Salomon Revises '94 Loss Upward After Finding New Computer Error

From Associated Press

Salomon Inc., which reported its first-ever annual loss early this month, acknowledged Monday that the results were even worse because of yet another bookkeeping blunder by the big Wall Street investment firm.

The parent of Salomon Bros. Inc. said it is revamping its financial and operations staff as a result of the latest undetected error and is reassessing the performance of its outside auditor.

Salomon blamed a computer glitch that failed to distinguish between interest income and principal gains and losses when the firm redeemed foreign securities, mostly short-term Mexican government debt securities known as tesobonos and cetes.

Arthur Andersen & Co., the company's main outside auditor, declined to comment.

Salomon revised its 1994 loss upward to $399 million from the $364 million reported earlier this month.

For the fourth quarter, Salomon actually lost $157 million. The previously reported deficit was $122 million.

Salomon said the new figures include a $35-million after-tax charge for a previously undetected error in recording a 1988 transaction involving Japanese yen. The charge was on top of a $126-million charge Salomon reported early this month, when it blamed bookkeeping discrepancies in its London-based business and U.S. operations.

The parent firm's stock closed down 87.5 cents a share at $35.875 on Monday.

"Hopefully it's all over with," said Perrin Long, a securities industry analyst with Brown Bros. Harriman & Co.

"They were honest to admit and come out and say upon further checking . . . they found additional losses and they have to take more charges," Long said.

The latest charge brings Salomon's loss for the fourth quarter to $1.65 a share. Salomon previously had said it lost $1.32 a share in the period. It contrasts with Salomon's profit of $4.33 a share in 1993's fourth quarter.

For the year, Salomon's revised loss was put at $4.31 a share. The firm previously said it lost $3.98 a share.

For all of 1993, Salomon earned $827 million, or $7.01 a share.

Revenue was also revised downward. Salomon said total 1994 revenue was $6.28 billion, compared to the previously reported $6.34 billion. In 1993, revenue was $8.80 billion.

For the fourth quarter, total revenue was $1.53 billion, compared to the previously reported $1.59 billion. In 1993's final quarter, revenue was $2.76 billion.

Salomon also disclosed another revision that it said had no impact on total revenue or net income. It reclassified revenue previously attributed to principal transactions as revenue from interest and dividends.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World
57°