Richmond-based Performance Food Group has revealed that it has identified certain accounting errors at one of its broadline operating subsidiaries.
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The company estimates that the cumulative effect of the errors, which began in early 2000, will reduce net income by an estimated US$4m to US$5m. A determination of the exact impact and the periods affected is expected within thirty days.
Michael Gray, president and CEO, said: “We have taken immediate and thorough steps to investigate these errors, and we are taking prompt remedial actions to address the causes of these errors. Based on our review to date of how these errors occurred, we believe that this is an isolated incident confined to this one subsidiary and did not involve any senior corporate management.
“Our core business remains strong, and we believe that our earnings per share for the Q1 of 2002 will be in the range of US$0.23 to US$0.25 and our earnings per share for the 2002 fiscal year will be in the range of US$1.41 to US$1.45. These revised estimates exclude any costs associated with our inquiry but take into account a lower anticipated level of performance at the affected subsidiary.”
Based on the results of its inquiry to date, Performance Food believes that the errors resulted primarily from the failure of the accounting staff at this subsidiary to properly reconcile its accounting records to supporting detail, which resulted in an understatement of cost of goods sold for the subsidiary, and their failure to appropriately account for intercompany transactions with a division of this subsidiary.
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By GlobalDataPerformance Food identified the errors during an inquiry begun following an internal review of inconsistencies in the subsidiary’s January 2002 financial statements. The company has retained outside counsel, which has also retained an independent accounting firm, to conduct the inquiry. The company’s inquiry is also focusing on whether any employee could have received any improper benefit in connection with these errors.
Performance Food has promised to update information with respect to the results of the inquiry upon its completion. It is currently consulting with its independent auditors regarding the appropriate accounting treatment for the errors.
