SEC Orders Tyco to Restate ResultsJun 17, 2003 | FT.COM
The Securities and Exchange Commission has asked Tyco to restate its results going back five years to account for charges the industrial group had already announced following the discovery of accounting irregularities.
Tyco said the restatement would not have an adverse affect on its balance sheet or on its operating results or cashflows for the rest of 2003 and in future. The company added that the restatement would not put the company in breach of any its financing covenants.
There may be further restatements once the SEC and Tyco agree on how to handle $630m of charges taken in the quarter to March 31, relating to contracts struck by ADT, Tyco's security systems subsidiary.
The result of the restatement which allocates pre-tax charges of nearly $700m to prior quarters is to improve reported results for the 2002 fiscal year and the first six months of this fiscal year.
But the announcements puts the years in which Dennis Kozlowski, the company's former chief executive, was in charge in a less flattering light, reducing reported results for the fiscal years 1998-2001. According to the company's filing with the SEC, net income in the two years to September 30, 2001 was about $441m or 5 per cent lower than originally reported.
The difference is not that great, except that Mr Kozlowski and Mark Swartz, then chief financial officer who have been accused of looting more than $170m from the company were well-known at the time for beating analysts' estimates of quarterly earnings by a few cents. Mr Kozlowski and Mr Swartz resigned last year.
Tyco's earnings beat analysts' consensus estimates by between one and four cents in every quarterly results announcement made between July 2000 and January 2002. In most cases, the positive reception for the "better than expected" results boosted Tyco's shares and helped the company to continue making acquisitions.
Tyco said on Monday that its earnings for the quarter to the end of this month would be reduced by 7 cents per share because of an expense relating to the repurchase of debt.
Edward Breen, who took over as Tyco's chief executive last July, has cleared out old management and installed a new board, whose operations include valves, electronic components, medical devices and plastics. Mr Breen has announced new charges this year after uncovering accounting irregularities and moving to conservative accounting methods.