Kraft heinz reports fourth quarter and full year 2022 results
Pittsburgh & chicago--(business wire)--the kraft heinz company (nasdaq: khc) (“kraft heinz” or the “company”) today reported financial results for the fourth quarter and full year 2022. “2022 was an incredible year for kraft heinz, delivering strong results and ending the fourth quarter with solid momentum that positions us well for 2023,” said kraft heinz ceo and chair of the board miguel patricio. “we continue to see strength driven by our key growth pillars, while at the same time prioritizing investments in our brands and delivering on efficiencies.” “the results were even more impressive considering the difficult operating environment, with record levels of inflation and supply chain disruptions, to which our teams responded with agility. i am very proud of the entire kraft heinz team for a strong year, while continuing to execute on our long-term strategy. we are confident that all the work we’ve done thus far positions us well to accelerate profitable growth and generate attractive returns for our stockholders.” net sales in millions net sales organic net sales(1) december 31, 2022 december 25, 2021 % chg vs py yoy growth rate price volume/ mix for the three months ended north america $ 5,684 $ 5,208 9.1% 9.2% 14.2 pp (5.0) pp international 1,697 1,501 13.1% 14.3% 18.5 pp (4.2) pp kraft heinz $ 7,381 $ 6,709 10.0% 10.4% 15.2 pp (4.8) pp for the year ended north america $ 20,340 $ 20,351 (0.1)% 9.2% 13.0 pp (3.8) pp international 6,145 5,691 8.0% 11.6% 13.5 pp (1.9) pp kraft heinz $ 26,485 $ 26,042 1.7% 9.8% 13.2 pp (3.4) pp net income/(loss) and diluted eps in millions, except per share data for the three months ended for the year ended december 31, 2022 december 25, 2021 % chg vs py december 31, 2022 december 25, 2021 % chg vs py gross profit $ 2,364 $ 2,162 9.3% $ 8,122 $ 8,682 (6.5)% operating income/(loss) 1,226 (20) 6,517.7% 3,634 3,460 5.0% net income/(loss) 887 (255) 447.9% 2,368 1,024 131.3% net income/(loss) attributable to common shareholders 890 (257) 447.2% 2,363 1,012 133.4% diluted eps $ 0.72 $ (0.21) 442.9% $ 1.91 $ 0.82 132.9% adjusted eps(1) 0.85 0.79 7.6% 2.78 2.93 (5.1)% adjusted ebitda(1) $ 1,743 $ 1,606 8.6% $ 6,003 $ 6,371 (5.8)% q4 2022 financial summary net sales increased 10.0 percent versus the year-ago period to $7.4 billion, including a positive 7.1 percentage point impact from a 53rd week, a negative 4.6 percentage point impact from divestitures and acquisitions, and a negative 2.9 percentage point impact from currency. organic net sales increased 10.4 percent versus the prior year period. price increased 15.2 percentage points versus the prior year period, with increases in both reportable segments primarily driven by price increases to mitigate rising input costs. volume/mix declined 4.8 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) increased 447.9 percent versus the year-ago period to $887 million, primarily driven by non-cash impairment losses in the prior year period, lower interest expense primarily due to debt extinguishment costs in the prior year period, and higher adjusted ebitda versus the prior year period. these factors were partially offset by higher tax expense, an accrual related to the previously disclosed securities class action lawsuit, and unfavorable changes in other expense/(income). adjusted ebitda increased 8.6 percent versus the year-ago period to $1.7 billion, including a positive 7.4 percentage point impact from a 53rd week, a negative 4.9 percentage point impact from divestitures and acquisitions, and a negative 2.1 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), higher commodity costs (mainly in dairy, packaging materials, energy, and soybean and vegetable oils), as well as unfavorable volume/mix. diluted eps was $0.72, up 442.9% versus the prior year period, driven by the net income/(loss) factors