The Kraft Heinz Company
02/12/2026 | Press release | Distributed by Public on 02/12/2026 06:37
Annual Report for Fiscal Year Ending December 27, 2025 (Form 10-K)
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 consolidated financial statements and related notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. 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.
See below for discussion and analysis of our financial condition and results of operations for 2025 compared to 2024. See Item 7, Management's Discussions 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 detailed discussion of our financial condition and results of operations for 2024 compared to 2023.
Description of the Company:
We manufacture and market food and beverage products around the world through our eight consumer-driven product platforms: Taste Elevation, Easy Ready Meals, Substantial Snacking, Desserts, Hydration, Cheese, Coffee, Meats, and other grocery products.
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 21, Segment Reporting, in Item 8, Financial Statements and Supplementary Data, for our financial information by segment.
Previously Announced 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"). On February 11, 2026, we announced that the Kraft Heinz Board of Directors (the "Board") has decided to pause work related to the Separation. See Item 1A, Risk Factors, for further discussion of risks relating to the Separation.
Business Trends and Items Affecting Comparability of Financial Results
Inflation and Supply Chain Impacts:
During the year ended December 27, 2025, we experienced increased inflationary pressures in our supply chain costs compared to the prior year period, due in part to the tariff and trade policy actions taken by the United States and foreign governments during the year. We expect these inflationary trends to moderate through 2026, although there continues to be significant uncertainty. Further, we continue to take measures to mitigate the impact of this inflation through efficiency initiatives, pricing actions, alternative sourcing, 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, mitigative actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we have taken have, in some instances, negatively impacted, and could continue to negatively impact, our market share. 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 ("OBBBA") was signed into law in the United States. The OBBBA includes a broad range of changes to U.S. tax law, which did not have a material impact on our total tax provision as of December 27, 2025, and we do not expect the elective provisions of the law to have a material impact on our effective tax rate in future periods. Further, certain provision of the OBBBA impact the timing of cash tax payments, which resulted in a reduction of our
cash tax payments in 2025, and is expected to reduce cash tax payments in 2026; however we do not expect these provisions to have a material impact on our cash flows in future periods.
The OBBBA also enacted modifications to the Supplemental Nutrition Assistance Program ("SNAP"). The modifications are expected to reduce the number of SNAP participants and the average benefits received by the eligible participants, which could impact consumers' demand for our products. We intend to take measures to mitigate the potential negative impacts through pricing strategies and changes to our product portfolios. However, the modifications to the SNAP program may have a negative impact on our results of operations, cash flows, and market share.
Impairment Losses:
Our results of operations reflect goodwill impairment losses of $6.7 billion and intangible asset impairment losses of $2.6 billion in 2025 compared to goodwill impairment losses of $1.6 billion and intangible asset impairment losses of $2.0 billion in 2024. See Note 9, Goodwill and Intangible Assets, in Item 8, Financial Statements and Supplementary Data, for additional information on our goodwill and intangible asset impairment losses.
Acquisitions and Divestitures:
In 2025, we entered into a definitive agreement to sell our infant and specialty food business in Italy, within our International Developed Markets segment. On December 31, 2025, which is in the first quarter of our fiscal year 2026, we closed the sale for total cash consideration of approximately $146 million. In 2024, we closed the sale of our infant nutrition business in Russia (the "Russia Infant Transaction") and the sale of 100% of the equity interests in our Papua New Guinea subsidiary (the "Papua New Guinea Transaction"), both within Emerging Markets. See Note 5, Acquisitions and Divestitures, in Item 8, Financial Statements and Supplementary Data, for additional information on our acquisition and divestiture activities.
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 consolidated financial statements, which are calculated in accordance with U.S. GAAP, see Non-GAAP Financial Measures.
Consolidated Results of Operations
Summary of Results:
| December 27, 2025 | December 28, 2024 | % Change | |||||||||||||||
| (in millions, except per share data) | |||||||||||||||||
| Net sales | $ | 24,942 | $ | 25,846 | (3.5) | % | |||||||||||
| Operating income/(loss) | (4,669) | 1,683 | (377.4) | % | |||||||||||||
| Net income/(loss) | (5,848) | 2,746 | (313.0) | % | |||||||||||||
| Net income/(loss) attributable to common shareholders | (5,846) | 2,744 | (313.0) | % | |||||||||||||
| Diluted EPS | (4.93) | 2.26 | (318.1) | % | |||||||||||||
Net Sales:
| December 27, 2025 | December 28, 2024 | % Change | |||||||||||||||
| (in millions) | |||||||||||||||||
| Net sales | $ | 24,942 | $ | 25,846 | (3.5) | % | |||||||||||
|
Organic Net Sales(a)
|
24,889 | 25,756 | (3.4) | % | |||||||||||||
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Fiscal Year 2025 Compared to Fiscal Year 2024:
Net sales decreased 3.5% to $24.9 billion in 2025 compared to $25.8 billion in 2024, including the unfavorable impacts of foreign currency (0.1 pp). Organic Net Sales decreased 3.4% to $24.9 billion in 2025 compared to $25.8 billion in 2024, primarily due to the unfavorable volume/mix (4.1 pp), which more than offset higher pricing (0.7 pp). Pricing was higher in each segment. Volume/mix in North America and International Developed Markets was unfavorable, while volume/mix in Emerging Markets was favorable.
