EDS delays release of earnings because of NMCI audit
Release of third-quarter earnings are delayed for a second time as auditors examine the development of the massive intranet project.
Texas technology contractor EDS has delayed the release of its third-quarter 2004 earnings because of an ongoing audit within the Navy Marine Corps Intranet program.
The decision marks the second time the defense contractor has delayed the announcement for the third quarter, which ended Sept. 30.
EDS is building a secure network to connect all Navy and Marine Corps military and civilian personnel. The contract to develop NMCI could exceed $8 billion by the time it is finished. EDS, however, was required to invest a great deal of capital in the project early, with the understanding that it would recoup its investment as users became connected to the system. The program has suffered delays, and EDS has experienced some trouble in dealing with the financial investment.
The company and its independent auditor-global accounting firm KPMG-are looking into details surrounding the write-down of NMCI assets. Auditors also are looking into bonus plan accruals in 2003 and 2004, as well as other financial adjustments. EDS officials said the review most likely will not affect the earnings reported for 2003.
"While EDS is unable to predict the outcome of this work or when it will be completed, it does not expect a material adverse effect on its financial results or its credit facilities or debt instruments," the company said in a press release. Until the audit is finished, "KPMG will not be able to complete its interim review of EDS' financial statements."</>
During an NMCI conference in June, Navy Secretary Gordon England said the service might renegotiate payments to lighten the burden on EDS, considering the unexpected complexity of the project. More recently, the Navy announced that it was streamlining the contract and lowering the threshold that EDS must achieve before its earnings can be increased.
The Navy announced this week that EDS is eligible for a 5 percent payment at 491 sites. This will bring the payment at those sites up to 90 percent of the eventual total seat price.