- Q4 net sales increased 0.3%; Organic
Net Sales(1) decreased 0.6%
- Q4 net income attributable to common
shareholders increased to $8.0 billion; Adjusted
EBITDA(1) increased 3.2% on a constant currency
basis
- Q4 diluted EPS increased to $6.52;
Adjusted EPS(1) decreased to $0.90 from $0.91 the
prior year
The Kraft Heinz Company (NASDAQ: KHC) (“Kraft Heinz” or the
“Company”) today reported fourth quarter and full year 2017
financial results.
“There's no question that our financial performance in 2017 did
not reflect our progress or potential,” said Kraft Heinz CEO
Bernardo Hees. “We made significant improvements in many of our
businesses, and were able to accelerate some important business
investments at the end of the year. This, together with benefits
from the U.S. Tax Cuts and Jobs Act and additional investments in
our capabilities, should help further advantage our brands and grow
our business in 2018 and beyond.”
“Since the HR-1 Tax Cuts and Jobs Act was signed into law, we
have already taken actions and are accelerating key business
initiatives,” said Kraft Heinz CFO David Knopf. “This includes
approximately $300 million in strategic investments to build our
capabilities, our people skills and our brands; more than $800
million in capital expenditures to improve quality, safety and
capacity; as well as $1.3 billion to pre-fund our post-retirement
benefit plans.”
Q4 2017 Financial Summary
For the Quarter Ended Year-over-year
Change December 30, December 31,
Impact of 2017 2016 Actual
Currency Organic (in millions, except per share data)
Net sales $ 6,877 $ 6,857 0.3 % 0.9 pp (0.6 )% Operating income
1,640 1,580 3.8 % Net income/(loss) attributable to common
shareholders 8,003 944 747.8 % Diluted EPS $ 6.52 $ 0.77 746.8 %
Adjusted EBITDA(1) 2,015 1,937 4.0 % 0.8 pp Adjusted EPS(1) $ 0.90
$ 0.91 (1.1 )%
Net sales were $6.9 billion, up 0.3 percent versus the year-ago
period, including a 0.9 percentage point benefit from currency.
Organic Net Sales decreased 0.6 percent versus the year-ago period.
Pricing increased 1.0 percentage points, driven by price increases
in Rest of World markets and the United States. Volume/mix
decreased 1.6 percentage points, primarily due to lower shipments
across several categories, particularly nuts, natural cheese and
cold cuts in the United States as well as cheese and coffee in
Canada. This was partially offset by ongoing growth in macaroni and
cheese in the United States as well as strong growth from
condiments and sauces in Europe, China and Indonesia.
Net income attributable to common shareholders increased to $8.0
billion and diluted EPS increased to $6.52, primarily reflecting
benefits from U.S. Tax Reform. Adjusted EBITDA increased 4.0
percent versus the year-ago period to $2.0 billion, including a
favorable 0.8 percentage point impact from currency. Excluding the
impact of currency, Adjusted EBITDA increased primarily due to
gains from cost savings initiatives(2), lower overhead costs and
favorable pricing, which was partially offset by higher input costs
and lower volume/mix. Adjusted EPS decreased 1.1 percent to $0.90,
mainly reflecting growth in Adjusted EBITDA that was more than
offset by a higher effective tax rate versus the prior year
period.
Q4 2017 Business Segment Highlights United
States For the Quarter Ended
Year-over-year Change December 30, December
31, Impact of 2017 2016
Actual Currency Organic (in millions) Net
sales $ 4,787 $ 4,839 (1.1 )% 0.0 pp (1.1 )% Segment Adjusted
EBITDA 1,523 1,502 1.4 % 0.0 pp
United States net sales were $4.8 billion, down 1.1 percent
versus the year-ago period. Pricing increased 0.6 percentage
points, reflecting higher pricing in cheese and seasonal items
partially offset by distribution-related investments in cold cuts.
