schoolyd's  Instablog

Clearly the following helped cash flow, but I would like to know if the reversal of this reserve also flowed back into net income. If so, it would have contributed $2.5 m to Q4 net income and will contribute $1.0 m to Q1 earnings. It's not clear from filing, but typically when a reserve is lowered, it directly benefits earnings.

From 10-K, "In December 2008, our credit card processor informed us that it would begin requiring a reserve from us due to the inherent risks of credit card processing and its assessment of the risks of processing our customer credit cards, and began withholding approximately 1% of our daily credit card remittances as a reserve. The credit card processor indicated that it expected to continue such withholding until the reserve reached a total of $3.5 million, which it did in August 2009. During September 2009, our processor informed us that it had reassessed the reserve requirement and reduced our reserve to $1.75 million and refunded the excess balance of $1.75 million to us. At December 31, 2009 the remaining reserve was $1 million, which is included in Accounts Receivable in the consolidated balance sheet. Subsequent to the end of the year, the credit card processor refunded the $1 million or the full amount of the reserve, reducing the reserve to zero."