Narrows Full Year Outlook for Organic Net
Sales(1)(2), Adjusted Operating Income(1)(2), and Adjusted
EPS(1)(2)
Third Quarter Highlights
- Net sales decreased 2.8%; Organic Net Sales(1) decreased
2.2%
- Gross profit margin increased 20 basis points to 34.2%;
Adjusted Gross Profit Margin(1) increased 30 basis points to
34.3%
- Operating income decreased 115.5%, driven by non-cash
impairment losses of $1.4 billion; Adjusted Operating Income(1)
increased 1.4%
- Diluted EPS was $(0.24), down 214.3%; Adjusted EPS(1) was
$0.75, up 4.2%
- Year-to-date net cash provided by operating activities was $2.8
billion, up 6.7%; Free Cash Flow(1) was $2.0 billion, up 9.7%
- Year-to-date return of capital to stockholders was $2.0
billion
The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the
“Company”) today reported financial results for the third quarter
of 2024.
“In the third quarter, our top-line performance across two of
our strategic pillars, Global Away From Home and Emerging Markets,
grew in line with our expectations,” said Kraft Heinz CEO Carlos
Abrams-Rivera. “As we look forward, we are expecting continued
momentum in these two pillars. When we look at our U.S. Retail
business, we are expecting more of an elongated recovery, driven by
specific categories that continue to experience pressure.”
“We continue to make investments in marketing, research and
development, and technology as we look to bring solutions to the
table that both create value for our consumers and support future
top-line growth. We are supporting these investments by our proven
ability to sustainably unlock efficiencies and generate strong cash
flow.”
Abrams-Rivera continued, “While a recovery is taking longer than
originally anticipated, we are not losing sight of our long-term
strategy. We remain confident in our ability to drive profitable
growth, generate strong cash flow, and return capital to our
stockholders.”
Net Sales
In millions
Net Sales
Organic Net Sales(1)
September 28,
2024
September 30, 2023
% Chg vs PY
YoY Growth Rate
Price
Volume/ Mix
For the Three Months Ended
North America
$
4,826
$
4,995
(3.4)%
(3.2)%
1.2 pp
(4.4) pp
International Developed Markets
882
883
(0.2)%
(1.8)%
(1.0) pp
(0.8) pp
Emerging Markets(a)
675
692
(2.4)%
4.9%
3.8 pp
1.1 pp
Kraft Heinz
$
6,383
$
6,570
(2.8)%
(2.2)%
1.2 pp
(3.4) pp
Net Sales
In millions
Net Sales
Organic Net Sales(1)
September 28, 2024
September 30, 2023
% Chg vs PY
YoY Growth Rate
Price
Volume/ Mix
For the Nine Months Ended
North America
$
14,575
$
14,959
(2.6)%
(2.5)%
1.6 pp
(4.1) pp
International Developed Markets
2,622
2,675
(2.0)%
(2.4)%
(0.1) pp
(2.3) pp
Emerging Markets(a)
2,073
2,146
(3.4)%
4.6%
3.3 pp
1.3 pp
Kraft Heinz
$
19,270
$
19,780
(2.6)%
(1.7)%
1.6 pp
(3.3) pp
(a)
Emerging Markets represents the
aggregation of our West and East Emerging Markets (“WEEM”) and Asia
Emerging Markets (“AEM”) operating segments.