Volume/mix decreased 1.7 percentage points driven by a combination
of distribution losses on Planters in the club channel, lower
shipments in natural cheese and service-related losses in cold
cuts. This was partially offset by consumption-driven gains in
macaroni and cheese as well as innovation-led growth in Lunchables,
Capri Sun ready-to-drink beverages, and P3.
United States Segment Adjusted EBITDA increased 1.4 percent
versus the year-ago period to $1.5 billion, driven by gains from
cost savings initiatives, lower overhead costs and higher pricing.
This was partially offset by unfavorable key commodity(3) costs,
lower volume/mix and increased investments to support strategic
growth initiatives.
Canada
For the Quarter Ended Year-over-year
Change December 30, December 31,
Impact of 2017 2016 Actual
Currency Organic (in millions) Net sales $ 591 $ 617
(4.1 )% 4.5 pp (8.6 )% Segment Adjusted EBITDA 162 151 7.1 % 5.2 pp
Canada net sales were $591 million, down 4.1 percent versus the
year-ago period, including a favorable 4.5 percentage point impact
from currency. Organic Net Sales decreased 8.6 percent versus the
year-ago period. Pricing was flat to the prior year period while
volume/mix decreased 8.6 percentage points. The decline in
volume/mix primarily reflected lower inventory levels at retail
versus the prior year period, the discontinuation of select cheese
products and lower shipments of coffee.
Canada Segment Adjusted EBITDA increased 7.1 percent versus the
year-ago period to $162 million, including a favorable 5.2
percentage point impact from currency. Excluding the impact of
currency, Segment Adjusted EBITDA increased 1.9 percent as gains
from cost savings initiatives more than offset the impact of lower
volume/mix.
Europe(4)
For the Quarter Ended Year-over-year
Change December 30, December 31,
Impact of 2017 2016 Actual
Currency Organic (in millions) Net sales $ 656 $ 600
9.3 % 8.4 pp 0.9 % Segment Adjusted EBITDA 203 189 7.4 % 8.0 pp
Europe net sales were $656 million, up 9.3 percent versus the
year-ago period, including an 8.4 percentage point benefit from
currency. Organic Net Sales increased 0.9 percent versus the
year-ago period. Pricing declined 0.9 percentage points, primarily
due to changes in promotional spending levels versus the prior year
in Italy, the UK and Russia. Volume/mix increased 1.8 percentage
points as growth from condiments and sauces in Germany, Spain and
France more than offset ongoing consumption weakness in Italy
infant nutrition.
Europe Segment Adjusted EBITDA increased 7.4 percent versus the
year-ago period to $203 million, including a positive 8.0
percentage point impact from currency. Excluding the impact of
currency, Segment Adjusted EBITDA decreased 0.6 percentage points
as gains from cost savings were more than offset by higher input
costs in local currency and weak commercial performance in
Italy.
Rest of World(4)(5)
For the Quarter Ended Year-over-year
Change December 30, December 31,
Impact of 2017 2016 Actual
Currency Organic (in millions) Net sales $ 843 $ 801
5.2 % (1.8) pp 7.0 % Segment Adjusted EBITDA 142 144 (0.8 )% (4.4)
pp
Rest of World net sales were $843 million, a 5.2 percent
increase versus the year-ago period, despite a negative 1.8
percentage point impact from currency. Organic Net Sales increased
7.0 percent versus the year-ago period. Pricing increased 5.7
percentage points, primarily driven by actions to offset higher
input costs in local currency. Volume/mix was 1.3 percentage points
higher as strong growth in China and Indonesia was partially offset
by negative mix impacts in Australia and lower shipments in
Brazil.
Rest of World Segment Adjusted EBITDA decreased 0.8 percent
versus the year-ago period to $142 million, including an
unfavorable 4.4 percentage point impact from currency. Excluding
the impact of currency, Segment Adjusted EBITDA increased 3.6
percentage points, primarily reflecting favorable pricing and lower
overhead costs that were partially offset by higher input costs in
local currency.
