True North delays earnings, citing 'accounting matter'

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True North Communications, Chicago, late Feb. 28 said it is postponing its fourth quarter and year-end earnings release and related conference call that had been set for March 1. The agency company attributed the delay in part to a delay in an earnings release by interactive shop Modem Media, in which True North holds a 46% stake. But True North also said it is delaying because its accountants "brought an accounting matter to the attention of the (Securities and Exchange Commission) accounting staff in the past few days and have been in discussions with them." In a statement, Kevin Smith, True North's exec VP-chief financial officer, said True North is giving the SEC data on past amortization of intangible assets related to earlier acquisitions. "It is important to recognize that these are technical accounting matters which would not affect either our cash flow or, we believe, the underlying economic value of our business, but could affect how we report our results," Mr. Smith said in the statement, adding True North hopes to resolve the matter and release its results "promptly." True North has been the subject of ongoing speculation as a takeover candidate.

Still, that explanation did not seem to satisfy investors. Mr. Smith restated his explanation at midafternoon March 1, issuaing a statement that reiterated "this is not a cash issue" and added the company is comfortable with analysts' consensus estimates for the fourth quarter. According to Zacks Investment Research, analysts project an average 7.5% earnings growth for the fourth quarter of 2000 and 18.5% for the year.

The delay and reports that Havas Advertising has cooled its desire to buy True North sent its shares down 5.2% to close at $36.49, off $2.01.

--Mercedes Cardona

Copyright March 2001, Crain Communications Inc.

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