The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) today reported fourth quarter and full year 2019
financial results.
“While our 2019 results were disappointing, we closed the year
with performance consistent with our expectations, and driven by
factors we anticipated,” said Kraft Heinz CEO Miguel Patricio. "We
have taken critical actions over the past six months to
re-establish visibility and control over the business. And we
remain convinced Kraft Heinz has the potential to achieve
best-in-class financial performance as we begin transforming our
capabilities and making necessary investments in our brands based
on deep consumer insights. Our turnaround will take time, but we
expect to make significant progress in 2020, laying a strong
foundation for future growth.”
Q4 2019 Financial Summary
For the Three Months
Ended
Year-over-year Change
December 28, 2019
December 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions, except per share
data)
Net sales
$
6,536
$
6,891
(5.1)%
(0.6) pp
(2.3) pp
(2.2)%
Operating income/(loss)
594
(14,136)
nm
Net income/(loss) attributable to common
shareholders
182
(12,568)
nm
Diluted EPS
$
0.15
$
(10.30)
nm
Adjusted EBITDA(1)
1,564
1,674
(6.6)%
(1.3) pp
(1.5) pp
Adjusted EPS(1)
$
0.72
$
0.84
(14.3)%
nm - not meaningful
Net sales were $6.5 billion, down 5.1 percent versus the
year-ago period, including a negative 2.3 percentage point impact
from divestitures and an unfavorable 0.6 percentage point impact
from currency. Organic Net Sales(1) decreased 2.2 percent versus
the year-ago period. Pricing increased 2.0 percentage points versus
the prior year period, with higher pricing in all business segments
except Canada. Volume/mix decreased 4.2 percentage points,
primarily driven by volume/mix declines in the United States and,
to a lesser extent, Rest of World markets that more than offset
growth in Canada and EMEA.
Net income attributable to common shareholders increased to $182
million and diluted EPS increased to $0.15, primarily reflecting
lower non-cash impairment charges recognized in the current year
period. The current period included approximately $453 million of
non-cash impairment charges to lower the carrying amount of
goodwill in the Company’s Australia & New Zealand, as well as
Latin America Exports businesses, as well as non-cash impairment
charges of approximately $213 million to lower the carrying amount
of the Maxwell House trademark. Adjusted EBITDA decreased 6.6
percent versus the year-ago period to $1.6 billion, including an
unfavorable 1.3 percentage point impact from currency and a
negative 1.5 percentage point impact from divestitures. Excluding
these factors, growth in the United States and EMEA was more than
offset by higher supply chain costs in Rest of World markets,
higher general corporate expenses, and lower pricing versus the
prior year period in Canada. Adjusted EPS decreased 14.3 percent to
$0.72, reflecting lower Adjusted EBITDA, a higher effective tax
rate, and higher stock-based compensation versus the prior year
period.
Q4 2019 Business Segment Highlights
United States
For the Three Months
Ended
Year-over-year Change
December 28, 2019
December 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
4,682
$
4,810
(2.7)%
0.0 pp
0.0 pp
(2.7)%
Segment Adjusted EBITDA
1,270
1,249
1.6%
0.0 pp
0.0 pp
United States net sales were $4.7 billion, down 2.7 percent
versus the year-ago period. Pricing increased 3.1 percentage
points, reflecting a combination of higher list prices in several
categories, including price increases to reflect higher key
commodity(2) costs for dairy and meats, as well as a favorable
impact from promotional timing versus the prior year, and reduced
promotional intensity compared to the year-ago period. Volume/mix
decreased 5.8 percentage points, primarily due to lower shipments
of cheese, coffee, cold cuts, and bacon that more than offset
growth in condiments and sauces as well as foodservice. The
decreases reflect volume declines in response to higher prices,
including prior year promotional activities that were not repeated,
as well as lower distribution in cold cuts and frozen categories at
select retailers.
