Kraft Heinz Reports Third Quarter 2016 Results
- Q3 GAAP net sales increased 2.4% due to the merger of Kraft and Heinz; Organic Net
Sales(1) declined 1.0%
- Q3 GAAP operating income increased 254% and net income attributable to common shareholders
increased to $842 million
- Q3 Adjusted EBITDA(1) increased to $1.8 billion from $1.5 billion in
the year-ago period
- Q3 GAAP diluted EPS increased to $0.69; Adjusted EPS(1) increased to
$0.83
The Kraft Heinz Company (NASDAQ: KHC) (“Kraft Heinz” or the “Company”) today reported third quarter 2016 financial results that
reflected a combination of significant gains from cost savings and the redemption of preferred stock, as well as lower taxes versus
the prior year period.
“Overall, our third quarter results are a good representation of where we are as a company,” said Kraft Heinz CEO Bernardo Hees.
“While our financial performance is respectable, we continue to have the opportunity to improve our offerings and retail execution
in several key markets and take our brands to places they don’t currently compete. Our focus now is to finish 2016 strong and set
the stage for another year of strong, profitable growth in 2017.”
Q3 2016 Financial Summary
|
|
For the Three Months Ended |
|
Year-over-year Change |
|
|
October 2, |
|
September 27, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
2015 |
|
Actual |
|
Currency |
|
Divestitures |
|
Organic |
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
GAAP net sales |
|
$ |
6,267 |
|
|
$ |
6,120 |
|
|
2.4 |
% |
|
|
|
|
|
|
GAAP operating income |
|
1,413 |
|
|
399 |
|
|
254.1 |
% |
|
|
|
|
|
|
GAAP net income/(loss) attributable to common shareholders |
|
842 |
|
|
(303 |
) |
|
nm |
|
|
|
|
|
|
GAAP diluted EPS |
|
$ |
0.69 |
|
|
$ |
(0.27 |
) |
|
nm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net sales(2) |
|
$ |
6,267 |
|
|
$ |
6,363 |
|
|
(1.5 |
)% |
|
(0.5 |
) pp |
|
— |
|
|
(1.0 |
)% |
Adjusted EBITDA(1,2) |
|
1,803 |
|
|
1,482 |
|
|
21.7 |
% |
|
|
|
|
|
|
Adjusted EPS(1,2) |
|
$ |
0.83 |
|
|
$ |
0.44 |
|
|
88.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales were $6.3 billion, down 1.5 percent versus pro forma net sales for the year-ago period, including a negative 0.5
percentage point impact from currency. Organic Net Sales decreased 1.0 percent versus the year-ago period. Pricing decreased 0.7
percentage points driven by key commodity(3) deflation in the United States, primarily in meats and coffee, and coffee
in Canada, as well as higher promotional expenses in Europe. Volume/mix decreased 0.3 percentage points primarily due to lower
shipments across several categories, particularly cold cuts, foodservice and nuts in the United States. This was partially offset
by growth driven by innovation in Lunchables and the macaroni and cheese portfolio, as well as gains in coffee in the United
States and growth in condiments and sauces globally.
Net income attributable to common shareholders increased to $842 million and GAAP diluted EPS increased to $0.69. Adjusted
EBITDA increased 21.7 percent versus the year-ago period to $1.8 billion, including a negative 0.8 percentage point impact from
currency, driven by gains from cost savings initiatives(4) and favorable pricing net of key commodity costs. Adjusted
EPS increased 88.6 percent versus the year-ago period to $0.83, mainly reflecting growth in Adjusted EBITDA, the refinancing of
Series A Preferred Stock and lower taxes.
Q3 2016 Business Segment Highlights
United States
|
|
For the Three Months Ended |
|
Year-over-year Change |
|
|
October 2, |
|
September 27, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
2015 |
|
Actual |
|
Currency |
|
Divestitures |
|
Organic |
|
|
(in millions) |
|
|
|
|
|
|
|
|
Pro forma net sales(2,5) |
|
$ |
4,395 |
|
|
$ |
4,449 |
|
|
(1.2 |
)% |
|
— |
|
|
— |
|
|
(1.2 |
)% |
Segment Adjusted EBITDA(1,2,5) |
|
1,349 |
|
|
1,033 |
|
|
30.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States net sales were $4.4 billion, down 1.2 percent versus pro forma net sales for the year-ago period. Pricing
decreased 0.7 percentage points driven by deflation in key commodities, primarily in meats and coffee. Volume/mix was 0.5
percentage points lower reflecting growth from innovation in Lunchables and the macaroni and cheese portfolio, as well as
gains from coffee, that were more than offset by declines in cold cuts, foodservice and nuts.
United States Segment Adjusted EBITDA increased 30.6 percent versus the year-ago period to $1.3 billion. Gains from cost savings
initiatives and, to a lesser extent, favorable pricing net of key commodity costs were partially offset by lower volume/mix.
Canada
|
|
For the Three Months Ended |
|
Year-over-year Change |
|
|
October 2, |
|
September 27, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
2015 |
|
Actual |
|
Currency |
|
Divestitures |
|
Organic |
|
|
(in millions) |
|
|
|
|
|
|
|
|
Pro forma net sales(2) |
|
$ |
550 |
|
|
$ |
539 |
|
|
2.0 |
% |
|
— |
|
|
— |
|
|
2.0 |
% |
Segment Adjusted EBITDA(1,2) |
|
148 |
|
|
110 |
|
|
34.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada net sales and Organic Net Sales were $550 million, up 2.0 percent versus pro forma net sales for the year-ago period.
Pricing decreased 1.4 percentage points primarily due to commodity-driven pricing actions in coffee. Volume/mix increased 3.4
percentage points driven by gains in foodservice as well as shipment timing in macaroni & cheese and coffee.
Canada Segment Adjusted EBITDA increased 34.5 percent versus the year-ago period to $148 million, including a 1.8 percentage
point favorable impact from currency. Excluding currency, gains were driven by cost savings initiatives and volume/mix growth.
Europe
|
|
For the Three Months Ended |
|
Year-over-year Change |
|
|
October 2, |
|
September 27, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
2015 |
|
Actual |
|
Currency |
|
Divestitures |
|
Organic |
|
|
(in millions) |
|
|
|
|
|
|
|
|
Pro forma net sales(2,5) |
|
$ |
513 |
|
|
$ |
600 |
|
|
(14.5 |
)% |
|
(6.7 |
) pp |
|
— |
|
|
(7.8 |
)% |
Segment Adjusted EBITDA(1,2,5) |
|
183 |
|
|
223 |
|
|
(17.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe net sales were $513 million, down 14.5 percent versus pro forma net sales for the year-ago period, including a negative
6.7 percentage point impact from currency. Organic Net Sales were 7.8 percent lower than the year-ago period. Pricing was down 2.9
percentage points primarily due to the timing of promotional expenses versus the prior year. Volume/mix decreased 4.9 percentage
points reflecting a combination of shipment timing versus the prior year as well as ongoing consumption weakness across several
categories, primarily in the UK and the Netherlands.
