Answerthink Completes UK Misappropriation Review.MIAMI Miami, cities, United States Miami (mīăm`ē, –ə). 1 City (1990 pop. 358,548), seat of Dade co., SE Fla., on Biscayne Bay at the mouth of the Miami River; inc. 1896. -- Answerthink, Inc. (Nasdaq:ANSR ANSR Autonomous Naval Support Round ANSR Adaptive Network Solutions Research, Inc. ANSR Advanced Neutron Source Reactor ANSR Active No Swashplate Rotor (Army) ): * Proforma 2006 Third Quarter Results Remain Unchanged * Loss From Misappropriation misappropriation n. the intentional, illegal use of the property or funds of another person for one's own use or other unauthorized purpose, particularly by a public official, a trustee of a trust, an executor or administrator of a dead person's estate, or by any Totals $2.2 million * Will Restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state Financial Results for Certain Prior Periods * Tentative Settlement Reached That Would Fully Repay Misappropriation Answerthink, Inc. (Nasdaq:ANSR) today announced that it has completed its review, previously reported on November 1, 2006, into the misappropriation perpetrated by its former disbursement DISBURSEMENT. Literally, to take money out of a purse. Figuratively, to pay out money; to expend money; and sometimes it signifies to advance money. 2. agent in the United Kingdom. The Company has concluded that the total loss related to the misappropriation is $2.2 million and that certain prior-period financial statements will be required to be restated. Efforts to recover the misappropriated mis·ap·pro·pri·ate tr.v. mis·ap·pro·pri·at·ed, mis·ap·pro·pri·at·ing, mis·ap·pro·pri·ates 1. a. To appropriate wrongly: misappropriating the theories of social science. funds are ongoing. However, the Company and the former disbursement agent have agreed in principle on terms that would include the full repayment of the misappropriation. In addition, the Company has identified a material weakness in its internal controls over financial reporting relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc cash disbursements in the United Kingdom for the year ended December 30, 2005. Answerthink also announced today that the Audit Committee of its Board of Directors has completed an independent review of the matter. Information provided on each of these matters is presented below. UK Misappropriation On November 1, 2006, the Company reported preliminary results of operations for the third quarter and nine months ended September 29, 2006, pending the results of its review of the misappropriation of funds transferred to its former agent to disburse dis·burse tr.v. dis·bursed, dis·burs·ing, dis·burs·es To pay out, as from a fund; expend. See Synonyms at spend. [Obsolete French desbourser, from Old French desborser payroll, payroll taxes Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. and vendor payments in the United Kingdom. As described in the November 1, 2006 release, on or about October 26, 2006, the Company learned of a misappropriation by its former UK disbursement agent which related to funds earmarked for payroll taxes due to the United Kingdom Inland Revenue Inland Revenue Noun (in Britain and New Zealand) a government department that collects major direct taxes, such as income tax Noun 1. . The disbursement agent had been utilized by the Company from early 2003 to January 2006 to make payroll, payroll tax and vendor disbursements in the UK. The Company has now concluded that the loss resulting from the misappropriation was approximately $2.2 million. The total loss is comprised of payroll taxes that were not disbursed to the United Kingdom Inland Revenue of approximately $1.8 million, interest owing on past due payroll tax amounts of approximately $0.1 million, the write-off of funds owed back to the Company from the agent of approximately $0.3 million, and excludes the impact of the foreign currency exchange rate fluctuations. The Company's Audit Committee also initiated a review of the matter. That review is now complete. The former disbursement agent admitted to the full extent of the misappropriation. A suit was commenced against the agent in the United Kingdom on October 27, 2006, and certain assets of the former agent have been frozen. Efforts to recover the misappropriated funds are ongoing, the Company and the former disbursement agent have agreed in principle on terms that would include the full repayment of the misappropriation. The Company cannot predict the outcome of this suit, whether our efforts to recover the misappropriated funds will be successful or whether the former disbursement agent will satisfy the terms of the settlement agreement. The Company did not find any evidence indicating that anyone employed by Answerthink or any of its subsidiaries was aware of or involved in the misconduct MISCONDUCT. Unlawful behaviour by a person entrusted in any degree: with the administration of justice, by which the rights of the parties and the justice of the, case may have been affected. 