Item 5. Other Information
ITEM 5. Other Information
The following tables showing the correction of prior period amounts should be read in conjunction with Note 2 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q. This correction affected our consolidated balance sheets, consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of stockholders’ equity and consolidated statements of cash flows for historical periods through June 30, 2020.
This correction was not material to any of our previously issued financial statements. The following previously issued financial statements have been adjusted to reflect the correction: the condensed consolidated balance sheets as of June 30, 2020 and March 31, 2020; the consolidated balance sheets as of December 31, 2019, 2018, and 2017; the condensed consolidated statements of income for the three and six months ended June 30, 2020 and 2019 and the three months ended March 31, 2020 and 2019; the consolidated statements of income for the years ended December 31, 2019, 2018 and 2017; the condensed consolidated statements of cash flows for the six months ended June 30, 2020 and the three months ended March 31, 2020; and the consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017. We also have revised our net income and comprehensive income in our condensed consolidated statements of comprehensive income and our net income, retained earnings (accumulated deficit) and total stockholders’ equity in our condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2020 and the three months ended March 31, 2020 and our net income and comprehensive income in our consolidated statements of comprehensive income and our net income, retained earnings (accumulated deficit) and total stockholders’ equity in our consolidated statements of stockholders’ equity for the years ended December 31, 2019, 2018 and 2017 as a result of this correction.
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The following tables show the affected line items within the consolidated financial statements (in millions):
Consolidated Balance Sheets:
December 31, 2017
As Previously Reported Corrections As Corrected
ASSETS
DEFERRED TAX ASSETS $ 146.9 $ (4.0) $ 142.9
TOTAL ASSETS 2,257.9 (4.0) 2,253.9
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Deferred revenue 793.8 (9.1) 784.7
Total current liabilities 1,027.2 (9.1) 1,018.1
DEFERRED REVENUE 542.5 (7.5) 535.0
Total liabilities 1,668.5 (16.6) 1,651.9
STOCKHOLDERS’ EQUITY:
Accumulated deficit (319.6) 12.6 (307.0)
Total stockholders’ equity 589.4 12.6 602.0
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,257.9 $ (4.0) $ 2,253.9
December 31, 2018
As Previously Reported Corrections As Corrected
ASSETS
DEFERRED TAX ASSETS $ 255.0 $ (4.7) $ 250.3
TOTAL ASSETS 3,078.0 (4.7) 3,073.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Deferred revenue 965.9 (11.0) 954.9
Total current liabilities 1,256.4 (11.0) 1,245.4
DEFERRED REVENUE 720.9 (9.0) 711.9
Total liabilities 2,067.8 (20.0) 2,047.8
STOCKHOLDERS’ EQUITY:
Accumulated deficit (57.5) 15.3 (42.2)
Total stockholders’ equity 1,010.2 15.3 1,025.5
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,078.0 $ (4.7) $ 3,073.3
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March 31, 2020
As Previously Reported Corrections As Corrected
ASSETS
DEFERRED TAX ASSETS $ 226.5 $ (6.5) $ 220.0
TOTAL ASSETS 3,206.2 (6.5) 3,199.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Deferred revenue 1,230.2 (18.6) 1,211.6
Total current liabilities 1,543.0 (18.6) 1,524.4
DEFERRED REVENUE 996.6 (9.0) 987.6
Total liabilities 2,669.9 (27.6) 2,642.3
STOCKHOLDERS’ EQUITY:
Retained earnings (accumulated deficit) (589.2) 21.1 (568.1)
Total stockholders’ equity 536.3 21.1 557.4
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,206.2 $ (6.5) $ 3,199.7
