Exhibit 99.1
September 28, 2006
NEC Corporation
Kaoru Yano, President
(Tokyo Stock Exchange, 1st Section;
Code Number 6701)
NEC TO DELAY FILING ITS 2006 FORM 20-F AND FORM 20-F/A
NEC Corporation ("NEC") hereby notifies that it will be delaying the filing with
the U.S. Securities and Exchange Commission ("SEC") of its annual report on Form
20-F for the fiscal year ended March 31, 2006 (the "2006 Form 20-F"), which is
due not later than October 2, 2006. NEC intends to file a Form 12b-25 as
notification to the SEC of its inability to timely file the 2006 Form 20-F. NEC
will not file for the 15-day extension permitted as part of Form 12b-25 as it
has no assurance at this time that it will complete the work required to file
the 2006 Form 20-F within the 15-day period. In addition, to date, NEC has been
unable to file its Form 20-F/A for the fiscal year ended March 31, 2005 to
reflect previously announced restatements of financial statements for the three
years ended March 31, 2005.
The delay in the filing of the 2006 Form 20-F, and the inability to file the
Form 20-F/A, are principally the result of the need for further analysis to
support recognition of revenue from maintenance and support services provided as
part of multiple element arrangements with respect to IT solutions.
Specifically, NEC has been unable to gather the data necessary to complete the
audit with respect to the vendor specific objective evidence of the relative
fair value of maintenance and support services. This compilation and analysis
must be completed in order for NEC's outside auditor to complete the audits
under U.S. Public Company Accounting Oversight Board ("PCAOB") standards of
NEC's consolidated financial statements as of and for the fiscal year ended
March 31, 2006 and NEC's restated consolidated financial statements for prior
years.
The financial results for the fiscal years ended March 31, 2004, 2005 and 2006
(including restated financial results for the fiscal years ended March 31, 2004
and 2005) previously announced by NEC and submitted on a Form 6-K on June 23,
2006 were audited under generally accepted auditing standards in Japan, and not
under PCAOB standards. At this time and pending completion of the revenue
recognition analyses and additional audit procedures under PCAOB standards, NEC
is unable to determine whether any adjustments to the previously announced
financial results will be required as a result of the ongoing review of the
revenue recognition issues.
NEC notes that, although it is not yet subject to the reporting requirements
under Section 404 of the Sarbanes-Oxley Act in respect of internal control over
financial reporting, its 2006 Form 20-F will disclose material weaknesses in its
internal control over financial
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reporting and, as a result of such material weaknesses, the 2006 Form 20-F will
also disclose that its disclosure controls and procedures are ineffective. As of
the date of this press release, the 2006 Form 20-F would have reported the
following material weaknesses:
The material weaknesses include the failure to have an adequate
system of internal control over the preparation and review of
U.S. GAAP consolidated financial statements to ensure that
material errors do not occur in their preparation. In
particular, (a) the current system of internal control over the
U.S. GAAP financial statement closing process does not ensure
that all significant U.S. GAAP adjustments and
reclassifications, presentations, and disclosures are properly
addressed and included in the preparation of U.S. GAAP
consolidated financial statements; (b) NEC currently does not
have comprehensive group accounting policies and procedures that
indicate with specificity how various transactions are to be
recorded under U.S. GAAP, including procedures to document the
application of U.S. GAAP to particular transactions such as
lease transactions, business combinations and reorganizations,
and other complex accounting areas, or that enable it to
maintain a current understanding of revisions to U.S. GAAP; and
(c) NEC currently does not have a sufficient number of personnel
with the appropriate knowledge, experience, and training in the
application of U.S. GAAP at its headquarters' corporate
controller division or its various business units and
subsidiaries. As a result of the foregoing, several material
audit adjustments to NEC's historical consolidated financial
statements were identified, including those related to revenue
recognition, income taxes, accruals and reserves, and research
and development expenses.
In addition, NEC conducted independent investigations into a
number of irregularities identified during the past two years.
These included improper accounting practices for revenue
recognition related to two U.S. subsidiaries, fictitious sales
transactions occurring for more than three years at a Japanese
subsidiary, and several irregularities at certain other business
units. Based on the findings and the observations of NEC's
outside auditors, in addition to its independent investigations,
it identified the following material weaknesses: (a) it did not
sufficiently emphasize the importance of integrity and ethical
behavior throughout the NEC group; (b) it currently does not
have a system of adequate procedures to substantiate and
reconcile physical assets at external locations, such as at
vendors, customers, or subcontractors, in comparison to amounts
shown on its books and records; (c) the review of its actual
performance compared to budgets, forecasts, and prior period
performance failed to operate effectively. In addition, its
process for reviewing actual performance compared to budgets,
forecasts, and prior period performance is not applied
consistently throughout the NEC group in terms of extent of
analysis, investigation of variances, and resolution of
exceptions; and (d)
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there is a lack of adequate segregation of certain duties, such
as maintaining custody of assets, providing authorization and
approval of transactions and journal entries, and recording and
reporting transactions and journal entries.
