Miércoles 14 de Noviembre 2018

Kraft Heinz Reports Third Quarter 2016 Results

  • Q3 GAAP net sales increased 2.4% due to the merger of Kraft and
    Heinz; Organic Net Sales
    (1) declined 1.0%
  • Q3 GAAP operating income increased 254% and net income attributable
    to common shareholders increased to $842 million
  • Q3 Adjusted EBITDA(1) increased to $1.8
    billion from $1.5 billion in the year-ago period
  • Q3 GAAP diluted EPS increased to $0.69; Adjusted EPS(1)
    increased to $0.83

PITTSBURGH & CHICAGO–(BUSINESS WIRE)–The Kraft Heinz Company (NASDAQ: KHC) (“Kraft Heinz” or the “Company”)
today reported third quarter 2016 financial results that reflected a
combination of significant gains from cost savings and the redemption of
preferred stock, as well as lower taxes versus the prior year period.

“Overall, our third quarter results are a good representation of where
we are as a company,” said Kraft Heinz CEO Bernardo Hees. “While our
financial performance is respectable, we continue to have the
opportunity to improve our offerings and retail execution in several key
markets and take our brands to places they don’t currently compete. Our
focus now is to finish 2016 strong and set the stage for another year of
strong, profitable growth in 2017.”

Q3 2016 Financial Summary

  For the Three Months Ended   Year-over-year Change
October 2,   September 27,      
2016   2015 Actual Currency Divestitures Organic
(in millions, except per share data)
GAAP net sales $ 6,267 $ 6,120 2.4 %
GAAP operating income 1,413 399 254.1 %
GAAP net income/(loss) attributable to common shareholders 842 (303 ) nm
GAAP diluted EPS $ 0.69 $ (0.27 ) nm
 
Pro forma net sales(2) $ 6,267 $ 6,363 (1.5 )% (0.5 ) pp (1.0 )%
Adjusted EBITDA(1,2) 1,803 1,482 21.7 %
Adjusted EPS(1,2) $ 0.83 $ 0.44 88.6 %
 

Net sales were $6.3 billion, down 1.5 percent versus pro forma net sales
for the year-ago period, including a negative 0.5 percentage point
impact from currency. Organic Net Sales decreased 1.0 percent versus the
year-ago period. Pricing decreased 0.7 percentage points driven by key
commodity(3) deflation in the United States, primarily in
meats and coffee, and coffee in Canada, as well as higher promotional
expenses in Europe. Volume/mix decreased 0.3 percentage points primarily
due to lower shipments across several categories, particularly cold
cuts, foodservice and nuts in the United States. This was partially
offset by growth driven by innovation in Lunchables and the
macaroni and cheese portfolio, as well as gains in coffee in the United
States and growth in condiments and sauces globally.

Net income attributable to common shareholders increased to $842 million
and GAAP diluted EPS increased to $0.69. Adjusted EBITDA increased 21.7
percent versus the year-ago period to $1.8 billion, including a negative
0.8 percentage point impact from currency, driven by gains from cost
savings initiatives(4) and favorable pricing net of key
commodity costs. Adjusted EPS increased 88.6 percent versus the year-ago
period to $0.83, mainly reflecting growth in Adjusted EBITDA, the
refinancing of Series A Preferred Stock and lower taxes.

Q3 2016 Business Segment Highlights

United States

  For the Three Months Ended   Year-over-year Change
October 2,   September 27,      
2016   2015 Actual Currency Divestitures Organic
(in millions)
Pro forma net sales(2,5) $ 4,395 $ 4,449 (1.2 )% (1.2 )%
Segment Adjusted EBITDA(1,2,5) 1,349 1,033 30.6 %
 

United States net sales were $4.4 billion, down 1.2 percent versus pro
forma net sales for the year-ago period. Pricing decreased 0.7
percentage points driven by deflation in key commodities, primarily in
meats and coffee. Volume/mix was 0.5 percentage points lower reflecting
growth from innovation in Lunchables and the macaroni and
cheese portfolio, as well as gains from coffee, that were more than
offset by declines in cold cuts, foodservice and nuts.

United States Segment Adjusted EBITDA increased 30.6 percent versus the
year-ago period to $1.3 billion. Gains from cost savings initiatives
and, to a lesser extent, favorable pricing net of key commodity costs
were partially offset by lower volume/mix.

