U.S. Foodservice begins layoffs

no number set

Half of those let go held administrative jobs


U.S. Foodservice has laid off an unspecified number of workers this week as it continues to recover from an accounting scandal and rebuild its food distribution businesses.

"We're trying to reduce expenses and bring them in line with the needs of the business," said Rob Meyne, vice president of corporate communications at the Columbia company, which is a subsidiary of Dutch food company Royal Ahold NV. "To the extent possible, we tried to consolidate and make the business more efficient by reducing excess operations and losing people."

Meyne said he would not know until the end of the month how many of the company's 29,000 employees would lose their jobs. About 50 percent of the people let go were in administrative positions, and the rest worked at the company's 70 divisions nationwide, he said. Some of the jobs were duplicate ones created over the years as U.S. Foodservice acquired other companies.

Meyne said he expected the company to complete the job eliminations in the next couple of weeks. "What we hope to do is roll through the majority of this process by the end of the year," he said. "Our intention is to get this process behind us and start 2006 with a fresh plate and a great team in place."

Ahold disclosed in February 2003 that it had overstated profits by more than $1 billion from 2000 to 2002.

The overstatement was largely because of inflated earnings reported at U.S. Foodservice, the second-largest food distributor in the United States.

The company had improperly booked hundreds of millions of dollars in volume rebates and promotions that food manufacturers pay to distributors in exchange for shelf space in stores. Federal regulators found that U.S. Foodservice provided auditors with false information by persuading their vendors to confirm overstated promotional allowances. Several former U.S. Foodservice executives and vendors that did business with the company still face criminal charges.

Rebuilding U.S. Foodservice has been key to regaining credibility for Ahold, which also owns the Giant supermarket chain. Last month, Ahold agreed to pay $1.1 billion to settle a securities fraud class action lawsuit brought by U.S. shareholders and announced it was splitting U.S. Foodservice into two divisions. It also said it wanted to cut administrative costs by $100 million by 2008.

Even with its troubles, U.S. Foodservice generates strong cash flow. But at least one analyst predicts that Ahold will eventually sell the food distributor, which services fast food chains and institutional investors such as hospitals, schools and prisons. The company had 2004 sales of $18.8 billion,

"I would question whether it's a good fit given the fact that all their other operations are retail-driven," said Jeffrey M. Metzger, publisher of Food World, a trade publication based in Columbia.


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