Delivers results ahead of
expectations
Gaining traction to address inflation,
advance strategy
Raises full year outlook
The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) today reported financial results for the third quarter
of 2021, which reflected gains in Organic Net Sales on top of
exceptionally strong growth in 2020. The Company also reported
better-than-expected results, enabled by improvements in its
operating model and an agile approach to managing supply and
services through volatile markets.
"I am incredibly proud of our Kraft Heinz team for delivering
another quarter of results that exceed our expectations, even as we
face the ongoing challenges of the pandemic and, now, escalating
inflation,” said Kraft Heinz CEO Miguel Patricio. “We are
effectively adapting to near-term challenges while transforming our
business and rejuvenating our iconic brands to better serve
consumers for the long term. We still have much to do, but our
momentum is strong and our strategy to bring agility to our scale
is working, which is why we are increasing full-year
expectations."
Net Sales
In millions
Net Sales
Organic Net Sales(1)
Growth
September 25,
2021
September 26,
2020
% Chg vs PY
YoY Growth
Rate
Price
Volume/Mix
For the Three Months Ended
United States
$
4,521
$
4,710
(4.0)%
1.3%
1.4 pp
(0.1) pp
International
1,383
1,325
4.4%
2.2%
2.2 pp
0.0 pp
Canada
420
406
3.4%
(1.9)%
0.2 pp
(2.1) pp
Kraft Heinz
$
6,324
$
6,441
(1.8)%
1.3%
1.5 pp
(0.2) pp
For the Nine Months Ended
United States
$
13,867
$
14,122
(1.8)%
0.3%
1.3 pp
(1.0) pp
International
4,190
3,931
6.6%
1.8%
2.1 pp
(0.3) pp
Canada
1,276
1,193
7.0%
(1.2)%
2.2 pp
(3.4) pp
Kraft Heinz
$
19,333
$
19,246
0.5%
0.5%
1.5 pp
(1.0) pp
Net Income/(Loss) and Diluted
EPS
In millions, except per share
data
For the Three Months
Ended
For the Nine Months
Ended
September 25,
2021
September 26,
2020
% Chg vs PY
September 25,
2021
September 26,
2020
% Chg vs PY
Gross profit
$
2,028
$
2,344
(13.5)%
$
6,520
$
6,654
(2.0)%
Operating income/(loss)
1,156
1,147
0.8%
3,480
578
502.3%
Net income/(loss)
736
598
23.2%
1,279
(673)
289.9%
Net income/(loss) attributable to common
shareholders
733
597
23.0%
1,269
(676)
287.6%
Diluted EPS
$
0.59
$
0.49
20.4%
$
1.03
$
(0.55)
287.3%
Adjusted EPS(1)
0.65
0.70
(7.1)%
2.15
2.09
2.9%
Adjusted EBITDA(1)
$
1,479
$
1,667
(11.3)%
$
4,765
$
4,881
(2.4)%
Q3 2021 Financial Summary
- Net sales decreased 1.8 percent versus the year-ago
period to $6.3 billion, including a negative 4.0 percentage point
impact from the divestiture of the Company's nuts business, which
closed in the second quarter of 2021, and a favorable 0.9
percentage point impact from currency. Net sales versus the
comparable 2019 period increased 4.1 percent, including a favorable
0.8 percentage point impact from currency and despite a negative
4.3 percentage point impact from divestitures. Organic Net
Sales(1) increased 1.3 percent versus the prior year period and
7.6 percent versus the comparable 2019 period, with growth versus
2019 negatively impacted by 1.4 percentage points from exiting the
McCafé licensing agreement. Pricing was up 1.5 percentage points
versus the prior year period with growth across each reporting
segment that primarily reflected inflation-justified price
increases in foodservice and retail channels across all
geographies. These gains came despite more normalized promotional
activities with retailers versus the year-ago period, especially in
the United States. Volume/mix declined 0.2 percentage points versus
the year-ago period reflecting declines versus extraordinary
COVID-19-related retail demand in 2020, that were partially offset
by a recovery in foodservice channels.
