- Q4 net sales decreased 3.7%; Organic Net Sales (1) increased 1.6%
- Q4 operating income increased 22.8% and net income attributable to common shareholders increased to $944 million
- Q4 Adjusted EBITDA (1) increased 4.8% on a constant currency basis, despite an approximate 4.5 percentage point negative impact from a 53rd week of shipments in 2015
- Q4 diluted EPS increased to $0.77; Adjusted EPS (1) increased to $0.91, up from $0.62 the prior year, despite an approximate $0.03 negative impact from a 53rd week of shipments in 2015
The Kraft Heinz Company (NASDAQ: KHC) (“Kraft Heinz” or the “Company”)
today reported fourth quarter and full year 2016 financial results that
reflected significant gains from cost savings, the redemption of
preferred stock and lower taxes versus the prior year period.
“We finished 2016 consistent with our expectations and with good
momentum heading into 2017,” said Kraft Heinz CEO Bernardo Hees.
“Looking forward, our objectives and opportunities are clear. But we
need to sharpen our focus on profitable sales, and further improve our
capabilities and execution to deliver another year of strong,
sustainable growth in 2017.”
The Company now expects its multi-year Integration Program to deliver
$1.7 billion in cumulative, pre-tax savings by the end of 2017, up from
$1.5 billion previously. The program is now forecast to result in $2.0
billion of pre-tax costs, up from $1.9 billion previously, and $1.3
billion of capital expenditures, up from $1.1 billion previously.
Q4 2016 Financial Summary
|
|
|
For the Quarter Ended
|
|
Year-over-year Change
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
Actual
|
|
Impact of
Currency
|
|
Impact of
Divestitures
|
|
Impact of
53rd week
|
|
Organic
|
|
|
|
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
6,857
|
|
|
$
|
7,124
|
|
|
(3.7
|
)%
|
|
(0.7
|
) pp
|
|
0.0
|
pp
|
|
(4.6
|
) pp
|
|
1.6
|
%
|
|
Operating income
|
|
1,580
|
|
|
1,287
|
|
|
22.8
|
%
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to common shareholders
|
|
944
|
|
|
285
|
|
|
231.2
|
%
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
0.77
|
|
|
$
|
0.23
|
|
|
234.8
|
%
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1)
|
|
1,937
|
|
|
1,875
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
Adjusted EPS(1)
|
|
$
|
0.91
|
|
|
$
|
0.62
|
|
|
46.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales were $6.9 billion, down 3.7 percent versus net sales for the
year-ago period, including a negative 4.6 percentage point impact from a
53rd week of shipments in 2015 and an unfavorable 0.7 percentage point
impact from currency. Organic Net Sales increased 1.6 percent versus the
year-ago period. Pricing decreased 0.1 percentage points as price
increases to offset input cost inflation in Rest of World markets,
primarily in Latin America, as well as gains in the United States were
more than offset by the timing of promotional activities versus the
prior year in Canada. Volume/mix increased 1.7 percentage points with
positive contributions from all business segments.
Net income attributable to common shareholders increased to $944 million
and diluted EPS increased to $0.77. Adjusted EBITDA increased 3.3
percent versus the year-ago period to $1.9 billion, despite an
approximate 4.5 percentage point negative impact from a 53rd week of
shipments in 2015 and an unfavorable 1.5 percentage point impact from
currency. Excluding these factors, gains from cost savings initiatives(3)
and favorable pricing in the United States were partially offset by
increased business investments, mainly in the Europe and Rest of World
segments. Adjusted EPS increased 46.8 percent versus the year-ago period
to $0.91, despite an approximate 7.5 percentage point negative impact
from a 53rd week of shipments in 2015. This increase reflects a
combination of benefits from the refinancing of Series A Preferred Stock
and lower taxes as well as growth in Adjusted EBITDA.
Q4 2016 Business Segment Highlights
United States
|
|
|
For the Quarter Ended
|
|
Year-over-year Change
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
Actual
|
|
Impact of
Currency
|
|
Impact of
Divestitures
|
|
Impact of
53rd week
|
|
Organic
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Net sales(4)
|
|
$
|
4,839
|
|
|
$
|
4,993
|
|
|
(3.1
|
)%
|
|
0.0 pp
|
|
0.0 pp
|
|
(4.8
|
) pp
|
|
1.7
|
%
|
|
Segment Adjusted EBITDA(1,4)
|
|
1,502
|
|
|
1,326
|
|
|
13.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States net sales were $4.8 billion, down 3.1 percent versus the
year-ago period, including a negative 4.8 percentage point impact from a
53rd week of shipments in 2015. Organic Net Sales increased 1.7 percent
driven by net pricing gains of 0.3 percentage points and an increase in
volume/mix of 1.4 percentage points. Volume/mix gains reflected strong
growth in coffee as well as innovation across the macaroni and cheese
portfolio that were partially offset by lower shipments in foodservice
and cold cuts.
United States Segment Adjusted EBITDA increased 13.3 percent versus the
year-ago period to $1.5 billion, despite an approximate 4.5 percentage
point negative impact from a 53rd week of shipments in 2015. Growth
reflected gains from cost savings initiatives and positive net pricing
that were partially offset by the timing of overhead expenses versus the
prior year period.
Canada
|
|
|
For the Quarter Ended
|
|
Year-over-year Change
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
Actual
|
|
Impact of
Currency
|
|
Impact of
Divestitures
|
|
Impact of
53rd week
|
|
Organic
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
617
|
|
|
$
|
632
|
|
|
(2.4
|
)%
|
|
0.8 pp
|
|
0.0 pp
|
|
(4.4
|
) pp
|
|
1.2
|
%
|
|
Segment Adjusted EBITDA(1)
|
|
151
|
|
|
167
|
|
|
(9.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada net sales were $617 million, down 2.4 percent versus net sales
for the year-ago period, including a negative 4.4 percentage point
impact from a 53rd week of shipments in 2015 and a favorable 0.8
percentage point impact from currency. Organic Net Sales increased 1.2
percent versus the year-ago period. Pricing decreased 3.1 percentage
points due to the timing of promotional activities versus the prior year
period. Volume/mix increased 4.3 percentage points driven by growth in
coffee, whitespace gains in foodservice as well as growth in cheese.
