UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2019

or

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-37482

The Kraft Heinz Company

(Exact name of registrant as specified in its charter)

Delaware				46-2078182
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
One PPG Place,	Pittsburgh,	Pennsylvania		15222
(Address of Principal Executive Offices)				(Zip Code)

(412) 456-5700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered
Common stock, $0.01 par value	KHC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒		Accelerated filer	☐
Non-accelerated filer	☐		Smaller reporting company	☐		Emerging growth company	☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 26, 2019, there were 1,221,160,646 shares of the registrant’s common stock outstanding.

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Table of Contents

PART I - FINANCIAL INFORMATION	1
Item 1. Financial Statements.	1
Condensed Consolidated Statements of Income	1
Condensed Consolidated Statements of Comprehensive Income	2
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Equity	4
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Note 1. Basis of Presentation	7
Note 2. Restatement of Previously Issued Condensed Consolidated Financial Statements	8
Note 3. Significant Accounting Policies	21
Note 4. New Accounting Standards	22
Note 5. Acquisitions and Divestitures	23
Note 6. Restructuring Activities	26
Note 7. Restricted Cash	28
Note 8. Inventories	28
Note 9. Goodwill and Intangible Assets	28
Note 10. Income Taxes	31
Note 11. Employees’ Stock Incentive Plans	32
Note 12. Postemployment Benefits	33
Note 13. Financial Instruments	34
Note 14. Accumulated Other Comprehensive Income/(Loss)	40
Note 15. Venezuela - Foreign Currency and Inflation	42
Note 16. Financing Arrangements	43
Note 17. Commitments, Contingencies and Debt	44
Note 18. Leases	48
Note 19. Earnings Per Share	50
Note 20. Segment Reporting	50
Note 21. Supplemental Guarantor Information	52
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	65
Overview	65
Consolidated Results of Operations	65
Results of Operations by Segment	69
Liquidity and Capital Resources	74
Commodity Trends	76
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations	76
Equity and Dividends	76
Critical Accounting Estimates	76
New Accounting Pronouncements	79
Contingencies	79
Non-GAAP Financial Measures	79
Forward-Looking Statements	85
Item 3. Quantitative and Qualitative Disclosures about Market Risk.	86
Item 4. Controls and Procedures.	86
PART II - OTHER INFORMATION	88
Item 1. Legal Proceedings.	88
Item 1A. Risk Factors.	88
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	89
Item 6. Exhibits.	90
Signatures	91

Unless the context otherwise requires, the terms “we,” “us,” “our,” “Kraft Heinz,” and the “Company” each refer to The Kraft Heinz Company and all of its consolidated subsidiaries.

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Explanatory Note

As previously disclosed, we restated our audited consolidated financial statements at December 30, 2017 and for the years ended December 30, 2017 and December 31, 2016. The restatement of these periods was effective with the filing of our Annual Report on Form 10-K for the year ended December 29, 2018. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, to the consolidated financial statements in our Annual Report on Form 10-K for additional information related to the restatement.

Additionally, as previously disclosed, we restated the relevant unaudited interim financial information for the quarterly periods ended September 29, 2018, June 30, 2018, March 31, 2018, December 30, 2017, September 30, 2017, July 1, 2017, and April 1, 2017. The 2018 quarterly restatements became effective with the filing of our 2019 unaudited interim condensed consolidated financial statement filings in Quarterly Reports on Form 10-Q, including the periods ended September 29, 2018, which are effective with the filing of this Quarterly Report on Form 10-Q. See Note 2, Restatement of Previously Issued Condensed Consolidated Financial Statements, in Item 1, Financial Statements, for additional information related to the restatement of our condensed consolidated financial statements for the periods ended September 29, 2018.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

The Kraft Heinz Company

Condensed Consolidated Statements of Income

(in millions, except per share data)

(Unaudited)

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
Net sales	$	6,076			$	6,383			$	18,441			$	19,377
Cost of products sold	4,129				4,289				12,401				12,672
Gross profit	1,947				2,094				6,040				6,705
Selling, general and administrative expenses, excluding impairment losses	762				803				2,341				2,323
Goodwill impairment losses	—				—				744				133
Intangible asset impairment losses	5				217				479				318
Selling, general and administrative expenses	767				1,020				3,564				2,774
Operating income/(loss)	1,180				1,074				2,476				3,931
Interest expense	398				326				1,035				959
Other expense/(income)	(380		)		(71		)		(893		)		(181		)
Income/(loss) before income taxes	1,162				819				2,334				3,153
Provision for/(benefit from) income taxes	264				201				584				779
Net income/(loss)	898				618				1,750				2,374
Net income/(loss) attributable to noncontrolling interest	(1		)		(1		)		(3		)		(2		)
Net income/(loss) attributable to common shareholders	$	899			$	619			$	1,753			$	2,376
Per share data applicable to common shareholders:
Basic earnings/(loss)	$	0.74			$	0.51			$	1.44			$	1.95
Diluted earnings/(loss)	0.74				0.50				1.43				1.94

See accompanying notes to the condensed consolidated financial statements.

1

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The Kraft Heinz Company

Condensed Consolidated Statements of Comprehensive Income

(in millions)

(Unaudited)

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
Net income/(loss)	$	898			$	618			$	1,750			$	2,374
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(407		)		(144		)		(257		)		(809		)
Net deferred gains/(losses) on net investment hedges	151				13				147				158
Amounts excluded from the effectiveness assessment of net investment hedges	6				3				16				3
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(6		)		(2		)		(10		)		(2		)
Net deferred gains/(losses) on cash flow hedges	50				(16		)		24				40
Amounts excluded from the effectiveness assessment of cash flow hedges	8				—				21				—
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	(50		)		12				(55		)		(10		)
Net actuarial gains/(losses) arising during the period	(9		)		17				(14		)		70
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	(59		)		(58		)		(176		)		(133		)
Total other comprehensive income/(loss)	(316		)		(175		)		(304		)		(683		)
Total comprehensive income/(loss)	582				443				1,446				1,691
Comprehensive income/(loss) attributable to noncontrolling interest	2				(3		)		12				(15		)
Comprehensive income/(loss) attributable to common shareholders	$	580			$	446			$	1,434			$	1,706

See accompanying notes to the condensed consolidated financial statements.

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The Kraft Heinz Company

Condensed Consolidated Balance Sheets

(in millions, except per share data)

(Unaudited)

	September 28, 2019				December 29, 2018
ASSETS
Cash and cash equivalents	$	2,315			$	1,130
Trade receivables (net of allowances of $35 at September 28, 2019 and $24 at December 29, 2018)	1,959				2,129
Income taxes receivable	119				152
Inventories	3,158				2,667
Prepaid expenses	415				400
Other current assets	1,124				1,221
Assets held for sale	35				1,376
Total current assets	9,125				9,075
Property, plant and equipment, net	6,926				7,078
Goodwill	35,826				36,503
Intangible assets, net	48,714				49,468
Other non-current assets	2,231				1,337
TOTAL ASSETS	$	102,822			$	103,461
LIABILITIES AND EQUITY
Commercial paper and other short-term debt	$	15			$	21
Current portion of long-term debt	2,545				377
Trade payables	4,156				4,153
Accrued marketing	458				722
Interest payable	278				408
Other current liabilities	1,658				1,767
Liabilities held for sale	2				55
Total current liabilities	9,112				7,503
Long-term debt	28,112				30,770
Deferred income taxes	12,010				12,202
Accrued postemployment costs	315				306
Other non-current liabilities	1,467				902
TOTAL LIABILITIES	51,016				51,683
Commitments and Contingencies (Note 17)
Redeemable noncontrolling interest	2				3
Equity:
Common stock, $0.01 par value (5,000 shares authorized; 1,224 shares issued and 1,221 shares outstanding at September 28, 2019; 1,224 shares issued and 1,220 shares outstanding at December 29, 2018)	12				12
Additional paid-in capital	57,293				58,723
Retained earnings/(deficit)	(3,241		)		(4,853		)
Accumulated other comprehensive income/(losses)	(2,126		)		(1,943		)
Treasury stock, at cost (3 shares at September 28, 2019 and 4 shares at December 29, 2018)	(265		)		(282		)
Total shareholders' equity	51,673				51,657
Noncontrolling interest	131				118
TOTAL EQUITY	51,804				51,775
TOTAL LIABILITIES AND EQUITY	$	102,822			$	103,461

See accompanying notes to the condensed consolidated financial statements.

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The Kraft Heinz Company

Condensed Consolidated Statements of Equity

(in millions)

(Unaudited)

	Common Stock				Additional Paid-in Capital				Retained Earnings/(Deficit)				Accumulated Other Comprehensive Income/(Losses)				Treasury Stock, at Cost				Noncontrolling Interest				Total Equity
Balance at December 29, 2018	$	12			$	58,723			$	(4,853	)		$	(1,943	)		$	(282	)		$	118			$	51,775
Net income/(loss) excluding redeemable noncontrolling interest	—				—				405				—				—				—				405
Other comprehensive income/(loss)	—				—				—				123				—				12				135
Dividends declared-common stock ($0.40 per share)	—				(488		)		—				—				—				—				(488		)
Cumulative effect of accounting standards adopted in the period	—				—				(136		)		136				—				—				—
Exercise of stock options, issuance of other stock awards, and other	—				17				(2		)		—				(9		)		—				6
Balance at March 30, 2019	12				58,252				(4,586		)		(1,684		)		(291		)		130				51,833
Net income/(loss) excluding redeemable noncontrolling interest	—				—				449				—				—				—				449
Other comprehensive income/(loss)	—				—				—				(123		)		—				—				(123		)
Dividends declared-common stock ($0.40 per share)	—				(488		)		—				—				—				—				(488		)
Exercise of stock options, issuance of other stock awards, and other	—				5				(3		)		—				—				2				4
Balance at June 29, 2019	12				57,769				(4,140		)		(1,807		)		(291		)		132				51,675
Net income/(loss) excluding redeemable noncontrolling interest	—				—				899				—				—				(5		)		894
Other comprehensive income/(loss)	—				—				—				(319		)		—				3				(316		)
Dividends declared-common stock ($0.40 per share)	—				(491		)		—				—				—				—				(491		)
Exercise of stock options, issuance of other stock awards, and other	—				15				—				—				26				1				42
Balance at September 28, 2019	$	12			$	57,293			$	(3,241	)		$	(2,126	)		$	(265	)		$	131			$	51,804

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	Common Stock				Additional Paid-in Capital				Retained Earnings/(Deficit)				Accumulated Other Comprehensive Income/(Losses)				Treasury Stock, at Cost				Noncontrolling Interest				Total Equity
Balance at December 30, 2017	$	12			$	58,634			$	8,495			$	(1,054	)		$	(224	)		$	207			$	66,070
Net income/(loss) excluding redeemable noncontrolling interest	—				—				1,003				—				—				5				1,008
Other comprehensive income/(loss)	—				—				—				79				—				(5		)		74
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Cumulative effect of accounting standards adopted in the period	—				—				(95		)		—				—				—				(95		)
Exercise of stock options, issuance of other stock awards, and other	—				22				(7		)		—				(16		)		—				(1		)
Balance at March 31, 2018 (As Restated)	12				58,656				8,634				(975		)		(240		)		207				66,294
Net income/(loss) excluding redeemable noncontrolling interest	—				—				754				—				—				—				754
Other comprehensive income/(loss)	—				—				—				(576		)		—				(6		)		(582		)
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Exercise of stock options, issuance of other stock awards, and other	—				33				(2		)		—				(14		)		(13		)		4
Balance at June 30, 2018 (As Restated)	12				58,689				8,624				(1,551		)		(254		)		188				65,708
Net income/(loss) excluding redeemable noncontrolling interest	—				—				619				—				—				2				621
Other comprehensive income/(loss)	—				—				—				(173		)		—				(2		)		(175		)
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Cumulative effect of accounting standards adopted in the period	—				—				(2		)		—				—				—				(2		)
Exercise of stock options, issuance of other stock awards, and other	—				27				—				—				(10		)		—				17
Balance at September 29, 2018 (As Restated)	$	12			$	58,716			$	8,479			$	(1,724	)		$	(264	)		$	188			$	65,407

See accompanying notes to the condensed consolidated financial statements.

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The Kraft Heinz Company

Condensed Consolidated Statements of Cash Flows

(in millions)

(Unaudited)

	For the Nine Months Ended
	September 28, 2019				September 29, 2018
					(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)	$	1,750			$	2,374
Adjustments to reconcile net income/(loss) to operating cash flows:
Depreciation and amortization	737				712
Amortization of postretirement benefit plans prior service costs/(credits)	(229		)		(261		)
Equity award compensation expense	26				44
Deferred income tax provision/(benefit)	(140		)		104
Postemployment benefit plan contributions	(23		)		(64		)
Goodwill and intangible asset impairment losses	1,223				451
Nonmonetary currency devaluation	10				131
Loss/(gain) on sale of business	(490		)		15
Other items, net	(34		)		20
Changes in current assets and liabilities:
Trade receivables	138				(2,154		)
Inventories	(637		)		(645		)
Accounts payable	113				130
Other current assets	(73		)		(103		)
Other current liabilities	(381		)		124
Net cash provided by/(used for) operating activities	1,990				878
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash receipts on sold receivables	—				1,296
Capital expenditures	(581		)		(594		)
Payments to acquire business, net of cash acquired	(199		)		(248		)
Proceeds from sale of business, net of cash disposed	1,875				18
Other investing activities, net	16				13
Net cash provided by/(used for) investing activities	1,111				485
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(3,272		)		(2,706		)
Proceeds from issuance of long-term debt	2,967				2,990
Debt prepayment and extinguishment costs	(91		)		—
Proceeds from issuance of commercial paper	377				2,485
Repayments of commercial paper	(377		)		(1,950		)
Dividends paid	(1,464		)		(2,421		)
Other financing activities, net	(21		)		(35		)
Net cash provided by/(used for) financing activities	(1,881		)		(1,637		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(40		)		(128		)
Cash, cash equivalents, and restricted cash
Net increase/(decrease)	1,180				(402		)
Balance at beginning of period	1,136				1,769
Balance at end of period	$	2,316			$	1,367
NON-CASH INVESTING ACTIVITIES:
Beneficial interest obtained in exchange for securitized trade receivables	$	—			$	938

See accompanying notes to the condensed consolidated financial statements.

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The Kraft Heinz Company

Notes to Condensed Consolidated Financial Statements

Note 1. Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In management’s opinion, these interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary to fairly state our results for the periods presented.

The condensed consolidated balance sheet data at December 29, 2018 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These statements should be read in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 29, 2018. The results for interim periods are not necessarily indicative of future or annual results.

Principles of Consolidation

The consolidated financial statements include Kraft Heinz and all of our controlled subsidiaries. All intercompany transactions are eliminated.

Reportable Segments

We manage and report our operating results through four segments. We have three reportable segments defined by geographic region: United States, Canada, and Europe, Middle East, and Africa (“EMEA”). Our remaining businesses are combined and disclosed as “Rest of World.” Rest of World comprises two operating segments: Latin America and Asia Pacific (“APAC”).

During the third quarter of 2019, certain organizational changes were announced that will likely impact our internal reporting in 2020 and, as a result, will require us to evaluate the potential impact on our reportable segments. We continue to assess the potential impact of these announced organizational changes and will consider the impact of any further changes that may be announced. We expect that any change to our reportable segments would be effective in the first quarter of 2020.

Use of Estimates

We prepare our condensed consolidated financial statements in accordance with U.S. GAAP, which requires us to make accounting policy elections, estimates, and assumptions that affect the reported amount of assets, liabilities, reserves, and expenses. These accounting policy elections, estimates, and assumptions are based on our best estimates and judgments. We evaluate our policy elections, estimates, and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We believe these estimates to be reasonable given the current facts available. We adjust our policy elections, estimates, and assumptions when facts and circumstances dictate. Market volatility, including foreign currency exchange rates, increases the uncertainty inherent in our estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from estimates. If actual amounts differ from estimates, we include the revisions in our consolidated results of operations in the period the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a material effect on our condensed consolidated financial statements.

Reclassifications

We made reclassifications to certain previously reported financial information to conform to our current period presentation.

Held for Sale

At December 29, 2018, we had classified certain assets and liabilities as held for sale in our condensed consolidated balance sheet primarily relating to the previously announced divestiture of our equity interests in a subsidiary in India and our divestiture of certain assets and operations in Canada, which closed in January and July 2019, respectively. At September 28, 2019, the assets and liabilities identified as held for sale in our condensed consolidated balance sheet reflect the closing of these two transactions and the remaining balances represent certain assets globally that are held for sale. See Note 5, Acquisitions and Divestitures, for additional information.

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Note 2. Restatement of Previously Issued Condensed Consolidated Financial Statements

We have restated herein our condensed consolidated financial statements at September 29, 2018 and for the three and nine months ended September 29, 2018. We have also restated impacted amounts within the accompanying footnotes to the condensed consolidated financial statements.

Restatement Background

As previously disclosed on February 21, 2019, we received a subpoena from the SEC in October 2018 related to our procurement area, specifically the accounting policies, procedures, and internal controls related to our procurement function, including, but not limited to, agreements, side agreements, and changes or modifications to agreements with our suppliers. Following the receipt of this subpoena, we, together with external counsel and forensic accountants, and subsequently, under the oversight of the Audit Committee of our Board of Directors (the “Audit Committee”), conducted an internal investigation into the procurement area and related matters. As a result of the findings from this internal investigation, which was completed prior to the filing of our Annual Report on Form 10-K for the year ended December 29, 2018 on June 7, 2019 and which identified that multiple employees in the procurement area engaged in misconduct, we corrected prior period misstatements that generally increased the total cost of products sold in prior financial periods. These misstatements principally related to the incorrect timing of when certain cost and rebate elements associated with supplier contracts and related arrangements were initially recognized.

In connection with the internal investigation, we also conducted a comprehensive review of supplier contracts and related arrangements to identify other potential misstatements in the timing of the recognition of supplier rebates, incentive payments, and pricing arrangements. The review identified further misstatements, which we also investigated and have been unable to conclude if they resulted from the misconduct described above. These misstatements are described in more detail in restatement reference (a) below.

Our internal investigation and review identified adjustments that resulted in an understatement of cost of products sold totaling $208 million, including misstatements of $175 million relating to the periods up through September 29, 2018 that were restated in our Annual Report on Form 10-K for the year ended December 29, 2018. The misstatements of cost of products sold related to our internal investigation and review were $22 million for the nine months ended September 29, 2018, including a $4 million overstatement for the first quarter and understatements of $13 million for the second quarter and $13 million for the third quarter. We do not believe that the misstatements are quantitatively material to any period presented in our prior financial statements. However, due to the qualitative nature of the matters identified in our internal investigation, including the number of years over which the misconduct occurred and the number of transactions, suppliers, and procurement employees involved, we determined that it would be appropriate to correct the misstatements in our previously issued annual and interim consolidated financial statements by restating such financial statements. The restatement also included corrections for additional identified out-of-period and uncorrected misstatements in the impacted periods.

Accordingly, we have restated herein our unaudited condensed consolidated financial statements at September 29, 2018 and for the three and nine months ended September 29, 2018, in accordance with Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections. In addition to the misstatements related to the supplier contracts and related arrangements, including the misstatements related to lease classification described in restatement reference (b) below, we corrected additional identified out-of-period and uncorrected misstatements that were not material, individually or in the aggregate, to our condensed consolidated financial statements. These misstatements were related to balance sheet misclassifications, income taxes, impairments, and other misstatements, all of which are described in more detail in restatement references (c) through (f) below.

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Description of Misstatements

Misstatements Associated with Supplier Contracts and Related Arrangements

(a) Supplier Rebates

We recorded adjustments to correct the misstatements found as a result of the internal investigation related to procurement described above. In connection with the internal investigation, we also conducted a comprehensive review of supplier contracts and related arrangements to identify other potential misstatements in the timing of the recognition of supplier rebates, incentive payments, and pricing arrangements. The review identified further misstatements, which we also investigated and have been unable to conclude if they resulted from the misconduct described above. These misstatements were primarily related to certain supplier contracts and related arrangements where the allocation of value of all or a portion of rebates and up-front payments to contractual elements in the current period should have been deferred and recognized over an applicable contractual period. We corrected these misstatements to defer the up-front consideration from suppliers when the retention or receipt of that consideration was contingent upon future events and to correctly recognize the consideration as a reduction of cost of products sold over the terms of the arrangements with the suppliers. The impacts of the supplier rebate misstatements are discussed in restatement reference (a) throughout this note.

(b) Capital Leases

As part of our review of supplier contracts and related arrangements in connection with the internal investigation, we evaluated additional elements of such arrangements, including the classification of embedded lease provisions as capital or operating. We had initially classified certain embedded lease provisions as capital leases and allocated their fixed consideration to the lease components. As a result of our analysis, and also taking into consideration, among other elements, the total value of supplier contracts and related arrangements, we determined that the classification of the embedded lease element for certain contracts should have been classified as an operating lease instead of a capital lease. In addition, we identified certain arrangements that were improperly accounted for as embedded capital leases. The impacts of the capital lease misstatements are discussed in restatement reference (b) throughout this note.

Additional Misstatements

(c) Balance Sheet Misclassifications

We recorded adjustments to recognize certain balance sheet misclassifications in the correct period. These adjustments primarily related to the classification of products held at co-packer locations. The impacts of the balance sheet misclassifications are discussed in restatement reference (c) throughout this note.

(d) Income Taxes

We recorded adjustments to recognize certain income tax items in the correct period, primarily deferred tax adjustments related to a Brazilian subsidiary, as well as return-to-provision adjustments and various other misclassifications. The income tax impacts of all misstatements outside of this category are included in their respective misstatement categories. The impacts of income tax misstatements are discussed in restatement reference (d) throughout this note.

(e) Impairments

We recorded adjustments to recognize certain non-cash impairment losses in the correct period. In 2018, we had determined that a definite-lived intangible asset had been impaired in the fourth quarter of 2016 due to a license termination in that period and recorded an out-of-period correction to recognize the non-cash impairment loss. In addition, we recorded an adjustment to correct goodwill impairment losses related to our Australia and New Zealand reporting unit, which had been overstated in the second quarter of 2018. The impacts of the impairment misstatements are discussed in restatement reference (e) throughout this note.

(f) Other

We recorded adjustments to correct other identified out-of-period and uncorrected misstatements that were not material, individually or in the aggregate, to our condensed consolidated financial statements. These other misstatements were primarily related to structured payable and product financing arrangements, inventory write-offs, certain accrued liabilities, and other misstatements within net sales and certain income tax and balance sheet accounts. The impacts of the other misstatements are discussed in restatement reference (f) throughout this note.

9

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Description of Restatement Tables

Below, we have presented a reconciliation from the as previously reported to the restated values for each of our condensed consolidated financial statements at September 29, 2018 and for the three and nine months ended September 29, 2018. The values as previously reported were derived from our Quarterly Report on Form 10-Q for the quarter ended September 29, 2018 filed on November 2, 2018.

10

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The Kraft Heinz Company

Condensed Consolidated Statement of Income

(in millions, except per share data)

	For the Three Months Ended September 29, 2018
	As Previously Reported				Restatement Impacts				Restatement Reference		As Restated
Net sales	$	6,378			$	5			(f)		$	6,383
Cost of products sold	4,271				18				(a)(b)(f)		4,289
Gross profit	2,107				(13		)				2,094
Selling, general and administrative expenses, excluding impairment losses	803				—				(f)		803
Goodwill impairment losses	—				—						—
Intangible asset impairment losses	234				(17		)		(e)		217
Selling, general and administrative expenses	1,037				(17		)				1,020
Operating income/(loss)	1,070				4						1,074
Interest expense	327				(1		)		(b)(f)		326
Other expense/(income)	(71		)		—						(71		)
Income/(loss) before income taxes	814				5						819
Provision for/(benefit from) income taxes	186				15				(a)(b)(d)(e)(f)		201
Net income/(loss)	628				(10		)				618
Net income/(loss) attributable to noncontrolling interest	(2		)		1				(f)		(1		)
Net income/(loss) attributable to common shareholders	$	630			$	(11	)				$	619
Per share data applicable to common shareholders:
Basic earnings/(loss)	$	0.52			$	(0.01	)				$	0.51
Diluted earnings/(loss)	0.51				(0.01		)				0.50

(a) Supplier Rebates—The correction of these misstatements resulted in an increase to cost of products sold of $13 million and a decrease to provision for income taxes of $2 million for the three months ended September 29, 2018.

(b) Capital Leases—The correction of these misstatements resulted in an increase to cost of products sold of less than $1 million, a decrease to interest expense of $1 million, and an increase to provision for income taxes of less than $1 million for the three months ended September 29, 2018.

(c) Balance Sheet Misclassifications—None.

(d) Income Taxes—The correction of these misstatements resulted in an increase to provision for income taxes of $14 million for the three months ended September 29, 2018.

(e) Impairments—The correction of these misstatements resulted in a decrease to SG&A of $17 million and an increase to provision for income taxes of $4 million for the three months ended September 29, 2018.

(f) Other—The correction of these misstatements resulted in an increase to net sales of $5 million, an increase to cost of products sold of $5 million, an increase to SG&A of less than $1 million, a decrease to interest expense of less than $1 million, a decrease to provision for income taxes of $1 million, and a decrease to net loss attributable to noncontrolling interest of $1 million for the three months ended September 29, 2018.

11

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The Kraft Heinz Company

Condensed Consolidated Statement of Income

(in millions, except per share data)

	For the Nine Months Ended September 29, 2018
	As Previously Reported				Restatement Impacts(1)				Restatement Reference		As Restated
Net sales	$	19,368			$	9			(f)		$	19,377
Cost of products sold	12,651				21				(a)(b)(f)		12,672
Gross profit	6,717				(12		)				6,705
Selling, general and administrative expenses, excluding impairment losses	2,338				(15		)		(f)		2,323
Goodwill impairment losses	164				(31		)		(e)		133
Intangible asset impairment losses	335				(17		)		(e)		318
Selling, general and administrative expenses	2,837				(63		)				2,774
Operating income/(loss)	3,880				51						3,931
Interest expense	962				(3		)		(b)(f)		959
Other expense/(income)	(196		)		15						(181		)
Income/(loss) before income taxes	3,114				39						3,153
Provision for/(benefit from) income taxes	738				41				(a)(b)(d)(e)(f)		779
Net income/(loss)	2,376				(2		)				2,374
Net income/(loss) attributable to noncontrolling interest	(3		)		1				(f)		(2		)
Net income/(loss) attributable to common shareholders	$	2,379			$	(3	)				$	2,376
Per share data applicable to common shareholders:
Basic earnings/(loss)	$	1.95			$	—					$	1.95
Diluted earnings/(loss)	1.94				—						1.94

(1)	We have reclassified our $15 million pre-tax loss on the sale of our South African business from SG&A to other expense/(income) in order to conform with current period presentation. This reclassification has been included in the restatement impacts column above.

