Restatement of Previously Issued Financial Statements

On April 10, 2012, the Company concluded that previously issued consolidated financial statements should not be relied upon due to certain revenue recognition adjustments. The Company's decision to restate its consolidated financial statements was based on the results of an internal review of the Company's historical revenue recognition policies and the application of these policies. We have restated the accompanying previously issued consolidated financial statements including the consolidated balance sheet as of December 31, 2010 and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the fiscal years ended December 31, 2010 and 2009. Additionally, the unaudited quarterly financial information for each quarter in the fiscal year ended December 31, 2010 and for the first three quarters of fiscal 2011 as shown in Note 21, “Quarterly Financial Data (Unaudited)” of the Notes to Consolidated Financial Statements.

Impact of Corrections on Previously Issued Consolidated Financial Statements

Revenue Related Adjustments:

Certain revenue recognition adjustments were noted during the internal reviews performed by management. Adjustments were primarily related to the following areas within revenue recognition:

•

In the course of our review, we identified software license and associated services agreements that were deemed to be linked but previously accounted for as separate transactions. To correct these items, we have recognized software license revenue for such transactions when the services agreement was executed, which was often the quarter immediately following the time when the license agreement is executed.

•

The restatement reflects our determination that vendor specific objective evidence (“VSOE”) of fair value did not exist for Cloud Services and certain types of consulting arrangements. To correct these items, revenue associated with certain software license agreements and related services was deferred and recognized over the longest period for any undelivered services, often three years, or when VSOE of fair value was obtained, commencing once services began.

Other Adjustments:

In connection with the restatement, the Company also recorded certain aggregated adjustments during the restatement periods that were previously considered immaterial. As part of the restatement, these adjustments have now been reflected in the periods in which the item arose. The Other Adjustment column below also contains the tax effect of the revenue related adjustments and the aggregated adjustments that were previously considered immaterial.

The Company's accompanying Consolidated Financial Statements have been restated to reflect the incremental impact resulting from the restatement adjustments described above, as follows:



Summary of Impact of Restatement Adjustments
	Linking			Cloud Services			Consulting			Other Revenue			Total Revenue Adjustments			Cost of Revenue Adjustments			Other Adjustments			Total Adjustments
	(in thousands)
Cumulative effect on January 1, 2009 opening retained earnings	$	(626	)	$	(4,117	)	$	(5,786	)	$	(847	)	$	(11,376	)	$	—		$	5,848		$	(5,528	)
Year Ended December 31, 2009	625			2,866			1,898			(221		)	5,168			246			(4,178		)	1,236
Year Ended December 31, 2010	(4,774		)	(13,527		)	(5,676		)	510			(23,467		)	(1,212		)	9,102			(15,577		)
Total	$	(4,775	)	$	(14,778	)	$	(9,564	)	$	(558	)	$	(29,675	)	$	(966	)	$	10,772		$	(19,869	)

The $29.7 million of revenue adjustments was recorded into deferred revenue and $19.5 million was recognized into revenue for the year ended December 31, 2011 as follows:



	Linking		Cloud Services			Consulting			Other Revenue			Total Revenue Released
	(in thousands)
Year Ended December 31, 2011	$	4,775	$	9,309		$	5,598		$	(192	)	$	19,490
Remaining Restatement Deferred Revenue, December 31, 2011	$	—	$	(5,469	)	$	(3,966	)	$	(750	)	$	(10,185	)

We expect the remaining $10.2 million associated deferred revenue to be recognized into revenue over the next four years.

The following table presents the effect of the restatement adjustments on the consolidated balance sheet:



	December 31, 2010
	As Previously Reported		Adjustments			As Restated
	(In thousands)
Restricted cash — current portion	$	34,855	$	(729	)	$	34,126
Accounts receivable, net	102,118		8,924			111,042
Deferred tax assets — current portion	43,753		7,063			50,816
Prepaid expenses and other current assets	27,723		(2,108		)	25,615
Total current assets	380,067		13,150			393,217
Restricted cash — long-term portion	—		728			728
Goodwill	226,863		4,514			231,377
Deferred tax assets — long-term portion	255,386		(323		)	255,063
Other non-current assets	16,367		345			16,712
Total non-current assets	733,461		5,264			738,725
Total Assets	$	1,113,528	$	18,414		$	1,131,942
Accrued expenses and other liabilities	84,256		3,772			88,028
Deferred revenue — current portion	88,055		27,849			115,904
Total current liabilities	193,403		31,621			225,024
Deferred revenue — long-term portion	9,090		6,385			15,475
Other non-current liabilities	—		284			284
Total non-current liabilities	296,018		6,669			302,687
Total Liabilities	489,421		38,290			527,711
Additional paid-in capital	550,177		997			551,174
Retained earnings	91,732		(19,869		)	71,863
Accumulated other comprehensive income	8,980		(1,004		)	7,976
Total stockholders’ equity	624,107		(19,876		)	604,231
Total liabilities and stockholders’ equity	$	1,113,528	$	18,414		$	1,131,942

The adjustments reflected in the table above include:


•	Adjustments to restricted cash include reclassifications to include a portion in restricted cash-non current.


