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

102K 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 17, Segment Reporting, in Item 1, Financial Statements, for our financial information by segment.

Proposed Separation Transaction:

On September 2, 2025, we announced our plan to separate the Company into two independent, publicly traded companies through a tax-free spin-off. The Separation is expected to allow each company to have greater strategic and operational focus to better serve customers, customize capital allocation, and accelerate profitable growth. We currently expect to complete the Separation in the second half of 2026. See Part II. Items 1A. Risk Factors of this Quarterly Report on Form 10-Q for further discussion of risks relating to the Separation.

Acquisitions and Divestitures:

On July 9, 2025, we entered into a definitive agreement to sell our infant and specialty food business in Italy, within our International Developed Markets segment, which is expected to close in the first quarter of 2026. 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 5, 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 nine months ended September 27, 2025, we experienced increased inflationary pressures compared to the prior year, due in part to the recent tariff and trade policy actions taken by the United States and foreign governments. We have incurred increased cost of products sold within a subset of our North America segment (primarily within our Coffee and Hydration platforms) due to the impacts of tariffs on certain raw materials currently sourced from outside of the U.S. and on certain products that are manufactured through our integrated supply chain that spans the U.S. and Canada.

While these increased costs have had 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 alternative sourcing. However, there has been, and we expect that there could continue to be, a difference between the timing of when these mitigative actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we take have, in some instances, negatively impacted, and could continue to negatively impact, our market share. 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.

Consumer Trends:

In 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. While OBBBA did not have a significant impact on our total tax provision as of September 27, 2025, we are still evaluating our position on the elective provisions of the law and the potential impacts of those elections on our financial statements.

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 Nine Months Ended
	September 27, 2025		September 28, 2024		% Change		September 27, 2025		September 28, 2024		% Change
	(in millions, except per share data)						(in millions, except per share data)
Net sales	$	6,237	$	6,383	(2.3)	%	$	18,588	$	19,270	(3.5)	%
Operating income/(loss)	1,025		(101)		1,114.9	%	(5,753)		1,723		(433.9)	%
Net income/(loss)	613		(290)		311.4	%	(6,496)		614		(1,158.0)	%
Net income/(loss) attributable to common shareholders	615		(290)		312.1	%	(6,497)		613		(1,159.9)	%
Diluted EPS	0.52		(0.24)		316.7	%	(5.47)		0.50		(1,194.0)	%

Net Sales:


	For the Three Months Ended						For the Nine Months Ended
	September 27, 2025		September 28, 2024		% Change		September 27, 2025		September 28, 2024		% Change
	(in millions)						(in millions)
Net sales	$	6,237	$	6,383	(2.3)	%	$	18,588	$	19,270	(3.5)	%
Organic Net Sales(a)	6,201		6,363		(2.5)	%	18,612		19,204		(3.1)	%

(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 September 27, 2025 Compared to the Three Months Ended September 28, 2024:

Net sales decreased 2.3% to $6.2 billion for the three months ended September 27, 2025 compared to $6.4 billion for the three months ended September 28, 2024, including the favorable impact of foreign currency (0.2 pp). Organic Net Sales decreased 2.5% to $6.2 billion for the three months ended September 27, 2025 compared to $6.4 billion for the three months ended September 28, 2024, primarily due to the unfavorable volume/mix (3.5 pp), which more than offset higher pricing (1.0 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.

Nine Months Ended September 27, 2025 Compared to the Nine Months Ended September 28, 2024:

Net sales decreased 3.5% to $18.6 billion for the nine months ended September 27, 2025 compared to $19.3 billion for the nine months ended September 28, 2024, including the unfavorable impact of foreign currency (0.4 pp). Organic Net Sales decreased 3.1% to $18.6 billion for the nine months ended September 27, 2025 compared to $19.2 billion for the nine months ended September 28, 2024, primarily due to the unfavorable volume/mix (3.9 pp), which more than offset higher pricing (0.8 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 Nine Months Ended
	September 27, 2025		September 28, 2024		% Change		September 27, 2025		September 28, 2024		% Change
	(in millions)						(in millions)
Operating income/(loss)	$	1,025	$	(101)	1,114.9	%	$	(5,753)	$	1,723	(433.9)	%
Net income/(loss)	613		(290)		311.4	%	(6,496)		614		(1,158.0)	%
Net income/(loss) attributable to common shareholders	615		(290)		312.1	%	(6,497)		613		(1,159.9)	%
Adjusted Operating Income(a)	1,106		1,330		(16.9)	%	3,581		3,975		(9.9)	%

(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 September 27, 2025 Compared to the Three Months Ended September 28, 2024:

Operating income/(loss) increased 1,114.9% to income of $1.0 billion for the three months ended September 27, 2025 compared to losses of $101 million for the three months ended September 28, 2024, primarily due to non-cash impairment losses that were $1.4 billion lower in the current year period. In addition to the impact of these non-cash impairment losses, operating income/(loss) decreased $267 million due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, increased SG&A, primarily due to increased advertising expenses, and unfavorable changes in unrealized losses/(gains) on commodity hedges. These unfavorable impacts to operating income/(loss) were partially offset by higher pricing.

Net income/(loss) increased 311.4% to income of $613 million for the three months ended September 27, 2025 compared to losses of $290 million for the three months ended September 28, 2024. This increase was due to the favorable changes in operating income/(loss) factors discussed above, partially offset by higher income tax expense, unfavorable changes in other expense/(income), and higher interest expense.

Our effective tax rate for the three months ended September 27, 2025 was an expense of 24.0% on pre-tax income. Our effective tax rate for the three months ended September 28, 2024 was an expense of 2.5% on pre-tax loss, which included the net unfavorable effective tax rate impact of goodwill and intangible asset impairment losses of 22.9%. 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 $22 million of income for the three months ended September 27, 2025 compared to $48 million of income for the three months ended September 28, 2024. This change was primarily driven by a $44 million net loss on the sale of a business recognized in the third quarter of 2025 associated with the Italy Infant Transaction, partially offset by an $18 million increase in interest income primarily due to interest earned on our available-for-sale securities.

Adjusted Operating Income decreased 16.9% to $1.1 billion for the three months ended September 27, 2025 compared to $1.3 billion for the three months ended September 28, 2024, primarily due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, and increased SG&A, primarily due to increased advertising expenses. These unfavorable impacts more than offset higher pricing and the favorable impact of foreign currency (0.1 pp).

Nine Months Ended September 27, 2025 Compared to the Nine Months Ended September 28, 2024:

Operating income/(loss) decreased 433.9% to a loss of $5.8 billion for the nine months ended September 27, 2025 compared to income of $1.7 billion for the nine months ended September 28, 2024, primarily due to non-cash impairment losses that were $7.0 billion higher in the current year period. In addition to the impact of these non-cash impairment losses, operating income/(loss) decreased $457 million due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, 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 1,158.0% to a loss of $6.5 billion for the nine months ended September 27, 2025 compared to income of $614 million for the nine months ended September 28, 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 nine months ended September 27, 2025 was an expense of 2.4% on pre-tax loss, which included the net unfavorable effective tax rate impact of non-deductible goodwill impairments of 24.8%. Our effective tax rate for the nine months ended September 28, 2024 was an expense of 43.9% on pre-tax income, which included the net unfavorable effective tax rate impact of goodwill and intangible asset impairment losses of 21.5%. The year-over-year change in the effective tax rate for the nine 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 $120 million of income for the nine months ended September 27, 2025 compared to $56 million of income for the nine months ended September 28, 2024. This change was primarily driven by a $36 million increase in interest income in 2025 compared to 2024 primarily due to interest earned our available-for-sale securities, and a $44 million net loss on the sale of a business recognized in 2025 compared to a $78 million net loss on the sale of businesses in 2024.

Adjusted Operating Income decreased 9.9% to $3.6 billion for the nine months ended September 27, 2025 compared to $4.0 billion for the nine months ended September 28, 2024, primarily due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, and the unfavorable impact of foreign currency (0.1 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 Nine Months Ended
	September 27, 2025		September 28, 2024		% Change		September 27, 2025		September 28, 2024		% Change
Diluted EPS	$	0.52	$	(0.24)	316.7	%	$	(5.47)	$	0.50	(1,194.0)	%
Adjusted EPS(a)	0.61		0.75		(18.7)	%	1.92		2.22		(13.5)	%

(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 September 27, 2025 Compared to the Three Months Ended September 28, 2024:

Diluted EPS increased 316.7% to $0.52 for the three months ended September 27, 2025 compared to $(0.24) for the three months ended September 28, 2024, primarily due to the net income/(loss) factors discussed above and the favorable impact of our common stock repurchases.


