January 11, 2005 8:51 AM PST
Nortel restates results, cuts profits
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The Brampton, Ontario, company, which has missed three self-imposed deadlines for reporting its restated financial results, cut profits for 2003 to $434 million, down from the $732 million previously reported. The company also announced that 12 executives who had received bonuses based on faulty financial figures will repay roughly $8.6 million. None of those executives have been found to be directly involved in inappropriate accounting, Nortel said.
Nortel also said that five directors, including Chairman Lynton Wilson, will retire from the board when their terms are over.
president and CEO,
This is the second time Nortel has restated results for this period. The company has been mired in an accounting scandal that resulted from overstating sales by booking orders too soon.
Nortel said the restated financials are a significant step in putting the 10-month scandal behind it.
"Today's announcement is a major step forward for the company," said CEO Bill Owens. "But there is a lot more to do."
Accounting irregularities led the company to fire Frank Dunn, its previous CEO, along with other executives, in April.
Nortel has not pursued legal action against these individuals, but authorities in the United States and Canada are investigating the situation. Owens said during a conference call with reporters that the company will continue seeking to recover bonuses that were given based on faulty accounting and, when necessary, take legal action.
The company also said it is currently implementing several recommendations that resulted from an independent study of Nortel's accounting procedures. As part of those changes, Nortel has created a new executive position to oversee ethics and compliance. Susan Shepard--a member of the New York State Ethics Commission since May 2003--will fill that role. Shepard was also commissioner of investigation for New York City from 1990 to 1994, Nortel said.
As for the new numbers, Nortel reported net income for 2003 of 10 cents a share, or $434 million, on revenue of $10.2 billion. These figures are down from previously stated profits of $732 million, or 17 cents per share, on sales of $9.81 billion.
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Nortel also reported a loss of 78 cents a share for 2002, down from the 85 cents previously reported. Its sales for that period totaled $11 billion, instead of the previously reported $10.56 billion, the company said.
For 2001, the company reported a reduced loss of $8.08 a share, down from a loss of $8.52, and higher revenue: $18.9 billion, up from $17.4 billion.
The company plans to report unaudited first- and second-quarter results for 2004 by the end of January. No specific timetable was given for releasing unaudited results for the third and fourth quarters.