Kraft Heinz Reports Fourth Quarter and Full Year 2017 Results
- 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 Currency
Adjusted 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 Currency
Adjusted 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 |
|
The Kraft Heinz Company
Michael Mullen (media)
Michael.Mullen@kraftheinz.com
or
Christopher Jakubik, CFA (investors)
ir@kraftheinzcompany.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20180216005092/en/