SEC Comment Letter for PTC (PTC) — Mar 2, 2017
PTC INC.
Date: March 2, 2017 · CIK: 0000857005 · Accession: 0000000000-17-006990
AI Filing Summary & Sentiment
Letter
Mail Stop 4561 March 2, 2017 Mr. James Heppelmann Chief Executive Officer PTC, Inc. 140 Kendrick Street Needham, MA 02494
Re: PTC Inc. Form 10-K for the Fiscal Year Ended September 30, 2016 Filed November 18, 2016 File No. 000 -18059
Dear Mr. Heppelmann :
We have reviewed your filing an d have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to these comments within ten busine ss days by providing the requested information or advis e us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response.
After reviewing your response to these comments, we may have additional comments.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources, page 34
1. We note that although you had $582 million undrawn on your credit facility, only approximately $40 million was availab le for borrowing due to covenant limitations. Please explain further the covenants that limit your borrowing capacity and tell us what consideration you have given to providing additional detail regarding such covenants . Also, tell us whether similar limitations existed at December 31, 2016 and your consideration to include a discussion of available credit, if limited in your Form 10 -Q disclosures. Refer to Item 303(a)(1) of Regulation S -K and Section IV.C of SEC Release 33-8350.
Mr. James Heppelmann PTC Inc. March 2, 2017 Page 2
Item 15. Exhibits and Financial Statement Schedules
Consolidated Statements of Operations, page F -43
2. Your subscription revenue line item appears to include both product (i.e., term licenses) and service arrangements (i.e., cloud services). Also, your cost of software revenue includes the cost of support services, subscription service arrangements, subscription product arrangements and perpetual license revenues. Please tell how you considered Rule 5 -03(b)(1) and (2) of Regulat ion S -X to separately present product and service revenues and their related costs on the face of your consolidated statement of operations.
3. Also, please consider renaming the “total recurring software revenue” and “total software revenue” line items to more appropriately reflect the inclusion of both software and service revenues in these amounts.
Notes to Consolidated Financial Statements
Note B. Summary of Significant Accounting Policies
Subscription, page F -9
4. We note that VSOE of fair value for subscription -based licenses is established through use of a substantive renewal clause within the customer contract, and VSOE for cloud servic e arrangements accounted for under ASC 985 -605 is established through a substantive stated renewal rate or stated contract overage rate. Please clarify the elements in a typical multiple -element arrangement for your subscription and cloud service arrangem ents. Also, tell us how you determined that the contractually stated renewal provisions were substantive and tell us what percentage of your customers have actually renewed at such rates.
Note C. Restructuring Charges, page F -18
5. Tell us how you cons idered the disclosure requirements of ASC 420 -10-50-1(d) to disclose the total amount of restructuring charges expected to be incurred, the amount incurred for each period presented, and the cumulative amount incurred to date for each of your reportable se gments.
We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff.
Mr. James Heppelmann PTC Inc. March 2, 2017 Page 3
You may contact Megan Akst, Senior Staff Accountant at (202) 551 -3407 if you have questions regarding comments on the financial statements and re lated matters. If you require further assistance, do not hesitate to contact me at (202) 551 -3499.
Sincerely,
/s/ Kathleen Collins
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Mail Stop 4561 March 2, 2017 Mr. James Heppelmann Chief Executive Officer PTC, Inc. 140 Kendrick Street Needham, MA 02494 Re: PTC Inc. Form 10-K for the Fiscal Year Ended September 30, 2016 Filed November 18, 2016 File No. 000 -18059 Dear Mr. Heppelmann : We have reviewed your filing an d have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to these comments within ten busine ss days by providing the requested information or advis e us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response. After reviewing your response to these comments, we may have additional comments. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources, page 34 1. We note that although you had $582 million undrawn on your credit facility, only approximately $40 million was availab le for borrowing due to covenant limitations. Please explain further the covenants that limit your borrowing capacity and tell us what consideration you have given to providing additional detail regarding such covenants . Also, tell us whether similar limitations existed at December 31, 2016 and your consideration to include a discussion of available credit, if limited in your Form 10 -Q disclosures. Refer to Item 303(a)(1) of Regulation S -K and Section IV.C of SEC Release 33-8350. Mr. James Heppelmann PTC Inc. March 2, 2017 Page 2 Item 15. Exhibits and Financial Statement Schedules Consolidated Statements of Operations, page F -43 2. Your subscription revenue line item appears to include both product (i.e., term licenses) and service arrangements (i.e., cloud services). Also, your cost of software revenue includes the cost of support services, subscription service arrangements, subscription product arrangements and perpetual license revenues. Please tell how you considered Rule 5 -03(b)(1) and (2) of Regulat ion S -X to separately present product and service revenues and their related costs on the face of your consolidated statement of operations. 3. Also, please consider renaming the “total recurring software revenue” and “total software revenue” line items to more appropriately reflect the inclusion of both software and service revenues in these amounts. Notes to Consolidated Financial Statements Note B. Summary of Significant Accounting Policies Subscription, page F -9 4. We note that VSOE of fair value for subscription -based licenses is established through use of a substantive renewal clause within the customer contract, and VSOE for cloud servic e arrangements accounted for under ASC 985 -605 is established through a substantive stated renewal rate or stated contract overage rate. Please clarify the elements in a typical multiple -element arrangement for your subscription and cloud service arrangem ents. Also, tell us how you determined that the contractually stated renewal provisions were substantive and tell us what percentage of your customers have actually renewed at such rates. Note C. Restructuring Charges, page F -18 5. Tell us how you cons idered the disclosure requirements of ASC 420 -10-50-1(d) to disclose the total amount of restructuring charges expected to be incurred, the amount incurred for each period presented, and the cumulative amount incurred to date for each of your reportable se gments. We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff. Mr. James Heppelmann PTC Inc. March 2, 2017 Page 3 You may contact Megan Akst, Senior Staff Accountant at (202) 551 -3407 if you have questions regarding comments on the financial statements and re lated matters. If you require further assistance, do not hesitate to contact me at (202) 551 -3499. Sincerely, /s/ Kathleen Collins Kathleen Collins Accounting Branch Chief Office of Information Technologies and Services