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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 March 27, 2021
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
https://cdn.kscope.io/23af2f4741b25331ea4751e9c9a1b794-khc-20210327_g1.jpg
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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueKHCThe 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 filerAccelerated filer
Non-accelerated filerSmaller reporting companyEmerging growth company

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 April 24, 2021, there were 1,223,147,340 shares of the registrant’s common stock outstanding.



Table of Contents
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.



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
March 27, 2021March 28, 2020
Net sales$6,394 $6,157 
Cost of products sold4,193 4,299 
Gross profit2,201 1,858 
Selling, general and administrative expenses, excluding impairment losses882 862 
Goodwill impairment losses230 226 
Selling, general and administrative expenses1,112 1,088 
Operating income/(loss)1,089 770 
Interest expense415 310 
Other expense/(income)(30)(81)
Income/(loss) before income taxes704 541 
Provision for/(benefit from) income taxes136 160 
Net income/(loss)568 381 
Net income/(loss) attributable to noncontrolling interest5 3 
Net income/(loss) attributable to common shareholders$563 $378 
Per share data applicable to common shareholders:
Basic earnings/(loss)$0.46 $0.31 
Diluted earnings/(loss)0.46 0.31 
See accompanying notes to the condensed consolidated financial statements.
1


The Kraft Heinz Company
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(Unaudited)
For the Three Months Ended
March 27, 2021March 28, 2020
Net income/(loss)$568 $381 
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments59 (790)
Net deferred gains/(losses) on net investment hedges5 166 
Amounts excluded from the effectiveness assessment of net investment hedges5 5 
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)(3)(6)
Net deferred gains/(losses) on cash flow hedges(29)101 
Amounts excluded from the effectiveness assessment of cash flow hedges7 5 
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)27 (10)
Net actuarial gains/(losses) arising during the period2  
Net postemployment benefit losses/(gains) reclassified to net income/(loss)(6)(25)
Total other comprehensive income/(loss)67 (554)
Total comprehensive income/(loss)635 (173)
Comprehensive income/(loss) attributable to noncontrolling interest3 (11)
Comprehensive income/(loss) attributable to common shareholders$632 $(162)
See accompanying notes to the condensed consolidated financial statements.
2


The Kraft Heinz Company
Condensed Consolidated Balance Sheets
(in millions, except per share data)
(Unaudited)
 March 27, 2021December 26, 2020
ASSETS
Cash and cash equivalents$2,360 $3,417 
Trade receivables (net of allowances of $45 at March 27, 2021 and $48 at December 26, 2020)
2,079 2,063 
Inventories2,676 2,773 
Prepaid expenses136 132 
Other current assets621 574 
Assets held for sale5,264 1,863 
Total current assets13,136 10,822 
Property, plant and equipment, net6,579 6,876 
Goodwill31,447 33,089 
Intangible assets, net45,021 46,667 
Other non-current assets2,481 2,376 
TOTAL ASSETS$98,664 $99,830 
LIABILITIES AND EQUITY
Commercial paper and other short-term debt$6 $6 
Current portion of long-term debt126 230 
Trade payables4,225 4,304 
Accrued marketing1,001 946 
Interest payable371 358 
Other current liabilities1,824 2,200 
Liabilities held for sale17 17 
Total current liabilities7,570 8,061 
Long-term debt27,074 28,070 
Deferred income taxes11,619 11,462 
Accrued postemployment costs244 243 
Other non-current liabilities1,726 1,751 
TOTAL LIABILITIES48,233 49,587 
Commitments and Contingencies (Note 15)
Equity: 
Common stock, $0.01 par value (5,000 shares authorized; 1,229 shares issued and 1,223 shares outstanding at March 27, 2021; 1,228 shares issued and 1,223 shares outstanding at December 26, 2020)
12 12 
Additional paid-in capital54,678 55,096 
Retained earnings/(deficit)(2,131)(2,694)
Accumulated other comprehensive income/(losses)(1,898)(1,967)
Treasury stock, at cost (6 shares at March 27, 2021 and 5 shares at December 26, 2020)
(373)(344)
Total shareholders' equity50,288 50,103 
Noncontrolling interest143 140 
TOTAL EQUITY50,431 50,243 
TOTAL LIABILITIES AND EQUITY$98,664 $99,830 
See accompanying notes to the condensed consolidated financial statements.
