Sunbeam to Restate Some Financial Results
Sunbeam Corp. on Thursday said it will restate results for part of 1998, all of 1997 and possibly 1996 because of improper accounting practices during the tenure of fired Chairman Al Dunlap.
The largest U.S. maker of small appliances also said Dunlap and an ally, Russell Kersh, had resigned from the appliance maker’s board. Kersh was fired as Sunbeam’s chief financial officer a few days after Dunlap left the company.
Sunbeam, in turmoil over accounting and marketing practices under Dunlap, said it was delaying until late September its financial reporting for the three months ended June 30 because of the confusion caused by unreliable bookkeeping and accounting.
“The restatement will involve adjustments that are expected to be material in the aggregate for 1997 and possibly for 1996, as well as for the first quarter of 1998,” Sunbeam said in a news release.
Regulators at the Securities and Exchange Commission are also investigating the bookkeeping at Sunbeam, which turnaround specialist Dunlap ran for two years through June 13.
Shares of Sunbeam fell $1 to close at $7 in New York Stock Exchange trading.
The restatement further dims prospects for Sunbeam’s future, as its shares have plunged 87% since hitting an all-time high of $53 in March. Most of that appears now to be an illusion, leaving analysts questioning whether the company can avoid bankruptcy.
“This probably implies that there was fraud involved by the senior management,” said Nicholas Heymann, a Prudential Securities analyst. He foresees “more likely challenges from the lenders and the very real possibility that this company could go Chapter 11. They’ll have to go through a re-capitalization as far as we can see.”
The Delray Beach, Fla.-based company said its decision was based on a review by Deloitte & Touche with assistance from the company’s regular auditor, Arthur Andersen. Though the company initially said it backed the accounting during Dunlap’s tenure, it began a review after the SEC began an investigation.
Analysts say the company will have to cut too-high inventories pushed on retailers--some at cut-rate prices--before it can recover.
“They are being held by a string by all the banks. They will have a hard time selling anything,” said Jeff Middleswart, an analyst with David W. Tice & Associates.
Sunbeam repeated Thursday that it hasn’t agreed to pay severance to Dunlap, known as “Chainsaw Al” for his severe cuts in employment. The company did agree to pay $52,000 in accrued vacation pay as part of an agreement in which Dunlap resigned from the board, the company said.
The restatement could aid Sunbeam’s efforts to prevent him from getting a severance package valued at $27 million, analysts said.
Yet contrary to comments by a spokesman for Dunlap that the ousted chairman is cooperating with the company, Sunbeam said it was not cooperating “to develop legal strategies” with Dunlap or Kersh. Dunlap couldn’t be reached to comment Thursday.
Sunbeam’s financial statements say sales rose 19% last year, to $1.17 billion, though analysts say much of the gain was the result of sales being recorded long before products were shipped to retailers.