2. uncovered by the investigation. It found evidence indicating that the former disbursement agent provided misleading records and correspondence designed to prevent Answerthink's management from detecting this misconduct. In the November 1, 2006 release, the Company indicated that it would consider, in consultation with its current independent registered public accounting firm, BDO Seidman BDO Seidman, LLP is the United States arm of BDO International, one of the largest accounting firms outside of the Big Four. History BDO Seidman, LLP was founded as Seidman and Seidman in New York City in 1910 by Maximillian L. Seidman. , LLP LLP - Lower Layer Protocol , and PricewaterhouseCoopers, LLP, its former independent registered public accounting firm prior to August 2005, whether any restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior-period financial statements would be required under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting with respect to the UK misappropriation matter. The Company also reported that it had commenced a review of the Company's internal controls over financial reporting, including, in particular, its controls over UK cash disbursements. Restatement of Financial Information The Audit Committee's review of the UK misappropriation matter is complete. On December 18, 2006, the Board of Directors, acting on the recommendation of the Audit Committee and management, concluded that the Company should restate certain previously issued financial statements, as described below. The Company expects to restate its financial results for the 2003, 2004, and 2005 fiscal years as well as the first and second quarters of 2006. Accordingly, the financial statements and related audit reports for the 2003, 2004 and 2005 fiscal years contained in the following Company filings with the Securities and Exchange Commission should no longer be relied upon: * Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 30, 2005; * Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarterly period ended March 31, 2006; and * Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006. The estimated earnings impact (in thousands except per share amounts) on the interim 2006 periods, and each of the years from 2003 through 2005 is set forth in the table of estimated restatement impacts included in this news release. Any funds recovered from the former disbursement agent will be recorded as income in the period in which such recovery occurs. The restated financial statements for fiscal years 2003, 2004 and 2005 will be included in the Company's Annual Report on Form 10-K/A for its fiscal year ended December 30, 2005 and the Quarterly Reports on Form 10-Q/A for the periods ended March 31, 2006, and June 30, 2006, when these reports are filed. The Company also expects to file its delayed Quarterly Report on Form 10-Q for the period ended September 29, 2006. All of the filings are expected to be completed in January 2007. Accounting for the UK Misappropriation - Impact on Third Quarter 2006 Results The Company has determined that its payroll tax liability was understated by $2.1 million as of September 29, 2006. The Company's preliminary GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net earnings results released on November 1, 2006 did not include a loss related to the misappropriation of $24,000 and $326,000 for the three months and nine months ended September 29, 2006, respectively. Including the impact of the loss from the misappropriation, third quarter 2006 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of was $0.01, unchanged from the $0.01 as reported in the preliminary results. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma diluted earnings per share was $0.03, compared to $0.03 as reported in the preliminary results. For the first nine months of 2006, diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share was ($0.07), unchanged from the diluted loss of ($0.07) as reported in the preliminary results. Pro forma diluted earnings per share was $0.12 compared to $0.12 as reported in the preliminary results. Pro forma information is provided to enhance the understanding of the Company's financial performance and is reconciled to the Company's GAAP information in the tables accompanying the November 1, 2006 press release. [TABLE OMITTED] [TABLE OMITTED] Management and the Company's Audit Committee discussed the matter disclosed above with BDO Seidman, LLP, the Company's independent registered public accounting firm, and PricewaterhouseCoopers, LLP, its independent registered public accounting firm prior to August 2005. Neither BDO Seidman, LLP nor PricewaterhouseCoopers. LLP has audited the proposed adjustments and estimates of earnings impacts from the expected restatement set forth in this news release. Section 404 of the Sarbanes-Oxley Act See SOX. In connection with its review of UK misappropriation matter, the Company has identified a previously existing material weakness relating to cash disbursement controls in its UK operations. This has led to the untimely identification and resolution of certain payroll tax accounting matters with respect to its UK operations and has resulted in the above-described restatement of certain previously issued financial statements. The Company has taken and will take specific actions to address this situation, including (i) enhancing cash controls in foreign subsidiary operations, including enhancing controls over the review and approval of cash disbursements including those made by third parties on the Company's behalf; (ii) strengthening, through enhanced contractual or surety An individual who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act. surety n. safeguards, the relationship between the Company and all third parties