01—Abstract
Summary
Summary of the 10-K filed February 17, 2021. Cited figures are marked; the original filing is the authoritative source.
The Kraft Heinz Company reported 2020 net sales of $26.19 billiona, up 4.8% from $24.98 billion in 2019, with Organic Net Sales up 6.5% to $26.32 billion, driven by volume/mix (3.4 pp) and pricing (3.1 pp).
Growth was supported by at-home consumption during the COVID-19 pandemic, which more than offset declines in foodservice. However, net income attributable to common shareholders fell 81.6% to $356 millionb, primarily because of $3.4 billion in non-cash impairment losses in 2020 (goodwill of $2.3 billion and intangible assets of $1.1 billion), compared with $1.9 billion in 2019. Adjusted EBITDA rose 10.0% to $6.67 billion, and Adjusted EPS rose 1.1% to $2.88.
The balance sheet shows total assets of $99.83 billionc and long-term debt of $28.07 billion excluding the current portion. Operating cash flow was $4.93 billion, and the company paid $1.96 billion in dividends. Pending transactions include the Cheese Transaction with Lactalis for about $3.3 billion, expected to close in the first half of 2021, and a subsequent-event agreement to sell certain nuts assets to Hormel Foods for about $3.4 billion in cash.
The filing also discloses an ongoing SEC investigation and USAO review related to the procurement area, along with consolidated securities, ERISA, and derivative class actions. The company states it cannot estimate its potential liability in these matters. The company previously identified material weaknesses in internal control, and as of December 26, 2020 it reported that its internal control over financial reporting was effective.
02—Key points
Key Highlights
- Net sales rose 4.8% to $26.19 billion; Organic Net Sales rose 6.5% to $26.32 billion, with volume/mix contributing 3.4 pp and pricing 3.1 pp.
- Net income attributable to common shareholders fell 81.6% to $356 million, driven by $3.4 billion in non-cash impairment losses in 2020 versus $1.9 billion in 2019.
- Adjusted EBITDA increased 10.0% to $6.67 billion; Adjusted EPS increased 1.1% to $2.88.
- Segment Adjusted EBITDA rose 15.1% in the United States to $5.56 billion, while Canada declined 20.2% to $389 million.
- Operating cash flow was $4.93 billion, and the company paid $1.96 billion in dividends during the year.
- Pending Cheese Transaction with Lactalis (about $3.3 billion) and a February 10, 2021 agreement to sell nuts assets to Hormel Foods for about $3.4 billion in cash.
- The SEC and USAO investigations remain unresolved, and the company cannot estimate its potential liability in the related class and derivative actions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Kraft Heinz kept $0.01.
- Revenue$26.18B100.0%
- Cost of revenue−$17.01B65.0%
- Gross profit$9.18B35.0%
- Operating costs−$7.05B26.9%
- Operating income$2.13B8.1%
- Interest, other & tax−$1.77B6.8%
- Net income$356.0M1.4%
Where FY2020 revenue went
$26.18B- Cost of revenue: $17.01B, 65% of revenue
- SG&A: $7.05B, 27% of revenue
- Net income: $356.0M, 1.4% of revenue
- R&D: $119.0M, 0.5% of revenue
- Interest, other & tax: $1.77B, 6.8% of revenue
Kept 1.4% as net incomeNet income $356.0M · 1.4%R&D $119.0M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 17, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $26.18B$24.98B | +4.8% |
| Cost of Revenue | $17.01B$16.83B | +1.1% |
| Gross Profit | $9.18B$8.15B | +12.6% |
| R&D Expenses | $119.00M$112.00M | +6.3% |
| SG&A Expenses | $7.05B$5.08B | +38.8% |
| Operating Income | $2.13B$3.07B | −30.7% |
| Interest Expense | $1.39B$1.36B | +2.4% |
| Net Income | $356.00M$1.94B | −81.6% |
| EPS (Basic) | $0.29$1.59 | −81.8% |
| EPS (Diluted) | $0.29$1.58 | −81.6% |
| Shares Outstanding (Basic) | 1.22B1.22B | +0.2% |
| Shares Outstanding (Diluted) | 1.23B1.22B | +0.3% |
05—Questions
Frequently Asked Questions
Why did net income fall so sharply despite higher sales and Adjusted EBITDA?
Net income attributable to common shareholders fell 81.6% to $356 million, mainly because of non-cash impairment losses of $3.4 billion in 2020, compared with $1.9 billion in 2019. Adjusted EBITDA, which excludes impairments, rose 10.0% to $6.67 billion.
What drove the growth in net sales?
Net sales rose 4.8% to $26.19 billion. Organic Net Sales grew 6.5%, driven by favorable volume/mix (3.4 pp) and higher pricing (3.1 pp), with the company citing continued growth in at-home consumption partly due to COVID-19.
What is the status of the SEC investigation and related lawsuits?
The SEC and USAO investigations had not been resolved as of the filing. The company is cooperating and intends to vigorously defend the civil lawsuits, and it states it is unable to estimate its potential liability at this time.
What major transactions are pending?
The Cheese Transaction with an affiliate of Groupe Lactalis, for total consideration of about $3.3 billion, is expected to close in the first half of 2021. The company also agreed on February 10, 2021 to sell certain global nuts assets to Hormel Foods for about $3.4 billion in cash, with a pre-tax loss of about $200 million to $300 million expected in the first quarter of 2021.
How is the company's debt and dividend position?
Long-term debt including the current portion was $28.3 billion at December 26, 2020. The company paid $1.6 per share in common dividends for 2020, and on February 11, 2021 its Board declared a $0.40 per share dividend payable March 26, 2021.
06—Continue