Canada Segment Adjusted EBITDA decreased 9.6 percent versus the year-ago
period to $151 million, including an approximate 3.5 percentage point
negative impact from a 53rd week of shipments in 2015 and a favorable
0.6 percentage point impact from currency. Excluding these factors,
Segment Adjusted EBITDA declined as volume/mix gains and incremental
cost savings were more than offset by a combination of higher input
costs in local currency and timing of promotional activities.
Europe
|
|
|
For the Quarter Ended
|
|
Year-over-year Change
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
Actual
|
|
Impact of
Currency
|
|
Impact of
Divestitures
|
|
Impact of
53rd week
|
|
Organic
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Net sales(5)
|
|
$
|
600
|
|
|
$
|
692
|
|
|
(13.3
|
)%
|
|
(8.1
|
) pp
|
|
0.1 pp
|
|
(3.8
|
) pp
|
|
(1.5
|
)%
|
|
Segment Adjusted EBITDA(1,5,6)
|
|
189
|
|
|
260
|
|
|
(27.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe net sales were $600 million, down 13.3 percent versus net sales
for the year-ago period, including a negative 8.1 percentage point
impact from currency and a negative 3.8 percentage point impact from a
53rd week of shipments in 2015. Organic Net Sales were 1.5 percent lower
than the year-ago period. Pricing was down 2.5 percentage points,
reflecting increased promotional support in the UK as well as stepped up
investments behind innovation in infant food. Volume/mix increased 1.0
percentage points as growth in Russia was partially offset by lower
shipments in the UK.
Europe Segment Adjusted EBITDA decreased 27.3 percent versus the
year-ago period to $189 million, including an unfavorable 10.0
percentage point impact from currency and an approximate 3.0 percentage
point negative impact from a 53rd week of shipments in 2015. Excluding
these factors, Segment Adjusted EBITDA was lower as manufacturing
savings were more than offset by a combination of lower Organic Net
Sales and increased investments in overhead and marketing.
Rest of World
(7)
|
|
|
For the Quarter Ended
|
|
Year-over-year Change
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
Actual
|
|
Impact of
Currency
|
|
Impact of
Divestitures
|
|
Impact of
53rd week
|
|
Organic
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Net sales(4,5)
|
|
$
|
801
|
|
|
$
|
807
|
|
|
(0.7
|
)%
|
|
(0.1
|
) pp
|
|
0.0 pp
|
|
(5.1
|
) pp
|
|
4.5
|
%
|
|
Segment Adjusted EBITDA(1,4,5)
|
|
144
|
|
|
182
|
|
|
(20.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of World net sales were $801 million, down 0.7 percent versus net
sales in the year-ago period, including a negative 5.1 percentage point
impact from a 53rd week of shipments in 2015 and an unfavorable currency
impact of 0.1 percentage points. Organic Net Sales increased 4.5 percent
versus the year-ago period. Pricing increased 2.8 percentage points,
primarily driven by pricing to offset higher input costs in local
currency, particularly in Latin America. Volume/mix increased 1.7
percentage points driven by continued growth in condiments and sauces in
Latin America.
Rest of World Segment Adjusted EBITDA decreased 20.9 percent versus the
year-ago period to $144 million, including an approximate 3.0 percentage
point negative impact from a 53rd week of shipments in 2015 and an
unfavorable 1.3 percentage point impact from currency. Excluding these
impacts, Segment Adjusted EBITDA declined as Organic Net Sales growth
was more than offset by higher input costs in local currency as well as
investments in new product and whitespace 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)
|
|
The Company's key commodities in the United States and Canada are
dairy, meat, coffee and nuts.
|
|
|
|
|
|
(3)
|
|
Cost savings initiatives include the Company's integration,
restructuring and ongoing productivity efforts.
|
|
|
|
|
|
(4)
|
|
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 Jan.
3, 2016, this change resulted in the reclassification of $89 million
of net sales for the fourth quarter ended Jan. 3, 2016 from the
United States segment to the Rest of World segment, as well as $20
million of Segment Adjusted EBITDA from the United States segment to
the Rest of World segment.
|
|
|
|
|
|
(5)
|
|
In the fourth quarter of 2016, the Company reorganized its segments
to reflect a change in the Company's organizational structure. As a
result, the Russia business, which was included within the Company's
historical Russia, India, Middle East and Africa (“RIMEA”) operating
segment moved to the Europe reportable segment. The remaining
businesses within RIMEA joined the historical Asia Pacific operating
segment to form the AMEA operating segment (as defined below). This
change resulted in reclassification of net sales from the Rest of
World segment to the Europe segment of $52 million and Segment
Adjusted EBITDA of $10 million for the fourth quarter ended Jan. 3,
2016.
|
|
|
|
|
|
(6)
|
|
In the fourth quarter of 2016, the Company determined that its
Global Procurement Office (“GPO”), formerly managed by a subsidiary
within the Europe segment, would be managed by its global
headquarters. This change resulted in the reclassification of
Segment Adjusted EBITDA from the Europe segment to general corporate
expenses of $2 million for the fourth quarter ended Jan. 3, 2016.
|
|
|
|
|
|
(7)
|
|
Rest of World is comprised of two operating segments: Latin America;
and Asia Pacific, Middle East and Africa (“AMEA”).
|
|
|
|
|
Webcast and Conference Call Information
A webcast of The Kraft Heinz Company's fourth quarter and full year 2016
earnings conference call will be available at ir.kraftheinzcompany.com.
The call begins today at 5:00 p.m. Eastern Time.
ABOUT THE KRAFT HEINZ COMPANY
The Kraft Heinz Company (NASDAQ: KHC) is the fifth-largest food and
beverage company in the world. A globally trusted producer of delicious
foods, The Kraft Heinz Company provides high quality, great taste and
nutrition for all eating occasions whether at home, in restaurants or on
the go. The Company’s iconic brands include Kraft, Heinz, ABC,
Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Maxwell
House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero,
Weight Watchers Smart Ones and Velveeta. The Kraft
Heinz Company is dedicated to the sustainable health of our people, our
planet and our Company. For more information, visit www.kraftheinzcompany.com.
Forward-Looking Statements
This press release contains a number of forward-looking statements.
