Collins & Aikman Corporation Announces Completion of Previously Announced Audit Committee Inquiry
11 März 2004 - 2:31PM
PR Newswire (US)
Collins & Aikman Corporation Announces Completion of Previously
Announced Audit Committee Inquiry TROY, Mich., March 11
/PRNewswire-FirstCall/ -- Collins & Aikman Corporation
announced today that its Audit Committee inquiry into certain
assertions made by two former executives and related matters has
been completed. The Audit Committee, aided by its independent
counsel, Davis Polk & Wardwell, and by an outside accounting
expert, reported its findings and recommendations to the company's
full Board of Directors. In general, the Audit Committee's inquiry
extended into the following areas: (1) assertions regarding the
company's accounting for revenue and tooling, (2) a comprehensive
review of related party transactions and (3) certain corporate
governance procedures. The following summarizes the Committee's
principal findings and recommendations: * The Audit Committee has
not become aware of any events that would necessitate a restatement
of any previously issued financial statements. * While the
assertions concerning related party transactions were limited to
certain transactions involving Charles Becker and Elkin McCallum
and entities controlled by them, the Audit Committee reviewed all
material transactions entered into between the company, on the one
hand, and Heartland Industrial Partners, Mr. McCallum and Mr.
Becker and their respective affiliates. Both Mr. Becker and Mr.
McCallum are directors and significant shareholders of the company
and are, directly or indirectly, limited partners in Heartland, the
company's largest shareholder. The Audit Committee concluded that
each of these transactions had a legitimate business purpose, was
negotiated fairly, and was intended to advance the interests of the
company and not to benefit the related parties at the company's
expense. The Audit Committee further concluded that, by and large,
these transactions were appropriately presented to and approved by
the Board of Directors of the company, were properly documented and
adequately disclosed. The Audit Committee concluded that certain
related party matters referred to below had not been formally
submitted for Board approval, and that others should have been more
appropriately documented. The Audit Committee recommended that
disinterested members of the Board review those matters and take
whatever procedural action may be deemed appropriate. After Board
discussion with the Audit Committee on March 10, 2004, the Board
has scheduled a meeting prior to the filing of its Annual Report on
Form 10-K to formally review and consider ratification of these
matters. Specifically, the matters to be reviewed are (1) with
respect to Mr. Becker and his affiliates: leases of two buildings
adjacent to the company's headquarters, which was already the
subject of a Board-approved lease from an affiliate of Mr. Becker;
an amendment reducing the rent at the company's headquarters to the
rent at these two additional buildings; and amendments of existing
plant leases with an affiliate of Mr. Becker to extend the term and
reduce the rent for the initial term; and (2) with respect to Mr.
McCallum and his affiliates, an amendment of the previously Board-
approved Joan Automotive merger agreement clarifying ownership of
certain equipment listed in a schedule attached to that agreement;
and the final terms of a supply agreement contemplated at the time
the Board approved a January 2003 purchase of certain fabrics
equipment from an affiliate of Mr. McCallum. * The Audit Committee
also recommended that the company review its public filings to
determine whether disclosure of certain aspects of the related
party transactions reviewed by the Audit Committee should be
enhanced and additionally, it proposed a resolution for the Board
that will require pre-approval of all future related party
transactions, even where pre-approval of the Board is not legally
required. The resolution also reiterates procedures for ensuring
proper documentation and disclosure of suchtransactions. This
resolution will also be considered at the next Board meeting. The
company intends to file amended Quarterly Reports on Form 10-Q for
the quarters ended June 30, 2003 and September 30, 2003, to reflect
the conclusion of the Audit Committee's inquiry and its
recommendations, but, as indicated above, no restatement of any
previously issued financial statements is required or being made.
The company also expects to enhance the disclosure in its Form 10-K
for 2003 with respect to the recommended matters. The 2003 Form
10-K is expected to include audited financial statements and the
required CEO and CFO certifications under Sarbanes-Oxley. The
enhanced disclosure is expected to include (1) disclosure of the
Board-approved payment of $300,000 as compensation to Mr. Becker in
2002 for his temporary service as Vice Chairman of the company
during that year, (2) an improved description of the 2003 fabrics
transactions with Mr. McCallum and (3) the dollar volume of
previously disclosed ordinary course arrangements with Mr.
McCallum, specifically, from transition services, supply and rebate
arrangements. The members of our Audit Committee are Robert C.
Clark, the former Dean of the Harvard Law School, Marshall A.
Cohen, counsel at Cassels Brock and Blackwell, a Canadian law firm,
and former Senator Warren B. Rudman. The accounting expert who
advised the Audit Committee is Alex Arcady, a retired partner from
Ernst & Young LLP, who spent the last ten years of his career
in that firm's national office. Commenting upon the completion of
the Audit Committee's work, which began in August 2003, Mr.
Stockman said, "The company is deeply grateful to the members of
the Audit Committee and its advisors for their tireless work in
examining these matters." Collins & Aikman Corporation is a
leading global supplier of automotive interior components and
systems, including: instrument panels, cockpit modules, flooring
and acoustic systems, automotive fabric, and interior trim, as well
as exterior trim and convertible roof systems. The company's
current operations include 15 countries, more than 100 facilities
and nearly 24,000 employees. Information about Collins & Aikman
is available on the Internet at http://www.collinsaikman.com/.
DATASOURCE: Collins & Aikman Corporation CONTACT: J. Michael
Stepp, Vice Chairman & CFO, +1-248-824-1520, or , or Robert
Krause, Vice President and Treasurer, Head of Investor Relations,
+1-248-733-4355, or , both of Collins & Aikman Corporation Web
site: http://www.collinsaikman.com/
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