “if-converted” method. This calculation assumes that all Class B common shares are converted into Class A common shares and, as a result, assumes there are no holders of Class B common shares to participate in undistributed earnings. |
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For the Company’s diluted earnings per share calculation for Class B shares, the Company uses the “two-class” method. This calculation does not assume that all Class B common shares are converted into Class A common shares. In addition, this method assumes the dilutive effect of Class A stock options were converted to Class A shares and the undistributed earnings are allocated evenly to both Class A and B shares including Class A shares issued pursuant to those converted stock options. This allocation is based on management’s judgment after considering the dividend rights of the two-classes of common stock, the control of the Class B shareholders and the convertibility rights of the Class B shares into Class A shares. |
The following tables set forth the computation of basic earnings per common share and diluted earnings per common share (in thousands except for per share amounts), See Note 7 for total stock options outstanding and potentially dilutive: |
Basic earnings per common share: |
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| | Year Ended | | | Year Ended | | | Year Ended | |
April 30, 2014 | April 30, 2013 | April 30, 2012 |
| | Class A | | | Class B | | | Class A | | | Class B | | | Class A | | | Class B | |
Distributed earnings | | $ | 0.3 | | | $ | 0.3 | | | $ | 0.48 | | | $ | 0.48 | | | $ | 0.36 | | | $ | 0.36 | |
Undistributed earnings/(loss) | | | 0.07 | | | | 0.07 | | | | (0.10 | ) | | | (0.10 | ) | | | 0.07 | | | | 0.07 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 0.37 | | | $ | 0.37 | | | $ | 0.38 | | | $ | 0.38 | | | $ | 0.43 | | | $ | 0.43 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Distributed earnings | | $ | 7,584 | | | $ | 776 | | | $ | 11,796 | | | $ | 1,242 | | | $ | 8,642 | | | $ | 931 | |
Undistributed earnings/(loss) | | | 1,786 | | | | 185 | | | | (2,377 | ) | | | (250 | ) | | | 1,595 | | | | 175 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 9,370 | | | $ | 961 | | | $ | 9,419 | | | $ | 992 | | | $ | 10,237 | | | $ | 1,106 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Basic weighted average common shares | | | 25,049 | | | | 2,587 | | | | 24,586 | | | | 2,587 | | | | 23,840 | | | | 2,615 | |
Diluted EPS for Class A common shares using the If-Converted Method |
Year Ended April 30, 2014 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Undistributed and | | | Class A | | | EPS* | | | | | | | | | | | | | |
distributed earnings | Common | | | | | | | | | | | | |
to Class A | Shares | | | | | | | | | | | | |
Common | | | | | | | | | | | | | |
Per basic | | $ | 9,370 | | | | 25,049 | | | $ | 0.37 | | | | | | | | | | | | | |
Common stock equivalents | | | — | | | | 475 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 9,370 | | | | 25,524 | | | | 0.37 | | | | | | | | | | | | | |
Class B conversion | | | 961 | | | | 2,587 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted EPS for Class A | | $ | 10,331 | | | | 28,111 | | | $ | 0.37 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended April 30, 2013 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Undistributed and | | | Class A | | | EPS* | | | | | | | | | | | | | |
distributed earnings | Common | | | | | | | | | | | | |
to Class A | Shares | | | | | | | | | | | | |
Common | | | | | | | | | | | | | |
Per basic | | $ | 9,419 | | | | 24,586 | | | $ | 0.38 | | | | | | | | | | | | | |
Common stock equivalents | | | — | | | | 456 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 9,419 | | | | 25,042 | | | | 0.38 | | | | | | | | | | | | | |
Class B conversion | | | 992 | | | | 2,587 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted EPS for Class A | | $ | 10,411 | | | | 27,629 | | | $ | 0.38 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
|
Year Ended April 30, 2012 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Undistributed and | | | Class A | | | EPS* | | | | | | | | | | | | | |
distributed earnings | Common | | | | | | | | | | | | |
to Class A | Shares | | | | | | | | | | | | |
Common | | | | | | | | | | | | | |
Per basic | | $ | 10,237 | | | | 23,840 | | | $ | 0.43 | | | | | | | | | | | | | |
Common stock equivalents | | | — | | | | 643 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 10,237 | | | | 24,483 | | | | 0.42 | | | | | | | | | | | | | |
Class B conversion | | | 1,106 | | | | 2,615 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted EPS for Class A | | $ | 11,343 | | | | 27,098 | | | $ | 0.42 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted EPS for Class B common shares using the Two-Class Method |
Year Ended April 30, 2014 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Undistributed and | | | Class B | | | EPS* | | | | | | | | | | | | | |
distributed earnings | Common | | | | | | | | | | | | |
to Class B | Shares | | | | | | | | | | | | |
