Kraft Heinz Reports Second Quarter 2021 Results
Maintaining strong net sales growth versus 2019
Effectively managing inflationary pressures
Expecting 2021 financial performance ahead of initial expectations
"Our second quarter results serve as a strong indicator that our
|
||||||||||||||
In millions |
||||||||||||||
|
|
|
|
Organic |
||||||||||
|
|
2021 |
|
2020 |
|
% Chg vs PY |
|
YoY Growth Rate |
|
Price |
|
Volume/Mix |
||
For the Three Months Ended |
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
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 |
||
|
|
464 |
|
426 |
|
8.8% |
|
(3.6)% |
|
1.9 pp |
|
(5.5) pp |
||
|
|
$ |
6,615 |
|
$ |
6,648 |
|
(0.5)% |
|
(2.1)% |
|
1.5 pp |
|
(3.6) pp |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
For the Six Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
$ |
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 |
||
|
|
856 |
|
787 |
|
8.8% |
|
(0.8)% |
|
3.2 pp |
|
(4.0) pp |
||
|
|
$ |
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 |
||||||||||||
|
|
2021 |
|
2020 |
|
% Chg vs PY |
|
2021 |
|
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. OrganicNet 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 inthe 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
End Notes
(1) |
Organic |
|
(2) |
Third quarter 2021 guidance for Organic |
Earnings Discussion and Webcast Information
A pre-recorded management discussion of
ABOUT
We are driving transformation at
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
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
To supplement the financial information provided, the Company has presented Organic
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
Organic
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.,
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.
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|
|
|
|
|
||||||
Schedule 1 |
|||||||||||
Condensed Consolidated Statements of Income (in millions, except per share data) (Unaudited) |
|||||||||||
|
For the Three Months Ended |
|
For the Six Months Ended |
||||||||
|
|
|
|
|
|
|
|
||||
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 |
||||
|
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 |
|||||||||||||||
Reconciliation of For the Three Months Ended (dollars in millions) (Unaudited) |
|||||||||||||||
|
|
|
Currency |
|
Acquisitions and Divestitures |
|
Organic Net Sales |
|
Price |
|
Volume/Mix |
||||
|
|
|
|
|
|||||||||||
|
$ |
4,738 |
|
$ |
— |
|
$ |
197 |
|
$ |
4,541 |
|
|
|
|
International |
|
1,413 |
|
|
108 |
|
|
5 |
|
|
1,300 |
|
|
|
|
|
|
464 |
|
|
53 |
|
|
1 |
|
|
410 |
|
|
|
|
|
$ |
6,615 |
|
$ |
161 |
|
$ |
203 |
|
$ |
6,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
4,917 |
|
$ |
— |
|
$ |
251 |
|
$ |
4,666 |
|
|
|
|
International |
|
1,305 |
|
|
5 |
|
|
5 |
|
|
1,295 |
|
|
|
|
|
|
426 |
|
|
— |
|
|
1 |
|
|
425 |
|
|
|
|
|
$ |
6,648 |
|
$ |
5 |
|
$ |
257 |
|
$ |
6,386 |
|
|
|
|
Year-over-year growth rates |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
(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 |
||
|
|
8.8% |
|
12.4 pp |
|
0.0 pp |
|
|
(3.6)% |
|
1.9 pp |
|
(5.5) pp |
||
|
|
(0.5)% |
|
2.3 pp |
|
(0.7) pp |
|
|
(2.1)% |
|
1.5 pp |
|
(3.6) pp |
|
|
|
|||||||||||||
Schedule 3 |
|||||||||||||||