Europe Segment Adjusted EBITDA decreased 17.9 percent versus the year-ago period to $183 million, including a negative 8.5
percentage point impact from currency, as manufacturing savings were more than offset by a combination of unfavorable volume/mix,
lower pricing and increased marketing investments.
Rest of World(6)
|
|
For the Three Months Ended |
|
Year-over-year Change |
|
|
October 2, |
|
September 27, |
|
|
|
|
|
|
|
|
|
|
2016 |
|
2015 |
|
Actual |
|
Currency |
|
Divestitures |
|
Organic |
|
|
(in millions) |
|
|
|
|
|
|
|
|
Pro forma net sales(2,5) |
|
$ |
809 |
|
|
$ |
775 |
|
|
4.4 |
% |
|
0.8 |
pp |
|
— |
|
|
3.6 |
% |
Segment Adjusted EBITDA(1,2,5) |
|
150 |
|
|
152 |
|
|
(1.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of World net sales were $809 million, up 4.4 percent versus pro forma net sales in the year-ago period, including a
favorable currency impact of 0.8 percentage points. Organic Net Sales increased 3.6 percent versus the year-ago period. Pricing
increased 1.9 percentage points as pricing actions to offset higher input costs in local currency, particularly in Latin America,
were partially offset by higher promotional spending to support new product initiatives. Volume/mix increased 1.7 percentage points
driven by strong growth in condiments and sauces across all regions.
Rest of World Segment Adjusted EBITDA decreased 1.3 percent versus the year-ago period to $150 million, despite a positive 2.6
percentage point impact from currency. Excluding the impact from currency, Segment Adjusted EBITDA declined as organic sales growth
was more than offset by a combination of higher input costs in local currency and investments behind new product initiatives.
End Notes
(1)
|
|
Organic Net Sales, 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)
|
|
Pro forma net sales, Adjusted EBITDA and Adjusted EPS for the three months ended
September 27, 2015 include the operating results of Kraft on a pro forma basis, as if Kraft had been acquired as of December
30, 2013. There are no pro forma adjustments for the three months ended October 2, 2016 as Kraft and Heinz were a combined
company for the entire period. Please see discussion of the unaudited pro forma condensed combined financial information at the
end of this press release for more information. |
|
|
|
(3)
|
|
The Company's key commodities in the United States and Canada are dairy, meat, coffee
and nuts. |
|
|
|
(4)
|
|
Cost savings initiatives include the Company's integration, restructuring and ongoing
productivity efforts. |
|
|
|
(5)
|
|
In the first quarter of 2016, the Company moved certain of the historical Kraft
export businesses from the Company's United States segment to its Rest of World and Europe segments to align with its long-term
go-to-market strategies. For the three months ended September 27, 2015, this change resulted in the reclassification of $92
million of pro forma net sales from the United States segment to the Rest of World segment ($91 million) and Europe segment ($1
million), as well as $28 million of Segment Adjusted EBITDA from the United States segment to the Rest of World segment ($27
million) and Europe ($1 million). |
|
|
|
(6)
|
|
Rest of World is comprised of three operating segments: Asia Pacific; Latin America;
and, Russia, India, the Middle East and Africa (“RIMEA”). |
|
|
|
Webcast and Conference Call Information
A webcast of The Kraft Heinz Company's third quarter 2016 earnings conference call will be available at ir.kraftheinzcompany.com. The call begins today at 5:00 p.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, Weight Watchers 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,” “continue,” “improve,” “believe,”
“will,” "focus," 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, investments, execution,
growth and integration. 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, increased competition; the Company's ability to
maintain, extend and expand its reputation and brand image; the Company's ability to differentiate its products from other brands;
the consolidation of retail customers; 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 inability to realize the anticipated
benefits from the Company's cost savings initiatives; changes in relationships with significant customers and suppliers; execution
of the Company's international expansion strategy; changes in laws and regulations; legal claims or other regulatory enforcement
actions; product recalls or product liability claims; unanticipated business disruptions; failure to successfully integrate the
business and operations of the Company in the expected time frame; 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 nations
in which the Company operates; 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 that the Company uses; exchange rate fluctuations; disruptions in
information technology networks and systems; the Company's inability to protect intellectual property rights; impacts of natural
events in the locations in which the Company or its customers, suppliers or regulators operate; the Company's indebtedness and
ability to pay such indebtedness; tax law changes or interpretations; 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.
Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial information (the “pro forma financial information”) presented in this
release illustrates the estimated effects of the merger (the “2015 Merger”) consummated on July 2, 2015 (the “2015 Merger Date”) of
Kraft Foods Group, Inc. (“Kraft”) with and into a wholly-owned subsidiary of H.J. Heinz Holding Corporation (“Heinz”), the related
equity investments and common stock conversion, the application of the acquisition method of accounting, and conformance of
accounting policies. The pro forma financial information is presented as if the 2015 Merger had been consummated on December 30,
2013, the first business day of the Company’s 2014 fiscal year, and combines the historical results of Kraft and Heinz. For
additional information on the 2015 Merger, please refer to the Company’s filings with the SEC.
The pro forma financial information was prepared using the acquisition method of accounting, which requires, among other things,
that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the completion of
the acquisition. The Company utilized estimated fair values at the 2015 Merger Date to allocate the total consideration exchanged
to the net tangible and intangible assets acquired and liabilities assumed. Such allocation was final as of July 3, 2016.
The historical consolidated financial statements have been adjusted in the accompanying pro forma financial information to give
effect to unaudited pro forma events that are (1) directly attributable to the 2015 Merger, (2) factually supportable and (3)
expected to have a continuing impact on the results of operations of the combined company.
This pro forma financial information is not necessarily indicative of what the Company’s results of operations actually would
have been had the 2015 Merger been completed as of December 30, 2013. In addition, the pro forma financial information is not
indicative of future results or current financial conditions and does not reflect any additional anticipated synergies, operating
efficiencies, cost savings or any integration costs that may result from the 2015 Merger.
This pro forma financial information should be read in conjunction with historical financial statements and accompanying notes
filed with the SEC. Certain reclassifications have been made to the historical Kraft and Heinz results to align accounting policies
and eliminate intercompany sales in all periods presented.
