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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 2019
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission File Number 001-37482
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13057800&doc=11
The Kraft Heinz Company
(Exact name of registrant as specified in its charter)

Delaware
 
46-2078182
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
One PPG Place,
Pittsburgh,
Pennsylvania
 
15222
(Address of Principal Executive Offices)
 
(Zip Code)

(412) 456-5700
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of exchange on which registered
Common stock, $0.01 par value
KHC
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
Emerging growth company





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

As of August 3, 2019, there were 1,219,991,425 shares of the registrant’s common stock outstanding.





Table of Contents
Unless the context otherwise requires, the terms “we,” “us,” “our,” “Kraft Heinz,” and the “Company” each refer to The Kraft Heinz Company and all of its consolidated subsidiaries.





Explanatory Note
As previously disclosed, we restated our audited consolidated financial statements at December 30, 2017 and for the years ended December 30, 2017 and December 31, 2016. The restatement of these periods was effective with the filing of our Annual Report on Form 10-K for the year ended December 29, 2018. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, to the consolidated financial statements in our Annual Report on Form 10-K for additional information related to the restatement.
Additionally, as previously disclosed, we restated the relevant unaudited interim financial information for the quarterly periods ended September 29, 2018, June 30, 2018, March 31, 2018, December 30, 2017, September 30, 2017, July 1, 2017, and April 1, 2017. The 2018 quarterly restatements are or will become effective with the filing of our 2019 unaudited interim condensed consolidated financial statement filings in Quarterly Reports on Form 10-Q, including the quarterly period ended March 31, 2018, which is effective with the filing of this Quarterly Report on Form 10-Q. See Note 2, Restatement of Previously Issued Condensed Consolidated Financial Statements, in Item 1, Financial Statements, for additional information related to the restatement of our condensed consolidated financial statements for the period ended March 31, 2018.





PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Kraft Heinz Company
Condensed Consolidated Statements of Income
(in millions, except per share data)
(Unaudited)
 
For the Three Months Ended
 
March 30,
2019
 
March 31,
2018
 
 
 
(As Restated)
Net sales
$
5,959

 
$
6,304

Cost of products sold
3,948

 
4,040

Gross profit
2,011

 
2,264

Selling, general and administrative expenses, excluding impairment losses
829

 
764

Goodwill impairment losses
620

 

Intangible asset impairment losses

 

Selling, general and administrative expenses
1,449

 
764

Operating income/(loss)
562

 
1,500

Interest expense
321

 
317

Other expense/(income)
(380
)
 
(90
)
Income/(loss) before income taxes
621

 
1,273

Provision for/(benefit from) income taxes
217

 
270

Net income/(loss)
404

 
1,003

Net income/(loss) attributable to noncontrolling interest
(1
)
 

Net income/(loss) attributable to common shareholders
$
405

 
$
1,003

Per share data applicable to common shareholders:
 
 
 
Basic earnings/(loss)
$
0.33

 
$
0.82

Diluted earnings/(loss)
0.33

 
0.82


See accompanying notes to the condensed consolidated financial statements.

1




The Kraft Heinz Company
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(Unaudited)
 
For the Three Months Ended
 
March 30,
2019
 
March 31,
2018
 
 
 
(As Restated)
Net income/(loss)
$
404

 
$
1,003

Other comprehensive income/(loss), net of tax:
 
 
 
Foreign currency translation adjustments
219

 
197

Net deferred gains/(losses) on net investment hedges
(14
)
 
(74
)
Amounts excluded from the effectiveness assessment of net investment hedges
4

 

Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)
2

 

Net deferred gains/(losses) on cash flow hedges
(16
)
 
22

Amounts excluded from the effectiveness assessment of cash flow hedges
6

 

Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)
(8
)
 
(13
)
Net postemployment benefit losses/(gains) reclassified to net income/(loss)
(58
)
 
(58
)
Total other comprehensive income/(loss)
135

 
74

Total comprehensive income/(loss)
539

 
1,077

Comprehensive income/(loss) attributable to noncontrolling interest
11

 
(5
)
Comprehensive income/(loss) attributable to common shareholders
$
528

 
$
1,082


See accompanying notes to the condensed consolidated financial statements.