	For the Three Months Ended
	September 27, 2025		September 28, 2024		$ Change		% Change
Diluted EPS	$	0.52	$	(0.24)	$	0.76	316.7	%


Unrealized losses/(gains) on commodity hedges	0.02		—		0.02
Impairment losses	0.03		0.99		(0.96)
Separation costs	0.01		—		0.01

Losses/(gains) on sale of business	0.04		—		0.04



Certain significant discrete income tax items	(0.01)		—		(0.01)
Adjusted EPS(a)	$	0.61	$	0.75	$	(0.14)	(18.7)	%

Key drivers of change in Adjusted EPS(a):
Results of operations					$	(0.14)

Interest expense					(0.01)
Other expense/(income)					0.02
Effective tax rate					(0.02)
Effect of common stock repurchases(b)					0.01
					$	(0.14)

(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 16, Earnings Per Share, for more information on our weighted average shares outstanding.

Adjusted EPS decreased 18.7% to $0.61 for the three months ended September 27, 2025 compared to $0.75 for the three months ended September 28, 2024. This decrease was primarily due to lower Adjusted Operating Income, higher taxes on adjusted earnings, and higher interest expense, which more than offset the favorable changes in other expense/(income) and the favorable impact of our common stock repurchases.

Nine Months Ended September 27, 2025 Compared to the Nine Months Ended September 28, 2024:

Diluted EPS decreased 1,194.0% to $(5.47) for the nine months ended September 27, 2025 compared to $0.50 for the nine months ended September 28, 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 Nine Months Ended
	September 27, 2025		September 28, 2024		$ Change		% Change
Diluted EPS	$	(5.47)	$	0.50	$	(5.97)	(1,194.0)	%
Restructuring activities	0.01		—		0.01

Unrealized losses/(gains) on commodity hedges	—		(0.02)		0.02
Impairment losses	7.30		1.69		5.61
Separation costs	0.01		—		0.01

Losses/(gains) on sale of business	0.04		0.05		(0.01)

Nonmonetary currency devaluation	0.02		—		0.02

Certain significant discrete income tax items	0.01		—		0.01
Adjusted EPS(a)	$	1.92	$	2.22	$	(0.30)	(13.5)	%

Key drivers of change in Adjusted EPS(a):
Results of operations					$	(0.26)

Interest expense					(0.01)
Other expense/(income)					0.04
Effective tax rate					(0.11)
Effect of common stock repurchases(b)					0.04
					$	(0.30)

(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 13.5% to $1.92 for the nine months ended September 27, 2025 compared to $2.22 for the nine months ended September 28, 2024. This decrease was primarily due to lower Adjusted Operating Income, higher taxes on adjusted earnings, and higher interest expense, 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, separation costs, 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 3, 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 Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
	(in millions)
Net sales:
North America	$	4,641	$	4,826	$	13,886	$	14,575
International Developed Markets	895		882		2,609		2,622
Emerging Markets	701		675		2,093		2,073
Total net sales	$	6,237	$	6,383	$	18,588	$	19,270

Organic Net Sales:


	For the Three Months Ended				For the Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
	(in millions)
Organic Net Sales(a):
North America	$	4,645	$	4,826	$	13,921	$	14,575
International Developed Markets	869		882		2,575		2,622
Emerging Markets	687		655		2,116		2,007
Total Organic Net Sales	$	6,201	$	6,363	$	18,612	$	19,204

(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 and nine months ended September 27, 2025 compared to the three and nine months ended September 28, 2024 were:


	Net Sales		Currency	Acquisitions and Divestitures	Organic Net Sales		Price	Volume/Mix
For the Three Months Ended
North America	(3.8)	%	0.0 pp	0.0 pp	(3.8)	%	0.4 pp	(4.2) pp
International Developed Markets	1.6	%	3.0 pp	0.0 pp	(1.4)	%	1.0 pp	(2.4) pp
Emerging Markets	3.8	%	(0.9) pp	0.0 pp	4.7	%	4.0 pp	0.7 pp
Kraft Heinz	(2.3)	%	0.2 pp	0.0 pp	(2.5)	%	1.0 pp	(3.5) pp


	Net Sales		Currency	Acquisitions and Divestitures	Organic Net Sales		Price	Volume/Mix
For the Nine Months Ended
North America	(4.7)	%	(0.2) pp	0.0 pp	(4.5)	%	0.4 pp	(4.9) pp
International Developed Markets	(0.5)	%	1.3 pp	0.0 pp	(1.8)	%	0.5 pp	(2.3) pp
Emerging Markets	0.9	%	(4.0) pp	(0.5) pp	5.4	%	4.5 pp	0.9 pp
Kraft Heinz	(3.5)	%	(0.4) pp	0.0 pp	(3.1)	%	0.8 pp	(3.9) pp

