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ASHEVILLE, N.C. -- After being informally investigated in 2004 for certain accounting practices, Ingles Markets, Inc. here is now the subject of a formal investigation by the Securities and Exchange Commission, the supermarket chain revealed in its latest 10-Q filing with the SEC.
During 2004, the SEC initiated an informal inquiry of Ingles regarding the accounting for a vendor contract the company entered into in 2002. Through the inquiry, the SEC requested certain documentation regarding that vendor contract, other vendor contracts entered into from 2002 through 2004, and related information and documents regarding the company's accounting for vendor allowances.
Ingles' audit committee, in turn, conducted an internal review, with assistance of independent counsel, of the accounting issues. As a result, the company restated its financial statements for fiscal years 2002 and 2003 and the first three quarters of fiscal 2004.
In May 2005, the SEC issued a formal order of private investigation, Ingles said, noting that the SEC has issued subpoenas to the company and certain existing and former officers and directors of the company.
Ingles said it has been cooperating with the SEC and continues to do so. Further comment from the chain was not made available yesterday.
The retailer noted in the 10-Q filing that professional fees for the three-month and nine-month periods ended June 25, 2005 included $0.7 million and $2.6 million, respectively, of costs incurred as a result of the ongoing SEC investigation. The company anticipates additional professional fees will be incurred in the fourth quarter of fiscal 2005 related to the ongoing SEC investigation and to the implementation of the requirements of Section 404 of the Sarbanes-Oxley Act of 2002.