(a) Supplier Rebates—The correction of these misstatements resulted in an increase to cost of products sold of $22 million and a decrease to provision for income taxes of $3 million for the nine months ended September 29, 2018.

(b) Capital Leases—The correction of these misstatements resulted in an increase to cost of products sold of $1 million, a decrease to interest expense of $3 million, and an increase to provision for income taxes of less than $1 million for the nine months ended September 29, 2018.

(c) Balance Sheet Misclassifications—None.

(d) Income Taxes—The correction of these misstatements resulted in an increase to provision for income taxes of $40 million for the nine months ended September 29, 2018.

(e) Impairments—The correction of these misstatements resulted in a decrease to SG&A of $48 million and an increase to provision for income taxes of $4 million for the nine months ended September 29, 2018.

(f) Other—The correction of these misstatements resulted in an increase to net sales of $9 million, a decrease to cost of products sold of $2 million, an increase to SG&A of less than $1 million, a decrease to interest expense of less than $1 million, an increase to provision for income taxes of less than $1 million, and a decrease to net loss attributable to noncontrolling interest of $1 million for the nine months ended September 29, 2018.

12

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The Kraft Heinz Company

Condensed Consolidated Statement of Comprehensive Income

(in millions)

	For the Three Months Ended September 29, 2018
	As Previously Reported				Restatement Impacts				Restatement Reference		As Restated
Net income/(loss)	$	628			$	(10	)		(a)(b)(d)(e)(f)		$	618
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(146		)		2				(b)(d)(e)		(144		)
Net deferred gains/(losses) on net investment hedges	13				—						13
Amounts excluded from the effectiveness assessment of net investment hedges	3				—						3
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(2		)		—						(2		)
Net deferred gains/(losses) on cash flow hedges	(16		)		—						(16		)
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	12				—						12
Net actuarial gains/(losses) arising during the period	17				—						17
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	(58		)		—						(58		)
Total other comprehensive income/(loss)	(177		)		2						(175		)
Total comprehensive income/(loss)	451				(8		)				443
Comprehensive income/(loss) attributable to noncontrolling interest	(4		)		1				(f)		(3		)
Comprehensive income/(loss) attributable to Kraft Heinz	$	455			$	(9	)				$	446

The $10 million decrease to net income was primarily driven by misstatements in the income taxes and supplier rebates categories, partially offset by misstatements in the impairments, capital leases, and other categories. See additional descriptions of the net income impacts in the consolidated statement of income for the three months ended September 29, 2018 section above.

The $2 million change to foreign currency translation adjustments is the result of misstatements in the income taxes, capital leases, and impairments categories.

13

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The Kraft Heinz Company

Condensed Consolidated Statement of Comprehensive Income

(in millions)

	For the Nine Months Ended September 29, 2018
	As Previously Reported				Restatement Impacts				Restatement Reference		As Restated
Net income/(loss)	$	2,376			$	(2	)		(a)(b)(d)(e)(f)		$	2,374
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	(817		)		8				(b)(d)(e)		(809		)
Net deferred gains/(losses) on net investment hedges	158				—						158
Amounts excluded from the effectiveness assessment of net investment hedges	3				—						3
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(2		)		—						(2		)
Net deferred gains/(losses) on cash flow hedges	40				—						40
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	(10		)		—						(10		)
Net actuarial gains/(losses) arising during the period	70				—						70
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	(133		)		—						(133		)
Total other comprehensive income/(loss)	(691		)		8						(683		)
Total comprehensive income/(loss)	1,685				6						1,691
Comprehensive income/(loss) attributable to noncontrolling interest	(16		)		1				(f)		(15		)
Comprehensive income/(loss) attributable to Kraft Heinz	$	1,701			$	5					$	1,706

The $2 million decrease to net income was primarily driven by misstatements in the income taxes and supplier rebates categories, partially offset by misstatements in the impairments, other, and capital leases categories. See additional descriptions of the net income impacts in the consolidated statement of income for the nine months ended September 29, 2018 section above.

The $8 million change in foreign currency translation adjustments is the result of misstatements in the income taxes, capital leases, and impairments categories.

14

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The Kraft Heinz Company

Condensed Consolidated Balance Sheet

(in millions, except per share data)

	September 29, 2018
	As Previously Reported				Restatement Impacts				Restatement Reference		As Restated
ASSETS
Cash and cash equivalents	$	1,366			$	—					$	1,366
Trade receivables (net of allowances of $24 at September 29, 2018)	2,032				—						2,032
Sold receivables	—				—						—
Income taxes receivable	195				8				(a)(b)(d)(f)		203
Inventories	3,287				(73		)		(c)(f)		3,214
Prepaid expenses	389				—						389
Other current assets	321				31				(a)(c)		352
Total current assets	7,590				(34		)				7,556
Property, plant and equipment, net	7,216				(142		)		(b)(f)		7,074
Goodwill	44,308				31				(e)(f)		44,339
Intangible assets, net	58,727				—						58,727
Other non-current assets	1,889				(10		)		(d)		1,879
TOTAL ASSETS	$	119,730			$	(155	)				$	119,575
LIABILITIES AND EQUITY
Commercial paper and other short-term debt	$	973			$	—					$	973
Current portion of long-term debt	405				(34		)		(b)(f)		371
Trade payables	4,312				(74		)		(f)		4,238
Accrued marketing	494				—						494
Interest payable	315				—						315
Other current liabilities	1,082				149				(a)(f)		1,231
Total current liabilities	7,581				41						7,622
Long-term debt	30,998				(111		)		(b)(f)		30,887
Deferred income taxes	14,215				9				(a)(d)(f)		14,224
Accrued postemployment costs	394				—						394
Other non-current liabilities	964				71				(a)		1,035
TOTAL LIABILITIES	54,152				10						54,162
Commitments and Contingencies
Redeemable noncontrolling interest	6				—						6
Equity:
Common stock, $0.01 par value (5,000 shares authorized; 1,222 shares issued and 1,219 shares outstanding at September 29, 2018)	12				—						12
Additional paid-in capital	58,793				(77		)		(c)		58,716
Retained earnings/(deficit)	8,576				(97		)		(a)(b)(c)(d)(e)(f)		8,479
Accumulated other comprehensive income/(losses)	(1,732		)		8				(b)(d)(e)		(1,724		)
Treasury stock, at cost (3 shares at September 29, 2018)	(264		)		—						(264		)
Total shareholders' equity	65,385				(166		)				65,219
Noncontrolling interest	187				1				(f)		188
TOTAL EQUITY	65,572				(165		)				65,407
TOTAL LIABILITIES AND EQUITY	$	119,730			$	(155	)				$	119,575

15

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(a) Supplier Rebates—The correction of these misstatements resulted in an increase to income taxes receivable of $1 million, a decrease to other current assets of $36 million, an increase to other current liabilities of $66 million, a decrease to deferred income taxes of $40 million, an increase to other non-current liabilities of $71 million, and a decrease to retained earnings of $132 million at September 29, 2018.

(b) Capital Leases—The correction of these misstatements resulted in a decrease to income taxes receivable of less than $1 million, a decrease to property, plant and equipment, net, of $141 million, a decrease to current portion of long-term debt of $32 million, a decrease to long-term debt of $111 million, an increase to retained earnings of $2 million, and a decrease to accumulated other comprehensive losses of less than $1 million at September 29, 2018.

(c) Balance Sheet Misclassifications—The correction of these misstatements resulted in a decrease to inventories of $67 million, an increase to other current assets of $67 million, a decrease to additional paid-in capital of $77 million, and an increase to retained earnings of $77 million at September 29, 2018.

(d) Income Taxes—The correction of these misstatements resulted in an increase to income taxes receivable of $3 million, a decrease to other non-current assets of $10 million, an increase to deferred income taxes of $50 million, a decrease to retained earnings of $66 million, and a decrease to accumulated other comprehensive losses of $9 million at September 29, 2018.

(e) Impairments—The correction of these misstatements resulted in an increase to goodwill of $30 million, an increase to retained earnings of $31 million, and an increase to accumulated other comprehensive losses of $1 million at September 29, 2018.

(f) Other—The correction of these misstatements resulted in an increase to income taxes receivable of $4 million, a decrease to inventories of $6 million, a decrease to property, plant and equipment, net of $1 million, an increase to goodwill of $1 million, a decrease to current portion of long-term debt of $2 million, a decrease to trade payables of $74 million, an increase to other current liabilities of $83 million, an increase to long-term debt of less than $1 million, a decrease to deferred income taxes of $1 million, and a decrease to retained earnings of $9 million, and an increase to noncontrolling interest of $1 million at September 29, 2018.

The cumulative effect of misstatements corrected in periods prior to December 31, 2017 resulted in a reduction to retained earnings of $94 million. The correction of misstatements in the nine months ended September 29, 2018 resulted in a decrease to retained earnings of $3 million. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, in our Annual Report on Form 10-K for the year ended December 29, 2018 for additional information.

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The Kraft Heinz Company

Condensed Consolidated Statement of Equity

For the Three Months Ended March 31, 2018, June 30, 2018, and September 29, 2018

(in millions, except per share data)

	As Previously Reported
	Common Stock				Additional Paid-in Capital				Retained Earnings/(Deficit)				Accumulated Other Comprehensive Income/(Losses)				Treasury Stock, at Cost				Noncontrolling Interest				Total Equity
Balance at December 30, 2017	$	12			$	58,711			$	8,589			$	(1,054	)		$	(224	)		$	207			$	66,241
Net income/(loss) excluding redeemable noncontrolling interest	—				—				993				—				—				5				998
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—				—				—				79				—				(5		)		74
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Cumulative effect of accounting standards adopted in the period	—				—				(95		)		—				—				—				(95		)
Exercise of stock options, issuance of other stock awards, and other	—				22				(7		)		—				(16		)		—				(1		)
Balance at March 31, 2018	12				58,733				8,718				(975		)		(240		)		207				66,455
Net income/(loss) excluding redeemable noncontrolling interest	—				—				756				—				—				—				756
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—				—				—				(582		)		—				(6		)		(588		)
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Exercise of stock options, issuance of other stock awards, and other	—				33				(2		)		—				(14		)		(13		)		4
Balance at June 30, 2018	12				58,766				8,710				(1,557		)		(254		)		188				65,865
Net income/(loss) excluding redeemable noncontrolling interest	—				—				630				—				—				1				631
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—				—				—				(175		)		—				(2		)		(177		)
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Cumulative effect of accounting standards adopted in the period	—				—				(2		)		—				—				—				(2		)
Exercise of stock options, issuance of other stock awards, and other	—				27				—				—				(10		)		—				17
Balance at September 29, 2018	$	12			$	58,793			$	8,576			$	(1,732	)		$	(264	)		$	187			$	65,572

17

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	Restatement Impacts
	Restatement Reference		Common Stock				Additional Paid-in Capital				Retained Earnings/(Deficit)				Accumulated Other Comprehensive Income/(Losses)				Treasury Stock, at Cost				Noncontrolling Interest				Total Equity
Balance at December 30, 2017			$	—			$	(77	)		$	(94	)		$	—			$	—			$	—			$	(171	)
Net income/(loss) excluding redeemable noncontrolling interest	(a)(b)(d)(e)(f)		—				—				10				—				—				—				10
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	(b)(d)		—				—				—				—				—				—				—
Dividends declared-common stock ($0.625 per share)			—				—				—				—				—				—				—
Cumulative effect of accounting standards adopted in the period			—				—				—				—				—				—				—
Exercise of stock options, issuance of other stock awards, and other			—				—				—				—				—				—				—
Balance at March 31, 2018			—				(77		)		(84		)		$	—			—				—				(161		)
Net income/(loss) excluding redeemable noncontrolling interest	(a)(b)(d)(e)(f)		—				—				(2		)		—				—				—				(2		)
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	(b)(d)(e)		—				—				—				6				—				—				6
Dividends declared-common stock ($0.625 per share)			—				—				—				—				—				—				—
Exercise of stock options, issuance of other stock awards, and other			—				—				—				—				—				—				—
Balance at June 30, 2018			—				(77		)		(86		)		6				—				—				(157		)
Net income/(loss) excluding redeemable noncontrolling interest	(a)(b)(d)(e)(f)		—				—				(11		)		—				—				1				(10		)
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	(b)(d)(e)		—				—				—				2				—				—				2
Dividends declared-common stock ($0.625 per share)			—				—				—				—				—				—				—
Cumulative effect of accounting standards adopted in the period			—				—				—				—				—				—				—
Exercise of stock options, issuance of other stock awards, and other			—				—				—				—				—				—				—
Balance at September 29, 2018			$	—			$	(77	)		$	(97	)		$	8			$	—			$	1			$	(165	)

18

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	As Restated
	Common Stock				Additional Paid-in Capital				Retained Earnings/(Deficit)				Accumulated Other Comprehensive Income/(Losses)				Treasury Stock, at Cost				Noncontrolling Interest				Total Equity
Balance at December 30, 2017	$	12			$	58,634			$	8,495			$	(1,054	)		$	(224	)		$	207			$	66,070
Net income/(loss) excluding redeemable noncontrolling interest	—				—				1,003				—				—				5				1,008
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—				—				—				79				—				(5		)		74
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Cumulative effect of accounting standards adopted in the period	—				—				(95		)		—				—				—				(95		)
Exercise of stock options, issuance of other stock awards, and other	—				22				(7		)		—				(16		)		—				(1		)
Balance at March 31, 2018	12				58,656				8,634				(975		)		(240		)		207				66,294
Net income/(loss) excluding redeemable noncontrolling interest	—				—				754				—				—				—				754
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—				—				—				(576		)		—				(6		)		(582		)
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Exercise of stock options, issuance of other stock awards, and other	—				33				(2		)		—				(14		)		(13		)		4
Balance at June 30, 2018	12				58,689				8,624				(1,551		)		(254		)		188				65,708
Net income/(loss) excluding redeemable noncontrolling interest	—				—				619				—				—				2				621
Other comprehensive income/(loss) excluding redeemable noncontrolling interest	—				—				—				(173		)		—				(2		)		(175		)
Dividends declared-common stock ($0.625 per share)	—				—				(762		)		—				—				—				(762		)
Cumulative effect of accounting standards adopted in the period	—				—				(2		)		—				—				—				(2		)
Exercise of stock options, issuance of other stock awards, and other	—				27				—				—				(10		)		—				17
Balance at September 29, 2018	$	12			$	58,716			$	8,479			$	(1,724	)		$	(264	)		$	188			$	65,407

See descriptions of the net income and other comprehensive income impacts in the consolidated statement of income and consolidated statement of comprehensive income for the three and nine months ended September 29, 2018 sections above.

19

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The Kraft Heinz Company

Consolidated Statement of Cash Flows

(in millions)

	For the Nine Months Ended September 29, 2018
	As Previously Reported				Restatement Impacts				Restatement Reference		As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)	$	2,376			$	(2	)		(a)(b)(d)(e)(f)		$	2,374
Adjustments to reconcile net income/(loss) to operating cash flows:
Depreciation and amortization	736				(24		)		(b)(f)		712
Amortization of postretirement benefit plans prior service costs/(credits)	(261		)		—						(261		)
Equity award compensation expense	44				—						44
Deferred income tax provision/(benefit)	96				8				(a)(d)(e)(f)		104
Postemployment benefit plan contributions	(64		)		—						(64		)
Goodwill and intangible asset impairment losses	499				(48		)		(e)		451
Nonmonetary currency devaluation	131				—						131
Loss/(gain) on sale of business	15				—						15
Other items, net	21				(1		)		(a)(f)		20
Changes in current assets and liabilities:
Trade receivables	(2,154		)		—						(2,154		)
Inventories	(663		)		18				(c)(f)		(645		)
Accounts payable	145				(15		)		(f)		130
Other current assets	(105		)		2				(a)(c)		(103		)
Other current liabilities	83				41				(a)(b)(d)(f)		124
Net cash provided by/(used for) operating activities	899				(21		)				878
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash receipts on sold receivables	1,296				—						1,296
Capital expenditures	(594		)		—						(594		)
Payments to acquire business, net of cash acquired	(248		)		—						(248		)
Proceeds from sale of business	18				—						18
Other investing activities, net	13				—						13
Net cash provided by/(used for) investing activities	485				—						485
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(2,727		)		21				(b)(f)		(2,706		)
Proceeds from issuance of long-term debt	2,990				—						2,990
Proceeds from issuance of commercial paper	2,485				—						2,485
Repayments of commercial paper	(1,950		)		—						(1,950		)
Dividends paid - common stock	(2,421		)		—						(2,421		)
Other financing activities, net	(35		)		—						(35		)
Net cash provided by/(used for) financing activities	(1,658		)		21						(1,637		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(128		)		—						(128		)
Cash, cash equivalents, and restricted cash
Net increase/(decrease)	(402		)		—						(402		)
Balance at beginning of period	1,769				—						1,769
Balance at end of period	$	1,367			$	—					$	1,367
NON-CASH INVESTING ACTIVITIES:
Beneficial interest obtained in exchange for securitized trade receivables	$	938			$	—					$	938

See descriptions of the net income impacts in the condensed consolidated statement of income for the nine months ended September 29, 2018 section above.

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The misstatements in the capital leases misclassifications category resulted in a decrease to net cash flows provided by operating activities of $21 million and a decrease to net cash flows used for financing activities of $21 million for the nine months ended September 29, 2018.

The misstatements in the other misclassifications category resulted in a decrease to net cash flows provided by operating activities of less than $1 million and a decrease to net cash flows used for financing activities of less than $1 million for the nine months ended September 29, 2018.

No other misstatements impacted the classifications between net operating, net investing, or net financing cash flow activities for the nine months ended September 29, 2018.

Note 3. Significant Accounting Policies

The following significant accounting policy was updated in the first quarter of 2019 to reflect changes upon adoption of ASU 2016-02. There were no other changes to our accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 29, 2018.

Leases:

We determine whether a contract is or contains a lease at contract inception based on the presence of identified assets and our right to obtain substantially all of the economic benefit from or to direct the use of such assets. When we determine a lease exists, we record a right-of-use (“ROU”) asset and corresponding lease liability on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term. Lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets are recognized at commencement date at the value of the lease liability and are adjusted for any prepayments, lease incentives received, and initial direct costs incurred. Lease liabilities are recognized at lease commencement date based on the present value of remaining lease payments over the lease term. As the discount rate implicit in the lease is not readily determinable in most of our leases, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

We do not record lease contracts with a term of 12 months or less on our consolidated balance sheets.

We recognize fixed lease expense for operating leases on a straight-line basis over the lease term. For finance leases, we recognize amortization expense on the ROU asset and interest expense on the lease liability over the lease term.

We have lease agreements with non-lease components that relate to the lease components (e.g., common area maintenance such as cleaning or landscaping, insurance, etc.). We account for each lease and any non-lease components associated with that lease as a single lease component for all underlying asset classes. Accordingly, all costs associated with a lease contract are accounted for as lease costs.

Certain leasing arrangements require variable payments that are dependent on usage or output or may vary for other reasons, such as insurance and tax payments. Variable lease payments that do not depend on an index or rate are excluded from lease payments in the measurement of the ROU asset and lease liability and are recognized as expense in the period in which the payment occurs.

Our lease agreements do not include significant restrictions or covenants, and residual value guarantees are generally not included within our operating leases.

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Note 4. New Accounting Standards

Accounting Standards Adopted in the Current Year

Leases:

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued accounting standards update (“ASU”) 2016-02 to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The updated guidance requires lessees to reflect the majority of leases on their balance sheets as assets and obligations. This ASU became effective beginning in the first quarter of our fiscal year 2019. We adopted this ASU in the first quarter of 2019 using a modified retrospective transition method and elected the following practical expedients: (i) the optional transition method that allows us to apply the guidance at the adoption date and recognize any adjustments that result from applying Accounting Standards Codification (“ASC”) Topic 842, Leases, to existing leases as a cumulative-effect adjustment to the opening balance of retained earnings/(deficit) in the period of adoption (i.e., the effective date); (ii) the package of practical expedients that allows us to carry forward our determination of whether a lease exists, the classification of a lease, and whether initial direct lease costs exist for purposes of transition to the new standard; (iii) the land easement option, which allows us to continue to use prior accounting conclusions reached in our accounting for land easements; and (iv) the short-term lease exemption whereby we will not record an asset or liability for short-term leases. The most significant impact of adoption on our condensed consolidated financial statements was the recognition of ROU assets and lease liabilities for operating leases. Our accounting for finance leases remained substantially unchanged. Upon adoption, we had total lease assets of $821 million and total lease liabilities of $887 million. The adoption of this ASU did not result in a cumulative-effect adjustment to the opening balance of retained earnings/(deficit) and did not impact our condensed consolidated statements of income or our cash flows. See Note 3, Significant Accounting Policies, for our lease accounting policy and Note 18, Leases, for additional information related to our lease arrangements.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income:

In February 2018, the FASB issued ASU 2018-02 related to reclassifying tax effects stranded in accumulated other comprehensive income/(losses) because of the Tax Cuts and Jobs Act (“U.S. Tax Reform”) enacted on December 22, 2017. U.S. Tax Reform reduced the U.S. federal corporate tax rate from 35.0% to 21.0%. ASC Topic 740, Income Taxes, requires the remeasurement of deferred tax assets and liabilities as a result of such changes in tax laws or rates to be presented in net income/(loss) from continuing operations. However, the related tax effects of such deferred tax assets and liabilities may have been originally recorded in other comprehensive income/(loss). This ASU allows companies to reclassify such stranded tax effects from accumulated other comprehensive income/(losses) to retained earnings/(deficit). This reclassification adjustment is optional, and if elected, may be applied either to the period of adoption or retrospectively to the period(s) impacted by U.S. Tax Reform. Additionally, this ASU requires companies to disclose the policy election for stranded tax effects as well as the general accounting policy for releasing income tax effects from accumulated other comprehensive income/(losses). This ASU became effective beginning in the first quarter of our fiscal year 2019. We adopted this ASU on the first day of our fiscal year 2019 and made the policy election to reclassify stranded tax effects from accumulated other comprehensive income/(losses) to retained earnings/(deficit) in the period of adoption. The impact of this policy election was an increase to retained earnings/(deficit) and a corresponding decrease to accumulated other comprehensive income/(losses) of $136 million. We generally release income tax effects from accumulated other comprehensive income/(losses) when the entire portfolio of the item giving rise to the tax effect is disposed of, liquidated, or terminated.

Accounting Standards Not Yet Adopted

Measurement of Current Expected Credit Losses:

In June 2016, the FASB issued ASU 2016-13 to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This ASU replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. This ASU will be effective beginning in the first quarter of our fiscal year 2020. We are currently evaluating the impact this ASU will have on our financial statements and related disclosures.

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Fair Value Measurement Disclosures:

In August 2018, the FASB issued ASU 2018-13 related to fair value measurement disclosures. This ASU removes the requirement to disclose the amount of and reasons for transfers between Levels 1 and 2 of the fair value hierarchy, the policy for determining that a transfer has occurred, and valuation processes for Level 3 fair value measurements. Additionally, this ASU modifies the disclosures related to the measurement uncertainty for recurring Level 3 fair value measurements (by removing the requirement to disclose sensitivity to future changes) and the timing of liquidation of investee assets (by removing the timing requirement in certain instances). The guidance also requires new disclosures for Level 3 financial assets and liabilities, including the amount and location of unrealized gains and losses recognized in other comprehensive income/(loss) and additional information related to significant unobservable inputs used in determining Level 3 fair value measurements. This ASU will be effective beginning in the first quarter of our fiscal year 2020. Early adoption of the guidance in whole is permitted. Alternatively, companies may early adopt removed or modified disclosures and delay adoption of the additional disclosures until their effective date. Certain of the amendments in this ASU must be applied prospectively upon adoption, while other amendments must be applied retrospectively upon adoption. We elected to early adopt the provisions related to removing disclosures in the fourth quarter of our fiscal year 2018 on a retrospective basis. Accordingly, we removed certain disclosures from Note 12, Postemployment Benefits and Note 13, Financial Instruments, in our Annual Report on Form 10-K for the year ended December 29, 2018. There was no other impact to our financial statement disclosures as a result of early adopting the provisions related to removing disclosures. We are currently evaluating the disclosure impact of the provisions related to modifying and adding disclosures.

Disclosure Requirements for Certain Employer-Sponsored Benefit Plans:

In August 2018, the FASB issued ASU 2018-14 related to the disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. The guidance requires sponsors of these plans to provide additional disclosures, including weighted-average interest rates used in the company’s cash balance plans and a narrative description of reasons for any significant gains or losses impacting the benefit obligation for the period. Additionally, this guidance eliminates certain previous disclosure requirements. This ASU will be effective beginning in the first quarter of our fiscal year 2020. This guidance must be applied on a retrospective basis to all periods presented. We are currently evaluating the impact this ASU will have on our financial statements and related disclosures.

Implementation Costs Incurred in Hosted Cloud Computing Service Arrangements:

In August 2018, the FASB issued ASU 2018-15 related to accounting for implementation costs incurred in hosted cloud computing service arrangements. Under the new guidance, implementation costs incurred in a hosting arrangement that is a service contract should be expensed or capitalized based on the nature of the costs and the project stage during which such costs are incurred. If the implementation costs qualify for capitalization, they must be amortized over the term of the hosting arrangement and assessed for impairment. Companies must disclose the nature of any hosted cloud computing service arrangements. This ASU also provides guidance for balance sheet and income statement presentation of capitalized implementation costs and statement of cash flows presentation for the related payments. This ASU will be effective beginning in the first quarter of our fiscal year 2020. This guidance may be adopted either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently evaluating the impact this ASU will have on our financial statements and related disclosures as well as the application method.

Note 5. Acquisitions and Divestitures

Acquisitions

Primal Acquisition:

On January 3, 2019 (the “Primal Acquisition Date”), we acquired 100% of the outstanding equity interests in Primal Nutrition, LLC (“Primal Nutrition”) (the “Primal Acquisition”), a better-for-you brand primarily focused on condiments, sauces, and dressings, with growing product lines in healthy snacks and other categories. The Primal Kitchen brand holds leading positions in the e-commerce and natural channels. The results of Primal Nutrition have been included in our condensed consolidated financial statements for the three and nine months ended September 28, 2019. We have not included unaudited pro forma results as it would not yield significantly different results.

The Primal Acquisition was accounted for under the acquisition method of accounting for business combinations. The total cash consideration paid for Primal Nutrition was $201 million. We utilized estimated fair values at the Primal Acquisition Date to allocate the total consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed. The fair value estimates of the assets acquired and liabilities assumed were subject to adjustment during the measurement period (up to one year from the Primal Acquisition Date). The purchase price allocation for the Primal Acquisition was final as of September 28, 2019.

