Aurora Trades Up
Aurora Foods has brought in two packaged goods veterans to steer the company through a legal crisis over its trade-promotion accounting practices.
On April 3, St. Louis-based Aurora named James Smith president-ceo and Christopher Sortwell executive vp-cfo. Smith had been president-chief operating officer at ConAgra Frozen Prepared Foods. Sortwell was exec vp-cfo at The Stroh Companies.
At the same time, Aurora refigured its earnings for the first nine months of 1999 and the second half of ’98. The new statement reports that the company spent $202 million on trade promotions in ’98, nearly $30 million more than originally reported. Aurora reports that it spent $241 million on trade promotion in ’99 after the re-figuring. Consumer marketing was $57 million in ’98 and $77 million in ’99.
Law firms contend that Aurora misled stockholders by under-reporting how much it spent on trade promotion – and thereby over-inflating earnings. (Aurora’s April report shows a loss of $1.29 per share, not the $0.85 loss per share it first claimed.) At least six class-action suits have been filed on behalf of stockholders since late February, when Aurora formed a special committee to investigate and ceo Ian Wilson and three other top executives resigned. Ropes & Gray, Boston, represents Aurora. No court date has been set.
Ironically, sales have been strong for Aurora, whose brands include Duncan Hines, Lender’s, Aunt Jemima, Mrs. Butterworth, and Mrs. Paul’s. Sales for ’99 hit $995 million, up from $785 million in ’98. (The ’99 figure includes Lender’s bagels, bought from Kellogg Co. last November, and Chef’s Choice, acquired in April ’99.)
Aurora would not say how it initially accounted for trade spending, or how it has changed its accounting practices.
The company projects a first-quarter 2000 sales decline of three percent to $320 million, due to a late Lent and soft seafood and bakery sales. The company has pledged to streamline operations and restructure its management this year.
Smith is credited with doubling ConAgra Frozen Foods’ revenues by launching 300-plus new products and line extensions and overseeing the company’s purchases of Marie Callender’s, Gilardi Foods, and Pierce Foods. He was president of Gerber Products Co. before joining ConAgra, and before that spent 20 years at Procter & Gamble managing the Duncan Hines brand, among others.
Sortwell spent 15 years at Stroh, where he’s credited with expanding international business 15 percent annually. He logged five years at McKinsey & Co. before joining Stroh.