- Net income/(loss) increased 23.2 percent to $736
million, primarily driven by a $300 million non-cash goodwill
impairment loss in the prior year period related to the Cheese
Transaction, a lower effective tax rate versus the prior year
period, and favorable changes in other expense/(income). These
factors were partially offset by lower Adjusted EBITDA, higher
interest expense due to debt extinguishment costs, as well as
unrealized losses on commodity hedges in the current year period
compared to unrealized gains on commodity hedges in the prior year
period. Net income/(loss) decreased 18.1 percent versus the
comparable 2019 period. Adjusted EBITDA(1) decreased 11.3
percent versus the year-ago period to $1.5 billion and increased
0.7 percent versus the comparable 2019 period, with performance
against each period including an unfavorable impact from
divestitures of approximately 3 percentage points. Excluding a
favorable 0.6 percentage point impact from currency, year-over-year
Adjusted EBITDA benefited from efficiency gains, higher Organic Net
Sales, and lower general corporate expenses. These increases were
more than offset by unfavorable supply chain, key commodity(2), and
packaging costs.
- Diluted EPS increased to $0.59, up 20.4 percent versus
the prior year, driven by the net income/(loss) factors discussed
above. Adjusted EPS(1) decreased to $0.65, down 7.1 percent
versus the prior year, primarily driven by lower Adjusted EBITDA,
higher equity award compensation expense, and unfavorable changes
in other expense/(income) that more than offset lower taxes on
adjusted earnings and lower interest expense versus the prior year
period.
- Year-to-date net cash provided by operating activities
was $2.4 billion, down 26.4 percent versus the year-ago period,
primarily driven by higher cash tax payments on divestitures in
2021 related to the divestiture of the Company's nuts business,
higher cash outflows for variable compensation in 2021 compared to
2020, higher cash outflows from increased promotional activity
versus the prior year period, and lower Adjusted EBITDA. These
impacts were partially offset by lower cash outflows for
inventories and favorable changes in accounts payable compared to
the prior year, largely due to the timing of purchases and
favorable payment terms. Free Cash Flow(1) in the first nine
months of 2021 was $1.8 billion, down 38.8 percent versus the
comparable prior year period due to lower net cash provided by
operating activities and higher capital expenditures versus the
prior year period.
Outlook
Based on strong performance to date, the Company expects Organic
Net Sales(3) growth in 2021 to be flat compared to an exceptionally
strong 2020 period. In addition, the Company has increased its
expectations for 2021 Adjusted EBITDA(3) from at least $6.1 billion
to more than $6.2 billion. This reflects a combination of
greater-than-expected Organic Net Sales as well as the Company's
ongoing efforts to manage inflationary pressures as it continues to
invest in long-term growth. This outlook includes the impact of the
sale of the Company’s nuts business completed in June, but does not
include an impact from the pending sale of its natural cheese
business.
End Notes
(1)
Organic Net Sales, Adjusted
EBITDA, Adjusted EPS, Constant Currency Adjusted EBITDA, and Free
Cash Flow 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, and coffee.
(3)
Full year 2021 guidance for
Organic Net Sales and Adjusted EBITDA is provided on a non-GAAP
basis only because certain information necessary to calculate the
most comparable GAAP measure is unavailable due to the uncertainty
and inherent difficulty of predicting the occurrence and the future
financial statement impact of such items impacting comparability,
including, but not limited to, the impact of currency, acquisitions
and divestitures, restructuring expenses, deal costs, unrealized
losses/(gains) on commodity hedges, impairment losses, certain
non-ordinary course legal and regulatory matters, and equity award
compensation expense, among other items. Therefore, as a result of
the uncertainty and variability of the nature and amount of future
adjustments, which could be significant, the Company is unable to
provide a reconciliation of these measures without unreasonable
effort.
Earnings Discussion and Webcast Information
A pre-recorded management discussion of The Kraft Heinz
Company's third quarter 2021 earnings is available at
ir.kraftheinzcompany.com. The Company will host a live question and
answer session beginning today at 9:00 a.m. Eastern Daylight Time.
A webcast of the session will also be accessible at
ir.kraftheinzcompany.com.
ABOUT THE KRAFT HEINZ COMPANY
We are driving transformation at The Kraft Heinz Company
(Nasdaq: KHC), inspired by our Purpose, Let’s Make Life Delicious.
