SEC Comment Letter for SECURE COMPUTING CORP (CIK 0001001916) — Oct 24, 2005
SECURE COMPUTING CORP (CIK 0001001916)
Date: Oct. 24, 2005 · CIK: 0001001916 · Accession: 0000000000-05-053907
AI Filing Summary & Sentiment
File numbers found in text: 000-27074
Referenced dates: September 26, 2005
Letter
Room 4561 October 24, 2005 Mr. Tim Steinkopf Chief Financial Officer and Senior Vice President Secure Computing Corporation 4810 Harwood Road San Jose, CA 95124
Re: Secure Computing Corporation Form 10-K for Fiscal Year Ended December 31, 2004 Filed March 11, 2005 File No. 000-27074
Dear Mr. Steinkopf:
We have reviewed your response letter dated September 26, and have the following additional comments. We may ask you to provide us with supplemental information so we may better understand your disclosure. Please be as detailed as necessary in your explanation. After reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K for the Fiscal Year Ended December 31, 2004
Consolidated Balance Sheets and Consolidated Statements of Cash Flows, pages 33 and 36
1. We note your response to prior comment number 1 and it remains unclear how you have been able to conclude that specific disclosure regarding the reclassification is not necessary. In this regard we note that:
a. The reclassification appears to have had a quantitatively material effect on your statement of cash flows which would therefore require disclosure. See SAB 99. b. Paragraph 2 of Chapter 2A of ARB 43 requires disclosure explaining the changes in presentation in comparative financial statements.
Please explain to us how your current disclosures comply with GAAP and SEC practice considering that you have not provided disclosure related to a material change made to your financial statements.
Consolidated Statements of Operations, page 34
2. We note your response to prior comment number 2. Please explain to us your basis for including the costs related to providing maintenance, training and installation service revenues in selling and marketing expenses rather then in cost of sales and refer to the authoritative literature that supports your accounting. As part of your response, please quantify the costs included in selling and marketing expenses that represent the costs of providing service revenue. Also, we note your disclosure in Note 1 provides no indication that personnel engaged in maintenance (or any other services) are included in selling and marketing expense.
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Revenue Recognition, page 37
3. We note your response to prior comment number 4 and have the following additional comments: a. You indicate that VSOE for hardware, software and subscription based products is based on the "average" amount when the product or subscription is sold separately. Specifically describe the process you use to determine the "average" amount when the product or subscription is sold separately. Tell us how you evaluate the various factors that affect your VSOE including customer type and other pricing factors. Further address how you can reasonably estimate fair value if your VSOE varies from customer to customer. Tell us how your accounting complies with paragraph 10 of SOP 97- 2. b. Please tell us more about the subscription-based contracts you refer to in your response. In this regard, we note that such contracts are not disclosed in your Form 10-K or subsequent 10- Q`s. Clarify the nature of the subscription-based contracts, the services you provide under these contracts, the respective periods underlying the contracts and how you recognize revenue under these arrangements. Refer to the respective authoritative guidance to support your accounting. c. We note that your response does not address how you determine VSOE for the other services you offer. Please tell us how you have established VSOE for the solution planning and implementation services you provide. d. As previously requested, please explain any circumstances under which VSOE for PCS differs from either the renewal rate and/or your published price lists.
4. We note your response to prior comment number 5. Please explain to us the difference between the "sell-through reporting" which you use for international distributor sales and "end-user sell- through" which you use for all other distributor and reseller sales. As part of your response, please clarify to whom you are shipping when you indicate that revenue is recognized when you have "end-user sell- through and the product has shipped." We also note that you obtain sell-through data at the time of the P.O. which is prior to the shipment of the product. As you indicate that international distributor sales are recognized at sell-through and this information is obtained prior to shipment, please clarify whether revenue from these sales is recorded prior to the shipment of the product.
As appropriate, please amend your filing and respond to these comments within 10 business days or tell us when you will provide us with a response. Please submit all correspondence and supplemental materials on EDGAR as required by Rule 101 of Regulation S-T. You may wish to provide us with marked copies of any amendment to expedite our review. Please furnish a cover letter with any amendment that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing any amendment and your responses to our comments.
