Inadequate Internal Controls Contribute to Surge of Delayed Annual Reports

A slew of companies both large and small have announced in recent weeks that they would miss the deadline this year for filing their annual reports. Although companies delaying the release of their Form 10-K isn’t unusual, the number doing so this year is. According to Intelligize data, 71 companies have announced delays in releasing their annual reports this year, compared with 42 last year, marking an increase of roughly 40%.

Well-publicized lapses in internal controls over financial reporting have contributed to some of the delays, and large companies are certainly not immune to the deficiencies. Sixteen companies with market capitalizations over $1 billion have announced so far this year that they would delay filing their annual reports, almost twice the number of similarly sized companies that had done so this time last year.

Here’s a sample of what some of the more prominent stragglers have to say for themselves about missing their deadlines.

Archer-Daniels-Midland Co.

ADM, which recently faced questions about the abrupt suspension of its chief financial officer and inquiries into its accounting practices and executive payouts, said on March 1 that it intended to release its report by March 15 after missing its deadline. ADM revealed in January that it had tasked outside counsel with looking into “certain accounting practices and procedures” involving its nutrition segment. Not surprisingly, ADM said in a notification of late filing submitted to the Securities and Exchange Commission that it needed additional time to correct “certain intersegment sales” in its consolidated financial statements because they were not recorded at approximate market value.

New York Community Bancorp.

Here’s another company that has had an eventful start to the year. In addition to delaying its annual report, NYCB also:

• Replaced its chief executive officer;
• Made changes to its executive board;
• Reported a fourth-quarter loss that was “more than 10 times what it previously stated”; and
• Disclosed material weaknesses and faults in its financial reporting.

In a February 29 notification of late filing submitted to the SEC, NYCB said an internal review found that “management identified material weaknesses in the company’s internal controls.” The problems “related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities,” according to the company.

Mattel

The toy company announced on February 29 that it was unable to file its 2023 annual report on time after identifying certain deficiencies that exposed material weakness in its internal controls over financial reporting. The deficiencies stem from information technology controls and are not expected to materially impact the financial information to be reported in the Barbie maker’s 2023 annual report. Mattel said it intends to file its report no later than March 15.

Chemours

The chemical company and manufacturer of Teflon also delayed its earnings release and annual financial results. It is currently navigating an executive shake up and conducting an internal review to investigate weaknesses in its internal controls over financial reporting. Specifically, Chemours is assessing the effectiveness of the “tone at the top” generated by senior management.

Chemours said it intends to disclose any steps taken to remediate issues identified in the investigation once it does release its annual report.

CLICK HERE to see the full list of companies that have announced delays to their annual reports so far this year. (An Intelligize subscription is required.)