End Notes
(1) Organic Net Sales, Adjusted EBITDA, Constant
Currency Adjusted EBITDA and Adjusted EPS are non-GAAP financial
measures. Please see discussion of non-GAAP financial measures and
the reconciliations at the end of this press release for more
information. (2) Cost savings initiatives include the
Company's integration, restructuring and ongoing productivity
efforts. (3) The Company's key commodities in the United
States and Canada are dairy, meat, coffee and nuts. (4) In
the third quarter of 2017, we announced our plans to reorganize
certain of our international businesses to better align our global
geographies. These plans include moving our Middle East and Africa
businesses from the AMEA segment into the Europe segment, forming
the Europe, Middle East, and Africa (“EMEA”) segment. The remaining
AMEA businesses will become the Asia Pacific (“APAC”) segment,
which will remain in Rest of World. We expect these changes to
become effective in the first quarter of 2018. As a result, we
expect to restate our Europe and Rest of World segments to reflect
these changes for historical periods presented in the first quarter
of 2018. (5) Rest of World is comprised of two operating
segments: Latin America; and Asia Pacific, Middle East and Africa
(“AMEA”).
Webcast and Conference Call Information
A webcast of The Kraft Heinz Company's fourth quarter and full
year 2017 earnings conference call will be available at
ir.kraftheinzcompany.com. The call begins today at 8:30 a.m.
Eastern Time.
ABOUT THE KRAFT HEINZ COMPANY
The Kraft Heinz Company (NASDAQ: KHC) is the fifth-largest food
and beverage company in the world. A globally trusted producer of
delicious foods, The Kraft Heinz Company provides high quality,
great taste and nutrition for all eating occasions whether at home,
in restaurants, or on the go. The Company’s iconic brands include
Kraft, Heinz, ABC, Capri Sun,
Classico, Jell-O, Kool-Aid, Lunchables, Maxwell
House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon,
Quero, Smart Ones and Velveeta. The Kraft Heinz Company is
dedicated to the sustainable health of our people, our planet and
our Company. For more information, visit
www.kraftheinzcompany.com.
Forward-Looking Statements
This press release contains a number of forward-looking
statements. Words such as "expect," "advantage," "continue,"
"remain," "execute," "expand," "drive," "believe," "will," and
variations of such words and similar expressions are intended to
identify forward-looking statements. Examples of forward-looking
statements include, but are not limited to, statements regarding
the Company's plans, objectives, cost savings initiatives,
opportunities, capabilities, investments, execution and growth.
These forward-looking statements are not guarantees of future
performance and are subject to a number of risks and uncertainties,
many of which are difficult to predict and beyond the Company's
control.
Important factors that may affect the Company's business and
operations and that may cause actual results to differ materially
from those in the forward-looking statements include, but are not
limited to, operating in a highly competitive industry; changes in
the retail landscape or the loss of key retail customers; the
Company’s ability to maintain, extend and expand its reputation and
brand image; the impacts of the Company’s international operations;
the Company’s ability to leverage its brand value; the Company’s
ability to predict, identify and interpret changes in consumer
preferences and demand; the Company’s ability to drive revenue
growth in its key product categories, increase its market share, or
add products; an impairment of the carrying value of goodwill or
other indefinite-lived intangible assets; volatility in commodity,
energy and other input costs; changes in the Company’s management
team or other key personnel; the Company’s ability to realize the
anticipated benefits from its cost savings initiatives; changes in
relationships with significant customers and suppliers; the
execution of the Company’s international expansion strategy; tax
law changes or interpretations; legal claims or other regulatory
enforcement actions; product recalls or product liability claims;
unanticipated business disruptions; the Company’s ability to
complete or realize the benefits from potential and completed
acquisitions, alliances, divestitures or joint ventures; economic
and political conditions in the United States and in various other
nations in which we operate; the volatility of capital markets;
increased pension, labor and people-related expenses; volatility in
the market value of all or a portion of the derivatives we use;
exchange rate fluctuations; risks associated with information
technology and systems, including service interruptions,
misappropriation of data or breaches of security; the Company’s
ability to protect intellectual property rights; impacts of natural
events in the locations in which we or the Company’s customers,
suppliers or regulators operate; the Company’s indebtedness and
ability to pay such indebtedness; the Company’s ownership
structure; the impact of future sales of its common stock in the
public markets; the Company’s ability to continue to pay a regular
dividend; changes in laws and regulations; restatements of the
Company’s consolidated financial statements; and other factors. For
additional information on these and other factors that could affect
the Company's forward-looking statements, see the Company's risk
factors, as they may be amended from time to time, set forth in its
filings with the Securities and Exchange Commission (the “SEC”).
