Maintaining strong net sales growth versus
2019
Effectively managing inflationary
pressures
Expecting 2021 financial performance ahead
of initial expectations
The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) today reported financial results for the second quarter
of 2021.
"Our second quarter results serve as a strong indicator that our
Kraft Heinz team will not only deliver a stronger 2021 than we
initially anticipated, but will come out of the global pandemic
much stronger than we entered,” said Kraft Heinz CEO Miguel
Patricio. “We continue to drive our transformation program forward,
modernizing our brands and better connecting with our consumers.
And while industry challenges, like cost inflation, certainly
remain, the investments we are making in our people, brands, and
capabilities are enabling us to leverage our tremendous scale
through greater agility and build our advantage in the markets we
serve around the world."
Net Sales
In millions
Net Sales
Organic Net Sales(1)
Growth
June 26,
2021
June 27,
2020
% Chg vs
PY
YoY Growth
Rate
Price
Volume/Mix
For the Three Months Ended
United States
$
4,738
$
4,917
(3.6)%
(2.7)%
1.3 pp
(4.0) pp
International
1,413
1,305
8.3%
0.4%
1.9 pp
(1.5) pp
Canada
464
426
8.8%
(3.6)%
1.9 pp
(5.5) pp
Kraft Heinz
$
6,615
$
6,648
(0.5)%
(2.1)%
1.5 pp
(3.6) pp
For the Six Months Ended
United States
$
9,346
$
9,412
(0.7)%
(0.1)%
1.4 pp
(1.5) pp
International
2,807
2,606
7.7%
1.6%
2.1 pp
(0.5) pp
Canada
856
787
8.8%
(0.8)%
3.2 pp
(4.0) pp
Kraft Heinz
$
13,009
$
12,805
1.6%
0.2%
1.6 pp
(1.4) pp
Net Income/(Loss) and Diluted
EPS
In millions, except per share
data
For the Three Months
Ended
For the Six Months
Ended
June 26,
2021
June 27,
2020
% Chg vs
PY
June 26,
2021
June 27,
2020
% Chg vs
PY
Gross profit
$
2,291
$
2,452
(6.6)%
$
4,492
$
4,310
4.2%
Operating income/(loss)
1,235
(1,339)
192.2%
2,324
(569)
508.5%
Net income/(loss)
(25)
(1,652)
98.5%
543
(1,271)
142.7%
Net income/(loss) attributable to common
shareholders
(27)
(1,651)
98.3%
536
(1,273)
142.1%
Diluted EPS
$
(0.02)
$
(1.35)
98.5%
$
0.43
$
(1.04)
141.3%
Adjusted EPS(1)
0.78
0.80
(2.5)%
1.50
1.39
7.9%
Adjusted EBITDA(1)
$
1,706
$
1,799
(5.2)%
$
3,286
$
3,214
2.2%
Q2 2021 Financial Summary
- Net sales decreased 0.5 percent versus the year-ago
period to $6.6 billion, including a favorable 2.3 percentage point
impact from currency and a negative 0.7 percentage point impact
from the divestiture of the Company's nuts business, which closed
in the second quarter of 2021. Net sales versus the comparable 2019
period increased 3.2 percent, including a favorable 0.9 percentage
point impact from currency and a negative 2.7 percentage point
impact from divestitures. Organic Net Sales decreased 2.1
percent versus the prior year period, but increased 5.0 percent
versus the comparable 2019 period with both comparisons negatively
impacted by exiting the McCafé licensing agreement. Pricing was up
1.5 percentage points versus the prior year period with growth
across each reporting segment that reflected favorable trade
expense timing in the United States as well as higher,
inflation-justified pricing in foodservice and retail channels.
These gains more than offset the negative impact from restoring
more normalized promotional activities versus the year-ago period.