United States Segment Adjusted EBITDA increased 1.6 percent
versus the year-ago period to $1.3 billion, driven by higher
pricing, lower procurement and logistics costs, as well as lower
variable compensation versus the prior year. This more than offset
unfavorable impacts from volume/mix and key commodity cost
inflation, specifically in dairy and meats, as well as higher
manufacturing costs.
Canada
For the Three Months
Ended
Year-over-year Change
December 28, 2019
December 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
457
$
600
(23.8)%
0.1 pp
(21.4) pp
(2.5)%
Segment Adjusted EBITDA
116
157
(26.1)%
0.2 pp
(14.8) pp
Canada net sales were $457 million, 23.8 percent lower than the
year-ago period, including a negative 21.4 percentage point impact
from the Canadian natural cheese divestiture and a favorable 0.1
percentage point impact from currency. Organic Net Sales decreased
2.5 percent versus the year-ago period. Pricing declined 5.0
percentage points, reflecting unfavorable trade expense versus the
prior year and increased holiday-related promotional activity
across several categories. Volume/mix increased 2.5 percent, driven
by consumption-led growth in peanut butter and pasta sauce that
more than offset lower shipments for cheese and ongoing weakness in
coffee.
Canada Segment Adjusted EBITDA decreased 26.1 percent versus the
year-ago period to $116 million, including a negative 14.8
percentage point impact from a divestiture and a 0.2 percentage
point favorable impact from currency. Excluding the impact of these
factors, the decrease versus prior year was due to lower pricing,
as well as unfavorable dairy and procurement costs versus the prior
year period.
EMEA
For the Three Months
Ended
Year-over-year Change
December 28, 2019
December 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
689
$
692
(0.5)%
(0.8) pp
0.0 pp
0.3%
Segment Adjusted EBITDA
182
171
6.3%
(1.4) pp
0.0 pp
EMEA net sales were $689 million, down 0.5 percent versus the
year-ago period, due to a negative 0.8 percentage point impact from
currency. Organic Net Sales increased 0.3 percent versus the
year-ago period. Pricing was slightly favorable as gains from
pricing initiatives, particularly in the UK, more than offset lower
pricing versus the prior year in Russia. Volume/mix increased 0.2
percentage points, reflecting condiments and sauces growth in
Russia, as well as foodservice growth across most regions that more
than offset ongoing weakness in infant nutrition and the impact of
reduced promotional activity versus the year-ago period in the
UK.
EMEA Segment Adjusted EBITDA increased 6.3 percent versus the
year-ago period to $182 million, despite a negative 1.4 percentage
point impact from currency. Excluding currency, Segment Adjusted
EBITDA increased 7.7 percent, from a combination of Organic Net
Sales growth and lower variable compensation versus the prior year
period.
Rest of World(3)
For the Three Months
Ended
Year-over-year Change
December 28, 2019
December 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
708
$
789
(10.1)%
(5.2) pp
(3.3) pp
(1.6)%
Segment Adjusted EBITDA
60
130
(53.9)%
(8.0) pp
(0.3) pp
Rest of World net sales of $708 million decreased 10.1 percent
versus the year-ago period, including a negative 5.2 percentage
point impact from currency and a negative 3.3 percentage point
impact from the India nutritional beverages divestiture. Organic
Net Sales decreased 1.6 percent versus the year-ago period. Pricing
increased 0.7 percentage points, due to higher pricing in Latin
America and China that more than offset lower pricing in Australia.
Volume/mix decreased 2.3 percentage points, as growth in Indonesia
and Brazil was more than offset by lower shipments across several
categories in Australia and New Zealand as well as lower shipments
in Latin American exports, including Colombia and Puerto Rico.
Rest of World Segment Adjusted EBITDA decreased 53.9 percent
versus the year-ago period to $60 million, including an 8.0
percentage point unfavorable impact from currency and a 0.3
percentage point unfavorable impact from divestiture. Results also
included approximately $35 million of costs not expected to repeat,
due to $15 million of higher labor-related expenses associated with
the Holidays Act in New Zealand as well as $20 million of asset-
and inventory-related write-offs in Australia, New Zealand, and
Latin America. Excluding these factors, the decline in Segment
Adjusted EBITDA was driven by ongoing supply chain cost inflation
and lower volume/mix.