discussed above. adjusted eps(1) was $0.85, up 7.6 percent versus the prior year period, primarily driven by results of ongoing operations, a 53rd week, and lower interest expense versus the prior year period. these factors were partially offset by a negative $0.05 impact from divestitures and unfavorable changes in other expense/(income). fy 2022 financial summary net sales increased 1.7 percent versus the year-ago period to $26.5 billion, including a negative 8.0 percentage point impact from divestitures and acquisitions, a negative 2.0 percentage point impact from currency, and a positive 1.9 percentage point impact from a 53rd week. organic net sales increased 9.8 percent versus the prior year period. price increased 13.2 percentage points versus the prior year period, with increases in both reportable segments primarily driven by price increases to mitigate rising input costs. volume/mix declined 3.4 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) increased 131.3 percent versus the year-ago period to $2.4 billion, driven by lower interest expense primarily due to debt extinguishment costs in the prior year period and lower non-cash impairment losses in the current year period. these factors were partially offset by lower adjusted ebitda versus the prior year period and an accrual related to the previously disclosed securities class action lawsuit. adjusted ebitda decreased 5.8 percent versus the year-ago period to $6.0 billion, including a negative 6.1 percentage point impact from divestitures and acquisitions, a negative 1.3 percentage point impact from currency, and a positive 1.9 percentage point impact from a 53rd week. the remaining year-over-year decrease in adjusted ebitda is primarily a result of higher supply chain costs (reflecting inflationary pressure in procurement, logistics, and manufacturing costs), higher commodity costs (mainly in dairy, packaging materials, soybean and vegetable oils, energy, and meat), and unfavorable volume/mix. these impacts were offset by higher pricing and efficiency gains. diluted eps was $1.91, up 132.9 percent versus the prior year period, primarily driven by the net income/(loss) factors discussed above. adjusted eps was $2.78, down 5.1 percent versus the prior year period, primarily driven by a negative $0.26 impact from divestitures, higher taxes on adjusted earnings, and unfavorable changes in other expense/(income). these factors were partially offset by lower interest expense and a 53rd week. year-to-date net cash provided by operating activities was $2.5 billion, down 54.0 percent versus the year-ago period, primarily driven by one-time proceeds from the sale of licenses in connection with the cheese transaction in the prior year period, higher cash outflows for inventories primarily related to stock rebuilding, increased input costs, and the acceleration of payments to suppliers attributed to the wind-down of existing product financing arrangements, 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. year-to date free cash flow(1) was $1.6 billion, down 65.2 percent versus the comparable prior year period due to the same drivers of net cash provided by operating activities. outlook the company expects 2023 organic net sales(1)(2) growth of 4 to 6 percent versus 2022. constant currency adjusted ebitda(1)(2) growth from 2022 to 2023 is expected to range between 2 to 4 percent, or 4 to 6 percent when excluding the impact from the 53rd week in 2022. the company anticipates high single-digit inflation for the year, with pricing and gross efficiencies contributing to adjusted gross profit margin(1)(2) recovery. adjusted gross profit margin expansion is expected to fund incremental investments across technology, marketing, and people. adjusted eps(1)(2) is expected to be $2.67 to $2.75, which includes approximately a $0.04 negative impact from expected unfavorable changes in non-cash