Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Objective:

The following discussion provides an analysis of our financial condition and results of operations from management's perspective and should be read in conjunction with the condensed consolidated financial statements and related notes included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q. Our objective is to also provide discussion of material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides an understanding of our financial condition, results of operations, and cash flows.

Description of the Company:

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

In the first quarter of 2024, our internal reporting structure and reportable segments changed. We divided our International segment into three operating segments — Europe and Pacific Developed Markets (“EPDM” or “International Developed Markets”), West and East Emerging Markets (“WEEM”), and Asia Emerging Markets (“AEM”) — to enable enhanced focus on the different strategies required for each of these regions as part of our long-term strategic plan. Subsequently, we manage our operating results through four operating segments. We have two reportable segments defined by geographic region: North America and International Developed Markets. Our remaining operating segments, consisting of WEEM and AEM, are combined and disclosed as Emerging Markets. We have reflected this change in all historical periods presented.

See Note 16, Segment Reporting, in Item 1, Financial Statements, for our financial information by segment.

Acquisitions and Divestitures:

In the first quarter of 2024, we closed the sale of the Russia Infant Transaction and the Papua New Guinea Transaction. See Note 4, Acquisitions and Divestitures, in Item 1, Financial Statements, for additional information on divestiture activities.

Conflict Between Russia and Ukraine:

For the three months ended March 30, 2024 and the year ended December 30, 2023, approximately 1% of consolidated net sales, operating income, and Adjusted Operating Income were generated from our business in Russia. As of March 30, 2024, less than 1% of consolidated total assets were located in Russia and we had approximately 800 employees in Russia. We have no operations or employees in Ukraine and insignificant net sales through distributors. We will continue to monitor the impact that this conflict has on our business; however, through the first quarter of 2024, the conflict between Russia and Ukraine did not have a material impact on our financial condition, results of operations, or cash flows.

Items Affecting Comparability of Financial Results

Inflation and Supply Chain Impacts:

During the three months ended March 30, 2024, we experienced moderate increases to supply chain costs due to inflationary pressures as compared to the prior year period. We expect inflation to moderate through the remainder of 2024 and to be lower than we experienced in 2023. While these costs have a negative impact on our results of operations, we have taken measures to mitigate the impact of this inflation through pricing actions, efficiency gains, and hedging strategies. However, there has been, and we expect that there could continue to be, a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we have taken have, in some instances, negatively impacted, and could continue to negatively impact, our market share.

Results of Operations

We disclose in this report certain non-GAAP financial measures. These non-GAAP financial measures assist management in comparing our performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our underlying operations. For additional information and reconciliations to the most closely comparable financial measures presented in our condensed consolidated financial statements, which are calculated in accordance with U.S. GAAP see Non-GAAP Financial Measures.

Consolidated Results of Operations

Summary of Results:

			For the Three Months Ended
			March 30, 2024						April 1, 2023						% Change
			(in millions, except per share data)
Net sales			$	6,411					$	6,489					(1.2)		%
Operating income/(loss)			1,302						1,243						4.7		%
Net income/(loss)			804						837						(3.9)		%
Net income/(loss) attributable to common shareholders			801						836						(4.2)		%
Diluted EPS			0.66						0.68						(2.9)		%

Net Sales:

			For the Three Months Ended
			March 30, 2024						April 1, 2023						% Change
			(in millions)
Net sales			$	6,411					$	6,489					(1.2)		%
Organic Net Sales(a)			6,410						6,441						(0.5)		%

(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023:

Net sales decreased 1.2% to $6.4 billion for the three months ended March 30, 2024 compared to $6.5 billion for the three months ended April 1, 2023, including the unfavorable impacts of foreign currency (0.6 pp) and acquisitions and divestitures (0.1 pp). Organic Net Sales decreased 0.5% to $6.4 billion for the three months ended March 30, 2024 compared to $6.4 billion for the three months ended April 1, 2023, primarily driven by unfavorable volume/mix (3.2 pp) which more than offset higher pricing (2.7 pp). Pricing was higher in each segment. Volume/mix in each of North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.

