Restatement of Previously Issued Financial Statements

As disclosed in our Form 10-K for the year ended December 31, 2011, on April 10, 2012, we concluded that previously issued financial statements should not be relied upon due to certain revenue recognition adjustments. The decision to restate our financial statements was based on the results of an internal review of our historical revenue recognition policies and the application of these policies. All information presented in the accompanying Condensed Consolidated Financial Statements and the related notes include all such restatement adjustments.

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 our cloud services (“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 following tables summarize the effects of the restatement on the condensed consolidated financial statements of income for the three and nine months ended September 30, 2011:



	Three Months Ended September 30, 2011									Nine Months Ended September 30, 2011
	As Reported			Adjustments			As Restated			As Reported			Adjustments			As Restated
Software licenses	$	33,139		$	1,587		$	34,726		$	91,534		$	9,057		$	100,591
Maintenance services	68,261			(629		)	67,632			199,129			(584		)	198,545
Product revenues	105,138			958			106,096			303,245			8,473			311,718
Consulting services	60,392			578			60,970			177,069			87			177,156
Service revenues	66,425			578			67,003			194,334			87			194,421
Total revenues	171,563			1,536			173,099			497,579			8,560			506,139
Cost of maintenance services	13,704			(50		)	13,654			42,362			14			42,376
Cost of product revenues	16,439			(50		)	16,389			50,894			14			50,908
Cost of consulting services	44,821			(316		)	44,505			138,998			(983		)	138,015
Cost of service revenues	50,854			(316		)	50,538			156,263			(983		)	155,280
Total cost of revenues	67,293			(366		)	66,927			207,157			(969		)	206,188
Gross Profit	104,270			1,902			106,172			290,422			9,529			299,951
Product development	18,946			(199		)	18,747			58,889			(288		)	58,601
Sales and marketing	26,144			(388		)	25,756			77,748			(388		)	77,360
General and administrative	16,018			(203		)	15,815			54,420			68			54,488
Restructuring charges	768			—			768			1,749			(470		)	1,279
Total operating expenses	71,438			(790		)	70,648			184,178			(1,078		)	183,100
Operating income	32,832			2,692			35,524			106,244			10,607			116,851
Interest income and other, net	(521		)	(120		)	(641		)	(2,672		)	31			(2,641		)
Income before income taxes	26,918			2,812			29,730			89,831			10,576			100,407
Income tax provision	10,115			1,328			11,443			17,381			3,913			21,294
Net income	16,803			1,484			18,287			72,450			6,663			79,113
Basic net income per common share	$	0.40		$	0.03		$	0.43		$	1.71		$	0.16		$	1.87
Diluted net income per common share	$	0.39		$	0.04		$	0.43		$	1.70		$	0.15		$	1.85

The adjustments reflected in the table above include the following:


•	Adjustments to revenue related to the lack of vendor specific objective evidence of fair value for Cloud Services and certain Consulting Services currencies and offerings, 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 cost of revenue and operating expenses related to certain employee expenses, costs associated with the acquisition of i2, and the result of certain changes in assumptions related to equity compensation.


•	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 condensed consolidated statements of comprehensive income:



	Three Months Ended September 30, 2011									Nine Months Ended September 30, 2011
	As Reported			Adjustments			As Restated			As Reported			Adjustments			As Restated
Net income	$	16,803		$	1,484		$	18,287		$	72,450		$	6,663		$	79,113
Foreign currency translation adjustment, net of tax	(8,075		)	5			(8,070		)	(4,958		)	15			(4,943		)
Unrealized gains (losses) on cash flow hedges, net of tax	(2,856		)	55			(2,801		)	(3,026		)	120			(2,906		)
Reclassification adjustment for (gains) losses in net income	—			(54		)	(54		)	—			(120		)	(120		)
Other comprehensive income	(10,931		)	6			(10,925		)	(7,984		)	15			(7,969		)
Comprehensive income	5,872			1,490			7,362			64,466			6,678			71,144

The following table presents the effect of the restatement adjustments on the condensed consolidated statements of cash flows as well as the reclassification of 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:



	Nine Months Ended September 30, 2011
	As Reported			Adjustments			As Restated
Net income	$	72,450		$	6,663		$	79,113
Stock-based compensation	13,073			(912		)	12,161
Deferred income taxes	14,652			3,914			18,566
Accounts receivable	(17,674		)	878			(16,796		)
Prepaid expenses and other assets	(12,772		)	9,798			(2,974		)
Accounts payable	(13,817		)	(1,140		)	(14,957		)
Accrued expenses and other liabilities	9,749			(9,090		)	659
Deferred revenue	20,935			(12,690		)	8,245
Net cash provided by operating activities	132,620			(2,579		)	130,041
Payment of direct costs related to acquisitions	(2,579		)	2,579			—
Net cash used in investing activities	(12,446		)	2,579			(9,867		)

See also Note 13, “Condensed Consolidating Financial Information,” for a description of the Company's adjustments to its historical presentation of its condensed consolidating financial information.