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

100K characters. Original on sec.gov · Markdown

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.

We manage our operating results through four operating segments: North America, Europe and Pacific Developed Markets (“EPDM” or “International Developed Markets”), West and East Emerging Markets (“WEEM”), and Asia Emerging Markets (“AEM”). 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.

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, both within Emerging Markets. See Note 4, Acquisitions and Divestitures, in Item 1, Financial Statements, for additional information on divestiture activities.

Business Trends and Items Affecting Comparability of Financial Results

Inflation, Supply Chain, and Tariff Impacts:

During the six months ended June 28, 2025, we experienced inflationary pressures at a slightly elevated rate compared to the inflationary pressures experienced throughout 2024. We are closely monitoring the recent tariff and trade policy actions changes taken by the United States and foreign governments. As the situation continues to remain fluid due to the rapidly changing global trade environment, we continue to evaluate the potential implications of these actions on our business. If enacted as currently outlined, we expect that the proposed trade policy changes would primarily impact a subset of our North America segment (primarily within our Hydration and Coffee platforms). We anticipate an increase in cost of products sold due to certain raw materials currently sourced from outside of the U.S. as well as the impact of tariffs on certain products that are part of our integrated supply chain that spans the U.S. and Canada. During the six months ended June 28, 2025, these tariff actions have not had a significant impact on our results of operations; however, we have experienced increased foreign currency exchange rate volatility, which we attribute, in part, to the rapidly changing global trade environment.

While the ultimate impact of tariffs remains uncertain and we anticipate taking measures to attempt to mitigate these negative cost impacts, these tariff and trade policy actions may have a material impact on our results of operations. Further, we expect that there could be a difference between the timing of when these mitigation actions impact our results of operations and when the cost inflation is incurred, and that any pricing actions we take could negatively impact our market share.

Consumer Trends:

During the second quarter of 2025, we announced our commitment to remove Food, Drug & Cosmetic (“FD&C”) colors from our U.S. portfolio of products before the end of 2027. Additionally, we have committed to ensuring that all new products launched in the U.S. will be free of FD&C colors. This initiative will impact a subset of the products sold within our North America segment, primarily within our Hydration and Desserts platforms. While we do not currently anticipate a significant impact to our input costs in our efforts to meet this commitment, our net sales, market share, or results of operations could be adversely affected if we are unsuccessful in our efforts to continue to satisfy consumer preferences.

Regulatory Landscape:

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States. The OBBBA includes, among other provisions, a broad range of changes to U.S. tax law, as well as changes to eligibility requirements for Supplemental Nutrition Assistance Program (“SNAP”) recipients. We are currently evaluating the law and its potential impact on our financial statements and future results of operations.

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						For the Six Months Ended
	June 28, 2025		June 29, 2024		% Change		June 28, 2025		June 29, 2024		% Change
	(in millions, except per share data)						(in millions, except per share data)
Net sales	$	6,352	$	6,476	(1.9)	%	$	12,351	$	12,887	(4.2)	%
Operating income/(loss)	(7,974)		522		(1,627.6)	%	(6,778)		1,824		(471.6)	%
Net income/(loss)	(7,823)		100		(7,923.0)	%	(7,109)		904		(886.4)	%
Net income/(loss) attributable to common shareholders	(7,824)		102		(7,770.6)	%	(7,112)		903		(887.6)	%
Diluted EPS	(6.60)		0.08		(8,350.0)	%	(5.98)		0.74		(908.1)	%

Net Sales:


	For the Three Months Ended						For the Six Months Ended
	June 28, 2025		June 29, 2024		% Change		June 28, 2025		June 29, 2024		% Change
	(in millions)						(in millions)
Net sales	$	6,352	$	6,476	(1.9)	%	$	12,351	$	12,887	(4.2)	%
Organic Net Sales(a)	6,328		6,458		(2.0)	%	12,411		12,841		(3.3)	%

(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 June 28, 2025 Compared to the Three Months Ended June 29, 2024:

Net sales decreased 1.9% to $6.4 billion for the three months ended June 28, 2025 compared to $6.5 billion for the three months ended June 29, 2024, including the favorable impacts of foreign currency (0.1 pp). Organic Net Sales decreased 2.0% to $6.3 billion for the three months ended June 28, 2025 compared to $6.5 billion for the three months ended June 29, 2024, primarily due to the unfavorable volume/mix (2.7 pp), which more than offset higher pricing (0.7 pp). Pricing was higher in each segment. Volume/mix in North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.

Six Months Ended June 28, 2025 Compared to the Six Months Ended June 29, 2024:

Net sales decreased 4.2% to $12.4 billion for the six months ended June 28, 2025 compared to $12.9 billion for the six months ended June 29, 2024, including the unfavorable impacts of foreign currency (0.8 pp) and acquisitions and divestitures (0.1 pp). Organic Net Sales decreased 3.3% to $12.4 billion for the six months ended June 28, 2025 compared to $12.8 billion for the six months ended June 29, 2024, primarily due to the unfavorable volume/mix (4.2 pp), which more than offset higher pricing (0.9 pp). Pricing was higher in each segment. Volume/mix in North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.