Words such as “expect,” "momentum," "execute," “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, objectives, initiatives, opportunities,
capabilities, 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
In the Schedules to this release, the Company presents unaudited pro
forma condensed combined financial information (the “pro forma financial
information”), which is intended to illustrate 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 Dec. 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 Dec. 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 Dec. 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 (e.g., remeasurement gains and losses), 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 Dec. 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 (e.g., remeasurement gains and losses), 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 Dec. 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
Consolidated Statements of Income
(in
millions, except per share data)
(Unaudited)
|
|
|
|
|
|
For the Quarter Ended
|
|
For the Year Ended
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
December 31,
2016
(52 weeks)
|
|
January 3,
2016
(53 weeks)
|
|
Net sales
|
|
$
|
6,857
|
|
|
$
|
7,124
|
|
|
$
|
26,487
|
|
|
$
|
18,338
|
|
|
Cost of products sold
|
|
4,398
|
|
|
4,720
|
|
|
16,901
|
|
|
12,577
|
|
|
Gross profit
|
|
2,459
|
|
|
2,404
|
|
|
9,586
|
|
|
5,761
|
|
|
Selling, general and administrative expenses
|
|
879
|
|
|
1,117
|
|
|
3,444
|
|
|
3,122
|
|
|
Operating income
|
|
1,580
|
|
|
1,287
|
|
|
6,142
|
|
|
2,639
|
|
|
Interest expense
|
|
310
|
|
|
266
|
|
|
1,134
|
|
|
1,321
|
|
|
Other expense/(income), net
|
|
(10
|
)
|
|
(9
|
)
|
|
(15
|
)
|
|
305
|
|
|
Income/(loss) before income taxes
|
|
1,280
|
|
|
1,030
|
|
|
5,023
|
|
|
1,013
|
|
|
Provision for/(benefit from) income taxes
|
|
336
|
|
|
382
|
|
|
1,381
|
|
|
366
|
|
|
Net income/(loss)
|
|
944
|
|
|
648
|
|
|
3,642
|
|
|
647
|
|
|
Net income/(loss) attributable to noncontrolling interest
|
|
—
|
|
|
3
|
|
|
10
|
|
|
13
|
|
|
Net income/(loss) attributable to Kraft Heinz
|
|
944
|
|
|
645
|
|
|
3,632
|
|
|
634
|
|
|
Preferred dividends(a)
|
|
—
|
|
|
360
|
|
|
180
|
|
|
900
|
|
|
Net income/(loss) attributable to common shareholders
|
|
$
|
944
|
|
|
$
|
285
|
|
|
$
|
3,452
|
|
|
$
|
(266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares outstanding
|
|
1,217
|
|
|
1,214
|
|
|
1,217
|
|
|
786
|
|
|
Diluted shares outstanding
|
|
1,226
|
|
|
1,225
|
|
|
1,226
|
|
|
786
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per share
|
|
$
|
0.78
|
|
|
$
|
0.23
|
|
|
$
|
2.84
|
|
|
$
|
(0.34
|
)
|
|
Diluted earnings/(loss) per share
|
|
0.77
|
|
|
0.23
|
|
|
2.81
|
|
|
(0.34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*The consolidated statements of income for the year ended Jan. 3,
2016 reflect the results for Heinz and the results of Kraft Heinz
for the period after the 2015 Merger occurred on July 2, 2015.
|
|
|
|
|
|
(a)
|
|
Cash distributions for Series A Preferred Stock totaled $360
million and $900 million for the quarter and year ended Jan. 3,
2016, respectively. This reflected one additional dividend payment
versus the prior year made during the fourth quarter due to the
fact that, in connection with the Dec. 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 Dec. 8, 2015.
|
|
|
|
Schedule 2
|
The Kraft Heinz Company
Pro Forma Condensed Combined Statements
of Income
(in millions, except per share data)
(Unaudited)
|
|
|
|
|
|
For the Year Ended
|
|
|
|
January 3, 2016
(53 weeks)
|
|
Net sales
|
|
$
|
27,447
|
|
Cost of products sold(a)
|
|
18,299
|
|
Gross profit
|
|
9,148
|
|
Selling, general and administrative expenses(b)
|
|
4,613
|
|
Operating income
|
|
4,535
|
|
Interest expense
|
|
1,528
|
|
Other expense/(income), net
|
|
289
|
|
Income/(loss) before income taxes
|
|
2,718
|
|
Provision for/(benefit from) income taxes
|
|
944
|
|
Net income/(loss)
|
|
1,774
|
|
Net income/(loss) attributable to noncontrolling interest
|
|
13
|
|
Net income/(loss) attributable to Kraft Heinz
|
|
1,761
|
|
Preferred dividends(c)
|
|
900
|
|
Net income/(loss) attributable to common shareholders
|
|
$
|
861
|
|
|
|
|
|
Basic common shares outstanding
|
|
1,202
|
|
Diluted common shares outstanding
|
|
1,222
|
|
|
|
|
|
Per share data applicable to common shareholders:
|
|
|
|
Basic earnings per share
|
|
$
|
0.72
|
|
Diluted earnings per share
|
|
0.70
|
|
|
|
|
|
Note: There are no pro forma adjustments in 2016 as Kraft and Heinz
were a combined company for the entire period. Refer to Schedule 10
for additional information on the pro forma adjustments for 2015.
|
|
|
|
|
|
(a)
|
|
Integration and restructuring expenses in cost of products sold
were $479 million in the full year 2015 ($322 million after-tax).
|
|
|
|
|
|
(b)
|
|
Integration and restructuring expenses in selling, general and
administrative expenses were $638 million in the full year 2015
($428 million after-tax).
