Kraft Heinz Co

Results of Operations

We disclose in this report certain non-GAAP financial measures. These non-GAAP financial measures assist management in comparing our 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 our underlying operations. For additional information and reconciliations to the most closely comparable financial measures presented in our consolidated financial statements, which are calculated in accordance with U.S. GAAP, see Non-GAAP Financial Measures.

Consolidated Results of Operations

Summary of Results:

Net Sales:

Net sales increased 0.6% to $26.6 billion in 2023 compared to $26.5 billion in 2022, including the unfavorable impacts of lapping a 53rd week of shipments in the prior period (1.8 pp), foreign currency (0.9 pp), and acquisitions and divestitures (0.1 pp). Organic Net Sales increased 3.4% to $26.8 billion in 2023 compared to $25.9 billion in 2022, primarily driven by higher pricing (8.9 pp), which more than offset unfavorable volume/mix (5.5 pp). Pricing was higher in both segments, while volume/mix was unfavorable in both segments.

Net Income/(Loss):

(a) Adjusted EBITDA is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Operating income/(loss) increased 25.8% to $4.6 billion in 2023 compared to $3.6 billion in 2022, primarily driven by higher pricing, efficiency gains, lower non-cash impairment losses in the current year period, and the impact of the securities class action lawsuit in the prior year period. These impacts more than offset higher commodity costs, including the impact of realized and unrealized gains and losses on commodity hedges; higher supply chain costs, reflecting inflationary pressure in manufacturing and procurement costs; unfavorable volume/mix; increased selling, general and administrative expenses (“SG&A”), particularly advertising expenses; and the decrease from lapping a 53rd week of shipments in the prior period.

Net income/(loss) increased 20.2% to $2.8 billion in 2023 compared to $2.4 billion in 2022. This increase was driven by the operating income/(loss) factors discussed above and lower interest expense, which more than offset unfavorable changes in other expense/(income) and higher tax expense.

•Interest expense was $912 million in 2023 compared to $921 million in 2022.

•Our effective tax rate was 21.7% in 2023 compared to 20.2% in 2022. Our 2023 effective tax rate was favorably impacted by the geographic mix of pre-tax income in various non-U.S. jurisdictions. These impacts were partially offset by the impact of certain unfavorable rate reconciling items, primarily non-deductible goodwill impairments and the impact of the federal tax on global intangible low-taxed income (“GILTI”). Our 2022 effective tax rate was impacted by the favorable geographic mix of pre-tax income in various non-U.S. jurisdictions and certain favorable items, primarily the decrease in deferred tax liabilities due to the merger of certain foreign entities, the revaluation of deferred tax balances due to changes in state tax laws, and changes in estimates of certain 2021 U.S. income and deductions. This impact was partially offset by the impact of certain unfavorable items, primarily non-deductible goodwill impairments, the impact of the federal tax on GILTI, and the establishment of uncertain tax positions and valuation allowance reserves. The year-over-year increase in the effective tax rate was due primarily to the decrease in deferred tax liabilities due to the merger of certain foreign entities and the revaluation of deferred tax balances due to changes in state tax laws in the prior year versus the current year.

•Other expense/(income) was $27 million of expense in 2023 compared to $253 million of income in 2022. This change was primarily driven by a $67 million net pension and postretirement non-service costs in 2023 compared to a $135 million net pension and postretirement non-service benefit in 2022 due in part to the settlement of one of our U.K. defined benefit pension plans, which resulted in pre-tax losses of $162 million. Further, additional changes in other expense/(income) were driven by a $73 million net foreign exchange loss in 2023 compared to a $106 million net foreign exchange gain in 2022, and a $21 million decrease in gain on sale of businesses. These impacts were partially offset by a $59 million net gain on derivative activities in 2023 compared to an $50 million net loss on derivative activities in 2022, and a $13 million increase in interest income as compared to the prior year period.

Adjusted EBITDA increased 5.1% to $6.3 billion in 2023 compared to $6.0 billion in 2022, primarily due to higher pricing and efficiency gains, which more than offset higher commodity costs, including the impact of realized gains and losses on commodity hedges; higher supply chain costs, reflecting inflationary pressure in manufacturing, procurement, and logistics; unfavorable volume/mix; increased SG&A, particularly in advertising expenses; the decrease from lapping a 53rd week of shipments in the prior period (2.1 pp); and the unfavorable impact of foreign currency (0.9 pp).

Diluted Earnings Per Share (“EPS”):

(a) Adjusted EPS is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Diluted EPS increased 20.9% to $2.31 in 2023 compared to $1.91 in 2022, primarily driven by the net income/(loss) factors discussed above.

(a) Adjusted EPS is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Adjusted EPS increased 7.2% to $2.98 in 2023 compared to $2.78 in 2022 primarily driven by higher Adjusted EBITDA and lower interest expense, which more than offset the decrease from lapping a 53rd week of shipments in the prior period, unfavorable changes in other expense/(income), and higher taxes on adjusted earnings.