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The Honolulu Advertiser
Posted on: Sunday, June 30, 2002

WorldCom one of many restating results

By Alex Armitage
Bloomberg News Service

WorldCom Inc. bought MCI Communications for $44 billion in 1998 and may be compelled to shed real estate that it owns or leases, such as the MCI Center in Washington, D.C., if it is to survive.

Bloomberg News Service

NEW YORK — WorldCom Inc., the No. 2 U.S. long-distance telephone company, is just the latest to restate results because of accounting issues. WorldCom announced last week that it will restate results for 2001 and the first quarter of 2002 to reflect losses after disclosing that its profit was inflated by the misrepresentation of $3.9 billion in expenses.

In other instances:

Rite Aid Corp, the third-largest U.S. drugstore chain, says in July 2001 it will restate fiscal 1998 and 1999, erasing $1 billion in profit. KPMG International quit as the company's auditor, saying it couldn't trust information from the retailer's management.

Enron Corp., the energy trader that filed the largest-ever U.S. bankruptcy, says in November 2001 it will restate $586 million in profit since 1997 after disclosing accounting irregularities in affiliated partnerships that shifted losses and poor-performing assets off its books.

Xerox Corp., the world's largest copier maker, is ordered by the Securities and Exchange Commission in May 2001 to restate results. The SEC levies a record $10 million fine on the company for prematurely booking $3 billion in equipment-lease revenue over a four-year period starting in 1997. The agency says Xerox acceded to pressure to meet Wall Street earnings expectations. Xerox agrees to the fine without admitting or denying wrongdoing.

Lucent Technologies Inc., the biggest maker of telephone equipment, says in December 2000 it restated fiscal fourth-quarter sales and profit for a second time, slashing revenue by about 7 percent. The company blames misleading documentation and communications between sales employees and the financial department. The SEC investigated an initial booking of $679 million in sales and later a restatement of fiscal 2000 revenue to exclude that amount.

Cendant Corp., the owner of Avis car rentals, Honolulu-based Cheap Tickets and Howard Johnson Hotels, says in April 1998 it will restate 1997 profit by $100 million to $115 million and expects to reduce 1998 profit by a similar amount because it found accounting irregularities in some former businesses, including travel and discount clubs of fee-paying members.

Sunbeam Corp., the maker of small appliances such as toasters and blenders, says in June 1998 it may restate 1997 and the first quarter of 1998 because the results were inaccurate. The restatements turn 1997's results into a profit of $6.8 million from a loss of $6.4 million, excluding the reversal of restructuring charges, and turn a 1996 profit of $10.8 million into a loss of $33.9 million.

Waste Management Inc., a trash-hauling company run by former Aloha Airlines chief Maurice Myers, says in January 1996 it will restate six quarters starting in 1996 to include accounting changes. In March 2001, the company won court approval for a $22.7 million settlement of shareholder suits over the $2.9 billion in restated earnings for the five-year period.

America Online Inc., the Internet service run by Honolulu-born Steve Case, says in May 2000 it will restate financial results from fiscal 1995 to 1997 after the company recorded $385 million in marketing costs as an asset. AOL took a $385 million pretax charge. America Online changed its name to AOL Time Warner Inc. in January 2001.

Safety-Kleen Corp., once the largest recycler of industrial waste in North America, says in July 2001 that it restated 1997 through 1999 results, reducing earnings by $534 million. Safety-Kleen had losses in 1998 and 1999, instead of previously announced profits, and a wider loss in 1997 than it initially reported.

Dynegy Inc., a natural gas and power supplier and trader, in May 2002 restates 2001 net income lower by $79 million, or 23 cents a share, after reversing a $79 million tax benefit related to a gas contract under investigation.

Kroger Co., the largest U.S. supermarket company, says in March 2001 it will restate earnings for the past three years because of accounting irregularities at a chain it acquired in 1999. The restatement will cut earnings by 2 cents a share over three years.

CMS Energy Corp., owner of Michigan's largest utility, agrees in June 2002 to restate 2000 and 2001 results after admitting it used sham energy trades to inflate revenue by $5.2 billion. Chief executive William T. McCormick Jr. resigned after the disclosures, and the company named a committee to investigate the so-called round-trip trades.

Reliant Resources Inc., the trading arm of Texas's largest energy company, Reliant Energy Inc., says in May 2002 it will restate the first quarter of 2001. The company eliminates $1.2 billion in revenue from round-trip trades.

Homestore.com Inc., the biggest real estate Web site, says in February 2002 it will restate 2000 financial results and says it expects to file new numbers pending an internal inquiry. The company says it overstated 2000 revenue by $41.4 million by counting barter transactions as cash sales.

L90 Inc., an Internet advertising company under investigation by the Securities and Exchange Commission, says in May 2002 it's restating 2000 and 2001 because it improperly accounted for revenue. Sales in 2000 and the first three quarters of 2001 will be reduced by about $8.3 million. Expenses and other income for both years also are being restated.

MicroStrategy Inc., a maker of data delivery software, says in March 2000 it will reduce sales from 1998 and 1999 by as much as $65.8 million and restate losses and profit in those years to comply with accounting rules.

Peregrine Systems Inc., a maker of business management software, says in May 2002 that about $100 million in sales to consultants and other resellers over three years will be restated. Two top executives quit and the SEC starts an inquiry.

Restoration Hardware Inc., a home furnishings retailer, in May 2002 restates the prior two years after changing its accounting for furniture sales. Fiscal 2000's loss widens and the loss in 2001 narrows after the change.

Network Associates Inc., the anti-virus software maker, in April 2002 says it will restate 1999 and 2000 results after it made mistakes in recording sales and expenses. Network Associates said a month earlier the SEC began an inquiry in 2000 of revenue recognition.

Chambers Development Co., once the nation's fourth-largest waste management company, says in March 1992 it will restate profit from 1989 to 1991 because it showed landfill-development costs as capital and would instead count them as expenses. The restatement eventually revealed it had losses of $129 million in those three years instead of $111 million in profits.