|
Tyco reassures again
|
 |
February 13, 2002: 3:21 p.m. ET
Executives reaffirm will miss 2Q EPS, but say things getting back to normal.
|
NEW YORK (CNN/Money) - Executives of Tyco International Ltd. said Wednesday that they expect the current quarter to be the worst for their electronics business - and their corporate morale - but that they are addressing their public relations problems and expect to return soon to business as usual.
In the second of what are expected to be weekly investor conference calls, Tyco CEO Dennis Kozlowski and Chief Financial Officer Mark Swartz discussed aspects of the Bermuda-based company's accounting as part of an ongoing effort to reassure investors that it is nothing like bankrupt energy trader Enron Corp.
The executives offered more specific guidance about Tyco's earnings per share in its fiscal second quarter, ending in March, saying they thought earnings could be as low as between 65 cents and 68 cents per share. Wall Street analysts expect Tyco to earn 76 cents, according to earnings tracker First Call.
Dragging down earnings is a combination of a difficult electronics market, higher borrowing costs following downgrades of the company's credit ratings, the cost of trying to spin off its financing business, and the efforts to soothe fears of investors, employees, customers and suppliers about its finances.
"Our goal is to calm people down as quickly as possible and make this the worst-case scenario," Swartz said -- but the job of restoring confidence could cost the company between 5 cents and 10 cents a share in the quarter.
The executives also again assured investors that Tyco has plenty of cash and said they expected its credit rating to improve soon, at which point the company plans to buy back some of its own stock. The excess borrowing costs associated with its lower credit rating could cut about 5 cents a share from earnings in the quarter, Swartz said.
Kozlowski said he saw improvement in business in the second half of the year and already had a sense the company was beginning to return to normal after several weeks of worries that have cut Tyco's stock price in half, erasing about $70 billion in market value.
The diversified manufacturer also continued to back away from plans announced last month to split into four separate companies in a series of initial public offerings.
While Tyco still plans to spin off its financing unit - called CIT or Tyco Capital - and still hopes to shed itself of its fire safety and health care businesses, it would consider methods other than an IPO. It would even consider hanging on to the businesses, if market conditions dictate that.
"We need confidence and credibility here to spin companies to shareholders and achieve for them the absolute very best value possible," Kozlowski said. "Maintaining flexibility with that is the best thing to do."
Enron's bankruptcy, the largest in U.S. history, came on the heels of revelations that it had used several off-the-books entities to hide debts and assets. Tyco's decision to split into four companies was based in part on a desire to simplify its accounting after years of aggressive acquisitions. But investors were not impressed, and Tyco (TYC: Research, Estimates) stock continued to fall.
The executives expressed some frustration with the news media, saying their good news was unreported or overshadowed by bad news, but they also accepted some of the blame.
"We're taking a hard look at public relations," Kozlowski said. "We definitely think that a far better job can be done there."
To address investor fears, the company instituted weekly investor conferences and said its next quarterly filing with the Securities and Exchange Commission will be more detailed than ever.
"You will see even more disclosures than you're used to at Tyco," Kozlowski said. "We're ready to provide more disclosure than our peers. The more you know about our accounting, the more comfortable you'll be."
But the executives did not address a report in Wednesday's New York Times that the two had together sold about $500 million in Tyco stock since 1999.
The company told the Times that Kozlowski and Swartz were "net purchasers" of Tyco stock, and SEC filings show that they each bought 500,000 shares - about $14.7 million worth - on Jan. 30.
Still, many of the Wall Street analysts on the call appreciated Tyco's efforts at coming clean, in contrast with Enron, some of whose former executives have asserted their Fifth Amendment right against self-incrimination and refused to answer questions in recent appearances before Congress.
"I appreciate the way you're open with all you're numbers," one analyst said. "None of you fellows have taken the Fifth, and I want to commend you on that." 
|
|
|
|
|
|
|
