Reaffirms Full Year Outlook for Organic Net
Sales(1)(2) and Raises Lower End of Previous Adjusted EBITDA(1)(2)
Range
The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) today reported financial results for the third quarter
of 2022.
"We delivered another quarter of strong results as we continue
to successfully navigate a volatile environment," said Kraft Heinz
CEO and Chair of the Board Miguel Patricio. "We are driving net
sales growth across both North America and International segments,
fueled by each of our three pillars of growth: our GROW platforms
in North America, Foodservice, and Emerging Markets. At the same
time, the consumer remains our top priority. We're dedicated to
providing solutions for consumers by leveraging the power of our
brands to deliver on value at a time when consumers need it most.
I'm very proud of what we have been able to deliver thus far, but
our work continues. We remain focused on advancing our long-term
strategy, and believe we are well-positioned to drive profitable
growth and generate attractive returns for our stockholders."
Net Sales
In millions
Net Sales
Organic Net Sales(1)
September 24, 2022
September 25, 2021
% Chg vs PY
YoY Growth Rate
Price
Volume/ Mix
For the Three Months Ended
North America
$
5,016
$
4,941
1.5%
10.9%
15.3 pp
(4.4) pp
International
1,489
1,383
7.7%
13.9%
15.7 pp
(1.8) pp
Kraft Heinz
$
6,505
$
6,324
2.9%
11.6%
15.4 pp
(3.8) pp
For the Nine Months Ended
North America
$
14,656
$
15,143
(3.2)%
9.2%
12.6 pp
(3.4) pp
International
4,448
4,190
6.2%
10.5%
11.6 pp
(1.1) pp
Kraft Heinz
$
19,104
$
19,333
(1.2)%
9.5%
12.3 pp
(2.8) pp
Net Income/(Loss) and Diluted
EPS
In millions, except per share
data
For the Three Months
Ended
For the Nine Months
Ended
September 24, 2022
September 25, 2021
% Chg vs PY
September 24, 2022
September 25,
2021
% Chg vs PY
Gross profit
$
1,843
$
2,028
(9.1)%
$
5,758
$
6,520
(11.7)%
Operating income/(loss)
751
1,156
(35.0)%
2,408
3,480
(30.8)%
Net income/(loss)
435
736
(40.8)%
1,481
1,279
15.8%
Net income/(loss) attributable to common
shareholders
432
733
(41.0)%
1,473
1,269
16.1%
Diluted EPS
$
0.35
$
0.59
(40.7)%
$
1.19
$
1.03
15.5%
Adjusted EPS(1)
0.63
0.65
(3.1)%
1.93
2.15
(10.2)%
Adjusted EBITDA(1)
$
1,398
$
1,479
(5.5)%
$
4,260
$
4,765
(10.6)%
Q3 2022 Financial Summary
- Net sales increased 2.9 percent versus the year-ago
period to $6.5 billion, including a negative 6.4 percentage point
impact from divestitures and acquisitions and a negative 2.3
percentage point impact from currency. Organic Net Sales(1)
increased 11.6 percent versus the prior year period. Price
increased 15.4 percentage points versus the prior year period, with
growth in both reportable segments that was primarily driven by
price increases to mitigate rising input costs. Volume/mix declined
3.8 percentage points versus the prior year period, with declines
in both reportable segments that were primarily driven by supply
constraints and elasticity impacts from pricing actions.
- Net income/(loss) decreased 40.8 percent versus the
year-ago period to $435 million primarily driven by higher non-cash
impairment losses, unfavorable changes in other expense/(income),
and lower Adjusted EBITDA versus the prior year period. These
factors were partially offset by lower interest expense primarily
due to debt extinguishment costs in the prior year period.
Adjusted EBITDA(1) decreased 5.5 percent versus the year-ago
period to $1.4 billion, with performance including an unfavorable
impact from divestitures and acquisitions of 6.1 percentage points
and an unfavorable 1.4 percentage point impact from currency. The
remaining year-over-year increase in Adjusted EBITDA is a result of
higher pricing and efficiency gains that more than offset higher
supply chain costs (reflecting inflationary pressure in
procurement, logistics and manufacturing costs) and higher
commodity costs (mainly in dairy, packaging materials, soybean and
vegetable oils, and energy), as well as unfavorable volume/mix.
