INTERVIEW/Cendant CEO sees 20 pct eps growth
By Brendan Intindola
NEW YORK, July 14 (Reuters) - Cendant chief executive Henry Silverman said he expects the company to sustain 20 percent per-share earning
growth as the marketing and franchising giant continues to investigate accounting irregularities that have sapped Cendant's earnings and investor confidence.
Cendant currently expects to report 1998 operating earnings of $1.08 per share in 1998 and $1.30 per share in 1999, Silverman told Reuters in a telephone interview.
Early Tuesday, Cendant said preliminary findings of an investigation into the former CUC International's accounting practices found ''widespread and systematic'' irregularities and errors that will reduce historical earnings, and pare back earnings forecasts.
The news drove another investor exodus from Cendant equity, the shares off 2-3/4, or about 15 percent, at 16 in afternoon New York Stock Exchange trade, where more than 28 million shares had traded.
Yesterday, Cendant stock fell 3-1/8 after more than 21 million shares traded on the Big Board, a tumble made amid bearish market rumors about the investigation into the accounting practice at CUC International, which merged with HFS in an $11 billion deal to create Cendant last December.
Silverman said in the interview the company has directed New York law firm Skadden Arps Slate Meagher & Flom to request U.S. Securities and
Exchange Commission investigation of trading in Cendant stock before today's news of the preliminary findings.
The latest findings of the probe -- including fictitious revenues, overstatement of assets, and delayed recognition of canceled CUC memberships -- are expected to reduce 1997 net income before merger-related and one-time charges by $0.22 to $0.28 per share, nearly double the previously expected 1997 impact, first announced in mid-April.
Cendant reported 1997 income before one-time charges of $1.00 per share.
Cendant also said its 1998 operating earnings will be $0.05 to $0.06 per share below previous expectations. The earlier 1998 First Call consensus estimate of analysts forecasts was $1.13 per share.
Cendant's investigation also confirmed accounting irregularities existed in CUC's financial statements in years prior to 1997 and that in addition to 1997, 1996 and 1995 results will be restated to correct the irregularities.
''Cendant's probe of CUC's financial records, while not finished, is substantially complete,'' said Michael Monaco, Cendant vice chairman and chief financial officer, in a prepared statement.
''Arthur Andersen is expected to provide a report to (the board of directors) audit committee in two weeks, and Cendant expects to issue full restated and audited historical financial statements in early August,'' he said.
Deloitte & Touche is principal independent accountants to Cendant and has replaced Ernst & Young as the auditor of these historical statements, Cendant said.
The Arthur Andersen forensic audit was commissioned by New York law firm Willkie Farr & Gallagher as part of its overall investigation of the accounting irregularities.
The audit committee's report of that investigation should be complete in August, the company said. |
