Anthony Clark to restate 2003 financials

Calgary-based Anthony Clark International Insurance Brokers (TSX: ACL) says it will be restating its 2003 yearend financial reports after re-assessing its purchase of Vista International Insurance Brokers. The company also says it has fallen out of compliance with its lending agreements and is looking at renegotiating those agreements.The announcements came as the company reported strong results for the second quarter ending September 30, 2004. Amidst the turmoil, the company produced a revenue increase of 107% in the second quarter and an increase of 93% for the six-month period, growth it attributes to U.S. acquisitions.However, the company faces restating its 2003 accounts (for the year ending March 31, 2004), after it re-assessed the purchase price for its acquisition of Vista International Insurance Brokers, and how that purchase price was allocated to identifiable assets acquired. “The corporation has determined that the fair value of vendor debt issued on the Vista acquisition was $886,112 less than the face value of that debt if financing for this acquisition had been arranged through a third party lender. The revised financial statements now reflect the reduction in the Vista purchase price by that amount.” The company adds that the restatement also includes a reduction in the allocation of purchase price to customer accounts and non-compete contracts for the Vista acquisition, as well as the acquisition of Johns. At the same time, the company acknowledges that its working capital has plummeted to $445,000 when scheduled debt repayments for the next year are considered. This is down from more than $2 million in working capital at March 31, 2004. The result is that the company is not in compliance with covenants in its loan agreements and has received a waiver for the time being from lenders. However, it has had to reclassifying its debts as current liabilities in its most recent financials to meet accounting rules.While the company hopes to renegotiate these covenants to “those that can reasonably be maintained” by the company, this is not guaranteed. If lenders are unwilling to renegotiate, the company will have to look at other options, including issuing additional equity or renegotiating principal payments required by subordinated lenders. The corporation will be dependent on the continued support of its lender, failing which the corporation’s ability to maintain continued operations may be adversely affected,” the company’s quarterly returns note.Current returns show the company with a deficit of more than $5 million as of September 30. For the six months to September 30, the company produced a net loss of $1.42 million ($0.18 per share), compared to a loss of $368,000 ($0.05 per share) for the same period a year earlier.