Kraft Heinz will restate financial reports for a period of almost three years to fix errors that resulted from lapses in procurement practices by some of its employees, the packaged food company said in a filing on Monday.
Kraft Heinz also said it received an additional subpoena from the US Securities and Exchange Commission (SEC) on March 1st, related to the assessment of goodwill and intangible asset impairments and a request for documents associated with the procurement business.
The company had disclosed in February it had been subpoenaed by the SEC relating to an investigation into its accounting policies, procedures and internal controls related to its procurement. Following the first subpoena, the company, together with its external counsel and forensic accountants, initiated an investigation into the procurement practices.
Write-down increase
Kraft Heinz had in February also announced a $15.4 billion write-down of its iconic Kraft and Oscar Mayer brands. Monday’s filing revealed that the misstatements would increase the amount by about $13 million.
Due to these findings, the company said it would not be able to file its quarterly report for the period ended March 30th on time, sending its shares down about 1 per cent before the bell.
Warren Buffett's Berkshire Hathaway, Kraft Heinz's largest shareholder with a 26.7 per cent stake, said on Saturday its results exclude Kraft Heinz's results because it had not released its own quarterly results.
Still, Mr Buffett told CNBC after Kraft Heinz disclosed the restatements that the company had his confidence. The misstatements in its reports for the years 2016, 2017 and the first nine months of 2018 mainly relate to the timing and recognition of supplier contracts in the procurement area, the company said.
No misconduct
The investigation and review required adjustments of about $208 million related to the costs of products sold and the findings from the investigation also revealed that there was no misconduct from any member of Kraft Heinz’s senior management team.
The misstatement was not “quantitatively material” to its financial statements, the company said.
Kraft also said it reviewed supplier contracts and found additional misstatements may or may not have resulted from the misconduct tied to its procurement practices.
"The company is taking action to improve our policies and procedures, and will continue to strengthen our internal financial controls," Kraft Heinz spokesman Michael Mullen said.
Kraft Heinz added that its investigation was substantially complete, and that it would continue to co-operate fully with the SEC. – Reuters