Adjusted Operating Income:


	For the Three Months Ended				For the Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
	(in millions)
Segment Adjusted Operating Income:
North America	$	1,018	$	1,237	$	3,292	$	3,793
International Developed Markets	130		135		393		397
Total Segment Adjusted Operating Income	1,148		1,372		3,685		4,190
Emerging Markets	79		84		278		232
General corporate expenses	(121)		(126)		(382)		(447)
Restructuring activities	(6)		—		(10)		—

Unrealized gains/(losses) on commodity hedges	(23)		(3)		(6)		30
Impairment losses	(35)		(1,428)		(9,301)		(2,282)
Separation costs	(17)		—		(17)		—

Operating income/(loss)	1,025		(101)		(5,753)		1,723
Interest expense	240		230		709		685
Other expense/(income)	(22)		(48)		(120)		(56)
Income/(loss) before income taxes	$	807	$	(283)	$	(6,342)	$	1,094

North America:


	For the Three Months Ended						For the Nine Months Ended
	September 27, 2025		September 28, 2024		% Change		September 27, 2025		September 28, 2024		% Change
	(in millions)						(in millions)
Net sales	$	4,641	$	4,826	(3.8)	%	$	13,886	$	14,575	(4.7)	%
Organic Net Sales(a)	4,645		4,826		(3.8)	%	13,921		14,575		(4.5)	%
Segment Adjusted Operating Income	1,018		1,237		(17.8)	%	3,292		3,793		(13.2)	%

(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 September 27, 2025 Compared to the Three Months Ended September 28, 2024:

Net sales decreased 3.8% to $4.6 billion for the three months ended September 27, 2025 compared to $4.8 billion for the three months ended September 28, 2024. Organic Net Sales decreased 3.8% to $4.6 billion for the three months ended September 27, 2025 compared to $4.8 billion for the three months ended September 28, 2024, primarily due to unfavorable volume/mix (4.2

pp), which more than offset higher pricing (0.4 pp). Unfavorable volume/mix was primarily due to declines in coffee, cold cuts, frozen snacks, and certain condiments. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in coffee.

Segment Adjusted Operating Income decreased 17.8% to $1.0 billion for the three months ended September 27, 2025 compared to $1.2 billion for the three months ended September 28, 2024, primarily due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, increased SG&A, primarily due to increased advertising expenses, and the unfavorable impact of foreign currency (0.1 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing.

Nine Months Ended September 27, 2025 Compared to the Nine Months Ended September 28, 2024:

Net sales decreased 4.7% to $13.9 billion for the nine months ended September 27, 2025 compared to $14.6 billion for the nine months ended September 28, 2024, including the unfavorable impacts of foreign currency (0.2 pp). Organic Net Sales decreased 4.5% to $13.9 billion for the nine months ended September 27, 2025 compared to $14.6 billion for the nine months ended September 28, 2024, primarily due to unfavorable volume/mix (4.9 pp), which more than offset higher pricing (0.4 pp). Unfavorable volume/mix was primarily driven by declines in cold cuts, coffee, frozen snacks, desserts, and certain condiments. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in coffee.

Segment Adjusted Operating Income decreased 13.2% to $3.3 billion for the nine months ended September 27, 2025 compared to $3.8 billion for the nine months ended September 28, 2024, primarily due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, higher depreciation expense, and the unfavorable impact of foreign currency (0.1 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing and decreased SG&A, primarily due to decreased advertising expenses, and lower variable compensation expense.

International Developed Markets:


	For the Three Months Ended						For the Nine Months Ended
	September 27, 2025		September 28, 2024		% Change		September 27, 2025		September 28, 2024		% Change
	(in millions)						(in millions)
Net sales	$	895	$	882	1.6	%	$	2,609	$	2,622	(0.5)	%
Organic Net Sales(a)	869		882		(1.4)	%	2,575		2,622		(1.8)	%
Segment Adjusted Operating Income	130		135		(3.5)	%	393		397		(1.0)	%

(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 September 27, 2025 Compared to the Three Months Ended September 28, 2024:

Net sales increased 1.6% to $895 million for the three months ended September 27, 2025 compared to $882 million for the three months ended September 28, 2024, including the favorable impacts of foreign currency (3.0 pp). Organic Net Sales decreased 1.4% to $869 million for the three months ended September 27, 2025 compared to $882 million for the three months ended September 28, 2024, primarily due to unfavorable volume/mix (2.4 pp), which more than offset higher pricing (1.0 pp). Unfavorable volume/mix was primarily due to continued industry slowdowns in meals in the United Kingdom and pricing elasticity in New Zealand.