Net Income/(Loss):
| December 27, 2025 | December 28, 2024 | % Change | |||||||||||||||
| (in millions) | |||||||||||||||||
| Operating income/(loss) | $ | (4,669) | $ | 1,683 | (377.4) | % | |||||||||||
| Net income/(loss) | (5,848) | 2,746 | (313.0) | % | |||||||||||||
| Net income/(loss) attributable to common shareholders | (5,846) | 2,744 | (313.0) | % | |||||||||||||
|
Adjusted Operating Income(a)
|
4,745 | 5,360 | (11.5) | % | |||||||||||||
(a) Adjusted Operating Income is a non-GAAP financial measure. See theNon-GAAP Financial Measures section at the end of this item.
Fiscal Year 2025 Compared to Fiscal Year 2024:
Operating income/(loss) decreased 377.4% to a loss of $4.7 billion in 2025 compared to income of $1.7 billion in 2024, primarily due to non-cash impairment losses that were $5.6 billion higher in the current year period. In addition to the impact of these non-cash impairment losses, operating income/(loss) decreased $715 million due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, separation costs incurred in the current year, unfavorable changes in unrealized losses/(gains) on commodity hedges, increased advertising expenses and increased research and development costs. These unfavorable impacts to operating income/(loss) were partially offset by higher pricing and decreased general corporate expenses.
Net income/(loss) decreased 313.0% to a loss of $5.8 billion in 2025 compared to income of $2.7 billion in 2024. This decrease was due to the unfavorable changes in operating income/(loss) factors discussed above, higher income tax expense and higher interest expense, partially offset by favorable changes in other expense/(income).
•Our effective tax rate was an expense of 7.4% on pre-tax loss in 2025 compared to a benefit of 220.5% on pre-tax income in 2024. The year-over-year increase in the effective tax rate was due primarily to higher non-deductible goodwill impairments in the current year and recognizing a non-U.S. deferred tax asset as a result of the movement of certain business operations to a wholly-owned subsidiary in the Netherlands offset by establishing valuation allowances on certain non-U.S. deferred tax assets in the prior year.
•Other expense/(income) was income of $171 million in 2025 compared to $85 million in 2024. This change was driven by a $53 million increase in interest income primarily due to interest earned on our available-for-sale securities, and a $42 million net loss on the sale of a business recognized in 2025 compared to a $81 million net loss on the sale of businesses in 2024. These positive impacts on other expense/(income) were partially offset by a $28 million decrease in our net pension and postretirement non-service components.
Adjusted Operating Income decreased 11.5% to $4.7 billion in 2025 compared to $5.4 billion in 2024, primarily due to inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, unfavorable volume/mix, increased advertising expenses, increased research and development costs, and the unfavorable impact of foreign currency (0.1 pp). These unfavorable impacts more than offset higher pricing and decreased general corporate expenses.
Diluted Earnings Per Share ("EPS"):
| December 27, 2025 | December 28, 2024 | % Change | |||||||||||||||
| (in millions, except per share data) | |||||||||||||||||
| Diluted EPS | $ | (4.93) | $ | 2.26 | (318.1) | % | |||||||||||
|
Adjusted EPS(a)
|
2.60 | 3.06 | (15.0) | % | |||||||||||||
(a) Adjusted EPS is a non-GAAP financial measure. See theNon-GAAP Financial Measures section at the end of this item.
Fiscal Year 2025 Compared to Fiscal Year 2024:
Diluted EPS decreased 318.1% to $(4.93) in 2025 compared to $2.26 in 2024, primarily due to the net income/(loss) factors discussed above, which more than offset the favorable impact of our common stock repurchases.
| December 27, 2025 | December 28, 2024 | $ Change | % Change | ||||||||||||||||||||
| Diluted EPS | $ | (4.93) | $ | 2.26 | $ | (7.19) | (318.1) | % | |||||||||||||||
| Restructuring activities | 0.02 | 0.01 | 0.01 | ||||||||||||||||||||
| Unrealized losses/(gains) on commodity hedges | 0.02 | (0.01) | 0.03 | ||||||||||||||||||||
| Impairment losses | 7.31 | 2.58 | 4.73 | ||||||||||||||||||||
| Separation costs | 0.05 | - | 0.05 | ||||||||||||||||||||
| Losses/(gains) on sale of business | 0.04 | 0.05 | (0.01) | ||||||||||||||||||||
| Nonmonetary currency devaluation | 0.03 | 0.01 | 0.02 | ||||||||||||||||||||
| Certain significant discrete income tax items | 0.06 | (1.84) | 1.90 | ||||||||||||||||||||
|
Adjusted EPS(a)
|
$ | 2.60 | $ | 3.06 | $ | (0.46) | (15.0) | % | |||||||||||||||
|
Key drivers of change in Adjusted EPS(a):
|
|||||||||||||||||||||||
| Results of operations | $ | (0.40) | |||||||||||||||||||||
|
Effect of common stock repurchases(b):
|
0.06 | ||||||||||||||||||||||
| Interest expense | (0.02) | ||||||||||||||||||||||
| Other expense/(income) | 0.05 | ||||||||||||||||||||||
| Effective tax rate | (0.15) | ||||||||||||||||||||||
| $ | (0.46) | ||||||||||||||||||||||
(a) Adjusted EPS is a non-GAAP financial measure. See theNon-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 20, Earnings Per Share, in Item 8, Financial Statements and Supplementary Data, for more information on our weighted average shares outstanding.
