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Cendant to restate results
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April 15, 1998: 6:37 p.m. ET
Shares plummet after company discovers 'accounting irregularities'
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NEW YORK (CNNfn) - Shares of travel and real estate titan Cendant Corp. lost almost one-third of their value Wednesday after the company warned it expects to restate its 1997 earnings, resulting in a net income reduction of up to $115 million.
Cendant shares closed off 1 to 35-5/8. However, shares plunged almost 10 in after-hours trading to 26.
The Parsippany, N.J.-based company, a product of the merger of CUC International Inc. and HFS Inc., said while preparing to report its first quarter 1998 results, officials discovered potential accounting irregularities in former CUC business units.
As a result, officials warned the company faces an unexpected charge of between $100 million and $115 million, which will cut 1997 earnings by between 11 and 13 cents a share. Cendant (CD) previously reported a 1997 net income of $872 million, or $1 a share, before one-time charges.
The company said the potential problems are limited to former CUC businesses accounting for less than a third of Cendant's 1997 net income.
Officials said all current businesses continue to perform strongly and that they expect the company to meet or exceed the consensus estimate of 25 cents a share for the first quarter. However, 1998 earnings are expected to be cut by 11 to 13 cents as well.
Cendant President and Chief Executive Officer Henry R. Silverman said the company remains healthy. He promised to take action against any individuals found to be involved in the potential accounting irregularities.
"We are outraged by the actions of a small number of former CUC employees who betrayed the trust that was placed in them by the company and our fellow shareholders.
"The company will continue to pursue aggressively the independent and internal investigations that are underway and will take whatever further actions are necessary based on the results of that comprehensive inquiry," he said.
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Cendant
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