2




The Kraft Heinz Company
Condensed Consolidated Balance Sheets
(in millions, except per share data)
(Unaudited)
 
March 30, 2019
 
December 29, 2018
ASSETS
 
 
 
Cash and cash equivalents
$
1,096

 
$
1,130

Trade receivables (net of allowances of $27 at March 30, 2019 and $24 at December 29, 2018)
2,010

 
2,129

Income taxes receivable
85

 
152

Inventories
3,118

 
2,667

Prepaid expenses
384

 
400

Other current assets
1,116

 
1,221

Assets held for sale
1,026

 
1,376

Total current assets
8,835

 
9,075

Property, plant and equipment, net
7,031

 
7,078

Goodwill
36,091

 
36,503

Intangible assets, net
49,553

 
49,468

Other non-current assets
2,052

 
1,337

TOTAL ASSETS
$
103,562

 
$
103,461

LIABILITIES AND EQUITY
 
 
 
Commercial paper and other short-term debt
$
2

 
$
21

Current portion of long-term debt
1,305

 
377

Trade payables
4,184

 
4,153

Accrued marketing
543

 
722

Interest payable
356

 
408

Other current liabilities
1,575

 
1,767

Liabilities held for sale
7

 
55

Total current liabilities
7,972

 
7,503

Long-term debt
29,803

 
30,770

Deferred income taxes
12,161

 
12,202

Accrued postemployment costs
308

 
306

Other non-current liabilities
1,483

 
902

TOTAL LIABILITIES
51,727

 
51,683

Commitments and Contingencies (Note 17)

 

Redeemable noncontrolling interest
2

 
3

Equity:
 
 
 
Common stock, $0.01 par value (5,000 shares authorized; 1,224 shares issued and 1,220 shares outstanding at March 30, 2019; 1,224 shares issued and 1,220 shares outstanding at December 29, 2018)
12

 
12

Additional paid-in capital
58,252

 
58,723

Retained earnings/(deficit)
(4,586
)
 
(4,853
)
Accumulated other comprehensive income/(losses)
(1,684
)
 
(1,943
)
Treasury stock, at cost (4 shares at March 30, 2019 and December 29, 2018)
(291
)
 
(282
)
Total shareholders' equity
51,703

 
51,657

Noncontrolling interest
130

 
118

TOTAL EQUITY
51,833

 
51,775

TOTAL LIABILITIES AND EQUITY
$
103,562

 
$
103,461



See accompanying notes to the condensed consolidated financial statements.

3




The Kraft Heinz Company
Condensed Consolidated Statements of Equity
(in millions)
(Unaudited)
 
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 29, 2018
$
12

 
$
58,723

 
$
(4,853
)
 
$
(1,943
)
 
$
(282
)
 
$
118

 
$
51,775

Net income/(loss) excluding redeemable noncontrolling interest

 

 
405

 

 

 

 
405

Other comprehensive income/(loss)

 

 

 
123

 

 
12

 
135

Dividends declared-common stock ($0.40 per share)

 
(488
)
 

 

 

 

 
(488
)
Cumulative effect of accounting standards adopted in the period

 

 
(136
)
 
136

 

 

 

Exercise of stock options, issuance of other stock awards, and other

 
17

 
(2
)
 

 
(9
)
 

 
6

Balance at March 30, 2019
$
12

 
$
58,252

 
$
(4,586
)
 
$
(1,684
)
 
$
(291
)
 
$
130

 
$
51,833

 
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)

 

 

 
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 (As Restated)
$
12

 
$
58,656

 
$
8,634

 
$
(975
)
 
$
(240
)
 
$
207

 
$
66,294


See accompanying notes to the condensed consolidated financial statements.

4




The Kraft Heinz Company
Condensed Consolidated Statements of Cash Flows
(in millions)
(Unaudited)
 
For the Three Months Ended
 
March 30,
2019
 
March 31,
2018
 
 
 
(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income/(loss)
$
404

 
$
1,003

Adjustments to reconcile net income/(loss) to operating cash flows:
 
 
 

Depreciation and amortization
239

 
227

Amortization of postretirement benefit plans prior service costs/(credits)
(77
)
 
(106
)
Equity award compensation expense
9

 
7

Deferred income tax provision/(benefit)
(67
)
 
(46
)
Postemployment benefit plan contributions
(13
)
 
(22
)
Goodwill and intangible asset impairment losses
620

 

Nonmonetary currency devaluation
4

 
47

Loss/(gain) on sale of business
(246
)
 

Other items, net
(64
)
 
(22
)
Changes in current assets and liabilities:
 
 
 
Trade receivables
116

 
(712
)
Inventories
(488
)
 
