Collins & Aikman (NYSE:CKC)
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Collins & Aikman Announces Stockman Resignation and Appointment
of Becker as Acting Chief Executive Officer; Company Further Announces Receipt
of Receivables Facility Waiver and Amendment and Need for Senior Credit
Facility Waiver Due to Lower Than Expected First Quarter Performance
TROY, Mich., May 12 /PRNewswire-FirstCall/ -- Collins & Aikman Corporation
(NYSE:CKC) today announced that its Board of Directors has accepted the
resignation of David A. Stockman as Chief Executive Officer, Chairman of the
Board and a director of the company. Charles E. Becker, a former director of
the company, has agreed to serve as acting Chief Executive Officer of the
company. In addition, the Board has asked three directors, Anthony Hardwick,
Timothy D. Leuliette and Daniel P. Tredwell, to support Mr. Becker as a
Temporary Steering Committee of the Board while it spearheads a search for a
full time replacement to serve as Chief Executive Officer of the company. In
addition, Marshall Cohen, a current director of the company, was named as
non-executive interim Chairman of the Board of Directors.
Mr. Becker was Vice Chairman of the Board from July 2001 until July 2002 and
ceased to serve as a director in May 2004. For over 25 years, through 1998,
Mr. Becker was the Chief Executive Officer and co-owner of Becker Group, Inc.,
a global automotive interior components supplier. Mr. Becker is the owner and
Chairman of Becker Ventures, which was established in 1998 to invest in a
variety of business ventures, including the manufacturing, real estate and
service industries, and which is a lessor of properties to the company. Mr.
Becker is also a director of Metaldyne Corporation and TriMas Corporation. Mr.
Hardwick has been a director since September 2004 and is currently Executive
Vice President and Chief Financial Officer of Easley Custom Plastics, Inc. He
was employed by the company from 1976 through 1995, when he served as Vice
President, Administration and Control of the company's automotive group and
then Vice President and Controller of the company. Messrs. Leuliette and
Tredwell are each Senior Managing Directors and co-founders of Heartland
Industrial Partners, the company's largest shareholder. Mr. Leuliette is
currently the Chief Executive Officer of Metaldyne Corporation, and also serves
on a number of corporate and charitable boards, and served as a director of The
Federal Reserve Bank of Chicago, Detroit Branch. In 1996, Mr. Leuliette joined
Penske Corporation as President and Chief Operating Officer to address
operational and strategic issues. From 1991 to 1996, he served as President
and Chief Executive Officer of ITT Automotive. Mr. Tredwell also serves on a
number of corporate boards and has two decades of leveraged financing and
buyout experience. Prior to co-founding Heartland, he served as a Managing
Director at Chase Securities Inc. and had been with Chase Securities since
1985.
The company further announced today that it had obtained an amendment and
waiver of its accounts receivables facility to address immediate liquidity
issues arising from the recent simultaneous credit ratings downgrades of Ford
Motor Company and General Motors Corporation by Standard & Poor's Corporation
to below investment grade status. In addition, the company obtained a
conditional waiver of a financial covenant relating to first quarter 2005
performance in its accounts receivable facility and the company also intends to
seek a waiver under its senior credit facility for a breach of the same
financial covenant. The company is cautioning all investors and its creditors
that any previous forecasts, guidance or outlook concerning financial
information for all or any part of 2005 should not be relied on at this time.
Under the terms of the company's receivables facility, the downgrades of Ford
and General Motors resulted in a change in receivables concentration limits
relative to these customers and, consequently, required a partial paydown of
the receivables facility and reduced ongoing availability under the receivables
facility. The amendment phases in modified customer concentration limits that
take account of the changed credit ratings of Ford and General Motors and also
increases the margins applicable to both base rate and LIBOR- based advances by
0.75% per annum. Based on receivables balances on the day following the
downgrades, the company would have been obligated to reduce its receivables
balances by approximately $70 million. An amendment and waiver was required
since the company lacked the financial resources to timely make the paydown and
availability would otherwise have been clearly inadequate for the company's
ongoing operating obligations. As a result of the amendment, no immediate
paydown was required. If the final phased-in terms that go into effect on May
23, 2005 were immediately in effect, the required reduction would have been
approximately $15 million. The company is seeking more favorable payment terms
from the downgraded customers to further benefit the company's liquidity prior
to the final phase-in. With or without more favorable terms from these
customers, the modified terms of the receivables facility will remain a
challenge for the company.
