Great Atlantic restatement cuts past 2 years' losses

shares rise

Upward revision viewed as a hardly typical event

July 06, 2002|By BLOOMBERG NEWS

MONTVALE, N.J. - Shares of Great Atlantic & Pacific Tea Co. had their largest gain in two months after the operator of A&P, Super Fresh, Waldbaum's and Food Emporium supermarkets restated and narrowed losses for the past two fiscal years and raised its 2000 profit.

The company's shares rose $1.65, or 10 percent, to $18.05. The stock had fallen 35 percent since May 24, when Great Atlantic said it would review its accounting.

Great Atlantic inappropriately timed some vendor discounts and used the wrong method to determine self-insurance reserves, the company said in a regulatory filing.

The review improved results for the past three years, allaying investor concern that Great Atlantic might have had wider losses or be investigated by regulators.

"Great Atlantic is more the exception than the rule," said Bob Zimmer, who helps manage about $2 billion in assets at Freeman Associates Investment Management, which owns about 10,000 of the company's shares. "There are going to be more negative restatements than positive ones."

In May, the company delayed filing its annual report with the Securities and Exchange Commission, saying it booked promotional money from vendors up front instead of over a period of 12 months. Investors and regulators are scrutinizing companies' accounting after Enron Corp.'s bankruptcy and WorldCom Inc.'s disclosure of $3.85 billion in hidden expenses.

"This is a WorldCom-Enron environment, and people expected the worst," said Credit Suisse First Boston analyst Jack Murphy, who rates the shares "buy" and doesn't own them. "Now you have a relatively clean resolution to a small problem."

The review narrowed the net loss for the year that ended Feb. 23 to $1.88 a share from $2.18. The net loss for the previous year was restated to 51 cents a share from 65 cents, and net income for the year that ended Feb. 26, 2000, was revised to 92 cents a share from 37 cents.

Great Atlantic didn't return calls yesterday seeking comment. The company, which operates supermarkets under 11 brand names, owns more than 700 stores, mostly in the eastern United States and Canada.

Great Atlantic delayed filing its fiscal year results three times before sending the form to the Securities and Exchange Commission yesterday.

There was no change in its cash balances or debt levels as a result of the restatement, the company said. Its auditor is Deloitte & Touche LLP.

Other adjustments included the overstatement of perishable inventory in one region and changes in the timing for recognition of sublet income from stores that were closed.

Great Atlantic is majority-owned by Germany's Tengelmann Group, one of the biggest family-controlled retailers. The retailer has rescheduled the annual shareholders meeting to July 30.

The restatement will have no effect on Tengelmann's earnings, a Tengelmann spokeswoman said.

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