Consumers are at the center of everything we do. With 2020 net
sales of approximately $26 billion, we are committed to growing our
iconic and emerging food and beverage brands on a global scale. We
leverage our scale and agility to unleash the full power of Kraft
Heinz across a portfolio of six consumer-driven product platforms.
As global citizens, we’re dedicated to making a sustainable,
ethical impact while helping feed the world in healthy, responsible
ways. Learn more about our journey by visiting
www.kraftheinzcompany.com or following us on LinkedIn and
Twitter.
Forward-Looking Statements
This press release contains a number of forward-looking
statements. Words such as “plan,” "believe," "anticipate,"
"reflect," "invest," "see," "make," "expect," "deliver," "drive,"
“improve,” “intend,” "assess," "remain," "evaluate," “establish,”
“focus,” “build,” “turn,” “expand,” “leverage,” "grow," "will,"
"maintain," "manage," 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, impacts of accounting standards and guidance, growth, legal
matters, taxes, costs and cost savings, impairments, dividends,
expectations, investments, innovations, opportunities,
capabilities, execution, initiatives, and pipeline. These
forward-looking statements reflect management's current
expectations and 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, the impacts of COVID-19 and government and consumer
responses; 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 or suppliers, or in 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 or platforms,
increase its market share, or add products that are in
faster-growing and more profitable categories; product recalls or
other product liability claims; 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 successfully execute its strategic
initiatives; the impacts of the Company's international operations;
the Company's ability to protect intellectual property rights; the
Company's ownership structure; 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 level of indebtedness, as well as
our ability to comply with covenants under our debt instruments;
additional impairments of the carrying amounts of goodwill or other
indefinite-lived intangible assets; foreign exchange rate
fluctuations; volatility in commodity, energy, and other input
costs; volatility in the market value of all or a portion of the
commodity derivatives we use; compliance with laws and regulations
and related legal claims or regulatory enforcement actions; failure
to maintain an effective system of internal controls; a downgrade
in the Company's credit rating; the impact of future sales of the
Company's common stock in the public market; the Company’s ability
to continue to pay a regular dividend and the amounts of any such
dividends; unanticipated business disruptions and natural events in
the locations in which the Company or the Company's customers,
suppliers, distributors, or regulators operate; 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; increased pension, labor, and
people-related expenses; changes in tax laws and interpretations;
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, revise, or
withdraw 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 provided, the Company
has presented Organic Net Sales, Adjusted EBITDA, Constant Currency
Adjusted EBITDA, Adjusted EPS, and Free Cash Flow, 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 ("EPS"), net cash provided by/(used for)
operating activities, 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,
Adjusted EPS, and Free Cash Flow) 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 restructuring activities); in addition to
these adjustments, the Company excludes, when they occur, the
impacts of restructuring activities, deal costs, unrealized
losses/(gains) on commodity hedges, impairment losses, certain
non-ordinary course legal and regulatory matters, and equity award
compensation expense (excluding restructuring activities). 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. In the
second quarter of 2021, the Company revised the definition of
Adjusted EBITDA to adjust for the impact of certain legal and
regulatory matters arising outside the ordinary course of its
business, as management believes such matters, when they occur, 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 restructuring activities, deal
costs, unrealized losses/(gains) on commodity hedges, impairment
losses, certain non-ordinary course legal and regulatory matters,
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
certain significant discrete income tax items (e.g., U.S. and
non-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. In the second
quarter of 2021, the Company revised the definition of Adjusted EPS
to adjust for the impact of certain legal and regulatory matters
arising outside the ordinary course of its business and certain
significant discrete income tax items beyond U.S. tax reform, as
management believes such matters, when they occur, do not directly
reflect the Company's underlying operations.
Free Cash Flow is defined as net cash provided by/(used for)
operating activities less capital expenditures. The Company
believes Free Cash Flow provides a measure of the Company's core
operating performance, the cash-generating capabilities of the
Company's business operations, and is one factor used in
determining the amount of cash available for debt repayments,
dividends, acquisitions, share repurchases, and other corporate
purposes. The use of this non-GAAP measure does not imply or
represent the residual cash flow for discretionary expenditures
since the Company has certain non-discretionary obligations such as
debt service that are not deducted from the measure.