The waiver and amendment of the accounts receivable facility also provides
relief for a financial covenant breach related to first quarter 2005
performance. The covenant at issue is the consolidated leverage ratio, or
consolidated debt to EBITDA, as defined in the covenant. This covenant is the
same under both the company's senior credit facility and receivables facility
and was recently modified. The company is still reviewing its first quarter
2005 performance and is not yet in a position to comfortably disclose estimated
first quarter 2005 results. However, it expects EBITDA to be materially lower
than previously provided guidance and to not satisfy the covenant requirement.
The financial covenant waiver under the receivables facility expires if similar
relief is not timely obtained from lenders under the company's senior credit
facility. The amendment also extends the previously granted waiver for
financial statement delivery requirements until June 15, 2005, absent certain
adverse events prior to that date (such as termination events). If the company
is unable to obtain further necessary waivers or modifications, the company,
its financial condition and performance will be materially and adversely
impacted.
The company continues to face significant near term liquidity challenges. The
company is currently fully drawn under its senior credit facility and relies
upon timely access to its receivables facility, foreign receivables factoring
arrangement and fast pay financing programs to fund ongoing operations. In
addition to the receivables facility, the company has a significant foreign
factoring arrangement, under which outstanding factored balances were
approximately $96 million at March 31, 2005. These are generally terminable on
short notice. A material European factoring arrangement that relates
principally to one customer is due to expire at the end of this month. If this
facility is not extended or renewed on acceptable terms, the company will seek
more favorable payment terms from the customer. As a general matter, the
company has sought with some success and will continue to seek earlier
collections or more favorable payment terms from customers or through third
party fast pay programs. The company is in the process of transitioning the
General Motors fast pay program administered by GECC to one administered by
GMAC that will provide a commitment to October 2005. In addition, the company
is continuing to work with its largest customers and suppliers to enhance
commercial terms to improve operating results, cost recovery and liquidity.
There can be no assurance that the company will be successful in these or any
other efforts to improve results or enhance liquidity.
As of May 11, 2005, the company had cash and availability under its financing
arrangements of approximately $13.4 million. Taking account of the amended
terms of the receivables facility, depending upon many factors, the company
expects to operate for the near future on a global basis with approximately $15
million or less of daily available liquidity. The company's near term cash
requirements, apart from financing its ongoing operating obligations, include
capital expenditures and a scheduled interest payment on debt securities of
approximately $26.9 million on June 30, 2005 and $26.7 million on August 15,
2005. Capital expenditures for 2005 may be higher than previous guidance and,
for the first quarter, capital expenditures were approximately $50 million.
The company continues to expect that the first quarter will be the highest
quarter for capital expenditures in 2005. During this period of difficult
liquidity, the company has extended payables to ensure adequate cash balances
to support its operations and may continue to do so as it works with customers,
suppliers and creditors. The company's ability to meet its obligations and to
make necessary capital expenditures will depend on a number of factors,
including, without limitation, its continuing cash flow from operations, its
ability to address financial covenant defaults, continued compliance with its
debt instruments generally and sufficient continuing availability to the
previously mentioned financing arrangements. The company will also be impacted
by the mounting competitive challenges facing its customers and the continuing
pressure being placed upon it by rising raw material and other costs in the
face of lower demand.
Due to the previously announced and ongoing investigation into certain
accounting matters, the company has not completed its 2004 audited financial
statements and is still in the process of reviewing results for the first
quarter 2005. Its first quarter financial results continue to be subject to
some uncertainty due to a number of issues, including the impact of the ongoing
accounting investigation. As noted above, the company expects to initiate a
process with its senior lenders to seek a similar waiver under the senior
credit facilities and the failure to obtain such a waiver will terminate its
receivables facility waiver period and permit a termination of the receivables
facility. The company cannot predict whether it will receive the relief it is
requesting from its senior lenders. The existence of an event of default under
the senior credit agreement permits the acceleration of amounts outstanding
thereunder and foreclosure by the senior lenders on the company's assets
securing their obligations. In addition, this may have adverse consequences
under the company's material lease agreements. The company's existing waivers
of financial statement delivery requirements have a limited duration (June 15,
2005) and are premised on certain conditions, including continued compliance
with financial covenants and no material adverse developments. The continued
effectiveness of these waivers and the ability to timely obtain any further
necessary waivers or amendments cannot be assured.