Adjusted EPS decreased 15.0% to $2.60 in 2025 compared to $3.06 in 2024 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 consolidated statement of income, as nonmonetary currency devaluation, rather than accumulated other comprehensive income/(losses) on our consolidated balance sheet, until such time as the economy is no longer considered highly inflationary. See Note 2, Significant Accounting Policies,in Item 8, Financial Statements and Supplementary Data, for additional information. We apply highly inflationary accounting to the results of our subsidiaries in Turkey, Venezuela, and Egypt, which are all in Emerging Markets.
Net Sales:
| December 27, 2025 | December 28, 2024 | ||||||||||
| (in millions) | |||||||||||
| Net sales: | |||||||||||
| North America | $ | 18,586 | $ | 19,543 | |||||||
|
International Developed Markets
|
3,539 | 3,535 | |||||||||
|
Emerging Markets
|
2,817 | 2,768 | |||||||||
| Total net sales | $ | 24,942 | $ | 25,846 | |||||||
Organic Net Sales:
| December 27, 2025 | December 28, 2024 | ||||||||||
| (in millions) | |||||||||||
|
Organic Net Sales(a):
|
|||||||||||
| North America | $ | 18,621 | $ | 19,543 | |||||||
| International Developed Markets | 3,466 | 3,535 | |||||||||
| Emerging Markets | 2,802 | 2,678 | |||||||||
| Total Organic Net Sales | $ | 24,889 | $ | 25,756 | |||||||
(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 were:
| Net Sales | Currency | Acquisitions and Divestitures | Organic Net Sales | Price | Volume/Mix | ||||||||||||||||||||||||||||||
|
2025 Compared to 2024
|
|||||||||||||||||||||||||||||||||||
| North America | (4.9) | % | (0.2) pp | 0.0 pp | (4.7) | % | 0.3 pp | (5.0) pp | |||||||||||||||||||||||||||
| International Developed Markets | 0.1 | % | 2.0 pp | 0.0 pp | (1.9) | % | 0.9 pp | (2.8) pp | |||||||||||||||||||||||||||
| Emerging Markets | 1.8 | % | (2.4) pp | (0.4) pp | 4.6 | % | 4.0 pp | 0.6 pp | |||||||||||||||||||||||||||
| Kraft Heinz | (3.5) | % | (0.1) pp | 0.0 pp | (3.4) | % | 0.7 pp | (4.1) pp | |||||||||||||||||||||||||||
Adjusted Operating Income:
| December 27, 2025 | December 28, 2024 | ||||||||||
| (in millions) | |||||||||||
| Segment Adjusted Operating Income: | |||||||||||
| North America | $ | 4,389 | $ | 5,111 | |||||||
| International Developed Markets | 543 | 537 | |||||||||
| Emerging Markets | 341 | 321 | |||||||||
| General corporate expenses | (528) | (609) | |||||||||
| Restructuring activities | (13) | (27) | |||||||||
| Unrealized gains/(losses) on commodity hedges | (35) | 19 | |||||||||
| Impairment losses | (9,306) | (3,669) | |||||||||
|
Separation costs
|
(60) | - | |||||||||
| Operating income/(loss) | $ | (4,669) | $ | 1,683 | |||||||
| Interest expense | 947 | 912 | |||||||||
| Other expense/(income) | (171) | (85) | |||||||||
| Income/(loss) before income taxes | $ | (5,445) | $ | 856 | |||||||
North America:
| December 27, 2025 | December 28, 2024 | % Change | |||||||||||||||
| (in millions) | |||||||||||||||||
| Net sales | $ | 18,586 | $ | 19,543 | (4.9) | % | |||||||||||
|
Organic Net Sales(a)
|
18,621 | 19,543 | (4.7) | % | |||||||||||||
|
Segment Adjusted Operating Income
|
4,389 | 5,111 | (14.1) | % | |||||||||||||
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Fiscal Year 2025 Compared to Fiscal Year 2024:
Net sales decreased 4.9% to $18.6 billion in 2025 compared to $19.5 billion in 2024, including the unfavorable impacts of foreign currency (0.2 pp). Organic Net Sales decreased 4.7% to $18.6 billion in 2025 compared to $19.5 billion in 2024, primarily due to unfavorable volume/mix (5.0 pp), which more than offset higher pricing (0.3 pp). Unfavorable volume/mix was primarily due to declines in cold cuts, coffee, certain condiments, bacon, frozen snacks, and desserts. Higher pricing was taken in certain categories to mitigate higher input costs, primarily in coffee.
Segment Adjusted Operating Income decreased 14.1% to $4.4 billion in 2025 compared to $5.1 billion in 2024, primarily due to unfavorable volume/mix, inflationary pressures in commodity and manufacturing costs that outpaced our efficiency initiatives, increased advertising expenses, higher depreciation expense, increased research and development costs, and the unfavorable impact of foreign currency (0.1 pp). These unfavorable impacts to Segment Adjusted Operating Income more than offset higher pricing.
International Developed Markets:
| December 27, 2025 | December 28, 2024 | % Change | |||||||||||||||
| (in millions) | |||||||||||||||||
| Net sales | $ | 3,539 | $ | 3,535 | 0.1 | % | |||||||||||
|
Organic Net Sales(a)
|
3,466 | 3,535 | (1.9) | % | |||||||||||||
|
Segment Adjusted Operating Income
|
543 | 537 | 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.