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)
The Company's key commodities in
the United States and Canada are dairy, meat, coffee and nuts.
(3)
Rest of World comprises two
operating segments: Latin America and Asia Pacific.
Webcast, Conference Call, and Filing Information
A webcast of The Kraft Heinz Company's fourth quarter and full
year 2019 earnings conference call will be available at
ir.kraftheinzcompany.com. The call begins today at 8:30 a.m.
Eastern Standard Time.
ABOUT THE KRAFT HEINZ COMPANY
For 150 years, we have produced some of the world’s most beloved
products at The Kraft Heinz Company (Nasdaq: KHC). Our Vision is To
Be the Best Food Company, Growing a Better World. We are one of the
largest global food and beverage companies, with 2019 net sales of
approximately $25 billion. Our portfolio is a diverse mix of iconic
and emerging brands. As the guardians of these brands and the
creators of innovative new products, we are dedicated to the
sustainable health of our people and our planet. To learn more,
visit www.kraftheinzcompany.com or follow us on LinkedIn and
Twitter.
Forward-Looking Statements
This press release contains a number of forward-looking
statements. Words such as “commit,” “plan,” "believe,"
"anticipate," "reflect," "invest," "make," "expect," "deliver,"
“develop,” "drive," "assess," "evaluate," “establish,” “focus,”
“build,” “turn,” “expand,” “leverage,” "grow," "remain," "will,"
and variations of such words and similar future or conditional
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, costs and cost
savings, legal matters, taxes, expectations, investments,
innovations, opportunities, capabilities, execution, initiatives,
pipeline, 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; the
Company’s ability to correctly predict, identify, and interpret
changes in consumer preferences and demand, to offer new products
to meet those changes, and to respond to competitive innovation;
changes in the retail landscape or the loss of key retail
customers; changes in the Company's relationships with significant
customers, suppliers and other business relationships; the
Company’s ability to maintain, extend, and expand its reputation
and brand image; the Company’s ability to leverage its brand value
to compete against private label products; the Company’s ability to
drive revenue growth in its key product categories, increase its
market share, or add products that are in faster-growing and more
profitable categories; product recalls or product liability claims;
unanticipated business disruptions; the Company’s ability to
identify, complete or realize the benefits from strategic
acquisitions, alliances, divestitures, joint ventures or other
investments; the Company’s ability to realize the anticipated
benefits from prior or future streamlining actions to reduce fixed
costs, simplify or improve processes, and improve its
competitiveness; the Company’s ability to successfully execute its
strategic initiatives; the impacts of the Company’s international
operations; economic and political conditions in the United States
and in various other nations where the Company does business;
changes in the Company’s management team or other key personnel and
the Company’s ability to hire or retain key personnel or a highly
skilled and diverse global workforce; risks associated with
information technology and systems, including service
interruptions, misappropriation of data or breaches of security;
impacts of natural events in the locations in which we or the
Company’s customers, suppliers, distributors, or regulators
operate; the Company’s ownership structure; the Company’s
indebtedness and ability to pay such indebtedness, as well as its
ability to comply with covenants under debt instruments; additional
impairments of the carrying amounts of goodwill or other
indefinite-lived intangible assets; foreign exchange rate
fluctuations; volatility in commodity, energy, and other input
costs; volatility in the market value of all or a portion of the
commodity derivatives we use; increased pension, labor and
people-related expenses; compliance with laws, regulations, and
related interpretations and related legal claims or other
regulatory enforcement actions, including additional risks and
uncertainties related to any potential actions resulting from the
Securities and Exchange Commission’s (“SEC”) ongoing investigation,
as well as potential additional subpoenas, litigation, and
regulatory proceedings; an inability to remediate the material
weaknesses in the Company’s internal control over financial
reporting or additional material weaknesses or other deficiencies
in the future or the failure to maintain an effective system of
internal controls; the Company’s failure to prepare and timely file
its periodic reports; the restatement of certain of the Company’s
previously issued consolidated financial statements, which resulted
in unanticipated costs and may affect investor confidence and raise
reputational issues; the Company’s ability to protect intellectual
property rights; tax law changes or interpretations; the impact of
future sales of the Company's common stock in the public markets;
the Company’s ability to continue to pay a regular dividend and the
amounts of any such dividends; volatility of capital markets and
other macroeconomic factors; 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 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
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.
