The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) today reported third quarter 2019 financial results that
reflected a one-time gain on the sale of the Company's Canadian
natural cheese business, lower net sales, and higher input
costs.
“While our third-quarter results remain below our potential, we
showed sequential improvement versus the first half, and I believe
we are beginning to operate the business better,” said Kraft Heinz
CEO Miguel Patricio. "We are making good progress in identifying
and addressing the root causes of past performance, as well as
setting our strategic direction. Although there is still much work
ahead, we’re encouraged by our improving performance, and are even
more confident in our ability to turn around the Company and set a
path of long term growth and profitability.”
Q3 2019 Financial Summary
For the Three Months
Ended
Year-over-year Change
September 28, 2019
September 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions, except per share
data)
Net sales
$
6,076
$
6,383
(4.8)%
(1.7) pp
(2.0) pp
(1.1)%
Operating income/(loss)
1,180
1,074
9.8%
Net income/(loss) attributable to common
shareholders
899
619
45.4%
Diluted EPS
$
0.74
$
0.50
48.0%
Adjusted EBITDA(1)
1,469
1,594
(7.8)%
(3.2) pp
(1.4) pp
Adjusted EPS(1)
$
0.69
$
0.76
(9.2)%
Net sales were $6.1 billion, down 4.8 percent versus the
year-ago period, including a negative 2.0 percentage point impact
from divestitures and an unfavorable 1.7 percentage point impact
from currency. Organic Net Sales(1) decreased 1.1 percent versus
the year-ago period. Pricing increased 1.0 percent versus the prior
year period, reflecting higher pricing in the United States, Rest
of World and EMEA segments that more than offset lower pricing in
Canada. Volume/mix was 2.1 percentage points below the prior year
period as global growth in condiments and sauces was more than
offset by lower shipments in the United States.
Net income attributable to common shareholders increased to $899
million and diluted EPS increased to $0.74, primarily reflecting
the gain on the sale of Canadian natural cheese business and a
non-cash impairment charge in the prior year period that was
partially offset by debt extinguishment costs associated with the
tender offers. Adjusted EBITDA decreased 7.8 percent versus the
year-ago period to $1.5 billion, including 3.2 percentage point
impact from unfavorable currency and a negative 1.4 percentage
point impact from divestitures. Excluding these factors, the
decrease was driven by declines in the United States and Canada, as
well as higher general corporate expenses that more than offset
growth in EMEA. Adjusted EPS decreased 9.2% percent to $0.69,
reflecting lower Adjusted EBITDA, higher taxes on adjusted earnings
in the current period, and lower interest expense versus the
year-ago period.
Q3 2019 Business Segment Highlights
United States
For the Three Months
Ended
Year-over-year Change
September 28, 2019
September 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
4,361
$
4,431
(1.6)%
0.0 pp
0.0 pp
(1.6)%
Segment Adjusted EBITDA
1,155
1,176
(1.8)%
0.0 pp
0.0 pp
United States net sales were $4.4 billion, down 1.6 percent
versus the year-ago period. Pricing increased 1.5 percentage
points, driven by price increases across several categories,
including Oscar Mayer cold cuts, Philadelphia cream cheese,
macaroni & cheese, and Lunchables. This more than offset
pricing to offset lower key commodity(2) costs in coffee and nuts.
Volume/mix decreased 3.1 percentage points, primarily driven by
lower retail takeaway in natural cheese, cold cuts and Lunchables,
as well as unfavorable changes in retail inventory levels versus
the prior year period. This more than offset consumption-led growth
in condiments and sauces, and, to a lesser extent, nuts.
United States Segment Adjusted EBITDA decreased 1.8 percent
versus the year-ago period to $1.2 billion, driven by unfavorable
volume/mix that more than offset higher pricing and favorable
timing of marketing expenses versus the prior year period.