Net Income/(Loss):


	For the Three Months Ended						For the Six Months Ended
	June 28, 2025		June 29, 2024		% Change		June 28, 2025		June 29, 2024		% Change
	(in millions)						(in millions)
Operating income/(loss)	$	(7,974)	$	522	(1,627.6)	%	$	(6,778)	$	1,824	(471.6)	%
Net income/(loss)	(7,823)		100		(7,923.0)	%	(7,109)		904		(886.4)	%
Net income/(loss) attributable to common shareholders	(7,824)		102		(7,770.6)	%	(7,112)		903		(887.6)	%
Adjusted Operating Income(a)	1,276		1,380		(7.5)	%	2,475		2,645		(6.4)	%

(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 June 28, 2025 Compared to the Three Months Ended June 29, 2024:

Operating income/(loss) decreased 1,627.6% to a loss of $8.0 billion for the three months ended June 28, 2025 compared to income of $522 million for the three months ended June 29, 2024, primarily due to non-cash impairment losses that were $8.4 billion higher in the current year period. In addition to the impact of these non-cash impairment losses, operating income/(loss) decreased $84 million driven by increased commodity cost inflation, which more than offset our efficiency initiatives, and unfavorable volume/mix. These unfavorable impacts to operating income/(loss) were partially offset by higher pricing, decreased SG&A, primarily due to lower advertising expense, and favorable changes in unrealized losses/(gains) on commodity hedges.

Net income/(loss) decreased 7,923.0% to a loss of $7.8 billion for the three months ended June 28, 2025 compared to income of $100 million for the three months ended June 29, 2024. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above, higher interest expense, and unfavorable changes in other expense/(income), partially offset by lower income tax expense.

Our effective tax rate for the three months ended June 28, 2025 was a benefit of 4.2% on pre-tax loss, which included the net unfavorable effective tax rate impact of goodwill and intangible asset impairment losses of 21.6%. Our effective tax rate for the three months ended June 29, 2024 was an expense of 71.1% on pre-tax income, which included the net unfavorable effective tax rate impact of goodwill and intangible asset impairment losses of 50.8%. The year-over-year change in the effective tax rate for the three-month period was primarily driven by the impact of non-deductible goodwill impairments and a less favorable geographic mix of pre-tax income in various non-U.S. jurisdictions primarily due to the changes made to our corporate entity structure in December 2024.
Other expense/(income) was $47 million of income for the three months ended June 28, 2025 compared to $55 million of income for the three months ended June 29, 2024.

Adjusted Operating Income decreased 7.5% to $1.3 billion for the three months ended June 28, 2025 compared to $1.4 billion for the three months ended June 29, 2024, primarily driven by increased commodity cost inflation, which more than offset our efficiency initiatives, and unfavorable volume/mix. These unfavorable impacts more than offset higher pricing, decreased SG&A, primarily due to lower advertising expenses, and the favorable impact of foreign currency (0.2 pp).

Six Months Ended June 28, 2025 Compared to the Six Months Ended June 29, 2024:

Operating income/(loss) decreased 471.6% to a loss of $6.8 billion for the six months ended June 28, 2025 compared to income of $1.8 billion for the six months ended June 29, 2024, primarily non-cash impairment losses that were $8.4 billion higher in the current year period. In addition to the impact of these non-cash impairment losses, operating income/(loss) decreased $190 million due to unfavorable volume/mix, increased commodity cost inflation, which more than offset our efficiency initiatives, and unfavorable changes in unrealized losses/(gains) on commodity hedges. These unfavorable impacts to operating income/(loss) were partially offset by higher pricing, and decreased SG&A, primarily due to decreased advertising expenses and lower variable compensation expense.

Net income/(loss) decreased 886.4% to a loss of $7.1 billion for the six months ended June 28, 2025 compared to income of $904 million for the six months ended June 29, 2024. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above and higher interest expense, partially offset by lower income tax expense and favorable changes in other expense/(income).

Our effective tax rate for the six months ended June 28, 2025 was a benefit of 0.6% on pre-tax loss, which included the net unfavorable effective tax rate impact of goodwill and intangible asset impairment losses of 24.7%. Our effective tax rate for the six months ended June 29, 2024 was an expense of 34.4% on pre-tax income, which included the net unfavorable effective tax rate impact of goodwill and intangible asset impairment losses of 12.4%. The year-over-year change in the effective tax rate for the six month period was primarily due to the impact of non-deductible goodwill impairments, and a less favorable geographic mix of pre-tax income in various non-U.S. jurisdictions.
Other expense/(income) was $98 of income for the six months ended June 28, 2025 compared to $8 million of income for the six months ended June 29, 2024. This change was primarily driven by lapping the $79 million loss on the sale of business recognized in 2024, and an $18 million increase in interest income in 2025 compared to 2024 primarily due to interest earned our available-for-sale securities.

Adjusted Operating Income decreased 6.4% to $2.5 billion for the six months ended June 28, 2025 compared to $2.6 billion for the six months ended June 29, 2024, primarily driven by unfavorable volume/mix, increased commodity cost inflation, which more than offset our efficiency initiatives, and the unfavorable impact of foreign currency (0.3 pp). These unfavorable impacts more than offset higher pricing and decreased SG&A, primarily due to decreased advertising expenses and lower variable compensation expense.

Diluted EPS:


	For the Three Months Ended						For the Six Months Ended
	June 28, 2025		June 29, 2024		% Change		June 28, 2025		June 29, 2024		% Change
Diluted EPS	$	(6.60)	$	0.08	(8,350.0)	%	$	(5.98)	$	0.74	(908.1)	%
Adjusted EPS(a)	0.69		0.78		(11.5)	%	1.31		1.47		(10.9)	%

(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 June 28, 2025 Compared to the Three Months Ended June 29, 2024:

Diluted EPS decreased 8,350.0% to $(6.60) for the three months ended June 28, 2025 compared to $0.08 for the three months ended June 29, 2024, primarily due to the net income/(loss) factors discussed above, which more than offset the favorable impact of our common stock repurchases.


