Four months after declaring an internal audit had found no major fraud, Tyco International on Wednesday said new accounting problems helped spur a second-quarter loss caused in part by $1.36 billion in related pretax charges.
The troubled conglomerate also announced plans for more corporate firings.
The news raised to about $7 billion the charges, restatements and write-downs taken by Tyco since last year’s ouster of CEO Dennis Kozlowski in a financial scandal.
Tyco said the latest problems would result in a 23-cents-a-share loss in the second quarter. Tyco lost $3.20 a share the same period last year. Analysts had projected a profit of 32 cents a share for the quarter.
The announcement represents a potential new hurdle to Bermuda-based Tyco’s efforts to rebuild credibility and recover from a more than 70% plunge in share value.
CEO Edward Breen told investors that most of the new problems resulted from questions over the way Tyco accounted for sales of its ADT security alarms and assessed the value of its former CIT finance unit. He blamed the financial ”legacy” left by Kozlowski’s team.
Breen said the problems were uncovered by audits he ordered after an earlier $40 million review reported no evidence of widespread fraud when it concluded in December.
”We now believe we have identified all, or nearly all, of the remaining legacy issues,” Breen said. Repeating a vow to make Tyco’s financial culture ”more conservative,” he announced that several unidentified executives would be ousted over ”issues that we identified during our internal audits.”
Breen said Tyco had addressed the problems with more stringent accounting procedures. But he acknowledged that the Securities and Exchange Commission has not completed its investigation of Tyco’s auditing.
On the plus side, Breen predicted the accounting problems would not lead to further earnings restatements. He also said the company’s free cash flow jumped 47% to $833 million. Despite a weak economy, Breen said, Tyco should meet the low end of the $1.30-to-$1.40-a-share profit range forecast for fiscal 2003.
Tyco shares closed up 1.5% at $15.60.
Tyco’s financial troubles began last year, not long before Kozlowski and former CFO Mark Swartz were indicted on charges that they reaped more than $600 million through improper bonuses, loans and stock sales. They have pleaded not guilty.