Canada
For the Three Months
Ended
Year-over-year Change
September 28, 2019
September 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
415
$
525
(21.1)%
(0.8) pp
(19.8) pp
(0.5)%
Segment Adjusted EBITDA
107
144
(25.7)%
(0.8) pp
(14.9) pp
Canada net sales were $415 million, 21.1 percent lower than the
year-ago period, including a negative 19.8 percentage point impact
from the Canadian natural cheese divestiture and a 0.8 percentage
point unfavorable impact from currency. Organic Net Sales decreased
0.5 percent versus the year-ago period. Pricing declined 2.6
percentage points, driven by increased promotional activity and
unfavorable trade expense in cheese that more than offset higher
pricing of macaroni and cheese. Volume/mix increased 2.1 percent,
reflecting growth from increased promotional support in cheese and
pasta sauce, as well as a partial recovery of retail inventory
levels in certain categories. These gains more than offset a
decline in macaroni and cheese due to reduced promotional activity
and lower coffee shipments versus the prior year period.
Canada Segment Adjusted EBITDA decreased 25.7 percent versus the
year-ago period to $107 million, including a 14.9 percentage point
impact from a divestiture and a 0.8 percentage point unfavorable
impact from currency. Excluding the impact of these factors, the
decrease versus the prior year was driven by lower pricing and
higher input costs.
EMEA
For the Three Months
Ended
Year-over-year Change
September 28, 2019
September 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
612
$
634
(3.5)%
(3.9) pp
0.0 pp
0.4%
Segment Adjusted EBITDA
165
165
0.3%
(4.4) pp
0.0 pp
EMEA net sales were $612 million, down 3.5 percent versus the
year-ago period, due to a negative 3.9 percentage point impact from
currency. Organic Net Sales increased 0.4 percent versus the
year-ago period. Pricing was up 0.2 percentage points, with higher
pricing in the UK more than offsetting lower pricing in other
regions. Volume/mix increased 0.2 percentage points, driven by
favorable shipment timing versus the prior year period in Russia
and foodservice growth across most regions that more than offset
ongoing weakness in infant nutrition.
EMEA Segment Adjusted EBITDA increased 0.3 percent versus the
year-ago period to $165 million, despite a negative 4.4 percentage
point impact from currency. Excluding currency, Segment Adjusted
EBITDA increased 4.7 percent, primarily reflecting lower supply
chain costs.
Rest of World(3)
For the Three Months
Ended
Year-over-year Change
September 28, 2019
September 29, 2018
Actual
Currency
Acquisitions and
Divestitures
Organic
(in millions)
Net sales
$
688
$
793
(13.3)%
(10.2) pp
(3.3) pp
0.2%
Segment Adjusted EBITDA
100
148
(32.7)%
(31.1) pp
2.1 pp
Rest of World net sales of $688 million decreased 13.3 percent
versus the year-ago period, including a negative 10.2 percentage
point impact from currency and a 3.3 percentage point negative
impact from the India nutritional beverages divestiture. Organic
Net Sales increased 0.2 percent versus the year-ago period, driven
by a 0.9 percentage point increase from pricing. Price increases in
Latin America, including in highly inflationary markets, more than
offset lower pricing in Asia Pacific. Volume/mix decreased 0.7
percentage points, as ongoing weakness in China infant nutritional
products more than offset growth from condiments and sauces,
foodservice, and Indonesia beverages.
Rest of World Segment Adjusted EBITDA decreased 32.7 percent
versus the year-ago period to $100 million, due to a negative 31.1
percentage point impact from currency, as well as higher supply
chain costs and lower Organic Net Sales in Asia Pacific.
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 third quarter 2019
earnings conference call will be available at
ir.kraftheinzcompany.com. The call begins today at 8:30 a.m.