|
|
|
|
|
|
(c)
|
|
Cash distributions for Series A Preferred Stock totaled $360
million and $900 million for the quarter and year ended Jan. 3,
2016, respectively. This reflected one additional dividend payment
versus the prior year made during the fourth quarter due to the
fact that, in connection with the Dec. 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 Dec. 8, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 3
|
The Kraft Heinz Company
Reconciliation of Net Sales to Organic
Net Sales
For the Quarter Ended
(dollars in millions)
(Unaudited)
|
|
|
|
|
|
Net Sales
|
|
Impact of
Currency
|
|
Impact of
Divestitures
|
|
Impact of
53rd Week
|
|
Organic Net
Sales
|
|
Price
|
|
Volume/Mix
|
|
December 31, 2016 (13 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
4,839
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,839
|
|
|
|
|
|
|
Canada
|
|
617
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
612
|
|
|
|
|
|
|
Europe
|
|
600
|
|
|
(56
|
)
|
|
—
|
|
|
—
|
|
|
656
|
|
|
|
|
|
|
Rest of World
|
|
801
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
797
|
|
|
|
|
|
|
|
|
$
|
6,857
|
|
|
$
|
(47
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, 2016 (14 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States(a)
|
|
$
|
4,993
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
233
|
|
|
$
|
4,760
|
|
|
|
|
|
|
Canada
|
|
632
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
605
|
|
|
|
|
|
|
Europe(a,b)
|
|
692
|
|
|
—
|
|
|
(1
|
)
|
|
27
|
|
|
666
|
|
|
|
|
|
|
Rest of World(a,b)
|
|
807
|
|
|
5
|
|
|
—
|
|
|
39
|
|
|
763
|
|
|
|
|
|
|
|
|
$
|
7,124
|
|
|
$
|
5
|
|
|
$
|
(1
|
)
|
|
$
|
326
|
|
|
$
|
6,794
|
|
|
|
|
|
|
Year-over-year growth rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States(a)
|
|
(3.1)%
|
|
0.0 pp
|
|
0.0 pp
|
|
(4.8) pp
|
|
1.7
|
%
|
|
0.3 pp
|
|
1.4 pp
|
|
Canada
|
|
(2.4)%
|
|
0.8 pp
|
|
0.0 pp
|
|
(4.4) pp
|
|
1.2
|
%
|
|
(3.1) pp
|
|
4.3 pp
|
|
Europe(a,b)
|
|
(13.3)%
|
|
(8.1) pp
|
|
0.1 pp
|
|
(3.8) pp
|
|
(1.5
|
)%
|
|
(2.5) pp
|
|
1.0 pp
|
|
Rest of World(a,b)
|
|
(0.7)%
|
|
(0.1) pp
|
|
0.0 pp
|
|
(5.1) pp
|
|
4.5
|
%
|
|
2.8 pp
|
|
1.7 pp
|
|
Kraft Heinz
|
|
(3.7)%
|
|
(0.7) pp
|
|
0.0 pp
|
|
(4.6) pp
|
|
1.6
|
%
|
|
(0.1) pp
|
|
1.7 pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
In the first quarter of 2016, the Company moved certain of the
historical Kraft export businesses from the Company's United States
segment to its Rest of World and Europe segments to align with its
long-term go-to-market strategies. This change resulted in the
reclassification of net sales from the United States segment to the
Rest of World segment of $89 million for the fourth quarter ended
Jan. 3, 2016.
|
|
|
|
(b)
|
|
In the fourth quarter of 2016, the Company reorganized its segments
to reflect a change in the Company's organizational structure. As a
result, the Russia business within the historical RIMEA operating
segment moved to the Europe reportable segment. The remaining
businesses within RIMEA joined the historical Asia Pacific operating
segment to form the AMEA operating segment. This change resulted in
the reclassification of net sales from the Rest of World segment to
the Europe segment of $52 million for the fourth quarter ended Jan.
3, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4
|
The Kraft Heinz Company
Reconciliation of Pro Forma Net Sales
to Organic Net Sales
For the Year Ended
(dollars in
millions)
(Unaudited)
|
|
|
|
|
|
Pro Forma
Net Sales
(a)
|
|
Impact of
Currency
|
|
Impact of
Divestitures
|
|
Impact of
53rd Week
|
|
Organic Net
Sales
|
|
Price
|
|
Volume/Mix
|
|
December 31, 2016 (52 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
18,641
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,641
|
|
|
|
|
|
|
Canada
|
|
2,309
|
|
|
(84
|
)
|
|
—
|
|
|
—
|
|
|
2,393
|
|
|
|
|
|
|
Europe
|
|
2,366
|
|
|
(154
|
)
|
|
—
|
|
|
—
|
|
|
2,520
|
|
|
|
|
|
|
Rest of World
|
|
3,171
|
|
|
(92
|
)
|
|
—
|
|
|
—
|
|
|
3,263
|
|
|
|
|
|
|
|
|
$
|
26,487
|
|
|
$
|
(330
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, 2016 (53 weeks)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States(b)
|
|
$
|
18,932
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
233
|
|
|
$
|
18,699
|
|
|
|
|
|
|
Canada
|
|
2,386
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
2,359
|
|
|
|
|
|
|
Europe(b,c)
|
|
2,657
|
|
|
—
|
|
|
42
|
|
|
27
|
|
|
2,588
|
|
|
|
|
|
|
Rest of World(b,c)
|
|
3,472
|
|
|
351
|
|
|
—
|
|
|
39
|
|
|
3,082
|
|
|
|
|
|
|
|
|
$
|
27,447
|
|
|
$
|
351
|
|
|
$
|
42
|
|
|
$
|
326
|
|
|
$
|
26,728
|
|
|
|
|
|
|
Year-over-year growth rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States(b)
|
|
(1.5
|
)%
|
|
0.0 pp
|
|
0.0 pp
|
|
(1.2) pp
|
|
(0.3
|
)%
|
|
0.2 pp
|
|
(0.5) pp
|
|
Canada
|
|
(3.2
|
)%
|
|
(3.5) pp
|
|
0.0 pp
|
|
(1.1) pp
|
|
1.4
|
%
|
|
0.6 pp
|
|
0.8 pp
|
|
Europe(b,c)
|
|
(11.0
|
)%
|
|
(5.8) pp
|
|
(1.6) pp
|
|
(1.0) pp
|
|
(2.6
|
)%
|
|
(2.5) pp
|
|
(0.1) pp
|
|
Rest of World(b,c)
|
|
(8.7
|
)%
|
|
(13.2) pp
|
|
0.0 pp
|
|
(1.4) pp
|
|
5.9
|
%
|
|
3.2 pp
|
|
2.7 pp
|
|
Kraft Heinz
|
|
(3.5
|
)%
|
|
(2.5) pp
|
|
(0.1) pp
|
|
(1.2) pp
|
|
0.3
|
%
|
|
0.3 pp
|
|
0.0 pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
There are no pro forma adjustments in 2016 as Kraft and Heinz were a
combined company for the entire period.
|
|
|
|
(b)
|
|
In the first quarter of 2016, the Company moved certain of the
historical Kraft export businesses from the Company's United States
segment to its Rest of World and Europe segments to align with its
long-term go-to-market strategies. This change resulted in the
reclassification of $352 million of pro forma net sales from the
United States segment to the Rest of World segment ($350 million)
and Europe segment ($2 million) for the year ended Jan. 3, 2016.
|
|
|
|
(c)
|
|
In the fourth quarter of 2016, the Company reorganized its segments
to reflect a change in the Company's organizational structure. As a
result, the Russia business within the historical RIMEA operating
segment moved to the Europe reportable segment. The remaining
businesses within RIMEA joined the historical Asia Pacific operating
segment to form the AMEA operating segment. This change resulted in
the reclassification of pro forma net sales from the Rest of World
segment to the Europe segment $170 million for the year ended Jan.
