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Nortel To Restate Again |
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Written by Adam Gosling
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Saturday, 03 March 2007 |
Nortel says it has identified "certain errors" in its account going back three years which will force it to restate its financial results for 2004, 2005 and the first nine months of 2006, and will make adjustments to periods prior to 2004.
The restatement will primarily correct third party actuarial
calculation errors embedded in Nortel's North American pension and
post-retirement plans and revenue incorrectly recognized in prior
periods that should have been deferred to later periods, said the
company.
The Company currently expects revisions to increases
revenues and net earnings for the first three quarters of 2006 while
reducing them for the both 2005 and 2004. Period prior to 2004 will
also suffer minor negative impacts.
"This restatement has no
material impact to our fourth quarter 2006 operating expectations or
performance. During 2006, we have implemented significant remedial
measures and other actions to address our internal control weaknesses.
This has resulted in a substantial reduction of control weaknesses as
at year end and represents a major milestone in our journey toward
consistent, reliable and timely financial reporting," said Peter
Currie, Nortel executive vice president and CFO.
The company
denied that there was any connection between the departure of CFO Peter
Currie and the latest restatement. Nortel has been plagued by
accounting irregularities for several years resulting in accounting
scandals that subjected it to class-action lawsuits and putting
pressure on its share price.
"Nortel made tremendous progress
advancing its business transformation plan in 2006, and today's
announcement does not slow our progress or divert our focus," said Mike
Zafirovski, Nortel president and CEO. "Our expected fourth quarter
results show measurable operating and financial improvements. We are a
stronger, more competitive company today and we will continue to drive
our progress into 2007 and beyond."
Fourth quarter 2006 revenues
are expected to be approximately US$3.32 billion, up 10.2 percent from
US$3.01 billion for the same period in 2005. Gross margin in the
quarter is expected to be at slightly above 40% of revenue, with a
strong contribution from the LG joint-venture and CDMA, up from 38.8%
in the fourth quarter of 2005. Spending (SG&A and R&D) for the
fourth quarter of 2006 is expected to be approximately $1.18 billion.
Cash
as at December 31, 2006 was approximately $3.50 billion, up about $900
million from September 30, 2006. This includes approximately $300
million of gross proceeds from the sale of certain assets and
liabilities of the UMTS Access business to Alcatel-Lucent.
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