The company further commented on the status of the ongoing investigation by the
Board's audit committee into the company's accounting for certain supplier
rebates. The company previously reported that it had identified certain
accounting for supplier rebates that led to premature or inappropriate revenue
recognition or that was inconsistent with relevant accounting standards and the
company's policies and practices. While the investigation is ongoing, the
audit committee has preliminarily indicated that it believes that the company's
previously announced estimated adjustments to reported periods to correct the
accounting for these rebates will likely be understated, but it has not yet
quantified the extent of this and has not submitted its findings to management
for review at this time. In addition to vendor rebates, the audit committee's
investigation also is reviewing the company's forecasts for the first quarter
of 2005 and related matters, as well as other matters that have arisen in the
course of its investigation. The company cannot currently comment upon the
timing for completion of, or the ultimate scope or outcome of, the audit
committee investigation, the audit or any necessary restatements.
As previously discussed, the company has not yet filed its annual report on
Form 10-K for 2004 due to this accounting matter and the need for additional
time for completion of the 2004 audit and the review of internal controls over
financial reporting under Section 404 under Sarbanes-Oxley, and it does not
expect to make its first quarter 2005 filing on a timely basis.
Collins & Aikman Corporation, a Fortune 500 company, is a global leader in
cockpit modules and automotive floor and acoustic systems and is a leading
supplier of instrument panels, automotive fabric, plastic-based trim, and
convertible top systems. Headquartered in Troy, Michigan, we have a workforce
of approximately 23,000 and a network of more than 100 technical centers, sales
offices and manufacturing sites in 17 countries throughout the world.
Information about Collins & Aikman is available on the Internet at
http://www.collinsaikman.com/ .
Cautionary Statement Concerning Forward-Looking Information
The foregoing reflects the Company's views about the accounting investigation,
its financial condition, performance and other matters that constitute
"forward-looking" statements, as that term is defined by the federal securities
laws. You can find many of these statements by looking for words such as
"may," "will," "expect," "anticipate," "believe," "estimate," "should,"
"continue," "predict," "preliminary" and similar words used herein. These
forward-looking statements are intended to be subject to the safe harbor
protection provided by the federal securities laws. These forward-looking
statements are subject to numerous assumptions, risks and uncertainties.
Because the statements are subject to risks and uncertainties, actual
developments and results may differ materially from those expressed or implied
by the forward-looking statements. Readers are cautioned not to place undue
reliance on the statements, which speak only as of the date hereof.
Various factors that may affect actual outcomes and performance and results
include, but are not limited to, general economic conditions in the markets in
which the Company operates, declines in North American, South American and
European automobile and light truck builds; labor costs and strikes at the
Company's major customers and at the Company's facilities; fluctuations in the
production of vehicles for which we are a supplier; changes in the popularity
of particular car models, particular interior trim packages or the loss of
programs on particular vehicle models; dependence on significant automotive
customers; the level of competition in the automotive supply industry and
pricing pressure from automotive customers; risks associated with conducting
business in foreign countries; and increases in the price of certain raw
materials, including resins and other petroleum-based products. In addition,
the following may have a material impact on actual outcomes and performance and
results: the results of the pending investigation; the change in leadership at
the Company, the Company's ability to maintain access to its receivables
facility and other financing arrangements, the Company's ability to otherwise
maintain satisfactory relations with its creditors, suppliers, customers and
creditors; the Company's ability to maintain current trade credit terms and
manage its cash and liquidity, the Company's high leverage and ability to
service its debt; and the impact of defaults under its material agreements and
debt instruments. The cautionary statements set forth above should be
considered in connection with any subsequent written or oral forward-looking
statements that the Company or persons acting on its behalf may issue. The
Company does not undertake any obligation to review or confirm analysts'
expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this report or to reflect the occurrence of unanticipated events.
DATASOURCE: Collins & Aikman Corporation
CONTACT: Bryce Koth, Chief Financial Officer, +1-248-824-1520,
or David A. Youngman, Director of Corporate
Communications, +1-248-733-4355, , both of
Collins & Aikman Corporation
Web site: http://www.collinsaikman.com/