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The final purchase price allocation to assets acquired and liabilities assumed in the Primal Acquisition was (in millions):

Cash	$	2
Other current assets	15
Identifiable intangible assets	66
Current liabilities	(6		)
Net assets acquired	77
Goodwill on acquisition	124
Total consideration	$	201

The Primal Acquisition resulted in $124 million of non tax deductible goodwill relating principally to planned expansion of the Primal Kitchen brand into new channels and categories. This goodwill was allocated to the United States segment as shown in Note 9, Goodwill and Intangible Assets.

The purchase price allocation to identifiable intangible assets acquired in the Primal Acquisition was:

	Fair Value (in millions of dollars)				Weighted Average Life (in years)
Definite-lived trademarks	$	52.5			15
Customer-related assets	13.5				20
Total	$	66.0

We valued trademarks using the relief from royalty method and customer-related assets using the distributor method. Some of the more significant assumptions inherent in developing the valuations included the estimated annual net cash flows for each definite-lived intangible asset (including net sales, cost of products sold, selling and marketing costs, and working capital/contributory asset charges), the discount rate that appropriately reflects the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends, as well as other factors. We determined the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management plans, and market comparables.

We used carrying values as of the Primal Acquisition Date to value certain current and non-current assets and liabilities, as we determined that they represented the fair value of those items at the Primal Acquisition Date.

Cerebos Acquisition:

On March 9, 2018 (the “Cerebos Acquisition Date”), we acquired 100% of the outstanding equity interests in Cerebos Pacific Limited (“Cerebos”) (the “Cerebos Acquisition”), an Australian food and beverage company.

The Cerebos Acquisition was accounted for under the acquisition method of accounting for business combinations. The total cash consideration paid for Cerebos was $244 million. We utilized estimated fair values at the Cerebos Acquisition Date to allocate the total consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed. Such allocation was final as of December 29, 2018.

See Note 5, Acquisitions and Divestitures, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 29, 2018 for the final purchase price allocation, valuation methodology, and other information related to the Cerebos Acquisition.

Other Acquisitions

In the third quarter of 2018, we had two additional acquisitions of businesses, including The Ethical Bean Coffee Company Ltd., a Canadian-based coffee roaster, and Wellio, Inc., a full-service meal planning and preparation technology start-up in the U.S. The aggregate consideration paid related to these acquisitions was $27 million.

Related to our acquisitions, we incurred aggregate deal costs of $2 million for the nine months ended September 28, 2019 and $3 million for the three months and $19 million for the nine months ended September 29, 2018. There were no deal costs related to acquisitions for the three months ended September 28, 2019. We recognized these deal costs in SG&A.

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Divestitures

Heinz India Transaction:

In October 2018, we entered into a definitive agreement with two third-parties, Zydus Wellness Limited and Cadila Healthcare Limited (collectively, the “Buyers”), to sell 100% of our equity interests in Heinz India Private Limited (“Heinz India”) for approximately 46 billion Indian rupees (approximately $655 million at January 30, 2019) (the “Heinz India Transaction”). In connection with the Heinz India Transaction, we transferred to the Buyers, among other assets and operations, our global intellectual property rights to several brands, including Complan, Glucon-D, Nycil, and Sampriti. Our core brands (i.e., Heinz and Kraft) were not transferred. The Heinz India Transaction closed on January 30, 2019 (the “Heinz India Closing Date”). We recognized a pre-tax gain of $246 million in the first quarter of 2019. Additionally, in the third quarter of 2019, we recognized a recovery of local India taxes of $3 million, which was classified as gain on sale of business. As a result, we recognized pre-tax gains of $3 million for the three months and $249 million for the nine months ended September 28, 2019. These pre-tax gains were included in other expense/(income).

The components of the pre-tax gain were as follows (in millions):

Proceeds	$	655
Less investment in Heinz India	(355		)
Recognition of tax indemnification	(48		)
Other	(3		)
Pre-tax gain on sale of Heinz India	$	249

In connection with the Heinz India Transaction we agreed to indemnify the Buyers from and against any tax losses for any taxable period prior to the Heinz India Closing Date, including taxes for which we are liable as a result of any transaction that occurred on or before such date. To determine the fair value of our tax indemnity we made various assumptions, including the range of potential dates the tax matters will be resolved, the range of potential future cash flows, the probabilities associated with potential resolution dates and potential future cash flows, and the discount rate. We recorded tax indemnity liabilities related to the Heinz India Transaction totaling approximately $48 million, including $18 million in other current liabilities and $30 million in other non-current liabilities on our condensed consolidated balance sheet as of the Heinz India Closing Date. We also recorded a corresponding $48 million reduction of the gain on the Heinz India Transaction within other expense/(income) in our condensed consolidated statement of income in the first quarter of 2019. Future changes to the fair value of these tax indemnity liabilities will continue to impact other expense/(income) throughout the life of the exposures as a component of the gain on sale for the Heinz India Transaction.

The other component of the pre-tax gain on the sale of Heinz India in the table above primarily related to losses on net investment hedges of our investment in Heinz India, which were settled in the first quarter of 2019, and were partially offset by the local India tax recovery in the third quarter of 2019.

Canada Natural Cheese Transaction:

In November 2018, we entered into a definitive agreement with a third-party, Parmalat SpA (“Parmalat”), to sell certain assets in our natural cheese business in Canada for approximately 1.6 billion Canadian dollars (approximately $1.2 billion at July 2, 2019) (the “Canada Natural Cheese Transaction”). In connection with the Canada Natural Cheese Transaction, we transferred certain assets to Parmalat, including the intellectual property rights to Cracker Barrel in Canada and P’Tit Quebec globally. The Canada Natural Cheese Transaction closed on July 2, 2019. We recognized a pre-tax gain of $241 million, which was included in other expense/(income) for the three and nine months ended September 28, 2019.

The components of the pre-tax gain were as follows (in millions):

Proceeds	$	1,236
Less carrying value of Canada Natural Cheese net assets	(996		)
Other	1
Pre-tax gain resulting from Canada Natural Cheese Transaction	$	241

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South Africa Transaction:

On May 31, 2018, we sold our 50.1% interest in our South African subsidiary to our minority interest partner. This transaction included proceeds of $18 million. We recorded a pre-tax loss on the sale of a business of approximately $15 million, which was included in other expense/(income) on the condensed consolidated statements of income for the nine months ended September 29, 2018.

We incurred aggregate deal costs related to our divestitures of $6 million for the three months and $17 million for the nine months ended September 28, 2019. We recognized these deal costs in SG&A.

Held for Sale

Our assets and liabilities held for sale, by major class, were (in millions):

	September 28, 2019				December 29, 2018
ASSETS
Inventories	$	—			$	92
Property, plant and equipment, net	26				139
Goodwill	—				669
Intangible assets, net	9				437
Other	—				39
Total assets held for sale	$	35			$	1,376
LIABILITIES
Total liabilities held for sale	$	2			$	55

The change in assets and liabilities held for sale during the nine months ended September 28, 2019 was primarily related to the Heinz India Transaction closing on January 30, 2019 and the Canada Natural Cheese Transaction closing on July 2, 2019. The balances held for sale at September 28, 2019 primarily relate to land and manufacturing equipment.

Note 6. Restructuring Activities

As part of our restructuring activities, we incur expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs and other exit costs. Severance and employee benefit costs primarily relate to cash severance, non-cash severance, including accelerated equity award compensation expense, and pension and other termination benefits. Other exit costs primarily relate to lease and contract terminations. We also incur expenses that are an integral component of, and directly attributable to, our restructuring activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include asset-related costs and other implementation costs. Asset-related costs primarily relate to accelerated depreciation and asset impairment charges. Other implementation costs primarily relate to start-up costs of new facilities, professional fees, asset relocation costs, costs to exit facilities, and costs associated with restructuring benefit plans.

Employee severance and other termination benefit packages are primarily determined based on established benefit arrangements, local statutory requirements, or historical benefit practices. We recognize the contractual component of these benefits when payment is probable and estimable; additional elements of severance and termination benefits associated with non-recurring benefits are recognized ratably over each employee’s required future service period. Charges for accelerated depreciation are recognized on long-lived assets that will be taken out of service before the end of their normal service, in which case depreciation estimates are revised to reflect the use of the asset over its shortened useful life. Asset impairments establish a new fair value basis for assets held for disposal or sale, and those assets are written down to expected net realizable value if carrying value exceeds fair value. All other costs are recognized as incurred.

Restructuring Activities:

We have restructuring programs globally, which are focused primarily on workforce reduction and factory closure and consolidation. As of September 28, 2019, related to these programs, we expect to eliminate approximately 450 positions, primarily outside the U.S. Of these expected reductions, 300 positions were eliminated during the nine months ended September 28, 2019. These programs resulted in expenses of $56 million during the nine months ended September 28, 2019, including $5 million of credits in severance and employee benefit costs, $20 million of non-cash asset-related costs, and $41 million of other implementation costs. Restructuring expenses during the three months ended September 28, 2019 were $15 million, including $2 million of credits in severance and employee benefit costs, $8 million of non-cash asset-related costs, and $9 million of other implementation costs. Restructuring expenses totaled $21 million for the three months and $188 million for the nine months ended September 29, 2018.

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Our net liability balance for restructuring project costs that qualify as exit and disposal costs under U.S. GAAP (i.e., severance and employee benefit costs and other exit costs) was (in millions):

	Severance and Employee Benefit Costs				Other Exit Costs				Total
Balance at December 29, 2018	$	32			$	33			$	65
Charges/(credits)	(5		)		—				(5		)
Cash payments	(16		)		(7		)		(23		)
Balance at September 28, 2019	$	11			$	26			$	37

We expect the liability for severance and employee benefit costs as of September 28, 2019 to be paid by the end of 2020. The liability for other exit costs primarily relates to lease obligations. The cash impact of these obligations will continue for the duration of the lease terms, which expire between 2019 and 2026.

Integration Program:

At the end of 2017, we had substantially completed our multi-year program announced following the merger of Kraft Foods Group, Inc. with and into a wholly-owned subsidiary of H. J. Heinz Holding Corporation (“Heinz”) (the “2015 Merger”) (the “Integration Program”), which was designed to reduce costs and integrate and optimize our combined organization, primarily in the U.S. and Canada reportable segments.

We incurred pre-tax costs related to the Integration Program of $10 million during the three months and $90 million during the nine months ended September 29, 2018. No such expenses were incurred during the three or nine months ended September 28, 2019.

Total Expenses:

Total expense/(income) related to restructuring activities, including the Integration Program, by income statement caption, were (in millions):

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
Severance and employee benefit costs - COGS	$	(1	)		$	(8	)		$	(4	)		$	17
Severance and employee benefit costs - SG&A	(1		)		2				(1		)		12
Severance and employee benefit costs - Other expense/(income)	—				(1		)		—				5
Asset-related costs - COGS	8				8				11				33
Asset-related costs - SG&A	—				6				9				7
Other costs - COGS	5				18				20				125
Other costs - SG&A	4				6				21				21
Other costs - Other expense/(income)	—				—				—				58
	$	15			$	31			$	56			$	278

We do not include our restructuring activities, including the Integration Program, within Segment Adjusted EBITDA (as defined in Note 20, Segment Reporting). The pre-tax impact of allocating such expenses to our segments would have been (in millions):

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
United States	$	8			$	23			$	34			$	144
Canada	4				4				10				70
EMEA	—				(11		)		4				17
Rest of World	2				5				3				14
General corporate expenses	1				10				5				33
	$	15			$	31			$	56			$	278

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Note 7. Restricted Cash

The following table provides a reconciliation of cash and cash equivalents, as reported on our condensed consolidated balance sheets, to cash, cash equivalents, and restricted cash, as reported on our condensed consolidated statements of cash flows (in millions):

	September 28, 2019				December 29, 2018
Cash and cash equivalents	$	2,315			$	1,130
Restricted cash included in other current assets	1				1
Restricted cash included in other non-current assets	—				5
Cash, cash equivalents, and restricted cash	$	2,316			$	1,136

Note 8. Inventories

Inventories consisted of the following (in millions):

	September 28, 2019				December 29, 2018
Packaging and ingredients	$	634			$	510
Work in process	367				343
Finished product	2,157				1,814
Inventories	$	3,158			$	2,667

At December 29, 2018, inventories excluded amounts classified as held for sale. See Note 5, Acquisitions and Divestitures, for additional information.

Note 9. Goodwill and Intangible Assets

Goodwill:

Changes in the carrying amount of goodwill, by segment, were (in millions):

	United States				Canada				EMEA				Rest of World				Total
Balance at December 29, 2018	$	29,597			$	2,438			$	3,074			$	1,394			$	36,503
Impairment losses	(118		)		—				(292		)		(334		)		(744		)
Acquisitions	124				—				6				—				130
Translation adjustments and other	(2		)		73				(109		)		(25		)		(63		)
Balance at September 28, 2019	$	29,601			$	2,511			$	2,679			$	1,035			$	35,826

In the first quarter of 2019, we completed the acquisition of Primal Nutrition. Additionally, at December 29, 2018, goodwill excluded amounts classified as held for sale. See Note 5, Acquisitions and Divestitures, for additional information related to this acquisition, as well as amounts held for sale.

We maintain 19 reporting units, 12 of which comprise our goodwill balance. These 12 reporting units had an aggregate carrying amount of $35.8 billion as of September 28, 2019. We test our reporting units for impairment annually as of the first day of our second quarter, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

In connection with the preparation of the first quarter financial statements, which occurred concurrently with the preparation of the second quarter financial statements due to the delay in the filing of our Annual Report on Form 10-K for the year ended December 29, 2018, we concluded that it was more likely than not that the fair values of three of our 19 reporting units (EMEA East, Brazil and Latin America Exports) were below their carrying amounts. The factors that led to this conclusion included: (i) changes in management structure which triggered the reorganization of the EMEA East and Latin America Exports reporting units in the first quarter; (ii) new management in certain of these reporting units coupled with the development of our five-year operating plan assumptions for each of these reporting units in the first quarter, which established revised expectations and priorities for the coming years in response to current market factors, such as lower revenue growth and margin expectations; (iii) increases in discount rates used to value reporting units in these regions due to expectations of increased risk in these emerging markets; and (iv) fluctuations in forecasted foreign exchange rates in certain countries.

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We recognized a non-cash impairment loss of $620 million in SG&A in the first quarter of 2019 related to the three reporting units noted above that are contained within our EMEA and Rest of World segments. We determined the factors contributing to the impairment loss were the result of circumstances that arose during the first quarter of 2019.

We recognized a $286 million impairment loss in our EMEA East reporting unit within our EMEA segment. In the first quarter of 2019, we reorganized our reporting units to combine Russia, Poland, Middle East, and Distributors operations into the EMEA East reporting unit as a result of changing our management structure. Following this reorganization, we established a new management team in the region at the beginning of 2019 that developed a new five-year operating plan for the region, which established a revised downward outlook for net sales, margin, and cash flows in response to lower expectations for margin and revenue growth opportunities in the region. As a result of this planning process, management revised its expectations downward in relation to the anticipated long-term impact of white space growth opportunities in MEA and the impact of discounter store growth in Russia. Additionally, there were declines in forecasted foreign exchange rates in the region. After the impairment, the goodwill carrying amount of the EMEA East reporting unit was approximately $144 million.

We recognized a $205 million impairment loss in our Brazil reporting unit within our Rest of World segment. During the first quarter, we observed lower than expected performance in launches of new products coupled with the de-listing of certain existing products as well as higher costs due to changes in our sourcing approach to support revenue growth plans. We developed a new five-year operating plan for the region in the first quarter of 2019, which produced a revised outlook for net sales and margins in contemplation of these events and after considering their potential long-term impacts. Additionally, there were declines in forecasted foreign exchange rates in the region. The impairment of the Brazil reporting unit represents all of the goodwill of that reporting unit.

We recognized a $129 million impairment loss in our Latin America Exports reporting unit within our Rest of World segment. In the first quarter of 2019, we reorganized our reporting units to combine Puerto Rico and our Other Latin America Exports business with Costa Rica, Panama, Colombia, Argentina, and Andinos operations (which were part of the previously fully impaired Other Latin America reporting unit and thus had previously been identified as having a fair value less than carrying amount) into the Latin America Exports reporting unit as a result of changing our management structure. We developed a new five-year operating plan for the region in the first quarter of 2019, which produced a revised downward outlook for net sales and margins and adjusted cash flow forecasts to reflect lower expectations in the market, higher costs associated with changes in our sourcing approach, and increased investments in the business to support growth in these emerging markets. After the impairment, the goodwill carrying amount of the Latin America Exports reporting unit was approximately $297 million.

We performed our 2019 annual impairment test as of March 31, 2019, which is the first day of our second quarter in 2019 (this was performed concurrently with the preparation of the first and second quarter 2019 financial statements due to the delay in the filing of our Annual Report on Form 10-K for the year ended December 29, 2018). We utilized the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Through the performance of the 2019 annual impairment test, we identified an impairment related to the U.S. Refrigerated reporting unit. This impairment was primarily due to an increase in the discount rate assumption used for the fair value estimation. The increase in the discount rate was applied to reflect a market participants’ perceived risk in the valuation implied by the sustained reduction in our stock price and, hence, market capitalization (which decreased approximately 25% from December 29, 2018 to the March 31, 2019 annual impairment test date and sustained this decline through June 29, 2019). Since this valuation assumption change was made in connection with the annual impairment test in the second quarter of 2019 and was not indicative of events or conditions that would have constituted a triggering event during the first quarter of 2019, we recorded a non-cash impairment loss of $118 million in SG&A in the second quarter of 2019 within our United States segment. The goodwill carrying amount of this reporting unit was $7.0 billion after the impairment.

The goodwill carrying amounts associated with an additional six reporting units, which each had excess fair value over its carrying amount of 10% or less based on the results of our 2019 annual impairment assessment, were $18.6 billion for U.S. Grocery, $3.9 billion for U.S. Foodservice, $2.1 billion for Canada Retail, $370 million for Australia and New Zealand, $368 million for Canada Foodservice, and $83 million for Northeast Asia as of the annual impairment test date. The goodwill carrying amount associated with one additional reporting unit, which had excess fair value over its carrying amount between 10-20%, was $593 million for Continental Europe as of the annual impairment test date. The aggregate goodwill carrying amount of reporting units with fair value over carrying amount between 20-50% was $2.4 billion as of the annual impairment test date, and there were no reporting units with fair value over carrying amount in excess of 50%.

As a result of our 2018 annual impairment test, we recognized a non-cash impairment loss of $133 million in SG&A related to our Australia and New Zealand reporting unit in the second quarter of 2018. This impairment loss was primarily due to margin declines in the region.

Accumulated impairment losses to goodwill were $7.8 billion at September 28, 2019.

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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 requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax rates, discount rates, growth rates, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, change, or if management’s expectations or plans otherwise change, including as a result of updates to our global five-year operating plan, then one or more of our reporting units might become impaired in the future. Our reporting units that were impaired in 2018 and 2019 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 individual reporting units that have 20% or less excess fair value over carrying amount as of the 2019 annual impairment test date have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future. Although the remaining reporting units have more than 20% excess fair value over carrying amount as of the 2019 annual impairment test date, these amounts are also associated with the 2013 Heinz acquisition and the 2015 Merger and are recorded on the 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.

Indefinite-lived intangible assets:

Changes in the carrying amount of indefinite-lived intangible assets, which primarily consisted of trademarks, were (in millions):

Balance at December 29, 2018	$	43,966
Impairment losses	(474		)
Reclassified to assets held for sale	(9		)
Translation adjustments	(89		)
Balance at September 28, 2019	$	43,394

At September 28, 2019 and December 29, 2018, indefinite-lived intangible assets excluded amounts classified as held for sale. See Note 5, Acquisitions and Divestitures, for additional information on amounts held for sale.

Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $43.4 billion as of September 28, 2019. We test our brands for impairment annually as of the first day of our second quarter, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a brand is less than its carrying amount.

We performed our 2019 annual impairment test as of March 31, 2019, which is the first day of our second quarter in 2019. As a result of our 2019 annual impairment test, we recognized a non-cash impairment loss of $474 million in SG&A in the second quarter of 2019 primarily related to six brands (Miracle Whip, Velveeta, Lunchables, Maxwell House, Philadelphia, and Cool Whip). This impairment loss was recorded in our United States segment, consistent with the ownership of the trademarks. The impairment for these brands was largely due to an increase in the discount rate assumptions used for the fair value estimations. The increase in the discount rate was applied to reflect a market participants’ perceived risk in the valuation implied by the sustained reduction in our stock price and, hence, market capitalization (which decreased approximately 25% from December 29, 2018 to the March 31, 2019 annual impairment test date and sustained this decline through June 29, 2019).

For Miracle Whip and Maxwell House, the reduction in fair value was also driven by lower expectations of near and long-term net sales growth that were adjusted in the second quarter of 2019 due to anticipated trends in consumer preferences. For Lunchables, the reduction in fair value was also due to lower forecasted net sales and royalty rate assumptions associated with lower profit margin expectations driven by pricing actions at certain customers. For Velveeta, Philadelphia, and Cool Whip, no assumption changes other than the discount rate had a meaningful impact on the estimated fair value of brands. Since these valuation assumption changes were made in connection with the annual impairment test in the second quarter of 2019 and were not indicative of events or conditions that would have constituted a triggering event during the first quarter of 2019, we recorded the non-cash impairment loss in the second quarter of 2019. These brands had an aggregate carrying value of $13.5 billion prior to this impairment and $13.0 billion after impairment.

The aggregate carrying amount associated with an additional three brands (Kraft, Planters, and ABC), which each had excess fair value over its carrying amount of 10% or less, was $13.4 billion as of the annual impairment test date. The aggregate carrying amount of an additional three brands (Oscar Mayer, Jet Puffed, and Quero), which each had fair value over its carrying amount of between 10-20%, was $3.6 billion as of the annual impairment test date. The aggregate carrying amount of brands with fair value over carrying amount between 20-50% was $4.2 billion, and the aggregate carrying amount of brands with fair value over carrying amount in excess of 50% was $9.3 billion as of the annual impairment test date.

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As a result of our 2018 annual impairment test, we recognized a non-cash impairment loss of $101 million in SG&A in the second quarter of 2018. This impairment loss was due to net sales and margin declines related to the Quero brand in Brazil.

In the third quarter of 2018, we recognized a non-cash impairment loss of $215 million in SG&A related to the Smart Ones brand. This impairment loss was primarily due to reduced future investment expectations and continued sales declines in the third quarter of 2018. We transferred the remaining carrying value of Smart Ones to definite-lived intangible assets.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual brands requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, growth rates, royalty rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, change, or if management’s expectations or plans otherwise change, including as a result of updates to our global five-year operating plan, then one or more of our brands might become impaired in the future. Our brands that were impaired in 2018 and 2019 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 individual brands that have 20% or less excess fair value over carrying amount as of the 2019 annual impairment test date have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future. Although the remaining brands have more than 20% excess fair value over carrying amount as of the 2019 annual impairment test date, these amounts are also associated with the 2013 Heinz acquisition and the 2015 Merger and are recorded on the 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.

Definite-lived intangible assets:

Definite-lived intangible assets were (in millions):

	September 28, 2019												December 29, 2018
	Gross				Accumulated Amortization				Net				Gross				Accumulated Amortization				Net
Trademarks	$	2,456			$	(443	)		$	2,013			$	2,474			$	(402	)		$	2,072
Customer-related assets	4,094				(799		)		3,295				4,097				(681		)		3,416
Other	14				(2		)		12				18				(4		)		14
	$	6,564			$	(1,244	)		$	5,320			$	6,589			$	(1,087	)		$	5,502

Amortization expense for definite-lived intangible assets was $66 million for the three months and $214 million for the nine months ended September 28, 2019 and $75 million for the three months and $214 million for the nine months ended September 29, 2018. Aside from amortization expense, the changes in definite-lived intangible assets from December 29, 2018 to September 28, 2019 primarily reflect additions of $66 million related to purchase accounting for Primal Nutrition, impairment losses of $5 million, and foreign currency. Definite-lived intangible assets at December 29, 2018 excluded amounts classified as held for sale. See Note 5, Acquisitions and Divestitures, for additional information related to our acquisition of Primal Nutrition, as well as amounts held for sale.

We estimate that amortization expense related to definite-lived intangible assets will be approximately $273 million for the next year and approximately $273 million for each of the four years thereafter.

Note 10. Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment; accordingly, the consolidated effective tax rate is a composite rate reflecting the earnings in various locations and the applicable tax rates. Additionally, small movements in tax rates due to a change in tax law or a change in tax rates that causes us to revalue our deferred tax balances produces volatility in our effective tax rate. Our quarterly income tax provision is determined based on our estimated full year effective tax rate, adjusted for tax attributable to infrequent or unusual items, which are recognized on a discrete period basis in the income tax provision for the period in which they occur.

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Our effective tax rate was 22.6% for the three months ended September 28, 2019 compared to 24.6% for the three months ended September 29, 2018. The decrease in our effective tax rate was primarily driven by a decrease in unfavorable net discrete items. Current year unfavorable impacts from net discrete items were primarily related to tax impacts for divestitures, specifically related to the Canada Natural Cheese Transaction, the impact of which was partially offset by the reversal of certain deferred withholding tax liabilities resulting from the ratification of the U.S. tax treaty with Spain. In the prior year, we had unfavorable impacts from net discrete items primarily related to the revaluation of our deferred tax balances due to changes in state tax laws, non-deductible currency devaluation losses, and non-deductible goodwill impairments, which were partially offset by the favorable impact of reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2017 U.S. income and deductions.

Our effective tax rate was 25.0% for the nine months ended September 28, 2019 compared to 24.7% for the nine months ended September 29, 2018. The increase in our effective tax rate was primarily driven by the less favorable geographic mix of pre-tax income in various non-U.S. jurisdictions, partially offset by a decrease in unfavorable net discrete items. Current year unfavorable impacts from net discrete items primarily related to non-deductible goodwill impairment and the tax impacts from the Heinz India and Canada Natural Cheese Transactions, the impacts of which were partially offset by the reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2018 U.S. income and deductions. In the prior year, we had an unfavorable impact from net discrete items, primarily related to the revaluation of our deferred tax balances due to changes in state tax laws, non-deductible currency devaluation losses, and non-deductible goodwill impairments, which were partially offset by the reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2017 U.S. income and deductions.

Note 11. Employees’ Stock Incentive Plans

Stock Options:

Our stock option activity and related information was:

	Number of Stock Options			Weighted Average Exercise Price (per share)
Outstanding at December 29, 2018	18,259,965			$	44.64
Granted	1,880,648			25.41
Forfeited	(1,279,549	)		66.59
Exercised	(469,687	)		23.19
Outstanding at September 28, 2019	18,391,377			41.70

The aggregate intrinsic value of stock options exercised during the period was $8 million for the nine months ended September 28, 2019.