pension and post-retirement benefits, and a $0.04 currency headwind at current foreign exchange rates. the expected 2023 year-over-year adjusted eps performance reflects a negative $0.06 impact from lapping the 53rd week in 2022. end notes (1) organic net sales, adjusted ebitda, constant currency adjusted ebitda, adjusted eps, adjusted gross profit margin 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, constant currency adjusted ebitda, adjusted eps, and adjusted gross margin 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 fourth quarter and full year 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 standard 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 2022 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 “provide,” “deliver,’ “see,” “drive,” “accelerate,” “execute,” “generate,” “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, 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 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, including the ongoing conflict between russia and ukraine; 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); 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; 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 (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. 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 consolidated statements of income (in millions, except per share data) (unaudited) for the three months ended for the year ended december 31, 2022 december 25, 2021 december 31, 2022 december 25, 2021 net sales $ 7,381 $ 6,709 $ 26,485 $ 26,042 cost of products sold 5,017 4,547 18,363 17,360 gross profit 2,364 2,162 8,122 8,682 selling, general and administrative expenses, excluding impairment losses 1,138 891 3,575 3,588 goodwill impairment losses — 53 444 318 intangible asset impairment losses — 1,238 469 1,316 selling, general and administrative expenses 1,138 2,182 4,488 5,222 operating income/(loss) 1,226 (20) 3,634 3,460 interest expense 217 604 921 2,047 other expense/(income) (42) (104) (253) (295) income/(loss) before income taxes 1,051 (520) 2,966 1,708 provision for/(benefit from) income taxes 164 (265) 598 684 net income/(loss) 887 (255) 2,368 1,024 net income/(loss) attributable to noncontrolling interest (3) 2 5 12 net income/(loss) attributable to common shareholders $ 890 $ (257) $ 2,363 $ 1,012 basic shares outstanding 1,226 1,225 1,226 1,224 diluted shares outstanding 1,233 1,225 1,235 1,236 per share data applicable to common shareholders: basic earnings/(loss) per share $ 0.73 $ (0.21) $ 1.93 $ 0.83 diluted earnings/(loss) per share 0.72 (0.21) 1.91 0.82 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 53rd week organic net sales price volume/mix december 31, 2022 north america $ 5,684 $ (35) $ — $ 357 $ 5,362 international 1,697 (143) 71 97 1,672 kraft heinz $ 7,381 $ (178) $ 71 $ 454 $ 7,034 december 25, 2021 north america $ 5,208 $ — $ 297 $ — $ 4,911 international 1,501 12 26 — 1,463 kraft heinz $ 6,709 $ 12 $ 323 $ — $ 6,374 year-over-year growth rates north america 9.1% (0.7) pp (6.6) pp 7.2 pp 9.2% 14.2 pp (5.0) pp international 13.1% (10.5) pp 2.6 pp 6.7 pp 14.3% 18.5 pp (4.2) pp kraft heinz 10.0% (2.9) pp (4.6) pp 7.1 pp 10.4% 15.2 pp (4.8) pp schedule 3 the kraft heinz company reconciliation of net sales to organic net sales for the year ended (dollars in millions) (unaudited) net sales currency acquisitions and divestitures 53rd week organic net sales price volume/mix december 31, 2022 north america $ 20,340 $ (67) $ — $ 357 $ 20,050 international 6,145 (430) 279 97 6,199 kraft heinz $ 26,485 $ (497) $ 279 $ 454 $ 26,249 december 25, 2021 north america $ 20,351 $ — $ 1,990 $ — $ 18,361 international 5,691 26 109 — 5,556 kraft heinz $ 26,042 $ 26 $ 2,099 $ — $ 23,917 year-over-year growth rates north america (0.1)% (0.4) pp (10.8) pp 1.9 pp 9.2% 13.0 pp (3.8) pp international 8.0% (8.1) pp 2.8 pp 1.7 pp 11.6% 13.5 