Item 8. Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of The Kraft Heinz Company

In our opinion, the accompanying consolidated balance sheets as of January 3, 2016 and December 28, 2014, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for the fiscal years ended January 3, 2016 and December 28, 2014 and for the period from February 8, 2013 through December 29, 2013, present fairly, in all material respects, the financial position of The Kraft Heinz Company and its subsidiaries (Successor) at January 3, 2016 and December 28, 2014, and the results of their operations and their cash flows for the fiscal years ended January 3, 2016 and December 28, 2014 and for the period from February 8, 2013 through December 29, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule of valuation and qualifying accounts for the fiscal years ended January 3, 2016 and December 28, 2014 and for the period from February 8, 2013 through December 29, 2013 appearing under item 15 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, during 2015 the Company changed the manner in which it accounts for certain warehouse and distribution costs associated with the distribution of finished products to customers, the manner in which it accounts for trademark and license intangible asset impairments and amortization and the manner in which it accounts for debt issuance costs.

/s/ PRICEWATERHOUSECOOPERS LLP

Chicago, Illinois

March 3, 2016

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of H. J. Heinz Company

In our opinion, the accompanying consolidated statements of income, of comprehensive income, of equity and of cash flows for the period from April 29, 2013 to June 7, 2013 and for the fiscal year ended April 28, 2013 present fairly, in all material respects, the results of operations and cash flows of H. J. Heinz Company and its subsidiaries (Predecessor) for the period from April 29, 2013 to June 7, 2013 and for the fiscal year ended April 28, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule of valuation and qualifying accounts for the period from April 29, 2013 to June 7, 2013 and for the fiscal year ended April 28, 2013 appearing under item 15 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, during 2015 the Company changed the manner in which it accounts for certain warehouse and distribution costs associated with the distribution of finished products to customers and the manner in which it accounts for trademark and license intangible asset impairments and amortization.

/s/ PRICEWATERHOUSECOOPERS LLP

Chicago, Illinois

March 7, 2014, except for the changes in the manner of accounting for certain warehouse and distribution costs and trademark and license intangible asset impairments and amortization as discussed in Note 1 and the effects of the change in the composition of reportable segments discussed in Note 20, as to which the date is March 3, 2016

The Kraft Heinz Company

Consolidated Statements of Income

(in millions, except per share data)

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Net sales	$	18,338			$	10,922			$	6,240			$	1,113			$	11,529
Cost of products sold	12,577				7,645				4,908				793				7,958
Gross profit	5,761				3,277				1,332				320				3,571
Selling, general and administrative expenses	3,122				1,709				1,340				292				1,909
Operating income/(loss)	2,639				1,568				(8		)		28				1,662
Interest expense	1,321				686				409				35				284
Other expense/(income), net	305				79				(119		)		123				34
Income/(loss) from continuing operations before income taxes	1,013				803				(298		)		(130		)		1,344
Provision for/(benefit from) income taxes	366				131				(232		)		61				242
Net income/(loss) from continuing operations	647				672				(66		)		(191		)		1,102
Loss from discontinued operations, net of tax	—				—				(6		)		(1		)		(75		)
Net income/(loss)	647				672				(72		)		(192		)		1,027
Net income attributable to noncontrolling interest	13				15				5				3				14
Net income/(loss) attributable to Kraft Heinz	634				657				(77		)		(195		)		1,013
Preferred dividends	900				720				360				—				—
Accretion of Series A Preferred Stock to redemption value	—				—				687				—				—
Net (loss)/income attributable to common shareholders	$	(266	)		$	(63	)		$	(1,124	)		$	(195	)		$	1,013
Per share data applicable to common shareholders:
Basic (loss)/earnings:
Continuing operations	$	(0.34	)		$	(0.17	)		$	(2.97	)		$	(0.60	)		$	3.39
Discontinued operations	—				—				(0.01		)		(0.01		)		(0.23		)
Net (loss)/earnings	$	(0.34	)		$	(0.17	)		$	(2.98	)		$	(0.61	)		$	3.16
Diluted (loss)/earnings:
Continuing operations	$	(0.34	)		$	(0.17	)		$	(2.97	)		$	(0.60	)		$	3.37
Discontinued operations	—				—				(0.01		)		(0.01		)		(0.23		)
Net (loss)/earnings	$	(0.34	)		$	(0.17	)		$	(2.98	)		$	(0.61	)		$	3.14
Dividends declared	$	1.70			$	—			$	—			$	—			$	2.06

See accompanying notes to the consolidated financial statements.

The Kraft Heinz Company

Consolidated Statements of Comprehensive Income

(in millions)

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Net income/(loss)	$	647			$	672			$	(72	)		$	(192	)		$	1,027
Other comprehensive (loss)/income, net of tax:
Foreign currency translation adjustments	(1,604		)		(939		)		129				(98		)		(229		)
Net deferred gains/(losses) on net investment hedges	506				336				(118		)		—				—
Net postemployment benefit gains/(losses)	946				(34		)		102				—				(189		)
Reclassification of net postemployment benefit (gains)/losses to net income	(85		)		(7		)		—				7				55
Net deferred (losses)/gains on cash flow hedges	(6		)		(173		)		111				(1		)		(12		)
Net deferred losses/(gains) on cash flow hedges reclassified to net income	120				4				(3		)		7				30
Total other comprehensive (loss)/income	(123		)		(813		)		221				(85		)		(345		)
Total comprehensive income/(loss)	524				(141		)		149				(277		)		682
Comprehensive (loss)/income attributable to noncontrolling interest	(13		)		8				(6		)		(1		)		(1		)
Comprehensive income/(loss) attributable to Kraft Heinz	$	537			$	(149	)		$	155			$	(276	)		$	683

See accompanying notes to the consolidated financial statements.

The Kraft Heinz Company

Consolidated Balance Sheets

(in millions of dollars)

	January 3, 2016				December 28, 2014
ASSETS
Cash and cash equivalents	$	4,837			$	2,298
Trade receivables (net of allowances of $32 at January 3, 2016 and $8 at December 28, 2014)	871				690
Sold receivables	583				161
Inventories	2,618				1,185
Other current assets	871				581
Total current assets	9,780				4,915
Property, plant and equipment, net	6,524				2,365
Goodwill	43,051				14,959
Intangible assets, net	62,120				13,188
Other assets	1,498				1,144
TOTAL ASSETS	$	122,973			$	36,571
LIABILITIES AND EQUITY
Trade payables	$	2,844			$	1,651
Accrued marketing	856				297
Accrued postemployment costs	328				15
Income taxes payable	417				232
Interest payable	401				167
Dividends payable	762				—
Other current liabilities	1,324				730
Total current liabilities	6,932				3,092
Long-term debt	25,151				13,358
Deferred income taxes	21,497				3,867
Accrued postemployment costs	2,405				287
Other liabilities	752				282
TOTAL LIABILITIES	56,737				20,886
Commitments and Contingencies (Note 18)
Redeemable noncontrolling interest	23				29
9.00% Series A cumulative redeemable preferred stock, 80,000 authorized and issued shares at January 3, 2016 and December 28, 2014, $.01 par value	8,320				8,320
Equity:
Common stock, $.01 par value (5,000,000,000 shares authorized, 1,214,391,614 shares issued and 1,213,978,752 shares outstanding at January 3, 2016; 4,000,000,000 shares authorized, 377,010,463 shares issued and outstanding at December 28, 2014)	12				4
Warrants	—				367
Additional paid-in capital	58,375				7,320
Retained earnings/(deficit)	—				—
Accumulated other comprehensive income/(losses)	(671		)		(574		)
Treasury stock, at cost	(31		)		—
Total shareholders' equity	57,685				7,117
Noncontrolling interest	208				219
TOTAL EQUITY	57,893				7,336
TOTAL LIABILITIES AND EQUITY	$	122,973			$	36,571

See accompanying notes to the consolidated financial statements.

The Kraft Heinz Company

Consolidated Statements of Equity

(in millions)

	Common Stock				Warrants				Additional Paid-in Capital				Retained Earnings/ (Deficit)				Accumulated Other Comprehensive Income/(Losses)				Treasury Stock				Noncontrolling Interest				Total Equity
Predecessor (H. J. Heinz Company)
Balance at April 29, 2012	$	108			$	—			$	595			$	7,568			$	(845	)		$	(4,666	)		$	52			$	2,812
Net income excluding redeemable noncontrolling interest	—				—				—				1,013				—				—				13				1,026
Other comprehensive loss excluding redeemable noncontrolling interest	—				—				—				—				(329		)		—				(5		)		(334		)
Dividends declared-common stock	—				—				—				(666		)		—				—				—				(666		)
Dividends declared-noncontrolling interest	—				—				—				—				—				—				(13		)		(13		)
Shares reacquired	—				—				—				—				—				(139		)		—				(139		)
Exercise of stock options, issuance of other stock awards, and other	—				—				14				(8		)		—				158				—				164
Balance at April 28, 2013	$	108			$	—			$	609			$	7,907			$	(1,174	)		$	(4,647	)		$	47			$	2,850
Net (loss)/income excluding redeemable noncontrolling interest	—				—				—				(195		)		—				—				3				(192		)
Other comprehensive loss excluding redeemable noncontrolling interest	—				—				—				—				(81		)		—				(2		)		(83		)
Cancellation of stock options and restricted stock units	—				—				(178		)		—				—				—				—				(178		)
Exercise of stock options, issuance of other stock awards, and other	—				—				4				—				—				1				—				5
Balance at June 7, 2013	$	108			$	—			$	435			$	7,712			$	(1,255	)		$	(4,646	)		$	48			$	2,402

See accompanying notes to the consolidated financial statements.

The Kraft Heinz Company

Consolidated Statements of Equity

(in millions)

	Common Stock				Warrants				Additional Paid-in Capital				Retained Earnings/ (Deficit)				Accumulated Other Comprehensive Income/(Losses)				Treasury Stock				Noncontrolling Interest				Total Equity
Successor
Balance at February 8, 2013	$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Fair value of noncontrolling interest as of June 8, 2013	—				—				—				—				—				—				230				230
Net (loss)/income excluding redeemable noncontrolling interest	—				—				—				(77		)		—				—				5				(72		)
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—				—				—				—				232				—				(13		)		219
Dividends declared- Series A Preferred Stock	—				—				(360		)		—				—				—				—				(360		)
Dividends declared-noncontrolling interest	—				—				—				—				—				—				(6		)		(6		)
Accretion of Series A Preferred Stock to redemption value	—				—				(687		)		—				—				—				—				(687		)
Warrants issued	—				367				—				—				—				—				—				367
Issuance of common stock to Sponsors	4				—				8,496				—				—				—				—				8,500
Exercise of stock options, issuance of other stock awards, and other	—				—				1				—				—				—				—				1
Balance at December 29, 2013	$	4			$	367			$	7,450			$	(77	)		$	232			$	—			$	216			$	8,192
Net income excluding redeemable noncontrolling interest	—				—				—				657				—				—				14				671
Other comprehensive loss excluding redeemable noncontrolling interest	—				—				—				—				(806		)		—				(4		)		(810		)
Dividends declared-Series A Preferred Stock	—				—				(142		)		(578		)		—				—				—				(720		)
Dividends declared-noncontrolling interest	—				—				—				—				—				—				(7		)		(7		)
Exercise of stock options, issuance of other stock awards, and other	—				—				12				(2		)		—				—				—				10
Balance at December 28, 2014	$	4			$	367			$	7,320			$	—			$	(574	)		$	—			$	219			$	7,336
Net income excluding redeemable noncontrolling interest	—				—				—				634				—				—				13				647
Other comprehensive loss excluding redeemable noncontrolling interest	—				—				—				—				(97		)		—				(18		)		(115		)
Dividends declared-Series A Preferred Stock	—				—				(360		)		(540		)		—				—				—				(900		)
Dividends declared-common stock	—				—				(1,972		)		(92		)		—				—				—				(2,064		)
Dividends declared-noncontrolling interest	—				—				—				—				—				—				(6		)		(6		)
Exercise of warrants	—				(367		)		367				—				—				—				—				—
Issuance of common stock to Sponsors	2				—				9,998				—				—				—				—				10,000
Acquisition of Kraft Foods Group, Inc.	6				—				42,849				—				—				—				—				42,855
Exercise of stock options, issuance of other stock awards, and other	—				—				173				(2		)		—				(31		)		—				140
Balance at January 3, 2016	$	12			$	—			$	58,375			$	—			$	(671	)		$	(31	)		$	208			$	57,893

See accompanying notes to the consolidated financial statements.

The Kraft Heinz Company

Consolidated Statements of Cash Flows

(in millions)

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)	$	647			$	672			$	(72	)		$	(192	)		$	1,027
Adjustments to reconcile net income/(loss) to operating cash flows:
Depreciation and amortization	740				530				280				40				344
Amortization of postretirement benefit plans prior service credits	(112		)		(6		)		—				(1		)		(4		)
Amortization of inventory step-up	347				—				383				—				—
Equity award compensation expense	133				8				1				26				34
Deferred income tax provision	(317		)		(174		)		(298		)		(20		)		(87		)
Pension contributions	(286		)		(102		)		(152		)		(7		)		(69		)
Impairment losses on indefinite-lived intangible assets	58				221				—				—				—
Nonmonetary currency devaluation	234				—				—				—				—
Write-off of debt issuance costs	236				—				—				—				—
Other items, net	120				194				(40		)		(3		)		114
Changes in current assets and liabilities:
Trade receivables	838				144				(112		)		(37		)		(103		)
Sold receivables	(422		)		(129		)		(9		)		63				(3		)
Inventories	25				153				84				(183		)		(49		)
Accounts payable	(119		)		562				(90		)		(70		)		169
Other current assets	114				(20		)		46				(47		)		(46		)
Other current liabilities	231				87				14				58				63
Net cash provided by/(used for) operating activities	2,467				2,140				35				(373		)		1,390
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(648		)		(399		)		(202		)		(120		)		(399		)
Acquisitions of businesses, net of cash on hand	(9,468		)		—				(21,494		)		—				—
Proceeds from net investment hedges	488				—				—				—				—
Other investing activities, net	(76		)		50				25				30				26
Net cash used for investing activities	(9,704		)		(349		)		(21,671		)		(90		)		(373		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(12,314		)		(1,103		)		(2,670		)		(440		)		(224		)
Proceeds from issuance of long-term debt	14,834				—				12,575				2				205
Debt issuance costs	(98		)		—				(321		)		—				—
Net (payments)/proceeds on short-term debt	(49		)		(3		)		(1,641		)		481				1,090
Proceeds from issuance of Series A Preferred Stock	—				—				7,633				—				—
Proceeds from issuance of common stock to Sponsors	10,000				—				8,500				—				—
Proceeds from issuance of warrants	—				—				367				—				—
Dividends paid-Series A Preferred Stock	(900		)		(720		)		(360		)		—				—
Dividends paid-common stock	(1,302		)		—				—				—				(666		)
Other financing activities, net	12				6				26				43				(149		)
Net cash provided by/(used for) financing activities	10,183				(1,820		)		24,109				86				256
Effect of exchange rate changes on cash and cash equivalents	(407		)		(132		)		(14		)		(30		)		(127		)
Cash and cash equivalents:
Net increase/(decrease)	2,539				(161		)		2,459				(407		)		1,146
Balance at beginning of period	2,298				2,459				—				2,477				1,331
Balance at end of period	$	4,837			$	2,298			$	2,459			$	2,070			$	2,477

See accompanying notes to the consolidated financial statements.

The Kraft Heinz Company

Consolidated Statements of Cash Flows

(in millions)

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Cash paid during the period for:
Interest	$	704			$	620			$	259			$	42			$	285
Income taxes	577				86				131				32				327

See accompanying notes to the consolidated financial statements.

The Kraft Heinz Company

Notes to Consolidated Financial Statements

Note 1. Background and Basis of Presentation

Description of the Company

We manufacture and market food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products throughout the world.

Organization

On July 2, 2015 (the “2015 Merger Date”), through a series of transactions, we consummated the merger of Kraft Foods Group, Inc. (“Kraft”) with and into a wholly-owned subsidiary of H.J. Heinz Holding Corporation (“Heinz”) (the “2015 Merger”). At the closing of the 2015 Merger, Heinz was renamed The Kraft Heinz Company (“Kraft Heinz”).

Before the consummation of the 2015 Merger, Heinz was controlled by Berkshire Hathaway Inc. (“Berkshire Hathaway”) and 3G Global Food Holdings, L.P. (“3G Capital,” and together with Berkshire Hathaway, the “Sponsors”) following their acquisition of H. J. Heinz Company (the “2013 Merger”) on June 7, 2013 (the “2013 Merger Date”). The Sponsors initially owned 850 million shares of common stock in Heinz; Berkshire Hathaway also held a warrant to purchase 46 million additional shares of common stock, which it exercised in June 2015. Additionally, in connection with the 2013 Merger, we issued an $8.0 billion preferred stock investment in Heinz which entitles Berkshire Hathaway to a 9.00% annual dividend. Prior to, but in connection with, the 2015 Merger, the Sponsors made equity investments whereby they purchased an additional 500 million newly issued shares of Heinz common stock for an aggregate purchase price of $10.0 billion.

Immediately prior to the consummation of the 2015 Merger, each share of Heinz issued and outstanding common stock was reclassified and changed into 0.443332 of a share of Kraft Heinz common stock. All share and per share amounts in the consolidated financial statements and related notes have been retroactively adjusted for all historical Successor periods presented to give effect to this conversion, including reclassifying an amount equal to the change in value of common stock to additional paid-in capital. In the 2015 Merger, all outstanding shares of Kraft common stock were converted into the right to receive, on a one-for-one basis, shares of Kraft Heinz common stock. Deferred shares and restricted shares of Kraft were converted to deferred shares and restricted shares of Kraft Heinz, as applicable. Upon the completion of the 2015 Merger, the Kraft shareholders of record immediately prior to the closing of the 2015 Merger received a special cash dividend of $16.50 per share.

On June 7, 2013, H. J. Heinz Company was acquired by Heinz (formerly known as Hawk Acquisition Holding Corporation), a Delaware corporation controlled by the Sponsors, pursuant to the Agreement and Plan of Merger, dated February 13, 2013 (the “2013 Merger Agreement”), as amended by the Amendment to Agreement and Plan of Merger, dated March 4, 2013 (the “Amendment”), by and among H. J. Heinz Company, Heinz, and Hawk Acquisition Sub, Inc. (“Hawk”).

See Note 2, Merger and Acquisition, for additional information on the 2015 Merger and the 2013 Merger.

Periods Presented

The 2013 Merger established a new accounting basis for Heinz. Accordingly, the consolidated financial statements present both Predecessor and Successor periods, which relate to the accounting periods preceding and succeeding the completion of the 2013 Merger. The Predecessor and Successor periods are separated by a vertical line on the face of the consolidated financial statements to highlight the fact that the financial information for such periods has been prepared under two different historical-cost bases of accounting.

Additionally, on October 21, 2013, our Board of Directors approved a change in our fiscal year-end from the Sunday closest to April 30 to the Sunday closest to December 31. In 2013, as a result of the change in fiscal year-end, the 2013 Merger, and the creation of Hawk, there are three 2013 reporting periods as described below.

The “Successor (Heinz, renamed to The Kraft Heinz Company at the closing of the 2015 Merger) Period” includes:

•	The consolidated financial statements for the year ended January 3, 2016 (a 53 week period, including a full year of Heinz results and post-2015 Merger results of Kraft);

•	The consolidated financial statements for the year ended December 28, 2014 (a 52 week period, including a full year of Heinz results); and

• The period from February 8, 2013 through December 29, 2013 (the “2013 Successor Period”), reflecting:

▪	The creation of Hawk on February 8, 2013 and the activity from February 8, 2013 to June 7, 2013, which related primarily to the issuance of debt and recognition of associated issuance costs and interest expense; and

▪	All activity subsequent to the 2013 Merger. Therefore, the 2013 Successor Period includes 29 weeks of operating activity (June 8, 2013 to December 29, 2013). We indicate on our financial statements the weeks of operating activities in this period.

The “Predecessor (H. J. Heinz Company) Period” includes, but is not limited to:

•	The consolidated financial statements of H. J. Heinz Company prior to the 2013 Merger on June 7, 2013, which includes the period from April 29, 2013 through June 7, 2013 (the “2013 Predecessor Period”); this represents six weeks of activity from April 29, 2013 through the 2013 Merger; and

•	The consolidated financial statements of H. J. Heinz Company for the fiscal year from April 30, 2012 to April 28, 2013 (“Fiscal 2013”).

The following represents the condensed statement of operations of Hawk for the period February 8, 2013 through April 28, 2013 and the condensed balance sheet of Hawk as of April 28, 2013:

Hawk Acquisition Sub, Inc. (Successor)

Condensed Statement of Operations

For the Period from February 8, 2013 through April 28, 2013

		February 8 - April 28, 2013
		(in millions)
Selling, general and administrative expenses		$	20
Operating loss		(20		)
Interest expense		11
Other expense, net		65
Loss from continuing operations before income tax		(96		)
Benefit from income taxes		38
Net loss		$	(58	)

Hawk Acquisition Sub, Inc. (Successor)

Condensed Balance Sheet

As of April 28, 2013

		April 28, 2013
		(in millions)
Cash		$	3,012
Other assets		125
Total assets		$	3,137
Notes payable		$	3,100
Other liabilities		95
Total liabilities		3,195
Shareholder's deficit		(58		)
Total liabilities and shareholder's deficit		$	3,137

Changes in Accounting and Reporting:

In 2015, we made the following changes in accounting and reporting to harmonize our accounting and reporting as Kraft Heinz:

•

We made a voluntary change in accounting policy to classify certain warehouse and distribution costs (including shipping and handling costs) associated with the distribution of finished product to our customers as cost of products sold, which were previously recorded in selling, general and administrative expenses (“SG&A”). We made this voluntary change in accounting policy because we believe this presentation is preferable, as the classification in cost of products sold better reflects the cost of producing and distributing products. Additionally, this presentation enhances the comparability of our financial statements with industry peers and aligns with how we now internally manage and review costs. As required by accounting principles generally accepted in the United States of America (“U.S. GAAP”), the change has been reflected in the consolidated statements of income through retrospective application of the change in accounting policy. The impact of this change was to increase cost of products sold and decrease SG&A by $666 million for the year ended December 28, 2014, $367 million in the 2013 Successor Period, $66 million in the 2013 Predecessor Period, and $656 million in Fiscal 2013.

