Business Context and Reporting Period
Company: Iridium Communications Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: October 29, 2012
Subject: Non-reliance on previously issued financial statements and audit reports due to identified errors.
Key Financial Metrics and Impact
The filing identifies errors related to the provision for income taxes concerning a non-operating foreign subsidiary. The filing explicitly states that these errors do not impact revenue, operating income, cash balances, total assets, or cash flows as previously reported.
The estimated impact on net income/loss for the affected years is as follows:
- Year Ended Dec 31, 2009: $2.1 million overstatement of net loss.
- Year Ended Dec 31, 2010: $2.8 million overstatement of net income.
- Year Ended Dec 31, 2011: $1.4 million understatement of net income.
Note: These amounts are estimates and have not yet been finalized or audited by Ernst & Young LLP.
Material Changes and Restatement Scope
The Audit Committee, in consultation with management and the independent auditor, determined that the consolidated financial statements and related audit reports for the following periods should no longer be relied upon:
- Years ended December 31, 2009, 2010, and 2011.
- Quarters ended December 31, 2009 through December 31, 2011.
- Internal control over financial reporting reports for the years ended December 31, 2009, 2010, and 2011.
The Company will restate these financial statements to correct the errors.
Outlook, Management Commentary, and Risks
Management Action Plan:
- Restatements for the three and nine-month periods ended September 30, 2011, will be included in the Form 10-Q for the period ended September 30, 2012.
- An amendment to the Form 10-K for the year ended December 31, 2011, containing restatements for other affected periods, will be filed as soon as practicable.
Risks and Contingencies:
- There is a risk that the restatements may not be completed within the estimated timeframe.
- The Audit Committee or independent auditor may reach different conclusions regarding the financial statements and internal controls.
- Forward-looking statements regarding the timing and extent of adjustments are subject to uncertainty.
Investor Verification Checklist
- Verify the finalized restatement amounts once the amended Form 10-K is filed.
- Review the upcoming Form 10-Q for the period ended September 30, 2012, for restated interim data.
- Monitor the status of the internal control over financial reporting assessment in the amended filings.
- Confirm that the errors remain isolated to income tax provisions and do not affect operating metrics or liquidity.