3, 2016.
|
|
|
|
|
|
Schedule 5
|
The Kraft Heinz Company
Reconciliation of Pro Forma Net
Income/(Loss) to Adjusted EBITDA
(in millions)
(Unaudited)
|
|
|
|
|
|
For the Quarter Ended
|
|
For the Year Ended
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
December 31,
2016
(52 weeks)
|
|
January 3,
2016
(53 weeks)
|
|
Pro forma net income/(loss)(a)
|
|
$
|
944
|
|
|
$
|
648
|
|
|
$
|
3,642
|
|
|
$
|
1,774
|
|
|
Interest expense
|
|
310
|
|
|
266
|
|
|
1,134
|
|
|
1,528
|
|
|
Other expense/(income), net
|
|
(10
|
)
|
|
(9
|
)
|
|
(15
|
)
|
|
289
|
|
|
Provision for/(benefit from) income taxes
|
|
336
|
|
|
382
|
|
|
1,381
|
|
|
944
|
|
|
Operating income
|
|
1,580
|
|
|
1,287
|
|
|
6,142
|
|
|
4,535
|
|
|
Depreciation and amortization (excluding integration and
restructuring expenses)
|
|
135
|
|
|
160
|
|
|
536
|
|
|
779
|
|
|
Integration and restructuring expenses
|
|
231
|
|
|
436
|
|
|
1,012
|
|
|
1,117
|
|
|
Merger costs
|
|
(3
|
)
|
|
1
|
|
|
30
|
|
|
194
|
|
|
Unrealized losses/(gains) on commodity hedges
|
|
(15
|
)
|
|
(18
|
)
|
|
(38
|
)
|
|
(41
|
)
|
|
Impairment losses
|
|
—
|
|
|
—
|
|
|
53
|
|
|
58
|
|
|
Losses/(gains) on sale of business
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
Nonmonetary currency devaluation
|
|
—
|
|
|
8
|
|
|
4
|
|
|
57
|
|
|
Equity award compensation expense (excluding integration and
restructuring expenses)
|
|
9
|
|
|
1
|
|
|
39
|
|
|
61
|
|
|
Adjusted EBITDA
|
|
$
|
1,937
|
|
|
$
|
1,875
|
|
|
$
|
7,778
|
|
|
$
|
6,739
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
United States(b)
|
|
$
|
1,502
|
|
|
$
|
1,326
|
|
|
$
|
5,862
|
|
|
$
|
4,690
|
|
|
Canada
|
|
151
|
|
|
167
|
|
|
642
|
|
|
541
|
|
|
Europe(b,c,d)
|
|
189
|
|
|
260
|
|
|
781
|
|
|
938
|
|
|
Rest of World(b,c)
|
|
144
|
|
|
182
|
|
|
657
|
|
|
742
|
|
|
General corporate expenses(d)
|
|
(49
|
)
|
|
(60
|
)
|
|
(164
|
)
|
|
(172
|
)
|
|
Adjusted EBITDA
|
|
$
|
1,937
|
|
|
$
|
1,875
|
|
|
$
|
7,778
|
|
|
$
|
6,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
There are no pro forma adjustments in 2016 as Kraft and Heinz were a
combined company for the entire period.
|
|
|
|
|
|
(b)
|
|
In the first quarter of 2016, the Company moved certain historical
Kraft export businesses from the Company's United States segment to
its Rest of World and Europe segments to align with its long-term
go-to-market strategies. For the fourth quarter ended Jan. 3, 2016,
this change resulted in the reclassification of $20 million of
Segment Adjusted EBITDA from the United States segment to the Rest
of World segment. For the year ended Jan. 3, 2016, this change
resulted in the reclassification of $93 million of Segment Adjusted
EBITDA from the United States segment to the Rest of World segment
($92 million) and Europe segment ($1 million).
|
|
|
|
|
|
(c)
|
|
In the fourth quarter of 2016, the Company reorganized its segments
to reflect a change in the Company's organizational structure. As a
result, the Russia business within the historical RIMEA operating
segment moved to the Europe reportable segment. The remaining
businesses within RIMEA joined the historical Asia Pacific operating
segment to form the AMEA operating segment. This change resulted in
the reclassification of Segment Adjusted EBITDA from the Rest of
World segment to the Europe segment of $10 million for the fourth
quarter and $20 million for the year ended Jan. 3, 2016.
|
|
|
|
|
|
(d)
|
|
In the fourth quarter of 2016, the Company determined that its GPO,
formerly managed by a subsidiary within the Europe segment, would be
managed by its global headquarters. This change resulted in the
reclassification of Segment Adjusted EBITDA from the Europe segment
to general corporate expenses of $2 million for the fourth quarter
and $8 million for the year ended Jan. 3, 2016.