(312
)
Accounts payable
64

 
(85
)
Other current assets
14

 
26

Other current liabilities
(211
)
 
403

Net cash provided by/(used for) operating activities
304

 
408

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Cash receipts on sold receivables

 
436

Capital expenditures
(249
)
 
(223
)
Payments to acquire business, net of cash acquired
(200
)
 
(215
)
Proceeds from sale of business, net of cash disposed
640

 

Other investing activities, net
(14
)
 
6

Net cash provided by/(used for) investing activities
177

 
4

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Repayments of long-term debt
(1
)
 
(6
)
Proceeds from issuance of commercial paper
377

 
1,524

Repayments of commercial paper
(377
)
 
(1,006
)
Dividends paid
(488
)
 
(897
)
Other financing activities, net
(15
)
 
14

Net cash provided by/(used for) financing activities
(504
)
 
(371
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(11
)
 
(10
)
Cash, cash equivalents, and restricted cash
 
 
 
Net increase/(decrease)
(34
)
 
31

Balance at beginning of period
1,136

 
1,769

Balance at end of period
$
1,102

 
$
1,800

 
 
 
 
NON-CASH INVESTING ACTIVITIES:
 
 
 
Beneficial interest obtained in exchange for securitized trade receivables
$

 
$
613

See accompanying notes to the condensed consolidated financial statements.

5




The Kraft Heinz Company
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In management’s opinion, these interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary to fairly state our results for the periods presented.
The condensed consolidated balance sheet data at December 29, 2018 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These statements should be read in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 29, 2018. The results for interim periods are not necessarily indicative of future or annual results.
Principles of Consolidation
The consolidated financial statements include Kraft Heinz and all of our controlled subsidiaries. All intercompany transactions are eliminated.
Reportable Segments
We manage and report our operating results through four segments. We have three reportable segments defined by geographic region: United States, Canada, and Europe, Middle East, and Africa (“EMEA”). Our remaining businesses are combined and disclosed as “Rest of World.” Rest of World comprises two operating segments: Latin America and Asia Pacific (“APAC”).
Use of Estimates
We prepare our condensed consolidated financial statements in accordance with U.S. GAAP, which requires us to make accounting policy elections, estimates, and assumptions that affect the reported amount of assets, liabilities, reserves, and expenses. These accounting policy elections, estimates, and assumptions are based on our best estimates and judgments. We evaluate our policy elections, estimates, and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We believe these estimates to be reasonable given the current facts available. We adjust our policy elections, estimates, and assumptions when facts and circumstances dictate. Market volatility, including foreign currency exchange rates, increases the uncertainty inherent in our estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from estimates. If actual amounts differ from estimates, we include the revisions in our consolidated results of operations in the period the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a material effect on our condensed consolidated financial statements.
Reclassifications
We made reclassifications to certain previously reported financial information to conform to our current period presentation.
Held for Sale
We previously announced our plans to divest certain assets and operations in Canada. At March 30, 2019 and December 29, 2018, we have classified the assets and liabilities related to this disposal group as held for sale in our condensed consolidated balance sheet. Additionally, at December 29, 2018, the assets and liabilities related to the Heinz India divestiture were classified as held for sale in our condensed consolidated balance sheet. The Heinz India Transaction closed on January 30, 2019. Our assets held for sale are included within current assets and our liabilities held for sale are included within current liabilities. See Note 5, Acquisitions and Divestitures, for additional information.

