010572 ConAgra Forced to Restate Earnings

Omaha, NE - Fictitious sales and misreported earnings in a ConAgra Foods' subsidiary will result in lower earnings for three years totaling about $123 million, the multifoods giant said.

The company and the U.S. Securities and Exchange Commission are investigating accounting problems at United Agri Products Cos., ConAgra chief executive officer Bruce Rohde said late Wednesday.

“I have directed that the control systems at UAP be strengthened,” Rohde said, “and that we take additional actions, as appropriate, including personnel changes.”

The agricultural subsidiary distributes seed, fertilizer and farm chemicals. It accounts for about 9% of ConAgra's business. ConAgra spokeswoman Karen Lynn said Thursday that people responsible will be disciplined or fired.

With sales of about $27 billion a year, ConAgra is the nation's largest food service manufacturer and second largest retail food supplier. It owns companies across the food chain, and its major brand names include Healthy Choice, Hunt's tomato products, Banquet meals and Armour meats.

ConAgra grew out of numerous acquisitions and undertook a yearlong, $1 billion restructuring that ended in June to bring its many divisions under better control. In February, it announced that second-half earnings would be lower than expected because of high energy costs and a faltering national economy.

Analyst William Leach of Banc of America Securities said the report of accounting irregularities at United Agri Products comes on top of the poor earnings news, and might indicate other problems.

“In a company as diverse as ConAgra, you wonder if this is just the tip of the iceberg,” Leach said. “If one business was cooking the books and they didn't catch it for several years, you wonder if there are others.”

Rohde said ConAgra believes all problems having a financial impact have been identified. He said the company's audit committee began investigating the accounting at United Agri Products in November.

ConAgra estimated that for fiscal 1998, revenues will be reduced by about $80 million, from $24.27 billion to $24.19 billion; profits before taxes will be reduced by $27 million, from $1.04 billion to $1.01 billion; and earnings per share will be reduced from $1.35 to $1.32.

Fiscal 1999 revenues will be reduced by about $100 million, from $25.02 billion to $24.92 billion; profits before taxes by about $37 million, from $1.12 billion to $1.08 billion; and earnings per share will be reduced from $1.46 to $1.41.

Fiscal 2000 revenues will be reduced by $174 million, from $25.8 billion to $25.6 billion; profits before taxes by $59 million, from $1.28 billion to $1.22 billion; and earnings per share will be reduced from $1.67 to $1.60 per share.

The accounting changes will mean a $350 million increase in revenue for fiscal 2001, an increase in profit before tax of $127 million, and an increase of about 15 cents per share, the company said.

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