What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-15 compared with 2023-02-16 · 131 added, 163 removed, 489 unchanged (38% of the section changed)

6 unchanged sentences

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

In the second quarter of 2022, our internal reporting and reportable segments changed.

We combined our United States and Canada zones to form the North America zone as a result of previously announced organizational changes, which are intended to advance and support our long-term growth plans by streamlining and synergizing our United States and Canada businesses.

Subsequently, we manage and report our operating results through two reportable segments defined by geographic region:

We manage and report our operating results through two reportable segments defined by geographic region:

North America and International.

We have reflected this change in all historical periods presented.

During the fourth quarter of 2023, certain organizational changes were announced that are expected to impact our future internal reporting and reportable segments.

We expect to divide our International segment into three operating segments — Europe and Pacific Developed Markets (“EPDM” or “International Developed Markets”), West and East Emerging Markets (“WEEM”), and Asia Emerging Markets (“AEM”) — in order to enable enhanced focus on the different strategies required for each of these regions as part of our long-term strategic plan.

As a result of these changes, we expect to have two reportable segments:

North America and International Developed Markets.

We anticipate that our remaining operating segments, consisting of WEEM and AEM, will be combined and disclosed as Emerging Markets.

We expect that the change to our reportable segments will be effective in the first quarter of 2024.

See Note 20, Segment Reporting , in Item 8, Financial Statements and Supplementary Data , for our financial information by segment.

Acquisitions and Divestitures:

In 2022, we completed the acquisition of Companhia Hemmer Indústria e Comércio (the “Hemmer Acquisition”) and Just Spices GmbH (the “Just Spices Acquisition”), both of which are in our International segment.

Additionally, in 2022, we completed the sale of our business-to-business powdered cheese business (the “Powdered Cheese Transaction”).

The Powdered Cheese Transaction is not considered a strategic shift that will have a major effect on our operations or financial results;

therefore, the results of this business are included in continuing operations through the date of sale.

In 2021, we completed the acquisition of Assan Gıda Sanayi ve Ticaret A.Ş.

(the “Assan Foods Acquisition”) and BR Spices Indústria e Comércio de Alimentos Ltda (the “BR Spices Acquisition”), both of which are in our International segment .

Additionally, in 2021, we completed the sale of certain assets in our global nuts business (the “Nuts Transaction”) as well as the sale of certain assets in our global cheese businesses (the “Cheese Transaction”).

The Nuts Transaction and the Cheese Transaction are not, individually or in the aggregate, considered a strategic shift that will have a major effect on our operations or financial results;

therefore, the results of these businesses are included in continuing operations through the date of each sale in the prior year period.

See Note 4, Acquisitions and Divestitures , in Item 8, Financial Statements and Supplementary Data , for additional information.

Conflict Between Russia and Ukraine:

For the year ended December 31, 2022, approximately 1% of consolidated net sales, net income/(loss), and Adjusted EBITDA were generated from our business in Russia.

For the year ended December 25, 2021, approximately 1% of consolidated net sales were generated from our business in Russia, while net income/(loss) and Adjusted EBITDA were each insignificant.

As of December 31, 2022, we had approximately 1,100 employees in Russia.

For the years ended December 30, 2023 and December 31, 2022, approximately 1% of consolidated net sales, net income/(loss), and Adjusted EBITDA were generated from our business in Russia.

As of December 30, 2023, less than 1% of consolidated total assets were located in Russia and we had approximately 1,100 employees in Russia.

We have no operations or employees in Ukraine and insignificant net sales through distributors.

Further, we have experienced cost increases globally for certain commodities, including packaging materials, soybean and vegetable oils, energy, corn products, and wheat products due to overall market demand, inflationary pressures, and, in part, to the negative impact of the conflict between Russia and Ukraine on the global economy.

We will continue to monitor the impact that this conflict has on our business;

2 unchanged sentences

Impairment Losses:

Our results of operations reflect goodwill impairment losses of $444 million, intangible asset impairment losses of $469 million, and property, plant, and equipment, net asset impairment losses of $86 million in 2022 compared to goodwill impairment losses of $318 million and intangible asset impairment losses of $1.3 billion in 2021.

Our results of operations reflect goodwill impairment losses of $510 million and intangible asset impairment losses of $152 million in 2023 compared to goodwill impairment losses of $444 million, intangible asset impairment losses of $469 million, and net property, plant, and equipment asset impairment losses of $86 million in 2022.

See Note 4, Acquisitions and Divestitures , and Note 8, Goodwill and Intangible Assets , in Item 8, Financial Statements and Supplementary Data , for additional information on these impairment losses.

We operate on a 52- or 53-week fiscal year ending on the last Saturday in December in each calendar year.

Our 2022 fiscal year ended December 31, 2022 includes a 53rd week of activity.

Our 2023 fiscal year was a 52-week period that ended on December 30, 2023.

Our 2022 fiscal year was a 53-week period that ended on December 31, 2022.

Inflation and Supply Chain Impacts:

During the year ended December 31, 2022, we continued to experience increasing commodity costs and supply chain costs, including procurement, logistics, and manufacturing costs, largely due to inflationary pressures, as compared to the prior year period.

We expect these costs to continue to increase and inflation to remain elevated through 2023.

While these costs have a negative impact on our results of operations, we are currently taking measures to mitigate, and expect to continue to take measures to mitigate, the impact of this inflation through pricing actions and efficiency gains.

During the year ended December 30, 2023, we experienced increased supply chain costs, including procurement, and manufacturing costs, largely due to inflationary pressures concentrated in the first half of the year, as compared to the prior year period.

While these costs have a negative impact on our results of operations, we have taken measures to mitigate the impact of this inflation through pricing actions, efficiency gains, and hedging strategies.

However, there has been, and we expect that there could continue to be, a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred.

