Enterasys Networks settles SEC investigation, files third quarter form 10-Q, and announces preliminary fourth quarter estimates
Announcement posted by Enterasys Networks 28 Feb 2003
Historical Financial Issues Resolved And Company Now Current With SEC Filings
Enterasys Networks (NYSE: ETS) todayannounced that it has reached an accord with the U.S. Securities and Exchange Commission (SEC), pursuant to which Enterasys settled an investigation initiated by the SEC in January of 2002. The Company added that it has filedits quarterly report on Form 10-Q forthethird fiscalquarter ended September 28, 2002, bringing the Company current with its financial reporting obligations. A copy of the filing can be viewed and downloaded at http://www.enterasys.com/corporate/ir/sec.html. The Company also announced that it expects revenue for the fourth quarter ended December 28, 2002 to show continued stability in a range approximating $120 million, and that it has achieved its goal of break-even operating cash flow in the fourth quarter, ending the fiscal year with approximately $305 million of cash and marketable securities.
The settlement with the SEC does not require any further adjustment to the Companys historical financial statements and does not impose any civil penalties or fines. Pursuant to the settlement, Enterasys, without admitting or denying any allegations, agreed to a cease and desist order requiring future compliance with the federal securities laws and regulations, and to appoint an internal auditor reporting directly to the Audit Committee of Enterasys Board of Directors. The Company confirmed that a director of internal audit, reporting to the Audit Committee, was appointed in October of 2002.
We are extremely pleased to have this matter behind us, stated William K. OBrien, Chief Executive Officer of Enterasys Networks, Inc. This settlement effectively resolves the Companys outstanding issues with the SEC - bringing closure to historical reporting matters and marking the end of a long and difficult process.
OBrien continued, We cooperated fully with the SEC in a very thorough review of complex accounting issues and are pleased that the settlement recognizes the Companys efforts. In addition, we conducted our own comprehensive internal review, completed the appropriate restatements, and have now brought all of our periodic reporting up to date. Having implemented additional internal controls, established and expanded the internal audit function and introduced other process improvements over the past year, Enterasys is committed to the highest level of integrity in its financial reporting.
Since new management was appointed by the Board of Directors in early 2002, we have focused intensely on delivering business-driven solutions to our loyal installed customer base, making dramatic improvements in our operations, executing on key product roadmaps, and resolving the historical accounting issues, said OBrien. With the historical matters firmly behind us, we can now also focus significant resources on expanding new business in the market. We have a powerful product roadmap that will deliver tangible benefits to customers. As we deliver on this roadmap by launching significant new products in the months ahead, the market will begin to see a reinvigorated Enterasys Networks.
With its financial reporting now current and the SEC investigation resolved, Enterasys management will hold a conference call on Thursday, February 27, 2003 at 5:00 PM Eastern Time to provide a business update. To access a live webcast and replay of the call on February 27th, please refer to the following website link: http://www.enterasys.com/corporate/ir/.
About Enterasys Networks
Enterasys Networks (NYSE: ETS) is a leading worldwide provider of Business-Driven Networks for enterprise-class customers. Enterasys innovative network infrastructure offerings deliver the security, productivity and agility benefits required by Global 2000 organizations, coupled with the industrys strongest service and support. For more information on Enterasys and its products, including multilayer switches and routers, wireless LANs, VPN, network management, and intrusion detection systems (IDS), visit www.enterasys.com.
This press release contains projections and other forward-looking statements regarding the future revenue, cash flows and other financial performance of the Company or other future events and circumstances, and actual results, events and circumstances could differ materially. These forward-looking statements are not historical facts or guarantees of future performance, and are based on current estimates and numerous assumptions. These estimates and assumptions reflect subjective judgments concerning future events and circumstances and may be incomplete or incorrect, and unanticipated events or circumstances may occur causing these estimates and assumptions to be wrong. Risks that could cause actual events or results to differ materially from those described in the projections or forward-looking statements include business disruption and market perceptions associated with the Company's internal inquiry and the Securities and Exchange Commission's investigation relating to the Company's financial reporting, economic trends associated with the recent terrorist activities experienced in the United States and general global political and economic instability, including the effects of any hostilities involving the United States in the Middle East, and any continuation or repercussions thereof or responses thereto, as well as risks associated with competitive conditions, pricing and margin pressures as a result of product shifts and changes in market dynamics, greater use of, and expenses associated with, distributors and resellers, limited management resources and recent management turnover, the Company's acquisition strategy, extension or deterioration of prevailing economic conditions, redemption of the Companys preferred stock by the Company for cash, volatility in the stock markets and market valuations being placed on communications infrastructure and service companies, technological changes, intellectual property protection and related issues, dependence on suppliers and contract manufacturers, and potential volatility in operating results, among others. The Company's goal of achieving breakeven cash flow from operations by the fourth quarter of 2002 and its estimate that its existing cash balance will be sufficient to meet its on-going cash needs for at least the next twelve months are based on projections of, among other things, revenues, margins, costs and expenses, any of which could be adversely affected by many of the factors described above. Adverse changes in assumptions relating to revenues, margins, costs and expenses could have the effect of delaying the Company's achievement of breakeven cash flow from operations beyond 2002, if at all. For a more detailed discussion of these and other risks and uncertainties related to the Company's business, please refer to the most recent filings of Enterasys Networks, Inc. with the Securities and Exchange Commission, including Enterasys Network's annual report on Form 10-K for the ten-month transition period ended December 29, 2001
The settlement with the SEC does not require any further adjustment to the Companys historical financial statements and does not impose any civil penalties or fines. Pursuant to the settlement, Enterasys, without admitting or denying any allegations, agreed to a cease and desist order requiring future compliance with the federal securities laws and regulations, and to appoint an internal auditor reporting directly to the Audit Committee of Enterasys Board of Directors. The Company confirmed that a director of internal audit, reporting to the Audit Committee, was appointed in October of 2002.
