Kraft Heinz plans to restate its financial statements for 2016, 2017 and the first nine months of 2018 after discovering employee misconduct in its procurement practices, the food giant said last week in a regulatory filing.
Kraft Heinz, based in Chicago and Pittsburgh, identified $181 million in financial misstatements that will be corrected, according to the filing.
The disclosure comes during a period of tumult at Kraft Heinz, which last month announced its CEO is stepping down and on Monday confirmed it is losing it U.S. chief marketing and global brand officer Edward Luz.
The maker of the famous ketchup and mac and cheese brands launched an internal review of its procurement department after receiving a subpoena from the Securities and Exchange Commission in October regarding its supplier contracts. The company’s investigation discovered misstatements that “principally relate to the incorrect timing of when certain cost and rebate elements associated with complex supplier contracts and arrangements were initially recognized.”
The investigation didn’t identify misconduct by senior management. The company has taken employee personnel actions and improved internal controls to reduce the chance of it happening again, it said in the filing.
In restating its financials, Kraft Heinz essentially increased the total cost of products sold during the time when the misconduct was occurring.
“While we don’t believe that the misstatements are quantitatively material to any prior period, due to the qualitative nature of the matters identified, the company determined that it is appropriate to correct the errors in previously issued financial statements,” spokesman Michael Mullen said in a statement.
While that investigation is “substantially complete,” Kraft Heinz received another subpoena from the SEC March 1 associated with its assessment of goodwill and intangible asset impairments. The company says it continues to cooperate fully with the SEC.
Kraft Heinz, one of the nation’s largest food companies, revealed the initial SEC investigation in February during an earnings release that included a $12.6 billion loss for the fourth quarter and a $15.4 billion write-down of some of its big brands like Kraft and Oscar Mayer. Like many food companies, it is challenged by changing consumer tastes that favor healthier fare as well as competition from private label brands and startups.
The company announced last month that CEO Bernardo Hees, who has been at the helm since Kraft Foods and H.J. Heinz merged in 2015, will step down this summer and be replaced by former Anheuser-Busch InBev chief marketing officer Miguel Patricio.