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 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 (i.e., Organic
Net Sales, Adjusted EBITDA, Constant Currency Adjusted EBITDA, and
Adjusted EPS) 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 currency, acquisitions and 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 highly
inflationary subsidiaries, 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),
provision for/(benefit from) income taxes, and depreciation and
amortization (excluding integration and restructuring expenses); in
addition to these adjustments, the Company excludes, when they
occur, the impacts of integration and restructuring expenses, deal
costs, unrealized losses/(gains) on commodity hedges, impairment
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 highly inflationary subsidiaries, 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, deal costs, unrealized losses/(gains) on commodity
hedges, impairment losses, losses/(gains) on the sale of a
business, other losses/(gains) related to acquisitions and
divestitures (e.g., tax and hedging impacts), nonmonetary currency
devaluation (e.g., remeasurement gains and losses), debt prepayment
and extinguishment costs, and U.S. Tax Reform discrete income tax
expense/(benefit), 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 Three Months
Ended
For the Year Ended
December 28, 2019
December 29, 2018
December 28, 2019
December 29, 2018
Net sales
$
6,536
$
6,891
$
24,977
$
26,268
Cost of products sold
4,429
4,675
16,830
17,347
Gross profit
2,107
2,216
8,147
8,921
Selling, general and administrative
expenses, excluding impairment losses
837
867
3,178
3,190
Goodwill impairment losses
453
6,875
1,197
7,008
Intangible asset impairment losses
223
8,610
702
8,928
Selling, general and administrative
expenses
1,513
16,352
5,077
19,126
Operating income/(loss)
594
(14,136)
3,070
(10,205)
Interest expense
326
325
1,361
1,284
Other expense/(income)
(59)
13
(952)
(168)
Income/(loss) before income taxes
327
(14,474)
2,661
(11,321)
Provision for/(benefit from) income
taxes
144
(1,846)
728
(1,067)
Net income/(loss)
183
(12,628)
1,933
(10,254)
Net income/(loss) attributable to
noncontrolling interest
1
(60)
(2)
(62)
Net income/(loss) attributable to common
shareholders
$
182
$
(12,568)
$
1,935
$
(10,192)
Basic shares outstanding
1,221
1,220
1,221
1,219
Diluted shares outstanding
1,225
1,220
1,224
1,219
Per share data applicable to common
shareholders:
Basic earnings/(loss) per share
$
0.15
$
(10.30)
$
1.59
$
(8.36)
Diluted earnings/(loss) per share
0.15
(10.30)
1.58
8.36)
Schedule
2
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Three Months Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions and
Divestitures
Organic Net Sales
Price
Volume/ Mix
December 28, 2019
United States
$
4,682
$
—
$
—
$
4,682
Canada
457
1
—
456
EMEA
689
(6)
—
695
Rest of World
708
(11)
—
719
$
6,536
$
(16)
$
—
$
6,552
December 29, 2018
United States
$
4,810
$
—
$
—
$
4,810
Canada
600
—
133
467
EMEA
692
—
—
692
Rest of World
789
32
26
731
$
6,891
$
32
$
159
$
6,700
Year-over-year growth rates
United States
(2.7)%
0.0 pp
0.0 pp
(2.7)%
3.1 pp
(5.8) pp
Canada
(23.8)%
0.1 pp
(21.4) pp
(2.5)%
(5.0) pp
2.5 pp
EMEA
(0.5)%
(0.8) pp
0.0 pp
0.3%
0.1 pp
0.2 pp
