SYRACUSE, N.Y. -- Penn Traffic here last week became the latest in a series of food retailing companies that have recently found accounting errors causing them to restate their financial results.
The company said it would restate its earnings reports for the past three years and the first quarter of this year after a former manager in its Penny Curtiss bakery manufacturing subsidiary allegedly admitted to overstating the inventory in the division, resulting in an overstatement of profits. Other violations of the company's accounting policies also were involved, a Penn Traffic spokesman told SN.
The company estimated the adjustment to pretax earnings would be in the range of $10 million to $11 million. It will equal about 3% to 4% of the company's cumulative cash flow for the past three years and the first quarter of this year, according to Marc Jampole, spokesman, Penn Traffic.
"It is too early to speculate why the employee overstated inventories and committed the other false accounting, but the investigation is looking into personal gain as a possible motive," he said.
He said he could not comment on how the manager's compensation was tied to the division's profitability.
The Penny Curtiss division, which also is based here, produces baked goods for all of Penn Traffic's store banners and also has some customers outside the company, Jampole said.
The employee was fired, and the company said it would "cooperate with the appropriate authorities on any criminal investigation."
In a prepared statement, Joseph V. Fisher, president and chief executive officer, Penn Traffic, said the company would "not feel any significant impact from the financial restatement we expect to make."