|
|
|
|
|
|
Schedule 6
|
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA to
Constant Currency Adjusted EBITDA
For the Quarter Ended
(dollars
in millions)
(Unaudited)
|
|
|
|
|
|
Adjusted EBITDA
|
|
Impact of Currency
|
|
Constant Currency
Adjusted EBITDA
|
|
December 31, 2016 (13 weeks)
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,502
|
|
|
$
|
—
|
|
|
$
|
1,502
|
|
|
Canada
|
|
151
|
|
|
1
|
|
|
150
|
|
|
Europe
|
|
189
|
|
|
(26
|
)
|
|
215
|
|
|
Rest of World
|
|
144
|
|
|
—
|
|
|
144
|
|
|
General corporate expenses
|
|
(49
|
)
|
|
1
|
|
|
(50
|
)
|
|
|
|
$
|
1,937
|
|
|
$
|
(24
|
)
|
|
$
|
1,961
|
|
|
|
|
|
|
|
|
|
|
January 3, 2016 (14 weeks)
|
|
|
|
|
|
|
|
United States(a)
|
|
$
|
1,326
|
|
|
$
|
—
|
|
|
$
|
1,326
|
|
|
Canada
|
|
167
|
|
|
—
|
|
|
167
|
|
|
Europe(a,b,c)
|
|
260
|
|
|
—
|
|
|
260
|
|
|
Rest of World(a,b)
|
|
182
|
|
|
3
|
|
|
179
|
|
|
General corporate expenses(c)
|
|
(60
|
)
|
|
—
|
|
|
(60
|
)
|
|
|
|
$
|
1,875
|
|
|
$
|
3
|
|
|
$
|
1,872
|
|
|
Year-over-year growth rates
|
|
|
|
|
|
|
|
United States(a)
|
|
13.3 %
|
|
0.0 pp
|
|
13.3 %
|
|
Canada
|
|
(9.6)%
|
|
0.6 pp
|
|
(10.2)%
|
|
Europe(a,b,c)
|
|
(27.3)%
|
|
(10.0) pp
|
|
(17.3)%
|
|
Rest of World(a,b)
|
|
(20.9)%
|
|
(1.3) pp
|
|
(19.6)%
|
|
General corporate expenses(c)
|
|
(18.3)%
|
|
(1.6) pp
|
|
(16.7)%
|
|
Kraft Heinz
|
|
3.3 %
|
|
(1.5) pp
|
|
4.8 %
|
|
|
|
|
|
|
|
|
|
(a)
|
|
In the first quarter of 2016, the Company moved certain historical
Kraft export businesses from the Company's United States segment to
its Rest of World and Europe segments to align with its long-term
go-to-market strategies. For the fourth quarter ended Jan. 3, 2016,
this change resulted in the reclassification of $20 million of
Segment Adjusted EBITDA from the United States segment to the Rest
of World segment.
|
|
|
|
|
|
(b)
|
|
In the fourth quarter of 2016, the Company reorganized its segments
to reflect a change in the Company's organizational structure. As a
result, the Russia business within the historical RIMEA operating
segment moved to the Europe reportable segment. The remaining
businesses within RIMEA joined the historical Asia Pacific operating
segment to form the AMEA operating segment. This change resulted in
the reclassification of Segment Adjusted EBITDA from the Rest of
World segment to the Europe segment of $10 million for the fourth
quarter ended Jan. 3, 2016.
|
|
|
|
|
|
(c)
|
|
In the fourth quarter of 2016, the Company determined that its GPO,
formerly managed by a subsidiary within the Europe segment, would be
managed by its global headquarters. This change resulted in the
reclassification of Segment Adjusted EBITDA from the Europe segment
to general corporate expenses of $2 million for the fourth quarter
ended Jan. 3, 2016.
|
|
|
|
|
|
Schedule 7
|
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA to
Constant Currency Adjusted EBITDA
For the Year Ended
(dollars
in millions)
(Unaudited)
|
|
|
|
|
|
Adjusted EBITDA
(a)
|
|
Impact of Currency
|
|
Constant Currency
Adjusted EBITDA
|
|
December 31, 2016 (52 weeks)
|
|
|
|
|
|
|
|
United States
|
|
$
|
5,862
|
|
|
$
|
—
|
|
|
$
|
5,862
|
|
|
Canada
|
|
642
|
|
|
(24
|
)
|
|
666
|
|
|
Europe
|
|
781
|
|
|
(61
|
)
|
|
842
|
|
|
Rest of World
|
|
657
|
|
|
(21
|
)
|
|
678
|
|
|
General corporate expenses
|
|
(164
|
)
|
|
1
|
|
|
(165
|
)
|
|
|
|
$
|
7,778
|
|
|
$
|
(105
|
)
|
|
$
|
7,883
|
|
|
|
|
|
|
|
|
|
|
January 3, 2016 (53 weeks)
|
|
|
|
|
|
|
|
United States(b)
|
|
$
|
4,690
|
|
|
$
|
—
|
|
|
$
|
4,690
|
|
|
Canada
|
|
541
|
|
|
—
|
|
|
541
|
|
|
Europe(b,c,d)
|
|
938
|
|
|
—
|
|
|
938
|
|
|
Rest of World(b,c)
|
|
742
|
|
|
102
|
|
|
640
|
|
|
General corporate expenses(d)
|
|
(172
|
)
|
|
—
|
|
|
(172
|
)
|
|
|
|
$
|
6,739
|
|
|
$
|
102
|
|
|
$
|
6,637
|
|
|
Year-over-year growth rates
|
|
|
|
|
|
|
|
United States(b)
|
|
25.0 %
|
|
0.0 pp
|
|
25.0 %
|
|
Canada
|
|
18.7 %
|
|
(4.4) pp
|
|
23.1 %
|
|
Europe(b,c,d)
|
|
(16.7)%
|
|
(6.5) pp
|
|
(10.2)%
|
|
Rest of World(b,c)
|
|
(11.5)%
|
|
(17.4) pp
|
|
5.9 %
|
|
General corporate expenses(d)
|
|
(4.7)%
|
|
(0.6) pp
|
|
(4.1)%
|
|
Kraft Heinz
|
|
15.4 %
|
|
(3.4) pp
|
|
18.8 %
|
|
|
|
|
|
|
|
|
|
(a)
|
|
There are no pro forma adjustments in 2016 as Kraft and Heinz were a
combined company for the entire period.
|
|
|
|
|
|
(b)
|
|
In the first quarter of 2016, the Company moved certain historical
Kraft export businesses from the Company's United States segment to
its Rest of World and Europe segments to align with its long-term
go-to-market strategies. For the year ended Jan. 3, 2016, this
change resulted in the reclassification of $93 million of Segment
Adjusted EBITDA from the United States segment to the Rest of World
segment ($92 million) and Europe segment ($1 million).
|
|
|
|
|
|
(c)
|
|
In the fourth quarter of 2016, the Company reorganized its segments
to reflect a change in the Company's organizational structure. As a
result, the Russia business within the historical RIMEA operating
segment moved to the Europe reportable segment. The remaining
businesses within RIMEA joined the historical Asia Pacific operating
segment to form the AMEA operating segment. This change resulted in
the reclassification of Segment Adjusted EBITDA from the Rest of
World segment to the Europe segment of $20 million for the year
ended Jan. 3, 2016.
|
|
|
|
|
|
(d)
|
|
In the fourth quarter of 2016, the Company determined that its GPO,
formerly managed by a subsidiary within the Europe segment, would be
managed by its global headquarters. This change resulted in the
reclassification of Segment Adjusted EBITDA from the Europe segment
to general corporate expenses of $8 million for the year ended Jan.
3, 2016.
|
|
|
|
|
|
Schedule 8
|
The Kraft Heinz Company
Reconciliation of Pro Forma Diluted EPS
to Adjusted EPS
(Unaudited)
|
|
|
|
|
|
For the Quarter Ended
|
|
For the Year Ended
|
|
|
|
December 31,
2016
(13 weeks)
|
|
January 3,
2016
(14 weeks)
|
|
December 31,
2016
(52 weeks)
|
|
January 3,
2016
(53 weeks)
|
|
Pro forma diluted EPS(a)
|
|
$
|
0.77
|
|
|
$
|
0.23
|
|
|
$
|
2.81
|
|
|
$
|
0.70
|
|
|
Integration and restructuring expenses(b)(c)
|
|
0.13
|
|
|
0.24
|
|
|
0.57
|
|
|
0.61
|
|
|
Merger costs(b)(d)
|
|
—
|
|
|
—
|
|
|
0.02
|
|
|
0.49
|
|
|
Unrealized losses/(gains) on commodity hedges(b)(e)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
Impairment losses(b)(e)
|
|
—
|
|
|
—
|
|
|
0.03
|
|
|
0.03
|
|
|
Losses/(gains) on sale of business(b)(e)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
Nonmonetary currency devaluation(b)(f)
|
|
0.02
|
|
|
0.01
|
|
|
0.02
|
|
|
0.24
|
|
|
Preferred dividend adjustment(g)
|
|
—
|
|
|
0.15
|
|
|
(0.10
|
)
|
|
0.15
|
|
|
Adjusted EPS
|
|
$
|
0.91
|
|
|
$
|
0.62
|
|
|
$
|
3.33
|
|
|
$
|
2.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
There are no pro forma adjustments in 2016, as Kraft and Heinz were
a combined company for the entire period.
|
|
|
|
|
|
(b)
|
|
Income tax expense associated with these items is based on
applicable jurisdictional tax rates and deductibility assessment of
individual items.
|
|
|
|
|
|
(c)
|
|
Integration and restructuring expenses include the following gross
expenses:
|
|
|
|
•
|
Expenses recorded in cost of products sold were $179 million in the
fourth quarter and $711 million in the year ended Dec. 31, 2016 and
$178 million in the fourth quarter and $479 million in the year
ended Jan. 3, 2016;
|
|
|
|
•
|
Expenses recorded in SG&A were $52 million in the fourth quarter and
$301 million in the year ended Dec. 31, 2016 and $258 million in the
fourth quarter and $638 million in the year ended Jan. 3, 2016;
|
|
|
|
•
|
Expenses recorded in other expense/(income), net, were income of $2
million in the fourth quarter ended Dec. 31, 2016 (there were no
such expenses in the year ended Dec. 31, 2016 or in the fourth
quarter and year ended Jan. 3, 2016);
|
|
|
|
|
|
(d)
|
|
Merger costs include the following gross expenses:
|
|
|
|
•
|
Expenses recorded in cost of products sold were $2 million in the
year ended Dec. 31, 2016 and $2 million in the fourth quarter and $6
million in the year ended Jan. 3, 2016 (there were no such expenses
in the fourth quarter ended Dec. 31, 2016);
|
|
|
|
•
|
Expenses recorded in SG&A were a benefit of $3 million in the fourth
quarter and expense of $28 million in the year ended Dec. 31, 2016
and a benefit of $1 million in the fourth quarter and expense of
$188 million in the year ended Jan. 3, 2016;
|
|
|
|
•
|
Expenses recorded in interest expense were $466 million in the year
ended Jan. 3, 2016 (there were no such expenses in the fourth
quarter and year ended Dec. 31, 2016 or the fourth quarter ended
Jan. 3, 2016);
|
|
|
|
•
|
Expenses recorded in other expense/(income), net, were $5 million in
the fourth quarter and $144 million in the year ended Jan. 3, 2016
(there were no such expenses in the fourth quarter and year ended
Dec. 31, 2016);
|
|
|
|
|
|
(e)
|
|
Refer to the reconciliation of pro forma net income/(loss) to
Adjusted EBITDA for the related gross expenses.
|
|
|
|
|
|
(f)
|
|
Nonmonetary currency devaluation includes the following gross
expenses/(income):
|
|
|
|
•
|
Expenses recorded in cost of products sold of $4 million in the year
ended Dec. 31, 2016 and $8 million in the fourth quarter and $57
million in the year ended Jan. 3, 2016 (there were no such expenses
in the fourth quarter ended Dec. 31, 2016), and
|
|
|
|
•
|
Expenses recorded in other expense/(income), net, of $23 million in
the fourth quarter and $24 million in the year ended Dec. 31, 2016
and $234 million in the year ended Jan. 3, 2016 (there were no such
expenses in the fourth quarter ended Jan. 3, 2016);
|
|
|
|
|
|
(g)
|
|
For Adjusted EPS, we present the impact of the Series A Preferred
Stock dividend payments on an accrual basis. Accordingly, we
included adjustments to EPS to exclude $180 million of Series A
Preferred Stock dividends from the fourth quarter of 2015 (to
reflect the March 7, 2016 Series A Preferred Stock dividend that was
paid in Dec. 2015), to include such $180 million Series A Preferred
Stock dividend payment in the first quarter of 2016, and to exclude
$51 million of Series A Preferred Stock dividends from the second
quarter of 2016 (to reflect that it was redeemed on June 7, 2016).