Additionally, the pricing actions we take have, in some instances, negatively impacted, and could continue to negatively impact, our market share.

Further, given the current level of demand for our products combined with industry-wide supply chain issues, we have experienced capacity constraints for certain products when demand has exceeded our current manufacturing capacity.

As discussed in Liquidity and Capital Resources , we continue to focus on rebuilding inventory and expanding capacity through increased capital investments, which have resulted in an increased ability to meet customer demand.

However, these capacity constraints have negatively impacted, and could continue to negatively impact, our market share, financial condition, results of operations, or cash flows, until we return to optimal service levels.

Additionally, the pricing actions we have taken have, in some instances, negatively impacted, and could continue to negatively impact, our market share.

Results of Operations

20 unchanged sentences

Fiscal Year 2023 Compared to Fiscal Year 2022:

Net sales increased 1.7% to $26.5 billion in 2022 compared to $26.0 billion in 2021, including the unfavorable impacts of acquisitions and divestitures (8.0 pp) and foreign currency (2.0 pp) and the favorable impact of a 53rd week of shipments (1.9 pp).

Net sales increased 0.6% to $26.6 billion in 2023 compared to $26.5 billion in 2022, including the unfavorable impacts of lapping a 53rd week of shipments in the prior period (1.8 pp), foreign currency (0.9 pp), and acquisitions and divestitures (0.1 pp).

Organic Net Sales increased 3.4% to $26.8 billion in 2023 compared to $25.9 billion in 2022, primarily driven by higher pricing (8.9 pp), which more than offset unfavorable volume/mix (5.5 pp).

11 unchanged sentences

Fiscal Year 2023 Compared to Fiscal Year 2022:

Operating income/(loss) increased 5.0% to $3.6 billion in 2022 compared to $3.5 billion in 2021, primarily driven by higher pricing, lower non-cash impairment losses in the current year period, efficiency gains, and the favorable impact of a 53rd week of shipments, which more than offset higher supply chain costs, reflecting inflationary pressure in procurement, logistics, and manufacturing costs;

higher commodity costs (mainly in dairy, packaging materials, soybean and vegetable oils, energy, and meat);

the unfavorable impact of acquisitions and divestitures;

Operating income/(loss) increased 25.8% to $4.6 billion in 2023 compared to $3.6 billion in 2022, primarily driven by higher pricing, efficiency gains, lower non-cash impairment losses in the current year period, and the impact of the securities class action lawsuit in the prior year period.

These impacts more than offset higher commodity costs, including the impact of realized and unrealized gains and losses on commodity hedges;

higher supply chain costs, reflecting inflationary pressure in manufacturing and procurement costs;

unfavorable volume/mix;

and an accrual related to the previously disclosed securities class action lawsuit.

increased selling, general and administrative expenses (“SG&A”), particularly advertising expenses;

and the decrease from lapping a 53rd week of shipments in the prior period.

Net income/(loss) increased 20.2% to $2.8 billion in 2023 compared to $2.4 billion in 2022.

This increase was driven by lower interest expense, the operating income/(loss) factors discussed above, and lower tax expense, which more than offset unfavorable changes in other expense/(income).

• Interest expense was $921 million in 2022 compared to $2.0 billion in 2021.

This decrease was primarily due to a $38 million net gain on extinguishment of debt recognized in the current year period in connection with our debt repurchases in 2022 compared to a $917 million loss on extinguishment of debt recognized in the prior year period in connection with our tender offers, debt redemptions, and debt repurchases in 2021.

The remaining change in interest expense was a decrease of approximately $171 million compared to the prior year period, as our aggregate principal amount of senior notes was reduced by approximately $6.2 billion in 2021 through tender offers, redemptions, repurchases, and repayments and approximately $1.5 billion in 2022 through repurchases and repayments.

This increase was driven by the operating income/(loss) factors discussed above and lower interest expense, which more than offset unfavorable changes in other expense/(income) and higher tax expense.

• Interest expense was $912 million in 2023 compared to $921 million in 2022.

• Our effective tax rate was 21.7% in 2023 compared to 20.2% in 2022.

Our 2023 effective tax rate was favorably impacted by the geographic mix of pre-tax income in various non-U.S.

jurisdictions.

These impacts were partially offset by the impact of certain unfavorable rate reconciling items, primarily non-deductible goodwill impairments and the impact of the federal tax on global intangible low-taxed income (“GILTI”).

Our 2022 effective tax rate was impacted by the favorable geographic mix of pre-tax income in various non-U.S.

1 unchanged sentence

income and deductions.

This impact was partially offset by the impact of certain unfavorable items, primarily non-deductible goodwill impairments, the impact of the federal tax on global intangible low-taxed income (“GILTI”), and the establishment of uncertain tax positions and valuation allowance reserves.

Our 2021 effective tax rate was unfavorably impacted by rate reconciling items, primarily the tax impacts related to acquisitions and divestitures, which mainly reflect the impacts of the Nuts Transaction and Cheese Transaction, partially offset by 2021 capital losses;

the revaluation of our deferred tax balances due to changes in international and state tax rates, mainly an increase in U.K.

the impact of the federal tax on GILTI;

and non-deductible goodwill impairments.

These impacts were partially offset by a favorable geographic mix of pre-tax income in various non-U.S.

jurisdictions.

• Other expense/(income) was $253 million of income in 2022 compared to $295 million of income in 2021.

This change was primarily driven by a $79 million decrease in net pension and postretirement non-service benefits and a $25 million net gain on sales of businesses in 2022 compared to a $44 million net gain on sales of businesses in 2021.

These impacts were partially offset by a $50 million net loss on derivative activities in 2022 compared to an $86 million net loss on derivative activities in 2021 and a $12 million increase in interest income as compared to the prior year period.