Fiscal Year 2025 Compared to Fiscal Year 2024:
Net sales increased 0.1% to $3.5 billion in 2025 compared to $3.5 billion in 2024, including the favorable impacts of foreign currency (2.0 pp). Organic Net Sales decreased 1.9% to $3.5 billion in 2025 compared to $3.5 billion in 2024, primarily due to unfavorable volume/mix (2.8 pp), which more than offset higher pricing (0.9 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 increased 1.0% to $543 million in 2025 compared to $537 million in 2024, primarily driven by higher pricing, the favorable impact of foreign currency (3.2 pp), decreased advertising expenses, and lower amortization expense. These favorable impacts to Segment Adjusted Operating Income more than offset unfavorable volume/mix and inflationary pressures in manufacturing and procurement costs that outpaced our efficiency initiatives.
Emerging Markets:
| December 27, 2025 | December 28, 2024 | % Change | |||||||||||||||
| (in millions) | |||||||||||||||||
| Net sales | $ | 2,817 | $ | 2,768 | 1.8 | % | |||||||||||
|
Organic Net Sales(a)
|
2,802 | 2,678 | 4.6 | % | |||||||||||||
|
Segment Adjusted Operating Income
|
341 | 321 | 6.2 | % | |||||||||||||
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Fiscal Year 2025 Compared to Fiscal Year 2024:
Net sales increased 1.8% to $2.8 billion in 2025 compared to $2.8 billion in 2024, including the unfavorable impacts of foreign currency (2.4 pp) and divestitures (0.4 pp). Organic Net Sales increased 4.6% to $2.8 billion in 2025 compared to $2.7 billion in 2024, primarily driven by higher pricing (4.0 pp) and favorable volume/mix (0.6 pp). Higher pricing was taken primarily in certain countries within WEEM to address inflationary pressures, which more than offset lower pricing in Indonesia. Favorable volume/mix was primarily driven by Taste Elevation, particularly in Brazil and China, which more than offset unfavorable volume/mix in Indonesia.
Segment Adjusted Operating Income increased 6.2% to $341 million in 2025 compared to $321 million in 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 higher procurement and logistics costs reflecting inflationary pressure in WEEM, increased advertising expenses, unfavorable changes in allowances for trade receivables in Indonesia, the unfavorable impact of foreign currency (4.5 pp), and higher depreciation expense.
Liquidity and Capital Resources
We believe that cash generated from our operating activities, as well as our access to other potential sources of liquidity including our available-for-sale debt securities, 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.
Acquisitions and Divestitures:
In 2025, we entered into a definitive agreement to sell our infant and specialty food business in Italy, within our International Developed Markets segment. On December 31, 2025, in the first quarter of our fiscal year 2026, we closed the sale for total cash consideration of approximately $146 million.
In the first quarter of 2024, we consummated the Russia Infant Transaction for total cash consideration of approximately $25 million, and the Papua New Guinea Transaction for total cash consideration of approximately $22 million.
See Note 5, Acquisitions and Divestitures, in Item 8, Financial Statements and Supplementary Data, for additional information on our acquisitions and divestitures.
Cash Flow Activity for 2025 Compared to 2024:
Net Cash Provided by/Used for Operating Activities:
Net cash provided by operating activities was $4.5 billion for the year ended December 27, 2025 compared to $4.2 billion for the year ended December 28, 2024. This increase was primarily due to favorable changes in working capital, predominantly within inventory as a result of our efforts to optimize inventory levels, lower income taxes paid due, in part, to benefits received through the OBBBA, reduced cash outflows for variable compensation, and the current year conversion of certain plan assets related to the U.S. postretirement medical plan to cash. These impacts were partially offset by lower Adjusted Operating Income. See Note 12, Postemployment Benefits, in Item 8, Financial Statements and Supplementary Data, for additional information on our postemployment benefit plans activities.
Net Cash Provided by/Used for Investing Activities:
Net cash used for investing activities was $1.8 billion for the year ended December 27, 2025 compared to $1.0 billion for the year ended December 28, 2024. This change was primarily driven by the purchases of marketable securities, partially offset by lower capital expenditures, and lapping our prior year payment to acquire the TGI Friday License. Our 2025 capital expenditures were primarily focused on maintenance, technology, and cost improvement projects. We expect 2026 capital expenditures to be approximately $950 million.
Net Cash Provided by/Used for Financing Activities:
Net cash used for financing activities was $1.3 billion for the year ended December 27, 2025 compared to $3.0 billion for the year ended December 28, 2024. This change was primarily driven by increased debt proceeds received in the current year, decreased repurchases of common stock compared to the prior year period, and increased hedge settlements. See Note 17, Debt, in Item 8, Financial Statements and Supplementary Data, for additional information on our debt transactions and Note 19, Capital Stock, in Item 8, Financial Statements and Supplementary Data, for additional information on our share repurchase program.
Cash Held by International Subsidiaries:
Of the $2.6 billion cash and cash equivalents on our consolidated balance sheet at December 27, 2025, $981 million was held by international subsidiaries.
