Technology firm PTC Inc. said in a securities filing Monday it has reserved $28.2 million for a possible settlement with the DOJ and SEC of apparent FCPA offenses in China.
PTC said it has reached agreement in principle to settle the fed’s investigation into “expenditures [in China], including for travel and entertainment, that apparently benefited employees of customers regarded as state owned enterprises in China.”
The company said it isn’t certain it will enter into final settlements with the DOJ and SEC on the terms reflected by the in-principle agreement, or that the settlement won’t cost more than the accrued amount of $28.2 million.
PTC reserved $13.6 million for a settlement in October and an additional $14.6 million in mid-November.
In May 2014, PTC said it received an SEC subpoena in connection with the FCPA investigation. The company first disclosed settlement talks with the DOJ and SEC in February last year.
In Tuesday’s SEC filing, PTC said the payments in China to employees of state-owned enterprises came from “business partners” and from the company itself.
PTC provides digital and online technology services to businesses. It specializes in 2D and 3D design software, product lifecycle management, and service management solutions.
The company was formerly known as Parametric Technology Corporation and changed its name to PTC Inc. in January 2013. It is headquartered in Needham, Massachusetts.
PTC Inc. trades on Nasdaq under the symbol PTC.
* * *
PTC Inc.’s Annual Report (Form 10-K) filed with the SEC on November 23, 2015 said:
We have been investigating certain matters in China, the resolution of which could have a material adverse effect on our business and our results.
We have been in discussions with the U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) to resolve an investigation concerning expenditures by our business partners in China and by our China business, including for travel and entertainment, that apparently benefited employees of customers regarded as state owned enterprises in China. This matter involves issues regarding compliance with laws, including the U.S. Foreign Corrupt Practices Act. We have recorded liabilities of $28.2 million as a result of our agreements in principle with those agencies to settle the matter. There can be no assurance that we will enter into final settlements on the agreed terms with these agencies or, if not, that the cost of any final settlements, if reached, would not exceed the existing accrual. Further, any settlement or other resolution of this matter could have collateral effects on our business in China, the United States and elsewhere.
Our results for the year ended September 30, 2015 included in this Annual Report on Form 10-K reflect an accrual of $28.2 million related to a previously disclosed matter in China, as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations Impact of an Investigation in China. This accrual includes $14.6 million recorded in the fourth quarter of 2015 after we initially reported our results for the fourth quarter and fiscal year 2015 in our Earnings Release on Form 8-K on October 28, 2015. As a result, GAAP operating income and net income for the quarter and year ended September 30, 2015 are $14.6 million lower than initially reported, and earnings per share is $0.13 lower.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.