Goodyear's investigation into possible improper accounting issues has been expanded to other overseas operations outside of Europe, and the U.S. Securities and Exchange Commission (SEC) has issued a formal order of investigation into last year's restatement, the tire maker said.
The company filed an 8-K report with the SEC as part of its proposed $650 million term loan. The report highlights several risk factors facing the company-from significant competition to pricing pressure from vehicle manufacturers-that could impact its results. Goodyear is seeking the term loan, which would add $350 million to a $300 million loan addition announced in January. The proposed $650 million would be in addition to a $1.3 billion asset-based credit facility arranged last year as part of a larger package negotiated to replace $2.94 billion in financing with $3.3 billion in credit facilities.
Last year, Goodyear announced it would restate more than five years' worth of earnings after it discovered needed adjustments. In its report, Goodyear said it still is working to install internal controls aimed at strengthening the company's account reconciliation control process. Goodyear's independent accountants will not be able to assess the effectiveness of the actions until they complete their audit for the fiscal year ended Dec. 31.
In November, Goodyear reported restated results from 1998 through the first half of 2003. But in December, Goodyear delayed filing its amended 2002 10-K because of the possible improper accounting issues in Europe.
``The investigation has subsequently expanded to other locations of the company's overseas operations,'' Goodyear said in its report. A spokesman added the other areas are outside of Europe, but he did not identify them.
``We're working as expeditiously as we can to complete it, but we're going to be as thorough as possible,'' he said.
Because of this investigation, there is a ``substantial probability'' that the 2003 10-K will not be filed by its March 15 deadline, the report said.
Also, the SEC informed Goodyear on Feb. 5 that it had approved the issuance of a formal order of investigation. Shortly after Goodyear announced its restatement, the SEC had launched a routine informal investigation.
Though he could not comment specifically on the Goodyear investigation, an SEC spokesman told Tire Business that the formal order generally means the full commission has authorized staff to fully investigate whether any laws have been broken. The staff also has subpoena power if needed. The issuance of the formal order does not necessarily imply any charges are imminent, he said.
Goodyear said it is cooperating fully with the SEC investigation, though it is unable to predict the outcome. In addition, at least 36 lawsuits have been filed against the company following the restatements.
Goodyear's shares tumbled more than 9 percent following the report.
The next day, Goodyear announced it intends to commence a private offering of about $650 million aggregate principal amount of senior secured notes to help pay down some debt and for general corporate purposes. The notes are expected to be secured by junior liens on certain collateral securing the company's senior secured U.S. credit facilities. The final amount and maturities of the notes will be determined by market conditions.