The Company disclaims and does not undertake any obligation to
update or revise any forward-looking statement in this press
release, except as required by applicable law or regulation.
Non-GAAP Financial Measures
To supplement the financial information, the Company has
presented Organic Net Sales, Adjusted EBITDA, Constant Currency
Adjusted EBITDA, and Adjusted EPS, which are considered non-GAAP
financial measures. The non-GAAP financial measures provided should
be viewed in addition to, and not as an alternative for, results
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) that are
presented in this press release. The non-GAAP financial measures
presented may differ from similarly titled non-GAAP financial
measures presented by other companies, and other companies may not
define these non-GAAP financial measures in the same way. These
measures are not substitutes for their comparable GAAP financial
measures, such as net sales, net income/(loss), diluted earnings
per share, or other measures prescribed by GAAP, and there are
limitations to using non-GAAP financial measures.
Management uses these non-GAAP financial measures to assist in
comparing the Company's performance on a consistent basis for
purposes of business decision making by removing the impact of
certain items that management believes do not directly reflect the
Company's underlying operations. Management believes that
presenting the Company's non-GAAP financial measures is useful to
investors because it (i) provides investors with meaningful
supplemental information regarding financial performance by
excluding certain items, (ii) permits investors to view performance
using the same tools that management uses to budget, make operating
and strategic decisions, and evaluate historical performance, and
(iii) otherwise provides supplemental information that may be
useful to investors in evaluating the Company's results. The
Company believes that the presentation of these non-GAAP financial
measures, when considered together with the corresponding GAAP
financial measures and the reconciliations to those measures,
provides investors with additional understanding of the factors and
trends affecting the Company's business than could be obtained
absent these disclosures.
Organic Net Sales is defined as net sales excluding, when they
occur, the impact of acquisitions, currency, divestitures and a
53rd week of shipments. The Company calculates the impact of
currency on net sales by holding exchange rates constant at the
previous year's exchange rate, with the exception of Venezuela
following the Company's June 28, 2015 currency devaluation, for
which the Company calculates the previous year's results using the
current year's exchange rate. Organic Net Sales is a tool that can
assist management and investors in comparing the Company's
performance on a consistent basis by removing the impact of certain
items that management believes do not directly reflect the
Company's underlying operations.
Adjusted EBITDA is defined as net income/(loss) from continuing
operations before interest expense, other expense/(income), net,
and provision for/(benefit from) income taxes; in addition to these
adjustments, the Company excludes, when they occur, the impacts of
depreciation and amortization (excluding integration and
restructuring expenses; including amortization of postretirement
benefit plans prior service credits), integration and restructuring
expenses, merger costs, unrealized losses/(gains) on commodity
hedges, impairment losses, losses/(gains) on the sale of a
business, nonmonetary currency devaluation (e.g., remeasurement
gains and losses), and equity award compensation expense (excluding
integration and restructuring expenses). The Company also presents
Adjusted EBITDA on a constant currency basis. The Company
calculates the impact of currency on Adjusted EBITDA by holding
exchange rates constant at the previous year's exchange rate, with
the exception of Venezuela following the Company's June 28, 2015
devaluation of the Venezuelan bolivar and remeasurement of assets
and liabilities of its Venezuelan subsidiary, for which it
calculates the previous year's results using the current year's
exchange rate. Adjusted EBITDA and Constant Currency Adjusted
EBITDA are tools that can assist management and investors in
comparing the Company's performance on a consistent basis by
removing the impact of certain items that management believes do
not directly reflect the Company's underlying operations.