3


The Kraft Heinz Company
Condensed Consolidated Statements of Equity
(in millions)
(Unaudited)
Common StockAdditional Paid-in CapitalRetained Earnings/(Deficit)Accumulated Other Comprehensive Income/(Losses)Treasury Stock, at CostNoncontrolling InterestTotal Equity
Balance at December 26, 2020$12 $55,096 $(2,694)$(1,967)$(344)$140 $50,243 
Net income/(loss)— — 563 — — 5 568 
Other comprehensive income/(loss)— — — 69 — (2)67 
Dividends declared-common stock ($0.40 per share)
— (495)— — — — (495)
Exercise of stock options, issuance of other stock awards, and other— 77  — (29)— 48 
Balance at March 27, 2021$12 $54,678 $(2,131)$(1,898)$(373)$143 $50,431 

Common StockAdditional Paid-in CapitalRetained Earnings/(Deficit)Accumulated Other Comprehensive Income/(Losses)Treasury Stock, at CostNoncontrolling InterestTotal Equity
Balance at December 28, 2019$12 $56,828 $(3,060)$(1,886)$(271)$126 $51,749 
Net income/(loss) excluding redeemable noncontrolling interest— — 378 — — 3 381 
Other comprehensive income/(loss)— — — (540)— (14)(554)
Dividends declared-common stock ($0.40 per share)
— (492)— — — — (492)
Exercise of stock options, issuance of other stock awards, and other— 42 (4)— 2 — 40 
Balance at March 28, 2020$12 $56,378 $(2,686)$(2,426)$(269)$115 $51,124 
See accompanying notes to the condensed consolidated financial statements.
4


The Kraft Heinz Company
Condensed Consolidated Statements of Cash Flows
(in millions)
(Unaudited)
For the Three Months Ended
March 27, 2021March 28, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)$568 $381 
Adjustments to reconcile net income/(loss) to operating cash flows: 
Depreciation and amortization222 243 
Amortization of postretirement benefit plans prior service costs/(credits)(2)(31)
Equity award compensation expense51 33 
Deferred income tax provision/(benefit)127 (46)
Postemployment benefit plan contributions(9)(9)
Goodwill and intangible asset impairment losses230 226 
Nonmonetary currency devaluation4 1 
Loss/(gain) on sale of business19 2 
Other items, net30 169 
Changes in current assets and liabilities:
Trade receivables(34)(423)
Inventories(101)(231)
Accounts payable(11)(2)
Other current assets(54)(142)
Other current liabilities(230)41 
Net cash provided by/(used for) operating activities810 212 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(227)(131)
Other investing activities, net11 9 
Net cash provided by/(used for) investing activities(216)(122)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt(1,014)(407)
Debt prepayment and extinguishment costs(103) 
Proceeds from revolving credit facility 4,000 
Dividends paid(489)(488)
Other financing activities, net(37) 
Net cash provided by/(used for) financing activities(1,643)3,105 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(8)(71)
Cash, cash equivalents, and restricted cash
Net increase/(decrease)(1,057)3,124 
Balance at beginning of period3,418 2,280 
Balance at end of period$2,361 $5,404 
See accompanying notes to the condensed consolidated financial statements.
5


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.
We operate on a 52- or 53-week fiscal year ending on the last Saturday in December in each calendar year. Unless the context requires otherwise, references to years and quarters contained herein pertain to our fiscal years and fiscal quarters. Our 2021 fiscal year is scheduled to be a 52-week period ending on December 25, 2021, and the 2020 fiscal year was a 52-week period that ended on December 26, 2020.
The condensed consolidated balance sheet data at December 26, 2020 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 26, 2020. The results for interim periods are not necessarily indicative of future or annual results.
Principles of Consolidation
The condensed 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 three reportable segments defined by geographic region: United States, International, and Canada.
Considerations Related to COVID-19
The ongoing spread of COVID-19 throughout the United States and internationally, as well as measures implemented by governmental authorities in an attempt to minimize transmission of the virus, including social distancing restrictions, shelter-in-place orders, and business shutdowns, and consumer responses have had and continue to have negative and positive implications for portions of our business. Though many areas have begun relaxing such restrictions, varying levels of restrictions remain in many places and may be increased.