•

We made a voluntary change in accounting policy to classify our trademark and license intangible asset impairments and amortization in SG&A, which were previously recorded in cost of products sold. We made this voluntary change in accounting policy because we believe this presentation is preferable, as removing these expenses from cost of products sold better aligns cost of products sold with costs directly associated with generating revenue. Additionally, this presentation enhances the comparability of our financial statements with industry peers and aligns with how we now internally manage and review costs. As required by U.S. GAAP, the change has been reflected in the consolidated statements of income through retrospective application of the change in accounting policy. The impact of this change was to increase SG&A and decrease cost of products sold by $244 million for the year ended December 28, 2014, $11 million in the 2013 Successor Period, $2 million in the 2013 Predecessor Period, and $13 million in Fiscal 2013.

•

In 2015, we determined that we had previously misclassified customer related intangible asset amortization. Such costs were previously included in cost of products sold but should have been included in SG&A. We have revised the classification to report these expenses in SG&A in the consolidated statements of income for all prior periods presented. The impact of this revision was to increase SG&A and decrease cost of products sold by $68 million for the year ended December 28, 2014, $36 million in the 2013 Successor Period, $1 million in the 2013 Predecessor Period, and $18 million in Fiscal 2013. These misstatements were not material to our current or any prior period financial statements.

•	We separately presented sold receivables on our consolidated balance sheets and consolidated statements of cash flows to align with current period presentation.

We revised our other assets (long-term), accrued postemployment costs (long-term), and other liabilities (long-term) on our 2014 consolidated balance sheet to correct for a prior period classification error and to correct for the misclassification of other assets to accrued postemployment costs (long-term). This correction resulted in an increase of $36 million to other assets, an increase of $43 million to accrued postemployment costs (long-term), and a decrease of $7 million to other liabilities (long-term). This misstatement was not material to our current or any prior period financial statements.

In 2015, we determined that we had misstated foreign currency translation gains and losses on goodwill from the date of the 2013 Merger through December 28, 2014, as well as deferred taxes recognized on the 2013 Merger opening balance sheet. In 2015, we recorded out-of-period corrections to reduce goodwill by $40 million, reduce deferred tax assets by $11 million, and reduce accumulated other comprehensive income/(losses) by $51 million. These misstatements were not material to our current or any prior period financial statements.

Significant Accounting Policies

Principles of Consolidation:

The consolidated financial statements include The Kraft Heinz Company, as well as our wholly-owned and majority-owned subsidiaries. All intercompany transactions are eliminated. Our year end date for financial reporting purposes is the Sunday closest to December 31. As a result, we occasionally have a 53rd week in a fiscal year. Our year ended January 3, 2016 includes a 53rd week of activity. The year end date of certain of our U.S. and Canada businesses is the Saturday closest to December 31.

Use of Estimates:

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make accounting policy elections, estimates, and assumptions that affect a number of amounts in our consolidated financial statements. We base our estimates on historical experience and other assumptions that we believe are reasonable. If actual amounts differ from estimates, we include the revisions in our consolidated results of operations in the period the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a material effect on our consolidated financial statements.

Translation of Foreign Currencies:

For all significant foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each period end. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of accumulated other comprehensive income/(losses) on the balance sheet. Gains and losses from foreign currency transactions are included in net income for the period.

Highly Inflationary Accounting:

We apply highly inflationary accounting if the cumulative inflation rate in an economy for a three-year period meets or exceeds 100 percent. Under highly inflationary accounting, the financial statements of a subsidiary are remeasured into our reporting currency (U.S. dollars) and exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in net income, rather than accumulated other comprehensive income/(losses) on the balance sheet, until such time as the economy is no longer considered highly inflationary. Certain non-monetary assets and liabilities are recorded at the applicable historical exchange rates.

Cash and Cash Equivalents:

Cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Inventories:

Inventories are stated at the lower of cost or market. We value inventories primarily using the average cost method.

Property, Plant and Equipment:

Property, plant and equipment are stated at historical cost and depreciated on the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 20 years and buildings and improvements over periods up to 40 years. Capitalized software costs are included in property, plant and equipment and amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed seven years. We review long-lived assets for impairment when conditions exist that indicate the carrying amount of the assets may not be fully recoverable. Such conditions include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. We perform undiscounted operating cash flow analyses to determine if an impairment exists. When testing for impairment of assets held for use, we group assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Goodwill and Intangible Assets:

We test goodwill and indefinite-lived intangible assets for impairment at least annually in the second quarter or when a triggering event occurs. We performed our annual impairment testing in the second quarter of 2015, prior to completion of the 2015 Merger.

The first step of the goodwill impairment test compares the reporting unit’s estimated fair value with its carrying value. If the carrying value of a reporting unit’s net assets exceeds its fair value, the second step would be applied to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill would be considered impaired and would be reduced to its implied fair value. We test indefinite-lived intangible assets for impairment by comparing the fair value of each intangible asset with its carrying value. If the carrying value exceeds fair value, the intangible asset would be considered impaired and would be reduced to fair value.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating the fair value of individual reporting units and indefinite-lived intangible assets requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include projected revenues and income growth rates, terminal growth rates, competitive and consumer trends, market-based discount rates, and other market factors. If current expectations of future growth rates are not met or market factors outside of our control, such as discount rates, change significantly, then one or more reporting units or intangible assets might become impaired in the future. Additionally, as goodwill and intangible assets associated with recently acquired businesses are recorded on the balance sheet at their estimated acquisition date fair values, those amounts are more susceptible to an impairment risk if business operating results or macroeconomic conditions deteriorate.

Revenue Recognition:

We recognize revenues when title and risk of loss pass to our customers. We record revenues net of consumer incentives and trade promotions and include all shipping and handling charges billed to customers. We also record provisions for estimated product returns and customer allowances as reductions to revenues within the same period that the revenue is recognized. We base these estimates principally on historical and current period experience factors.

Advertising, Consumer Incentives, and Trade Promotions:

We promote our products with advertising, consumer incentives, and trade promotions.

Advertising expenses are recorded in SG&A. We recorded advertising expense of $464 million in the year ended January 3, 2016, $241 million in the year ended December 28, 2014, $190 million in the 2013 Successor Period, $22 million in the 2013 Predecessor Period, and $305 million in Fiscal 2013. For interim reporting purposes, we charge advertising to operations as a percentage of estimated full year sales activity and marketing costs. We review and adjust these estimates each quarter based on actual experience and other information.

Consumer incentives and trade promotions include, but are not limited to, discounts, coupons, rebates, in-store display incentives, and volume-based incentives. Consumer incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated as being due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. We review and adjust these estimates each quarter based on actual experience and other information.

Research and Development Expense:

We expense costs as incurred for product research and development within SG&A. Research and development expense was $105 million in the year ended January 3, 2016, $58 million in the year ended December 28, 2014, $53 million in the 2013 Successor Period, $10 million in the 2013 Predecessor Period, and $93 million in Fiscal 2013.

Postemployment Benefit Plans:

We provide a range of benefits to our eligible employees and retirees. These include defined benefit pension, postretirement benefit plans, defined contribution, and multiemployer pension and medical benefits. We maintain various retirement plans for the majority of our employees. The cost of these plans is charged to expense over the working life of the covered employees. We generally amortize net actuarial gains or losses and changes in the fair value of plan assets in future periods within cost of products sold and SG&A.

Financial Instruments:

As we source our commodities on global markets and periodically enter into financing or other arrangements abroad, we use a variety of risk management strategies and financial instruments to manage commodity price, foreign currency exchange rate, and interest rate risks. Our risk management program focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on our operating results. One way we do this is through actively hedging our risks through the use of derivative instruments. As a matter of policy, we do not use highly leveraged derivative instruments, nor do we use financial instruments for speculative purposes.

Derivatives are recorded on our consolidated balance sheets at fair value, which fluctuates based on changing market conditions.

Certain derivatives are designated as cash flow hedges and qualify for hedge accounting treatment, while others are not designated as hedging instruments and are marked to market through earnings. The effective portion of gains and losses on cash flow hedges are deferred as a component of accumulated other comprehensive income/(losses) and are recognized in earnings at the time the hedged item affects earnings, in the same line item as the underlying hedged item. We also designate certain derivatives and non-derivatives as net investment hedges to hedge the net assets of certain foreign subsidiaries which are exposed to volatility in foreign currency exchange rates. The fair value of these derivatives and remeasurements of our non-derivatives designated as net investment hedges are calculated each period with changes reported in foreign currency translation adjustment within accumulated other comprehensive income/(losses). Such amounts will remain in accumulated other comprehensive income/(losses) until the complete or substantially complete liquidation of our investment in the underlying foreign operations. The income statement classification of gains and losses related to derivative instruments not designated as hedging instruments is determined based on the underlying intent of the contracts. Cash flows related to the settlement of derivative instruments designated as net investment hedges of foreign operations are classified in the consolidated statements of cash flows within investing activities. All other cash flows related to derivative instruments are generally classified within operating activities. For additional information on derivative activity within our operating results, see Note 16, Financial Instruments.

To qualify for hedge accounting, a specified level of hedging effectiveness between the hedging instrument and the item being hedged must be achieved at inception and maintained throughout the hedged period. Any hedging ineffectiveness is recognized in net earnings when the change in the value of the hedge does not offset the change in the value of the underlying hedged item. We formally document our risk management objectives, strategies for undertaking the various hedge transactions, the nature of and relationships between the hedging instruments and hedged items, and method for assessing hedge effectiveness. Additionally, for qualified hedges of forecasted transactions, we specifically identify the significant characteristics and expected terms of the forecasted transactions. If it becomes probable that a forecasted transaction will not occur, the hedge will no longer be effective and all of the derivative gains or losses would be recognized in earnings in the current period.

Unrealized gains and losses on our commodity derivatives not designated as hedging instruments are recorded in general corporate expenses until realized. Once realized, the gains and losses are recorded within the applicable segment operating results.

When we use financial instruments, we are exposed to credit risk that a counterparty might fail to fulfill its performance obligations under the terms of our agreement. We minimize our credit risk by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure we have with each counterparty, and monitoring the financial condition of our counterparties. We also maintain a policy of requiring that all significant, non-exchange traded derivative contracts with a duration of greater than one year be governed by an International Swaps and Derivatives Association master agreement. We are also exposed to market risk as the value of our financial instruments might be adversely affected by a change in foreign currency exchange rates, commodity prices, or interest rates. We manage market risk by incorporating monitoring parameters within our risk management strategy that limit the types of derivative instruments and derivative strategies we use and the degree of market risk that we hedge with derivative instruments.

Foreign currency cash flow hedges - We use various financial instruments to mitigate our exposure to changes in exchange rates from third-party and intercompany actual and forecasted transactions. Our principal foreign currency exposures that are hedged include the British Pound Sterling, Euro, and Canadian dollar. These instruments may include forward foreign exchange contracts and foreign currency options. Substantially all of these derivative instruments are highly effective and qualify for hedge accounting treatment. We exclude forward points from the assessment and measurement of hedge ineffectiveness and report such amounts in current period net income as interest expense.

Net investment hedges - We have numerous investments in our foreign subsidiaries, the net assets of which are exposed to volatility in foreign currency exchange rates. We manage this risk by utilizing derivative and non-derivative instruments, including cross-currency swap contracts and certain foreign denominated debt designated as net investment hedges.

Interest rate cash flow hedges - From time to time, we have used derivative instruments, including interest rate swaps, as part of our interest rate risk management strategy. We have primarily used interest rate swaps to hedge the variability of interest payment cash flows on a portion of our future debt obligations. Substantially all of these derivative instruments have been highly effective and have qualified for hedge accounting treatment.

Commodity derivatives - We are exposed to price risk related to forecasted purchases of certain commodities that we primarily use as raw materials. We enter into commodity purchase contracts primarily for coffee beans, meat products, sugar, wheat products, corn products, vegetable oils, cocoa products, and dairy products. These commodity purchase contracts generally are not subject to the accounting requirements for derivative instruments and hedging activities under the normal purchases exception. We also use commodity futures and options to economically hedge the price of certain commodity costs, including coffee beans, meat products, sugar, wheat products, corn products, vegetable oils, cocoa products, dairy products, diesel fuel, and packaging products. We do not designate these commodity contracts as hedging instruments. We also sell commodity futures to unprice future purchase commitments, and we occasionally use related futures to economically cross hedge a commodity exposure.

Income Taxes:

We recognize income taxes based on amounts refundable or payable for the current year and record deferred tax assets or liabilities for any difference between U.S. GAAP accounting and tax reporting. We also recognize deferred tax assets for temporary differences, operating loss carryforwards, and tax credit carryforwards. Inherent in determining our annual tax rate are judgments regarding business plans, planning opportunities, and expectations about future outcomes. Realization of certain deferred tax assets, primarily net operating loss and other carryforwards, is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods.

We apply a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. Accordingly, we recognize the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. Future changes in judgment related to the expected ultimate resolution of uncertain tax positions will affect income in the quarter of such change.

We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. When assessing the need for valuation allowances, we consider future taxable income and ongoing prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in judgment about the realizability of deferred tax assets in future years, we would adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. The resolution of tax reserves and changes in valuation allowances could be material to our results of operations for any period, but is not expected to be material to our financial position.

Common Stock and Preferred Stock Dividends:

Dividends are recorded as a reduction to retained earnings. When we have an accumulated deficit, dividends are recorded as a reduction of additional paid-in capital.

Recently Issued Accounting Standards:

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update (“ASU”) that superseded previously existing revenue recognition guidance. Under this ASU, an entity will apply a principles-based five step model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This ASU will be effective beginning in the first quarter of our fiscal year 2018. We are currently evaluating the impact that this ASU will have on our financial statements and related disclosures.

In April 2015, the FASB issued an ASU intended to simplify the presentation of debt issuance costs. The ASU requires that debt issuance costs be presented on the balance sheet as a direct deduction from the carrying amount of debt, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this ASU. We early-adopted this ASU in 2015, and accordingly reclassified unamortized debt issuance costs of $228 million from other assets to long-term debt on the consolidated balance sheet at December 28, 2014.

In September 2015, the FASB issued an ASU intended to simplify the accounting for measurement period adjustments in a business combination. Measurement period adjustments are changes to provisional amounts recorded when the accounting for a business combination is incomplete as of the end of a reporting period. The measurement period can extend for up to a year following the transaction date. During the measurement period, companies may make adjustments to provisional amounts when information necessary to complete the measurement is received. The ASU requires companies to recognize these adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. Companies are no longer required to retroactively apply measurement period adjustments to all periods presented. We early-adopted this ASU in 2015. See Note 2, Merger and Acquisition, for additional information on measurement period adjustments.

In November 2015, the FASB issued an ASU intended to simplify the presentation of deferred income taxes. The ASU requires that deferred income tax liabilities and assets be classified as noncurrent in the balance sheet. Previously, companies were required to classify deferred tax liabilities and assets as current or noncurrent based on the classification of the related asset or liability. We early adopted this ASU 2015 on a prospective basis, as the impact to prior periods was not significant.

Note 2. Merger and Acquisition

2015 Merger

Transaction Overview:

As discussed in Note 1, Background and Basis of Presentation, Heinz merged with Kraft on July 2, 2015. The Kraft businesses manufacture and market food and beverage products, including cheese, meats, refreshment beverages, coffee, packaged dinners, refrigerated meals, snack nuts, dressings, and other grocery products, primarily in the United States and Canada. Total net sales for Kraft during its most recent pre-acquisition year ended December 27, 2014 were $18.2 billion. Following the 2015 Merger Date, the operating results of the Kraft businesses have been included in our consolidated financial statements. For the period from the 2015 Merger Date through January 3, 2016, Kraft's net sales were $8.5 billion and net income was $478 million.

The 2015 Merger was accounted for under the acquisition method of accounting for business combinations and Heinz was considered to be the acquiring company. Under the acquisition method of accounting, total consideration exchanged was (in millions):

Aggregate fair value of Kraft common stock	$	42,502
$16.50 per share special cash dividend	9,782
Fair value of replacement equity awards	353
Total consideration exchanged	$	52,637

Valuation Assumptions and Preliminary Purchase Price Allocation:

We utilized estimated fair values at the 2015 Merger Date for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed. Our purchase price allocation is substantially complete with the exception of identifiable intangible assets, certain income tax accounts and goodwill. During our fourth quarter 2015, we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments included a $5.4 billion increase in indefinite-lived trademarks, a related $2.0 billion increase in deferred tax liabilities, and a $3.4 billion decrease in goodwill. In addition, we reflected a correction to our third quarter foreign currency exchange rate assumptions impacting foreign currency translation and goodwill by approximately $100 million. This misstatement was not material to our current or any prior period financial statements. As we continue to integrate Kraft businesses, we may obtain additional information on the acquired identifiable intangible assets which, if significant, could require revisions to preliminary valuation assumptions, estimates and resulting fair values. Amounts for certain income tax accounts are also subject to change pending the filing of Kraft’s pre-acquisition tax returns and the receipt of information from taxing authorities which, if significant, could require revisions to preliminary assumptions and estimates. If we determine any measurement period adjustments are significant, we will recognize those adjustments, including any related impacts to deferred tax positions, goodwill or net income, in the reporting period in which the adjustments are determined.

The preliminary purchase price allocation to assets acquired and liabilities assumed in the transaction was (in millions):

Cash	$	314
Other current assets	3,423
Property, plant and equipment	4,193
Identifiable intangible assets	49,749
Other non-current assets	214
Trade and other payables	(3,026		)
Long-term debt	(9,286		)
Net postemployment benefits and other non-current liabilities	(4,734		)
Deferred income tax liabilities	(17,239		)
Net assets acquired	23,608
Goodwill on acquisition	29,029
Total consideration	52,637
Fair value of shares exchanged and equity awards	42,855
Total cash consideration paid to Kraft shareholders	9,782
Cash and cash equivalents of Kraft at the 2015 Merger Date	314
Acquisition of business, net of cash on hand	$	9,468

The 2015 Merger preliminarily resulted in $29.0 billion of non tax deductible goodwill relating principally to synergies expected to be achieved from the combined operations and planned growth in new markets. Goodwill has preliminarily been allocated to our segments as shown in Note 7, Goodwill and Intangible Assets.

The preliminary purchase price allocation to identifiable intangible assets acquired was:

	Preliminary Fair Value				Weighted Average Life
	(in millions of dollars)				(in years)
Indefinite-lived trademarks	$	45,082
Definite-lived trademarks	1,690				24
Customer relationships	2,977				29
Total identifiable intangible assets	$	49,749

We preliminarily valued trademarks using either the excess earnings method or relief from royalty method, which are both variations of the income approach. We used the excess earnings method for our most significant trademarks due to their impact on the cash flows of the business and used the relief from royalty method for the remaining trademarks and licenses. For customer relationships, we used the distributor method, a variation of the excess earnings method that uses distributor-based inputs for margins and contributory asset charges.

Some of the more significant assumptions inherent in developing the valuations included the estimated annual net cash flows for each indefinite-lived or definite-lived intangible asset (including net sales, cost of products sold, selling and marketing costs, and working capital/contributory asset charges), the discount rate that appropriately reflects the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends, as well as other factors. We determined the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management plans, and market comparables. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. Preliminary assumptions may change and may result in changes to the final valuation.

We used existing carrying values to value trade receivables and payables, as well as certain other current and non-current assets and liabilities, as we determined that they represented the fair value of those items at the 2015 Merger Date.

We valued finished goods and work-in-process inventory using a net realizable value approach, which resulted in a step-up of $347 million that was recognized in cost of products sold in the period from the 2015 Merger Date to September 27, 2015 as the related inventory was sold. Raw materials and packaging inventory was valued using the replacement cost approach.

We valued property, plant and equipment using a combination of the income approach, the market approach and the cost approach, which is based on current replacement and/or reproduction cost of the asset as new, less depreciation attributable to physical, functional, and economic factors.

Deferred income tax assets and liabilities as of the 2015 Merger Date represented the expected future tax consequences of temporary differences between the preliminary fair values of the assets acquired and liabilities assumed and their tax bases.

Pro Forma Results:

The following table provides unaudited pro forma results, prepared in accordance with ASC 805, for the years ended January 3, 2016 and December 28, 2014, as if Kraft had been acquired as of December 30, 2013.

	For the Year Ended
	January 3, 2016				December 28, 2014
	(in millions, except per share data)
Net sales	$	27,447			$	29,122
Net income from continuing operations	1,761				2,003
Basic earnings per share	0.72				1.08
Diluted earnings per share	0.70				1.05

The unaudited pro forma results include certain preliminary purchase accounting adjustments. We have made pro forma adjustments to exclude deal costs (“Deal Costs”) of $166 million ($102 million net of tax) and non-cash costs related to the fair value step-up of Kraft’s inventory (“Inventory Step-up Costs”) of $347 million ($213 million net of tax) for the year ended January 3, 2016, because such costs are nonrecurring and are directly attributable to the 2015 Merger. As required by U.S. GAAP, we have made pro forma adjustments to include the Deal Costs and Inventory Step-up Costs in results for the year ended December 28, 2014.

The unaudited pro forma results do not include any anticipated cost savings or other effects of future integration efforts. Unaudited pro forma amounts are not necessarily indicative of results had the 2015 Merger occurred on December 30, 2013 or of future results.

2013 Merger

Transaction Overview:

As discussed in Note 1, Background and Basis of Presentation, the 2013 Merger occurred on June 7, 2013. Under the Merger Agreement between H. J. Heinz Company, Heinz, and Hawk, Hawk merged with and into H. J. Heinz Company, with H. J. Heinz Company surviving as a wholly-owned subsidiary of H.J. Heinz Corporation II. H.J. Heinz Corporation II was an indirect wholly-owned subsidiary of Heinz, which was controlled by the Sponsors. Upon completion of the 2013 Merger, H. J. Heinz Company’s shareholders received $72.50 in cash, without interest and less applicable taxes, for each share of common stock held prior to the effective time of the 2013 Merger. Additionally, all outstanding stock option awards, restricted stock units (“RSUs”) (except for certain retention RSUs which continued on their original terms), and restricted stock awards were automatically canceled and converted into the right to receive cash consideration of $72.50.

The total consideration paid in connection with the 2013 Merger was $28.8 billion, including the assumption of H. J. Heinz Company’s outstanding debt, which was funded by equity contributions from the Sponsors totaling $16.5 billion, comprised of $8.5 billion of common stock, $7.6 billion of preferred stock and $0.4 billion of warrants, as well as proceeds received by Hawk of approximately $11.5 billion (of which $9.5 billion was drawn at the close of the transaction), and $3.1 billion upon issuance of the 4.250% Second Lien Senior Secured Notes, less applicable debt issuance costs of $316 million. As a result of the 2013 Merger, we assumed the liabilities and obligations of Hawk.

Valuation Assumptions and Purchase Price Allocation:

The allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in the 2013 Merger was based on estimated fair values at the date of acquisition.

