Restatement of Previously Issued Condensed Consolidated Financial Statements (Tables)

9 Months Ended

Sep. 28, 2019

Accounting Changes and Error Corrections [Abstract]

Restatement of Condensed Consolidated Financial Statements

The Kraft Heinz Company

Condensed Consolidated Statement of Income

(in millions, except per share data)

	For the Three Months Ended September 29, 2018
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated
Net sales	$	6,378		$	5		(f)	$	6,383
Cost of products sold	4,271			18			(a)(b)(f)	4,289
Gross profit	2,107			(13		)		2,094
Selling, general and administrative expenses, excluding impairment losses	803			—			(f)	803
Goodwill impairment losses	—			—				—
Intangible asset impairment losses	234			(17		)	(e)	217
Selling, general and administrative expenses	1,037			(17		)		1,020
Operating income/(loss)	1,070			4				1,074
Interest expense	327			(1		)	(b)(f)	326
Other expense/(income)	(71		)	—				(71		)
Income/(loss) before income taxes	814			5				819
Provision for/(benefit from) income taxes	186			15			(a)(b)(d)(e)(f)	201
Net income/(loss)	628			(10		)		618
Net income/(loss) attributable to noncontrolling interest	(2		)	1			(f)	(1		)
Net income/(loss) attributable to common shareholders	$	630		$	(11	)		$	619
Per share data applicable to common shareholders:
Basic earnings/(loss)	$	0.52		$	(0.01	)		$	0.51
Diluted earnings/(loss)	0.51			(0.01		)		0.50

(a) Supplier Rebates—The correction of these misstatements resulted in an increase to cost of products sold of $13 million and a decrease to provision for income taxes of $2 million for the three months ended September 29, 2018.

(b) Capital Leases—The correction of these misstatements resulted in an increase to cost of products sold of less than $1 million, a decrease to interest expense of $1 million, and an increase to provision for income taxes of less than $1 million for the three months ended September 29, 2018.

(c) Balance Sheet Misclassifications—None.

(d) Income Taxes—The correction of these misstatements resulted in an increase to provision for income taxes of $14 million for the three months ended September 29, 2018.

(e) Impairments—The correction of these misstatements resulted in a decrease to SG&A of $17 million and an increase to provision for income taxes of $4 million for the three months ended September 29, 2018.

(f) Other—The correction of these misstatements resulted in an increase to net sales of $5 million, an increase to cost of products sold of $5 million, an increase to SG&A of less than $1 million, a decrease to interest expense of less than $1 million, a decrease to provision for income taxes of $1 million, and a decrease to net loss attributable to noncontrolling interest of $1 million for the three months ended September 29, 2018.

The Kraft Heinz Company

Condensed Consolidated Statement of Income

(in millions, except per share data)

	For the Nine Months Ended September 29, 2018
	As Previously Reported			Restatement Impacts(1)			Restatement Reference	As Restated
Net sales	$	19,368		$	9		(f)	$	19,377
Cost of products sold	12,651			21			(a)(b)(f)	12,672
Gross profit	6,717			(12		)		6,705
Selling, general and administrative expenses, excluding impairment losses	2,338			(15		)	(f)	2,323
Goodwill impairment losses	164			(31		)	(e)	133
Intangible asset impairment losses	335			(17		)	(e)	318
Selling, general and administrative expenses	2,837			(63		)		2,774
Operating income/(loss)	3,880			51				3,931
Interest expense	962			(3		)	(b)(f)	959
Other expense/(income)	(196		)	15				(181		)
Income/(loss) before income taxes	3,114			39				3,153
Provision for/(benefit from) income taxes	738			41			(a)(b)(d)(e)(f)	779
Net income/(loss)	2,376			(2		)		2,374
Net income/(loss) attributable to noncontrolling interest	(3		)	1			(f)	(2		)
Net income/(loss) attributable to common shareholders	$	2,379		$	(3	)		$	2,376
Per share data applicable to common shareholders:
Basic earnings/(loss)	$	1.95		$	—			$	1.95
Diluted earnings/(loss)	1.94			—				1.94

(1) We have reclassified our $15 million pre-tax loss on the sale of our South African business from SG&A to other expense/(income) in order to conform with current period presentation. This reclassification has been included in the restatement impacts column above.

(a) Supplier Rebates—The correction of these misstatements resulted in an increase to cost of products sold of $22 million and a decrease to provision for income taxes of $3 million for the nine months ended September 29, 2018.

(b) Capital Leases—The correction of these misstatements resulted in an increase to cost of products sold of $1 million, a decrease to interest expense of $3 million, and an increase to provision for income taxes of less than $1 million for the nine months ended September 29, 2018.

(c) Balance Sheet Misclassifications—None.

(d) Income Taxes—The correction of these misstatements resulted in an increase to provision for income taxes of $40 million for the nine months ended September 29, 2018.

(e) Impairments—The correction of these misstatements resulted in a decrease to SG&A of $48 million and an increase to provision for income taxes of $4 million for the nine months ended September 29, 2018.

(f) Other—The correction of these misstatements resulted in an increase to net sales of $9 million, a decrease to cost of products sold of $2 million, an increase to SG&A of less than $1 million, a decrease to interest expense of less than $1 million, an increase to provision for income taxes of less than $1 million, and a decrease to net loss attributable to noncontrolling interest of $1 million for the nine months ended September 29, 2018.

The Kraft Heinz Company

Consolidated Statement of Cash Flows

(in millions)

	For the Nine Months Ended September 29, 2018
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)	$	2,376		$	(2	)	(a)(b)(d)(e)(f)	$	2,374
Adjustments to reconcile net income/(loss) to operating cash flows:
Depreciation and amortization	736			(24		)	(b)(f)	712
Amortization of postretirement benefit plans prior service costs/(credits)	(261		)	—				(261		)
Equity award compensation expense	44			—				44
Deferred income tax provision/(benefit)	96			8			(a)(d)(e)(f)	104
Postemployment benefit plan contributions	(64		)	—				(64		)
Goodwill and intangible asset impairment losses	499			(48		)	(e)	451
Nonmonetary currency devaluation	131			—				131
Loss/(gain) on sale of business	15			—				15
Other items, net	21			(1		)	(a)(f)	20
Changes in current assets and liabilities:
Trade receivables	(2,154		)	—				(2,154		)
Inventories	(663		)	18			(c)(f)	(645		)
Accounts payable	145			(15		)	(f)	130
Other current assets	(105		)	2			(a)(c)	(103		)
Other current liabilities	83			41			(a)(b)(d)(f)	124
Net cash provided by/(used for) operating activities	899			(21		)		878
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash receipts on sold receivables	1,296			—				1,296
Capital expenditures	(594		)	—				(594		)
Payments to acquire business, net of cash acquired	(248		)	—				(248		)
Proceeds from sale of business	18			—				18
Other investing activities, net	13			—				13
Net cash provided by/(used for) investing activities	485			—				485
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(2,727		)	21			(b)(f)	(2,706		)
Proceeds from issuance of long-term debt	2,990			—				2,990
Proceeds from issuance of commercial paper	2,485			—				2,485
Repayments of commercial paper	(1,950		)	—				(1,950		)
Dividends paid - common stock	(2,421		)	—				(2,421		)
Other financing activities, net	(35		)	—				(35		)
Net cash provided by/(used for) financing activities	(1,658		)	21				(1,637		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(128		)	—				(128		)
Cash, cash equivalents, and restricted cash
Net increase/(decrease)	(402		)	—				(402		)
Balance at beginning of period	1,769			—				1,769
Balance at end of period	$	1,367		$	—			$	1,367
NON-CASH INVESTING ACTIVITIES:
Beneficial interest obtained in exchange for securitized trade receivables	$	938		$	—			$	938

The Kraft Heinz Company

Condensed Consolidated Statement of Comprehensive Income

(in millions)

	For the Three Months Ended September 29, 2018
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated
Net income/(loss)	$	628		$	(10	)	(a)(b)(d)(e)(f)	$	618
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(146		)	2			(b)(d)(e)	(144		)
Net deferred gains/(losses) on net investment hedges	13			—				13
Amounts excluded from the effectiveness assessment of net investment hedges	3			—				3
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(2		)	—				(2		)
Net deferred gains/(losses) on cash flow hedges	(16		)	—				(16		)
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	12			—				12
Net actuarial gains/(losses) arising during the period	17			—				17
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	(58		)	—				(58		)
Total other comprehensive income/(loss)	(177		)	2				(175		)
Total comprehensive income/(loss)	451			(8		)		443
Comprehensive income/(loss) attributable to noncontrolling interest	(4		)	1			(f)	(3		)
Comprehensive income/(loss) attributable to Kraft Heinz	$	455		$	(9	)		$	446

The $10 million decrease to net income was primarily driven by misstatements in the income taxes and supplier rebates categories, partially offset by misstatements in the impairments, capital leases, and other categories. See additional descriptions of the net income impacts in the consolidated statement of income for the three months ended September 29, 2018 section above.

The $2 million change to foreign currency translation adjustments is the result of misstatements in the income taxes, capital leases, and impairments categories.

The Kraft Heinz Company

Condensed Consolidated Statement of Comprehensive Income

(in millions)

	For the Nine Months Ended September 29, 2018
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated
Net income/(loss)	$	2,376		$	(2	)	(a)(b)(d)(e)(f)	$	2,374
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(817		)	8			(b)(d)(e)	(809		)
Net deferred gains/(losses) on net investment hedges	158			—				158
Amounts excluded from the effectiveness assessment of net investment hedges	3			—				3
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(2		)	—				(2		)
Net deferred gains/(losses) on cash flow hedges	40			—				40
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	(10		)	—				(10		)
Net actuarial gains/(losses) arising during the period	70			—				70
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	(133		)	—				(133		)
Total other comprehensive income/(loss)	(691		)	8				(683		)
Total comprehensive income/(loss)	1,685			6				1,691
Comprehensive income/(loss) attributable to noncontrolling interest	(16		)	1			(f)	(15		)
Comprehensive income/(loss) attributable to Kraft Heinz	$	1,701		$	5			$	1,706

The $2 million decrease to net income was primarily driven by misstatements in the income taxes and supplier rebates categories, partially offset by misstatements in the impairments, other, and capital leases categories. See additional descriptions of the net income impacts in the consolidated statement of income for the nine months ended September 29, 2018 section above.

The $8 million change in foreign currency translation adjustments is the result of misstatements in the income taxes, capital leases, and impairments categories.

The Kraft Heinz Company

Condensed Consolidated Balance Sheet

(in millions, except per share data)

	September 29, 2018
	As Previously Reported			Restatement Impacts			Restatement Reference	As Restated
ASSETS
Cash and cash equivalents	$	1,366		$	—			$	1,366
Trade receivables (net of allowances of $24 at September 29, 2018)	2,032			—				2,032
Sold receivables	—			—				—
Income taxes receivable	195			8			(a)(b)(d)(f)	203
Inventories	3,287			(73		)	(c)(f)	3,214
Prepaid expenses	389			—				389
Other current assets	321			31			(a)(c)	352
Total current assets	7,590			(34		)		7,556
Property, plant and equipment, net	7,216			(142		)	(b)(f)	7,074
Goodwill	44,308			31			(e)(f)	44,339
Intangible assets, net	58,727			—				58,727
Other non-current assets	1,889			(10		)	(d)	1,879
TOTAL ASSETS	$	119,730		$	(155	)		$	119,575
LIABILITIES AND EQUITY
Commercial paper and other short-term debt	$	973		$	—			$	973
Current portion of long-term debt	405			(34		)	(b)(f)	371
Trade payables	4,312			(74		)	(f)	4,238
Accrued marketing	494			—				494
Interest payable	315			—				315
Other current liabilities	1,082			149			(a)(f)	1,231
Total current liabilities	7,581			41				7,622
Long-term debt	30,998			(111		)	(b)(f)	30,887
Deferred income taxes	14,215			9			(a)(d)(f)	14,224
Accrued postemployment costs	394			—				394
Other non-current liabilities	964			71			(a)	1,035
TOTAL LIABILITIES	54,152			10				54,162
Commitments and Contingencies
Redeemable noncontrolling interest	6			—				6
Equity:
Common stock, $0.01 par value (5,000 shares authorized; 1,222 shares issued and 1,219 shares outstanding at September 29, 2018)	12			—				12
Additional paid-in capital	58,793			(77		)	(c)	58,716
Retained earnings/(deficit)	8,576			(97		)	(a)(b)(c)(d)(e)(f)	8,479
Accumulated other comprehensive income/(losses)	(1,732		)	8			(b)(d)(e)	(1,724		)
Treasury stock, at cost (3 shares at September 29, 2018)	(264		)	—				(264		)
Total shareholders' equity	65,385			(166		)		65,219
Noncontrolling interest	187			1			(f)	188
TOTAL EQUITY	65,572			(165		)		65,407
TOTAL LIABILITIES AND EQUITY	$	119,730		$	(155	)		$	119,575

(a) Supplier Rebates—The correction of these misstatements resulted in an increase to income taxes receivable of $1 million, a decrease to other current assets of $36 million, an increase to other current liabilities of $66 million, a decrease to deferred income taxes of $40 million, an increase to other non-current liabilities of $71 million, and a decrease to retained earnings of $132 million at September 29, 2018.

(b) Capital Leases—The correction of these misstatements resulted in a decrease to income taxes receivable of less than $1 million, a decrease to property, plant and equipment, net, of $141 million, a decrease to current portion of long-term debt of $32 million, a decrease to long-term debt of $111 million, an increase to retained earnings of $2 million, and a decrease to accumulated other comprehensive losses of less than $1 million at September 29, 2018.

(c) Balance Sheet Misclassifications—The correction of these misstatements resulted in a decrease to inventories of $67 million, an increase to other current assets of $67 million, a decrease to additional paid-in capital of $77 million, and an increase to retained earnings of $77 million at September 29, 2018.

(d) Income Taxes—The correction of these misstatements resulted in an increase to income taxes receivable of $3 million, a decrease to other non-current assets of $10 million, an increase to deferred income taxes of $50 million, a decrease to retained earnings of $66 million, and a decrease to accumulated other comprehensive losses of $9 million at September 29, 2018.

(e) Impairments—The correction of these misstatements resulted in an increase to goodwill of $30 million, an increase to retained earnings of $31 million, and an increase to accumulated other comprehensive losses of $1 million at September 29, 2018.

(f) Other—The correction of these misstatements resulted in an increase to income taxes receivable of $4 million, a decrease to inventories of $6 million, a decrease to property, plant and equipment, net of $1 million, an increase to goodwill of $1 million, a decrease to current portion of long-term debt of $2 million, a decrease to trade payables of $74 million, an increase to other current liabilities of $83 million, an increase to long-term debt of less than $1 million, a decrease to deferred income taxes of $1 million, and a decrease to retained earnings of $9 million, and an increase to noncontrolling interest of $1 million at September 29, 2018.

The cumulative effect of misstatements corrected in periods prior to December 31, 2017 resulted in a reduction to retained earnings of $94 million. The correction of misstatements in the nine months ended September 29, 2018 resulted in a decrease to retained earnings of $3 million. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in our Annual Report on Form 10-K for the year ended December 29, 2018 for additional information.

The Kraft Heinz Company

Condensed Consolidated Statement of Equity

For the Three Months Ended March 31, 2018, June 30, 2018, and September 29, 2018

(in millions, except per share data)

	As Previously Reported
	Common Stock		Additional Paid-in Capital		Retained Earnings/(Deficit)			Accumulated Other Comprehensive Income/(Losses)			Treasury Stock, at Cost			Noncontrolling Interest			Total Equity
Balance at December 30, 2017	$	12	$	58,711	$	8,589		$	(1,054	)	$	(224	)	$	207		$	66,241
Net income/(loss) excluding redeemable noncontrolling interest	—		—		993			—			—			5			998
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—		—		—			79			—			(5		)	74
Dividends declared-common stock ($0.625 per share)	—		—		(762		)	—			—			—			(762		)
Cumulative effect of accounting standards adopted in the period	—		—		(95		)	—			—			—			(95		)
Exercise of stock options, issuance of other stock awards, and other	—		22		(7		)	—			(16		)	—			(1		)
Balance at March 31, 2018	12		58,733		8,718			(975		)	(240		)	207			66,455
Net income/(loss) excluding redeemable noncontrolling interest	—		—		756			—			—			—			756
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—		—		—			(582		)	—			(6		)	(588		)
Dividends declared-common stock ($0.625 per share)	—		—		(762		)	—			—			—			(762		)
Exercise of stock options, issuance of other stock awards, and other	—		33		(2		)	—			(14		)	(13		)	4
Balance at June 30, 2018	12		58,766		8,710			(1,557		)	(254		)	188			65,865
Net income/(loss) excluding redeemable noncontrolling interest	—		—		630			—			—			1			631
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—		—		—			(175		)	—			(2		)	(177		)
Dividends declared-common stock ($0.625 per share)	—		—		(762		)	—			—			—			(762		)
Cumulative effect of accounting standards adopted in the period	—		—		(2		)	—			—			—			(2		)
Exercise of stock options, issuance of other stock awards, and other	—		27		—			—			(10		)	—			17
Balance at September 29, 2018	$	12	$	58,793	$	8,576		$	(1,732	)	$	(264	)	$	187		$	65,572

