Printer Friendly

ePresence Files Second Quarter 10-Q, First Quarter 10-Q/A And Amended Statements for Fiscal Year 2001.

Business Editors

WESTBORO, Mass.--(BUSINESS WIRE)--Sept. 25, 2002

ePresence Will Host Joint Conference Call with Switchboard

Incorporated at 10:00 a.m. ET on September 26

ePresence, Inc. (NASDAQ: EPREE) announced it has filed its Form 10-Q for the quarter ended June 30, 2002 with the Securities and Exchange Commission ("SEC").

The Company also filed an amended 10-Q for the first quarter of 2002 and recently filed amended consolidated financial statements for the year ended December 31, 2001. The amended filings were primarily due to restatements made by ePresence's majority-owned subsidiary, Switchboard Incorporated (NASDAQ: SWBDE), for the fiscal period ended December 31, 2001 and for the first quarter of 2002 financial statements. ePresence's filings can be accessed in the "Investors" section of the Company's web site, www.epresence.com.

"Our 10-Q filing and our amended filings bring closure to a thorough and comprehensive re-audit of the Company's financial statements and should return us to compliance with SEC requirements and the NASDAQ National Market continued listing standards," said Bill Ferry, chairman and chief executive officer of ePresence. "These filings have had no impact on our capital resources or the Company's business strategy."

ePresence Restatement of Fiscal Year 2001 Results

The Company's previously issued consolidated financial statements for the year ended December 31, 2001 and its consolidated financial statements for the quarters ended March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 have been restated. The restatements are described in detail below.

In the first quarter of 2001, Switchboard sold banner advertising to a single customer that resulted in $2.7 million of revenue recognized in 2001. While seeking to collect payment, additional information about the customer and its relationship with one of Switchboard's vendors was evaluated by Switchboard and its recently engaged independent auditors, Ernst & Young LLP. This information led Switchboard to conclude that it would have been more appropriate to record the 2001 banner advertising revenue as a reduction of expense. Accordingly, as part of this restatement, Switchboard reduced 2001 annual revenue by $2.7 million, reduced 2001 annual sales and marketing expenses by $1.5 million and reduced the 2001 special charges by $1.2 million. There was no effect on Switchboard's or the Company's net loss for the year ended December 31, 2001 related to this issue.

Contemporaneous with Switchboard's decision to restate its 2001 financial statements for the banner advertising arrangement, Arthur Andersen LLP, independent auditor for ePresence and Switchboard in fiscal year 2001, advised both companies that its Boston office had ceased operations and would be unable to render a report on restated 2001 financial statements. Therefore, Ernst & Young commenced a re-audit of 2001 financial statements in August 2002.

As a result of the re-audit, it was determined that the previously reported 2001 financial statements should also be restated and reclassified as follows:
-- A reduction in Switchboard's operating expenses of $1.1 million related to the elimination of excess accrued liabilities.

-- A reduction in 2001 annual amortization expense related to Switchboard's directory and local advertising platform agreement entered into with America Online, Inc. ("AOL") in December 2000 ("AOL Directory Agreement") of $3.3 million resulting from a change in the amortization rate used to amortize the assets related to the AOL Directory Agreement as presented on the Company's balance sheet.

-- An impairment charge in Switchboard relating to the AOL Directory Agreement of $11.7 million determined pursuant to SFAS No. 121 "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of," based on revised revenue projections under the AOL Directory Agreement.

-- A reclassification of $27.9 million and $10.4 million in Switchboard's marketable securities at December 31, 2001 and 2000, respectively, from long-term to short-term, to reflect all marketable securities with less than one year to maturity as short-term. This reclassification had no effect on the Company's total assets for the period.

-- A $0.6 million reduction in operating expenses for ePresence's services business related to the elimination of excess accrued liabilities and a reduction of amortization related to unearned compensation.


