J. Peter Wilson predicted last week that heads would roll at Archive Corp. over accounting errors that rocked the Costa Mesa company. He was right--and his was the first to go.
The company said Monday that Wilson, 51, has resigned as president and chief operating officer and that D. Howard Lewis, chairman and chief executive officer, assumed Wilson's positions immediately.
Lewis, 50, had been president from the company's birth in 1980 until Wilson was hired 14 months ago to bolster the then-sagging earnings of the computer parts manufacturer.
It appeared that Wilson was doing just that, but Archive's spectacular growth in the last year ended abruptly last week when the company disclosed that accounting errors will result in unspecified losses in the fiscal 1986 fourth quarter and a $1.4-million reduction in third-quarter profits. The company will take a $5-million write-down of its inventory for the fourth quarter, ended Sept. 26, because the inventory value was overstated, Wilson said last week.
Last week's announcement stunned investors and caused the company's stock to drop $3.25 a share, to $5.88, in one day.
On Monday, after Wilson's resignation was announced, Archive's common stock closed down 12 1/2 cents at $5.38 a share.
Lewis said Monday that he plans "to run the company indefinitely. We're not going to be looking for a replacement (for Wilson) for a while."
Lewis probably will clean house and get the company's finances in order before searching for a new president in the next quarter or so, said Donald Sinsabaugh of the New York investment firm of Swergold, Chefitz & Sinsabaugh.
Though he was reluctant to comment, Lewis said auditors' discovery two weeks ago of the massive accounting errors was the reason Wilson left.
He also said the possibility of more employee departures is "under review."
The company's policies and procedures also "are being evaluated and changes will be made," Lewis said.
Labor Costs Cut
Under Wilson, Archive cut labor costs by moving nearly all its production to its Singapore plant. The company's revenues grew from $57.8 million to an expected $78 million for the fiscal year ended Sept. 26. In the third quarter, net income apparently jumped to $1.8 million from $383,000 the previous year.
But miscalculations resulted in overstated inventories and understated manufacturing costs, leading the company to slash its third-quarter net income to $400,000 and to predict a loss in its final quarter.
"There were errors in the procedures used to calculate the difference between the prices of the goods in Singapore and their value in American dollars," Wilson said last Tuesday as he predicted that "heads will roll" in the company's accounting and finance departments.
He could not be reached Monday. Lewis said Wilson left the company on Friday.
Sinsabaugh said he had not expected Wilson to lose his job because of the errors. "But he was the one with ultimate responsibility," the analyst said. "When you're running a company and there are errors of that magnitude and you don't know about it, something's wrong. I like Pete a lot, but that's hardball in the city."
Wilson, a Silicon Valley computer executive before joining Archive, had worked for Minneapolis-based Control Data Corp. for 12 years in senior operations positions.
While Archive's policies, procedures and personnel may be shaken up, Lewis said its offshore manufacturing strategy will not change significantly.
And the company says it still expects to report a $2-million annual profit in a few weeks when an audited financial statement is complete.