GTSI misses 2Q report, plans for restatements

Government IT reseller GTSI Corp. failed to issue its second quarter 2006 financial report yesterday because of accounting errors in financial statements for the past two years.

The Chantilly, Va., company plans to restate its financial results for 2004 and 2005 because of an accounting change for various lease-sales agreements.

GTSI also will restate its report for the first quarter 2006 because of an overstatement of the cost of goods it sold.

The company expects to complete the restatements in September. It then will file an amended annual report for 2005 that will include restated 2004 and 2005 financial statements, and amended quarterly reports for the first and second quarters of 2006.

GTSI said it expects to receive a notice from Nasdaq about a possible delisting for failing to meet the requirements of the stock exchange for timely and accurate filings.

The company did issue an unaudited second quarter financial update, showing a pre-tax loss of about $3 million, compared to a pre-tax loss of $12 million for the same period in 2005.

In the meantime, GTSI will stop reporting monthly results for its sales, backlogs and bookings until it completes the restatements, the company said.

GTSI leases IT solutions to its government customers, and then sells the leases to third parties under agreements that let the company repurchase them under certain circumstances.

The announcement was the latest in a series of financial setbacks that GTSI has experienced over the last couple of years, as it transforms itself from a hardware reseller into an IT solutions provider.

Earlier this year, GTSI reported a $16 million net loss on revenue of $886.3 million for 2005. The company later received a staff determination letter from Nasdaq because it failed to file its annual report on Form 10-K for 2005 with the Securities and Exchange Commission, as market rules require.

GTSI also has had to tackle problems with the implementation of its new enterprise resources management system, high employee turnover and layoffs, deficiencies in its sales teams, and low sales and high employee-related costs.

GTSI has about 750 employees and ranks No. 27on Washington Technology's 2006 Top 100 list of federal prime contractors.