pp (1.9) pp kraft heinz 1.7% (2.0) pp (8.0) pp 1.9 pp 9.8% 13.2 pp (3.4) 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 year ended december 31, 2022 december 25, 2021 december 31, 2022 december 25, 2021 net income/(loss) $ 887 $ (255) $ 2,368 $ 1,024 interest expense 217 604 921 2,047 other expense/(income) (42) (104) (253) (295) provision for/(benefit from) income taxes 164 (265) 598 684 operating income/(loss) 1,226 (20) 3,634 3,460 depreciation and amortization (excluding restructuring activities) 246 233 922 910 divestiture-related license income (15) (4) (56) (4) restructuring activities 36 32 74 84 deal costs 1 3 9 11 unrealized losses/(gains) on commodity hedges (2) 29 63 17 impairment losses — 1,291 999 1,634 certain non-ordinary course legal and regulatory matters 210 — 210 62 equity award compensation expense 41 42 148 197 adjusted ebitda $ 1,743 $ 1,606 $ 6,003 $ 6,371 segment adjusted ebitda: north america $ 1,550 $ 1,445 $ 5,284 $ 5,576 international 284 245 1,017 1,066 general corporate expenses (91) (84) (298) (271) adjusted ebitda $ 1,743 $ 1,606 $ 6,003 $ 6,371 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 december 31, 2022 north america $ 1,550 $ (8) $ 1,558 international 284 (26) 310 general corporate expenses (91) 2 (93) kraft heinz $ 1,743 $ (32) $ 1,775 december 25, 2021 north america $ 1,445 $ — $ 1,445 international 245 2 243 general corporate expenses (84) — (84) kraft heinz $ 1,606 $ 2 $ 1,604 year-over-year growth rates north america 7.3% (0.5) pp 7.8% international 16.0% (12.0) pp 28.0% general corporate expenses 8.3% (3.2) pp 11.5% kraft heinz 8.6% (2.1) pp 10.7% schedule 6 the kraft heinz company reconciliation of adjusted ebitda to constant currency adjusted ebitda for the year ended (dollars in millions) (unaudited) adjusted ebitda currency constant currency adjusted ebitda december 31, 2022 north america $ 5,284 $ (14) $ 5,298 international 1,017 (71) 1,088 general corporate expenses (298) 9 (307) kraft heinz $ 6,003 $ (76) $ 6,079 december 25, 2021 north america $ 5,576 $ — $ 5,576 international 1,066 6 1,060 general corporate expenses (271) — (271) kraft heinz $ 6,371 $ 6 $ 6,365 year-over-year growth rates north america (5.2)% (0.2) pp (5.0)% international (4.6)% (7.2) pp 2.6% general corporate expenses 9.8% (3.5) pp 13.3% kraft heinz (5.8)% (1.3) pp (4.5)% schedule 7 the kraft heinz company reconciliation of gaap results to non-gaap results (dollars in millions) (unaudited) for the three months ended december 31, 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 $ 2,364 $ 1,138 $ 1,226 $ 217 $ (42) $ 1,051 $ 164 $ 887 $ (3) $ 890 $ 0.72 items affecting comparability restructuring activities 12 (24) 36 — (1) 37 9 28 — 28 0.02 deal costs — (1) 1 — — 1 1 — — — — unrealized losses/(gains) on commodity hedges (2) — (2) — — (2) (1) (1) — (1) — certain non-ordinary course legal and regulatory matters — (210) 210 — — 210 49 161 — 161 0.13 losses/(gains) on sale of business — — — — 24 (24) (15) (9) — (9) (0.01) nonmonetary currency devaluation — — — — (1) 1 — 1 — 1 — debt prepayment and extinguishment (benefit)/costs — — — 26 — (26) (7) (19) — (19) (0.01) adjusted non-gaap results $ 2,374 $ 1,048 $ 0.85 schedule 8 the kraft heinz company reconciliation of gaap results to non-gaap results (dollars in millions) (unaudited) for the three months ended december 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 $ 2,162 $ 2,182 $ (20) $ 604 $ (104) $ (520) $ (265) $ (255) $ 2 $ (257) $ (0.21) items affecting comparability restructuring activities 9 (22) 31 — (1) 32 8 24 — 24 0.02 deal costs — (3) 3 — — 3 1 2 — 2 — unrealized losses/(gains) on commodity hedges 29 — 29 — — 29 7 22 — 22 0.02 impairment losses — (1,291) 1,291 — — 1,291 290 1,001 — 1,001 0.81 losses/(gains) on sale of business — — — — 33 (33) 66 (99) — (99) (0.08) nonmonetary currency devaluation — — — — 4 (4) — (4) — (4) — debt prepayment