disbursing funds on its behalf in any foreign operations; and (iii) enhancing controls over the review of all foreign tax filings. However, as a result of the late identification of this material weakness, management cannot provide assurance that this material weakness will be remediated by the time management concludes its testing and assessment of internal control over financial reporting for the year ending December 29, 2006. The Company continues to assess its findings and has not reached a conclusion as to whether there are likely to be any other material weaknesses to report under Section 404 for the year ending December 29, 2006. Since management has not completed its testing and evaluation of the Company's internal controls over financial reporting, and with respect to any control deficiencies identified to date in 2006, the Company's management may ultimately identify additional control deficiencies as being material weaknesses. The Company will conclude its analyses and report its findings when it files its Annual Report on Form 10-K for the period ending December 29, 2006. As noted above, based on the UK misappropriation review commenced in October 2006, the Company has identified a material weakness relating to cash disbursement controls in its UK operations that likely existed on December 30, 2005, the date as of which management previously reported on its assessment of internal controls. As a result, the Company's previous conclusion as of December 30, 2005 which were based on the procedures then performed and the information then known to it that its internal controls over financial reporting was effective, was not accurate. The Company expects to conclude its analysis and report its findings when it files an Amended Annual Report on Form 10-K/A for the period ended December 30, 2005. Results of Audit Committee Review The Audit Committee engaged a global accounting firm to assist with the investigation. This firm has completed its work. The Audit Committee's findings were consistent with those conclusions reached by management as a result of its internal investigation of the misappropriation as reported above. About Answerthink Answerthink, Inc. (www.answerthink.com) is a leading business and technology consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a that enables companies to achieve world-class business performance. By leveraging the comprehensive database of The Hackett Group, Answerthink's business and technology solutions help clients significantly improve performance and maximize returns on technology investments. Answerthink's capabilities include benchmarking, business transformation, business applications, business intelligence, and offshore application development and support. Founded in 1997, Answerthink has offices throughout the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and in Europe and India. About The Hackett Group The Hackett Group, a strategic advisory firm, is a global leader in best practice research, benchmarking, and business transformation services that enable world-class performance across selling, general & administrative (SG&A) and supply chain activities. Through the acquisition of REL Consultancy Group, we offer Hackett-REL Total Working Capital services to liberate (Liberate Technologies, San Mateo, CA) A software company that specialized in the information appliance field. Formerly Network Computer, Inc. (NCI), a spin-off from Oracle in 1996, it changed its name in 1999. cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . Hackett provides strategic insight, best practice advice and implementation services grounded in performance metrics Performance metrics are measures of an organizations activities and performance. Performance metrics should support a range of stakeholder needs from customers, shareholders to employees [1]. obtained through 14 years and 3,500 benchmark studies at 2,100 of the world's leading companies. This press release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 and involves known and unknown risks, uncertainties and other factors that may cause Answerthink's actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Factors that impact such forward-looking statements include, among others, the ability of the products, services, or practices mentioned in this release to deliver the desired effect, our ability to effectively integrate acquisitions into our operations, our ability to attract additional business, our ability to effectively market and sell our product offerings and other services, the timing of projects and the potential for contract cancellations by our customers, changes in expectations regarding the information technology industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , risks of competition, price and margin trends, foreign currency fluctuations, changes in general economic conditions and interest rates, the results of our investigation into the misappropriation of funds by our former UK disbursement agent, the timing of our amended SEC filings, the actual amount and timing of any charges related to the misappropriation and the investigation, as well as other risks detailed in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2005 filed with the Securities and Exchange Commission. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. |
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