Net Income/(Loss):

			For the Three Months Ended
			March 30, 2024						April 1, 2023						% Change
			(in millions)
Operating income/(loss)			$	1,302					$	1,243					4.7		%
Net income/(loss)			804						837						(3.9)		%
Net income/(loss) attributable to common shareholders			801						836						(4.2)		%
Adjusted Operating Income(a)			1,265						1,245						1.7		%

(a) Adjusted Operating Income is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023:

Operating income/(loss) increased 4.7% to income of $1.3 billion for the three months ended March 30, 2024 compared to income of $1.2 billion for the three months ended April 1, 2023, primarily due to higher pricing and the impact of realized and unrealized gains and losses on commodity hedges. These increases to operating income/(loss) were partially offset by unfavorable volume/mix; increased SG&A due, in part, to investments in advertising, technology, and research and development; and higher employee compensation related costs.

Net income/(loss) decreased 3.9% to income of $804 million for the three months ended March 30, 2024 compared to income of $837 million for the three months ended April 1, 2023. This decrease was due to unfavorable changes in other expense/(income) and higher tax expense, which more than offset the favorable changes in operating income/(loss) factors discussed above. Interest expense was flat compared to the prior year period.

• Our effective tax rate for the three months ended March 30, 2024 was an expense of 21.9% on pre-tax income, compared to an expense of 20.3% for the three months ended April 1, 2023. The year-over-year increase in the effective tax rate for the three month period was driven by certain net discrete items, primarily due to establishing a valuation allowance on the deferred tax asset for the U.S. capital loss carryover generated from our divestiture activities, as well as from a less favorable geographic mix of pre-tax income.

• Other expense/(income) was $47 million of expense for the three months ended March 30, 2024 compared to $35 million of income for the three months ended April 1, 2023. This change was primarily driven by a $80 million net loss on the sale of businesses in the first quarter of 2024.

Adjusted Operating Income increased 1.7% to $1.3 billion for the three months ended March 30, 2024 compared to $1.2 billion for the three months ended April 1, 2023, primarily driven by higher pricing, which more than offset unfavorable volume/mix; increased SG&A due, in part, to investments in advertising, technology, and research and development; increased fixed cost of products sold, particularly for employee compensation related expenses; and the unfavorable impact of foreign currency (0.5 pp).

Diluted EPS:

			For the Three Months Ended
			March 30, 2024						April 1, 2023						% Change
Diluted EPS			$	0.66					$	0.68					(2.9)		%
Adjusted EPS(a)			0.69						0.68						1.5		%

(a) Adjusted EPS is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023:

Diluted EPS decreased 2.9% to $0.66 for the three months ended March 30, 2024 compared to $0.68 for the three months ended April 1, 2023, primarily due to the net income/(loss) factors discussed above, which more than offset the impact of our share repurchase activity.

			For the Three Months Ended
			March 30, 2024						April 1, 2023						$ Change						% Change
Diluted EPS			$	0.66					$	0.68					$	(0.02)					(2.9)		%
Restructuring activities			—						(0.01)						0.01
Unrealized losses/(gains) on commodity hedges			(0.02)						0.01						(0.03)
Losses/(gains) on sale of business			0.05						—						0.05
Adjusted EPS(a)			$	0.69					$	0.68					$	0.01					1.5		%
Key drivers of change in Adjusted EPS(a):
Results of operations															$	0.01
Effective tax rate															(0.01)
Effect of common stock repurchases(b)															0.01
															$	0.01

(a) Adjusted EPS is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

(b) Includes the impact of (1) shares purchased pursuant to our share repurchase program, (2) shares repurchased to offset the dilutive effect of the exercise of stock options using option exercise proceeds and the vesting RSUs and PSUs, and (3) shares withheld for tax liabilities associated with the vesting of RSUs and PSUs.

Adjusted EPS increased 1.5% to $0.69 for the three months ended March 30, 2024 compared to $0.68 for the three months ended April 1, 2023. This increase was primarily driven by higher Adjusted Operating Income and the favorable effect of common stock repurchases, which more than offset higher taxes on adjusted earnings.

Results of Operations by Segment

We manage our operating results through four operating segments. We have two reportable segments defined by geographic region: North America and International Developed Markets. Our remaining operating segments, consisting of WEEM and AEM, are combined and disclosed as Emerging Markets.

