Auto industry supplier Tenneco will restate previously reported financial results mainly to correct accounting for interest rate swaps that the company entered into in 2004.
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Tenneco said the restatement would impact the years ended 31 December 2004, 2005 and 2006 and the quarters ended 31 March 2006 and 2007, 30 June 2006, and 30 September 2006.
The company expects to file new statements covering those periods with the US Securities and Exchange Commission (SEC) next month.
In April 2004, Tenneco entered into three separate fixed-to-floating interest rate swaps with two financial institutions. The agreements swapped a total of $US150m of the company’s 10.25% senior secured notes to floating interest rate debt at LIBOR plus an average spread of 5.68 percentage points.
When the audit of the company’s financial statements by external auditors was reviewed by the Public Company Accounting Oversight Board, it found Tenneco had wrongly assumed its method of accounting for the swaps met regulations.
The changed in accounting method used when re-stating the results will increase the company’s pre-tax interest expense by $US1m in 2004, $5m in 2005, $1m in 2006 and decrease pre-tax interest in the first quarter of 2007 by $1m.
Tenneco chairman and CEO Gregg Sherrill said: “The accounting standards for interest rate swaps are complex and we are disappointed in having to restate our financial results.”
Tenneco will also make other accounting adjustments as part of the re-statements but said these would not be significant.
