The Santa Clara, California-based security and network management vendor has postponed the filing of its 2002 full-year financial results, which was due on March 31 2003, in order to restate its results for 1998, 1999 and 2000. It is not anticipated that the restatement will affect results for either 2001 or 2002, however.

The company first restated its financial figures in May 2002 to reflect the results of an internal investigation into accounting errors. This time the results are being restated to reflect a change in revenue recognition on sales to distributors from a sell-in to sell-through model.

The investigations by the SEC and the DoJ into the years 1998, 1999 and 2000 are ongoing, said the company’s CEO George Samenuk. As a result of the information obtained in connection with those investigations, our audit committee, our full board of directors and our management have determined to restate the results of those periods.

The involvement of the DoJ would appear to indicate an escalation of the investigation, but NAI’s senior management refused to be drawn into a discussion into the context of the investigations. The DoJ is involved at this point, and they do have a different role from the SEC in this matter, commented the company’s general counsel, Kent Roberts. But I’m not going to comment on the scope of their investigation.

NAI said that it only became aware of the DoJ’s investigation this quarter and that its restatement could include other matters addressed by the government’s investigation. Executives wouldn’t comment on what those might be. I don’t think we can speculate on what the government’s activities are, Samenuk added.

While NAI revealed that its decision to restate its results for the periods had been influenced by information delivered to it by the SEC and the DoJ, Roberts denied that it had been required to restate its results. It’s the company’s decision, he said. It’s influenced by discussions with the government, but we do believe that this is the appropriate way to move at this point.

Asked what additional information had prompted the company to restate its results, however, Roberts added: We’ve had a lot of discussion with the government in recent weeks and it’s information that was developed in conjunction with their investigation.

NAI first restated its results for 1998, 1999 and 2000 after an internal investigation into inaccurate transactions related to an unnamed individual. Most of the inaccurate entries related to amounts from the tax liability restated to general and administrative liability accounts.

The current restatement relates to a change in the way the company recognized revenue from distributors. In 2001 the company changed from a sell-in recognition model – where revenue is recognized when product is sold to distributors – to a sell-through model – where revenue is recognized when it is sold by distributors to consumers.

The restatement that we did last year was specifically related to some inaccurate entries involving our tax liability account, and the planned restatement currently deals specifically with the changing of revenue recognition from sell-in to sell-through, said Roberts.

Asked why the company didn’t make the changes involved in the planned restatement when it altered its results last year, Samenuk appeared to suggest that some pressure had come to bear from the government. We did not believe that the restatement of our results after last year was necessary, he said. Our decision to restate the 1998, 1999 and 2000 statements is to reflect the sell-through method, and it’s based on our recent discussions with the US government.

Source: Computerwire