Management evaluates segment performance based on several factors, including net sales, Organic Net Sales, and Segment Adjusted Operating Income. In the first quarter of 2024, certain measures utilized by management to evaluate segment performance changed, including a change from Segment Adjusted EBITDA to Segment Adjusted Operating Income in order to drive a stronger connection to our long-term strategic plan. Segment Adjusted Operating Income is defined as operating income/(loss) excluding, when they occur, the impacts of restructuring activities, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized; once realized, the gains and losses are recorded in the applicable segment’s operating results), impairment losses, and certain non-ordinary course legal and regulatory matters. Segment Adjusted Operating Income for Emerging Markets, which represents the aggregation of our WEEM and AEM operating segments, is defined and presented consistently with the Segment Adjusted Operating Income of our reportable segments — North America and International Developed Markets. Segment Adjusted Operating Income is a financial measure that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations. Management also uses Segment Adjusted Operating Income to allocate resources. We have reflected this change from Segment Adjusted EBITDA to Segment Adjusted Operating Income in all historical periods presented.

Under highly inflationary accounting, the financial statements of a subsidiary are remeasured into our reporting currency (U.S. dollars) based on the legally available exchange rate at which we expect to settle the underlying transactions. Exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in other expense/(income) on our condensed consolidated statement of income, as nonmonetary currency devaluation, rather than accumulated other comprehensive income/(losses) on our condensed consolidated balance sheet, until such time as the economy is no longer considered highly inflationary. See Note 2, Significant Accounting Policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 30, 2023, for additional information. We apply highly inflationary accounting to the results of our subsidiaries in Venezuela, Argentina, and Turkey, which are all included in Emerging Markets.

Net Sales:

			For the Three Months Ended
			March 30, 2024						April 1, 2023
			(in millions)
Net sales:
North America			$	4,828					$	4,885
International Developed Markets			855						860
Emerging Markets			728						744
Total net sales			$	6,411					$	6,489

Organic Net Sales:

			For the Three Months Ended
			March 30, 2024						April 1, 2023
			(in millions)
Organic Net Sales(a):
North America			$	4,826					$	4,885
International Developed Markets			850						860
Emerging Markets			734						696
Total Organic Net Sales			$	6,410					$	6,441

(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Drivers of the changes in net sales and Organic Net Sales for the three months ended March 30, 2024 compared to the three months ended April 1, 2023 were:

			Net Sales						Currency						Acquisitions and Divestitures						Organic Net Sales						Price						Volume/Mix
For the Three Months Ended
North America			(1.2)		%				0.0 pp						0.0 pp						(1.2)		%				2.5 pp						(3.7) pp
International Developed Markets			(0.6)		%				0.7 pp						0.0 pp						(1.3)		%				2.5 pp						(3.8) pp
Emerging Markets			(2.1)		%				(6.3) pp						(1.3) pp						5.5		%				4.1 pp						1.4 pp
Kraft Heinz			(1.2)		%				(0.6) pp						(0.1) pp						(0.5)		%				2.7 pp						(3.2) pp

Adjusted Operating Income:

			For the Three Months Ended
			March 30, 2024						April 1, 2023
			(in millions)
Segment Adjusted Operating Income:
North America			$	1,215					$	1,209
International Developed Markets			136						107
Total Segment Adjusted Operating Income			1,351						1,316
Emerging Markets Segment Adjusted Operating Income(a)			82						101
General corporate expenses			(168)						(172)
Restructuring activities			3						10
Unrealized gains/(losses) on commodity hedges			34						(11)
Certain non-ordinary course legal and regulatory matters			—						(1)
Operating income/(loss)			1,302						1,243
Interest expense			226						227
Other expense/(income)			47						(35)
Income/(loss) before income taxes			$	1,029					$	1,051

(a) Segment Adjusted Operating Income for Emerging Markets, which represents which represents the combination of our WEEM and AEM operating segments, is defined and presented consistently with the Segment Adjusted Operating Income of our reportable segments - North America and International Developed Markets.

North America:

			For the Three Months Ended
			March 30, 2024						April 1, 2023						% Change
			(in millions)
Net sales			$	4,828					$	4,885					(1.2)		%
Organic Net Sales(a)			4,826						4,885						(1.2)		%
Segment Adjusted Operating Income			1,215						1,209						0.4		%

(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023:

Net sales decreased 1.2% to $4.8 billion for the three months ended March 30, 2024 compared to $4.9 billion for the three months ended April 1, 2023. Organic Net Sales decreased 1.2% to $4.8 billion for the three months ended March 30, 2024 compared to $4.9 billion for the three months ended April 1, 2023, due to unfavorable volume/mix (3.7 pp), which more than offset higher pricing (2.5 pp). Higher pricing was primarily driven by increases to mitigate higher input costs, particularly in the first half of 2023. Unfavorable volume/mix was primarily due to elasticity impacts from pricing actions and due, in part, to the February 2023 reduction of Supplemental Nutrition Assistance Program (“SNAP”) benefits.

Segment Adjusted Operating Income increased 0.4% to $1.2 billion for the three months ended March 30, 2024 compared to $1.2 billion for the three months ended April 1, 2023, primarily driven by higher pricing taken predominantly in the first half of 2023. Further, we experienced reduced logistics costs and procurement costs, which were both due, in part, to our efficiency initiatives. These impacts more than offset unfavorable volume/mix; increased fixed cost of products sold, particularly for employee compensation related expenses and facility maintenance costs; as well as increased SG&A, driven by investments in advertising, research and development, and technology.

International Developed Markets:

			For the Three Months Ended
			March 30, 2024						April 1, 2023						% Change
			(in millions)
Net sales			$	855					$	860					(0.6)		%
Organic Net Sales(a)			850						860						(1.3)		%
Segment Adjusted Operating Income			136						107						27.7		%

(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023:

Net sales decreased 0.6% to $855 million for the three months ended March 30, 2024 compared to $860 million for the three months ended April 1, 2023, including the favorable impacts of foreign currency (0.7 pp). Organic Net Sales decreased 1.3% to $850 million for the three months ended March 30, 2024 compared to $860 million for the three months ended April 1, 2023, driven by unfavorable volume/mix (3.8 pp), which more than offset higher pricing (2.5 pp). Higher pricing was taken in our Australia, New Zealand, and Japan (“ANJ”) and Continental Europe regions primarily to mitigate higher input costs. Unfavorable volume/mix within our ANJ region was due, in part, to an inventory reduction by a regional customer. Further, unfavorable volume/mix within our Continental Europe region was primarily due to elasticity impacts from pricing actions. These unfavorable volume/mix impacts more than offset favorable volume/mix within our Northern Europe region.

Segment Adjusted Operating Income increased 27.7% to $136 million for the three months ended March 30, 2024 compared to $107 million for the three months ended April 1, 2023, primarily driven by higher pricing, lapping the prior year business disruption caused by Cyclone Gabrielle within our ANJ region, and the favorable impact of foreign currency (3.8 pp). These favorable impacts to Segment Adjusted Operating Income more than offset unfavorable volume/mix and increased advertising expense.

Emerging Markets:

			For the Three Months Ended
			March 30, 2024						April 1, 2023						% Change
			(in millions)
Net sales			$	728					$	744					(2.1)		%
Organic Net Sales(a)			734						696						5.5		%
Segment Adjusted Operating Income(b)			82						101						(18.4)		%

(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.

(b) Segment Adjusted Operating Income for Emerging Markets, which represents which represents the combination of our WEEM and AEM operating segments, is defined and presented consistently with the Segment Adjusted Operating Income of our reportable segments - North America and International Developed Markets.

Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023:

Net sales decreased 2.1% to $728 million for the three months ended March 30, 2024 compared to $744 million for the three months ended April 1, 2023, including the unfavorable impacts of foreign currency (6.3 pp) and acquisitions and divestitures (1.3 pp). Organic Net Sales increased 5.5% to $734 million for the three months ended March 30, 2024 compared to $696 million for the three months ended April 1, 2023, driven by higher pricing (4.1 pp) and favorable volume/mix (1.4 pp). Higher pricing included increases across all regions taken to mitigate higher input costs. Favorable volume/mix within our Eastern Europe and Asia regions more than offset unfavorable volume/mix within our LATAM region, which was primarily due to the lapping of shipment timing in the prior year quarter within Brazil.

