The Dutch firm Ahold (NYSE: AHO) announced today irregularities in accounting for promotional allowances at its US Foodservice division. In an ongoing investigation, the company says earnings for fiscal 2001 and 2002 have been overstated by an amount that the may exceed US $500 million.
According to a note issued by Lehman Brothers analyst MItch Speiser, US Foodservice was apparently booking vendor rebates based on volumes which had not been achieved. Such booking of rebates before being earned may have inflated inventories.
In a conference call this morning, Supervisory Board Chairman Henny de Ruiter said the company has appointed independent forensic accountants to investigate the irregularities.
The supervisory board of Ahold also announced that Ahold President and Chief Executive Officer Cees van der Hoeven and Chief Financial Officer Michael Meurs will resign after a reasonable transitioning period. In addition, some employees at the US Foodservice division have been suspended. Ahold declined to name specific persons but said no members of senior management were affected.
Chairman de Ruiter said a restructuring of management is planned at US Foodservice but President Jim Miller and CFO Michael Resnick were not suspended and will retain their positions.
Share prices in Ahold on the New York Stock Exchange closed down more than 60% at $4.18.
US Foodservice supports over 300,000 foodservice customers, including restaurants, hotels, healthcare facilities, cafeterias and schools from more than 100 distribution facilities. US Foodservice President Jim Miller said the problems will have no effect on customers or employees.