	For the Three Months Ended
	June 28, 2025		June 29, 2024		$ Change		% Change
Diluted EPS	$	(6.60)	$	0.08	$	(6.68)	(8,350.0)	%
Restructuring activities	0.01		—		0.01

Unrealized losses/(gains) on commodity hedges	(0.01)		—		(0.01)
Impairment losses	7.28		0.70		6.58



Nonmonetary currency devaluation	0.01		—		0.01


Adjusted EPS(a)	$	0.69	$	0.78	$	(0.09)	(11.5)	%

Key drivers of change in Adjusted EPS(a):
Results of operations					$	(0.07)



Effective tax rate					(0.03)
Effect of common stock repurchases(b)					0.01
					$	(0.09)

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

Adjusted EPS decreased 11.5% to $0.69 for the three months ended June 28, 2025 compared to $0.78 for the three months ended June 29, 2024. This decrease was primarily due to lower Adjusted Operating Income and higher taxes on adjusted earnings, which more than offset the favorable impact of our common stock repurchases.

Six Months Ended June 28, 2025 Compared to the Six Months Ended June 29, 2024:

Diluted EPS decreased 908.1% to $(5.98) for the six months ended June 28, 2025 compared to $0.74 for the six months ended June 29, 2024, primarily due to the net income/(loss) factors discussed above, which more than offset the favorable impact of our common stock repurchases.


	For the Six Months Ended
	June 28, 2025		June 29, 2024		$ Change		% Change
Diluted EPS	$	(5.98)	$	0.74	$	(6.72)	(908.1)	%
Restructuring activities	0.01		—		0.01

Unrealized losses/(gains) on commodity hedges	(0.01)		(0.02)		0.01
Impairment losses	7.26		0.70		6.56

Losses/(gains) on sale of business	—		0.05		(0.05)

Nonmonetary currency devaluation	0.02		—		0.02

Certain significant discrete income tax items	0.01		—		0.01
Adjusted EPS(a)	$	1.31	$	1.47	$	(0.16)	(10.9)	%

Key drivers of change in Adjusted EPS(a):
Results of operations					$	(0.12)


Other expense/(income)					0.02
Effective tax rate					(0.09)
Effect of common stock repurchases(b)					0.03
					$	(0.16)

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

Adjusted EPS decreased 10.9% to $1.31 for the six months ended June 28, 2025 compared to $1.47 for the six months ended June 29, 2024. This decrease was primarily due to lower Adjusted Operating Income and higher taxes on adjusted earnings, which more than offset the favorable impact of our common stock repurchases and favorable changes in other expense/(income).

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. 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.

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 statements of income, as nonmonetary currency devaluation, rather than accumulated other comprehensive income/(losses) on our condensed consolidated balance sheets, 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 28, 2024, for additional information. We apply highly inflationary accounting to the results of our subsidiaries in Venezuela, Turkey, and Egypt, which are all in Emerging Markets.

Net Sales:


	For the Three Months Ended				For the Six Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
	(in millions)
Net sales:
North America	$	4,757	$	4,921	$	9,245	$	9,749
International Developed Markets	897		885		1,714		1,740
Emerging Markets	698		670		1,392		1,398
Total net sales	$	6,352	$	6,476	$	12,351	$	12,887

Organic Net Sales:


	For the Three Months Ended				For the Six Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
	(in millions)
Organic Net Sales(a):
North America	$	4,761	$	4,921	$	9,276	$	9,749
International Developed Markets	866		885		1,706		1,740
Emerging Markets	701		652		1,429		1,352
Total Organic Net Sales	$	6,328	$	6,458	$	12,411	$	12,841

(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 June 28, 2025 compared to the three months ended June 29, 2024 were:


	Net Sales		Currency	Acquisitions and Divestitures	Organic Net Sales		Price	Volume/Mix
For the Three Months Ended
North America	(3.3)	%	(0.1) pp	0.0 pp	(3.2)	%	0.2 pp	(3.4) pp
International Developed Markets	1.3	%	3.5 pp	0.0 pp	(2.2)	%	0.7 pp	(2.9) pp
Emerging Markets	4.2	%	(3.1) pp	(0.3) pp	7.6	%	5.2 pp	2.4 pp
Kraft Heinz	(1.9)	%	0.1 pp	0.0 pp	(2.0)	%	0.7 pp	(2.7) pp


	Net Sales		Currency	Acquisitions and Divestitures	Organic Net Sales		Price	Volume/Mix
For the Six Months Ended
North America	(5.2)	%	(0.4) pp	0.0 pp	(4.8)	%	0.4 pp	(5.2) pp
International Developed Markets	(1.5)	%	0.5 pp	0.0 pp	(2.0)	%	0.2 pp	(2.2) pp
Emerging Markets	(0.4)	%	(5.3) pp	(0.8) pp	5.7	%	4.8 pp	0.9 pp
Kraft Heinz	(4.2)	%	(0.8) pp	(0.1) pp	(3.3)	%	0.9 pp	(4.2) pp

Adjusted Operating Income:


	For the Three Months Ended				For the Six Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
	(in millions)
Segment Adjusted Operating Income:
North America	$	1,173	$	1,341	$	2,274	$	2,556
International Developed Markets	136		126		263		262
Total Segment Adjusted Operating Income	1,309		1,467		2,537		2,818
Emerging Markets	100		66		199		148
General corporate expenses	(133)		(153)		(261)		(321)
Restructuring activities	—		(3)		(4)		—

Unrealized gains/(losses) on commodity hedges	16		(1)		17		33
Impairment losses	(9,266)		(854)		(9,266)		(854)

Operating income/(loss)	(7,974)		522		(6,778)		1,824
Interest expense	240		229		469		455
Other expense/(income)	(47)		(55)		(98)		(8)
Income/(loss) before income taxes	$	(8,167)	$	348	$	(7,149)	$	1,377

North America:


	For the Three Months Ended						For the Six Months Ended
	June 28, 2025		June 29, 2024		% Change		June 28, 2025		June 29, 2024		% Change
	(in millions)						(in millions)
Net sales	$	4,757	$	4,921	(3.3)	%	$	9,245	$	9,749	(5.2)	%
Organic Net Sales(a)	4,761		4,921		(3.2)	%	9,276		9,749		(4.8)	%
Segment Adjusted Operating Income	1,173		1,341		(12.5)	%	2,274		2,556		(11.0)	%

(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 June 28, 2025 Compared to the Three Months Ended June 29, 2024:

Net sales decreased 3.3% to $4.8 billion for the three months ended June 28, 2025 compared to $4.9 billion for the three months ended June 29, 2024, including the unfavorable impacts of foreign currency (0.1 pp). Organic Net Sales decreased 3.2% to $4.8 billion for the three months ended June 28, 2025 compared to $4.9 billion for the three months ended June 29, 2024, primarily due to unfavorable volume/mix (3.4 pp), which more than offset higher pricing (0.2 pp). Unfavorable volume/mix was primarily driven by declines in cold cuts, coffee, Lunchables, frozen snacks, and powdered beverages. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in coffee.