Non-GAAP Financial Measures
To supplement the financial information, the Company has presented Organic Net Sales, 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, financial measures 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 for any period
prior to the 2015 Merger Date includes the operating results of Kraft on a pro forma basis, as if Kraft had been acquired as of
December 30, 2013. 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,
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, and equity award compensation
expense (excluding integration and restructuring expenses). Adjusted EBITDA for any period prior to the 2015 Merger Date includes
the operating results of Kraft on a pro forma basis, as if Kraft had been acquired as of December 30, 2013. 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 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 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,
and nonmonetary currency devaluation, and including when they occur, adjustments to reflect preferred stock dividend payments on an
accrual basis. Adjusted EPS for any period prior to the 2015 Merger Date includes the operating results of Kraft on a pro forma
basis, as if Kraft had been acquired as of December 30, 2013. 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 for the relevant periods.
|
|
|
|
|
Schedule 1
|
The Kraft Heinz Company |
Condensed Consolidated Statements of Income |
(in millions, except per share data) |
(Unaudited) |
|
|
|
For the Three Months |
|
For the Nine Months |
|
|
Ended |
|
Ended |
|
|
October 2, |
|
September |
|
October 2, |
|
September |
|
|
2016 |
|
27, 2015 |
|
2016 |
|
27, 2015 |
Net sales |
|
$ |
6,267 |
|
|
$ |
6,120 |
|
|
$ |
19,630 |
|
|
$ |
11,214 |
|
Cost of products sold |
|
4,049 |
|
|
4,492 |
|
|
12,503 |
|
|
7,857 |
|
Gross profit |
|
2,218 |
|
|
1,628 |
|
|
7,127 |
|
|
3,357 |
|
Selling, general and administrative expenses |
|
805 |
|
|
1,229 |
|
|
2,565 |
|
|
2,005 |
|
Operating income |
|
1,413 |
|
|
399 |
|
|
4,562 |
|
|
1,352 |
|
Interest expense |
|
311 |
|
|
460 |
|
|
824 |
|
|
1,055 |
|
Other expense/(income), net |
|
(3 |
) |
|
108 |
|
|
(5 |
) |
|
314 |
|
Income/(loss) before income taxes |
|
1,105 |
|
|
(169 |
) |
|
3,743 |
|
|
(17 |
) |
Provision for/(benefit from) income taxes |
|
262 |
|
|
(49 |
) |
|
1,045 |
|
|
(16 |
) |
Net income/(loss) |
|
843 |
|
|
(120 |
) |
|
2,698 |
|
|
(1 |
) |
Net income/(loss) attributable to noncontrolling interest |
|
1 |
|
|
3 |
|
|
10 |
|
|
10 |
|
Net income/(loss) attributable to Kraft Heinz |
|
842 |
|
|
(123 |
) |
|
2,688 |
|
|
(11 |
) |
Preferred dividends(a) |
|
— |
|
|
180 |
|
|
180 |
|
|
540 |
|
Net income/(loss) attributable to common shareholders |
|
$ |
842 |
|
|
$ |
(303 |
) |
|
$ |
2,508 |
|
|
$ |
(551 |
) |
|
|
|
|
|
|
|
|
|
Basic shares outstanding |
|
1,218 |
|
|
1,142 |
|
|
1,216 |
|
|
633 |
|
Diluted shares outstanding |
|
1,228 |
|
|
1,142 |
|
|
1,226 |
|
|
633 |
|
|
|
|
|
|
|
|
|
|
Per share data applicable to common shareholders: |
|
|
|
|
|
|
|
|
Basic earnings/(loss) per share |
|
$ |
0.69 |
|
|
$ |
(0.27 |
) |
|
$ |
2.06 |
|
|
$ |
(0.87 |
) |
Diluted earnings/(loss) per share |
|
0.69 |
|
|
(0.27 |
) |
|
2.05 |
|
|
(0.87 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The consolidated statements of income for the three and nine months ended September
27, 2015 reflect the results for Heinz and the results of Kraft Heinz for the period after the 2015 Merger occurred on July 2,
2015. |
|
|
|
(a)
|
|
In connection with the December 8, 2015 Common Stock dividend declaration, the
Company was required to accelerate payment of the Series A Preferred Stock dividend from March 7, 2016 to December 8, 2015.
Accordingly, there were no cash distributions related to the Company's Series A Preferred Stock in the first quarter of 2016.
Additionally, as the Series A Preferred Stock was redeemed on June 7, 2016, there were no cash distributions in the third
quarter of 2016, resulting in cash distributions of $180 million in the nine months ended October 2, 2016 compared to $540
million in the nine months ended September 27, 2015. |
|
|
|
|
|
|
|
|
Schedule 2
|
The Kraft Heinz Company |
Pro Forma Condensed Combined Statements of Income(a)
|
(in millions, except per share data) |
(Unaudited) |
|
|
|
|
|
|
|
For the Three Months |
|
For the Nine Months |
|
|
Ended |
|
Ended |
|
|
October 2, |
|
September |
|
October 2, |
|
September |
|
|
2016 |
|
27, 2015 |
|
2016 |
|
27, 2015 |
Net sales |
|
$ |
6,267 |
|
|
$ |
6,363 |
|
|
$ |
19,630 |
|
|
$ |
20,323 |
Cost of products sold(b) |
|
4,049 |
|
|
4,314 |
|
|
12,503 |
|
|
13,579 |
Gross profit |
|
2,218 |
|
|
2,049 |
|
|
7,127 |
|
|
6,744 |
Selling, general and administrative expenses(c) |
|
805 |
|
|
1,397 |
|
|
2,565 |
|
|
3,496 |
Operating income |
|
1,413 |
|
|
652 |
|
|
4,562 |
|
|
3,248 |
Interest expense |
|
311 |
|
|
460 |
|
|
824 |
|
|
1,262 |
Other expense/(income), net |
|
(3 |
) |
|
108 |
|
|
(5 |
) |
|
298 |
Income/(loss) before income taxes |
|
1,105 |
|
|
84 |
|
|
3,743 |
|
|
1,688 |
Provision for/(benefit from) income taxes |
|
262 |
|
|
69 |
|
|
1,045 |
|
|
562 |
Net income/(loss) |
|
843 |
|
|
15 |
|
|
2,698 |
|
|
1,126 |
Net income/(loss) attributable to noncontrolling interest |
|
1 |
|
|
3 |
|
|
10 |
|
|
10 |
Net income/(loss) attributable to Kraft Heinz |
|
842 |
|
|
12 |
|
|
2,688 |
|
|
1,116 |
Preferred dividends(d) |
|
— |
|
|
180 |
|
|
180 |
|
|
540 |
Net income/(loss) attributable to common shareholders |