Net Income/(Loss) and Diluted
EPS
In millions, except per share
data
For the Three Months
Ended
For the Nine Months
Ended
September 28,
2024
September 30, 2023
% Chg vs PY
September 28, 2024
September 30, 2023
% Chg vs PY
Gross profit
$
2,186
$
2,235
(2.2)%
$
6,723
$
6,609
1.7%
Operating income/(loss)
(101)
653
(115.5)%
1,723
3,272
(47.3)%
Net income/(loss)
(290)
254
(214.2)%
614
2,089
(70.6)%
Net income/(loss) attributable to common
shareholders
(290)
262
(210.7)%
613
2,098
(70.8)%
Diluted EPS
$
(0.24)
$
0.21
(214.3)%
$
0.50
$
1.70
(70.6)%
Adjusted EPS(1)
0.75
0.72
4.2%
2.22
2.20
0.9%
Adjusted Operating Income(1)
$
1,330
$
1,312
1.4%
$
3,975
$
3,908
1.7%
Q3 2024 Financial Summary
- Net sales decreased 2.8 percent versus the year-ago
period to $6.4 billion, including a negative 0.4 percentage point
impact from foreign currency and a negative 0.2 percentage point
impact from divestitures. Organic Net Sales(1) decreased 2.2
percent versus the prior year period. Price increased 1.2
percentage points versus the prior year period, with increases in
the North America and Emerging Markets segments partially offset by
lower price in International Developed Markets. Favorable price was
primarily due to pricing taken in certain categories to mitigate
higher input costs. Volume/mix declined 3.4 percentage points
versus the prior year period, with declines in the North America
and International Developed Markets segments partially offset by
volume/mix growth in Emerging Markets. Unfavorable volume/mix was
primarily driven by continued shifts in consumer behavior due to
economic uncertainty and a decline in Lunchables.
- Operating Income decreased 115.5 percent versus the
year-ago period to $(0.1) billion, as a result of non-cash
impairment losses of $1.4 billion in the current year period. This
impairment charge was due to an intangible asset impairment largely
on the Lunchables brand and a goodwill impairment related to the
Continental Europe reporting unit. Excluding the impact of these
non-cash impairment losses, operating income increased $12 million
due to factors noted in Adjusted Operating Income. Adjusted
Operating Income(1) increased 1.4 percent versus the year-ago
period to $1.3 billion, primarily driven by higher pricing, the
beneficial impact from our efficiency initiatives mostly in
procurement, and lower variable compensation expense. These factors
more than offset unfavorable volume/mix, increased manufacturing
expenses due in part to increased labor costs, and an unfavorable
impact from foreign currency (0.2 pp).
- Diluted EPS decreased 214.3 percent versus the prior
year period to $(0.24), driven by non-cash impairment losses in the
current year period. Adjusted EPS(1) was $0.75, up 4.2
percent versus the prior year period, primarily driven by higher
Adjusted Operating Income, fewer shares outstanding, and lower
taxes on adjusted earnings.
- Year-to-date net cash provided by/(used for) operating
activities was $2.8 billion, up 6.7 percent versus the year-ago
period. This increase was primarily due to favorable changes in
working capital driven by accounts payable and the lapping of prior
year cash payments associated with the settlement of the
consolidated securities class action lawsuit, which were partially
offset by higher cash outflows from inventory and variable
compensation in the 2024 period compared to the 2023 period.
Further, net cash by operating activities was favorably impacted by
increased Adjusted Operating Income. Free Cash Flow(1) was
$2.0 billion, up 9.7 percent versus the prior year period, driven
by the same net cash provided by/(used for) operating activities
discussed above.
- Capital Return: Year to date, the Company paid $1.5
billion in cash dividends and repurchased $538 million of common
stock. Of the $538 million in share repurchases in 2024, $350
million were repurchased under the Company’s publicly announced
share repurchase program and $188 million were purchased to offset
the dilutive effect of equity-based compensation. As of Sept. 28,
2024, the Company had remaining authorization to repurchase
approximately $2.4 billion of common stock under the publicly
announced share repurchase program.
Outlook
For fiscal year 2024, the Company now expects:
- Organic Net Sales(2) to be at the low end of the
previous guidance range of down 2 percent to flat versus the prior
year.
- Adjusted Operating Income(2) growth to be at the low end
of the previous guidance range of 1 to 3 percent versus the prior
year. This also contemplates expected Adjusted Gross Profit
Margin(1)(2) expansion at the lower end of the previous range of 75
to 125 basis points versus the prior year.
- Adjusted EPS(2) growth to be at the low end of the
previous guidance range of 1 to 3 percent, or in the range of $3.01
to $3.07. The Company expects an effective tax rate on Adjusted EPS
to be approximately 21 percent. Additionally, the Company expects
interest expense and other expense/(income) to be relatively flat
versus the prior year. This guidance does not reflect any impact
from future potential share repurchases.