Segment Adjusted Operating Income decreased 12.5% to $1.2 billion for the three months ended June 28, 2025 compared to $1.3 billion for the three months ended June 29, 2024, primarily due to increased commodity cost inflation, which more than offset our efficiency initiatives, unfavorable volume/mix, higher research and development costs, and the unfavorable impact of foreign currency (0.1 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset decreased advertising expenses, and higher pricing.

Six Months Ended June 28, 2025 Compared to the Six Months Ended June 29, 2024:

Net sales decreased 5.2% to $9.2 billion for the six months ended June 28, 2025 compared to $9.7 billion for the six months ended June 29, 2024, including the unfavorable impacts of foreign currency (0.4 pp). Organic Net Sales decreased 4.8% to $9.3 billion for the six months ended June 28, 2025 compared to $9.7 billion for the six months ended June 29, 2024, primarily due to unfavorable volume/mix (5.2 pp), which more than offset higher pricing (0.4 pp). Unfavorable volume/mix was primarily driven by declines in cold cuts, coffee, Lunchables, and desserts. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in coffee.

Segment Adjusted Operating Income decreased 11.0% to $2.3 billion for the six months ended June 28, 2025 compared to $2.6 billion for the six months ended June 29, 2024, primarily due to unfavorable volume/mix, increased commodity cost inflation, which more than offset our efficiency initiatives, higher depreciation expense, higher research and development costs, and the unfavorable impact of foreign currency (0.2 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset decreased SG&A, primarily due to decreased advertising expenses, lower variable compensation expense, and higher pricing.

International Developed Markets:


	For the Three Months Ended						For the Six Months Ended
	June 28, 2025		June 29, 2024		% Change		June 28, 2025		June 29, 2024		% Change
	(in millions)						(in millions)
Net sales	$	897	$	885	1.3	%	$	1,714	$	1,740	(1.5)	%
Organic Net Sales(a)	866		885		(2.2)	%	1,706		1,740		(2.0)	%
Segment Adjusted Operating Income	136		126		8.2	%	263		262		0.3	%

(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 June 28, 2025 Compared to the Three Months Ended June 29, 2024:

Net sales increased 1.3% to $897 million for the three months ended June 28, 2025 compared to $885 million for the three months ended June 29, 2024, including the favorable impacts of foreign currency (3.5 pp). Organic Net Sales decreased 2.2% to $866 million for the three months ended June 28, 2025 compared to $885 million for the three months ended June 29, 2024, primarily due to unfavorable volume/mix (2.9 pp), which more than offset higher pricing (0.7 pp). Unfavorable volume/mix was primarily due to pricing elasticity in New Zealand and industry slowdowns in meals in the United Kingdom.

Segment Adjusted Operating Income increased 8.2% to $136 million for the three months ended June 28, 2025 compared to $126 million for the three months ended June 29, 2024, primarily driven by decreased SG&A, the favorable impact of foreign currency (5.7 pp), and higher pricing, which more than offset unfavorable volume/mix.

Six Months Ended June 28, 2025 Compared to the Six Months Ended June 29, 2024:

Net sales decreased 1.5% to $1.7 billion for the six months ended June 28, 2025 compared to $1.7 billion for the six months ended June 29, 2024, including the favorable impacts of foreign currency (0.5 pp). Organic Net Sales decreased 2.0% to $1.7 billion for the six months ended June 28, 2025 compared to $1.7 billion for the six months ended June 29, 2024, primarily due to unfavorable volume/mix (2.2 pp), which more than offset higher pricing (0.2 pp). Unfavorable volume/mix was primarily due to industry slowdowns of meals in the United Kingdom.

Segment Adjusted Operating Income increased 0.3% to $263 million for the six months ended June 28, 2025 compared to $262 million for the six months ended June 29, 2024, primarily driven by decreased SG&A, primarily for advertising expenses, the favorable impact of foreign currency (2.1 pp), and higher pricing, partially offset by unfavorable volume/mix and inflationary pressures in manufacturing and procurement, which more than offset our efficiency initiatives.

Emerging Markets:


	For the Three Months Ended						For the Six Months Ended
	June 28, 2025		June 29, 2024		% Change		June 28, 2025		June 29, 2024		% Change
	(in millions)						(in millions)
Net sales	$	698	$	670	4.2	%	$	1,392	$	1,398	(0.4)	%
Organic Net Sales(a)	701		652		7.6	%	1,429		1,352		5.7	%
Segment Adjusted Operating Income(b)	100		66		52.3	%	199		148		34.5	%

(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 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 June 28, 2025 Compared to the Three Months Ended June 29, 2024:

Net sales increased 4.2% to $698 million for the three months ended June 28, 2025 compared to $670 million for the three months ended June 29, 2024, including the unfavorable impacts of foreign currency (3.1 pp) and divestitures (0.3 pp). Organic Net Sales increased 7.6% to $701 million for the three months ended June 28, 2025 compared to $652 million for the three months ended June 29, 2024, primarily driven by higher pricing (5.2 pp) and favorable volume/mix (2.4 pp). Higher pricing was taken primarily in certain countries within WEEM to address inflationary pressures. Favorable volume/mix was primarily driven by Taste Elevation within our LATAM and Middle East and Africa (“MEA”) regions, which more than offset unfavorable volume/mix in certain countries within our Eastern Europe region.

