Ace Hardware restated previously issued income and equity for fiscal years 2006, 2005 and 2004. The restatement was primarily the result of the discovery of a $152 million shortfall due to an inventory accounting error, which the company announced in September 2007.
Net income for 2006 was restated as $94.5 million, previously reported as $107.4 million. The 2005 figures were adjusted to $79.5 million, down from $100.4 million. The 2004 net income was adjusted to $65.0 million, down from $101.9 million.
The inventory accounting error by itself reduced net earnings by $18.9 million in 2006, by $19.3 million in 2005 and by $33.5 million in 2004. These reductions combined with other relatively minor out-of-period adjustments and reclassifications in the restatements.
The Oak Brook, Ill.-based company restated equity for the same three years. Equity was restated as $174.0 million in 2006, $182.0 million in 2005 and 191.0 million in 2004. Those figures were downwardly revised from $319.9 million, $314.9 million and $303.0 million, respectively.
Ace said that additional measures are also being taken to restore company equity to the $320 million level, including the establishment of variance allocation accounts for co-op members.
"We anticipate having Ace's equity restored to previously reported levels within the next two years," said Ace president and CEO Ray Griffith. "The fact that we identified the discrepancy, conducted a full, third-party investigation that found no fraud, no missing money and no missing inventory, and have issued audited restated financials within a six-month time frame is a testament to our resolve for fixing the issue and moving the company forward."