Segment Adjusted Operating Income decreased 3.5% to $130 million for the three months ended September 27, 2025 compared to $135 million for the three months ended September 28, 2024, primarily due to unfavorable volume/mix and increased SG&A, primarily due to increased variable compensation expense and research and development costs. These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing and the favorable impact of foreign currency (4.1 pp).

Nine Months Ended September 27, 2025 Compared to the Nine Months Ended September 28, 2024:

Net sales decreased 0.5% to $2.6 billion for the nine months ended September 27, 2025 compared to $2.6 billion for the nine months ended September 28, 2024, including the favorable impacts of foreign currency (1.3 pp). Organic Net Sales decreased 1.8% to $2.6 billion for the nine months ended September 27, 2025 compared to $2.6 billion for the nine months ended September 28, 2024, primarily due to unfavorable volume/mix (2.3 pp), which more than offset higher pricing (0.5 pp). Unfavorable volume/mix was primarily due to continued industry slowdowns of meals in the United Kingdom and pricing elasticity in New Zealand.

Segment Adjusted Operating Income decreased 1.0% to $393 million for the nine months ended September 27, 2025 compared to $397 million for the nine months ended September 28, 2024, primarily due to unfavorable volume/mix and inflationary pressures in manufacturing and procurement costs that outpaced our efficiency initiatives. These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing, the favorable impact of foreign currency (2.8 pp), lower amortization expense, and decreased SG&A, primarily due to decreased advertising expenses.

Emerging Markets:


	For the Three Months Ended						For the Nine Months Ended
	September 27, 2025		September 28, 2024		% Change		September 27, 2025		September 28, 2024		% Change
	(in millions)						(in millions)
Net sales	$	701	$	675	3.8	%	$	2,093	$	2,073	0.9	%
Organic Net Sales(a)	687		655		4.7	%	2,116		2,007		5.4	%
Segment Adjusted Operating Income(b)	79		84		(6.5)	%	278		232		19.6	%

(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 September 27, 2025 Compared to the Three Months Ended September 28, 2024:

Net sales increased 3.8% to $701 million for the three months ended September 27, 2025 compared to $675 million for the three months ended September 28, 2024, including the unfavorable impacts of foreign currency (0.9 pp). Organic Net Sales increased 4.7% to $687 million for the three months ended September 27, 2025 compared to $655 million for the three months ended September 28, 2024, primarily driven by higher pricing (4.0 pp) and favorable volume/mix (0.7 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 region, which more than offset unfavorable volume/mix in Indonesia.

Segment Adjusted Operating Income decreased 6.5% to $79 million for the three months ended September 27, 2025 compared to $84 million for the three months ended September 28, 2024, primarily due to increased advertising expenses, higher procurement and logistics costs reflecting inflationary pressure in WEEM, unfavorable changes in allowances for trade receivables in Indonesia, higher depreciation expense, and the unfavorable impact of foreign currency (1.8 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing, reduced manufacturing costs primarily as a result of our efficiency initiatives, and favorable volume/mix.

Nine Months Ended September 27, 2025 Compared to the Nine Months Ended September 28, 2024:

Net sales increased 0.9% to $2.1 billion for the nine months ended September 27, 2025 compared to $2.1 billion for the nine months ended September 28, 2024, including the unfavorable impacts of foreign currency (4.0 pp) and divestitures (0.5 pp). Organic Net Sales increased 5.4% to $2.1 billion for the nine months ended September 27, 2025 compared to $2.0 billion for the nine months ended September 28, 2024, primarily driven by higher pricing (4.5 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 19.6% to $278 million for the nine months ended September 27, 2025 compared to $232 million for the nine months ended September 28, 2024, primarily due to higher pricing, reduced manufacturing costs, primarily as a result of our efficiency initiatives, and favorable volume/mix. These favorable impacts to Segment Adjusted Operating Income more than offset increased SG&A, primarily due to increased advertising expenses, higher procurement and logistics costs reflecting inflationary pressure in WEEM, higher depreciation expense, and the unfavorable impact of foreign currency (4.9 pp).

