Allied-Signal Expects to Record Loss for ’85

Citing greater-than-anticipated expenses from its recently completed merger, Allied-Signal said Tuesday that it expects to take a charge of up to $700 million in the fourth quarter, giving it a loss for 1985.

The Morristown, N.J., company did not estimate the size of the loss. It had a profit of $785 million, or $3.11 per share, for 1984.

Allied-Signal had previously suggested that it might earn $4 per share last year, and some industry analysts had predicted that write-offs would not cause a loss for the company, which was formed last September by the merger of Allied Corp. and La Jolla-based Signal Cos.

The huge charge results from post-merger, company-wide restructuring and costs generated by early retirement programs and the spin-off of 30 businesses to be run from San Diego by former Signal President Michael Dingman, according to Chairman Edward L. Hennessy Jr.

Avoids ’86 Charges

Hennessy told Dow Jones News Service on Tuesday that Allied-Signal’s decision to absorb the charges during 1985 would likely mean that the company won’t face similar charges this year. “I don’t want to have to take any more special charges,” Hennessy said.

“I’d been looking for a loss for the full year, but they are talking about a bit more than I anticipated,” said Katherine M. Stults, vice president of research with Dean Witter, Reynolds in New York. “I understand that part of the reason for the larger write-downs (is that) some of the write-downs will go right to the bottom line without tax write-offs.”

Hennessy linked about $300 million of the charge to write-downs generated by Allied-Signal’s decision to sell several units. Another $200 million was generated by job cutbacks and facility consolidations.

The company anticipates at least $100 million in write-downs related to the 30 Signal and Allied business units that will be spun off to Henley Group, the soon-to-be-created company that Dingman will run.

Stults suggested that the company was on target with its prediction of 1986 earnings between $3.75 and $4.25 a share.

Later this week, Allied-Signal will file documents with the Securities and Exchange Commission that will lead to the issuance of publicly traded stock in the Henley Group, the company that Dingman will lead.

Change in Allocation

Allied-Signal previously had indicated that its shareholders would receive one share of Henley Group stock for each share of Allied-Signal. However, according to the Dow Jones report, Hennessy has now decided that only one share of Henley stock be issued for every four shares of Allied-Signal stock.

That distribution would “reduce the future number of Henley shares outstanding and boost the stock’s price,” according to Dow Jones.