Kraft Heinz (KHC) 10-K risk factor changes: FY2017 vs FY2016

We compete based on product innovation, price, product quality, [added: nutritional value,] service, taste, convenience, brand recognition and loyalty, effectiveness of marketing and distribution, promotional activity, and the ability to identify and satisfy consumer preferences.

We may need to reduce our prices in response to competitive and customer [removed: pressures, including changing consumer preferences that may adversely impact the market for our products.][added: pressures.]

Maintaining, [removed: extending] [added: extending,] and expanding our reputation and brand image are essential to our business success.

[removed: Increasing negative attention] [added: Negative perceptions] on the role of food and beverage marketing could adversely affect our brand [removed: image.][added: image or lead to stricter regulations and scrutiny of marketing practices.]

Existing or increased legal or regulatory restrictions on our advertising, consumer [removed: promotions] [added: promotions,] and marketing, or our response to those restrictions, could limit our efforts to maintain, [removed: extend] [added: extend,] and expand our brands.

Moreover, adverse publicity about legal or regulatory action against us, our quality and safety, our environmental or social impacts, or our suppliers and, in some cases, our competitors, could damage our reputation and brand image, undermine our customers’ [removed: confidence] [added: confidence,] and reduce demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.

In addition, we might fail to anticipate consumer preferences, invest sufficiently in maintaining, [removed: extending] [added: extending,] and expanding our brand image.

If we do not maintain, extend, and expand our [removed: reputation,] [added: reputation or] brand image, then our product sales, financial [removed: condition] [added: condition,] and operating results could be materially and adversely affected.

We are a global company with sales [removed: or operations] in approximately 190 countries and territories; approximately 30% of our [removed: 2016] [added: 2017] net [removed: revenues] [added: sales] were generated outside of the United States.

All of these factors could result in increased costs or decreased [removed: revenues,] [added: sales,] and could materially and adversely affect our product sales, financial [removed: condition] [added: condition,] and results of operations.

A change in consumer preferences could also cause us to increase capital, [removed: marketing] [added: marketing,] and other expenditures, which could materially and adversely affect our product sales, financial condition, and operating results.

There are inherent risks associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance or [removed: impact] [added: potential impacts] on our existing product offerings.

Our failure to drive revenue growth, limit market share decreases in our key product [removed: categories] [added: categories,] or develop innovative products for new and existing categories could materially and adversely affect our product sales, financial condition, and operating results.

We performed our annual impairment testing in the second quarter of [removed: 2016.][added: 2017.]

If the carrying value exceeds fair value, the intangible asset would be considered impaired and would be reduced to [added: its] fair value.

[removed: Additionally, as] [added: 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.

We purchase and use large quantities of commodities, including dairy products, meat products, coffee beans, nuts, soybean and vegetable oils, sugar and other sweeteners, corn products, tomatoes, cucumbers, potatoes, onions, other fruits and vegetables, spices, [removed: flour] [added: flour,] and wheat to manufacture our products.

In addition, we purchase and use significant quantities of resins, cardboard, glass, plastic, metal, paper, [removed: fiberboard] [added: fiberboard,] and other materials to package our products and we use other inputs, such as water and natural gas, to operate our facilities.

We depend on the skills, working [removed: relationships] [added: relationships,] and continued services of key personnel, including our experienced management team.

In addition, certain of our initiatives may lead to increased costs in other aspects of our business such as increased conversion, [removed: outsourcing] [added: outsourcing,] or distribution costs.

If we are unable to realize the anticipated benefits from our efforts, we could be cost disadvantaged in the marketplace, and our competitiveness, [removed: production] [added: production,] and profitability could [removed: decrease.][added: be adversely affected.]

Retail customers, such as supermarkets, warehouse [removed: clubs] [added: clubs,] and food distributors in our major markets, may [added: continue to] consolidate, resulting in fewer but larger customers for our [removed: business.][added: business across various channels.]

We plan to drive additional growth and profitability through international [removed: distribution channels.][added: markets.]

Consumer [removed: demand, behavior, taste] [added: demands, behaviors, tastes] and purchasing trends may differ in international markets and, as a result, our sales may not be successful or meet expectations, or the margins on those sales may be less than currently anticipated.

We may also face difficulties integrating foreign business operations with our current sourcing, distribution, information technology [removed: systems] [added: systems,] and other operations.

[removed: Changes] [added: Compliance with changes] in [removed: laws] [added: laws, regulations,] and [removed: regulations] [added: related interpretations] could [removed: increase] [added: impact] our [removed: costs.][added: business.]

Various laws and regulations govern [removed: food and beverage] production, storage, distribution, sales, [removed: and] [added: advertising, labeling, including on-pack claims, information or disclosures,] marketing, [removed: as well as] licensing, trade, [added: labor,] tax, and environmental [removed: matters.][added: matters, as well as health and safety practices.]

Our [removed: need to comply] [added: compliance] with new or revised [removed: regulations] [added: laws and regulations,] or [removed: their] [added: the] interpretation and application [added: of existing laws and regulations,] could materially and adversely affect our product sales, financial condition, and [removed: operating results.][added: results of operations.]

Federal, state, and local governments and administrative bodies within the U.S., which represents a majority of our operations, [added: and other foreign jurisdictions have implemented, or] are [removed: considering] [added: considering,] a variety of broad tax, trade, and other regulatory [removed: reforms.][added: reforms that may impact us.]

[removed: For example, an increase in tariff or restrictive trade activities around the world could negatively impact our ability to succeed in certain markets; similarly, changes in tax laws, such as tax reform in the United States, or] [added: Relatedly,] changes in tax laws resulting from the Organization for Economic Co-operation and Development’s [removed: (“OECD”)] [added: (OECD)] multi-jurisdictional plan of action to address “base erosion and profit sharing” could impact our effective tax rate.

As a [removed: large] [added: large, global] food and beverage company, we operate in a [removed: highly regulated] [added: highly-regulated] environment with [removed: constantly evolving] [added: constantly-evolving] legal and regulatory frameworks.

[removed: Consequently,] [added: As a consequence of the legal and regulatory environment in which] we [added: operate, we] are [removed: subject to] [added: faced with a] heightened risk of legal claims [removed: or other] [added: and] regulatory enforcement actions.

Although we have implemented policies and procedures designed to ensure compliance with existing laws and regulations, there can be no assurance that [added: courts or regulators will agree with] our [added: interpretations or that our] employees, contractors, or agents will not violate our policies and procedures.

We could decide to, or be required to, recall products due to suspected or confirmed product contamination, adulteration, [added: product mislabeling or] misbranding, tampering, or other deficiencies.

From time to time, we may evaluate acquisition candidates, [removed: alliances] [added: alliances,] or joint ventures that may strategically fit our business objectives or we may consider divesting businesses that do not meet our strategic objectives or growth or profitability targets.

These activities may present financial, managerial, and operational risks including, but not limited to, diversion of management’s attention from existing core businesses, difficulties integrating or separating personnel and financial and other systems, inability to effectively and immediately implement control environment processes across a diverse employee population, adverse effects on existing or acquired customer and supplier business relationships, and potential disputes with buyers, [removed: sellers] [added: sellers,] or partners.

To the extent we undertake acquisitions, [removed: alliances or] [added: alliances,] joint [removed: ventures] [added: ventures,] or other developments outside our core regions or in new categories, we may face additional risks related to such developments.

Other factors impacting our operations in the United [removed: States, Venezuela, Russia] [added: States] and [removed: other] [added: in] international locations where we do business include export and import restrictions, currency exchange rates, currency devaluation, cash repatriation restrictions, recessionary conditions, foreign ownership restrictions, nationalization, the impact of hyperinflationary environments, terrorist acts, and political unrest.

Such factors in either domestic or foreign jurisdictions could materially and adversely affect our [added: product sales,] financial [added: condition, and operating] results.

For further information on Venezuela, see Note [removed: 15,] [added: 13,] Venezuela - Foreign Currency and Inflation, to the consolidated financial statements.

Failure to effectively assess, timely change and set proper pricing or trade incentives may negatively impact the achievement of our objectives.

The rapid emergence of new distribution channels, particularly e-commerce, may create consumer price deflation, affecting our retail customer relationships and presenting additional challenges to increasing prices in response to commodity or other cost increases.

| • | challenges associated with cross-border product distribution; |

Additionally, recently impaired intangible assets can also be more susceptible to future impairment as they are recorded on the balance sheet at their recently estimated fair values.

We derive significant portions of our sales from certain significant customers (see Sales and Customers within Item 1, Business, of this report).

Changes in tax laws and interpretations could adversely affect our business.

We are subject to income and other taxes in the U.S. and in numerous foreign jurisdictions.

Our domestic and foreign tax liabilities are dependent on the jurisdictions in which profits are determined to be earned and taxed.

Additionally, the amount of taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we operate.

A number of factors influence our effective tax rate, including changes in tax laws and treaties as well as the interpretation of existing laws and rules.

For example, the Tax Cuts and Jobs Act (the “U.S. Tax Reform”) enacted on December 22, 2017 resulted in changes in our corporate tax rate, our deferred income taxes, and the taxation of foreign earnings.

We are still assessing the impact of the U.S. Tax Reform, and while a number of impacts are anticipated to be positive, certain provisions may have adverse or uncertain effects.

Significant judgment, knowledge, and experience are required in determining our worldwide provision for income taxes.

Our future effective tax rate is impacted by a number of factors including changes in the valuation of our deferred tax assets and liabilities, increases in expenses not deductible for tax, including impairment of goodwill in connection with acquisitions, and changes in available tax credits.

In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain.

We are also regularly subject to audits by tax authorities.

Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.

Economic and political pressures to increase tax revenue in various jurisdictions may make resolving tax disputes more difficult.

The results of an audit or litigation could adversely affect our financial statements in the period or periods for which that determination is made.

Government authorities regularly change laws and regulations and their interpretations.

Economic and financial uncertainties in our international markets, including uncertainties surrounding the United Kingdom's impending withdrawal from the European Union (commonly referred to as “Brexit”) and changes to major international trade arrangements (e.g., the North American Free Trade Agreement), could negatively impact our operations and sales.

Furthermore, we may be subject to increased costs or experience adverse effects to our operating results if we are unable to renew collectively bargained agreements on satisfactory terms.

| • | resulting in a downgrade to our credit rating, which could adversely affect our cost of funds, liquidity, and access to capital markets; |

| • | exposing us to risks related to fluctuations in foreign currency as we earn profits in a variety of currencies around the world and substantially all of our debt is denominated in U.S. dollars; and |

While we have remediated the previously-identified material weakness in our internal control over financial reporting, we may identify other material weaknesses in the future.

In November 2017, we restated our consolidated financial statements for the quarters ended April 1, 2017 and July 1, 2017 in order to correctly classify cash receipts from the payments on sold receivables (which are cash receipts on the underlying trade receivables that have already been securitized) to cash provided by investing activities (from cash provided by operating activities) within our condensed consolidated statements of cash flows.

In connection with these restatements, management identified a material weakness in our internal control over financial reporting related to the misapplication of Accounting Standards Update 2016-15.

Specifically, we did not maintain effective controls over the adoption of new accounting standards, including communication with the appropriate individuals in coming to our conclusions on the application of new accounting standards.

As a result of this material weakness, our management concluded that we did not maintain effective internal control over financial reporting as of April 1, 2017 and July 1, 2017.

While we have remediated the material weakness and our management has determined that our disclosure controls and procedures were effective as of December 30, 2017, there can be no assurance that our controls will remain adequate.

The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including judgments used in decision-making, the nature and complexity of the transactions we undertake, assumptions about the likelihood of future events, the soundness of our systems, cost limitations, and other limitations.

If other material weaknesses or significant deficiencies in our internal control are discovered or occur in the future or we otherwise must restate our financial statements, it could materially and adversely affect our business and results of operations or financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the weaknesses or deficiencies, subject us to fines, penalties, investigations or judgments, harm our reputation, or otherwise cause a decline in investor confidence.

It could also lead to stricter regulations and greater scrutiny of marketing practices.

| | |

| --- | --- |

The food and beverage industry’s overall growth is generally linked to population growth.

In particular, the success of the continued integration of Kraft and Heinz will depend in part on our ability to retain the talents and dedication of key employees.

If key employees terminate their employment, or if an insufficient number of employees is retained to maintain effective operations, our business activities may be adversely affected and our management team’s attention may be diverted.

In addition, we may not be able to locate suitable replacements for any key employees who leave, or offer employment to potential replacements on reasonable terms, all of which could adversely affect our product sales, financial condition, and operating results.

We have significant sales to certain significant customers.

Our activities throughout the world are highly regulated and subject to government oversight.

Governing bodies regularly issue new regulations and changes to existing regulations.

Legal claims or other regulatory enforcement actions could subject us to civil and criminal penalties.

The failure to integrate successfully the business and operations of Kraft and Heinz in the expected time frame may adversely affect our future results.

While no material disruptions occurred during the first full year of integration, there can be no assurances that the Kraft and Heinz businesses can be integrated successfully.

It is possible that the integration process could result in the the loss of customers, the disruption of ongoing businesses, unexpected integration issues, or higher than expected integration costs.

It is also possible that the overall post-merger integration process will take longer than originally anticipated.

Specifically, the following issues, among others, must be addressed as we continue to integrate the operations of Kraft and Heinz in order to realize the anticipated benefits of the 2015 Merger:

| • | combining the companies’ operations and corporate functions; |

| • | combining the businesses of Kraft and Heinz and meeting the capital requirements of the combined company in a manner that permits us to achieve the cost savings anticipated to result from the 2015 Merger, the failure of which could result in the material anticipated benefits of the 2015 Merger not being realized in the time frame currently anticipated, or at all; |

| • | integrating the companies’ technologies; |

| • | integrating and unifying the offerings and services available to historical Kraft and Heinz customers; |

| • | identifying and eliminating redundant and underperforming functions and assets; |

| • | harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes; |

| • | integrating the companies’ financial reporting and internal control systems, including our ability to maintain compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the rules promulgated thereunder by the SEC; |

| • | maintaining existing agreements with customers, distributors, providers and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers and vendors; |

| • | addressing possible differences in business backgrounds, corporate cultures and management philosophies; |

| • | integrating and consolidating the companies’ administrative and information technology infrastructure and computer systems; |

| • | coordinating distribution and marketing efforts; |

| • | managing the movement of certain positions to different locations; and |

| • | coordinating geographically dispersed organizations. |

In addition, at times the attention of certain members of our management may be focused on the integration of the businesses of Kraft and Heinz and diverted from day-to-day business operations, which may disrupt our business.

Such conditions and factors include changes in applicable laws and regulations, including changes in food and drug laws, accounting standards and critical accounting estimates, taxation requirements and environmental laws.

For example, our indebtedness could:

| • | result in a downgrade to our credit rating; |

In addition, our credit agreement and indentures governing our indebtedness contain various covenants that limit our ability to engage in specified types of transactions.

These covenants will limit our ability to, among other things, incur or permit to exist certain liens or our ability to merge or consolidate with or into, another company, in each case with customary exceptions.

We may not generate U.S. earnings and profits sufficient for distributions paid to stockholders to be treated as dividends for U.S. federal income tax purposes.

In 2016,distributions made on our stock, including the redemption of $8.3 billion of our 9.00% cumulative compounding preferred stock, Series A (“Series A Preferred Stock”) (which we believe will be treated as a dividend distribution for U.S. federal income tax purposes), significantly exceeded our earnings and profits (as determined under U.S. tax principles) and, therefore, only a portion of our regular 2016 quarterly dividends was treated as dividends for U.S. federal income tax purposes.

For purposes of U.S. federal income tax, insofar as our earnings and profits are not sufficient, these distributions would be treated as a return of capital to each stockholder, up to the extent of the stockholder’s tax basis.

If a stockholder does not have sufficient tax basis, these distributions could result in taxable gains to the stockholder.

Although it is currently anticipated that we will continue to pay regular quarterly dividends, we cannot currently anticipate whether our future earnings and profits will be sufficient for all or a portion of future year distributions to be treated as dividends (as determined under U.S. tax principles).

See Note [removed: 18,] [added: 19,] Segment Reporting, to the consolidated financial statements for [removed: additional] [added: our financial] information [removed: on these changes.][added: by segment.]

As a result, 2016 was the first full year of combined Kraft and Heinz results, [added: while] 2015 included a full year of Heinz results and post-2015 Merger results of [removed: Kraft, and 2014 included the results of Heinz only.][added: Kraft.]

For comparability, we disclose in this report certain unaudited pro forma condensed combined financial information, which presents 2015 [removed: and 2014] as if the 2015 Merger had been consummated on December 30, [removed: 2013 (the] [added: 2013, the] first business day of our 2014 fiscal [removed: year)] [added: year,] and combines the historical results of Heinz and Kraft.

See Note 1, Background and Basis of Presentation, [removed: and Note 2, Merger and Acquisition,] to the consolidated financial statements for additional information related to the 2015 Merger.

Our [added: 2015 fiscal] year [removed: ended January 3, 2016 includes] [added: included] a 53rd week of activity.

See Note [removed: 1, Background] [added: 2, Merger] and [removed: Basis of Presentation,] [added: Acquisition,] to the consolidated financial statements for additional information on [removed: our change in fiscal year end.][added: the 2015 Merger.]

Integration Program [removed: expenses] [added: costs] included in these totals were [added: $339 million in 2017,] $887 million in [removed: 2016] [added: 2016,] and $829 million in 2015.

These costs primarily [removed: include] [added: included] severance and employee benefit [removed: costs, including] [added: costs (including] cash and non-cash [removed: severance,] [added: severance),] costs to exit [removed: facilities, including] [added: facilities (including] non-cash costs such as accelerated [removed: depreciation,] [added: depreciation),] and other costs incurred as a direct result of integration activities related to the 2015 Merger.

[removed: Additionally, we] [added: We] anticipate [added: cumulative] capital expenditures of approximately [removed: $1.3] [added: $1.4] billion related to the Integration Program.

As of December [removed: 31, 2016,] [added: 30, 2017,] we have incurred [removed: $801 million] [added: $1.3 billion] in capital expenditures since the inception of the Integration Program.

[removed: The] [added: Since the inception of the] Integration [removed: Program is designed to reduce costs, integrate, and optimize] [added: Program,] our [removed: combined organization and is expected to achieve $1.7 billion of] [added: cumulative] pre-tax savings [removed: by the end of 2017,] [added: achieved are approximately $1,725 million,] primarily benefiting the United States and Canada segments.

Series A Preferred [removed: Stock:][added: Stock Dividends:]

On June 7, 2016, we redeemed all outstanding shares of our Series A Preferred [removed: Stock for $8.3 billion.][added: Stock.]

[removed: The] [added: We funded this] redemption [removed: was] primarily [removed: funded] through [added: the issuance of long-term] debt [removed: issuances] in May 2016, [removed: including $5.0 billion and €1.8 billion aggregate principal amounts of notes,] as well as other sources of liquidity, including our commercial paper program, U.S. securitization program, and cash on hand.

See Equity and Dividends within this item, along with Note [removed: 11,] [added: 16,] Debt, and Note [removed: 12,] [added: 17,] Capital Stock, to the consolidated financial statements for additional information.

Due to the size of Kraft’s business relative to the size of Heinz’s business prior to the 2015 Merger, and for purposes of comparability, the Results of Operations include certain unaudited pro forma condensed combined financial information (the “pro forma financial information”) adjusted to assume that Kraft and Heinz were a combined company for the full year [removed: 2015 and for 2014.][added: 2015.]

There are no pro forma adjustments [removed: in] [added: for 2017 or] 2016 as Kraft and Heinz were a combined company for [removed: the entire period.][added: these periods.]

For more [removed: information] [added: information,] see Supplemental Unaudited Pro Forma Condensed Combined Financial Information.

In addition, we disclose in this report certain non-GAAP financial measures, which, for [removed: the prior year periods,] [added: 2015,] are derived from the pro forma financial information.

| | December [removed: 31, 2016] [added: 30, 2017] (52 weeks) | | | | [removed: January 3,] [added: December 31,] 2016 [removed: (53] [added: (52] weeks) | | | | % Change | | | [removed: January 3,] [added: December 31,] 2016 [removed: (53] [added: (52] weeks) | | | | [removed: December 28, 2014 (52] [added: January 3, 2016 (53] weeks) | | | | % Change | |

| Net sales | $ | [removed: 26,487] [added: 26,232] | | | $ | [removed: 18,338] [added: 26,487] | | | [removed: 44.4] [added: (1.0] | [removed: %] [added: )%] | | $ | [removed: 18,338] [added: 26,487] | | | $ | [removed: 10,922] [added: 18,338] | | | [removed: 67.9] [added: 44.4] | % |

| Operating income | [removed: 6,142] [added: 6,773] | | | | [removed: 2,639] [added: 6,142] | | | | [removed: 132.7] [added: 10.3] | % | | [removed: 2,639] [added: 6,142] | | | | [removed: 1,568] [added: 2,639] | | | | [removed: 68.3] [added: 132.7] | % |

| Net income/(loss) attributable to common shareholders | [removed: 3,452] [added: 10,999] | | | | [removed: (266] [added: 3,452] | | [removed: )] | | [removed: nm] [added: 218.6] | [added: %] | | [removed: (266] [added: 3,452] | | [removed: )] | | [removed: (63] [added: (266] | | ) | | nm | |

| Diluted earnings/(loss) per share | [removed: 2.81] [added: 8.95] | | | | [removed: (0.34] [added: 2.81] | | [removed: )] | | [removed: nm] [added: 218.5] | [added: %] | | [removed: (0.34] [added: 2.81] | | [removed: )] | | [removed: (0.17] [added: (0.34] | | ) | | nm | |

| Pro forma net sales(a) | [removed: 26,487] [added: 26,232] | | | | [removed: 27,447] [added: 26,487] | | | | [removed: (3.5] [added: (1.0] | )% | | [removed: 27,447] [added: 26,487] | | | | [removed: 29,122] [added: 27,447] | | | | [removed: (5.8] [added: (3.5] | )% |

| Organic Net Sales(b) | [removed: 26,817] [added: 26,169] | | | | [removed: 26,728] [added: 26,432] | | | | [removed: 0.3] [added: (1.0] | [removed: %] [added: )%] | | [removed: 28,286] [added: 26,817] | | | | [removed: 28,741] [added: 26,728] | | | | [removed: (1.6] [added: 0.3] | [removed: )%] [added: %] |

| (a) | There were no pro forma adjustments [removed: in] [added: for] 2016, as Kraft and Heinz were a combined company for the entire period. See the Supplemental Unaudited Pro Forma Condensed Combined Financial Information at the end of this item. |

Pro forma net sales decreased [removed: 3.5%,] [added: 3.5%] primarily due to the unfavorable impacts of foreign currency (2.5 pp), 53rd week of shipments in [removed: the prior period] [added: 2015] (1.2 pp), and divestitures (0.1 pp).

Year Ended [removed: January 3, 2016] [added: December 30, 2017] compared to the Year Ended December [removed: 28, 2014:][added: 31, 2016:]

[removed: Unfavorable volume/mix] [added: Volume/mix] was [removed: driven primarily by lower shipments in refreshment beverages, frozen meals, foodservice, and boxed dinners] [added: unfavorable] in the United States and Canada, partially offset by growth in [added: Europe and] Rest of World.

