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Global to Restate Most 2001 Results

Firm says move would erase $19 million in revenue. Analyst calls news 'anticlimactic.'

October 22, 2002|Elizabeth Douglass | Times Staff Writer

Under pressure from federal regulators, Global Crossing Ltd. said Monday it would restate financial results for the first nine months of 2001 to exclude revenue from controversial network capacity deals with other carriers.

The telecommunications company, which filed for bankruptcy protection in January, said the move would erase $19 million in revenue for the first three quarters of last year and would wipe out $1.2 billion each in assets and liabilities from its balance sheet.

The restatement also would increase the company's nine-month net loss by $13 million, to about $4.8 billion.

Global Crossing's changes are largely irrelevant to investors, since the company's stock and other securities lost virtually all of their value when the company entered Bankruptcy Court. In fact, the company has yet to file -- or certify -- full-year results for 2001 or even replace its longtime auditor, Arthur Andersen, which stopped performing audits after being found guilty of obstruction of justice in a case involving Enron Corp.

The accounting practices at Global Crossing, Qwest Communications International Inc. and other carriers have been under investigation by the Justice Department and the Securities and Exchange Commission. The probes have focused on the way the companies booked revenue from reciprocal transactions, or deals in which two carriers essentially exchanged like amounts of fiber-optic capacity and then simply "round-tripped" cash payments.

Patrick Comack, a telecommunications analyst at Guzman & Co., called Global Crossing's announcement "anticlimactic" and added that the $19 million "sounds like it's the tip of the swap iceberg."

John Legere, Global Crossing's current chief executive, has testified before congressional panels probing the capacity deals, saying the accounting practices at the company were widely accepted in the industry. Legere and other Global Crossing executives declined to comment Monday.

The transactions added only a fraction of each deal's value to quarterly revenue statements. But the deals had a far greater effect on Global Crossing's pro forma financial figures -- numbers that the company stressed in press releases and analyst presentations and that were watched closely by Global Crossing's lenders.

Global Crossing chose not to release revised figures for the pro forma numbers from 2001. Instead, the company said the pro forma results it reported last year "should now be disregarded."

Also on Monday, a bankruptcy judge agreed to extend Global Crossing's exclusive right to present and approve a reorganization plan, a move that will further delay the submission and review of any competing reorganization plans.

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