Adjusted EPS is defined as diluted earnings per share excluding,
when they occur, the impacts of integration and restructuring
expenses, merger costs, unrealized losses/(gains) on commodity
hedges, impairment losses, losses/(gains) on the sale of a
business, nonmonetary currency devaluation (e.g., remeasurement
gains and losses), and U.S. Tax Reform, and including when they
occur, adjustments to reflect preferred stock dividend payments on
an accrual basis. The Company believes Adjusted EPS provides
important comparability of underlying operating results, allowing
investors and management to assess operating performance on a
consistent basis.
See the attached schedules for supplemental financial data,
which includes the financial information, the non-GAAP financial
measures and corresponding reconciliations to the comparable GAAP
financial measures for the relevant periods.
Schedule
1
The Kraft Heinz Company Consolidated Statements of Income (in
millions, except per share data) (Unaudited)
For the
Quarter Ended For the Year Ended December 30,
December 31, December 30, December
31, 2017 2016 2017 2016 (13
weeks) (13 weeks) (52 weeks) (52 weeks)
Net sales $ 6,877 $ 6,857 $ 26,232 $ 26,487 Cost of products
sold(a) 4,470 4,398 16,529 16,901 Gross
profit 2,407 2,459 9,703 9,586 Selling, general and administrative
expenses(b) 767 879 2,930 3,444
Operating income 1,640 1,580 6,773 6,142 Interest expense 308 310
1,234 1,134 Other expense/(income), net 1 (10 ) 9 (15
) Income/(loss) before income taxes 1,331 1,280 5,530 5,023
Provision for/(benefit from) income taxes (6,665 ) 336
(5,460 ) 1,381 Net income/(loss) 7,996 944 10,990 3,642 Net
income/(loss) attributable to noncontrolling interest (7 ) —
(9 ) 10 Net income/(loss) attributable to Kraft Heinz 8,003
944 10,999 3,632 Preferred dividends(c) — — —
180 Net income/(loss) attributable to common shareholders $
8,003 $ 944 $ 10,999 $ 3,452
Basic shares outstanding 1,219 1,217 1,218 1,217 Diluted shares
outstanding 1,228 1,226 1,228 1,226 Per share data
applicable to common shareholders: Basic earnings/(loss) per share
$ 6.57 $ 0.78 $ 9.03 $ 2.84 Diluted earnings/(loss) per share 6.52
0.77 8.95 2.81 (a) Integration and restructuring expenses
recorded in cost of products sold were $200 million for the quarter
ended December 30, 2017 ($146 million after-tax), $179 million for
the quarter ended December 31, 2016 ($130 million after-tax), $324
million for the year ended December 30, 2017 ($239 million
after-tax), and $711 million for the year ended December 31, 2016
($491 million after-tax). (b) Integration and restructuring
expenses recorded in selling, general and administrative expenses
were $20 million in the quarter ended December 30, 2017 ($14
million after-tax), $52 million in the quarter ended December 31,
2016 ($38 million after-tax), $133 million in the year ended
December 30, 2017 ($91 million after-tax), and $301 million in the
year ended December 31, 2016 ($207 million after-tax). (c)
On June 7, 2016, the Company redeemed all outstanding shares of our
Series A Preferred Stock. Accordingly, the Company no longer pays
any associated dividends, and there were no such dividend payments
in 2017. Prior to the redemption, the Company made cash
distributions of $180 million in the second quarter of 2016. The
Company's Series A Preferred Stock entitled holders to a 9.00%
annual dividend, to be paid in four dividends, in arrears on each
March 7, June 7, and December 7, in cash. Concurrent with the
declaration of our common stock dividend on December 8, 2015, we
also declared and paid the Series A Preferred Stock dividend that
would otherwise have been payable on March 7, 2016. Accordingly,
there were no cash distributions related to the Series A Preferred
Stock in the first quarter of 2016, resulting in only one dividend
payment in 2016 prior to redemption.