6




Note 2. Restatement of Previously Issued Condensed Consolidated Financial Statements
We have restated herein our condensed consolidated financial statements at March 31, 2018 and for the three months ended March 31, 2018. We have also restated impacted amounts within the accompanying footnotes to the condensed consolidated financial statements.
Restatement Background
As previously disclosed on February 21, 2019, we received a subpoena from the SEC in October 2018 related to our procurement area, specifically the accounting policies, procedures, and internal controls related to our procurement function, including, but not limited to, agreements, side agreements, and changes or modifications to agreements with our suppliers. Following the receipt of this subpoena, we, together with external counsel and forensic accountants, and subsequently, under the oversight of the Audit Committee of our Board of Directors (the “Audit Committee”), conducted an internal investigation into the procurement area and related matters. As a result of the findings from this internal investigation, which was completed prior to the filing of our Annual Report on Form 10-K for the year ended December 29, 2018 on June 7, 2019 and which identified that multiple employees in the procurement area engaged in misconduct, we corrected prior period misstatements that generally increased the total cost of products sold in prior financial periods. These misstatements principally related to the incorrect timing of when certain cost and rebate elements associated with supplier contracts and related arrangements were initially recognized.
In connection with the internal investigation, we also conducted a comprehensive review of supplier contracts and related arrangements to identify other potential misstatements in the timing of the recognition of supplier rebates, incentive payments, and pricing arrangements. The review identified further misstatements, which we also investigated and have been unable to conclude if they resulted from the misconduct described above. These misstatements are described in more detail in restatement reference (a) below.
Our internal investigation and review identified adjustments that resulted in an understatement of cost of products sold totaling $208 million, including misstatements of $175 million relating to the periods up through September 29, 2018 that were restated in our Annual Report on Form 10-K for the year ended December 29, 2018. The misstatements of cost of products sold related to our internal investigation and review were $22 million for the nine months ended September 29, 2018, including a $4 million overstatement for the first quarter and understatements of $13 million for the second quarter and $13 million for the third quarter. We do not believe that the misstatements are quantitatively material to any period presented in our prior financial statements. However, due to the qualitative nature of the matters identified in our internal investigation, including the number of years over which the misconduct occurred and the number of transactions, suppliers, and procurement employees involved, we determined that it would be appropriate to correct the misstatements in our previously issued annual and interim consolidated financial statements by restating such financial statements. The restatement also included corrections for additional identified out-of-period and uncorrected misstatements in the impacted periods.
Accordingly, we have restated herein our unaudited condensed consolidated financial statements at March 31, 2018 and for the three months ended March 31, 2018, in accordance with Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections. In addition to the misstatements related to the supplier contracts and related arrangements, including the misstatements related to lease classification described in restatement reference (b) below, we corrected additional identified out-of-period and uncorrected misstatements that were not material, individually or in the aggregate, to our condensed consolidated financial statements. These misstatements were related to balance sheet misclassifications, income taxes, impairments, and other misstatements, all of which are described in more detail in restatement references (c) through (f) below.

7




Description of Misstatements
Misstatements Associated with Supplier Contracts and Related Arrangements
(a) Supplier Rebates
We recorded adjustments to correct the misstatements found as a result of the internal investigation related to procurement described above. In connection with the internal investigation, we also conducted a comprehensive review of supplier contracts and related arrangements to identify other potential misstatements in the timing of the recognition of supplier rebates, incentive payments, and pricing arrangements. The review identified further misstatements, which we also investigated and have been unable to conclude if they resulted from the misconduct described above. These misstatements were primarily related to certain supplier contracts and related arrangements where the allocation of value of all or a portion of rebates and up-front payments to contractual elements in the current period should have been deferred and recognized over an applicable contractual period. We corrected these misstatements to defer the up-front consideration from suppliers when the retention or receipt of that consideration was contingent upon future events and to correctly recognize the consideration as a reduction of cost of products sold over the terms of the arrangements with the suppliers. The impacts of the supplier rebate misstatements are discussed in restatement reference (a) throughout this note.
(b) Capital Leases
As part of our review of supplier contracts and related arrangements in connection with the internal investigation, we evaluated additional elements of such arrangements, including the classification of embedded lease provisions as capital or operating. We had initially classified certain embedded lease provisions as capital leases and allocated their fixed consideration to the lease components. As a result of our analysis, and also taking into consideration, among other elements, the total value of supplier contracts and related arrangements, we determined that the classification of the embedded lease element for certain contracts should have been classified as an operating lease instead of a capital lease. In addition, we identified certain arrangements that were improperly accounted for as embedded capital leases. The impacts of the capital lease misstatements are discussed in restatement reference (b) throughout this note.
Additional Misstatements
(c) Balance Sheet Misclassifications
We recorded adjustments to recognize certain balance sheet misclassifications in the correct period. These adjustments primarily related to the classification of state income taxes and the classification of products held at co-packer locations. The impacts of the balance sheet misclassifications are discussed in restatement reference (c) throughout this note.
(d) Income Taxes
We recorded adjustments to recognize certain income tax items in the correct period, primarily deferred tax adjustments related to a Brazilian subsidiary, as well as return-to-provision adjustments and various other misclassifications. The income tax impacts of all misstatements outside of this category are included in their respective misstatement categories. The impacts of income tax misstatements are discussed in restatement reference (d) throughout this note.
(e) Impairments
We recorded adjustments to recognize certain non-cash impairment losses in the correct period. In 2018, we had determined that a definite-lived intangible asset had been impaired in the fourth quarter of 2016 due to a license termination in that period and recorded an out-of-period correction to recognize the non-cash impairment loss. The impacts of the impairment misstatements are discussed in restatement reference (e) throughout this note.
(f) Other
We recorded adjustments to correct other identified out-of-period and uncorrected misstatements that were not material, individually or in the aggregate, to our condensed consolidated financial statements. These other misstatements were primarily related to structured payable and product financing arrangements, inventory write-offs, certain accrued liabilities, and other misstatements within net sales and certain income tax and balance sheet accounts. The impacts of the other misstatements are discussed in restatement reference (f) throughout this note.