Results continue to reflect the difference in timing between
inflationary pressures and the mitigating actions that were
taken.
- Diluted EPS was $0.35, down 40.7 percent versus the
prior year period, driven by the net income/(loss) factors
discussed above. Adjusted EPS(1) was $0.63, down 3.1 percent
versus the prior year period, primarily driven by lower Adjusted
EBITDA, including a negative $0.06 impact from divestitures, and an
unfavorable impact from other expense/(income). These factors more
than offset lower interest expense versus the prior year
period.
- Year-to-date net cash provided by operating activities
was $1.5 billion, down 38.0 percent versus the year-ago period,
primarily driven by higher cash outflows for inventories primarily
related to stock rebuilding and increased input costs, and lower
Adjusted EBITDA. These impacts were partially offset by lower cash
outflows for interest primarily due to prior year reduction of
long-term debt and lower cash outflows for variable compensation
versus the year ago period. Year-to date Free Cash Flow(1)
was $885 million, down 50.7 percent versus the comparable prior
year period due to the same drivers of net cash provided by
operating activities.
Outlook
The Company continues to expect strong financial performance for
2022 and reaffirms 2022 Organic Net Sales(2) growth of a
high-single-digit percentage increase versus the prior year period.
The Company has also raised the lower end of its expected 2022
Adjusted EBITDA(2) range. It now expects 2022 Adjusted EBITDA to be
$5.9 billion to $6.0 billion as compared to the prior expectation
of $5.8 billion to $6.0 billion. Due to uncertainty with regard to
the potential impact of continued upstream supply chain challenges
faced by the industry, the Company anticipates coming in at the
lower end of this new Adjusted EBITDA range. The full year Adjusted
EBITDA outlook reflects a 53rd week in 2022, an increase in foreign
currency headwinds based on current exchange rates, the impact of
divestitures versus the prior year, strong Organic Net Sales, as
well as the Company's ongoing efforts to manage inflationary
pressures, including unlocking gross efficiencies, as it continues
to invest in long-term growth.
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)
Guidance for Organic Net Sales
and Adjusted EBITDA is provided on a non-GAAP basis only because
certain information necessary to calculate the most comparable GAAP
measure is unavailable due to the uncertainty and inherent
difficulty of predicting the occurrence and the future financial
statement impact of such items impacting comparability, including,
but not limited to, the impact of currency, acquisitions and
divestitures, divestiture-related license income, 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, among
other items. Therefore, as a result of the uncertainty and
variability of the nature and amount of future adjustments, which
could be significant, the Company is unable to provide a
reconciliation of these measures without unreasonable effort.
Earnings Discussion and Webcast Information
A pre-recorded management discussion of The Kraft Heinz
Company's third quarter 2022 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 2021 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 “anticipate,” “believe,” “continue,”
“could,” “expect,” “plan,” “will,” “guidance,” and “outlook,” 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; climate change and legal or
regulatory responses; the Company’s ability to identify, complete,
or realize the benefits from strategic acquisitions, alliances,
divestitures, joint ventures, or other investments; the Company's
ability to successfully execute its strategic initiatives; the
impacts of the Company's international operations; the Company's
ability to protect intellectual property rights; the Company's
ownership structure; the Company’s ability to realize the
anticipated benefits from prior or future streamlining actions to
reduce fixed costs, simplify or improve processes, and improve its
competitiveness; the Company's level of indebtedness, as well as
our ability to comply with covenants under our debt instruments;
additional impairments of the carrying amounts of goodwill or other
indefinite-lived intangible assets; foreign exchange rate
fluctuations; volatility in commodity, energy, and other input
costs; volatility in the market value of all or a portion of the
commodity derivatives we use; compliance with laws and regulations
and related legal claims or regulatory enforcement actions; failure
to maintain an effective system of internal controls; a downgrade
in the Company's credit rating; the impact of future sales of the
Company's common stock in the public market; the Company’s ability
to continue to pay a regular dividend and the amounts of any such
dividends; unanticipated business disruptions and natural events in
the locations in which the Company or the Company's customers,
suppliers, distributors, or regulators operate; economic and
political conditions in the United States and in various other
nations where the Company does business (including inflationary
pressures, general economic slowdown, or recession and the Russia
and Ukraine conflict and its regional and global ramifications);
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 Securities and Exchange Commission. 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 in this press release
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”).