Adjusted EBITDA decreased 5.8% to $6.0 billion in 2022 compared to $6.4 billion in 2021, primarily due to higher supply chain costs, reflecting inflationary pressure in procurement, logistics, and manufacturing costs;

higher commodity costs (mainly in dairy, packaging materials, soybean and vegetable oils, energy, and meat);

the unfavorable impact of acquisitions and divestitures (6.1 pp);

This impact was partially offset by the impact of certain unfavorable items, primarily non-deductible goodwill impairments, the impact of the federal tax on GILTI, and the establishment of uncertain tax positions and valuation allowance reserves.

The year-over-year increase in the effective tax rate was due primarily to the decrease in deferred tax liabilities due to the merger of certain foreign entities and the revaluation of deferred tax balances due to changes in state tax laws in the prior year versus the current year.

• Other expense/(income) was $27 million of expense in 2023 compared to $253 million of income in 2022.

This change was primarily driven by a $67 million net pension and postretirement non-service costs in 2023 compared to a $135 million net pension and postretirement non-service benefit in 2022 due in part to the settlement of one of our U.K.

defined benefit pension plans, which resulted in pre-tax losses of $162 million.

Further, additional changes in other expense/(income) were driven by a $73 million net foreign exchange loss in 2023 compared to a $106 million net foreign exchange gain in 2022, and a $21 million decrease in gain on sale of businesses.

These impacts were partially offset by a $59 million net gain on derivative activities in 2023 compared to an $50 million net loss on derivative activities in 2022, and a $13 million increase in interest income as compared to the prior year period.

Adjusted EBITDA increased 5.1% to $6.3 billion in 2023 compared to $6.0 billion in 2022, primarily due to higher pricing and efficiency gains, which more than offset higher commodity costs, including the impact of realized gains and losses on commodity hedges;

higher supply chain costs, reflecting inflationary pressure in manufacturing, procurement, and logistics;

unfavorable volume/mix;

and the unfavorable impact of foreign currency (1.3 pp), which more than offset higher pricing, efficiency gains, and the favorable impact of a 53rd week of shipments (1.9 pp).

increased SG&A, particularly in advertising expenses;

the decrease from lapping a 53rd week of shipments in the prior period (2.1 pp);

and the unfavorable impact of foreign currency (0.9 pp).

Diluted Earnings Per Share (“EPS”):

19 unchanged sentences

Certain significant discrete income tax items (0.01) — (0.01)

— 0.19 (0.19)

Adjusted EPS (b)

Adjusted EPS (a)

$ 2.98 $ 2.78 $ 0.20 7.2 %

1 unchanged sentence

Results of operations $ 0.27

Results of divested operations (0.26)

53rd week (0.06)

4 unchanged sentences

See the Non-GAAP Financial Measures section at the end of this item.

Adjusted EPS decreased 5.1% to $2.78 in 2022 compared to $2.93 in 2021 primarily due to lower Adjusted EBITDA, which includes the unfavorable impact of our divestitures, higher taxes on adjusted earnings, and unfavorable changes in other expense/(income), which more than offset lower interest expense, the favorable impact of a 53rd week of shipments, higher divestiture-related license income, and lower equity award compensation expense.

Adjusted EPS increased 7.2% to $2.98 in 2023 compared to $2.78 in 2022 primarily driven by higher Adjusted EBITDA and lower interest expense, which more than offset the decrease from lapping a 53rd week of shipments in the prior period, unfavorable changes in other expense/(income), and higher taxes on adjusted earnings.

Results of Operations by Segment

1 unchanged sentence

Segment Adjusted EBITDA is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), provision for/(benefit from) income taxes, and depreciation and amortization (excluding restructuring activities);

in addition to these adjustments, we exclude, when they occur, the impacts of divestiture-related license income (e.g., income related to the sale of licenses in connection with the Cheese Transaction), restructuring activities, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized;

in addition to these adjustments, we exclude, when they occur, the impacts of divestiture-related license income, 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, certain non-ordinary course legal and regulatory matters, and equity award compensation expense (excluding restructuring activities).

Segment Adjusted EBITDA is a tool 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 EBITDA to allocate resources.

Under highly inflationary accounting, the financial statements of a subsidiary are remeasured into our reporting currency (U.S.

54 unchanged sentences

Fiscal Year 2023 Compared to Fiscal Year 2022:

Net sales decreased 0.1% to $20.3 billion in 2022 compared to $20.4 billion in 2021, including the unfavorable impacts of divestitures (10.8 pp) and foreign currency (0.4 pp), partially offset by the favorable impact of a 53rd week of shipments (1.9 pp).

Net sales decreased 1.0% to $20.1 billion in 2023 compared to $20.3 billion in 2022, including the decrease from lapping a 53rd week of shipments in the prior period (1.7 pp) and the unfavorable impacts of foreign currency (0.3 pp).

Organic Net Sales increased 1.0% to $20.2 billion in 2023 compared to $20.0 billion in 2022, driven by higher pricing (7.5 pp), which more than offset unfavorable volume/mix (6.5 pp).

Higher pricing was primarily driven by increases to mitigate rising input costs.

Unfavorable volume/mix was primarily due to declines in frozen, meat, condiments and sauces, coffee, ready-to-drink beverages, and desserts.

Segment Adjusted EBITDA decreased 5.2% to $5.3 billion in 2022 compared to $5.6 billion in 2021, primarily due to higher commodity costs (mainly in dairy, packaging materials, soybean and vegetable oils, meat, and energy);

higher supply chain costs, reflecting inflationary pressure in procurement, logistics, and manufacturing costs;

the unfavorable impact of the Cheese Transaction and Nuts Transaction (6.7 pp);

Higher pricing was primarily driven by increases to mitigate higher input costs, particularly in the first half of 2023.

Unfavorable volume/mix was primarily due to elasticity impacts from pricing actions and due, in part, to the reduction of Supplemental Nutrition Assistance Program (“SNAP”) benefits.