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 25,
2021
September 26,
2020
September 25,
2021
September 26,
2020
Net sales
$
6,324
$
6,441
$
19,333
$
19,246
Cost of products sold
4,296
4,097
12,813
12,592
Gross profit
2,028
2,344
6,520
6,654
Selling, general and administrative
expenses, excluding impairment losses
872
897
2,697
2,677
Goodwill impairment losses
—
300
265
2,343
Intangible asset impairment losses
—
—
78
1,056
Selling, general and administrative
expenses
872
1,197
3,040
6,076
Operating income/(loss)
1,156
1,147
3,480
578
Interest expense
415
314
1,443
1,066
Other expense/(income)
(138)
(73)
(191)
(232)
Income/(loss) before income taxes
879
906
2,228
(256)
Provision for/(benefit from) income
taxes
143
308
949
417
Net income/(loss)
736
598
1,279
(673)
Net income/(loss) attributable to
noncontrolling interest
3
1
10
3
Net income/(loss) attributable to common
shareholders
$
733
$
597
$
1,269
$
(676)
Basic shares outstanding
1,225
1,223
1,224
1,222
Diluted shares outstanding
1,236
1,229
1,235
1,222
Per share data applicable to common
shareholders:
Basic earnings/(loss) per share
$
0.60
$
0.49
$
1.04
$
(0.55)
Diluted earnings/(loss) per share
0.59
0.49
1.03
(0.55)
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 25, 2021
United States
$
4,521
$
—
$
—
$
4,521
International
1,383
39
—
1,344
Canada
420
25
—
395
Kraft Heinz
$
6,324
$
64
$
—
$
6,260
September 26, 2020
United States
$
4,710
$
—
$
246
$
4,464
International
1,325
6
5
1,314
Canada
406
—
2
404
Kraft Heinz
$
6,441
$
6
$
253
$
6,182
Year-over-year growth rates
United States
(4.0)%
0.0 pp
(5.3) pp
1.3%
1.4 pp
(0.1) pp
International
4.4%
2.6 pp
(0.4) pp
2.2%
2.2 pp
0.0 pp
Canada
3.4%
5.7 pp
(0.4) pp
(1.9)%
0.2 pp
(2.1) pp
Kraft Heinz
(1.8)%
0.9 pp
(4.0) pp
1.3%
1.5 pp
(0.2) 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 25, 2021
United States
$
13,867
$
—
$
446
$
13,421
International
4,190
211
9
3,970
Canada
1,276
100
1
1,175
Kraft Heinz
$
19,333
$
311
$
456
$
18,566
September 26, 2020
United States
$
14,122
$
—
$
745
$
13,377
International
3,931
17
14
3,900
Canada
1,193
—
4
1,189
Kraft Heinz
$
19,246
$
17
$
763
$
18,466
Year-over-year growth rates
United States
(1.8)%
0.0 pp
(2.1) pp
0.3%
1.3 pp
(1.0) pp
International
6.6%
5.0 pp
(0.2) pp
1.8%
2.1 pp
(0.3) pp
Canada
7.0%
8.3 pp
(0.1) pp
(1.2)%
2.2 pp
(3.4) pp
Kraft Heinz
0.5%
1.6 pp
(1.6) pp
0.5%
1.5 pp
(1.0) pp
Schedule
4
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
September 25, 2021
United States
$
4,521
$
—
$
—
$
4,521
International
1,383
32
—
1,351
Canada
420
20
—
400
Kraft Heinz
$
6,324
$
52
$
—
$
6,272
September 28, 2019
United States
$
4,385
$
—
$
231
$
4,154
International
1,276
7
5
1,264
Canada
415
—
3
412
Kraft Heinz
$
6,076
$
7
$
239
$
5,830
Year-over-year growth rates
United States
3.1%
0.0 pp
(5.7) pp
8.8%
International
8.4%
1.9 pp
(0.4) pp
6.9%
Canada
1.2%
4.8 pp
(0.5) pp
(3.1)%
Kraft Heinz
4.1%
0.8 pp
(4.3) pp
7.6%
Schedule
5
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
September 25, 2021
United States
$
13,867
$
—
$
446
$
13,421
International
4,190
80
9
4,101
Canada
1,276
77
1
1,198
Kraft Heinz
$
19,333
$
157
$
456
$
18,720
September 28, 2019
United States
$
13,142
$
—
$
681
$
12,461
International
3,874
21
30
3,823
Canada
1,425
—
222
1,203
Kraft Heinz
$
18,441
$
21
$
933
$
17,487