•	Adjustments to accounts receivables include reclassifications of certain balances that were incorrectly included in other current assets.


•	Deferred tax assets - current portion reflects the impact of the restatement adjustments.


•	Prepaid expenses and other current assets adjustments include reclassifications of accounts receivables and the correction of certain prepaid expenses that were incorrectly recorded.


•	Goodwill includes adjustments related to acquisition-related costs associated with the acquisition of i2.


•	Accrued expenses and other liabilities include adjustments related to royalties, pre-billed maintenance, employee bonuses and acquisition related costs associated with the acquisition of i2.


•	Adjustments to deferred revenue relate to the previously described revenue adjustments.


•	Adjustments to other long-term liabilities include severance costs associated with the acquisition of i2.


•	Accumulated other comprehensive income adjustments relate to foreign currency translations resulting from the other restatement adjustments.

The following tables present the effect of the restatement adjustments on the consolidated statements of income:



	Year Ended December 31, 2010
		As Previously Reported			Adjustments			As Restated
	(In thousands, except per share data)
Software licenses		$	109,546		$	(18,056	)	$	91,490
Maintenance services		246,241			(464		)	245,777
Product revenues		376,930			(18,520		)	358,410
Consulting services		220,417			(4,947		)	215,470
Service revenues		240,279			(4,947		)	235,332
Total revenues		617,209			(23,467		)	593,742
Cost of maintenance services		52,543			(5		)	52,538
Cost of product revenues		63,846			(5		)	63,841
Cost of consulting services		169,826			1,217			171,043
Cost of service revenues		189,688			1,217			190,905
Total cost of revenues		253,534			1,212			254,746
Gross Profit		363,675			(24,679		)	338,996
Product development		72,158			565			72,723
Sales and marketing		91,329			12			91,341
General and administrative		72,299			(187		)	72,112
Total operating expenses		317,247			390			317,637
Operating Income		46,428			(25,069		)	21,359
Interest income and other, net		(1,683		)	205			(1,478		)
Income (Loss) Before Income Taxes		23,353			(25,274		)	(1,921		)
Income tax provision (benefit)		5,635			(9,697		)	(4,062		)
Net Income		17,718			(15,577		)	2,141
Income Applicable to Common Shareholders		$	17,718		$	(15,577	)	$	2,141
Basic net income per common share		$	0.43		$	(0.38	)	$	0.05
Diluted net income per common share		$	0.42		$	(0.37	)	$	0.05

The adjustments reflected in the table above include:


•	Adjustments to software license and consulting services relate to the lack of vendor specific objective evidence for Cloud Services and certain consulting services, identification of linked contracts that should have been accounted for as a single arrangement, and the consideration of platform transfer rights on revenue recognition.


•	Product Development and General and Administrative expense include adjustments for annual employee bonuses, amortization of leasehold improvements and certain accrued liabilities.


•	Adjustments to interest income and other include the correction of a marked-to-market forward contract and minority interest income.


•	Provision for (benefit from) income taxes includes adjustments to deferred tax assets and income tax effects of other restatement adjustments.



	Year Ended December 31, 2009
		As Previously Reported			Adjustments			As Restated
	(In thousands, except per share data)
Software licenses		$	84,913		$	6,876		$	91,789
Maintenance services		179,336			(80		)	179,256
Product revenues		268,122			6,796			274,918
Consulting services		107,618			(1,628		)	105,990
Service revenues		117,678			(1,628		)	116,050
Total revenues		385,800			5,168			390,968
Cost of maintenance services		43,165			(59		)	43,106
Cost of product revenues		50,326			(59		)	50,267
Cost of consulting services		85,285			(187		)	85,098
Cost of service revenues		95,345			(187		)	95,158
Total cost of revenues		145,671			(246		)	145,425
Gross Profit		240,129			5,414			245,543
Product development		51,318			(103		)	51,215
Sales and marketing		66,001			(12		)	65,989
General and administrative		47,664			(84		)	47,580
Total operating expenses		200,249			(199		)	200,050
Operating Income		39,880			5,613			45,493
Interest income and other, net		(1,253		)	40			(1,213		)
Income Before Income Taxes		39,188			5,573			44,761
Income tax provision		12,849			4,337			17,186
Net Income		26,339			1,236			27,575
Income Applicable to Common Shareholders		$	17,746		$	1,236		$	18,982
Basic net income per common share		$	0.51		$	0.03		$	0.54
Diluted net income per common share		$	0.50		$	0.04		$	0.54