Reconciliation of For the Six Months Ended (dollars in millions) (Unaudited) |
|||||||||||||||
|
|
|
Currency |
|
Acquisitions and Divestitures |
|
Organic Net Sales |
|
Price |
|
Volume/Mix |
||||
|
|
|
|
|
|||||||||||
|
$ |
9,346 |
|
$ |
— |
|
$ |
446 |
|
$ |
8,900 |
|
|
|
|
International |
|
2,807 |
|
|
172 |
|
|
9 |
|
|
2,626 |
|
|
|
|
|
|
856 |
|
|
75 |
|
|
1 |
|
|
780 |
|
|
|
|
|
$ |
13,009 |
|
$ |
247 |
|
$ |
456 |
|
$ |
12,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
9,412 |
|
$ |
— |
|
$ |
499 |
|
$ |
8,913 |
|
|
|
|
International |
|
2,606 |
|
|
11 |
|
|
9 |
|
|
2,586 |
|
|
|
|
|
|
787 |
|
|
— |
|
|
2 |
|
|
785 |
|
|
|
|
|
$ |
12,805 |
|
$ |
11 |
|
$ |
510 |
|
$ |
12,284 |
|
|
|
|
Year-over-year growth rates |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
(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 |
||
|
|
8.8% |
|
9.6 pp |
|
0.0 pp |
|
|
(0.8)% |
|
3.2 pp |
|
(4.0) pp |
||
|
|
1.6% |
|
1.8 pp |
|
(0.4) pp |
|
|
0.2% |
|
1.6 pp |
|
(1.4) pp |
|
|||||||||||
Schedule 4 |
|||||||||||
Reconciliation of For the Three Months Ended (dollars in millions) (Unaudited) |
|||||||||||
|
|
|
Currency |
|
Acquisitions and Divestitures |
|
Organic Net Sales |
||||
|
|
||||||||||
|
$ |
4,738 |
|
$ |
— |
|
$ |
197 |
|
$ |
4,541 |
International |
|
1,413 |
|
|
29 |
|
|
5 |
|
|
1,379 |
|
|
464 |
|
|
38 |
|
|
1 |
|
|
425 |
|
$ |
6,615 |
|
$ |
67 |
|
$ |
203 |
|
$ |
6,345 |
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
|
$ |
4,533 |
|
$ |
— |
|
$ |
224 |
|
$ |
4,309 |
International |
|
1,313 |
|
|
7 |
|
|
6 |
|
|
1,300 |
|
|
560 |
|
|
— |
|
|
128 |
|
|
432 |
|
$ |
6,406 |
|
$ |
7 |
|
$ |
358 |
|
$ |
6,041 |
|
|
|
|
|
|
|
|||||
Year-over-year growth rates |
|
|
|
|
|
|
|
||||
|
|
4.5% |
|
0.0 pp |
|
(0.9) pp |
|
|
5.4% |
||
International |
|
7.5% |
|
1.6 pp |
|
(0.2) pp |
|
|
6.1% |
||
|
|
(17.2)% |
|
6.8 pp |
|
(22.3) pp |
|
|
(1.7)% |
||
|
|
3.2% |
|
0.9 pp |
|
(2.7) pp |
|
|
5.0% |
|
|
||||||||||
Schedule 5 |
|||||||||||
Reconciliation of For the Six Months Ended (dollars in millions) (Unaudited) |
|||||||||||
|
|
|
Currency |
|
Acquisitions and Divestitures |
|
Organic Net Sales |
||||
|
|
|
|||||||||
|
$ |
9,346 |
|
$ |
— |
|
$ |
446 |
|
$ |
8,900 |
International |
|
2,807 |
|
|
48 |
|
|
9 |
|
|
2,750 |
|
|
856 |
|
|
57 |
|
|
1 |
|
|
798 |
|
$ |
13,009 |
|
$ |
105 |
|
$ |
456 |
|
$ |
12,448 |
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
|
$ |
8,757 |
|
$ |
— |
|
$ |
450 |
|
$ |
8,307 |
International |
|
2,598 |
|
|
14 |
|
|
25 |
|
|
2,559 |
|
|
1,010 |
|
|
— |
|
|
219 |
|
|
791 |
|
$ |
12,365 |
|
$ |
14 |
|
$ |
694 |
|
$ |
11,657 |
|
|
|
|
|
|
|
|||||
Year-over-year growth rates |
|
|
|
|
|
|
|
||||
|
|
6.7% |
|
0.0 pp |
|
(0.4) pp |
|
|
7.1% |
||
International |
|
8.0% |
|
1.2 pp |
|
(0.7) pp |
|
|
7.5% |
||
|
|
(15.2)% |
|
5.6 pp |
|
(21.7) pp |
|
|
0.9% |
||
|
|
5.2% |
|
0.7 pp |
|
(2.3) pp |
|
|
6.8% |
|
|
|||||||
Schedule 6 |
||||||||
Reconciliation of Net Income/(Loss) to Adjusted EBITDA (dollars in millions) (Unaudited) |
||||||||
|
For the Three Months Ended |
|||||||
|
|
|
|
|
|
|||
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: |
|
|
|
|
|
|||
|
$ |
1,374 |
|
$ |
1,478 |
|
$ |
1,257 |
International |
286 |
|
275 |
|
267 |
|||
|
117 |
|
110 |
|
143 |
|||
General corporate expenses |