Year-over-year growth rates
United States
5.5%
0.0 pp
(2.2) pp
7.7%
International
8.1%
1.4 pp
(0.6) pp
7.3%
Canada
(10.5)%
5.3 pp
(15.4) pp
(0.4)%
Kraft Heinz
4.8%
0.7 pp
(3.0) pp
7.1%
Schedule
6
The Kraft Heinz Company
Reconciliation of Net
Income/(Loss) to Adjusted EBITDA
(dollars in millions)
(Unaudited)
For the Three Months
Ended
September 25,
2021
September 26,
2020
September 28,
2019
Net income/(loss)
$
736
$
598
$
898
Interest expense
415
314
398
Other expense/(income)
(138)
(73)
(380)
Provision for/(benefit from) income
taxes
143
308
264
Operating income/(loss)
1,156
1,147
1,180
Depreciation and amortization (excluding
restructuring activities)
228
232
243
Restructuring activities
15
8
15
Deal costs
2
9
6
Unrealized losses/(gains) on commodity
hedges
27
(70)
9
Impairment losses
—
300
5
Equity award compensation expense
(excluding restructuring activities)
51
41
11
Adjusted EBITDA
$
1,479
$
1,667
$
1,469
Segment Adjusted EBITDA:
United States
$
1,173
$
1,363
$
1,160
International
252
277
260
Canada
100
103
107
General corporate expenses
(46)
(76)
(58)
Adjusted EBITDA
$
1,479
$
1,667
$
1,469
Schedule
7
The Kraft Heinz Company
Reconciliation of Net
Income/(Loss) to Adjusted EBITDA
(dollars in millions)
(Unaudited)
For the Nine Months
Ended
September 25,
2021
September 26,
2020
September 28,
2019
Net income/(loss)
$
1,279
$
(673)
$
1,750
Interest expense
1,443
1,066
1,035
Other expense/(income)
(191)
(232)
(893)
Provision for/(benefit from) income
taxes
949
417
584
Operating income/(loss)
3,480
578
2,476
Depreciation and amortization (excluding
restructuring activities)
677
722
730
Restructuring activities
52
12
56
Deal costs
8
9
19
Unrealized losses/(gains) on commodity
hedges
(12)
47
(30)
Impairment losses
343
3,399
1,223
Certain non-ordinary course legal and
regulatory matters
62
—
—
Equity award compensation expense
(excluding restructuring activities)
155
114
26
Adjusted EBITDA
$
4,765
$
4,881
$
4,500
Segment Adjusted EBITDA:
United States
$
3,827
$
4,050
$
3,556
International
821
797
765
Canada
304
268
371
General corporate expenses
(187)
(234)
(192)
Adjusted EBITDA
$
4,765
$
4,881
$
4,500
Schedule
8
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 25, 2021
United States
$
1,173
$
—
$
1,173
International
252
9
243
Canada
100
5
95
General corporate expenses
(46)
(1)
(45)
Kraft Heinz
$
1,479
$
13
$
1,466
September 26, 2020
United States
$
1,363
$
—
$
1,363
International
277
3
274
Canada
103
—
103
General corporate expenses
(76)
—
(76)
Kraft Heinz
$
1,667
$
3
$
1,664
Year-over-year growth rates
United States
(14.0)%
0.0 pp
(14.0)%
International
(9.1)%
2.2 pp
(11.3)%
Canada
(2.1)%
5.3 pp
(7.4)%
General corporate expenses
(39.5)%
0.2 pp
(39.7)%
Kraft Heinz
(11.3)%
0.6 pp
(11.9)%
Schedule
9
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 25, 2021
United States
$
3,827
$
—
$
3,827
International
821
48
773
Canada
304
24
280
General corporate expenses
(187)
(3)
(184)
Kraft Heinz
$
4,765
$
69
$
4,696
September 26, 2020
United States
$
4,050
$
—
$
4,050
International
797
8
789
Canada
268
—
268
General corporate expenses
(234)
—
(234)
Kraft Heinz
$
4,881
$
8
$
4,873
Year-over-year growth rates
United States
(5.5)%
0.0 pp
(5.5)%
International
3.0%
5.0 pp
(2.0)%
Canada
13.4%
9.0 pp
4.4%
General corporate expenses
(20.2)%
1.3 pp
(21.5)%
Kraft Heinz
(2.4)%
