Philip Services reveals inventory adjustment

Hamilton, Ont.-based waste-management firm Philip Services revealed in late January that it is taking a one-time charge to its 1997 earnings of at least US$75 million relating to an after-tax “physical inventory adjustment” of about US$60 million.

Philip says the US$60-million shortfall is due to the difference between book inventory and physical inventory, primarily in the company’s yard copper business at two Hamilton facilities where low-grade copper scrap is processed.

Although rumors about the discrepancy abound, the company has offered no explanation for the missing inventory, stating only that it is investigating the matter with the help of outside auditors and that it intends to make a further statement on March 4.

Meanwhile, Philip has become the target of at least eight U.S. class-action lawsuits, which charge that the company misled investors about its finances prior to a US$364-million share offering in November.

The inventory and legal problems are hampering Philip as it continues its drawn-out, US$1.8-billion cash takeover bid of Illinois-based cleaning services company Safety-Kleen against rival-bidder Laidlaw Environmental Services of South Carolina.

Philip’s market capitalization has shed well over $1 billion over the last few months; at presstime, its share price had plummeted to less than $14 from a high of more than $27 in September.