June 30, 2020
As Previously Reported Corrections As Corrected
ASSETS
DEFERRED TAX ASSETS $ 218.9 $ (6.9) $ 212.0
TOTAL ASSETS 3,330.6 (6.9) 3,323.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Deferred revenue 1,275.8 (20.7) 1,255.1
Total current liabilities 1,611.9 (20.7) 1,591.2
DEFERRED REVENUE 1,047.0 (9.0) 1,038.0
Total liabilities 2,786.7 (29.7) 2,757.0
STOCKHOLDERS’ EQUITY:
Accumulated deficit (613.1) 22.8 (590.3)
Total stockholders’ equity 543.9 22.8 566.7
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,330.6 $ (6.9) $ 3,323.7
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Consolidated Statements of Income:
Year Ended December 31, 2017
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 917.7 $ 2.8 $ 920.5
Total revenue 1,494.9 2.8 1,497.7
GROSS PROFIT:
Service 776.2 2.8 779.0
Total gross profit 1,109.6 2.8 1,112.4
OPERATING INCOME 109.8 2.8 112.6
INCOME BEFORE INCOME TAXES 124.0 2.8 126.8
PROVISION FOR INCOME TAXES 92.6 (1.2) 91.4
NET INCOME $ 31.4 $ 4.0 $ 35.4
Net income per share:
Basic $ 0.18 $ 0.02 $ 0.20
Diluted $ 0.18 $ 0.02 $ 0.20
Year Ended December 31, 2018
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 1,126.8 $ 3.4 $ 1,130.2
Total revenue 1,801.2 3.4 1,804.6
GROSS PROFIT:
Service 967.4 3.4 970.8
Total gross profit 1,350.8 3.4 1,354.2
OPERATING INCOME 231.0 3.4 234.4
INCOME BEFORE INCOME TAXES 250.9 3.4 254.3
BENEFIT FROM INCOME TAXES (81.3) 0.7 (80.6)
NET INCOME $ 332.2 $ 2.7 $ 334.9
Net income per share:
Basic $ 1.96 $ 0.02 $ 1.98
Diluted $ 1.91 $ 0.01 $ 1.92
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Three Months Ended March 31, 2019
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 309.9 $ 0.4 $ 310.3
Total revenue 472.6 0.4 473.0
GROSS PROFIT:
Service 267.1 0.4 267.5
Total gross profit 359.6 0.4 360.0
OPERATING INCOME 50.6 0.4 51.0
INCOME BEFORE INCOME TAXES 60.3 0.4 60.7
PROVISION FOR INCOME TAXES 1.5 0.1 1.6
NET INCOME $ 58.8 $ 0.3 $ 59.1
Net income per share:
Basic $ 0.35 $ — $ 0.35
Diluted $ 0.34 $ — $ 0.34
Three Months Ended June 30, 2019
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 331.8 $ 2.1 $ 333.9
Total revenue 521.7 2.1 523.8
GROSS PROFIT:
Service 286.2 2.1 288.3
Total gross profit 393.4 2.1 395.5
OPERATING INCOME 75.2 2.1 77.3
INCOME BEFORE INCOME TAXES 85.8 2.1 87.9
PROVISION FOR INCOME TAXES 13.1 0.6 13.7
NET INCOME $ 72.7 $ 1.5 $ 74.2
Net income per share:
Basic $ 0.42 $ 0.01 $ 0.43
Diluted $ 0.42 $ — $ 0.42
Six Months Ended June 30, 2019
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 641.7 $ 2.5 $ 644.2
Total revenue 994.3 2.5 996.8
GROSS PROFIT:
Service 553.3 2.5 555.8
Total gross profit 753.0 2.5 755.5
OPERATING INCOME 125.8 2.5 128.3
INCOME BEFORE INCOME TAXES 146.1 2.5 148.6
PROVISION FOR INCOME TAXES 14.6 0.7 15.3
NET INCOME $ 131.5 $ 1.8 $ 133.3
Net income per share:
Basic $ 0.77 $ 0.01 $ 0.78
Diluted $ 0.75 $ 0.01 $ 0.76
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Year Ended December 31, 2019
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 1,367.7 $ 6.8 $ 1,374.5
Total revenue 2,156.2 6.8 2,163.0
GROSS PROFIT:
Service 1,186.4 6.8 1,193.2
Total gross profit 1,650.3 6.8 1,657.1
OPERATING INCOME 344.2 6.8 351.0
INCOME BEFORE INCOME TAXES 379.2 6.8 386.0
PROVISION FOR INCOME TAXES 52.7 1.6 54.3
NET INCOME $ 326.5 $ 5.2 $ 331.7
Net income per share:
Basic $ 1.91 $ 0.03 $ 1.94
Diluted $ 1.87 $ 0.03 $ 1.90
Three Months Ended March 31, 2020
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 384.6 $ 0.8 $ 385.4
Total revenue 576.9 0.8 577.7
GROSS PROFIT:
Service 332.2 0.8 333.0
Total gross profit 448.2 0.8 449.0
OPERATING INCOME 115.9 0.8 116.7
INCOME BEFORE INCOME TAXES 117.1 0.8 117.9
PROVISION FOR INCOME TAXES 13.1 0.2 13.3
NET INCOME $ 104.0 $ 0.6 $ 104.6
