NY-based grocer The Penn Traffic Company has revealed that it will have to restate its fiscal results for the past three fiscal years and the Q1 of the current fiscal year after discovering that an employee at its Penny Curtiss bakery manufacturing subsidiary made false accounting entries which primarily involved the overstatement of inventory.
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Penn Traffic said that it discovered the misconduct several days ago and has already terminated the employment of the employee responsible for the fraud.
The firm added that it informed the chairman of its board’ audit committee and began an internal review of the Penny Curtiss baking operation in Syracuse, NY. Based on the preliminary findings of this internal review, the audit committee engaged Paul, Weiss, Rifkind, Wharton & Garrison as independent legal counsel to conduct an independent investigation, which in turn has engaged KPMG LLP to assist in this ongoing investigation.
“We will not feel any significant impact from the financial restatement we expect to make,” said Joseph V. Fisher, president and CEO. In the fiscal year ended 2 February, Penn Traffic had revenues of about US$2.4bn and previously reported adjusted EBITDA of US$106m; about US$6m of EBITDA from the Penny Curtiss subsidiary was included in these reported results.
“Penn Traffic remains a good company with solid operations and a strong financial structure,” insisted Fisher: “[It] does not and will not tolerate any illegal or unethical actions by any employee.”
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By GlobalDataPenn Traffic intends to restate financial statements for the past three fiscal years and the Q1 of the current fiscal year, and said that it believes the total amount of the accounting misstatement during this time period was US$10-11m. The firm will adjust its pretax earnings over the three-and-a-quarter year period by the amount of the misstatement.