Volume/mix declined 3.6 percentage points versus the year-ago
period from a combination of extraordinary COVID-19-related retail
demand in 2020 and a negative 1.1 percentage point impact from
exiting the McCafé licensing agreement. This decline was offset, in
part, by a partial recovery in foodservice channels and retail
consumption trends that remained well ahead of 2019 levels across
all reporting segments.
- Net income/(loss) increased 98.5 percent versus the
year-ago period to a loss of $25 million primarily driven by
favorable changes in non-cash impairment charges versus the
year-ago period. This was partially offset by a higher effective
tax rate versus the prior year period as well as unfavorable
changes in interest expense due to one-time debt extinguishment
costs. Net income/(loss) decreased 105.7 percent versus the
comparable 2019 period. Adjusted EBITDA decreased 5.2
percent versus the year-ago period to $1.7 billion and increased
6.6 percent versus the comparable 2019 period. Excluding a
favorable 1.8 percentage point impact from currency, year-over-year
Adjusted EBITDA benefited from higher pricing, efficiency gains,
and favorable overhead costs versus the prior year period. These
benefits, however, were more than offset by higher cost inflation,
lower shipments, and unfavorable mix versus an exceptionally strong
2020 period.
- Diluted EPS increased to a loss of $0.02, up 98.5
percent versus the prior year, driven by the net income/(loss)
factors discussed above. Adjusted EPS was $0.78, down 2.5
percent versus the prior year, primarily driven by lower Adjusted
EBITDA that more than offset lower interest expense and a lower
effective tax rate versus the prior year period.
- Year-to-date net cash provided by operating activities
was $2.0 billion, down 8.4 percent versus the year-ago period
reflecting a combination of higher cash outflows related to
variable compensation, taxes, and promotional activity versus the
prior year period. These impacts were partially offset by favorable
changes in accounts payable, largely due to purchase timing and
favorable payment terms, favorable changes in cash related to
commodity margin requirements, and higher year-to-date Adjusted
EBITDA versus the year-ago period. Free Cash Flow(1) in the
first six months of 2021 was $1.6 billion, down 18.4 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 performance to date, while the Company continues to
expect it will deliver 2021 Adjusted EBITDA ahead of its strategic
plan, it now expects Adjusted EBITDA to be ahead of 2019 as well.
The Company views comparison to the 2019 period to be more
meaningful than the comparable 2020 period given the exceptional,
COVID-19-related consumer demand changes experienced in the 2020
period.
For the third quarter of 2021, the Company currently expects a
mid-single-digit percentage increase in Organic Net Sales(2) and a
low-single-digit percentage decline in Constant Currency Adjusted
EBITDA(1)(2) versus the third quarter of 2019. This outlook
corresponds to a low-single-digit percentage decline in Organic Net
Sales(2) and a low-teens percentage decline in Constant Currency
Adjusted EBITDA(2) versus the comparable 2020 period.
