CALABASAS, Calif.--(BUSINESS WIRE)--Ixia (Nasdaq: XXIA) announced today that the Audit Committee of the company’s Board of Directors (the “Audit Committee”) has concluded that the company’s previously issued condensed consolidated financial statements contained in its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 should no longer be relied upon and should be restated.
As previously reported, on February 26, 2014, the Audit Committee completed an internal investigation, which included performing procedures to assess the company’s recording of financial transactions and the corresponding impact on the company’s financial reporting. Through the internal investigation and the company’s own internal accounting review, the company identified certain errors, as described below.
Certain identified errors in the company’s revenue recognition practices involved the company’s incorrect assessment of and accounting for certain sales transactions which led to revenue being recognized prematurely for: 1) 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 coverage for any additional products purchased by the customer over the multi-year term of the applicable arrangement, 2) multiple-element arrangements that included separate customer purchase orders for products and related professional services, or arrangements that included future deliverables that were committed to be provided to the customers but were not considered, and 3) an arrangement with a customer involving the extension of payment terms beyond the company’s customary terms. Additional information regarding these matters can be found in the company’s Current Report on Form 8-K filed today with the SEC.
The correction of the errors is expected to reduce total revenues by approximately $2.0 million and $4.5 million for the quarters ended March 31, 2013 and June 30, 2013, respectively. Further, the correction of the errors is expected to increase deferred revenues by approximately $2.0 million and $6.5 million as of March 31, 2013 and June 30, 2013, respectively. The company’s restated condensed consolidated financial statements for the affected periods will also reflect the correction of errors related to the income tax effects of the revenue errors, as well as the correction of certain other tax items. The restatement will result in revenue recognition timing differences between quarterly periods and will not have any impact on the total revenue to be recognized over the life of the applicable arrangements. As part of the restatement process, the company is continuing to assess the estimated errors identified above and will assess any other potential identified errors for correction as needed.
In connection with the restatement of the company’s previously issued condensed consolidated financial statements for the quarters ended March 31, 2013 and June 30, 2013, the company’s management has reassessed its evaluation of the effectiveness of the company’s disclosure controls and procedures and internal control over financial reporting as of each of March 31, 2013 and June 30, 2013. Based on such reassessment and review, management has concluded, and the company expects to report in its amended filing for each quarter, that due to the identified errors and material weaknesses in the company’s internal controls, the company did not maintain effective disclosure controls and procedures or effective internal control over financial reporting as of either March 31, 2013 or June 30, 2013.
The company plans to amend its previously filed Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 as soon as practicable and at or about the same time the company files its Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “Form 10-Q”) and its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Form 10-K”).
Updated Plan to Regain Compliance with Nasdaq Listing Rule
As previously reported, as a result of Ixia’s delayed filing of its Form 10-Q and Form 10-K, the company is not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Listing Rule”), which requires the timely filing with the SEC of all required periodic financial reports. The company announced today that, as requested by the company in an updated plan to regain compliance with the Listing Rule, The Nasdaq Stock Market LLC (“Nasdaq”) has granted the company through April 30, 2014 to regain compliance with the Listing Rule, which will permit the continued listing of our common stock on the Nasdaq Global Select Market.
Under the terms of the extension granted by Nasdaq, the company is required to file the Form 10-Q and Form 10-K on or before April 30, 2014 to regain compliance with the Listing Rule. If the company does not make the filings on or before April 30, 2014, Nasdaq has advised that it will notify the company that its stock will be delisted. If Ixia receives such a notice, the company will have an opportunity to appeal the delisting decision to a Nasdaq Hearings Panel. Under Nasdaq’s rules and procedures, a company’s request for such a hearing is generally due within seven calendar days after receipt of the delisting notification, and such a request automatically stays any delisting (and suspension of trading) for an additional 15 calendar days from the deadline to request a hearing. Upon receiving any such notification, the company intends to timely request a hearing and to request an additional stay (beyond the 15 calendar days) should it become necessary.
About Ixia
Ixia develops amazing products so its customers can connect the world. Ixia helps its customers provide an always-on user experience through fast, secure delivery of dynamic, connected technologies and services. Through actionable insights that accelerate and secure application and service delivery, Ixia's customers benefit from faster time to market, optimized application performance, and higher-quality deployments. Learn more at http://www.ixiacom.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding the expected impact of the identified errors on the company’s previously issued unaudited consolidated financial statements; the manner in which the company will effect the restatements in its filings with the SEC and the anticipated timing of the filing of the amended Quarterly Reports, the Form 10-Q and the Form 10-K; and the company’s intention to appeal to a Nasdaq Hearings Panel any notification from Nasdaq that the company’s common stock will be delisted. In some cases, such forward-looking statements can be identified by terms such as “may,” “will,” “expect,” “plan,” “believe,” “estimate,” “predict” or the like. Such statements reflect the company’s current intent, belief and expectations and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that may cause future results to differ materially from our current expectations include risks that the completion and filing of the amended Quarterly Reports, the Form 10-Q and the Form 10-K will take longer than anticipated; that prior to making such filings the company will identify additional issues or considerations that relate to such filings, such as additional errors in the company’s accounting practices, that will require additional adjustments to the company’s previously issued financial statements; and that, if necessary, the company will be unable to timely appeal any delisting notification to a Nasdaq Hearings Panel. Factors that may cause future results to differ materially from our current expectations also include those identified in our Annual Report on Form 10-K for the year ended December 31, 2012 and in our other filings with the SEC. There can be no assurance that the final impact of the restatement and the effect of the changes in our accounting practices will not differ materially from our expectations as described herein or that any other information set forth herein regarding the restatement will not change materially before we complete the filing of our restated unaudited consolidated financial statements. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
