Kmart to Restate Financial Results for Prior Years
DETROIT - Kmart Corp. said Monday that it will restate its financial results for the past three fiscal years and the first two quarters of 2002 after problems were discovered during a review of its accounting practices, The Associated Press reports.
Kmart said the adjustments will likely decrease its net loss for the first two quarters of this year by less than $100 million. For fiscal years 1999-2001, taken as a whole, it likely will have a negative effect on earnings by nearly $100 million.
The previously reported net loss for that three-year period was roughly $2 billion. For the first two quarters of this year, Kmart lost roughly $1.8 billion.
The adjustments related to several items, including a software programming error in Kmart's accounts payable system and leasing issues. Kmart said past estimates for the cost of some leases was too small and it didn't set aside enough to cover the true cost of some past rent expenses.
The programming error was a logic error in a computer program that was written more than 15 years ago, said Al Koch, Kmart's CFO. The error was restricted to a single vendor and resulted in some paid invoices not being treated correctly in Kmart's financial statements.
Kmart said the adjustments won't affect its liquidity or force it to borrow more.
In September, Kmart said it had discovered accounting transactions that boosted its loss in 2001 and understated the amount the year before. At that time, Kmart said it probably wouldn't have to restate earnings.
In June, Kmart filed restated earnings for the first three quarters of 2001, reflecting changes made to the way it reports vendor discounts.
Kmart's review of its accounting followed anonymous letters claiming to be from employees that questioned the company's accounting practices. The letters also spawned an investigation into the way the company was managed under its former executives.
Kmart, which filed for Chapter 11 bankruptcy protection Jan. 22, is to file its third-quarter earnings and monthly operating reports for October and November later this month.
Kmart said the adjustments will likely decrease its net loss for the first two quarters of this year by less than $100 million. For fiscal years 1999-2001, taken as a whole, it likely will have a negative effect on earnings by nearly $100 million.
The previously reported net loss for that three-year period was roughly $2 billion. For the first two quarters of this year, Kmart lost roughly $1.8 billion.
The adjustments related to several items, including a software programming error in Kmart's accounts payable system and leasing issues. Kmart said past estimates for the cost of some leases was too small and it didn't set aside enough to cover the true cost of some past rent expenses.
The programming error was a logic error in a computer program that was written more than 15 years ago, said Al Koch, Kmart's CFO. The error was restricted to a single vendor and resulted in some paid invoices not being treated correctly in Kmart's financial statements.
Kmart said the adjustments won't affect its liquidity or force it to borrow more.
In September, Kmart said it had discovered accounting transactions that boosted its loss in 2001 and understated the amount the year before. At that time, Kmart said it probably wouldn't have to restate earnings.
In June, Kmart filed restated earnings for the first three quarters of 2001, reflecting changes made to the way it reports vendor discounts.
Kmart's review of its accounting followed anonymous letters claiming to be from employees that questioned the company's accounting practices. The letters also spawned an investigation into the way the company was managed under its former executives.
Kmart, which filed for Chapter 11 bankruptcy protection Jan. 22, is to file its third-quarter earnings and monthly operating reports for October and November later this month.