and extinguishment (benefit)/costs — — — (346) — 346 68 278 — 278 0.23 adjusted non-gaap results $ 2,200 $ 969 $ 0.79 schedule 9 the kraft heinz company reconciliation of gaap results to non-gaap results (dollars in millions) (unaudited) for the year ended december 31, 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 $ 8,122 $ 4,488 $ 3,634 $ 921 $ (253) $ 2,966 $ 598 $ 2,368 $ 5 $ 2,363 $ 1.91 items affecting comparability restructuring activities 27 (47) 74 — — 74 18 56 — 56 0.05 deal costs — (9) 9 — — 9 4 5 — 5 — unrealized losses/(gains) on commodity hedges 63 — 63 — — 63 15 48 — 48 0.04 impairment losses 86 (913) 999 — — 999 132 867 — 867 0.70 certain non-ordinary course legal and regulatory matters — (210) 210 — — 210 49 161 — 161 0.13 losses/(gains) on sale of business — — — — 25 (25) (8) (17) — (17) (0.01) other losses/(gains) related to acquisitions and divestitures — — — — 38 (38) (9) (29) — (29) (0.02) nonmonetary currency devaluation — — — — (17) 17 — 17 — 17 0.01 debt prepayment and extinguishment (benefit)/costs — — — 38 — (38) (3) (35) — (35) (0.03) adjusted non-gaap results $ 8,298 $ 3,441 $ 2.78 schedule 10 the kraft heinz company reconciliation of gaap results to non-gaap results (dollars in millions) (unaudited) for the year ended december 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 $ 8,682 $ 5,222 $ 3,460 $ 2,047 $ (295) $ 1,708 $ 684 $ 1,024 $ 12 $ 1,012 $ 0.82 items affecting comparability restructuring activities 13 (70) 83 — (1) 84 20 64 — 64 0.05 deal costs — (11) 11 — — 11 7 4 — 4 — unrealized losses/(gains) on commodity hedges 17 — 17 — — 17 4 13 — 13 0.01 impairment losses — (1,634) 1,634 — — 1,634 310 1,324 — 1,324 1.07 certain non-ordinary course legal and regulatory matters — (62) 62 — — 62 — 62 — 62 0.05 losses/(gains) on sale of business — — — — 44 (44) (225) 181 — 181 0.15 debt prepayment and extinguishment (benefit)/costs — — — (917) — 917 189 728 — 728 0.59 certain significant discrete income tax items — — — — — — (235) 235 — 235 0.19 adjusted non-gaap results $ 8,712 $ 3,635 $ 2.93 schedule 11 the kraft heinz company key drivers of change in adjusted eps (unaudited) for the three months ended december 31, 2022 december 25, 2021 $ change key drivers of change in adjusted eps: results of operations(a)(b) $ 0.95 $ 0.87 $ 0.08 results of divested operations — 0.05 (0.05) 53rd week 0.06 — 0.06 interest expense (0.16) (0.18) 0.02 other expense/(income) 0.02 0.05 (0.03) effective tax rate (0.01) — (0.01) effect of dilutive equity awards(c) (0.01) — (0.01) adjusted eps $ 0.85 $ 0.79 $ 0.06 (a) includes non-cash amortization of definite-lived intangible assets, which accounted for a negative impact to adjusted eps from results of operations of $0.05 for the three months ended december 31, 2022 and $0.04 for the three months ended december 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 december 31, 2022. (c) represents the impact of excluding the dilutive equity awards for the three months ended december 25, 2021, as their inclusion would have had an anti-dilutive effect on eps due to net losses attributable to common shareholders for the same period. schedule 12 the kraft heinz company key drivers of change in adjusted eps (unaudited) for the year ended december 31, 2022 december 25, 2021 $ change key drivers of change in adjusted eps: results of operations(a)(b) $ 3.26 $ 3.25 $ 0.01 results of divested operations 0.01 0.27 (0.26) 53rd week 0.06 — 0.06 interest expense (0.63) (0.76) 0.13 other expense/(income)(c) 0.14 0.17 (0.03) effective tax rate (0.06) — (0.06) adjusted eps $ 2.78 $ 2.93 $ (0.15) (a) includes non-cash amortization of definite-lived intangible assets, which accounted for a negative impact to adjusted eps from results of operations of $0.18 in 2022 and $0.16 in 2021. (b) includes divestiture-related license income, which accounted for a benefit to adjusted eps from results