SEC Comment Letter for Palo Alto Networks Inc (PANW) (CIK 0001327567) (PANW) — Feb 14, 2014
Palo Alto Networks Inc (PANW) (CIK 0001327567)
Date: Feb. 14, 2014 · CIK: 0001327567 · Accession: 0000000000-14-007815
AI Filing Summary & Sentiment
Reasoning
Letter
February 14, 2014 Via E -mail Mark D. McLaughlin President and CEO Palo Alto Networks, Inc. 4401 Great America Parkway Santa Clara, California 95054
Re: Palo Alto Networks, Inc. Form 10-Q for the Quarterly Period Ended October 31, 2013 Filed December 5, 2013 Form 10-K for the Fiscal Year Ended July 31, 2013 Filed September 25, 2013 File No. 001 -35594
Dear Mr. McLaughlin :
We have reviewed your filing s and have the following co mments. Please note that we have limited our review to only your financial statements and related disclosures. In some of our comments , we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circumstance s or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing any amendment to your filing and the information you provide in response to these comment s, we may have additional comments.
Form 10 -Q for the quart er ended October 31, 2013
Condensed Consolidated Balance Sheet, Page 3
1. It is not clear from your existing disclosures why your allowance for doubtful accounts increa sed in the amount of $435,000 over the quarter ended October 31, 2013. Pleas e tell us why and cons ider an explanation of the reasons in your next Form 10 -Q.
Mark D. McLaughlin Palo Alto Networks, Inc. February 14, 2014 Page 2
Form 10 -K for the Fis cal Year Ended July 31, 2013
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Comparison of Fiscal 2013 and 2012, page 43
2. Please tell us what consideration you gave to providing disclosures that explain the extent to which increases/decreases in your product and service revenues were attributable to changes in price. W e refer you to Item 303(a)(3)(iii) of Regulation S -K.
Liquidity and Capital Resources, page 48
3. We note that approximately $27.2 million of your cash and cash equivalents and investments was held outside the United States and is not presently available to fund domestic operations and obligations as of July 31, 2013. We further note from your disclosures on page 79 that you have not made any tax provision for U.S. income taxes on approximately $5.2 million of undistributed earnings in foreign subsidiarie s, which you expect to reinvest outside of the U.S. indefinitely. Please explain whether you have recorded a deferred tax liability on any portion of your undistributed earnings in foreign subsidiaries. Describe the nature of any additional restrictions on your cash and cash equivalents and investments held outside the United States that are not presently available to fund your domestic operations and obligations.
Consolidated Financial Statements
Note 8. Income Taxes, page 77
4. We note the captions i n your effective income tax rate reconciliation for share -based compensation and foreign income at other than U.S. rates. Please clarify what the share - based compensation and foreign rate differentials represent for each year presented. As part of your r esponse, explain how the share -based compensation and foreign rate differentials are determined in each fiscal year and identify the significant components of these items.
We urge all persons who are responsible for the accuracy and adequacy of the disclo sure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclo sure, they are responsible for the accuracy and adequacy of the disclosures they have made.
Mark D. McLaughlin Palo Alto Networks, Inc. February 14, 2014 Page 3
In responding to our comments, please provide a written statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
You may contact Morgan Youngwood, Staff Accountant, at (202) 551-3479 if you have any questions regarding comments on the financial statements and related matters . Please contact me at (202) 551 -3730 with any other questions.
Sincerely,
/s/ Craig Wilson
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February 14, 2014 Via E -mail Mark D. McLaughlin President and CEO Palo Alto Networks, Inc. 4401 Great America Parkway Santa Clara, California 95054 Re: Palo Alto Networks, Inc. Form 10-Q for the Quarterly Period Ended October 31, 2013 Filed December 5, 2013 Form 10-K for the Fiscal Year Ended July 31, 2013 Filed September 25, 2013 File No. 001 -35594 Dear Mr. McLaughlin : We have reviewed your filing s and have the following co mments. Please note that we have limited our review to only your financial statements and related disclosures. In some of our comments , we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter within ten business days by amending your filing, by providing the requested information, or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circumstance s or do not believe an amendment is appropriate, please tell us why in your response. After reviewing any amendment to your filing and the information you provide in response to these comment s, we may have additional comments. Form 10 -Q for the quart er ended October 31, 2013 Condensed Consolidated Balance Sheet, Page 3 1. It is not clear from your existing disclosures why your allowance for doubtful accounts increa sed in the amount of $435,000 over the quarter ended October 31, 2013. Pleas e tell us why and cons ider an explanation of the reasons in your next Form 10 -Q. Mark D. McLaughlin Palo Alto Networks, Inc. February 14, 2014 Page 2 Form 10 -K for the Fis cal Year Ended July 31, 2013 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Comparison of Fiscal 2013 and 2012, page 43 2. Please tell us what consideration you gave to providing disclosures that explain the extent to which increases/decreases in your product and service revenues were attributable to changes in price. W e refer you to Item 303(a)(3)(iii) of Regulation S -K. Liquidity and Capital Resources, page 48 3. We note that approximately $27.2 million of your cash and cash equivalents and investments was held outside the United States and is not presently available to fund domestic operations and obligations as of July 31, 2013. We further note from your disclosures on page 79 that you have not made any tax provision for U.S. income taxes on approximately $5.2 million of undistributed earnings in foreign subsidiarie s, which you expect to reinvest outside of the U.S. indefinitely. Please explain whether you have recorded a deferred tax liability on any portion of your undistributed earnings in foreign subsidiaries. Describe the nature of any additional restrictions on your cash and cash equivalents and investments held outside the United States that are not presently available to fund your domestic operations and obligations. Consolidated Financial Statements Note 8. Income Taxes, page 77 4. We note the captions i n your effective income tax rate reconciliation for share -based compensation and foreign income at other than U.S. rates. Please clarify what the share - based compensation and foreign rate differentials represent for each year presented. As part of your r esponse, explain how the share -based compensation and foreign rate differentials are determined in each fiscal year and identify the significant components of these items. We urge all persons who are responsible for the accuracy and adequacy of the disclo sure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclo sure, they are responsible for the accuracy and adequacy of the disclosures they have made. Mark D. McLaughlin Palo Alto Networks, Inc. February 14, 2014 Page 3 In responding to our comments, please provide a written statement from the company acknowledging that: the company is responsible for the adequacy and accuracy of the disclosure in the filing; staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. You may contact Morgan Youngwood, Staff Accountant, at (202) 551-3479 if you have any questions regarding comments on the financial statements and related matters . Please contact me at (202) 551 -3730 with any other questions. Sincerely, /s/ Craig Wilson Craig Wilson Senior Assistant Chief Accountant