Qwest Finds More Accounting Errors
Troubled Telecom Will Erase $358M More From Its Books, Says It May Have Trouble Servicing DebtNov 15, 2002 | AP
Qwest Communications International Inc. said it has found more accounting mistakes that will force it to erase $358 million more in earnings before interest, taxes, depreciation and amortization for 2000 and 2001.
The company previously disclosed that it overstated revenue by $1.86 billion in 2000 and 2001, affecting $1.2 billion in earnings. The new disclosures in a regulatory filing Thursday bring the total affected earnings to $1.56 billion.
Qwest also said it could have trouble meeting debt service obligations in 2004, even if it sells the rest of its QwestDex phone directory arm, if economic conditions do not improve. The first half of the $7.05 billion deal closed last week.
The phone company said it misclassified some costs associated with designing, deploying and testing facilities, erasing $200 million in adjusted earnings before interest, taxes, depreciation and amortization for 2000 and 2001, and it improperly deferred commissions, erasing another $158 million for 2001.
Previous disclosures involved swaps of capacity on its fiber-optic network, wireless revenue and the phone directory unit. Expenses related to services received from third-party telecommunications providers were understated, growing from the $113 million that Qwest had announced earlier to $171 million for 2000 and 2001.
The company remains under investigation by the Securities and Exchange Commission and the Justice Department.
Qwest has been reviewing its accounting with auditors KPMG, which took over for Arthur Andersen in May. Due to the ongoing review, Qwest said it would be unable to file its quarterly reports on time.
Qwest also said it will take a $58 million hit associated with abandoning the construction of three Web-hosting centers, and it ended its satellite video resale business.
The filing also revealed that a number of insurance carriers want to cancel policies covering Qwest directors and officers for up to $250 million in legal damages. Qwest has sued to block the carriers from seeking binding arbitration.