To supplement the financial information provided, the Company
has presented Organic Net Sales, Adjusted EBITDA, Constant Currency
Adjusted EBITDA, Adjusted EPS, Free Cash Flow, Adjusted Gross
Profit, and Adjusted Net Income/(Loss), 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), gross profit,
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. The Company believes:
- Organic Net Sales, Adjusted EBITDA, Constant Currency Adjusted
EBITDA, Adjusted Gross Profit, Adjusted Net Income/(Loss), and
Adjusted EPS provide important comparability of underlying
operating results, allowing investors and management to assess the
Company’s operating performance on a consistent basis; and
- 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.
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.
Definitions
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.
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 divestiture-related license income (e.g.,
income related to the sale of licenses in connection with the
Cheese Transaction), 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 (Constant Currency Adjusted EBITDA).
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 Gross Profit, Adjusted Net Income/(Loss), and
Adjusted EPS are defined as gross profit, net income/(loss),
and diluted earnings per share, respectively, 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.
Free Cash Flow is defined as net cash provided by/(used
for) operating activities less capital expenditures. 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.
Schedule
1
The Kraft Heinz Company
Condensed Consolidated Statements
of Income
(in millions, except per share
data)
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 24, 2022
September 25, 2021
September 24, 2022
September 25, 2021
Net sales
$
6,505
$
6,324
$
19,104
$
19,333
Cost of products sold
4,662
4,296
13,346
12,813
Gross profit
1,843
2,028
5,758
6,520
Selling, general and administrative
expenses, excluding impairment losses
798
872
2,437
2,697
Goodwill impairment losses
220
—
444
265
Intangible asset impairment losses
74
—
469
78
Selling, general and administrative
expenses
1,092
872
3,350
3,040
Operating income/(loss)
751
1,156
2,408
3,480
Interest expense
228
415
704
1,443
Other expense/(income)
(22)
(138)
(211)
(191)
Income/(loss) before income taxes
545
879
1,915
2,228
Provision for/(benefit from) income
taxes
110
143
434
949
Net income/(loss)
435
736
1,481
1,279
Net income/(loss) attributable to
noncontrolling interest
3
3
8
10
Net income/(loss) attributable to common
shareholders
$
432
$
733
$
1,473
$
1,269
Basic shares outstanding
1,227
1,225
1,226
1,224
Diluted shares outstanding
1,235
1,236
1,235
1,235
Per share data applicable to common
shareholders:
Basic earnings/(loss) per share
$
0.35
$
0.60
$
1.20
$
1.04
Diluted earnings/(loss) per share
0.35
0.59
1.19
1.03
Schedule
2
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Three Months Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions and
Divestitures
Organic Net Sales
Price
Volume/Mix
September 24, 2022
North America
$
5,016
$
(14)
$
—
$
5,030
International
1,489
(131)
68
1,552
Kraft Heinz
$
6,505
$
(145)
$
68
$
6,582
September 25, 2021