Net pricing was higher [removed: in nearly all segments] despite deflation in key [removed: commodities] [added: commodities, primarily] in [removed: United States] [added: dairy, coffee,] and [removed: Canada.][added: meat.]

| Operating income | $ | [removed: 6,142] [added: 6,773] | | | $ | [removed: 2,639] [added: 6,142] | | | [removed: 132.7] [added: 10.3] | % | | $ | [removed: 2,639] [added: 6,142] | | | $ | [removed: 1,568] [added: 2,639] | | | [removed: 68.3] [added: 132.7] | % |

| Adjusted EBITDA(a) | [removed: 7,778] [added: 7,930] | | | | [removed: 6,739] [added: 7,778] | | | | [removed: 15.4] [added: 1.9] | % | | [removed: 6,739] [added: 7,778] | | | | [removed: 6,526] [added: 6,739] | | | | [removed: 3.3] [added: 15.4] | % |

| • | Interest expense decreased to $1.1 billion in 2016 compared to $1.3 billion in 2015. This decrease was primarily due to a $236 million write-off of debt issuance costs related to 2015 debt refinancing activities and a $227 million loss released from accumulated other comprehensive income/(losses) due to the early termination of certain interest rate swaps in the prior period as well as lower interest rates following our debt refinancing in connection with the 2015 Merger. These were partially offset by the assumption of $8.6 billion aggregate principal amount of Kraft’s long-term debt obligations in the 2015 Merger, the issuance of new long-term debt in conjunction with the redemption of our Series A Preferred Stock, and new borrowings under our commercial paper program. See Note [removed: 11,] [added: 16,] Debt, and Note [removed: 12,] [added: 17,] Capital Stock, to the consolidated financial statements for additional information. |

| • | The effective tax rate was 27.5% in 2016, compared to 36.2% in 2015. The change in effective tax rate was primarily driven by higher earnings repatriation charges and the nondeductible nonmonetary currency devaluation loss related to our Venezuelan subsidiary in the prior period, partially offset by lower tax benefits associated with taxes on income of foreign subsidiaries, tax exempt income, and deferred tax effects of statutory rate changes in the current period. See Note [removed: 7,] [added: 8,] Income Taxes, to the consolidated financial statements for a discussion of effective tax rates. |

The [removed: decrease] [added: increase] was [added: primarily] due to [removed: higher interest expense, higher other expense/(income), net, more] [added: a lower effective tax rate in the current period, the operating income factors discussed above, and the absence of the] Series A Preferred Stock dividend [removed: payments,] [added: in the current period, partially offset by higher interest expense] and [removed: a] higher [removed: effective tax rate, which, combined, more than offset growth in operating income.][added: other expense/(income), net, detailed as follows:]

Adjusted EBITDA increased [removed: 3.3%] [added: 1.9%] to [removed: $6.7] [added: $7.9] billion in [removed: 2015] [added: 2017] compared to [removed: 2014, driven] [added: 2016,] primarily [removed: by] [added: due to] savings from the Integration Program and other restructuring [removed: activities, favorable pricing net of key commodity costs,] [added: activities] and [removed: the benefit of a 53rd week of shipments (approximately 1.0 pp),] [added: lower overhead costs,] partially offset by [added: higher input costs in local currency, a decline in Organic Net Sales, and] the unfavorable impact of foreign currency [removed: (6.3 pp) and unfavorable volume/mix.][added: (0.4pp).]

| • | United States Segment Adjusted EBITDA [removed: growth was] [added: increased] primarily driven by [removed: favorable pricing net of key commodity costs, savings from the] Integration Program [removed: and other restructuring activities,] [added: savings] and [added: lower overhead costs in] the [removed: favorable impact of a 53rd week of shipments (approximately 1.0 pp),] [added: current period,] partially offset by unfavorable [removed: volume/mix.] [added: key commodity costs, primarily in dairy, meat, and coffee, and volume/mix declines.] |

| • | [removed: Rest of World] [added: Europe] Segment Adjusted EBITDA [removed: growth] was [added: flat] primarily driven by [removed: savings from restructuring activities and other ongoing] productivity [removed: efforts as well as the favorable impact of a 53rd week of shipments (approximately 1.0 pp), partially] [added: savings that were] offset by [added: higher input costs in local currency and] the unfavorable impact of foreign currency [removed: (27.6 pp) and higher local input costs.] [added: (1.6 pp).] |

| • | Canada Segment Adjusted EBITDA decreased primarily due to [removed: the unfavorable impact of foreign currency (14.6 pp), unfavorable volume/mix, and higher input costs] [added: a decline] in [removed: local currency,] [added: Organic Net Sales,] partially offset by [removed: savings from the] Integration Program [removed: and other restructuring activities,] [added: savings,] lower [removed: marketing spending,] [added: overhead costs in the current period,] and the favorable impact of [removed: a 53rd week of shipments (approximately 1.0] [added: foreign currency (1.7] pp). |

In the third quarter of 2017, we announced our plans to reorganize certain of our international businesses to better align our global geographies.

These plans include moving our Middle East and Africa businesses from the AMEA operating segment into the EMEA operating segment.

The remaining AMEA businesses will become the APAC operating segment.

We currently expect these changes to become effective in the first quarter of our fiscal year 2018.

As a result, we expect to restate our Europe and Rest of World segments to reflect these changes for historical periods presented as of March 31, 2018.

In 2017, we substantially completed our multi-year program announced following the 2015 Merger (the “Integration Program”), for which we expect to incur cumulative pre-tax costs of approximately $2.1 billion.

Approximately 60% of these costs will be cash expenditures.

As of December 30, 2017, we have incurred cumulative pre-tax costs of $2,055 million related to the Integration Program.

Total expenses related to our restructuring activities, including the Integration Program, were $457 million in 2017, $1,012 million in 2016, and $1,023 million in 2015.

The Integration Program was designed to reduce costs, integrate, and optimize our combined organization.

U.S. Tax Reform:

On December 22, 2017, the Tax Cuts and Jobs Act (“U.S. Tax Reform”) was enacted by the U.S. federal government.

The legislation significantly changed U.S. tax law by, among other things, lowering the federal corporate tax rate from 35.0% to 21.0%, effective January 1, 2018, implementing a territorial tax system, and imposing a one-time toll charge on deemed repatriated earnings of foreign subsidiaries as of December 30, 2017.

The two material items that impacted us in 2017 were the corporate tax rate reduction and the one-time toll charge.

While the corporate tax rate reduction is effective January 1, 2018, we accounted for this anticipated rate change in 2017, the period of enactment.

We have estimated the provisional tax impacts related to the toll charge, certain components of the revaluation of deferred tax assets and liabilities, including depreciation and executive compensation, and the change in our indefinite reinvestment assertion.

As a result, we recognized a net tax benefit of approximately $7.0 billion, including a reasonable estimate of our deferred income tax benefit of approximately $7.5 billion related to the corporate rate change, which was partially offset by a reasonable estimate of $312 million for the toll charge and approximately $125 million for other tax expenses, including a change in our indefinite reinvestment assertion.

See Critical Accounting Policies within this item and Note 8, Income Taxes, to the consolidated financial statements for additional information.

| Net sales | $ | 26,232 | | | $ | 26,487 | | | (1.0 | )% | | $ | 26,487 | | | $ | 18,338 | | | 44.4 | % |

| (a) | There were no pro forma adjustments for 2017 or 2016, as Kraft and Heinz were a combined company for these periods. See the Supplemental Unaudited Pro Forma Condensed Combined Financial Information at the end of this item. |

Higher pricing in Rest of World and the United States was partially offset by lower pricing in Canada and Europe.

Operating income increased 10.3% to $6.8 billion in 2017 compared to $6.1 billion in 2016.

This increase was primarily due to lower Integration Program and other restructuring expenses in the current period, savings from the Integration Program and other restructuring activities, and lower overhead costs, partially offset by higher input costs in local currency, lower Organic Net Sales, lower unrealized gains on commodity hedges in the current period, and the unfavorable impact of foreign currency (0.4 pp).

Net income/(loss) attributable to common shareholders increased 218.6% to $11.0 billion in 2017 compared to $3.5 billion in 2016.

| • | The effective tax rate was a 98.7% benefit in 2017 compared to 27.5% expense in 2016. The change in the effective tax rate was primarily driven by the $7.0 billion tax benefit from U.S. Tax Reform, lower tax benefits associated with deferred tax effects of statutory rate changes, and taxes on income of foreign subsidiaries in the current period. See Note 8, Income Taxes, to the consolidated financial statements for additional information related to our effective tax rates. |

| • | The Series A Preferred Stock was fully redeemed on June 7, 2016. Accordingly, there were no dividends for 2017, compared to $180 million in the prior period. See Equity and Dividends within this item for additional information. |

| • | Interest expense increased to $1.2 billion in 2017 compared to $1.1 billion in 2016. This increase was primarily due to the May 2016 issuances of long-term debt and borrowings under our commercial paper programs, which began in the second quarter of 2016. |

| • | Other expense/(income), net was an expense of $9 million in 2017 compared to income of $15 million in 2016. This increase was primarily due to a $36 million nonmonetary currency devaluation loss in the current period compared to $24 million in the prior period related to our Venezuelan operations. See Note 13, Venezuela - Foreign Currency and Inflation, to the consolidated financial statements for additional information. |

| • | Rest of World Segment Adjusted EBITDA decreased primarily due to higher input costs in local currency, increased commercial investments, and the unfavorable impact of foreign currency (3.4 pp), partially offset by Organic Net Sales growth. |

| | December 30, 2017 (52 weeks) | | | | December 31, 2016 (52 weeks) | | | | % Change | | | December 31, 2016 (52 weeks) | | | | January 3, 2016 (53 weeks) | | | | % Change | |

Year Ended December 30, 2017 compared to the Year Ended December 31, 2016:

Diluted EPS increased 218.5% to $8.95 in 2017 compared to $2.81 in 2016, primarily driven by the net income/(loss) attributable to common shareholders factors discussed above.

| | December 30, 2017 (52 weeks) | | | | December 31, 2016 (52 weeks) | | | | $ Change | | | | % Change | |

| Diluted EPS | $ | 8.95 | | | $ | 2.81 | | | $ | 6.14 | | | 218.5 | % |

| U.S. Tax Reform | (5.73 | | ) | | — | | | | (5.73 | | ) | | | |

| Adjusted EPS(a) | $ | 3.55 | | | $ | 3.33 | | | $ | 0.22 | | | 6.6 | % |

| | | | | | | | | | $ | 0.22 | | | | |

Adjusted EPS increased 6.6% to $3.55 in 2017 compared to $3.33 in 2016, primarily driven by the absence of Series A Preferred Stock dividends in the current period and Adjusted EBITDA growth despite the unfavorable impact of foreign currency, partially offset by higher interest expense.

| (a) | There were no pro forma adjustments for 2017 or 2016, as Kraft and Heinz were a combined company for these periods. See the Supplemental Unaudited Pro Forma Condensed Combined Financial Information at the end of this item. |

| 2017 Compared to 2016 | | | | | | | | | | | | | | | |

In 2016, we reorganized our segments to reflect the following:

| | |

| --- | --- |

| • | our Russia business moved from the Rest of World segment to the Europe segment; |

| • | management of our Global Procurement Office moved from one of our European subsidiaries to our global headquarters, which resulted in moving the related costs from the Europe segment to general corporate expenses; and |

| • | certain historical Kraft export businesses moved from our United States segment to our Rest of World and Europe segments. |

These changes are reflected in all historical periods presented and did not have a material impact on our financial statements.

We recorded expenses related to our restructuring activities, including the multi-year program announced following the 2015 Merger (the “Integration Program”), totaling $1.0 billion in 2016, $1.0 billion in 2015, and $637 million in 2014.

We expect to incur pre-tax costs of $2.0 billion related to the Integration Program.

Since the inception of the Integration Program, our cumulative pre-tax savings achieved are approximately $1,175 million.

Following the redemption, we no longer pay quarterly Series A Preferred Stock dividends.

Net sales increased 67.9% to $18.3 billion in 2015 compared to 2014, primarily driven by the 2015 Merger.

Pro forma net sales decreased 5.8%, primarily due to the unfavorable impacts of foreign currency (5.2 pp) and divestitures (0.2 pp), partially offset by the favorable impact of a 53rd week of shipments (1.2 pp).

Excluding these impacts, Organic Net Sales declined 1.6% as unfavorable volume/mix (2.6 pp) was partially offset by higher net pricing (1.0 pp).

Operating income increased 68.3% to $2.6 billion in 2015 compared to 2014 driven primarily by the 2015 Merger, as well as a$64 million favorable impact due to a 53rd week of shipments in 2015, which were partially offset by the following:

| • | Integration Program and other restructuring expenses, merger costs, and depreciation and amortization expense that were higher in 2015 than 2014. |

| • | Non-cash costs of $347 million relating to the fair value adjustment of Kraft’s inventory in purchase accounting in 2015. |

| • | Unfavorable impact from foreign currency of $284 million. |

| • | Nonmonetary currency devaluation loss of $49 million related to the write-down of inventory for our Venezuelan subsidiary in 2015. |

Net income/(loss) attributable to common shareholders decreased $203 million to a loss of $266 million in 2015 compared to a loss of $63 million in 2014.

These drivers are detailed as follows:

| • | Interest expense increased to $1.3 billion in 2015 compared to $686 million in 2014. This increase was primarily due to a $236 million write-off of debt issuance costs related to 2015 debt refinancing activities and a $227 million loss released from accumulated other comprehensive income/(losses) due to the early termination of certain interest rate swap contracts. The remaining increase was due to the assumption of $8.6 billion aggregate principal amount of Kraft’s long-term debt obligations in the 2015 Merger, partially offset by interest savings following our 2015 debt refinancing activities. |

| • | Other expense/(income), net increased to $305 million in 2015 compared to $79 million in 2014. This increase was primarily due to a $234 million nonmonetary currency devaluation loss related to our Venezuelan subsidiary and call premiums of $105 million related to our 2015 debt refinancing activities, compared to currency losses of $99 million in the prior year. |

| • | Series A Preferred Stock dividend cash distributions increased to $900 million in 2015 compared to $720 million in 2014. Due to the December 8, 2015 common stock dividend declaration, we were required to accelerate payment of the Series A Preferred Stock dividend from March 7, 2016 to December 8, 2015. Accordingly, there were two cash distributions for Series A Preferred Stock during the fourth quarter of 2015. This resulted in five Series A Preferred Stock dividend payments in 2015 compared to four payments in 2014. |

| • | The effective tax rate was 36.2% in 2015 compared to 16.3% in 2014, primarily driven by higher earnings repatriation charges and the nondeductible nonmonetary currency devaluation loss related to our Venezuelan subsidiary in 2015, partially offset by increased benefits from statutory tax rate changes. See Note 7, Income Taxes, to the consolidated financial statements for a discussion of effective tax rates. |

| • | Europe Segment Adjusted EBITDA decreased primarily due to unfavorable impact of foreign currency (15.0 pp) and increased marketing investments partially offset by lower input costs, savings from restructuring activities and other ongoing productivity efforts, favorable product mix and the favorable impact of a 53rd week of shipments (approximately 1.0 pp). |

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | (in millions, except per share data) | | | | | | | | | (in millions, except per share data) | | | | | | | |

Diluted EPS decreased to a loss of $0.34 in 2015 compared to a loss of $0.17 in 2014.

The decrease was driven primarily by the net income/(loss) attributable to common shareholders factors discussed above, partially offset by the effect of an increase in the weighted average shares of common stock outstanding following the 2015 Merger and a 53rd week of shipments.

| Diluted EPS | $ | (0.34 | ) | | $ | (0.17 | ) | | $ | (0.17 | ) | | nm | |

| Pro forma adjustments(a) | 1.04 | | | | 1.48 | | | | (0.44 | | ) | | | |

| Adjusted EPS(b) | $ | 2.19 | | | $ | 1.98 | | | $ | 0.21 | | | 10.6 | % |

| 53rd week of shipments | | | | | | | | | 0.03 | | | | | |

| | | | | | | | | | $ | 0.21 | | | | |

Adjusted EPS increased 10.6% to $2.19 in 2015 compared to $1.98 in 2014, driven primarily by higher Adjusted EBITDA despite the unfavorable impact of foreign currency, lower other expense/(income), net, lower interest expense, and a 53rd week of shipments, partially offset by a higher effective tax rate.

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Canada | (15.1 | )% | | (13.4 | ) pp | | 0.0 | pp | | 1.1 | pp | | (2.8 | )% | | 2.2 | pp | | (5.0 | ) pp |

See Note 1, Background and Basis of Presentation, and Note [removed: 14,] [added: 11,] Financial Instruments, to the consolidated financial statements for details of our market risk management policies and the financial instruments used to hedge those exposures.

| | December [removed: 31, 2016] [added: 30, 2017] (52 weeks) | | | | [removed: January 3,] [added: December 31,] 2016 [removed: (53] [added: (52] weeks) | | |

| Commodity contracts | $ | [removed: 39] [added: 23] | | | $ | [removed: 54] [added: 39] | |

| Foreign currency contracts | [removed: 179] [added: 173] | | | | [removed: 194] [added: 179] | | |

| Cross-currency swap contracts | [removed: 306] [added: 287] | | | | [removed: 447] [added: 306] | | |

The effect of a hypothetical 10% fluctuation in market prices on certain of our derivative contracts as of January 3, 2016 was revised to reflect a correction to the potential gain or loss on fair values, including an increase of $36 million related to cross-currency swap contracts and an increase of $9 million related to foreign currency contracts.

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, under a host of iconic brands including Heinz, Kraft, Oscar Mayer, Philadelphia, [removed: Planters,] Velveeta, Lunchables, [added: Planters,] Maxwell House, Capri Sun, [removed: and Ore-Ida.][added: Ore-Ida, Kool-Aid, Jell-O.]

As of December [removed: 31, 2016,] [added: 30, 2017,] we had assets of [removed: $120.5] [added: $120.2] billion.

While [removed: Kraft Heinz was] [added: we were] organized as a Delaware corporation in 2013 (as Heinz), both Kraft and Heinz [removed: have] [added: each had] been pioneers in the food industry for over 100 years.

[removed: Prior to] [added: Before] the consummation of the 2015 Merger, Heinz [removed: had been] [added: was] controlled by Berkshire Hathaway Inc. [removed: (“Berkshire Hathaway”)] [added: ("Berkshire Hathaway")] and 3G Global Food [removed: Holdings LP] [added: Holdings, L.P. (“3G Capital”)] (together, the [removed: “Sponsors”),] [added: "Sponsors"),] following their acquisition of H. J. Heinz [removed: Company.][added: Company (the “2013 Merger”).]

See Note 1, Background and Basis of Presentation, and Note 2, Merger and Acquisition, to the consolidated financial statements for [removed: further] [added: additional] information on the 2015 Merger.

See Note [removed: 1, Background and Basis of Presentation,] [added: 19, Segment Reporting,] to the consolidated financial statements for [removed: further] [added: our geographic financial] information [removed: on the 2013 Merger.][added: by segment.]

In [removed: 2016,] [added: the first quarter of 2017,] we reorganized the products within our product categories to reflect how we manage our business.

| | December [added: 30, 2017 (52 weeks) | | | December] 31, 2016 (52 weeks) | | | January 3, 2016 (53 weeks) | | [removed: | December 28, 2014 (52 weeks) | |]

| Condiments and sauces | [removed: 26] [added: 25] | % | | [removed: 32] [added: 24] | % | | [removed: 50] [added: 32] | % |

| Cheese and dairy | 21 | % | | [removed: 15] [added: 21] | % | | [removed: —] [added: 15] | % |

| Ambient meals | 9 | % | | [removed: 10] [added: 9] | % | | [removed: 14] [added: 10] | % |

| Frozen and chilled meals | [removed: 8] [added: 10] | % | | [removed: 12] [added: 10] | % | | [removed: 18] [added: 12] | % |

| Meats and seafood | 10 | % | | [removed: 8] [added: 10] | % | | [removed: 2] [added: 8] | % |

As a result, 2016 was the first full year of combined Kraft and Heinz results, [added: while] 2015 included a full year of Heinz results and post-2015 Merger results of [removed: Kraft, and 2014 included the results of Heinz only.][added: Kraft.]

The year-over-year fluctuations in the percentages [removed: above] [added: between 2015 and 2016] are primarily driven by including Kraft’s results.

Our largest customer, [removed: Wal-Mart Stores] [added: Walmart] Inc., represented approximately [removed: 22%] [added: 21%] of our net sales in [removed: 2016,] [added: 2017,] approximately [removed: 20%] [added: 22%] of our net sales in [removed: 2015,] [added: 2016,] and approximately [removed: 10%] [added: 20%] of our net sales in [removed: 2014.][added: 2015.]

In [removed: 2016,] [added: 2017,] the five largest customers in our United States segment accounted for approximately [removed: 49%] [added: 48%] of United States segment [added: net] sales, the five largest customers in our Canada segment accounted for approximately [removed: 76%] [added: 72%] of Canada segment [added: net] sales, and the five largest customers in our Europe segment accounted for approximately 31% of our Europe segment [added: net] sales.

Our [removed: risk management group works with our] procurement teams [removed: to] monitor worldwide supply and cost trends so we can obtain ingredients and packaging needed for production at competitive prices.

[removed: Our risk management group uses] [added: We use] a range of hedging techniques in an effort to limit the impact of price fluctuations on many of our principal raw materials.

We actively monitor [removed: any] changes to commodity costs so that we can seek to mitigate the effect through pricing and other operational measures.

Improving our market position or introducing [removed: a] new [removed: product] [added: products] requires substantial advertising and promotional expenditures.

Significant trademarks by segment based on net sales [removed: at December 31, 2016] [added: in 2017] were:

| United States | | Kraft, Oscar Mayer, Heinz, [removed: Planters, Velveeta,] Philadelphia, Lunchables, [added: Velveeta, Planters,] Maxwell House, Capri Sun*, Ore-Ida, Kool-Aid, Jell-O |

| Canada | | Kraft, Heinz, [added: Philadelphia,] Cracker Barrel, [removed: Philadelphia, Maxwell House,] P’Tit Cheese, [removed: Tassimo*] [added: Maxwell House, Tassimo*, Classico] |

| Europe | | Heinz, Plasmon, Pudliszki, Honig, HP, [removed: Benedicta, Weight Watchers*] [added: Benedicta] |

| Rest of World | | Heinz, ABC, Master, Quero, Golden Circle, [removed: Wattie's,] Kraft, [removed: Complan,] [added: Wattie's,] Glucon [removed: D] [added: D, Complan] |

We sell some products under brands we license from third parties, including Capri Sun packaged drink pouches for sale in the United States, [removed: T.G.I.] [added: TGI] Fridays frozen snacks and appetizers in the United States and Canada, McCafe ground, whole [removed: bean] [added: bean,] and on-demand single cup coffees in the United States and Canada, [added: and] Taco Bell Home Originals Mexican-style food products in U.S. grocery [removed: stores, and Weight Watchers Smart Ones frozen entrées, snacks and desserts in the United States and Canada.][added: stores.]

In our agreements with Mondelēz International, Inc. (“Mondelēz International”), we each granted the other party various licenses to use certain of our and their respective intellectual property rights in named jurisdictions for [removed: an agreed period] [added: certain periods] of time following the spin-off of Kraft from Mondelēz International in 2012.

| • | growth through product improvements and [removed: renovations, new products,] [added: renovation, innovation,] and line extensions, |

Research and development expense was approximately [removed: $120] [added: $93] million in [removed: 2016, $105] [added: 2017, $120] million in [removed: 2015,] [added: 2016,] and [removed: $58] [added: $105] million in [removed: 2014.][added: 2015.]

These factors influence our quarterly sales, operating [removed: income] [added: income,] and cash flows.

We had approximately [removed: 41,000] [added: 39,000] employees as of December [removed: 31, 2016.][added: 30, 2017.]

Our business operations, including the production, [added: transportation,] storage, distribution, sale, display, advertising, marketing, labeling, quality and safety of our [removed: products,] [added: products and their ingredients,] occupational safety and health practices, [removed: transportation and use of many of our products,] are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as laws and regulations administered by government entities and agencies outside the United States in markets in which our products are manufactured, distributed or sold.

As of December [removed: 31, 2016,] [added: 30, 2017,] we had accrued an amount we deemed appropriate for environmental remediation.

The following are our executive officers as of February [removed: 13, 2017:][added: 10, 2018:]

| Bernardo Hees | | [removed: 47] [added: 48] | | Chief Executive Officer |

| [removed: Paulo Basilio] [added: David Knopf] | | [removed: 42] [added: 29] | | Executive Vice President and Chief Financial Officer |

| [removed: Raphael] [added: Rafael] Oliveira | | [removed: 42] [added: 43] | | Zone President of [removed: Europe] [added: EMEA] |

| Eduardo Pelleissone | | [removed: 43] [added: 44] | | Executive Vice President of Global Operations |

| Carlos Piani | | [removed: 43] [added: 44] | | Zone President of Canada |

In the third quarter of 2017, we announced our plans to reorganize certain of our international businesses to better align our global geographies.

These plans include moving our Middle East and Africa businesses from the AMEA segment into the Europe segment, forming the Europe, Middle East, and Africa (“EMEA”) segment.

The remaining AMEA businesses will become the Asia Pacific (“APAC”) segment, which will remain in Rest of World.

We expect these changes to become effective in the first quarter of 2018.

As a result, we expect to restate our Europe and Rest of World segments to reflect these changes for historical periods presented in the first quarter of 2018.

Our products are also sold online through various e-commerce platforms and retailers.

Our products are sold in highly competitive marketplaces, which have experienced increased concentration and the growing presence of e-commerce retailers, large-format retailers, and discounters.

The manufacture and sale of consumer food and beverage products is highly regulated.

In the U.S., our activities are subject to regulation by various federal government agencies, including the Food and Drug Administration, U.S. Department of Agriculture, Federal Trade Commission, Department of Labor, Department of Commerce and Environmental Protection Agency, as well as various state and local agencies.

| Paulo Basilio | | 43 | | President of U.S. Commercial Business |

| Rodrigo Wickbold | | 41 | | Zone President of APAC |

David Knopf became Executive Vice President and Chief Financial Officer in October 2017.

He had previously served as Vice President, Category Head of Planters Business since August 2016.

Prior to that role, Mr. Knopf served as Vice President of Finance, Head of Global Budget & Business Planning, Zero-Based Budgeting, and Financial & Strategic Planning from July 2015 to August 2016.

Prior to joining Kraft Heinz in July 2015, Mr. Knopf served in various roles at 3G Capital, including as an associate partner.

Before joining 3G Capital in October 2013, Mr. Knopf served in various roles at Onex Partners, a private equity firm, and Goldman Sachs, a global investment banking, securities, and investment management firm.

Paulo Basilio assumed his current role as President of the U.S. Commercial Business in October 2017.

Pedro Drevon assumed his current role as Zone President of Latin America in October 2017.

Previously he served as Managing Director for Kraft Heinz Brazil since August 2015.

Prior to joining Kraft Heinz in 2015, Mr. Drevon served in various capacities at 3G Capital.

Before joining 3G Capital in 2008, Mr. Drevon served in various roles at Banco BBM, a financial advisory and wealth management firm.

Mr. Drevon has also been a partner of 3G Capital since January 2011.

Rashida La Lande joined Kraft Heinz as Senior Vice President, Global General Counsel and Corporate Secretary in January 2018.

Prior to joining Kraft Heinz, Ms. La Lande was a partner at the law firm of Gibson, Dunn & Crutcher, where she advised corporations and their boards, primarily in the areas of mergers and acquisitions, leveraged buyouts, private equity deals, and joint ventures.

During her nearly 20-year career at Gibson, Dunn & Crutcher, she represented companies and private equity sponsors in the consumer products, retail, financial services, and technology industries.

Rodrigo Wickbold assumed his current role as Zone President of APAC in January 2018 after serving as Chief Marketing Officer of APAC since January 2016.

Prior to joining Kraft Heinz in January 2016, Mr. Wickbold served in various marketing and business leadership roles at Unilever, a consumer products company, since 2000, including as Global Senior Brand Manager - Skin Care.

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

In 2016, we reorganized our segments to reflect the following:

| | |

| --- | --- |

| • | our Russia business moved from the Rest of World segment to the Europe segment; |

| • | management of our Global Procurement Office moved from one of our European subsidiaries to our global headquarters, which resulted in moving the related costs from the Europe segment to general corporate expenses; and |

| • | certain historical Kraft export businesses moved from our United States segment to our Rest of World and Europe segments. |

These changes are reflected in all historical periods presented and did not have a material impact on our financial statements.

See Note 18, Segment Reporting, to the consolidated financial statements for additional information on these changes and for our financial information by segment.

| Infant and nutrition | 3 | % | | 5 | % | | 10 | % |

The most significant cost components of our cheese products are dairy commodities, including milk and cheese.

We purchase our dairy raw material requirements from independent third parties, such as agricultural cooperatives and independent processors.

Market supply and demand, as well as government programs, significantly influence the prices for milk and other dairy products.

Significant cost components in our meat business include pork, beef, and poultry, which we primarily purchase from applicable local markets.

Livestock feed costs and the global supply and demand for U.S. meats influence the prices of these meat products.

The most significant cost component of our coffee products is coffee beans, which we purchase on world markets.

Quality and availability of supply, currency fluctuations, and consumer demand for coffee products impact coffee bean prices.

The most significant cost components in our nut products include peanuts, cashews, and almonds, which we purchase on both domestic and world markets, where global market supply and demand is the primary driver of price.

We face competition in all aspects of our business.

Therefore, it is most meaningful to compare quarterly results to the same quarters of prior years.

We are required to comply with a variety of U.S. and Canadian laws and regulations, including but not limited to: the Federal Food, Drug and Cosmetic Act and various state laws governing food safety; the Food Safety Modernization Act; the Safe Food for Canadians Act; the Occupational Safety and Health Act; various federal and state laws and regulations governing competition and trade practices; various federal and state laws and regulations governing our employment practices, including those related to equal employment opportunity, such as the Equal Employment Opportunity Act and the National Labor Relations Act; customs and foreign trade laws and regulations; and laws regulating the sale of certain of our products in schools.

Foreign Operations

In 2016, we generated a significant amount of our net sales from operations outside of the United States and sold our products in approximately 190 countries and territories.

For additional information about our foreign operations, see Note 18, Segment Reporting, to the consolidated financial statements.

Refer to Item 2, Properties, for more information on our manufacturing and other facilities.

For a discussion of risks related to our operations outside the United States, including currency risk, see Risk Factors in Item 1A.

| Emin Mammadov | | 40 | | President, Global Foodservice |

| Marcos Romaneiro | | 33 | | Zone President of AMEA |

| George Zoghbi | | 50 | | Chief Operating Officer of U.S. Commercial business |

Emin Mammadov assumed his current role as President, Global Foodservice on December 31, 2016.

Previously he had served as Zone President of Russia, India, the Middle East and Africa (“RIMEA”) since June 2013.

Prior to serving in that role, Mr. Mammadov was President, Africa & Middle East from March 2013 to June 2013 and Managing Director of Heinz China Sauces from 2010 to March 2013.

He also served as Marketing Director and then Commercial Director of Heinz Russia from 2006 to 2010.

Prior to joining Kraft Heinz, Mr. Oliveira spent 17 years in the financial industry.

Marcos Romaneiro assumed his current role as Zone President of AMEA on December 31, 2016.

Previously he had served as Zone President of Asia Pacific since June 2014.

Prior to his appointment as Zone President of Asia Pacific, Mr. Romaneiro was Senior Vice President, Global Finance at Heinz from June 2013 to May 2014.

From January 2012 to May 2013, Mr. Romaneiro was Vice President at 3G Capital and was responsible for evaluating and executing private equity transactions.

Prior to joining 3G Capital, Mr. Romaneiro worked at Cerberus Capital Management, a private equity firm, from January 2010 to December 2011.

Francisco Sa assumed his current role upon the closing of the 2015 Merger and had previously held the same role at Heinz after joining in July 2014.

On April 1, 2015, the Commodity Futures Trading Commission (“CFTC”) filed a formal complaint against Mondelēz International (formerly known as Kraft Foods Inc.) 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.

For the fiscal year ended December [removed: 31, 2016][added: 30, 2017]

[removed: ][added: ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting [added: company,” and “emerging growth] company” in Rule 12b-2 of the Exchange Act.

| Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | [added: Emerging growth company o] |

The aggregate market value of the shares of common stock held by non-affiliates of the registrant, computed by reference to the closing price of such stock as of the last business day of the registrant’s most recently completed second quarter, was [removed: $107] [added: $52] billion.

As of February [removed: 18, 2017,] [added: 10, 2018,] there were [removed: 1,217,136,057] [added: 1,218,801,890] shares of the registrant’s common stock outstanding.

Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its annual meeting of shareholders expected to be held on April [removed: 19, 2017] [added: 23, 2018] are incorporated by reference into Part III hereof.

| [Item 1. [removed: Business.](#s597dd19f3da24becb2bc6740fdcdd27c)] [added: Business.](#sf2a3682d1a444228a399d1529cc1554a)] | [removed: [1](#s597dd19f3da24becb2bc6740fdcdd27c)] [added: [1](#sf2a3682d1a444228a399d1529cc1554a)] |

| [Item 1A. Risk [removed: Factors.](#sBE4D3AB1C9F05E58A0DADC6BC58115A6)] [added: Factors.](#s268B72C436DE50B3938B31ABFEB2C6F2)] | [removed: [6](#sBE4D3AB1C9F05E58A0DADC6BC58115A6)] [added: [6](#s268B72C436DE50B3938B31ABFEB2C6F2)] |

| [Item 1B. Unresolved Staff [removed: Comments.](#sbf077938fb314e6eac26a4d55803df35)] [added: Comments.](#sced140c3beb1491ebb5e7d9567f32843)] | [removed: [17](#sbf077938fb314e6eac26a4d55803df35)] [added: [16](#sced140c3beb1491ebb5e7d9567f32843)] |

| [Item 2. [removed: Properties.](#sf6310b0c84c846eab03bc5d5f2edd5a2)] [added: Properties.](#s66f6b47f0b664b03a88cb2726c9b413f)] | [removed: [17](#sf6310b0c84c846eab03bc5d5f2edd5a2)] [added: [16](#s66f6b47f0b664b03a88cb2726c9b413f)] |

| [Item 3. Legal [removed: Proceedings.](#s47C247FCF9355F8A871C610F04B21C6E)] [added: Proceedings.](#s6619510ADE5E5341A8F5579C4AF285FA)] | [removed: [17](#s47C247FCF9355F8A871C610F04B21C6E)] [added: [16](#s6619510ADE5E5341A8F5579C4AF285FA)] |

| [Item 4. Mine Safety [removed: Disclosures.](#sc992baf8fc5d4189b385045ab80d9365)] [added: Disclosures.](#s2e7078aee9b24ddb974c4df2844f208d)] | [removed: [17](#sc992baf8fc5d4189b385045ab80d9365)] [added: [16](#s2e7078aee9b24ddb974c4df2844f208d)] |

| [Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities.](#s0ac2de669df74b0599db4f7300870a76)] [added: Securities.](#s4dbd7e2e4ede45e8893abe891d530c5e)] | [removed: [18](#s0ac2de669df74b0599db4f7300870a76)] [added: [17](#s4dbd7e2e4ede45e8893abe891d530c5e)] |

| [Item 6. Selected Financial [removed: Data.](#sb07b269d558a42f5b95afa3ad1495076)] [added: Data.](#sfc6a26d0c771478dbb27e91cad1d7691)] | [removed: [19](#sb07b269d558a42f5b95afa3ad1495076)] [added: [18](#sfc6a26d0c771478dbb27e91cad1d7691)] |

| [Item 7. Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations.](#s562549023F275E27B08402AEC6B095CE)] [added: Operations.](#sD2501E46994A59189971988B2FF07C47)] | [removed: [21](#s562549023F275E27B08402AEC6B095CE)] [added: [19](#sD2501E46994A59189971988B2FF07C47)] |

| [Consolidated Results of [removed: Operations](#sF16210F587F756F3BA4B58F7678FF7C5)] [added: Operations](#s48CF3E76A0BF58D98BC5A73459E783A3)] | [removed: [22](#sF16210F587F756F3BA4B58F7678FF7C5)] [added: [21](#s48CF3E76A0BF58D98BC5A73459E783A3)] |

| [Results of Operations by [removed: Segment](#s70C4EF1F730E5747A0DF5942A11381FA)] [added: Segment](#sAB8653446F1F5E8D95B1F40BF5A5567D)] | [removed: [27](#s70C4EF1F730E5747A0DF5942A11381FA)] [added: [25](#sAB8653446F1F5E8D95B1F40BF5A5567D)] |

| [Critical Accounting [removed: Policies](#sdb27006b8f29412e87b009a0ae1681a5)] [added: Policies](#sD09EE4ACFAD158B195C3C065E3BA063A)] | [removed: [32](#sdb27006b8f29412e87b009a0ae1681a5)] [added: [30](#sD09EE4ACFAD158B195C3C065E3BA063A)] |

| [New Accounting [removed: Pronouncements](#s7ACE70729D405C8DBCCF40A1493DCD87)] [added: Pronouncements](#sA56CF9D904D259CB8FAA9412A6AF74EC)] | [removed: [35](#s7ACE70729D405C8DBCCF40A1493DCD87)] [added: [33](#sA56CF9D904D259CB8FAA9412A6AF74EC)] |

| [Commodity [removed: Trends](#s39B8F0F45D305892B1D7A9EE33581484)] [added: Trends](#s13B796F19CDF55278FA772BE3DC4EE38)] | [removed: [35](#s39B8F0F45D305892B1D7A9EE33581484)] [added: [34](#s13B796F19CDF55278FA772BE3DC4EE38)] |

| [Liquidity and Capital [removed: Resources](#sCEBFF0D7874D52B4B50BF9E5A386ED9A)] [added: Resources](#s883F8CF5F70D5840A345B36F31A978A2)] | [removed: [35](#sCEBFF0D7874D52B4B50BF9E5A386ED9A)] [added: [34](#s883F8CF5F70D5840A345B36F31A978A2)] |

| [Off-Balance Sheet Arrangements and Aggregate Contractual [removed: Obligations](#s87522BBA83445C3E8BA4DC474E1116EB)] [added: Obligations](#s3D7D10AA500B575DB7E56A410050C3E9)] | [removed: [37](#s87522BBA83445C3E8BA4DC474E1116EB)] [added: [36](#s3D7D10AA500B575DB7E56A410050C3E9)] |

| [Equity and [removed: Dividends](#sF1483C06BCD95A1A8F6350E709A0657D)] [added: Dividends](#s56BE830B985D5EBBB3C7D678A52EE6CE)] | [removed: [38](#sF1483C06BCD95A1A8F6350E709A0657D)] [added: [37](#s56BE830B985D5EBBB3C7D678A52EE6CE)] |

| [Supplemental Unaudited Pro Forma Condensed Combined Financial [removed: Information](#s47FA4CCD9FC057BCAB05A542B779B17F)] [added: Information](#sf2d36d092bc047dbae1f996d13ab555f)] | [removed: [38](#s47FA4CCD9FC057BCAB05A542B779B17F)] [added: [38](#sf2d36d092bc047dbae1f996d13ab555f)] |

| [Non-GAAP Financial [removed: Measures](#s72A9F466871C5D089D3663E350570DE1)] [added: Measures](#sBC0F2902E1505B9486885034CFE6FF28)] | [removed: [44](#s72A9F466871C5D089D3663E350570DE1)] [added: [41](#sBC0F2902E1505B9486885034CFE6FF28)] |

| [Item 7A. Quantitative and Qualitative Disclosures [removed: About] [added: about] Market [removed: Risk.](#s932C6C5248F65481B425DF5D5BD488EE)] [added: Risk.](#s315B214CEAA05E43A66CB6975EBAE517)] | [removed: [49](#s932C6C5248F65481B425DF5D5BD488EE)] [added: [46](#s315B214CEAA05E43A66CB6975EBAE517)] |

| [Item 8. Financial Statements and Supplementary [removed: Data.](#sA0CE5F8987CB5537ACACC3ACF0BB6989)] [added: Data.](#sE9B35769723555E69FCBF13D2E79B185)] | [removed: [50](#sA0CE5F8987CB5537ACACC3ACF0BB6989)] [added: [47](#sE9B35769723555E69FCBF13D2E79B185)] |

| [Report of Independent Registered Public Accounting [removed: Firm](#sc4e071fbe6ce4bc3a86e08182cf2c62e)] [added: Firm](#s22905f134af54dc396bd38a459f23fe7)] | [removed: [50](#sc4e071fbe6ce4bc3a86e08182cf2c62e)] [added: [47](#s22905f134af54dc396bd38a459f23fe7)] |

| [Consolidated Statements of [removed: Income](#s9D7CD13457AF5234B1F98C6B0C7484A7)] [added: Income](#s6BA8FD6536485D00AFBE6141CD54D412)] | [removed: [51](#s9D7CD13457AF5234B1F98C6B0C7484A7)] [added: [49](#s6BA8FD6536485D00AFBE6141CD54D412)] |

| [Consolidated Statements of Comprehensive [removed: Income](#sB83548625E195B8C8D774C896DE8472A)] [added: Income](#s2CA90041C6C65D5A805790B42B4524AB)] | [removed: [52](#sB83548625E195B8C8D774C896DE8472A)] [added: [50](#s2CA90041C6C65D5A805790B42B4524AB)] |

| [Consolidated Balance [removed: Sheets](#s4EC5874A080D54CFBC7AB5016D208BAE)] [added: Sheets](#sB8C62D5E34045798845F2E2A0D8227A0)] | [removed: [53](#s4EC5874A080D54CFBC7AB5016D208BAE)] [added: [51](#sB8C62D5E34045798845F2E2A0D8227A0)] |

| [Consolidated Statements of Cash [removed: Flows](#s4A3432A027D959C0A5BB0CD6ED3B8A82)] [added: Flows](#sEB68982C71725B9F8E704F69AC07A4EB)] | [removed: [55](#s4A3432A027D959C0A5BB0CD6ED3B8A82)] [added: [53](#sEB68982C71725B9F8E704F69AC07A4EB)] |

| [Notes to Consolidated Financial [removed: Statements](#s8704D6B90FEC5608B80E72EE8D744D46)] [added: Statements](#s702F0C5655A25BA0B39E887B99F2010F)] | [removed: [57](#s8704D6B90FEC5608B80E72EE8D744D46)] [added: [55](#s702F0C5655A25BA0B39E887B99F2010F)] |

| [Note 1. Background and Basis of [removed: Presentation](#s67144915212C5FA3838631D121396D11)] [added: Presentation](#sF1675398D9F951B59866B60E78A69BCF)] | [removed: [57](#s67144915212C5FA3838631D121396D11)] [added: [55](#sF1675398D9F951B59866B60E78A69BCF)] |

| [Note 2. Merger and [removed: Acquisition](#s76509FFB52F95F3E8EC930608C04E3E2)] [added: Acquisition](#s7c4a59ce3c3c4f8db62a7a7852b86327)] | [removed: [62](#s76509FFB52F95F3E8EC930608C04E3E2)] [added: [61](#s7c4a59ce3c3c4f8db62a7a7852b86327)] |

| [Note 3. Integration and Restructuring [removed: Expenses](#s3FF44D9AB72A53EAB90586B9CA1B2E22)] [added: Expenses](#s5B1F9A6C22165E86B751C591E9FB862F)] | [removed: [64](#s3FF44D9AB72A53EAB90586B9CA1B2E22)] [added: [63](#s5B1F9A6C22165E86B751C591E9FB862F)] |

| [Note [removed: 4. Inventories](#sE90C76939CB75C1C89D6454E375E49B8)] [added: 5. Inventories](#s239D1E6796AD5053B1EC6ECDA49B7EF3)] | [removed: [66](#sE90C76939CB75C1C89D6454E375E49B8)] [added: [66](#s239D1E6796AD5053B1EC6ECDA49B7EF3)] |

| [Note [removed: 5.] [added: 6.] Property, Plant and [removed: Equipment](#sd32f9762f19c4085bcd73da13feb0390)] [added: Equipment](#s6f0f695c3e3d41cf9689acc4a9b316a9)] | [removed: [66](#sd32f9762f19c4085bcd73da13feb0390)] [added: [66](#s6f0f695c3e3d41cf9689acc4a9b316a9)] |

10-K 1 form10-k2017.htm 2017 10-K

(Mark One)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| [PART I](#s581E562C70925D039C27DFA2119D815B) | [1](#s581E562C70925D039C27DFA2119D815B) |

| [PART II](#s633946AA95B9563FA0815AD84BA1C00E) | [17](#s633946AA95B9563FA0815AD84BA1C00E) |

| [Overview](#s77088FC15B525C9BAD81BB24D3C9BD9E) | [19](#s77088FC15B525C9BAD81BB24D3C9BD9E) |

| [Contingencies](#sCCD3D6936B0D5F4D89661FFDB82BEA8D) | [33](#sCCD3D6936B0D5F4D89661FFDB82BEA8D) |

| [Consolidated Statements of Equity](#s99BB61B854F35017AD3D07D335CE5801) | [52](#s99BB61B854F35017AD3D07D335CE5801) |

| [Note 4. Restricted Cash](#s65C309A9D7F15345807FA7C6BB96259D) | [66](#s65C309A9D7F15345807FA7C6BB96259D) |

| [Note 9. Employees’ Stock Incentive Plan](#s391DFCEE720D5B82AB7CB459A1BEF284) | [71](#s391DFCEE720D5B82AB7CB459A1BEF284) |

| [Note 16. Debt](#sbed67bde028b44098bc8dbd7fbb8e5f0) | [92](#sbed67bde028b44098bc8dbd7fbb8e5f0) |

10-K 1 khc201610k.htm 2016 10-K

(Check One):

| [PART I](#sBB18CC2EB72B535D951E9E369A8C757A) | [1](#sBB18CC2EB72B535D951E9E369A8C757A) |

| [PART II](#s89A10F24AC855D128321DF3D05511182) | [18](#s89A10F24AC855D128321DF3D05511182) |

| [Overview](#s96E3589BA079580CABE3D60CCDD768F7) | [21](#s96E3589BA079580CABE3D60CCDD768F7) |

| [Contingencies](#s788AF90251A55A61AF9CD3905481979A) | [35](#s788AF90251A55A61AF9CD3905481979A) |

| [Consolidated Statement of Equity](#sBB18508B6508519F9C3CA64EE9A19393) | [54](#sBB18508B6508519F9C3CA64EE9A19393) |

| [Note 8. Employee’s Stock Incentive Plans](#sA569E16D56395025AD9689F832D750A1) | [72](#sA569E16D56395025AD9689F832D750A1) |

| [Note 11. Debt](#s12f056292b9a4c8db77bb2770c10df36) | [85](#s12f056292b9a4c8db77bb2770c10df36) |

Our co-headquarters are leased and house [removed: our] [added: certain] executive offices, [removed: certain] [added: our] U.S. business units, and our administrative, finance, [added: legal,] and human resource functions.

As of December [removed: 31, 2016,] [added: 30, 2017,] we operated [removed: 87] [added: 83] manufacturing and processing facilities.

We own [removed: 83] [added: 80] and lease [removed: four] [added: three] of these facilities.

Our manufacturing and processing facilities count by segment as of December [removed: 31, 2016] [added: 30, 2017] was:

| | [removed: |] Owned | | Leased |

| United States | [removed: | 43] [added: 41] | | [removed: 2] [added: 1] |

| Canada | [removed: | 3] [added: 2] | | — |

| Europe | [removed: |] 11 | | — |

| Rest of World | [removed: |] 26 | | 2 |

| | | | |

| --- | --- | --- | --- |

| | | | |

| | | | | |

| --- | --- | --- | --- | --- |

In the fourth quarter of 2016, we reorganized our segment structure to move our Russia business from the Rest of World segment to the Europe segment.

We have reflected this change in the table above.

See Note 18, Segment Reporting, to the consolidated financial statements for additional information.

Several of our current manufacturing and processing facilities are scheduled to be closed within the next year.

See Note 3, Integration and Restructuring Expenses, to the consolidated financial statements for additional information.

At February [removed: 18, 2017,] [added: 10, 2018,] there were approximately [removed: 55,000] [added: 53,000] holders of record of our common stock.

Our quarterly highest and lowest market prices [added: and dividends declared] are:

| | [removed: 2016] [added: 2017] Quarters | | | | | | | | | | | | | | | | [removed: 2015] [added: 2016] Quarters | | | | | | | | | | | [added: | | | |]

| | First | | | | Second | | | | Third | | | | Fourth | | | | First | | [added: | |] Second | | [added: | |] Third | | | | Fourth | | |

| Market price-high | $ | [removed: 79.16] [added: 97.77] | | | $ | [removed: 89.40] [added: 93.88] | | | $ | [removed: 90.54] [added: 90.38] | | | $ | [removed: 90.15] [added: 82.48] | | | [removed: NA] [added: $] | [added: 79.16] | [removed: NA] | | $ | [removed: 81.20] [added: 89.40] | | | $ | [removed: 79.94] [added: 90.54] | | [added: | $ | 90.15 | |]

| Market price-low | [removed: $] [added: 85.41] | [removed: 68.18] | | | [removed: $] [added: 85.45] | [removed: 76.64] | | | [removed: $] [added: 77.40] | [removed: 84.25] | | | [removed: $] [added: 75.21] | [removed: 79.69] | | | [removed: NA] [added: 68.18] | | [removed: NA] | | [removed: $] [added: 76.64] | [removed: 61.42] | | | [removed: $] [added: 84.25] | [removed: 68.65] | | [added: | 79.69 | | |]

| Dividends declared | [removed: $] [added: 0.60] | [removed: 0.575] | | | [removed: $] [added: 0.60] | [removed: 0.575] | | | [removed: $] [added: 0.625] | [removed: 0.60] | | | [removed: $] [added: 0.625] | [removed: 0.60] | | | [removed: NA] [added: 0.575] | | [removed: NA] | | [removed: $] [added: 0.575] | [removed: 0.55] | | | [removed: $] [added: 0.60] | [removed: 1.15] | | [added: | 0.60 | | |]

This graph covers the period from July 6, 2015 (the first day our common stock began trading on NASDAQ) through December [removed: 30, 2016] [added: 29, 2017] (the last trading day of our fiscal year).

[removed: ][added: ]

| | Kraft Heinz | | [added: | |] S&P 500 | | [added: | |] S&P Consumer Staples Food Products | [added: | |]

| July 6, 2015 | [removed: $100.00] [added: $] | [added: 100.00] | [removed: $100.00] | | [removed: $100.00] [added: $] | [added: 100.00 | | | $ | 100.00 | |]

During [removed: 2016, Keurig Green Mountain, Inc.] [added: 2017, Mead Johnson Nutrition Company] was removed from the index, therefore it is excluded from the table and chart above.

Issuer Purchases of Equity Securities During the Three Months Ended December [removed: 31, 2016][added: 30, 2017]

Our share repurchase activity [removed: for] [added: in] the three months ended December [removed: 31, 2016] [added: 30, 2017] was:

| | | Total Number of Shares(a) | | | Average Price Paid Per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced [removed: Plan] [added: Plans] or [removed: Program] [added: Programs(b)] | | | Dollar Value of Shares that May Yet [removed: be] [added: Be] Purchased Under the [removed: Plan] [added: Plans] or [removed: Program] [added: Programs] | | |

| For the Three Months Ended December [removed: 31, 2016] [added: 30, 2017] | | [removed: 1,455,829] [added: 2,076] | | | | | | | — | | | | | |

| (a) | Includes the following types of share repurchase activity, when they occur: (1) shares repurchased in connection with the exercise of stock options (including periodic repurchases using [removed: accumulated] option exercise proceeds), (2) shares [removed: tendered by individuals who used shares to pay the related taxes] [added: withheld] for [removed: grants] [added: tax liabilities associated with the vesting] of [removed: restricted stock units (“RSUs”) that vested,] [added: RSUs,] and (3) shares repurchased related to employee benefit programs (including our annual bonus swap [removed: program).] [added: program) or to offset the dilutive effect of equity issuances.] |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| December 31, 2015 | 102.07 | | | | 99.85 | | | | 107.48 | | |

| December 30, 2016 | 125.99 | | | | 111.79 | | | | 117.49 | | |

| December 29, 2017 | 115.44 | | | | 136.20 | | | | 118.95 | | |

| 10/1/2017 - 11/4/2017 | | 648 | | | $ | 77.25 | | | — | | | $ | — | |

| 11/5/2017 - 12/2/2017 | | — | | | — | | | | — | | | — | | |

| 12/3/2017 - 12/30/2017 | | 1,428 | | | 80.46 | | | | — | | | — | | |

| | |

| --- | --- |

| (b) | We do not have any publicly announced share repurchase plans or programs. |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| December 31, 2015 | $102.07 | | $99.85 | | $106.15 |

| December 30, 2016 | $125.99 | | $111.79 | | $115.17 |

| 10/3/2016 - 11/6/2016 | | 541,110 | | | $ | 88.82 | | | — | | | | | |

| 11/7/2016 - 12/4/2016 | | 459,117 | | | 83.16 | | | | — | | | | | |

| 12/5/2016 - 12/31/2016 | | 455,602 | | | 84.64 | | | | — | | | $ | — | |

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

| • | The consolidated financial statements for the year ended December 31, 2016 (a [removed: 52 week] [added: 52-week] period, including a full year of Kraft Heinz results); |

| • | The consolidated financial statements for the year ended January 3, 2016 (a [removed: 53 week] [added: 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 [removed: 52 week] [added: 52-week] period, including a full year of Heinz results); and |

The [removed: “Predecessor] [added: “Predecessor”] (H. J. Heinz Company) [removed: Period”] [added: 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; [added: and] |

| • | The consolidated financial statements of H. J. Heinz Company for the fiscal year from April 30, 2012 to April 28, 2013 (“Fiscal [removed: 2013”); and] [added: 2013”).] |

The following table presents selected consolidated financial data for [added: 2017,] 2016, 2015, 2014, the 2013 Successor Period, the 2013 Predecessor Period, [removed: Fiscal 2013,] and Fiscal [removed: 2012.][added: 2013.]

| | Successor | | | | | | | | | | | | | | | | [added: | | | |] Predecessor (H. J. Heinz Company) | | | | | | | [removed: | | | |]

| | December [added: 30, 2017 (52 weeks) | | | | December] 31, 2016 (52 weeks)(a) | | | | 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) | | | [removed: | April 29, 2012 (52 1/2 weeks)(e) | | |]

| Net sales(b)(d) | $ | [added: 26,232 | | | $ |] 26,487 | | | $ | 18,338 | | | $ | 10,922 | | | $ | 6,240 | | | $ | 1,113 | | | $ | 11,529 | | [removed: | $ | 11,508 | |]

| Income/(loss) from continuing operations(b) | [added: 10,990 | | | |] 3,642 | | | | 647 | | | | 672 | | | | (66 | | ) | | (191 | | ) | | 1,102 | | | [removed: | 992 | | |]

| Income/(loss) from continuing operations attributable to common shareholders(b) | [added: 10,999 | | | |] 3,452 | | | | (266 | | ) | | (63 | | ) | | (1,118 | | ) | | (194 | | ) | | 1,088 | | | [removed: | 974 | | |]

| Basic | [added: 9.03 | | | |] 2.84 | | | | (0.34 | | ) | | (0.17 | | ) | | (2.97 | | ) | | (0.60 | | ) | | 3.39 | | | [removed: | 3.03 | | |]

| Diluted | [added: 8.95 | | | |] 2.81 | | | | (0.34 | | ) | | (0.17 | | ) | | (2.97 | | ) | | (0.60 | | ) | | 3.37 | | | [removed: | 3.01 | | |]

| Total assets(d) | [added: 120,232 | | | |] 120,480 | | | | 122,973 | | | | 36,571 | | | | 38,681 | | | | NA | | | | 12,920 | | | [removed: | 11,960 | | |]

| Long-term debt(c)(d) | [added: 28,333 | | | |] 29,713 | | | | 25,151 | | | | 13,358 | | | | 14,326 | | | | NA | | | | 3,830 | | | [removed: | 4,757 | | |]

| Redeemable preferred stock | — | | | | [removed: 8,320] [added: —] | | | | 8,320 | | | | 8,320 | | | | [removed: NA] [added: 8,320] | | | | [removed: —] [added: NA] | | | | — | | |

| Cash dividends per common share | [removed: 2.35] [added: 2.45] | | | | [removed: 1.70] [added: 2.35] | | | | [removed: —] [added: 1.70] | | | | — | | | | — | | | | [removed: 2.06] [added: —] | | | | [removed: 1.92] [added: 2.06] | | |

| (a) | On December 9, 2016, our Board of Directors approved a change to our fiscal year end from Sunday to Saturday. Effective December 31, 2016, we operate on a 52 or 53-week fiscal year ending on the last Saturday in December in each calendar year. In prior years, we operated on a 52 or 53-week fiscal year ending the Sunday closest to December 31. As a result, we occasionally have a 53rd week in a fiscal year. Our [added: 2015 fiscal] year [removed: ended January 3, 2016] includes a 53rd week of activity. [removed: See Note 1, Background and Basis of Presentation, to the consolidated financial statements for additional information.] |

| (b) | Amounts exclude the operating results [removed: as well as] [added: and] any associated impairment charges and losses on sale related to the Company's Shanghai LongFong Foods business in China and U.S. Foodservice frozen desserts business, which were divested in Fiscal 2013. |

| (c) | Amounts [added: exclude the current portion of long-term debt. Additionally, amounts] include interest rate swap hedge accounting adjustments of $123 million at April 28, [removed: 2013 and $128 million at April 29, 2012.] [added: 2013.] There were no interest rate swaps requiring such hedge accounting adjustments at December [added: 30, 2017, December] 31, 2016, January 3, 2016, December 28, 2014, or December 29, 2013. [removed: Additionally, amounts exclude the current portion of long-term debt.] |

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, as amended by the Amendment to Agreement and Plan of Merger, dated March 4, 2013, by and among H. J. Heinz Company, Heinz, and Hawk Acquisition Sub, Inc. (“Hawk”).

| • | The consolidated financial statements for the year ended December 30, 2017 (a 52-week period, including a full year of Kraft Heinz results); |

| | |

| --- | --- |

| • | The consolidated financial statements of H. J. Heinz Company for the fiscal year from April 28, 2011 to April 29, 2012 (“Fiscal 2012”). |

| (e) | On March 14, 2012, H. J. Heinz Company’s board of directors authorized a change in fiscal year end from the Wednesday nearest April 30 to the Sunday nearest April 30. This change resulted in a 52 1/2-week-long Fiscal 2012. |

In our opinion, the [removed: accompanying] consolidated [removed: balance sheets and the related consolidated] [added: financial] statements [removed: of income, comprehensive income, equity and cash flows] [added: referred to above] present fairly, in all material respects, the financial position of [removed: The Kraft Heinz] [added: the] Company [added: as of December 30, 2017] and [removed: its subsidiaries at] December 31, [removed: 2016 and January 3,] 2016, and the results of their operations and their cash flows for [added: each of] the [removed: fiscal] [added: three] years [added: in the period] ended December [removed: 31, 2016, January 3, 2016, and December 28, 2014] [added: 30, 2017] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December [removed: 31, 2016,] [added: 30, 2017,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the [removed: Committee of Sponsoring Organizations of the Treadway Commission (COSO).][added: COSO.]

The Company's management is responsible for these [removed: financial statements and] [added: consolidated] financial [removed: statement schedule,] [added: statements,] for maintaining effective internal control over financial [removed: reporting] [added: reporting,] and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under [removed: item] [added: Item] 9A.

Our responsibility is to express opinions on [removed: these financial statements, on] the [added: Company’s consolidated] financial [removed: statement schedule,] [added: statements] and on the Company's internal control over financial reporting based on our [removed: audits (which was an integrated audit for the fiscal year ended December 31, 2016).][added: audits.]

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the [added: consolidated] financial statements are free of material [removed: misstatement] [added: misstatement, whether due to error or fraud,] and whether effective internal control over financial reporting was maintained in all material respects.

Our audits [removed: of the financial statements] [added: also] included [removed: examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing] [added: evaluating] the accounting principles used and significant estimates made by management, [removed: and] [added: as well as] evaluating the overall [added: presentation of the consolidated] financial [removed: statement presentation.][added: statements.]

| | December [removed: 31, 2016] [added: 30, 2017] (52 weeks) | | | | [removed: January 3,] [added: December 31,] 2016 [removed: (53] [added: (52] weeks) | | | | [removed: December 28, 2014 (52] [added: January 3, 2016 (53] weeks) | | |

| Net sales | $ | [removed: 26,487] [added: 26,232] | | | $ | [removed: 18,338] [added: 26,487] | | | $ | [removed: 10,922] [added: 18,338] | |

| Cost of products sold | [removed: 16,901] [added: 16,529] | | | | [removed: 12,577] [added: 16,901] | | | | [removed: 7,645] [added: 12,577] | | |

| Gross profit | [removed: 9,586] [added: 9,703] | | | | [removed: 5,761] [added: 9,586] | | | | [removed: 3,277] [added: 5,761] | | |

| Selling, general and administrative expenses | [removed: 3,444] [added: 2,930] | | | | [removed: 3,122] [added: 3,444] | | | | [removed: 1,709] [added: 3,122] | | |

| Operating income | [removed: 6,142] [added: 6,773] | | | | [removed: 2,639] [added: 6,142] | | | | [removed: 1,568] [added: 2,639] | | |

| Interest expense | [removed: 1,134] [added: 1,234] | | | | [removed: 1,321] [added: 1,134] | | | | [removed: 686] [added: 1,321] | | |

| Other expense/(income), net | [removed: (15] [added: 9] | | [removed: )] | | [removed: 305] [added: (15] | | [added: )] | | [removed: 79] [added: 305] | | |

| Income/(loss) before income taxes | [removed: 5,023] [added: 5,530] | | | | [removed: 1,013] [added: 5,023] | | | | [removed: 803] [added: 1,013] | | |

| Provision for/(benefit from) income taxes | [removed: 1,381] [added: (5,460] | | [added: )] | | [removed: 366] [added: 1,381] | | | | [removed: 131] [added: 366] | | |

| Net income/(loss) | [removed: 3,642] [added: 10,990] | | | | [removed: 647] [added: 3,642] | | | | [removed: 672] [added: 647] | | |

| Net income/(loss) attributable to noncontrolling interest | [removed: 10] [added: (9] | | [added: )] | | [removed: 13] [added: 10] | | | | [removed: 15] [added: 13] | | |

| Net income/(loss) attributable to Kraft Heinz | [removed: 3,632] [added: 10,999] | | | | [removed: 634] [added: 3,632] | | | | [removed: 657] [added: 634] | | |

| Preferred dividends | [removed: 180] [added: —] | | | | [removed: 900] [added: 180] | | | | [removed: 720] [added: 900] | | |

| Net income/(loss) attributable to common shareholders | $ | [removed: 3,452] [added: 10,999] | | | $ | [removed: (266] [added: 3,452] | [removed: )] | | $ | [removed: (63] [added: (266] | ) |

| Basic earnings/(loss) | $ | [removed: 2.84] [added: 9.03] | | | $ | [removed: (0.34] [added: 2.84] | [removed: )] | | $ | [removed: (0.17] [added: (0.34] | ) |

| Diluted earnings/(loss) | [removed: 2.81] [added: 8.95] | | | | [removed: (0.34] [added: 2.81] | | [removed: )] | | [removed: (0.17] [added: (0.34] | | ) |

| Dividends declared | [removed: 2.35] [added: 2.45] | | | | [removed: 1.70] [added: 2.35] | | | | [removed: —] [added: 1.70] | | |

| Net income/(loss) | $ | [removed: 3,642] [added: 10,990] | | | $ | [removed: 647] [added: 3,642] | | | $ | [removed: 672] [added: 647] | |

| Foreign currency translation adjustments | [removed: (986] [added: 1,184] | | [removed: )] | | [removed: (1,604] [added: (986] | | ) | | [removed: (939] [added: (1,604] | | ) |

| Net deferred gains/(losses) on net investment hedges | [removed: 226] [added: (353] | | [added: )] | | [removed: 506] [added: 226] | | | | [removed: 336] [added: 506] | | |

| Net actuarial gains/(losses) arising during the period | [removed: (40] [added: 69] | | [removed: )] | | [removed: 23] [added: (40] | | [added: )] | | [removed: (34] [added: 23] | | [removed: )] |

| Prior service credits/(costs) arising during the period | [removed: 97] [added: 17] | | | | [removed: 923] [added: 97] | | | | [removed: —] [added: 923] | | |

| Reclassification of net postemployment benefit losses/(gains) | [removed: (207] [added: (309] | | ) | | [removed: (85] [added: (207] | | ) | | [removed: (7] [added: (85] | | ) |

| Net deferred gains/(losses) on cash flow hedges | [removed: 46] [added: (113] | | [added: )] | | [removed: (6] [added: 46] | | [removed: )] | | [removed: (173] [added: (6] | | ) |

| Net deferred losses/(gains) on cash flow hedges reclassified to net income | [removed: (87] [added: 85] | | [removed: )] | | [removed: 120] [added: (87] | | [added: )] | | [removed: 4] [added: 120] | | |

| Total other comprehensive income/(loss) | [removed: (951] [added: 580] | | [removed: )] | | [removed: (123] [added: (951] | | ) | | [removed: (813] [added: (123] | | ) |

| Total comprehensive income/(loss) | [removed: 2,691] [added: 11,570] | | | | [removed: 524] [added: 2,691] | | | | [removed: (141] [added: 524] | | [removed: )] |

| Comprehensive income/(loss) attributable to noncontrolling interest | [removed: 16] [added: (3] | | [added: )] | | [removed: (13] [added: 16] | | [removed: )] | | [removed: 8] [added: (13] | | [added: )] |

| Comprehensive income/(loss) attributable to Kraft Heinz | $ | [removed: 2,675] [added: 11,573] | | | $ | [removed: 537] [added: 2,675] | | | $ | [removed: (149] [added: 537] | [removed: )] |

| | December [added: 30, 2017 (52 weeks) | | | | December] 31, 2016 [added: (52 weeks)] | | | | January 3, 2016 [added: (53 weeks)] | | |

| Cash and cash equivalents | $ | [removed: 4,204] [added: 1,629] | | | $ | [removed: 4,837] [added: 4,204] | |

| Trade receivables (net of allowances of [removed: $20] [added: $23] at December [removed: 31, 2016] [added: 30, 2017] and [removed: $32] [added: $20] at [removed: January 3,] [added: December 31,] 2016) | [removed: 769] [added: 921] | | | | [removed: 871] [added: 769] | | |

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of The Kraft Heinz Company and its subsidiaries as of December 30, 2017 and December 31, 2016, and the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 30, 2017, including the related notes and the financial statement schedule listed in the index appearing under Item 15(a) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it presents cash receipts relating to beneficial interests obtained in securitized trade receivables in 2017.

Basis for Opinions

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Definition and Limitations of Internal Control over Financial Reporting

We have served as the Company’s or its predecessor’s auditor since 1979.

| | December 30, 2017 | | | | December 31, 2016 | | |

| Income taxes receivable | 582 | | | | 260 | | |

| Dividends declared-common stock | — | | | | — | | | | — | | | | (2,988 | | ) | | — | | | | — | | | | — | | | | (2,988 | | ) |

| Balance at December 30, 2017 | $ | 12 | | | $ | — | | | $ | 58,711 | | | $ | 8,589 | | | $ | (1,054 | ) | | $ | (224 | ) | | $ | 207 | | | $ | 66,241 | |

| Net income/(loss) | $ | 10,990 | | | $ | 3,642 | | | $ | 647 | |

| Trade receivables | (2,629 | | ) | | (2,055 | | ) | | (915 | | ) |

| Cash receipts on sold receivables | 2,286 | | | | 2,589 | | | | 1,331 | | |

| Debt prepayment and extinguishment costs | — | | | | — | | | | (105 | | ) |

| Net increase/(decrease) | (2,486 | | ) | | (657 | | ) | | 2,602 | | |

| Balance at beginning of period | 4,255 | | | | 4,912 | | | | 2,310 | | |

| Balance at end of period | $ | 1,769 | | | $ | 4,255 | | | $ | 4,912 | |

| Non-cash investing activities: | | | | | | | | | | | |

| Beneficial interest obtained in exchange for securitized trade receivables | $ | 2,519 | | | $ | 2,213 | | | $ | 1,609 | |

The Sponsors initially owned 850 million shares of common stock in Heinz.

We apply highly inflationary accounting to the results of our Venezuelan subsidiary.

Foreign currency cash flow hedges:

Net investment hedges:

Interest rate cash flow hedges:

Commodity derivatives:

New Accounting Pronouncements

Accounting Standards Adopted in the Current Year:

Cash flows related to excess tax benefits are classified as operating activities rather than financing activities.

This ASU became effective in the first quarter of 2017.

We adopted the guidance related to excess tax benefits on a prospective basis.

As a result, we recognized a tax benefit of $22 million in our consolidated statement of income for 2017 related to our excess tax benefits upon the exercise of share-based payment awards.

We retrospectively adopted the guidance related to cash flow classification of employee tax withholdings on restricted share vesting.

This guidance did not have a material impact on our consolidated statement of cash flows for 2016.

The impact on our consolidated statement of cash flows for 2015 was a $31 million decrease to cash flows provided by financing activities and a corresponding increase to cash flows provided by operating activities.

Our equity award compensation cost continues to reflect estimated forfeitures.

In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a) for the fiscal years ended December 31, 2016, January 3, 2016, and December 28, 2014 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

February 23, 2017

(in millions of dollars)

| Dividends payable | 39 | | | | 762 | | |

| Common stock, $0.01 par value (5,000,000,000 shares authorized; 1,218,947,088 shares issued and 1,216,475,740 shares outstanding at December 31, 2016; 1,214,391,614 shares issued and 1,213,978,752 shares outstanding at January 3, 2016) | 12 | | | | 12 | | |

| Balance at December 29, 2013 | $ | 4 | | | $ | 367 | | | $ | 7,450 | | | $ | (77 | ) | | $ | 232 | | | $ | — | | | $ | 216 | | | $ | 8,192 | |

| Trade receivables | 80 | | | | 838 | | | | 144 | | |

| Sold receivables | 454 | | | | (422 | | ) | | (129 | | ) |

| Net increase/(decrease) | (633 | | ) | | 2,539 | | | | (161 | | ) |

| Balance at beginning of period | 4,837 | | | | 2,298 | | | | 2,459 | | |

| Balance at end of period | $ | 4,204 | | | $ | 4,837 | | | $ | 2,298 | |

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

Subsequent Event:

On February 17, 2017, we disclosed that we approached Unilever plc / Unilever N.V. (“Unilever”) with a comprehensive proposal to combine the two companies to create a leading consumer goods company with a mission of long-term growth and sustainable living.

Unilever declined the proposal.

On February 19, 2017, we disclosed that we had amicably withdrawn our proposal for a combination of the two companies.

Change in Fiscal Year End:

On December 9, 2016, our Board of Directors approved a change to our fiscal year end from Sunday to Saturday.

Effective December 31, 2016, we operate on a 52 or 53-week fiscal year ending on the last Saturday in December in each calendar year.

In prior years, we operated on a 52 or 53-week fiscal year ending 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.

This change to our fiscal year end aligns our financial statement reporting date with the fiscal close periods of certain of our U.S. and Canada businesses, which make up a substantial portion of our results.

This change did not have a material impact on our current or any prior period financial statements.

Certain non-monetary assets and liabilities are recorded at the applicable historical exchange rates.

hedges are calculated each period with changes reported in foreign currency translation adjustment within accumulated other comprehensive income/(losses).

Recently Issued Accounting Standards:

We have focused our reviews on the revenue streams in the U.S., Canada, and Europe as they are our most significant.

At this time, we believe the potential impacts on our existing accounting policies may be associated with our consumer incentive and trade promotion programs.

We will adopt the new standard on January 1, 2018, however, we are still evaluating our application method.

Our ability to adopt using the full retrospective method is dependent on system readiness, which may include software procured from third-party providers, and finalizing our assessment of information necessary to restate prior period financial statements.

Early adoption is permitted.

Based on our initial reviews, we expect that the adoption will increase the assets and liabilities on our consolidated balance sheets.

The ASU impacts income tax accounting related to equity-based awards, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows.

The impact of adopting this ASU at December 31, 2016 would have been a $30 million income tax benefit recorded on the consolidated statement of income and an offsetting non-cash deduction in cash flows from operating activities on the statement of cash flows for the year ended December 31, 2016.

This ASU provides guidance on eight specific cash flow classification matters in order to reduce current and future diversity in practice.

We expect that this will result in a reclassification of call premiums paid in conjunction with our debt refinancing activity in 2015 from operating activities to financing activities.

This guidance is intended to reduce the complexity and diversity in practice, particularly for intellectual property transfers.

Early adoption is permitted but must be adopted in the first interim period of the annual period for which the ASU is adopted.

Accordingly, restricted cash would be required to be included in the beginning and ending cash and cash equivalents balances.

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and [removed: procedures] [added: procedures,] as of December [removed: 31, 2016, the end of the period covered by this report,] [added: 30, 2017,] were effective and provided reasonable assurance that the information required to be disclosed by us in reports filed or submitted under the [added: Securities] Exchange Act [added: of 1934] is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer, with other members of management, evaluated the changes in our internal control over financial reporting during the [removed: quarter] [added: three months] ended December [removed: 31, 2016.][added: 30, 2017.]

We determined [removed: that] [added: that, except for the remediation activities described above,] there were no changes in our internal control over financial reporting during the [removed: quarter] [added: three months] ended December [removed: 31, 2016,] [added: 30, 2017] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.