Two months after announcing the resignation of its chief financial officer and six weeks after it changed the way it books support subscription revenue, Linux vendor Red Hat Inc. has named a new CFO.
In an announcement Thursday, the Raleigh, N.C.-based company said it has hired Charles E. Peters Jr. as its new chief financial officer, effective immediately. He replaces Kevin Thompson.
Peters, a certified public accountant, most recently served for eight years as the CFO at Greensboro, N.C.-based Burlington Industries LLC, which sells fabrics for clothing and furniture.
In June, Thompson, who had been with the company for about four years, said he left to spend more time with his family and to "pursue other interests."
A month later, Red Hat announced that it was changing the way it books support subscription revenue, based on a recommendation from its auditors. Red Hat was notified by its auditor, PricewaterhouseCoopers, of the recommendation on June 16 -- just two days after Thompson's resignation.
Red Hat said the two events were unrelated.
The accounting changes prompted Red Hat to correct and restate its audited financial statements for the fiscal years that ended Feb. 29, 2004, Feb. 28, 2003, and Feb. 28, 2002, and its unaudited financial statements for the fiscal quarter that ended May 31, 2004. Under the new procedures, Red Hat now recognizes revenue for subscription agreements on a daily basis, rather than on the monthly basis it had been using for five years.
The accounting issues didn't end there. Almost immediately, several shareholder class-action lawsuits were filed alleging that Red Hat officials, including Thompson, failed to disclose the method used for reporting subscription revenue and that, as a consequence, the company's earnings were overstated.
Conor Crowley, an attorney at Chicago-based Much Shelist Freed Denenberg Ament & Rubenstein PC, which filed one of the class-action lawsuits, said the multiple suits will likely be consolidated at a later date by the court. The suits were filed in the U.S. District Court for the Eastern District of North Carolina, where Red Hat is based. The court will hear requests for consolidation and for the appointment of a lead plaintiff on Sept. 13, he said.
Red Hat was contacted by the U.S. Securities and Exchange Commission with questions and comments about the reporting changes.
In an interview Thursday, Peters, 52, said he is well aware of the recent accounting changes and lawsuits. "I did substantial due diligence before I decided to join the company. I'm very comfortable with the restatement. I would call it a refinement of the accounting. It didn't have significant changes looking backward" on the company's overall financial results, he said.
"In regard to the class-action lawsuits, those will be dealt with by the lawyers," Peters said.
At Red Hat, Peters will be responsible for accounting, finance, treasury, tax, credit and investor relations.
"Charlie is a seasoned professional with a unique depth and breadth of experience in international finance and publicly traded companies that will help lead Red Hat's next phase of growth," Matthew Szulik, Red Hat chairman and CEO, said in a statement.
Peters began his career with Price Waterhouse in 1973, serving in Boston and London in the company's audit division. In 1982, he joined GenRad Inc., a multinational maker of scientific test equipment, where he served as CFO for six years. In 1991, he joined Boston Edison Co., a $1.5 billion electric power company serving the Boston area.