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SHEBOYGAN, Wis. - Fresh Brands, Inc. announced yesterday that it had discovered a mistake that resulted in the understatement of its cost of goods sold for 2001, 2000 and 1999. The aggregate after-tax impact to earnings for these three fiscal years is expected to approximate $400,000.
After consulting with the Board of Directors, the company has concluded that it needs to restate prior years' earnings to reflect the understatement of cost of goods sold. The restatement is expected to impact previously reported earnings per share in 2001 by $0.03, 2000 by $0.02 and 1999 by $0.02. The restated earnings per share for 2001, 2000 and 1999 are expected to be $1.45, $1.31 and $1.28, respectively.
Added costs that will be incurred to complete the restatements will also affect forecasted 2002 earnings, said executives of Fresh Brands, a wholesaler and operator of 27 Piggly Wiggly and Dick's supermarkets in Wisconsin and Illinois. The company now expects its 2002 earnings per share to be in the range of $1.53 to $1.58, compared to previous estimates of $1.60 and $1.75 per share.
The understatement of cost of goods sold is related to a unique supply relationship the company has with one of its direct store delivery meat vendors. Orders from nine supermarkets were delivered by the vendor to the company's meat distribution center and shipped by the company to the stores. Sales were properly recorded, but the company inadvertently failed to record accurately the corresponding cost of goods sold.
Fresh Brands' chief executive noted the irony of the company's $400,000 error in light of Worldcom's highly publicized $4 billion misstatement of costs. "It is unfortunate in this current environment of earnings restatements that we must report one due to a simple mistake," said president and c.e.o. Elwood F. Winn.
Separately, the company will release its earnings for the second quarter of 2002 before the market opens on Friday, August 2, 2002.