NEW YORK (CNNfn) - A day after giving shareholders a new streamlining initiative to cushion the blow, Cendant Corp. said Thursday its recalculated earnings statement will lower 1997 profits by $392 million before taxes, or 28 cents a share.
The Parsippany, N.J.-based consumer services firm, forced to restate its earnings for the last three years because of widespread accounting irregularities, told investors to expect the restatement to lower 1997 net income by 22 to 28 cents a share, before one-time and extraordinary items.
Cendant originally had reported 1997 earnings of $1 per share.
"We have now concluded our investigation of the accounting issues at CUC," said Cendant vice chairman and chief financial officer Michael P. Monaco. "While we take no joy in reporting these results, our shareholders should take great comfort from the thoroughness of this investigation and the fact that we have unflinchingly accepted and reported its results, even when it uncovered much greater and more systematic fraud than we had any conception of when we launched this effort in April."
Due to the findings of its accountants and auditors, Cendant said it also will lower 1996 results by 18 cents per share and 1995 earnings by 14 cents per share.
In April, Cendant revealed "accounting irregularities" at CUC, a business unit, that it said would reduce 1997 net income by 11 cents to 13 cents a share. But last month, Cendant revised the impact estimate, saying the problems were much larger than expected and included $300 million in fabricated revenues over a three-year period.
Since the scandal first erupted, Cendant's shares (CD) have lost more than 50 percent of their value.
The earnings restatement, however, left Wall Street undaunted.
The company's shares were trading up 1/8 Thursday at 16-1/4 on the New York Stock Exchange.
In July, Cendant's embattled Chairman Walter Forbes resigned along with eight other board members. A ninth is expected to leave the company by the end of the year.
Forbes maintains he was unaware of the accounting irregularities at CUC, which merged last year with HFS Inc. to form Cendant.
Cendant agreed Wednesday to sell its Hebdo Mag International subsidiary to the management of the classified ads publisher.
The sale is expected to generate an after-tax gain of more than $250 million.
The company also said it hired an investment advisor to handle the sale of its entire consumer software business.