In the preparation of these financial statements and related disclosures we have assessed the impact that COVID-19 has had on our estimates, assumptions, forecasts, and accounting policies and made additional disclosures, as necessary. As COVID-19 and its impacts are unprecedented and ever evolving, future events and effects related to the pandemic cannot be determined with precision and actual results could significantly differ from estimates or forecasts.
See Note 8, Goodwill and Intangible Assets, Note 11, Postemployment Benefits, and Note 15, Commitments, Contingencies and Debt, for further discussion of COVID-19 considerations.
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.
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Reclassifications
We made reclassifications and adjustments to certain previously reported financial information to conform to our current period presentation. In the first quarter of 2021, we reclassified certain balances, which were previously reported in prepaid expenses, to inventories on our condensed consolidated balance sheets. Certain financial statement line items in our condensed consolidated balance sheet at December 26, 2020 and our condensed consolidated statement of cash flows for the three months ended March 28, 2020, were adjusted as necessary. See Note 7, Inventories, for additional information.
Held for Sale
At March 27, 2021, we classified certain assets and liabilities as held for sale in our condensed consolidated balance sheet, primarily relating to the divestitures of our nuts business and certain of our cheese businesses, a business in our International segment, and certain manufacturing equipment and land use rights across the globe. At December 26, 2020, the assets and liabilities identified as held for sale in our condensed consolidated balance sheet primarily related to the divestiture of certain of our cheese businesses, a business in our International segment, and certain manufacturing equipment and land use rights across the globe. See Note 4, Acquisitions and Divestitures, for additional information.
Note 2. Significant Accounting Policies
There were no significant changes to our accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 26, 2020.
Note 3. New Accounting Standards
Accounting Standards Adopted in the Current Year
Simplifying the Accounting for Income Taxes:
In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12 to simplify the accounting in Accounting Standards Codification (“ASC”) 740, Income Taxes. This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. This ASU became effective in the first quarter of 2021. The adoption of this ASU did not impact our financial statements or the related disclosures.
Note 4. Acquisitions and Divestitures
Divestitures
Nuts Transaction:
In February 2021, we entered into a definitive agreement with Hormel Foods Corporation (“Hormel”) to sell certain assets in our global nuts business for total consideration of approximately $3.4 billion (the “Nuts Transaction”). The net assets to be transferred in the Nuts Transaction include, among other things, our intellectual property rights to the Planters brand and to the Corn Nuts brand, three manufacturing facilities in the U.S., and the associated inventories (collectively, the “Nuts Disposal Group”).
In the first quarter of 2021, we determined that the Nuts Disposal Group met the held for sale criteria. Accordingly, we have presented the assets and liabilities of the Nuts Disposal Group as held for sale on the condensed consolidated balance sheet at March 27, 2021. As of February 10, 2021, the date the Nuts Disposal Group was determined to be held for sale, we tested the individual assets included within the Nuts Disposal Group for impairment. The net assets of the Nuts Disposal Group had an aggregate carrying amount above their $3.4 billion estimated fair value. We determined that the goodwill within the Nuts Disposal Group was partially impaired. As a result, we recorded a non-cash goodwill impairment loss of $230 million, which was recognized in selling, general and administrative expenses (“SG&A”), in the first quarter of 2021. Additionally, we recorded an estimated pre-tax loss on sale of business of $19 million in the first quarter of 2021 primarily related to estimated costs to sell, which was recognized in other expense/(income) on our condensed consolidated statement of income.
The Nuts Transaction is expected to close in the second quarter of 2021, subject to customary closing conditions. The Nuts Transaction is not considered a strategic shift that will have a major effect on our operations or financial results; therefore, it will not be reported as discontinued operations.
