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 3.6% to $6.5 billion for the three months ended June 29, 2024 compared to $6.7 billion for the three months ended July 1, 2023, including the unfavorable impacts of foreign currency (1.0 pp) and acquisitions and divestitures (0.2 pp). Organic Net Sales decreased 2.4% to $6.5 billion for the three months ended June 29, 2024 compared to $6.7 billion for the three months ended July 1, 2023, primarily due to the unfavorable volume/mix (3.4 pp), which more than offset higher pricing (1.0 pp). Higher pricing in North America and Emerging Markets was partially offset by lower pricing in International Developed Markets. Volume/mix in North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.

Net sales decreased 2.4% to $12.9 billion for the six months ended June 29, 2024 compared to $13.2 billion for the six months ended July 1, 2023, including unfavorable impacts of foreign currency (0.8 pp) and acquisitions and divestitures (0.1 pp). Organic Net Sales decreased 1.5% to $12.9 billion for the six months ended June 29, 2024 compared to $13.1 billion for the six months ended July 1, 2023, primarily due to the unfavorable volume/mix (3.3 pp), which more than offset higher pricing (1.8 pp). Pricing was higher in each segment. Volume/mix in both 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) decreased 62.1% to income of $522 million for the three months ended June 29, 2024 compared to income of $1.4 billion for the three months ended July 1, 2023, primarily due to the non-cash impairment losses of $854 million in the current year period, unfavorable volume/mix, and increased SG&A due, in part, to investments in advertising and technology. These decreases in operating income/(loss) were partially offset by lower commodity costs, including the favorable impact of commodity hedges, higher pricing, and reduced logistics costs.

Net income/(loss) decreased 90.0% to income of $100 million for the three months ended June 29, 2024 compared to income of $998 million for the three months ended July 1, 2023. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above and higher tax expense, which more than offset the favorable changes in other expense/(income). Interest expense was flat compared to the prior year period.

•Our effective tax rate for the three months ended June 29, 2024 was an expense of 71.1% on pre-tax income, compared to an expense of 14.9% for the three months ended July 1, 2023. The year-over-year increase in the effective tax rate for the three month period was primarily due to the impact of non-deductible goodwill impairments (56.5%), partially offset by the impact of the net decrease in uncertain tax position reserves in the prior year period and the release of a valuation allowance on certain deferred tax assets.

•Other expense/(income) was $55 million of income for the three months ended June 29, 2024 compared to $24 million of income for the three months ended July 1, 2023. The year-over-year increase was primarily driven by an increase in non-cash net pension and postretirement non-service benefits and an increase in interest income.

Adjusted Operating Income increased 2.0% to $1.4 billion for the three months ended June 29, 2024 compared to $1.4 billion for the three months ended July 1, 2023, primarily driven by lower commodity costs, including the favorable impact of commodity hedges, higher pricing, and reduced logistics costs, which more than offset unfavorable volume/mix; increased SG&A due, in part, to investments in advertising and technology, and the unfavorable impact of foreign currency (0.7 pp).

Operating income/(loss) decreased 30.4% to income of $1.8 billion for the six months ended June 29, 2024 compared to income of $2.6 billion for the six months ended July 1, 2023, primarily due to non-cash impairment losses of $854 million in the current year period, unfavorable volume/mix, and increased SG&A due, in part, to investments in advertising, technology, and research and development. These decreases in operating income/(loss) were partially offset by higher pricing, lower commodity costs, including the favorable impact of commodity hedges, and reduced logistics costs.

Net income/(loss) decreased 50.7% to income of $0.9 billion compared to income of $1.8 billion for the six months ended July 1, 2023. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above, higher tax expense, and unfavorable changes in other expense/(income). Interest expense was flat compared to the prior year period.

•Our effective tax rate for the six months ended June 29, 2024 was an expense of 34.4% on pre-tax income, compared to an expense of 17.5% for the six months ended July 1, 2023. The year-over-year increase in the effective tax rate for the six month period was primarily due to the impact of non-deductible goodwill impairments (14.3%), partially offset by the impact of the net decrease in uncertain tax position reserves in the prior year period.

•Other expense/(income) was $8 million of income for the six months ended June 29, 2024 compared to $59 million of income for the six months ended July 1, 2023. The year-over-year decrease was primarily due to a $79 million net loss on the sale of businesses in 2024, which was partially offset by an increase in net pension and postretirement non-service benefit and an increase in interest income in 2024.

Adjusted Operating Income increased 1.9% to $2.6 billion for the six months ended June 29, 2024 compared to $2.6 billion for the six months ended July 1, 2023, primarily driven by higher pricing, lower commodity costs, including the favorable impact of commodity hedges, and reduced logistics costs, which more than offset unfavorable volume/mix; increased SG&A due, in part, to investments in advertising, technology, and research and development; and the unfavorable impact of foreign currency (0.6 pp).

Diluted EPS:

Diluted EPS decreased 90.1% to $0.08 for the three months ended June 29, 2024 compared to $0.81 for the three months ended July 1, 2023, primarily due to the net income/(loss) factors discussed above, which more than offset the impact of our share repurchase activity.

(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 decreased 1.3% to $0.78 for the three months ended June 29, 2024 compared to $0.79 for the three months ended July 1, 2023. This decrease was primarily due to lapping a one-time tax benefit in the prior year period associated with a net decrease in uncertain tax position reserves, which more than offset higher Adjusted Operating Income, the favorable impact of our common stock repurchases, and favorable changes in other expense/(income).

Diluted EPS decreased 50.3% to $0.74 for the six months ended June 29, 2024 compared to $1.49 for the six months ended July 1, 2023, primarily due to the net income/(loss) factors discussed above, which more than offset the impact of our share repurchase activity.

(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 decreased 0.7% to $1.47 for the six months ended June 29, 2024 compared to $1.48 for the six months ended July 1, 2023. This decrease was primarily due to lapping a one-time tax benefit in the prior year period associated with a net decrease in uncertain tax position reserves, which more than offset higher Adjusted Operating Income and the favorable impact of our common stock repurchases.