Segment Adjusted EBITDA increased 6.0% to $5.6 billion in 2023 compared to $5.3 billion in 2022, primarily due to higher pricing and efficiency gains, which more than offset higher commodity costs, including the impact of realized gains and losses on commodity hedges;

unfavorable volume/mix;

higher supply chain costs, reflecting inflationary pressure in manufacturing costs;

increased SG&A, particularly advertising expenses;

the decrease from lapping a 53rd week of shipments in the prior period (2.2 pp);

and the unfavorable impact of foreign currency (0.3 pp).

These decreases to Segment Adjusted EBITDA more than offset higher pricing, efficiency gains, and the favorable impact of a 53rd week of shipments (1.9 pp).

International:

9 unchanged sentences

Fiscal Year 2023 Compared to Fiscal Year 2022:

Net sales increased 8.0% to $6.1 billion in 2022 compared to $5.7 billion in 2021, including the favorable impacts of acquisitions and divestitures (2.8 pp) and a 53rd week of shipments (1.7 pp) and the unfavorable impact of foreign currency (8.1 pp).

Net sales increased 6.0% to $6.5 billion in 2023 compared to $6.1 billion in 2022, including the unfavorable impacts of foreign currency (3.2 pp), lapping a 53rd week of shipments in the prior period (1.8 pp), and acquisitions and divestitures (0.5 pp).

Organic Net Sales increased 11.5% to $6.6 billion in 2023 compared to $5.9 billion in 2022, driven by higher pricing (13.6 pp), which more than offset unfavorable volume/mix (2.1 pp).

Higher pricing included increases across markets primarily to mitigate rising input costs.

Unfavorable volume/mix was primarily due to declines across categories in Australia and New Zealand, declines in boxed dinners and condiments and sauces in the United Kingdom, and declines in condiments and sauces and infant nutrition in Russia, which more than offset higher foodservice sales across most markets and growth in Brazil.

Segment Adjusted EBITDA decreased 4.6% to $1.0 billion in 2022 compared to $1.1 billion in 2021, primarily due to higher supply chain costs, reflecting inflationary pressure in procurement, logistics, and manufacturing costs;

higher commodity costs, including in packaging and energy;

Higher pricing included increases across markets primarily to mitigate higher input costs.

Unfavorable volume/mix was primarily due to the elasticity impacts from pricing actions, particularly in our Northern Europe region, which more than offset favorable volume/mix growth in emerging markets within our Eastern Europe and LATAM regions.

Segment Adjusted EBITDA increased 7.6% to $1.1 billion in 2023 compared to $1.0 billion in 2022, primarily due to higher pricing and efficiency gains, partially offset by higher supply chain costs, reflecting inflationary pressure in manufacturing and procurement costs;

increased SG&A, particularly advertising expenses;

higher commodity costs;

unfavorable volume/mix;

the unfavorable impact of foreign currency (4.3 pp);

and unfavorable volume/mix, which more than offset higher pricing, efficiency gains, and the favorable impact of a 53rd week of shipments (1.6 pp).

and the decrease from lapping a 53rd week of shipments in the prior period (1.8 pp).

Liquidity and Capital Resources

3 unchanged sentences

Acquisitions and Divestitures:

In the first quarter of 2022, we closed the Just Spices Acquisition for cash consideration of approximately $243 million.

In the second quarter of 2022, we closed the Hemmer Acquisition for cash consideration of approximately $279 million.

In the fourth quarter of 2022, we received approximately $108 million of cash consideration following the closing of the Powdered Cheese Transaction.

In the second quarter of 2021, we received approximately $3.4 billion of cash consideration following the closing of the Nuts Transaction.

In connection with the Nuts Transaction, we paid approximately $700 million of cash taxes in the second half of 2021, primarily to U.S.

federal and state tax authorities.

We primarily utilized the post-tax transaction proceeds, along with cash on hand, to fund opportunistic repayments of long-term debt, including our tender offers in the second quarter of 2021 and our debt redemption and open market debt repurchases in the third quarter of 2021.

In the fourth quarter of 2021, we received approximately $3.2 billion of cash consideration following the closing of the Cheese Transaction.

In the first quarter of 2022, we acquired 85% of the shares of Just Spices GmbH (“Just Spices”), a German-based company focused on direct-to-consumer sales of premium spice blends, from certain third-party shareholders (the “Just Spices Acquisition”) for cash consideration of approximately $243 million.

In the third quarter of 2023, we completed the redemption of an additional 5% of the outstanding shares and own 90% of the controlling interest in Just Spices as of December 30, 2023.

In the second quarter of 2022, we acquired a majority of the outstanding equity interests of Companhia Hemmer Indústria e Comércio (“Hemmer”), a Brazilian food and beverage manufacturing company focused on the condiments and sauces category, from certain third-party shareholders (the “Hemmer Acquisition”) for cash consideration of approximately $279 million.

In the fourth quarter of 2022, we sold our business-to-business powdered cheese business to a third party, Kerry Group, for cash consideration of approximately $108 million (the “Powdered Cheese Transaction”).

In the fourth quarter of 2021, we closed on our transaction with a third party, an affiliate of Groupe Lactalis, to sell certain assets in our global cheese business, as well as to license certain trademarks (the “Cheese Transaction”).

In connection with the Cheese Transaction, we paid approximately $620 million of cash taxes in the second quarter of 2022, primarily to U.S.

federal and state tax authorities.

We primarily utilized the post-tax transaction proceeds to fund our open market debt repurchases and tender offer in the fourth quarter of 2021.

Additionally, in the fourth quarter of 2021, we completed the Assan Foods Acquisition, which included cash consideration of approximately $70 million, and the BR Spices Acquisition for an insignificant amount of cash consideration.

See Note 4, Acquisitions and Divestitures , in Item 8, Financial Statements and Supplementary Data , for additional information on our acquisitions and divestitures.