8




Description of Restatement Tables
Below, we have presented a reconciliation from the as previously reported to the restated values for each of our condensed consolidated financial statements at March 31, 2018 and for the three months ended March 31, 2018. The values as previously reported were derived from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 filed on May 3, 2018.

9




The Kraft Heinz Company
Condensed Consolidated Statement of Income
(in millions, except per share data)
 
For the Three Months Ended March 31, 2018
 
As Previously Reported
 
Restatement Impacts
 
Restatement Reference
 
As Restated
Net sales
$
6,304

 
$

 
 
 
$
6,304

Cost of products sold
4,059

 
(19
)
 
(a)(b)(f)
 
4,040

Gross profit
2,245

 
19

 
 
 
2,264

Selling, general and administrative expenses, excluding impairment losses
764

 

 
 
 
764

Goodwill impairment losses

 

 
 
 

Intangible asset impairment losses

 

 
(e)
 

Selling, general and administrative expenses
764

 

 
 
 
764

Operating income/(loss)
1,481

 
19

 
 
 
1,500

Interest expense
317

 

 
(b)(f)
 
317

Other expense/(income)
(90
)
 

 
 
 
(90
)
Income/(loss) before income taxes
1,254

 
19

 
 
 
1,273

Provision for/(benefit from) income taxes
261

 
9

 
(a)(b)(d)(e)(f)
 
270

Net income/(loss)
993

 
10

 
 
 
1,003

Net income/(loss) attributable to noncontrolling interest

 

 
 
 

Net income/(loss) attributable to common shareholders
$
993

 
$
10

 
 
 
$
1,003

Per share data applicable to common shareholders:
 
 
 
 
 
 
 
Basic earnings/(loss)
$
0.81

 
$
0.01

 
 
 
$
0.82

Diluted earnings/(loss)
0.81

 
0.01

 
 
 
0.82

(a) Supplier Rebates—The correction of these misstatements resulted in a decrease to cost of products sold of $4 million and an increase to provision for income taxes of $1 million for the three months ended March 31, 2018.
(b) Capital Leases—The correction of these misstatements resulted in a decrease to cost of products sold of less than $1 million, a decrease to interest expense of less than $1 million, and an increase to provision for income taxes of less than $1 million for the three months ended March 31, 2018.
(c) Balance Sheet Misclassifications—None.
(d) Income Taxes—The correction of these misstatements resulted in an increase to provision for income taxes of $5 million for the three months ended March 31, 2018.
(e) Impairments—The correction of these misstatements resulted in a decrease to selling, general and administrative expenses (“SG&A”) of less than $1 million and an increase to provision for income taxes of less than $1 million for the three months ended March 31, 2018.
(f) Other—The correction of these misstatements resulted in a decrease to cost of products sold of $15 million, a decrease to interest expense of less than $1 million, and an increase to provision for income taxes of $3 million for the three months ended March 31, 2018.

10




The Kraft Heinz Company
Condensed Consolidated Statement of Comprehensive Income
(in millions)
 
For the Three Months Ended March 31, 2018
 
As Previously Reported
 
Restatement Impacts
 
Restatement Reference
 
As Restated
Net income/(loss)
$
993

 
$
10

 
(a)(b)(d)(e)(f)
 
$
1,003

Other comprehensive income/(loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
197

 

 
(b)(d)
 
197

Net deferred gains/(losses) on net investment hedges
(74
)
 

 
 
 
(74
)
Net deferred gains/(losses) on cash flow hedges
22

 

 
 
 
22

Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)
(13
)
 

 
 
 
(13
)
Net postemployment benefit losses/(gains) reclassified to net income/(loss)
(58
)
 

 
 