Restricted Stock Units:

Our restricted stock unit (“RSU”) activity and related information was:

	Number of Units			Weighted Average Grant Date Fair Value (per share)
Outstanding at December 29, 2018	2,338,958			$	68.49
Granted	7,867,566			25.64
Forfeited	(695,969	)		54.66
Vested	(58,152	)		84.95
Outstanding at September 28, 2019	9,452,403			33.74

The aggregate fair value of RSUs that vested during the period was $2 million for the nine months ended September 28, 2019.

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Performance Share Units:

Our performance share unit (“PSU”) activity and related information was:

	Number of Units			Weighted Average Grant Date Fair Value (per share)
Outstanding at December 29, 2018	3,252,056			$	59.24
Forfeited	(955,880	)		58.10
Outstanding at September 28, 2019	2,296,176			59.72

Note 12. Postemployment Benefits

We capitalize a portion of net pension and postretirement cost/(benefit) into inventory based on our production activities. Beginning January 1, 2018, only the service cost component of net pension and postretirement cost/(benefit) is capitalized into inventory. As part of the adoption of ASU 2017-07 in the first quarter of 2018, we recognized a one-time favorable credit of $42 million within cost of products sold related to amounts that were previously capitalized into inventory. Included in this credit was $28 million related to prior service credits that were previously capitalized to inventory.

Pension Plans

Components of Net Pension Cost/(Benefit):

Net pension cost/(benefit) consisted of the following (in millions):

	For the Three Months Ended
	U.S. Plans								Non-U.S. Plans
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
Service cost	$	2			$	2			$	4			$	4
Interest cost	41				41				12				16
Expected return on plan assets	(58		)		(60		)		(34		)		(42		)
Amortization of prior service costs/(credits)	—				—				1				—
Amortization of unrecognized losses/(gains)	—				—				—				1
Settlements	—				(1		)		—				—
Special/contractual termination benefits	—				—				1				—
Other	—				—				2				—
Net pension cost/(benefit)	$	(15	)		$	(18	)		$	(14	)		$	(21	)

	For the Nine Months Ended
	U.S. Plans								Non-U.S. Plans
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
Service cost	$	6			$	7			$	12			$	14
Interest cost	122				118				38				52
Expected return on plan assets	(172		)		(187		)		(107		)		(134		)
Amortization of prior service costs/(credits)	—				—				1				—
Amortization of unrecognized losses/(gains)	—				—				—				2
Settlements	—				(3		)		—				58
Curtailments	—				—				—				(1		)
Special/contractual termination benefits	—				—				1				6
Other	—				—				3				—
Net pension cost/(benefit)	$	(44	)		$	(65	)		$	(52	)		$	(3	)

We present all non-service cost components of net pension cost/(benefit) within other expense/(income) on our condensed consolidated statements of income.

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Employer Contributions:

Related to our non-U.S. pension plans, we contributed $15 million during the nine months ended September 28, 2019 and plan to make further contributions of approximately $4 million during the remainder of 2019. Related to our U.S. pension plans, we did not contribute during the nine months ended September 28, 2019 and do not plan to make contributions during the remainder of 2019. 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 asset performance or interest rates, or other factors.

Postretirement Plans

Components of Net Postretirement Cost/(Benefit):

Net postretirement cost/(benefit) consisted of the following (in millions):

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
Service cost	$	1			$	2			$	4			$	6
Interest cost	12				11				35				33
Expected return on plan assets	(13		)		(12		)		(40		)		(37		)
Amortization of prior service costs/(credits)	(77		)		(77		)		(230		)		(233		)
Amortization of unrecognized losses/(gains)	(2		)		—				(6		)		—
Curtailments	(4		)		—				(4		)		—
Net postretirement cost/(benefit)	$	(83	)		$	(76	)		$	(241	)		$	(231	)

We present all non-service cost components of net postretirement cost/(benefit) within other expense/(income) on our condensed consolidated statements of income.

Employer Contributions:

During the nine months ended September 28, 2019, we contributed $8 million to our postretirement benefit plans. We plan to make further contributions of approximately $4 million to our postretirement benefit plans during the remainder of 2019. 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 postretirement plan asset performance or interest rates, or other factors.

Note 13. Financial Instruments

See our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 29, 2018 for additional information on our overall risk management strategies, our use of derivatives, and our related accounting policies.

Derivative Volume:

The notional values of our outstanding derivative instruments were (in millions):

	Notional Amount
	September 28, 2019				December 29, 2018
Commodity contracts	$	587			$	478
Foreign exchange contracts	2,602				3,263
Cross-currency contracts	10,146				10,146

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Fair Value of Derivative Instruments:

The fair values and the levels within the fair value hierarchy of derivative instruments recorded on the consolidated balance sheets were (in millions):

	September 28, 2019
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)								Significant Other Observable Inputs (Level 2)								Total Fair Value
	Assets				Liabilities				Assets				Liabilities				Assets				Liabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	—			$	—			$	23			$	12			$	23			$	12
Cross-currency contracts(b)	—				—				348				98				348				98
Derivatives not designated as hedging instruments:
Commodity contracts(c)	17				11				1				1				18				12
Foreign exchange contracts(a)	—				—				4				25				4				25
Cross-currency contracts(b)	—				—				593				144				593				144
Total fair value	$	17			$	11			$	969			$	280			$	986			$	291

(a)	At September 28, 2019, the fair value of our derivative assets was recorded in other current assets ($23 million) and other non-current assets ($4 million) the fair value of our derivative liabilities was recorded in other current liabilities ($35 million) and other non-current liabilities ($2 million).

(b)	At September 28, 2019, the fair value of our derivative assets was recorded in other current assets ($593 million) and other non-current assets ($348 million), and the fair value of our derivative liabilities was recorded in other current liabilities ($144 million) and other non-current liabilities ($98 million).

(c)	At September 28, 2019, the fair value of our derivative assets was recorded in other current assets ($17 million) and other non-current assets ($1 million) and the fair value of derivative liabilities was recorded in other current liabilities.

	December 29, 2018
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)								Significant Other Observable Inputs (Level 2)								Total Fair Value
	Assets				Liabilities				Assets				Liabilities				Assets				Liabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	—			$	—			$	51			$	26			$	51			$	26
Cross-currency contracts(b)	—				—				139				3				139				3
Derivatives not designated as hedging instruments:
Commodity contracts(a)	5				27				—				2				5				29
Foreign exchange contracts(a)	—				—				5				42				5				42
Cross-currency contracts(b)	—				—				557				119				557				119
Total fair value	$	5			$	27			$	752			$	192			$	757			$	219

(a)	The fair value of derivative assets was recorded in other current assets and the fair value of derivative liabilities was recorded in other current liabilities.

(b)	The fair value of derivative assets was recorded in other current assets ($557 million) and other non-current assets ($139 million), and the fair value of derivative liabilities was recorded within other current liabilities ($119 million) and other non-current liabilities ($3 million).

Our derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. We elect to record the gross assets and liabilities of our derivative financial instruments on the consolidated balance sheets. If the derivative financial instruments had been netted on the consolidated balance sheets, the asset and liability positions each would have been reduced by $221 million at September 28, 2019 and $124 million at December 29, 2018. No significant amounts of collateral were received or posted on our derivative assets and liabilities at September 28, 2019.

Level 1 financial assets and liabilities consist of commodity future and options contracts and are valued using quoted prices in active markets for identical assets and liabilities.

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Level 2 financial assets and liabilities consist of commodity swaps, foreign exchange forwards, options, and swaps, and cross-currency swaps. Commodity swaps are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount. Foreign exchange forwards and swaps are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Foreign exchange options are valued using an income approach based on a Black-Scholes-Merton formula. This formula uses present value techniques and reflects the time value and intrinsic value based on observable market rates. Cross-currency swaps are valued based on observable market spot and swap rates.

We did not have any Level 3 financial assets or liabilities in any period presented.

Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk.

Net Investment Hedging:

At September 28, 2019, we had the following items designated as net investment hedges:

•	Non-derivative foreign denominated debt with principal amounts of €2,550 million and £400 million;

•	Cross-currency contracts with notional amounts of £1.0 billion ($1.4 billion), C$2.1 billion ($1.6 billion), and ¥9.6 billion ($85 million); and

•	Foreign exchange contracts denominated in Chinese renminbi with an aggregate notional amount of $161 million.

We periodically use non-derivative instruments such as non-U.S. dollar financing transactions or non-U.S. dollar assets or liabilities, including intercompany loans, to hedge the exposure of changes in underlying foreign currency denominated subsidiary net assets, and they are designated as net investment hedges. At September 28, 2019, we had a euro intercompany loan with aggregate notional amount of $120 million.

The component of the gains and losses on our net investment in these designated foreign operations, driven by changes in foreign exchange rates, are economically offset by fair value movements on the effective portion of our cross-currency contracts and foreign exchange contracts and remeasurements of our foreign denominated debt.

Cash Flow Hedge Coverage:

At September 28, 2019, we had entered into foreign exchange contracts designated as cash flow hedges for periods not exceeding the next two years and into cross-currency contracts designated as cash flow hedges for periods not exceeding the next five years.

Deferred Hedging Gains and Losses on Cash Flow Hedges:

Based on our valuation at September 28, 2019 and assuming market rates remain constant through contract maturities, we expect transfers to net income/(loss) of unrealized gains on foreign currency cash flow hedges and cross-currency cash flow hedges during the next 12 months to be insignificant. Additionally, we expect transfers to net income/(loss) of unrealized losses on interest rate cash flow hedges during the next 12 months to be insignificant.

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Derivative Impact on the Statements of Comprehensive Income:

The following table presents the pre-tax amounts of derivative gains/(losses) deferred into accumulated other comprehensive income/(losses) and the income statement line item that will be affected when reclassified to net income/(loss) (in millions):

Accumulated Other Comprehensive Income/(Losses) Component		Gains/(Losses) Recognized in Other Comprehensive Income/(Losses) Related to Derivatives Designated as Hedging Instruments																Location of Gains/(Losses) When Reclassified to Net Income/(Loss)
		For the Three Months Ended								For the Nine Months Ended
		September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
Cash flow hedges:
Foreign exchange contracts		$	—			$	—			$	(1	)		$	—			Net sales
Foreign exchange contracts		8				(5		)		(19		)		27				Cost of products sold
Foreign exchange contracts (excluded component)		1				(2		)		1				(2		)		Cost of products sold
Foreign exchange contracts		—				(12		)		(22		)		19				Other expense/(income)
Foreign exchange contracts (excluded component)		—				2				—				2				Other expense/(income)
Cross-currency contracts		43				—				62				—				Other expense/(income)
Cross-currency contracts (excluded component)		7				—				21				—				Other expense/(income)
Net investment hedges:
Foreign exchange contracts		5				8				18				10				Other expense/(income)
Foreign exchange contracts (excluded component)		—				1				(1		)		1				Interest expense
Cross-currency contracts		66				(18		)		28				78				Other expense/(income)
Cross-currency contracts (excluded component)		8				6				22				6				Interest expense
Total gains/(losses) recognized in statements of comprehensive income		$	138			$	(20	)		$	109			$	141

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Derivative Impact on the Statements of Income:

The following tables present the pre-tax amounts of derivative gains/(losses) reclassified from accumulated other comprehensive income/(losses) to net income/(loss) and the affected income statement line items (in millions):

	For the Three Months Ended
	September 28, 2019												September 29, 2018
													(As Restated)
	Cost of products sold				Interest expense				Other expense/ (income)				Cost of products sold				Interest expense				Other expense/ (income)
Total amounts presented in the consolidated statements of income in which the following effects were recorded	$	4,129			$	398			$	(380	)		$	4,289			$	326			$	(71	)
Gains/(losses) related to derivatives designated as hedging instruments:
Cash flow hedges:
Foreign exchange contracts	$	5			$	—			$	—			$	1			$	—			$	(12	)
Foreign exchange contracts (excluded component)	1				—				—				(1		)		—				2
Interest rate contracts	—				(1		)		—				—				(1		)		—
Cross-currency contracts	—				—				38				—				—				—
Cross-currency contracts (excluded component)	—				—				7				—				—				—
Net investment hedges:
Cross-currency contracts (excluded component)	—				8				—				—				6				—
Gains/(losses) related to derivatives not designated as hedging instruments:
Commodity contracts	(13		)		—				—				(17		)		—				—
Foreign exchange contracts	—				—				(10		)		—				—				(12		)
Cross-currency contracts	—				—				3				—				—				2
Total gains/(losses) recognized in statements of income	$	(7	)		$	7			$	38			$	(17	)		$	5			$	(20	)

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	For the Nine Months Ended
	September 28, 2019												September 29, 2018
													(As Restated)
	Cost of products sold				Interest expense				Other expense/ (income)				Cost of products sold				Interest expense				Other expense/ (income)
Total amounts presented in the consolidated statements of income in which the following effects were recorded	$	12,401			$	1,035			$	(893	)		$	12,672			$	959			$	(181	)
Gains/(losses) related to derivatives designated as hedging instruments:
Cash flow hedges:
Foreign exchange contracts	$	22			$	—			$	(22	)		$	(8	)		$	—			$	19
Foreign exchange contracts (excluded component)	(1		)		—				—				(1		)		—				2
Interest rate contracts	—				(3		)		—				—				(3		)		—
Cross-currency contracts	—				—				44				—				—				—
Cross-currency contracts (excluded component)	—				—				21				—				—				—
Net investment hedges:
Foreign exchange contracts	—				—				(6		)		—				—				—
Foreign exchange contracts (excluded component)	—				(1		)		—				—				—				—
Cross-currency contracts (excluded component)	—				22				—				—				6				—
Gains/(losses) related to derivatives not designated as hedging instruments:
Commodity contracts	13				—				—				(32		)		—				—
Foreign exchange contracts	—				—				(16		)		—				—				(56		)
Cross-currency contracts	—				—				10				—				—				1
Total gains/(losses) recognized in statements of income	$	34			$	18			$	31			$	(41	)		$	3			$	(34	)

Non-Derivative Impact on Statements of Comprehensive Income:

Related to our non-derivative, foreign denominated debt instruments designated as net investment hedges, we recognized pre-tax gains of $128 million for the three months and $147 million for the nine months ended September 28, 2019 and $26 million for the three months and $118 million for the nine months ended September 29, 2018. These amounts were recognized in other comprehensive income/(loss).

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Note 14. Accumulated Other Comprehensive Income/(Losses)

The components of, and changes in, accumulated other comprehensive income/(losses), net of tax, were as follows (in millions):

	Foreign Currency Translation Adjustments				Net Postemployment Benefit Plan Adjustments				Net Cash Flow Hedge Adjustments				Total
Balance as of December 29, 2018	$	(2,476	)		$	492			$	41			$	(1,943	)
Foreign currency translation adjustments	(272		)		—				—				(272		)
Net deferred gains/(losses) on net investment hedges	147				—				—				147
Amounts excluded from the effectiveness assessment of net investment hedges	16				—				—				16
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(10		)		—				—				(10		)
Net deferred gains/(losses) on cash flow hedges	—				—				24				24
Amounts excluded from the effectiveness assessment of cash flow hedges	—				—				21				21
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	—				—				(55		)		(55		)
Net postemployment benefit gains/(losses) arising during the period	—				(14		)		—				(14		)
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	—				(176		)		—				(176		)
Cumulative effect of accounting standards adopted in the period(a)	—				114				22				136
Total other comprehensive income/(loss)	(119		)		(76		)		12				(183		)
Balance as of September 28, 2019	$	(2,595	)		$	416			$	53			$	(2,126	)

(a)	In the first quarter of 2019, we adopted ASU 2018-02 related to reclassifying tax effects stranded in accumulated other comprehensive income/(losses). See Note 4, New Accounting Standards, for additional information.

Reclassification of net postemployment benefit losses/(gains) included amounts reclassified to net income and amounts reclassified into inventory (consistent with our capitalization policy).

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The gross amount and related tax benefit/(expense) recorded in, and associated with, each component of other comprehensive income/(loss) were as follows (in millions):

	For the Three Months Ended
	September 28, 2019												September 29, 2018
													(As Restated)
	Before Tax Amount				Tax				Net of Tax Amount				Before Tax Amount				Tax				Net of Tax Amount
Foreign currency translation adjustments	$	(410	)		$	—			$	(410	)		$	(142	)		$	—			$	(142	)
Net deferred gains/(losses) on net investment hedges	199				(48		)		151				16				(3		)		13
Amounts excluded from the effectiveness assessment of net investment hedges	8				(2		)		6				7				(4		)		3
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(8		)		2				(6		)		(6		)		4				(2		)
Net deferred gains/(losses) on cash flow hedges	51				(1		)		50				(17		)		1				(16		)
Amounts excluded from the effectiveness assessment of cash flow hedges	8				—				8				—				—				—
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	(50		)		—				(50		)		11				1				12
Net actuarial gains/(losses) arising during the period	(13		)		4				(9		)		22				(5		)		17
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	(79		)		20				(59		)		(77		)		19				(58		)

	For the Nine Months Ended
	September 28, 2019												September 29, 2018
													(As Restated)
	Before Tax Amount				Tax				Net of Tax Amount				Before Tax Amount				Tax				Net of Tax Amount
Foreign currency translation adjustments	$	(272	)		$	—			$	(272	)		$	(796	)		$	—			$	(796	)
Net deferred gains/(losses) on net investment hedges	193				(46		)		147				206				(48		)		158
Amounts excluded from the effectiveness assessment of net investment hedges	21				(5		)		16				7				(4		)		3
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)	(15		)		5				(10		)		(6		)		4				(2		)
Net deferred gains/(losses) on cash flow hedges	20				4				24				46				(6		)		40
Amounts excluded from the effectiveness assessment of cash flow hedges	22				(1		)		21				—				—				—
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)	(61		)		6				(55		)		(9		)		(1		)		(10		)
Net actuarial gains/(losses) arising during the period	(14		)		—				(14		)		93				(23		)		70
Net postemployment benefit losses/(gains) reclassified to net income/(loss)	(235		)		59				(176		)		(177		)		44				(133		)

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The amounts reclassified from accumulated other comprehensive income/(losses) were as follows (in millions):

Accumulated Other Comprehensive Income/(Losses) Component		Reclassified from Accumulated Other Comprehensive Income/(Losses) to Net Income/(Loss)																Affected Line Item in the Statements of Income
		For the Three Months Ended								For the Nine Months Ended
		September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
Losses/(gains) on net investment hedges:
Foreign exchange contracts(a)		$	—			$	—			$	6			$	—			Other expense/(income)
Foreign exchange contracts(b)		—				—				1				—				Interest expense
Cross-currency contracts(b)		(8		)		(6		)		(22		)		(6		)		Interest expense
Losses/(gains) on cash flow hedges:
Foreign exchange contracts(c)		(6		)		—				(21		)		9				Cost of products sold
Foreign exchange contracts(c)		—				10				22				(21		)		Other expense/(income)
Cross-currency contracts(c)		(45		)		—				(65		)		—				Other expense/(income)
Interest rate contracts(d)		1				1				3				3				Interest expense
Losses/(gains) on hedges before income taxes		(58		)		5				(76		)		(15		)
Losses/(gains) on hedges, income taxes		2				5				11				3
Losses/(gains) on hedges		$	(56	)		$	10			$	(65	)		$	(12	)
Losses/(gains) on postemployment benefits:
Amortization of unrecognized losses/(gains)		$	(2	)		$	1			$	(6	)		$	2			(e)
Amortization of prior service costs/(credits)		(76		)		(77		)		(229		)		(233		)		(e)
Settlement and curtailment losses/(gains)		(1		)		(1		)		(1		)		54				(e)
Other losses/(gains) on postemployment benefits		—				—				1				—
Losses/(gains) on postemployment benefits before income taxes		(79		)		(77		)		(235		)		(177		)
Losses/(gains) on postemployment benefits, income taxes		20				19				59				44
Losses/(gains) on postemployment benefits		$	(59	)		$	(58	)		$	(176	)		$	(133	)

(a)	Represents the reclassification of hedge losses/(gains) resulting from the complete or substantially complete liquidation of our investment in the underlying foreign operations.

(b)	Represents recognition of the excluded component in net income/(loss).

(c)	Includes amortization of the excluded component and the effective portion of the related hedges.

(d)	Represents amortization of realized hedge losses that were deferred into accumulated other comprehensive income/(losses) through the maturity of the related long-term debt instruments.

(e)	These components are included in the computation of net periodic postemployment benefit costs. See Note 12, Postemployment Benefits, for additional information.

In this note we have excluded activity and balances related to noncontrolling interest due to its insignificance. This activity was primarily related to foreign currency translation adjustments.

Note 15. Venezuela - Foreign Currency and Inflation

We have a subsidiary in Venezuela that manufactures and sells a variety of products, primarily in the condiments and sauces and infant and nutrition categories. We apply highly inflationary accounting to the results of our Venezuelan subsidiary and include these results in our condensed consolidated financial statements. Under highly inflationary accounting, the functional currency of our Venezuelan subsidiary is the U.S. dollar (the reporting currency of Kraft Heinz), although the majority of its transactions are in Venezuelan bolivars. As a result, we must revalue the results of our Venezuelan subsidiary to U.S. dollars.

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As of September 28, 2019, companies and individuals are allowed to use an auction-based system at private and public banks to obtain foreign currency. This is the only foreign currency exchange mechanism legally available to us for converting Venezuelan bolivars to U.S. dollars. Published daily by the Banco Central de Venezuela, the exchange rate (“BCV Rate”) is calculated as the weighted average rate of participating banking institutions with active exchange operations. We believe the BCV Rate is the most appropriate legally available rate at which to translate the results of our Venezuelan subsidiary. Therefore, we revalue the income statement using the weighted average BCV Rates, and we revalue the bolivar-denominated monetary assets and liabilities at the period-end BCV Rate. The resulting revaluation gains and losses are recorded in current net income/(loss), rather than accumulated other comprehensive income/(losses). These gains and losses are classified within other expense/(income) as nonmonetary currency devaluation on our condensed consolidated statements of income.

The BCV Rate at September 28, 2019 was BsS21,028.08 per U.S. dollar compared to BsS638.18 at December 29, 2018. The weighted average rate was BsS14,919.84 for the three months and BsS7,460.73 for the nine months ended September 28, 2019 and BsS6.10 for the three months and BsS2.46 for the nine months ended September 29, 2018. Remeasurements of the bolivar-denominated monetary assets and liabilities and operating results of our Venezuelan subsidiary at BCV Rates resulted in nonmonetary currency devaluation losses of $4 million for the three months and $10 million for the nine months ended September 28, 2019 and $64 million for the three months and $131 million for the nine months ended September 29, 2018. These losses were recorded in other expense/(income) in the consolidated statements of income.

Our Venezuelan subsidiary obtains U.S. dollars through private and public bank auctions, royalty payments, and exports. These U.S. dollars are primarily used for purchases of tomato paste and spare parts for manufacturing, as well as a limited amount of other operating costs. As of September 28, 2019, our Venezuelan subsidiary had sufficient U.S. dollars to fund these operational needs in the foreseeable future. However, further deterioration of the economic environment or regulation changes could jeopardize our export business.

In addition to the bank auctions described above, there is an unofficial market for obtaining U.S. dollars with Venezuelan bolivars. The exact exchange rate is widely debated but is generally accepted to be substantially higher than the latest published BCV Rate. We have not transacted at any unofficial market rates and have no plans to transact at unofficial market rates in the foreseeable future.

Our results of operations in Venezuela reflect a controlled subsidiary. However, the continuing economic uncertainty, strict labor laws, and evolving government controls over imports, prices, currency exchange, and payments present a challenging operating environment. Increased restrictions imposed by the Venezuelan government along with further deterioration of the economic environment could impact our ability to control our Venezuelan operations and could lead us to deconsolidate our Venezuelan subsidiary in the future.

Note 16. Financing Arrangements

We have utilized accounts receivable securitization and factoring programs (the “Programs”) globally for our working capital needs and to provide efficient liquidity. During 2018, we had Programs in place in various countries across the globe. In the second quarter of 2018, we unwound our U.S. securitization program, which represented the majority of our Programs, using proceeds from the issuance of long-term debt in June 2018. As of December 29, 2018, we had unwound all of our Programs.

We operated the Programs such that we generally utilized the majority of the available aggregate cash consideration limits. We accounted for transfers of receivables pursuant to the Programs as a sale and removed them from our consolidated balance sheets. Under the Programs, we generally received cash consideration up to a certain limit and recorded a non-cash exchange for sold receivables for the remainder of the purchase price. We maintained a “beneficial interest,” or a right to collect cash, in the sold receivables. Cash receipts from the payments on sold receivables (which are cash receipts on the underlying trade receivables that have already been securitized in these Programs) are classified as investing activities and presented as cash receipts on sold receivables on our consolidated statements of cash flows.

As all of the Programs were unwound as of December 29, 2018, there were no related amounts on our condensed consolidated balance sheets at September 28, 2019 or December 29, 2018.

Our U.S. securitization program utilized a bankruptcy-remote special-purpose entity (“SPE”). The SPE was wholly-owned by a subsidiary of Kraft Heinz, and its sole business consisted of the purchase or acceptance, through capital contributions, of receivables and related assets from a Kraft Heinz subsidiary and the subsequent transfer of such receivables and related assets to a bank. Although the SPE is included in our consolidated financial statements, it was a separate legal entity with separate creditors who were entitled, upon its liquidation in the second quarter of 2018, to be satisfied out of the SPE's assets prior to any assets or value in the SPE becoming available to Kraft Heinz or its subsidiaries.

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We enter into various structured payable and product financing arrangements to facilitate supply from our vendors. Balance sheet classification is based on the nature of the agreements. For certain arrangements, we classify amounts outstanding within other current liabilities on our consolidated balance sheets. We had approximately $146 million on our consolidated balance sheets at September 28, 2019 and approximately $267 million at December 29, 2018 related to these arrangements.

Note 17. Commitments, Contingencies and Debt

Legal Proceedings

We are involved in legal proceedings, claims, and governmental inquiries, inspections, or investigations (“Legal Matters”) arising in the ordinary course of our business. While we cannot predict with certainty the results of Legal Matters in which we are currently involved or may in the future be involved, we do not expect that the ultimate costs to resolve the Legal Matters that are currently pending will have a material adverse effect on our financial condition, results of operations, or cash flows.