Rest of World
(10.1)%
(5.2) pp
(3.3) pp
(1.6)%
0.7 pp
(2.3) pp
Kraft Heinz
(5.1)%
(0.6) pp
(2.3) pp
(2.2)%
2.0 pp
(4.2) pp
Schedule 3
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Year Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions and
Divestitures
Organic Net Sales
Price
Volume/ Mix
December 28, 2019
United States
$
17,756
$
—
$
—
$
17,756
Canada
1,882
(45)
227
1,700
EMEA
2,551
(115)
—
2,666
Rest of World
2,788
(102)
51
2,839
$
24,977
$
(262)
$
278
$
24,961
December 29, 2018
United States
$
18,122
$
—
$
—
$
18,122
Canada
2,173
—
441
1,732
EMEA
2,718
—
21
2,697
Rest of World
3,255
243
170
2,842
$
26,268
$
243
$
632
$
25,393
Year-over-year growth rates
United States
(2.0)%
0.0 pp
0.0 pp
(2.0)%
0.4 pp
(2.4) pp
Canada
(13.4)%
(2.1) pp
(9.4) pp
(1.9)%
(3.4) pp
1.5 pp
EMEA
(6.2)%
(4.3) pp
(0.7) pp
(1.2)%
0.0 pp
(1.2) pp
Rest of World
(14.3)%
(10.3) pp
(3.9) pp
(0.1)%
1.2 pp
(1.3) pp
Kraft Heinz
(4.9)%
(1.9) pp
(1.3) pp
(1.7)%
0.1 pp
(1.8) pp
Schedule
4
The Kraft Heinz Company
Reconciliation of Net
Income/(Loss) to Adjusted EBITDA
(dollars in millions)
(Unaudited)
For the Three Months
Ended
For the Year Ended
December 28, 2019
December 29, 2018
December 28, 2019
December 29, 2018
Net income/(loss)
$
183
$
(12,628)
$
1,933
$
(10,254)
Interest expense
326
325
1,361
1,284
Other expense/(income)
(59)
13
(952)
(168)
Provision for/(benefit from) income
taxes
144
(1,846)
728
(1,067)
Operating income/(loss)
594
(14,136)
3,070
(10,205)
Depreciation and amortization (excluding
integration and restructuring expenses)
255
240
985
919
Integration and restructuring expenses
46
82
102
297
Deal costs
—
4
19
23
Unrealized losses/(gains) on commodity
hedges
(27)
10
(57)
21
Impairment losses
676
15,485
1,899
15,936
Equity award compensation expense
(excluding integration and restructuring expenses)
20
(11)
46
33
Adjusted EBITDA
$
1,564
$
1,674
$
6,064
$
7,024
Segment Adjusted EBITDA:
United States
$
1,270
$
1,249
$
4,809
$
5,218
Canada
116
157
487
608
EMEA
182
171
661
724
Rest of World
60
130
363
635
General corporate expenses
(64)
(33)
(256)
(161)
Adjusted EBITDA
$
1,564
$
1,674
$
6,064
$
7,024
Schedule
5
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA
to Constant Currency Adjusted EBITDA
For the Three Months Ended
(dollars in millions)
(Unaudited)
Adjusted EBITDA
Currency
Constant Currency Adjusted
EBITDA
December 28, 2019
United States
$
1,270
$
—
$
1,270
Canada
116
—
116
EMEA
182
(2)
184
Rest of World
60
3
57
General corporate expenses
(64)
—
(64)
$
1,564
$
1
$
1,563
December 29, 2018
United States
$
1,249
$
—
$
1,249
Canada
157
—
157
EMEA
171
—
171
Rest of World
130
23
107
General corporate expenses
(33)
—
(33)
$
1,674
$
23
$
1,651
Year-over-year growth rates
United States
1.6%
0.0 pp
1.6%
Canada
(26.1)%
0.2 pp
(26.3)%
EMEA
6.3%
(1.4) pp
7.7%
Rest of World
(53.9)%
(8.0) pp
(45.9)%
General corporate expenses
92.2%
(2.2) pp
94.4%
Kraft Heinz
(6.6)%
(1.3) pp
(5.3)%
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
Currency
Constant Currency Adjusted
EBITDA
December 28, 2019
United States
$
4,809
$
—
$
4,809
Canada
487
(12)
499
EMEA
661
(30)
691
Rest of World
363
(8)
371
General corporate expenses
(256)
4
(260)
$
6,064
$
(46)
$
6,110
December 29, 2018
United States
$
5,218
$
—
$
5,218
Canada
608
—
608
EMEA
724
—
724
Rest of World
635
170
465
General corporate expenses
(161)
—
(161)
$
7,024
$
170
$
6,854
Year-over-year growth rates
United States
(7.8)%
0.0 pp
(7.8)%
Canada
(19.9)%
(1.9) pp
(18.0)%
EMEA
(8.7)%
(4.2) pp
(4.5)%
Rest of World
(42.8)%
(22.6) pp
(20.2)%
General corporate expenses
58.6%
(2.5) pp
61.1%
Kraft Heinz
(13.7)%
(2.8) pp
(10.9)%
Schedule
7
The Kraft Heinz Company
Reconciliation of Diluted EPS to
Adjusted EPS
(Unaudited)
For the Three Months
Ended
December 28, 2019
December 29, 2018
Diluted EPS
$
0.15
$
(10.30)
Integration and restructuring
expenses(a)
0.03
0.13
Unrealized losses/(gains) on commodity
hedges(b)
(0.02)
0.01
Impairment losses(c)
0.49
10.97
Losses/(gains) on sale of business(d)
0.06
—
Other losses/(gains) related to
acquisitions and divestitures(e)
—
0.02
Nonmonetary currency devaluation(f)
—
0.01
Debt prepayment and extinguishment
costs(g)
0.01
—
Adjusted EPS
$
0.72
$
0.84
(a)
Gross expenses included in
integration and restructuring expenses were $52 million ($39
million after-tax) for the three months ended December 28, 2019 and
$182 million ($159 million after-tax) for the three months ended
December 29, 2018 and were recorded in the following income
statement line items:
•
Cost of products sold included
$21 million for the three months ended December 28, 2019 and $19
million for the three months ended December 29, 2018;
•
SG&A included $25 million for
the three months ended December 28, 2019 and $63 million for the
three months ended December 29, 2018; and
•
Other expense/(income) included
expenses of $6 million for the three months ended December 28, 2019
and expenses of $100 million for the three months ended December
29, 2018.
(b)
Gross expenses/(income) included
in unrealized losses/(gains) on commodity hedges were income of $27
million ($21 million after-tax) for the three months ended December
28, 2019 and expenses of $10 million ($6 million after-tax) for the
three months ended December 29, 2018 and were recorded in cost of
products sold.
(c)
Gross impairment losses, which
were recorded in SG&A, included the following:
•
Goodwill impairment losses of
$453 million ($439 million after-tax) for the three months ended
December 28, 2019 and $6.9 billion ($6.9 billion after-tax) for the
three months ended December 29, 2018; and
•
Intangible asset impairment
losses of $223 million ($156 million after-tax) for the three
months ended December 28, 2019 and $8.6 billion ($6.5 billion
after-tax) for the three months ended December 29, 2018.
(d)
Gross expenses included in
losses/(gains) on sale of business were expenses of $70 million
($73 million after-tax) for the three months ended December 28,
2019 and were included in other expense/(income).
(e)
Gross expenses included in other
losses/(gains) related to acquisitions and divestitures were $27
million ($15 million after-tax) for the three months ended December
29, 2018 and were recorded in the following income statement line
items:
•
Interest expense included $3
million for the three months ended December 29, 2018;
•
Other expense/(income) included
$17 million for the three months ended December 29, 2018; and
•
Provision for/(benefit from)
income taxes included $7 million for the three months ended
December 29, 2018.
