Originally Published MX March/April
2002
EDITOR'S PAGE
Numbers Never Lie
This
is the time of year when many public medtech companies issue their annual reports,
which means it’s also the high season for analysts and others who are seeking
out good investments.
This year’s reports are especially interesting, because they indicate how
medtech companies have been affected by varied worldwide economic conditions
over the past year. Industry followers may be relieved to know, for instance,
that medical device companies continued to post solid gains in 2001, showing
good growth even during the troubled fourth quarter (see Business
News).
A good annual report places company R&D efforts into the context of a competitive
marketplace, and explains how the company’s business strategies will make
it successful.
But the real reason for compiling an annual report is to summarize a company’s
financial data, as required by the Securities Exchange Commission (SEC). In
the wrong hands, this important financial data can sometimes be influenced by
a company’s public relations spin.
Spinning numbers, however, is a dangerous game. In the wake of the Enron scandal,
SEC officials are more vigilant than ever, and Congress is expected to require
new accounting principles and safeguards to protect investors.
Lack of accounting clarity can discourage investors and even become a deal breaker.
In February, for instance, the U.S. District Court for the District of New Hampshire
dismissed 38 identical lawsuits alleging improprieties in the disclosure and
accounting practices of Tyco International. Company officials denied that the
suits had anything to do with their January decision to break Tyco into four
independent companies. But given executive anxieties over Enronlike issues,
it would be difficult to imagine that the suits didn’t contribute to the
breakup of Tyco’s proposed merger with C. R. Bard, which had been in the
works since last May.
Annual reports offer company executives an opportunity to demonstrate everything
that’s best about their firm—including their honesty, integrity, and
clarity.
Copyright ©2002 MX