Schedule
2
The Kraft Heinz Company Reconciliation of Net Sales to Organic Net
Sales For the Quarter Ended (dollars in millions) (Unaudited)
Impact of Organic Net Net Sales
Currency Sales Price Volume/Mix
December 30, 2017(13 weeks) United States $ 4,787 $ —
$ 4,787 Canada 591 27 564 Europe 656 50 606 Rest of World 843
8
835 $ 6,877 $ 85 $ 6,792
December
31, 2016(13 weeks) United States $ 4,839 $ — $ 4,839
Canada 617 — 617 Europe 600 — 600 Rest of World 801 21 780
$ 6,857 $ 21 $ 6,836
Year-over-year
growth rates United States (1.1 )% 0.0 pp (1.1 )% 0.6 pp (1.7)
pp Canada (4.1 )% 4.5 pp (8.6 )% 0.0 pp (8.6) pp Europe 9.3 % 8.4
pp 0.9 % (0.9) pp 1.8 pp Rest of World 5.2 % (1.8) pp 7.0 % 5.7 pp
1.3 pp Kraft Heinz 0.3 % 0.9 pp (0.6 )% 1.0 pp (1.6) pp
Schedule
3
The Kraft Heinz Company Reconciliation of Net Sales to Organic Net
Sales For the Year Ended (dollars in millions) (Unaudited)
Impact of Organic Net Net
Sales Currency Sales Price
Volume/Mix
December 30, 2017(52
weeks)
United States $ 18,353 $ — $ 18,353 Canada 2,190 42 2,148 Europe
2,393 8 2,385 Rest of World 3,296 13 3,283 $ 26,232
$ 63 $ 26,169
December 31, 2016(52
weeks)
United States $ 18,641 $ — $ 18,641 Canada 2,309 — 2,309 Europe
2,366 — 2,366 Rest of World 3,171 55 3,116 $ 26,487
$ 55 $ 26,432
Year-over-year growth
rates United States (1.5 )% 0.0 pp (1.5 )% 0.4 pp (1.9) pp
Canada (5.2 )% 1.8 pp (7.0 )% (1.7) pp (5.3) pp Europe 1.1 % 0.3 pp
0.8 % (0.9) pp 1.7 pp Rest of World 3.9 % (1.5) pp 5.4 % 4.6 pp 0.8
pp Kraft Heinz (1.0 )% 0.0 pp (1.0 )% 0.5 pp (1.5) pp
Schedule
4
The Kraft Heinz Company Reconciliation of Net Income/(Loss) to
Adjusted EBITDA (dollars in millions) (Unaudited)
For the
Quarter Ended For the Year Ended December 30,
December 31, December 30, December
31, 2017 2016 2017 2016 (13
weeks) (13 weeks) (52 weeks) (52 weeks)
Net income/(loss) $ 7,996 $ 944 $ 10,990 $ 3,642 Interest expense
308 310 1,234 1,134 Other expense/(income), net 1 (10 ) 9 (15 )
Provision for/(benefit from) income taxes (6,665 ) 336
(5,460 ) 1,381 Operating income 1,640 1,580 6,773 6,142
Depreciation and amortization (excluding integration and
restructuring expenses) 149 135 583 536 Integration and
restructuring expenses 220 231 457 1,012 Merger costs — (3 ) — 30
Unrealized losses/(gains) on commodity hedges (5 ) (15 ) 19 (38 )
Impairment losses — — 49 53 Nonmonetary currency devaluation — — —
4 Equity award compensation expense (excluding integration and
restructuring expenses) 11 9 49 39
Adjusted EBITDA $ 2,015 $ 1,937 $ 7,930 $
7,778 Segment Adjusted EBITDA: United States $ 1,523
$ 1,502 $ 6,001 $ 5,862 Canada 162 151 639 642 Europe 203 189 781
781 Rest of World 142 144 617 657 General corporate expenses (15 )
(49 ) (108 ) (164 ) Adjusted EBITDA $ 2,015 $ 1,937 $
7,930 $ 7,778
Schedule
5
The Kraft Heinz Company Reconciliation of Adjusted EBITDA to
Constant Currency Adjusted EBITDA For the Quarter Ended (dollars in
millions) (Unaudited)
Adjusted EBITDA
Impact of Currency
