Execs Quit Aurora Foods Amid Probe
SAN FRANCISCO (AP) _ Four senior management officials at Aurora Foods Inc., owner of such well-known brands as Duncan Hines and Aunt Jemima, resigned Friday as the company launched an investigation into its internal accounting practices.
Chairman and chief executive Ian R. Wilson, vice chairman James B. Ardrey, executive vice president Ray Chung and chief financial officer M. Laurie Cummings all stepped down, the company said in a statement. Wilson and Ardrey also resigned from the company’s board of directors.
Aurora Food’s board said it has formed a special committee with its New York-based auditor PricewaterhouseCoopers to investigate Aurora’s accounting practices that it expects will result in a non-cash charge to 1999 earnings and could affect earnings projections for 2000.
Board member Richard C. Dresdale, president of investment firm Fenway Partners was appointed acting chairman while Peter Lamm, chairman and CEO of Fenway, was appointed acting president and CEO of Aurora Foods. Fenway and fellow investment firm McCown De Leeuw & Co. own 46 percent of Aurora Food’s outstanding shares.
The accounting practices immediately under investigation relate primarily to the accrual of trade promotion expenses in 1999. The committee has also asked hired the law firm Ropes & Gray and auditor Deloitte & Touche to investigate the practice and see if it also affects prior earnings statements.
Aurora Foods spokesman Tom Franco refused to elaborate on the statement. PricewaterhouseCoopers also declined to comment.
``It’s pretty apparent that there’s a difference opinion between the auditors and management,″ said David Goldman, a Bank of America analyst who follows the company. ``Management believes that the retail promotion expense should be deferred into future periods; auditors believe that it should be recognized in the current period ... There’s no hard and fast rule and the auditors are demanding a conservative approach.″
Goldman said he didn’t know what was the precise reason behind the dispute, but was hoping to obtain more information from the company.
``There’s no evidence of wrongdoing that’s available to the public, but there was enough evidence that the management resigned,″ Goldman said. It’s unlikely the accounting practice in question goes back further than the last fiscal year, he added.
Aurora Foods has not yet reported full-year earnings for 1999, but expects to by the end of March. It also said the accounting investigation should not affect the company’s ability to operate.
Back in November, Aurora Foods said it expected to report 1999 earnings between 78 cents to 81 cents per share. According to a First Call/Thomson Financial survey, analysts were expecting 79 cents per share.
In the past few years, the San Francisco-based company has grown by acquiring well-known brands and revitalizing them with marketing support, expanded distribution, and new product development. Among the brands under the Aurora Foods umbrella are Mrs. Butterworth’s pancake mix, Log Cabin syrup, Chef’s Choice frozen meals, Lender’s bagels, Celeste frozen pizza and Van de Kamp’s frozen seafood.
Trading in Aurora was halted Friday on the New York Stock Exchange on the news. Shares closed Thursday at $7.31 1/4, well off their 52-week high of $19.50.