Aviation’s Accountant Resigns; Trading Halted
Arthur Andersen LLC unexpectedly resigned as accountant for Aviation Distributors Inc., prompting Nasdaq officials to halt trading in the Irvine company’s stock Tuesday.
The accounting firm has withdrawn its opinions on Aviation’s financial reports for the past three years.
Last week, Arthur Andersen sent the company a letter outlining its concerns, as well as its reasons for ending its business links with Aviation, a distributor of aerospace parts.
On Wednesday, neither Arthur Andersen nor Aviation would discuss the contents of the letter or the resignation.
“The company is preparing a report, which will address Arthur Andersen’s reasons for their resignation, our management’s response to those reasons, and any possible impact that this week’s news will have on our financial reports,” company spokesman Steven B. Johnson said.
The report is expected to be released early next week, Johnson said.
Aviation is interviewing other accounting firms, Johnson said.
Analysts noted that, though details about the resignation are sketchy, the news could hurt the Irvine company’s credibility among investors.
Because Arthur Andersen has pulled three years worth of Aviation’s financial records, analysts say that any accounting concerns could date back as far as 1994 or before. The accounting firm withdrew reports on Aviation financial statements dated Dec. 31, 1994, 1995 and 1996, and June 30, 1996.
Formed in 1992, Aviation buys new and used airplane parts and redistributes them to international airlines. The Irvine firm’s clients include British Airways and Qantas Airlines.
The firm, which has 60 employees, completed its initial public offering in March, selling about 1.2 million shares at $5 a share.
Prior to the halt in trading, Aviation stock was priced at $12.13 a share, hovering around the company’s high of $13.38 a share.
The company posted second-quarter net income of $608,000, or 20 cents a share, down 21% from the $768,000, or 43 cents a share, recorded for the same period in 1996. Sales increased 45% to $10.3 million from $7.1 million.
