Nortel this week completed its financial restatements for the 2001, 2002 and 2003 fiscal years, ending a tumultuous period for the company as it attempted to conduct business while reconstructing its credibility with customers, business partners and investors.
The completion of the restatements is accompanied by a “new tone at the top” where senior level executives of Nortel are now committed to “transparency and integrity” when reporting financial results, says Nortel CEO Bill Owens. To underscore that, Nortel created the position and announced the appointment of a chief ethics and compliance officer, and said that 12 senior executives have voluntarily agreed to pay back some $8.6 million in bonuses tied to bogus profitability.
The restatements required the attention of 600 people at a cost of $100 million, Owens says. They also incurred numerous reporting delays.
The financial misconduct that prompted the audits and restatements resulted in the firing of 10 Nortel executives, including CEO Frank Dunn in April.
Audited results for 2003 showed earnings of $434 million on revenue of $10.2 billion. For 2002, restatements resulted in a loss of $3 billion on revenue of $11 billion. For the full year of 2001, the company lost $25.7 billion on revenue of $18.9 billion.
Before restating, Nortel had reported net earnings of $732 million for 2003 on revenue of $9.8 billion, a loss of $3.3 billion on revenue of $10.6 billion for 2002, and a $27.3 billion loss for 2001 on revenue of $17.5 billion.
Despite the distraction of the audits and restatements, Nortel performed “respectably” in its key market segments, Owens claims.
Nortel expects to file unaudited financial statements for the first and second quarters of 2004 before the end of this month, and follow with unaudited financial statements for the third quarter of 2004. Nortel already disclosed a “limited estimated unaudited” loss of $0.06 per share for the 2004 third quarter, on revenue of $2.3 billion. This was down from revenue of about $2.6 billion for the second quarter.
Nortel forecasts revenue in the range of $2.8 billion to $2.9 billion for the fourth quarter and revenue between $10.1 billion to $10.2 billion for the full year 2004.
The company’s new ethics and compliance officer, effective Feb. 21, is Susan Shepard, a former commissioner for the New York State Ethics Commission. Over the past 20 years, Shepard was also commissioner of investigation for New York City, chief counsel to the New York State Commission of Investigation, and an assistant United States attorney for the Eastern District of New York.
Shepard will report to the Nortel’s chairman, and president and CEO.