Constant CurrencyAdjusted
EBITDA
December 30, 2017(13
weeks)
United States $ 1,523 $ — $ 1,523 Canada 162 8 154 Europe 203 14
189 Rest of World 142 1 141 General corporate expenses (15 ) — (15
) $ 2,015 $ 23 $ 1,992
December 31, 2016(13
weeks)
United States $ 1,502 $ — $ 1,502 Canada 151 — 151 Europe 189 — 189
Rest of World 144 6 138 General corporate expenses (49 ) — (49 ) $
1,937 $ 6 $ 1,931
Year-over-year growth
rates United States 1.4 % 0.0 pp 1.4 % Canada 7.1 % 5.2 pp 1.9
% Europe 7.4 % 8.0 pp (0.6 )% Rest of World (0.8 )% (4.4) pp 3.6 %
General corporate expenses (68.9 )% 1.2 pp (70.1 )% Kraft Heinz 4.0
% 0.8 pp 3.2 %
Schedule
6
The Kraft Heinz Company Reconciliation of Adjusted EBITDA to
Constant Currency Adjusted EBITDA For the Year Ended (dollars in
millions) (Unaudited)
Adjusted EBITDA
Impact of Currency
Constant CurrencyAdjusted
EBITDA
December 30, 2017(52
weeks)
United States $ 6,001 $ — $ 6,001 Canada 639 11 628 Europe 781 (13
) 794 Rest of World 617 — 617 General corporate expenses (108 ) —
(108 ) $ 7,930 $ (2 ) $ 7,932
December 31, 2016(52
weeks)
United States $ 5,862 $ — $ 5,862 Canada 642 — 642 Europe 781 — 781
Rest of World 657 22 635 General corporate expenses (164 ) —
(164 ) $ 7,778 $ 22 $ 7,756
Year-over-year growth rates United States 2.4 % 0.0 pp 2.4 %
Canada (0.5 )% 1.7 pp (2.2 )% Europe — % (1.6) pp 1.6 % Rest of
World (6.1 )% (3.4) pp (2.7 )% General corporate expenses (34.0 )%
0.4 pp (34.4 )% Kraft Heinz 1.9 % (0.4) pp 2.3 %
Schedule
7
The Kraft Heinz Company Reconciliation of Diluted EPS to Adjusted
EPS For the Quarter Ended (Unaudited)
December 30,
December 31, 2017 2016 (13 weeks)
(13 weeks) Diluted EPS $ 6.52 $ 0.77 Integration and
restructuring expenses(a)(c) 0.11 0.13 Merger costs(a)(b) — —
Unrealized losses/(gains) on commodity hedges(a)(b) — (0.01 )
Impairment losses(a)(b) — — Nonmonetary currency devaluation(a)(d)
— 0.02 U.S. Tax Reform(e) (5.73 ) — Adjusted EPS $ 0.90
$ 0.91 (a) Income tax expense associated with
these items is based on applicable jurisdictional tax rates and
deductibility assessments of individual items. (b) Refer to the
reconciliation of net income/(loss) to Adjusted EBITDA for the
related gross expenses. (c) Integration and restructuring expenses
included the following gross expenses:
• Expenses recorded in cost of products
sold were $200 million in 2017 and $179 million in 2016; and
• Expenses recorded in SG&A were $20
million in 2017 and $52 million in 2016; and
• Expenses recorded in other
expense/(income), net, were income of $2 million in 2016 (there
were no such expenses in 2017).
(d) Nonmonetary currency devaluation included the following gross
expenses:
• Expenses recorded in other
expense/(income), net, of $23 million in 2016 (there were no such
expenses in 2017)
(e) U.S. Tax Reform included a tax benefit of $7.0 billion in 2017
related to enactment of the Tax Cuts and Jobs Act by the U.S.
government on December 22, 2017. There were no such expenses in
2016.
