Caterpillar Inc. (CAT: Quote) said it uncovered a “deliberate, multi-year, coordinated accounting misconduct at its recently acquired company, ERA Mining Machinery (ERA), including its wholly owned subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing Co. or “Siwei”.
Caterpillar’s investigation determined that several Siwei senior managers were engaged in deliberate misconduct prior to Caterpillar’s acquisition of Siwei. The deliberate misconduct would result in a non-cash goodwill impairment charge of around $580 million or $0.87 per share in the fourth quarter of 2012.
Construction and mining equipments maker stated that it removed several Siwei senior managers responsible for the misconduct and a new leadership team was formed. The responsibilities for Siwei manufacturing operations have been moved to Caterpillar’s China Operations Division, while the sales and support organization at Siwei would report to Kebao Yang, Caterpillar Global Mining General Manager for China and Korea.
Further the company has advised the Hong Kong Securities and Futures Commission of the misconduct and has filed a Form 8-K with the United States Securities and Exchange Commission disclosing the impairment charge and Caterpillar’s investigation is ongoing.
Steve Wunning, Caterpillar group president with responsibility for Resource Industries commented, “Despite these actions we continue to believe that the Siwei acquisition is well aligned with our strategy to expand our role as a leading equipment and solutions provider for the Chinese coal mining industry. We intend to utilize Siwei roof support products and manufacturing capabilities, combined with Caterpillar’s strong commitment to technical innovation and safety, to help our mining customers in China become more efficient and safer within their mines,” Wunning added.
In November 2011, Caterpillar and ERA together announced a pre-conditional voluntary offer by Caterpillar, through a wholly owned subsidiary, for all of the issued shares of ERA and annouced the completion of its tender offer for ERA, including its wholly owned subsidiary Siwei in June 2012.
In a separate press release, Caterpillar said that Luis de Leon, vice president with responsibility for the Mining Products Division, is leaving the company to pursue other opportunities.
Caterpillar closed Friday at $97.62, up 2.01%, on a volume of 8.33 million shares on the NYSE. In after hours, the stock dropped $1.57 or 1.61%.
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by RTT Staff Writer
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