Business Context and Reporting Period
Company: Harvard Bioscience, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: February 28, 2006 (Event Date)
Reporting Period: This filing addresses a restatement of previously issued financial statements for the three and six months ended June 30, 2005, and the nine months ended September 30, 2005. It also references the issuance of a press release on March 2, 2006, regarding results for the three months and year ended December 31, 2005.
Key Financial Metrics
This filing does not provide current period revenue, cash flow, or debt figures. It focuses exclusively on the correction of an accounting error regarding income tax expense. The error resulted in an overstatement of tax expense and net loss in prior periods.
| Period | Metric | As Reported | As Restated |
|---|---|---|---|
| Three months ended June 30, 2005 | Stockholders' Equity | $74,240 | $77,785 |
| Net Loss | $(27,379) | $(23,834) | |
| Loss per Diluted Share | $(0.90) | $(0.78) | |
| Six months ended June 30, 2005 | Stockholders' Equity | $74,240 | $77,785 |
| Net Loss | $(27,177) | $(23,632) | |
| Loss per Diluted Share | $(0.89) | $(0.78) | |
| Nine months ended Sept 30, 2005 | Stockholders' Equity | $74,577 | $78,122 |
| Net Loss | $(26,516) | $(22,971) | |
| Loss per Diluted Share | $(0.86) | $(0.75) |
Note: All figures in thousands except per share data.
Material Changes Versus Prior Period
The material change is a restatement of prior financial statements due to an accounting error. The Company incorrectly recognized $3.5 million of tax expense to increase the valuation allowance above the amount required under SFAS No. 109. This error was identified during the preparation of the tax provision for the year ended December 31, 2005.
- Impact: The correction reduces income tax expense and reduces the net loss by $3.5 million for the affected periods.
- Unaffected Metrics: The adjustment does not affect previously reported revenue, operating profit, adjusted non-GAAP earnings per diluted share, or future revenue, earnings, or cash flow.
Guidance, Outlook, and Risks
Management Commentary: The Company concluded that the previously issued consolidated financial statements for the periods ended June 30, 2005, and September 30, 2005, should no longer be relied upon. The Audit Committee has discussed the matter with the independent registered public accounting firm.
Contingencies and Unusual Items: The unusual item is the $3.5 million overstatement of income tax expense related to the Capital Equipment Business segment's valuation allowance assessment in the second quarter of 2005.
Future Action: The Company will correct this error by restating the quarterly financial information in the footnotes to its financial statements for the year ended December 31, 2005, to be filed in its Form 10-K.
Investor Verification Checklist
- Verify the restated financial figures in the upcoming Form 10-K for the year ended December 31, 2005.
- Confirm that the $3.5 million tax adjustment does not impact the company's current liquidity or debt covenants.
- Review the March 2, 2006 press release (Exhibit 99.1) for the full year 2005 results, as this 8-K only summarizes the restatement impact.
- Assess the internal controls surrounding the calculation of deferred tax assets and valuation allowances.