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 2.8% to $6.4 billion for the three months ended September 28, 2024 compared to $6.6 billion for the three months ended September 30, 2023, including the unfavorable impacts of foreign currency (0.4 pp) and acquisitions and divestitures (0.2 pp). Organic Net Sales decreased 2.2% to $6.4 billion for the three months ended September 28, 2024 compared to $6.5 billion for the three months ended September 30, 2023, primarily due to the unfavorable volume/mix (3.4 pp), which more than offset higher pricing (1.2 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 2.6% to $19.3 billion for the nine months ended September 28, 2024 compared to $19.8 billion for the nine months ended September 30, 2023, including unfavorable impacts of foreign currency (0.7 pp) and acquisitions and divestitures (0.2 pp). Organic Net Sales decreased 1.7% to $19.3 billion for the nine months ended September 28, 2024 compared to $19.7 billion for the nine months ended September 30, 2023, primarily due to the unfavorable volume/mix (3.3 pp), which more than offset higher pricing (1.6 pp). Higher pricing in North America and Emerging Markets was partially offset by lower pricing in International Developed Markets. 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 115.5% to losses of $101 million for the three months ended September 28, 2024 compared to income of $653 million for the three months ended September 30, 2023, due to non-cash impairment losses that were $766 million higher in the current year period. Excluding the impact of these non-cash impairment losses, operating income/(loss) increased $12 million driven by higher pricing; the beneficial impact from our efficiency initiatives, primarily in procurement; and lower variable compensation expense, partially offset by unfavorable volume/mix; increased manufacturing expenses due, in part, to increased labor costs; and unfavorable changes in unrealized losses/(gains) on commodity hedges.

Net income/(loss) decreased 214.2% to losses of $290 million for the three months ended September 28, 2024 compared to income of $254 million for the three months ended September 30, 2023. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above, which more than offset the lower income tax expense and 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 September 28, 2024 was an expense of 2.5% on pre-tax losses, compared to an expense of 44.7% on pre-tax income for the three months ended September 30, 2023. Our effective tax rate included a net unfavorable impact of goodwill and intangible asset impairment losses in both the current year period (23.1%), and in the prior year period (24.3%). The year-over-year change in the effective tax rate for the three-month period was primarily due to the unfavorable impact of goodwill and intangible asset impairment losses and the establishment of valuation allowances in certain foreign jurisdictions, partially offset by more favorable changes in estimates of certain 2022 U.S. income and deductions in the prior year period.

•Other expense/(income) was $48 million of income for the three months ended September 28, 2024 compared to $35 million of income for the three months ended September 30, 2023. The year-over-year increase was primarily driven by an increase in non-cash net pension and postretirement non-service benefits.

Adjusted Operating Income increased 1.4% to $1.3 billion for the three months ended September 28, 2024 compared to $1.3 billion for the three months ended September 30, 2023, primarily driven by higher pricing; the beneficial impact from our efficiency initiatives, primarily in procurement; and lower variable compensation expense. These favorable impacts more than offset unfavorable volume/mix; increased manufacturing expenses due, in part, to increased labor costs, and the unfavorable impact of foreign currency (0.2 pp).

Operating income/(loss) decreased 47.3% to income of $1.7 billion for the nine months ended September 28, 2024 compared to income of $3.3 billion for the nine months ended September 30, 2023, due to non-cash impairment losses that were $1.6 billion higher in the current year period. Excluding the impact of these non-cash impairment losses, operating income/(loss) increased $71 million driven by higher pricing; the beneficial impact from our efficiency initiatives, primarily in procurement and logistics; and lower variable compensation expense, partially offset by unfavorable volume/mix; increased manufacturing expenses due, in part, to increased labor costs; and increased SG&A due to investments in advertising, technology, and research and development.

Net income/(loss) decreased 70.6% to income of $614 million for the nine months ended September 28, 2024 compared to income of $2.1 billion for the nine months ended September 30, 2023. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above and unfavorable changes in other expense/(income), partially offset by lower income tax expense. Interest expense was flat compared to the prior year period.

•Our effective tax rate for the nine months ended September 28, 2024 was an expense of 43.9% on pre-tax income, compared to an expense of 22.1% on pre-tax income for the nine months ended September 30, 2023. Our effective tax rate included a net unfavorable impact of goodwill and intangible asset impairment losses in both the current year period (22.9%), and in the prior year period (3.9%). The year-over-year increase in the effective tax rate for the nine-month period was primarily due to the unfavorable impact of goodwill and intangible asset impairment losses, the establishment of valuation allowances in certain foreign jurisdictions, and the impact of a net decrease in uncertain tax position reserves in the prior year period.

•Other expense/(income) was $56 million of income for the nine months ended September 28, 2024 compared to $94 million of income for the nine months ended September 30, 2023. The year-over-year decrease was primarily due to a $78 million net loss on the sale of businesses in 2024, which was partially offset by an increase in net pension and postretirement non-service benefits, an increase in interest income, and net foreign exchange gains in 2024.

Adjusted Operating Income increased 1.7% to $4.0 billion for the nine months ended September 30, 2023 compared to $3.9 billion for the nine months ended September 30, 2023, primarily driven by higher pricing; the beneficial impact from our efficiency initiatives, primarily in procurement and logistics; and lower variable compensation expense. These favorable impacts more than offset unfavorable volume/mix; increased manufacturing expenses due, in part, to increased labor costs; increased SG&A due to investments in advertising, technology, and research and development; and the unfavorable impact of foreign currency (0.5 pp).

Diluted EPS:

Diluted EPS decreased 214.3% to $(0.24) for the three months ended September 28, 2024 compared to $0.21 for the three months ended September 30, 2023, primarily due to the net income/(loss) factors discussed above, which more than offset the favorable impact of our common stock repurchases.

(b) Includes the impact of the change in the weighted average shares of common stock outstanding, including dilutive effect, which is primarily due to shares purchased pursuant to our publicly announced share repurchase program. See Note 15, Earnings Per Share, for more information on our weighted average shares outstanding.

Adjusted EPS increased 4.2% to $0.75 for the three months ended September 28, 2024 compared to $0.72 for the three months ended September 30, 2023. This increase was primarily due to higher Adjusted Operating Income, lower taxes on adjusted earnings, and the favorable impact of our common stock repurchases.

Diluted EPS decreased 70.6% to $0.50 for the nine months ended September 28, 2024 compared to $1.70 for the nine months ended September 30, 2023, primarily due to the net income/(loss) factors discussed above, which more than offset the favorable impact of our common stock repurchases.

(b) Includes the impact of the change in the weighted average shares of common stock outstanding, including dilutive effect, which is primarily due to shares purchased pursuant to our publicly announced share repurchase program. See Note 15, Earnings Per Share, for more information on our weighted average shares outstanding.

Adjusted EPS increased 0.9% to $2.22 for the nine months ended September 28, 2024 compared to $2.20 for the nine months ended September 30, 2023. This increase was primarily due to higher Adjusted Operating Income and the favorable impact of our common stock repurchases, which more than offset higher taxes on adjusted earnings.