North America
$
4,941
$
—
$
404
$
4,537
International
1,383
6
16
1,361
Kraft Heinz
$
6,324
$
6
$
420
$
5,898
Year-over-year growth rates
North America
1.5%
(0.3) pp
(9.1) pp
10.9%
15.3 pp
(4.4) pp
International
7.7%
(9.8) pp
3.6 pp
13.9%
15.7 pp
(1.8) pp
Kraft Heinz
2.9%
(2.3) pp
(6.4) pp
11.6%
15.4 pp
(3.8) pp
Schedule
3
The Kraft Heinz Company
Reconciliation of Net Sales to
Organic Net Sales
For the Nine Months Ended
(dollars in millions)
(Unaudited)
Net Sales
Currency
Acquisitions and
Divestitures
Organic Net Sales
Price
Volume/Mix
September 24, 2022
North America
$
14,656
$
(32)
$
—
$
14,688
International
4,448
(287)
179
4,556
Kraft Heinz
$
19,104
$
(319)
$
179
$
19,244
September 25, 2021
North America
$
15,143
$
—
$
1,693
$
13,450
International
4,190
14
54
4,122
Kraft Heinz
$
19,333
$
14
$
1,747
$
17,572
Year-over-year growth rates
North America
(3.2)%
(0.2) pp
(12.2) pp
9.2%
12.6 pp
(3.4) pp
International
6.2%
(7.2) pp
2.9 pp
10.5%
11.6 pp
(1.1) pp
Kraft Heinz
(1.2)%
(1.7) pp
(9.0) pp
9.5%
12.3 pp
(2.8) pp
Schedule
4
The Kraft Heinz Company
Reconciliation of Net
Income/(Loss) to Adjusted EBITDA
(dollars in millions)
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 24, 2022
September 25, 2021
September 24, 2022
September 25, 2021
Net income/(loss)
$
435
$
736
$
1,481
$
1,279
Interest expense
228
415
704
1,443
Other expense/(income)
(22)
(138)
(211)
(191)
Provision for/(benefit from) income
taxes
110
143
434
949
Operating income/(loss)
751
1,156
2,408
3,480
Depreciation and amortization (excluding
restructuring activities)
227
228
676
677
Divestiture-related license income
(14)
—
(41)
—
Restructuring activities
8
15
38
52
Deal costs
—
2
8
8
Unrealized losses/(gains) on commodity
hedges
84
27
65
(12)
Impairment losses
314
—
999
343
Certain non-ordinary course legal and
regulatory matters
—
—
—
62
Equity award compensation expense
(excluding restructuring activities)
28
51
107
155
Adjusted EBITDA
$
1,398
$
1,479
$
4,260
$
4,765
Segment Adjusted EBITDA:
North America
$
1,213
$
1,273
$
3,734
$
4,131
International
243
252
733
821
General corporate expenses
(58)
(46)
(207)
(187)
Adjusted EBITDA
$
1,398
$
1,479
$
4,260
$
4,765
Schedule
5
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA
to Constant Currency Adjusted EBITDA
For the Three Months Ended
(dollars in millions)
(Unaudited)
Adjusted EBITDA
Currency
Constant Currency Adjusted
EBITDA
September 24, 2022
North America
$
1,213
$
(2)
$
1,215
International
243
(21)
264
General corporate expenses
(58)
3
(61)
Kraft Heinz
$
1,398
$
(20)
$
1,418
September 25, 2021
North America
$
1,273
$
—
$
1,273
International
252
1
251
General corporate expenses
(46)
—
(46)
Kraft Heinz
$
1,479
$
1
$
1,478
Year-over-year growth rates
North America
(4.8)%
(0.2) pp
(4.6)%
International
(3.7)%
(8.6) pp
4.9%
General corporate expenses
24.8%
(7.1) pp
31.9%
Kraft Heinz
(5.5)%
(1.4) pp
(4.1)%
Schedule
6
The Kraft Heinz Company
Reconciliation of Adjusted EBITDA
to Constant Currency Adjusted EBITDA
For the Nine Months Ended
(dollars in millions)
(Unaudited)
Adjusted EBITDA
Currency
Constant Currency Adjusted
EBITDA
September 24, 2022
North America
$
3,734
$
(6)
$
3,740
International
733
(45)
778
General corporate expenses
(207)
