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Kit Menkin's Leasing News www.leasingnews.org Friday, April 26, 2002 Accurate, fair and unbiased news for the equipment Leasing Industry Headlines Tyco to go IPO—“The Whole Truth, and Nothing But” Corporate Profile of DVI—Tell Me True ELA Funding Exhibition---More Reactions Leasing Recruiter Debate 1st Quarter e-tailer report e-Plus gets Reward 1st Source 1st Quarter Report Jeffrey Taylor To Lecture In Kuwait CIT 2nd Quarter Full Report ### Denotes Press Release Ten Top Things Not to Say at the EAEL/UAEL Joint Conference in Las Vegas ________________________________________________________________________ As Leasing News has reported from the very beginning, Tyco would go IPO: It is now official in the New York Times, Wall Street Journal, and
the “dedicated readers” can testify we were the first
to report that Tyco International Ltd. (TYC.N) would wind up filing
a public offering of its finance arm CIT Group ------after failing
to find a buyer for the unit ( they found buyers who wanted to steal the separate divisions or group, no where near the original
purchase price) had nothing but compliments, even over rates and other issues.
They employees work hard and espirt de corp never left,
even during all this turmoil. Leasing News also reported that the talks with GE Capital and Ford
Motor Credit Corporation fell apart, and that Tyco executives
scared a group that was trying to make a deal for an “employee
owned IPO” in conjunction with Merrill Lynch.
Then Merrill Lynch had their problems, as did GE Capital
and Ford Motor Company, and the interview on radio with Neutron
Jack and a $10 billion sale price jinxed it all ( Welch’s
girl friend Suzy Wetlaufer has left her Harvard Review editor
job, the New York Times reports, giving up a $276,963 year, including
a bonus---but then he gave up half of his assets for her, so it
must be “true love.” Readers say there is too much gossip,
but we don’t create it, we just report it. One reader sent me the full story on the PinnFund/PinnLeasing
story from the April 8 San Diego Weekly Reader---wow!!! the Enquirer
doesn’t even get this racy. It not only is too long to re-print,
but we’re trying to be a family news media. The Welch-Welaufer
story may make the movies one day—Sean Connery plays Jack
and Megan Ryan plays Suzy. Okay, back to CIT ) New York Times---Alex Berenson Under L. Dennis Kozlowski, its charismatic chairman and chief executive, Tyco has been an aggressive buyer of other companies since the early 1990's. Based in Bermuda with headquarters in Exeter, N.H., Tyco has 240,000 employees and makes everything from security systems to telecommunications equipment. Its best-known brands include ADT, a security company, and AMP, a big electronics manufacturer. Because it is incorporated in Bermuda, the company avoids paying American taxes on its profits generated overseas, and also shelters some United States income from taxes. It says that being a Bermuda corporation saved it more than $400 million last year alone. This year, Tyco says its overall worldwide tax rate will be about 18 percent, about half the corporate tax rate in the United States. Mr. Kozlowski has spoken repeatedly of his ambition to build a conglomerate that rivals Berkshire Hathaway or General Electric. But when Tyco's stock dipped in January after a series of negative news articles, Mr. Kozlowski suddenly announced that Tyco would break into four companies. Mr. Kozlowski, and Tyco's investment bankers, expected investors to embrace the change in strategy, even though it appeared to be mainly a response to its declining stock price, not a change in business fundamentals. Instead, the breakup announcement fed questions about whether Tyco's earnings were as good as they had appeared. The disclosure that Mr. Kozlowski and Mark H. Swartz, Tyco's chief financial officer, had sold more than $500 million in stock to the company since 1999 while saying they rarely sold shares further damaged management's credibility. Now Tyco's stock stands at less than half the level it was on Jan. 22, when the breakup was announced. Tyco fell $5.15 yesterday, closing at $20.75, down 19.9 percent. "The breakup plan was a mistake, and I take full responsibility for that mistake," Mr. Kozlowski said. "It was the wrong idea at the wrong time." Instead, Mr. Kozlowski said, Tyco will split off only its big financing division, the CIT Group. Tyco bought CIT for nearly $10 billion last year. Tyco, which initially hoped to sell CIT in its entirety to another company, now plans to sell it to investors in an initial public offering, which will cost hundreds of millions of dollars in fees. Tyco hopes to raise about $7 billion in the offering, money it will use to shore up its balance sheet and pay down debt. Some stock analysts questioned whether Tyco would be able to get that much for CIT. Tyco badly needs to sell the unit to raise cash to strengthen its balance sheet, said Nicholas Heymann, a stock analyst at Prudential Securities. With the Middle East in turmoil and the economy's recovery slowing, Tyco may run