Subsequent to January 1, 2018, we consider the unremitted earnings of certain international subsidiaries that impose local country taxes on dividends to be indefinitely reinvested. For those undistributed earnings considered to be indefinitely reinvested, our intent is to reinvest these funds in our international operations, and our current plans do not demonstrate a need to repatriate the accumulated earnings to fund our U.S. cash requirements. The amount of unrecognized deferred tax liabilities for local country withholding taxes that would be owed, if repatriated, related to our 2018 through 2025 accumulated earnings of certain international subsidiaries is approximately $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 December 27, 2025, December 28, 2024, and December 30, 2023, 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 outstanding under these programs were $755 million at December 27, 2025 and $745 million at December 28, 2024. The amounts were included in accounts payable on our consolidated balance sheets. See Note 15, Financing Arrangements, in Item 8, Financial Statements and Supplementary Data, 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 December 27, 2025, December 28, 2024, and December 30, 2023. We had no commercial paper outstanding during the years ended December 27, 2025 and December 28, 2024, and the maximum amount of commercial paper outstanding was $150 million during the year ended December 30, 2023.
Together with Kraft Heinz Food Company ("KHFC"), our 100% owned operating subsidiary, we have a 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"). On July 8, 2025, we entered into an amendment to this agreement to extend the maturity date from July 8, 2029 to July 8, 2030. Further, the amendment modified certain financial covenants, which changed the minimum shareholders' equity balance from $35 billion to $25 billion, and added an allowable add-back to the minimum shareholders' equity balance of up to $2 billion annually, commensurate with goodwill and intangible asset impairments recorded during the period. 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 27, 2025, December 28, 2024, or December 30, 2023. No amounts were drawn on our Senior Credit Facility during the years ended December 27, 2025, December 28, 2024 or December 30, 2023.
Our credit agreement contains customary representations, warranties, and covenants that are typical for these types of facilities and could, upon the occurrence of certain events of default, restrict our ability to access our Senior Credit Facility. We were in compliance with all financial covenants as of December 27, 2025.
Long-Term Debt:
Our long-term debt, including the current portion, was $21.2 billion at December 27, 2025, $19.9 billion at December 28, 2024, and $20.0 billion at December 30, 2023. The increase of debt in 2025 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. The decrease of debt in 2024 was primarily due to changes in foreign currency exchange rates on our foreign-denominated debt, as well as the 550 million euro aggregate principle amount of senior notes that were repaid at maturity in May 2024, partially offset by the issuance of the 2024 Notes.
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 December 27, 2025.
See Note 17, Debt, in Item 8, Financial Statements and Supplementary Data, for additional information on our long-term debt activity.
Equity and Dividends:
We paid dividends on our common stock of $1.9 billion in 2025 and 2024 and $2.0 billion in 2023. Additionally, in the first quarter of 2026, our Board declared a cash dividend of $0.40 per share of common stock, which is payable on March 27, 2026 to stockholders of record on March 6, 2026.
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 27, 2025, we had remaining authorization under the share repurchase program of approximately $1.5 billion. The share repurchase program is in addition to our share repurchases to offset the dilutive effect of equity-based compensation.
Aggregate Contractual Obligations:
Related to our current and long-term material cash requirements, the following table summarizes our aggregate contractual obligations at December 27, 2025, which we expect to primarily fund with cash from operating activities (in millions):
| Material Cash Requirements | |||||||||||||||||||||||||||||
| 2026 | 2027-2028 | 2029-2030 | 2031 and Thereafter | Total | |||||||||||||||||||||||||
|
Long-term debt(a)
|
$ | 2,802 | $ | 5,261 | $ | 3,412 | $ | 21,577 | $ | 33,052 | |||||||||||||||||||
|
Finance leases(b)
|
45 | 119 | 105 | 113 | 382 | ||||||||||||||||||||||||
|
Operating leases(c)
|
144 | 212 | 133 | 149 | 638 | ||||||||||||||||||||||||
|
Purchase obligations(d)
|
587 | 843 | 407 | 197 | 2,034 | ||||||||||||||||||||||||
|
Other long-term liabilities(e)
|
24 | 34 | 33 | 132 | 223 | ||||||||||||||||||||||||
| Total | $ | 3,602 | $ | 6,469 | $ | 4,090 | $ | 22,168 | $ | 36,329 | |||||||||||||||||||
(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 27, 2025.
(b) Amounts represent the expected cash payments of our finance leases, including expected cash payments of interest expense.
(c) Operating leases represent the minimum rental commitments under non-cancellable operating leases net of sublease income.
(d) We have purchase obligations for materials, supplies, property, plant and equipment, and co-packing, storage, and distribution services based on projected needs to be utilized in the normal course of business. Other purchase obligations include commitments for marketing, advertising, capital expenditures, information technology, and professional services. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure, and approximate timing of the transaction. Several of these obligations are long-term and are based on minimum purchase requirements. Certain purchase obligations contain variable pricing components, and, as a result, actual cash payments are expected to fluctuate based on changes in these variable components. Due to the proprietary nature of some of our materials and processes, certain supply contracts contain penalty provisions for early terminations. We do not believe that a material amount of penalties is reasonably likely to be incurred under these contracts based upon historical experience and current expectations.
(e) Other long-term liabilities primarily consist of estimated payments for the one-time toll charge related to 2017 U.S. tax reform, as well as postretirement benefit commitments. Certain other long-term liabilities related to income taxes, insurance accruals, and other accruals included on the consolidated balance sheet are excluded from the above table as we are unable to estimate the timing of payments for these items.
Pension plan contributions were $5 million in 2025. We estimate that 2026 pension plan contributions will be approximately $6 million. Postretirement benefit plan contributions were $10 million in 2025. We estimate that 2026 postretirement benefit plan contributions will be approximately $11 million. During the fourth quarter of 2025, we amended our U.S. postretirement medical plan to establish a sub-trust to permit the payment of certain postretirement benefit plan contributions for active non-union employees using $200 million of the retiree plan surplus. During the fourth quarter of 2024, we amended our U.S. postretirement medical plan to establish a sub-trust to permit the payment of certain postretirement benefit plan contributions for active union employees using $150 million of the retiree plan surplus. See Note 12,Postemployment Benefits,in Item 8, Financial Statements and Supplementary Data, for additional information on our pension and postretirement plans.