	Restatement Impacts
	Restatement Reference	Common Stock		Additional Paid-in Capital			Retained Earnings/(Deficit)			Accumulated Other Comprehensive Income/(Losses)		Treasury Stock, at Cost		Noncontrolling Interest		Total Equity
Balance at December 30, 2017		$	—	$	(77	)	$	(94	)	$	—	$	—	$	—	$	(171	)
Net income/(loss) excluding redeemable noncontrolling interest	(a)(b)(d)(e)(f)	—		—			10			—		—		—		10
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	(b)(d)	—		—			—			—		—		—		—
Dividends declared-common stock ($0.625 per share)		—		—			—			—		—		—		—
Cumulative effect of accounting standards adopted in the period		—		—			—			—		—		—		—
Exercise of stock options, issuance of other stock awards, and other		—		—			—			—		—		—		—
Balance at March 31, 2018		—		(77		)	(84		)	$	—	—		—		(161		)
Net income/(loss) excluding redeemable noncontrolling interest	(a)(b)(d)(e)(f)	—		—			(2		)	—		—		—		(2		)
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	(b)(d)(e)	—		—			—			6		—		—		6
Dividends declared-common stock ($0.625 per share)		—		—			—			—		—		—		—
Exercise of stock options, issuance of other stock awards, and other		—		—			—			—		—		—		—
Balance at June 30, 2018		—		(77		)	(86		)	6		—		—		(157		)
Net income/(loss) excluding redeemable noncontrolling interest	(a)(b)(d)(e)(f)	—		—			(11		)	—		—		1		(10		)
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	(b)(d)(e)	—		—			—			2		—		—		2
Dividends declared-common stock ($0.625 per share)		—		—			—			—		—		—		—
Cumulative effect of accounting standards adopted in the period		—		—			—			—		—		—		—
Exercise of stock options, issuance of other stock awards, and other		—		—			—			—		—		—		—
Balance at September 29, 2018		$	—	$	(77	)	$	(97	)	$	8	$	—	$	1	$	(165	)

	As Restated
	Common Stock		Additional Paid-in Capital		Retained Earnings/(Deficit)			Accumulated Other Comprehensive Income/(Losses)			Treasury Stock, at Cost			Noncontrolling Interest			Total Equity
Balance at December 30, 2017	$	12	$	58,634	$	8,495		$	(1,054	)	$	(224	)	$	207		$	66,070
Net income/(loss) excluding redeemable noncontrolling interest	—		—		1,003			—			—			5			1,008
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—		—		—			79			—			(5		)	74
Dividends declared-common stock ($0.625 per share)	—		—		(762		)	—			—			—			(762		)
Cumulative effect of accounting standards adopted in the period	—		—		(95		)	—			—			—			(95		)
Exercise of stock options, issuance of other stock awards, and other	—		22		(7		)	—			(16		)	—			(1		)
Balance at March 31, 2018	12		58,656		8,634			(975		)	(240		)	207			66,294
Net income/(loss) excluding redeemable noncontrolling interest	—		—		754			—			—			—			754
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—		—		—			(576		)	—			(6		)	(582		)
Dividends declared-common stock ($0.625 per share)	—		—		(762		)	—			—			—			(762		)
Exercise of stock options, issuance of other stock awards, and other	—		33		(2		)	—			(14		)	(13		)	4
Balance at June 30, 2018	12		58,689		8,624			(1,551		)	(254		)	188			65,708
Net income/(loss) excluding redeemable noncontrolling interest	—		—		619			—			—			2			621
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—		—		—			(173		)	—			(2		)	(175		)
Dividends declared-common stock ($0.625 per share)	—		—		(762		)	—			—			—			(762		)
Cumulative effect of accounting standards adopted in the period	—		—		(2		)	—			—			—			(2		)
Exercise of stock options, issuance of other stock awards, and other	—		27		—			—			(10		)	—			17
Balance at September 29, 2018	$	12	$	58,716	$	8,479		$	(1,724	)	$	(264	)	$	188		$	65,407