Additionally, on January 1, 2001, ePresence adopted SFAS No. 133, as amended, which, among other things, required derivatives to be measured at fair value and recognized as either assets or liabilities in the financial statements, as discussed in Note 2 to the Company's Consolidated Financial Statements. As a result, ePresence recorded a $3.4 million cumulative effect in accounting change, net of taxes, offset by a decrease in the reported gain on the sale of Openwave as well as a decrease in the provision for income taxes. The adoption of SFAS 133 had no effect on ePresence's consolidated net income for the period ended December 31, 2001.

Because the above-described restatements reflect the timing of certain revenues and expenses and non-cash transactions, the Company's consolidated balance sheet was correspondingly adjusted in various categories, including the asset related to the Directory Agreement, other assets and accrued expenses. In addition, the accumulated deficit at December 31, 2001 was increased by $3.5 million to reflect the cumulative effect of these adjustments. ePresence's capital resources were not impacted by any of these restatements and reclassifications.

As previously announced, the SEC has advised Switchboard that it will be delivering a document request in connection with an investigation by the SEC of the restatements of Switchboard's financial statements. Switchboard intends to cooperate fully with the SEC regarding this investigation.

Restatement of First-Quarter 2002 Financial Results

Switchboard, in conjunction with its newly appointed independent auditors, Ernst & Young, re-evaluated the adoption of Emerging Issues Task Force Issue 01-9 "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)" ("EITF 01-9"), which became effective for fiscal years beginning after December 15, 2001, and concluded that EITF 01-9 is applicable to the accounting for the AOL Directory Agreement. The 2001 quarterly results, presented for comparative purposes, have been reclassified to conform to the presentation required by EITF 01-9. Accordingly, Switchboard reduced both revenue and operating expenses by $1.1 million and $1.0 million in the fiscal quarters ended March 31, 2002 and 2001, respectively, which represented the restated amortization expense related to the AOL Directory Agreement assets described below. The adoption of EITF 01-9 had no effect on net income or cash for either Switchboard or ePresence.

ePresence's March 31, 2002 consolidated financial statements have been restated to reflect a net decrease in Switchboard amortization of approximately $0.7 million. This adjustment reflects the reversal of $1.0 million of Switchboard amortization expense previously recorded on AOL related prepaid assets which were determined to be impaired as of December 31, 2001, offset by the amortization resulting from the $13.0 million AOL related asset recorded on January 2, 2002. The restated Switchboard amortization for the quarter ended March 31, 2002 is reflected as a reduction of Switchboard gross revenues in accordance with EITF 01-9.

As a result of the above-described restatements, ePresence's accumulated deficit at March 31, 2002 was decreased by $0.4 million to reflect the cumulative effect of these 2002 adjustments. ePresence's capital resources were not impacted by any of these restatements.

Complete financial information for the fiscal quarter ended March 31, 2002 is available in ePresence's Amendment No. 1 to Quarterly Report on Form 10-Q, filed with the SEC today.

ePresence Revised Second-Quarter 2002 Consolidated Financial

Results

As a result of Switchboard's revision to previously announced second-quarter results, ePresence's consolidated revenues for the second quarter of 2002 were $11.0 million. This compares with consolidated revenues of $15.9 million for the second quarter of 2001. For the second quarter of 2002, the consolidated net loss was $(2.7) million, or $(0.12) per share. This compares with a consolidated net loss of $(5.6) million, or $(0.24) per share, in the second quarter of 2001. There were no revisions to previously announced results for ePresence's services business.

As of June 30, 2002, ePresence reported $111.7 million in cash, marketable securities, and restricted cash on a consolidated basis, consisting of $57.0 million held by ePresence and $54.7 million held by Switchboard.

Selected items affected by the restatement of fiscal year 2001 and first quarter 2002, as well as revision of second quarter 2002 financial results are listed in the table below. Full financial information can be found in the Company's filings on Form 10-K/A for the year ended December 31, 2001 filed with the SEC on September 20, 2002, Form 10-Q for the quarter ended June 30, 2002 filed with the SEC on September 24, 2002 and Form 10-Q/A for the quarter ended March 31, 2002 filed with the SEC today.


