Accounting Firm Quits Work With Pinnacle
Less than three months after settling a costly shareholder lawsuit stemming from accounting irregularities, Pinnacle Micro Inc. said Tuesday that its independent accounting firm has resigned over a new bookkeeping dispute.
The Irvine-based maker of optical disk drives said its accounting firm, Coopers & Lybrand L.L.P., disagreed with the way Pinnacle Micro recorded certain engineering expenditures that totaled $406,000 during 1995.
Meanwhile, Pinnacle also reported a fourth-quarter loss, including a charge of $1.53 million related to the company’s settlement of the 1994 shareholder suit. The suit stemmed from Pinnacle’s admission that in 1993, it recorded about $2 million in revenue that should not have been counted until the first quarter of 1994.
A subsequent review by an audit committee stated that some employees “knowingly adopted or utilized improper procedures” while recording shipments.
The price of Pinnacle’s stock on Tuesday plunged 37%, or $4.75 per share, closing at $8 per share in Nasdaq trading. The company’s stock had been trading at about $19 per share last November.
The company’s fourth-quarter loss totaled $2.59 million, or 32 cents per share, compared with a year-earlier profit of $549,000, or 7 cents per share. Fourth-quarter sales totaled $19.7 million, up 5% from $18.8 million in the fourth quarter of 1994.
For the full year, Pinnacle reported a loss of $2.2 million, or 27 cents per share, compared with a year-earlier profit of $2.74 million, or 35 cents per share. Sales in 1995 climbed 25% to $81.8 million, up from $65.4 million in 1994.
The company said the results are preliminary and subject to audit adjustments.
When Pinnacle paid $2.33 million in cash and stock to settle the shareholder suit in December, Chief Executive Bill Blum said the company was “pleased we will soon have this issue completely behind us.” But the resignation of Coopers & Lybrand has thrust Pinnacle into another accounting squabble.
Coopers & Lybrand disagreed with Pinnacle’s decision to capitalize certain engineering costs, effectively recording the expenditures as assets rather than expenses, Pinnacle officials said in a news release.
“We were surprised and disappointed at the resignation of Coopers & Lybrand,” Blum said in the release. “Management will move quickly to replace Coopers & Lybrand and will work diligently to avoid delay in preparation and filing of the audited annual financial statements.”
Blum was not available for further comment.
A spokesman for Coopers & Lybrand said the company had tried to work out its disagreement with Pinnacle Micro over the past week, but the accounting firm finally decided to resign when the two sides could not resolve their differences.
“We did have discussions with them,” said David Nestor, a spokesman for Coopers & Lybrand. “When it reaches the point where you’re not going to agree, you have to do something else.”
Coopers & Lybrand became Pinnacle’s independent accounting firm in April 1995 after Pinnacle and its previous accounting firm, Ernst & Young, split as part of what the companies called a “mutual decision.”
The company also said it is reviewing its accounting of several expenditures similar to those questioned by Coopers & Lybrand. Those expenditures total $23,000.
Pinnacle Micro makes CD-ROM computer drives that can store vast amounts of data, typically much more than conventional magnetic computer disks can store.