(f)
Gross expenses included in
nonmonetary currency devaluation were $15 million ($15 million
after-tax) for the three months ended December 29, 2018 and were
recorded in other expense/(income).
(g)
Gross expenses included in debt
prepayment and extinguishment costs were $10 million ($11 million
after-tax) for the three months ended December 28, 2019 and were
recorded in interest expense.
Schedule
8
The Kraft Heinz Company
Reconciliation of Diluted EPS to
Adjusted EPS
(Unaudited)
For the Year Ended
December 28, 2019
December 29, 2018
Diluted EPS
$
1.58
$
(8.36)
Integration and restructuring
expenses(a)
0.07
0.32
Deal costs(b)
0.02
0.02
Unrealized losses/(gains) on commodity
hedges(c)
(0.04)
0.01
Impairment losses(d)
1.38
11.28
Losses/(gains) on sale of business(e)
(0.23)
0.01
Other losses/(gains) related to
acquisitions and divestitures(f)
—
0.02
Nonmonetary currency devaluation(g)
0.01
0.12
Debt prepayment and extinguishment
costs(h)
0.06
—
U.S. Tax Reform discrete income tax
expense/(benefit)(i)
—
0.09
Adjusted EPS
$
2.85
$
3.51
(a)
Gross expenses included in
integration and restructuring expenses were $108 million in 2019
($83 million after-tax) and $460 million in 2018 ($396 million
after-tax) and were recorded in the following income statement line
items:
•
Cost of products sold included
$48 million in 2019 and $194 million in 2018;
•
SG&A included $54 million in
2019 and $103 million in 2018; and
•
Other expense/(income) included
expenses of $6 million in 2019 and expenses of $163 million in
2018.
(b)
Gross expenses included in deal
costs were $19 million in 2019 ($18 million after-tax) and $23
million in 2018 ($19 million after-tax) and were recorded in the
following income statement line items:
•
Cost of products sold included $4
million in 2018; and
•
SG&A included $19 million in
2019 and $19 million in 2018.
(c)
Gross expenses/(income) included
in unrealized losses/(gains) on commodity hedges were income of $57
million in 2019 ($43 million after-tax) and expenses of $21 million
in 2018 ($16 million after-tax) and were recorded in cost of
products sold.
(d)
Gross impairment losses, which
were recorded in SG&A, included the following:
•
Goodwill impairment losses of
$1.2 billion in 2019 ($1.2 billion after-tax) and $7.0 billion in
2018 ($7.0 billion after-tax); and
•
Intangible asset impairment
losses of $702 million in 2019 ($537 million after-tax) and $8.9
billion in 2018 ($6.8 billion after-tax).
(e)
Gross expenses/(income) included
in losses/(gains) on sale of business were income of $420 million
in 2019 ($275 million after-tax) and expenses of $15 million in
2018 ($15 million after-tax) and were recorded in other
expense/(income).
(f)
Gross expenses/(income) included
in other losses/(gains) related to acquisitions and divestitures
were income of $5 million in 2019 ($5 million after-tax) and
expenses of $27 million in 2018 ($15 million after-tax) and were
recorded in the following income statement line items:
•
Interest expense included $1
million in 2019 and $3 million in 2018;
•
Other expense/(income) included
income of $6 million in 2019 and expenses of $17 million in 2018;
and
•
Provision for/(benefit from)
income taxes included $7 million in 2018.
(g)
Gross expenses included in
nonmonetary currency devaluation were $10 million in 2019 ($10
million after-tax) and $146 million in 2018 ($146 million
after-tax) and were recorded in other expense/(income).
(h)
Gross expenses included in debt
prepayment and extinguishment costs were $98 million in 2019 ($73
million after-tax) and were recorded in interest expense.
(i)
U.S. Tax Reform discrete income
tax expense/(benefit) included expenses of $104 million in
2018.
