The Minneapolis, Minnesota-based company said it has to review accounting for shipments and said the changes involve the reconciliation of finished goods inventory between the general ledger and the company’s material requirements planning, MRP, system. It also warned that it is likely to restate results for the first three quarters of 2004.
We felt that it was prudent to reschedule the call so that the company and our auditors could make sure that the systems were properly reconciled and the accounting was proper, said Greg Barnum, CNT’s chief financial officer.
The company said the restatement is expected to increase the company’s reported cost of goods sold by approximately $2m for the first nine months of 2004. The company’s previously reported loss of $3.85 per share for the first nine months of 2004 isxexpected to increase by $0.07 per share as a result.
Over the past year or so, CNT has lost a lot of stock market credibility, especially last August when it issued a profit warning for the second quarter running. Before that in April 2004, it issued a warning that instead of recording a pro forma profit, it was heading for a loss.
Meanwhile, CNT has also revealed that the company and its directors have been named as defendants in a shareholder lawsuit filed on March 7. The suit claims that the directors have breached their fiduciary duties to the company’s shareholders in connection with their actions by agreeing to the proposed merger with McData.
The plaintiff is apparently seeking various forms of injunctive relief, including an order preventing the company and the directors from consummating the merger with McData. It also seeks damages.
CNT and its directors have stated that they believe the lawsuit is without merit and plan to vigorously defend against the claims.
McData acquired its smaller rival for $235m in January in an effort to bulk up for survival in the competitive SAN market. The deal had been expected to close next month.