Estimated future contributions take into consideration current economic conditions, which at this time are expected to have minimal impact on expected contributions for 2026. Beyond 2026, we are unable to reliably estimate the timing of contributions to our pension or postretirement plans. Our actual contributions and plans may change due to many factors, including changes in tax, employee benefit, or other laws and regulations, tax deductibility, significant differences between expected and actual pension or postretirement asset performance or interest rates, or other factors. As such, estimated pension and postretirement plan contributions for 2026 have been excluded from the above table.
At December 27, 2025, the amount of net unrecognized tax benefits for uncertain tax positions, including an accrual of related interest and penalties along with positions only impacting the timing of tax benefits, was approximately $589 million. The timing of payments will depend on the progress of examinations with tax authorities. We are unable to make a reasonably reliable estimate as to if or when any significant cash settlements with taxing authorities may occur; therefore, we have excluded the amount of net unrecognized tax benefits from the above table.
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 17, Debt, in Item 8, Financial Statements and Supplementary Data, for additional descriptions of these guarantees.
The payment of the principal, premium, and interest 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 passuin 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 Year Ended | |||||
| December 27, 2025 | |||||
| Net sales | $ | 15,849 | |||
|
Gross profit(a)
|
5,802 | ||||
| Intercompany service fees and other recharges | 4,075 | ||||
| Operating income/(loss) | 1,008 | ||||
| Equity in earnings/(losses) of subsidiaries | (5,812) | ||||
| Net income/(loss) | (5,846) | ||||
| Net income/(loss) attributable to common shareholders | (5,846) | ||||
(a) In 2025, the Obligor Group recorded $489 million of net sales to the non-guarantor subsidiaries and $67 million of purchases from the non-guarantor subsidiaries.
Summarized Balance Sheets
| December 27, 2025 | |||||
| ASSETS | |||||
| Current assets | $ | 6,336 | |||
|
Current assets due from affiliates(a)
|
269 | ||||
| Non-current assets | 5,648 | ||||
| Goodwill | 8,823 | ||||
| Intangible assets, net | 1,768 | ||||
|
Non-current assets due from affiliates(b)
|
28 | ||||
| LIABILITIES | |||||
| Current liabilities | $ | 5,211 | |||
|
Current liabilities due to affiliates(a)
|
1,122 | ||||
| Non-current liabilities | 21,260 | ||||
|
Non-current liabilities due to affiliates(b)
|
208 | ||||
(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, meat products, sugar and other sweeteners, coffee, tomato products, soybean and vegetable oils, eggs, other fruits and vegetables, and wheat and processed grains to manufacture our products. In addition, we purchase and use significant quantities of plastics, resin, cardboard, glass, paper and metal 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 27, 2025, we experienced increases in certain commodity costs, particularly for coffee, meats, and eggs while costs for cheese and dairy products and tomato 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.
Critical Accounting Estimates
Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data, includes a summary of the significant accounting policies we used to prepare our consolidated financial statements. The following is a review of the more significant assumptions and estimates as well as accounting policies we used to prepare our consolidated financial statements.
Revenue Recognition:
Our revenues are primarily derived from customer orders for the purchase of our products. We recognize revenues as performance obligations are fulfilled when control passes to our customers. We record revenues net of variable consideration, including consumer incentives and performance obligations related to trade promotions, excluding taxes, and including all shipping and handling charges billed to customers (accounting for shipping and handling charges that occur after the transfer of control as fulfillment costs). We also record a refund liability for estimated product returns and customer allowances as reductions to revenues within the same period that the revenue is recognized. We base these estimates principally on historical and current period experience factors. We recognize costs paid to third-party brokers to obtain contracts as expenses as our contracts are generally less than one year.
Advertising, Consumer Incentives, and Trade Promotions:
We promote our products with advertising, consumer incentives, and performance obligations related to trade promotions. Consumer incentives and trade promotions include, but are not limited to, discounts, coupons, rebates, performance-based in-store display activities, and volume-based incentives. Variable consideration related to consumer incentive and trade promotion activities is recorded as a reduction to revenues based on amounts estimated as being due to customers and consumers at the end of a period. We base these estimates principally on historical utilization, redemption rates, and/or current period experience factors. 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"). For interim reporting purposes, we charge advertising to operations as a percentage of estimated full year sales activity and marketing costs. We then review and adjust these estimates each quarter based on actual experience and other information. Our definition of advertising expenses includes advertising production costs, in-store advertising costs, agency fees, brand promotions and events, and sponsorships, in addition to costs to obtain advertising in television, radio, print, digital, and social channels. We recorded advertising expenses of $1,073 million in 2025, $1,031 million in 2024, and $1,071 million in 2023. We also incur market research costs, which are recorded in SG&A but are excluded from advertising expenses.
Goodwill and Intangible Assets:
As of December 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 December 27, 2025. Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $34.2 billion as of December 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.
