Kraft to Restate Financial Results Following Investigation -- Update
May 06 2019 - 8:54AM
Dow Jones News
By Allison Prang and Heather Haddon
Kraft Heinz Co. said it is restating a host of financial
statements dating as far back as 2016, after it determined they
included certain misstatements.
The food company said an investigation revealed misconduct by
several staffers in its procurement division. The probe is largely
finished and senior management wasn't involved in the misconduct,
Kraft said in a filing with the Securities and Exchange
Commission.
Kraft disclosed in February that the SEC was investigating the
procurement division's accounting practices.
Shares fell 1% in premarket 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,
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 an investigation into the accounting
problems. Kraft entered into an agreement with its lenders to file
its financial statements by May 14, it said in a filing.
A 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.
Kraft said it 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 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.
The company said it has already taken and it will continue to
take personnel actions and steps to fix controls internally.
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 Allison Prang at allison.prang@wsj.com and Heather
Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
May 06, 2019 08:39 ET (12:39 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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