Sunbeam Stock Drops Under New Attack
Sunbeam Corp.’s bookkeeping and sales practices came under new attack, knocking the appliance maker’s shares Monday to a year’s low despite a hot denial of accounting gimmickry by the company’s combative chief.
Sunbeam’s stock, as high as $53 in recent months, closed down $1.25 in heavy New York Stock Exchange trading at $20.63. Earlier, Sunbeam shares were as low as $20.25, a new 52-week bottom.
“I don’t think anyone knows what’s going on with Sunbeam at the moment,” said one industry analyst, who requested anonymity. “There’s a credibility problem and you just don’t know where the floor is.”
Barron’s published a sharply critical article over the weekend suggesting that Sunbeam’s 1997 profits of $109.4 million were largely due to improper shifting of costs, write-offs and revenues.
Such techniques, Barron’s said, added up $120 million of questionable “profit boosters.”
The influential investment weekly also said Sunbeam, under turnaround specialist Al Dunlap, its chief executive, had front-loaded its 1997 sales by encouraging big customers to buy barbecue grills and other items for 1998 far ahead of schedule.
“Sunbeam had every incentive to try to shoot the lights out in 1997,” Jonathan R. Laing wrote in Barron’s.
“Dunlap and crew were convinced they would be able to attract a buyer for the company just as they had done in the second year of the restructuring of Scott Paper in 1995, when Dunlap managed to fob off Scott on Kimberly-Clark for $9 billion,” Laing said.
Dunlap, with Sunbeam shares and options estimated by Barron’s to be worth about $70 million, won a big following on Wall Street in the mid-1990s after a rapid and highly profitable turnaround at Scott during which he cut half the work force and sold off businesses. He took similar steps at Sunbeam.
Dunlap, who had tried to sell Sunbeam in late 1997, only to switch gears and buy three other companies in early 1998, denounced the article.
“All of Sunbeam’s accounting was proper under generally accepted accounting principles and audited by Arthur Andersen LLP,” the company said in a news release.
“Sunbeam did not capitalize advertising and marketing expenses; it did not lower bad debt reserves to inflate earnings; it did not manipulate prepaid expenses; it did not sell written-off inventory at a gain, and it did not engage in any other manipulative actions,” the company said.
A spokesman for Arthur Andersen, the world’s biggest accounting and consulting group, was not immediately available for comment.
Analysts said the Barron’s article repeated and expanded upon some charges made against Sunbeam earlier this year, when it announced its first-quarter earnings would be lower than expected. Sunbeam has since been hit by class-action suits alleging the company misled investors.
