An earnings restatement and an informal inquiry by the Securities and Exchange Commission proved to Navigant International Inc. the high cost of being a publicly traded company.
“It really points out the perils,” Ed Adams, the Arapahoe County-based travel-management company’s chairman and chief executive, said last week. “The regulatory environment for companies is just a perilous minefield to try and navigate through.”
Another well-known Colorado company, The Sports Authority, last week announced a joint bid by senior management and a private equity firm to take the sporting-goods chain private.
Adams, however, declined to speculate on the possibility that the same thing would happen at Navigant. But he added, “Certainly I think it’s a discussion for my board and my senior management. If we determine that’s the best thing for the constituents on a going-forward basis, certainly we would entertain that.”
Though going public can make it easier to raise capital, “Many small companies … later regret that decision” because of the cost of legal and accounting fees and filing reports, along with additional SEC requirements, said John Ruhnka, professor of law and ethics at the University of Colorado’s Executive MBA program.
“There seems to be somewhat of a trend of companies to do ‘going private’ transactions to get out from under the jurisdictions of Sarbanes-Oxley (a corporate reform law) as well as the additional expenses,” he said.
Navigant had said in June that the SEC was conducting an informal inquiry focused on Navigant’s restatement of its finances for the fiscal years 2000, 2001, 2002, 2003 and the first three quarters of fiscal 2004. On Wednesday, it announced that the SEC has decided not to take any action.
Navigant shares were relisted on the Nasdaq on Jan. 14. They were delisted in July after the company failed to file its annual and quarterly reports on time.
“It kept snowballing into more and more issues, to where we got delisted, where we missed filing deadlines, where we had to restate issues with purchase accounting that had already been reviewed and passed on,” Adams said. “It was so frustrating.”
Adams said he thinks the process was exacerbated by Sarbanes-Oxley, passed in 2002.
Navigant’s general and administrative expenses increased 10.1 percent to $35.9 million in the quarter ended Sept. 25, 2005, according to its most recent quarterly financial report. The increase was due to $2.9 million of additional expenses, including acquisitions, pay raises and health-care cost increases, and for financial restatements.
“The cost of being public is very, very high, and I don’t think that cost is going to go away,” Adams said. He said the share price was hurt from the delisting, and some potential customers thought the company wasn’t financially stable, affecting new sales.
“We had some prospects that thought maybe we were under a cloud of SEC enforcement,” Adams said. “We had folks that were wondering what was the viability of the company.”
Staff writer Kelly Yamanouchi can be reached at 303-820-1488 or kyamanouchi@denverpost.com.
