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Avid Announces Receipt of Second Anticipated NASDAQ Letter and Initial Determinations of Its Accounting Evaluation
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The Company has, as previously reported, been unable to file the Form
10-K and the Form 10-Q because it is continuing to evaluate the
accounting treatment related to bug fixes, upgrades, enhancements and
compatibility extensions (collectively, "Software Updates"). The first
step in the Company's evaluation was to undertake an initial review of
whether Software Updates previously made available by the Company to
certain of its customers at no-charge included upgrades, enhancements or
compatibility extensions and if so, whether such upgrades, enhancements
or compatibility extensions met the definition of post-contract customer
support (PCS) under U.S. Generally Accepted Accounting Principles
("GAAP"). During the course of this initial review, the Company
concluded that certain of these no-charge Software Updates should have
been accounted for as implied PCS when recognizing revenue for the
original sale of the related product. The Company management has
evaluated the potential impact of its findings on the Company's prior
period financial statements and concluded that the Company's unaudited
interim consolidated financial statements for the quarterly periods
ended (i)
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.
In addition, the Company will revise its consolidated financial
statements for the years ended
The Company is also reassessing its accounting for certain restructuring
expenses related to lease obligations and other exit activities in the
quarters ended
The Company's management, including its Chief Executive Officer and
Chief Financial Officer, has concluded that the Company's disclosure
controls and procedures and internal controls over financial reporting
were not effective as of
The Company's evaluation of current and historical accounting treatment related to Software Updates is ongoing and the Company may identify additional issues, which could require further adjustments to the Company's prior financial statements for one or more prior fiscal years or periods.
The Company is working diligently to complete the review and continues to focus its efforts on completing and filing the delayed periodic reports, including restatements, as soon as possible. During this evaluation, the Company plans to continue to invest in its product innovation and execute on its growth strategy. The Company believes it is well positioned to support its customers' ongoing success.
Cautionary Note regarding Forward-Looking Statements
Except for historical information contained in this press release, this
press release contains forward-looking statements that involve risks and
uncertainties, including statements about Avid's anticipated plans,
objectives, expectations and intentions. Such statements include,
without limitation, statements regarding the additional time that may be
granted for Avid to regain compliance with the NASDAQ rules, Avid's
ability to regain compliance with NASDAQ's rules, the ongoing evaluation
of Avid's current and historical accounting practices and treatment of
various items, including Software Updates and the outcome and timing of
such evaluation; the scope of the ongoing evaluation; the impact of the
evaluation on Avid's financial results and the financial statements for
the quarter ended
Avid expressly disclaims any obligation or undertaking to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
About Avid
Avid creates the digital audio and video technology used to make the
most listened to, most watched and most loved media in the world — from
the most prestigious and award-winning feature films, music recordings,
television shows, to live concert tours and news broadcasts. Some of
Avid's most influential and pioneering solutions include Media
Composer®, Pro Tools®, Interplay®, ISIS®, VENUE, Sibelius®, and System
5. For more information about Avid solutions and services, visit www.avid.com,
connect with Avid on Facebook,
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© 2013
Media Contact
Avid
lisa.kilborn@avid.com
or
Investor
Contact
Avid
tom.fitzsimmons@avid.com
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