Nortel defers reporting of full-year results for 2005

Nortel reported that revenues were US$2.95 billion for 4Q05 compared to $2.59 billion for the fourth quarter of 2004 and $2.62 billion for the third quarter of 2005.The company reported a net loss in 4Q05 of US$2.21 billion.

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By  Tawanda Chihota Published  March 12, 2006

Canadian vendor Nortel Networks is delaying the filing with the US Securities and Exchange Commission (SEC) of its annual reports for the year ended December 31, 2005 and its corresponding filings under Canadian securities laws. Parent company Nortel announced that it would restate financial results for 2003, 2004 and the first nine months of 2005, and will have adjustments to periods prior to 2003, primarily due to revenue incorrectly recognised in prior periods that should have been deferred to future periods. According to a company statement, the restatement adjustments were identified primarily through an extensive contract review undertaken as part of remedial efforts to compensate for previously reported internal control deficiencies and through discussions with its independent auditors as part of the audit of the 2005 financial results. The company currently expects revisions to its previously reported 2003 and 2004 financial results reflecting negative impacts on revenue of US$157 million and US$77 million respectively, and on net earnings/loss of US$91 million and US$93 million, respectively, as well as revisions to its previously reported 2005 nine month results reflecting negative impacts on revenue of US$162 million and on net earnings/loss of US$95 million in the aggregate. With respect to financial results prior to 2003, the company currently expects revisions reflecting negative impacts on revenue of US$470 million and on net earnings/loss of US$99 million, in the aggregate. "Our priority is to have accurate financial information. Although the need to restate certain financial statements is unfortunate, it's the right thing to do. This revenue is real - it was recognised in the wrong periods. The restatements do not affect the company's cash position," said Mike Zafirovski, president and chief executive officer, Nortel. Nortel reported that revenues were US$2.95 billion for 4Q05 compared to $2.59 billion for the fourth quarter of 2004 and $2.62 billion for the third quarter of 2005.The company reported a net loss in 4Q05 of US$2.21 billion, compared to net earnings of US$107 million in 4Q04 and a net loss of US$110 million in 3Q05. Net loss in the fourth quarter of 2005 included a litigation expense of US$2.47 billion as a result of an agreement reached in principle for the proposed settlement of certain shareholder class action litigation and a tax benefit of approximately US$140 million related to a liability release as a result of a transfer pricing resolution. Nortel is in continuing mediation discussions regarding the proposed settlement.

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