Tyco (TYC) primed Wall Street for an eventful Thursday morning with a postclose earnings warning and a new accounting setback.
The troubled Bermuda-based conglomerate said Wednesday evening that it had fired the president of its Tyco Fire and Security business, Jerry Boggess, after identifying a number of bookkeeping issues at the unit. Tyco said that rectifying the accounting problems would force it to take a charge of about 10 cents a share in the current quarter, its fiscal second period.
The company also trimmed fiscal 2003 earnings guidance, saying that earnings before charges would be in the $1.40-$1.50-a-share range; previously, Tyco expected earnings to be near the lower end of a $1.50-$1.75 range. The current Wall Street estimate as quoted by Thomson Financial/First Call is $1.49, down from $1.79 a year earlier.
Free cash flow for the year is expected to range from $1.45 billion to $1.85 billion, Tyco said. Tyco said its latest outlook "confirms prior cash-flow guidance," but the company noted that it also changed its definition of free cash flow. Under the new definition, the number will include the effect of spending on ADT dealer account acquisitions as well as purchase accounting and holdback liabilities related to prior acquisitions.
The comments come as Tyco prepares to host a six-hour-long analyst conference Thursday morning in New York. The stock has mounted a rally off last summer's lows under the house-cleaning led by new CEO Ed Breen, but Tyco shares have fallen in recent weeks amid wartime worries and analyst cutbacks of Tyco's earnings estimates. Tyco rose 33 cents Wednesday, to $14.03.
The latest events come after an eventful year for Tyco. As recently as early 2002, the company was still a Wall Street favorite after years of go-go growth. But last spring the company ousted its longtime CEO, Dennis Kozlowski, and his top management team amid charges that they engaged in unethical and illegal personal and business behavior. Kozlowski and his top aides have since been indicted on tax and fraud charges. Meanwhile, the company has remained the subject of various inquiries, and some investors continue to question its accounting.
Tyco named David Robinson, who was president of Tyco Plastics and Adhesives, to replace Boggess. Mark Schmitz remains chief financial officer of Tyco Fire and Security, a job he took in January.