Avoid Technology: How does a company not manage to file its financials?

Sorry, was that a typo?  I meant to say Avid Technology (NASDAQ:AVID).  I’ve written about the company in the past (“How to lose money when you’re the market leader“).  The thing about this company that I don’t understand is why it can’t file its financials in time.  Their excuse doesn’t make sense to me.

I’ve made my own highlight to a segment of the latest NT 10-Q filing:

As previously reported in the Form 8-K filed on May 21, 2013 (“Form 8-K”), Avid Technology, Inc. (the “Company”) is in the process of restating its financial statements for the fiscal years ended December 31, 2011, 2010 and 2009 and for its quarterly periods ended September 30, 2012 and 2011, June 30, 2012 and 2011, and March 31, 2012 and 2011. The restatement relates to the Company’s accounting treatment of certain upgrades, enhancements and compatibility extensions (collectively “Software Updates”) it previously made available to certain of its customers at no-charge. The Company has determined that such Software Updates should have been accounted for as implied post-contract customer support (PCS) under U.S. Generally Accepted Accounting Principles. The Company expects that the timing of revenue recognition for the impacted customer arrangements will change from the historical presentation in the Company’s financial statements pursuant to which revenue was recognized up front, generally to being recognized ratably over the estimated implied PCS service period. In addition, the timing of recognition of certain costs related to these customer arrangements may also be impacted, along with the timing of related income taxes. The Company cannot at this time estimate the full impact of the adjustments of revenue and costs, and the related impact on income taxes, on any previously issued financial statements for any individual reporting period, although it may be significant. However, while the restatement adjustments will impact previously reported revenue and operating results for prior periods, the restatement adjustments are not expected to affect the amount of total revenue ultimately to be earned, or the amount or timing of cash received or to be received, from the sales transactions or the Company’s liquidity or cash flow for any prior period.
Pending completion of the restatement work, the Company is not able to complete and cannot file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 by the prescribed due date or by November 18, 2013, the fifth calendar day after the prescribed due date. The Company will continue to work expeditiously to file as soon as practicable thereafter.
Please refer to the disclosures in the Form 8-K and the Form 8-K furnished on October 17, 2013 for additional information regarding the Company’s ongoing accounting evaluation, and for information regarding the Company’s delayed filing of its 2012 Form 10-K and Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013.

I honestly don’t understand this.  So they’ve given out free software updates.  Every company in their industry does this (as does almost every software company, except for the SaaS/cloud companies).  Adobe (ADBE) and Autodesk (ADSK) have no problem with their accounting.  Apple (AAPL), Sony (SNE) and Digital Vision are other publicly-traded competitors that have no problem.  So why does Avid have a problem?  It’s been half a year now.  There are some astute readers of this blog… maybe some of you can figure it out.

*Disclosure:  No position in Avid currently.  The company revolutionized video and film editing and is a very important part of the film, video, and audio industries.  Their technology is behind virtually every Hollywood movie in theatres right now.  This is a legitimate company that has created value for society.  I’m not sure if I want to be the jerk that shorts their stock.

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2 thoughts on “Avoid Technology: How does a company not manage to file its financials?

  1. Pingback: More new positions Dec 20, 2013 | Glenn Chan's Random Notes on Investing

  2. Pingback: Avid: I don’t understand what they’re doing | Glenn Chan's Random Notes on Investing

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