Segment Adjusted Operating Income decreased 18.4% to $82 million for the three months ended March 30, 2024 compared to $101 million for the three months ended April 1, 2023, primarily driven by higher SG&A as a result of increased employee compensation costs and advertising expense supporting our investments in our go-to-market strategy; higher supply chain costs,

due, in part, for logistics in Brazil; and the unfavorable impact of foreign currency (9.0 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing and favorable volume/mix.

Liquidity and Capital Resources

We believe that cash generated from our operating activities, commercial paper programs, and our senior unsecured revolving credit facility (the “Senior Credit Facility”) will provide sufficient liquidity to meet our working capital needs, repayments of long-term debt, future contractual obligations, payment of our anticipated quarterly dividends, planned capital expenditures, restructuring expenditures, and contributions to our postemployment benefit plans for the next 12 months. An additional potential source of liquidity is access to capital markets. We intend to use our cash on hand and commercial paper programs for daily funding requirements.

Cash Flow Activity for the Three Months Ended March 30, 2024 Compared to the Three Months Ended April 1, 2023:

Net Cash Provided by/Used for Operating Activities:

Net cash provided by operating activities was $771 million for the three months ended March 30, 2024 compared to $486 million for the three months ended April 1, 2023. This increase was primarily driven by lower cash outflows in the current year period for inventories, primarily related to stock rebuilding in the prior year, partially offset by higher cash outflows for variable compensation in the 2024 period compared to the 2023 period.

Net Cash Provided by/Used for Investing Activities:

Net cash used for investing activities was $287 million for the three months ended March 30, 2024 compared to $264 million for the three months ended April 1, 2023. This change was primarily driven by higher capital expenditures in the current year period. We expect 2024 capital expenditures to be approximately $1.1 billion compared to the 2023 capital expenditures of $1.0 billion. Our 2024 capital expenditures are expected to be primarily driven by capital investments focused on generating growth, including cost improvement, capacity expansion, digital, and automation projects, as well as capital investments in maintenance and technology.

Net Cash Provided by/Used for Financing Activities:

Net cash used for financing activities was $239 million for the three months ended March 30, 2024 compared to $439 million for the three months ended April 1, 2023. This change was primarily due to proceeds from the issuance of the 2024 Notes, partially offset by higher common stock repurchases, due, in part, to our share repurchase program. See Note 14, Commitments, Contingencies, and Debt for additional information on our debt issuances.

Cash Held by International Subsidiaries:

Of the $1.6 billion cash and cash equivalents on our condensed consolidated balance sheet at March 30, 2024, $820 million was held by international subsidiaries.

Subsequent to January 1, 2018, we consider the unremitted earnings of certain international subsidiaries that impose local country taxes on dividends to be indefinitely reinvested. For those undistributed earnings considered to be indefinitely reinvested, our intent is to reinvest these funds in our international operations, and our current plans do not demonstrate a need to repatriate the accumulated earnings to fund our U.S. cash requirements. The amount of unrecognized deferred tax liabilities for local country withholding taxes that would be owed, if repatriated, related to our 2018 through 2024 accumulated earnings of certain international subsidiaries is approximately $70 million.

Our undistributed historic earnings in foreign subsidiaries through December 31, 2017 are currently not considered to be indefinitely reinvested. Our deferred tax liability associated with these undistributed historical earnings was insignificant at March 30, 2024 and December 30, 2023 and relates to local withholding taxes that will be owed when this cash is distributed.

Trade Payables Programs:

In order to manage our cash flow and related liquidity, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. We estimate that the amounts outstanding under these programs were $0.8 billion at March 30, 2024 and December 30, 2023. See Note 13, Financing Arrangements, in Item 1, Financial Statement, for additional information on our trade payables programs.

Borrowing Arrangements:

From time to time, we obtain funding through our commercial paper programs. We had no commercial paper outstanding at March 30, 2024, at December 30, 2023, or during the three months ended March 30, 2024 or April 1, 2023.

Our Senior Credit Facility provides for a revolving commitment of $4.0 billion through July 8, 2028. Subject to certain conditions, we may increase the amount of revolving commitments and/or add tranches of term loans in a combined aggregate amount of up to $1.0 billion.

No amounts were drawn on our Senior Credit Facility at March 30, 2024 or December 30, 2023, or during the three months ended March 30, 2024 or April 1, 2023.

Our credit agreement contains customary representations, warranties, and covenants that are typical for these types of facilities and could, upon the occurrence of certain events of default, restrict our ability to access our Senior Credit Facility. We were in compliance with all financial covenants as of March 30, 2024.

Long-Term Debt:

Our long-term debt, including the current portion, was $20.5 billion at March 30, 2024 and $20.0 billion at December 30, 2023. This increase was primarily due to the issuance of the 2024 Notes.

We have aggregate principal amounts of senior notes of approximately 550 million euros maturing in May 2024.

We may from time to time seek to retire or purchase our outstanding debt through redemptions, tender offers, cash purchases, prepayments, refinancing, exchange offers, open market or privately negotiated transactions, Rule 10b5-1 plans, or otherwise.

Our long-term debt contains customary representations, covenants, and events of default. We were in compliance with all financial covenants as of March 30, 2024.

See Note 14, Commitments, Contingencies, and Debt, in Item 1, Financial Statements, for additional information on our long-term debt activity and Note 16, Debt, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 30, 2023 for additional information on our borrowing arrangements and long-term debt.

Equity and Dividends:

We paid dividends on our common stock of $486 million for the three months ended March 30, 2024 and $491 million for the three months ended April 1, 2023. Additionally, in the second quarter of 2024, our Board of Directors declared a cash dividend of $0.40 per share of common stock, which is payable on June 28, 2024 to stockholders of record on June 6, 2024.

The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net income, financial condition, cash requirements, future prospects, and other factors that our Board of Directors deems relevant to its analysis and decision making.

On November 27, 2023, we announced that the Board of Directors approved a share repurchase program authorizing the Company to purchase up to $3.0 billion, exclusive of fees, of the Company’s common stock through December 26, 2026. We are not obligated to repurchase any specific number of shares and the program may be modified, suspended, or discontinued at any time. Under the program, shares may be repurchased in open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), privately negotiated transactions, transactions structured through investment banking institutions, or other means. We purchased approximately 4 million shares during the three months ended March 30, 2024 and had approximately $2.6 billion remaining authorization under the share repurchase program as of March 30, 2024. The share repurchase program is in addition to our share repurchases to offset the dilutive effect of equity-based compensation.

Aggregate Contractual Obligations:

In the first quarter of 2024, we issued the 2024 Notes, which mature in 2029. See Note 14, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for additional information. There were no other material changes to our aggregate contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 30, 2023.

Supplemental Guarantor Information:

The Kraft Heinz Company (as the “Parent Guarantor”) fully and unconditionally guarantees all the senior unsecured registered notes (collectively, the “KHFC Senior Notes”) issued by KHFC, our 100% owned operating subsidiary (the “Guarantee”). See Note 14, Commitments, Contingencies, and Debt, in Item 1, Financial Statements, and Note 16, Debt, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 30, 2023 for additional descriptions of these guarantees.

The payment of the principal, interest and premium, when applicable, on the KHFC Senior Notes is fully and unconditionally guaranteed on a senior unsecured basis by the Parent Guarantor, pursuant to the terms and conditions of the applicable indenture. None of the Parent Guarantor’s subsidiaries guarantee the KHFC Senior Notes.

The Guarantee is the Parent Guarantor’s senior unsecured obligation and is: (i) pari passu in right of payment with all of the Parent Guarantor’s existing and future senior indebtedness; (ii) senior in right of payment to all of the Parent Guarantor’s future subordinated indebtedness; (iii) effectively subordinated to all of the Parent Guarantor’s existing and future secured indebtedness to the extent of the value of the assets secured by that indebtedness; and (iv) effectively subordinated to all existing and future indebtedness and other liabilities of the Parent Guarantor’s subsidiaries.

The KHFC Senior Notes are obligations exclusively of KHFC and the Parent Guarantor and not of any of the Parent Guarantor’s other subsidiaries. Substantially all of the Parent Guarantor’s operations are conducted through its subsidiaries. The Parent Guarantor’s other subsidiaries are separate legal entities that have no obligation to pay any amounts due under the KHFC Senior Notes or to make any funds available therefor, whether by dividends, loans, or other payments. Except to the extent the Parent Guarantor is a creditor with recognized claims against its subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of its subsidiaries will have priority with respect to the assets of such subsidiaries over its claims (and therefore the claims of its creditors, including holders of the KHFC Senior Notes). Consequently, the KHFC Senior Notes are structurally subordinated to all liabilities of the Parent Guarantor’s subsidiaries and any subsidiaries that it may in the future acquire or establish. The obligations of the Parent Guarantor will terminate and be of no further force or effect in the following circumstances: (i) (a) KHFC’s exercise of its legal defeasance option or, except in the case of a guarantee of any direct or indirect parent of KHFC, covenant defeasance option in accordance with the applicable indenture, or KHFC’s obligations under the applicable indenture have been discharged in accordance with the terms of the applicable indenture or (b) as specified in a supplemental indenture to the applicable indenture; and (ii) the Parent Guarantor has delivered to the trustee an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable indenture have been complied with. The Guarantee is limited by its terms to an amount not to exceed the maximum amount that can be guaranteed by the Parent Guarantor without rendering the Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

The following tables present summarized financial information for the Parent Guarantor and KHFC (as subsidiary issuer of the KHFC Senior Notes) (together, the “Obligor Group”), on a combined basis after the elimination of all intercompany balances and transactions between the Parent Guarantor and subsidiary issuer and investments in any subsidiary that is a non-guarantor.

Summarized Statement of Income

			For the Three Months Ended
			March 30, 2024
Net sales			$	4,176
Gross profit(a)			1,616
Intercompany service fees and other recharges			1,158
Operating income/(loss)			261
Equity in earnings/(losses) of subsidiaries			801
Net income/(loss)			801
Net income/(loss) attributable to common shareholders			801

(a) For the three months ended March 30, 2024, the Obligor Group recorded $106 million of net sales to the non-guarantor subsidiaries and $18 million of purchases from the non-guarantor subsidiaries.

Summarized Balance Sheets

			March 30, 2024						December 30, 2023
ASSETS
Current assets			$	4,706					$	4,347
Current assets due from affiliates(a)			474						529
Non-current assets			5,642						5,665
Goodwill			8,823						8,823
Intangible assets, net			1,965						1,993
Non-current assets due from affiliates(b)			28						16
LIABILITIES
Current liabilities			$	4,231					$	4,461
Current liabilities due to affiliates(a)			1,894						2,055
Non-current liabilities			21,947						21,429
Non-current liabilities due to affiliates(b)			500						500

(a) Represents receivables and short-term lending due from and payables and short-term lending due to non-guarantor subsidiaries.

(b) Represents long-term lending due from and long-term borrowings due to non-guarantor subsidiaries.

Commodity Trends

We purchase and use large quantities of commodities, including dairy products, meats, tomatoes, sugar and other sweeteners, edible oils, coffee beans, wheat products, other fruits and vegetables, eggs, and corn products to manufacture our products. In addition, we purchase and use significant quantities of resins, fiberboard, and cardboard to package our products, and we use electricity, diesel fuel, and natural gas in the manufacturing and distribution of our products. We continuously monitor worldwide supply and cost trends of these commodities.

During the three months ended March 30, 2024, we experienced lower commodity costs primarily for edible oils, dairy products, eggs, corn, and meats while costs for coffee and sugars increased. We manage commodity cost volatility primarily through pricing and risk management strategies including utilizing a range of commodity hedging techniques in an effort to limit the impact of price fluctuations on many of our principal raw materials. However, we do not fully hedge against changes in commodity prices, and our hedging strategies may not protect us from increases in specific raw material costs. As a result of these risk management strategies, our commodity costs may not immediately correlate with market price trends.

See our Annual Report on Form 10-K for the year ended December 30, 2023 for additional information on how we manage commodity costs.

Critical Accounting Estimates

Our significant accounting policies are described in Note 2, Significant Accounting Policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 30, 2023.

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments, and assumptions. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 30, 2023 for a discussion of our other critical accounting estimates and assumptions.

New Accounting Pronouncements

See Note 3, New Accounting Standards, in Item 1, Financial Statements, for a discussion of new accounting pronouncements.

Contingencies

See Note 14, Commitments, Contingencies, and Debt, in Item 1, Financial Statements, for a discussion of our contingencies.

Non-GAAP Financial Measures

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

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

Management uses these non-GAAP financial measures to assist in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes do not directly reflect our underlying operations. We believe that Organic Net Sales, Adjusted Operating Income, and Adjusted EPS provide important comparability of underlying operating results, allowing investors and management to assess the Company’s operating performance on a consistent basis.

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

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

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

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

The Kraft Heinz Company

Reconciliation of Net Sales to Organic Net Sales

(dollars in millions)

(Unaudited)

			Net Sales						Currency						Acquisitions and Divestitures						Organic Net Sales						Price						Volume/Mix
Three Months Ended March 30, 2024
North America			$	4,828					$	2					$	—					$	4,826
International Developed Markets			855						5						—						850
Emerging Markets			$	728					$	(15)					$	9					$	734
Kraft Heinz			$	6,411					$	(8)					$	9					$	6,410
Three Months Ended April 1, 2023
North America			$	4,885					$	—					$	—					$	4,885
International Developed Markets			860						—						—						860
Emerging Markets			$	744					$	30					$	18					$	696
Kraft Heinz			$	6,489					$	30					$	18					$	6,441

Year-over-year growth rates
North America			(1.2)		%				0.0 pp						0.0 pp						(1.2)		%				2.5 pp						(3.7) pp
International Developed Markets			(0.6)		%				0.7 pp						0.0 pp						(1.3)		%				2.5 pp						(3.8) pp
Emerging Markets			(2.1)		%				(6.3) pp						(1.3) pp						5.5		%				4.1 pp						1.4 pp
Kraft Heinz			(1.2)		%				(0.6) pp						(0.1) pp						(0.5)		%				2.7 pp						(3.2) pp

The Kraft Heinz Company

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

(dollars in millions)

(Unaudited)

			For the Three Months Ended
			March 30, 2024						April 1, 2023
Operating income/(loss)			1,302						1,243
Restructuring activities			(3)						(10)
Unrealized losses/(gains) on commodity hedges			(34)						11
Certain non-ordinary course legal and regulatory matters			—						1
Adjusted Operating Income			$	1,265					$	1,245

The Kraft Heinz Company

Reconciliation of Diluted EPS to Adjusted EPS

(Unaudited)

			For the Three Months Ended
			March 30, 2024						April 1, 2023
Diluted EPS			$	0.66					$	0.68
Restructuring activities(a)			—						(0.01)
Unrealized losses/(gains) on commodity hedges(b)			(0.02)						0.01
Losses/(gains) on sale of business(c)			0.05						—
Adjusted EPS			$	0.69					$	0.68

(a) Gross expenses/(income) included in restructuring activities were income of $3 million ($2 million after-tax) for the three months ended March 30, 2024 and $8 million ($7 million after tax) for the three months ended April 1, 2023 and were recorded in the following income statement line items:

• Cost of products sold included expenses of $1 million for the three months ended March 30, 2024 and $6 million for the three months ended April 1, 2023; and

• SG&A included income of $4 million for the three months ended March 30, 2024 and $16 million for the three months ended April 1, 2023.

• Other expense/(income) included expenses of $2 million for the three months ended April 1, 2023.

(b) Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were income of $34 million ($26 million after-tax) for the three months ended March 30, 2024 and expenses of $11 million ($9 million after-tax) for the three months ended April 1, 2023 and were recorded in cost of products sold.

(c) Gross expenses/(income) included in losses/(gains) on sale of business were expenses of $80 million ($68 million after-tax) for the three months ended March 30, 2024 and were recorded in other expense/(income).