Segment Adjusted Operating Income increased 52.3% to $100 million for the three months ended June 28, 2025 compared to $66 million for the three months ended June 29, 2024, primarily due to higher pricing, favorable volume/mix and manufacturing efficiency gains, which more than offset manufacturing inflation. These favorable impacts to Segment Adjusted Operating Income more than offset higher procurement and logistics costs reflecting inflationary pressure in WEEM, increased SG&A, higher depreciation expense, and the unfavorable impact of foreign currency (4.0 pp).

Six Months Ended June 28, 2025 Compared to the Six Months Ended June 29, 2024:

Net sales decreased 0.4% to $1.4 billion for the six months ended June 28, 2025 compared to $1.4 billion for the six months ended June 29, 2024, including the unfavorable impacts of foreign currency (5.3 pp) and divestitures (0.8 pp). Organic Net Sales increased 5.7% to $1.4 billion for the six months ended June 28, 2025 compared to $1.4 billion for the six months ended June 29, 2024, primarily driven by higher pricing (4.8 pp) and favorable volume/mix (0.9 pp). Higher pricing was taken primarily in certain countries within WEEM to address inflationary pressures. Favorable volume/mix was primarily driven by Taste Elevation within LATAM, particularly in Brazil, which more than offset unfavorable volume/mix in Indonesia.

Segment Adjusted Operating Income increased 34.5% to $199 million for the six months ended June 28, 2025 compared to $148 million for the six months ended June 29, 2024, primarily due to higher pricing, favorable volume/mix and reduced manufacturing costs, primarily as a result of our efficiency initiatives. These favorable impacts to Segment Adjusted Operating Income more than offset higher procurement and logistics costs reflecting inflationary pressure in WEEM, the unfavorable impact of foreign currency (6.5 pp), and higher depreciation expense.

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 Six Months Ended June 28, 2025 Compared to the Six Months Ended June 29, 2024:

Net Cash Provided by/Used for Operating Activities:

Net cash provided by operating activities was $1.9 billion for the six months ended June 28, 2025 compared to $1.7 billion for the six months ended June 29, 2024. This increase was primarily due to favorable changes in working capital, predominantly within accounts payable, as well as lower cash outflows from variable compensation in the 2025 period compared to the 2024 period. These impacts were partially offset by lower Adjusted Operating Income.

Net Cash Provided by/Used for Investing Activities:

Net cash used for investing activities was $1.3 billion for the six months ended June 28, 2025 compared to $632 million for the six months ended June 29, 2024. This change was primarily driven by the purchases of marketable securities in the 2025 period, partially offset by lapping our prior year payment to acquire the TGI Friday License, lower capital expenditures in the 2025 period compared to the 2024 period. We expect 2025 capital expenditures to be approximately $1.0 billion compared to the 2024 capital expenditures of $1.0 billion. Our 2025 capital expenditures are expected to be primarily driven by maintenance projects, investments in technology, capital investments focused on generating growth, including cost improvements, capacity expansion, and investments in warehouse.

Net Cash Provided by/Used for Financing Activities:

Net cash used for financing activities was $423 million for the six months ended June 28, 2025 compared to $1.6 billion for the six months ended June 29, 2024. This change was primarily driven by debt proceeds received from the issuance of the 2025 Notes in the current year period and decreased repurchases of common stock compared to the prior year period. 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 June 28, 2025, $943 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 2025 accumulated earnings of certain international subsidiaries is approximately $90 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 June 28, 2025 and December 28, 2024 and relates to local withholding taxes that would 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 maintain agreements with third-party administrators that allow participating suppliers to track payment obligations from us, and, at the sole discretion of the supplier, sell one or more of those payment obligations to participating financial institutions. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. Our current payment terms with our suppliers, which we deem to be commercially reasonable, generally range from 0 to 250 days. All amounts due to participating suppliers are paid to the third party on the original invoice due dates, regardless of whether a particular invoice was sold. The amounts confirmed outstanding under these programs were $752 million at June 28, 2025 and $745 million at December 28, 2024. The amounts were included in accounts payable on our consolidated balance sheets. See Note 13, Financing Arrangements, in Item 1, Financial Statements, 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 June 28, 2025, at December 28, 2024, or during the six months ended June 28, 2025 or June 29, 2024.

Our Senior Credit Facility provides for a revolving commitment of $4.0 billion through July 8, 2030. 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 June 28, 2025 or December 28, 2024, or during the six months ended June 28, 2025 or June 29, 2024.

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 June 28, 2025.

Long-Term Debt:

Our long-term debt, including the current portion, was $21.2 billion at June 28, 2025 and $19.9 billion at December 28, 2024. This increase was primarily due to the issuance of the 2025 Notes, as well as changes in foreign currency exchange rates on our foreign-denominated debt, partially offset by the repayment of our 600 million euro senior notes due May 2025.

In the first quarter of 2025, KHFC, our 100% owned operating subsidiary, issued 600 million euro aggregate principal amount of 3.250% senior notes due March 2033, $500 million aggregate principal amount of 5.200% senior notes due March 2032, and $500 million aggregate principal amount of 5.400% senior notes due March 2035 (collectively, the “2025 Notes”). We used a portion of the net proceeds from the 2025 Notes to fund the 600 million euro senior notes that matured in May 2025 and expect to use the remaining net proceeds from the 2025 Notes for general corporate purposes, including our investment in certain marketable fixed-income debt securities that are classified as available-for-sale and to fund the repayment of outstanding indebtedness such as our $1.9 billion senior notes that mature in June 2026.

