The company also announced the results of an investigation by its audit committee into bonus accruals, launched earlier this month, and raised its earnings guidance for the full year.
After postponing its third quarter results twice, the company has finally released the figures, reporting a net loss of $153 million, or $0.30 per share, compared to a $16 million loss last year. Revenues were down 1% to $4.95 billion.
The figures included a $375 million impairment charge on the Navy Marine Corp Intranet contract. The delay in announcing the third quarter figures was largely down a protracted debate on the size of the charge between EDS and its auditor, KPMG.
EDS put the impairment charge down to a more conservative timeline for meeting modified performance levels, as well as a deceleration in customer satisfaction rates, delays in signing certain contract modifications and additions, and failure to meet seat cutover schedules.
Excluding the NMCI impairment charge, and other charges and gains, the company reported pro forma net income of $57 million, or $0.11 per share. Wall Street had been expecting $0.08 per share. The pro forma figure includes a provision of $0.03 related to a reserve against pre-petition US Airways receivables.
When EDS announced the delays to its third quarter figures earlier this month it also announced that its audit committee, on KPMG’s recommendation, had launched an investigation of its quarterly bonus plan accruals and other adjustments proposed by EDS for the closing of its books for the quarter.
EDS said its audit committee had completed its investigation, and found there had been no improper activities related to the accruals and other adjustments. However, it noted that KPMG had identified two significant deficiencies that it considered material weaknesses in the company’s internal controls. These are detailed in the filed 10-Q.
The auditors also advised the company to restate results for each quarterly period in 2003 to reflect a more appropriate allocation of bonus expense, and further noted that $9 million of revenue, subject to an ongoing settlement discussion with a client, should not have been recognized in the third quarter last year. EDS said it had restated its third and fourth quarter 2003 figures accordingly. Full year 2003 figures are not affected by that restatement, EDS said.
EDS reaffirmed its revenue guidance for the full year, which calls for revenues of $20 billion to $21 billion and raised its pro forma earnings per share guidance to $0.23 to $0.31, reflecting lower fourth quarter depreciation of the NMCI deal following the asset impairment.
