Three companies announced restatements on Friday or Monday: Conseco, Michael Baker Corp., and Alaska Communications Systems.
Conseco said it will correct errors identified while it was trying to cure material weaknesses in its internal controls disclosed in its 2006 annual report. The insurer expects to file new financials for its fiscal years that ended in 2005 and 2006, selected financial data for 2003 and 2004, and quarterly financial information for 2006 and the first three quarters of 2007.
The most significant errors involve adjustments to insurance policy benefits and liabilities for insurance products in its specified-disease, life, and long-term-care businesses, the company said.
Conseco said that in its internal-controls remediation process, which is ongoing, it has reviewed actuarial valuation processes for about 2,400 types of policy forms, encompassing products that account for more than 80 percent of its total.
Michael Baker, meanwhile, said it will restate its unaudited financials for the first three quarters of 2007 because of non-cash errors involving its Energy business segment. The errors relate primarily to improper of revenue recognition on domestic managed services projects, according to company, which provides engineering, operations, and maintenance services.
Correcting the mistakes will reduce the company’s earnings for each of the quarterly periods. In fact, the company, the accumulated pre-tax impact of the revenue recognition errors may entirely offset the Energy segment’s reported income from operations before corporate overhead for the first nine months of 2007.
“We are extremely disappointed with the circumstances that have resulted in this restatement decision,” said chairman and CEO Richard Shaw. “Our financial staff is working tirelessly to fully define the issues and to resolve them in a timely manner.”
Alaska Communications said a computer programming error will force it to restate its financials going back to January 1, 2006, to correct errors in its reported depreciation expense for its past two fiscal years.
Certain assets employed in Alaska’s intrastate operations are depreciated over their extended lives as required by state regulations, the telecom company explained. The programming error caused the depreciation on those assets to be ceased prematurely.
The company expects no significant changes to previously reported revenues, EBITDA, or cash flows. However, depreciation expense will increase from $6 million to $8 million for the fiscal year ended December 31, 2006, and from $5 million to $7 million for the nine months ended September 30, 2007.
Given that depreciation is a non-cash charge, the restatement is not expected to impact the company’s dividend policy or the financial covenants of its credit agreement.