Eastern Daylight 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 2018 net sales of
approximately $26 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; additional
impairments of the carrying amounts of goodwill or other
indefinite-lived intangible assets; exchange rate fluctuations;
volatility in commodity, energy, and other input costs; volatility
in the market value of all or a portion of the 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 the Company’s
restatement and 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 Condensed
Consolidated Statements of Income (in millions, except per share
data) (Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 28, 2019
September 29, 2018
September 28, 2019
September 29, 2018
Net sales
$
6,076
$
6,383
$
18,441
$
19,377
Cost of products sold
4,129
4,289
12,401
12,672
Gross profit
1,947
2,094
6,040
6,705
Selling, general and administrative
expenses, excluding impairment losses
762
803
2,341
2,323
Goodwill impairment losses
—
—
744
133
Intangible asset impairment losses
5
217
479
318
Selling, general and administrative
expenses
767
1,020
3,564
2,774
Operating income/(loss)
1,180
1,074
2,476
3,931
Interest expense
398
326
1,035
959
Other expense/(income)
(380)
(71)
(893)
(181)
Income/(loss) before income taxes
1,162
819
2,334
3,153
Provision for/(benefit from) income
taxes
264
201
584
779
Net income/(loss)
898
618
1,750
2,374
Net income/(loss) attributable to
noncontrolling interest
(1)
(1)
(3)
(2)
Net income/(loss) attributable to common
shareholders
$
899
$
619
$
1,753
$
2,376
Basic shares outstanding
1,221
1,219
1,220
1,219
Diluted shares outstanding
1,223
1,226
1,223
1,227
Per share data applicable to common
shareholders:
Basic earnings/(loss) per share
$
0.74
$
0.51
$
1.44
$
1.95
Diluted earnings/(loss) per share
0.74
0.50
1.43
1.94
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
September 28, 2019
United States
$
4,361
$
—
$
—
$
4,361
Canada
415
(4)
1
418
EMEA
612
(24)
—
636
Rest of World
688
(13)
—
701
$
6,076
$
(41)
$
1
$
6,116
September 29, 2018
United States
$
4,431
$
—
$
—
$
4,431
Canada
525
—
104
421
EMEA
634
—
—
634
Rest of World
793
71
23
699
$
6,383
$
71
$
127
$
6,185
Year-over-year growth rates
United States
(1.6)%
0.0 pp
0.0 pp
(1.6)%
1.5 pp
(3.1) pp
Canada
(21.1)%
(0.8) pp
(19.8) pp
(0.5)%
(2.6) pp
2.1 pp
EMEA
(3.5)%
(3.9) pp
0.0 pp
0.4%
0.2 pp
0.2 pp
Rest of World
(13.3)%
(10.2) pp
(3.3) pp
0.2%
0.9 pp
(0.7) pp
Kraft Heinz
(4.8)%
(1.7) pp
(2.0) pp
(1.1)%
1.0 pp
(2.1) pp
Schedule
3
The Kraft Heinz Company
Reconciliation of Net Sales to Organic Net Sales For the Nine
Months Ended (dollars in millions) (Unaudited)
Net Sales
Currency
Acquisitions and
Divestitures
Organic Net Sales
Price
Volume/Mix
September 28, 2019
United States
$
13,074
$
—
$
—
$
13,074
Canada
1,425
(46)
227
1,244
EMEA
1,862
(109)
—
1,971
Rest of World
2,080
(91)
51
2,120
$
18,441
$
(246)
$
278
$
18,409
September 29, 2018
United States
$
13,312
$
—
$
—
$
13,312
Canada
1,573
—
308
1,265
EMEA
2,026
—
21
2,005
Rest of World
2,466
211
144
2,111
$
19,377
$
211
$
473
$
18,693
Year-over-year growth rates
United States
(1.8)%
0.0 pp
0.0 pp
(1.8)%
(0.7) pp
(1.1) pp
Canada
(9.5)%
(3.0) pp
(4.8) pp
(1.7)%
(2.8) pp
1.1 pp
EMEA
(8.1)%
(5.4) pp
(1.0) pp
(1.7)%
0.0 pp
(1.7) pp
Rest of World
(15.7)%
(11.9) pp
(4.2) pp
0.4%
1.3 pp
(0.9) pp
Kraft Heinz
(4.8)%
(2.3) pp
(1.0) pp
(1.5)%
(0.5) pp
(1.0) 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 Nine Months
Ended
September 28, 2019
September 29, 2018
September 28, 2019
September 29, 2018
Net income/(loss)
$
898
$
618
$
1,750
$
2,374
Interest expense
398
326
1,035
959
Other expense/(income)
(380)
(71)
(893)
(181)
Provision for/(benefit from) income
taxes
264
201
584
779
Operating income/(loss)
1,180
1,074
2,476
3,931
Depreciation and amortization (excluding
