Immaterial Correction of Prior Period Financial Statements

9 Months Ended

Sep. 30, 2020

Accounting Changes and Error Corrections [Abstract]

IMMATERIAL CORRECTION OF PRIOR PERIOD FINANCIAL STATEMENTS

Subsequent to the issuance of our condensed consolidated financial statements for the period ended June 30, 2020, we identified an immaterial error related to the commencement of revenue recognition for certain FortiCare standalone service contracts. Rather than commencing recognition upon end user registration, we should have begun to recognize revenue over the service period when control had passed to the distributor which we have determined is our customer. We assessed the effect of this correction, individually and in the aggregate, on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletins No. 99 and 108 and, based on an analysis of quantitative and qualitative factors, determined that the correction was not individually material to any of our prior interim or annual consolidated financial statements.

All financial information contained in the accompanying notes to these condensed consolidated financial statements has been revised to reflect the correction of this error.

The corrections to our condensed consolidated balance sheet as of December 31, 2019 were as follows (in millions):


	December 31, 2019
	As Previously Reported		Corrections		As Corrected
ASSETS
DEFERRED TAX ASSETS	$	232.6	$	(6.3)	$	226.3
TOTAL ASSETS	3,885.5		(6.3)		3,879.2
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Deferred revenue	1,173.6		(17.8)		1,155.8
Total current liabilities	1,473.6		(17.8)		1,455.8
DEFERRED REVENUE	962.3		(9.0)		953.3
Total liabilities	2,563.6		(26.8)		2,536.8
STOCKHOLDERS’ EQUITY:
Retained earnings (accumulated deficit)	140.3		20.5		160.8
Total stockholders’ equity	1,321.9		20.5		1,342.4
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,885.5	$	(6.3)	$	3,879.2

The corrections to our condensed consolidated statements of income for the three and nine months ended September 30, 2019 were as follows (in millions, except per share amounts):


	Three Months Ended September 30, 2019
	As Previously Reported		Corrections		As Corrected
REVENUE:
Service	$	350.4	$	0.6	$	351.0
Total revenue	547.5		0.6		548.1
GROSS PROFIT:
Service	305.3		0.6		305.9
Total gross profit	423.4		0.6		424.0
OPERATING INCOME	100.0		0.6		100.6
INCOME BEFORE INCOME TAXES	105.4		0.6		106.0
PROVISION FOR INCOME TAXES	25.6		0.2		25.8
NET INCOME	$	79.8	$	0.4	$	80.2
Net income per share (Note 10):
Basic	$	0.47	$	—	$	0.47
Diluted	$	0.46	$	—	$	0.46


	Nine Months Ended September 30, 2019
	As Previously Reported		Corrections		As Corrected
REVENUE:
Service	$	992.1	$	3.1	$	995.2
Total revenue	1,541.8		3.1		1,544.9
GROSS PROFIT:
Service	858.6		3.1		861.7
Total gross profit	1,176.4		3.1		1,179.5
OPERATING INCOME	225.8		3.1		228.9
INCOME BEFORE INCOME TAXES	251.5		3.1		254.6
PROVISION FOR INCOME TAXES	40.2		0.9		41.1
NET INCOME	$	211.3	$	2.2	$	213.5
Net income per share (Note 10):
Basic	$	1.24	$	0.01	$	1.25
Diluted	$	1.21	$	0.01	$	1.22

The corrections to our condensed consolidated statements of cash flows for the nine months ended September 30, 2019 were as follows (in millions):


	Nine Months Ended September 30, 2019
	As Previously Reported		Corrections		As Corrected
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	211.3	$	2.2	$	213.5
Changes in operating assets and liabilities:
Deferred tax assets	10.6		0.9		11.5
Deferred revenue	258.8		(3.1)		255.7
Net cash provided by operating activities	$	617.6	$	—	$	617.6

The results for the nine months ended September 30, 2020 include corrections to increase revenue, gross profit and operating income by $0.8 million and $2.1 million for the three months ended March 31, 2020 and June 30, 2020, respectively, and to increase net income by $0.6 million and $1.7 million for the three months ended March 31, 2020 and June 30, 2020, respectively. The correction did not change diluted net income per share for the three months ended March 31, 2020 but did increase diluted net income per share by $0.01 for the three months ended June 30, 2020. For all periods in which we corrected net income, we made corresponding corrections to net income and comprehensive income in our condensed consolidated statements of comprehensive income and to net income, retained earnings (accumulated deficit) and total stockholders’ equity in our condensed consolidated statements of stockholders’ equity.