You may contact Christine Davis, Staff Accountant, at (202) 551- 3408, Lisa Mitrovich, Assistant Chief Accountant at (202) 551-3453 or me at (202) 551-3489 if you have questions regarding these comments.
Sincerely,
Brad Skinner
Accounting Branch Chief
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Room 4561
October 24, 2005
Mr. Tim Steinkopf
Chief Financial Officer and
Senior Vice President
Secure Computing Corporation
4810 Harwood Road
San Jose, CA 95124
Re: Secure Computing Corporation
Form 10-K for Fiscal Year Ended December 31, 2004
Filed March 11, 2005
File No. 000-27074
Dear Mr. Steinkopf:
We have reviewed your response letter dated September 26,
2005
and have the following additional comments. We may ask you to
provide us with supplemental information so we may better
understand
your disclosure. Please be as detailed as necessary in your
explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Fiscal Year Ended December 31, 2004
Consolidated Balance Sheets and Consolidated Statements of Cash
Flows, pages 33 and 36
1. We note your response to prior comment number 1 and it remains
unclear how you have been able to conclude that specific
disclosure
regarding the reclassification is not necessary. In this regard
we
note that:
a. The reclassification appears to have had a quantitatively
material
effect on your statement of cash flows which would therefore
require
disclosure. See SAB 99.
b. Paragraph 2 of Chapter 2A of ARB 43 requires disclosure
explaining
the changes in presentation in comparative financial statements.
Please explain to us how your current disclosures comply with GAAP
and SEC practice considering that you have not provided disclosure
related to a material change made to your financial statements.
Consolidated Statements of Operations, page 34
2. We note your response to prior comment number 2. Please
explain
to us your basis for including the costs related to providing
maintenance, training and installation service revenues in selling
and marketing expenses rather then in cost of sales and refer to
the
authoritative literature that supports your accounting. As part
of
your response, please quantify the costs included in selling and
marketing expenses that represent the costs of providing service
revenue. Also, we note your disclosure in Note 1 provides no
indication that personnel engaged in maintenance (or any other
services) are included in selling and marketing expense.
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Revenue Recognition, page 37
3. We note your response to prior comment number 4 and have the
following additional comments:
a. You indicate that VSOE for hardware, software and subscription
based products is based on the "average" amount when the product
or
subscription is sold separately. Specifically describe the
process
you use to determine the "average" amount when the product or
subscription is sold separately. Tell us how you evaluate the
various factors that affect your VSOE including customer type and
other pricing factors. Further address how you can reasonably
estimate fair value if your VSOE varies from customer to customer.
Tell us how your accounting complies with paragraph 10 of SOP 97-
2.
b. Please tell us more about the subscription-based contracts you
refer to in your response. In this regard, we note that such
contracts are not disclosed in your Form 10-K or subsequent 10-
Q`s.
Clarify the nature of the subscription-based contracts, the
services
you provide under these contracts, the respective periods
underlying
the contracts and how you recognize revenue under these
arrangements.
Refer to the respective authoritative guidance to support your
accounting.
c. We note that your response does not address how you determine
VSOE
for the other services you offer. Please tell us how you have
established VSOE for the solution planning and implementation
services you provide.
d. As previously requested, please explain any circumstances under
which VSOE for PCS differs from either the renewal rate and/or
your
published price lists.
4. We note your response to prior comment number 5. Please
explain
to us the difference between the "sell-through reporting" which
you
use for international distributor sales and "end-user sell-
through"
which you use for all other distributor and reseller sales. As
part
of your response, please clarify to whom you are shipping when you
indicate that revenue is recognized when you have "end-user sell-
through and the product has shipped." We also note that you
obtain
sell-through data at the time of the P.O. which is prior to the
shipment of the product. As you indicate that international
distributor sales are recognized at sell-through and this
information
is obtained prior to shipment, please clarify whether revenue from
these sales is recorded prior to the shipment of the product.
As appropriate, please amend your filing and respond to these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
You may contact Christine Davis, Staff Accountant, at (202)
551-
3408, Lisa Mitrovich, Assistant Chief Accountant at (202) 551-3453
or
me at (202) 551-3489 if you have questions regarding these
comments.
Sincerely,
Brad Skinner
Accounting Branch Chief
??
??
??
??
Mr. Tim Steinkopf
Secure Computing Corporation
October 24, 2005
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