We have aggregate principal amounts of senior notes of approximately $1.9 billion maturing in June 2026.

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 June 28, 2025.

See Note 14, Commitments, Contingencies, and Debt, in Item 1, Financial Statements, for additional information on our long-term debt activity, Note 11, Financial Instruments, in Item 1, Financial Statements, for additional information on our available-for-sale securities, and Note 16, Debt, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2024 for additional information on our borrowing arrangements and long-term debt.

Equity and Dividends:

We paid dividends on our common stock of $951 million for the six months ended June 28, 2025. Additionally, in the third quarter of 2025, our Board of Directors declared a cash dividend of $0.40 per share of common stock, which is payable on September 26, 2025 to stockholders of record on August 29, 2025.

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 6.8 million shares during the three months ended and 13.5 million shares during the six months ended June 28, 2025 and had approximately $1.5 billion remaining authorization under the share repurchase program as of June 28, 2025. 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 2025, we issued the 2025 Notes, which mature between 2032 and 2035. 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 28, 2024.

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 28, 2024 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 Six Months Ended
	June 28, 2025
Net sales	$	7,889
Gross profit(a)	2,984


Intercompany service fees and other recharges	2,126
Operating income/(loss)	497
Equity in earnings/(losses) of subsidiaries	(6,994)
Net income/(loss)	(7,112)
Net income/(loss) attributable to common shareholders	(7,112)

(a) For the six months ended June 28, 2025, the Obligor Group recorded $243 million of net sales to the non-guarantor subsidiaries and $30 million of purchases from the non-guarantor subsidiaries.

Summarized Balance Sheets


	June 28, 2025		December 28, 2024
ASSETS
Current assets	$	5,597	$	4,506
Current assets due from affiliates(a)	242		445
Non-current assets	5,874		5,848
Goodwill	8,823		8,823
Intangible assets, net	1,824		1,881
Non-current assets due from affiliates(b)	28		28
LIABILITIES
Current liabilities	$	5,205	$	5,563
Current liabilities due to affiliates(a)	1,474		1,924
Non-current liabilities	21,479		22,846
Non-current liabilities due to affiliates(b)	211		194

(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, coffee beans, sugar and other sweeteners, tomatoes, edible oils, eggs, wheat products, and fruits and vegetables to manufacture our products. In addition, we purchase and use significant quantities of plastics, resins, cardboard, glass and paper to package our products, and we use electricity, diesel fuel, and natural gas in the manufacturing and distribution of our products. We continuously monitor global supply and cost trends of these commodities.

During the six months ended June 28, 2025, we experienced stabilized commodity costs for tomato products, fruits and vegetables, wheat products, and sugar and other sweeteners, while coffee, meat, eggs, and cheese and dairy costs increased and commodity costs for edible oils decreased. 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 28, 2024 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 28, 2024.

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. Our critical accounting estimates and assumptions related to goodwill and intangible assets are described below. We have included an update to our critical accounting estimates as we performed an interim triggering event impairment test as a result of the sustained decline in our share price and market capitalization. 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 28, 2024 for a discussion of our other critical accounting estimates and assumptions.

Goodwill and Intangible Assets:

As of June 28, 2025, we maintain 11 reporting units, seven of which comprise our goodwill balance. These seven reporting units had an aggregate goodwill carrying amount of $22.2 billion at June 28, 2025. Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $34.2 billion at June 28, 2025.

We test our reporting units and brands for impairment annually, as of the first day of our third quarter, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit or brand is less than its carrying amount. Such events and circumstances could include a sustained decrease in our market capitalization, increased competition or unexpected loss of market share, increased input costs beyond projections, disposals of significant brands or components of our business, unexpected business disruptions (for example due to a natural disaster, pandemic, or loss of a customer, supplier, or other significant business relationship), unexpected significant declines in operating results, significant adverse changes in the markets in which we operate, changes in income tax rates, changes in interest rates, or changes in management strategy. We test reporting units for impairment by comparing the estimated fair value of each reporting unit with its carrying amount. We test brands for impairment by comparing the estimated fair value of each brand with its carrying amount. If the carrying amount of a reporting unit or brand exceeds its estimated fair value, we record an impairment loss based on the difference between fair value and carrying amount, in the case of reporting units, not to exceed the associated carrying amount of goodwill. See Note 7, Goodwill and Intangible Assets, in Item 1, Financial Statements, for a discussion of the timing of the annual impairment test.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units and brands requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions, and to consider the market multiples of certain peer and guideline companies. These assumptions and estimates include estimated future annual cash flows (including net sales, cost of products sold, SG&A, depreciation and amortization, working capital, and capital expenditures), income tax considerations, discount rates, long-term growth rates, royalty rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control change; such as discount rates, market capitalization, income tax rates, foreign currency exchange rates, or inflation, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then one or more of our reporting units or brands might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could lead to future goodwill or intangible asset impairments.

As detailed in Note 7, Goodwill and Intangible Assets, in Item 1, Financial Statements, we recorded impairment losses related to goodwill and indefinite-lived intangible assets in the second quarter of 2025. Our reporting units and brands that were impaired in 2025 were written down to their respective fair values, resulting in zero excess fair value over carrying amount as of the Q2 Impairment Test date. Accordingly, our reporting units and brands that have 20% or less excess fair value over carrying amount as of the Q2 Impairment Test have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future.

Our reporting units that were impaired as part of our Q2 Impairment Test, resulting in zero excess fair value over carrying amount, had an aggregate goodwill carrying amount after impairment of $17.6 billion as of the Q2 Impairment Test and included TMS, AFH, WE, MC, and CNAC reporting units. These reporting units are considered at a heightened risk of future impairments. Our HD reporting unit had less than 20% fair value over carrying amount with carrying amount of $4.3 billion and our Asia reporting units had less than 50% fair value over carrying amount with an aggregate goodwill carrying amount of $312 million as of the Q2 Impairment Test. Our four remaining reporting units had no goodwill carrying amount at the time of the Q2 Impairment Test.