into a cash squeeze if it does not raise more equity soon, he said. "You really got to get much more liquid here," Mr. Heymann said. "If you don't get liquid with CIT prior to having a real credit freeze-up, you might be on a different path. It might end up that the keys get turned over to the creditors." Mr. Kozlowski called such concerns nonsense. Tyco continues to generate cash, he said, and its balance sheet is strong. Tyco has suspended its previous plan to sell its plastics unit because it could not find a buyer at a reasonable price, Mr. Kozlowski said. He said buyers were willing to pay no more than $3 billion for the unit, which generates about $400 million in cash flow a year. Tyco's electronics and telecommunications divisions, meanwhile, are sputtering. As a result, the company said yesterday that its earnings before one-time charges would be less than $2.70 a share for the fiscal year that ends in September, down from $2.81 a share last year. After those charges, to cover such things as office closings and severance costs, Tyco expects earnings to be about $1 a share this year, down from $2.17 last year. Only a few months ago, analysts had projected $3.70 a share. Tyco also said it planned to lay off 7,100 employees, or 3 percent of its work force, mostly in its electronics and telecommunications units. As it tries to get business back on track, Tyco will essentially stop making acquisitions, Mr. Kozlowski said. Tyco's problems are a sharp comedown for a company that was one of Wall Street's highest fliers in the late 1990's. From 1997 through 2001, an acquisition binge pushed Tyco's sales to $36 billion from $17 billion. Its reported income soared to $5.1 billion from $1.2 billion. With Tyco's earnings soaring, Wall Street happily supported Mr. Kozlowski's dreams with ever higher valuations and buy recommendations, even though a series of companies suffered spectacular failures a generation ago in trying to acquire their way into being industrial conglomerates. Short sellers, who bet on a decline in a stock's price, said that Tyco appeared to use aggressive accounting to generate big gains in profits and that most of its sales growth had come from acquisitions. Tyco said its accounting was proper. But the company's long string of profit growth has come to an end. Tyco's sliding earnings and plunging stock are another black eye for Wall Street analysts, who have come under heavy criticism recently for the poor quality of their research. Tyco has been one of Wall Street's most recommended stocks in recent years. Even this winter, as questions mounted about the company's accounting practices and the disclosure of the stock sales by Mr. Kozlowski, most analysts retained their buy ratings on Tyco. Among the most bullish was Phua Young of Merrill Lynch, who put out dozens of reports recommending the company. Like several other analysts, Mr. Young did not return calls for comment yesterday. But off Wall Street, comments were easier to come by. Graef Crystal, an executive pay expert, said Tyco's plunging stock proved that Mr. Kozlowski did not deserve the hundreds of millions of dollars in pay he had received. "He's just a big pig," Mr. Crystal said. "The only thing that has protected him is the stock price." Stephen
Frothingham Associated
Press "Investors
are running away because it looks like management doesn't have
a strong strategic plan for the long-run," said Rob Plaza,
an analyst with Chicago-based Morningstar. "There is very
little faith in the company right now, and that's why their stock
is being punished." Shares
of Tyco plunged nearly 20 percent Thursday after the company announced
it was backing away from the breakup plan unveiled in January.
The huge conglomerate also said it would close 24 plants. Tyco
said it will keep its plastics division, which it had hoped to
sell for as much as $4 billion, and sell its CIT financial division
in a public offering. Shares
of Tyco, based in Bermuda but run from Exeter, closed down $5.15
to $20.75 on the New York Stock Exchange. Analysts said the abrupt
shift in the company's plans added to Tyco's credibility problems,
which started earlier this year with Enron-inspired accounting
questions. "They're
not giving investors a lot of reason to trust them right now,"
Plaza said. In
a conference call, executives said Tyco lost $1.9 billion last
quarter and had lowered its profit projections for the year. Chairman
and chief executive Dennis Kozlowski said the breakup plan was
simply a mistake. "In
retrospect, it is now clear that we took the market by surprise
with our announcement, and failed adequately to take into account
the extraordinarily fragile market psychology and hostile environment
that has distracted and damaged our business in recent months,"
he said. The
layoffs, primarily in electronics and telecommunications, account
for about 3 percent of Tyco's worldwide work force of almost 250,000,
including about 1,200 in New Hampshire. Tyco blamed a "fierce
decline" in the electronics and telecommunications markets. Brad
McGee, a Tyco vice president, said six U.S. factories will close.
