CC, thanks for sharing that, I had meant to check in on that website but forgot to. After reading that I have some concerns about this company, and its apparent poor performance by its CFO.
The excerpt below is of particular concern:
So, EBITDA was already going to be a little lower. But, now you’ve got a situation where there were substantial expenses and one-time charges related to the closing of the Benchmark acquisition. How big were these expenses? There were around $10M in one-time expenses during the quarter. Let’s list a few of them.
Legal fees
Accounting/auditing expenses
Tax related work
Due diligence expenses
Year-end employee expenses
I’m sure there were more. These were one-time, non-recurring (except annual bonuses) expenses and they ate up EBITDA rapidly in the Q.
On a side note, someone might ask (I certainly did) why these expenses weren’t amortized over several quarters? They could have been. However, by the time Q4 came along, it would have required restating prior quarters, so they elected to take a hit on Q4 numbers. This is another reason they presented 6 month numbers, not just Q4, this week. Would I have preferred they amortize? Sure. Do I care that they aren’t worried about massaging numbers, but are more focused on the big picture and driving this business? Much more important to me, so I’m over the charges being levied all at once.
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All of the items he lists as being reasons for the $10M of one-time costs are things that should have been fully or partially accounted for in previous quarters, or should not be that large. If they are that large then we got a problem here.
The CFO gets paid big bucks to keep accounting surprises down to a minimum. He is supposed to recognize issues ahead of time, and address them in time so that he doesn't have a Chinese fire drill going when its time to file the 10K. If he's got a complicated tax situation, call in the heavy artillery before the year even ends and have them work out a template for the tax provision that could be filled in quickly once the books are closed for the year. For expenses, he is supposed to think ahead and accrue for them during the year vs. having them all hit at 4Q as what happened here. Either this CFO dropped the ball here or he brought up all this stuff in prior quarters but his CEO overruled him and the company just pushed this stuff under the rug until 4Q. In either event this is not a good situation. Hopefully we will learn a little more about what happened in the earnings release and the ensuing conference call.
