ReclassificationsThat means without the reclassification, the revenue of 2012Q1and 2011Q1 should be $230m and $233.4m respectively. Oops, a slight drop.
Beginning in the first quarter of fiscal 2013, we have recorded settlements from implementation licensees as licensing revenue rather than as an offset to sales and marketing expense. In order to conform to the current period's presentation, we have reclassified these settlements for the prior periods presented within our condensed consolidated statements of operations. For the fiscal quarters ended December 28, 2012 and December 30, 2011, licensing revenue now includes amounts recognized under settlement agreements of $6.6 million and $0.8 million, respectively. The reclassification did not impact our previously reported operating income, operating cash flows, net income, or earnings per share.
It's not a significant sum. Yet, you come out with the impression all these little accounting maneuvers were there to please the forever short-term focusing Wall Street, to avoid showing a drop.
Oh, well, an analyst did ask something in the conference call which I believe relates to this reclassification:
Steven Frankel - Dougherty & Company: Could you start Lewis with some clarity on the catch-up royalty payments that occurred in Q1? How much was that and what category did that come from?I said "I believe" because the languages used by both the analyst and the CFO were obscure. Why said "catch-up payments" and "classified" instead "reclassification"? If you haven't read the 10Q, you will probably miss it.You can't help but think the analyst was conspiring with the management to obscure this and, at the same time, had himself covered.
Lewis Chew - EVP and CFO: First of all, I'd say that this is really a subset of all those items, so that going forward now, starting with this quarter, all of our catch-up, whether they settlements or back royalties, will all be classified in revenues. So that will get rid of any remaining – I know in the past we've talked about some of these that were recorded as credits to expense. The impact both year-over-year and quarter-over-quarter was about plus 5 and in terms of market categories, in any given quarter they are spread across and this quarter was the same. They happened in several of our different buckets, the normal buckets we talk about – set-top box, PC, TV, et cetera, but that's the impact is about plus 5 both year-over-year and quarter-over-quarter.
Sadly, that's the norm, not an exception. Sigh...
(Disclosure: Long DLB, but not too happy.)