Avid, which since February 2013 has been conducting an internal investigation into its current and historical accounting treatment related to software updates, said in a regulatory filing that in approximately four weeks, it expects to have completed its accounting audit and filed its annual report (Form 10-K) for the fiscal year ended December 31, 2013.
Because of its 18 month-long internal accounting audit, the company has not been able to file financial results with securities regulators since the third quarter of 2012.
This delay ultimately resulted in Avid’s stock being delisted from The NASDAQ Stock Market on February 25, 2014.
But with today’s announcement, it appears that the audit is nearly completed.
Avid now says that its 2013 Form 10-K will include results for the fiscal year ended December 31, 2012 and restated results for the fiscal year ended December 31, 2011. The company said it also intends to file its Form 10-Q for each of the three-month periods ended March 31, June 30 and September 30, 2013 concurrently with the 2013 Form 10-K filing.
The company will then file its Form 10-Q for the period ended March 31, 2014 approximately one week after filing the 2013 Form 10-K and file Form 10-Q for the period ended June 30, 2014 approximately 40 days later.
Avid then expects to be back to a normal reporting cycle beginning with the reporting of results for the third quarter of 2014.
When the Avid does report its financials, it will bring an end to a process that began in February 2013 when the company announced that it would delay the announcement of its Q4 and full year 2012 results in order “to provide additional time for the company to evaluate its current and historical accounting treatment related to bug fixes, upgrades and enhancements to certain products which the company has provided to certain customers.”
That news came just two weeks after Avid named Louis Hernandez, Jr. to replace Gary Greenfield as the company’s president and CEO.
In May of 2013, Avid said that, as a result of its internal review, the company had determined that its financial statements from 2009 – 2011 are no longer reliable, and must be restated “because of errors in the application of US GAAP.”
At issue is the historic accounting treatment the company applied for certain software upgrades, dating back to 2009, which were made available to certain of its customers at no-charge. Avid management said in August 2013 that it has now determined that these upgrades should have been accounted for as “implied post-contract customer support” under US GAAP accounting rules.
The problem is that Avid has had a lot of transactions since 2009, and each one must be reviewed.
In January 2014, the company said it had made significant progress toward completion of the restatement, including evaluating transactions over an eight-and-a-half year period, encompassing a review of approximately 5 million transaction lines and 700 software releases.
Not only is this a time-consuming process, it’s also expensive. In January 2014, Avid said its cash expenditures in 2014 related to the ongoing accounting evaluation through completion of the evaluation will amount to approximately $25m to $34m.
On June 30, 2014 Avid’s cash and debt balances were $23m and $5m respectively, $48m no debt at on December 31, 2013.
Avid says it expects remaining payments related to the restatement as of July 1, 2014 to amount to approximately $12m to $14m.
Despite its well-publicized financial woes over the past few years, our market research during this same period shows that Avid continues to enjoy a strong brand reputation and customer loyalty, particularly among broadcasters and large media companies.
It’s also interesting to note that, while it may be a coincidence, the timing of Avid planned release of its historic financials more or less exactly coincides with the AvidConnect Europe event, and the 2014 IBC trade show in Amsterdam.
Press Release: Avid Announces Timeline for Restatement
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