Ace Hardware Announces Restated Financial Results For 2004 – 2006

March 04, 2008 // Franchising.com // Oak Brook, Ill. – Ace Hardware Corporation reported that it has successfully restated its previously issued financial statements for the fiscal years ended 2006, 2005 and 2004. The restatement was primarily the result of the discovery of an inventory accounting error, which the company announced in September 2007.

The restatement includes the correction of the inventory accounting error which reduced 2006, 2005 and 2004 net earnings by $18.9 million, $19.3 million and $33.5 million, respectively. Additionally, the company also recorded other out of period adjustments and reclassifications in the restatement of its financial statements. Measures are being taken to restore the company's equity, which include the establishment of variance allocation accounts for Ace's stockholders, its independent store owners.

"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."

A summary of the impact of the restatement on net income and equity for 2006, 2005 and 2004 follows:


Net Income


As Previously Reported Restatement Adjustment As Restated
2006 $107,420 $(12,889) $94,531
2005 $100,419 $(20,934) $79,485
2004 $101,947 $(36,976) $64,971




Equity


As Previously Reported Restatement Adjustment As Restated
2006 $319,873 $(145,828) $174,045
2005 $314,910 $(132,939) $181,971
2004 $302,970 $(112,005) $190,965



Financial results for fiscal year 2007 will be released separately in the second quarter of 2008. "Ace is financially sound and growing," said Griffith. "We're now ready to move forward, build the strength of the Ace brand and continue to provide our 4,600 stores with the highest levels of support and retail strategies to better serve their customers."

Griffith also highlighted some of Ace's recent accomplishments, including:


  • While its big box competitors experienced same-store sales declines in 2007, Ace Hardware stores' same-store sales were largely flat and Ace's total merchandise sales to its retailers increased 1.1 percent, in spite of the challenging economy and housing market.
  • Ace Hardware was recently ranked in the top 10 of best-in-class companies by BusinessWeek magazine's "Customer Service Champs."
  • Ace anticipates opening 100 new stores in 2008 to better serve customers throughout the country with helpful and knowledgeable home improvement service.




About Ace Hardware

Throughout its 84-year history, Ace Hardware has been known as the helpful hardware store by both customers and communities. With approximately 4,600 hardware, home center and building materials stores that generate annual retail sales of more than $12 billion, Ace Hardware is the largest retailer-owned hardware cooperative in the industry. Headquartered in Oak Brook, Ill., Ace currently operates 14 distribution centers in the U.S. and its retailers' stores are located in all 50 states and 60 countries. More information about Ace can be found at www.acehardware.com.

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