1.2 pp
(3.6)%
Schedule
10
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 25, 2021
United States
$
1,173
$
—
$
1,173
International
252
11
241
Canada
100
4
96
General corporate expenses
(46)
(1)
(45)
Kraft Heinz
$
1,479
$
14
$
1,465
September 28, 2019
United States
$
1,160
$
—
$
1,160
International
260
2
258
Canada
107
—
107
General corporate expenses
(58)
—
(58)
Kraft Heinz
$
1,469
$
2
$
1,467
Year-over-year growth rates
United States
1.1%
0.0 pp
1.1%
International
(3.1)%
3.2 pp
(6.3)%
Canada
(5.9)%
4.4 pp
(10.3)%
General corporate expenses
(20.4)%
1.7 pp
(22.1)%
Kraft Heinz
0.7%
0.8 pp
(0.1)%
Schedule
11
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 25, 2021
United States
$
3,827
$
—
$
3,827
International
821
33
788
Canada
304
18
286
General corporate expenses
(187)
(2)
(185)
Kraft Heinz
$
4,765
$
49
$
4,716
September 28, 2019
United States
$
3,556
$
—
$
3,556
International
765
9
756
Canada
371
—
371
General corporate expenses
(192)
—
(192)
Kraft Heinz
$
4,500
$
9
$
4,491
Year-over-year growth rates
United States
7.6%
0.0 pp
7.6%
International
7.2%
3.0 pp
4.2%
Canada
(18.0)%
5.0 pp
(23.0)%
General corporate expenses
(2.7)%
1.3 pp
(4.0)%
Kraft Heinz
5.9%
0.9 pp
5.0%
Schedule
12
The Kraft Heinz Company
Reconciliation of Diluted EPS to
Adjusted EPS
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 25,
2021
September 26,
2020
September 25,
2021
September 26,
2020
Diluted EPS
$
0.59
$
0.49
$
1.03
$
(0.55)
Restructuring activities(a)
0.01
0.01
0.03
0.01
Unrealized losses/(gains) on commodity
hedges(b)
0.02
(0.04)
(0.01)
0.03
Impairment losses(c)
—
0.24
0.26
2.60
Certain non-ordinary course legal and
regulatory matters(d)
—
—
0.05
—
Losses/(gains) on sale of business(e)
(0.06)
—
0.23
—
Debt prepayment and extinguishment
costs(f)
0.09
—
0.37
0.07
Certain significant discrete income tax
items(g)
—
—
0.19
(0.07)
Adjusted EPS
$
0.65
$
0.70
$
2.15
$
2.09
(a)
Gross expenses included in
restructuring activities were $15 million ($12 million after-tax)
for the three months and $52 million ($40 million after-tax) for
the nine months ended September 25, 2021 and $9 million ($7 million
after tax) for the three months and $13 million ($10 million
after-tax) for the nine months ended September 26, 2020 and were
recorded in the following income statement line items:
•
Cost of products sold included
expenses of $4 million for the nine months ended September 25, 2021
and income of $3 million for the three months and $4 million for
the nine months ended September 26, 2020; and
•
SG&A included expenses of $15
million for the three months and $48 million for the nine months
ended September 25, 2021 and $11 million for the three months and
$16 million for the nine months ended September 26, 2020.
•
Other expense/(income) included
expenses of $1 million for the three and nine months ended
September 26, 2020.
(b)
Gross expenses/(income) included
in unrealized losses/(gains) on commodity hedges were expenses of
$27 million ($20 million after-tax) for the three months and income
of $12 million ($9 million after-tax) for the nine months ended
September 25, 2021 and income of $70 million ($54 million
after-tax) for the three months and expenses of $47 million ($35
million after-tax) for the nine months ended September 26, 2020 and
were recorded in cost of products sold.
(c)
Gross impairment losses, which
were recorded in SG&A, included the following:
•
Goodwill impairment losses of
$265 million ($265 million after-tax) for the nine months ended
September 25, 2021 and $300 million ($300 million after-tax) for
the three months and $2.3 billion ($2.3 billion after-tax) for the
nine months ended September 26, 2020; and
•
Intangible asset impairment
losses of $78 million ($59 million after-tax) for the nine months
ended September 25, 2021 and $1.1 billion ($829 million after-tax)
for the nine months ended September 26, 2020.
(d)
Gross expenses included in
certain non-ordinary course legal and regulatory matters were $62
million ($62 million after-tax) for the nine months ended September
25, 2021 and were recorded in SG&A.
(e)
Gross expenses/(income) included
in losses/(gains) on sale of business were income of $76 million
($72 million after-tax) for the three months and income of $11
million (expenses of $280 million after-tax) for the nine months
ended September 25, 2021 and expenses of $2 million ($2 million
after-tax) for the nine months ended September 26, 2020 and were
recorded in other expense/(income). The impact in 2021 includes a
gain on the remeasurement of a disposal group, which was
reclassified as held and used in the third quarter of 2021.
(f)
Gross expenses included in debt
prepayment and extinguishment costs were $147 million ($115 million
after-tax) for the three months and $571 million ($450 million
after-tax) for the nine months ended September 25, 2021 and $109
million ($82 million after-tax) for the nine months ended September
26, 2020 and were recorded in interest expense.
(g)
Certain significant discrete
income tax items were a benefit of $1 million for the three months
and an expense of $235 million for the nine months ended September
25, 2021 and a benefit of $81 million for the nine months ended
September 26, 2020. The impact in 2021 relates to the revaluation
of our deferred tax balances due to an increase in U.K. tax rates.
The benefit in 2020 relates to the revaluation of our deferred tax
balances due to changes in state tax laws following U.S. tax reform
and subsequent clarification or interpretation of state tax
laws.
Schedule
13
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Three Months
Ended
September 25,
2021
September 26,
2020
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)
$
0.72
$
0.81
$
(0.09)
Results of divested operations
—
0.03
(0.03)
Interest expense
(0.17)
(0.19)
0.02
Other expense/(income)(b)
0.04
0.05
(0.01)
Effective tax rate
0.06
—
0.06
Adjusted EPS
$
0.65
$
0.70
$
(0.05)
(a)
Includes non-cash amortization of
definite-lived intangible assets, which accounted for a negative
impact to Adjusted EPS from results of operations of $0.04 for the
three months ended September 25, 2021 and September 26, 2020.
(b)
Includes non-cash amortization of
prior service credits, which accounted for a benefit to Adjusted
EPS from other expense/(income) of $0.02 for the three months ended
September 26, 2020.
Schedule
14
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Nine Months
Ended
September 25,
2021
September 26,
2020
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)
$
2.41
$
2.44
$
(0.03)
Results of divested operations
0.06
0.10
(0.04)
Interest expense
(0.55)
(0.60)
0.05
Other expense/(income)(b)
0.11
0.15
(0.04)
Effective tax rate
0.14
—
0.14
Effect of dilutive equity awards(c)
(0.02)
—
(0.02)
Adjusted EPS
$
2.15
$
2.09
$
0.06
(a)
Includes non-cash amortization of
definite-lived intangible assets, which accounted for a negative
impact to Adjusted EPS from results of operations of $0.11 for the
nine months ended September 25, 2021 and $0.13 for the nine months
ended September 26, 2020.
(b)
Includes non-cash amortization of
prior service credits, which accounted for a benefit to Adjusted
EPS from other expense/(income) of $0.06 for the nine months ended
September 26, 2020.
(c)
Represents the impact of
excluding the dilutive effects of equity awards for the nine months
ended September 26, 2020, as their inclusion would have had an
anti-dilutive effect on EPS due to net losses attributable to
common shareholders for the same period.