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)
Third quarter 2021 guidance for
Organic Net Sales and Constant Currency 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 second 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 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," 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, regulations,
and related interpretations and related legal claims or other
regulatory enforcement actions, including additional risks and
uncertainties related to any potential actions resulting from the
Securities and Exchange Commission’s (“SEC”) ongoing investigation,
as well as potential additional subpoenas, litigation, and
regulatory proceedings; 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. The
Company has 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. The Company has
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 Six Months
Ended
June 26, 2021
June 27, 2020
June 26, 2021
June 27, 2020
Net sales
$
6,615
$
6,648
$
13,009
$
12,805
Cost of products sold
4,324
4,196
8,517
8,495
Gross profit
2,291
2,452
4,492
4,310
Selling, general and administrative
expenses, excluding impairment losses
943
918
1,825
1,780
Goodwill impairment losses
35
1,817
265
2,043
Intangible asset impairment losses
78
1,056
78
1,056
Selling, general and administrative
expenses
1,056
3,791
2,168
4,879
Operating income/(loss)
1,235
(1,339)
2,324
(569)
Interest expense
613
442
1,028
752
Other expense/(income)
(23)
(78)
(53)
(159)
Income/(loss) before income taxes
645
(1,703)
1,349
(1,162)
Provision for/(benefit from) income
taxes
670
(51)
806
109
Net income/(loss)
(25)
(1,652)
543
(1,271)
Net income/(loss) attributable to
noncontrolling interest
2
(1)
7
2
Net income/(loss) attributable to common
shareholders
$
(27)
$
(1,651)
$
536
$
(1,273)
Basic shares outstanding
1,224
1,223
1,223
1,222
Diluted shares outstanding
1,224
1,223
1,235
1,222
Per share data applicable to common
shareholders:
Basic earnings/(loss) per share
$
(0.02)
$
(1.35)
$
0.44
$
(1.04)
Diluted earnings/(loss) per share
(0.02)
(1.35)
0.43
(1.04)
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
June 26, 2021
United States
$
4,738
$
—
$
197
$
4,541
International
1,413
108
5
1,300
Canada
464
53
1
410
Kraft Heinz
$
6,615
$
161
$
203
$
6,251
June 27, 2020
United States
$
4,917
$
—
$
251
$
4,666
International
1,305
5
5
1,295
Canada
426
—
1
425
Kraft Heinz
$
6,648
$
5
$
257
$
6,386
Year-over-year growth rates
United States
(3.6)%
0.0 pp
(0.9) pp
(2.7)%
1.3 pp
(4.0) pp
International
8.3%
7.9 pp
0.0 pp
0.4%
1.9 pp
(1.5) pp
Canada
8.8%
12.4 pp
0.0 pp
(3.6)%
1.9 pp
(5.5) pp
Kraft Heinz
(0.5)%
2.3 pp
(0.7) pp
(2.1)%
1.5 pp
(3.6) pp
Schedule
3
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Six Months Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions
and
Divestitures
Organic Net
Sales
Price
Volume/Mix
June 26, 2021
United States
$
9,346
$
—
$
446
$
8,900
International
2,807
172
9
2,626
Canada
856
75
1
780
Kraft Heinz
$
13,009
$
247
$
456
$
12,306
June 27, 2020
United States
$
9,412
$
—
$
499
$
8,913
International
2,606
11
9
2,586
Canada
787
—
2
785
Kraft Heinz
$
12,805
$
11
$
510
$
12,284
Year-over-year growth rates
United States
(0.7)%
0.0 pp
(0.6) pp
(0.1)%
1.4 pp
(1.5) pp
International
7.7%
6.1 pp
0.0 pp
1.6%
2.1 pp
(0.5) pp
Canada
8.8%
9.6 pp
0.0 pp
(0.8)%
3.2 pp
(4.0) pp
Kraft Heinz
1.6%
1.8 pp
(0.4) pp
0.2%
1.6 pp
(1.4) 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
June 26, 2021
United States
$
4,738
$
—
$
197
$
4,541
International
1,413
29
5
1,379
Canada
464
38
1
425
Kraft Heinz