----------------------------------------------------------------------

 ePresence, Incorporated
 Condensed Results of Operations Data
 (in thousands, except per share amounts)
----------------------------------------------------------------------
 Year ended Three months ended
 December 31, 2001 March 31, 2002
----------------------------------------------------------------------
 As Restated As As As
 and Previously Restated Previously
 Reclassified Reported Reported
 (audited)
----------------------------------------------------------------------
Services $51,711 $51,711 $10,293 $10,293

Switchboard 13,326 16,026 2,920 4,023
 ------- ------ ------ -------
Total Revenue 65,037 67,737 13,213 14,316

Operating
 (loss) (105,743) (99,032) (8,583) (9,304)

Net (loss) $(40,331) $(36,841) $(6,934) $(7,318)

Basic and
 diluted net
 (loss) per
 share $(1.76) $(1.60) $(0.31) $(0.33)

Shares used
 to compute
 basic and
 diluted
 net (loss)
 per share 22,976 22,976 22,332 22,332

----------------------------------------------------------------------
 Three months ended
 June 30, 2002
----------------------------------------------------------------------
 As As
 Reported Previously
 Announced
----------------------------------------------------------------------
Services $8,952 $8,952

Switchboard 2,068 3,014
 ------ ------
Total Revenue 11,020 11,966

Operating (loss) (4,639) (5,091)

Net (loss) $(2,722) $(2,963)

Basic and diluted net
 (loss) per share $(0.12) $(0.13)

Shares used to compute
 basic and diluted
 net (loss) per
 share 22,231 22,231
----------------------------------------------------------------------

 ePresence Incorporated
 Condensed Balance Sheet Data
 (in thousands)
----------------------------------------------------------------------

 As of December 31, 2001 As of March 31, 2002
----------------------------------------------------------------------
 As Restated As As As
 and Previously Restated Previously
 Reclassified Reported Reported
 (audited)
----------------------------------------------------------------------
Total assets 162,951 171,491 161,708 156,525

Total liabilities 53,765 58,713 60,919 52,556

Shareholder
 equity $109,186 $112,778 $100,789 $103,969
----------------------------------------------------------------------

 As of June 30, 2002
----------------------------------------------------------------------
 As As
 Reported Previously
 Announced
----------------------------------------------------------------------
Total assets 154,561 149,928

Total liabilities 57,035 49,470

Shareholder equity $97,526 $100,458
----------------------------------------------------------------------



ePresence Third-Quarter Business Update

ePresence also announced today that it expects services revenues to be approximately $7.5 million for the third-quarter of 2002. Including one-time fees of $0.3 million incurred in connection with the re-audit, ePresence anticipates a cash loss from its services business of $(0.09) to $(0.11) per share for the third quarter of 2002. Cash earnings (loss) excludes depreciation, amortization and non-cash compensation.

NASDAQ Listing Status

ePresence's hearing at NASDAQ, with respect to the Company's failure to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 in a timely manner, was held on September 19, 2002. The Company yesterday filed its delinquent Quarterly Report on Form 10-Q and believes that it is once again in compliance with the NASDAQ National Market continued listing requirements. The NASDAQ Hearing Panel will issue its determination regarding the Company's continued listing status in the upcoming weeks.

Conference Call

ePresence and Switchboard will host a joint conference call for investors at 10:00 a.m. ET on September 26 to discuss this announcement. The call will be broadcast live over the Internet. Investors interested in listening to the webcast should log onto the "Investors" section of ePresence's web site, located at www.epresence.com, at least 15 minutes prior to the broadcast. To participate in the live teleconference call, please dial (719) 457-2657 and use confirmation code 310170. A replay will be available from 1:00 p.m. ET, September 26 through 8:00 p.m. ET, September 30, 2002 at 719-457-0820. The confirmation code for the replay is 310170.

