From Reuters via MEMA Industry News
DETROIT — Collins & Aikman Corp. on Thursday said it completed an internal accounting inquiry and will not restate previously issued financial statements, sending its shares up 18 percent.
The company also said its fourth-quarter loss more than tripled to nearly $10 million.
Last August, the Troy, Mich., company said it was investigating business transactions between the company and two of its directors, just days after its CEO resigned.
Collins & Aikman said an audit committee examined some accounting for revenue and machinery and reviewed transactions with directors. It found no reason to restate previously issued financial statements.
The audit committee had been charged with reviewing the company’s acquisition of automotive plastics maker Becker Group in 2001 from Charles Becker, who is also a Collins & Aikman director.
According to the company’s annual report, Collins & Aikman agreed to pay Charles Becker $11.3 million not to start a competing company. Collins & Aikman also leases its Troy headquarters and five manufacturing facilities from companies owned by Becker.
The supplier of car fabrics, instrument panels and other automotive parts also examined transactions between the company and affiliates of company director Elkin McCallum.
McCallum was named to Collins & Aikman’s board after the company bought automotive fabrics maker Joan Fabrics from McCallum in 2001. The company later bought a lamination company from McCallum.
LEGITIMATE BUSINESS
The audit committee concluded that the transactions had a legitimate business purpose, were negotiated fairly, and were intended to advance the interests of the company and not to benefit the directors at the company’s expense.
But the audit committee also made some corporate governance and disclosure recommendations. Collins & Aikman said it intends to file amended reports for the quarters ended June 30 and Sept. 30 to reflect the conclusion of the audit committee’s inquiry and its recommendations, but there is no need to restate financial results.
Collins & Aikman announced the inquiry just days after CEO Jerry Mosingo resigned after just one year on the job. Chairman David Stockman, President Ronald Reagan’s former budget director, replaced Mosingo as CEO.
The company said its losses in the fourth quarter rose to $9.9 million, or 12 cents per share, due to restructuring charges and asset write-downs totaling $16.7 million, or 20 cents per share. The company posted a loss of $3.1 million, or 4 cents per share, in the fourth quarter last year when it took restructuring and asset write-downs of $13.0 million, or 16 cents per share. Net sales in the fourth quarter rose to $1.0 billion from $963 million.
Collins & Aikman said it expects net sales for all of 2004 will total $4.0 billion to $4.05 billion, and operating income will be in the $225 million to $240 million range. Net earnings will range from break-even to 10 cents per share. All of the figures exclude any future restructuring or impairment charges.
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