of operations of $0.04 in 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 in 2022 and 2021. schedule 13 the kraft heinz company consolidated balance sheets (in millions, except per share data) (unaudited) december 31, 2022 december 25, 2021 assets cash and cash equivalents $ 1,040 $ 3,445 trade receivables, net 2,120 1,957 inventories 3,651 2,729 prepaid expenses 240 136 other current assets 842 716 assets held for sale 4 11 total current assets 7,897 8,994 property, plant and equipment, net 6,740 6,806 goodwill 30,833 31,296 intangible assets, net 42,649 43,542 other non-current assets 2,394 2,756 total assets $ 90,513 $ 93,394 liabilities and equity commercial paper and other short-term debt $ 6 $ 14 current portion of long-term debt 831 740 trade payables 4,848 4,753 accrued marketing 749 804 interest payable 264 268 income taxes payable 136 541 other current liabilities 2,194 1,944 total current liabilities 9,028 9,064 long-term debt 19,233 21,061 deferred income taxes 10,152 10,536 accrued postemployment costs 144 205 long-term deferred income 1,477 1,534 other non-current liabilities 1,609 1,542 total liabilities 41,643 43,942 redeemable noncontrolling interest 40 4 equity: common stock, $0.01 par value 12 12 additional paid-in capital 51,834 53,379 retained earnings/(deficit) 489 (1,682) accumulated other comprehensive income/(losses) (2,810) (1,824) treasury stock, at cost (847) (587) total shareholders' equity 48,678 49,298 noncontrolling interest 152 150 total equity 48,830 49,448 total liabilities and equity $ 90,513 $ 93,394 schedule 14 the kraft heinz company consolidated statements of cash flows (in millions) (unaudited) for the year ended december 31, 2022 december 25, 2021 cash flows from operating activities: net income/(loss) $ 2,368 $ 1,024 adjustments to reconcile net income/(loss) to operating cash flows: depreciation and amortization 933 910 amortization of postemployment benefit plans prior service costs/(credits) (14) (7) divestiture-related license income (56) (4) equity award compensation expense 148 197 deferred income tax provision/(benefit) (278) (1,042) postemployment benefit plan contributions (23) (27) goodwill and intangible asset impairment losses 913 1,634 nonmonetary currency devaluation 17 — loss/(gain) on sale of business (25) (44) proceeds from sale of license — 1,587 loss/(gain) on extinguishment of debt (38) 917 other items, net 7 (187) changes in current assets and liabilities: trade receivables (228) 87 inventories (1,121) (144) accounts payable 152 408 other current assets (314) (32) other current liabilities 28 87 net cash provided by/(used for) operating activities 2,469 5,364 cash flows from investing activities: capital expenditures (916) (905) payments to acquire business, net of cash acquired (481) (74) settlement of net investment hedges 208 (28) proceeds from sale of business, net of cash disposed and working capital adjustments 88 5,014 other investing activities, net 10 31 net cash provided by/(used for) investing activities (1,091) 4,038 cash flows from financing activities: repayments of long-term debt (1,465) (6,202) debt prepayment and extinguishment benefit/(costs) 10 (924) proceeds from issuance of commercial paper 228 — repayments of commercial paper (228) — dividends paid (1,960) (1,959) other financing activities, net (299) (259) net cash provided by/(used for) financing activities (3,714) (9,344) effect of exchange rate changes on cash, cash equivalents, and restricted cash (69) (30) cash, cash equivalents, and restricted cash net increase/(decrease) (2,405) 28 balance at beginning of period 3,446 3,418 balance at end of period $ 1,041 $ 3,446 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 year ended december 31, 2022 december 25, 2021 net cash provided by/(used for) operating activities $ 2,469 $ 5,364 capital expenditures (916) (905) free cash flow $ 1,553 $ 4,459