 
(58
)
Total other comprehensive income/(loss)
74

 

 
 
 
74

Total comprehensive income/(loss)
1,067

 
10

 
 
 
1,077

Comprehensive income/(loss) attributable to noncontrolling interest
(5
)
 

 
 
 
(5
)
Comprehensive income/(loss) attributable to Kraft Heinz
$
1,072

 
$
10

 
 
 
$
1,082


The $10 million increase to net income was primarily driven by misstatements in the other, supplier rebates, capital leases, and impairments categories, partially offset by misstatements in the income taxes category. See additional descriptions of the net income impacts in the consolidated statement of income for the three months ended March 31, 2018 section above.
The less than $1 million decrease to foreign currency translation adjustments is the result of misstatements in the income taxes and capital leases categories.

11




The Kraft Heinz Company
Condensed Consolidated Balance Sheet
(in millions, except per share data)
 
March 31, 2018
 
As Previously Reported
 
Restatement Impacts
 
Restatement Reference
 
As Restated
ASSETS
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,794

 
$

 
 
 
$
1,794

Trade receivables (net of allowances of $24 at March 31, 2018)
1,044

 

 
 
 
1,044

Sold receivables
530

 

 
 
 
530

Income taxes receivable
150

 
(29
)
 
(a)(b)(c)(d)(f)
 
121

Inventories
3,144

 
(55
)
 
(c)(f)
 
3,089

Prepaid expenses
367

 

 
 
 
367

Other current assets
408

 
18

 
(a)(c)(f)
 
426

Total current assets
7,437

 
(66
)
 
 
 
7,371

Property, plant and equipment, net
7,267

 
(122
)
 
(b)(f)
 
7,145

Goodwill
44,843

 
1

 
(f)
 
44,844

Intangible assets, net
59,600

 
(17
)
 
(e)
 
59,583

Other non-current assets
1,640

 

 
 
 
1,640

TOTAL ASSETS
$
120,787

 
$
(204
)
 
 
 
$
120,583

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
Commercial paper and other short-term debt
$
1,001

 
$
2

 
(f)
 
$
1,003

Current portion of long-term debt
2,742

 
(27
)
 
(b)(f)
 
2,715

Trade payables
4,241

 
(93
)
 
(f)
 
4,148

Accrued marketing
567

 
9

 
(f)
 
576

Interest payable
345

 

 
 
 
345

Other current liabilities
1,433

 
67

 
(a)(c)(d)(f)
 
1,500

Total current liabilities
10,329

 
(42
)
 
 
 
10,287

Long-term debt
28,561

 
(96
)
 
(b)(f)
 
28,465

Deferred income taxes
14,085

 
21

 
(a)(d)(e)(f)
 
14,106

Accrued postemployment costs
400

 

 
 
 
400

Other non-current liabilities
949

 
74

 
(a)
 
1,023

TOTAL LIABILITIES
54,324

 
(43
)
 
 
 
54,281

Commitments and Contingencies

 

 
 
 

Redeemable noncontrolling interest
8

 

 
 
 
8

Equity:
 
 
 
 
 
 
 
Common stock, $0.01 par value (5,000 shares authorized; 1,222 shares issued and 1,219 shares outstanding at March 31, 2018)
12

 

 
 
 
12

Additional paid-in capital
58,733

 
(77
)
 
(c)
 
58,656

Retained earnings/(deficit)
8,718

 
(84
)
 
(a)(b)(c)(d)(e)(f)
 
8,634

Accumulated other comprehensive income/(losses)
(975
)
 

 
(b)(d)
 
(975
)
Treasury stock, at cost (3 shares at March 31, 2018)
(240
)
 

 
 
 
(240
)
Total shareholders' equity
66,248

 
(161
)
 
 
 
66,087

Noncontrolling interest
207

 

 
 
 
207

TOTAL EQUITY
66,455

 
(161
)
 
 
 
66,294

TOTAL LIABILITIES AND EQUITY
$
120,787

 
$
(204
)
 
 
 
$
120,583


12





(a) Supplier Rebates—The correction of these misstatements resulted in a decrease to income taxes receivable of $1 million, a decrease to other current assets of $8 million, an increase to other current liabilities of $63 million, a decrease to deferred income taxes of $35 million, an increase to other non-current liabilities of $74 million, and a decrease to retained earnings of $111 million at March 31, 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 $120 million, a decrease to current portion of long-term debt of $25 million