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Kraft Heinz Annual Report, Year Ended Dec 31, 2016

Filing Date
Filed February 23, 2017
Period End
December 31, 2016
Security
KHC
In the record · 2016–202610-K1110-Q348-K161

KHC filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 161 current reports (8-K) between 2016 and 2026.

  1. Impairment8-K · Feb ’19Feb ’19
  2. Material agreement8-K · Oct ’20Oct ’20
  3. Leadership change8-K · Dec ’22Dec ’22
  4. Leadership change8-K · Nov ’26Nov ’26

01—Abstract

Summary

Summary of the 10-K filed February 23, 2017. Cited figures are marked; the original filing is the authoritative source.

The Kraft Heinz Company reported net sales of $26.49 billiona for the 52 weeks ended December 31, 2016, up 44.4% from $18.34 billion in the 53-week 2015 period, primarily driven by the July 2, 2015 merger of Kraft Foods Group with Heinz.

Operating income rose to $6.14 billionb from $2.64 billion, and net income attributable to common shareholders was $3.45 billion, compared with a loss of $266 million in 2015. Diluted EPS was $2.81, and Adjusted EPS, a non-GAAP measure, was $3.33 versus $2.19 a year earlier. Adjusted EBITDA increased 15.4% to $7.78 billion.

On an organic basis, the company's net sales rose 0.3% in 2016, with higher net pricing offset by neutral volume/mix, while pro forma net sales declined 3.5% due mainly to foreign currency. Integration Program and restructuring expenses totaled $1.0 billionc in 2016, and the company expects $2.0 billion of pre-tax Integration Program costs and $1.7 billion of pre-tax savings by the end of 2017. Cash from operations was $5.24 billion, capital expenditures were $1.25 billion, and total assets were $120.48 billion, with long-term debt of $29.71 billion plus a current portion of $2.05 billion.

Capital allocation included the June 2016 redemption of the $8.3 billiond Series A Preferred Stock, funded largely by $5.0 billion and €1.8 billion of notes issued in May 2016, and common dividends declared of $2.35 per share for 2016. The filing also states that the Sponsors own approximately 51% of common stock and that the company disclosed a withdrawn proposal to combine with Unilever in February 2017.

02—Key points

Key Highlights

  1. Net sales of $26.49 billion in 2016, up 44.4% year over year, driven by the 2015 Merger; organic net sales rose 0.3%.
  2. Operating income of $6.14 billion, up 132.7%, supported by Integration Program savings and favorable pricing net of key commodity costs in the United States and Canada.
  3. Diluted EPS of $2.81 versus a loss of $0.34 in 2015; Adjusted EPS of $3.33, up 52.1%.
  4. Adjusted EBITDA of $7.78 billion, up 15.4%; United States Segment Adjusted EBITDA up 25.0% to $5.86 billion.
  5. Redeemed all $8.3 billion of Series A Preferred Stock on June 7, 2016, funded primarily by May 2016 debt issuances; total long-term debt including current portion was $31.8 billion.
  6. Integration Program expected to cost $2.0 billion pre-tax and deliver $1.7 billion of pre-tax savings by end of 2017; cumulative savings achieved were approximately $1,175 million.
  7. Sponsors own approximately 51% of common stock, and Wal-Mart Stores Inc. accounted for approximately 22% of 2016 net sales.

03—Questions

Frequently Asked Questions

  1. How did Kraft Heinz's profitability change in 2016?

    Operating income rose to $6.14 billion from $2.64 billion, and net income attributable to common shareholders was $3.45 billion versus a loss of $266 million in 2015. The filing attributes the increase mainly to the 2015 Merger, Integration Program savings, and favorable pricing net of key commodity costs, partly offset by currency and a 53rd week in the prior year.

  2. What drove the growth in net sales?

    Reported net sales rose 44.4% to $26.49 billion, primarily because 2016 was the first full year of combined Kraft and Heinz results. On an organic basis, net sales increased 0.3%, with higher net pricing (0.3 pp) and neutral volume/mix (0.0 pp); pro forma net sales declined 3.5%, mainly due to foreign currency.

  3. How much debt does the company carry and what did it do with the preferred stock?

    Long-term debt was $29.71 billion, with a current portion of $2.05 billion, for total long-term debt of $31.8 billion at December 31, 2016. The company redeemed its $8.3 billion Series A Preferred Stock on June 7, 2016, funded primarily by $5.0 billion and €1.8 billion of notes issued in May 2016, plus commercial paper, securitization, and cash on hand.

  4. What are the company's dividend and cash flow levels?

    Dividends declared were $2.35 per common share in 2016 and $1.70 in 2015. Net cash from operating activities was $5.24 billion, capital expenditures were $1.25 billion, and the Board declared a $0.60 per share quarterly dividend on February 15, 2017.

04—Continue

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