The final allocation of the purchase price of the 2013 Merger to assets acquired and liabilities assumed in the transaction was (in millions):

Cash	$	3,224
Other current assets	3,735
Property, plant and equipment	2,686
Identifiable intangible assets	13,914
Other non-current assets	651
Trade and other payables	(2,742		)
Long-term debt	(3,022		)
Net postemployment benefits and other non-current liabilities	(671		)
Deferred income tax liabilities	(4,056		)
Redeemable noncontrolling interest and noncontrolling interest	(258		)
Net assets acquired	13,461
Goodwill on acquisition	15,292
Total consideration	28,753
Debt repayment and associated costs	(3,977		)
Excess cash	(1,154		)
Other transaction related costs	(58		)
Total consideration paid to Predecessor shareholders	23,564
Cash and cash equivalents of Predecessor at June 7, 2013	(2,070		)
Acquisition of business, net of cash on hand	$	21,494

The total non tax deductible goodwill relating to the 2013 Merger was $15.3 billion. The goodwill recognized related principally to H. J. Heinz Company’s established global organization, reputation and strategic positioning.

Trademarks were valued using the excess earnings method for our most significant trademarks due to their impact on the cash flows of the business and the relief from royalty method for other trademarks. Customer relationships were determined using the distributor method.

We used existing carrying values to value trade receivables and payables, as well as certain other current and non-current assets and liabilities, as we determined that they represented the fair value of those items at the 2013 Merger Date.

We valued finished goods and work-in-process inventory using a net realizable value approach, which resulted in a step-up of $384 million that was recognized in cost of products sold in the 2013 Successor Period as the related inventory was sold. Raw materials and packaging inventory was valued using the replacement cost approach.

We valued property, plant and equipment using a combination of the income approach, the market approach, and the cost approach, which is based on current replacement and/or reproduction cost of the asset as new, less depreciation attributable to physical, functional, and economic factors.

Deferred income tax assets and liabilities as of the 2013 Merger Date represented the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases.

Pro Forma Results:

The following table provides unaudited pro forma results, prepared in accordance with ASC 805, for the eight months ended December 29, 2013 and Fiscal 2013, as if the H. J. Heinz Company had been acquired as of April 30, 2012.

	Eight Months Ended December 29, 2013				Fiscal Year Ended April 28, 2013
	(in millions, except per share data)
Net sales	$	7,352			$	11,529
Net income from continuing operations	187				324
Basic loss per share	(0.78		)		(2.87		)
Diluted loss per share	(0.78		)		(2.87		)

The unaudited pro forma results included certain purchase accounting adjustments. We have made pro forma adjustments to exclude $384 million in non-cash costs related to the fair value step-up of H. J. Heinz Company's inventory, $270 million of 2013 Merger costs, and a $118 million unrealized gain on derivative instruments for the eight months ended December 29, 2013, because such costs are nonrecurring and are directly attributable to the 2013 Merger. We have made pro forma adjustments to include these transactions in results for the fiscal year ended April 28, 2013.

Unaudited pro forma amounts are not necessarily indicative of results had the 2013 Merger occurred on April 30, 2012 or of future results.

Other Acquisitions

During Fiscal 2013, we acquired an additional 15% interest in Coniexpress S.A. Industrias Alimenticias (“Coniexpress”), a leading Brazilian manufacturer of the Quero® brand of tomato-based sauces, tomato paste, ketchup, condiments and vegetables for $80 million. Prior to this transaction, we owned 80% of Coniexpress. See Note 18, Commitments and Contingencies, for further details regarding this redeemable noncontrolling interest.

In the 2011 fiscal year, we acquired Foodstar Holding Pte (“Foodstar”), a manufacturer of soy sauces and fermented bean curd in China, which included a potential earn-out payment contingent upon certain net sales and EBITDA targets during Fiscal 2013 and the 2014 fiscal year. During Fiscal 2013, we renegotiated the terms of the earn-out agreement to obtain future flexibility for growing our business in China, resulting in a cash settlement of the earn-out for $60 million, including a $12 million charge for the difference between the settlement amount and the carrying value of the earn-out as reported on our balance sheet at the date of this transaction.

Note 3. Integration and Restructuring Expenses

Following the 2015 Merger, we announced a multi-year program (the “Integration Program”) designed to reduce costs, integrate, and optimize the combined organization. As part of these activities, we incur expenses (primarily employee separations, lease terminations and other direct exit costs) that qualify as exit and disposal costs under U.S. GAAP. We also incur expenses that are an integral component of, and directly attributable to, our restructuring activities, which do not qualify as exit and disposal costs (primarily accelerated depreciation, asset impairments, implementation costs such as new facility relocation and start-up costs, and other incremental costs).

Employee severance and other termination benefit packages are primarily determined based on established benefit arrangements, local statutory requirements or historical benefit practices. We recognize the contractual component of these benefits when payment is probable and estimable; additional elements of severance and termination benefits associated with non-recurring benefits are recognized ratably over each employee’s required future service period. Asset-related costs consist primarily of accelerated depreciation, and to a lesser degree asset impairments. Charges for accelerated depreciation are recognized on long-lived assets that will be taken out of service before the end of their normal service, in which case depreciation estimates are revised to reflect the use of the asset over its shortened useful life. Asset impairments establish a new fair value basis for assets held for disposal or sale and those assets are written down to expected net realizable if carrying value exceeds fair value. All other costs are recognized as incurred.

Integration Program:

We currently expect the Integration Program will result in $1.9 billion of pre-tax costs, with approximately 60% reflected in cost of products sold, comprised of the following categories:

•	Organization costs ($650 million) associated with our plans to streamline and simplify our operating structure, resulting in workforce reduction. These costs will primarily include: severance and employee benefits (cash severance, non-cash severance, including accelerated equity award compensation expense, and pension and other termination benefits).

Beginning in August 2015, we announced a new, streamlined structure for our businesses in the United States and Canada segments. This resulted in the reduction of salaried positions across the United States and Canada. We currently expect to eliminate 2,650 positions.

•

Footprint costs ($1.1 billion) associated with our plans to optimize our production and supply chain network, resulting in facility closures and consolidations. These costs will primarily include: asset-related costs (accelerated depreciation and asset impairment charges), costs to exit facilities, relocation and start-up costs of new facilities, and severance and employee benefits. On November 4, 2015, we announced the closure of seven factories and began consolidation of our distribution network. In a staged process over the next 12 to 24 months, production in these locations will shift to other existing factories in the United States and Canada. Overall, we expect to eliminate 2,600 positions.

•	Other costs ($150 million) incurred as a direct result of restructuring activities, primarily including: contract and lease terminations, professional fees, and other incremental third-party fees.

For the year ended January 3, 2016, we have incurred $829 million of costs under the Integration Program including: $562 million of severance and employee benefit costs, $136 million of non-cash asset-related costs, $76 million of other implementation costs and $55 million of other exit costs. We expect approximately 60% of the Integration Program expenses will be cash expenditures.

At January 3, 2016, the total Integration Program liability related primarily to the elimination of general salaried and footprint-related positions across the United States and Canada; 2,500 of whom have left the company by January 3, 2016. The liability balance associated with the Integration Program, which qualifies as U.S. GAAP exit and disposal costs, was (in millions):

	Severance and Employee Benefit Costs				Other Exit Costs(a)				Total
Balance at December 28, 2014	$	—			$	—			$	—
Charges	562				55				617
Cash payments	(327		)		(32		)		(359		)
Non-cash utilization	(50		)		—				(50		)
Balance at January 3, 2016	$	185			$	23			$	208

(a) Other costs primarily represent contract and lease terminations.

We expect a substantial portion of the January 3, 2016 Integration Program liability will be paid in 2016.

Restructuring Activities:

Prior to the 2015 Merger, we executed a number of other restructuring activities focused primarily on work-force reduction and factory closure and consolidation in relation to the 2013 Merger. Those programs, which are substantially complete, resulted in the elimination of 8,100 positions and cumulative $550 million severance and employee benefit costs, $340 million non-cash asset-related costs, and $350 million other exit costs through January 3, 2016. Related to these restructuring activities we incurred expenses of $194 million for the year ended January 3, 2016, expenses of $637 million for the year ended December 28, 2014, and expenses of $411 million during the 2013 Successor Period. The expense/(benefit) related to these restructuring activities was insignificant during the 2013 Predecessor Period and during Fiscal 2013.

As of January 3, 2016, the liability balance associated with active restructuring projects, which qualifies as U.S. GAAP exit and disposal costs, was (in millions):

	Severance and Employee Benefit Costs				Other Exit Costs(a)				Total
Balance at December 28, 2014	$	53			$	26			$	79
Charges	75				23				98
Cash payments	(102		)		(17		)		(119		)
Non-cash utilization	(1		)		(2		)		(3		)
Balance at January 3, 2016	$	25			$	30			$	55

(a) Other costs primarily represent contract and lease terminations.

Total Integration and Restructuring:

Our total Integration Program and Restructuring expenses were (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Severance and Employee benefit costs - COGS	$	119			$	135			$	101			$	—			$	—
Severance and Employee benefit costs - SG&A	519				67				173				—				—
Asset related costs - COGS	186				199				60				6				—
Asset related costs - SG&A	7				9				6				—				—
Other exit costs - COGS	99				179				7				—				—
Other exit costs - SG&A	93				48				64				(12		)		1
	$	1,023			$	637			$	411			$	(6	)		$	1

Following the 2015 Merger, we began to report under a new segment structure and have reflected these changes for all historical periods presented. See Note 20, Segment Reporting, for additional information. We do not include Integration Program and Restructuring expenses within Segment Adjusted EBITDA. The pre-tax impact of allocating such expenses to our segments would have been (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
United States	$	790			$	227			$	113			$	—			$	—
Canada	47				101				59				—				—
Europe	141				224				126				4				—
Rest of World	13				62				49				2				—
Non-Operating	32				23				64				(12		)		1
	$	1,023			$	637			$	411			$	(6	)		$	1

Note 4. Discontinued Operations

In 2013, our Board of Directors approved management’s plan to sell Shanghai LongFong Foods (“LongFong”), a manufacturer of frozen products in China, which was previously reported in the Rest of World segment. During Fiscal 2013, we secured an agreement with a buyer and the sale was completed during the 2013 Successor Period, which resulted in an insignificant pre-tax and after-tax loss recorded in discontinued operations. As a result, LongFong’s net assets were classified as held for sale and we adjusted the carrying value to the estimated fair value, recording a $36 million pre-tax and after-tax non-cash goodwill impairment charge to discontinued operations during Fiscal 2013.

During Fiscal 2013, we sold our U.S. Foodservice frozen desserts business, which was previously reported in the United States segment, resulting in a $33 million pre-tax ($21 million after-tax) loss recorded in discontinued operations.

The operating results related to these businesses were included in discontinued operations in our consolidated statements of income. The operating results for these discontinued operations were (in millions):

	Successor				Predecessor (H. J. Heinz Company)
	February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Net sales	$	3			$	1			$	48
Net after-tax losses	(6		)		(1		)		(18		)
Tax benefit on losses	—				—				1

Note 5. Inventories

Inventories at January 3, 2016 and December 28, 2014 were (in millions):

	January 3, 2016				December 28, 2014
Packaging and ingredients	$	563			$	223
Work in process	393				136
Finished product	1,662				826
Inventories	$	2,618			$	1,185

Note 6. Property, Plant and Equipment

Property, plant and equipment at January 3, 2016 and December 28, 2014 was (in millions):

	January 3, 2016				December 28, 2014
Land	$	297			$	199
Buildings and improvements	1,700				597
Equipment and other	4,432				1,735
Construction in progress	1,001				265
	7,430				2,796
Accumulated depreciation	(906		)		(431		)
Property, plant and equipment, net	$	6,524			$	2,365

In 2015, we consummated the 2015 Merger and recorded $4.2 billion of property, plant and equipment in purchase accounting. See Note 2, Merger and Acquisition, for additional information.

Note 7. Goodwill and Intangible Assets

Goodwill:

Following the 2015 Merger, we began to report under a new segment structure and have reflected these changes for all historical periods presented. See Note 20, Segment Reporting, for additional information. Changes in the carrying amount of goodwill from December 28, 2014 to January 3, 2016, by segment, were (in millions):

	United States				Canada				Europe				Rest of World				Total
Balance at December 28, 2014	$	8,754			$	1,348			$	3,454			$	1,403			$	14,959
2015 Merger purchase accounting	25,008				4,021				—				—				29,029
Translation adjustments	—				(568		)		(208		)		(207		)		(983		)
Other	1				(5		)		(94		)		144				46
Balance at January 3, 2016	$	33,763			$	4,796			$	3,152			$	1,340			$	43,051

In connection with the 2015 Merger, we recorded $29.0 billion of goodwill in purchase accounting, representing the preliminary fair value as of the 2015 Merger Date. As of the issuance date of this report, the assignment of goodwill to reporting units was also preliminary.

We perform our annual impairment testing in the second quarter or when a triggering event occurs. We performed our annual impairment testing in the second quarter of 2015, prior to the completion of the 2015 Merger. No impairment of goodwill was reported as a result of our 2015 annual goodwill impairment test; however, the historical Heinz North America Consumer Products reporting unit had an estimated fair value in excess of its carrying value of less than 10%.

If our current expectations of future growth rates are not met or if valuation factors outside of our control, such as discount rates, change unfavorably, the estimated fair value of our goodwill could be adversely affected, leading to a potential impairment in the future. There were no accumulated impairment losses to goodwill as of January 3, 2016 or December 28, 2014.

Indefinite-lived intangible assets:

Indefinite-lived intangible assets primarily consisted of trademarks. The changes in indefinite-lived intangible assets from December 28, 2014 to January 3, 2016 were (in millions):

Balance at December 28, 2014	$	11,872
2015 Merger purchase accounting	45,082
Impairment losses on indefinite-lived intangible assets	(58		)
Transfers to definite-lived intangible assets	(553		)
Translation adjustments	(519		)
Balance at January 3, 2016	$	55,824

In connection with the 2015 Merger, we recorded $45.1 billion of indefinite-lived intangible assets in purchase accounting, representing the preliminary fair values as of the 2015 Merger Date.

We test indefinite-lived intangible assets for impairment at least annually in the second quarter or when a triggering event occurs. We performed our annual impairment testing in the second quarter of 2015, prior to the completion of the 2015 Merger. As a result of our 2015 annual impairment test, we recognized non-cash impairment losses of $58 million in SG&A. The impairment losses were primarily related to declines within frozen soup in the United States, frozen meals and snacks primarily in the United Kingdom, and pasta sauce in the United States and Canada. Additionally, as of the date of our 2015 annual impairment test, 21 brands, with an aggregate carrying value of $2.5 billion, had excess fair values over their carrying values of less than 10%.

If our current expectations of future growth rates are not met or if valuation factors outside of our control, such as discount rates, change unfavorably, the estimated fair values of our indefinite-lived intangible assets could be adversely affected, leading to potential impairments in the future.

In the year ended December 28, 2014, we recognized non-cash impairment losses of $221 million in SG&A, primarily related to our Heinz North America frozen meals and snacks business due to continued category softness and weaker than anticipated sales.

Definite-lived intangible assets:

Definite-lived intangible assets at January 3, 2016 and December 28, 2014 were (in millions):

	January 3, 2016												December 28, 2014
	Gross				Accumulated Amortization				Net				Gross				Accumulated Amortization				Net
Trademarks	$	2,346			$	(70	)		$	2,276			$	118			$	(31	)		$	87
Customer-related assets	4,218				(209		)		4,009				1,315				(99		)		1,216
Other	15				(4		)		11				15				(2		)		13
	$	6,579			$	(283	)		$	6,296			$	1,448			$	(132	)		$	1,316

Amortization expense for definite-lived intangible assets was $178 million for the year ended January 3, 2016, $93 million for the year ended December 28, 2014, $47 million for the 2013 Successor Period, and $31 million for Fiscal 2013. Amortization expense was insignificant for the 2013 Predecessor Period. Aside from amortization expense, the changes in definite-lived intangible assets from December 28, 2014 to January 3, 2016 reflect the impacts of preliminary purchase accounting, $553 million of transfers from indefinite-lived intangible assets, and foreign currency. We estimate that annual amortization expense for definite-lived intangible assets for each of the next five years will be approximately $276 million.

Note 8. Income Taxes

Income before income taxes from continuing operations and the provision for income taxes for continuing operations, consisted of the following (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Income/(loss) from continuing operations before income taxes:
United States	$	(13	)		$	(207	)		$	(291	)		$	(191	)		$	379
International	1,026				1,010				(7		)		61				965
Total	$	1,013			$	803			$	(298	)		$	(130	)		$	1,344
Provision/(benefit) for income taxes:
Current:
U.S. federal	$	427			$	105			$	10			$	55			$	127
U.S. state and local	22				12				2				8				15
International	234				188				54				18				187
	683				305				66				81				329
Deferred:
U.S. federal	(173		)		(159		)		(125		)		(13		)		(14		)
U.S. state and local	(70		)		(14		)		5				—				1
International	(74		)		(1		)		(178		)		(7		)		(74		)
	(317		)		(174		)		(298		)		(20		)		(87		)
Total provision for income taxes	$	366			$	131			$	(232	)		$	61			$	242

Tax benefits related to stock options and other equity instruments recorded directly to additional paid-in capital totaled $10 million in the year ended January 3, 2016, $47 million in the 2013 Predecessor Period and $21 million in Fiscal 2013. There were no tax benefits related to stock options and other equity instruments in the year ended December 28, 2014 or the 2013 Successor Period.

The effective income tax rate on pre-tax income from continuing operations differed from the U.S. federal statutory tax rate for the following reasons:

	Successor									Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)			December 28, 2014 (52 weeks)			February 8 - December 29, 2013 (29 weeks)			April 29 - June 7, 2013 (6 weeks)			April 28, 2013 (52 weeks)
U.S. federal statutory tax rate	35.0	%		35.0	%		35.0	%		35.0	%		35.0	%
Increase/(decrease) resulting from:
Tax on income of foreign subsidiaries	(11.8	)%		(8.3	)%		2.0	%		4.3	%		(4.8	)%
Changes in valuation allowances	1.4	%		(1.3	)%		(2.7	)%		1.6	%		0.9	%
Domestic manufacturing deduction	(2.9	)%		(2.8	)%		—	%		0.7	%		(0.3	)%
U.S. state and local income taxes, net of federal tax benefit	(0.6	)%		(0.9	)%		(4.3	)%		(0.5	)%		0.3	%
Nondeductible deal costs	1.3	%		—	%		(2.0	)%		(18.8	)%		—	%
Earnings repatriation	21.9	%		8.0	%		(1.0	)%		(77.2	)%		0.9	%
Tax exempt income	(10.9	)%		(12.3	)%		13.3	%		8.9	%		(6.3	)%
Effects of revaluation of tax basis of foreign assets	—	%		—	%		—	%		0.4	%		(6.2	)%
Reduction of manufacturing deduction for loss carryback	—	%		—	%		(3.7	)%		—	%		—	%
Deferred tax effect of statutory tax rate changes	(10.4	)%		(0.8	)%		35.9	%		0.3	%		(0.7	)%
Audit settlements and changes in uncertain tax positions	6.2	%		2.2	%		(0.4	)%		(3.6	)%		(0.3	)%
Venezuela nondeductible devaluation loss	9.9	%		—	%		—	%		—	%		—	%
Venezuela inflation adjustment	(1.7	)%		(3.1	)%		4.9	%		1.7	%		(0.7	)%
Other	(1.2	)%		0.6	%		0.8	%		0.2	%		0.2	%
Effective tax rate	36.2	%		16.3	%		77.8	%		(47.0	)%		18.0	%

The provision for income taxes consists of provisions for federal, state and foreign income taxes. We operate in an international environment; accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in various locations and the applicable tax rates. Additionally, the calculation of the percentage point impact of domestic manufacturing deductions, uncertain tax positions and other items on the effective tax rate shown in the table above are affected by income before income taxes from continuing operations. Fluctuations in the amount of income could impact comparability of reconciling items between periods.

The tax provision for the 2015 and 2014 tax years benefited from a favorable jurisdictional income mix which primarily resulted from restructuring and impairment costs recorded in the U.S.

The tax benefit in the 2015 tax year included a benefit related to the impact on deferred taxes of a 200 basis point statutory rate reduction in the United Kingdom. The tax benefit for the 2013 Successor Period included a benefit related to the impact on deferred taxes of a 300 basis point statutory rate reduction in the United Kingdom. The benefits of these statutory rate reductions in the United Kingdom were favorably impacted by the increase in deferred tax liabilities recorded in purchase accounting in the 2013 merger.

The tax provision for the June 7, 2013 Predecessor period was principally caused by the effect of repatriation costs of approximately $100 million for earnings of foreign subsidiaries distributed during the period and the effect of nondeductible costs related to the 2013 merger.

In 2015, the FASB issued an ASU intended to simplify the presentation of deferred income taxes. We early adopted this ASU on a prospective basis, as the impact to prior periods was not significant, see Note 1, Background and Basis of Presentation, for additional information. The tax effects of temporary differences and carryforwards that gave rise to deferred income tax assets and liabilities consisted of the following at January 3, 2016 and December 28, 2014:

	January 3, 2016				December 28, 2014
	(in millions)
Deferred income tax liabilities:
Depreciation and amortization	$	1,659			$	686
Benefit plans	63				109
Deferred income	324				217
Indefinite lived intangible assets	21,525				3,493
Other	107				96
Deferred income tax liabilities	23,678				4,601
Deferred income tax assets:
Operating loss carryforwards	(135		)		(110		)
Benefit plans	(1,323		)		(145		)
Depreciation and amortization	(248		)		(404		)
Tax credit carryforwards	(53		)		(36		)
Deferred income	(165		)		(15		)
Other	(410		)		(149		)
Deferred income tax assets	(2,334		)		(859		)
Valuation allowance	83				64
Net deferred income tax liabilities	$	21,427			$	3,806

The increase in our valuation allowance during 2015 of $19 million reflects the impact of the inclusion of valuation allowances resulting from the accounting acquisition of Kraft, the recording a valuation allowance for foreign tax credit carryforwards generated in the current year that are not expected to be utilized, partially offset by a reduction resulting from the utilization of foreign net operating losses and deferred tax assets that we had not previously anticipated being able to utilize.

At January 3, 2016, foreign operating loss carryforwards totaled $364 million. Of that amount, $90 million expire between 2016 and 2035; the other $274 million do not expire. We have recorded $98 million of deferred tax assets related to these foreign operating loss carryforwards. Additionally, we have foreign operating loss carryforwards of $972 million for which the realization of a tax benefit is considered remote and, as a result, we have recorded a full valuation allowance for the tax benefits. However, due to the remote likelihood of utilizing these losses, neither the deferred tax asset nor the offsetting valuation allowance have been presented in the table above. Deferred tax assets of $37 million have been recorded for U.S. state and local operating loss carryforwards. These losses expire between 2016 and 2035.

Deferred tax assets of $16 million have been recorded for U.S. foreign tax credit carryforwards. These credit carryforwards expire between 2022 and 2025.

At January 3, 2016, our unrecognized tax benefits for uncertain tax positions of $353 million are included in income taxes payable (current liabilities) and other liabilities (long-term). If we had recognized all of these benefits, the impact on our income tax provision would have been $218 million. It is reasonably possible that our unrecognized tax benefits will decrease by as much as $118 million in the next 12 months primarily due to the progression of federal, state and foreign audits in process.

The changes in our unrecognized tax benefits were (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Balance at the beginning of the period	$	71			$	53			$	51			$	45			$	53
Increases for tax positions of prior years	25				5				—				6				2
Decreases for tax positions of prior years	(9		)		(5		)		(7		)		(1		)		(9		)
Increases based on tax positions related to the current year	33				21				5				2				14
Increases due to acquisitions of businesses	242				—				4				—				—
Decreases due to settlements with taxing authorities	—				(1		)		—				—				(4		)
Decreases due to lapse of statute of limitations	(9		)		(2		)		—				(1		)		(11		)
Balance at the end of the period	$	353			$	71			$	53			$	51			$	45

The gross unrecognized tax balance increased substantially in 2015 as a result of 2015 Merger preliminary purchase accounting and the recognition of a tax reserve resulting from an unfavorable judgment in a foreign tax court case in the third quarter of 2015. While we plan to continue vigorously defending our position, the unfavorable court decision has resulted in a change in our evaluation of the ability to record benefits for the issue and accordingly we have recorded a $37 million reserve. As a result, the issue has now been fully reserved for all tax years which have not been substantially concluded.

We include interest and penalties related to uncertain tax positions in our tax provision. Our provision for income taxes included an expense of $18 million in the year ended January 3, 2016 and a benefit of $10 million in Fiscal 2013 for interest and penalties. Our interest and penalties expense was insignificant in the year ended December 28, 2014, the 2013 Successor period, and the 2013 Predecessor period. Accrued interest and penalties were $72 million as of January 3, 2016, and $21 million as of December 28, 2014. The increase in the accrued amount of interest and penalties was primarily the result of the 2015 Merger.

We have a tax sharing agreement with Mondelēz International, Inc. (“Mondelēz International,” formerly known as Kraft Foods Inc.), which provides that for legacy Kraft for periods prior to October 1, 2012, Mondelēz International is liable for and will indemnify us against all U.S. federal income taxes and substantially all foreign income taxes, excluding Canadian income taxes; and that we are liable for and will indemnify Mondelēz International against U.S. state income taxes and Canadian federal and provincial income taxes.

Legacy Kraft's U.S. operations were included in Mondelēz International's U.S. federal consolidated income tax returns for tax periods through October 1, 2012. In August 2014, Mondelēz International reached a final resolution on a U.S. federal income tax audit of the 2007-2009 tax years. The U.S. federal statute of limitations remains open for tax year 2010 and forward, and federal income tax returns for 2010-2012 are currently under examination. As noted above, we are indemnified for U.S. federal income taxes related to these periods.

In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, Italy, the Netherlands, the United Kingdom and the United States. We have substantially concluded all national income tax matters for years through the 2013 fiscal year for the Netherlands and the United Kingdom, through the 2011 fiscal year for the U.S. and Australia, through the 2010 fiscal year for Italy, and through the 2009 fiscal year for Canada.

Undistributed earnings of foreign subsidiaries considered to be indefinitely reinvested or which may be remitted tax free in certain situations, amounted to approximately $3.6 billion at January 3, 2016. It is not practicable to determine the deferred tax liability associated with the indefinitely reinvested undistributed earnings. Additionally, we have undistributed earnings in foreign subsidiaries which are currently not considered to be indefinitely reinvested, for which we have recorded deferred taxes of $22 million as of January 3, 2016. For those undistributed earnings considered to be indefinitely reinvested, our intent is to reinvest these funds in our international operations and our current plans do not demonstrate a need to repatriate the accumulated earnings to fund our United States cash requirements.

Note 9. Employees’ Stock Incentive Plans

During the years ended January 3, 2016 and December 28, 2014, the 2013 Successor Period, the 2013 Predecessor Period, and Fiscal 2013, we issued equity-based awards from the following plans:

2013 Omnibus Incentive Plan

In October 2013, our Board of Directors adopted the 2013 Omnibus Incentive Plan (“2013 Omnibus Plan”), which authorized the issuance of shares of capital stock. Each Heinz stock option that was outstanding under the 2013 Omnibus Plan immediately prior to the completion of the 2015 Merger was converted into 0.443332 of a Kraft Heinz stock option. Following this conversion, the 2013 Omnibus Plan authorized the issuance of up to 17,555,947 shares of our common stock. All Heinz stock option amounts have been retrospectively adjusted for the Successor periods presented to give effect to this conversion. We grant non-qualified stock options under the 2013 Omnibus Plan to select employees with a five-year cliff vesting. Such options have a maximum exercise term of ten years. If a participant is involuntarily terminated without cause, 20% of their options will vest, on an accelerated basis, for each full year of service after the grant date.

Kraft 2012 Performance Incentive Plan

Prior to the 2015 Merger, Kraft issued equity-based awards, including stock options and RSUs, under its 2012 Performance Incentive Plan. As a result of the 2015 Merger, each outstanding Kraft stock option was converted into an option to purchase a number of shares of our common stock based upon an option adjustment ratio, and each outstanding Kraft RSU was converted into one Kraft Heinz RSU. These Kraft Heinz stock awards will continue to vest and become exercisable in accordance with the terms and conditions that were applicable immediately prior to the completion of the 2015 Merger. These options generally become exercisable in three annual installments beginning on the first anniversary of the original grant date, and have a maximum exercise term of ten years. RSUs generally cliff vest on the third anniversary of the original grant date. In accordance with the terms of the 2012 Performance Incentive Plan, vesting generally accelerates for holders of Kraft awards who are terminated without cause within two years of the 2015 Merger Date.

In addition, prior to the 2015 Merger, Kraft issued performance based long-term incentive awards (“Performance Shares”), which vested based on varying performance, market, and service conditions. In connection with the 2015 Merger, all outstanding Performance Shares were converted into cash awards, payable in two installments: (i) a 2015 pro-rata payment based upon the portion of the Performance Share cycle completed prior to the 2015 Merger and (ii) the remaining value of the award to be paid on the earlier of the first anniversary of the closing of the 2015 Merger and a participant's termination without cause.

Heinz 2003 Incentive Plan

During the 2013 Predecessor Period and Fiscal 2013, we issued equity-based awards, including stock options, restricted stock, and RSUs from the Fiscal Year 2003 Stock Incentive Plan (“2003 Plan”). This program was terminated as a result of the 2013 Merger and each award outstanding was canceled and converted into the right to receive cash. See Note 2, Merger and Acquisition, for additional information. In connection with the accelerated vesting of these equity-based awards, we recorded expenses of $24 million in SG&A in the consolidated statement of income for the 2013 Predecessor Period. There were no outstanding pre-2013 Merger equity-based awards as of January 3, 2016.

Stock Options:

We use the Black-Scholes model to estimate the fair value of stock option grants. We used the Hull-White II Lattice (“Lattice”) model to estimate the fair value of Kraft converted stock options. We believe the Lattice model provided an appropriate estimate of fair value of Kraft converted options as it took into account each option’s distinct in-the-money level and remaining terms. The grant date fair value of options is amortized to expense over the vesting period.

Our weighted average Black-Scholes fair value assumptions were:

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)		April 28, 2013 (52 weeks)
Risk-free interest rate	1.70		%		1.49		%		1.41		%		NA		1.00		%
Expected term	6.3 years				5 years				5 years				NA		7 years
Expected volatility	22.9		%		24.3		%		24.3		%		NA		19.4		%
Expected dividend yield	1.5		%		—		%		—		%		NA		3.7		%
Weighted average grant date fair value per share	$	9.60			$	5.53			$	5.48			NA		$	5.79

The risk-free interest rate represented the constant maturity U.S. Treasury rate in effect at the grant date, with a remaining term equal to the expected life of the options. The expected life is the period over which our employees are expected to hold their options. Due to the lack of historical data for the years ended January 3, 2016 and December 28, 2014, we calculated expected life using the Safe Harbor method, which uses the weighted average vesting period and the contractual term of the options. For the 2013 Successor Period and Fiscal 2013, the weighted average expected life of options was based on consideration of historical exercise patterns adjusted for changes in the contractual term and exercise periods of current awards. For the years ended January 3, 2016 and December 28, 2014, and for the 2013 Successor Period, volatility was estimated based on a review of the equity volatilities of publicly-traded peer companies for a period commensurate with the expected life of the options. Volatility for Fiscal 2013 was estimated based on a historic daily volatility rate over a period equal to the average life of an option. Dividend yield was estimated over the expected life of the options based on our stated dividend policy.

Our Lattice model fair value assumptions for the Kraft converted options were:

	January 3, 2016 (53 weeks)
Risk-free interest rate	1.72		%
Weighted average expected volatility	20.10		%
Expected dividend yield	3.00		%
Weighted average fair value per share	$	35.65

The risk-free interest rate represented the constant maturity U.S. Treasury rate in effect at the conversion date, with a remaining term equal to the expected life of the options. The expected volatility was calculated as the average leverage-adjusted historical volatility of several peer companies, matched to the remaining term of each option. Dividend yield was estimated based on our stated dividend policy and conversion date stock price.

Our stock option activity and related information was:

	Number of Stock Options			Weighted Average Exercise Price (per share)				Aggregate Intrinsic Value (in millions)				Average Remaining Contractual Term
Outstanding at December 28, 2014	8,570,796			$	22.56
Kraft options converted	13,887,135			37.69
Options granted	3,409,031			52.52
Options forfeited	(576,362	)		33.02
Options exercised	(1,084,988	)		30.30
Outstanding at January 3, 2016	24,205,612			34.86				$	920			7 years
Exercisable at January 3, 2016	10,713,602			35.92				395				6 years

The aggregate intrinsic value of stock options exercised during the period was $21 million for the year ended January 3, 2016 and $148 million during Fiscal 2013. The aggregate intrinsic value of stock options exercised during the 2013 Predecessor Period was insignificant, and no stock options were exercised during the year ended December 28, 2014 or during the 2013 Successor Period.

Cash received from options exercised was $29 million during year ended January 3, 2016 and $114 million during Fiscal 2013. The tax benefit realized from stock options exercised was $12 million during the year ended January 3, 2016, $51 million during the 2013 Predecessor Period, and $18 million during Fiscal 2013. Cash received from options exercised was insignificant during the 2013 Predecessor Period. There was no cash received and no tax benefit recognized related to stock option exercises during the year ended December 28, 2014 or during the 2013 Successor Period.

Our unvested stock options and related information was:

	Number of Options			Weighted Average Grant Date Fair Value (per share)
Unvested options at December 28, 2014	8,570,796			$	5.38
Kraft options converted	5,510,511			26.38
Options granted	3,409,031			9.60
Options vested	(3,421,966	)		24.40
Options forfeited	(576,362	)		10.59
Unvested options at January 3, 2016	13,492,010			10.02

RSUs:

We use the closing stock price on the grant date to estimate the fair value of RSUs. The grant date fair value is amortized to expense over the vesting period.

Our RSU activity and related information was:

	Number of Units			Weighted Average Grant Date Fair Value (per share)
RSUs at December 28, 2014	—			$	—
Kraft RSUs converted	1,950,365			72.96
Granted	58,520			26.24
Forfeited	(31,538	)		72.96
Vested	(1,008,903	)		72.96
RSUs at January 3, 2016	968,444			70.14

The aggregate fair value of restricted stock and RSUs that vested during the period was $76 million for the year ended January 3, 2016 and $34 million during Fiscal 2013. The aggregate fair value of restricted stock and RSUs that vested during the 2013 Predecessor Period was insignificant. No restricted stock or RSUs vested during the year ended December 28, 2014 or during the 2013 Successor Period.

Total Equity Awards:

The compensation cost related to equity awards was primarily recognized in general corporate expenses within SG&A. Equity award compensation cost and the related tax benefit was (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Pre-tax compensation cost	$	133			$	8			$	1			$	26			$	34
Tax benefit	(48		)		(3		)		—				(8		)		(11		)
After-tax compensation cost	$	85			$	5			$	1			$	18			$	23

Unrecognized compensation cost related to unvested equity awards was $97 million at January 3, 2016 and is expected to be recognized over a weighted average period of two years.

Note 10. Postemployment Benefits

We maintain various retirement plans for the majority of our employees. Current defined benefit plans are provided primarily for certain domestic union and foreign employees. Local statutory requirements govern many of these plans. The pension benefits of our unionized workers are in accordance with the applicable collective bargaining agreement covering their employment. Defined contribution plans are provided for certain domestic unionized, non-union hourly, and salaried employees as well as certain employees in foreign locations.

We provide health care and other postretirement benefits to certain of our eligible retired employees and their eligible dependents. Certain of our U.S. and Canadian employees may become eligible for such benefits. We currently do not fund these benefit arrangements until claims occur and may modify plan provisions or terminate plans at our discretion. The postretirement benefits of our unionized workers are in accordance with the applicable collective bargaining agreement covering their employment.

Prior to the 2015 Merger, Kraft provided a range of benefits to its employees and retirees, including pension benefits and postretirement health care benefits. As part of the 2015 Merger, we assumed the assets and liabilities associated with these plans.

We remeasure our postemployment benefit plans at least annually at the end of our fiscal year.

Pension Plans

Obligations and Funded Status:

The projected benefit obligations, plan assets and funded status of our pension plans at January 3, 2016 and December 28, 2014 were:

	U.S. Plans								Non-U.S. Plans
	January 3, 2016				December 28, 2014				January 3, 2016				December 28, 2014
	(in millions)
Benefit obligation at beginning of year	$	540			$	639			$	2,611			$	2,587
Service cost	45				4				26				25
Interest cost	164				29				103				107
Benefits paid	(167		)		(44		)		(138		)		(122		)
Actuarial (gains)/losses	(121		)		133				23				235
Plan amendments	7				—				—				—
Currency	—				—				(300		)		(181		)
Settlements	(977		)		(220		)		(655		)		(5		)
Curtailments	(148		)		—				(50		)		(45		)
Special/contractual termination benefits	4				—				6				8
Assumption of Kraft's benefit obligations	6,645				—				1,264				—
Other	(2		)		(1		)		2				2
Benefit obligation at end of year	5,990				540				2,892				2,611
Fair value of plan assets at beginning of year	547				748				3,088				2,907
Actual return on plan assets	(34		)		63				126				411
Participants' contributions	—				—				2				2
Employer contributions	227				—				59				102
Benefits paid	(167		)		(44		)		(138		)		(122		)
Currency	—				—				(331		)		(207		)
Settlements	(977		)		(220		)		(655		)		(5		)
Assumption of Kraft's plan assets	5,686				—				1,277				—
Fair value of plan assets at end of year	5,282				547				3,428				3,088
Net pension liability/(asset) recognized at end of year	$	708			$	(7	)		$	(536	)		$	(477	)

The accumulated benefit obligation, which represents benefits earned to the measurement date, was $6.0 billion at January 3, 2016 and $534 million at December 28, 2014 for the U.S. pension plans. The accumulated benefit obligation for the non-U.S. pension plans was $2.7 billion at January 3, 2016 and $2.4 billion at December 28, 2014.

The combined U.S. and non-U.S. pension plans resulted in a net pension liability of $172 million at January 3, 2016 and net pension asset of $484 million at December 28, 2014. We recognized these amounts on our consolidated balance sheets at January 3, 2016 and December 28, 2014, as follows:

	January 3, 2016				December 28, 2014
	(in millions)
Other assets (long-term assets)	$	616			$	581
Accrued postemployment costs (current liabilities)	(172		)		(1		)
Accrued postemployment costs (long-term liabilities)	(616		)		(96		)
	$	(172	)		$	484

For certain of our U.S. and non-U.S. plans that were underfunded based on accumulated benefit obligations in excess of plan assets, the projected benefit obligations, accumulated benefit obligations, and the fair value of plan assets at January 3, 2016 and December 28, 2014 were:

	U.S. Plans								Non-U.S. Plans
	January 3, 2016				December 28, 2014				January 3, 2016				December 28, 2014
	(in millions)
Projected benefit obligation	$	5,990			$	402			$	72			$	743
Accumulated benefit obligation	5,986				402				72				743
Fair value of plan assets	5,282				366				15				713

For certain of our U.S. and non-U.S. plans that were underfunded based on projected benefit obligations in excess of plan assets, the projected benefit obligations, accumulated benefit obligations, and the fair value of plan assets at January 3, 2016 and December 28, 2014 were:

	U.S. Plans								Non-U.S. Plans
	January 3, 2016				December 28, 2014				January 3, 2016				December 28, 2014
	(in millions)
Projected benefit obligation	$	5,990			$	402			$	119			$	810
Accumulated benefit obligation	5,986				402				72				743
Fair value of plan assets	5,282				366				43				748

We used the following weighted average assumptions to determine our projected benefit obligations under the pension plans at January 3, 2016 and December 28, 2014:

	U.S. Plans						Non-U.S. Plans
	January 3, 2016			December 28, 2014			January 3, 2016			December 28, 2014
Discount rate	4.3	%		3.8	%		3.8	%		3.5	%
Rate of compensation increase	4.2	%		4.5	%		3.4	%		3.3	%

Components of Net Pension Cost/(Benefit):

Net pension cost/(benefit) consisted of the following (in millions):

	U.S. Plans
	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Service cost	$	45			$	4			$	3			$	1			$	4
Interest cost	164				29				14				3				27
Expected return on plan assets	(179		)		(46		)		(25		)		(6		)		(55		)
Amortization of unrecognized losses	3				—				—				3				31
Amortization of prior service costs	—				—				—				—				1
Settlements	102				10				(1		)		—				3
Curtailments	(96		)		—				23				—				—
Special/contractual termination benefits	4				—				—				17				—
Net pension cost/(benefit)	$	43			$	(3	)		$	14			$	18			$	11

	Non-U.S. Plans
	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Service cost	$	26			$	25			$	17			$	3			$	28
Interest cost	103				107				58				11				105
Expected return on plan assets	(194		)		(169		)		(91		)		(22		)		(196		)
Amortization of unrecognized losses	—				—				—				7				45
Amortization of prior service costs	—				—				—				—				2
Settlements	17				—				—				—				1
Curtailments	(47		)		(6		)		(2		)		—				—
Special/contractual termination benefits	6				8				37				—				—
Net pension (benefit)/cost	$	(89	)		$	(35	)		$	19			$	(1	)		$	(15	)

In the year ended January 3, 2016, we recorded net settlement losses for the U.S. and non-U.S. plans primarily related to certain plan terminations. We also recorded net curtailment gains for the U.S. and non-U.S. plans primarily related to certain plan freezes and work force reductions under our integration and restructuring activities.

In the year ended December 28, 2014 and the 2013 Successor Period, we recorded curtailment (gains)/losses and special termination benefit charges related to work force reductions under our restructuring activities.

In the 2013 Predecessor Period, we recorded special termination benefit charges related to the accelerated vesting of benefits under certain plans. The accelerated vesting occurred upon the consummation of the 2013 Merger and these plans were terminated within 364 days.

We used the following weighted average assumptions to determine our net pension cost:

	U.S. Plans
	Successor									Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)			December 28, 2014 (52 weeks)			February 8 - December 29, 2013 (29 weeks)			April 29 - June 7, 2013 (6 weeks)			April 28, 2013 (52 weeks)
Discount rate	4.4	%		4.8	%		4.1	%		3.6	%		4.3	%
Expected rate of return on plan assets	5.6	%		6.5	%		6.5	%		8.8	%		8.8	%
Rate of compensation increase	4.0	%		4.5	%		4.0	%		4.3	%		4.3	%

	Non-U.S. Plans
	Successor									Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)			December 28, 2014 (52 weeks)			February 8 - December 29, 2013 (29 weeks)			April 29 - June 7, 2013 (6 weeks)			April 28, 2013 (52 weeks)
Discount rate	3.7	%		4.5	%		4.2	%		4.1	%		5.0	%
Expected rate of return on plan assets	6.4	%		6.1	%		6.1	%		8.0	%		8.0	%
Rate of compensation increase	3.3	%		3.6	%		3.4	%		3.4	%		3.3	%

Discount rates for our U.S. and non-U.S. plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. We determine our expected rate of return on plan assets from the plan assets' historical long-term investment performance, target asset allocation, and estimates of future long-term returns by asset class.

Plan Assets:

The underlying basis of the investment strategy of our defined benefit plans is to ensure that pension funds are available to meet the plans’ benefit obligations when they are due. Our investment objectives include: investing plan assets in a high-quality, diversified manner in order to maintain the security of the funds; achieving an optimal return on plan assets within specified risk tolerances; and investing according to local regulations and requirements specific to each country in which a defined benefit plan operates. The investment strategy expects equity investments to yield a higher return over the long term than fixed-income securities, while fixed-income securities are expected to provide certain matching characteristics to the plans’ benefit payment cash flow requirements. Our investment policy specifies the type of investment vehicles appropriate for the applicable plan, asset allocation guidelines, criteria for the selection of investment managers, procedures to monitor overall investment performance as well as investment manager performance. It also provides guidelines enabling the applicable plan fiduciaries to fulfill their responsibilities.

Our weighted average asset allocations were:

	U.S. Plans						Non-U.S. Plans
	January 3, 2016			December 28, 2014			January 3, 2016			December 28, 2014
Equity securities	27	%		12	%		31	%		38	%
Fixed-income securities	62	%		81	%		48	%		35	%
Real estate	5	%		—	%		9	%		10	%
Cash and cash equivalents	5	%		7	%		7	%		11	%
Certain insurance contracts	1	%		—	%		5	%		6	%
	100	%		100	%		100	%		100	%

Our pension asset strategy for U.S. plans is designed to align our pension assets with our projected benefit obligation to reduce volatility by targeting an investment of approximately 70% of our U.S. plan assets in fixed-income securities and approximately 30% in return seeking assets, primarily equity securities. We expect to reach our investment target in 2016.

For pension plans outside the U.S., our investment strategy is subject to local regulations and the asset/liability profiles of the plans in each individual country. In aggregate, the long-term asset allocation targets of our non-U.S. plans are broadly characterized as a mix of approximately 50% fixed-income securities, and approximately 50% in return seeking assets, primarily equity securities and real estate.

The fair value of pension plan assets at January 3, 2016 was determined using the following fair value measurements:

Asset Category	Total Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
	(in millions)
Equity securities	$	321			$	321			$	—			$	—
Equity securities (mutual and pooled funds)	2,173				16				2,157				—
Total equity securities	2,494				337				2,157				—
Government bonds	671				671				—				—
Fixed-income securities (pooled funds)	1,254				—				1,254				—
Corporate bonds and other fixed-income securities	2,994				—				2,994				—
Total fixed-income securities	4,919				671				4,248				—
Real estate	571				—				—				571
Cash and cash equivalents	490				18				472				—
Certain insurance contracts	236				—				—				236
Total	$	8,710			$	1,026			$	6,877			$	807

The fair value of pension plan assets at December 28, 2014 was determined using the following fair value measurements:

Asset Category	Total Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
	(in millions)
Equity securities	$	377			$	377			$	—			$	—
Equity securities (mutual and pooled funds)	852				95				757				—
Total equity securities	1,229				472				757				—
Government bonds	124				124				—				—
Fixed-income securities (pooled funds)	896				—				844				52
Corporate bonds and other fixed-income securities	517				—				517				—
Total fixed-income securities	1,537				124				1,361				52
Real estate	307				—				—				307
Cash and cash equivalents	374				17				357				—
Certain insurance contracts	188				—				—				188
Total	$	3,635			$	613			$	2,475			$	547

The following section describes the valuation methodologies used to measure the fair value of pension plan assets, including an indication of the level in the fair value hierarchy in which each type of asset is generally classified.

Equity Securities. These securities consist of direct investments in the stock of publicly traded companies. Such investments are valued based on the closing price reported in an active market on which the individual securities are traded. As such, the direct investments are classified as Level 1.

Equity Securities (mutual and pooled funds). Mutual funds are valued at the net asset value of shares held by the applicable plan at year end. As such, these mutual fund investments are classified as Level 1. Pooled funds are similar in nature to retail mutual funds, but are more efficient for institutional investors than retail mutual funds. As pooled funds are only accessible by institutional investors, the net asset value is not readily observable by non-institutional investors; therefore, pooled funds are classified as Level 2.

Government Bonds. These securities consist of direct investments in publicly traded U.S. and non-U.S. fixed interest obligations (principally debentures). Such investments are valued using quoted prices in active markets. These securities are included in Level 1.

Fixed-Income Securities (pooled funds). Pooled funds are similar in nature to retail mutual funds, but are more efficient for institutional investors than retail mutual funds. As pooled funds are only accessible by institutional investors, the net asset value is not readily observable by non-institutional investors. Pooled funds investing in securities with significant other observable inputs, such as publicly traded corporate bonds, are classified as Level 2. Pooled funds investing in securities with significant unobservable inputs, such as private debt, are classified as Level 3.

Corporate Bonds and Other Fixed-Income Securities. These securities consist of publicly traded U.S. and non-U.S. fixed interest obligations (principally corporate bonds). Such investments are valued through consultation and evaluation with brokers in the institutional market using quoted prices and other observable market data. As such, these securities are included in Level 2.

Real Estate. These holdings consist of real estate investments. Direct investments of real estate are valued by investment managers based on the most recent financial information available, which typically represents significant unobservable data. As such, these investments are generally classified as Level 3.

Cash and Cash Equivalents. This consists of direct cash holdings and institutional short-term investment vehicles. Direct cash holdings are valued based on cost, which approximates fair value and are classified as Level 1. Institutional short-term investment vehicles are valued daily and are classified as Level 2.

Certain Insurance Contracts. This category consists of group annuity contracts that have been purchased to cover a portion of the plan members. The fair value of non-participating annuity buy-in contracts fluctuates based on fluctuations in the obligation associated with the covered plan members. The fair value of certain participating annuity contracts are reported at contract value. These values have been classified as Level 3.

Changes in our Level 3 plan assets for the year ended January 3, 2016 included:

Asset Category	December 28, 2014				2015 Merger				Net Realized Gain/(Loss)				Net Unrealized Gain/(Loss)				Net Purchases, Issuances and Settlements				Transfers Into/(Out of) Level 3				January 3, 2016
	(in millions)
Fixed-income securities (pooled funds)	$	52			$	—			$	2			$	(2	)		$	(52	)		$	—			$	—
Real estate	307				273				4				11				(24		)		—				571
Certain insurance contracts	188				52				12				(14		)		(2		)		—				236
Total Level 3 investments	$	547			$	325			$	18			$	(5	)		$	(78	)		$	—			$	807

Changes in our Level 3 plan assets for the year ended December 28, 2014 included:

Asset Category	December 29, 2013				Net Realized Gain/(Loss)				Net Unrealized Gain/(Loss)				Net Purchases, Issuances and Settlements				Transfers Into/(Out of) Level 3				December 28, 2014
	(in millions)
Fixed-income securities (pooled funds)	$	11			$	—			$	2			$	39			$	—			$	52
Real estate	283				(1		)		45				(20		)		—				307
Certain insurance contracts	13				—				11				164				—				188
Total Level 3 investments	$	307			$	(1	)		$	58			$	183			$	—			$	547

Employer Contributions:

In 2015, we contributed $227 million to our U.S. pension plans and $59 million to our non-U.S. pension plans. We estimate that 2016 pension contributions will be approximately $315 million to our U.S. plans and approximately $30 million to our non-U.S. plans. Our U.S. contributions include approximately $160 million in the first quarter of 2016 related to the termination of our U.S. nonqualified pension plan that was effective December 31, 2015. However, our actual contributions may differ due to many factors, including changes in tax, employee benefit, or other laws, tax deductibility, significant differences between expected and actual pension asset performance or interest rates, or other factors.

Future Benefit Payments:

The estimated future benefit payments from our pension plans at January 3, 2016 were:

	U.S. Plans				Non-U.S. Plans
	(in millions)
2016	$	696			$	140
2017	394				144
2018	381				323
2019	378				145
2020	373				147
2021-2025	1,900				770

Postretirement Benefit Plans

Obligations:

Our postretirement benefit plans are not funded. The changes in and the amount of the accrued benefit obligations at January 3, 2016 and December 28, 2014 were:

	January 3, 2016				December 28, 2014
	(in millions)
Accrued benefit obligations at beginning of year	$	205			$	208
Service cost	13				5
Interest cost	56				9
Benefits paid	(106		)		(13		)
Actuarial losses/(gains)	(7		)		7
Plan amendments	(1,507		)		—
Currency	(25		)		(4		)
Curtailments	(55		)		(8		)
Participant's contributions	—				1
Assumption of Kraft's benefit obligations	3,371				—
Accrued benefit obligations at end of year	$	1,945			$	205

In the third quarter of 2015, we made a number of plan amendments to certain of our postretirement health care benefit plans in the U.S., which resulted in a $1.5 billion reduction to our postretirement plan accrued benefit obligations. This $1.5 billion pre-tax benefit was deferred as a component of accumulated other comprehensive income/(losses) and is being amortized to net income as a prior service credit over the remaining working life to full eligibility of the covered employees.

We used the following weighted average assumptions to determine our postretirement benefit obligations at January 3, 2016 and December 28, 2014:

	January 3, 2016			December 28, 2014
Discount rate	4.2	%		3.7	%
Health care cost trend rate assumed for next year	6.5	%		5.9	%
Ultimate trend rate	4.9	%		4.8	%

Discount rates for our plans were developed from a model portfolio of high-quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Our expected health care cost trend rate is based on historical costs.

The year that the health care cost trend rate reaches the ultimate trend rate varies by plan and ranges between 2016 and 2024 as of January 3, 2016.

Assumed health care costs trend rates have a significant impact on the amounts reported for the postretirement benefit plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects, increase/(decrease) in cost and obligation, as of January 3, 2016:

	One-Percentage-Point
	Increase				Decrease
	(in millions)
Effect of annual service and interest cost	$	8			$	(7	)
Effect on postretirement benefit obligation	126				(104		)

Components of Net Postretirement Plans (Benefit)/Cost:

Net postretirement plans (benefit)/cost consisted of the following (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Service cost	$	13			$	5			$	4			$	1			$	6
Interest cost	56				9				5				1				10
Amortization of unrecognized losses	—				—				—				—				2
Amortization of prior service credits	(112		)		(6		)		—				(1		)		(6		)
Curtailments	1				(7		)		(1		)		—				—
Net postretirement benefit plans (benefit)/cost	$	(42	)		$	1			$	8			$	1			$	12

The amortization of prior service credits of $112 million in the year ended January 3, 2016 was primarily driven by four months of amortization related to the 2015 plan amendments.

In the years ended December 28, 2014 and the 2013 Successor Period, we had curtailment gains triggered by work force reductions under our restructuring activities.

We used the following weighted average assumptions to determine our net postretirement benefit plans cost:

	Successor									Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)			December 28, 2014 (52 weeks)			February 8 - December 29, 2013 (29 weeks)			April 29 - June 7, 2013 (6 weeks)			April 28, 2013 (52 weeks)
Discount rate	4.2	%		4.3	%		3.7	%		3.4	%		4.1	%
Health care cost trend rate	6.7	%		6.0	%		6.3	%		6.3	%		7.1	%

Future Benefit Payments:

Our estimated future benefit payments for our postretirement plans at January 3, 2016 were (in millions):

2016	$	162
2017	160
2018	156
2019	152
2020	147
2021-2025	644

Other Costs

We sponsor and contribute to employee savings plans that cover eligible salaried, non-union, and union employees. Our contributions and costs are determined by the matching of employee contributions, as defined by the plans. Amounts charged to expense for defined contribution plans totaled $52 million in the year ended January 3, 2016, $19 million in the year ended December 28, 2014, $24 million in the 2013 Successor Period, and $47 million in Fiscal 2013. Amounts charged to expense for defined contribution plans was insignificant for the 2013 Predecessor Period.

Accumulated Other Comprehensive Income/(Losses):

Our accumulated other comprehensive income/(losses) pension and postretirement benefit plans balances, before tax, consisted of the following:

	Pension Benefits								Postretirement Benefits								Total
	January 3, 2016				December 28, 2014				January 3, 2016				December 28, 2014				January 3, 2016				December 28, 2014
	(in millions)
Net actuarial gain	$	13			$	36			$	70			$	9			$	83			$	45
Prior service credit	—				—				1,409				14				1,409				14
	$	13			$	36			$	1,479			$	23			$	1,492			$	59

The net postemployment benefits recognized in other comprehensive income/(loss), consisted of the following (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Net postemployment benefit gains/(losses):
Net actuarial gain/(loss) arising during the period-Pension Benefits	$	3			$	(75	)		$	102			$	—			$	(256	)
Net actuarial gain/(loss) arising during the period-Postretirement Benefits	62				1				19				—				(9		)
Prior service cost arising during the period-Pension Benefits	(7		)		—				—				—				—
Prior service credit arising during the period-Postretirement Benefits	1,507				—				21				—				—
	1,565				(74		)		142				—				(265		)
Tax (expense)/benefit	(619		)		40				(40		)		—				76
	$	946			$	(34	)		$	102			$	—			$	(189	)
Reclassification of net postemployment benefit (gains)/losses to net income:
Amortization of unrecognized loss-Pension Benefits	$	3			$	—			$	—			$	10			$	76
Amortization of unrecognized loss-Postretirement Benefits	—				—				—				—				2
Amortization of prior service cost-Pension Benefits	—				—				—				—				3
Amortization of prior service (credit)/cost-Postretirement Benefits	(112		)		(6		)		—				(1		)		(6		)
Net settlement and curtailment (gain)/loss-Pension Benefits	(24		)		4				—				—				4
Net settlement and curtailment loss/(gain)-Postretirement Benefits	1				(7		)		—				—				—
	(132		)		(9		)		—				9				79
Tax benefit/(expense)	47				2				—				(2		)		(24		)
	$	(85	)		$	(7	)		$	—			$	7			$	55

We revised certain of our prior period accumulated other comprehensive income/(losses) and other comprehensive income/(loss) balances, in this note to the consolidated financial statements, to correct the balances previously disclosed in the Accumulated Other Comprehensive Income/(Losses) footnote. These misstatements were not material to our current or any prior period financial statements.

As of January 3, 2016, we expect to amortize $325 million of postretirement benefit plans prior service credits from accumulated other comprehensive income/(losses) into net postretirement benefit plans costs during 2016. We do not expect to reclassify any other significant postemployment benefit (gains)/losses into net pension or net postretirement benefit plans costs during 2016.

Note 11. Accumulated Other Comprehensive Income/(Losses)

The components of, and changes in, accumulated other comprehensive income/(losses) were as follows (net of tax):

	Foreign Currency Translation Adjustments				Net Postemployment Benefit Plan Adjustments				Net Cash Flow Hedge Adjustments				Total
	(in millions)
Predecessor (H. J. Heinz Company)
Balance as of April 29, 2012	$	(23	)		$	(828	)		$	6			$	(845	)
Foreign currency translation adjustments	(213		)		—				—				(213		)
Net postemployment benefit losses	—				(189		)		—				(189		)
Reclassification of net postemployment benefit losses to net income	—				55				—				55
Net deferred losses on cash flow hedges	—				—				(12		)		(12		)
Net deferred losses on cash flow hedges reclassified to net income	—				—				30				30
Total other comprehensive (loss)/income	(213		)		(134		)		18				(329		)
Balance as of April 28, 2013	$	(236	)		$	(962	)		$	24			$	(1,174	)
Foreign currency translation adjustments	(94		)		—				—				(94		)
Reclassification of net postemployment benefit losses to net income	—				7				—				7
Net deferred losses on cash flow hedges	—				—				(1		)		(1		)
Net deferred losses on cash flow hedges reclassified to net income	—				—				7				7
Total other comprehensive (loss)/income	(94		)		7				6				(81		)
Balance as of June 7, 2013	$	(330	)		$	(955	)		$	30			$	(1,255	)
Successor
Balance as of February 8, 2013	$	—			$	—			$	—			$	—
Foreign currency translation adjustments	140				—				—				140
Net deferred losses on net investment hedges	(118		)		—				—				(118		)
Net postemployment benefit gains	—				102				—				102
Net deferred gains on cash flow hedges	—				—				111				111
Net deferred gains on cash flow hedges reclassified to net income	—				—				(3		)		(3		)
Total other comprehensive income	22				102				108				232
Balance as of December 29, 2013	$	22			$	102			$	108			$	232
Foreign currency translation adjustments	(932		)		—				—				(932		)
Net deferred gains on net investment hedges	336				—				—				336
Net postemployment benefit losses	—				(34		)		—				(34		)
Reclassification of net postemployment benefit gains to net income	—				(7		)		—				(7		)
Net deferred losses on cash flow hedges	—				—				(173		)		(173		)
Net deferred losses on cash flow hedges reclassified to net income	—				—				4				4
Total other comprehensive loss	(596		)		(41		)		(169		)		(806		)
Balance as of December 28, 2014	$	(574	)		$	61			$	(61	)		$	(574	)
Foreign currency translation adjustments	(1,578		)		—				—				(1,578		)
Net deferred gains on net investment hedges	506				—				—				506
Net postemployment benefit gains	—				946				—				946
Reclassification of net postemployment benefit gains to net income	—				(85		)		—				(85		)
Net deferred losses on cash flow hedges	—				—				(6		)		(6		)
Net deferred losses on cash flow hedges reclassified to net income	—				—				120				120
Total other comprehensive (loss)/income	(1,072		)		861				114				(97		)
Balance as of January 3, 2016	$	(1,646	)		$	922			$	53			$	(671	)

The tax (expense)/benefit recorded in and associated with each component of other comprehensive income/(loss) for the years

ended January 3, 2016 and December 28, 2014, the 2013 Successor Period, the 2013 Predecessor Period, and Fiscal 2013 were as follows (in millions):

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
Net deferred gains/(losses) on net investment hedges	$	(295	)		$	(209	)		$	73			$	—			$	—
Net postemployment benefit gains/(losses)	$	(619	)		$	40			$	(40	)		$	—			$	76
Reclassification of net postemployment benefit (gains)/losses to net income	$	47			$	2			$	—			$	(2	)		$	(24	)
Net deferred gains/(losses) on cash flow hedges	$	32			$	95			$	(67	)		$	—			$	18
Net deferred (gains)/losses on cash flow hedges reclassified to net income	$	(75	)		$	9			$	1			$	(3	)		$	(26	)

In 2015, we corrected the (expense)/benefit designation on the Fiscal 2013 $76 million tax balance for net postemployment benefit gains/(losses). This misstatement was not material to our current or any prior period financial statements.

The amounts reclassified from accumulated other comprehensive income/(losses) in the years ended January 3, 2016 and December 28, 2014, the 2013 Successor Period, and the 2013 Predecessor Period were as follows (in millions):

Accumulated Other Comprehensive Income/(Losses) Component		Reclassified from Accumulated Other Comprehensive Income/(Losses) to Net Income																Affected Line Item in the Statement Where Net Income is Presented
		Successor												Predecessor (H. J. Heinz Company)
		January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)
Losses/(gains) on cash flow hedges:
Foreign exchange contracts		$	2			$	1			$	1			$	(1	)		Net sales
Foreign exchange contracts		(45		)		(5		)		(3		)		(2		)		Cost of products sold
Foreign exchange contracts		(1		)		(1		)		(2		)		2				Other expense/(income), net
Interest rate contracts		239				—				—				—				Interest expense
Cross-currency interest rate swap contracts		—				—				—				1				Interest expense
Cross-currency interest rate swap contracts		—				—				—				10				Other expense/(income), net
Losses/(gains) on cash flow hedges before income taxes		195				(5		)		(4		)		10				Income from continuing operations before income taxes
Losses/(gains) on cash flow hedges income taxes		(75		)		9				1				(3		)		Provision for income taxes
Losses/(gains) on cash flow hedges		$	120			$	4			$	(3	)		$	7			Net income from continuing operations
(Gains)/ losses on postemployment benefits:
Amortization of unrecognized losses		$	3			$	—			$	—			$	10			(a)
Amortization of prior service (credits)/costs		(112		)		(6		)		—				(1		)		(a)
Settlement and curtailments gains		(23		)		(3		)		—				—				(a)
(Gains)/ losses on postemployment benefits before income taxes		(132		)		(9		)		—				9				Income from continuing operations before income taxes
(Gains)/ losses on postemployment benefits income taxes		47				2				—				(2		)		Provision for income taxes
(Gains)/ losses on postemployment benefits		$	(85	)		$	(7	)		$	—			$	7			Net income from continuing operations

(a)	These components are included in the computation of net periodic postemployment benefit costs. See Note 10, Postemployment Benefits, for additional information.

In this note we have excluded activity and balances related to noncontrolling interest (which was primarily comprised of foreign currency translation adjustments) due to its insignificance.

Note 12. Debt

Long-Term Debt:

Balance as of December 28, 2014:

At December 28, 2014, the carrying value of our long-term debt consisted of the following (in millions of dollars):

	Priority 1		Maturity Date		Interest Rate		Carrying Value
Term B-1 Loan	Senior Secured Loan		*		*		$	2,729
Term B-2 Loan	Senior Secured Loan		*		*		5,503
$3.10 billion 4.250% Second Lien Senior Secured Notes due October 15, 2020	Senior Secured Notes		October 15, 2020		4.250%		3,029
$931 million 7.125% U.S. Dollar Notes due August 1, 2039	Senior Notes		August 1, 2039		7.125%		1,023
Other long-term debt	Various		2016-2032		1.500%-6.750%		1,022
Capital lease obligations							63
Total long-term debt							$	13,369
Current portion of long-term debt							11
Total long-term debt, excluding current portion							$	13,358

1 Priority of debt indicates the order which debt would be paid if all debt obligations were due on the same day. Senior secured debt takes priority over unsecured debt. Senior debt has greater seniority than subordinated debt.

*Borrowings under the Term B-1 and Term B-2 Loan Facilities had tranches of 6 and 7 year maturities and fluctuating interest rates based on, at our election, base rate or LIBOR plus a spread on each of the tranches, with respective spreads ranging from 125-150 basis points for base rate loans with a 2% base rate floor and 225-250 basis points for LIBOR loans with a 1% LIBOR floor.

Current Year Activity:

During the year ended January 3, 2016, the composition of our long-term debt changed largely due to the assumption of all outstanding long-term debt obligations of Kraft in connection with the 2015 Merger, as well as certain debt issuances, refinancing activities, and repayments as summarized in the table below (excluding capital lease activity):

	Aggregate Principal Amount
	(in millions)
Issuances and assumption of debt:
2025 Notes(a)	$	2,000
Euro Notes(b)	€	750
Pound Sterling Notes(c)	£	400
U.S. Dollar Notes(d)	$	10,000
Canadian Dollar Notes(e)	C$	1,000
Term Loan Facility(f)	$	600
Assumption of Kraft's long-term debt obligations(g)	$	8,600
Debt repayments(h):
Term B-1 Loan	$	2,780
Term B-2 Loan	$	5,601
2020 Notes	$	3,100
2025 Notes	$	800

(a)	$2.0 billion aggregate principal amount of 4.875% Second Lien Senior Secured Notes due February 15, 2025 (the “2025 Notes”)

(b)	€750 million aggregate principal amount of 2.000% Senior Notes due June 30, 2023 (the “Euro Notes”)

(c)	£400 million aggregate principal amount of 4.125% Senior Notes due July 1, 2027 (the “Pound Sterling Notes”)

(d)	$1.0 billion aggregate principal amount of 1.600% Senior Notes due June 30, 2017;

	$1.5 billion aggregate principal amount of 2.000% Senior Notes due July 2, 2018;

	$1.5 billion aggregate principal amount of 2.800% Senior Notes due July 2, 2020;

	$1.0 billion aggregate principal amount of 3.500% Senior Notes due July 15, 2022;

	$2.0 billion aggregate principal amount of 3.950% Senior Notes due July 15, 2025;

	$1.0 billion aggregate principal amount of 5.000% Senior Notes due July 15, 2035; and

	$2.0 billion aggregate principal amount of 5.200% Senior Notes due July 15, 2045 (collectively, the “U.S. Dollar Notes”)

In connection with the issuance of the U.S. Dollar Notes, we entered into a registration rights agreement pursuant to which we agreed to exchange the notes for a new issue of substantially identical debt securities registered under the Securities Act of 1933 within 455 days after July 2, 2015. If we fail to meet these registration obligations, then additional interest will accrue on the aggregate principal amount of the U.S. Dollar Notes at an annual interest rate of 0.25% for the first 90 days period and, thereafter, the annual interest rate will be increased by an additional 0.25% for each subsequent 90 days period that elapses, up to a maximum additional rate of 0.50% per annum.

(e)	C$200 million aggregate principal amount of Floating Rate Senior Notes due July 6, 2018, C$300 million aggregate principal amount of 2.700% Senior Notes due July 6, 2020, and C$500 million aggregate principal amount of Floating Rate Senior Notes due July 6, 2020 (collectively, the “Canadian Dollar Notes”)

(f)	$600 million aggregate principal amount of our Senior Unsecured Term Loan Facility floating rate (LIBOR plus 1.250%) due July 6, 2022 (the “Term Loan Facility”)

(g)	In connection with the 2015 Merger, Kraft Heinz Foods Company, our 100% owned subsidiary, assumed all of the long-term debt obligations of Kraft including the following obligations relating to its notes (collectively, the “Kraft Notes”). :

	$1.0 billion aggregate principal amount of 2.250% Notes due June 5, 2017;

	$1,035 million aggregate principal amount of 6.125% Notes due August 23, 2018;

	$900 million aggregate principal amount of 5.375% Notes due February 10, 2020;

	$2.0 billion aggregate principal amount of 3.500% Notes due June 6, 2022;

	$878 million aggregate principal amount of 6.875% Notes due January 26, 2039;

	$787 million aggregate principal amount of 6.500% Notes due February 9, 2040; and

	$2.0 billion aggregate principal amount of 5.000% Notes due June 4, 2042

	The aggregate principal amounts above exclude $686 million recorded in purchase accounting primarily related to a fair value adjustment.

(h)

In January 2015 we repaid $650 million aggregate principal amount of the Term B-1 Loan and $1,310 million aggregate principal amount of the Term B-2 Loan. On July 2, 2015, we repaid the remaining aggregate principal amounts of the Term B-1 Loan and the Term B-2 Loan, fully redeemed $3.1 billion aggregate principal amount of the 4.250% Second Lien Senior Secured Notes due October 15, 2020 (the “2020 Notes”) and partially redeemed $800 million aggregate principal amount of the 2025 Notes.

In relation to our debt repayments, during the year ended January 3, 2016, we recorded a $341 million loss on extinguishment of debt, which was comprised of a write-off of debt issuance costs and unamortized debt discounts of $236 million in interest expense and call premiums of $66 million on the 2020 Notes and $39 million on the 2025 Notes in other expense/(income), net.

In relation to our debt issuances, during the year ended January 3, 2016, we capitalized $99 million of debt issuance costs.

The Euro Notes, Pound Sterling Notes, U.S. Dollar Notes, Canadian Dollar Notes and Kraft Notes are fully and unconditionally guaranteed by us. Additionally, in connection with the 2015 Merger, we became a guarantor of:

•	$1,719 million aggregate principal amount of securities previously issued by Kraft Heinz Foods Company, our 100% owned subsidiary, consisting of: 2.000% U.S. Dollar Notes due 2016, 1.500% U.S. Dollar Notes due 2017, 3.125% U.S. Dollar Notes due 2021, 2.850% U.S. Dollar Notes due 2022, 6.375% Debentures due 2028, 6.750% Debentures due 2032, and 7.125% Debentures due 2039.

•	£125 million aggregate principal amount of 6.250% Pound Sterling notes due 2030 previously issued by H.J. Heinz Finance UK Plc and guaranteed by Kraft Heinz Foods Company.

Balance at January 3, 2016:

At January 3, 2016 the carrying value of our long-term debt consisted of the following (in millions of dollars):

	Priority 1		Maturity Date		Interest Rate2		Carrying Value
2025 Notes	Senior Secured Notes3		February 15, 2025		4.875%		$	1,190
Euro Notes	Senior Notes		June 30, 2023		2.000%		803
Pound Sterling Notes	Senior Notes		July 1, 2027		4.125%		584
U.S. Dollar Notes	Senior Notes		2017-2045		1.600%-5.200%		9,916
Canadian Dollar Notes	Senior Notes		2018-2020		1.598%-2.700%		720
Kraft Notes	Senior Unsecured Notes		2017-2040		2.250%-6.875%		9,179
Term Loan Facility	Senior Unsecured Loan		July 6, 2022		1.573%		596
Other-long term debt	Various		2016-2039		0.500%-7.125%		2,113
Capital lease obligations							129
Total long-term debt							$	25,230
Current portion of long-term debt							79
Total long-term debt, excluding current portion							$	25,151

1 Priority of debt indicates the order which debt would be paid if all debt obligations were due on the same day. Senior secured debt takes priority over unsecured debt. Senior debt has greater seniority than subordinated debt.

2Floating interest rates are stated as of January 3, 2016.

3The 2025 Notes, which are secured by certain assets of our subsidiary, Kraft Heinz Foods Company, are senior in right of payment of existing and future unsecured and subordinated indebtedness.

Our long-term debt contains customary representations, covenants, and events of default. We were in compliance with all debt covenants at January 3, 2016.

At January 3, 2016, aggregate principal maturities of our long-term debt excluding capital leases were (in millions):

2016	$	60
2017	2,019
2018	2,682
2019	4
2020	3,582
Thereafter	16,138

Debt Issuance Costs:

Unamortized debt issuance costs were $85 million at January 3, 2016 and $228 million at December 28, 2014. Unamortized debt issuance costs are presented on the balance sheets as a direct deduction from the carrying amount of the debt liability. Amortization of debt issuance costs was $27 million for the year ended January 3, 2016, $49 million for the year ended December 28, 2014, and $29 million in the 2013 Successor Period. Amortization of debt issuance costs were insignificant in the 2013 Predecessor Period and Fiscal 2013. In 2015, the FASB issued an ASU intended to simplify the presentation of debt issuance costs. We early-adopted this ASU in 2015, see Note 1, Background and Basis of Presentation, for additional information

Debt Premium:

Unamortized debt premium, net was $699 million at January 3, 2016 and $139 million at December 28, 2014. Amortization of our debt premium, net was $45 million for the year ended January 3, 2016 and $25 million for the year ended December 28, 2014. Amortization of our debt premium was insignificant in the 2013 Successor Period, in the 2013 Predecessor Period, and in Fiscal 2013.

Borrowing Arrangements:

On July 6, 2015, together with Kraft Heinz Foods Company, our 100% owned subsidiary, we entered into a new $4.0 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) that will mature on July 6, 2020, and a $600 million Term Loan Facility that will mature on July 6, 2022, unless extended (together with the Revolving Credit Facility, the “Senior Credit Facilities”). The Revolving Credit Facility includes a $1.0 billion sub-limit for borrowings in Canadian dollars, Euro or Sterling as well as a letter of credit sub-facility of up to $150 million. Subject to certain conditions, we may increase the amount of revolving commitments and/or add additional tranches of term loans in a combined aggregate amount of up to $1.0 billion. Any committed borrowings under the Senior Credit Facilities bear interest at a variable annual rate based on LIBOR/EURIBOR/CDOR loans or an alternate base rate/Canadian prime rate, in each case subject to an applicable margin based upon the long-term senior unsecured, non-credit enhanced debt rating assigned to us. The borrowings under the Revolving Credit Facility have a seven year maturity and interest rates based on, at our election, base rate, LIBOR, EURIBOR, CDO or Canadian prime rate plus a spread ranging from 87.5-175 basis points for LIBOR, EURIBOR and CDO rate loans, and 0-75 basis points for base rate or Canadian prime rate loans. The Senior Credit Facilities contain representations, warranties and covenants that are typical for these types of facilities. Our Revolving Credit Facility requires us to maintain a minimum shareholders’ equity (excluding accumulated other comprehensive income/(losses)) of at least $35 billion. We were in compliance with all debt covenants at January 3, 2016. In addition, we and Kraft Heinz Foods Company guarantee certain borrowings and other liabilities under the Senior Credit Facilities. At January 3, 2016, $600 million aggregate principal amount of our Term Loan Facility was outstanding. No amounts were drawn on our Revolving Credit Facility at January 3, 2016 or during the year ended January 3, 2016. In connection with the consummation of the 2015 Merger, on July 2, 2015, all outstanding obligations with respect to principal, interest, and fees under our previous credit agreement, dated as of June 7, 2013, were repaid and such credit agreement was terminated.

Fair Value of Debt:

At January 3, 2016, the aggregate fair value of our total debt was $25.7 billion as compared with the carrying value of $25.2 billion. We determined the fair value of our long-term debt using Level 2 inputs. Fair values are generally estimated based on quoted market prices for identical or similar instruments.

Note 13. Preferred Stock and Warrants

Our Amended and Restated Certificate of Incorporation authorizes the issuance of up to 1 million shares of preferred stock.

In connection with the 2013 Merger, we issued 80,000 shares of 9.00% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) and warrants to purchase 46 million Heinz common shares, at an exercise price of $0.01 per common share (the “Warrants”), for an aggregate purchase price of $8.0 billion. We allocated the proceeds to the Series A Preferred Stock ($7.6 billion) and the Warrants ($367 million) on a relative fair value basis. In June 2015, Berkshire Hathaway exercised the Warrants to purchase the additional 46 million Heinz common shares, which were subsequently reclassified and changed into approximately 20 million shares of Kraft Heinz common stock.

The Series A Preferred Stock 9.00% annual dividend accrues whether or not declared by our Board of Directors and is payable, quarterly in arrears, only when declared and approved by our Board of Directors. In the event of our liquidation, dissolution, or wind up, whether voluntary or involuntary, each Series A Preferred Stock holder would be entitled to receive $100,000 per share plus any accrued and unpaid dividends. This payment would be made before any distribution of assets or proceeds to holders of common stock, or other stock ranked junior to the Series A Preferred Stock. We may not redeem the Series A Preferred Stock before June 7, 2016. On or after this date, we may redeem shares of Series A Preferred Stock, at a redemption price paid in cash for each share equal to the sum of (i) the Base Amount per share (as defined below), plus (ii) the accrued and unpaid dividends on each share. The “Base Amount” means one of the following amounts, as applicable:

•	$104,000 per share for any payment from June 7, 2016 and through June 6, 2017;

•	$105,000 per share for any payment made from June 7, 2017 and through June 6, 2018;

•	$106,000 per share for any payment made from June 7, 2018 and through June 6, 2019;

•	$107,000 per share for any payment made from June 7, 2019 and through June 6, 2020; and

•	$108,000 per share for any payment made on or after June 7, 2020.

In addition, after June 7, 2021, the holders of our Series A Preferred Stock can require us to undertake a redemption offering, as defined, and use the proceeds net of expenses of such redemption offering to redeem outstanding Series A Preferred Stock at the redemption price of $108,000 per share. If such redemption is for less than all of the outstanding Preferred Stock, the holders of the Preferred Stock can require us to undertake additional redemption offerings until no shares of Preferred Stock remain outstanding. As a result, the Series A Preferred Stock is considered contingently redeemable and is shown on our consolidated balance sheets separate from shareholders’ equity. In the 2013 Successor Period, the carrying value of the Series A Preferred Stock was adjusted from its initial carrying value to the initial redemption price of $104,000, which resulted in an increase in Series A Preferred Stock and expense of $687 million. In the event we do not redeem the Series A Preferred Stock before June 7, 2017, we will be required to record further accretion adjustments at each anniversary date until June 7, 2021 to the applicable redemption prices through net income attributable to common shareholders up to the maximum redemption price of $108,000.

Note 14. Common Stock

Our Amended and Restated Certificate of Incorporation authorizes the issuance of up to 5.0 billion shares of common stock.

Immediately prior to the consummation of the 2015 Merger, each share of Heinz issued and outstanding common stock was reclassified and changed into 0.443332 of a share of Kraft Heinz common stock. All successor share and per share amounts have been retroactively adjusted for all historical Successor periods presented to give effect to this conversion. In the 2015 Merger, all outstanding shares of Kraft common stock were converted into the right to receive, on a one-for-one basis, shares of Kraft Heinz common stock.

Shares of common stock issued, in treasury and outstanding were (in thousands of shares):

	Shares Issued			Treasury Shares			Shares Outstanding
Predecessor (H. J. Heinz Company)
Balance at April 29, 2012	431,096			(110,871	)		320,225
Exercise of stock options, issuance of other stock awards, and other	—			1,041			1,041
Balance at April 28, 2013	431,096			(109,830	)		321,266
Exercise of stock options, issuance of other stock awards, and other	—			33			33
Balance at June 7, 2013	431,096			(109,797	)		321,299
Successor
Balance at February 8, 2013	—			—			—
Issuance of common stock to Sponsors	376,832			—			376,832
Balance at December 29, 2013	376,832			—			376,832
Exercise of stock options, issuance of other stock awards, and other	178			—			178
Balance at December 28, 2014	377,010			—			377,010
Exercise of warrants	20,480			—			20,480
Issuance of common stock to Sponsors	221,666			—			221,666
Acquisition of Kraft Foods Group, Inc.	592,898			—			592,898
Exercise of stock options, issuance of other stock awards, and other	2,338			(413	)		1,925
Balance at January 3, 2016	1,214,392			(413	)		1,213,979

Upon completion of the 2013 Merger, all outstanding shares of H. J. Heinz Company were canceled and automatically converted into the right to receive $72.50.

Note 15. Financing Arrangements

We routinely enter into accounts receivable securitization and factoring programs. We account for transfers of receivables pursuant to these programs as a sale and remove them from our consolidated balance sheet. Significant programs in place at January 3, 2016 were:

•

On October 9, 2015, we entered into a $150 million U.S. securitization program, replacing a similar arrangement in existence during the first three quarters of 2015. Under this program, we receive cash consideration of up to $150 million and a receivable for the remainder of the purchase price (the “Deferred Purchase Price”). This securitization program utilizes a bankruptcy-remote special-purpose entity (“SPE”). The SPE is wholly-owned by a subsidiary of Kraft Heinz and its sole business consists of the purchase or acceptance, through capital contributions of receivables and related assets, from a Kraft Heinz subsidiary and subsequent transfer of such receivables and related assets to a bank. Although the SPE is included in our consolidated financial statements, it is a separate legal entity with separate creditors who will be entitled, upon its liquidation, to be satisfied out of the SPE's assets prior to any assets or value in the SPE becoming available to Kraft Heinz or its subsidiaries. The assets of the SPE are not available to pay creditors of Kraft Heinz or its subsidiaries. This program expires in October 2016.

•	We have a $70 million Australian dollar factoring program in which we receive cash consideration of up to $70 million Australian dollars and a receivable for the Deferred Purchase Price. This program began in August 2014 and automatically renews annually until it is terminated by either party.

•	We have a $50 million New Zealand dollar factoring program in which we receive cash consideration of up to $50 million New Zealand dollars and a receivable for the Deferred Purchase Price. This program began in August 2014 and automatically renews annually until it is terminated by either party.

•	We have a £90 million and €35 million European factoring program in which we receive cash consideration of up to ninety-five percent of the £90 million and €35 million facilities and a receivable for the remainder of the Deferred Purchase Price. This program began in December 2014 and automatically renews annually until it is terminated by either party.

The cash consideration and carrying amount of receivables removed from the consolidated balance sheets in connection with the above programs were $267 million at January 3, 2016 and $284 million at December 28, 2014. The fair value of the Deferred Purchase Price for the programs was $583 million at January 3, 2016 and $161 million at December 28, 2014. The Deferred Purchase Price is included in sold receivables on the consolidated balance sheets and had a carrying value which approximated its fair value at January 3, 2016 and December 28, 2014. The proceeds from these sales are recognized on the consolidated statements of cash flows as a component of operating activities. We act as servicer for these arrangements and have not recorded any servicing assets or liabilities for these arrangements as of January 3, 2016 and December 28, 2014 because they were not material to the financial statements.

Note 16. Financial Instruments

Derivative Volume:

The notional values of our derivative instruments at January 3, 2016 and December 28, 2014 were (in millions):

	Notional Amount
	January 3, 2016				December 28, 2014
Commodity contracts	$	787			$	—
Foreign exchange contracts	3,458				4,607
Cross-currency contracts	4,328				9,900
Interest rate contracts	—				7,921

Fair Value of Derivative Instruments:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values and the levels within the fair value hierarchy of derivative instruments recorded on the consolidated balance sheets at January 3, 2016 and December 28, 2014 were (in millions):

	January 3, 2016
	Quoted Prices in Active Markets for Identical Assets (Level 1)								Significant Other Observable Inputs (Level 2)								Significant Unobservable Inputs (Level 3)								Total Fair Value
	Assets				Liabilities				Assets				Liabilities				Assets				Liabilities				Assets				Liabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	—			$	—			$	46			$	6			$	—			$	—			$	46			$	6
Cross-currency contracts	—				—				605				—				—				—				605				—
Derivatives not designated as hedging instruments:
Commodity contracts	24				29				1				7				—				—				25				36
Foreign exchange contracts	—				—				88				13				—				—				88				13
Cross-currency contracts	—				—				47				—				—				—				47				—
Total fair value	$	24			$	29			$	787			$	26			$	—			$	—			$	811			$	55

	December 28, 2014
	Quoted Prices in Active Markets for Identical Assets (Level 1)								Significant Other Observable Inputs (Level 2)								Significant Unobservable Inputs (Level 3)								Total Fair Value
	Assets				Liabilities				Assets				Liabilities				Assets				Liabilities				Assets				Liabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	—			$	—			$	46			$	15			$	—			$	—			$	46			$	15
Cross-currency contracts	—				—				357				2				—				—				357				2
Interest rate contracts	—				—				2				16				—				—				2				16
Derivatives not designated as hedging instruments:
Foreign exchange contracts	—				—				169				108				—				—				169				108
Total fair value	$	—			$	—			$	574			$	141			$	—			$	—			$	574			$	141

Our derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. We elect to record the gross assets and liabilities of our derivative financial instruments on the consolidated balance sheets. If the derivative financial instruments had been netted on the consolidated balance sheets, the asset and liability positions each would have been reduced by $44 million at January 3, 2016 and $141 million at December 28, 2014. No material amounts of collateral were received or posted on our derivative assets and liabilities at January 3, 2016.

Level 1 financial assets and liabilities consist of commodity future and options contracts and are valued using quoted prices in active markets for identical assets and liabilities.

Level 2 financial assets and liabilities consist of commodity forwards, foreign exchange forwards, interest rate swaps and cross-currency swaps. Commodity forwards are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount. Foreign exchange forwards are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Interest rate swaps are valued based on observable market swap rates. Cross-currency swaps are valued based on observable market spot and swap rates.

Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk.

There have been no transfers between Levels 1, 2, and 3 in any period presented.

The fair values of our asset derivatives are recorded within other current assets and other assets. The fair values of our liability derivatives are recorded within other current liabilities and other liabilities.

Net Investment Hedging:

In the third quarter of 2015, we issued foreign denominated debt instruments, which we designated as net investment hedges. At January 3, 2016, the principal amounts of this foreign denominated debt totaled €750 million and £400 million.

At January 3, 2016, our cross-currency swaps consisted of:

Instrument		Notional (local) (in billions)				Notional (USD) (in billions)				Maturity
Cross-currency swap		£	0.8			$	1.4			October 2019
Cross-currency swap		€	0.9			$	1.1			October 2019
Cross-currency swap		C$	1.8			$	1.6			December 2019

The component of the gains and losses on our net investment in these designated foreign operations, driven by changes in foreign exchange rates, are economically offset by movements in the fair values of our cross-currency swap contracts and remeasurement of our foreign denominated debt. In the year ended January 3, 2016, we partially unwound our Euro swap (USD notional amount of $1.9 billion) and our British Pound Sterling swap (USD notional amount of $3.2 billion). Additionally, in the year ended January 3, 2016, we fully unwound our Australian dollar swap (USD notional amount of $750 million) and our Japanese yen swap (USD notional amount of $50 million).

Interest Rate Hedging:

During 2015, we de-designated all of our outstanding interest rate swaps (total notional amount of $7.9 billion) from hedging relationships in connection with the repayment of the Term B-1 and Term B-2 loans. We determined that the related forecasted future cash flows were probable of not occurring, and as a result, we reclassified $227 million of deferred losses initially reported in accumulated other comprehensive income/(losses) to net income as interest expense.

Hedge Coverage:

At January 3, 2016, we had hedged transactions for the following durations:

•	foreign currency transactions for periods not exceeding the next two years; and

•	cross-currency transactions for periods not exceeding the next four years.

Hedge Ineffectiveness:

We record pre-tax gains or losses reclassified from accumulated other comprehensive income/(losses) due to ineffectiveness in:

•	other expense/(income), net for foreign exchange contracts related to forecasted transactions; and

•	interest expense for interest rate contracts.

Deferred Hedging Gains and Losses:

Based on our valuation at January 3, 2016 and assuming market rates remain constant through contract maturities, we expect to transfer unrealized gains of $60 million (net of taxes) for foreign currency cash flow hedges. We expect transfers to net income of unrealized losses for interest rate cash flow hedges during the next 12 months to be insignificant.

Concentration of Credit Risk:

Counterparties to foreign exchange and interest rate derivatives consist of major international financial institutions. We continually monitor our positions and the credit ratings of the counterparties involved and, by policy, limit the amount of our credit exposure to any one party. While we may be exposed to potential losses due to the credit risk of non-performance by these counterparties, losses are not anticipated. We closely monitor the credit risk associated with our counterparties and customers and to date have not experienced material losses.

Economic Hedging:

We enter into certain derivative contracts not designated as hedging instruments in accordance with our risk management strategy which have an economic impact of largely mitigating commodity price risk and foreign currency exposures. Our commodity contracts generally mature in less than one year and our cross currency and foreign exchange contracts are scheduled to mature in the next three years. Gains and losses are recorded in net income as a component of cost of products sold for our commodity contracts and other expense/(income), net for our cross currency and foreign exchange contracts.

Derivative Impact on the Statements of Income and Statements of Comprehensive Income:

The following tables present the pre-tax effect of derivative instruments on the statements of income and statements of comprehensive income for the years ended January 3, 2016 and December 28, 2014:

	Successor
	January 3, 2016 (53 weeks)																				December 28, 2014 (52 weeks)
	Commodity Contracts				Foreign Exchange Contracts				Cross-Currency Contracts				Cross-Currency Interest Rate Swap Contracts				Interest Rate Contracts				Commodity Contracts				Foreign Exchange Contracts				Cross-Currency Contracts				Cross-Currency Interest Rate Swap Contracts				Interest Rate Contracts
	(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges:
Gains/(losses) recognized in other comprehensive income (effective portion)	$	—			$	73			$	—			$	—			$	(111	)		$	—			$	21			$	—			$	—			$	(289	)
Net investment hedges:
Gains recognized in other comprehensive income (effective portion)	—				—				736				—				—				—				—				545				—				—
Total gains/(losses) recognized in other comprehensive income (effective portion)	$	—			$	73			$	736			$	—			$	(111	)		$	—			$	21			$	545			$	—			$	(289	)
Cash flow hedges reclassified to net income/(loss):
Net sales	$	—			$	(2	)		$	—			$	—			$	—			$	—			$	(1	)		$	—			$	—			$	—
Cost of products sold (effective portion)	—				45				—				—				—				—				5				—				—				—
Other expense/(income), net	—				1				—				—				—				—				1				—				—				—
Interest expense	—				—				—				—				(239		)		—				—				—				—				—
	—				44				—				—				(239		)		—				5				—				—				—
Derivatives not designated as hedging instruments:
Unrealized gains on derivative instruments	—				—				—				—				—				—				75				—				—				—
Losses on derivatives recognized in cost of products sold	(57		)		—				—				—				—				—				—				—				—				—
Gains on derivatives recognized in other expense/(income), net	—				92				53				—				8				—				76				—				—				—
	(57		)		92				53				—				8				—				151				—				—				—
Total (losses)/gains recognized in statements of income	$	(57	)		$	136			$	53			$	—			$	(231	)		$	—			$	156			$	—			$	—			$	—

	Successor																				Predecessor (H. J. Heinz Company)
	February 8 - December 29, 2013 (29 weeks)																				April 29 - June 7, 2013 (6 weeks)
	Commodity Contracts				Foreign Exchange Contracts				Cross-Currency Contracts				Cross-Currency Interest Rate Swap Contracts				Interest Rate Contracts				Commodity Contracts				Foreign Exchange Contracts				Cross-Currency Contracts				Cross-Currency Interest Rate Swap Contracts				Interest Rate Contracts
	(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges:
Gains/(losses) recognized in other comprehensive income (effective portion)	$	—			$	30			$	—			$	—			$	147			$	—			$	3			$	—			$	(4	)		$	—
Net investment hedges:
Losses recognized in other comprehensive income (effective portion)	—				—				(191		)		—				—				—				—				—				—				—
Total gains/(losses) recognized in other comprehensive income (effective portion)	$	—			$	30			$	(191	)		$	—			$	147			$	—			$	3			$	—			$	(4	)		$	—
Cash flow hedges reclassified to net income/(loss):
Net sales	$	—			$	(1	)		$	—			$	—			$	—			$	—			$	1			$	—			$	—			$	—
Cost of products sold (effective portion)	—				3				—				—				—				—				2				—				—				—
Other expense/(income), net	—				2				—				—				—				—				(2		)		—				(10		)		—
	—				4				—				—				—				—				1				—				(10		)		—
Fair value hedges:
Losses recognized in other expense/(income), net	—				—				—				—				—				—				—				—				—				(6		)
Derivatives not designated as hedging instruments:
Unrealized gains on derivative instruments	—				—				—				—				118				—				—				—				—				—
Losses on derivatives recognized in other expense/(income), net	—				(31		)		—				—				—				—				(4		)		—				—				—
	—				(31		)		—				—				118				—				(4		)		—				—				—
Total (losses)/gains recognized in statements of income	$	—			$	(27	)		$	—			$	—			$	118			$	—			$	(3	)		$	—			$	(10	)		$	(6	)

	Predecessor (H. J. Heinz Company)
	April 28, 2013 (52 weeks)
	Commodity Contracts				Foreign Exchange Contracts				Cross-Currency Contracts				Cross-Currency Interest Rate Swap Contracts				Interest Rate Contracts
	(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges:
Gains/(losses) recognized in other comprehensive income (effective portion)	$	—			$	48			$	—			$	(77	)		$	—
Cash flow hedges reclassified to net income/(loss):
Net sales	$	—			$	11			$	—			$	—			$	—
Cost of products sold (effective portion)	—				(5		)		—				—				—
Other expense/(income), net	—				14				—				(70		)		—
Interest expense	—				—				—				(5		)		—
	—				20				—				(75		)		—
Fair value hedges:
Gains/(losses) recognized in other expense/(income), net	—				—				—				70				(3		)
Derivatives not designated as hedging instruments:
Gains on derivatives recognized in other expense/(income), net	—				(8		)		—				—				(1		)
Total gains/(losses) recognized in statement of income	$	—			$	12			$	—			$	(5	)		$	(4	)

Related to our non-derivative, foreign denominated debt instruments designated as net investment hedges, we recognized a $65 million pre-tax gain in other comprehensive loss for the year ended January 3, 2016.

Note 17. Venezuela - Foreign Currency and Inflation

We have a subsidiary in Venezuela that manufactures and sells a variety of products, primarily in the condiments and sauces and infant/nutrition categories. We apply highly inflationary accounting to our business in Venezuela. Under highly inflationary accounting, the financial statements of our Venezuelan subsidiary are remeasured into our reporting currency (U.S. dollars) based on the legally available exchange rate at which we expect to settle the underlying transactions. Exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current net income, rather than accumulated other comprehensive income/(losses) on the balance sheet, until the Venezuelan economy is no longer considered highly inflationary. Certain non-monetary assets and liabilities are recorded at the applicable historical exchange rates.

There are currently three exchange rates legally available to us for converting Venezuelan bolivars to U.S. dollars, including:

•	the official exchange rate of BsF6.30 per U.S. dollar, which is available through the government-operated National Center of Foreign Commerce (“CENCOEX”) and is applicable to import activities related to certain necessities, including food products;

•	the Complimentary System of Foreign Currency Acquirement (“SICAD I”) rate of approximately BsF12 per U.S. dollar, which operates similar to an auction system and allows entities in specific sectors to bid for U.S. dollars to be used for specified import transactions; and

•	the Marginal Currency System (“SIMADI”) rate, which has averaged approximately BsF198 per U.S. dollar since commencement of trading and is an open-market exchange format that allows for legal trading of foreign currency based upon supply and demand.

Prior to February 2015, a fourth foreign exchange market mechanism (SICAD II) was available to us. SICAD II became effective on March 24, 2014 and was the market through which U.S. dollars were to be obtained for the remittance of dividends. This market had significantly higher foreign exchange rates than those available through the other foreign exchange mechanisms, with published weighted average daily exchange rates of approximately BsF50 per U.S. dollar. During 2014, we had limited access to the SICAD II market mechanism and converted 164 million bolivars into $3 million U.S. dollars, recognizing a $23 million transactional currency loss which was recorded in other expense/(income), net, in the consolidated statements of income for the year ended December 28, 2014. In February 2015, the SICAD I and SICAD II foreign currency exchange systems were merged (thereafter called “SICAD”). The published exchange rate for the SICAD mechanism continues to be approximately BsF12 per U.S. dollar.

We have had limited access to, and settlements at, the current official exchange rate of BsF6.30 per U.S. dollar during the year ended January 3, 2016. We had $26 million of outstanding requests at January 3, 2016 for payment of invoices for the purchase of ingredients and packaging materials for the years from 2012 through 2015. Subsequent to January 3, 2016, we have received approvals for payment of invoices at BsF6.30 of approximately $2 million. Until June 2015, we had determined that the official CENCOEX rate of BsF6.30 per U.S. dollar was the most appropriate rate to use for remeasurement.

In June 2015, due to the continued lack of liquidity and increasing economic uncertainty, we reevaluated the rate used to remeasure the monetary assets and liabilities of our Venezuelan subsidiary. As of June 28, 2015, we determined that the then SIMADI rate of BsF197.7 per U.S. dollar was the most appropriate legally available rate and remeasured our net monetary assets of our Venezuelan subsidiary, resulting in a nonmonetary currency devaluation of $234 million recorded in other expense/(income), net, in the consolidated statements of income during the second quarter of 2015. Additionally, we assessed the non-monetary assets of our Venezuelan subsidiary for impairment, which resulted in a $49 million loss to write down inventory to the lower of cost or market, which was recorded in cost of products sold in the consolidated statements of income during the second quarter of 2015.

As of January 3, 2016, we continue to believe that the SIMADI rate is the most appropriate legally available rate. Prior to the devaluation, our Venezuelan subsidiary had recognized net sales of $352 million and operating income of $51 million for the first half of 2015. As a result of the devaluation, it recognized net sales of $10 million and had an operating loss of $8 million for the second half of 2015. Our results of operations in Venezuela reflect a controlled subsidiary. However, the continuing economic uncertainty, strict labor laws, and evolving government controls over imports, prices, currency exchange and payments present a challenging operating environment. Increased restrictions imposed by the Venezuelan government could impact our ability to control our Venezuelan operations and could lead us to deconsolidate our Venezuelan subsidiary in the future.

On February 18, 2016, the Venezuelan government announced two changes to its exchange controls: (i) an official exchange rate change from BsF6.30 per U.S. dollar to BsF10 per U.S. dollar and (ii) a transition of SIMADI from open-market exchange format to free-floating format, in which exchange rates will fluctuate based on supply and demand. We do not expect these changes to have a significant impact on our Venezuelan results.

Note 18. Commitments and Contingencies

Legal Proceedings:

We are routinely involved in legal proceedings, claims, and governmental inquiries, inspections or investigations (“Legal Matters”) arising in the ordinary course of our business.

On April 1, 2015, the Commodity Futures Trading Commission (“CFTC”) filed a formal complaint against Mondelēz International and Kraft in the U.S. District Court for the Northern District of Illinois, Eastern Division, related to activities involving the trading of December 2011 wheat futures contracts. The complaint alleges that Mondelēz International and Kraft (1) manipulated or attempted to manipulate the wheat markets during the fall of 2011, (2) violated position limit levels for wheat futures, and (3) engaged in non-competitive trades by trading both sides of exchange-for-physical Chicago Board of Trade wheat contracts. As previously disclosed by Kraft, these activities arose prior to the October 1, 2012 spin-off of Kraft by Mondelēz International to its shareholders and involve the business now owned and operated by Mondelēz International or its affiliates. The Separation and Distribution Agreement between Kraft and Mondelēz International, dated as of September 27, 2012, governs the allocation of liabilities between Mondelēz International and Kraft and, accordingly, Mondelēz International will predominantly bear the costs of this matter and any monetary penalties or other payments that the CFTC may impose. We do not expect this matter to have a material adverse effect on our financial condition, results of operations, or business.

As previously disclosed, six lawsuits were filed in connection with the 2015 Merger against Kraft, members of its board of directors, Heinz, Kite Merger Sub Corp., and Kite Merger Sub LLC. The plaintiffs in these matters alleged, among other things, that (i) the Form S-4 contained material omissions and misleading statements, and (ii) the members of the Kraft board of directors breached their fiduciary duties in connection with the 2015 Merger. The plaintiffs sought, among other things, injunctive relief and damages. As disclosed in Kraft’s Form 8-K filed on June 24, 2015, on June 23, 2015, Kraft entered into a memorandum of understanding with the plaintiffs providing for the settlement of all of these lawsuits. On October 28, 2015, we executed a stipulation of settlement

with the plaintiffs formalizing the terms of the memorandum of understanding. On November 10, 2015, the U.S. District Court for the Eastern District of Virginia issued an order preliminarily approving the settlement and providing for notice to Kraft’s shareholders regarding the proposed settlement. On February 18, 2016, the court held a hearing regarding the proposed settlement. The court indicated that it intends to approve the settlement and requested that Plaintiffs’ counsel provide certain additional information. We do not expect this matter to have a material adverse effect on our financial condition or results of operations.

While we cannot predict with certainty the results of Legal Matters in which we are currently involved or may in the future be involved, we do not expect that the ultimate costs to resolve any of the Legal Matters that are currently pending will have a material adverse effect on our financial condition or results of operations.

Leases:

Rental expenses for leases of warehouse, production, and office facilities and equipment were $160 million for the year ended January 3, 2016, $102 million for the year ended December 28, 2014, $123 million in the 2013 Successor Period, $15 million in the 2013 Predecessor Period, and $145 million in Fiscal 2013.

Minimum rental commitments under non-cancelable operating leases in effect at January 3, 2016 were (in millions):

2016	$	120
2017	119
2018	106
2019	90
2020	68
Thereafter	235
Total	$	738

Redeemable Noncontrolling Interest:

The minority partner in our Brazilian subsidiary, Coniexpress, has the right, at any time, to exercise a put option that would require us to purchase their equity interest at a redemption value determinable from a specified formula based on a multiple of EBITDA (subject to a fixed minimum linked to the original acquisition date value). We also have a call right on this noncontrolling interest exercisable at any time and subject to the same redemption price. The put and call options cannot be separated from the noncontrolling interest and the combination of a noncontrolling interest and the redemption feature require classification of the minority partner’s interest as a redeemable noncontrolling interest on the consolidated balance sheets.

In Fiscal 2013, the minority partner exercised their put option for 15% of their initial 20% equity interest, retaining 5%. An adjustment was made to retained earnings to record the carrying value at the maximum redemption value immediately prior to this transaction. As this exercise did not result in a change in control of Coniexpress, it was accounted for as an equity transaction. In addition, the amount of cumulative translation adjustment previously allocated to the redeemable noncontrolling interest was adjusted to reflect the change in ownership. Any subsequent change in maximum redemption value will be adjusted through retained earnings.

The carrying amount of the redeemable noncontrolling interest approximates its maximum redemption value of the remaining 5% equity interest at January 3, 2016. We do not currently believe the exercise of the put option would materially impact our results of operations or financial condition.

Note 19. Earnings Per Share

As a result of the stock conversion prior to the 2015 Merger all historical Successor Period per share data, numbers of shares, and numbers of equity awards outstanding were retroactively adjusted. See Note 1, Background and Basis of Presentation, for additional information.

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
	(in millions, except per share amounts)
Basic Earnings Per Common Share:
(Loss)/income from continuing operations attributable to common shareholders	$	(266	)		$	(63	)		$	(1,118	)		$	(194	)		$	1,088
Loss from discontinued operations, net of tax	—				—				(6		)		(1		)		(75		)
Net (loss)/income attributable to common shareholders	$	(266	)		$	(63	)		$	(1,124	)		$	(195	)		$	1,013
Weighted average shares of common stock outstanding	786				377				377				321				321
Continuing operations	$	(0.34	)		$	(0.17	)		$	(2.97	)		$	(0.60	)		$	3.39
Discontinued operations	—				—				(0.01		)		(0.01		)		(0.23		)
Net (loss)/earnings	$	(0.34	)		$	(0.17	)		$	(2.98	)		$	(0.61	)		$	3.16
Diluted Earnings Per Common Share:
(Loss)/income from continuing operations attributable to common shareholders	$	(266	)		$	(63	)		$	(1,118	)		$	(194	)		$	1,088
Loss from discontinued operations, net of tax	—				—				(6		)		(1		)		(75		)
Net (loss)/income attributable to common shareholders	$	(266	)		$	(63	)		$	(1,124	)		$	(195	)		$	1,013
Weighted average shares of common stock outstanding	786				377				377				321				321
Effect of dilutive securities:
Equity awards	—				—				—				—				2
Weighted average shares of common stock, including dilutive effect	786				377				377				321				323
Continuing operations	$	(0.34	)		$	(0.17	)		$	(2.97	)		$	(0.60	)		$	3.37
Discontinued operations	—				—				(0.01		)		(0.01		)		(0.23		)
Net (loss)/earnings	$	(0.34	)		$	(0.17	)		$	(2.98	)		$	(0.61	)		$	3.14

We use the treasury stock method to calculate the dilutive effect of outstanding warrants and equity awards in the denominator for diluted earnings per common share. We had net losses attributable to common shareholders for the years ended January 3, 2016 and December 28, 2014, for the 2013 Successor Period, and for the 2013 Predecessor Period. Therefore, we have excluded the dilutive effects of stock options, RSUs, and warrants for these periods as their inclusion would have had an anti-dilutive effect on earnings per common share (“EPS”). Anti-dilutive shares were 17 million for the year ended January 3, 2016, 29 million for the year ended December 28, 2014, and 27 million for the 2013 Successor Period. Anti-dilutive shares were insignificant for the 2013 Predecessor Period and for Fiscal 2013.

Note 20. Segment Reporting

We manufacture and market food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products, throughout the world.

Following the 2015 Merger, we revised our segment structure and began to manage and report our operating results through four segments. We have three reportable segments defined by geographic region: United States, Canada, and Europe. Our remaining businesses are combined and disclosed as “Rest of World”. Rest of World is comprised of three operating segments: Asia Pacific, Latin America, and Russia, India, the Middle East and Africa (“RIMEA”). We began to report on our reorganized segment structure during the third quarter of 2015 and have reflected this structure for all historical periods presented.

Management evaluates segment performance based on several factors including net sales and segment adjusted earnings before interest, tax, depreciation and amortization (“Segment Adjusted EBITDA”). Management uses Segment Adjusted EBITDA to evaluate segment performance and allocate resources. Segment Adjusted EBITDA assists 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 core operations. These items include depreciation and amortization (including amortization of postretirement benefit plans prior service credits), equity award compensation expense, integration and restructuring expenses, merger costs, unrealized gains and 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 operating results), impairment losses, gain/loss associated with the sale of a business, nonmonetary currency devaluation, and certain general corporate expenses. In addition, consistent with the manner in which management evaluates segment performance and allocates resources, Segment Adjusted EBITDA includes the operating results of Kraft on a pro forma basis, as if Kraft had been acquired as of December 30, 2013. There are no pro forma adjustments to any of the numbers disclosed in this note to the consolidated financial statements except for the Segment Adjusted EBITDA reconciliation.

Consistent with internal management reporting, there are no pro forma adjustments in any of the 2013 periods presented as it would be impracticable to develop adjustments that would be meaningful. The information would not be meaningful due to the difficulty of interpreting these pro forma impacts on the various durations of the multiple 2013 periods presented, as well as, the length of time that has passed since 2013 makes it difficult to assess how the company would have performed if Kraft and Heinz had been a combined company at that time.

Management does not use assets by segment to evaluate performance or allocate resources and therefore, we do not disclose assets by segment.

Our net sales by segment and Segment Adjusted EBITDA were:

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
	(in millions)
Net sales:
United States	$	11,124			$	3,615			$	2,072			$	371			$	3,857
Canada	1,437				631				371				73				709
Europe	2,485				2,973				1,659				269				3,049
Rest of World	3,292				3,703				2,138				400				3,914
Total net sales	$	18,338			$	10,922			$	6,240			$	1,113			$	11,529

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
	(in millions)
Segment Adjusted EBITDA:
United States	$	4,783			$	4,499			$	519			$	81			$	932
Canada	541				615				99				16				175
Europe	909				898				349				42				671
Rest of World	670				689				256				58				485
General corporate expenses	(164		)		(175		)		(58		)		(25		)		(164		)
Depreciation and amortization (excluding integration and restructuring expenses)	(779		)		(924		)		(216		)		(34		)		(340		)
Integration and restructuring expenses	(1,117		)		(743		)		(411		)		6				(1		)
Merger costs	(194		)		(68		)		(158		)		(112		)		(45		)
Amortization of inventory step-up	(347		)		—				(383		)		—				—
Unrealized gains/(losses) on commodity hedges	41				(79		)		—				—				—
Impairment losses	(58		)		(221		)		—				—				—
Gain on sale of business	21				—				—				—				—
Nonmonetary currency devaluation	(57		)		—				—				—				—
Equity award compensation expense (excluding integration and restructuring expenses)	(61		)		(108		)		(5		)		(4		)		(51		)
Other pro forma adjustments	(1,549		)		(2,815		)		—				—				—
Operating income/(loss)	2,639				1,568				(8		)		28				1,662
Interest expense	1,321				686				409				35				284
Other expense/(income), net	305				79				(119		)		123				34
Income/(loss) from continuing operations before income taxes	$	1,013			$	803			$	(298	)		$	(130	)		$	1,344

Total depreciation and amortization expense and capital expenditures by segment were:

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
	(in millions)
Depreciation and Amortization Expense:
United States	$	484			$	191			$	125			$	12			$	104
Canada	36				83				28				4				23
Europe	83				121				60				9				90
Rest of World	88				103				55				10				96
Non-Operating(a)	49				32				12				5				31
Total depreciation and amortization expense	$	740			$	530			$	280			$	40			$	344

(a) Includes corporate overhead and general corporate expenses.

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
	(in millions)
Capital Expenditures:
United States	$	377			$	146			$	42			$	9			$	68
Canada	19				2				5				1				39
Europe	102				95				40				5				92
Rest of World	103				93				67				6				144
Non-Operating(a)	47				63				48				99				56
Total capital expenditures	$	648			$	399			$	202			$	120			$	399

(a) Includes corporate overhead and general corporate expenses.

Concentration of risk:

For the year ended January 3, 2016 Wal-Mart Stores Inc., our largest customer, represented approximately 20% of our net sales. For the year ended December 28, 2014, the 2013 Successor Period, the 2013 Predecessor Period, and Fiscal 2013 Wal-Mart Stores Inc., represented approximately 10% of our net sales. All of our segments have sales to Wal-Mart Stores Inc.

Our net sales by product category were:

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
	(in millions)
Condiments and sauces	$	5,846			$	5,489			$	3,081			$	534			$	5,376
Cheese and dairy	2,795				—				—				—				—
Ambient meals	1,858				1,544				865				140				1,646
Frozen and chilled meals	2,210				2,000				1,199				199				2,318
Meats	1,480				199				122				20				277
Refreshment beverages	665				—				—				—				—
Coffee	710				—				—				—				—
Infant/nutrition	902				1,116				624				119				1,189
Desserts, toppings and baking	521				—				—				—				—
Nuts and salted snacks	562				—				—				—				—
Other	789				574				349				101				723
Total net sales	$	18,338			$	10,922			$	6,240			$	1,113			$	11,529

We had significant net sales in the United States, Canada, and the United Kingdom. Sales are based on the location in which the sale originated. Our net sales by country were:

	Successor												Predecessor (H. J. Heinz Company)
	January 3, 2016 (53 weeks)				December 28, 2014 (52 weeks)				February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				April 28, 2013 (52 weeks)
	(in millions)
Net sales:
United States	$	11,124			$	3,615			$	2,072			$	371			$	3,857
Canada	1,437				631				371				73				709
United Kingdom	1,334				1,549				860				131				1,598
Other	4,443				5,127				2,937				538				5,365
Total net sales	$	18,338			$	10,922			$	6,240			$	1,113			$	11,529

We had significant long-lived assets in the United States and the United Kingdom. Long-lived assets include property, plant and equipment, goodwill, trademarks, and other intangibles, net of related depreciation and amortization. Our long-lived assets by country were:

	January 3, 2016				December 28, 2014
	(in millions)
Long-lived assets:
United States	$	94,504			$	15,957
United Kingdom	6,742				6,777
Canada	5,871				2,378
Other	4,578				5,400
Total long-lived assets	$	111,695			$	30,512

Note 21. Change in Fiscal Year End

We changed our fiscal year end from the Sunday closest to April 30 to the Sunday closest to December 31, effective December 29, 2013. The consolidated statements of operations are provided below for the Successor period February 8, 2013 to December 29, 2013, the Predecessor period April 29, 2013 to June 7, 2013, and the eight months ended December 23, 2012. The financial information provided for the eight months ended December 23, 2012 is unaudited since it represented an interim period of fiscal year 2013. The unaudited financial information for the eight-month period ended December 23, 2012 (based on H. J. Heinz Company’s former fiscal month end), includes all normal recurring adjustments necessary for a fair statement of the results for that period.