Class Actions and Stockholder Derivative Actions:

We and certain of our current and former officers and directors are currently defendants in three securities class action lawsuits filed in February, March, and April 2019. The first filed action, Hedick v. The Kraft Heinz Company, was filed on February 24, 2019 against the Company and three of its officers (the “Hedick Action”). The second filed action, Iron Workers District Council (Philadelphia and Vicinity) Retirement and Pension Plan v. The Kraft Heinz Company, was filed on March 15, 2019 against, among others, the Company and six of its current and former officers (the “Iron Workers Action”). The third filed action, Timber Hill LLC v. The Kraft Heinz Company, was filed on April 25, 2019 against, among others, the Company and seven of its current and former officers and directors (the “Timber Hill Action”). All of these securities class action lawsuits were filed in the United States District Court for the Northern District of Illinois. Another securities class action lawsuit, Walling v. Kraft Heinz Company, was filed on February 26, 2019 in the United States District Court for the Western District of Pennsylvania against, among others, the Company and six of its current and former officers (the “Walling Action”). Plaintiff in the Walling Action filed a notice of voluntary dismissal of his complaint, without prejudice, on April 26, 2019.

Plaintiffs in these lawsuits purport to represent a class of all individuals and entities who purchased, sold, or otherwise acquired or disposed of publicly traded securities of the Company (including in the Timber Hill Action, the purchase of call options on Company common stock, the sale of put options on Company common stock, and the purchase of futures on the Company’s common stock) from May 4, 2017 through February 21, 2019, in the case of the Hedick Action and the Walling Action, and from July 6, 2015 through February 21, 2019, in the case of the Iron Workers Action and the Timber Hill Action. The complaints assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, based on allegedly materially false or misleading statements and omissions in public statements, press releases, investor presentations, earnings calls, and SEC filings regarding the Company’s business, financial results, and internal controls. The plaintiffs seek damages in an unspecified amount, attorneys’ fees and other relief. On October 8, 2019, the court entered an order consolidating these lawsuits into one proceeding and appointing lead plaintiffs and lead plaintiffs’ counsel.

In addition, our Employee Benefits Administration Board and certain of our current and former officers and employees are currently defendants in one class action lawsuit, Osborne v. Employee Benefits Administration Board of Kraft Heinz, which was filed on March 19, 2019 in the United States District Court for the Western District of Pennsylvania. Plaintiffs in the lawsuit purport to represent a class of current and former employees who were participants in and beneficiaries of various retirement plans which were co-invested in a commingled investment fund known as the Kraft Foods Savings Plan Master Trust (the “Master Trust”) during the period of May 4, 2017 through February 21, 2019. An amended complaint was filed on June 28, 2019. The amended complaint alleges violations of Section 502 of the Employee Retirement Income Security Act (“ERISA”) based on alleged breaches of obligations as fiduciaries subject to ERISA by allowing the Master Trust to continue investing in our common stock, and alleges additional breaches of fiduciary duties by current and former officers for their purported failure to monitor Master Trust fiduciaries. The plaintiffs seek damages in an unspecified amount, attorneys’ fees, and other relief.

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Certain of our current and former officers and directors, among others, were also named as defendants in three stockholder derivative actions pending in the United States District Court for the Western District of Pennsylvania: Vladimir Gusinsky Revocable Trust v. Hees filed on May 8, 2019, Silverman v. Behring filed on May 15, 2019, and Green v. Behring filed on May 23, 2019, with the Company named as a nominal defendant. On June 14, 2019, plaintiffs in two other stockholder derivative actions, DeFabiis v. Hees and Kailas v. Hees, which were filed on April 16, 2019 and May 13, 2019, respectively, in the United States District Court for the Western District of Pennsylvania, filed notices of voluntary dismissal of their complaints, without prejudice. The three remaining lawsuits were consolidated, styled as In re Kraft Heinz Shareholder Derivative Litigation, and a consolidated amended complaint was filed on July 31, 2019. The consolidated amended complaint asserts claims under the common law and statutory law of Delaware for alleged breaches of fiduciary duties, unjust enrichment, and contribution for alleged violations of Sections 10(b) and 21D of the Exchange Act and Rule 10b-5 promulgated thereunder, based on allegedly materially false or misleading statements and omissions in public statements and SEC filings, and for implementing cost cutting measures that allegedly damaged the company. The plaintiffs seek damages in an unspecific amount, attorneys’ fees, and other relief.

The two plaintiffs who voluntarily dismissed their derivative lawsuits against certain of the Company’s current and former directors have filed new derivative actions in the Delaware Court of Chancery against 3G Capital, Inc. and several of its subsidiaries and affiliates (the “3G Entities”), with the Company named as a nominal defendant. The first action, DeFabiis v 3G Capital, Inc., was filed on June 14, 2019, and the second action, Kailas v. 3G Capital, Inc., was filed on October 9, 2019. The complaints allege that the defendant 3G Entities were controlling shareholders who owed fiduciary duties to the Company, and that they breached those duties by allegedly engaging in insider trading and misappropriating the Company’s material, non-public information. The complaints seek relief against the 3G Entities in the form of disgorgement of all profits obtained from alleged insider trading plus an award of attorneys’ fees and costs.

A third derivative lawsuit, Mary Nell Legg Family Trust v. 3G Capital Inc., was filed on October 29, 2019 in the Delaware Court of Chancery against certain of the Company’s current and former officers and directors, in addition to the 3G Entities, with the Company named as a nominal defendant. The complaint alleges that the defendant 3G Entities were controlling shareholders who owed fiduciary duties to the Company, and that they breached those duties by allegedly engaging in insider trading and misappropriating the Company’s material, non-public information. The complaint alleges the remaining defendants breached their fiduciary duties to the Company by purportedly making materially misleading statements and omissions regarding the Company’s financial performance and the impairment of its goodwill and intangible assets. The complaint seeks relief against the defendants in the form of damages, disgorgement of all profits the 3G Entities obtained from alleged insider trading, and an award of attorneys’ fees and costs.

We intend to vigorously defend against these lawsuits; however, we cannot reasonably estimate the potential range of loss, if any, due to the early stage of these proceedings.

Securities and Exchange Commission Investigation:

As previously disclosed on February 21, 2019, we received a subpoena in October 2018 from the SEC related to our procurement area, specifically the accounting policies, procedures, and internal controls related to our procurement function, including, but not limited to, agreements, side agreements, and changes or modifications to agreements with our suppliers. Following the receipt of this subpoena, we, together with external counsel and forensic accountants, and subsequently, under the oversight of the Audit Committee, conducted an internal investigation into our procurement area and related matters. The SEC has also issued additional subpoenas seeking information related to our financial reporting, internal controls, and disclosures, our assessment of goodwill and intangible asset impairments, our communications with certain shareholders, and other procurement-related information and materials in connection with its investigation. It is our understanding that the United States Attorney’s Office for the Northern District of Illinois also is reviewing this matter, working with the SEC and receiving materials from it. We cannot predict the eventual scope, duration or outcome of any potential SEC legal action or other action or whether it could have a material impact on our financial condition, results of operations, or cash flows. We have been responsive to the ongoing subpoenas and other document requests and will continue to cooperate fully with any governmental or regulatory inquiries or investigations.

Other Commitments and Contingencies

Redeemable Noncontrolling Interest:

We have a joint venture with a minority partner to manufacture, package, market, and distribute food products. We control operations and include this business in our consolidated results. Our minority partner has put options that, if it chooses to exercise, would require us to purchase portions of its equity interest at a future date. These put options will become exercisable beginning in 2025 (on the eighth anniversary of the product launch date) at a price to be determined at that time based upon an independent third party valuation. The minority partner’s put options are reflected on our consolidated balance sheets as a redeemable noncontrolling interest. We accrete the redeemable noncontrolling interest to its estimated redemption value over the term of the put options. At September 28, 2019, we estimate the redemption value to be approximately $38 million.

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Debt

Borrowing Arrangements:

We obtain funding through our U.S. and European commercial paper programs. We had no commercial paper outstanding at September 28, 2019 or at December 29, 2018. The maximum amount of commercial paper outstanding during the nine months ended September 28, 2019 was $200 million.

See Note 19, Debt, to our consolidated financial statements for the year ended December 29, 2018 in our Annual Report on Form 10-K for additional information on our borrowing arrangements.

Tender Offers:

On September 3, 2019, Kraft Heinz Foods Company (“KHFC”), our 100% owned subsidiary, commenced an offer to purchase for cash any and all of its outstanding 5.375% senior notes due February 2020 (the “First Tender Offer”). The First Tender Offer expired on September 9, 2019 with a settlement date of September 10, 2019. Additionally, on September 11, 2019, KHFC commenced an offer to purchase for cash up to the maximum combined aggregate purchase price of $2.5 billion, excluding accrued and unpaid interest, of its outstanding 3.500% senior notes due June 2022, 3.500% senior notes due July 2022, 4.000% senior notes due June 2023, and 4.875% second lien senior secured notes due February 2025 (the “Second Tender Offer”) (collectively with the First Tender Offer, the “Tender Offers”). The Second Tender Offer settled on September 26, 2019.

The aggregate principal amounts of senior notes and second lien senior secured notes before and after the Tender Offers and the amounts validly tendered pursuant to the Tender Offers were (in millions):

	Aggregate Principal Amount Outstanding Before Tender Offers				Amount Validly Tendered				Aggregate Principal Amount Outstanding After Tender Offers
5.375% senior notes due February 2020	$	900			$	495			$	405
3.500% senior notes due June 2022	2,000				881				1,119
3.500% senior notes due July 2022	1,000				554				446
4.000% senior notes due June 2023	1,600				762				838
4.875% second lien senior secured notes due February 2025	1,200				224				976

In connection with the Tender Offers, we recognized a loss on extinguishment of debt of $88 million. This loss primarily reflects the payment of early tender premiums and fees associated with the Tender Offers as well as the write-off of unamortized debt issuance costs, premiums, and discounts. We recognized this loss on extinguishment of debt within interest expense on the condensed consolidated statement of income. The cash payments related to the debt extinguishment are classified as cash outflows from financing activities on the condensed consolidated statement of cash flows. For the nine months ended September 28, 2019, debt prepayment and extinguishment costs per the condensed consolidated statement of cash flows were $91 million, which reflect the $88 million loss on extinguishment of debt adjusted for the non-cash write-off of unamortized premiums of $10 million, unamortized debt issuance costs of $5 million, and unamortized discounts of $2 million.

Debt Redemptions:

Concurrently with the commencement of the First Tender Offer, we issued a notice of redemption by Kraft Heinz Canada ULC, our 100% owned subsidiary, of all of Kraft Heinz Canada ULC’s outstanding 2.700% Canadian dollar senior notes due July 2020, of which 300 million Canadian dollar aggregate principal amount was outstanding, and a notice of partial redemption by KHFC of $800 million of KHFC’s 2.800% senior notes due July 2020, of which $1.5 billion aggregate principal amount was outstanding. The effective date of these redemptions was October 3, 2019.

Concurrently with the commencement of the Second Tender Offer, we issued a second notice of partial redemption providing for the redemption of $500 million aggregate principal amount of KHFC’s remaining 2.800% senior notes due July 2020. The effective date of this redemption was October 11, 2019.

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The aggregate principal amounts of senior notes before and after the debt redemptions in October 2019 were (in millions):

	Aggregate Principal Amount Outstanding Before Redemptions				Amount Redeemed				Aggregate Principal Amount Outstanding After Redemption
2.700% Canadian dollar senior notes due July 2020	C$	300			C$	300			C$	—
2.800% senior notes due July 2020	$	1,500			$	1,300			$	200

Our condensed consolidated financial statements as of September 28, 2019 do not reflect the extinguishment of these notes as they occurred in the fourth quarter of 2019.

Debt Issuances:

In September 2019, KHFC issued $1.0 billion aggregate principal amount of 3.750% senior notes due April 2030, $500 million aggregate principal amount of 4.625% senior notes due October 2039, and $1.5 billion aggregate principal amount of 4.875% senior notes due October 2049 (collectively, the “2019 Notes”). The 2019 Notes are fully and unconditionally guaranteed by Kraft Heinz as to payment of principal, premium, and interest on a senior unsecured basis. We used the proceeds from the 2019 Notes to fund the Second Tender Offer and to pay fees and expenses in connection therewith and to fund the partial redemption of $500 million aggregate principal amount of our 2.800% senior notes due July 2020, described above. A tabular summary of the 2019 Notes is included below.

		Aggregate Principal Amount
		(in millions)
3.750% senior notes due April 2030		$	1,000
4.625% senior notes due October 2039		500
4.875% senior notes due October 2049		1,500
Total senior notes issued		$	3,000

In June 2018, KHFC issued $300 million aggregate principal amount of 3.375% senior notes due June 2021, $1.6 billion aggregate principal amount of 4.000% senior notes due June 2023, and $1.1 billion aggregate principal amount of 4.625% senior notes due January 2029 (collectively, the “2018 Notes”). The 2018 Notes are fully and unconditionally guaranteed by Kraft Heinz as to payment of principal, premium, and interest on a senior unsecured basis. We used approximately $500 million of the proceeds from the 2018 Notes in connection with the wind-down of our U.S. securitization program in the second quarter of 2018. We also used proceeds from the 2018 Notes to refinance a portion of our commercial paper borrowings in the second quarter of 2018, to repay certain notes that matured in July and August 2018, and for other general corporate purposes.

Debt Issuance Costs:

Debt issuance costs related to the 2019 Notes were $25 million with $23 million paid as of September 28, 2019.

Debt issuance costs related to the 2018 Notes were $15 million.

Debt Repayments:

In August 2019, we repaid $350 million aggregate principal amount of senior notes that matured in the period.

In July and August 2018, we repaid $2.7 billion aggregate principal amount of senior notes that matured in the period. We funded these long-term debt repayments primarily with proceeds from the 2018 Notes issued in June 2018.

Fair Value of Debt:

At September 28, 2019, the aggregate fair value of our total debt was $31.8 billion as compared with a carrying value of $30.7 billion. At December 29, 2018, the aggregate fair value of our total debt was $30.1 billion as compared with a carrying value of $31.2 billion. Our short-term debt had carrying value that approximated its fair value at September 28, 2019 and December 29, 2018. We determined the fair value of our long-term debt using Level 2 inputs. Fair values are generally estimated based on quoted market prices for identical or similar instruments.

47

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Note 18. Leases

We have operating and finance leases, primarily for warehouse, production, and office facilities and equipment. Our lease contracts have remaining contractual lease terms of up to 14 years, some of which include options to extend the term by up to 10 years. We include renewal options that are reasonably certain to be exercised as part of the lease term. Additionally, some lease contracts include termination options. We do not expect to exercise the majority of our termination options and generally exclude such options when determining the term of our leases. See Note 3, Significant Accounting Policies, for our lease accounting policy.

The components of our lease costs were (in millions):

	For the Three Months Ended				For the Nine Months Ended
	September 28, 2019
Operating lease costs	$	49			$	145
Finance lease costs:
Amortization of right-of-use assets	6				19
Interest on lease liabilities	2				5
Short-term lease costs	3				9
Variable lease costs	325				976
Sublease income	(4		)		(11		)
Total lease costs	$	381			$	1,143

Our variable lease costs primarily consist of inventory related costs, such as materials, labor, and overhead components in our manufacturing and distribution arrangements that also contain a fixed component related to an embedded lease. These variable lease costs are determined based on usage or output or may vary for other reasons such as changes in materials prices, taxes, or insurance. Certain of our variable lease costs are based on fluctuating indices or rates. These leases are included in our ROU assets and lease liabilities based on the index or rate at the lease commencement date. The future variability in these indices and rates is unknown; therefore, it is excluded from our future minimum lease payments and is not a component of our ROU assets or lease liabilities.

Losses/(gains) on sale and leaseback transactions, net, were insignificant for the three months and nine months ended September 28, 2019.

Supplemental balance sheet information related to our leases was (in millions, except lease term and discount rate):

	September 28, 2019
	Operating Leases				Finance Leases
Right-of-use assets	$	557			$	183
Lease liabilities (current)	153				28
Lease liabilities (non-current)	467				157
Weighted average remaining lease term	6 years				9 years
Weighted average discount rate	4.1		%		3.4		%

Operating lease ROU assets are included in other non-current assets and finance lease ROU assets are included in property, plant and equipment, net, on our condensed consolidated balance sheets. The current portion of operating lease liabilities is included in other current liabilities, and the current portion of finance lease liabilities is included in the current portion of long-term debt on our condensed consolidated balance sheets. The non-current portion of operating lease liabilities is included in other non-current liabilities, and the non-current portion of finance lease liabilities is included in long-term debt on our condensed consolidated balance sheets.

Cash flows arising from lease transactions were (in millions):

48

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	For the Three Months Ended				For the Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash inflows/(outflows) from operating leases	$	(48	)		$	(146	)
Operating cash inflows/(outflows) from finance leases	(2		)		(5		)
Financing cash inflows/(outflows) from finance leases	(7		)		(20		)
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	4				31
Finance leases	8				8

Future minimum lease payments for leases in effect at September 28, 2019 were (in millions):

	Operating Leases				Finance Leases
2019 (excluding the nine months ended September 28, 2019)	$	49			$	9
2020	165				32
2021	128				70
2022	93				21
2023	66				9
Thereafter	206				85
Total future undiscounted lease payments	707				226
Less imputed interest	(87		)		(41		)
Total lease liability	$	620			$	185

Minimum rental commitments under non-cancelable operating leases in effect at December 29, 2018 under the previous lease standard, ASC 840, were (in millions):

2019	$	185
2020	137
2021	105
2022	70
2023	49
Thereafter	148
Total	$	694

At September 28, 2019, our operating and finance leases that had not yet commenced were insignificant.

49

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Note 19. Earnings Per Share

Our earnings per common share (“EPS”) were:

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
	(in millions, except per share data)
Basic Earnings Per Common Share:
Net income/(loss) attributable to common shareholders	$	899			$	619			$	1,753			$	2,376
Weighted average shares of common stock outstanding	1,221				1,219				1,220				1,219
Net earnings/(loss)	$	0.74			$	0.51			$	1.44			$	1.95
Diluted Earnings Per Common Share:
Net income/(loss) attributable to common shareholders	$	899			$	619			$	1,753			$	2,376
Weighted average shares of common stock outstanding	1,221				1,219				1,220				1,219
Effect of dilutive equity awards	2				7				3				8
Weighted average shares of common stock outstanding, including dilutive effect	1,223				1,226				1,223				1,227
Net earnings/(loss)	$	0.74			$	0.50			$	1.43			$	1.94

We use the treasury stock method to calculate the dilutive effect of outstanding equity awards in the denominator for diluted EPS. Anti-dilutive shares were 13 million for the three months and 11 million for the nine months ended September 28, 2019 and 6 million for the three months and 5 million for the nine months ended September 29, 2018.

Note 20. Segment Reporting

Management evaluates segment performance based on several factors, including net sales and Segment Adjusted EBITDA. 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 integration and restructuring expenses); in addition to these adjustments, we exclude, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized; once realized, the gains and losses are recorded in the applicable segment’s operating results), impairment losses, and equity award compensation expense (excluding integration and restructuring expenses). 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 uses Segment Adjusted EBITDA to evaluate segment performance and allocate resources.

Management does not use assets by segment to evaluate performance or allocate resources. Therefore, we do not disclose assets by segment.

Net sales by segment were (in millions):

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
Net sales:
United States	$	4,361			$	4,431			$	13,074			$	13,312
Canada	415				525				1,425				1,573
EMEA	612				634				1,862				2,026
Rest of World	688				793				2,080				2,466
Total net sales	$	6,076			$	6,383			$	18,441			$	19,377

50

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Segment Adjusted EBITDA was (in millions):

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
Segment Adjusted EBITDA:
United States	$	1,155			$	1,176			$	3,539			$	3,969
Canada	107				144				371				451
EMEA	165				165				479				553
Rest of World	100				148				303				505
General corporate expenses	(58		)		(39		)		(192		)		(128		)
Depreciation and amortization (excluding integration and restructuring expenses)	(243		)		(245		)		(730		)		(679		)
Integration and restructuring expenses	(15		)		(32		)		(56		)		(215		)
Deal costs	(6		)		(3		)		(19		)		(19		)
Unrealized gains/(losses) on commodity hedges	(9		)		(6		)		30				(11		)
Impairment losses	(5		)		(217		)		(1,223		)		(451		)
Equity award compensation expense (excluding integration and restructuring expenses)	(11		)		(17		)		(26		)		(44		)
Operating income/(loss)	1,180				1,074				2,476				3,931
Interest expense	398				326				1,035				959
Other expense/(income)	(380		)		(71		)		(893		)		(181		)
Income/(loss) before income taxes	$	1,162			$	819			$	2,334			$	3,153

In the fourth quarter of 2018, we reorganized the products within our product categories to reflect how we manage our business. We have reflected this change for all historical periods presented. Net sales by product category were (in millions):

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
Condiments and sauces	$	1,611			$	1,629			$	4,850			$	5,113
Cheese and dairy	1,104				1,236				3,552				3,727
Ambient foods	623				612				1,782				1,866
Frozen and chilled foods	643				685				1,847				1,900
Meats and seafood	612				645				1,852				1,893
Refreshment beverages	397				387				1,190				1,197
Coffee	296				342				932				1,041
Infant and nutrition	120				172				387				596
Desserts, toppings and baking	246				244				693				714
Nuts and salted snacks	233				229				687				650
Other	191				202				669				680
Total net sales	$	6,076			$	6,383			$	18,441			$	19,377

51

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Note 21. Supplemental Guarantor Information

Kraft Heinz fully and unconditionally guarantees the notes issued by our 100% owned operating subsidiary, Kraft Heinz Foods Company. See Note 19, Debt, to our consolidated financial statements for the year ended December 29, 2018 in our Annual Report on Form 10-K for additional descriptions of these guarantees. None of our other subsidiaries guarantee such notes.

Set forth below are the condensed consolidating financial statements presenting the results of operations, financial position, and cash flows of Kraft Heinz (as parent guarantor), Kraft Heinz Foods Company (as subsidiary issuer of the notes), and the non-guarantor subsidiaries on a combined basis and eliminations necessary to arrive at the total reported information on a consolidated basis. This condensed consolidating financial information has been prepared and presented pursuant to the SEC Regulation S-X Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered.” This information is not intended to present the financial position, results of operations, and cash flows of the individual companies or groups of companies in accordance with U.S. GAAP. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among the parent guarantor, subsidiary issuer, and the non-guarantor subsidiaries.

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The Kraft Heinz Company

Condensed Consolidating Statements of Income

For the Three Months Ended September 28, 2019

(in millions)

(Unaudited)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	4,118			$	2,070			$	(112	)		$	6,076
Cost of products sold	—				2,742				1,499				(112		)		4,129
Gross profit	—				1,376				571				—				1,947
Selling, general and administrative expenses, excluding impairment losses	—				195				567				—				762
Goodwill impairment losses	—				—				—				—				—
Intangible asset impairment losses	—				—				5				—				5
Selling, general and administrative expenses	—				195				572				—				767
Intercompany service fees and other recharges	—				719				(719		)		—				—
Operating income/(loss)	—				462				718				—				1,180
Interest expense	—				384				14				—				398
Other expense/(income)	—				12				(392		)		—				(380		)
Income/(loss) before income taxes	—				66				1,096				—				1,162
Provision for/(benefit from) income taxes	—				31				233				—				264
Equity in earnings/(losses) of subsidiaries	899				864				—				(1,763		)		—
Net income/(loss)	899				899				863				(1,763		)		898
Net income/(loss) attributable to noncontrolling interest	—				—				(1		)		—				(1		)
Net income/(loss) excluding noncontrolling interest	$	899			$	899			$	864			$	(1,763	)		$	899
Comprehensive income/(loss) excluding noncontrolling interest	$	580			$	580			$	(258	)		$	(322	)		$	580

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The Kraft Heinz Company

Condensed Consolidating Statements of Income

For the Three Months Ended September 29, 2018

(in millions)

(Unaudited)

	As Restated
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	4,226			$	2,295			$	(138	)		$	6,383
Cost of products sold	—				2,819				1,608				(138		)		4,289
Gross profit	—				1,407				687				—				2,094
Selling, general and administrative expenses, excluding impairment losses	—				205				598				—				803
Goodwill impairment losses	—				—				—				—				—
Intangible asset impairment losses	—				—				217				—				217
Selling, general and administrative expenses	—				205				815				—				1,020
Intercompany service fees and other recharges	—				975				(975		)		—				—
Operating income/(loss)	—				227				847				—				1,074
Interest expense	—				310				16				—				326
Other expense/(income)	—				(60		)		(11		)		—				(71		)
Income/(loss) before income taxes	—				(23		)		842				—				819
Provision for/(benefit from) income taxes	—				(41		)		242				—				201
Equity in earnings/(losses) of subsidiaries	619				600				—				(1,219		)		—
Net income/(loss)	619				618				600				(1,219		)		618
Net income/(loss) attributable to noncontrolling interest	—				—				(1		)		—				(1		)
Net income/(loss) excluding noncontrolling interest	$	619			$	618			$	601			$	(1,219	)		$	619
Comprehensive income/(loss) excluding noncontrolling interest	$	446			$	446			$	441			$	(887	)		$	446

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The Kraft Heinz Company

Condensed Consolidating Statements of Income

For the Three Months Ended September 29, 2018

(in millions)

(Unaudited)

	As Previously Reported
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	4,226			$	2,289			$	(137	)		$	6,378
Cost of products sold	—				2,800				1,608				(137		)		4,271
Gross profit	—				1,426				681				—				2,107
Selling, general and administrative expenses, excluding impairment losses	—				205				598				—				803
Goodwill impairment losses	—				—				—				—				—
Intangible asset impairment losses	—				—				234				—				234
Selling, general and administrative expenses	—				205				832				—				1,037
Intercompany service fees and other recharges	—				975				(975		)		—				—
Operating income/(loss)	—				246				824				—				1,070
Interest expense	—				311				16				—				327
Other expense/(income)	—				(59		)		(12		)		—				(71		)
Income/(loss) before income taxes	—				(6		)		820				—				814
Provision for/(benefit from) income taxes	—				(52		)		238				—				186
Equity in earnings/(losses) of subsidiaries	630				584				—				(1,214		)		—
Net income/(loss)	630				630				582				(1,214		)		628
Net income/(loss) attributable to noncontrolling interest	—				—				(2		)		—				(2		)
Net income/(loss) excluding noncontrolling interest	$	630			$	630			$	584			$	(1,214	)		$	630
																	—
Comprehensive income/(loss) excluding noncontrolling interest	$	455			$	455			$	423			$	(878	)		$	455

55

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The Kraft Heinz Company

Condensed Consolidating Statements of Income

For the Nine Months Ended September 28, 2019

(in millions)