About ePresence

ePresence, Inc. (NASDAQ: EPREE) is a market leader in delivering Secure Identity Management (SIM) solutions based on directory technology that help companies reduce cost, enhance security, improve customer service and increase revenues. Our highly focused solutions have enabled numerous Fortune 1000-class companies to efficiently and securely provide personalized access to digital resources for their employees, business partners and customers, thus maximizing the ROI of their IT-based initiatives. ePresence is headquartered in Westboro, Massachusetts and can be reached at (800) 222-6926 or online at www.epresence.com.

Forward-looking Statements

The Company noted that each of the above statements about the Company's business and financial outlook, future plans, operations and performance, including its statements regarding SEC and NASDAQ compliance issues, anticipated third-quarter financial results, as well as others using the terms "expect," "anticipate," "target," "plan," "believe," "will," and other similar terms and any other statements in this press release which are not historical facts are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and are subject to differ materially from actual results based on various important factors, including, without limitation, the impact of the broad economic slowdown and the uncertainty of current economic conditions, which has affected the demand for technology services, lengthened the sales cycles and caused decreased technology spending for many of our customers and potential customers; the uncertainty of current global political conditions; the impact of the Company's strategic initiatives to grow its business while reducing costs; market acceptance of the ePresence name and the identification of the name with the Company's SIM business; the Company's ability to enter and manage strategic alliances; the impact of the Company's termination of international operations; increased competition; acceptance of the Company's solutions in the marketplace and success of the Company's sales and marketing efforts; the Company's ability to attract and retain qualified personnel; the impact of the Company's stock repurchase program; the impact of Switchboard's financial results on the Company's consolidated results; the volatility of securities markets including fluctuations in the value of the Switchboard securities held by ePresence; the possible delisting of the Company's securities by NASDAQ for noncompliance with listing requirements; and the results of the SEC investigation of Switchboard. For further information on these and other risks, uncertainties, and factors, please review the Company's filings on Form 10-K/A for the year ended December 31, 2001 filed with the SEC on September 20, 2002, Form 10-Q for the quarter ended June 30, 2002 filed with the SEC on September 24, 2002 and Form 10-Q/A for the quarter ended March 31, 2002 filed with the SEC on September 25, 2002. The forward-looking statements made in this press release relate only to events as of the date on which the statements are made and the Company undertakes no obligation to update these forward-looking statements.
COPYRIGHT 2002 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2002, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

 Reader Opinion

Title:

Comment:



 

Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Geographic Code:1USA
Date:Sep 25, 2002
Words:2465
Previous Article:A.M. Best Downgrades Rating of Baltimore Life and Its Subsidiary.
Next Article:J-Bird Music Group to Expand Into a Fully Integrated Multimedia Entertainment Company.
Topics:


Related Articles
ePresence Announces 60 Percent Increase in E-services Revenue and Continued Bottom-Line Improvement in Fourth-Quarter of 2000.
ePresence Announces 60 Percent Increase in E-services Revenue and Continued Bottom-Line Improvement in Fourth-Quarter of 2000.
ePresence Announces Third-Quarter 2001 Financial Results.
ePresence Announces Third-Quarter 2002 Financial Results.
ePresence Provides Fourth-Quarter Update; Company Takes Action to Reduce Operating Costs.
ePresence Announces Fourth-Quarter 2002 Financial Results.
ePresence Announces First-Quarter 2003 Financial Results.
ePresence Announces Second-Quarter 2003 Financial Results; Company Sequentially Increases Revenues and Improves Bottom Line.
ePresence Announces Sale of its Majority Owned Subsidiary Switchboard, Inc. to InfoSpace, Inc.
ePresence Provides Update on the Sale of its Services Business and Plan of Liquidation.

Terms of use | Copyright © 2014 Farlex, Inc. | Feedback | For webmasters