7
(214)
Kraft Heinz
$
4,260
$
(44)
$
4,304
September 25, 2021
North America
$
4,131
$
—
$
4,131
International
821
4
817
General corporate expenses
(187)
—
(187)
Kraft Heinz
$
4,765
$
4
$
4,761
Year-over-year growth rates
North America
(9.6)%
(0.1) pp
(9.5)%
International
(10.8)%
(5.9) pp
(4.9)%
General corporate expenses
10.5%
(3.6) pp
14.1%
Kraft Heinz
(10.6)%
(1.0) pp
(9.6)%
Schedule
7
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Three Months
Ended
September 24, 2022
Gross profit
Selling, general and
administrative expenses
Operating income/
(loss)
Interest expense
Other expense/
(income)
Income/ (loss) before income
taxes
Provision for/ (benefit from)
income taxes
Net income/ (loss)
Net income/ (loss)
attributable to noncontrolling interest
Net income/ (loss)
attributable to common shareholders
Diluted EPS
GAAP Results
$
1,843
$
1,092
$
751
$
228
$
(22)
$
545
$
110
$
435
$
3
$
432
$
0.35
Items Affecting Comparability
Restructuring activities
5
(3)
8
—
1
7
1
6
—
6
0.01
Unrealized losses/(gains) on commodity
hedges
84
—
84
—
—
84
21
63
—
63
0.05
Impairment losses
20
(294)
314
—
—
314
24
290
—
290
0.23
Losses/(gains) on sale of business
—
—
—
—
—
—
7
(7)
—
(7)
(0.01)
Nonmonetary currency devaluation
—
—
—
—
(6)
6
—
6
—
6
0.01
Debt prepayment and extinguishment
costs
—
—
—
3
—
(3)
6
(9)
—
(9)
(0.01)
Adjusted Non-GAAP Results
$
1,952
$
784
$
0.63
Schedule
8
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Three Months
Ended
September 25, 2021
Gross profit
Selling, general and
administrative expenses
Operating income/
(loss)
Interest expense
Other expense/
(income)
Income/ (loss) before income
taxes
Provision for/ (benefit from)
income taxes
Net income/ (loss)
Net income/ (loss)
attributable to noncontrolling interest
Net income/ (loss)
attributable to common shareholders
Diluted EPS
GAAP Results
$
2,028
$
872
$
1,156
$
415
$
(138)
$
879
$
143
$
736
$
3
$
733
$
0.59
Items Affecting Comparability
Restructuring activities
—
(15)
15
—
—
15
3
12
—
12
0.01
Deal Costs
—
(2)
2
—
—
2
1
1
—
1
—
Unrealized losses/(gains) on commodity
hedges
27
—
27
—
—
27
7
20
—
20
0.02
Losses/(gains) on sale of business
—
—
—
—
76
(76)
(4)
(72)
—
(72)
(0.06)
Debt prepayment and extinguishment
costs
—
—
—
(147)
—
147
32
115
—
115
0.09
Certain significant discrete income tax
items
—
—
—
—
—
—
1
(1)
—
(1)
—
Adjusted Non-GAAP Results
$
2,055
$
811
$
0.65
Schedule
9
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Nine Months
Ended
September 24, 2022
Gross profit
Selling, general and
administrative expenses
Operating income/
(loss)
Interest expense
Other expense/
(income)
Income/ (loss) before income
taxes
Provision for/ (benefit from)
income taxes
Net income/ (loss)
Net income/ (loss)
attributable to noncontrolling interest
Net income/ (loss)
attributable to common shareholders
Diluted EPS
GAAP Results
$
5,758
$
3,350
$
2,408
$
704
$
(211)
$
1,915
$
434
$
1,481
$
8
$
1,473
$
1.19
Items Affecting Comparability
Restructuring activities
15
(23)
38
—
1
37
9
28
—
28
0.02
Deal Costs
—
(8)
8
—
—
8
3
5
—
5
0.01
Unrealized losses/(gains) on commodity
hedges
65
—
65
—
—
65
16
49
—
49
0.04
Impairment losses
86
(913)
999
—
—
999
132
867
—
867
0.70
Losses/(gains) on sale of business