(Unaudited)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	12,398			$	6,384			$	(341	)		$	18,441
Cost of products sold	—				8,130				4,612				(341		)		12,401
Gross profit	—				4,268				1,772				—				6,040
Selling, general and administrative expenses, excluding impairment losses	—				609				1,732				—				2,341
Goodwill impairment losses	—				—				744				—				744
Intangible asset impairment losses	—				—				479				—				479
Selling, general and administrative expenses	—				609				2,955				—				3,564
Intercompany service fees and other recharges	—				2,459				(2,459		)		—				—
Operating income/(loss)	—				1,200				1,276				—				2,476
Interest expense	—				982				53				—				1,035
Other expense/(income)	—				(53		)		(840		)		—				(893		)
Income/(loss) before income taxes	—				271				2,063				—				2,334
Provision for/(benefit from) income taxes	—				102				482				—				584
Equity in earnings/(losses) of subsidiaries	1,753				1,584				—				(3,337		)		—
Net income/(loss)	1,753				1,753				1,581				(3,337		)		1,750
Net income/(loss) attributable to noncontrolling interest	—				—				(3		)		—				(3		)
Net income/(loss) excluding noncontrolling interest	$	1,753			$	1,753			$	1,584			$	(3,337	)		$	1,753
Comprehensive income/(loss) excluding noncontrolling interest	$	1,434			$	1,434			$	1,210			$	(2,644	)		$	1,434

56

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The Kraft Heinz Company

Condensed Consolidating Statements of Income

For the Nine Months Ended September 29, 2018

(in millions)

(Unaudited)

	As Restated
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	12,693			$	7,091			$	(407	)		$	19,377
Cost of products sold	—				8,157				4,922				(407		)		12,672
Gross profit	—				4,536				2,169				—				6,705
Selling, general and administrative expenses, excluding impairment losses	—				589				1,734				—				2,323
Goodwill impairment losses	—				—				133				—				133
Intangible asset impairment losses	—				—				318				—				318
Selling, general and administrative expenses	—				589				2,185				—				2,774
Intercompany service fees and other recharges	—				3,253				(3,253		)		—				—
Operating income/(loss)	—				694				3,237				—				3,931
Interest expense	—				908				51				—				959
Other expense/(income)	—				(236		)		55				—				(181		)
Income/(loss) before income taxes	—				22				3,131				—				3,153
Provision for/(benefit from) income taxes	—				(23		)		802				—				779
Equity in earnings/(losses) of subsidiaries	2,376				2,331				—				(4,707		)		—
Net income/(loss)	2,376				2,376				2,329				(4,707		)		2,374
Net income/(loss) attributable to noncontrolling interest	—				—				(2		)		—				(2		)
Net income/(loss) excluding noncontrolling interest	$	2,376			$	2,376			$	2,331			$	(4,707	)		$	2,376
Comprehensive income/(loss) excluding noncontrolling interest	$	1,706			$	1,706			$	1,630			$	(3,336	)		$	1,706

57

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The Kraft Heinz Company

Condensed Consolidating Statements of Income

For the Nine Months Ended September 29, 2018

(in millions)

(Unaudited)

	As Previously Reported
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	12,693			$	7,082			$	(407	)		$	19,368
Cost of products sold	—				8,130				4,928				(407		)		12,651
Gross profit	—				4,563				2,154				—				6,717
Selling, general and administrative expenses, excluding impairment losses	—				589				1,749				—				2,338
Goodwill impairment losses	—				—				164				—				164
Intangible asset impairment losses	—				—				335				—				335
Selling, general and administrative expenses	—				589				2,248				—				2,837
Intercompany service fees and other recharges	—				3,253				(3,253		)		—				—
Operating income/(loss)	—				721				3,159				—				3,880
Interest expense	—				911				51				—				962
Other expense/(income)	—				(234		)		38				—				(196		)
Income/(loss) before income taxes	—				44				3,070				—				3,114
Provision for/(benefit from) income taxes	—				(36		)		774				—				738
Equity in earnings/(losses) of subsidiaries	2,379				2,299				—				(4,678		)		—
Net income/(loss)	2,379				2,379				2,296				(4,678		)		2,376
Net income/(loss) attributable to noncontrolling interest	—				—				(3		)		—				(3		)
Net income/(loss) excluding noncontrolling interest	$	2,379			$	2,379			$	2,299			$	(4,678	)		$	2,379
																	—
Comprehensive income/(loss) excluding noncontrolling interest	$	1,701			$	1,701			$	1,588			$	(3,289	)		$	1,701

58

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The Kraft Heinz Company

Condensed Consolidating Balance Sheets

As of September 28, 2019

(in millions)

(Unaudited)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Cash and cash equivalents	$	—			$	834			$	1,481			$	—			$	2,315
Trade receivables, net	—				867				1,092				—				1,959
Receivables due from affiliates	—				1,437				854				(2,291		)		—
Dividends due from affiliates	—				—				—				—				—
Income taxes receivable	—				38				81				—				119
Inventories	—				2,179				979				—				3,158
Short-term lending due from affiliates	—				1,357				4,242				(5,599		)		—
Prepaid expenses	—				216				199				—				415
Other current assets	—				669				455				—				1,124
Assets held for sale	—				23				12				—				35
Total current assets	—				7,620				9,395				(7,890		)		9,125
Property, plant and equipment, net	—				4,392				2,534				—				6,926
Goodwill	—				11,066				24,760				—				35,826
Investments in subsidiaries	50,788				66,986				—				(117,774		)		—
Intangible assets, net	—				2,895				45,819				—				48,714
Long-term lending due from affiliates	—				207				2,000				(2,207		)		—
Other non-current assets	—				825				1,406				—				2,231
TOTAL ASSETS	$	50,788			$	93,991			$	85,914			$	(127,871	)		$	102,822
LIABILITIES AND EQUITY
Commercial paper and other short-term debt	$	—			$	14			$	1			$	—			$	15
Current portion of long-term debt	—				1,928				617				—				2,545
Short-term lending due to affiliates	—				4,242				1,357				(5,599		)		—
Trade payables	—				2,602				1,554				—				4,156
Payables due to affiliates	—				854				1,437				(2,291		)		—
Accrued marketing	—				121				337				—				458
Interest payable	—				267				11				—				278
Dividends due to affiliates	—				—				—				—				—
Other current liabilities	—				1,019				639				—				1,658
Liabilities held for sale	—				—				2				—				2
Total current liabilities	—				11,047				5,955				(7,890		)		9,112
Long-term debt	—				27,822				290				—				28,112
Long-term borrowings due to affiliates	—				2,000				207				(2,207		)		—
Deferred income taxes	—				1,415				10,595				—				12,010
Accrued postemployment costs	—				82				233				—				315
Other non-current liabilities	—				837				630				—				1,467
TOTAL LIABILITIES	—				43,203				17,910				(10,097		)		51,016
Redeemable noncontrolling interest	—				—				2				—				2
Total shareholders’ equity	50,788				50,788				67,871				(117,774		)		51,673
Noncontrolling interest	—				—				131				—				131
TOTAL EQUITY	50,788				50,788				68,002				(117,774		)		51,804
TOTAL LIABILITIES AND EQUITY	$	50,788			$	93,991			$	85,914			$	(127,871	)		$	102,822

59

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The Kraft Heinz Company

Condensed Consolidating Balance Sheets

As of December 29, 2018

(in millions)

(Unaudited)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
ASSETS
Cash and cash equivalents	$	—			$	202			$	928			$	—			$	1,130
Trade receivables, net	—				933				1,196				—				2,129
Receivables due from affiliates	—				870				341				(1,211		)		—
Income taxes receivable	—				701				9				(558		)		152
Inventories	—				1,783				884				—				2,667
Short-term lending due from affiliates	—				1,787				3,753				(5,540		)		—
Prepaid expenses	—				198				202				—				400
Other current assets	—				776				445				—				1,221
Assets held for sale	—				75				1,301				—				1,376
Total current assets	—				7,325				9,059				(7,309		)		9,075
Property, plant and equipment, net	—				4,524				2,554				—				7,078
Goodwill	—				11,067				25,436				—				36,503
Investments in subsidiaries	51,657				67,867				—				(119,524		)		—
Intangible assets, net	—				3,010				46,458				—				49,468
Long-term lending due from affiliates	—				—				2,000				(2,000		)		—
Other non-current assets	—				316				1,021				—				1,337
TOTAL ASSETS	$	51,657			$	94,109			$	86,528			$	(128,833	)		$	103,461
LIABILITIES AND EQUITY
Commercial paper and other short-term debt	$	—			$	—			$	21			$	—			$	21
Current portion of long-term debt	—				363				14				—				377
Short-term lending due to affiliates	—				3,753				1,787				(5,540		)		—
Trade payables	—				2,563				1,590				—				4,153
Payables due to affiliates	—				341				870				(1,211		)		—
Accrued marketing	—				282				440				—				722
Interest payable	—				394				14				—				408
Other current liabilities	—				888				1,437				(558		)		1,767
Liabilities held for sale	—				—				55				—				55
Total current liabilities	—				8,584				6,228				(7,309		)		7,503
Long-term debt	—				29,872				898				—				30,770
Long-term borrowings due to affiliates	—				2,000				12				(2,012		)		—
Deferred income taxes	—				1,314				10,888				—				12,202
Accrued postemployment costs	—				89				217				—				306
Other non-current liabilities	—				593				309				—				902
TOTAL LIABILITIES	—				42,452				18,552				(9,321		)		51,683
Redeemable noncontrolling interest	—				—				3				—				3
Total shareholders’ equity	51,657				51,657				67,855				(119,512		)		51,657
Noncontrolling interest	—				—				118				—				118
TOTAL EQUITY	51,657				51,657				67,973				(119,512		)		51,775
TOTAL LIABILITIES AND EQUITY	$	51,657			$	94,109			$	86,528			$	(128,833	)		$	103,461

60

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The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

For the Nine Months Ended September 28, 2019

(in millions)

(Unaudited)

	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by/(used for) operating activities	$	1,464			$	1,715			$	275			$	(1,464	)		$	1,990
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—				(293		)		(288		)		—				(581		)
Payments to acquire business, net of cash acquired	—				(201		)		2				—				(199		)
Net proceeds from/(payments on) intercompany lending activities	—				1,620				373				(1,993		)		—
Additional investments in subsidiaries	(19		)		(36		)		—				55				—
Return of capital	—				—				—				—				—
Proceeds from sale of business, net of cash disposed	—				—				1,875				—				1,875
Other investing activities, net	—				60				(44		)		—				16
Net cash provided by/(used for) investing activities	(19		)		1,150				1,918				(1,938		)		1,111
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	—				(3,267		)		(5		)		—				(3,272		)
Proceeds from issuance of long-term debt	—				2,968				(1		)		—				2,967
Debt prepayment and extinguishment costs	—				(91		)		—				—				(91		)
Proceeds from issuance of commercial paper	—				377				—				—				377
Repayments of commercial paper	—				(377		)		—				—				(377		)
Net proceeds from/(payments on) intercompany borrowing activities	—				(373		)		(1,620		)		1,993				—
Dividends paid	(1,464		)		(1,464		)		—				1,464				(1,464		)
Other intercompany capital stock transactions	—				19				36				(55		)		—
Other financing activities, net	19				(23		)		(17		)		—				(21		)
Net cash provided by/(used for) financing activities	(1,445		)		(2,231		)		(1,607		)		3,402				(1,881		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	—				(2		)		(38		)		—				(40		)
Cash, cash equivalents, and restricted cash:
Net increase/(decrease)	—				632				548				—				1,180
Balance at beginning of period	—				202				934				—				1,136
Balance at end of period	$	—			$	834			$	1,482			$	—			$	2,316

61

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The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

For the Nine Months Ended September 29, 2018

(in millions)

(Unaudited)

	As Restated
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by/(used for) operating activities	$	2,421			$	825			$	63			$	(2,431	)		$	878
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipts on sold receivables	—				—				1,296				—				1,296
Capital expenditures	—				(251		)		(343		)		—				(594		)
Payments to acquire business, net of cash acquired	—				(245		)		(3		)		—				(248		)
Net proceeds from/(payments on) intercompany lending activities	—				1,074				185				(1,259		)		—
Additional investments in subsidiaries	—				(41		)		—				41				—
Return of capital	7				—				—				(7		)		—
Proceeds from sale of business, net of cash disposed	—				—				18				—				18
Other investing activities, net	—				14				(1		)		—				13
Net cash provided by/(used for) investing activities	7				551				1,152				(1,225		)		485
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	—				(2,546		)		(160		)		—				(2,706		)
Proceeds from issuance of long-term debt	—				2,990				—				—				2,990
Proceeds from issuance of commercial paper	—				2,485				—				—				2,485
Repayments of commercial paper	—				(1,950		)		—				—				(1,950		)
Net proceeds from/(payments on) intercompany borrowing activities	—				(185		)		(1,074		)		1,259				—
Dividends paid	(2,421		)		(2,421		)		(10		)		2,431				(2,421		)
Other intercompany capital stock transactions	—				(7		)		41				(34		)		—
Other financing activities, net	(7		)		(17		)		(11		)		—				(35		)
Net cash provided by/(used for) financing activities	(2,428		)		(1,651		)		(1,214		)		3,656				(1,637		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	—				—				(128		)		—				(128		)
Cash, cash equivalents, and restricted cash:
Net increase/(decrease)	—				(275		)		(127		)		—				(402		)
Balance at beginning of period	—				644				1,125				—				1,769
Balance at end of period	$	—			$	369			$	998			$	—			$	1,367

62

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The Kraft Heinz Company

Condensed Consolidating Statements of Cash Flows

For the Nine Months Ended September 29, 2018

(in millions)

(Unaudited)

	As Previously Reported
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by/(used for) operating activities	$	2,421			$	844			$	65			$	(2,431	)		$	899
CASH FLOWS FROM INVESTING ACTIVITIES
Cash receipts on sold receivables	—				—				1,296				—				1,296
Capital expenditures	—				(251		)		(343		)		—				(594		)
Payments to acquire business, net of cash acquired	—				(244		)		(4		)		—				(248		)
Net proceeds from/(payments on) intercompany lending activities	—				1,074				185				(1,259		)		—
Additional investments in subsidiaries	—				(41		)		—				41				—
Return of capital	7				—				—				(7		)		—
Proceeds from sale of business, net of cash disposed	—				—				18				—				18
Other investing activities, net	—				13				—				—				13
Net cash provided by/(used for) investing activities	7				551				1,152				(1,225		)		485
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt	—				(2,565		)		(162		)		—				(2,727		)
Proceeds from issuance of long-term debt	—				2,990				—				—				2,990
Proceeds from issuance of commercial paper	—				2,485				—				—				2,485
Repayments of commercial paper	—				(1,950		)		—				—				(1,950		)
Net proceeds from/(payments on) intercompany borrowing activities	—				(185		)		(1,074		)		1,259				—
Dividends paid	(2,421		)		(2,421		)		(10		)		2,431				(2,421		)
Other intercompany capital stock transactions	—				(7		)		41				(34		)		—
Other financing activities, net	(7		)		(16		)		(12		)		—				(35		)
Net cash provided by/(used for) financing activities	(2,428		)		(1,669		)		(1,217		)		3,656				(1,658		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	—				—				(128		)		—				(128		)
Cash, cash equivalents, and restricted cash:
Net increase/(decrease)	—				(274		)		(128		)		—				(402		)
Balance at beginning of period	—				644				1,125				—				1,769
Balance at end of period	$	—			$	370			$	997			$	—			$	1,367

63

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The following tables provide a reconciliation of cash and cash equivalents, as reported on our condensed consolidating balance sheets, to cash, cash equivalents, and restricted cash, as reported on our condensed consolidating statements of cash flows (in millions):

	September 28, 2019
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Cash and cash equivalents	$	—			$	834			$	1,481			$	—			$	2,315
Restricted cash included in other current assets	—				—				1				—				1
Restricted cash included in other non-current assets	—				—				—				—				—
Cash, cash equivalents, and restricted cash	$	—			$	834			$	1,482			$	—			$	2,316

	December 29, 2018
	Parent Guarantor				Subsidiary Issuer				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Cash and cash equivalents	$	—			$	202			$	928			$	—			$	1,130
Restricted cash included in other current assets	—				—				1				—				1
Restricted cash included in other non-current assets	—				—				5				—				5
Cash, cash equivalents, and restricted cash	$	—			$	202			$	934			$	—			$	1,136

64

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

Overview

Restatement of Previously Issued Condensed Consolidated Financial Statements:

We have restated certain previously reported financial information for the three and nine months ended September 29, 2018 in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Consolidated Results of Operations, Results of Operations by Segment, and Non-GAAP Financial Measures sections.

See Note 2, Restatement of Previously Issued Condensed Consolidated Financial Statements, in Item 1, Financial Statements, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our condensed consolidated financial statements.

Description of the Company:

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

We manage and report our operating results through four segments. We have three reportable segments defined by geographic region: United States, Canada, and EMEA. Our remaining businesses are combined and disclosed as “Rest of World.” Rest of World comprises two operating segments: Latin America and APAC.

During the third quarter of 2019, certain organizational changes were announced that will likely impact our internal reporting in 2020 and, as a result, will require us to evaluate the potential impact on our reportable segments. We continue to assess the potential impact of these announced organizational changes and will consider the impact of any further changes that may be announced. We expect that any change to our reportable segments would be effective in the first quarter of 2020.

See Note 20, Segment Reporting, in Item 1, Financial Statements, for our financial information by segment.

Items Affecting Comparability of Financial Results

Impairment Losses:

Our results of operations reflect goodwill impairment losses of $744 million and intangible asset impairment losses of $479 million for the nine months ended September 28, 2019 compared to goodwill impairment losses of $133 million and intangible asset impairment losses of $318 million for the nine months ended September 29, 2018. See Note 9, Goodwill and Intangible Assets, in Item 1, Financial Statements, for additional information on these impairment losses.

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 from our consolidated financial statements see Non-GAAP Financial Measures.

Consolidated Results of Operations

Summary of Results:

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions, except per share data)											(in millions, except per share data)
Net sales	$	6,076			$	6,383			(4.8	)%		$	18,441			$	19,377			(4.8	)%
Operating income/(loss)	1,180				1,074				9.8	%		2,476				3,931				(37.0	)%
Net income/(loss) attributable to common shareholders	899				619				45.4	%		1,753				2,376				(26.2	)%
Diluted EPS	0.74				0.50				48.0	%		1.43				1.94				(26.3	)%

65

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Net Sales:

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions, except per share data)											(in millions, except per share data)
Net sales	$	6,076			$	6,383			(4.8	)%		$	18,441			$	19,377			(4.8	)%
Organic Net Sales(a)	6,116				6,185				(1.1	)%		18,409				18,693				(1.5	)%

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

Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018:

Net sales decreased 4.8% to $6.1 billion for the three months ended September 28, 2019 compared to $6.4 billion for the three months ended September 29, 2018 primarily due to the unfavorable impacts of acquisitions and divestitures (2.0 pp) and foreign currency (1.7 pp). Organic Net Sales decreased 1.1% to $6.1 billion for the three months ended September 28, 2019 compared to $6.2 billion for the three months ended September 29, 2018 due to unfavorable volume/mix (2.1 pp), partially offset by higher pricing (1.0 pp). Volume/mix was unfavorable in the United States and Rest of World, partially offset by growth in Canada and EMEA. Higher pricing in the United States, Rest of World, and EMEA was partially offset by lower pricing in Canada.

Nine Months Ended September 28, 2019 compared to the Nine Months Ended September 29, 2018:

Net sales decreased 4.8% to $18.4 billion for the nine months ended September 28, 2019 compared to $19.4 billion for the nine months ended September 29, 2018 primarily due to the unfavorable impacts of foreign currency (2.3 pp) and acquisitions and divestitures (1.0 pp). Organic Net Sales decreased 1.5% to $18.4 billion for the nine months ended September 28, 2019 compared to $18.7 billion for the nine months ended September 29, 2018 due to unfavorable volume/mix (1.0 pp) and lower pricing (0.5 pp). Volume/mix was unfavorable in the United States, EMEA, and Rest of World, partially offset by growth in Canada. Lower pricing in the United States and Canada was partially offset by higher pricing in Rest of World, while pricing in EMEA was flat.

Net Income/(Loss):

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions)											(in millions)
Operating income/(loss)	$	1,180			$	1,074			9.8	%		$	2,476			$	3,931			(37.0	)%
Net income/(loss) attributable to common shareholders	899				619				45.4	%		1,753				2,376				(26.2	)%
Adjusted EBITDA(a)	1,469				1,594				(7.8	)%		4,500				5,350				(15.9	)%

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

Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018:

Operating income/(loss) increased 9.8% to $1.2 billion for the three months ended September 28, 2019 compared to $1.1 billion for the three months ended September 29, 2018. This increase was driven by higher impairment losses in the prior year. Impairment losses were $5 million for the three months ended September 28, 2019 compared to $217 million for the three months ended September 29, 2018. Excluding the impact of these impairment losses, operating income/(loss) decreased $106 million primarily due to the unfavorable impact of foreign currency (5.5 pp), higher supply chain costs, higher general corporate expenses, and lower Organic Net Sales, partially offset by lower restructuring expenses in the current period. See Note 9, Goodwill and Intangible Assets, in Item 1, Financial Statements, for additional information on our impairment losses.

66

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Net income/(loss) attributable to common shareholders increased 45.4% to $899 million for the three months ended September 28, 2019 compared to $619 million for the three months ended September 29, 2018. The increase was primarily driven by favorable changes in other expense/(income), the operating income/(loss) factors described above, and a lower effective tax rate, partially offset by higher interest expense, detailed as follows.

•

Other expense/(income) was $380 million of income for the three months ended September 28, 2019 compared to $71 million of income for the three months ended September 29, 2018. This increase was primarily driven by a $241 million gain on the Canada Natural Cheese Transaction in the current period and a $60 million decrease to nonmonetary currency devaluation losses related to our Venezuelan operations.

•

The effective tax rate was 22.6% for the three months ended September 28, 2019 compared to 24.6% for the three months ended September 29, 2018. The decrease in our effective tax rate was primarily driven by a decrease in unfavorable net discrete items. Current year unfavorable impacts from net discrete items were primarily related to tax impacts for divestitures, specifically related to the Canada Natural Cheese Transaction, the impact of which was partially offset by the reversal of certain deferred withholding tax liabilities resulting from the ratification of the U.S. tax treaty with Spain. In the prior year, we had unfavorable impacts from net discrete items primarily related to the revaluation of our deferred tax balances due to changes in state tax laws, non-deductible currency devaluation losses, and non-deductible goodwill impairments, which were partially offset by the favorable impact of reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2017 U.S. income and deductions.

•	Interest expense was $398 million for the three months ended September 28, 2019 compared to $326 million for the three months ended September 29, 2018. This increase was primarily driven by the $88 million loss on extinguishment of debt recognized in connection with the Tender Offers, partially offset by lower debt balances in 2019.

Adjusted EBITDA decreased 7.8% to $1.5 billion for the three months ended September 28, 2019 compared to $1.6 billion for the three months ended September 29, 2018. This decrease was primarily due to the unfavorable impact of foreign currency (3.2 pp), higher supply chain costs, higher general corporate expenses, and lower Organic Net Sales.

Nine Months Ended September 28, 2019 compared to the Nine Months Ended September 29, 2018:

Operating income/(loss) decreased 37.0% to $2.5 billion for the nine months ended September 28, 2019 compared to $3.9 billion for the nine months ended September 29, 2018. This decrease was primarily due to higher impairment losses in 2019. Impairment losses were $1.2 billion in 2019 compared to $451 million in 2018. The remaining $683 million decrease in operating income/(loss) was primarily due to lower Organic Net Sales, the unfavorable impact of foreign currency (2.0 pp), and higher supply chain costs, partially offset by lower restructuring expenses in the current period. See Note 9, Goodwill and Intangible Assets, in Item 1, Financial Statements, for additional information on our impairment losses.

Net income/(loss) attributable to common shareholders decreased 26.2% to $1.8 billion for the nine months ended September 28, 2019 compared to $2.4 billion for the nine months ended September 29, 2018. The decrease was primarily due to the operating income/(loss) factors described above (primarily higher impairment losses in the current period), higher interest expense, and a higher effective tax rate, partially offset by favorable changes in other expense/(income), detailed as follows.

•	Interest expense was $1.0 billion for the nine months ended September 28, 2019 compared to $959 million for the nine months ended September 29, 2018. This increase was primarily driven by the $88 million loss on extinguishment of debt recognized in connection with the Tender Offers, partially offset by lower debt balances in 2019.

•

The effective tax rate was 25.0% for the nine months ended September 28, 2019 compared to 24.7% for the nine months ended September 29, 2018. The increase in our effective tax rate was primarily driven by the less favorable geographic mix of pre-tax income in various non-U.S. jurisdictions, partially offset by a decrease in unfavorable net discrete items. Current year unfavorable impacts from net discrete items primarily related to non-deductible goodwill impairment and the tax impacts from the Heinz India and Canada Natural Cheese Transactions, the impacts of which were partially offset by the reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2018 U.S. income and deductions. In the prior year, we had an unfavorable impact from net discrete items, primarily related to the revaluation of our deferred tax balances due to changes in state tax laws, non-deductible currency devaluation losses, and non-deductible goodwill impairments, which were partially offset by the reversal of uncertain tax position reserves in the U.S. and certain state jurisdictions and changes in estimates of certain 2017 U.S. income and deductions.

•

Other expense/(income) was $893 million of income for the nine months ended September 28, 2019 compared to $181 million of income for the nine months ended September 29, 2018. This increase was primarily due to a $249 million gain on the Heinz India Transaction and a $241 million gain on the Canada Natural Cheese Transaction in the current period compared to a $15 million loss on our South Africa divestiture in the prior year, a $121 million decrease to nonmonetary currency devaluation losses related to our Venezuelan operations, and a $58 million non-cash settlement charge in the prior year related to the wind-up of a non-U.S. pension plan.

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Adjusted EBITDA decreased 15.9% to $4.5 billion for the nine months ended September 28, 2019 compared to $5.4 billion for the nine months ended September 29, 2018. This decrease was primarily due to lower Organic Net Sales, higher supply chain costs, the unfavorable impact of foreign currency (3.3 pp), higher general corporate expenses, and investments in strategic initiatives.

Diluted EPS:

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions, except per share data)											(in millions, except per share data)
Diluted EPS	$	0.74			$	0.50			48.0	%		$	1.43			$	1.94			(26.3	)%
Adjusted EPS(a)	0.69				0.76				(9.2	)%		2.13				2.66				(19.9	)%

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

Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018:

Diluted EPS increased 48.0% to $0.74 for the three months ended September 28, 2019 compared to $0.50 for the three months ended September 29, 2018 primarily due to the net income/(loss) attributable to common shareholders factors discussed above.

