A.M. International Inc., an office equipment manufacturer, allegedly overstated fiscal 1980 financial results to impress investors, reporting a $5.8 million profit when it actually had a loss of $17 million, according to a complaint filed yesterday by the Securities and Exchange Commission.
AMI, now in reorganization under the bankruptcy laws, agreed without admitting or denying the allegations to take steps to improve its accounting methods and to refrain from making untrue statements that defraud or mislead the public.
According to the SEC complaint, filed in U.S. District Court in Washington, AMI learned in 1980 that its divisions were reporting operating results "significantly" below budgeted levels. As the company's financial condition deteriorated, the company's management applied increasing "pressure" on those divisions to meet the previously set goals, the SEC charged.
"Such pressure consisted of, among other means, threatened dismissals, actual dismissals, and ad hominem attacks on certain of the divisions' senior management to middle management," the SEC alleged.
As a result, the SEC said, the company reported sales and profits in fiscal 1980 and part of 1981 that were false and had the effect of misleading buyers of its stock, which was traded on the New York Stock Exchange.
Those pressures became more intense, the SEC said, because AMI planned a public offering of securities in the fall of 1980 and wanted to show a pre-tax profit of $10 to $12 million for fiscal 1980.
As the complaint was filed, AMI agreed to a consent decree that requires the company to continue to maintain for three years an audit committee and to appoint to the committee two additional, independent directors with auditing experience. Yesterday, U.S. District Court Judge Howard F. Corcoran approved the decree in the form of a final judgment settling the complaint.
A year ago, AMI voluntarily asked for protection under Chapter 11 of the bankruptcy laws, citing a negative net worth and defaults on loan agreements. In its 1981 fiscal year--the last before its Chapter 11 filing, the company reported a loss of $245 million. AMI makes duplicating machines, embossers and Addressograph machines.
The SEC alleged that AMI overstated its operating results by:
* Improperly deferring $7.4 million in pre-tax costs and losses of foreign subsidiaries from fiscal 1980 to fiscal 1981.
* Improperly overstating fiscal 1980 pre-tax profits by $5.5 million by classifying its Multigraphics division's lease revenue as sales as well as by recording sales in fiscal 1980 and 1981 of $727,000 on items that had not yet been shipped to customers.
* Increasing 1980 pre-tax profits by $3 million by "manipulating" the cost of its Emeloid division's sales and by failing to provide for inventory obsolescence.
* Recording an allowance of $600,000 million for its Addressograph division's excess and obsolete inventory when the division had recommended an allowance of $1.8 million.
The SEC said its investigation is continuing.