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Reuters reports that less than a month after Fleming Cos. filed for bankruptcy protection, which followed the collapse of the company’s supply agreement with Kmart, major manufacturers already are feeling the repercussions.

Hershey Foods Corp., for example, said that it would take a first-quarter pre-tax charge of $5 million to create a "bad debt" reserve in case Fleming defaults on payments.

Kraft Foods Inc., while it said it did not expect to have to set up a reserve fund, said it was only shipping product to Fleming under more restrictive credit terms.

Hormel Foods Inc. announced that second-quarter earnings would be hurt by Fleming’s bankruptcy, though it was not specific about the amount.

Still, it could get worse.

Dow Jones reports that there is a lot of speculation that, based on the necessity that Fleming restate its financials from the past few years, Fleming may find it impossible to stay in business. Analysts and consultant Burt Flickinger III told Dow Jones, "The big question is whether it's a real business anymore. Based on the restatements, the company hasn't been making money in a long time."

Fleming has announced that because of how it booked rebates and allowances, it overstated earnings by $85 million in fiscal 2001 and the first three quarters of 2002; it also anticipates as much as $80 million in pre-tax losses from continuing operations in the fourth quarter.
KC's View:
When people as respected as Burt Flickinger start saying things like "the big question is whether it's a real business anymore," you know it is going to make everybody a lot more nervous about Fleming’s prospects than they are already.

Doesn’t look good. And, you get the feeling that there are a lot more shoes ready to drop…