Schedule
8
The Kraft Heinz Company Reconciliation of Diluted EPS to Adjusted
EPS For the Year Ended (Unaudited)
December 30,
December 31, 2017 2016 (52 weeks)
(52 weeks) Diluted EPS $ 8.95 $ 2.81 Integration and
restructuring expenses(a)(b) 0.26 0.57 Merger costs(a)(b) — 0.02
Unrealized losses/(gains) on commodity hedges(a)(b) 0.01 (0.02 )
Impairment losses(a)(b) 0.03 0.03 Nonmonetary currency
devaluation(a)(c) 0.03 0.02 Preferred dividend adjustment(d) —
(0.10 ) U.S. Tax Reform(e) (5.73 ) — Adjusted EPS $ 3.55
$ 3.33 (a) Income tax expense associated with
these items is based on applicable jurisdictional tax rates and
deductibility assessments of individual items. (b) Refer to the
reconciliation of net income/(loss) to Adjusted EBITDA for the
related gross expenses. (c) Nonmonetary currency devaluation
included the following gross expenses:
• Expenses recorded in cost of products
sold were $4 million in 2016 (there were no such expenses in 2017);
and
• Expenses recorded in other
expense/(income), net, were $36 million in 2017 and $24 million in
2016.
(d) For Adjusted EPS, the Company presents the impact of the Series
A Preferred Stock dividend payments on an accrual basis.
Accordingly, the Company included adjustments to EPS to include
$180 million of Series A Preferred Stock dividends in the first
quarter of 2016 (to reflect the March 7, 2016 Series A Preferred
Stock dividend that was paid in December 2015), and to exclude $51
million of Series A Preferred Stock dividends from the second
quarter of 2016 (to reflect that it was redeemed on June 7, 2016).
(e) U.S. Tax Reform included a tax benefit of $7.0 billion in 2017
related to enactment of the Tax Cuts and Jobs Act by the U.S.
government on December 22, 2017. There were no such expenses in
2016.
Schedule
9
The Kraft Heinz Company Consolidated Balance Sheets (in millions,
except per share data) (Unaudited)
December 30, 2017
December 31, 2016 ASSETS Cash and cash equivalents $ 1,629 $
4,204 Trade receivables, net 921 769 Sold receivables 353 129
Income taxes receivable 582 260 Inventories 2,815 2,684 Other
current assets 966 707 Total current assets 7,266
8,753 Property, plant and equipment, net 7,120 6,688 Goodwill
44,824 44,125 Intangible assets, net 59,449 59,297 Other assets
1,573 1,617 TOTAL ASSETS $ 120,232 $ 120,480
LIABILITIES AND EQUITY Commercial paper and other
short-term debt $ 460 $ 645 Current portion of long-term debt 2,743
2,046 Trade payables 4,449 3,996 Accrued marketing 680 749 Accrued
postemployment costs 51 157 Income taxes payable 152 255 Interest
payable 419 415 Other current liabilities 1,178 1,238
Total current liabilities 10,132 9,501 Long-term debt 28,333 29,713
Deferred income taxes 14,076 20,848 Accrued postemployment costs
427 2,038 Other liabilities 1,017 806 TOTAL
LIABILITIES 53,985 62,906 Redeemable noncontrolling interest 6 —
Equity: Common stock, $0.01 par value 12 12 Additional paid-in
capital 58,711 58,593 Retained earnings/(deficit) 8,589 588
Accumulated other comprehensive income/(losses) (1,054 ) (1,628 )
Treasury stock, at cost (224 ) (207 ) Total shareholders' equity
66,034 57,358 Noncontrolling interest 207 216 TOTAL
EQUITY 66,241 57,574 TOTAL LIABILITIES AND EQUITY $
120,232 $ 120,480
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version on businesswire.com: http://www.businesswire.com/news/home/20180216005092/en/
The Kraft Heinz CompanyMichael Mullen
(media)Michael.Mullen@kraftheinz.comorChristopher
Jakubik, CFA (investors)ir@kraftheinzcompany.com
Kraft Heinz (NASDAQ:KHC)
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