Kraft Heinz Co

The non-GAAP financial measures we provide in this report should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP.

To supplement the consolidated financial statements prepared in accordance with U.S. GAAP, we have presented Organic Net Sales, Adjusted Operating Income, and Adjusted EPS, which are considered non-GAAP financial measures. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. These measures are not substitutes for their comparable U.S. GAAP financial measures, such as net sales, net income/(loss), operating income(loss), diluted EPS, or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures.

Management uses these non-GAAP financial measures to assist 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. We believe that Organic Net Sales, Adjusted Operating Income, and Adjusted EPS provide important comparability of underlying operating results, allowing investors and management to assess the Company’s operating performance on a consistent basis.

Management believes that presenting our non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating our results. We believe that the presentation of these non-GAAP financial measures, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provides investors with additional understanding of the factors and trends affecting our business than could be obtained absent these disclosures.

Organic Net Sales is defined as net sales excluding, when they occur, the impact of currency, acquisitions and divestitures, and a 53rd week of shipments. We calculate the impact of currency on net sales by holding exchange rates constant at the previous year’s exchange rate, with the exception of highly inflationary subsidiaries, for which we calculate the previous year’s results using the current year’s exchange rate.

Adjusted Operating Income is defined as operating income excluding, when they occur, the impacts restructuring activities, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized; once realized, the gains and losses are recorded in the applicable segment’s operating results), impairment losses, and certain non-ordinary course legal and regulatory matters.

Adjusted EPS is defined as diluted EPS excluding, when they occur, the impacts of restructuring activities, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, certain non-ordinary course legal and regulatory matters, losses/(gains) on the sale of a business, other losses/(gains) related to acquisitions and divestitures (e.g., tax and hedging impacts), nonmonetary currency devaluation (e.g., remeasurement gains and losses), debt prepayment and extinguishment (benefit)/costs, and certain significant discrete income tax items, and including, when they occur, adjustments to reflect preferred stock dividend payments on an accrual basis.

Reconciliation of Net Sales to Organic Net Sales

(dollars in millions)

Reconciliation of Operating Income/(Loss) to Adjusted Operating Income

Reconciliation of Diluted EPS to Adjusted EPS

(a) Gross expenses/(income) included in restructuring activities were expenses of $20 million ($18 million after-tax) in 2024, $225 million ($193 million after-tax) in 2023 and $74 million ($56 million after-tax) in 2022 and were recorded in the following income statement line items:

•Cost of products sold included expenses of $8 million in 2024, $57 million in 2023 and $27 million in 2022;

•SG&A included expenses of $19 million in 2024, $3 million in 2023, and $47 million in 2022; and

•Other expense/(income) included income of $7 million in 2024 and expenses of $165 million in 2023. The 2024 income and 2023 expenses primarily relate to the settlement of one of our U.K. defined benefit pension plans. See Note 11, Postemployment Benefits, in Item 8, Financial Statements and Supplementary Data, for additional information.

(b) Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were income of $19 million ($15 million after-tax) in 2024, expenses of $1 million ($1 million after-tax) in 2023 and expenses of $63 million ($48 million after-tax) in 2022 and were recorded in cost of products sold.

(c) Gross impairment losses included the following:

•Goodwill impairment losses of $1.6 billion ($1.6 billion after-tax) in 2024, $510 million ($510 million after-tax) in 2023, and $444 million ($444 million after-tax) in 2022, which were recorded in SG&A;

•Intangible asset impairment losses of $2.0 billion ($1.6 billion after-tax) in 2024, $152 million ($116 million after-tax) in 2023, and $469 million ($358 million after-tax) in 2022, which were recorded in SG&A; and

•Property, plant and equipment asset impairment losses of $86 million ($65 million after-tax) in 2022, which were recorded in cost of products sold.

(d) Gross expenses included in certain non-ordinary course legal and regulatory matters were $2 million ($2 million after-tax) in 2023, and $210 million ($161 million after-tax) in 2022 and were recorded in SG&A. See Note 15, Commitments and Contingencies, in Item 8, Financial Statements and Supplementary Data, for additional information.

(e) Gross expenses/(income) included in losses/(gains) on sale of business were expenses of $81 million ($60 million after-tax) in 2024, income of $4 million (expenses of $3 million after-tax) in 2023, and income of $25 million ($17 million after-tax) in 2022 and were recorded in other expense/(income).

(f) Gross expenses/(income) included in other losses/(gains) related to acquisitions and divestitures were income of $38 million ($29 million after-tax) in 2022 and were recorded in other expense/(income).

(g) Gross expenses included in nonmonetary currency devaluation were $16 million ($16 million after-tax) in 2024, $28 million ($28 million after-tax) in 2023, and $17 million ($17 million after-tax) in 2022 and were recorded in other expense/(income).

(h) Gross expenses/(income) included in debt prepayment and extinguishment (benefit)/costs were income of $38 million ($35 million after-tax) in 2022 and were recorded in interest expense.

(i) Certain significant discrete income tax items were a benefit of $2.2 billion in 2024 and $17 million in 2023. The benefit in 2024 represents the recognition of a foreign deferred tax asset ($3.0 billion) and an associated valuation allowance ($0.6 billion) related to the transfer of business operations to a wholly-owned subsidiary in the Netherlands, partially offset by establishing a valuation allowance against deferred tax assets in our subsidiary in Brazil. The benefit in 2023 represents the reversal of uncertain tax position reserves related to the U.S. Tax Cuts and Jobs Act resulting from a conclusion of the IRS’s income tax examination for the year 2017 and the lapsing of the statute of limitations for such year.