The adjustments reflected in the table above include:


•	Adjustments to software license and consulting services relate to the lack of vendor specific objective evidence for Cloud Services and certain consulting services, identification of linked contracts that should have been accounted for as a single arrangement, and the consideration of platform transfer rights on revenue recognition.


•	Adjustments to product development and general and administrative expense include adjustments for annual employee bonuses.


•	Provision for income taxes includes adjustments to deferred tax assets and income tax effects of other restatement adjustments.

The following tables present the effect of the restatement adjustments on the consolidated statements of other comprehensive income:



	Year Ended December 31, 2010
	As Previously Reported		Adjustments			As Restated
	(In thousands)
Net income	$	17,718	$	(15,577	)	$	2,141
Foreign currency translation adjustment, net of tax	5,338		(1,004		)	4,335
Other comprehensive income	5,713		(1,003		)	4,710
Comprehensive income	23,431		(16,580		)	6,851



	Year Ended December 31, 2009
	As Previously Reported		Adjustments			As Restated
	(In thousands)
Net income	$	26,339	$	1,236		$	27,575
Foreign currency translation adjustment, net of tax	5,284		(3		)	5,281
Other comprehensive income	5,284		(3		)	5,281
Comprehensive income	31,623		1,233			32,856

The following tables present the effect of the restatement adjustments on the consolidated statements of cash flows as well as the reclassification of $3.6 million and $3.0 million in 2010 and 2009, respectively, previously recorded as payments of direct costs related to acquisitions in net cash provided by (used in) investing activities to net cash provided by operating activities as these amounts reflect certain acquired lease payments:



	Year Ended December 31, 2010
	As Previously Reported			Adjustments			As Restated
	(In thousands)
Net income	$	17,718		$	(15,577	)	$	2,141
Excess tax benefits from stock-based compensation	—			(278		)	(278		)
Deferred income taxes	(1,949		)	(8,655		)	(10,604		)
Accounts receivable	(2,613		)	(3,321		)	(5,934		)
Prepaid expenses and other assets	(5,138		)	2,934			(2,204		)
Accounts payable	11,397			542			11,939
Accrued expenses and other liabilities	(4,622		)	(1,916		)	(6,538		)
Deferred revenue	(22,322		)	22,845			523
Net cash provided by operating activities	65,172			(3,426		)	61,746
Payment of direct costs related to acquisitions	(3,625		)	3,625			—
Net cash provided by investing activities	19,736			3,625			23,361
Issuance of common stock	15,370			(477		)	14,893
Excess tax benefits for stock-based compensation	—			278			278
Purchase of treasury stock and other, net	(5,127		)	(179		)	(5,306		)
Conversion of warrants	—			179			179
Net cash provided by financing activities	10,243			(199		)	10,044
Supplemental Disclosures of Cash Flow Information:
Increase of goodwill recorded in acquisitions	$	91,588		$	5,741		$	97,329



	Year Ended December 31, 2009
	As Previously Reported			Adjustments			As Restated
	(In thousands)

Net income	$	26,339		$	1,236		$	27,575
Excess tax benefits from stock-based compensation	—			(720		)	(720		)
Deferred income taxes	4,242			1,711			5,953
Accounts receivable	9,894			(4,606		)	5,288
Prepaid expenses and other assets	(1,403		)	102			(1,301		)
Accounts payable	4,525			70			4,595
Accrued expenses and other liabilities	1,356			231			1,587
Deferred revenue	4,226			(1,774		)	2,452
Net cash provided by operating activities	96,481			(3,750		)	92,731
Payment of direct costs related to acquisitions	(5,110		)	5,110			—
Purchase of equity interest	—			(2,079		)	(2,079		)
Net cash used in investing activities	(300,037		)	3,031			(297,006		)
Excess tax benefits for stock-based compensation	—			720			720
Net cash provided by financing activities	245,968			720			246,688

See also Note 22, “Condensed Consolidating Financial Information,” for a description of the Company's adjustments to its historical presentation of its consolidating financial information.