Kraft Issues Preliminary Report With $1.2B In Charges, Announces Delayed 10-Q Filing

Kraft Heinz Co KHC released preliminary results for the first half of 2019 on Thursday and delayed its scheduled quarterly filing.

Delayed 10-Q Filing

Kraft disclosed it is unable to file its quarterly Form 10-Q report for the second quarter ended June 29. All public companies are required to release a 10-Q filing, as it includes relevant financial information.

Instead, Kraft disclosed certain preliminary financial information for the first half of 2019. The company said it can't guarantee the figures offered in Thursday's preliminary release will not change.

Shares of Kraft Heinz were trading lower by more than 10% at the time of publication Thursday. 

Preliminary Report

Kraft said net sales for the first half of 2019 fell 4.8% from the same period last year to $12.4 billion. Organic net sales fell 1.5% year-over-year, pricing was down 1.3 percentage points and the company saw an unfavorable 2.6-percentage point impact from currency.

Net income for the first half of the year fell from $1.757 billion last year to $854 million, Adjusted EBITDA fell from $3.756 billion to $3.031 billion and adjusted earnings per share fell from $1.89 to $1.44.

Write-Downs

Kraft said it concluded the fair values of certain goodwill and intangible assets were below the carrying amounts.

First, the company recorded a non-cash impairment charge to lower the carrying amount of goodwill in multiple reporting units by $744 million. This was based on new five-year operating forecasts for multiple businesses segments and regions.

Second, Kraft recorded a non-cash impairment charge of around $474 million to lower the carrying amount of certain intangible assets, the company said. The change is based on a higher discount rate that better reflects the markets' perceived risk in its valuation.

'Not Acceptable'

Kraft Heinz CEO Miguel Patricio said in a statement that the declines seen in the first half of 2019 are "nothing we should find acceptable moving forward." 

"We have a lot to work with and build upon, and our team is motivated by the opportunity to drive the next phase of growth and profitability for Kraft Heinz and our shareholders."

Kraft Heinz shares were down 13.22% at $26.79 at the time of publication Thursday. 

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