Kraft Heinz Co., the packaged-food giant, said it plans to restate earnings for 2016, 2017 and part of 2018, and that it found evidence of employee misconduct in procurement that increased the cost of products sold.
The effects of the restatements for supplier rebates and other misstatements are expected to be less than 2% in each year on adjusted earnings per share, the company said in a regulatory filing Monday. Kraft Heinz shares fell less than 1% in New York. The stock had dropped about 25% this year through the close of trading on Friday.
The company said it didn’t find any evidence of misconduct by senior managers in its investigation, which is now complete. It had delayed filing its annual report earlier this year because of the probe, and said it would do so as soon as practicable. Shareholder Warren Buffett said Monday he’s confident in the company.
Troubles are piling on at the owner of Jell-O and Velveeta: In February, it took a $15.4 billion writedown and disclosed a subpoena from the U.S. Securities and Exchange Commission.
Adjustments to earnings before interest, taxes, depreciation and amortization, excluding some items, totaled about $244 million, the company said in the filing. When reflected over the periods in question, they “are not quantitatively material to any prior year or quarter,” it said.
Kraft Heinz also said in the filing that it had received a second subpoena from the SEC on March 1, related to its goodwill assessment and requesting documents related to its procurement practices. It said it’s fully cooperating with the agency.
Buffett played a crucial role in the formation of Kraft Heinz, teaming up with 3G Capital to help create the merger of Kraft Foods Group Inc. and H.J. Heinz in 2015. In an interview Monday with CNBC, he said he had been briefed earlier about the restatement issues.
“The company has my confidence,” Buffett said. “If we had just bought Heinz, it would have been a better investment.”
Kraft Heinz said it is taking remedial steps, including personnel actions and changing some internal controls, to prevent such misconduct in the future.