Our brands that were impaired as part of the Q2 Impairment Test, resulting in zero excess fair value over carrying amount, had an aggregate carrying amount of $13.0 billion as of the Q2 Impairment Test and included Kraft, Velveeta, A1, Lunchables, Maxwell House, and Claussen. Further, our brands that were not impaired as part of the Q2 Impairment Test, but had 10% or less fair value over carrying amount included Oscar Mayer, Kool-Aid, Cool Whip, Bagel Bites, Gevalia, and Wattie’s and had an aggregate carrying amount of $2.8 billion as of the Q2 Impairment Test. Our Miracle Whip brand had 10-20% fair value over carrying amount with a carrying amount of $1.8 billion as of the Q2 Impairment Test. The aggregate carrying amount of brands with fair value over carrying amount 20-50% was $7.7 billion as of the Q2 Impairment Test. Although the remaining brands, with a carrying amount of $8.9 billion, have more than 50% excess fair value over carrying amount as of the Q2 Impairment Test, these amounts are also susceptible to impairments if any assumptions, estimates, or market factors significantly change in the future. Our brands that have 20% or less excess fair value over carrying amounts as of the Q2 Impairment Test are considered at a heightened risk of future impairments and had an aggregate carrying amount of $17.6 billion.

We generally utilize the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual cash flows for each reporting unit (including net sales, cost of products sold, SG&A, depreciation and amortization, working capital, and capital expenditures), income tax rates, long-term growth rates, royalty rates, a discount rate that appropriately reflects the risks inherent in each future cash flow stream, and other market factors. We select the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and a consideration of market multiples of certain peer and guideline companies. We incorporated the market’s perceived risks in our ability to achieve our future cash flows through the discount rate resulting in higher discount rates than those we’ve historically utilized.

We utilize the excess earnings method under the income approach to estimate the fair value of certain of our largest brands. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual cash flows for each brand (including net sales, cost of products sold, and SG&A), contributory asset charges, income tax considerations, long-term growth rates, a discount rate that reflects the level of risk associated with the future earnings attributable to the brand, and management’s intent to invest in the brand indefinitely. We select the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and a consideration of market multiples of certain peer and guideline companies. We incorporated the market’s perceived risks in our ability to achieve our future cash flows through the discount rate resulting in higher discount rates than those we’ve historically utilized.

We utilize the relief from royalty method under the income approach to estimate the fair value of our remaining brands. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual sales for each brand, royalty rates (as a percentage of net sales that would hypothetically be charged by a licensor of the brand to an unrelated licensee), income tax considerations, long-term growth rates, a discount rate that reflects the level of risk associated with the future cost savings attributable to the brand, and management’s intent to invest in the brand indefinitely. We select the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and a consideration of market multiples of certain peer and guideline companies. We incorporated the market’s perceived risks in our ability to achieve our future cash flows through the discount rate resulting in higher discount rates than those we’ve historically utilized.

The discount rates, long-term growth rates, and royalty rates used to estimate the fair values of our reporting units and our brands with 20% or less excess fair value over carrying amount, as well as the goodwill or brand carrying amounts, as of the Q2 Impairment Test for each reporting unit and brand were as follows:


	Goodwill Carrying Amount (in billions)			Discount Rate						Long-Term Growth Rate						Royalty Rate
			Minimum			Maximum			Minimum			Maximum			Minimum			Maximum
Reporting units	$	21.9		8.8	%		11.5	%		—	%		2.0	%
Brands (excess earnings method)	13.1			9.8	%		14.8	%		0.1	%		1.6	%
Brands (relief from royalty method)	4.5			10.0	%		16.5	%		0.5	%		2.0	%		4.0	%		20.0	%

Assumptions used in impairment testing are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each annual and interim impairment test date. Additionally, these assumptions are generally interdependent and do not change in isolation. However, as it is reasonably possible that changes in assumptions could occur, as a sensitivity measure, we have presented the estimated effects of isolated changes in discount rates, long-term growth rates, and royalty rates on the fair values of our reporting units and brands with 20% or less excess fair value over carrying amount. These estimated changes in fair value are not necessarily representative of the actual impairment that would be recorded in the event of a fair value decline.

If we had changed the assumptions used to estimate the fair value of our reporting units and brands with 20% or less excess fair value over carrying amount, as a result of the Q2 Impairment Test for each of these reporting units and brands, these isolated changes, which are reasonably possible to occur, would have led to the following increase/(decrease) in the aggregate fair value of these reporting units and brands (in billions):


	Discount Rate				Long-Term Growth Rate				Royalty Rate
	50-Basis-Point				25-Basis-Point				100-Basis-Point
	Increase		Decrease		Increase		Decrease		Increase		Decrease
Reporting units	$	(2.9)	$	3.3	$	1.4	$	(1.3)
Brands (excess earnings method)	(0.7)		0.8		0.3		(0.3)
Brands (relief from royalty method)	(0.2)		0.2		0.1		(0.1)		$	0.4	$	(0.4)

Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited. We review definite-lived intangible assets for impairment when conditions exist that indicate the carrying amount of the assets may not be recoverable. Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. We perform undiscounted operating cash flow analyses to determine if an impairment exists. When testing for impairment of definite-lived intangible assets held for use, we group assets at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value. Impairment losses on definite-lived intangible assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

See Note 7, Goodwill and Intangible Assets, in Item 1, Financial Statements, for our impairment testing results.

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), operating income(loss), diluted EPS, or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures.