	For the Three Months Ended
	September 28, 2019				September 29, 2018				$ Change				% Change
					(As Restated)
Diluted EPS	$	0.74			$	0.50			$	0.24			48.0	%
Integration and restructuring expenses	0.01				0.03				(0.02		)
Deal costs	0.01				—				0.01
Unrealized losses/(gains) on commodity hedges	0.01				—				0.01
Impairment losses	—				0.13				(0.13		)
Losses/(gains) on sale of business	(0.13		)		—				(0.13		)
Nonmonetary currency devaluation	—				0.05				(0.05		)
Debt prepayment and extinguishment costs	0.05				—				0.05
U.S. Tax Reform discrete income tax expense/(benefit)	—				0.05				(0.05		)
Adjusted EPS(a)	$	0.69			$	0.76			$	(0.07	)		(9.2	)%
Key drivers of change in Adjusted EPS(a):
Results of operations									$	(0.06	)
Results of divested operations									(0.02		)
Interest expense									0.01
Other expense/(income)									0.01
Effective tax rate									(0.01		)
									$	(0.07	)

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

Adjusted EPS decreased 9.2% to $0.69 for the three months ended September 28, 2019 compared to $0.76 for the three months ended September 29, 2018 primarily due to lower Adjusted EBITDA and higher taxes on adjusted earnings in the current period, partially offset by lower interest expense, lower equity award compensation expense, and favorable changes in other expense/(income).

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Nine Months Ended September 28, 2019 compared to the Nine Months Ended September 29, 2018:

Diluted EPS decreased 26.3% to $1.43 for the nine months ended September 28, 2019 compared to $1.94 for the nine months ended September 29, 2018 primarily due to the net income/(loss) attributable to common shareholders factors discussed above.

	For the Nine Months Ended
	September 28, 2019				September 29, 2018				$ Change				% Change
					(As Restated)
Diluted EPS	$	1.43			$	1.94			$	(0.51	)		(26.3	)%
Integration and restructuring expenses	0.04				0.19				(0.15		)
Deal costs	0.01				0.01				—
Unrealized losses/(gains) on commodity hedges	(0.02		)		0.01				(0.03		)
Impairment losses	0.90				0.30				0.60
Losses/(gains) on sale of business	(0.29		)		0.01				(0.30		)
Nonmonetary currency devaluation	0.01				0.11				(0.10		)
Debt prepayment and extinguishment costs	0.05				—				0.05
U.S. Tax Reform discrete income tax expense/(benefit)	—				0.09				(0.09		)
Adjusted EPS(a)	$	2.13			$	2.66			$	(0.53	)		(19.9	)%
Key drivers of change in Adjusted EPS(a):
Results of operations									$	(0.55	)
Results of divested operations									(0.03		)
Interest expense									0.01
Other expense/(income)									0.01
Effective tax rate									0.03
									$	(0.53	)

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

Adjusted EPS decreased 19.9% to $2.13 for the nine months ended September 28, 2019 compared to $2.66 for the nine months ended September 29, 2018 primarily due to lower Adjusted EBITDA and higher depreciation and amortization expenses, partially offset by lower taxes on adjusted earnings in the current period, lower equity award compensation expense, favorable changes in other expense/(income), and lower interest expense.

Results of Operations by Segment

Management evaluates segment performance based on several factors, including net sales, Organic Net Sales, and Segment Adjusted EBITDA. 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 integration and restructuring expenses); in addition to these adjustments, we exclude, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized; once realized, the gains and losses are recorded in the applicable segment’s operating results), impairment losses, and equity award compensation expense (excluding integration and restructuring expenses). 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.

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 net income/(loss), rather than accumulated other comprehensive income/(losses) on the balance sheet, until such time as the economy is no longer considered highly inflationary. The exchange gains and losses from remeasurement are recorded in current net income and are classified within other expense/(income), as nonmonetary currency devaluation. See Note 15, Venezuela - Foreign Currency and Inflation, in Item 1, Financial Statements, and Note 3, Significant Accounting Policies, in our Annual Report on Form 10-K for the year ended December 29, 2018, for additional information.

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Net Sales:

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
	(in millions)
Net sales:
United States	$	4,361			$	4,431			$	13,074			$	13,312
Canada	415				525				1,425				1,573
EMEA	612				634				1,862				2,026
Rest of World	688				793				2,080				2,466
Total net sales	$	6,076			$	6,383			$	18,441			$	19,377

Organic Net Sales:

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
	(in millions)
Organic Net Sales(a):
United States	$	4,361			$	4,431			$	13,074			$	13,312
Canada	418				421				1,244				1,265
EMEA	636				634				1,971				2,005
Rest of World	701				699				2,120				2,111
Total Organic Net Sales	$	6,116			$	6,185			$	18,409			$	18,693

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

Drivers of the changes in net sales and Organic Net Sales for the three and nine months ended September 28, 2019 compared to the three and nine months ended September 29, 2018 were:

	Net Sales			Currency		Acquisitions and Divestitures		Organic Net Sales			Price		Volume/Mix
For the Three Months Ended
United States	(1.6	)%		0.0 pp		0.0 pp		(1.6	)%		1.5 pp		(3.1) pp
Canada	(21.1	)%		(0.8) pp		(19.8) pp		(0.5	)%		(2.6) pp		2.1 pp
EMEA	(3.5	)%		(3.9) pp		0.0 pp		0.4	%		0.2 pp		0.2 pp
Rest of World	(13.3	)%		(10.2) pp		(3.3) pp		0.2	%		0.9 pp		(0.7) pp
Kraft Heinz	(4.8	)%		(1.7) pp		(2.0) pp		(1.1	)%		1.0 pp		(2.1) pp
For the Nine Months Ended
United States	(1.8	)%		0.0 pp		0.0 pp		(1.8	)%		(0.7) pp		(1.1) pp
Canada	(9.5	)%		(3.0) pp		(4.8) pp		(1.7	)%		(2.8) pp		1.1 pp
EMEA	(8.1	)%		(5.4) pp		(1.0) pp		(1.7	)%		0.0 pp		(1.7) pp
Rest of World	(15.7	)%		(11.9) pp		(4.2) pp		0.4	%		1.3 pp		(0.9) pp
Kraft Heinz	(4.8	)%		(2.3) pp		(1.0) pp		(1.5	)%		(0.5) pp		(1.0) pp

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Adjusted EBITDA:

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
	(in millions)
Segment Adjusted EBITDA:
United States	$	1,155			$	1,176			$	3,539			$	3,969
Canada	107				144				371				451
EMEA	165				165				479				553
Rest of World	100				148				303				505
General corporate expenses	(58		)		(39		)		(192		)		(128		)
Depreciation and amortization (excluding integration and restructuring expenses)	(243		)		(245		)		(730		)		(679		)
Integration and restructuring expenses	(15		)		(32		)		(56		)		(215		)
Deal costs	(6		)		(3		)		(19		)		(19		)
Unrealized gains/(losses) on commodity hedges	(9		)		(6		)		30				(11		)
Impairment losses	(5		)		(217		)		(1,223		)		(451		)
Equity award compensation expense (excluding integration and restructuring expenses)	(11		)		(17		)		(26		)		(44		)
Operating income/(loss)	1,180				1,074				2,476				3,931
Interest expense	398				326				1,035				959
Other expense/(income)	(380		)		(71		)		(893		)		(181		)
Income/(loss) before income taxes	$	1,162			$	819			$	2,334			$	3,153

United States:

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions)											(in millions)
Net sales	$	4,361			$	4,431			(1.6	)%		$	13,074			$	13,312			(1.8	)%
Organic Net Sales(a)	4,361				4,431				(1.6	)%		13,074				13,312				(1.8	)%
Segment Adjusted EBITDA	1,155				1,176				(1.8	)%		3,539				3,969				(10.8	)%

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

Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018:

Net sales and Organic Net Sales both decreased 1.6% to $4.4 billion for the three months ended September 28, 2019 compared to $4.4 billion for the three months ended September 29, 2018. This decrease was primarily due to the unfavorable volume/mix (3.1 pp), partially offset by higher pricing (1.5 pp). Unfavorable volume/mix was due to lower retail takeaway in meat, refrigerated meal combinations, and cheese, as well as unfavorable changes in retail inventory levels versus the prior year. This was partially offset by consumption led growth in condiments and sauces and nuts. Pricing was higher across most categories, primarily meat, condiments and sauces, and cheese, partially offset by lower key commodity driven pricing (which we define as dairy, meat, coffee, and nuts), primarily coffee and nuts.

Segment Adjusted EBITDA decreased 1.8% to $1.2 billion for the three months ended September 28, 2019 compared to $1.2 billion for the three months ended September 29, 2018. This decrease was primarily due to the unfavorable volume/mix, partially offset by higher pricing and favorable timing of marketing expenses versus prior year.

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Nine Months Ended September 28, 2019 compared to the Nine Months Ended September 29, 2018:

Net sales and Organic Net Sales both decreased 1.8% to $13.1 billion for the nine months ended September 28, 2019 compared to $13.3 billion for the nine months ended September 29, 2018 due to the unfavorable volume/mix (1.1 pp) and lower pricing (0.7 pp). Unfavorable volume/mix was primarily due to unfavorable changes in retail inventory levels versus the prior year and lower foodservice shipments, partially offset by growth in nuts and frozen. Pricing was lower across most categories due to higher promotional costs versus the prior year, increased in-store activity, and pricing related to favorable key commodity costs, primarily coffee and nuts. This was partially offset by higher pricing in meat.

Segment Adjusted EBITDA decreased 10.8% to $3.5 billion for the nine months ended September 28, 2019 compared to $4.0 billion for the nine months ended September 29, 2018. This decrease was primarily due to lower Organic Net Sales, cost inflation in procurement, logistics, and manufacturing, and strategic investments.

Canada:

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions)											(in millions)
Net sales	$	415			$	525			(21.1	)%		$	1,425			$	1,573			(9.5	)%
Organic Net Sales(a)	418				421				(0.5	)%		1,244				1,265				(1.7	)%
Segment Adjusted EBITDA	107				144				(25.7	)%		371				451				(17.8	)%

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

Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018:

Net sales decreased 21.1% to $415 million for the three months ended September 28, 2019 compared to $525 million for the three months ended September 29, 2018 primarily due to the unfavorable impacts of acquisitions and divestitures (19.8 pp) and foreign currency (0.8 pp). Organic Net Sales decreased 0.5% to $418 million for the three months ended September 28, 2019 compared to $421 million for the three months ended September 29, 2018 due to lower pricing (2.6 pp), partially offset by favorable volume/mix (2.1 pp). Pricing was lower primarily due to increased promotional activity and higher trade expense in cheese versus the prior year, partially offset by higher pricing in boxed dinners. Favorable volume/mix was driven by growth from increased promotional support in condiments and sauces and cheese, as well as a partial recovery of inventory levels at retail. This was partially offset by declines in boxed dinners due to reduced promotional activity and lower coffee shipments.

Segment Adjusted EBITDA decreased 25.7% to $107 million for the three months ended September 28, 2019 compared to $144 million for the three months ended September 29, 2018 partially due to the unfavorable impact of foreign currency (0.8 pp). Excluding the currency impact, Segment Adjusted EBITDA decreased primarily due to the Canada Natural Cheese Transaction, lower pricing, and higher input costs, partially offset by favorable volume/mix.

Nine Months Ended September 28, 2019 compared to the Nine Months Ended September 29, 2018:

Net sales decreased 9.5% to $1.4 billion for the nine months ended September 28, 2019 compared to $1.6 billion for the nine months ended September 29, 2018 primarily due to the unfavorable impacts of acquisition and divestitures (4.8 pp) and foreign currency (3.0 pp). Organic Net Sales decreased 1.7% to $1.2 billion for the nine months ended September 28, 2019 compared to $1.3 billion for the nine months ended September 29, 2018 due to lower pricing (2.8 pp), partially offset by favorable volume/mix (1.1 pp). Pricing was lower across most categories primarily due to higher promotional costs versus the prior year and increased in-store activity. Favorable volume/mix was primarily driven by growth in cheese and condiments and sauces.

Segment Adjusted EBITDA decreased 17.8% to $371 million for the nine months ended September 28, 2019 compared to $451 million for the nine months ended September 29, 2018 partially due to the unfavorable impact of foreign currency (2.7 pp). Excluding the currency impact, Segment Adjusted EBITDA decreased primarily due to lower pricing, higher input costs, and the Canada Natural Cheese Transaction, partially offset by favorable volume/mix.

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EMEA:

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions)											(in millions)
Net sales	$	612			$	634			(3.5	)%		$	1,862			$	2,026			(8.1	)%
Organic Net Sales(a)	636				634				0.4	%		1,971				2,005				(1.7	)%
Segment Adjusted EBITDA	165				165				0.3	%		479				553				(13.3	)%

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

Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018:

Net sales decreased 3.5% to $612 million for the three months ended September 28, 2019 compared to $634 million for the three months ended September 29, 2018 driven by the unfavorable impact of foreign currency (3.9 pp). Organic Net Sales increased 0.4% to $636 million for the three months ended September 28, 2019 compared to $634 million for the three months ended September 29, 2018 due to higher pricing (0.2 pp) and favorable volume/mix (0.2 pp). Higher pricing in the United Kingdom was partially offset by lower pricing in other regions. Favorable volume/mix was primarily driven by favorable shipment timing versus prior year in Russia and foodservice growth across most of the regions, partially offset by ongoing weakness in infant nutrition.

Segment Adjusted EBITDA increased 0.3% to $165 million for the three months ended September 28, 2019 compared to $165 million for the three months ended September 29, 2018, including the unfavorable impact of foreign currency (4.4 pp). Excluding the currency impact, the increase was primarily driven by lower supply chain costs.

Nine Months Ended September 28, 2019 compared to the Nine Months Ended September 29, 2018:

Net sales decreased 8.1% to $1.9 billion for the nine months ended September 28, 2019 compared to $2.0 billion for the nine months ended September 29, 2018 driven by the unfavorable impacts of foreign currency (5.4 pp) and acquisitions and divestitures (1.0 pp). Organic Net Sales decreased 1.7% to $2.0 billion for the nine months ended September 28, 2019 compared to $2.0 billion for the nine months ended September 29, 2018 due to unfavorable volume/mix (1.7 pp) while pricing remained flat. Unfavorable volume/mix was primarily due to the adverse impact of extended negotiations with key retailers and lower shipments of soup, partially offset by foodservice growth. Pricing was flat primarily due to lower pricing in Italy infant nutrition and Russia, partially offset by price increases in the United Kingdom.

Segment Adjusted EBITDA decreased 13.3% to $479 million for the nine months ended September 28, 2019 compared to $553 million for the nine months ended September 29, 2018, including the unfavorable impact of foreign currency (5.0 pp). Excluding the currency impact, the decrease was primarily due to higher supply chain costs, lower Organic Net Sales, the benefit from the postemployment benefits accounting change in the prior year, and investments in marketing and people.

Rest of World:

	For the Three Months Ended											For the Nine Months Ended
	September 28, 2019				September 29, 2018				% Change			September 28, 2019				September 29, 2018				% Change
					(As Restated)											(As Restated)
	(in millions)											(in millions)
Net sales	$	688			$	793			(13.3	)%		$	2,080			$	2,466			(15.7	)%
Organic Net Sales(a)	701				699				0.2	%		2,120				2,111				0.4	%
Segment Adjusted EBITDA	100				148				(32.7	)%		303				505				(40.0	)%

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

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Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018:

Net sales decreased 13.3% to $688 million for the three months ended September 28, 2019 compared to $793 million for the three months ended September 29, 2018 due to the unfavorable impact of foreign currency (10.2 pp, including 8.5 pp from the devaluation of the Venezuelan bolivar) and the unfavorable impact of acquisitions and divestitures (3.3 pp). Organic Net Sales increased 0.2% to $701 million for the three months ended September 28, 2019 compared to $699 million for the three months ended September 29, 2018 primarily driven by higher pricing (0.9 pp), partially offset by unfavorable volume/mix (0.7 pp). Pricing was higher primarily driven by pricing actions in Latin America, partially offset by lower pricing in Asia Pacific. Unfavorable volume/mix was due to ongoing weakness in China infant nutrition, partially offset by growth in condiments and sauces, foodservice, and Indonesia beverages.

Segment Adjusted EBITDA decreased 32.7% to $100 million for the three months ended September 28, 2019 compared to $148 million for the three months ended September 29, 2018 including the unfavorable impact of foreign currency (31.1 pp, including 30.4 pp from the devaluation of the Venezuelan bolivar). Excluding the currency impact, the decrease in Segment Adjusted EBITDA was primarily due to higher supply chain costs and lower Organic Net Sales in Asia Pacific.

Nine Months Ended September 28, 2019 compared to the Nine Months Ended September 29, 2018:

Net sales decreased 15.7% to $2.1 billion for the nine months ended September 28, 2019 compared to $2.5 billion for the nine months ended September 29, 2018 due to the unfavorable impact of foreign currency (11.9 pp, including 7.9 pp from the devaluation of the Venezuelan bolivar) and the unfavorable impact of acquisitions and divestitures (4.2 pp). Organic Net Sales increased 0.4% to $2.1 billion for the nine months ended September 28, 2019 compared to $2.1 billion for the nine months ended September 29, 2018 driven by higher pricing (1.3 pp), partially offset by the unfavorable volume/mix (0.9 pp). Higher pricing was primarily driven by price increases in Brazil. Unfavorable volume/mix was due to ongoing weakness in China infant nutrition, partially offset by growth in condiments and sauces.

Segment Adjusted EBITDA decreased 40.0% to $303 million for the nine months ended September 28, 2019 compared to $505 million for the nine months ended September 29, 2018, despite the unfavorable impact of foreign currency (27.5 pp, including 24.7 pp from the devaluation of the Venezuelan bolivar). Excluding the currency impact, the decrease in Segment Adjusted EBITDA was primarily due to higher supply chain costs, the sale of Heinz India, and lower Organic Net Sales in Asia Pacific.

Liquidity and Capital Resources

We believe that cash generated from our operating activities, commercial paper programs, and senior unsecured revolving credit facility (the “Senior Credit Facility”) will provide sufficient liquidity to meet our working capital needs, future contractual obligations (including repayments of long-term debt), payment of our anticipated quarterly dividends, planned capital expenditures, restructuring expenditures, and contributions to our postemployment benefit plans. An additional potential source of liquidity is access to capital markets. We intend to use our cash on hand and our commercial paper programs for daily funding requirements. Overall, while we are not currently eligible to use a registration statement on Form S-3 for any public offerings of registered debt or equity securities to raise capital, we do not expect any negative effects on our funding sources that would have a material effect on our short-term or long-term liquidity.

Cash Flow Activity For the Nine Months Ended September 28, 2019 Compared to the Nine Months Ended September 29, 2018:

Net Cash Provided by/Used for Operating Activities:

Net cash provided by operating activities was $2.0 billion for the nine months ended September 28, 2019 compared to $878 million for the nine months ended September 29, 2018. This increase was primarily driven by higher collections on trade receivables resulting from the reduction of receivables non-cash exchanged for sold receivables as we unwound all of our Programs in 2018 and as our trade receivables balance was higher at the end of 2018 compared to the end of 2017. This increase was partially offset by a federal tax refund received in the prior year, tax payments associated with the Heinz India Transaction, and increased cash payments for employee bonuses in 2019. See Note 16, Financing Arrangements, in Item 1, Financial Statements, for additional information on our Programs.

Net Cash Provided by/Used for Investing Activities:

Net cash provided by investing activities was $1.1 billion for the nine months ended September 28, 2019 compared to $485 million for the nine months ended September 29, 2018. This increase was primarily driven by proceeds from our Canada Natural Cheese Transaction and Heinz India Transaction, along with lower cash payments to acquire businesses year over year. These increases to cash provided by investing activities were partially offset by lower cash collections on previously sold receivables, as we unwound all of our Programs in 2018. Additionally, capital expenditures were mostly flat year over year. We expect 2019 capital expenditures to be approximately $750 million. See Note 5, Acquisitions and Divestitures, in Item 1, Financial Statements, for additional information on the Canada Natural Cheese Transaction, the Heinz India Transaction, and our acquisitions.

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Net Cash Provided by/Used for Financing Activities:

Net cash used for financing activities was $1.9 billion for the nine months ended September 28, 2019 compared to $1.6 billion for the nine months ended September 29, 2018. This increase was primarily driven by higher repayments of long-term debt, lower net proceeds from the issuance of commercial paper, and higher debt prepayment and extinguishment costs, primarily related to the Tender Offers. These increases to net cash used for financing activities were partially offset by decreased cash distributions related to our dividends. Proceeds from long-term debt issuances were mostly flat year over year. See Note 17, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for additional information on the Tender Offers and Equity and Dividends in this item for additional information on our dividends.

Cash Held by International Subsidiaries:

Of the $2.3 billion cash and cash equivalents on our condensed consolidated balance sheet at September 28, 2019, $1.5 billion was held by international subsidiaries.

As of 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 related to our 2018 and 2019 accumulated earnings of certain international subsidiaries is approximately $50 million.

Our undistributed historic earnings in foreign subsidiaries through December 30, 2017 are currently not considered to be indefinitely reinvested. As of September 28, 2019, we have recorded a deferred tax liability of $30 million on approximately $430 million of historic earnings related to local withholding taxes that will be owed when this cash is distributed. As of December 29, 2018, we had recorded a deferred tax liability of $78 million on $1.2 billion of historic earnings. The decreases are primarily due to the distribution of proceeds from the sale of Heinz India into Canada, which reduced our historic earnings related to Canada by approximately $600 million. Related to this distribution, we recorded tax expenses of approximately $30 million and reduced the deferred tax liability accordingly. Additionally, we reduced our historic earnings by approximately $100 million following the ratification of the U.S. tax treaty with Spain. This reduction resulted in a tax benefit of approximately $11 million and a corresponding decrease in our deferred tax liability.

Borrowing Arrangements:

We obtain funding through our U.S. and European commercial paper programs. We had no commercial paper outstanding at September 28, 2019 or at December 29, 2018. The maximum amount of commercial paper outstanding during the nine months ended September 28, 2019 was $200 million.

We maintain our $4.0 billion Senior Credit Facility, and subject to certain conditions, we may increase the amount of revolving commitments and/or add additional tranches of term loans in a combined aggregate amount of up to $1.0 billion. No amounts were drawn on our Senior Credit Facility at September 28, 2019 or during the nine months ended September 28, 2019. The Senior Credit Facility contains 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 during the three months ended September 28, 2019.

Long-Term Debt:

Our long-term debt, including the current portion, was $30.7 billion at September 28, 2019 and $31.1 billion at December 29, 2018. This decrease was primarily related to the $2.9 billion aggregate principal amount of certain senior notes and second lien senior secured notes that were validly tendered pursuant to the Tender Offers and the repayment of $350 million aggregate principal amount of senior notes that matured in August 2019. These decreases to long-term debt were partially offset by the $3.0 billion aggregate principal amount of the 2019 Notes issued in September 2019. We used the proceeds from the 2019 Notes, together with cash on hand, to fund the Tender Offers and to pay fees and expenses in connection therewith. Additionally, in October 2019, we used proceeds from the 2019 Notes to fund the partial redemption of $1.3 billion aggregate principal amount of our 2.800% senior notes due July 2020 and 300 million Canadian dollar senior notes due July 2020.

Following the issuance of the 2019 Notes, settlement of the Tender Offers, and the redemptions in October 2019, our long-term debt decreased by approximately $1.4 billion. This decrease includes the extinguishment of approximately $2.0 billion aggregate principal amount of senior notes that were due to mature in 2020.

After the redemptions in October 2019, we have aggregate principal amount of senior notes of approximately $405 million maturing in February 2020 and approximately 500 million Canadian dollars and $200 million maturing in July 2020. We expect to fund these long-term debt repayments primarily with cash on hand and cash generated from our operating activities.

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Our long-term debt contains customary representations, covenants, and events of default. We were in compliance with all financial covenants during the three months ended September 28, 2019.

See Note 17, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for additional information on our long-term debt activity in 2019 and Note 19, Debt, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 29, 2018 for additional information on our borrowing arrangements and long-term debt.

Commodity Trends

We purchase and use large quantities of commodities, including dairy products, meat products, coffee beans, nuts, tomatoes, potatoes, soybean and vegetable oils, sugar and other sweeteners, corn products, and wheat products to manufacture our products. In addition, we purchase and use significant quantities of resins, metals, and cardboard to package our products and natural gas to operate our facilities. We continuously monitor worldwide supply and cost trends of these commodities.

We define our key commodities in the United States and Canada as dairy, meat, coffee, and nuts. During the nine months ended September 28, 2019, we experienced cost decreases for nuts and coffee, while costs for meat and dairy increased. We manage commodity cost volatility primarily through pricing and risk management strategies. As a result of these risk management strategies, our commodity costs may not immediately correlate with market price trends.

See our Annual Report on Form 10-K for the year ended December 29, 2018 for additional information on how we manage commodity costs.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

There were no material changes to our off-balance sheet arrangements or aggregate contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 29, 2018.

Equity and Dividends

We paid common stock dividends of $1.5 billion for the nine months ended September 28, 2019 and $2.4 billion for the nine months ended September 29, 2018. Additionally, on October 31, 2019, our Board of Directors declared a cash dividend of $0.40 per share of common stock, which is payable on December 13, 2019 to shareholders of record on November 15, 2019.

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

Critical Accounting Estimates

Our significant accounting policies are described in Note 3, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data, of our consolidated financial statements for the year ended December 29, 2018 in our Annual Report on Form 10-K. See Note 3, Significant Accounting Policies, in Item 1, Financial Statements, for updates to our significant accounting policies during the nine months ended September 28, 2019.

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments, and assumptions. Our critical accounting estimates and assumptions related to goodwill and intangible assets are described below. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 29, 2018 for a discussion of our other critical accounting estimates and assumptions.

Goodwill and Intangible Assets:

We maintain 19 reporting units, 12 of which comprise our goodwill balance. These 12 reporting units had an aggregate carrying amount of $35.8 billion as of September 28, 2019. Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $43.4 billion as of September 28, 2019.

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We test our reporting units and brands for impairment annually as of the first day of our second 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 (for example due to regulatory or industry changes), disposals of significant brands or components of our business, unexpected business disruptions (for example due to a natural disaster 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, 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 to 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. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, growth rates, royalty rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, change, or if management’s expectations or plans otherwise change, including as a result of updates to our global five-year operating plan, then one or more of our reporting units or brands might become impaired in the future.