integration and restructuring expenses)
243
245
730
679
Integration and restructuring expenses
15
32
56
215
Deal costs
6
3
19
19
Unrealized losses/(gains) on commodity
hedges
9
6
(30)
11
Impairment losses
5
217
1,223
451
Equity award compensation expense
(excluding integration and restructuring expenses)
11
17
26
44
Adjusted EBITDA
$
1,469
$
1,594
$
4,500
$
5,350
Segment Adjusted EBITDA:
United States
$
1,155
$
1,176
$
3,539
$
3,969
Canada
107
144
371
451
EMEA
165
165
479
553
Rest of World
100
148
303
505
General corporate expenses
(58)
(39)
(192)
(128)
Adjusted EBITDA
$
1,469
$
1,594
$
4,500
$
5,350
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
September 28, 2019
United States
$
1,155
$
—
$
1,155
Canada
107
(1)
108
EMEA
165
(7)
172
Rest of World
100
(1)
101
General corporate expenses
(58)
1
(59)
$
1,469
$
(8)
$
1,477
September 29, 2018
United States
$
1,176
$
—
$
1,176
Canada
144
—
144
EMEA
165
—
165
Rest of World
148
46
102
General corporate expenses
(39)
—
(39)
$
1,594
$
46
$
1,548
Year-over-year
growth rates
United States
(1.8)%
0.0 pp
(1.8)%
Canada
(25.7)%
(0.8) pp
(24.9)%
EMEA
0.3%
(4.4) pp
4.7%
Rest of World
(32.7)%
(31.1) pp
(1.6)%
General corporate expenses
49.8%
(2.8) pp
52.6%
Kraft Heinz
(7.8)%
(3.2) pp
(4.6)%
Schedule
6
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA to Constant Currency Adjusted
EBITDA For the Nine Months Ended (dollars in millions)
(Unaudited)
Adjusted EBITDA
Currency
Constant Currency Adjusted
EBITDA
September 28, 2019
United States
$
3,539
$
—
$
3,539
Canada
371
(12)
383
EMEA
479
(28)
507
Rest of World
303
(11)
314
General corporate expenses
(192)
4
(196)
$
4,500
$
(47)
$
4,547
September 29, 2018
United States
$
3,969
$
—
$
3,969
Canada
451
—
451
EMEA
553
—
553
Rest of World
505
147
358
General corporate expenses
(128)
—
(128)
$
5,350
$
147
$
5,203
Year-over-year
growth rates
United States
(10.8)%
0.0 pp
(10.8)%
Canada
(17.8)%
(2.7) pp
(15.1)%
EMEA
(13.3)%
(5.0) pp
(8.3)%
Rest of World
(40.0)%
(27.5) pp
(12.5)%
General corporate expenses
50.0%
(2.6) pp
52.6%
Kraft Heinz
(15.9)%
(3.3) pp
(12.6)%
Schedule
7
The Kraft Heinz Company
Reconciliation of Diluted EPS to Adjusted EPS (Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 28, 2019
September 29, 2018
September 28, 2019
September 29, 2018
Diluted EPS
$
0.74
$
0.50
$
1.43
$
1.94
Integration and restructuring
expenses(a)
0.01
0.03
0.04
0.19
Deal costs(b)
0.01
—
0.01
0.01
Unrealized losses/(gains) on commodity
hedges(c)
0.01
—
(0.02)
0.01
Impairment losses(d)
—
0.13
0.90
0.30
Losses/(gains) on sale of business(e)
(0.13)
—
(0.29)
0.01
Nonmonetary currency devaluation(f)
—
0.05
0.01
0.11
Debt prepayment and extinguishment
costs(g)
0.05
—
0.05
—
U.S. Tax Reform discrete income tax
expense/(benefit)(h)
—
0.05
—
0.09
Adjusted EPS
$
0.69
$
0.76
$
2.13
$
2.66
(a)
Gross expenses included in
integration and restructuring expenses were $15 million ($15
million after-tax) for the three months and $56 million ($44
million after-tax) for the nine months ended September 28, 2019 and
$31 million ($31 million after-tax) for the three months and $278
million ($238 million after-tax) for the nine months ended
September 29, 2018 and were recorded in the following income
statement line items:
•
Cost of products sold included
$12 million for the three months and $27 million for the nine
months ended September 28, 2019 and $18 million for the three
months and $175 million for the nine months ended September 29,
2018;
•
SG&A included $3 million for
the three months and $29 million for the nine months ended
September 28, 2019 and $14 million for the three months and $40
million for the nine months ended September 29, 2018; and
•
Other expense/(income) included
income of $1 million for the three months and expenses of $63
million for the nine months ended September 29, 2018.