Net income per share:
Basic $ 0.61 $ — $ 0.61
Diluted $ 0.60 $ — $ 0.60
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Three Months Ended June 30, 2020
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 403.6 $ 2.1 $ 405.7
Total revenue 615.5 2.1 617.6
GROSS PROFIT:
Service 352.9 2.1 355.0
Total gross profit 480.4 2.1 482.5
OPERATING INCOME 116.7 2.1 118.8
INCOME BEFORE INCOME TAXES 121.6 2.1 123.7
PROVISION FOR INCOME TAXES 9.5 0.4 9.9
NET INCOME $ 112.1 $ 1.7 $ 113.8
Net income per share:
Basic $ 0.69 $ 0.01 $ 0.70
Diluted $ 0.68 $ 0.01 $ 0.69
Six Months Ended June 30, 2020
As Previously Reported Corrections As Corrected
REVENUE:
Service $ 788.2 $ 2.9 $ 791.1
Total revenue 1,192.4 2.9 1,195.3
GROSS PROFIT:
Service 685.1 2.9 688.0
Total gross profit 928.6 2.9 931.5
OPERATING INCOME 232.6 2.9 235.5
INCOME BEFORE INCOME TAXES 238.7 2.9 241.6
PROVISION FOR INCOME TAXES 22.6 0.6 23.2
NET INCOME $ 216.1 $ 2.3 $ 218.4
Net income per share:
Basic $ 1.30 $ 0.01 $ 1.31
Diluted $ 1.27 $ 0.02 $ 1.29
Consolidated Statements of Cash Flows:
Year Ended December 31, 2017
As Previously Reported Corrections As Corrected
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31.4 $ 4.0 $ 35.4
Changes in operating assets and liabilities:
Deferred tax assets $ 35.8 $ (1.2) $ 34.6
Deferred revenue $ 300.8 $ (2.8) $ 298.0
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Year Ended December 31, 2018
As Previously Reported Corrections As Corrected
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 332.2 $ 2.7 $ 334.9
Changes in operating assets and liabilities:
Deferred tax assets $ (127.8) $ 0.7 $ (127.1)
Deferred revenue $ 352.1 $ (3.4) $ 348.7
Year Ended December 31, 2019
As Previously Reported Corrections As Corrected
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 326.5 $ 5.2 $ 331.7
Changes in operating assets and liabilities:
Deferred tax assets $ 17.8 $ 1.6 $ 19.4
Deferred revenue $ 446.7 $ (6.8) $ 439.9
Three Months Ended March 31, 2020
As Previously Reported Corrections As Corrected
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 104.0 $ 0.6 $ 104.6
Changes in operating assets and liabilities:
Deferred tax assets $ 7.1 $ 0.2 $ 7.3
Deferred revenue $ 90.9 $ (0.8) $ 90.1
Six Months Ended June 30, 2020
As Previously Reported Corrections As Corrected
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 216.1 $ 2.3 $ 218.4
Changes in operating assets and liabilities:
Deferred tax assets $ 13.0 $ 0.6 $ 13.6
Deferred revenue $ 186.9 $ (2.9) $ 184.0
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ITEM 6. Exhibits
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
Incorporated by reference herein
Form Date Exhibit Number
3.1
Amended and Restated Bylaws
Current Report on Form 8-K (File No. 001-34511)
July 21, 2020
3.1
31.1 *
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 #
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
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101.SCH* Inline XBRL Taxonomy Extension Schema Document
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document
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104* Cover Page Interactive Data File - the cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 is formatted in inline XBRL.
________________________________
* Filed herewith.
# Furnished herewith.
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SIGNATURES
Pursuant to the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 6, 2020
FORTINET, INC.
By: /s/ Ken Xie
Ken Xie, Chief Executive Officer and Chairman
(Duly Authorized Officer and Principal Executive Officer)
FORTINET, INC.
By: /s/ Keith Jensen
Keith Jensen, Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer and Principal Accounting Officer)
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