$
6,615
$
67
$
203
$
6,345
June 29, 2019
United States
$
4,533
$
—
$
224
$
4,309
International
1,313
7
6
1,300
Canada
560
—
128
432
Kraft Heinz
$
6,406
$
7
$
358
$
6,041
Year-over-year growth rates
United States
4.5%
0.0 pp
(0.9) pp
5.4%
International
7.5%
1.6 pp
(0.2) pp
6.1%
Canada
(17.2)%
6.8 pp
(22.3) pp
(1.7)%
Kraft Heinz
3.2%
0.9 pp
(2.7) pp
5.0%
Schedule
5
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Six Months Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions
and
Divestitures
Organic Net
Sales
June 26, 2021
United States
$
9,346
$
—
$
446
$
8,900
International
2,807
48
9
2,750
Canada
856
57
1
798
Kraft Heinz
$
13,009
$
105
$
456
$
12,448
June 29, 2019
United States
$
8,757
$
—
$
450
$
8,307
International
2,598
14
25
2,559
Canada
1,010
—
219
791
Kraft Heinz
$
12,365
$
14
$
694
$
11,657
Year-over-year growth rates
United States
6.7%
0.0 pp
(0.4) pp
7.1%
International
8.0%
1.2 pp
(0.7) pp
7.5%
Canada
(15.2)%
5.6 pp
(21.7) pp
0.9%
Kraft Heinz
5.2%
0.7 pp
(2.3) pp
6.8%
Schedule
6
The Kraft Heinz Company
Reconciliation of Net
Income/(Loss) to Adjusted EBITDA
(dollars in millions)
(Unaudited)
For the Three Months
Ended
June 26, 2021
June 27, 2020
June 29, 2019
Net income/(loss)
$
(25)
$
(1,652)
$
448
Interest expense
613
442
316
Other expense/(income)
(23)
(78)
(133)
Provision for/(benefit from) income
taxes
670
(51)
103
Operating income/(loss)
1,235
(1,339)
734
Depreciation and amortization (excluding
restructuring activities)
227
247
253
Restructuring activities
19
4
14
Deal costs
(1)
—
5
Unrealized losses/(gains) on commodity
hedges
(2)
(26)
(10)
Impairment losses
113
2,873
598
Certain non-ordinary course legal and
regulatory matters
62
—
—
Equity award compensation expense
(excluding restructuring activities)
53
40
6
Adjusted EBITDA
$
1,706
$
1,799
$
1,600
Segment Adjusted EBITDA:
United States
$
1,374
$
1,478
$
1,257
International
286
275
267
Canada
117
110
143
General corporate expenses
(71)
(64)
(67)
Adjusted EBITDA
$
1,706
$
1,799
$
1,600
Schedule
7
The Kraft Heinz Company
Reconciliation of Net
Income/(Loss) to Adjusted EBITDA
(dollars in millions)
(Unaudited)
For the Six Months
Ended
June 26, 2021
June 27, 2020
June 29, 2019
Net income/(loss)
$
543
$
(1,271)
$
852
Interest expense
1,028
752
637
Other expense/(income)
(53)
(159)
(513)
Provision for/(benefit from) income
taxes
806
109
320
Operating income/(loss)
2,324
(569)
1,296
Depreciation and amortization (excluding
restructuring activities)
449
490
487
Restructuring activities
37
4
41
Deal costs
6
—
13
Unrealized losses/(gains) on commodity
hedges
(39)
117
(39)
Impairment losses
343
3,099
1,218
Certain non-ordinary course legal and
regulatory matters
62
—
—
Equity award compensation expense
(excluding restructuring activities)
104
73
15
Adjusted EBITDA
$
3,286
$
3,214
$
3,031
Segment Adjusted EBITDA:
United States
$
2,654
$
2,687
$
2,396
International
569
520
505
Canada
204
165
264
General corporate expenses
(141)
(158)
(134)
Adjusted EBITDA
$
3,286
$
3,214
$
3,031
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
June 26, 2021
United States
$
1,374
$
—
$
1,374
International
286
23
263
Canada
117
14
103
General corporate expenses
(71)
(1)
(70)
Kraft Heinz
$
1,706
$
36
$
1,670
June 27, 2020
United States
$
1,478
$
—
$
1,478
International
275
2
273
Canada
110
—
110
General corporate expenses
(64)
—
(64)
Kraft Heinz
$
1,799
$
2
$
1,797
Year-over-year growth rates
United States
(7.0)%
0.0 pp
(7.0)%
International
4.1%
7.5 pp
(3.4)%
Canada
5.6%
12.1 pp
(6.5)%
General corporate expenses
10.9%
2.2 pp
8.7%
Kraft Heinz
(5.2)%
1.8 pp
