ZAANDAM, Netherlands -- Ahold here said last week U.S. Foodservice, a wholly owned subsidiary in Columbia, Md., had overstated its earnings by $880 million from 2000 to 2002, rather than by $500 million as Ahold had said in late February, when it first revealed the accounting problems at U.S. Foodservice.
Late the previous week, Ahold named Anders Moberg acting chief executive officer. He was the former president and CEO of IKEA Group, the Swedish furniture manufacturer and retailer.
Simultaneous with the February announcement of the earnings overstatement, Cees van der Hoeven, Ahold's chairman and CEO, and Michael Meurs, Ahold's chief financial officer, resigned, and Ahold launched internal accounting and legal investigations into practices at U.S. Foodservice.
Ahold said last week the accounting investigation conducted by PricewaterhouseCoopers, New York, is substantially complete, with PwC identifying total overstatements of pretax earnings at U.S. Foodservice of $110 million in fiscal 2000, $260 million in fiscal 2001 and $510 million in fiscal 2002. Ahold acquired the company in April 2000.
PwC also identified other adjustments that need to be made to U.S. Foodservice's balance sheets, including a $90 million goodwill adjustment to the company's opening balances when it was acquired by Ahold. Related to these opening balances, Ahold said U.S. Foodservice will also make adjustments to its results for the year ended Dec. 28, including $700 million in write-offs of accrued vendor receivables, a $210 million increase in deferred contract revenue liabilities, an $80 million increase in trade payables and a $25 million increase in inventory.
As of late last week, Ahold had not yet released the results of its internal legal investigation of U.S. Foodservice. However, published reports said the investigation will blame two mid-level U.S. Foodservice executives, both of whom were suspended in late February, for the overstatements, and exonerate James Miller, U.S. Foodservice's CEO.
The reports speculated that Ahold would try to release the results of the legal investigation early next week, perhaps before Ahold's annual general meeting tomorrow.
Analysts, interviewed before Ahold released the results of the accounting investigation, told SN Moberg faces the difficult task of restoring confidence in the Dutch retailer.
Patrick Roquas, an analyst with Kempen & Co., Amsterdam, said Moberg faces a two-stage process: "First, he needs to fully give clarity regarding the accounting irregularities at U.S. Foodservice as well as provide an update on all of Ahold's operations. Second, he must present a plan regarding debt restructuring, asset disposal and the future of the remaining operations."
Jerome Samuel, an equity analyst at CDC Securities, Paris, also stressed the importance of clarity. "It will come from the publication of Ahold's accounts at the end of June," he said.
Moberg was president and CEO of IKEA from 1986 to 1999 and president of the international division of Home Depot, Atlanta, from 1999 to 2002.
Moberg's appointment to Ahold's executive board is subject to a shareholder vote at tomorrow's annual general meeting.