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

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

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

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

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

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 June 28, 2025
North America	$	4,757	$	(4)	$	—	$	4,761
International Developed Markets	897		31		—		866
Emerging Markets	698		(3)		—		701
Kraft Heinz	$	6,352	$	24	$	—	$	6,328

Three Months Ended June 29, 2024
North America	$	4,921	$	—	$	—	$	4,921
International Developed Markets	885		—		—		885
Emerging Markets	670		16		2		652
Kraft Heinz	$	6,476	$	16	$	2	$	6,458


Year-over-year growth rates
North America	(3.3)	%	(0.1) pp	0.0 pp	(3.2)	%	0.2 pp	(3.4) pp
International Developed Markets	1.3	%	3.5 pp	0.0 pp	(2.2)	%	0.7 pp	(2.9) pp
Emerging Markets	4.2	%	(3.1) pp	(0.3) pp	7.6	%	5.2 pp	2.4 pp
Kraft Heinz	(1.9)	%	0.1 pp	0.0 pp	(2.0)	%	0.7 pp	(2.7) pp

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
Six Months Ended June 28, 2025
North America	$	9,245	$	(31)	$	—	$	9,276
International Developed Markets	1,714		8		—		1,706
Emerging Markets	1,392		(37)		—		1,429
Kraft Heinz	$	12,351	$	(60)	$	—	$	12,411

Six Months Ended June 29, 2024
North America	$	9,749	$	—	$	—	$	9,749
International Developed Markets	1,740		—		—		1,740
Emerging Markets	1,398		36		10		1,352
Kraft Heinz	$	12,887	$	36	$	10	$	12,841


Year-over-year growth rates
North America	(5.2)	%	(0.4) pp	0.0 pp	(4.8)	%	0.4 pp	(5.2) pp
International Developed Markets	(1.5)	%	0.5 pp	0.0 pp	(2.0)	%	0.2 pp	(2.2) pp
Emerging Markets	(0.4)	%	(5.3) pp	(0.8) pp	5.7	%	4.8 pp	0.9 pp
Kraft Heinz	(4.2)	%	(0.8) pp	(0.1) pp	(3.3)	%	0.9 pp	(4.2) pp

The Kraft Heinz Company

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

(dollars in millions)

(Unaudited)


	For the Three Months Ended				For the Six Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
Operating income/(loss)	$	(7,974)	$	522	$	(6,778)	$	1,824
Restructuring activities	—		3		4		—

Unrealized losses/(gains) on commodity hedges	(16)		1		(17)		(33)
Impairment losses	9,266		854		9,266		854

Adjusted Operating Income	$	1,276	$	1,380	$	2,475	$	2,645

The Kraft Heinz Company

Reconciliation of Diluted EPS to Adjusted EPS

(Unaudited)


	For the Three Months Ended				For the Six Months Ended
	June 28, 2025		June 29, 2024		June 28, 2025		June 29, 2024
Diluted EPS	$	(6.60)	$	0.08	$	(5.98)	$	0.74
Restructuring activities(a)	0.01		—		0.01		—

Unrealized losses/(gains) on commodity hedges(b)	(0.01)		—		(0.01)		(0.02)
Impairment losses(c)	7.28		0.70		7.26		0.70

Losses/(gains) on sale of business(d)	—		—		—		0.05

Nonmonetary currency devaluation(e)	0.01		—		0.02		—

Certain significant discrete income tax items(f)	—		—		0.01		—
Adjusted EPS	$	0.69	$	0.78	$	1.31	$	1.47

(a) Gross expenses/(income) included in restructuring activities was expenses of $10 million ($7 million after-tax) for the three months and expenses of $14 million ($10 million after-tax) for the six months ended June 28, 2025 and expense of $2 million ($2 million after-tax) for the three months and income of $1 million (zero after-tax) for the six months ended June 29, 2024 and were recorded in the following income statement line items:

Cost of products sold included expenses of $1 million for the three months and income of $1 million for the six months ended June 28, 2025 and expenses of $1 million for the three months and $2 million for the six months ended June 29, 2024; and
SG&A included income of $1 million for the three months and expenses of $5 million for the six months ended June 28, 2025 and expenses of $2 million for the three months and income of $2 million for the six months ended June 29, 2024.
Other expense/(income) included expenses of $10 million for the three and six months ended June 28, 2025 and income of $1 million for the three and six months ended June 29, 2024

(b) Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were income of $16 million ($12 million after-tax) for the three months and income of $17 million ($13 million after-tax) for the six months ended June 28, 2025 and expenses of $1 million (zero after-tax) for the three months and income of $33 million ($26 million after-tax) for the six months ended June 29, 2024, and were recorded in cost of products sold.

Goodwill impairment losses of $6.7 billion ($6.7 billion after-tax) for the three and six months ended June 28, 2025 and $854 million ($854 million after-tax) for the three and six months ended June 29, 2024, which were recorded in SG&A;
Intangible asset impairment losses of $2.6 billion ($2 billion after-tax) for the three and six months ended June 28, 2025, which were recorded in SG&A.

(d) Gross expenses/(income) included in losses/(gains) on sale of business were income of $1 million ($14 million after-tax) for the three months and expenses of $79 million ($54 million after-tax) for the six months ended June 29, 2024 and were recorded in other expense/(income).

(e) Gross expenses included in nonmonetary currency devaluation were $7 million ($7 million after-tax) for the three months and $21 million ($21 million after-tax) for the six months ended June 28, 2025 and $1 million ($1 million after-tax) for the three months and $4 million ($4 million after-tax) for the six months ended June 29, 2024 and were recorded in other expense/(income).

(f) Certain significant discrete income tax items were an expense of $3 million for the three months and $16 million for the six months ended June 28, 2025. The expense represents current period movement in the valuation allowance against deferred tax assets in our subsidiary in Brazil and adjustments recorded to the deferred tax asset and valuation allowance related to the transfer of business operations to a wholly-owned subsidiary in the Netherlands in December 2024.

Previous: Item 1. Financial Statements. · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk.