Tesla Motors (NASDAQ: TSLA) skidded off track today when the electric-car maker said it won't be able to file the company's 10-K, or annual report, with the SEC by the March 1 deadline. The Silicon Valley start-up blamed the delay on an accounting error related to capital expenditures.
Let's take a closer look at how late filings can affect shareholders.
Playing by the rules
The SEC requires companies that fail to submit their quarterly or annual reports on time to file NT Form 12b-25, or what's known as a non-timely form. By doing so, the company in question buys itself time to get its act together and resubmit the appropriate reports. For 10-K reports, such as Tesla's, the SEC allows a grace period of 15 days following the initial missed deadline. In Tesla's case, the company hopes to file its revised 10-K report on or before March 11.
This development comes after reviewers discovered a mistake in the way Tesla recorded "certain non-cash items relating to capital expenditures on its consolidated statements of cash flows." Capital expenditures, or capex, is the amount of money a company spends on fixed assets, or assets that the company uses to generate revenue, such as a new manufacturing plant or delivery trucks. The key here is that unlike other investments a company makes, say for research and development purposes, capital expenditures are typically expensed over time.
According to Tesla's NT Form 12b-25 filing, the EV maker will probably reclassify some unpaid capital expenditures from 2011 and 2012 as "operating activities, rather than investing activities." Tesla said the changes wouldn't affect previously reported figures including cash, consolidated income statements, balance sheets, or free cash flows.
Stick to the road map
Of course, there could be penalties if Tesla were unable to file within the 15-day extension. However, I doubt that will be an issue for Tesla, since this appears to be a minor glitch for the company. So far the market doesn't seem to be reacting negatively to Tesla's non-timely filing. The stock has gained more than 2% year to date even though the company posted a wider-than-expected loss for its fourth quarter.
This is a critical time for Tesla, as it aims to post a much-needed profit and further increase production of its all-electric Model S sedan. While analysts expect the company to reach profitability before the end of fiscal 2013, Tesla CEO Elon Musk is more optimistic. "We really have very high confidence that we will have a profitable first quarter," Musk said.
And perhaps investors have a similar confidence in Tesla's management. Untimely filing of quarterly or annual reports can in some cases signal deeper problems within a company. Fortunately for Tesla shareholders, this doesn't seem to be the case. The proof is in Mr. Market's muted reaction to the company's delayed 10-K.
And why shouldn't investors be confident in Tesla's leadership? Up to this point, Tesla has been open and transparent about everything from lawsuits filled against its retail strategy to test-drives gone awry.
In fact, near-faultless execution has led Tesla to the brink of success.