See Note 16, Debt , in Item 8, Financial Statements and Supplementary Data , for additional information on our debt transactions.

Cash Flow Activity for 2023 Compared to 2022:

1 unchanged sentence

Net cash provided by operating activities was $4.0 billion for the year ended December 30, 2023 compared to $2.5 billion for the year ended December 31, 2022.

This decrease was primarily driven by proceeds from the sale of licenses in connection with the Cheese Transaction in 2021, higher cash outflows for inventories, primarily related to stock rebuilding, increased input costs, and the acceleration of payments to suppliers attributed to the wind-down of our existing product financing arrangements, as well as lower Adjusted EBITDA.

These impacts were partially offset by lower cash outflows for interest primarily due to the reduction of long-term debt throughout 2022 and 2021.

This increase was primarily driven by lower cash outflows in the current year for inventories, primarily related to stock rebuilding in the prior year, lower cash outflows in the current year for cash tax payments driven by cash taxes paid in 2022 related to the Cheese Transaction, higher Adjusted EBITDA in 2023, and lower interest payments in the current period due to the reduction of long-term debt throughout 2022.

These impacts were partially offset by cash payments associated with the settlement of the consolidated securities class action lawsuit.

See Note 15, Commitments and Contingencies , in Item 8, Financial Statements and Supplementary Data , for additional information on our legal proceedings.

Net Cash Provided by/Used for Investing Activities:

Net cash used for investing activities was $1.1 billion for the year ended December 31, 2022 compared to net cash provided by investing activities of $4.0 billion for the year ended December 25, 2021.

This decrease was primarily driven by proceeds from the Nuts Transaction and Cheese Transaction in 2021, as well as payments for the Just Spices Acquisition and Hemmer Acquisition in 2022.

These impacts were partially offset by increased proceeds from the settlement of net investment hedges and proceeds from the Powdered Cheese Transaction in 2022.

We had 2022 capital expenditures of $916 million compared to 2021 capital expenditures of $905 million.

We expect 2023 capital expenditures to be approximately $1.1 billion, primarily driven by capital investments for capacity expansion, maintenance, cost improvement and innovation projects, and technology.

Net cash used for investing activities was $916 million for the year ended December 30, 2023 compared to net cash used for investing activities of $1.1 billion for the year ended December 31, 2022.

This change was primarily driven by payments for the Just Spices Acquisition and Hemmer Acquisition in 2022, partially offset by higher proceeds from the settlement of net investment hedges in the prior year period, proceeds from the Powdered Cheese Transaction in 2022, and higher capital expenditures in the current year period.

We had 2023 capital expenditures of $1.0 billion compared to 2022 capital expenditures of $916 million.

We expect 2024 capital expenditures to be approximately $1.1 billion, primarily driven by capital investments focused on generating growth, including capacity expansion, cost improvement, digital, and automation projects, as well as capital investments in maintenance and technology.

Net Cash Provided by/Used for Financing Activities:

Net cash used for financing activities was $2.7 billion for the year ended December 30, 2023 compared to $3.7 billion for the year ended December 31, 2022.

This change was primarily due to higher repayments of long-term debt and debt prepayment and extinguishment costs in 2021 related to our tender offers, debt repurchases, and debt redemptions in 2021.

See Note 16, Debt , in Item 8, Financial Statements and Supplementary Data , for additional information on our debt repayments.

This change was primarily due to proceeds from the issuance of 600 million euro aggregate principal amount floating rate senior notes in 2023 and lower repayments of long-term debt in the current year period, partially offset by increased common stock repurchases primarily driven by our share repurchase program.

See Note 16, Debt , in Item 8, Financial Statements and Supplementary Data , for additional information on our debt transactions and Note 18, Capital Stock , in Item 8, Financial Statements and Supplementary Data , for additional information on our share repurchase program.

Cash Held by International Subsidiaries:

4 unchanged sentences

The amount of unrecognized deferred tax liabilities for local country withholding taxes that would be owed, if repatriated, related to our 2018 through 2023 accumulated earnings of certain international subsidiaries is approximately $60 million.

Our undistributed historic earnings in foreign subsidiaries through December 31, 2017 are currently not considered to be indefinitely reinvested.

Related to these undistributed historic earnings, we had recorded a deferred tax liability of approximately $10 million on approximately $90 million of historic earnings at December 31, 2022 and a deferred tax liability of approximately $10 million on approximately $135 million of historic earnings at December 25, 2021.

The deferred tax liability relates to local withholding taxes that will be owed when this cash is distributed.

Our undistributed historical 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 December 30, 2023 and December 31, 2022, and relates to local withholding taxes that will be owed when this cash is distributed.

Trade Payables Programs:

In order to manage our cash flow and related liquidity, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms.

Our current payment terms with our suppliers, which we deem to be commercially reasonable, generally range from 0 to 200 days.

Our current payment terms with our suppliers, which we deem to be commercially reasonable, generally range from zero to 220 days.

We also 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.

We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions.

We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions related to these programs.

We did not pledge any assets in connection with our trade payable programs.

Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

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.

Supplier participation in these agreements is voluntary.

We estimate that the amounts outstanding under these programs were $1.1 billion at December 31, 2022 and $820 million at December 25, 2021.

Product Financing Arrangements:

We enter into various product financing arrangements to facilitate supply from our vendors.

In the fourth quarter of 2022, we began to wind-down our existing product financing arrangements, with final impacts of the wind-down expected to extend into 2023.

We continue to have access to these programs to facilitate supply from our vendors in the future, if we choose to do so.

See Note 14, Financing Arrangements , in Item 8, Financial Statements and Supplementary Data , for additional information on our product financing arrangements.

We estimate that the amounts outstanding under these programs were $0.8 billion at December 30, 2023 and $1.1 billion at December 31, 2022.

The amounts were included in trade payables on our consolidated balance sheets.

Borrowing Arrangements:

As of the date of this filing, our long-term debt is rated BBB- by S&P Global Ratings (“S&P”), BBB by Fitch Ratings (“Fitch”) and Baa3 by Moody’s Investor Services, Inc.

(“Moody’s”), with a positive outlook from S&P and a stable outlook from Fitch and Moody’s.

In February 2020, Fitch and S&P downgraded our long-term credit rating from BBB- to BB+.

These downgrades adversely affected our ability to access the commercial paper market.

These downgrades did not constitute a default or event of default under any of our debt instruments.

Our ability to borrow under the Senior Credit Facility was not affected by the downgrades.

Our long-term credit rating was upgraded from BB+ to BBB- by S&P in March 2022 and by Fitch in May 2022.

Fitch upgraded our long-term debt credit rating from BBB- to BBB in November 2022.

From time to time, we obtain funding through our commercial paper programs.

We had no commercial paper outstanding at December 31, 2022, at December 25, 2021, or during the year ended December 25, 2021.

The maximum amount of commercial paper outstanding during the year ended December 31, 2022 was $198 million, under our U.S.

commercial paper program.

Our Senior Credit Facility provides for a revolving commitment of $4.0 billion through July 8, 2027.

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 December 31, 2022, our previous credit facility (the “Previous Senior Credit Facility”) at December 25, 2021, or on either the Senior Credit Facility or Previous Senior Credit Facility during the years ended December 31, 2022 and December 25, 2021.

We had no commercial paper outstanding at December 30, 2023 or at December 31, 2022.

Under our U.S.

commercial paper program, the maximum amount of commercial paper outstanding was $150 million and $198 million during the years ended December 30, 2023 and December 31, 2022.

In July 2022, together with KHFC, our 100% owned operating subsidiary, we entered into a new credit agreement (the “Credit Agreement”), which provides for a five-year senior unsecured revolving credit facility in an aggregate amount of $4.0 billion (the “Senior Credit Facility”) and replaced our then-existing credit facility (the “Previous Senior Credit Facility”).

On July 21, 2023, we entered into an agreement to extend the maturity date of our Senior Credit Facility from July 8, 2027 to July 8, 2028.

No amounts were drawn on our Senior Credit Facility at December 30, 2023 or December 31, 2022.

No amounts were drawn on our Senior Credit Facility during the years ended December 30, 2023 or December 31, 2022, or on the Previous Senior Credit Facility during the year ended December 31, 2022.

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.

2 unchanged sentences

Our long-term debt, including the current portion, was $20.0 billion at December 30, 2023 and $20.1 billion at December 31, 2022.

This decrease was primarily due to approximately $315 million aggregate principal amount of floating rate senior notes that were repaid at maturity in August 2022, approximately $381 million aggregate principal amount of senior notes that were repaid at maturity in June 2022, approximately $6 million aggregate principal amount of senior notes that were repaid at maturity in March 2022, and approximately $755 million aggregate principal amount of senior notes repurchased in connection with the debt repurchases in 2022, as well as changes in foreign currency exchange rates on our foreign-denominated debt.

We used cash on hand to fund our debt repurchases in 2022 and to pay related fees and expenses.

We have aggregate principal amounts of senior notes of approximately 750 million euros maturing in June 2023.

This decrease was primarily due to the repayment of 750 million euro aggregate principal amount of senior notes due in June 2023, which more than offset the issuance of 600 million euro aggregate principal amount of floating rate senior notes issued in May 2023.

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

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

3 unchanged sentences

Equity and Dividends:

We paid dividends on our common stock of $2.0 billion in 2022, 2021, and 2020, respectively.

We paid dividends on our common stock of $2.0 billion in 2023, 2022, and 2021.

Additionally, in the first quarter of 2024, our Board declared a cash dividend of $0.40 per share of common stock, which is payable on March 29, 2024 to stockholders of record on March 8, 2024.

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

On November 27, 2023, we announced that the Board 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 Exchange Act, privately negotiated transactions, transactions structured through investment banking institutions, or other means.

As of December 30, 2023, we had remaining authorization under the share repurchase program of

approximately $2.7 billion.

The share repurchase program is in addition to our share repurchases to offset the dilutive effect of equity-based compensation.

Aggregate Contractual Obligations:

13 unchanged sentences

Total $ 2,383 $ 5,474 $ 5,717 $ 23,272 $ 36,846

(a) Amounts represent the expected cash payments of our long-term debt, including interest on long-term debt.

(a) Amounts represent the expected cash payments of our long-term debt, including interest on variable and fixed rate long-term debt.

Interest on variable rate long-term debt is calculated based on interest rates at December 30, 2023.

(b) Amounts represent the expected cash payments of our finance leases, including expected cash payments of interest expense.

23 unchanged sentences

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 Kraft Heinz Foods Company (“KHFC”), our 100% owned operating subsidiary (the “Guarantee”).

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 16, Debt , in Item 8, Financial Statements and Supplementary Data , for additional descriptions of these guarantees.

8 unchanged sentences

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.

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).

10 unchanged sentences

Gross profit (a)

Goodwill impairment losses —

Intercompany service fees and other recharges 4,355

19 unchanged sentences

Commodity Trends

We purchase and use large quantities of commodities, including dairy products, meat products, soybean and vegetable oils, tomatoes, coffee beans, sugar and other sweeteners, other fruits and vegetables, corn products, wheat products, and potatoes, to manufacture our products.

We purchase and use large quantities of commodities, including dairy products, meat products, tomato products, soybean and vegetable oils, sugar and other sweeteners, coffee beans, wheat and processed grains, eggs, and other fruits and vegetables to manufacture our products.

In addition, we purchase and use significant quantities of resins, fiberboard, metals, and cardboard to package our products, and we use electricity, diesel fuel, and natural gas in the manufacturing and distribution of our products.

We continuously monitor worldwide supply and cost trends of these commodities.

During the year ended December 31, 2022, we experienced higher commodity costs primarily for dairy, packaging materials, soybean and vegetable oils, energy (including diesel fuel, electricity, and natural gas), and meat as compared to the prior year period.

These increases were primarily driven by overall market demand, inflationary pressures, and, in part, by the negative impact of the conflict between Russia and Ukraine on the global economy.

We anticipate commodity costs to continue to increase and inflation to remain elevated through 2023.

We manage commodity cost volatility primarily through pricing and risk management strategies.

During the year ended December 30, 2023, we experienced higher commodity costs for tomato products, sugar and other sweeteners, vegetables, and fruits, while costs for dairy products, meat products, vegetable oils, and coffee 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.

In 2022, dairy commodities, primarily milk, cream, and cheese, were the most significant cost components of our cheese products.

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

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

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

Livestock feed costs and the global supply and demand for U.S.

meats influence the prices of these meat products.

Critical Accounting Estimates

14 unchanged sentences

We review and adjust these estimates at least quarterly based on actual experience and other information.

Advertising expenses are recorded in selling, general and administrative expenses (“SG&A”).

Advertising expenses are recorded in SG&A.

For interim reporting purposes, we charge advertising to operations as a percentage of estimated full year sales activity and marketing costs.

12 unchanged sentences

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 8, Financial Statements and Supplementary Data , 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.

2 unchanged sentences

Our current expectations also include certain assumptions that could be negatively impacted if we are unable to meet our pricing expectations in relation to inflation.

If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, income tax rates, foreign currency exchange rates, or inflation, change, 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.

If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, market capitalization, income tax rates, foreign currency exchange rates, or inflation, change, 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 has led, and could in the future lead, to goodwill or intangible asset impairments.

As detailed in Note 8, Goodwill and Intangible Assets , in Item 8, Financial Statements and Supplementary Data , we recorded impairment losses related to goodwill and indefinite-lived intangible assets.

Our reporting units and brands that were impaired were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates.

Accordingly, these and other reporting units and brands that have 20% or less excess fair value over carrying amount as of the Q3 2022 Annual Impairment Test have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future.

Reporting units with 20% or less fair value over carrying amount had an aggregate goodwill carrying amount after impairment of $16.4 billion as of the Q3 2022 Annual Impairment Test and included Taste, Meals, and Away from Home (TMA), Canada and North America Coffee (CNAC), and Continental Europe.

Reporting units with between 20-50% fair value over carrying amount had an aggregate goodwill carrying amount of $14.5 billion as of the Q3 2022 Annual Impairment Test and included Fresh, Beverages, and Desserts (FBD), Northern Europe, Asia, and Latin America (LATAM).

Our reporting units that have less than 1% excess fair value over carrying amount as of the Q3 2022 Annual Impairment Test are considered at a heightened risk of future impairments and include our CNAC and Continental Europe reporting units, which had an aggregate goodwill carrying amount after impairment of $2.4 billion.

Our four remaining reporting units had no goodwill carrying amount at the time of the Q3 2022 Annual Impairment Test.

Brands with 20% or less fair value over carrying amount had an aggregate carrying amount after impairment of $16.6 billion as of the Q3 2022 Annual Impairment Test and included Kraft , Oscar Mayer , Miracle Whip , Ore-Ida , Maxwell House , Cool Whip , Jet Puffed , and Plasmon .

The aggregate carrying amount of brands with fair value over carrying amount between 20-50% was $2.5 billion as of the Q3 2022 Annual Impairment Test.

Although the remaining brands, with a carrying amount of $19.4 billion, have more than 50% excess fair value over carrying amount as of the Q3 2022 Annual Impairment Test, these amounts are also associated with the 2013 Heinz Acquisition and the 2015 Merger and were initially recorded at the time of acquisition on our consolidated balance sheet at their estimated acquisition date fair values.

Therefore, if any assumptions, estimates, or market factors change in the future, these amounts are also susceptible to impairments.

Our brands that have less than 5% excess fair value over carrying amount as of the Q3 2022 Annual Impairment Test are considered at a heightened risk of future impairments and include our Kraft , Ore-Ida , Jet Puffed , and Plasmon brands, which had an aggregate carrying amount of $11.3 billion.

Our reporting units and brands that were impaired in 2023, 2022, and 2021 were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates.

Accordingly, these and other reporting units and brands that have 20% or less excess fair value over carrying amount as of the 2023 annual impairment test have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future.

Reporting units with 10% or less fair value over carrying amount had an aggregate goodwill carrying amount after impairment of $17.6 billion as of the 2023 annual impairment test and included Taste, Meals, and Away from Home, Northern Europe, Continental Europe, and Canada and North America Coffee.

Reporting units with 10-20% fair value over carrying amount had an aggregate goodwill carrying amount of $12.5 billion as of the 2023 annual impairment test and included Fresh, Beverages, and Desserts and LATAM.

Our Asia reporting unit had between 20-50% fair value over carrying amount with an aggregate goodwill carrying amount of $309 million as of the 2023 annual impairment test.

Our reporting units that have less than 5% excess fair value over carrying amount as of the 2023 annual impairment test are considered at a heightened risk of future impairments and include our TMA, Continental Europe, and CNAC reporting units, which had an aggregate goodwill carrying amount of $15.9 billion.

Our four remaining reporting units had no goodwill carrying amount at the time of the 2023 annual impairment test.

After the 2023 annual impairment test and after reclassifying two indefinite-lived intangible asset brands to definite-lived trademarks, our indefinite-lived brands with 10% or less fair value over carrying amount had an aggregate carrying amount of $16.2 billion as of the 2023 annual impairment test and included Kraft , Oscar Mayer , Velveeta , Maxwell House , Cool Whip , and Jet Puffed.

Brands with 10-20% fair value over carrying amount had an aggregate carrying amount of $2.4 billion as of the 2023 annual impairment test and included Miracle Whip and Ore-Ida .

The aggregate carrying amount of brands with fair value over carrying amount between 20-50% was $4.2 billion as of the 2023 annual impairment test.

Although the remaining brands, with a carrying amount of $15.7 billion, have more than 50% excess fair value over carrying amount as of the 2023 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 less than 5% excess fair value over carrying amount as of the 2023 annual impairment test are considered at a heightened risk of future impairments and include our Kraft , Velveeta , Maxwell House , Cool Whip , and Jet Puffed brands, which had an aggregate carrying amount of $13.5 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 net 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, and a discount rate that appropriately reflects the risks inherent in each future cash flow stream.

Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual net 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, a discount rate that appropriately reflects the risks inherent in each future cash flow stream, and other market factors.

We selected 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 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 net 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.

Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual net 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, management’s intent to invest in the brand indefinitely, and other market factors.

2 unchanged sentences

As detailed in Note 4, Acquisitions and Divestitures , in Item 8, Financial Statements and Supplementary Data , the Cheese Transaction closed in the fourth quarter of 2021.

We received total consideration of approximately $3.3 billion, which included approximately $1.6 billion primarily attributed to the Kraft and Velveeta licenses that we granted to Lactalis and approximately $141 million attributed to the Cracker Barrel license that Lactalis granted to us, the amounts of which were based on the estimated fair values of the licensed portion of each brand as of the closing date of the Cheese Transaction.

In the fourth quarter of 2021, at the time the licensed rights were granted, we reassessed the remaining fair value of the retained portions of the Kraft and Velveeta brands and recorded a non-cash intangible asset impairment loss related to the Kraft brand of approximately $1.24 billion, which was recognized in SG&A.

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 Q3 2022 Annual Impairment Test for each reporting unit or brand, were as follows:

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 2023 annual impairment test for each reporting unit or brand, were as follows:

Goodwill or Brand Carrying Amount

9 unchanged sentences

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 of the Q3 2022 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):

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 of the 2023 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

80 unchanged sentences

Adjusted EBITDA is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), provision for/(benefit from) income taxes, and depreciation and amortization (excluding restructuring activities);

in addition to these adjustments, we exclude, when they occur, the impacts of divestiture-related license income (e.g., income related to the sale of licenses in connection with the Cheese Transaction), restructuring activities, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, certain non-ordinary course legal and regulatory matters, and equity award compensation expense (excluding restructuring activities).

in addition to these adjustments, we exclude, when they occur, the impacts of divestiture-related license income, restructuring activities, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, certain non-ordinary course legal and regulatory matters, and equity award compensation expense (excluding restructuring activities).

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

50 unchanged sentences

• Other expense/(income) included expenses of $165 million in 2023.

The 2023 expenses primarily relate to the settlement of one of our U.K.

defined benefit pension plans.

See Note 11, Postemployment Benefits , in Item 8, Financial Statements and Supplementary Data , for additional information.

(b) Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were expenses of $1 million ($1 million after-tax) in 2023 and $63 million ($48 million after-tax) in 2022 and were recorded in cost of products sold.

1 unchanged sentence

• Goodwill impairment losses of $510 million ($510 million after-tax) in 2023 and $444 million ($444 million after-tax) in 2022, which were recorded in SG&A;

• Intangible asset impairment losses of $469 million ($358 million after-tax) in 2022 and $1.3 billion ($1.0 billion after-tax) in 2021, which were recorded in SG&A;

• Intangible asset impairment losses of $152 million ($116 million after-tax) in 2023 and $469 million ($358 million after-tax) in 2022, which were recorded in SG&A;

• Property, plant and equipment asset impairment losses of $86 million ($65 million after-tax) in 2022, which were recorded in cost of products sold.

(d) Gross expenses included in certain non-ordinary course legal and regulatory matters were $2 million ($2 million after-tax) in 2023 and $210 million ($161 million after-tax) in 2022 and were recorded in SG&A.

The 2022 expenses relate to an accrual in connection with the previously disclosed securities class action lawsuit.

The 2021 expenses relate to the settlement of the previously disclosed SEC investigation.

The 2022 expenses related to an accrual in connection with the previously disclosed securities class action lawsuit.

See Note 15, Commitments and Contingencies , in Item 8, Financial Statements and Supplementary Data , for additional information.

1 unchanged sentence

(f) Gross expenses/(income) included in other losses/(gains) related to acquisitions and divestitures were income of $38 million ($29 million after-tax) in 2022 and were recorded in other expense/(income).

(g) Gross expenses included in nonmonetary currency devaluation were $17 million ($17 million after-tax) in 2022 and were recorded in other expense/(income).

(h) Gross expenses/(income) included in debt prepayment and extinguishment (benefit)/costs were income of $38 million ($35 million after-tax) in 2022 and expenses of $917 million ($728 million after-tax) in 2021 and were recorded in interest expense.

(i) Certain significant discrete income tax items were an expense of $235 million in 2021.

The impact in 2021 relates to the revaluation of our deferred tax balances due to an increase in U.K.

(g) Gross expenses included in nonmonetary currency devaluation were $28 million ($28 million after-tax) in 2023 and $17 million ($17 million after-tax) in 2022 and were recorded in other expense/(income).

(h) Gross expenses/(income) included in debt prepayment and extinguishment (benefit)/costs were income of $38 million ($35 million after-tax) in 2022 and were recorded in interest expense.

(i) Certain significant discrete income tax items were a benefit of $17 million in 2023.

The benefit represents the reversal of uncertain tax position reserves related to the U.S.

Tax Cuts and Jobs Act resulting from a conclusion of the IRS’s income tax examination for the year 2017 and the lapsing of the statute of limitations for such year.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis