UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Date of report (Date of earliest event reported)
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December 7, 2005 |
Delphi Corporation
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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1-14787
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38-3430473 |
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.) |
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5725 Delphi Drive, Troy, MI
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48098 |
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(Address of Principal Executive Offices)
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(Zip Code) |
(248) 813-2000
(Registrants Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
TABLE OF CONTENTS
EXPLANATORY NOTE
Delphi Corporation (Delphi or the Company) is filing this Form 8-K/A as Amendment No. 2 to its
Current Report on Form 8-K (the Form 8-K) filed with the United States Securities and Exchange
Commission (SEC) on December 13, 2005. The purpose for this Amendment is to update the
disclosures required under Item 304 of Regulation S-K of the Securities and Exchange Commission to
reflect the completion of its Annual Report on Form 10-K for the year ended December 31, 2005 and
its engagement of Deloitte & Touche LLP (Deloitte & Touche) as independent registered public
accounting firm for the year ended December 31, 2005. The entire content of the Form 8-K
incorporating the updated disclosure required is set forth below.
ITEM 4.01 CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANT
On December 7, 2005, after reviewing proposals from four accounting firms, including Deloitte &
Touche, the Companys then current independent registered public accounting firm, the Audit
Committee of the Board of Directors of Delphi selected Ernst & Young LLP (Ernst & Young) to serve
as Delphis independent registered public accounting firm, effective January 1, 2006, for the
fiscal year ended December 31, 2006. The Board of Directors concurred with the Audit Committees
selection. Delphis application for an order authorizing the retention of Deloitte & Touche to
serve as Delphis independent registered public accounting firm for the year ending December 31,
2005 was approved by the United States Bankruptcy Court for the Southern District of New York (the
Court) on January 17, 2006. Delphis application for an order authorizing the retention of Ernst
& Young to serve as Delphis independent registered public accounting firm for the year ending
December 31, 2006 was approved by the Court on April 5, 2006.
The change was not the result of any disagreement between Delphi and Deloitte & Touche on any
matter of accounting principles or practices, financial statement disclosure or auditing scope or
procedure or any decision by Deloitte & Touche to resign or
refuse to stand for re-election. Rather, the Audit Committees
selection of Ernst & Young to serve as Delphis independent
registered public accounting firm for the fiscal year ended
December 31, 2006 resulted in the dismissal of Deloitte &
Touche upon Deloitte & Touche's completion of its audit
engagement for the year ended December 31, 2005.
The independent auditors report of Deloitte & Touche on the Companys financial statements for the
year ended December 31, 2004 did not contain an adverse or disclaimer of opinion, nor were such
reports qualified or modified as to uncertainty, audit scope, or accounting principles; however,
the report of Deloitte & Touche on the Companys financial statements for the year ended December
31, 2004, included in the Companys Annual Report on Form 10-K for the year ended December 31,
2004, included an explanatory paragraph concerning the restatement of the Companys financial
statements for the years ended December 31, 2003 and 2002. The independent auditors report of
Deloitte & Touche on the Companys financial statements for the year ended December 31, 2005 did
not contain an adverse or disclaimer of opinion, nor was such report qualified or modified as to
audit scope, or accounting principles; however, the report of Deloitte & Touche on the Companys
financial statements for the year ended December 31, 2005, included in the Companys Annual Report
on Form 10-K for the year ended December 31, 2005, included: (1) an explanatory paragraph
concerning the restatement of the Companys financial statements for the year ended December 31,
2004; (2) an explanatory paragraph concerning the financial statements not reflecting or providing
for consequences of the bankruptcy proceedings involving Delphi and its affiliated debtors; and (3)
an explanatory paragraph regarding the uncertainty of the Companys ability to comply with the
terms and conditions of the debtor-in-possession financing agreement; to obtain confirmation of a
plan of reorganization under chapter 11 of the United States Bankruptcy Code; to reduce wage and
benefit costs and liabilities through the bankruptcy process; to return to profitability; to
generate sufficient cash flow from operations and; to obtain financing sources to meet the
Companys future obligations raise substantial doubt about its ability to continue as a going
concern.
In connection with the audits of Delphis financial statements for each of the fiscal years ended
December 31, 2005 and 2004 and for the subsequent interim period
through July 12, 2006 (the date Deloitte & Touche terminated
its client-auditor relationship, which was the day after Deloitte
& Touche completed its audit engagement and Delphi filed its Annual
Report on Form 10-K with the SEC) there were no disagreements between
Delphi and Deloitte & Touche on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of
Deloitte & Touche, would have caused Deloitte & Touche to make reference to the matter in their
reports.
During the fiscal year ending December 31, 2004 there were two reportable events, as defined in
Item 304(a)(1)(v) of Regulation S-K of the Securities and Exchange Commission, that were discussed
with the Companys Audit Committee. In performing the audit of Delphis financial statements for
the year ended December 31, 2004, Deloitte & Touche advised Delphi that material weaknesses existed
in Delphis internal control over financial reporting. The material weaknesses identified for the
year ended December 31, 2004 were as follows:
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Insufficient numbers of personnel having appropriate knowledge, experience and
training in the application of GAAP at the divisional level, and insufficient personnel
at the Companys headquarters to provide effective oversight and review of financial
transactions; |
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Ineffective or inadequate accounting policies to ensure the proper and consistent
application of GAAP throughout the organization; |
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Ineffective or inadequate controls over the administration and related accounting
for contracts; and |
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Ineffective tone within the organization related to the discouragement, prevention
or detection of management override, as well as inadequate emphasis on thorough and
proper analysis of accounts and financial transactions. |
For further discussion of these material weaknesses refer to Item 9A of Delphis Form 10-K for the
year ended December 31, 2004. Also, in September 2004, Deloitte & Touche advised Delphis Audit
Committee that in view of the commencement of an internal investigation into the accounting for a
number of prior year transactions, Deloitte & Touche would be required to extend the scope of its
audit and that the completion of the investigation could materially affect Deloitte & Touches
previously issued independent auditors reports on the Companys financial statements. The results
of the investigation and the restatement of the Companys previously issued financial statements
are also discussed in the Companys Form 10-K for the year ended December 31, 2004.
During the fiscal year ending December 31, 2005 there was one reportable event, as defined in Item
304(a)(1)(v) of Regulation S-K of the Securities and Exchange Commission, that was discussed with
the Companys Audit Committee. In performing the audit of Delphis financial statements for the
year ended December 31, 2005, Deloitte & Touche advised Delphi that material weaknesses existed in
Delphis internal control over financial reporting. The material weaknesses identified for the year
ended December 31, 2005 were as follows:
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Delphi did not maintain a control environment that fully emphasized the
establishment of or adherence to appropriate internal control for certain aspects of the
Companys operations. Principal contributing factors included (i) an insufficient number of
or inappropriate depth of experience in the application of U.S. GAAP for its accounting and
finance personnel, (ii) the inadequate establishment and maintenance of an effective
anti-fraud program, (iii) inadequate documentation of authorization to make changes to
payroll data and (iv) inadequate controls over records of employee and retiree demographic
information used in determining retirement benefits liabilities. |
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Delphi did not perform a formalized, company-wide risk assessment to evaluate
the implications of relevant risks on financial reporting. |
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Delphi failed to design and implement controls over the contract administration
process to provide reasonable assurance that significant contracts are adequately analyzed
to determine the accounting implications, or to capture, analyze, and record the accounting
impact of amendments to existing contracts. |
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Controls over account reconciliations did not operate effectively.
Specifically, controls over the preparation, review and monitoring of account
reconciliations of balance sheet accounts to ensure that account balances were accurate and
supported with appropriate underlying calculations and documentation in a timely manner. |
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Controls over journal entries did not operate effectively. Specifically,
controls surrounding the preparation, independent review, and authorization of journal
entries to ensure that entries were accurate and supported by appropriate underlying
documentation. |
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Controls over inventory accounting did not operate effectively. Specifically,
controls to determine that (i) consignment inventories (including buy/sell relationships)
and pay-on consumption inventories were reconciled on a timely basis; (ii) adjustments to
inventory costs or quantities related to annual physical inventories, cycle counts, and
negative inventory are made in the appropriate period; (iii) the receipt of raw materials,
finished goods returned by customers and finished goods received from production are
recorded in the appropriate period; and (iv) the calculation of excess and obsolete
inventory reserves are performed accurately and adjustments recorded on a timely basis. |
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Controls over fixed asset accounting did not operate effectively.
Specifically, controls over (i) the proper classification and approval of capitalized
maintenance; (ii) the proper and timely transfer of construction-work-in-progress tooling
to the fixed assets ledger; (iii) the proper amortization of tooling assets pursuant to
corporate guidelines; and (iv) the proper approval and timely recording of disposals and
transfers related to fixed assets and special tools. |
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Controls over income tax accounting and disclosure did not operate effectively.
Specifically, controls over the preparation and review of supporting calculations, analyses
and disclosures related to Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes that provide reasonable assurance that the account balances and
disclosures were accurate and supported by appropriate underlying documentation. |
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Controls over temporary cash disbursements process accounting did not operate
effectively. Specifically, controls over a temporary cash disbursements process
implemented following the Companys chapter 11 filing related to (i) unintended
over-payments, and (ii) the timely accounting of those payments. |
For further discussion on these material weaknesses refer to Item 9A of Delphis Form 10-K for the
year ended December 31, 2005.
Delphi has requested Deloitte & Touche to furnish Delphi with a letter addressed to the SEC stating
whether Deloitte & Touche agrees with the above statements and upon receipt will further amend this
report to file such letter as an exhibit.
During the fiscal years ended December 31, 2004 and 2005, and for the subsequent interim period
through July 12, 2006, neither Delphi nor anyone acting on its behalf consulted Ernst & Young
regarding Delphis consolidated financial statements for the years ended December 31, 2004, and
2005 for (1) either the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on Delphis consolidated
financial statements or (2) any matter that was either the subject of a disagreement with Deloitte
& Touche on accounting principles or practices, financial statement disclosure, or auditing scope
or procedures, which, if not resolved to the satisfaction of Deloitte & Touche, would have caused
Deloitte & Touche to make reference to the matter in their report, or a reportable event as defined
in Item 304(a)(1)(v) of Regulation S-K of the Securities and Exchange Commission Delphi provided
Ernst & Young with this Form 8-K prior to filing it with the SEC.
On July 12, 2006, Delphi received a letter from Deloitte & Touche confirming that the
client-auditor relationship between Delphi and Deloitte & Touche had ceased. A copy of Deloitte &
Touches letter is included as Exhibit 16 (a) hereto.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
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(c) |
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Exhibits. The following exhibit is being filed as part of this report. |
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Exhibit |
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Description |
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16 (a)
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Letter from Deloitte & Touche LLP to Delphi Corporation dated July 12, 2006 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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DELPHI CORPORATION
(Registrant)
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Date: July 24,
2006 |
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/s/ JOHN D. SHEEHAN
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(John D. Sheehan, |
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Vice President and Chief Restructuring Officer,
Chief Accounting Officer) |
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