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 Nine Months Ended September 27, 2025 Compared to the Nine Months Ended September 28, 2024:

Net Cash Provided by/Used for Operating Activities:

Net cash provided by operating activities was $3.1 billion for the nine months ended September 27, 2025 compared to $2.8 billion for the nine months ended September 28, 2024. This increase was primarily due to favorable changes in working capital, predominantly within inventory and 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 $1.6 billion for the nine months ended September 27, 2025 compared to $849 million for the nine months ended September 28, 2024. This change was primarily driven by the purchases of marketable securities, partially offset by proceeds received from the sale of marketable securities in the 2025 period, lower capital expenditures in the 2025 period compared to the 2024 period, and lapping our prior year payment to acquire the TGI Friday License. We expect 2025 capital expenditures to be approximately $950 million 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 $763 million for the nine months ended September 27, 2025 compared to $2.0 billion for the nine months ended September 28, 2024. This change was primarily driven by debt proceeds received from the issuance of the 2025 Notes in the current year period, increased cash flow hedge settlements, and decreased repurchases of common stock compared to the prior year period. See Note 15, Commitments, Contingencies, and Debt for additional information on our debt issuances.

Cash Held by International Subsidiaries:

Of the $2.1 billion cash and cash equivalents on our condensed consolidated balance sheet at September 27, 2025, $1.1 billion 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 $65 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 September 27, 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 $767 million at September 27, 2025 and $745 million at December 28, 2024. The amounts were included in accounts payable on our consolidated balance sheets. See Note 14, 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 September 27, 2025, at December 28, 2024, or during the nine months ended September 27, 2025 or September 28, 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 September 27, 2025 or December 28, 2024, or during the nine months ended September 27, 2025 or September 28, 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 September 27, 2025.

Long-Term Debt:

Our long-term debt, including the current portion, was $21.2 billion at September 27, 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 September 27, 2025.

See Note 15, Commitments, Contingencies, and Debt, in Item 1, Financial Statements, for additional information on our long-term debt activity, Note 12, 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 $1.4 billion for the nine months ended September 27, 2025. Additionally, in the fourth quarter of 2025, our Board of Directors declared a cash dividend of $0.40 per share of common stock, which is payable on December 26, 2025 to stockholders of record on November 28, 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 no shares during the three months ended and 13.5 million shares during the nine months ended September 27, 2025 and had approximately $1.5 billion remaining authorization under the share repurchase program as of September 27, 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 15, 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 15, 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 Nine Months Ended
	September 27, 2025
Net sales	$	11,834
Gross profit(a)	4,363


Intercompany service fees and other recharges	3,108
Operating income/(loss)	758
Equity in earnings/(losses) of subsidiaries	(6,421)
Net income/(loss)	(6,497)
Net income/(loss) attributable to common shareholders	(6,497)

(a) For the nine months ended September 27, 2025, the Obligor Group recorded $363 million of net sales to the non-guarantor subsidiaries and $46 million of purchases from the non-guarantor subsidiaries.

Summarized Balance Sheets


	September 27, 2025		December 28, 2024
ASSETS
Current assets	$	4,895	$	4,506
Current assets due from affiliates(a)	147		445
Non-current assets	5,689		5,848
Goodwill	8,823		8,823
Intangible assets, net	1,796		1,881
Non-current assets due from affiliates(b)	28		28
LIABILITIES
Current liabilities	$	4,757	$	5,563
Current liabilities due to affiliates(a)	1,548		1,924
Non-current liabilities	21,266		22,846
Non-current liabilities due to affiliates(b)	206		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, sugar and other sweeteners, coffee beans, tomatoes, edible oils, eggs, fruits and vegetables, and wheat products 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 nine months ended September 27, 2025, we experienced increased commodity costs for coffee, meat, and eggs, while commodity costs for cheese and dairy, tomato products, edible oil and wheat products 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. 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 September 27, 2025, we maintain 10 reporting units globally, six of which comprise our goodwill balance. These six reporting units had an aggregate goodwill carrying amount of $22.2 billion at September 27, 2025. Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $34.1 billion at September 27, 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 8, 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 8, Goodwill and Intangible Assets, in Item 1, Financial Statements, we performed our 2025 Annual Impairment Test as of June 29, 2025, which was the first day of our third quarter of 2025. We concluded that the fair value of our reporting units and brands exceeded their carrying amounts and no impairment was recorded in the third quarter of 2025 as a result of the 2025 Annual Impairment Test. Our reporting units and brands that have 20% or less excess fair value over carrying amount as of the 2025 Annual 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 determined to have less than 5% fair value over carrying amount as of our 2025 Annual Impairment Test had an aggregate goodwill carrying amount of $21.9 billion as of the 2025 Annual Impairment Test and included Elevation, HDM, Western Europe, MCCS, and Canada reporting units. Our Asia reporting unit had less than 20% fair value over carrying amount with an aggregate goodwill carrying amount of $314 million as of the 2025 Annual Impairment Test. Our reporting units that have 20% or less excess fair value over carrying amounts as of the 2025 Annual Impairment Test are considered at a heightened risk of future impairments and had an aggregate carrying amount of $22.2 billion. Our four remaining reporting units had no goodwill carrying amount at the time of the 2025 Annual Impairment Test.