Schedule
15
The Kraft Heinz Company
Condensed Consolidated Balance
Sheets
(in millions, except per share
data)
(Unaudited)
September 25, 2021
December 26, 2020
ASSETS
Cash and cash equivalents
$
2,273
$
3,417
Trade receivables, net
1,958
2,063
Inventories
2,839
2,773
Prepaid expenses
158
132
Other current assets
603
574
Assets held for sale
1,726
1,863
Total current assets
9,557
10,822
Property, plant and equipment, net
6,588
6,876
Goodwill
31,386
33,089
Intangible assets, net
44,803
46,667
Other non-current assets
2,563
2,376
TOTAL ASSETS
$
94,897
$
99,830
LIABILITIES AND EQUITY
Commercial paper and other short-term
debt
$
1
$
6
Current portion of long-term debt
1,034
230
Trade payables
4,380
4,304
Accrued marketing
908
946
Interest payable
285
358
Other current liabilities
1,841
2,200
Liabilities held for sale
6
17
Total current liabilities
8,455
8,061
Long-term debt
22,937
28,070
Deferred income taxes
11,389
11,462
Accrued postemployment costs
240
243
Other non-current liabilities
1,638
1,751
TOTAL LIABILITIES
44,659
49,587
Equity:
Common stock, $0.01 par value
12
12
Additional paid-in capital
53,823
55,096
Retained earnings/(deficit)
(1,425)
(2,694)
Accumulated other comprehensive
income/(losses)
(1,858)
(1,967)
Treasury stock, at cost
(463)
(344)
Total shareholders' equity
50,089
50,103
Noncontrolling interest
149
140
TOTAL EQUITY
50,238
50,243
TOTAL LIABILITIES AND EQUITY
$
94,897
$
99,830
Schedule
16
The Kraft Heinz Company
Condensed Consolidated Statements
of Cash Flow
(in millions)
(Unaudited)
For the Nine Months
Ended
September 25,
2021
September 26,
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)
$
1,279
$
(673)
Adjustments to reconcile net income/(loss)
to operating cash flows:
Depreciation and amortization
677
722
Amortization of postemployment benefit
plans prior service costs/(credits)
(5)
(92)
Equity award compensation expense
155
114
Deferred income tax
provision/(benefit)
(120)
(343)
Postemployment benefit plan
contributions
(21)
(20)
Goodwill and intangible asset impairment
losses
343
3,399
Nonmonetary currency devaluation
4
6
Loss/(gain) on sale of business
(11)
2
Other items, net
421
132
Changes in current assets and
liabilities:
Trade receivables
92
(6)
Inventories
(264)
(441)
Accounts payable
194
62
Other current assets
(96)
(18)
Other current liabilities
(200)
482
Net cash provided by/(used for) operating
activities
2,448
3,326
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(655)
(397)
Proceeds from sale of business, net of
cash disposed
3,401
—
Other investing activities, net
(2)
35
Net cash provided by/(used for) investing
activities
2,744
(362)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
(4,145)
(4,395)
Proceeds from issuance of long-term
debt
—
3,500
Debt prepayment and extinguishment
costs
(577)
(101)
Proceeds from revolving credit
facility
—
4,000
Repayments of revolving credit
facility
—
(4,000)
Dividends paid
(1,469)
(1,467)
Other financing activities, net
(142)
(46)
Net cash provided by/(used for) financing
activities
(6,333)
(2,509)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(3)
(14)
Cash, cash equivalents, and restricted
cash
Net increase/(decrease)
(1,144)
441
Balance at beginning of period
3,418
2,280
Balance at end of period
$
2,274
$
2,721
Schedule
17
The Kraft Heinz Company
Reconciliation of Net Cash
Provided By/(Used For) Operating Activities to Free Cash Flow
(in millions)
(Unaudited)
For the Nine Months
Ended
September 25,
2021
September 26,
2020
Net cash provided by/(used for) operating
activities
$
2,448
$
3,326
Capital expenditures
(655)
(397)
Free Cash Flow
$
1,793
$
2,929
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211027005216/en/
Alex Abraham (media) Alex.Abraham@kraftheinz.com
Christopher Jakubik, CFA (investors) ir@kraftheinz.com
Kraft Heinz (NASDAQ:KHC)
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