As detailed in Note 9, Goodwill and Intangible Assets, in Item 1, Financial Statements, we recorded impairment losses related to goodwill and indefinite-lived intangible assets in the current year and in the prior year. Our reporting units and brands that were impaired in 2018 and 2019 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 individual reporting units and brands that have 20% or less excess fair value over carrying amount as of the 2019 annual impairment test date 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 of $33.0 billion as of the 2019 annual impairment test date and included: U.S. Grocery, U.S. Refrigerated, U.S. Foodservice, Canada Retail, Canada Foodservice, Latin America Exports, EMEA East, Australia and New Zealand, and Northeast Asia. We had one reporting unit, Continental Europe, with 10-20% fair value over carrying amount. Continental Europe had a goodwill carrying amount of $593 million as of the 2019 annual impairment test date. The aggregate goodwill carrying amount of reporting units with fair value over carrying amount between 20-50% was $2.4 billion and there were no reporting units with fair value over carrying amount in excess of 50% as of the 2019 annual impairment test date. Brands with 10% or less fair value over carrying amount had an aggregate carrying amount after impairment of $26.4 billion as of the 2019 annual impairment test date and included: Kraft, Philadelphia, Velveeta, Lunchables, Miracle Whip, Planters, Maxwell House, Cool Whip, and ABC. Brands with 10-20% fair value over carrying amount had an aggregate carrying amount of $3.6 billion as of the 2019 annual impairment test date and included Oscar Mayer, Jet Puffed, and Quero. The aggregate carrying amount of brands with fair value over carrying amount between 20-50% was $4.2 billion as of the 2019 annual impairment test date. Although the remaining brands, with a carrying value of $9.3 billion, have more than 50% excess fair value over carrying amount as of the 2019 annual impairment test date, these amounts are also associated with the 2013 Heinz acquisition and the 2015 Merger and are recorded on the 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.

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. 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. 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 plans, and guideline companies.

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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 net 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 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.

The discount rates, long-term growth rates, and royalty rates used to estimate the fair values of our reporting units and brands with 10% or less excess fair value over carrying amount, as well as the goodwill or brand carrying amounts, as of the 2019 annual impairment test date for each reporting unit or brand, were as follows:

	Goodwill or Brand Carrying Amount (in billions)				Discount Rate						Long-Term Growth Rate						Royalty Rate
					Minimum			Maximum			Minimum			Maximum			Minimum			Maximum
Reporting units	$	33.0			7.0	%		10.3	%		1.5	%		4.0	%
Brands (excess earnings method)	19.4				7.7	%		7.8	%		0.8	%		2.0	%
Brands (relief from royalty method)	7.0				7.7	%		10.7	%		0.5	%		3.5	%		7.0	%		20.0	%

The discount rates, long-term growth rates, and royalty rates used to estimate the fair values of our reporting units and brands with 10-20% excess fair value over carry amount, as well as the goodwill or brand carrying amounts, as of the 2019 annual impairment test date for each reporting unit or brand, were as follows:

	Goodwill or Brand Carrying Amount (in billions)				Discount Rate						Long-Term Growth Rate						Royalty Rate
					Minimum			Maximum			Minimum			Maximum			Minimum			Maximum
Reporting units	$	0.6			9.0	%		11.3	%		2.5	%		3.5	%
Brands (excess earnings method)	3.3				7.8	%		7.8	%		1.0	%		1.0	%
Brands (relief from royalty method)	0.3				7.8	%		10.3	%		1.5	%		4.0	%		1.0	%		17.0	%

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 10% or less excess fair value over carrying amount and 10-20% excess fair value over carrying amount. Note that 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 10% or less excess fair value over carrying amount, as of the 2019 annual impairment test date 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	$	(5.6	)		$	6.7			$	2.7			$	(2.5	)
Brands (excess earnings method)	(1.4		)		1.7				0.6				(0.6		)
Brands (relief from royalty method)	(0.5		)		0.6				0.2				(0.2		)		$	0.6			$	(0.6	)

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If we had changed the assumptions used to estimate the fair value of our reporting units and brands with 10-20% excess fair value over carrying amount, as of the 2019 annual impairment test date 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																100-Basis-Point
	Increase				Decrease				Increase				Decrease				Increase				Decrease
Reporting units	$	(0.1	)		$	0.1			$	0.1			$	—
Brands (excess earnings method)	(0.3		)		0.3				0.1				(0.1		)
Brands (relief from royalty method)	—				—				—				—				$	—			$	—

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 1, Financial Statements, for our impairment testing results.

New Accounting Pronouncements

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

Contingencies

See Note 17, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for a discussion of our contingencies.

Non-GAAP Financial Measures

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

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

Management uses these non-GAAP financial measures to assist in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes do not directly reflect our underlying operations. Management believes that presenting our non-GAAP financial measures (i.e., Organic Net Sales, Adjusted EBITDA, and Adjusted EPS) 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. Organic Net Sales 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.

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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 integration and restructuring expenses); in addition to these adjustments, we exclude, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, and equity award compensation expense (excluding integration and restructuring expenses). 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.

Adjusted EPS is defined as diluted earnings per share excluding, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, 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 costs, and U.S. Tax Reform discrete income tax expense/(benefit), and including, when they occur, adjustments to reflect preferred stock dividend payments on an accrual basis. We believe Adjusted EPS provides important comparability of underlying operating results, allowing investors and management to assess operating performance on a consistent basis.

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The Kraft Heinz Company

Reconciliation of Net Sales to Organic Net Sales

(dollars in millions)

(Unaudited)

	Net Sales				Currency				Acquisitions and Divestitures				Organic Net Sales				Price		Volume/Mix
Three Months Ended September 28, 2019
United States	$	4,361			$	—			$	—			$	4,361
Canada	415				(4		)		1				418
EMEA	612				(24		)		—				636
Rest of World	688				(13		)		—				701
Kraft Heinz	$	6,076			$	(41	)		$	1			$	6,116
Three Months Ended September 29, 2018 (As Restated)
United States	$	4,431			$	—			$	—			$	4,431
Canada	525				—				104				421
EMEA	634				—				—				634
Rest of World	793				71				23				699
Kraft Heinz	$	6,383			$	71			$	127			$	6,185

Year-over-year growth rates
United States	(1.6	)%		0.0 pp		0.0 pp		(1.6	)%		1.5 pp		(3.1) pp
Canada	(21.1	)%		(0.8) pp		(19.8) pp		(0.5	)%		(2.6) pp		2.1 pp
EMEA	(3.5	)%		(3.9) pp		0.0 pp		0.4	%		0.2 pp		0.2 pp
Rest of World	(13.3	)%		(10.2) pp		(3.3) pp		0.2	%		0.9 pp		(0.7) pp
Kraft Heinz	(4.8	)%		(1.7) pp		(2.0) pp		(1.1	)%		1.0 pp		(2.1) pp

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The Kraft Heinz Company

Reconciliation of Net Sales to Organic Net Sales

(dollars in millions)

(Unaudited)

	Net Sales				Currency				Acquisitions and Divestitures				Organic Net Sales				Price		Volume/Mix
Nine Months Ended September 28, 2019
United States	$	13,074			$	—			$	—			$	13,074
Canada	1,425				(46		)		227				1,244
EMEA	1,862				(109		)		—				1,971
Rest of World	2,080				(91		)		51				2,120
Kraft Heinz	$	18,441			$	(246	)		$	278			$	18,409
Nine Months Ended September 29, 2018 (As Restated)
United States	$	13,312			$	—			$	—			$	13,312
Canada	1,573				—				308				1,265
EMEA	2,026				—				21				2,005
Rest of World	2,466				211				144				2,111
Kraft Heinz	$	19,377			$	211			$	473			$	18,693

Year-over-year growth rates
United States	(1.8	)%		0.0 pp		0.0 pp		(1.8	)%		(0.7) pp		(1.1) pp
Canada	(9.5	)%		(3.0) pp		(4.8) pp		(1.7	)%		(2.8) pp		1.1 pp
EMEA	(8.1	)%		(5.4) pp		(1.0) pp		(1.7	)%		0.0 pp		(1.7) pp
Rest of World	(15.7	)%		(11.9) pp		(4.2) pp		0.4	%		1.3 pp		(0.9) pp
Kraft Heinz	(4.8	)%		(2.3) pp		(1.0) pp		(1.5	)%		(0.5) pp		(1.0) pp

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The Kraft Heinz Company

Reconciliation of Net Income/(Loss) to Adjusted EBITDA

(in millions)

(Unaudited)

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
Net income/(loss)	$	898			$	618			$	1,750			$	2,374
Interest expense	398				326				1,035				959
Other expense/(income)	(380		)		(71		)		(893		)		(181		)
Provision for/(benefit from) income taxes	264				201				584				779
Operating income/(loss)	1,180				1,074				2,476				3,931
Depreciation and amortization (excluding integration and restructuring expenses)	243				245				730				679
Integration and restructuring expenses	15				32				56				215
Deal costs	6				3				19				19
Unrealized losses/(gains) on commodity hedges	9				6				(30		)		11
Impairment losses	5				217				1,223				451
Equity award compensation expense (excluding integration and restructuring expenses)	11				17				26				44
Adjusted EBITDA	$	1,469			$	1,594			$	4,500			$	5,350

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The Kraft Heinz Company

Reconciliation of Diluted EPS to Adjusted EPS

(Unaudited)

	For the Three Months Ended								For the Nine Months Ended
	September 28, 2019				September 29, 2018				September 28, 2019				September 29, 2018
					(As Restated)								(As Restated)
Diluted EPS	$	0.74			$	0.50			$	1.43			$	1.94
Integration and restructuring expenses(a)	0.01				0.03				0.04				0.19
Deal costs(b)	0.01				—				0.01				0.01
Unrealized losses/(gains) on commodity hedges(c)	0.01				—				(0.02		)		0.01
Impairment losses(d)	—				0.13				0.90				0.30
Losses/(gains) on sale of business(e)	(0.13		)		—				(0.29		)		0.01
Nonmonetary currency devaluation(f)	—				0.05				0.01				0.11
Debt prepayment and extinguishment costs(g)	0.05				—				0.05				—
U.S. Tax Reform discrete income tax expense/(benefit)(h)	—				0.05				—				0.09
Adjusted EPS	$	0.69			$	0.76			$	2.13			$	2.66

(a)

Gross expenses included in integration and restructuring expenses were $15 million ($15 million after-tax) for the three months and $56 million ($44 million after-tax) for the nine months ended September 28, 2019 and $31 million ($31 million after-tax) for the three months and $278 million ($238 million after-tax) for the nine months ended September 29, 2018 and were recorded in the following income statement line items:

•	Cost of products sold included $12 million for the three months and $27 million for the nine months ended September 28, 2019 and $18 million for the three months and $175 million for the nine months ended September 29, 2018;

•	SG&A included $3 million for the three months and $29 million for the nine months ended September 28, 2019 and $14 million for the three months and $40 million for the nine months ended September 29, 2018; and

•	Other expense/(income) included income of $1 million for the three months and expenses of $63 million for the nine months ended September 29, 2018.

(b)	Gross expenses included in deal costs were $6 million ($7 million after-tax) for the three months and $19 million ($18 million after-tax) for the nine months ended September 28, 2019 and $3 million ($2 million after-tax) for the three months and $19 million ($15 million after-tax) for the nine months ended September 29, 2018 and were recorded in the following income statement line items:

•	Cost of products sold included $4 million for the nine months ended September 29, 2018; and

•	SG&A included $6 million for the three months and $19 million for the nine months ended September 28, 2019 and $3 million for the three months and $15 million for the nine months ended September 29, 2018.

(c)

Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were expenses of $9 million ($7 million after-tax) for the three months and income of $30 million ($22 million after-tax) for the nine months ended September 28, 2019 and expenses of $6 million ($5 million after-tax) for the three months and $11 million ($9 million after-tax) for the nine months ended September 29, 2018 and were recorded in cost of products sold.

(d)	Gross impairment losses, which were recorded in SG&A, included the following:

•	Goodwill impairment losses of $744 million ($717 million after-tax) for the nine months ended September 28, 2019 and $133 million ($133 million after-tax) for the nine months ended September 29, 2018; and

•	Intangible asset impairment losses of $5 million ($7 million after-tax) for the three months and $479 million ($381 million after-tax) for the nine months ended September 28, 2019 and $217 million ($153 million after-tax) for the three months and $318 million ($233 million after-tax) for the nine months ended September 29, 2018.

(e)	Gross expenses/(income) included in losses/(gains) on sale of business were income of $244 million ($158 million after-tax) for the three months and $490 million ($348 million after-tax) for the nine months ended September 28, 2019 and expenses of $15 million ($15 million after-tax) for the nine months ended September 29, 2018 and were recorded in other expense/(income).

(f)	Gross expenses included in nonmonetary currency devaluation were $4 million ($4 million after-tax) for the three months and $10 million ($10 million after-tax) for the nine months ended September 28, 2019 and $64 million ($64 million after-tax) for the three months and $131 million ($131 million after-tax) for the nine months ended September 29, 2018 and were recorded in other expense/(income).

(g)	Gross expenses included in debt prepayment and extinguishment costs were $88 million ($62 million after-tax) for the three and nine months ended September 28, 2019 and were recorded in interest expense.

(h)	U.S. Tax Reform discrete income tax expense/(benefit) included expenses of $62 million for the three months and $106 million for the nine months ended September 29, 2018.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains a number of forward-looking statements. Words such as “anticipate,” “reflect,” “invest,” “see,” “make,” “expect,” “give,” “deliver,” “drive,” “believe,” “improve,” “assess,” “reassess,” “remain,” “evaluate,” “grow,” “will,” “plan,” “intend,” and variations of such words and similar future or conditional expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding our plans, impacts of accounting standards and guidance, growth, legal matters, taxes, costs and cost savings, impairments, and dividends. These forward-looking statements are not guarantees of future performance and are subject to a number of risks and uncertainties, many of which are difficult to predict and beyond our control.

Important factors that may affect our business and operations and that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, operating in a highly competitive industry; our ability to correctly predict, identify, and interpret changes in consumer preferences and demand, to offer new products to meet those changes, and to respond to competitive innovation; changes in the retail landscape or the loss of key retail customers; changes in our relationships with significant customers, suppliers, and other business relationships; our ability to maintain, extend, and expand our reputation and brand image; our ability to leverage our brand value to compete against private label products; our ability to drive revenue growth in our key product categories, increase our market share, or add products that are in faster-growing and more profitable categories; product recalls or product liability claims; unanticipated business disruptions; our ability to identify, complete, or realize the benefits from strategic acquisitions, alliances, divestitures, joint ventures, or other investments; our ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes, and improve our competitiveness; our ability to successfully execute our strategic initiatives; the impacts of our international operations; economic and political conditions in the United States and in various other nations where we do business; changes in our management team or other key personnel and our ability to hire or retain key personnel or a highly skilled and diverse global workforce; risks associated with information technology and systems, including service interruptions, misappropriation of data, or breaches of security; impacts of natural events in the locations in which we or our customers, suppliers, distributors, or regulators operate; our ownership structure; our indebtedness and ability to pay such indebtedness; additional impairments of the carrying amounts of goodwill or other indefinite-lived intangible assets; exchange rate fluctuations; volatility in commodity, energy, and other input costs; volatility in the market value of all or a portion of the derivatives we use; increased pension, labor and people-related expenses; compliance with laws, regulations, and related interpretations and related legal claims or other regulatory enforcement actions, including additional risks and uncertainties related to our restatement and any potential actions resulting from the SEC’s ongoing investigation, as well as potential additional subpoenas, litigation, and regulatory proceedings; an inability to remediate the material weaknesses in our internal control over financial reporting or additional material weaknesses or other deficiencies in the future or the failure to maintain an effective system of internal controls; our failure to prepare and timely file our periodic reports; the restatement of certain of our previously issued consolidated financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues; our ability to protect intellectual property rights; tax law changes or interpretations; the impact of future sales of our common stock in the public markets; our ability to continue to pay a regular dividend and the amounts of any such dividends; volatility of capital markets and other macroeconomic factors. For additional information on these and other factors that could affect our forward-looking statements, see Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 29, 2018. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this report, except as required by applicable law or regulation.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to our market risk during the nine months ended September 28, 2019. For additional information, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in our Annual Report on Form 10-K for the year ended December 29, 2018.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 28, 2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 28, 2019, due to the existence of the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Additionally, the material weaknesses described below could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 29, 2018, we identified a material weakness in the risk assessment component of internal control as we did not appropriately design controls in response to the risk of misstatement due to changes in our business environment. This material weakness in risk assessment gave rise to the specific control deficiencies described below, which we also determined to be material weaknesses:

•

Supplier Contracts and Related Arrangements: We did not design and maintain effective controls over the accounting for supplier contracts and related arrangements. Specifically, certain employees in our procurement organization engaged in misconduct and circumvented controls that included withholding information or directing others to withhold information related to supplier contracts that affected the accounting for certain supplier rebates, incentives, and pricing arrangements, in an attempt to influence the achievement of internal financial targets that became or were perceived to have become increasingly difficult to attain due to changes in our business environment. Additionally, in certain instances, we did not have a sufficient understanding or maintain sufficient documentation of the transaction to determine the appropriate accounting for certain cost and rebate elements and embedded leases. This material weakness resulted in misstatements that were corrected in the restatement included in our Annual Report on Form 10-K for the year ended December 29, 2018.

•

Goodwill and Indefinite-lived Intangible Asset Impairment Testing: We did not design and maintain effective controls to reassess the level of precision used to review the impairment assessments related to goodwill and indefinite-lived intangible assets as changes in our business environment occurred. Specifically, we did not design and maintain effective controls to reassess the level of precision used in the review of the allocation of cash flow projections to certain brands used as a basis for performing our fourth quarter 2018 interim impairment assessments in response to the significant reduction in, and in certain instances elimination of, the excess fair value over carrying amount of certain brands that resulted from changes in our business environment.

Remediation Plan

Our management, with oversight from our Audit Committee, has initiated a plan to remediate the material weaknesses previously identified in the Annual Report on Form 10-K for the period ended December 29, 2018. These plans include the implementation of additional controls and procedures to strengthen our internal controls related to our risk assessment component of internal control over financial reporting, supplier contracts and related arrangements, and the level of precision applied to the goodwill and indefinite-lived intangible asset impairment testing process. The remaining actions outlined in the remediation plan from what had been previously communicated in the Annual Report on Form 10-K include the following:

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•

Performance Targets—We have identified and will be implementing several performance-based target enhancements as follows: (i) implementing checkpoints to evaluate significant changes in the environment that could adversely impact the attainability of management goals and targets; (ii) reassessing and adjusting the overall balance of performance measures provided to employees to help drive challenging but attainable targets; (iii) enhancing our training and overall communication specific to the Management by Objective (“MBO”) process, including a focus on the process to request relief from previously established MBOs, to help ensure all eligible employees are aware of and understand the overall MBO waiver and relief process; (iv) reinforcing the importance of adherence to established internal controls and company policies and procedures through other formal communications, town hall meetings, and other employee trainings; and (v) reassessing certain employees’ key performance indicators.

•

Procurement Practices—We have evaluated our procurement practices and are in the process of implementing improvements to those practices, including: (i) developing more comprehensive contract approval policies and processes; (ii) enhancing required communication protocols among all functions involved in the procurement process (e.g., procurement, legal, accounting, and finance) to ensure all relevant parties are involved in the contract review process; (iii) standardizing contract documentation and analyses; and (iv) developing a more comprehensive accounting review process and monitoring controls over supplier contracts and related arrangements to ensure transactions are recorded in accordance with generally accepted accounting principles.

•	Training Practices—We are in the process of developing a comprehensive global procurement training program that will cover supplier contracts and related arrangements, including potential accounting implications.

•	Procurement Management Software—We have started to evaluate potential solutions to implement or upgrade the existing procurement management software to enhance the identification, tracking, and monitoring of supplier contracts and related arrangements.

To date, the following actions have been taken towards our remediation plan:

•	Personnel Actions—A comprehensive disciplinary plan has been implemented for all employees found to have engaged in misconduct, including termination, written warnings, and appropriate training depending on the severity of the misconduct.

•

Organizational Enhancements—We have implemented the following organizational enhancements: (i) augmented our procurement finance teams with additional professionals with the appropriate levels of accounting and controls knowledge, experience, and training in the area of supplier contracts and related arrangements; and (ii) realigned reporting lines whereby procurement finance now report directly to the finance organization.

•

Level of Precision Applied to Impairment Testing—We have enhanced the level of precision at which our internal controls over financial reporting relating to goodwill and indefinite-lived intangible asset impairment assessments are performed. Specifically, we implemented and executed additional procedures to (i) enhance our analysis of forecasted cash flows used in the impairment assessment and (ii) test the accuracy of forecasted cash flow allocations to specific brands.

We have begun and expect to continue implementing various changes in our internal control over financial reporting to remediate the material weaknesses described above. We continue to make progress on our remediation and our goal is to implement the remaining control improvements related to these material weaknesses by early 2020. We will also continue to review, optimize, and enhance our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies or we may modify certain of the remediation measures described above.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 28, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 17, Commitments, Contingencies and Debt, in Item 1, Financial Statements.

Item 1A. Risk Factors.

Additional impairments of the carrying amounts of goodwill or other indefinite-lived intangible assets could negatively affect our financial condition and results of operations.

We maintain 19 reporting units, 12 of which comprise our goodwill balance. Our indefinite-lived intangible asset balance primarily consists of a number of individual brands. We test our reporting units and brands for impairment annually as of the first day of our second 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 (for example due to regulatory or industry changes), disposals of significant brands or components of our business, unexpected business disruptions (for example due to a natural disaster or loss of a customer, supplier, or other significant business relationship), unexpected significant declines in operating results, or significant adverse changes in the markets in which we operate. 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 to 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. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, growth rates, royalty rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, change, or if management’s expectations or plans otherwise change, including as a result of updates to our global five-year operating plan, then one or more of our reporting units or brands might become impaired in the future.

As a result of our annual and interim impairment tests, we have recognized historical goodwill impairment losses of $7.0 billion and indefinite-lived intangible asset impairment losses of $8.9 billion in 2018, and goodwill impairment losses of $744 million and indefinite-lived intangible asset impairment losses of $474 million in the first nine months of 2019. Our reporting units and brands that were impaired in 2018 and 2019 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 individual reporting units and brands that have 20% or less excess fair value over carrying amount as of the 2019 annual impairment test date 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 of $33.0 billion as of the 2019 annual impairment test date and included: U.S. Grocery, U.S. Refrigerated, U.S. Foodservice, Canada Retail, Canada Foodservice, Latin America Exports, EMEA East, Australia and New Zealand, and Northeast Asia. We had one reporting unit, Continental Europe, with 10-20% fair value over carrying amount. Continental Europe had a goodwill carrying amount of $593 million as of the 2019 annual impairment test date. The aggregate goodwill carrying amount of reporting units with fair value over carrying amount between 20-50% was $2.4 billion and there were no reporting units with fair value over carrying amount in excess of 50% as of the 2019 annual impairment test date. Brands with 10% or less fair value over carrying amount had an aggregate carrying amount after impairment of $26.4 billion as of the 2019 annual impairment test date and included: Kraft, Philadelphia, Velveeta, Lunchables, Miracle Whip, Planters, Maxwell House, Cool Whip, and ABC. Brands with 10-20% fair value over carrying amount had an aggregate carrying amount of $3.6 billion as of the 2019 annual impairment test date and included Oscar Mayer, Jet Puffed, and Quero. The aggregate carrying amount of brands with fair value over carrying amount between 20-50% was $4.2 billion as of the 2019 annual impairment test date. Although the remaining reporting units and brands have more than 50% excess fair value over carrying amount as of the 2019 annual impairment test date, these amounts are also associated with the 2013 Heinz acquisition and the 2015 Merger and are recorded on the 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.

There have been no other material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 29, 2018.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Our share repurchase activity in the three months ended September 28, 2019 was:

		Total Number of Shares Purchased(a)			Average Price  Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(b)			Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
6/30/2019 - 8/3/2019		—			$	—			—			$	—
8/4/2019 - 8/31/2019		27,169			28.79				—			—
9/1/2019 - 9/28/2019		83,920			28.91				—			—
Total		111,089							—

(a)

Includes the following types of share repurchase activity, when they occur: (1) shares repurchased in connection with the exercise of stock options (including periodic repurchases using option exercise proceeds), (2) shares withheld for tax liabilities associated with the vesting of restricted stock units, and (3) shares repurchased related to employee benefit programs (including our annual bonus swap program) or to offset the dilutive effect of equity issuances.

(b)	We do not have any publicly announced share repurchase plans or programs.

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Item 6. Exhibits.

Exhibit No.		Descriptions
4.1		Eighth Supplemental Indenture, dated as of September 25, 2019, governing the 3.750% senior notes due 2030, the 4.625% senior notes due 2039 and the 4.875% senior notes due 2049, by and among Kraft Heinz Foods Company, as issuer, The Kraft Heinz Company, as guarantor, and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (File No. 1-37482), filed on September 25, 2019).
4.2		Form of Note (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K (File No. 1-37482), filed on September 25, 2019).
4.3		Registration Rights Agreement, dated as of September 25, 2019, by and among Kraft Heinz Foods Company, a Pennsylvania limited liability company, The Kraft Heinz Company, a Delaware corporation, as guarantor, and BofA Securities, Inc., Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as representatives of the Initial Purchasers (incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K (File No. 1-37482), filed on September 25, 2019).
10.1		Waiver and Consent No. 3 to Credit Agreement, dated as of July 29, 2019, to the Credit Agreement dated as of July 6, 2015, by and among The Kraft Heinz Company, Kraft Heinz Foods Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and J.P. Morgan Europe Limited, as London agent for the Lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 1-37482), filed on July 31, 2019).
10.2		Offer of Continued Employment Letter, dated as of September 6, 2019, by and between The Kraft Heinz Company and George Zoghbi.
10.3		Form of Amended and Restated The Kraft Heinz Company 2016 Omnibus Incentive Plan Non-Qualified Stock Option Agreement.
10.4		Form of Amended and Restated The Kraft Heinz Company 2016 Omnibus Incentive Plan Restricted Stock Unit Award Agreement.
10.5		Form of Amended and Restated The Kraft Heinz Company 2016 Omnibus Incentive Plan 2019 Performance Share Award Notice.
31.1		Certification of Chief Executive Officer pursuant to Rule 13a 14(a)/15d 14(a) of the Securities Exchange Act of 1934.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a 14(a)/15d 14(a) of the Securities Exchange Act of 1934.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1		The following materials from The Kraft Heinz Company’s Quarterly Report on Form 10-Q for the period ended September 28, 2019 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Equity, (iv) the Condensed Consolidated Balance Sheets, (v) the Condensed Consolidated Statements of Cash Flows, (vi) Notes to Condensed Consolidated Financial Statements, and (vii) document and entity information.
104.1		The cover page from The Kraft Heinz Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2019, formatted in iXBRL.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		The Kraft Heinz Company
Date:	October 31, 2019
		By:	/s/ Paulo Basilio
			Paulo Basilio
			Executive Vice President and Chief Financial Officer
			(Duly Authorized Officer and Principal Financial Officer)

		The Kraft Heinz Company
Date:	October 31, 2019
		By:	/s/ Vince Garlati
			Vince Garlati
			Vice President, Global Controller
			(Principal Accounting Officer)

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