Nortel Will 'Re-Revise' 2003 Results

Since November, Nortel's audit committee has been looking into the circumstances surrounding the company's December restatement, which stemmed from the discovery of about $900 million in liabilities that were either recorded incorrectly in prior periods or not properly released in the appropriate periods. The restated results covered the years 2000, 2001, 2002, and the first two quarters of 2003.

According to the December filing, the restatement had the effect of narrowing losses for the years 2000 through 2002, and resulted in a profit for the second quarter of 2003 rather than a loss. However, the first-quarter 2003 profit was revised downward to $11 million from $54 million.

But the company now says it will likely revise results already announced for 2003 as well as for one or more earlier periods. In January, the company announced a solid fourth-quarter profit after a year-earlier loss, and far surpassed analysts' expectations.

Because of the audit committee's work done to date, Nortel is "re-examining the establishment, timing of, support for and release to income of certain accruals and provisions in prior periods."

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"Nortel Networks cannot predict at this time when such review will be completed given the volume and complexity of the work involved," the company said in a statement late Wednesday.

A Nortel spokeswoman couldn't say to what extent the audit committee had been involved with or overseen the company's restatement filed in December.

Also in the December filing, Nortel said the company's auditors, Deloitte and Touche LLP, had identified material weaknesses in the company's accounting procedures and internal controls.

Until the latest revisions are ready, Nortel won't be able to file its annual report for 2003 with the SEC.

If the delay extends beyond March 30, the company won't be in compliance with obligations that cover about $1.8 billion in convertible debt securities and another $1.8 billion on the notes of its principal operating unit, Nortel Networks Limited. But, even if debt holders give notice of default, the company will then have 90 days to file its annual report before the holders can accelerate the debt.

The filing delay beyond March 30 would also give Export Development Canada the right to end a credit facility providing $300 million of committed support and $450 million of uncommitted support. Nortel plans to seek a temporary waiver so it can continue to use the facility while it completes the filing obligations.

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