End Notes
(1)
Organic Net Sales, Adjusted Gross
Profit, Adjusted Gross Profit Margin, Adjusted Operating Income,
Adjusted EPS, 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,
Adjusted Gross Profit Margin, Adjusted Operating Income, and
Adjusted EPS 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,
equity award compensation expense, nonmonetary currency
devaluation, and debt prepayment and extinguishment
(benefit)/costs, 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 2024 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 2023 net
sales of approximately $27 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 eight 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.
Forward-Looking Statements
This press release contains a number of forward-looking
statements. Words such as “accelerate,” “anticipate,” “believe,”
“commit,” “continue,” “expect,” “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, 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, divestitures,
alliances, joint ventures, or 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 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 influence of the Company's largest
stockholder; 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 sales of the
Company's common stock in the public market; the impact of the
Company’s share repurchases or any change in the Company’s share
repurchase activity; the Company’s ability to continue to pay a
regular dividend and the amounts of any such dividends; disruptions
in the global economy caused by geopolitical conflicts,
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, instability in financial institutions, general economic
slowdown, recession, or a potential U.S. federal government
shutdown); 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; our dependence on
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 and the final determination of tax
audits, including transfer pricing matters, and any related
litigation; 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 (“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.
We use our investor relations website, ir.kraftheinzcompany.com, as a routine channel for
distribution of important, and often material, information about
Kraft Heinz, including quarterly and annual earnings results and
presentations, press releases and other announcements, webcasts,
analyst presentations, investor days, sustainability initiatives,
financial information, and corporate governance practices, as well
as archives of past presentations and events. We encourage you to
follow our investor relations website in addition to our filings
with the SEC to receive timely information about the Company. The
information on our website is not part of this press release and
shall not be deemed to be incorporated by reference into any
filings we make with the SEC.
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 Operating Income,
Constant Currency Adjusted Operating Income, Adjusted Gross Profit,
Adjusted Gross Profit Margin, Adjusted Net Income/(Loss), Adjusted
EPS, Free Cash Flow, and Net Leverage 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 Operating Income, Constant Currency
Adjusted Operating Income, Adjusted Gross Profit, Adjusted Gross
Profit Margin, 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 and Net Leverage provide measures of the
Company’s core operating performance, the cash-generating
capabilities of the Company’s business operations, and are factors
used in determining the Company’s borrowing capacity and 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 Operating Income is defined as operating
income/(loss) excluding, when they occur, the impacts of
restructuring activities, deal costs, unrealized gains/(losses) on
commodity hedges (the unrealized gains and losses are recorded in
general corporate expenses until realized; once realized, the gains
and losses are recorded in the applicable segment’s operating
results), impairment losses, and certain non-ordinary course legal
and regulatory matters. The Company also presents Adjusted
Operating Income on a constant currency basis (Constant Currency
Adjusted Operating Income). The Company calculates the impact
of currency on Adjusted Operating Income 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
(benefit)/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. Adjusted Gross Profit Margin is defined as
Adjusted Gross Profit divided by net sales.
Net Leverage is defined as debt less cash, cash
equivalents and short-term investments divided by Adjusted EBITDA.
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,
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).
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 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Net sales
$
6,383
$
6,570
$
19,270
$
19,780
Cost of products sold
4,197
4,335
12,547
13,171
Gross profit
2,186
2,235
6,723
6,609
Selling, general and administrative
expenses, excluding impairment losses
859
920
2,718
2,675
Goodwill impairment losses
707
510
1,561
510
Intangible asset impairment losses
721
152
721
152
Selling, general and administrative
expenses
2,287
1,582
5,000
3,337
Operating income/(loss)
(101)
653
1,723
3,272
Interest expense
230
228
685
683
Other expense/(income)
(48)
(35)
(56)
(94)
Income/(loss) before income taxes
(283)
460
1,094
2,683
Provision for/(benefit from) income
taxes
7
206
480
594
Net income/(loss)
(290)
254
614
2,089
Net income/(loss) attributable to
noncontrolling interest
—
(8)
1
(9)
Net income/(loss) attributable to common
shareholders
$
(290)
$
262
$
613
$
2,098
Basic shares outstanding
1,210
1,229
1,212
1,228
Diluted shares outstanding
1,210
1,235
1,217
1,235
Per share data applicable to common
shareholders:
Basic earnings/(loss) per share
$
(0.24)
$
0.21
$
0.51
$
1.71
Diluted earnings/(loss) per share
(0.24)
0.21
0.50
1.70
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 28, 2024
North America
$
4,826
$
(8)
$
—
$
4,834
International Developed Markets
882
15
—
867
Emerging Markets
675
(23)
—
698
Kraft Heinz
$
6,383
$
(16)
$
—
$
6,399
September 30, 2023
North America
$
4,995
$
—
$
—
$
4,995
International Developed Markets
883
—
—
883
Emerging Markets
692
11
16
665
Kraft Heinz
$
6,570
$
11
$
16
$
6,543
Year-over-year growth rates
North America
(3.4)%
(0.2) pp
0.0 pp
(3.2)%
1.2 pp
(4.4) pp
International Developed Markets
(0.2)%
1.6 pp
0.0 pp
(1.8)%
(1.0) pp
(0.8) pp
Emerging Markets
(2.4)%
(4.9) pp
(2.4) pp
4.9%
3.8 pp
1.1 pp
Kraft Heinz
(2.8)%
(0.4) pp
(0.2) pp
(2.2)%
1.2 pp
(3.4) 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 28, 2024
North America
$
14,575
$
(15)
$
—
$
14,590
International Developed Markets
2,622
10
—
2,612
Emerging Markets(a)
$
2,073
$
(69)
$
12
$
2,130
Kraft Heinz
$
19,270
$
(74)
$
12
$
19,332
September 30, 2023
North America
$
14,959
$
—
$
—
$
14,959
International Developed Markets
2,675
—
—
2,675
Emerging Markets(a)
$
2,146
$
59
$
50
$
2,037
Kraft Heinz
$
19,780
$
59
$
50
$
19,671
Year-over-year growth rates
North America
(2.6)%
(0.1) pp
0.0 pp
(2.5)%
1.6 pp
(4.1) pp
International Developed Markets
(2.0)%
0.4 pp
0.0 pp
(2.4)%
(0.1) pp
(2.3) pp
Emerging Markets(a)
(3.4)%
(6.1) pp
(1.9) pp
4.6%
3.3 pp
1.3 pp
Kraft Heinz
(2.6)%
(0.7) pp
(0.2) pp
(1.7)%
1.6 pp
(3.3) pp
(a)
Emerging Markets represents the
aggregation of our WEEM and AEM operating segments.
Schedule 4
The Kraft Heinz Company
Reconciliation of Operating
Income/(Loss) to Adjusted Operating Income
(dollars in millions)
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Operating income/(loss)
$
(101)
$
653
1,723
3,272
Restructuring activities
—
45
—
25
Unrealized losses/(gains) on commodity
hedges
3
(48)
(30)
(53)
Impairment losses
1,428
662
2,282
662
Certain non-ordinary course legal and
regulatory matters
—
—
—
2
Adjusted Operating Income
$
1,330
$
1,312
$
3,975
$
3,908
Segment Adjusted Operating Income:
North America
$
1,237
$
1,245
$
3,793
$
3,701
International Developed Markets
135
129
397
376
Total Segment Adjusted Operating
Income
1,372
1,374
4,190
4,077
Emerging Markets Segment Adjusted
Operating Income(a)
84
88
232
286
General corporate expenses
(126)
(150)
(447)
(455)
Adjusted Operating Income
$
1,330
$
1,312
$
3,975
$
3,908
(a)
Segment Adjusted Operating Income
for Emerging Markets, which represents the combination of our WEEM
and AEM operating segments, is defined and presented consistently
with the Segment Adjusted Operating Income of our reportable
segments - North America and International Developed Markets.
Schedule 5
The Kraft Heinz Company
Reconciliation of Adjusted
Operating Income to Constant Currency Adjusted Operating Income
For the Three Months Ended
(dollars in millions)
(Unaudited)
Adjusted Operating
Income
Currency
Constant Currency Adjusted
Operating Income
September 28, 2024
North America
$
1,237
$
(3)
$
1,240
International Developed Markets
135
3
132
Emerging Markets
84
(1)
85
General corporate expenses
(126)
—
(126)
Kraft Heinz
$
1,330
$
(1)
$
1,331
September 30, 2023
North America
$
1,245
$
—
$
1,245
International Developed Markets
129
—
129
Emerging Markets
88
2
86
General corporate expenses
(150)
—
(150)
Kraft Heinz
$
1,312
$
2
$
1,310
Year-over-year growth rates
North America
(0.6)%
(0.2) pp
(0.4)%
International Developed Markets
4.2%
2.2 pp
2.0%
Emerging Markets
(4.5)%
(3.5) pp
(1.0)%
General corporate expenses
(15.9)%
0.3 pp
(16.2)%
Kraft Heinz
1.4%
(0.2) pp
1.6%
Schedule 6
The Kraft Heinz Company
Reconciliation of Adjusted
Operating Income to Constant Currency Adjusted Operating Income
For the Nine Months Ended
(dollars in millions)
(Unaudited)
Adjusted Operating
Income
Currency
Constant Currency
Adjusted Operating
Income
September 28, 2024
North America
$
3,793
$
(4)
$
3,797
International Developed Markets
397
7
390
Emerging Markets
232
(9)
241
General corporate expenses
(447)
(1)
(446)
Kraft Heinz
$
3,975
$
(7)
$
3,982
September 30, 2023
North America
$
3,701
$
—
$
3,701
International Developed Markets
376
—
376
Emerging Markets
286
11
275
General corporate expenses
(455)
—
(455)
Kraft Heinz
$
3,908
$
11
$
3,897
Year-over-year growth rates
North America
2.5%
(0.1) pp
2.6%
International
5.6%
1.7 pp
3.9%
Emerging Markets
(19.0)%
(6.5) pp
(12.5)%
General corporate expenses
(1.8)%
0.3 pp
(2.1)%
Kraft Heinz
1.7%
(0.5) pp
2.2%
Schedule
7
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Three Months
Ended
September 28, 2024
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
$
2,186
$
2,287
$
(101)
$
230
$
(48)
$
(283)
$
7
$
(290)
$
—
$
(290)
$
(0.24)
Items Affecting Comparability
Restructuring activities
—
—
—
—
7
(7)
(2)
(5)
—
(5)
—
Unrealized losses/(gains) on commodity
hedges
3
—
3
—
—
3
1
2
—
2
—
Impairment losses
—
(1,428)
1,428
—
—
1,428
229
1,199
—
1,199
0.99
Losses/(gains) on sale of business
—
—
—
—
—
—
(4)
4
—
4
—
Nonmonetary currency devaluation
—
—
—
—
(3)
3
—
3
—
3
—
Adjusted Non-GAAP Results
$
2,189
$
1,330
$
913
$
0.75
Schedule
8
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Three Months
Ended
September 30, 2023
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
$
2,235
$
1,582
$
653
$
228
$
(35)
$
460
$
206
$
254
$
(8)
$
262
$
0.21
Items Affecting Comparability
Restructuring activities
44
(1)
45
—
—
45
8
37
—
37
0.03
Unrealized losses/(gains) on commodity
hedges
(48)
—
(48)
—
—
(48)
(12)
(36)
—
(36)
(0.03)
Impairment losses
—
(662)
662
—
—
662
36
626
6
620
0.50
Nonmonetary currency devaluation
—
—
—
—
(9)
9
—
9
—
9
0.01
Adjusted Non-GAAP Results
$
2,231
$
1,312
$
890
$
0.72
Schedule
9
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Nine Months
Ended
September 28, 2024
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
$
6,723
$
5,000
$
1,723
$
685
$
(56)
$
1,094
$
480
$
614
$
1
$
613
$
0.50
Items Affecting Comparability
Restructuring activities
2
2
—
—
8
(8)
(2)
(6)
—
(6)
—
Unrealized losses/(gains) on commodity
hedges
(30)
—
(30)
—
—
(30)
(8)
(22)
—
(22)
(0.02)
Impairment losses
—
(2,282)
2,282
—
—
2,282
229
2,053
—
2,053
1.69
Losses/(gains) on sale of business
—
—
—
—
(78)
78
21
57
—
57
0.05
Nonmonetary currency devaluation
—
—
—
—
(7)
7
—
7
—
7
—
Adjusted Non-GAAP Results
$
6,695
$
3,975
$
2,703
$
2.22
Schedule
10
The Kraft Heinz Company
Reconciliation of GAAP Results to
Non-GAAP Results
(dollars in millions)
(Unaudited)
For the Nine Months
Ended
September 30, 2023
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
$
6,609
$
3,337
$
3,272
$
683
$
(94)
$
2,683
$
594
$
2,089
$
(9)
$
2,098
$
1.70
Items Affecting Comparability
Restructuring activities
44
19
25
—
(2)
27
5
22
—
22
0.02
Unrealized losses/(gains) on commodity
hedges
(53)
—
(53)
—
—
(53)
(13)
(40)
—
(40)
(0.03)
Impairment losses
—
(662)
662
—
—
662
36
626
6
620
0.50
Certain non-ordinary course legal and
regulatory matters
—
(2)
2
—
—
2
—
2
—
2
—
Losses/(gains) on sale of business
—
—
—
—
(2)
2
—
2
—
2
—
Nonmonetary currency devaluation
—
—
—
—
(27)
27
—
27
—
27
0.02
Certain significant discrete income tax
items
—
—
—
—
—
—
17
(17)
—
(17)
(0.01)
Adjusted Non-GAAP Results
$
6,600
$
3,908
$
2,711
$
2.20
Schedule
11
The Kraft Heinz Company
Adjusted Gross Profit Margin
(dollars in millions)
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 28, 2024
September 30, 2023
September 28, 2024
September 30, 2023
Adjusted Gross Profit
$
2,189
$
2,231
$
6,695
$
6,600
Net sales
6,383
6,570
19,270
19,780
Adjusted Gross Profit Margin
34.3%
34.0%
34.7%
33.4%
Schedule
12
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Three Months
Ended
September 28, 2024
September 30, 2023
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)(b)
$
0.84
$
0.83
$
0.01
Interest expense
(0.15)
(0.15)
—
Other expense/(income)
0.04
0.04
—
Effective tax rate
0.01
—
0.01
Effect of share repurchases
0.01
—
0.01
Adjusted EPS
$
0.75
$
0.72
$
0.03
(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 28, 2024 and September 30, 2023.
(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
28, 2024 and September 30, 2023.
Schedule
13
The Kraft Heinz Company
Key Drivers of Change in Adjusted
EPS
(Unaudited)
For the Nine Months
Ended
September 28, 2024
September 30, 2023
$ Change
Key drivers of change in Adjusted EPS:
Results of operations(a)(b)
$
2.60
$
2.56
$
0.04
Interest expense
(0.45)
(0.45)
—
Other expense/(income)
0.09
0.09
—
Effective tax rate
(0.05)
—
(0.05)
Effect of share repurchases
0.03
—
0.03
Adjusted EPS
$
2.22
$
2.20
$
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 $0.13 for the
nine months ended September 28, 2024 and $0.12 for the nine months
ended September 30, 2023.
(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
28, 2024 and September 30, 2023.
