Kraft Heinz said Monday it will restate nearly three year of financial results due to employee misconduct in its procurement department that caused it to understate the cost of products sold by $181 million.
The processed-foods giant conducted an internal investigation of its procurement function after receiving a subpoena from the U.S. Securities and Exchange Commission in October 2018 related to agreements with its suppliers.
In a regulatory filing, Kraft said the investigation showed “several employees in the procurement area engaged in misconduct” that qualitatively affected its financial reporting for 2016, 2017, and the first three quarters of 2018.
“As a result of the findings from the company’s investigation … the company has recorded adjustments to correct prior period misstatements that increase the total cost of products sold in prior financial periods,” the filing said.
“The findings from the investigation did not identify any misconduct by any member of the senior management team,” Kraft added.
According to Kraft, the misstatements “principally relate to the incorrect timing of when certain cost and rebate elements associated with complex supplier contracts and arrangements were initially recognized, and once corrected for, the company expects to recognize corresponding decreases to costs of products sold in future financial periods.”
The adjustments to financial statements totaled about $208 million, of which approximately $27 million was recorded in the fourth quarter 2018 cost of products sold, leaving a cumulative net misstatement of $181 million.
In trading Monday, Kraft shares rose 0.5% to $32.74.
“While we expect there will be more change, the worst of the uncertainty surrounding financial statements appears to be over,” Consumer Edge Research analyst Jonathan Feeney told Reuters.
Kraft also disclosed Monday it had received an additional subpoena from the SEC on March 1 related to ts assessment of goodwill and intangible asset impairments. The company’s own review, it said, had identified misstatements resulting in an increase of approximately $13 million from the previously disclosed $15.4 billion goodwill impairment loss in the fourth quarter of 2018.
Kraft shareholders have sued the company for fraud since the disclosure of the first SEC subpoena.