(71) |
|
(64) |
|
(67) |
|||
Adjusted EBITDA |
$ |
1,706 |
|
$ |
1,799 |
|
$ |
1,600 |
|
|
|||||||
Schedule 7 |
||||||||
Reconciliation of Net Income/(Loss) to Adjusted EBITDA (dollars in millions) (Unaudited) |
||||||||
|
For the Six Months Ended |
|||||||
|
|
|
|
|
|
|||
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: |
|
|
|
|
|
|||
|
$ |
2,654 |
|
$ |
2,687 |
|
$ |
2,396 |
International |
569 |
|
520 |
|
505 |
|||
|
204 |
|
165 |
|
264 |
|||
General corporate expenses |
(141) |
|
(158) |
|
(134) |
|||
Adjusted EBITDA |
$ |
3,286 |
|
$ |
3,214 |
|
$ |
3,031 |
|
|
|||||||
Schedule 8 |
||||||||
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 |
|||
|
|
|||||||
|
$ |
1,374 |
|
$ |
— |
|
$ |
1,374 |
International |
|
286 |
|
|
23 |
|
|
263 |
|
|
117 |
|
|
14 |
|
|
103 |
General corporate expenses |
|
(71) |
|
|
(1) |
|
|
(70) |
|
$ |
1,706 |
|
$ |
36 |
|
$ |
1,670 |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
$ |
1,478 |
|
$ |
— |
|
$ |
1,478 |
International |
|
275 |
|
|
2 |
|
|
273 |
|
|
110 |
|
|
— |
|
|
110 |
General corporate expenses |
|
(64) |
|
|
— |
|
|
(64) |
|
$ |
1,799 |
|
$ |
2 |
|
$ |
1,797 |
|
|
|
|
|
||||
Year-over-year growth rates |
|
|
|
|
|
|||
|
|
(7.0)% |
|
0.0 pp |
|
|
(7.0)% |
|
International |
|
4.1% |
|
7.5 pp |
|
|
(3.4)% |
|
|
|
5.6% |
|
12.1 pp |
|
|
(6.5)% |
|
General corporate expenses |
|
10.9% |
|
2.2 pp |
|
|
8.7% |
|
|
|
(5.2)% |
|
1.8 pp |
|
|
(7.0)% |
|
|
||||||||
Schedule 9 |
|||||||||
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 |
|||
|
|
||||||||
|
$ |
2,654 |
|
|
$ |
— |
|
$ |
2,654 |
International |
|
569 |
|
|
|
39 |
|
|
530 |
|
|
204 |
|
|
|
19 |
|
|
185 |
General corporate expenses |
|
(141) |
|
|
|
(2) |
|
|
(139) |
|
$ |
3,286 |
|
|
$ |
56 |
|
$ |
3,230 |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
$ |
2,687 |
|
|
$ |
— |
|
$ |
2,687 |
International |
|
520 |
|
|
|
5 |
|
|
515 |
|
|
165 |
|
|
|
— |
|
|
165 |
General corporate expenses |
|
(158) |
|
|
|
— |
|
|
(158) |
|
$ |
3,214 |
|
|
$ |
5 |
|
$ |
3,209 |
|
|
|
|
|
|
||||
Year-over-year growth rates |
|
|
|
|
|
|
|||
|
|
(1.2)% |
|
|
0.0 pp |
|
|
(1.2)% |
|
International |
|
9.4% |
|
|
6.4 pp |
|
|
3.0% |
|
|
|
23.0% |
|
|
11.3 pp |
|
|
11.7% |
|
General corporate expenses |
|
(11.0)% |
|
|
1.7 pp |
|
|
(12.7)% |
|
|
|
2.2% |
|
|
1.5 pp |
|
|
0.7% |
|
|
|||||||
Schedule 10 |
||||||||
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 |
|||
|
|
|||||||
|
$ |
1,374 |
|
$ |
— |
|
$ |
1,374 |
International |
|
286 |
|
|
11 |
|
|
275 |
|
|
117 |
|
|
10 |
|
|
107 |
General corporate expenses |
|
(71) |
|
|
— |
|
|
(71) |
|
$ |
1,706 |
|
$ |
21 |
|
$ |
1,685 |
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
$ |
1,257 |
|
$ |
— |
|
$ |
1,257 |
International |
|
267 |
|
|
3 |
|
|
264 |
|
|
143 |
|
|
— |
|
|
143 |
General corporate expenses |
|
(67) |
|
|
— |
|
|
(67) |
|
$ |
1,600 |
|
$ |
3 |
|
$ |
1,597 |
Year-over-year growth rates |
|
|
|
|
|
|||
|
|
9.3% |
|
0.0 pp |
|
|
9.3% |
|
International |
|
7.4% |
|
3.4 pp |
|
|
4.0% |
|
|
|
(18.9)% |
|
6.6 pp |
|
|
(25.5)% |
|
General corporate expenses |
|
6.3% |
|
1.1 pp |
|
|
5.2% |
|
|
|
6.6% |
|
1.1 pp |
|
|
5.5% |
|
|
||||||||
Schedule 11 |
|||||||||
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 |
|||
|
|
||||||||
|
$ |
2,654 |
|
|
$ |
— |
|
$ |
2,654 |
International |
|
569 |
|
|
|
22 |
|
|
547 |
|
|
204 |
|
|
|
14 |
|
|
190 |
General corporate expenses |
|
(141) |
|
|
|
(1) |
|
|
(140) |
|
$ |
3,286 |
|
|
$ |
35 |
|
$ |
3,251 |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
$ |
2,396 |
|
|
$ |
— |
|
$ |
2,396 |
International |
|
505 |
|
|
|
7 |
|
|
498 |
|
|
264 |
|
|
|
— |
|
|
264 |
General corporate expenses |
|
(134) |
|
|
|
— |
|
|
(134) |
|
$ |
3,031 |
|
|
$ |
7 |
|
$ |
3,024 |
|
|
|
|
|
|
||||
Year-over-year growth rates |
|
|
|
|
|
|
|||
|
|
10.8% |
|
|
0.0 pp |
|
|
10.8% |
|
International |
|
12.6% |
|
|
3.0 pp |
|
|
9.6% |
|
|
|
(22.8)% |
|
|
5.3 pp |
|
|
(28.1)% |
|
General corporate expenses |
|
5.0% |
|
|
1.2 pp |
|
|
3.8% |
|
|
|
8.4% |
|
|
0.9 pp |
|
|
7.5% |
|
|
|
|
|
|||||||
Schedule 12 |
|||||||||||
Reconciliation of Diluted EPS to Adjusted EPS (Unaudited) |
|||||||||||
|
For the Three Months Ended |
|
For the Six Months Ended |
||||||||
|
|
|
|
|
|
|
|
||||
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 |
||
|
• |
Cost of products sold included expenses of |
|
|
• |
SG&A included expenses of |
|
(b) |
|
Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were income of |
|
(c) |
Gross impairment losses, which were recorded in SG&A, included the following: |
||
|
• |
|
|
|
• |
Intangible asset impairment losses of |
|
(d) |
Gross expenses included in certain non-ordinary course legal and regulatory matters were |
||
(e) |
Gross expenses included in losses/(gains) on sale of business were |
||
(f) |
Gross expenses included in debt prepayment and extinguishment costs were |
||
(g) |
Certain significant discrete income tax items were an expense of |
|
||||||||
Schedule 13 |
||||||||
(Unaudited) |
||||||||
|
For the Three Months Ended |
|
|
|||||
|
|
|
|
|
$ 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 |
(b) |
Includes non-cash amortization of prior service credits, which accounted for a benefit to Adjusted EPS from other expense/(income) of |
|
|
|
|
|||||||
Schedule 14 |
||||||||
(Unaudited) |
||||||||
|
For the Six Months Ended |
|
|
|||||
|
|
|
|
|
$ 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 |
|
(b) |
Includes non-cash amortization of prior service credits, which accounted for a benefit to Adjusted EPS from other expense/(income) of |
|
(c) |
Represents the impact of excluding the dilutive effects of equity awards for the six months ended |
|
|
|
||||
Schedule 15 |
|||||
Condensed Consolidated Balance Sheets (in millions, except per share data) (Unaudited) |
|||||
|
|
|
|
||
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 |
||
|
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, |
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) |
||
|
(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 |
|||||
Condensed Consolidated Statements of Cash Flow (in millions) (Unaudited) |
|||||
|
For the Six Months Ended |
||||
|
|
|
|
||
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) |
||
|
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 |
|||||
Reconciliation of Net Cash Provided By/(Used For) Operating Activities to Free Cash Flow (in millions) (Unaudited) |
|||||
|
For the Six Months Ended |
||||
|
|
|
|
||
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@kraftheinz.com
ir@kraftheinz.com
Source: