VideoJust when it looked like the parade of corporate restatements might be slowing down, a number of high-profile companies have announced they are reving their financial results.
As CFO.com reported on Wednesday, AOL Time Warner said it will restate revenues downward by $190 million for the eight quarters ended June 30, 2002. The revenue-lowering stems from advertising and commerce transactions at its America Online division.
On Thursday, Bristol-Myers Squibb and Tyco International also reported they will restate their results.
With most companies just getting around to reporting their September quarterly results -- and with top corporate executives now required certify those results -- investors could be facing a restatement epidemic.
The restatement by Bristol-Myers is by far the biggest revision announced in the past couple of days.
The drug company said it will restate more than $2 billion in sales due to the company's accounting for its wholesaler inventory in its U.S. pharmaceuticals unit.
Bristol-Myers management said it will restate sales and earnings upward for 2002 and downward for prior periods that were affected, primarily in 2000 and 2001.
The drug company also indicated it will reallocate diluted earnings per share by about 61 cents over the three-year period. Apparently, the moves are being taken on the advice of the company's accountant, PricewaterhouseCoopers LLP.
Management at Bristol-Myers stressed that the figures are preliminary estimates and are subject to change.
"Restating will help put the inventory issue behind us as soon as possible and allow us to move forward," said Peter R. Dolan, chairman and chief executive officer.
On Aug. 14, the company reported that the SEC was informally investigating the company's accounting treatment of its sales incentives to wholesalers in 2000 and 2001. At the time, management indicated that the investigation could lead the pharmaceuticals giant to restate earnings for those two years.
A few weeks later, Bristol-Myers acknowledged that the SEC's investigation into its inventory accounting was upgraded into a formal investigation.
Meanwhile, Tyco International Ltd., which has had plenty of bad news over the past few months, yesterday restated its earnings for the first nine months of the current fiscal year.
The restatement was initially presented in an almost oblique manner in footnotes to financial tables accompanying a lengthy press release announcing quarterly results.
When the company was pressed by reporters and investors on a conference call later in the day, company management conceded that $135 million worth of pretax income already booked at its ADT security unit will be restated. The revenue will be recognized in future quarters, according to Reuters.
The wire service said that David FitzPatrick, Tyco's new chief financial officer, acknowledged that the income (related to ADT dealer fees) had been recognized upfront instead of recorded over the life of contracts. Typically, those contracts run for 10 years.
The aggressive accounting treatment took place under Tyco's former management, headed by former chairman, L. Dennis Kozlowski and former CFO Mark Swartz. Both those man currently face fraud and theft charges.
FitzPatrick reportedly said the restatement reflects the "best judgment" of management, in consultation with its outside auditor, PricewaterhouseCoopers.
Meanwhile, David Boies, a lawyer hired by Tyco to oversee an internal company investigation, said he expected the conglomerate to make additional accounting restatements. Boies added, however, that those future restatements would not meaningfully diminish current earnings, according to Reuters.
"It is likely some disclosures will be made in addition to what (Tyco's CFO) discussed with you this morning," Boies reportedly said.
He added that the forensic accounting investigation of Tyco's books is only 60 percent complete.
In other matters related to Tyco:
- The company's management said it recorded a $663 million charge related to the impairment of goodwill and intangibles.
- Tyco management indicated that its employee pension plans were underfunded by $1.7 billion in fiscal 2002.
- The ft.com reported that PwC, Tyco's auditor, apparently knew about loans from the conglomerate to its former corporate counsel. The ft.com cited court documents filed earlier this week.
Former Tyco attorney Mark Belnick was indicted last month for allegedly falsifying business records. Belnick is being sued by both Tyco and the SEC for allegedly taking $14 million in undisclosed, interest-free relocation loans.
Miner Restatements
Meanwhile, management at Newmont Mining Corp. announced on Wednesday that the company will restate its financials from the third quarter of 1999 through the second quarter of 2002. The reason for the revisions? To correct the accounting treatment for a prepaid forward gold sales contract and a forward gold purchase contract that the company entered into in July 1999.
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