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 net 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. As part of our 2025 annual impairment test as of June 29, 2025, we used discount rates ranging from 7.3% to 14.8% and long-term growth rates ranging from 0.0% to 4.0% in estimating the fair value of our reporting units. Additionally, we used discount rates ranging from 8.5% to 12.3%, long-term growth rates ranging from 0.0% to 4.0%, and royalty rates ranging from 5.0% to 20.0% in estimating the fair value of our brands. If current expectations of future growth rates, royalty 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 9, 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 in 2025, 2024, and 2023 were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates. Our reporting units and brands that had 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 Kraftbrand 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, andClaussen 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, andCool 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 or Brands 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 9, Goodwill and Intangible Assets, in Item 8, Financial Statements and Supplementary Data, for our impairment testing results.
Postemployment Benefit Plans:
We maintain various retirement plans for the majority of our employees. These include pension benefits, postretirement health care benefits, and defined contribution benefits. The cost of these plans is charged to expense over an appropriate term based on, among other things, the cost component and whether the plan is active or inactive. Changes in the fair value of our plan assets result in net actuarial gains or losses. These net actuarial gains and losses are deferred into accumulated other comprehensive income/(losses) and amortized within other expense/(income) in future periods using the corridor approach. The corridor is 10% of the greater of the market-related value of the plan's asset or projected benefit obligation. Any actuarial gains and losses in excess of the corridor are then amortized over an appropriate term based on whether the plan is active or inactive.
For our postretirement benefit plans, our 2026 health care cost trend rate assumption will be 6.5%. We established this rate based upon our most recent experience as well as our expectation for health care trend rates going forward. We anticipate the weighted average assumed ultimate trend rate will be 4.8%. The year in which the ultimate trend rate is reached varies by plan, ranging between the years 2027 and 2035. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.
Our 2026 discount rate assumption will be 5.3% for service cost and 4.5% for interest cost for our postretirement plans. Our 2026 discount rate assumption will be 5.7% for service cost and 4.8% for interest cost for our U.S. pension plans and 5.8% for service cost and 5.0% for interest cost for our non-U.S. pension plans. We model these discount rates using a portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the plans. Changes in our discount rates were primarily the result of changes in bond yields year-over-year.
Our 2026 expected return on plan assets will be 5.9% (net of applicable taxes) for our postretirement plans. Our 2026 expected rate of return on plan assets will be 6.7% for our U.S. pension plans and 5.3% for our non-U.S. pension plans. We determine our expected rate of return on plan assets from the plan assets' historical long-term investment performance, current and future asset allocation, and estimates of future long-term returns by asset class. We attempt to maintain our target asset allocation by re-balancing between asset classes as we make contributions and monthly benefit payments.
While we do not anticipate further changes in the 2026 assumptions for our U.S. and non-U.S. pension and postretirement benefit plans, as a sensitivity measure, a 100-basis-point change in our discount rate or a 100-basis-point change in the expected rate of return on plan assets would have the following effects, increase/(decrease) in cost (in millions):
| U.S. Plans | Non-U.S. Plans | ||||||||||||||||||||||
| 100-Basis-Point | 100-Basis-Point | ||||||||||||||||||||||
| Increase | Decrease | Increase | Decrease | ||||||||||||||||||||
| Effect of change in discount rate on pension costs | $ | 9 | $ | (4) | $ | (2) | $ | 3 | |||||||||||||||
| Effect of change in expected rate of return on plan assets on pension costs | (27) | 27 | (14) | 14 | |||||||||||||||||||
| Effect of change in discount rate on postretirement costs | - | - | (1) | 1 | |||||||||||||||||||
| Effect of change in expected rate of return on plan assets on postretirement costs | (6) | 6 | - | - | |||||||||||||||||||
Income Taxes:
We compute our annual tax rate based on the statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we earn income. Significant judgment is required in determining our annual tax rate and in evaluating the uncertainty of our tax positions. We recognize a benefit for tax positions that we believe will more likely than not be sustained upon examination. The amount of benefit recognized is the largest amount of benefit that we believe has more than a 50% probability of being realized upon settlement. We regularly monitor our tax positions and adjust the amount of recognized tax benefit based on our evaluation of information that has become available since the end of our last financial reporting period. The annual tax rate includes the impact of these changes in recognized tax benefits. When adjusting the amount of recognized tax benefits, we do not consider information that has become available after the balance sheet date, however we do disclose the effects of new information whenever those effects would be material to our financial statements. Unrecognized tax benefits represent the difference between the amount of benefit taken or expected to be taken in a tax return and the amount of benefit recognized for financial reporting. These unrecognized tax benefits are recorded primarily within other non-current liabilities on the consolidated balance sheets.
We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. When assessing the need for valuation allowances, we consider future taxable income and ongoing prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in judgment about the realizability of deferred tax assets in future years, we would adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or decrease to income. The resolution of tax reserves and changes in valuation allowances could be material to our results of operations for any period but is not expected to be material to our financial position.
New Accounting Pronouncements
See Note 4, New Accounting Standards, in Item 8, Financial Statements and Supplementary Data, for a discussion of new accounting pronouncements.