Common | | | | | | | | | | | | | |
Per basic | | $ | 961 | | | | 2,587 | | | $ | 0.37 | | | | | | | | | | | | | |
Reallocation of undistributed earnings from Class A shares to Class B shares | | | (3 | ) | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted EPS for Class B | | $ | 958 | | | | 2,587 | | | $ | 0.37 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended April 30, 2013 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Undistributed and | | | Class B | | | EPS* | | | | | | | | | | | | | |
distributed earnings | Common | | | | | | | | | | | | |
to Class B | Shares | | | | | | | | | | | | |
Common | | | | | | | | | | | | | |
Per basic | | $ | 992 | | | | 2,587 | | | $ | 0.38 | | | | | | | | | | | | | |
Reallocation of undistributed earnings from Class A shares to Class B shares | | | 4 | | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted EPS for Class B | | $ | 996 | | | | 2,587 | | | $ | 0.38 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended April 30, 2012 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Undistributed and | | | Class B | | | EPS* | | | | | | | | | | | | | |
distributed earnings | Common | | | | | | | | | | | | |
to Class B | Shares | | | | | | | | | | | | |
Common | | | | | | | | | | | | | |
Per basic | | $ | 1,106 | | | | 2,615 | | | $ | 0.43 | | | | | | | | | | | | | |
Reallocation of undistributed earnings from Class A shares to Class B shares | | | (4 | ) | | | — | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted EPS for Class B | | $ | 1,102 | | | | 2,615 | | | $ | 0.43 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
|
* | Amounts adjusted for rounding | | | | | | | | | | | | | | | | | | | | | | | |
Advertising | ' |
(s) Advertising |
All advertising costs are expensed as incurred. Advertising expenses, which are included within sales and marketing expenses, were $2.2 million, $2.0 million and $1.8 million in fiscal 2014, 2013 and 2012, respectively. |
Guarantees and Indemnifications | ' |
(t) Guarantees and Indemnifications |
The Company accounts for guarantees in accordance with the Guarantee Topic of the FASB Accounting Standards Codification. The Company’s sales agreements with customers generally contain infringement indemnity provisions. Under these agreements, the Company agrees to indemnify, defend and hold harmless the customer in connection with patent, copyright or trade secret infringement claims made by third parties with respect to the customer’s authorized use of the Company’s products and services. The indemnity provisions generally provide for the Company’s control of defense and settlement and cover costs and damages finally awarded against the customer, as well as the Company’s modification of the product so it is no longer infringing or, if it cannot be corrected, return of the product for a refund. The sales agreements with customers sometimes also contain indemnity provisions for death, personal injury or property damage caused by the Company’s personnel or contractors in the course of performing services to customers. Under these agreements, the Company agrees to indemnify, defend and hold harmless the customer in connection with death, personal injury and property damage claims made by third parties with respect to actions of the Company’s personnel or contractors. The indemnity provisions generally provide for the Company’s control of defense and settlement and cover costs and damages finally awarded against the customer. The indemnity obligations contained in sales agreements generally have a limited life and monetary award. The Company has not previously incurred costs to settle claims or pay awards under these indemnification obligations. The Company accounts for these indemnity obligations in accordance with the Contingencies Topic of the FASB Accounting Standards Codification, and records a liability for these obligations when a loss is probable and reasonably estimable. The Company has not recorded any liabilities for these agreements as of April 30, 2014 or 2013. |
The Company warrants to its customers that its software products will perform in all material respects in accordance with the standard published specifications in effect at the time of delivery of the licensed products to the customer generally for 90 days after delivery of the licensed products. Additionally, the Company warrants to its customers that services will be performed consistent with generally accepted industry standards or specific service levels through completion of the agreed upon services. If necessary, the Company will provide for the estimated cost of product and service warranties based on specific warranty claims and claim history. However, the Company has not incurred significant recurring expense under product or service warranties. Accordingly, the Company has no liabilities recorded for these agreements as of April 30, 2014 or 2013. |
Industry Segments | ' |
(u) Industry Segments |
The Company operates and manages its business in three reportable segments. See Note 9 of the Consolidated Financial Statements. |