Canada

  For the Three Months Ended   Year-over-year Change
October 2,   September 27,      
2016   2015 Actual Currency Divestitures Organic
(in millions)
Pro forma net sales(2) $ 550 $ 539 2.0 % 2.0 %
Segment Adjusted EBITDA(1,2) 148 110 34.5 %
 

Canada net sales and Organic Net Sales were $550 million, up 2.0 percent
versus pro forma net sales for the year-ago period. Pricing decreased
1.4 percentage points primarily due to commodity-driven pricing actions
in coffee. Volume/mix increased 3.4 percentage points driven by gains in
foodservice as well as shipment timing in macaroni & cheese and coffee.

Canada Segment Adjusted EBITDA increased 34.5 percent versus the
year-ago period to $148 million, including a 1.8 percentage point
favorable impact from currency. Excluding currency, gains were driven by
cost savings initiatives and volume/mix growth.

Europe

  For the Three Months Ended   Year-over-year Change
October 2,   September 27,      
2016   2015 Actual Currency Divestitures Organic
(in millions)
Pro forma net sales(2,5) $ 513 $ 600 (14.5 )% (6.7 ) pp (7.8 )%
Segment Adjusted EBITDA(1,2,5) 183 223 (17.9 )%
 

Europe net sales were $513 million, down 14.5 percent versus pro forma
net sales for the year-ago period, including a negative 6.7 percentage
point impact from currency. Organic Net Sales were 7.8 percent lower
than the year-ago period. Pricing was down 2.9 percentage points
primarily due to the timing of promotional expenses versus the prior
year. Volume/mix decreased 4.9 percentage points reflecting a
combination of shipment timing versus the prior year as well as ongoing
consumption weakness across several categories, primarily in the UK and
the Netherlands.

Europe Segment Adjusted EBITDA decreased 17.9 percent versus the
year-ago period to $183 million, including a negative 8.5 percentage
point impact from currency, as manufacturing savings were more than
offset by a combination of unfavorable volume/mix, lower pricing and
increased marketing investments.

Rest of World(6)

  For the Three Months Ended   Year-over-year Change
October 2,   September 27,      
2016   2015 Actual Currency Divestitures Organic
(in millions)
Pro forma net sales(2,5) $ 809 $ 775 4.4 % 0.8 pp 3.6 %
Segment Adjusted EBITDA(1,2,5) 150 152 (1.3 )%
 

Rest of World net sales were $809 million, up 4.4 percent versus pro
forma net sales in the year-ago period, including a favorable currency
impact of 0.8 percentage points. Organic Net Sales increased 3.6 percent
versus the year-ago period. Pricing increased 1.9 percentage points as
pricing actions to offset higher input costs in local currency,
particularly in Latin America, were partially offset by higher
promotional spending to support new product initiatives. Volume/mix
increased 1.7 percentage points driven by strong growth in condiments
and sauces across all regions.

Rest of World Segment Adjusted EBITDA decreased 1.3 percent versus the
year-ago period to $150 million, despite a positive 2.6 percentage point
impact from currency. Excluding the impact from currency, Segment
Adjusted EBITDA declined as organic sales growth was more than offset by
a combination of higher input costs in local currency and investments
behind new product initiatives.

End Notes

(1)

  Organic Net Sales, Adjusted EBITDA and Adjusted EPS are non-GAAP
financial measures. Please see discussion of non-GAAP financial
measures and the reconciliations at the end of this press release
for more information.
 

(2)

Pro forma net sales, Adjusted EBITDA and Adjusted EPS for the three
months ended September 27, 2015 include the operating results of
Kraft on a pro forma basis, as if Kraft had been acquired as of
December 30, 2013. There are no pro forma adjustments for the three
months ended October 2, 2016 as Kraft and Heinz were a combined
company for the entire period. Please see discussion of the
unaudited pro forma condensed combined financial information at the
end of this press release for more information.
 

(3)

The Company’s key commodities in the United States and Canada are
dairy, meat, coffee and nuts.
 

(4)

Cost savings initiatives include the Company’s integration,
restructuring and ongoing productivity efforts.
 

(5)

In the first quarter of 2016, the Company moved certain of the
historical Kraft export businesses from the Company’s United States
segment to its Rest of World and Europe segments to align with its
long-term go-to-market strategies. For the three months ended
September 27, 2015, this change resulted in the reclassification of
$92 million of pro forma net sales from the United States segment to
the Rest of World segment ($91 million) and Europe segment ($1
million), as well as $28 million of Segment Adjusted EBITDA from the
United States segment to the Rest of World segment ($27 million) and
Europe ($1 million).
 

(6)

Rest of World is comprised of three operating segments: Asia
Pacific; Latin America; and, Russia, India, the Middle East and
Africa (“RIMEA”).
 