|
$ |
842 |
|
|
$ |
(168 |
) |
|
$ |
2,508 |
|
|
$ |
576 |
|
|
|
|
|
|
|
|
|
Basic common shares outstanding |
|
1,218 |
|
|
1,213 |
|
|
1,216 |
|
|
1,198 |
Diluted common shares outstanding |
|
1,228 |
|
|
1,213 |
|
|
1,226 |
|
|
1,222 |
|
|
|
|
|
|
|
|
|
Per share data applicable to common shareholders: |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.69 |
|
|
$ |
(0.14 |
) |
|
$ |
2.06 |
|
|
$ |
0.48 |
Diluted earnings per share |
|
0.69 |
|
|
(0.14 |
) |
|
2.05 |
|
|
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
There are no pro forma adjustments in the three and nine months ended October 2, 2016
as Kraft and Heinz were a combined company for the entire period. Refer to Schedules 10 and 11 for additional information on
the pro forma adjustments for the three and nine months ended September 27, 2015. |
|
|
|
(b) |
|
Integration and restructuring expenses in cost of products sold were as follows: $152
million in the three months ended October 2, 2016 ($102 million after-tax), $161 million in the three months ended September
27, 2015 ($104 million after-tax), $532 million in the nine months ended October 2, 2016 ($361 million after-tax), and $301
million in the nine months ended September 27, 2015 ($203 million after-tax). |
|
|
|
(c) |
|
Integration and restructuring expenses in selling, general and administrative
expenses were as follows: $85 million in the three months ended October 2, 2016 ($57 million after-tax), $321 million in the
three months ended September 27, 2015 ($214 million after-tax), $249 million in the nine months ended October 2, 2016 ($169
million after-tax), and $380 million in the nine months ended September 27, 2015 ($256 million after-tax). |
|
|
|
(d) |
|
In connection with the December 8, 2015 Common Stock dividend declaration, the
Company was required to accelerate payment of the Series A Preferred Stock dividend from March 7, 2016 to December 8, 2015.
Accordingly, there were no cash distributions related to the Company's Series A Preferred Stock in the first quarter of 2016.
Additionally, as the Series A Preferred Stock was redeemed on June 7, 2016, there were no cash distributions in the third
quarter of 2016, resulting in cash distributions of $180 million in the nine months ended October 2, 2016 compared to $540
million in the nine months ended September 27, 2015. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 3
|
The Kraft Heinz Company |
Reconciliation of Pro Forma Net Sales to Organic Net Sales |
For the Three Months Ended |
(dollars in millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
Impact of |
|
Impact of |
|
Organic |
|
|
|
|
|
|
Net Sales(a)
|
|
Currency |
|
Divestitures |
|
Net Sales |
|
Price |
|
Volume/Mix |
October 2, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
4,395 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,395 |
|
|
|
|
|
Canada |
|
550 |
|
|
— |
|
|
— |
|
|
550 |
|
|
|
|
|
Europe |
|
513 |
|
|
(40 |
) |
|
|
— |
|
|
553 |
|
|
|
|
|
Rest of World |
|
809 |
|
|
8 |
|
|
— |
|
|
801 |
|
|
|
|
|
|
|
$ |
6,267 |
|
|
$ |
(32 |
) |
|
|
$ |
— |
|
|
$ |
6,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
United States(b) |
|
$ |
4,449 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,449 |
|
|
|
|
|
Canada |
|
539 |
|
|
— |
|
|
— |
|
|
539 |
|
|
|
|
|
Europe(b) |
|
600 |
|
|
— |
|
|
— |
|
|
600 |
|
|
|
|
|
Rest of World(b) |
|
775 |
|
|
2 |
|
|
— |
|
|
773 |
|
|
|
|
|
|
|
$ |
6,363 |
|
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
6,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rates |
|
|
|
|
|
|
|
|
|
|
|
|
United States(b) |
|
(1.2 |
)% |
|
— |
|
|
— |
|
|
(1.2 |
)% |
|
(0.7 |
) pp |
|
(0.5 |
) pp |
Canada |
|
2.0 |
% |
|
— |
|
|
— |
|
|
2.0 |
% |
|
(1.4 |
) pp |
|
3.4
|
pp
|
Europe(b) |
|
(14.5 |
)% |
|
(6.7 |
) pp |
|
— |
|
|
(7.8 |
)% |
|
(2.9 |
) pp |
|
(4.9 |
) pp |
Rest of World(b) |
|
4.4 |
% |
|
0.8
|
pp
|
|
— |
|
|
3.6 |
% |
|
1.9
|
pp
|
|
1.7
|
pp
|
Kraft Heinz |
|
(1.5 |
)% |
|
(0.5 |
) pp |
|
— |
|
|
(1.0 |
)% |
|
(0.7 |
) pp |
|
(0.3 |
) pp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
There are no pro forma adjustments in the three and nine months ended October 2, 2016
as Kraft and Heinz were a combined company for the entire period. |
|
|
|
(b) |
|
In the first quarter of 2016, the Company moved certain of the historical Kraft
export businesses from the Company's United States segment to its Rest of World and Europe segments to align with its long-term
go-to-market strategies. This change resulted in the reclassification of $92 million of pro forma net sales for the three
months ended September 27, 2015 from the United States segment to the Rest of World segment ($91 million) and Europe segment
($1 million). |
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4
|
The Kraft Heinz Company |
Reconciliation of Pro Forma Net Sales to Organic Net Sales |
For the Nine Months Ended |
(dollars in millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
Impact of |
|
Impact of |
|
Organic |
|
|
|
|
|
|
Net Sales(a)
|
|
Currency |
|
Divestitures |
|
Net Sales |
|
Price |
|
Volume/Mix |
October 2, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
13,802 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13,802 |
|
|
|
|
|
Canada |
|
1,692 |
|
|
(89 |
) |
|
|
— |
|
|
1,781 |
|
|
|
|
|
Europe |
|
1,644 |
|
|
(77 |
) |
|
|
— |
|
|
1,721 |
|
|
|
|
|
Rest of World |
|
2,492 |
|
|
(117 |
) |
|
|
— |
|
|
2,609 |
|
|
|
|
|
|
|
$ |
19,630 |
|
|
$ |
(283 |
) |
|
|
$ |
— |
|
|
$ |
