Kraft Heinz Co

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 condensed 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 decreased 1.2% to $6.4 billion for the three months ended March 30, 2024 compared to $6.5 billion for the three months ended April 1, 2023, including the unfavorable impacts of foreign currency (0.6 pp) and acquisitions and divestitures (0.1 pp). Organic Net Sales decreased 0.5% to $6.4 billion for the three months ended March 30, 2024 compared to $6.4 billion for the three months ended April 1, 2023, primarily driven by unfavorable volume/mix (3.2 pp) which more than offset higher pricing (2.7 pp). Pricing was higher in each segment. Volume/mix in each of North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.

Net Income/(Loss):

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

Operating income/(loss) increased 4.7% to income of $1.3 billion for the three months ended March 30, 2024 compared to income of $1.2 billion for the three months ended April 1, 2023, primarily due to higher pricing and the impact of realized and unrealized gains and losses on commodity hedges. These increases to operating income/(loss) were partially offset by unfavorable volume/mix; increased SG&A due, in part, to investments in advertising, technology, and research and development; and higher employee compensation related costs.

Net income/(loss) decreased 3.9% to income of $804 million for the three months ended March 30, 2024 compared to income of $837 million for the three months ended April 1, 2023. This decrease was due to unfavorable changes in other expense/(income) and higher tax expense, which more than offset the favorable changes in operating income/(loss) factors discussed above. Interest expense was flat compared to the prior year period.

•Our effective tax rate for the three months ended March 30, 2024 was an expense of 21.9% on pre-tax income, compared to an expense of 20.3% for the three months ended April 1, 2023. The year-over-year increase in the effective tax rate for the three month period was driven by certain net discrete items, primarily due to establishing a valuation allowance on the deferred tax asset for the U.S. capital loss carryover generated from our divestiture activities, as well as from a less favorable geographic mix of pre-tax income.

•Other expense/(income) was $47 million of expense for the three months ended March 30, 2024 compared to $35 million of income for the three months ended April 1, 2023. This change was primarily driven by a $80 million net loss on the sale of businesses in the first quarter of 2024.

Adjusted Operating Income increased 1.7% to $1.3 billion for the three months ended March 30, 2024 compared to $1.2 billion for the three months ended April 1, 2023, primarily driven by higher pricing, which more than offset unfavorable volume/mix; increased SG&A due, in part, to investments in advertising, technology, and research and development; increased fixed cost of products sold, particularly for employee compensation related expenses; and the unfavorable impact of foreign currency (0.5 pp).

Diluted 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 decreased 2.9% to $0.66 for the three months ended March 30, 2024 compared to $0.68 for the three months ended April 1, 2023, primarily due to the net income/(loss) factors discussed above, which more than offset the impact of our share repurchase activity.

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

(b) Includes the impact of (1) shares purchased pursuant to our share repurchase program, (2) shares repurchased to offset the dilutive effect of the exercise of stock options using option exercise proceeds and the vesting RSUs and PSUs, and (3) shares withheld for tax liabilities associated with the vesting of RSUs and PSUs.

Adjusted EPS increased 1.5% to $0.69 for the three months ended March 30, 2024 compared to $0.68 for the three months ended April 1, 2023. This increase was primarily driven by higher Adjusted Operating Income and the favorable effect of common stock repurchases, which more than offset higher taxes on adjusted earnings.