—
—
—
—
1
(1)
7
(8)
—
(8)
(0.01)
Other losses/(gains) related to
acquisitions and divestitures
—
—
—
—
38
(38)
(9)
(29)
—
(29)
(0.02)
Nonmonetary currency devaluation
—
—
—
—
(16)
16
—
16
—
16
0.01
Debt prepayment and extinguishment
costs
—
—
—
12
—
(12)
4
(16)
—
(16)
(0.01)
Adjusted Non-GAAP Results
$
5,924
$
2,393
$
1.93
Schedule
10
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Nine Months
Ended
September 25, 2021
Gross profit
Selling, general and
administrative expenses
Operating income/
(loss)
Interest expense
Other expense/
(income)
Income/ (loss) before income
taxes
Provision for/ (benefit from)
income taxes
Net income/ (loss)
Net income/ (loss)
attributable to noncontrolling interest
Net income/ (loss)
attributable to common shareholders
Diluted EPS
GAAP Results
$
6,520
$
3,040
$
3,480
$
1,443
$
(191)
$
2,228
$
949
$
1,279
$
10
$
1,269
$
1.03
Items Affecting Comparability
Restructuring activities
4
(48)
52
—
—
52
12
40
—
40
0.03
Deal Costs
—
(8)
8
—
—
8
6
2
—
2
—
Unrealized losses/(gains) on commodity
hedges
(12)
—
(12)
—
—
(12)
(3)
(9)
—
(9)
(0.01)
Impairment losses
—
(343)
343
—
—
343
19
324
—
324
0.26
Certain non-ordinary course legal and
regulatory matters
—
(62)
62
—
—
62
—
62
—
62
0.05
Losses/(gains) on sale of business
—
—
—
—
11
(11)
(291)
280
—
280
0.23
Nonmonetary currency devaluation
—
—
—
—
(4)
4
—
4
—
4
—
Debt prepayment and extinguishment
costs
—
—
—
(571)
—
571
121
450
—
450
0.37
Certain significant discrete income tax
items
—
—
—
—
—
—
(235)
235
—
235
0.19
Adjusted Non-GAAP Results
$
6,512
$
2,667
$
2.15
Schedule
11
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Three Months
Ended
September 24, 2022
September 25, 2021
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)(b)
$
0.76
$
0.73
$
0.03
Results of divested operations
—
0.06
(0.06)
Interest expense
(0.15)
(0.18)
0.03
Other expense/(income)
0.02
0.04
(0.02)
Adjusted EPS
$
0.63
$
0.65
$
(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 September 24, 2022 and September 25, 2021.
(b)
Includes divestiture-related
license income, which accounted for a benefit to Adjusted EPS from
results of operations of $0.01 for the three months ended September
24, 2022.
Schedule
12
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Nine Months
Ended
September 24, 2022
September 25, 2021
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)(b)
$
2.33
$
2.40
$
(0.07)
Results of divested operations
0.01
0.21
(0.20)
Interest expense
(0.48)
(0.58)
0.10
Other expense/(income)(c)
0.12
0.12
—
Effective tax rate
(0.05)
—
(0.05)
Adjusted EPS
$
1.93
$
2.15
$
(0.22)
(a)
Includes non-cash amortization of
definite-lived intangible assets, which accounted for a negative
impact to Adjusted EPS from results of operations of $0.13 for the
nine months ended September 24, 2022 and $0.12 for the nine months
ended September 25, 2021.
(b)
Includes divestiture-related
license income, which accounted for a benefit to Adjusted EPS from
results of operations of $0.03 for the nine months ended September
24, 2022.
(c)
Includes non-cash amortization of
prior service credits, which accounted for a benefit to Adjusted
EPS from other expense/(income) of $0.01 for the nine months ended
September 24, 2022.
