TOLEDO, OH — Dana Corp. has completed its financial restatements for the first two quarters of 2005, the year 2004 and prior years. The company has filed amended annual and quarterly reports for the applicable periods with the U.S. Securities and Exchange Commission.
As a result of these restatements, the total reduction in net income after tax for all periods restated was $44 million.
The company said primary items in the restatements that impacted the reduction in aggregate net income were inappropriate recognition of certain customer pricing increases and supplier reimbursement costs in the company’s commercial vehicle business, which prompted internal investigations. As announced on Dec. 23, the reduction was also affected by a correction to the prior calculation of the company’s 2004 LIFO inventory reserves with respect to steel surcharges.
The restatements were based upon the findings of internal investigations conducted by management and the audit committee of Dana’s board of directors, in consultation with independent investigators retained by the audit committee, and have been reviewed by the company’s independent registered public accounting firm, PricewaterhouseCoopers LLP.
Commenting on the restatements, Dana Chairman and CEO Michael Burns said, “During our investigations, we identified material weaknesses in our system of internal control over financial reporting and we have taken — and will continue to take — appropriate actions to remediate these weaknesses.”
The filing of Dana’s restated financial statements cures a default in a covenant in certain of the company’s indentures requiring it to maintain its financial statements in accordance with generally accepted accounting principles, and satisfies a delivery requirement for these financial statements pursuant to existing waivers under the company’s bank and accounts receivable agreements. As previously announced, Dana is in discussions with its lenders regarding possible modifications to its existing facilities, or alternative financing arrangements.
Dana also announced that it expects to file its Form 10-Q for the quarter ended Sept. 30, 2005, in early January 2006. In conjunction with this filing and the issuance of its third-quarter 2005 earnings release, Dana Chairman and CEO Michael Burns and CFO Bob Richter will discuss the company’s third-quarter 2005 and nine-month results in detail in a conference call, the date of which will be announced separately.
“This has been a difficult time for Dana’s investors, customers, suppliers, and employees,” Burns said. “Putting the restatements behind us allows Dana and our people to focus on improving operating and financial performance to benefit our stakeholders.”
The company also announced a number of strategic and operational initiatives the company is pursuing, including:
– Renewing its focus on light- and heavy-vehicle drivetrain, structural, sealing and thermal products;
– Divesting three non-core businesses – engine hard parts, fluid products and pump products – with annual revenues of $1.3 billion;
– Restructuring within the Automotive Systems and Heavy Vehicle Technologies and Systems groups;
– Increasing business efficiency and making workforce reductions;
– Reducing benefit costs;
– Taking steps to dissolve its joint venture with DESC S.A. de C.V. to enable Dana to acquire full ownership of core operations based in Mexico that manufacture and assemble axles and driveshafts;
– Consolidating the North American operations of the Thermal Products group to reduce operating and overhead costs and strengthen competitiveness; and
– Establishing an off-highway axle and transmission assembly facility in Gyor, Hungary, that is expected to begin production in the first quarter of 2006.
“These actions reflect our commitment to improved operating efficiency, while continuing to profitably grow our business,” Burns said. “We intend to build upon these actions to provide world-class products, service and support to all of our customers in the global market segments we know best.”
To learn more about Dana, go to: www.dana.com .
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