Webcast and Conference Call Information

A webcast of The Kraft Heinz Company’s third quarter 2016 earnings
conference call will be available at ir.kraftheinzcompany.com.
The call begins today at 5:00 p.m. Eastern time.

ABOUT THE KRAFT HEINZ COMPANY

The Kraft Heinz Company (NASDAQ: KHC) is the fifth-largest food and
beverage company in the world. A globally trusted producer of delicious
foods, The Kraft Heinz Company provides high quality, great taste and
nutrition for all eating occasions whether at home, in restaurants or on
the go. The Company’s iconic brands include Kraft, Heinz, ABC,
Capri Sun
, ClassicoJell-OKool-Aid, Lunchables, Maxwell
House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon
, Quero,
Weight Watchers
Smart Ones and Velveeta. The Kraft
Heinz Company is dedicated to the sustainable health of our people, our
planet and our Company. For more information, visit www.kraftheinzcompany.com.

Forward-Looking Statements

This press release contains a number of forward-looking statements.
Words such as “expect,” “continue,” “improve,” “believe,” “will,”
“focus,” and variations of such words and similar expressions are
intended to identify forward-looking statements. Examples of
forward-looking statements include, but are not limited to, statements
regarding the Company’s plans, investments, execution, growth and
integration. These forward-looking statements are not guarantees of
future performance and are subject to a number of risks and
uncertainties, many of which are difficult to predict and beyond the
Company’s control.

Important factors that may affect the Company’s business and operations
and that may cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, increased
competition; the Company’s ability to maintain, extend and expand its
reputation and brand image; the Company’s ability to differentiate its
products from other brands; the consolidation of retail customers; the
Company’s ability to predict, identify and interpret changes in consumer
preferences and demand; the Company’s ability to drive revenue growth in
its key product categories, increase its market share or add products;
an impairment of the carrying value of goodwill or other
indefinite-lived intangible assets; volatility in commodity, energy and
other input costs; changes in the Company’s management team or other key
personnel; the Company’s inability to realize the anticipated benefits
from the Company’s cost savings initiatives; changes in relationships
with significant customers and suppliers; execution of the Company’s
international expansion strategy; changes in laws and regulations; legal
claims or other regulatory enforcement actions; product recalls or
product liability claims; unanticipated business disruptions; failure to
successfully integrate the business and operations of the Company in the
expected time frame; the Company’s ability to complete or realize the
benefits from potential and completed acquisitions, alliances,
divestitures or joint ventures; economic and political conditions in the
nations in which the Company operates; the volatility of capital
markets; increased pension, labor and people-related expenses;
volatility in the market value of all or a portion of the derivatives
that the Company uses; exchange rate fluctuations; disruptions in
information technology networks and systems; the Company’s inability to
protect intellectual property rights; impacts of natural events in the
locations in which the Company or its customers, suppliers or regulators
operate; the Company’s indebtedness and ability to pay such
indebtedness; tax law changes or interpretations; and other factors. For
additional information on these and other factors that could affect the
Company’s forward-looking statements, see the Company’s risk factors, as
they may be amended from time to time, set forth in its filings with the
Securities and Exchange Commission (the “SEC”). The Company disclaims
and does not undertake any obligation to update or revise any
forward-looking statement in this press release, except as required by
applicable law or regulation.

Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information (the
“pro forma financial information”) presented in this release illustrates
the estimated effects of the merger (the “2015 Merger”) consummated on
July 2, 2015 (the “2015 Merger Date”) of Kraft Foods Group, Inc.
(“Kraft”) with and into a wholly-owned subsidiary of H.J. Heinz Holding
Corporation (“Heinz”), the related equity investments and common stock
conversion, the application of the acquisition method of accounting, and
conformance of accounting policies. The pro forma financial information
is presented as if the 2015 Merger had been consummated on December 30,
2013, the first business day of the Company’s 2014 fiscal year, and
combines the historical results of Kraft and Heinz. For additional
information on the 2015 Merger, please refer to the Company’s filings
with the SEC.

The pro forma financial information was prepared using the acquisition
method of accounting, which requires, among other things, that assets
acquired and liabilities assumed in a business combination be recognized
at their fair values as of the completion of the acquisition. The
Company utilized estimated fair values at the 2015 Merger Date to
allocate the total consideration exchanged to the net tangible and
intangible assets acquired and liabilities assumed. Such allocation was
final as of July 3, 2016.

The historical consolidated financial statements have been adjusted in
the accompanying pro forma financial information to give effect to
unaudited pro forma events that are (1) directly attributable to the
2015 Merger, (2) factually supportable and (3) expected to have a
continuing impact on the results of operations of the combined company.

This pro forma financial information is not necessarily indicative of
what the Company’s results of operations actually would have been had
the 2015 Merger been completed as of December 30, 2013. In addition, the
pro forma financial information is not indicative of future results or
current financial conditions and does not reflect any additional
anticipated synergies, operating efficiencies, cost savings or any
integration costs that may result from the 2015 Merger.

This pro forma financial information should be read in conjunction with
historical financial statements and accompanying notes filed with the
SEC. Certain reclassifications have been made to the historical Kraft
and Heinz results to align accounting policies and eliminate
intercompany sales in all periods presented.

Non-GAAP Financial Measures

To supplement the financial information, the Company has presented
Organic Net Sales, Adjusted EBITDA, and Adjusted EPS, which are
considered non-GAAP financial measures. The non-GAAP financial measures
provided should be viewed in addition to, and not as an alternative for,
financial measures prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) that are
presented in this press release. The non-GAAP financial measures
presented may differ from similarly titled non-GAAP financial measures
presented by other companies, and other companies may not define these
non-GAAP financial measures in the same way. These measures are not
substitutes for their comparable GAAP financial measures, such as net
sales, net income/(loss), diluted earnings per share, or other measures
prescribed by GAAP, and there are limitations to using non-GAAP
financial measures.

Management uses these non-GAAP financial measures to assist in comparing
the Company’s performance on a consistent basis for purposes of business
decision making by removing the impact of certain items that management
believes do not directly reflect the Company’s underlying operations.
Management believes that presenting the Company’s non-GAAP financial
measures is useful to investors because it (i) provides investors with
meaningful supplemental information regarding financial performance by
excluding certain items, (ii) permits investors to view performance
using the same tools that management uses to budget, make operating and
strategic decisions, and evaluate historical performance, and (iii)
otherwise provides supplemental information that may be useful to
investors in evaluating the Company’s results. The Company believes that
the presentation of these non-GAAP financial measures, when considered
together with the corresponding GAAP financial measures and the
reconciliations to those measures, provides investors with additional
understanding of the factors and trends affecting the Company’s business
than could be obtained absent these disclosures.

Organic Net Sales is defined as net sales excluding, when they occur,
the impact of acquisitions, currency, divestitures and a 53rd
week of shipments. The Company calculates the impact of currency on net
sales by holding exchange rates constant at the previous year’s exchange
rate, with the exception of Venezuela following the Company’s June 28,
2015 currency devaluation, for which the Company calculates the previous
year’s results using the current year’s exchange rate. Organic Net Sales
for any period prior to the 2015 Merger Date includes the operating
results of Kraft on a pro forma basis, as if Kraft had been acquired as
of December 30, 2013. Organic Net Sales is a tool that can assist
management and investors in comparing the Company’s performance on a
consistent basis by removing the impact of certain items that management
believes do not directly reflect the Company’s underlying operations.

Adjusted EBITDA is defined as net income/(loss) from continuing
operations before interest expense, other expense/(income), net,
provision for/(benefit from) income taxes; in addition to these
adjustments, the Company excludes, when they occur, the impacts of
depreciation and amortization (excluding integration and restructuring
expenses) (including amortization of postretirement benefit plans prior
service credits), integration and restructuring expenses, merger costs,
unrealized losses/(gains) on commodity hedges, impairment losses,
losses/(gains) on the sale of a business, nonmonetary currency
devaluation, and equity award compensation expense (excluding
integration and restructuring expenses). Adjusted EBITDA for any period
prior to the 2015 Merger Date includes the operating results of Kraft on
a pro forma basis, as if Kraft had been acquired as of December 30,
2013. The Company also presents Adjusted EBITDA on a constant currency
basis. The Company calculates the impact of currency on Adjusted EBITDA
by holding exchange rates constant at the previous year’s exchange rate,
with the exception of Venezuela following the Company’s June 28, 2015
devaluation of the Venezuelan bolivar and remeasurement of assets and
liabilities of its Venezuelan subsidiary, for which it calculates the
previous year’s results using the current year’s exchange rate. Adjusted
EBITDA is a tool that can assist management and investors in comparing
the Company’s performance on a consistent basis by removing the impact
of certain items that management believes do not directly reflect the
Company’s underlying operations.

Adjusted EPS is defined as diluted earnings per share excluding, when
they occur, the impacts of integration and restructuring expenses,
merger costs, unrealized losses/(gains) on commodity hedges, impairment
losses, losses/(gains) on the sale of a business, and nonmonetary
currency devaluation, and including when they occur, adjustments to
reflect preferred stock dividend payments on an accrual basis. Adjusted
EPS for any period prior to the 2015 Merger Date includes the operating
results of Kraft on a pro forma basis, as if Kraft had been acquired as
of December 30, 2013. The Company believes Adjusted EPS provides
important comparability of underlying operating results, allowing
investors and management to assess operating performance on a consistent
basis.

