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Fleming to Restate Results for 2001, 2002

DALLAS - Fleming Companies Inc. on Thursday said it will restate results for the two latest years and take a $645 million charge to reflect an overall decrease in the bankrupt grocery distributor's value.

Fleming said the restatements are to correct the way it accounted for promotional payments from vendors, known as vendor allowances or vendor rebates.

The U.S. Securities and Exchange Commission has been investigating a host of issues at Fleming, including its vendor trade practices, the presentation of earnings, its accounting for certain transactions, and its calculation of some same-store sales.

Fleming said it would restate its 2001 annual and quarterly financial statements and 2002 quarterly financial statements previously filed with the SEC.

The Dallas-based company said it would also revise its previously announced 2002 fourth quarter and full year financial results to reflect a loss from continuing operations.

Fleming said the actions reflect "significant business issues and developments," including the recent termination of its supply agreement with bankrupt retailer Kmart Corp. and other events leading to Fleming's own Chapter 11 bankruptcy filing earlier this month.

The restatements for 2001 and the first three quarters of 2002 are expected to reduce pre-tax financial results from continuing operations by an aggregate of up to $85 million.

In addition to the $645 million charge for a full impairment of goodwill, the company will record an additional impairment charge to discontinued operations of $90 million, related to retail store operations up for sale, since the realizable value of those assets has fallen.

Fleming will record a non-cash charge against continuing operations in the fourth quarter of 2002 related to deferred tax assets in the range of $275 million to $325 million, due to uncertainty around the timing of net operating losses utilized against future tax payments.

The company also said its fourth quarter 2002 pre-tax loss from continuing operations would be widened by expenses totaling up to $80 million.

Fleming said it has adopted a new standard for accounting for vendor allowances. The company will now record those rebates as a reduction to the prices it pays for the vendor's products, so they will be included in the cost of sales.

The 2002 effect of adopting the new accounting rule is expected to reduce the 2002 pre-tax loss by $5 million to $15 million. The cumulative effect that will be recorded as of the beginning of 2002 is expected to be an expense of not more than $45 million, Fleming said.
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