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Kraft Heinz To Restate FY-16, 17 Financial Results

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Food giant Kraft Heinz Co. (KHC) said Monday that it plans to restate its consolidated financial statements in its annual reports for the years ended December 30, 2017 and December 31, 2016 due to certain misstatements in those financial statements. The company will restate its financial statements for the two years by $181 million.

The company will also restate each of its quarterly and year-to-date periods in fiscal year 2017 and the quarterly and year-to-date periods for the nine months ended September 29, 2018.

In a filing with the Securities and Exchange Commission, Kraft Heinz noted that while its previously disclosed investigation into its procurement department is "substantially complete," it has not yet filed its annual report on Form 10-K for the fiscal year ended December 29, 2018 by the prescribed due date.

The delay is due to the time required to thoroughly and properly reflect the restatements discussed in the report. Due to the delay in filing the annual report, the company added that it will also not be able to file in Form 10-Q for the quarter ended March 30, 2019 on time.

Kraft Heinz revealed in February that it received a subpoena in October 2018 from the SEC over the company's accounting policies, procedures and internal controls related to its procurement area. At that time, the company also said it wrote down the value of some of its biggest brands, including the Oscar Meyer and Kraft brands, by $15.4 billion.

Kraft Heinz's findings from the investigation identified that several employees in the procurement area engaged in misconduct. Accordingly, the company has recorded adjustments to correct prior period misstatements that increase the total cost of products sold in prior financial periods.

However, Kraft Heinz does not believe these constitute a quantitatively material misstatement to any individual period. These misstatements principally relate to the incorrect timing of when certain cost and rebate elements associated with complex supplier contracts and arrangements were initially recognized.

Following the investigation, Kraft Heinz said it is implementing some remedial actions, including "employee personnel actions" and "certain improvements to its internal controls," to prevent the likelihood of these incidents from occurring in the future.

The company's investigation did not identify any misconduct by any member of its senior management team.

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