Schedule
9
The Kraft Heinz Company
Consolidated Balance Sheets (in millions, except per share data)
(Unaudited)
December 28, 2019
December 29, 2018
ASSETS
Cash and cash equivalents
$
2,279
$
1,130
Trade receivables, net
1,973
2,129
Income taxes receivable
173
152
Inventories
2,721
2,667
Prepaid expenses
384
400
Other current assets
445
1,221
Assets held for sale
122
1,376
Total current assets
8,097
9,075
Property, plant and equipment, net
7,055
7,078
Goodwill
35,546
36,503
Intangible assets, net
48,652
49,468
Other non-current assets
2,100
1,337
TOTAL ASSETS
$
101,450
$
103,461
LIABILITIES AND EQUITY
Commercial paper and other short-term
debt
$
6
$
21
Current portion of long-term debt
1,022
377
Trade payables
4,003
4,153
Accrued marketing
647
722
Interest payable
384
408
Other current liabilities
1,804
1,767
Liabilities held for sale
9
55
Total current liabilities
7,875
7,503
Long-term debt
28,216
30,770
Deferred income taxes
11,878
12,202
Accrued postemployment costs
273
306
Other non-current liabilities
1,459
902
TOTAL LIABILITIES
49,701
51,683
Redeemable noncontrolling interest
—
3
Equity:
Common stock, $0.01 par value
12
12
Additional paid-in capital
56,828
58,723
Retained earnings/(deficit)
(3,060)
(4,853)
Accumulated other comprehensive
income/(losses)
(1,886)
(1,943)
Treasury stock, at cost
(271)
(282)
Total shareholders' equity
51,623
51,657
Noncontrolling interest
126
118
TOTAL EQUITY
51,749
51,775
TOTAL LIABILITIES AND EQUITY
$
101,450
$
103,461
Schedule
10
The Kraft Heinz Company
Consolidated Statement of Cash Flows
(in millions) (Unaudited)
For the Year Ended
December 28, 2019
December 29, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)
$
1,933
$
(10,254)
Adjustments to reconcile net income/(loss)
to operating cash flows:
Depreciation and amortization
994
983
Amortization of postretirement benefit
plans prior service costs/(credits)
(306)
(339)
Equity award compensation expense
46
33
Deferred income tax
provision/(benefit)
(293)
(1,967)
Postemployment benefit plan
contributions
(32)
(76)
Goodwill and intangible asset impairment
losses
1,899
15,936
Nonmonetary currency devaluation
10
146
Loss/(gain) on sale of business
(420)
15
Other items, net
(46)
160
Changes in current assets and
liabilities:
Trade receivables
140
(2,280)
Inventories
(277)
(251)
Accounts payable
(58)
(23)
Other current assets
52
(146)
Other current liabilities
(90)
637
Net cash provided by/(used for) operating
activities
3,552
2,574
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash receipts on sold receivables
—
1,296
Capital expenditures
(768)
(826)
Payments to acquire business, net of cash
acquired
(199)
(248)
Proceeds from net investment hedges
590
24
Proceeds from sale of business, net of
cash disposed
1,875
18
Other investing activities, net
13
24
Net cash provided by/(used for) investing
activities
1,511
288
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
(4,795)
(2,713)
Proceeds from issuance of long-term
debt
2,967
2,990
Debt prepayment and extinguishment
costs
(99)
—
Proceeds from issuance of commercial
paper
557
2,784
Repayments of commercial paper
(557)
(3,213)
Dividends paid
(1,953)
(3,183)
Other financing activities, net
(33)
(28)
Net cash provided by/(used for) financing
activities
(3,913)
(3,363)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(6)
(132)
Cash, cash equivalents, and restricted
cash
Net increase/(decrease)
1,144
(633)
Balance at beginning of period
1,136
1,769
Balance at end of period
$
2,280
$
1,136
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200213005226/en/
Michael Mullen (media) Michael.Mullen@kraftheinz.com
Christopher Jakubik, CFA (investors) ir@kraftheinz.com
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