(7.0)%
Schedule
9
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA
to Constant Currency Adjusted EBITDA
For the Six Months Ended
(dollars in millions)
(Unaudited)
Adjusted EBITDA
Currency
Constant Currency
Adjusted EBITDA
June 26, 2021
United States
$
2,654
$
—
$
2,654
International
569
39
530
Canada
204
19
185
General corporate expenses
(141)
(2)
(139)
Kraft Heinz
$
3,286
$
56
$
3,230
June 27, 2020
United States
$
2,687
$
—
$
2,687
International
520
5
515
Canada
165
—
165
General corporate expenses
(158)
—
(158)
Kraft Heinz
$
3,214
$
5
$
3,209
Year-over-year growth rates
United States
(1.2)%
0.0 pp
(1.2)%
International
9.4%
6.4 pp
3.0%
Canada
23.0%
11.3 pp
11.7%
General corporate expenses
(11.0)%
1.7 pp
(12.7)%
Kraft Heinz
2.2%
1.5 pp
0.7%
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
June 26, 2021
United States
$
1,374
$
—
$
1,374
International
286
11
275
Canada
117
10
107
General corporate expenses
(71)
—
(71)
Kraft Heinz
$
1,706
$
21
$
1,685
June 29, 2019
United States
$
1,257
$
—
$
1,257
International
267
3
264
Canada
143
—
143
General corporate expenses
(67)
—
(67)
Kraft Heinz
$
1,600
$
3
$
1,597
Year-over-year growth rates
United States
9.3%
0.0 pp
9.3%
International
7.4%
3.4 pp
4.0%
Canada
(18.9)%
6.6 pp
(25.5)%
General corporate expenses
6.3%
1.1 pp
5.2%
Kraft Heinz
6.6%
1.1 pp
5.5%
Schedule
11
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA
to Constant Currency Adjusted EBITDA
For the Six Months Ended
(dollars in millions)
(Unaudited)
Adjusted EBITDA
Currency
Constant Currency
Adjusted EBITDA
June 26, 2021
United States
$
2,654
$
—
$
2,654
International
569
22
547
Canada
204
14
190
General corporate expenses
(141)
(1)
(140)
Kraft Heinz
$
3,286
$
35
$
3,251
June 29, 2019
United States
$
2,396
$
—
$
2,396
International
505
7
498
Canada
264
—
264
General corporate expenses
(134)
—
(134)
Kraft Heinz
$
3,031
$
7
$
3,024
Year-over-year growth rates
United States
10.8%
0.0 pp
10.8%
International
12.6%
3.0 pp
9.6%
Canada
(22.8)%
5.3 pp
(28.1)%
General corporate expenses
5.0%
1.2 pp
3.8%
Kraft Heinz
8.4%
0.9 pp
7.5%
Schedule
12
The Kraft Heinz Company
Reconciliation of Diluted EPS to
Adjusted EPS
(Unaudited)
For the Three Months
Ended
For the Six Months
Ended
June 26, 2021
June 27, 2020
June 26, 2021
June 27, 2020
Diluted EPS
$
(0.02)
$
(1.35)
$
0.43
$
(1.04)
Restructuring activities(a)
0.01
—
0.02
—
Unrealized losses/(gains) on commodity
hedges(b)
—
(0.02)
(0.02)
0.07
Impairment losses(c)
0.07
2.16
0.26
2.35
Certain non-ordinary course legal and
regulatory matters(d)
0.05
—
0.05
—
Losses/(gains) on sale of business(e)
0.27
—
0.29
—
Debt prepayment and extinguishment
costs(f)
0.21
0.07
0.28
0.07
Certain significant discrete income tax
items(g)
0.19
(0.06)
0.19
(0.06)
Adjusted EPS
$
0.78
$
0.80
$
1.50
$
1.39
(a)
Gross expenses included in
restructuring activities were $19 million ($15 million after-tax)
for the three months and $37 million ($28 million after-tax) for
the six months ended June 26, 2021 and $4 million ($3 million after
tax) for the three and six months ended June 27, 2020 and were
recorded in the following income statement line items:
•
Cost of products sold included
expenses of $1 million for the three months and $4 million for the
six months ended June 26, 2021 and income of $2 million for the
three months and $1 million for the six months ended June 27, 2020;
and
•
SG&A included expenses of $18
million for the three months and $33 million for the six months
ended June 26, 2021 and $6 million for the three months and $5
million for the six months ended June 27, 2020.
(b)
Gross expenses/(income) included
in unrealized losses/(gains) on commodity hedges were income of $2
million ($2 million after-tax) for the three months and $39 million
($29 million after-tax) for the six months ended June 26, 2021 and
income of $26 million ($19 million after-tax) for the three months
and expenses of $117 million ($89 million after-tax) for the six
months ended June 27, 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 $35
million ($35 million after-tax) for the three months and $265
million ($265 million after-tax) for the six months ended June 26,
2021 and $1.8 billion ($1.8 billion after-tax) for the three months
and $2.0 billion ($2.0 billion after-tax) for the six months ended
June 27, 2020; and
•
Intangible asset impairment
losses of $78 million ($59 million after-tax) for the three and six
months ended June 26, 2021 and $1.1 billion ($829 million
after-tax) for the three and six months ended June 27, 2020.
(d)
Gross expenses included in
certain non-ordinary course legal and regulatory matters were $62
million ($62 million after-tax) for the three and six months ended
June 26, 2021 and were recorded in SG&A.
(e)
Gross expenses included in
losses/(gains) on sale of business were $46 million ($333 million
after-tax) for the three months and $65 million ($352 million
after-tax) for the six months ended June 26, 2021 and $2 million
($2 million after-tax) for the six months ended June 27, 2020 and
were recorded in other expense/(income).
(f)
Gross expenses included in debt
prepayment and extinguishment costs were $318 million ($255 million
after-tax) for the three months and $424 million ($335 million
after-tax) for the six months ended June 26, 2021 and $109 million
($82 million after-tax) for the three and six months ended June 27,
2020 and were recorded in interest expense.
(g)
Certain significant discrete
income tax items were an expense of $236 million for the three and
six months ended June 26, 2021 and a benefit of $81 million for the
three and six months ended June 27, 2020. The expense 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
June 26, 2021
June 27, 2020
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)
$
0.88
$
0.92
$
(0.04)
Results of divested operations
0.03
0.04
(0.01)
Interest expense
(0.19)
(0.21)
0.02
Other expense/(income)(b)
0.04
0.05
(0.01)
Effective tax rate
0.02
—
0.02
Adjusted EPS
$
0.78
$
0.80
$
(0.02)
(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 June 26, 2021 and June 27, 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
June 27, 2020.
Schedule
14
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Six Months
Ended
June 26, 2021
June 27, 2020
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)
$
1.69
$
1.64
$
0.05
Results of divested operations
0.06
0.06
—
Interest expense
(0.39)
(0.42)
0.03
Other expense/(income)(b)
0.08
0.11
(0.03)
Effective tax rate
0.08
—
0.08
Effect of dilutive equity awards(c)
(0.02)
—
(0.02)
Adjusted EPS
$
1.50
$
1.39
$
0.11
(a)
Includes non-cash amortization of
definite-lived intangible assets, which accounted for a negative
impact to Adjusted EPS from results of operations of $0.08 for the
six months ended June 26, 2021 and $0.09 for the six months ended
June 27, 2020.
(b)
Includes non-cash amortization of
prior service credits, which accounted for a benefit to Adjusted
EPS from other expense/(income) of $0.04 for the six months ended
June 27, 2020.