He did not know their locations, but said the employees had been
notified. Tyco's
products include electronic equipment, fire and security systems
and disposable medical supplies. Tyco
said the $1.9 billion loss, 96 cents per share, for the quarter
that ended March 31 contrasted with a profit of $1.1 billion,
or 62 cents per share, a year ago. Revenue
slipped to $8.66 billion from $8.81 billion in the same quarter
a year ago. A
writedown of assets and other charges in the second quarter totaled
$3.3 billion. Excluding the charges, quarterly earnings were 65
cents a share, 3 cents ahead of Wall Street expectations. The
company cut its projected earnings for the fiscal year to $2.60
to $2.70 per share, before charges. Analysts surveyed by Thomson
Financial/First Call had projected $3.14. Tyco
said its estimate assumed CIT would remain part of Tyco through
the fiscal year, which ends in September. In
a letter to shareholders, Kozlowski said the company is still
negotiating to sell CIT but decided that a public stock offering
would reduce Tyco's vulnerability to debt markets, make the company
less complex and allow it to focus on its core markets. Kozlowski
said senior corporate managers will not receive bonuses this year. The
breakup plan was partly a response to criticism of Tyco's accounting
practices and debt load following the Enron scandal. Officials
had said simplifying the company would make its accounting easier
to understand. But
reports of alleged accounting irregularities and uncertainty stemming
from the breakup plan significantly hurt Tyco's business this
spring, company officials said Thursday. They said customers were
reluctant to place orders and employees were uncertain of their
future.
"They had to fight some pricing battles to maintain their market share. Now it's a question of how quickly they can regain their footing," said Steven Altman, a bond analyst for Commerzbank in New York. Altman said Tyco's apparent indecision concerns investors and analysts. "Management now has to regain credibility, and the only way to do that is to outperform the market," he said. The largest part of the $3.3 billion charge is a $2.4 billion pretax write down of its TyCom Global Network, an undersea fiber optic cable operation. The company also wrote down $250 million in inventory $95 million in credits for receivables from Argentina for CIT. The loss was connected to the devaluation of Argentina's peso.
On the Net: Tyco: www.tyco.com (The best thing that could happen to CIT would be to leave the Tyco business group, who’s leadership has failed the stockholders in recent years. The IPO is a smart move for Tyco, CIT, and all the investors, plus the most important part, that the business writers have left out: the employees...and the customers of CIT. editor ) *** full CIT press release at end of Leasing News ______________________________________________________________
Corporate Profile of DVI—Tell Me True http://www.dvi-inc.com/ ( This copy did not reproduce in yesterday’s story about DVI: No one is talking if one division is sold or not sold, or for sale or not for sale and “if it isn’t one thing, it’s another.” Rosanne Roseanna Danna.)
http://www.dvi-inc.com/1999/AC.htm ----------------------------------------------------------------------------------- the First Equipment Leasing Co-Op One
World Leasing (OWL) made its debut on “Meet the Leasing News
Maker” on
April 8. Up to 75 readers
joined the session that featured both David Stearns, CEO of American
Leasing Alliance MainStreet's Richard Selby, who will serve
as interim CEO during the cooperative formation. During the session, the readers predicted a co-op of 90 plus brokers. Right
now OWL is “recruiting” members who will each receive
one share at
the cost of $5,000 and 10% of the “bonus” earned income
of the co-op. Their
goal is 25 qualified brokers. Each member has one share only and
cannot buy more than one. They have one vote in the election of
directors or policy decisions. The idea is the volume rate discount
can make the broker more competitive or earn more points per transaction,
and at the end of the year, share in the
profits of the co-op. Leasing
News asked for an up-date and received this e-mail: The only thing I can truthfully say is that we have received 12 verbal YES's. Richard Selby | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
