Peregrine to erase $100 million in sales

Software firm to restate earnings for most of three fiscal years

May 24, 2002|By BLOOMBERG NEWS

SAN DIEGO - Peregrine Systems Inc. said yesterday that it will erase about $100 million in sales for most of the past three years, and that the Securities and Exchange Commission has started a formal investigation of the business-software maker's financial practices.

Peregrine, whose software lets businesses track assets such as computers and vehicles, will restate results for most of the past three years. The company said it might cut jobs and seek "financing alternatives."

Company officials couldn't be reached for comment.

Peregrine said it will correct up to $100 million in sales, "among other possible adjustments."

The company said May 6 that sales to resellers and other businesses in fiscal 2002 and prior periods may have been inflated. Chief Executive Officer Stephen P. Gardner and Chief Financial Officer Matthew C. Gless quit that day, and Peregrine informed the SEC of its findings.

"Investors are going to have to make up their own minds about who's responsible" for the errors, said Timothy M. Klein, an analyst with U.S. Bancorp Piper, who rates the stock "market perform" and doesn't own it. "At least people can take a little more comfort that they didn't raise the scope of the discrepancy."

Peregrine will restate results for fiscal 2000 and 2001 and the first three quarters of 2002, it said. The restatement will reduce sales by about 9 percent in the period, Klein said.

The company said it delayed reporting fourth-quarter results after replacing auditor Arthur Andersen LLP in April with KPMG LLP, which found errors that led to the restatement.

Peregrine's shares rose 6 cents yesterday to close at $1.59. The stock's price has lost 95 percent of its value in a year.

Software makers are under more scrutiny by investors and regulators over how they book sales. Other companies under investigation include Network Associates Inc. and Take-Two Interactive Software Inc. Investors became more concerned about aggressive accounting after last year's collapse of Enron Corp., another former Arthur Andersen client.

Some investors criticized Peregrine after the company acquired 12 companies, spending at least $2.2 billion, in the past four years and didn't integrate them properly. Sales soared to $564.7 million last year from $35 million in 1997, yet the company had losses in the past eight quarters.

The company named Richard T. Nelson, formerly executive vice president, as acting CEO on May 6. Fred Gerson, finance chief of the San Diego Padres baseball team, replaced Gless.

Peregrine eliminated 450 jobs in February and 730 in the previous year. In March, the company said it was selling a unit that employs 550. Peregrine employed about 3,000.

The company temporarily restructured a $150 million three-year revolving line of credit in February because it didn't comply with the terms. Peregrine has $288.7 million in long-term debt.

The company lost $103.6 million from operations in the first nine months of fiscal 2002, wider than the $26.4 million in the year-earlier period, according to its cash-flow statement. Peregrine's main source of cash over the first nine months came from issuing long-term debt.

A formal SEC probe means the federal agency can subpoena banking and telephone records and can compel testimony. It requires approval by the SEC's commissioners.

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