	Successor				Predecessor (H. J. Heinz Company)
	February 8 - December 29, 2013 (29 weeks)				April 29 - June 7, 2013 (6 weeks)				December 23, 2012 (34 Weeks)
									(Unaudited)
	(in millions)
Net sales	$	6,240			$	1,113			$	7,438
Gross profit	1,332				320				2,282
(Benefit from)/provision for income taxes	(232		)		61				143
Net (loss)/income from continuing operations	(66		)		(191		)		769
Loss from discontinued operations, net of tax	(6		)		(1		)		(36		)
Net (loss)/income attributable to Kraft Heinz	(77		)		(195		)		722

Note 22. Quarterly Financial Data (Unaudited)

Our quarterly financial data during the years ended January 3, 2016 and December 28, 2014 was:

	2015 Quarters
	First				Second				Third				Fourth
	(in millions, except per share data)
Net sales	$	2,478			$	2,616			$	6,120			$	7,124
Gross profit	847				882				1,628				2,404
Income/(loss) from continuing operations attributable to Kraft Heinz, net of tax	276				(164		)		(123		)		645
Net income/(loss) attributable to common shareholders	96				(344		)		(303		)		285
Per share data applicable to common shareholders:
Basic earnings/(loss)	0.26				(0.91		)		(0.27		)		0.23
Diluted earnings/(loss)	0.24				(0.91		)		(0.27		)		0.23

	2014 Quarters
	First				Second				Third				Fourth
	(in millions, except per share data)
Net sales	$	2,800			$	2,729			$	2,594			$	2,799
Gross profit	812				803				767				895
Income from continuing operations attributable to Kraft Heinz, net of tax	195				127				172				163
Net income/(loss) attributable to common shareholders	15				(53		)		(8		)		(17		)
Per share data applicable to common shareholders:
Basic earnings/(loss)	0.04				(0.14		)		(0.02		)		(0.04		)
Diluted earnings/(loss)	0.04				(0.14		)		(0.02		)		(0.04		)

We determined that we had previously misclassified customer related intangible asset amortization. Such costs were previously included in cost of products sold but should have been included in SG&A. We have revised the classification to report these expenses in SG&A in all periods presented. The impact of this revision was to increase SG&A and decrease cost of products sold by $17 million for each of the 2014 quarterly periods and $16 million for the first and second quarters of 2015. These misstatements were not material to our current or any prior period financial statements.

Note 23. Supplemental Financial Information

As discussed in Note 12, Debt, we fully and unconditionally guarantee the notes issued by our 100% owned operating subsidiary, Kraft Heinz Foods Company. None of our other subsidiaries guarantee these notes.

Set forth below are the condensed consolidating financial statements presenting the results of operations, financial position and cash flows of The Kraft Heinz Company (as parent guarantor), Kraft Heinz Foods Company (as subsidiary issuer of the notes), and the non-guarantor subsidiaries on a combined basis and eliminations necessary to arrive at the total reported information on a consolidated basis. This condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered.” This information is not intended to present the financial position, results of operations and cash flows of the individual companies or groups of companies in accordance with U.S. GAAP. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among the parent guarantor, subsidiary issuer, and the non-guarantor subsidiaries.

The Kraft Heinz Company

Condensed Consolidating Statements of Income

(in millions)

Successor

For the Year Ended January 3, 2016

(53 weeks)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	10,580			$	8,145			$	(387	)		$	18,338
Cost of products sold	—				7,298				5,666				(387		)		12,577
Gross profit	—				3,282				2,479				—				5,761
Selling, general and administrative expenses	—				2,378				744				—				3,122
Operating income	—				904				1,735				—				2,639
Interest expense	—				1,221				100				—				1,321
Other expense, net	—				140				165				—				305
(Loss)/income before income taxes	—				(457		)		1,470				—				1,013
Equity in earnings of subsidiaries	634				899				—				(1,533		)		—
(Benefit from)/provision for income taxes	—				(192		)		558				—				366
Net income	634				634				912				(1,533		)		647
Net income attributable to noncontrolling interest	—				—				13				—				13
Net income excluding noncontrolling interest	$	634			$	634			$	899			$	(1,533	)		$	634
Comprehensive income/(loss) excluding noncontrolling interest	$	537			$	537			$	(734	)		$	197			$	537

The Kraft Heinz Company

Condensed Consolidating Statements of Income

(in millions)

Successor

For the Year Ended December 28, 2014

(52 weeks)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	3,740			$	7,325			$	(143	)		$	10,922
Cost of products sold	—				2,663				5,125				(143		)		7,645
Gross profit	—				1,077				2,200				—				3,277
Selling, general and administrative expenses	—				610				1,099				—				1,709
Operating income	—				467				1,101				—				1,568
Interest expense	—				556				130				—				686
Other expense/(income), net	—				104				(25		)		—				79
(Loss)/income before income taxes	—				(193		)		996				—				803
Equity in earnings of subsidiaries	657				694				—				(1,351		)		—
(Benefit from)/provision for income taxes	—				(156		)		287				—				131
Net income	657				657				709				(1,351		)		672
Net income attributable to noncontrolling interest	—				—				15				—				15
Net income excluding noncontrolling interest	$	657			$	657			$	694			$	(1,351	)		$	657
Comprehensive loss excluding noncontrolling interest	$	(149	)		$	(149	)		$	(180	)		$	329			$	(149	)

The Kraft Heinz Company

Condensed Consolidating Statements of Income

(in millions)

Successor

For the Period from February 8, 2013 to December 29, 2013

(29 weeks)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	2,132			$	4,192			$	(84	)		$	6,240
Cost of products sold	—				1,638				3,354				(84		)		4,908
Gross profit	—				494				838				—				1,332
Selling, general and administrative expenses	—				485				855				—				1,340
Operating income/(loss)	—				9				(17		)		—				(8		)
Interest expense	—				334				75				—				409
Other income, net	—				(63		)		(56		)		—				(119		)
Loss from continuing operations before income taxes	—				(262		)		(36		)		—				(298		)
Equity in (losses)/earnings of subsidiaries	(77		)		88				—				(11		)		—
Benefit from income taxes	—				(97		)		(135		)		—				(232		)
Net (loss)/income from continuing operations	(77		)		(77		)		99				(11		)		(66		)
Loss from discontinued operations, net of tax	—				—				(6		)		—				(6		)
Net (loss)/income	(77		)		(77		)		93				(11		)		(72		)
Net income attributable to noncontrolling interest	—				—				5				—				5
Net (loss)/income excluding noncontrolling interest	$	(77	)		$	(77	)		$	88			$	(11	)		$	(77	)
Comprehensive income excluding noncontrolling interest	$	155			$	155			$	319			$	(474	)		$	155

The Kraft Heinz Company

Condensed Consolidating Statements of Income

(in millions)

Predecessor (H. J. Heinz Company)

For the Period from April 29, 2013 to June 7, 2013

(6 weeks)

	Parent Guarantor		Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	NA		$	377			$	744			$	(8	)		$	1,113
Cost of products sold	NA		263				538				(8		)		793
Gross profit	NA		114				206				—				320
Selling, general and administrative expenses	NA		154				138				—				292
Operating (loss)/income	NA		(40		)		68				—				28
Interest expense	NA		12				23				—				35
Other expense, net	NA		32				91				—				123
Loss from continuing operations before income taxes	NA		(84		)		(46		)		—				(130		)
Equity in losses of subsidiaries	NA		(30		)		—				30				—
Provision for/(benefit from) income taxes	NA		81				(20		)		—				61
Net loss from continuing operations	NA		(195		)		(26		)		30				(191		)
Loss from discontinued operations, net of tax	NA		—				(1		)		—				(1		)
Net loss	NA		(195		)		(27		)		30				(192		)
Net income attributable to noncontrolling interest	NA		—				3				—				3
Net loss excluding noncontrolling interest	NA		$	(195	)		$	(30	)		$	30			$	(195	)
Comprehensive loss excluding noncontrolling interest	NA		$	(276	)		$	(35	)		$	35			$	(276	)

The Kraft Heinz Company

Condensed Consolidating Statements of Income

(in millions)

Predecessor (H. J. Heinz Company)

For the Year Ended April 28, 2013

(52 weeks)

	Parent Guarantor		Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	NA		$	3,962			$	7,715			$	(148	)		$	11,529
Cost of products sold	NA		2,691				5,415				(148		)		7,958
Gross profit	NA		1,271				2,300				—				3,571
Selling, general and administrative expenses	NA		628				1,281				—				1,909
Operating income	NA		643				1,019				—				1,662
Interest expense	NA		86				198				—				284
Other expense/(income), net	NA		97				(63		)		—				34
Income from continuing operations before income taxes	NA		460				884				—				1,344
Equity in earnings of subsidiaries	NA		635				—				(635		)		—
Provision for income taxes	NA		60				182				—				242
Net income from continuing operations	NA		1,035				702				(635		)		1,102
Loss from discontinued operations, net of tax	NA		(22		)		(53		)		—				(75		)
Net income	NA		1,013				649				(635		)		1,027
Net income attributable to noncontrolling interest	NA		—				14				—				14
Net income excluding noncontrolling interest	NA		$	1,013			$	635			$	(635	)		$	1,013
Comprehensive income excluding noncontrolling interest	NA		$	683			$	321			$	(321	)		$	683

The Kraft Heinz Company

Condensed Consolidating Balance Sheets

(in millions)

As of January 3, 2016

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Cash and cash equivalents	$	—			$	3,189			$	1,648			$	—			$	4,837
Trade receivables	—				62				809				—				871
Receivables due from affiliates	—				555				319				(874		)		—
Sold receivables	—				554				29								583
Inventories	—				1,741				877				—				2,618
Short-term lending due from affiliates	—				3,657				4,353				(8,010		)		—
Other current assets	—				645				443				(217		)		871
Total current assets	—				10,403				8,478				(9,101		)		9,780
Property, plant and equipment, net	—				4,518				2,006				—				6,524
Goodwill	—				10,976				32,075				—				43,051
Investments in subsidiaries	66,005				73,105				—				(139,110		)		—
Intangible assets, net	—				3,838				58,282				—				62,120
Long-term lending due from affiliates	—				1,700				2,000				(3,700		)		—
Other assets	—				534				964				—				1,498
TOTAL ASSETS	$	66,005			$	105,074			$	103,805			$	(151,911	)		$	122,973
LIABILITIES AND EQUITY
Short-term lending due to affiliates	$	—			$	4,353			$	3,657			$	(8,010	)		$	—
Trade payables	—				1,612				1,232				—				2,844
Payables due to affiliates	—				319				555				(874		)		—
Accrued marketing	—				359				497				—				856
Accrued postemployment costs	—				316				12				—				328
Income taxes payable	—				71				563				(217		)		417
Interest payable	—				386				15				—				401
Dividends payable	—				762				—				—				762
Other current liabilities	—				1,053				271				—				1,324
Total current liabilities	—				9,231				6,802				(9,101		)		6,932
Long-term debt	—				24,143				1,008				—				25,151
Long-term borrowings due to affiliates	—				2,000				1,905				(3,905		)		—
Deferred income taxes	—				1,278				20,219				—				21,497
Accrued postemployment costs	—				2,147				258				—				2,405
Other liabilities	—				270				482				—				752
TOTAL LIABILITIES	—				39,069				30,674				(13,006		)		56,737
Redeemable noncontrolling interest	—				—				23				—				23
9.00% Series A cumulative redeemable preferred stock	8,320				—				—				—				8,320
Total shareholders' equity	57,685				66,005				72,900				(138,905		)		57,685
Noncontrolling interest	—				—				208				—				208
TOTAL EQUITY	57,685				66,005				73,108				(138,905		)		57,893
TOTAL LIABILITIES AND EQUITY	$	66,005			$	105,074			$	103,805			$	(151,911	)		$	122,973

The Kraft Heinz Company

Condensed Consolidating Balance Sheets

(in millions)

As of December 28, 2014

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Cash and cash equivalents	$	—			$	541			$	1,757			$	—			$	2,298
Trade receivables	—				—				690				—				690
Receivables due from affiliates	—				159				197				(356		)		—
Sold receivables	—				—				161				—				161
Inventories	—				468				717				—				1,185
Short-term lending due from affiliates	—				1,727				2,573				(4,300		)		—
Other current assets	—				316				313				(48		)		581
Total current assets	—				3,211				6,408				(4,704		)		4,915
Property, plant and equipment, net	—				940				1,425				—				2,365
Goodwill	—				8,907				6,052				—				14,959
Investments in subsidiaries	15,437				15,627				—				(31,064		)		—
Intangible assets, net	—				6,094				7,094				—				13,188
Long-term lending due from affiliates	—				146				2,000				(2,146		)		—
Other assets	—				513				631				—				1,144
TOTAL ASSETS	$	15,437			$	35,438			$	23,610			$	(37,914	)		$	36,571
LIABILITIES AND EQUITY
Short-term lending due to affiliates	$	—			$	2,573			$	1,727			$	(4,300	)		$	—
Trade payables	—				613				1,038				—				1,651
Payables due to affiliates	—				197				159				(356		)		—
Accrued marketing	—				53				244				—				297
Accrued postemployment costs	—				12				3				—				15
Income taxes payable	—				184				96				(48		)		232
Interest payable	—				113				54				—				167
Other current liabilities	—				241				489				—				730
Total current liabilities	—				3,986				3,810				(4,704		)		3,092
Long-term debt	—				11,355				2,003				—				13,358
Long-term borrowings due to affiliates	—				2,000				374				(2,374		)		—
Deferred income taxes	—				2,340				1,527				—				3,867
Accrued postemployment costs	—				185				102				—				287
Other liabilities	—				135				147				—				282
TOTAL LIABILITIES	—				20,001				7,963				(7,078		)		20,886
Redeemable noncontrolling interest	—				—				29				—				29
9.00% Series A cumulative redeemable preferred stock	8,320				—				—				—				8,320
Total shareholders' equity	7,117				15,437				15,399				(30,836		)		7,117
Noncontrolling interest	—				—				219				—				219
TOTAL EQUITY	7,117				15,437				15,618				(30,836		)		7,336
TOTAL LIABILITIES AND EQUITY	$	15,437			$	35,438			$	23,610			$	(37,914	)		$	36,571

The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

(in millions)

Successor

For the Year Ended January 3, 2016

(53 weeks)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities	$	632			$	1,227			$	1,395			$	(787	)		$	2,467
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—				(400		)		(248		)		—				(648		)
Net proceeds from/(payments on) intercompany lending activities	—				737				(721		)		(16		)		—
Return of capital	1,570				5				—				(1,575		)		—
Acquisition of business, net of cash on hand	—				(9,535		)		67				—				(9,468		)
Additional investments in subsidiaries	(10,000		)		—				—				10,000				—
Other investing activities, net	—				422				(10		)		—				412
Net cash used for investing activities	(8,430		)		(8,771		)		(912		)		8,409				(9,704		)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	—				(12,284		)		(30		)		—				(12,314		)
Proceeds from long-term debt	—				14,032				802				—				14,834
Net repayments of short-term debt	—				—				(49		)		—				(49		)
Net proceeds from/(payments on) intercompany borrowing activities	—				721				(737		)		16				—
Proceeds from issuance of common stock to Sponsors	10,000				—				—				—				10,000
Dividends paid-Series A Preferred Stock	(900		)		—				—				—				(900		)
Dividends paid-common stock	(1,302		)		(2,202		)		(155		)		2,357				(1,302		)
Other intercompany capital stock transactions	—				10,000				(5		)		(9,995		)		—
Other financing activities, net	—				(75		)		(11		)		—				(86		)
Net cash provided by/(used for) financing activities	7,798				10,192				(185		)		(7,622		)		10,183
Effect of exchange rate changes on cash and cash equivalents	—				—				(407		)		—				(407		)
Cash and cash equivalents:
Net increase/(decrease)	—				2,648				(109		)		—				2,539
Balance at beginning of period	—				541				1,757				—				2,298
Balance at end of period	$	—			$	3,189			$	1,648			$	—			$	4,837

The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

(in millions)

Successor

For the Year Ended December 28, 2014

(52 weeks)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities	$	578			$	669			$	1,556			$	(663	)		$	2,140
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—				(211		)		(188		)		—				(399		)
Net payments on intercompany lending activities	—				(802		)		(2,479		)		3,281				—
Return of capital	142				—				—				(142		)		—
Other investing activities, net	—				23				27				—				50
Net cash provided by/(used for) investing activities	142				(990		)		(2,640		)		3,139				(349		)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	—				(1,096		)		(7		)		—				(1,103		)
Net repayments of short-term debt	—				—				(3		)		—				(3		)
Net proceeds from intercompany borrowing activities	—				2,479				802				(3,281		)		—
Dividends paid-Series A Preferred Stock	(720		)		—				—				—				(720		)
Dividends paid-common stock	—				(720		)		(85		)		805				—
Other financing activities, net	—				12				(6		)		—				6
Net cash (used for)/provided by financing activities	(720		)		675				701				(2,476		)		(1,820		)
Effect of exchange rate changes on cash and cash equivalents	—				—				(132		)		—				(132		)
Cash and cash equivalents:
Net increase/(decrease)	—				354				(515		)		—				(161		)
Balance at beginning of period	—				187				2,272				—				2,459
Balance at end of period	$	—			$	541			$	1,757			$	—			$	2,298

The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

(in millions)

Successor

For the Period from February 8, 2013 to December 29, 2013

(29 weeks)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used for)/provided by operating activities	$	—			$	(137	)		$	281			$	(109	)		$	35
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—				(89		)		(113		)		—				(202		)
Net proceeds from intercompany lending activities	—				918				1,821				(2,739		)		—
Return of capital	360				—				—				(360		)		—
Acquisition of business, net of cash on hand	—				(23,564		)		2,070				—				(21,494		)
Additional investments in subsidiaries	(16,500		)		(62		)		—				16,562				—
Other investing activities, net	—				—				25				—				25
Net cash (used for)/provided by investing activities	(16,140		)		(22,797		)		3,803				13,463				(21,671		)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	—				(1,708		)		(962		)		—				(2,670		)
Proceeds from issuance of long-term debt	—				12,569				6				—				12,575
Net (payments on)/proceeds from short-term debt	—				(1,766		)		125				—				(1,641		)
Net payments on intercompany borrowing activities	—				(1,821		)		(918		)		2,739				—
Proceeds from issuance of Series A Preferred Stock	7,633				—				—				—				7,633
Proceeds from issuance of common stock to Sponsors	8,500				—				—				—				8,500
Proceeds from issuance of warrants	367				—				—				—				367
Dividends paid-Series A Preferred Stock	(360		)		—				—				—				(360		)
Dividends paid-common stock	—				(360		)		(109		)		469				—
Other intercompany capital stock transactions	—				16,500				62				(16,562		)		—
Other financing activities, net	—				(293		)		(2		)		—				(295		)
Net cash provided by/(used for) financing activities	16,140				23,121				(1,798		)		(13,354		)		24,109
Effect of exchange rate changes on cash and cash equivalents	—				—				(14		)		—				(14		)
Cash and cash equivalents:
Net increase/(decrease)	—				187				2,272				—				2,459
Balance at beginning of period	—				—				—				—				—
Balance at end of period	$	—			$	187			$	2,272			$	—			$	2,459

The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

(in millions)

Predecessor (H. J. Heinz Company)

For the Period from April 29, 2013 to June 7, 2013

(6 weeks)

	Parent Guarantor		Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used for operating activities	NA		$	(12	)		$	(351	)		$	(10	)		$	(373	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	NA		(19		)		(101		)		—				(120		)
Net (payments on)/proceeds from intercompany lending activities	NA		(201		)		2				199				—
Other investing activities, net	NA		(4		)		34				—				30
Net cash used for investing activities	NA		(224		)		(65		)		199				(90		)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	NA		(307		)		(133		)		—				(440		)
Proceeds from issuance of long-term debt	NA		—				2				—				2
Net proceeds from/(payments on) short-term debt	NA		500				(19		)		—				481
Net (payments on)/proceeds from intercompany borrowing activities	NA		(2		)		201				(199		)		—
Dividends paid-common stock	NA		—				(10		)		10				—
Other financing activities, net	NA		45				(2		)		—				43
Net cash provided by financing activities	NA		236				39				(189		)		86
Effect of exchange rate changes on cash and cash equivalents	NA		—				(30		)		—				(30		)
Cash and cash equivalents:
Net increase/(decrease)	NA		—				(407		)		—				(407		)
Balance at beginning of period	NA		—				2,477				—				2,477
Balance at end of period	NA		$	—			$	2,070			$	—			$	2,070

The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

(in millions)

Predecessor (H. J. Heinz Company)

For the Year Ended April 28, 2013

(52 weeks)

	Parent Guarantor		Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities	NA		$	648			$	800			$	(58	)		$	1,390
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	NA		(124		)		(275		)		—				(399		)
Net payments on intercompany lending activities	NA		(674		)		—				674				—
Additional investments in subsidiaries	NA		(276		)		—				276				—
Other investing activities, net	NA		4				22				—				26
Net cash used for investing activities	NA		(1,070		)		(253		)		950				(373		)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	NA		(189		)		(35		)		—				(224		)
Proceeds from issuance of long-term debt	NA		188				17				—				205
Net proceeds from/(payments on) short-term debt	NA		1,100				(10		)		—				1,090
Net proceeds from intercompany borrowing activities	NA		—				674				(674		)		—
Dividends paid-common stock	NA		(666		)		(58		)		58				(666		)
Other intercompany capital stock transactions	NA		—				276				(276		)		—
Other financing activities, net	NA		(11		)		(138		)		—				(149		)
Net cash provided by financing activities	NA		422				726				(892		)		256
Effect of exchange rate changes on cash and cash equivalents	NA		—				(127		)		—				(127		)
Cash and cash equivalents:
Net increase/(decrease)	NA		—				1,146				—				1,146
Balance at beginning of period	NA		—				1,331				—				1,331
Balance at end of period	NA		$	—			$	2,477			$	—			$	2,477