Qwest expects to restate earnings from 1999 to 2001
Sunday, July 28th 2002, 12:00 am
By: News On 6
DENVER (AP) _ Qwest Communications announced Sunday it expects to restate financial reports for 1999 to 2001 because of accounting errors, including overstated revenues.
``Most of these things are going to deal with timing,'' Qwest CFO Oren Shaffer said in a telephone interview. ``Should this have been in this period or in another period.''
Company officials said the errors were related to telephone services and sales of optical capacity and equipment, but declined to estimate how they would affect the books. They did not say when a restatement of revenue would be completed.
``We would rather it happen sooner than later, and we have a great sense of urgency,'' Qwest chief executive Dick Notebaert said. ``But we do want to do it with diligence. We do imagine it will take months and not days.''
Qwest, whose accounting practices are under a federal investigation, also said it would miss the Aug. 14 deadline set by the Securities and Exchange Commission for the nation's biggest companies to certify the accuracy of their financial statements.
The SEC is investigating Qwest's fiber-optic capacity swaps with Global Crossing, Enron and others in 2000 and 2001.
At issue is whether the swaps were done for legitimate business reasons, were priced at fair market values and were properly accounted for.
Qwest bought capacity on another company's system and booked it as a capital expense, which is only recorded slowly over several years, while selling the same amount of capacity to the other firm, and booking that immediately as revenue.
The announcement comes as the federal government is pledging a thorough crackdown on corporate misdeeds after a series of scandals at major companies eroded investor confidence in Wall Street.
The Justice Department is also investigating the company, and the General Services Administration is reviewing government contracts with Qwest.
``It is our intent to fully cooperate with every government agency and be totally transparent and responsive,'' Notebaert said.
The company reported Sunday that accounting policies were incorrectly applied to optical capacity sales in 1999, 2000 and 2001 totaling about $1.1 billion, or 18 percent of the optical capacity transactions during that time.
Any restated financial reports will also include adjustments for three transactions relating to equipment sales that totaled $283 million in 2000 and 2001. The company determined revenue and profit in those transactions were incorrectly recognized upfront and should be deferred.
Additionally, Qwest improperly recorded costs for services it purchased from third party telecommunications providers in 2000 and 2001.
Qwest, which was once part at the Bell System under AT&T Corp., is the local phone company for 14 states extending from Minnesota west to Washington and southwest to Arizona and New Mexico.
In the past year, Qwest has faced a downgrade of its credit rating to junk status and a sinking stock price. Longtime CEO Joseph P. Nacchio resigned last month.