Schedule
13
The Kraft Heinz Company
Condensed Consolidated Balance
Sheets
(in millions, except per share
data)
(Unaudited)
September 24, 2022
December 25, 2021
ASSETS
Cash and cash equivalents
$
997
$
3,445
Trade receivables, net
2,055
1,957
Inventories
3,535
2,729
Prepaid expenses
224
136
Other current assets
954
716
Assets held for sale
95
11
Total current assets
7,860
8,994
Property, plant and equipment, net
6,417
6,806
Goodwill
30,574
31,296
Intangible assets, net
42,354
43,542
Other non-current assets
2,787
2,756
TOTAL ASSETS
$
89,992
$
93,394
LIABILITIES AND EQUITY
Commercial paper and other short-term
debt
$
4
$
14
Current portion of long-term debt
770
740
Trade payables
4,733
4,753
Accrued marketing
811
804
Interest payable
255
268
Other current liabilities
2,113
2,485
Total current liabilities
8,686
9,064
Long-term debt
19,296
21,061
Deferred income taxes
10,285
10,536
Accrued postemployment costs
194
205
Long-term deferred income
1,490
1,534
Other non-current liabilities
1,698
1,542
TOTAL LIABILITIES
41,649
43,942
Redeemable noncontrolling interest
37
4
Equity:
Common stock, $0.01 par value
12
12
Additional paid-in capital
52,077
53,379
Retained earnings/(deficit)
(208)
(1,682)
Accumulated other comprehensive
income/(losses)
(3,004)
(1,824)
Treasury stock, at cost
(729)
(587)
Total shareholders' equity
48,148
49,298
Noncontrolling interest
158
150
TOTAL EQUITY
48,306
49,448
TOTAL LIABILITIES AND EQUITY
$
89,992
$
93,394
Schedule
14
The Kraft Heinz Company
Condensed Consolidated Statements
of Cash Flow
(in millions)
(Unaudited)
For the Nine Months
Ended
September 24, 2022
September 25, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)
$
1,481
$
1,279
Adjustments to reconcile net income/(loss)
to operating cash flows:
Depreciation and amortization
685
677
Amortization of postemployment benefit
plans prior service costs/(credits)
(11)
(5)
Divestiture-related license income
(41)
—
Equity award compensation expense
107
155
Deferred income tax
provision/(benefit)
(184)
(120)
Postemployment benefit plan
contributions
(14)
(21)
Goodwill and intangible asset impairment
losses
913
343
Nonmonetary currency devaluation
16
4
Loss/(gain) on sale of business
(1)
(11)
Loss/(gain) on extinguishment of debt
(12)
571
Other items, net
6
(150)
Changes in current assets and
liabilities:
Trade receivables
(208)
92
Inventories
(1,027)
(264)
Accounts payable
299
194
Other current assets
(136)
(96)
Other current liabilities
(356)
(200)
Net cash provided by/(used for) operating
activities
1,517
2,448
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(632)
(655)
Payments to acquire business, net of cash
acquired
(481)
—
Proceeds from sale of business, net of
cash disposed and working capital adjustments
(20)
3,401
Other investing activities, net
95
(2)
Net cash provided by/(used for) investing
activities
(1,038)
2,744
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
(1,157)
(4,145)
Debt prepayment and extinguishment
costs
(17)
(577)
Proceeds from issuance of commercial
paper
228
—
Repayments of commercial paper
(228)
—
Dividends paid
(1,470)
(1,469)
Other financing activities, net
(167)
(142)
Net cash provided by/(used for) financing
activities
(2,811)
(6,333)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(116)
(3)
Cash, cash equivalents, and restricted
cash
Net increase/(decrease)
(2,448)
(1,144)
Balance at beginning of period
3,446
3,418
Balance at end of period
$
998
$
2,274
Schedule
15
The Kraft Heinz Company
Reconciliation of Net Cash
Provided By/(Used For) Operating Activities to Free Cash Flow
(in millions)
(Unaudited)
For the Nine Months
Ended
September 24, 2022
September 25, 2021
Net cash provided by/(used for) operating
activities
$
1,517
$
2,448
Capital expenditures
(632)
(655)
Free Cash Flow
$
885
$
1,793
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221026005230/en/
Alex Abraham (media) Alex.Abraham@kraftheinz.com Anne-Marie
Megela (investors) ir@kraftheinz.com
Kraft Heinz (NASDAQ:KHC)
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