As of the 2025 Annual Impairment Test, our Kraft brand was determined to have less than 2% fair value over carrying amount, and had a carrying amount of $8.5 billion. Our brands that had over 2% but less than 10% fair value over carrying amount included Lunchables, Bagel Bites, and Claussen and had an aggregate carrying amount of $1.2 billion as of the 2025 Annual Impairment Test. Our brands that had 10-20% fair value over carrying amount included Velveeta, Oscar Mayer, A1, Capri Sun, and Cool Whip and had an aggregate carrying amount of $5.3 billion as of the 2025 Annual Impairment Test. The aggregate carrying amount of brands with fair value over carrying amount 20-50% was $17.0 billion as of the 2025 Annual Impairment Test. Although the remaining brands, with a carrying amount of $2.2 billion, have more than 50% excess fair value over carrying amount as of the 2025 Annual 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 2025 Annual Impairment Test are considered at a heightened risk of future impairments and had an aggregate carrying amount of $15.0 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 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 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.

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 2025 Annual 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	$	22.2		7.3	%		11.8	%		0.5	%		4.0	%
Brands (excess earnings method)	11.3			8.5	%		8.8	%		0.5	%		2.0	%
Brands (relief from royalty method)	3.7			8.8	%		9.3	%		0.5	%		2.0	%		7.0	%		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 2025 Annual 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	$	(3.5)	$	4.0	$	1.7	$	(1.6)
Brands (excess earnings method)	(0.8)		1.0		0.4		(0.3)
Brands (relief from royalty method)	(0.3)		0.3		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 8, Goodwill and Intangible Assets, in Item 1, Financial Statements, for our impairment testing results.

New Accounting Pronouncements

See Note 4, New Accounting Standards, in Item 1, Financial Statements, for a discussion of new accounting pronouncements.

Contingencies

See Note 15, 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, separation 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, separation 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 September 27, 2025
North America	$	4,641	$	(4)	$	—	$	4,645
International Developed Markets	895		26		—		869
Emerging Markets	701		14		—		687
Kraft Heinz	$	6,237	$	36	$	—	$	6,201

Three Months Ended September 28, 2024
North America	$	4,826	$	—	$	—	$	4,826
International Developed Markets	882		—		—		882
Emerging Markets	675		20		—		655
Kraft Heinz	$	6,383	$	20	$	—	$	6,363


Year-over-year growth rates
North America	(3.8)	%	0.0 pp	0.0 pp	(3.8)	%	0.4 pp	(4.2) pp
International Developed Markets	1.6	%	3.0 pp	0.0 pp	(1.4)	%	1.0 pp	(2.4) pp
Emerging Markets	3.8	%	(0.9) pp	0.0 pp	4.7	%	4.0 pp	0.7 pp
Kraft Heinz	(2.3)	%	0.2 pp	0.0 pp	(2.5)	%	1.0 pp	(3.5) 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
Nine Months Ended September 27, 2025
North America	$	13,886	$	(35)	$	—	$	13,921
International Developed Markets	2,609		34		—		2,575
Emerging Markets	2,093		(23)		—		2,116
Kraft Heinz	$	18,588	$	(24)	$	—	$	18,612

Nine Months Ended September 28, 2024
North America	$	14,575	$	—	$	—	$	14,575
International Developed Markets	2,622		—		—		2,622
Emerging Markets	2,073		56		10		2,007
Kraft Heinz	$	19,270	$	56	$	10	$	19,204


