The $500-million overstatement of promo income revealed at the end of February turned out to have been $880 million, as a third year was added onto the period in which the overstatements occurred (ID web news 5/8/03). The earnings restatements will delete some $700 million in assets from the USF balance sheet as of last December 28 and increase the Columbia, MD, based distributor's liabilities by $290 million.
Sales figures are not affected by these shortfalls and remain accurate, Dillison points out. "The problem relates solely to payments to vendors and receivables associated with them. In other words, the accounting issues relate to allowances reflected as part of the cost of goods sold. These are cost reduction or profitability issues, not sales issues."
USF has not lost ground with customers, he told ID. "We worked hard to help them understand what we're going through and to provide assurances. Independent customers can afford to be patient, as they can replace us at any time. National accounts are watching closely-to make sure we maintain our service levels and pay their vendors on time-and they know we are doing that. They are very concerned, but I am not aware of any large contract lost."
Vendors are reacting with "enlightened self-interest," the USF vp adds. "We have 250,000 customers and $17.5 billion in sales and expect more, and in many cases we are the biggest customer of a supplier. This is not a revenue or a service-level issue. So, generally, vendors are patient. They have become strict in their payment requirements, and we have to fulfill our obligations, but we are not aware of any circumstances where terms have been shortened. We are paying fully within terms."
(See the upcoming ID Management Report, 5/15/03, for more details.)