See the attached schedules for supplemental financial data, which
includes the financial information, the non-GAAP financial measures and
corresponding reconciliations for the relevant periods.

 

Schedule 1

The Kraft Heinz Company
Condensed Consolidated Statements of Income
(in millions, except per share data)
(Unaudited)
 
For the Three Months   For the Nine Months
Ended Ended
October 2,   September October 2,   September
2016 27, 2015 2016 27, 2015
Net sales $ 6,267 $ 6,120 $ 19,630 $ 11,214
Cost of products sold 4,049   4,492   12,503   7,857  
Gross profit 2,218 1,628 7,127 3,357
Selling, general and administrative expenses 805   1,229   2,565   2,005  
Operating income 1,413 399 4,562 1,352
Interest expense 311 460 824 1,055
Other expense/(income), net (3 ) 108   (5 ) 314  
Income/(loss) before income taxes 1,105 (169 ) 3,743 (17 )
Provision for/(benefit from) income taxes 262   (49 ) 1,045   (16 )
Net income/(loss) 843 (120 ) 2,698 (1 )
Net income/(loss) attributable to noncontrolling interest 1   3   10   10  
Net income/(loss) attributable to Kraft Heinz 842 (123 ) 2,688 (11 )
Preferred dividends(a)   180   180   540  
Net income/(loss) attributable to common shareholders $ 842   $ (303 ) $ 2,508   $ (551 )
 
Basic shares outstanding 1,218 1,142 1,216 633
Diluted shares outstanding 1,228 1,142 1,226 633
 
Per share data applicable to common shareholders:
Basic earnings/(loss) per share $ 0.69 $ (0.27 ) $ 2.06 $ (0.87 )
Diluted earnings/(loss) per share 0.69 (0.27 ) 2.05 (0.87 )
 
*   The consolidated statements of income for the three and nine months
ended September 27, 2015 reflect the results for Heinz and the
results of Kraft Heinz for the period after the 2015 Merger occurred
on July 2, 2015.
 

(a)

In connection with the December 8, 2015 Common Stock dividend
declaration, the Company was required to accelerate payment of the
Series A Preferred Stock dividend from March 7, 2016 to December 8,
2015. Accordingly, there were no cash distributions related to the
Company’s Series A Preferred Stock in the first quarter of 2016.
Additionally, as the Series A Preferred Stock was redeemed on June
7, 2016, there were no cash distributions in the third quarter of
2016, resulting in cash distributions of $180 million in the nine
months ended October 2, 2016 compared to $540 million in the nine
months ended September 27, 2015.
 
 

Schedule 2

The Kraft Heinz Company

Pro Forma Condensed Combined Statements of Income(a)

(in millions, except per share data)
(Unaudited)
 
For the Three Months For the Nine Months
Ended Ended
October 2,   September October 2,   September
2016 27, 2015 2016 27, 2015
Net sales $ 6,267 $ 6,363 $ 19,630 $ 20,323
Cost of products sold(b) 4,049   4,314   12,503   13,579
Gross profit 2,218 2,049 7,127 6,744
Selling, general and administrative expenses(c) 805   1,397   2,565   3,496
Operating income 1,413 652 4,562 3,248
Interest expense 311 460 824 1,262
Other expense/(income), net (3 ) 108   (5 ) 298
Income/(loss) before income taxes 1,105 84 3,743 1,688
Provision for/(benefit from) income taxes 262   69   1,045   562
Net income/(loss) 843 15 2,698 1,126
Net income/(loss) attributable to noncontrolling interest 1   3   10   10
Net income/(loss) attributable to Kraft Heinz 842 12 2,688 1,116
Preferred dividends(d)   180   180   540
Net income/(loss) attributable to common shareholders $ 842   $ (168 ) $ 2,508   $ 576
 
Basic common shares outstanding 1,218 1,213 1,216 1,198
Diluted common shares outstanding 1,228 1,213 1,226 1,222
 
Per share data applicable to common shareholders:
Basic earnings per share $ 0.69 $ (0.14 ) $ 2.06 $ 0.48
Diluted earnings per share 0.69 (0.14 ) 2.05 0.47
 

Contacts

The Kraft Heinz Company
Michael Mullen (media)
Michael.Mullen@kraftheinzcompany.com
or
Christopher
Jakubik, CFA (investors)
ir@kraftheinzcompany.com

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