Year-over-year growth rates
North America	(4.7)	%	(0.2) pp	0.0 pp	(4.5)	%	0.4 pp	(4.9) pp
International Developed Markets	(0.5)	%	1.3 pp	0.0 pp	(1.8)	%	0.5 pp	(2.3) pp
Emerging Markets	0.9	%	(4.0) pp	(0.5) pp	5.4	%	4.5 pp	0.9 pp
Kraft Heinz	(3.5)	%	(0.4) pp	0.0 pp	(3.1)	%	0.8 pp	(3.9) 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 Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Operating income/(loss)	$	1,025	$	(101)	$	(5,753)	$	1,723
Restructuring activities	6		—		10		—

Unrealized losses/(gains) on commodity hedges	23		3		6		(30)
Impairment losses	35		1,428		9,301		2,282
Separation costs	17		—		17		—

Adjusted Operating Income	$	1,106	$	1,330	$	3,581	$	3,975

The Kraft Heinz Company

Reconciliation of Diluted EPS to Adjusted EPS

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 27, 2025		September 28, 2024		September 27, 2025		September 28, 2024
Diluted EPS	$	0.52	$	(0.24)	$	(5.47)	$	0.50
Restructuring activities(a)	—		—		0.01		—

Unrealized losses/(gains) on commodity hedges(b)	0.02		—		—		(0.02)
Impairment losses(c)	0.03		0.99		7.30		1.69
Separation costs(d)	0.01		—		0.01		—

Losses/(gains) on sale of business(e)	0.04		—		0.04		0.05

Nonmonetary currency devaluation(f)	—		—		0.02		—

Certain significant discrete income tax items(g)	(0.01)		—		0.01		—
Adjusted EPS	$	0.61	$	0.75	$	1.92	$	2.22

(a) Gross expenses/(income) included in restructuring activities were expenses of $4 million ($1 million after-tax) for the three months and $18 million ($9 million after-tax) for the nine months ended September 27, 2025 and income of $7 million ($5 million after-tax) for the three months and $8 million ($6 million after-tax) for the nine months ended September 28, 2024 and were recorded in the following income statement line items:

Cost of products sold included expenses of $2 million for the three months and $1 million for the nine months ended September 27, 2025 and expenses of $2 million for the nine months ended September 28, 2024; and
SG&A included expenses of $4 million for the three months and $9 million for the nine months ended September 27, 2025 and income of $2 million for the nine months ended September 28, 2024.
Other expense/(income) included income of $2 million for the three months and expenses of $8 million for the nine months ended September 27, 2025 and income of $7 million for the three months and $8 million for the nine months ended September 28, 2024

(b) Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were expenses of $23 million ($18 million after-tax) for the three months and $6 million ($5 million after-tax) for the nine months ended September 27, 2025 and expenses of $3 million ($2 million after-tax) for the three months and income of $30 million ($22 million after-tax) for the nine months ended September 28, 2024, and were recorded in cost of products sold.

Goodwill impairment losses of $35 million ($35 million after-tax) for the three months and $6.7 billion ($6.7 billion after-tax) for the nine months ended September 27, 2025 and $707 million ($659 million after-tax) for the three months and $1.6 billion ($1.5 billion after-tax) for the nine months ended September 28, 2024, which were recorded in SG&A;
Intangible asset impairment losses of $2.6 billion ($2 billion after-tax) for the nine months ended September 27, 2025 and $721 million ($541 million after-tax) for the three and nine months ended September 28, 2024, which were recorded in SG&A.

(d) Gross expenses recorded in separation costs were $17 million ($13 million after-tax) for the three and nine months ended September 27, 2025, and were recorded in SG&A.

(e) Gross expenses/(income) included in losses/(gains) on sale of business were expenses of $44 million ($44 million after-tax) for the three and nine months ended September 27, 2025 and expenses of zero ($4 million after-tax) for the three months and $78 million ($57 million after-tax) for the nine months ended September 28, 2024, and were recorded in other expense/(income).

(f) Gross expenses included in nonmonetary currency devaluation were $5 million ($5 million after-tax) for the three months and $26 million ($26 million after-tax) for the nine months ended September 27, 2025 and $3 million ($3 million after-tax) for the three months and $7 million ($7 million after-tax) for the nine months ended September 28, 2024, and were recorded in other expense/(income).

(g) Certain significant discrete income tax items were a benefit of $6 million for the three months and expenses of $10 million for the nine months ended September 27, 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.