Kraft to Restate Financial Results Following Investigation -- 2nd Update
May 06 2019 - 11:16AM
Dow Jones News
By Heather Haddon and Allison Prang
Kraft Heinz Co. said it is restating a host of its financial
results dating as far back as 2016, after it determined they
included certain misstatements.
The food company also said an investigation revealed misconduct
by several staffers in its procurement division. A number of staff
in that division were let go as part of the probe.
"The findings from the investigation did not identify any
misconduct by any member of the senior management team," a Kraft
Heinz spokesman said Monday.
Kraft disclosed in February that the SEC was investigating the
procurement division's accounting practices. It said on Monday that
it had received an additional subpoena in regards to a write-down
of some of its brands on March 1. The company "has been responsive
to the ongoing document requests," it said.
Shares were little changed in early trading Monday.
Investors have been watching for updates from Kraft in the three
months since it disclosed the investigation and said it was writing
down the value of some of its brands by $15 billion. Lead investor
Warren Buffett has since said that Berkshire Hathaway Inc. and 3G
Capital overpaid when they helped form Kraft Heinz through a merger
in 2015.
Mr. Buffet defended the company during his annual meeting over
the weekend, but reiterated that deals can sour by paying too
much.
Kraft has yet to file its full-year financial report for 2018
while it has conducted the investigation into the accounting
problems. It said Monday it has entered into an agreement with its
lenders to file its financial statements by May 14.
The company said it wouldn't file its results of this year's
first quarter on time.
The Kraft spokesman said the food giant was pleased that the
investigation was wrapping up. "The company is taking action to
improve our policies and procedures and will continue to strengthen
our internal financial controls," he said.
Kraft now faces lawsuits in the wake of the investigation and
write-down. Several pension funds are suing in regards to the
company's plunging stock. Trading firm Timber Hill has filed a case
detailing allegations of insider trading.
Attorneys for Kraft have agreed to have the two cases
consolidated under a U.S. District Judge in Chicago. A first
appearance is scheduled for May 16. "The company intends to
vigorously defend against these lawsuits, " Kraft said in a filing
with the Securities and Exchange Commission on Monday.
The company is restating its financial statements for its 2016
and 2017 annual reports. It is also restating quarterly periods in
its 2017 fiscal year and the year-to-date and quarterly periods
that ended Sept. 29 of last year.
Kraft didn't find that the problems were material, but involved
the incorrect timing of reporting costs and rebates in contracts,
it said in the filing.
Kraft said it decided on May 2 that those financial statements
couldn't be relied upon because of the misstatements, which it said
were small.
The company said it is restating them "due to the qualitative
nature of the matters identified in the investigation, including
the number of years over which the misconduct occurred and the
number of transactions, suppliers, and procurement employees
involved."
It said its preliminary findings show that net income for 2016,
2017 and 2018 will change by less than a percentage point.
Kraft said it has adjusted what its cost of products sold has
been in recent periods, adding that the misstatements are related
to when some costs were recognized.
Write to Heather Haddon at heather.haddon@wsj.com and Allison
Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
May 06, 2019 11:01 ET (15:01 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Kraft Heinz (NASDAQ:KHC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Kraft Heinz (NASDAQ:KHC)
Historical Stock Chart
From Sep 2023 to Sep 2024