NEC is working diligently to complete and file its 2006 Form 20-F and Form
20/F-A as promptly as possible.
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CAUTIONARY STATEMENTS:
THIS MATERIAL CONTAINS FORWARD-LOOKING STATEMENTS PERTAINING TO STRATEGIES,
FINANCIAL TARGETS, TECHNOLOGY, PRODUCTS AND SERVICES, AND BUSINESS PERFORMANCE
OF NEC CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES (COLLECTIVELY "NEC").
WRITTEN FORWARD-LOOKING STATEMENTS MAY APPEAR IN OTHER DOCUMENTS THAT NEC FILES
WITH STOCK EXCHANGES OR REGULATORY AUTHORITIES, SUCH AS THE U.S. SECURITIES AND
EXCHANGE COMMISSION, AND IN REPORTS TO SHAREHOLDERS AND OTHER COMMUNICATIONS.
THE U.S. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 CONTAINS, AND OTHER
APPLICABLE LAWS MAY CONTAIN, A SAFE-HARBOR FOR FORWARD-LOOKING STATEMENTS, ON
WHICH NEC RELIES IN MAKING THESE DISCLOSURES. SOME OF THE FORWARD-LOOKING
STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS
"BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD," "SEEKS," "INTENDS," "PLANS,"
"ESTIMATES," "AIMS," OR "ANTICIPATES," OR THE NEGATIVE OF THOSE WORDS, OR OTHER
COMPARABLE WORDS OR PHRASES. YOU CAN ALSO IDENTIFY FORWARD-LOOKING STATEMENTS BY
DISCUSSIONS OF STRATEGY, BELIEFS, PLANS, TARGETS, OR INTENTIONS. FORWARD-LOOKING
STATEMENTS NECESSARILY DEPEND ON CURRENTLY AVAILABLE ASSUMPTIONS, DATA, OR
METHODS THAT MAY BE INCORRECT OR IMPRECISE AND NEC MAY NOT BE ABLE TO REALIZE
THE RESULTS EXPECTED BY THEM. YOU SHOULD NOT PLACE UNDUE RELIANCE ON
FORWARD-LOOKING STATEMENTS, WHICH REFLECT NEC'S ANALYSIS AND EXPECTATIONS ONLY.
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE
INHERENT RISKS AND UNCERTAINTIES. A NUMBER OF IMPORTANT FACTORS COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS. AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM SUCH STATEMENTS INCLUDE (I) GLOBAL ECONOMIC CONDITIONS AND
GENERAL ECONOMIC CONDITIONS IN NEC'S MARKETS, (II) FLUCTUATING DEMAND FOR, AND
COMPETITIVE PRICING PRESSURE ON, NEC'S PRODUCTS AND SERVICES, (III) NEC'S
ABILITY TO CONTINUE TO WIN ACCEPTANCE OF NEC'S PRODUCTS AND SERVICES IN HIGHLY
COMPETITIVE MARKETS, (IV) NEC'S ABILITY TO EXPAND INTO FOREIGN MARKETS, SUCH AS
CHINA, (V) REGULATORY CHANGE AND UNCERTAINTY AND POTENTIAL LEGAL LIABILITY
RELATING TO NEC'S BUSINESS AND OPERATIONS, (VI) NEC'S ABILITY TO RESTRUCTURE, OR
OTHERWISE ADJUST, ITS OPERATIONS TO REFLECT CHANGING MARKET CONDITIONS, AND
(VII) MOVEMENT OF CURRENCY EXCHANGE RATES, PARTICULARLY THE RATE BETWEEN THE YEN
AND THE U.S. DOLLAR. ANY FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE ON
WHICH THEY ARE MADE. NEW RISKS AND UNCERTAINTIES COME UP FROM TIME TO TIME, AND
IT IS IMPOSSIBLE FOR NEC TO PREDICT THESE EVENTS OR HOW THEY MAY AFFECT NEC. NEC
DOES NOT UNDERTAKE ANY OBLIGATION TO UPDATE OR REVISE ANY OF THE FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE.
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