We are extremely pleased to have this matter behind us, stated William K. OBrien, Chief Executive Officer of Enterasys Networks, Inc. This settlement effectively resolves the Companys outstanding issues with the SEC - bringing closure to historical reporting matters and marking the end of a long and difficult process.
OBrien continued, We cooperated fully with the SEC in a very thorough review of complex accounting issues and are pleased that the settlement recognizes the Companys efforts. In addition, we conducted our own comprehensive internal review, completed the appropriate restatements, and have now brought all of our periodic reporting up to date. Having implemented additional internal controls, established and expanded the internal audit function and introduced other process improvements over the past year, Enterasys is committed to the highest level of integrity in its financial reporting.
Since new management was appointed by the Board of Directors in early 2002, we have focused intensely on delivering business-driven solutions to our loyal installed customer base, making dramatic improvements in our operations, executing on key product roadmaps, and resolving the historical accounting issues, said OBrien. With the historical matters firmly behind us, we can now also focus significant resources on expanding new business in the market. We have a powerful product roadmap that will deliver tangible benefits to customers. As we deliver on this roadmap by launching significant new products in the months ahead, the market will begin to see a reinvigorated Enterasys Networks.
With its financial reporting now current and the SEC investigation resolved, Enterasys management will hold a conference call on Thursday, February 27, 2003 at 5:00 PM Eastern Time to provide a business update. To access a live webcast and replay of the call on February 27th, please refer to the following website link: http://www.enterasys.com/corporate/ir/.
About Enterasys Networks
Enterasys Networks (NYSE: ETS) is a leading worldwide provider of Business-Driven Networks for enterprise-class customers. Enterasys innovative network infrastructure offerings deliver the security, productivity and agility benefits required by Global 2000 organizations, coupled with the industrys strongest service and support. For more information on Enterasys and its products, including multilayer switches and routers, wireless LANs, VPN, network management, and intrusion detection systems (IDS), visit www.enterasys.com.
This press release contains projections and other forward-looking statements regarding the future revenue, cash flows and other financial performance of the Company or other future events and circumstances, and actual results, events and circumstances could differ materially. These forward-looking statements are not historical facts or guarantees of future performance, and are based on current estimates and numerous assumptions. These estimates and assumptions reflect subjective judgments concerning future events and circumstances and may be incomplete or incorrect, and unanticipated events or circumstances may occur causing these estimates and assumptions to be wrong. Risks that could cause actual events or results to differ materially from those described in the projections or forward-looking statements include business disruption and market perceptions associated with the Company's internal inquiry and the Securities and Exchange Commission's investigation relating to the Company's financial reporting, economic trends associated with the recent terrorist activities experienced in the United States and general global political and economic instability, including the effects of any hostilities involving the United States in the Middle East, and any continuation or repercussions thereof or responses thereto, as well as risks associated with competitive conditions, pricing and margin pressures as a result of product shifts and changes in market dynamics, greater use of, and expenses associated with, distributors and resellers, limited management resources and recent management turnover, the Company's acquisition strategy, extension or deterioration of prevailing economic conditions, redemption of the Companys preferred stock by the Company for cash, volatility in the stock markets and market valuations being placed on communications infrastructure and service companies, technological changes, intellectual property protection and related issues, dependence on suppliers and contract manufacturers, and potential volatility in operating results, among others. The Company's goal of achieving breakeven cash flow from operations by the fourth quarter of 2002 and its estimate that its existing cash balance will be sufficient to meet its on-going cash needs for at least the next twelve months are based on projections of, among other things, revenues, margins, costs and expenses, any of which could be adversely affected by many of the factors described above. Adverse changes in assumptions relating to revenues, margins, costs and expenses could have the effect of delaying the Company's achievement of breakeven cash flow from operations beyond 2002, if at all. For a more detailed discussion of these and other risks and uncertainties related to the Company's business, please refer to the most recent filings of Enterasys Networks, Inc. with the Securities and Exchange Commission, including Enterasys Network's annual report on Form 10-K for the ten-month transition period ended December 29, 2001