(b)
Gross expenses included in deal
costs were $6 million ($7 million after-tax) for the three months
and $19 million ($18 million after-tax) for the nine months ended
September 28, 2019 and $3 million ($2 million after-tax) for the
three months and $19 million ($15 million after-tax) for the nine
months ended September 29, 2018 and were recorded in the following
income statement line items:
•
Cost of products sold included $4
million for the nine months ended September 29, 2018; and
•
SG&A included $6 million for
the three months and $19 million for the nine months ended
September 28, 2019 and $3 million for the three months and $15
million for the nine months ended September 29, 2018.
(c)
Gross expenses/(income) included
in unrealized losses/(gains) on commodity hedges were expenses of
$9 million ($7 million after-tax) for the three months and income
of $30 million ($22 million after-tax) for the nine months ended
September 28, 2019 and expenses of $6 million ($5 million
after-tax) for the three months and $11 million ($9 million
after-tax) for the nine months ended September 29, 2018 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
$744 million ($717 million after-tax) for the nine months ended
September 28, 2019 and $133 million ($133 million after-tax) for
the nine months ended September 29, 2018; and
•
Intangible asset impairment
losses of $5 million ($7 million after-tax) for the three months
and $479 million ($381 million after-tax) for the nine months ended
September 28, 2019 and $217 million ($153 million after-tax) for
the three months and $318 million ($233 million after-tax) for the
nine months ended September 29, 2018.
(e)
Gross expenses/(income) included
in losses/(gains) on sale of business were income of $244 million
($158 million after-tax) for the three months and $490 million
($348 million after-tax) for the nine months ended September 28,
2019 and expenses of $15 million ($15 million after-tax) for the
nine months ended September 29, 2018 and were recorded in other
expense/(income).
(f)
Gross expenses included in
nonmonetary currency devaluation were $4 million ($4 million
after-tax) for the three months and $10 million ($10 million
after-tax) for the nine months ended September 28, 2019 and $64
million ($64 million after-tax) for the three months and $131
million ($131 million after-tax) for the nine months ended
September 29, 2018 and were recorded in other expense/(income).
(g)
Gross expenses included in debt
prepayment and extinguishment costs were $88 million ($62 million
after-tax) for the three months and nine months ended September 28,
2019 and were recorded in other expense/(income).
(h)
U.S. Tax Reform discrete income
tax expense/(benefit) included expenses of $62 million for the
three months and $106 million for the nine months ended September
29, 2018.
Schedule
8
The Kraft Heinz Company
Consolidated Balance Sheets (in millions, except per share data)
(Unaudited)
September 28, 2019
December 29, 2018
ASSETS
Cash and cash equivalents
$
2,315
$
1,130
Trade receivables, net
1,959
2,129
Income taxes receivable
119
152
Inventories
3,158
2,667
Prepaid expenses
415
400
Other current assets
1,124
1,221
Assets held for sale
35
1,376
Total current assets
9,125
9,075
Property, plant and equipment, net
6,926
7,078
Goodwill
35,826
36,503
Intangible assets, net
48,714
49,468
Other non-current assets
2,231
1,337
TOTAL ASSETS
$
102,822
$
103,461
LIABILITIES AND EQUITY
Commercial paper and other short-term
debt
$
15
$
21
Current portion of long-term debt
2,545
377
Trade payables
4,156
4,153
Accrued marketing
458
722
Interest payable
278
408
Other current liabilities
1,658
1,767
Liabilities held for sale
2
55
Total current liabilities
9,112
7,503
Long-term debt
28,112
30,770
Deferred income taxes
12,010
12,202
Accrued postemployment costs
315
306
Other non-current liabilities
1,467
902
TOTAL LIABILITIES
51,016
51,683
Redeemable noncontrolling interest
2
3
Equity:
Common stock, $0.01 par value
12
12
Additional paid-in capital
57,293
58,723
Retained earnings/(deficit)
(3,241)
(4,853)
Accumulated other comprehensive
income/(losses)
(2,126)
(1,943)
Treasury stock, at cost
(265)
(282)
Total shareholders' equity
51,673
51,657
Noncontrolling interest
131
118
TOTAL EQUITY
51,804
51,775
TOTAL LIABILITIES AND EQUITY
$
102,822
$
103,461
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191031005469/en/
Michael Mullen (media) Michael.Mullen@kraftheinz.com
Christopher Jakubik, CFA (investors) ir@kraftheinz.com
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