Schedule 14
The Kraft Heinz Company
Condensed Consolidated Balance
Sheets
(in millions, except per share
data)
(Unaudited)
September 28, 2024
December 30, 2023
ASSETS
Cash and cash equivalents
$
1,284
$
1,400
Trade receivables, net
2,178
2,112
Inventories
3,872
3,614
Prepaid expenses
228
234
Other current assets
633
566
Assets held for sale
7
3
Total current assets
8,202
7,929
Property, plant and equipment, net
7,137
7,122
Goodwill
28,946
30,459
Intangible assets, net
41,802
42,448
Other non-current assets
2,479
2,381
TOTAL ASSETS
$
88,566
$
90,339
LIABILITIES AND EQUITY
Commercial paper and other short-term
debt
$
13
$
—
Current portion of long-term debt
695
638
Accounts payable
4,553
4,627
Accrued marketing
752
733
Interest payable
273
258
Income taxes payable
—
—
Other current liabilities
1,442
1,781
Liabilities held for sale
—
—
Total current liabilities
7,728
8,037
Long-term debt
19,383
19,394
Deferred income taxes
10,023
10,201
Accrued postemployment costs
140
143
Long-term deferred income
1,386
1,424
Other non-current liabilities
1,437
1,418
TOTAL LIABILITIES
40,097
40,617
Redeemable noncontrolling interest
6
34
Equity:
Common stock, $0.01 par value
12
12
Additional paid-in capital
52,106
52,037
Retained earnings/(deficit)
521
1,367
Accumulated other comprehensive
income/(losses)
(2,547)
(2,604)
Treasury stock, at cost
(1,764)
(1,286)
Total shareholders' equity
48,328
49,526
Noncontrolling interest
135
162
TOTAL EQUITY
48,463
49,688
TOTAL LIABILITIES AND EQUITY
$
88,566
$
90,339
Schedule 15
The Kraft Heinz Company
Condensed Consolidated Statements
of Cash Flows
(in millions)
(Unaudited)
For the Nine Months
Ended
September 28, 2024
September 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)
$
614
$
2,089
Adjustments to reconcile net income/(loss)
to operating cash flows:
Depreciation and amortization
714
710
Amortization of postemployment benefit
plans prior service costs/(credits)
(6)
(10)
Divestiture-related license income
(41)
(41)
Equity award compensation expense
83
110
Deferred income tax
provision/(benefit)
(277)
(15)
Postemployment benefit plan
contributions
16
(18)
Goodwill and intangible asset impairment
losses
2,282
662
Nonmonetary currency devaluation
7
27
Loss/(gain) on sale of business
78
2
Other items, net
(39)
(44)
Changes in current assets and
liabilities:
Trade receivables
(83)
(16)
Inventories
(392)
(277)
Accounts payable
48
(221)
Other current assets
(129)
139
Other current liabilities
(79)
(477)
Net cash provided by/(used for) operating
activities
2,796
2,620
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(777)
(779)
Proceeds from sale of business, net of
cash disposed and working capital adjustments
5
—
Payments to acquire intangible assets
(140)
—
Other investing activities, net
63
41
Net cash provided by/(used for) investing
activities
(849)
(738)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
(607)
(823)
Proceeds from issuance of long-term
debt
594
657
Dividends paid
(1,452)
(1,474)
Repurchases of common stock
(538)
(150)
Other financing activities, net
(43)
(26)
Net cash provided by/(used for) financing
activities
(2,046)
(1,816)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(17)
(53)
Cash, cash equivalents, and restricted
cash
Net increase/(decrease)
(116)
13
Balance at beginning of period
1,404
1,041
Balance at end of period
$
1,288
$
1,054
Schedule 16
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 28, 2024
September 30, 2023
Net cash provided by/(used for) operating
activities
$
2,796
$
2,620
Capital expenditures
(777)
(779)
Free Cash Flow
$
2,019
$
1,841
Adjusted Net Income/(Loss)
$
2,703
$
2,711
Free Cash Flow Conversion
75%
68%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241030085196/en/
Alex Abraham (media) Alex.Abraham@kraftheinz.com
Anne-Marie Megela (investors)
anne-marie.megela@kraftheinz.com
Kraft Heinz (NASDAQ:KHC)
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