19,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
United States(b) |
|
$ |
13,939 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13,939 |
|
|
|
|
|
Canada |
|
1,754 |
|
|
— |
|
|
— |
|
|
1,754 |
|
|
|
|
|
Europe(b,c) |
|
1,847 |
|
|
— |
|
|
43 |
|
|
1,804 |
|
|
|
|
|
Rest of World(b) |
|
2,783 |
|
|
346 |
|
|
— |
|
|
2,437 |
|
|
|
|
|
|
|
$ |
20,323 |
|
|
$ |
346 |
|
|
$ |
43 |
|
|
$ |
19,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rates |
|
|
|
|
|
|
|
|
|
|
|
|
United States(b) |
|
(1.0 |
)% |
|
— |
|
|
— |
|
|
(1.0 |
)% |
|
0.2
|
pp
|
|
(1.2 |
) pp |
Canada |
|
(3.5 |
)% |
|
(5.0 |
) pp |
|
— |
|
|
1.5 |
% |
|
1.9
|
pp
|
|
(0.4 |
) pp |
Europe(b,c) |
|
(11.0 |
)% |
|
(4.2 |
) pp |
|
(2.2 |
) pp |
|
(4.6 |
)% |
|
(2.7 |
) pp
|
|
(1.9 |
) pp |
Rest of World(b) |
|
(10.5 |
)% |
|
(17.6 |
) pp |
|
— |
|
|
7.1 |
% |
|
3.1
|
pp
|
|
4.0
|
pp
|
Kraft Heinz |
|
(3.4 |
)% |
|
(3.1 |
) pp |
|
(0.2 |
) pp |
|
(0.1 |
)% |
|
0.5
|
pp
|
|
(0.6 |
) pp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
There are no pro forma adjustments in the nine months ended October 2, 2016 as Kraft
and Heinz were a combined company for the entire period. |
|
|
|
(b) |
|
In the first quarter of 2016, the Company moved certain of the historical Kraft
export businesses from the Company's United States segment to its Rest of World and Europe segments to align with its long-term
go-to-market strategies. This change resulted in the reclassification of $263 million of pro forma net sales for the nine
months ended September 27, 2015 from the United States segment to the Rest of World segment ($261 million) and Europe segment
($2 million). |
|
|
|
(c) |
|
The Company increased Europe Organic Net Sales by $2 million from the amount
previously published for the nine months ended September 27, 2015 to reflect a correction to the Impact of Divestitures. |
|
|
|
|
|
|
|
|
Schedule 5
|
The Kraft Heinz Company |
Reconciliation of Pro Forma Net Income/(Loss) to Adjusted EBITDA |
(in millions) |
(Unaudited) |
|
|
|
|
|
|
|
For the Three Months |
|
For the Nine Months |
|
|
Ended |
|
Ended |
|
|
October 2, |
|
September |
|
October 2, |
|
September |
|
|
2016 |
|
27, 2015 |
|
2016 |
|
27, 2015 |
Pro forma net income/(loss)(a) |
|
$ |
843 |
|
|
$ |
15 |
|
|
$ |
2,698 |
|
|
$ |
1,126 |
|
Interest expense |
|
311 |
|
|
460 |
|
|
824 |
|
|
1,262 |
|
Other expense/(income), net |
|
(3 |
) |
|
108 |
|
|
(5 |
) |
|
298 |
|
Provision for/(benefit from) income taxes |
|
262 |
|
|
69 |
|
|
1,045 |
|
|
562 |
|
Operating income |
|
1,413 |
|
|
652 |
|
|
4,562 |
|
|
3,248 |
|
Depreciation and amortization (excluding integration and restructuring expenses) |
|
116 |
|
|
193 |
|
|
401 |
|
|
619 |
|
Integration and restructuring expenses |
|
237 |
|
|
482 |
|
|
781 |
|
|
681 |
|
Merger costs |
|
4 |
|
|
139 |
|
|
33 |
|
|
193 |
|
Unrealized losses/(gains) on commodity hedges |
|
22 |
|
|
— |
|
|
(23 |
) |
|
(23 |
) |
Impairment losses |
|
— |
|
|
— |
|
|
53 |
|
|
58 |
|
Losses/(gains) on sale of business |
|
— |
|
|
— |
|
|
— |
|
|
(21 |
) |
Nonmonetary currency devaluation |
|
1 |
|
|
— |
|
|
4 |
|
|
49 |
|
Equity award compensation expense (excluding integration and restructuring
expenses) |
|
10 |
|
|
16 |
|
|
30 |
|
|
60 |
|
Adjusted EBITDA |
|
$ |
1,803 |
|
|
$ |
1,482 |
|
|
$ |
5,841 |
|
|
$ |
4,864 |
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA: |
|
|
|
|
|
|
|
|
United States(b) |
|
$ |
1,349 |
|
|
$ |
1,033 |
|
|
$ |
4,360 |
|
|
$ |
3,364 |
|
Canada |
|
148 |
|
|
110 |
|
|
491 |
|
|
374 |
|
Europe(b) |
|
183 |
|
|
223 |
|
|
572 |
|
|
662 |
|
Rest of World(b) |
|
150 |
|
|
152 |
|
|
525 |
|
|
570 |
|
General corporate expenses |
|
(27 |
) |
|
(36 |
) |
|
(107 |
) |
|
(106 |
) |
Adjusted EBITDA |
|
$ |
1,803 |
|
|
$ |
1,482 |
|
|
$ |
5,841 |
|
|
$ |
4,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
There are no pro forma adjustments in the nine months ended October 2, 2016 as Kraft
and Heinz were a combined company for the entire period. |
|
|
|
(b) |
|
In the first quarter of 2016, the Company moved certain historical Kraft export
businesses from the Company's United States segment to its Rest of World and Europe segments to align with its long-term
go-to-market strategies. For the three months ended September 27, 2015, this change resulted in the reclassification of $28
million of Segment Adjusted EBITDA from the United States segment to the Rest of World segment ($27 million) and Europe segment
($1 million). For the nine months ended September 27, 2015, this change resulted in the reclassification of $73 million of
Segment Adjusted EBITDA from the United States segment to the Rest of World segment ($72 million) and Europe segment ($1
million). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 6
|
The Kraft Heinz Company |
Reconciliation of Adjusted EBITDA to Constant Currency Adjusted
EBITDA |
For the Three Months Ended |
(dollars in millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency |
|
|
Adjusted EBITDA(a)
|
|
Impact of Currency |
|
Adjusted EBITDA |
October 2, 2016 |
|
|
|
|
|
|
United States |
|
$ |
1,349 |
|
|
$ |
— |
|
|
$ |
1,349 |
|
Canada |
|
148 |
|
|
2 |
|
|
146 |
|
Europe |
|
183 |
|
|
(19 |
) |
|
|
202 |
|
Rest of World |
|
150 |
|
|
2 |
|
|
148 |
|
General corporate expenses |
|
(27 |
) |
|
— |
|
|
(27 |
) |
|
|
$ |
1,803 |
|
|
$ |
(15 |
) |
|
|
$ |
1,818 |
|
|
|
|
|
|
|
|
September 27, 2015 |
|
|
|
|
|
|
United States(b) |
|
$ |
1,033 |
|
|
$ |
— |
|
|
$ |
1,033 |
|
Canada |
|
110 |
|
|
— |
|
|
110 |
|
Europe(b) |
|
223 |
|
|
— |
|
|
223 |
|
Rest of World(b) |
|
152 |
|
|
(2 |
) |
|
|
154 |
|
General corporate expenses |
|
(36 |
) |
|
— |
|
|
(36 |
) |
|
|
$ |
1,482 |
|
|
$ |
(2 |
) |
|
|
$ |
1,484 |
|
|
|
|
|
|
|
|
Year-over-year growth rates |
|
|
|
|
|
|
United States(b) |
|
30.6 |
% |
|
— |
|
|
30.6 |
% |
Canada |
|
34.5 |
% |
|
1.8
|
pp
|
|
32.7 |
% |
Europe(b) |
|
(17.9 |
)% |
|
(8.5
|
) pp |
|
(9.4 |
)% |
Rest of World(b) |
|
(1.3 |
)% |
|
2.6
|
pp
|
|
(3.9 |
)% |
General corporate expenses |
|
(25.0 |
)% |
|
— |
|
|
(25.0 |
)% |
Kraft Heinz |
|
21.7 |
% |
|
(0.8 |
) pp |
|
22.5 |
% |
|
|
|
|
|
|
|
|
|
(a) |
|
There are no pro forma adjustments in the three and nine months ended October 2, 2016
as Kraft and Heinz were a combined company for the entire period. |
|
|
|
(b) |
|
In the first quarter of 2016, the Company moved certain historical Kraft export
businesses from the Company's United States segment to its Rest of World and Europe segments to align with its long-term
go-to-market strategies. For the three months ended September 27, 2015, this change resulted in the reclassification of $28
million of Segment Adjusted EBITDA from the United States segment to the Rest of World segment ($27 million) and Europe segment
($1 million). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 7
|
The Kraft Heinz Company |
Reconciliation of Adjusted EBITDA to Constant Currency Adjusted
EBITDA |
For the Nine Months Ended |
(dollars in millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency |
|
|
Adjusted EBITDA(a)
|
|
Impact of Currency |
|
Adjusted EBITDA |
October 2, 2016 |
|
|
|
|
|
|
United States |
|
$ |
4,360 |
|
|
$ |
— |
|
|
$ |
4,360 |
|
Canada |
|
491 |
|
|
(25 |
) |
|
|
516 |
|
Europe |
|
572 |
|
|
(34 |
) |
|
|
606 |
|
Rest of World |
|
525 |
|
|
(22 |
) |
|
|
547 |
|
General corporate expenses |
|
(107 |
) |
|
— |
|
|
(107 |
) |
|
|
$ |
5,841 |
|
|
$ |
(81 |
) |
|
|
$ |
5,922 |
|
|
|
|
|
|
|
|
September 27, 2015 |
|
|
|
|
|
|
United States(b) |
|
$ |
3,364 |
|
|
$ |
— |
|
|
$ |
3,364 |
|
Canada |
|
374 |
|
|
— |
|
|
374 |
|
Europe(b) |
|
662 |
|
|
— |
|
|
662 |
|
Rest of World(b) |
|
570 |
|
|
99 |
|
|
471 |
|
General corporate expenses |
|
(106 |
) |
|
— |
|
|
(106 |
) |
|
|
$ |
4,864 |
|
|
$ |
99 |
|
|
$ |
4,765 |
|
|
|
|
|
|
|
|
Year-over-year growth rates |
|
|
|
|
|
|
United States(b) |
|
29.6 |
% |
|
— |
|
|
29.6 |
% |
Canada |
|
31.3 |
% |
|
(6.7 |
) pp |
|
38.0 |
% |
Europe(b) |
|
(13.6 |
)% |
|
(5.1 |
) pp |
|
(8.5 |
)% |
Rest of World(b) |
|
(7.9 |
)% |
|
(24.0 |
) pp |
|
16.1 |
% |
General corporate expenses |
|
0.9 |
% |
|
— |
|
|
0.9 |
% |
Kraft Heinz |
|
20.1 |
% |
|
(4.2 |
) pp |
|
24.3 |
% |
|
|
|
|
|
|
|
|
|
|
(a) |
|
There are no pro forma adjustments in the nine months ended October 2, 2016 as Kraft
and Heinz were a combined company for the entire period. |
|
|
|
(b) |
|
In the first quarter of 2016, the Company moved certain historical Kraft export
businesses from the Company's United States segment to its Rest of World and Europe segments to align with its long-term
go-to-market strategies. For the nine months ended September 27, 2015, this change resulted in the reclassification of $73
million of Segment Adjusted EBITDA from the United States segment to the Rest of World segment ($72 million) and Europe segment
($1 million). |
|
|
|
|
|
|
|
|
Schedule 8
|
The Kraft Heinz Company |
Reconciliation of Pro Forma Diluted EPS to Adjusted EPS |
(Unaudited) |
|
|
|
|
|
|
|
For the Three Months |
|
For the Nine Months |
|
|
Ended |
|
Ended |
|
|
October 2,
|
|
September |
|
October 2,
|
|
September |
|
|
2016
|
|
27, 2015 |
|
2016
|
|
27, 2015 |
Pro forma diluted EPS(a) |
|
$ |
0.69 |
|
|
$ |
(0.14 |
) |
|
$ |
2.05 |
|
|
$ |
0.47 |
|
Integration and restructuring expenses(b)(c) |
|
0.13 |
|
|
0.27 |
|
|
0.43 |
|
|
0.38 |
|
Merger costs(b)(d) |
|
— |
|
|
0.31 |
|
|
0.02 |
|
|
0.48 |
|
Unrealized losses/(gains) on commodity hedges(b)(e) |
|
0.01 |
|
|
— |
|
|
(0.02 |
) |
|
(0.01 |
) |
Impairment losses(b)(e) |
|
— |
|
|
— |
|
|
0.03 |
|
|
0.03 |
|
Losses/(gains) on sale of business(b)(e) |
|
— |
|
|
— |
|
|
— |
|
|
(0.01 |
) |
Nonmonetary currency devaluation(b)(f) |
|
— |
|
|
— |
|
|
— |
|
|
0.23 |
|
Preferred dividend adjustment(g) |
|
— |
|
|
— |
|
|
(0.10 |
) |
|
— |
|
Adjusted EPS |
|
$ |
0.83 |
|
|
$ |
0.44 |
|
|
$ |
2.41 |
|
|
$ |
1.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
There are no pro forma adjustments in the three and nine months ended
October 2, 2016, as Kraft and Heinz were a combined company for the entire period. |
|
|
|
(b) |
|
Income tax expense associated with these items is based on applicable
jurisdictional tax rates and deductibility assessment of individual items. |
|
|
|
(c) |
|
Integration and restructuring expenses include the following gross
expenses: |
|
|
•
|
Expenses recorded in cost of products sold were $152 million for the three months and $532 million
for the nine months ended October 2, 2016 and $161 million for the three months and $301 million for the nine months ended
September 27, 2015;
|
|
|
•
|
Expenses recorded in SG&A were $85 million for the three months and $249 million for the nine
months ended October 2, 2016 and $321 million for the three months and $380 million for the nine months ended September 27,
2015
|
|
|
•
|
Expenses recorded in other expense/(income), net, were $2 million for the three and nine months
ended October 2, 2016 (there were no such expenses for the three and nine months ended September 27, 2015).
|
|
|
|
(d) |
|
Merger costs include the following gross expenses: |
|
|
•
|
|
Expenses recorded in cost of products sold were $1 million for the three months and $2 million for
the nine months ended October 2, 2016, and $4 million for the three and nine months ended September 27, 2015;
|
|
|
•
|
|
Expenses recorded in SG&A were $3 million for the three months and $31 million for the nine
months ended October 2, 2016 and $135 million for the three months and $189 million for the nine months ended September 27,
2015;
|
|
|
•
|
|
Expenses recorded in interest expense were $207 million for the three months and $466 million for
the nine months ended September 27, 2015 (there were no such expenses for the three and nine months ended October 2, 2016);
and,
|
|
|
•
|
|
Expenses recorded in other expense/(income), net, were $113 million for the three and $139 million
for the nine months ended September 27, 2015 (there were no such expenses for the three and nine months ended October 2,
2016).
|
|
|
|
(e) |
|
Refer to the reconciliation of pro forma net income/(loss) to Adjusted
EBITDA for the related gross expenses. |
|
|
|
(f) |
|
Nonmonetary currency devaluation includes the following gross
expenses/(income): |
|
|
•
|
|
Expenses recorded in cost of products sold of $1 million for the three months and $4 million for the
nine months ended October 2, 2016 and $49 million the nine months ended September 27, 2015 (there were no such expenses for
the three months ended September 27, 2015); and,
|
|
|
•
|
|
Expenses/(income) recorded in other expense/(income), net, including income of $6 million for the
three months and expense of $1 million for the nine months ended October 2, 2016 and expense of $234 million for the nine
months ended September 27, 2015 (there were no such expenses for the three months ended September 27, 2015).
|
|
|
|
(g) |
|
For Adjusted EPS, the Company presents the impact of the Series A Preferred Stock dividend payments
on an accrual basis. Accordingly, the Company includes adjustments to EPS to include $180 million of Series A Preferred Stock
dividends during 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 during the second quarter of 2016 (to reflect
that it was redeemed on June 7, 2016).
|
|
|
|
|
|
|
|
|
Schedule 9
|
The Kraft Heinz Company |
Condensed Consolidated Balance Sheets |
(in millions) |
(Unaudited) |
|
|
|
|
|
|
|
October 2, 2016 |
|
January 3, 2016 |
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
3,920 |
|
|
$ |
4,837 |
|
Trade receivables |
|
855 |
|
|
871 |
|
Sold receivables |
|
208 |
|
|
583 |
|
Inventories |
|
3,108 |
|
|
2,618 |
|
Other current assets |
|
852 |
|
|
871 |
|
Total current assets |
|
8,943 |
|
|
9,780 |
|
Property, plant and equipment, net |
|
6,490 |
|
|
6,524 |
|
Goodwill |
|
44,518 |
|
|
43,051 |
|
Intangible assets, net |
|
59,620 |
|
|
62,120 |
|
Other assets |
|
1,509 |
|
|
1,498 |
|
TOTAL ASSETS |
|
$ |
121,080 |
|
|
$ |
122,973 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
Commercial paper and other short-term debt |
|
$ |
653 |
|
|
$ |
4 |
|
Current portion of long-term debt |
|
2,047 |
|
|
79 |
|
Trade payables |
|
3,456 |
|
|
2,844 |
|
Accrued marketing |
|
708 |
|
|
856 |
|
Accrued postemployment costs |
|
164 |
|
|
328 |
|
Income taxes payable |
|
142 |
|
|
417 |
|
Interest payable |
|
311 |
|
|
401 |
|
Dividends payable |
|
769 |
|
|
762 |
|
Other current liabilities |
|
1,164 |
|
|
1,241 |
|
Total current liabilities |
|
9,414 |
|
|
6,932 |
|
Long-term debt |
|
29,980 |
|
|
25,151 |
|
Deferred income taxes |
|
20,706 |
|
|
21,497 |
|
Accrued postemployment costs |
|
2,367 |
|
|
2,405 |
|
Other liabilities |
|
745 |
|
|
752 |
|
TOTAL LIABILITIES |
|
63,212 |
|
|
56,737 |
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
— |
|
|
23 |
|
9.00% cumulative compounding preferred stock, Series A |
|
— |
|
|
8,320 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Common stock, $0.01 par value |
|
12 |
|
|
12 |
|
Additional paid-in capital |
|
58,567 |
|
|
58,375 |
|
Retained earnings/(deficit) |
|
374 |
|
|
— |
|
Accumulated other comprehensive income/(losses) |
|
(1,229 |
) |
|
(671 |
) |
Treasury stock, at cost |
|
(82 |
) |
|
(31 |
) |
Total shareholders' equity |
|
57,642 |
|
|
57,685 |
|
Noncontrolling interest |
|
226 |
|
|
208 |
|
TOTAL EQUITY |
|
57,868 |
|
|
57,893 |
|
TOTAL LIABILITIES AND EQUITY |
|
$ |
121,080 |
|
|
$ |
122,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 10
|
The Kraft Heinz Company |
Pro Forma Condensed Combined Statement of Income |
For the Three Months Ended September 27, 2015 |
(in millions, except per share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
Historical |
|
Pro Forma |
|
|
|
|
|
|
Heinz |
|
Kraft |
|
Adjustments |
|
|
|
Pro Forma |
Net sales |
|
$ |
6,120 |
|
|
$ |
243 |
|
|
$ |
— |
|
|
|
|
$ |
6,363 |
|
Cost of products sold |
|
4,492 |
|
|
169 |
|
|
(347 |
) |
|
(a) |
|
4,314 |
|
Gross profit |
|
1,628 |
|
|
74 |
|
|
347 |
|
|
|
|
2,049 |
|
Selling, general and administrative expenses |
|
1,229 |
|
|
264 |
|
|
(96 |
) |
|
(b) |
|
1,397 |
|
Operating income |
|
399 |
|
|
(190 |
) |
|
443 |
|
|
|
|
652 |
|
Interest expense |
|
460 |
|
|
— |
|
|
— |
|
|
|
|
460 |
|
Other expense/(income), net |
|
108 |
|
|
— |
|
|
— |
|
|
|
|
108 |
|
Income/(loss) before income taxes |
|
(169 |
) |
|
(190 |
) |
|
443 |
|
|
|
|
84 |
|
Provision for/(benefit from) income taxes |
|
(49 |
) |
|
(52 |
) |
|
170 |
|
|
(c) |
|
69 |
|
Net income/(loss) |
|
(120 |
) |
|
(138 |
) |
|
273 |
|
|
|
|
15 |
|
Net income/(loss) attributable to noncontrolling interest |
|
3 |
|
|
— |
|
|
— |
|
|
|
|
3 |
|
Net income/(loss) attributable to Kraft Heinz |
|
(123 |
) |
|
(138 |
) |
|
273 |
|
|
|
|
12 |
|
Preferred dividends |
|
180 |
|
|
— |
|
|
— |
|
|
|
|
180 |
|
Net income/(loss) attributable to common shareholders |
|
$ |
(303 |
) |
|
$ |
(138 |
) |
|
$ |
273 |
|
|
|
|
$ |
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic common shares outstanding |
|
|
|
|
|
|
|
|
|
1,213 |
|
Diluted common shares outstanding |
|
|
|
|
|
|
|
|
|
1,213 |
|
|
|
|
|
|
|
|
|
|
|
|
Per share data applicable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
|
|
|
|
$ |
(0.14 |
) |
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents the elimination of nonrecurring non-cash costs related to the fair value
adjustment of Kraft’s inventory. |
|
|
|
(b) |
|
Reflects 2015 Merger-related adjustments including certain deal costs related to the
2015 Merger. |
|
|
|
(c) |
|
Represents the income tax effect of pro forma adjustments utilizing a 38.5% weighted
average statutory tax rate. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 11
|
The Kraft Heinz Company |
Pro Forma Condensed Combined Statement of Income |
For the Nine Months Ended September 27, 2015 |
(in millions, except per share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical |
|
Historical |
|
Pro Forma |
|
|
|
|
|
|
Heinz |
|
Kraft |
|
Adjustments |
|
|
|
Pro Forma |
Net sales |
|
$ |
11,214 |
|
|
$ |
9,109 |
|
|
$ |
— |
|
|
|
|
$ |
20,323 |
Cost of products sold |
|
7,857 |
|
|
6,103 |
|
|
(381 |
) |
|
(a) |
|
13,579 |
Gross profit |
|
3,357 |
|
|
3,006 |
|
|
381 |
|
|
|
|
6,744 |
Selling, general and administrative expenses |
|
2,005 |
|
|
1,532 |
|
|
(41 |
) |
|
(b) |
|
3,496 |
Operating income |
|
1,352 |
|
|
1,474 |
|
|
422 |
|
|
|
|
3,248 |
Interest expense |
|
1,055 |
|
|
247 |
|
|
(40 |
) |
|
(c) |
|
1,262 |
Other expense/(income), net |
|
314 |
|
|
(16 |
) |
|
— |
|
|
|
|
298 |
Income/(loss) before income taxes |
|
(17 |
) |
|
1,243 |
|
|
462 |
|
|
|
|
1,688 |
Provision for/(benefit from) income taxes |
|
(16 |
) |
|
400 |
|
|
178 |
|
|
(d) |
|
562 |
Net income/(loss) |
|
(1 |
) |
|
843 |
|
|
284 |
|
|
|
|
1,126 |
Net income/(loss) attributable to noncontrolling interest |
|
10 |
|
|
— |
|
|
— |
|
|
|
|
10 |
Net income/(loss) attributable to Kraft Heinz |
|
(11 |
) |
|
843 |
|
|
284 |
|
|
|
|
1,116 |
Preferred dividends |
|
540 |
|
|
— |
|
|
— |
|
|
|
|
540 |
Net income/(loss) attributable to common shareholders |
|
$ |
(551 |
) |
|
$ |
843 |
|
|
$ |
284 |
|
|
|
|
$ |
576 |
|
|
|
|
|
|
|
|
|
|
|
Basic common shares outstanding |
|
|
|
|
|
|
|
|
|
1,198 |
Diluted common shares outstanding |
|
|
|
|
|
|
|
|
|
1,222 |
|
|
|
|
|
|
|
|
|
|
|
Per share data applicable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
|
|
|
|
$ |
0.48 |
Diluted earnings per share |
|
|
|
|
|
|
|
|
|
0.47 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents the change to align Kraft to Kraft Heinz's accounting policy for
postemployment benefit plans and the elimination of nonrecurring non-cash costs related to the fair value adjustment of Kraft’s
inventory. |
|
|
|
(b) |
|
Reflects 2015 Merger-related adjustments including the change to align Kraft to Kraft
Heinz's accounting policy for postemployment benefit plans; incremental amortization resulting from the fair value adjustment
of Kraft's definite-lived intangible assets; incremental compensation expense due to the fair value remeasurement of certain
Kraft's equity awards; and, certain deal costs related to the 2015 Merger. |
|
|
|
(c) |
|
Represents the incremental change in interest expense resulting from the fair value
adjustment of Kraft's long-term debt in connection with the 2015 Merger, including the elimination of the historical
amortization of deferred financing fees and amortization of original issuance discount. |
|
|
|
(d) |
|
Represents the income tax effect of pro forma adjustments utilizing a 38.5% weighted
average statutory tax rate. |
The Kraft Heinz Company
Michael Mullen (media)
Michael.Mullen@kraftheinzcompany.com
or
Christopher Jakubik, CFA (investors)
ir@kraftheinzcompany.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20161103006713/en/