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Microcap & Penny Stocks : Zia Sun(zsun) -- Ignore unavailable to you. Want to Upgrade?

To: ezmoney who wrote (6038)	12/10/1999 9:50:00 AM
From: Sir Auric Goldfinger	Respond to of 10354

SEC Investigates Accounting At Tyco; Stock Takes Plunge By MARK MAREMONT Staff Reporter of THE WALL STREET JOURNAL Tyco International Ltd. said the U.S. Securities and Exchange Commission has launched an "informal inquiry" into the company's accounting practices, sending the conglomerate's stock tumbling 23% Thursday and erasing more than $14 billion from its market value. The company said the SEC's enforcement arm has requested documents supporting the way it has accounted for charges and reserves related to its acquisitions in the last six years. Tyco said it had acquired more than 120 firms during that period for more than $30 billion, and had taken about $3 billion in restructuring charges in conjunction with those deals. In a statement, Tyco's chairman, L. Dennis Kozlowski, said the company was confident of its accounting methodology and its public disclosures. He said Tyco welcomed the SEC inquiry in light of the recent weakness in its stock, which he said was "not justified by any development" at the company. Tyco also said that it will issue its 10-K annual report on Dec. 13, as scheduled. Drop of $8.375 The news of the SEC inquiry sent Tyco's once-highflying shares down $8.375 to $27.875 in 4 p.m. New York Stock Exchange trading Thursday. It was the most actively traded stock on the Big Board, with more than 114 million shares changing hands. Controversy over Tyco's acquisition-related accounting practices started in October with the release of a critical report by a Dallas money-management firm, David W. Tice Associates, that frequently shorts stocks. Tyco stock, which had been a Wall Street favorite for years, fell sharply after that report, and now has fallen by nearly half since early October. Tyco's Deal-Making Spree Month closed Company Business Price (billions) November 1999 Siemens Electromechanical Electronic parts $1.10 August 1999 Raychem Electronic parts 3.05 April 1999 AMP Electronic parts 11.90 October 1998 US Surgical Medical supplies 3.17 June 1998 Wells Fargo Alarm Security alarm services 0.43 March 1998 Sherwood Davis & Geck Medical supplies 1.80 September 1997 Keystone Industrial valves 1.20 July 1997 AT&T Submarine Systems Undersea cable 0.85 July 1997 ADT Security alarm services 5.60 Source: WSJ research The inquiry also comes two weeks after a wider SEC bid to curb abuses in the way companies handle their acquisition-related reserves. The agency in late November issued new guidance on how such reserves should be handled, emphasizing that companies can only book reserves for actions -- such as layoffs or plant closures -- that have already been identified and that they have definite plans to execute. The agency has been concerned about companies using such reserves as "cookie jars" to be dipped into when they need to boost earnings in future periods. An SEC spokeswoman declined to comment on the Tyco inquiry, citing an agency policy of confidentiality in such matters. Past SEC Reviews J. Brad McGee, a Tyco spokesman, said the SEC's corporation-finance division -- which reviews public filings and often operates separately from the enforcement arm -- has conducted "full reviews" of Tyco's accounting and disclosure practices four times since 1997. The most recent review was in December 1998, when Tyco was proposing to issue $11.9 billion in stock to acquire electrical-parts maker AMP Inc. Mr. McGee said those reviews did not result in any adjustments, other than a need to change wording to conform with the SEC's "plain English" push for more clarity. Mr. McGee said the company received notice of the SEC's inquiry on Wednesday. In an informal inquiry, the SEC staff conducts interviews and seeks documents without use of subpoenas, relying on voluntary cooperation. Mr. McGee said the company wasn't obliged to disclose the inquiry, but did so to protect the interests of investors. In addition to asking for Tyco's own documents, the letter requested documents related to charges taken by companies acquired by Tyco in the six months prior to completion of the deals. Some of the criticism of Tyco in recent weeks has centered on instances in which companies it had agreed to acquire -- including AMP and U.S. Surgical Corp. -- took substantial charges just before being folded into Tyco. The charges allowed Tyco in later periods to show higher profits and growth rates than it would otherwise have done. Tyco executives have said that the charges were taken for legitimate reasons and conformed to proper accounting practices, and that sophisticated investors have discounted any resulting distortions in its growth rates. Robert Willens, accounting analyst at Lehman Brothers Inc. in New York, said he expects the SEC to look closely at Tyco's restructuring plans to see if they were bona fide and were carried out as planned and within accounting guidelines. It's possible that Tyco will have to make some adjustments "on the basis of good-faith disputes" about proper procedures, he added, but any changes are "likely to be minor." Tyco, officially based in Bermuda but managed from Exeter, N.H., is a diversified conglomerate with interests in electronics, disposable medical supplies, undersea cable, fire and security systems, and other businesses. David Tice, the money manager who issued the critical report, said the SEC inquiry was "a little bit of vindication." After Mr. Tice issued his report, Tyco requested that the SEC take action against what it termed "malicious" rumors. Mr. Tice soon afterward said he had been contacted by the agency. Some analysts Thursday said it was possible the SEC inquiry into Tyco was an outgrowth of that earlier probe. Analysts said Tyco's huge stock slide in recent weeks comes amid market nervousness about companies with accounting problems. But Tyco's stock decline is "disappointing and frustrating," said Jack Blackstock, an analyst at Donaldson, Lufkin & Jenrette Inc., because "nobody has made any accusations of any kind of meaningful accounting problem" at Tyco.