ConAgra Foods Inc. announced that it will restate its financials for the past year and a half to correct errors in its accounting for income taxes.
The company, known for brands such as Armour, Butterball, and Chef Boyardee said it discovered the errors as part of its Sarbanes-Oxley 404 certification process and in connection with pending tax audits, as well as part of operational improvement efforts by its new financial management team. Frank Sklarsky joined ConAgra in December as executive vice president and chief financial officer; he had recently been named vice president, corporate financial control at DaimlerChrysler.
ConAgra stated that it does not expect the restatement to affect previously reported revenue or income from continuing operations before income taxes. However, the company added that it expects the restatement to increase tax expense between $150 million and $200 million, and therefore reduce after-tax profits, mostly in fiscal 2003 and 2004.
The company also determined that the existence of a material weakness in internal controls with respect to accounting for income taxes. To ensure that this weakness is remedied, the company announced that it will hire a new vice president of tax and additional tax accounting staff, as well as implement enhanced control processes that will involve the assistance of third-party professionals.
Earlier this year, the company announced that it reached an agreement to settle a class-action lawsuit stemming from its 2001 restatement at its subsidiary United Agri Products Cos., which distributes seed, fertilizer and agricultural chemicals to agricultural growers, for fiscal years 1997 through 2001.
At the time, ConAgra stated that it had found improper accounting practices in three areas at United Agri Products: revenue recognition for deferred delivery sales and associated vendor rebates, recognition of advance rebate income, and accruals for bad debt reserves. ConAgra added that it had identified an error relating to consolidation of inter-company sales during fiscal 1998.