Contingencies
See Note 16, Commitments and Contingencies, in Item 8, Financial Statements and Supplementary Data, 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 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 | ||||||||||||||||||||||||||||||
|
2025
|
|||||||||||||||||||||||||||||||||||
| North America | $ | 18,586 | $ | (35) | $ | - | $ | 18,621 | |||||||||||||||||||||||||||
|
International Developed Markets
|
3,539 | 73 | - | 3,466 | |||||||||||||||||||||||||||||||
|
Emerging Markets
|
2,817 | 15 | - | 2,802 | |||||||||||||||||||||||||||||||
| Kraft Heinz | $ | 24,942 | $ | 53 | $ | - | $ | 24,889 | |||||||||||||||||||||||||||
|
2024
|
|||||||||||||||||||||||||||||||||||
| North America | $ | 19,543 | $ | - | $ | - | $ | 19,543 | |||||||||||||||||||||||||||
|
International Developed Markets
|
3,535 | - | - | 3,535 | |||||||||||||||||||||||||||||||
|
Emerging Markets
|
2,768 | 80 | 10 | 2,678 | |||||||||||||||||||||||||||||||
| Kraft Heinz | $ | 25,846 | $ | 80 | $ | 10 | $ | 25,756 | |||||||||||||||||||||||||||
| Year-over-year growth rates | |||||||||||||||||||||||||||||||||||
| North America | (4.9) | % | (0.2) pp | 0.0 pp | (4.7) | % | 0.3 pp | (5.0) pp | |||||||||||||||||||||||||||
|
International Developed Markets
|
0.1 | % | 2.0 pp | 0.0 pp | (1.9) | % | 0.9 pp | (2.8) pp | |||||||||||||||||||||||||||
|
Emerging Markets
|
1.8 | % | (2.4) pp | (0.4) pp | 4.6 | % | 4.0 pp | 0.6 pp | |||||||||||||||||||||||||||
| Kraft Heinz | (3.5) | % | (0.1) pp | 0.0 pp | (3.4) | % | 0.7 pp | (4.1) pp | |||||||||||||||||||||||||||
The Kraft Heinz Company
Reconciliation of Operating Income/(Loss) to Adjusted Operating Income
(in millions)
(Unaudited)
| December 27, 2025 | December 28, 2024 | ||||||||||
| Operating income/(loss) | $ | (4,669) | $ | 1,683 | |||||||
| Restructuring activities | 13 | 27 | |||||||||
| Unrealized losses/(gains) on commodity hedges | 35 | (19) | |||||||||
| Impairment losses | 9,306 | 3,669 | |||||||||
| Separation costs | 60 | - | |||||||||
| Adjusted Operating Income | $ | 4,745 | $ | 5,360 | |||||||
The Kraft Heinz Company
Reconciliation of Diluted EPS to Adjusted EPS
(Unaudited)
| December 27, 2025 | December 28, 2024 | ||||||||||
| Diluted EPS | $ | (4.93) | $ | 2.26 | |||||||
|
Restructuring activities(a)
|
0.02 | 0.01 | |||||||||
|
Unrealized losses/(gains) on commodity hedges(b)
|
0.02 | (0.01) | |||||||||
|
Impairment losses(c)
|
7.31 | 2.58 | |||||||||
|
Separation costs(d)
|
0.05 | - | |||||||||
|
Losses/(gains) on sale of business(e)
|
0.04 | 0.05 | |||||||||
|
Nonmonetary currency devaluation(f)
|
0.03 | 0.01 | |||||||||
|
Certain significant discrete income tax items(g)
|
0.06 | (1.84) | |||||||||
| Adjusted EPS | $ | 2.60 | $ | 3.06 | |||||||
(a) Gross expenses/(income) included in restructuring activities were expenses of $21 million ($18 million after-tax) in 2025 and $20 million ($18 million after-tax) in 2024 and were recorded in the following income statement line items:
•Cost of products sold included expenses of $1 million in 2025 and $8 million in 2024;
•SG&A included expenses of $12 million in 2025 and $19 million in 2024; and
•Other expense/(income) included expenses of $8 million in 2025 and income of $7 million in 2024.
(b) Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were expenses of $35 million ($26 million after-tax) in 2025 and income of $19 million ($15 million after-tax) in 2024 and were recorded in cost of products sold.
(c) Gross impairment losses included the following:
•Goodwill impairment losses of $6.7 billion ($6.7 billion after-tax) in 2025 and $1.6 billion ($1.6 billion after-tax) in 2024, which were recorded in SG&A; and
•Intangible asset impairment losses of $2.6 billion ($2.0 billion after-tax) in 2025 and $2.0 billion ($1.6 billion after-tax) in 2024, which were recorded in SG&A.
(d) Gross expenses recorded in separation costs were $60 million ($53 million after-tax) in 2025 and were recorded in SG&A.
(e) Gross expenses/(income) included in losses/(gains) on sale of business were expenses of $42 million ($42 million after-tax) in 2025 and expenses of $81 million ($60 million after-tax) in 2024 and were recorded in other expense/(income).
(f) Gross expenses included in nonmonetary currency devaluation were $34 million ($34 million after-tax) in 2025 and $16 million ($16 million after-tax) in 2024 and were recorded in other expense/(income).
(g) Certain significant discrete income tax items included expenses of $73.0 million in 2025 and a benefit of $2.2 billion in 2024. The expense in 2025 related to an adjustment to the valuation allowance associated with a non-U.S. deferred tax asset recognized in 2024 as a result of the movement of certain business operations to a wholly-owned subsidiary in the Netherlands. The benefit in 2024 represented the recognition of a foreign deferred tax asset ($3.0 billion) and an associated valuation allowance ($0.6 billion) related to the transfer of business operations to a wholly-owned subsidiary in the Netherlands, partially offset by the establishment of a valuation allowance against deferred tax assets in our subsidiary in Brazil.
The Kraft Heinz Company published this content on February 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 12, 2026 at 12:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]