|
|
|
|
|
|
Schedule 9
|
The Kraft Heinz Company
Consolidated Balance Sheets
(in
millions)
(Unaudited)
|
|
|
|
|
|
December 31, 2016
|
|
January 3, 2016
|
|
ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,204
|
|
|
$
|
4,837
|
|
|
Trade receivables
|
|
769
|
|
|
871
|
|
|
Sold receivables
|
|
129
|
|
|
583
|
|
|
Inventories
|
|
2,684
|
|
|
2,618
|
|
|
Other current assets
|
|
967
|
|
|
871
|
|
|
Total current assets
|
|
8,753
|
|
|
9,780
|
|
|
Property, plant and equipment, net
|
|
6,688
|
|
|
6,524
|
|
|
Goodwill
|
|
44,125
|
|
|
43,051
|
|
|
Intangible assets, net
|
|
59,297
|
|
|
62,120
|
|
|
Other assets
|
|
1,617
|
|
|
1,498
|
|
|
TOTAL ASSETS
|
|
$
|
120,480
|
|
|
$
|
122,973
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
Commercial paper and other short-term debt
|
|
$
|
645
|
|
|
$
|
4
|
|
|
Current portion of long-term debt
|
|
2,046
|
|
|
79
|
|
|
Trade payables
|
|
3,996
|
|
|
2,844
|
|
|
Accrued marketing
|
|
749
|
|
|
856
|
|
|
Accrued postemployment costs
|
|
157
|
|
|
328
|
|
|
Income taxes payable
|
|
255
|
|
|
417
|
|
|
Interest payable
|
|
415
|
|
|
401
|
|
|
Dividends payable
|
|
39
|
|
|
762
|
|
|
Other current liabilities
|
|
1,199
|
|
|
1,241
|
|
|
Total current liabilities
|
|
9,501
|
|
|
6,932
|
|
|
Long-term debt
|
|
29,713
|
|
|
25,151
|
|
|
Deferred income taxes
|
|
20,848
|
|
|
21,497
|
|
|
Accrued postemployment costs
|
|
2,038
|
|
|
2,405
|
|
|
Other liabilities
|
|
806
|
|
|
752
|
|
|
TOTAL LIABILITIES
|
|
62,906
|
|
|
56,737
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
—
|
|
|
23
|
|
|
9.00% cumulative compounding preferred stock, Series A
|
|
—
|
|
|
8,320
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
Common stock, $0.01 par value
|
|
12
|
|
|
12
|
|
|
Additional paid-in capital
|
|
58,593
|
|
|
58,375
|
|
|
Retained earnings/(deficit)
|
|
588
|
|
|
—
|
|
|
Accumulated other comprehensive income/(losses)
|
|
(1,628
|
)
|
|
(671
|
)
|
|
Treasury stock, at cost
|
|
(207
|
)
|
|
(31
|
)
|
|
Total shareholders' equity
|
|
57,358
|
|
|
57,685
|
|
|
Noncontrolling interest
|
|
216
|
|
|
208
|
|
|
TOTAL EQUITY
|
|
57,574
|
|
|
57,893
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$
|
120,480
|
|
|
$
|
122,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 10
|
The Kraft Heinz Company
Pro Forma Condensed Combined Statement
of Income
For the Year Ended January 3, 2016
(in millions, except per share data)
(Unaudited)
|
|
|
|
|
|
Kraft Heinz
|
|
Historical
Kraft
(a)
|
|
Pro Forma
Adjustments
|
|
|
|
Pro Forma
|
|
Net sales
|
|
$
|
18,338
|
|
|
$
|
9,109
|
|
|
$
|
—
|
|
|
|
|
$
|
27,447
|
|
Cost of products sold
|
|
12,577
|
|
|
6,103
|
|
|
(381
|
)
|
|
(b)
|
|
18,299
|
|
Gross profit
|
|
5,761
|
|
|
3,006
|
|
|
381
|
|
|
|
|
9,148
|
|
Selling, general and administrative expenses
|
|
3,122
|
|
|
1,532
|
|
|
(41
|
)
|
|
(c)
|
|
4,613
|
|
Operating income
|
|
2,639
|
|
|
1,474
|
|
|
422
|
|
|
|
|
4,535
|
|
Interest expense
|
|
1,321
|
|
|
247
|
|
|
(40
|
)
|
|
(d)
|
|
1,528
|
|
Other expense/(income), net
|
|
305
|
|
|
(16
|
)
|
|
—
|
|
|
|
|
289
|
|
Income/(loss) before income taxes
|
|
1,013
|
|
|
1,243
|
|
|
462
|
|
|
|
|
2,718
|
|
Provision for/(benefit from) income taxes
|
|
366
|
|
|
400
|
|
|
178
|
|
|
(e)
|
|
944
|
|
Net income/(loss)
|
|
647
|
|
|
843
|
|
|
284
|
|
|
|
|
1,774
|
|
Net income/(loss) attributable to noncontrolling interest
|
|
13
|
|
|
—
|
|
|
—
|
|
|
|
|
13
|
|
Net income/(loss) attributable to Kraft Heinz
|
|
634
|
|
|
843
|
|
|
284
|
|
|
|
|
1,761
|
|
Preferred dividends(f)
|
|
900
|
|
|
—
|
|
|
—
|
|
|
|
|
900
|
|
Net income/(loss) attributable to common shareholders
|
|
$
|
(266
|
)
|
|
$
|
843
|
|
|
$
|
284
|
|
|
|
|
$
|
861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common shares outstanding
|
|
|
|
|
|
|
|
|
|
1,202
|
|
Diluted common shares outstanding
|
|
|
|
|
|
|
|
|
|
1,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
$
|
0.72
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Historical Kraft activity reflects activity for the period from Dec.
29, 2014 to July 2, 2015, prior to the 2015 Merger.
|
|
|
|
|
|
(b)
|
|
Represents the change to align Kraft to Kraft Heinz's accounting
policy for postemployment benefit plans and the elimination of
nonrecurring non-cash costs related to the fair value adjustment of
Kraft's inventory in purchase accounting.
|
|
|
|
|
|
(c)
|
|
Reflects 2015 Merger-related adjustments including the change to
align Kraft to Kraft Heinz's accounting policy for postemployment
benefit plans; incremental amortization resulting from the fair
value adjustment of Kraft's definite-lived intangible assets;
incremental compensation expense due to the fair value remeasurement
of certain of Kraft's equity awards; and, nonrecurring deal costs
incurred in connection with the 2015 Merger.
|
|
|
|
|
|
(d)
|
|
Represents the incremental change in interest expense resulting from
the fair value adjustment of Kraft's long-term debt in connection
with the 2015 Merger, including the elimination of the historical
amortization of deferred financing fees and amortization of original
issuance discount.
|
|
|
|
|
|
(e)
|
|
Represents the income tax effect of pro forma adjustments utilizing
a 38.5% weighted average statutory tax rate.
|
|
|
|
|
|
(f)
|
|
Cash distributions for Series A Preferred Stock totaled $900 million
for the year ended Jan. 3, 2016. This reflected one additional
dividend payment versus the prior year made during the fourth
quarter due to the fact that, in connection with the Dec. 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 Dec. 8, 2015.
|
The Kraft Heinz Company
Michael Mullen (media)
Michael.Mullen@kraftheinzcompany.com
or
Christopher Jakubik, CFA (investors)
ir@kraftheinzcompany.com