(c)
Represents the impact of
excluding the dilutive effects of equity awards for the six months
ended June 27, 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)
June 26, 2021
December 26, 2020
ASSETS
Cash and cash equivalents
$
3,941
$
3,417
Trade receivables, net
2,008
2,063
Inventories
2,820
2,773
Prepaid expenses
149
132
Other current assets
624
574
Assets held for sale
1,843
1,863
Total current assets
11,385
10,822
Property, plant and equipment, net
6,611
6,876
Goodwill
31,477
33,089
Intangible assets, net
44,941
46,667
Other non-current assets
2,624
2,376
TOTAL ASSETS
$
97,038
$
99,830
LIABILITIES AND EQUITY
Commercial paper and other short-term
debt
$
6
$
6
Current portion of long-term debt
1,604
230
Trade payables
4,391
4,304
Accrued marketing
968
946
Interest payable
322
358
Other current liabilities
2,577
2,200
Liabilities held for sale
11
17
Total current liabilities
9,879
8,061
Long-term debt
23,545
28,070
Deferred income taxes
11,377
11,462
Accrued postemployment costs
248
243
Other non-current liabilities
1,847
1,751
TOTAL LIABILITIES
46,896
49,587
Equity:
Common stock, $0.01 par value
12
12
Additional paid-in capital
54,255
55,096
Retained earnings/(deficit)
(2,158)
(2,694)
Accumulated other comprehensive
income/(losses)
(1,720)
(1,967)
Treasury stock, at cost
(392)
(344)
Total shareholders' equity
49,997
50,103
Noncontrolling interest
145
140
TOTAL EQUITY
50,142
50,243
TOTAL LIABILITIES AND EQUITY
$
97,038
$
99,830
Schedule
16
The Kraft Heinz Company
Condensed Consolidated Statements
of Cash Flow
(in millions)
(Unaudited)
For the Six Months
Ended
June 26, 2021
June 27, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)
$
543
$
(1,271)
Adjustments to reconcile net income/(loss)
to operating cash flows:
Depreciation and amortization
449
490
Amortization of postemployment benefit
plans prior service costs/(credits)
(3)
(61)
Equity award compensation expense
104
73
Deferred income tax
provision/(benefit)
(114)
(489)
Postemployment benefit plan
contributions
(14)
(15)
Goodwill and intangible asset impairment
losses
343
3,099
Nonmonetary currency devaluation
4
4
Loss/(gain) on sale of business
65
2
Other items, net
278
204
Changes in current assets and
liabilities:
Trade receivables
62
(60)
Inventories
(227)
(202)
Accounts payable
220
(54)
Other current assets
(67)
(138)
Other current liabilities
386
634
Net cash provided by/(used for) operating
activities
2,029
2,216
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(431)
(258)
Proceeds from sale of business, net of
cash disposed
3,435
—
Other investing activities, net
23
21
Net cash provided by/(used for) investing
activities
3,027
(237)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
(3,090)
(3,824)
Proceeds from issuance of long-term
debt
—
3,500
Debt prepayment and extinguishment
costs
(433)
(101)
Proceeds from revolving credit
facility
—
4,000
Repayments of revolving credit
facility
—
(4,000)
Dividends paid
(979)
(977)
Other financing activities, net
(53)
(35)
Net cash provided by/(used for) financing
activities
(4,555)
(1,437)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
23
(9)
Cash, cash equivalents, and restricted
cash
Net increase/(decrease)
524
533
Balance at beginning of period
3,418
2,280
Balance at end of period
$
3,942
$
2,813
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 Six Months
Ended
June 26, 2021
June 27, 2020
Net cash provided by/(used for) operating
activities
$
2,029
$
2,216
Capital expenditures
(431)
(258)
Free Cash Flow
$
1,598
$
1,958
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210804005216/en/
Michael Mullen (media) Michael.Mullen@kraftheinz.com
Christopher Jakubik, CFA (investors) ir@kraftheinz.com
Kraft Heinz (NASDAQ:KHC)
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