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Cheese Transaction:
In September 2020, we entered into a definitive agreement with an affiliate of Groupe Lactalis (“Lactalis”) to sell certain assets in our global cheese business, as well as to license certain trademarks, for total consideration of approximately $3.3 billion, including approximately $3.2 billion of cash consideration and approximately $75 million related to a perpetual license for the Cracker Barrel brand that Lactalis will grant to us for certain products (the “Cheese Transaction”). The Cheese Transaction has two primary components. The first component relates to the perpetual licenses for the Kraft and Velveeta brands that we will grant to Lactalis for certain cheese products (the “Kraft and Velveeta Licenses”). The second component relates to the net assets to be transferred to Lactalis (the “Cheese Disposal Group”), for which we recorded a $300 million impairment loss in the third quarter of 2020. We discuss the considerations related to each of these components in more detail below.
Of the $3.3 billion total consideration, approximately $1.5 billion was attributed to the Kraft and Velveeta Licenses based on the estimated fair value of the licensed portion of each brand. Lactalis will have rights to the Kraft and Velveeta brands in association with the manufacturing, distribution, marketing, and sale of certain cheese products in certain countries. Lactalis will also receive the rights to certain know-how in manufacturing the authorized cheese products. The license income will be recognized in the future as a reduction to SG&A, as it does not constitute our ongoing major or central operations.
The remaining $1.8 billion of consideration was attributed to the Cheese Disposal Group. The net assets in the Cheese Disposal Group are associated with our natural, grated, cultured, and specialty cheese businesses in the U.S., our grated cheese business in Canada, and our grated, processed, and natural cheese businesses outside the U.S. and Canada. The Cheese Disposal Group includes our global intellectual property rights to several brands, including, among others, Cracker Barrel, Breakstone’s, Knudsen, Athenos, Polly-O, and Hoffman’s, along with the Cheez Whiz brand in the majority of the countries outside of the U.S. and Canada. The Cheese Disposal Group also includes certain inventories, three manufacturing facilities and one distribution center in the U.S., and certain other manufacturing equipment.
Included in the consideration attributed to the Cheese Disposal Group is the perpetual license that Lactalis will grant to us for the Cracker Barrel brand for certain products, including macaroni and cheese. We determined that the Cracker Barrel license will be recognized on our consolidated balance sheet as an intangible asset upon closing of the Cheese Transaction, and increased the total consideration by approximately $75 million as noted above, which was the estimated fair value of the licensed portion of the Cracker Barrel brand.
In the third quarter of 2020, we determined that the Cheese Disposal Group met the held for sale criteria. Accordingly, we have presented the assets and liabilities of the Cheese Disposal Group as held for sale on the condensed consolidated balance sheets at March 27, 2021 and December 26, 2020. As of September 15, 2020, the date the Cheese Disposal Group was determined to be held for sale, we tested the individual assets included within the Cheese Disposal Group for impairment. The net assets of the Cheese Disposal Group had an aggregate carrying amount above their $1.8 billion estimated fair value. We determined that the goodwill within the Cheese Disposal Group was partially impaired. Accordingly, we recorded a non-cash impairment loss of $300 million, which was recognized in SG&A, in the third quarter of 2020. As of March 27, 2021, we assessed the fair value less costs to sell of the net assets of the Cheese Disposal Group and determined that their estimated fair value exceeded their carrying amount.
Additional considerations related to the Cheese Transaction include the treatment of the Kraft and Velveeta Licenses upon closing of the transaction. At the time the licensed rights are granted, we will reassess the remaining fair value of the retained portions of the Kraft and Velveeta brands and may record a charge to reduce the intangible asset carrying amounts to reflect the lower future cash flows expected to be generated after monetization of the licensed portion of each brand. Any potential reduction to the intangible asset carrying amounts will depend upon the excess fair value, if any, over carrying amount for each brand at the time we grant the perpetual licenses, which will be on the closing date of the Cheese Transaction. Changes in the fair value of the retained and licensed portions of each brand will impact the amount of any potential charges and the amount of license income that will be recognized, which, at this time, we would not expect to exceed the fair value of the perpetual licenses.
The Cheese Transaction is expected to close in the second half of 2021, subject to customary closing conditions, including regulatory approvals. Upon closing of the Cheese Transaction, and in addition to any potential impairment losses identified related to the Kraft and Velveeta brands noted above, we may recognize a gain or loss on sale of business. While the consideration for the transaction is not expected to materially change, the actual gain or loss on sale of business to be recognized will depend on, among other things, final transaction proceeds, inventory levels and underlying costs as of the closing date, and changes in the estimated fair values of certain components of the consideration.
8


We utilized the excess earnings method under the income approach to estimate the fair value of the licensed portion of the Kraft brand and the relief from royalty method under the income approach to estimate the fair value of the licensed portions of the Velveeta brand and the Cracker Barrel brand. Some of the more significant assumptions inherent in estimating these fair values include the estimated future annual net sales and net cash flows for each brand, contributory asset charges, 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, and a discount rate that reflects the level of risk associated with the future earnings attributable to each brand. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, and guideline companies. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. See Note 8, Goodwill and Intangible Assets, for additional information on the underlying assumptions and sensitivities.
The Cheese Transaction is not considered a strategic shift that will have a major effect on our operations or financial results; therefore, it will not be reported as discontinued operations.
Other Potential Dispositions:
As of March 27, 2021, we were in negotiations with a prospective third-party buyer for the sale of one business in our International segment. We expect this potential transaction to close in the next 12 months. We classified the related assets and liabilities as held for sale on the condensed consolidated balance sheets at March 27, 2021 and December 26, 2020. See Note 4, Acquisitions and Divestitures, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2019 for additional information.
In the first quarter of 2020, we had deemed a separate business in our International segment held for sale and recorded an estimated pre-tax loss on sale of business of $3 million within other expense/(income). In the fourth quarter of 2020, we deemed this business no longer held for sale and reversed the corresponding pre-tax loss. The related assets and liabilities were no longer classified as held for sale on our consolidated balance sheet at December 26, 2020.
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”) (the “Heinz India Transaction”). 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 January 30, 2019 (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. We recorded tax indemnity liabilities related to the Heinz India Transaction totaling approximately $48 million as of the Heinz India Closing Date. 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. There were no changes to the tax indemnity liabilities in the first quarter of 2021. We recognized a gain of approximately $1 million related to local India tax recoveries in the first quarter of 2020.
See Note 4, Acquisitions and Divestitures, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 26, 2020 for additional details related to this transaction and the tax indemnity associated with the Heinz India Transaction.
Deal Costs:
Related to our divestitures, we incurred aggregate deal costs of $7 million for the three months ended March 27, 2021. We recognized these deal costs in SG&A. There were no deal costs related to divestitures for the three months ended March 28, 2020.
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Held for Sale
Our assets and liabilities held for sale, by major class, were (in millions):
March 27, 2021
Nuts TransactionCheese TransactionOtherTotal
ASSETS
Cash and cash equivalents$ $ $33 $33 
Inventories160 358 11 529 
Property, plant and equipment, net195 256 15 466 
Goodwill (net of impairments of $530)
1,432 281  1,713 
Intangible assets, net1,645 850 24 2,519 
Other3 6 21 30 
Reserve for disposal groups(26)  (26)
Total assets held for sale$3,409 $1,751 $104 $5,264 
LIABILITIES
Other3 7 7 17 
Total liabilities held for sale$3 $7 $7 $17 

December 26, 2020
Cheese TransactionOtherTotal
ASSETS
Cash and cash equivalents$ $33 $33 
Inventories373 12 385 
Property, plant and equipment, net243 14 257 
Goodwill (net of impairment of $300)
281  281 
Intangible assets, net850 23 873 
Other10 24 34 
Total assets held for sale$1,757 $106 $1,863 
LIABILITIES
Other7 10 17 
Total liabilities held for sale$7 $10 $17 
Other balances held for sale at March 27, 2021 and December 26, 2020 primarily related to a business in our International segment as well as certain manufacturing equipment and land use rights across the globe. We recorded non-cash goodwill impairment losses of $230 million in the first quarter of 2021 related to the Nuts Transaction and $300 million in the third quarter of 2020 related to the Cheese Transaction. As a result, goodwill held for sale in the table above is presented net of cumulative goodwill impairment losses of $530 million at March 27, 2021 and $300 million at December 26, 2020.
Note 5. Restructuring Activities
See our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 26, 2020 for additional information on our restructuring activities.
Restructuring Activities:
We have restructuring programs globally, which are focused primarily on workforce reduction and factory closure and consolidation. For the three months ended March 27, 2021, we eliminated approximately 100 positions related to these programs. As of March 27, 2021, we expect to eliminate approximately 270 additional positions during the remainder of 2021. For the three months ended March 27, 2021, restructuring expenses were $18 million, which included $4 million of severance and employee benefit costs and $14 million of other implementation costs. Total restructuring expenses for the three months ended March 28, 2020 were insignificant.
10


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 CostsOther Exit CostsTotal
Balance at December 26, 2020$10 $20 $30 
Charges/(credits)4  4 
Cash payments(3)(1)(4)
Balance at March 27, 2021$11 $19 $30 
We expect the liability for severance and employee benefit costs as of March 27, 2021 to be paid by the end of 2021. 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 2021 and 2026.
Total Expenses:
Total expense/(income) related to restructuring activities, by income statement caption, were (in millions):
For the Three Months Ended
March 27, 2021March 28, 2020
Severance and employee benefit costs - Cost of products sold$3 $1 
Severance and employee benefit costs - SG&A1 (4)
Other costs - SG&A14 3 
$18 $ 
We do not include our restructuring activities within Segment Adjusted EBITDA (as defined in Note 17, Segment Reporting). The pre-tax impact of allocating such expenses to our segments would have been (in millions):
For the Three Months Ended
 March 27, 2021March 28, 2020
United States$1 $ 
International4 (1)
Canada 1 
General corporate expenses13  
$18 $ 

Note 6. 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):
March 27, 2021December 26, 2020
Cash and cash equivalents$2,360 $3,417 
Restricted cash included in other non-current assets1 1 
Cash, cash equivalents, and restricted cash$2,361 $3,418 
At March 27, 2021 and December 26, 2020, cash and cash equivalents excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information.
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Note 7. Inventories
Inventories consisted of the following (in millions):
March 27, 2021December 26, 2020
Packaging and ingredients$482 $482 
Spare parts211 219 
Work in process247 268 
Finished products1,736 1,804 
Inventories$2,676 $2,773 
At March 27, 2021 and December 26, 2020, inventories excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information.
In the first quarter of 2021, we reclassified certain balances from prepaid expenses to inventories on our condensed consolidated balance sheets. See Note 1, Basis of Presentation, for additional information.
Note 8. Goodwill and Intangible Assets
Goodwill:
Changes in the carrying amount of goodwill, by segment, were (in millions):
United StatesInternationalCanadaTotal
Balance at December 26, 2020$28,429 $3,160 $1,500 $33,089 
Reclassified to assets held for sale(1,653) (9)(1,662)
Translation adjustments and other (15)35 20 
Balance at March 27, 2021$26,776 $3,145 $1,526 $31,447 
At March 27, 2021 and December 26, 2020, goodwill excluded amounts classified as held for sale. Additionally, the amounts reclassified to assets held for sale in the table above represent the goodwill that was tested and determined to be partially impaired in connection with the Nuts Transaction. The resulting impairment loss of $230 million was recognized as a reduction to assets held for sale at March 27, 2021. See Note 4, Acquisitions and Divestitures, for additional information related to the Nuts Transaction and the Cheese Transaction and their financial statement impacts.
Q1 2021 Goodwill Impairment Testing
In the first quarter of 2021, we announced the Nuts Transaction and determined that the Nuts Disposal Group was held for sale. Accordingly, based on a relative fair value allocation, we reclassified $1.7 billion of goodwill to assets held for sale, which included a portion of goodwill from four of our reporting units. The Nuts Transaction primarily affected our Kids, Snacks, and Beverages (“KSB”) reporting unit but also affected, to a lesser extent, our Enhancers, Specialty, and Away From Home (“ESA”), Canada Foodservice, and Puerto Rico reporting units. These reporting units were evaluated for impairment prior to their representative inclusion in the Nuts Disposal Group as well as on a post-reclassification basis. The fair value of all reporting units was determined to be in excess of their carrying amounts in both scenarios and, therefore, no impairment was recorded.
As of March 27, 2021, we maintain 14 reporting units, nine of which comprise our goodwill balance. These nine reporting units had an aggregate goodwill carrying amount of $31.4 billion at March 27, 2021. As of their latest impairment testing date, three reporting units had 10% or less fair value over carrying amount and an aggregate goodwill carrying amount of $7.3 billion, three reporting units had between 10-20% fair value over carrying amount and a goodwill carrying amount of $11.1 billion, two reporting units had between 20-50% fair value over carrying amount and a goodwill carrying amount of $12.4 billion, and one reporting unit had over 50% fair value over carrying amount and a goodwill carrying amount of $326 million. 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.
Q1 2020 Goodwill Impairment Testing
As previously disclosed, in the first quarter of 2020, following changes to our internal reporting and reportable segments, the composition of certain of our reporting units changed and we performed an interim impairment test (or transition test) on the affected reporting units on both a pre- and post-reorganization basis.
We performed our pre-reorganization impairment test as of December 29, 2019, which was our first day of 2020. There were no impairment losses resulting from our pre-reorganization impairment test.
12


We performed our post-reorganization impairment test as of December 29, 2019. There were six reporting units in scope for our post-reorganization impairment test: Northern Europe, Continental Europe, Asia, Australia, New Zealand, and Japan (“ANJ”), Latin America (“LATAM”), and Puerto Rico. As a result of our post-reorganization impairment test, we recognized a non-cash impairment loss of $226 million in SG&A in the first quarter of 2020 related to two reporting units contained within our International segment, including $83 million related to our ANJ reporting unit and $143 million related to our LATAM reporting unit, which represented all of the goodwill associated with these reporting units. The remaining reporting units tested as part of our post-reorganization impairment test each had excess fair value over carrying amount as of December 29, 2019.
See Note 9, Goodwill and Intangible Assets, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 26, 2020 for additional information on these impairment losses.
Accumulated impairment losses to goodwill were $10.8 billion as of March 27, 2021.
Additional Goodwill Considerations
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, income tax rates, foreign currency exchange rates, or any factors that could be affected by COVID-19, change, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then one or more of our reporting units might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could lead to the impairment of one or more of our reporting units in the future.
In 2020 and continuing into 2021, the COVID-19 pandemic produced and has continued to produce a short-term beneficial financial impact for our consolidated results. Retail sales have increased due to higher than anticipated consumer demand for our products. The foodservice channel, however, has experienced a negative impact from prolonged social distancing mandates limiting access to and capacity at away-from-home establishments for a longer period of time than was expected when they were originally put in place. Our Canada Foodservice reporting unit is the most exposed of our reporting units to the long-term impacts to away-from-home establishments. While our other reporting units have varying levels of exposure to the foodservice channel, they also have exposure to the retail channel, which offsets some of the risk associated with the potential long-term impacts of shifts in net sales between retail and away-from-home establishments. Our Canada Foodservice reporting unit was impaired during our 2020 annual impairment test, reflecting our best estimate at that time of the future outlook and risks of this business. The Canada Foodservice reporting unit maintains an aggregate goodwill carrying amount of approximately $157 million as of March 27, 2021. A number of factors could result in further future impairments of our foodservice (or away-from-home) businesses, including but not limited to: continued mandates around closures of dining rooms in restaurants, distancing of people within establishments resulting in fewer customers, the total number of restaurant closures, forthcoming changes in consumer preferences or regulatory requirements over product formats (e.g., table top packaging vs. single serve packaging), and consumer trends of dining-in versus dining-out. Given the evolving nature of and uncertainty driven by the COVID-19 pandemic, we will continue to evaluate the impact on our reporting units as adverse changes to these assumptions could result in future impairments.
Our reporting units that were impaired were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates. Accordingly, these and other reporting units that have 20% or less excess fair value over carrying amount as of their latest impairment testing 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 their latest impairment testing date, these amounts are also associated with the acquisition of H. J. Heinz Company in 2013 by Berkshire Hathaway Inc. and 3G Global Food Holdings, LP (the “2013 Heinz Acquisition”) and the merger of Kraft Foods Group, Inc. with and into H.J. Heinz Holding Corporation in 2015 (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 26, 2020$42,267 
Reclassified to assets held for sale(1,487)
Translation adjustments66 
Balance at March 27, 2021$40,846 
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At March 27, 2021 and December 26, 2020, indefinite-lived intangible assets excluded amounts classified as held for sale. Indefinite-lived intangible assets amounts reclassified to assets held for sale in the table above represent the Planters trademark in connection with the Nuts Transaction. See Note 4, 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 $40.8 billion at March 27, 2021. 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. There were no indications that any of our brands were more likely than not impaired in the first quarter of 2021.
Additional Indefinite-Lived Intangible Asset Considerations
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, income tax rates, foreign currency exchange rates, or any factors that could be affected by COVID-19, change, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then one or more of our brands might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could lead to the impairment of one or more of our brands in the future.
As we consider the ongoing impact of the COVID-19 pandemic with regard to our indefinite-lived intangible assets, a number of factors could have a future adverse impact on our brands, including changes in consumer and consumption trends in both the short and long term, the extent of continued government mandates to shelter in place, total number of restaurant closures, economic declines, and reductions in consumer discretionary income. We have seen an increase in our retail business in the short-term that has more than offset declines in our foodservice business over the same period. Our brands are generally common across both the retail and foodservice businesses and the fair value of our brands are subject to a similar mix of positive and negative factors. Given the evolving nature and uncertainty driven by COVID-19 pandemic, we will continue to evaluate the impact on our brands.
Our brands that were impaired in 2020 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 their latest impairment testing 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 their latest impairment testing 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):
 March 27, 2021December 26, 2020
GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Trademarks$1,962 $(492)$1,470 $2,000 $(478)$1,522 
Customer-related assets3,631 (938)2,693 3,808 (942)2,866 
Other15 (3)12 15 (3)12 
$5,608 $(1,433)$4,175 $5,823 $(1,423)$4,400 
At March 27, 2021 and December 26, 2020, definite-lived intangible assets excluded amounts classified as held for sale. In the first quarter of 2021 in connection with the Nuts Transaction, definite-lived intangible assets reclassified to assets held for sale included customer-related assets with a net carrying value of $133 million and the Corn Nuts trademark with a net carrying value of $25 million. See Note 4, Acquisitions and Divestitures, for additional information on amounts held for sale.
Amortization expense for definite-lived intangible assets was $61 million for the three months ended March 27, 2021 and $68 million for the three months ended March 28, 2020. Aside from amortization expense and the amounts reclassified to assets held for sale, the change in definite-lived intangible assets from December 26, 2020 to March 27, 2021 primarily reflects the impact of foreign currency.
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We estimate that amortization expense related to definite-lived intangible assets will be approximately $239 million for each of the next five years.
Note 9. 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, the calculation of the percentage point impact of goodwill impairment and other items on the effective tax rate are affected by income/(loss) before income taxes. Further, 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.
Our effective tax rate of 19.3% for the three months ended March 27, 2021 was favorably impacted by the geographic mix of pre-tax income and the impact of certain net discrete items, including the reversal of uncertain tax position reserves in certain U.S. state and foreign jurisdictions, favorable changes in estimates of certain foreign taxes, and the revaluation of our deferred tax balances due to changes in U.S. state tax rates. These impacts were partially offset by the unfavorable impact of certain net discrete items, primarily due to non-deductible goodwill impairment (8.2%) related to the Nuts Transaction.
Our effective tax rate of 29.6% for the three months ended March 28, 2020 was unfavorably impacted by net discrete items, primarily related to non-deductible goodwill impairments (9.1%), which were partially offset by a favorable geographic mix of pre-tax income.
Note 10. Employees’ Stock Incentive Plans
Stock Options:
Our stock option activity and related information was:
Number of Stock OptionsWeighted Average Exercise Price
(per share)
Outstanding at December 26, 202013,479,668 $43.71 
Granted980,222 37.09 
Forfeited(202,229)49.25 
Exercised(958,927)25.82 
Outstanding at March 27, 202113,298,734 44.43 
The aggregate intrinsic value of stock options exercised during the period was $9 million for the three months ended March 27, 2021.
Restricted Stock Units:
Our restricted stock unit (“RSU”) activity and related information was:
Number of UnitsWeighted Average Grant Date Fair Value
(per share)
Outstanding at December 26, 202014,235,922 $31.32 
Granted2,880,455 37.09 
Forfeited(271,523)30.73 
Vested(233,994)77.29 
Outstanding at March 27, 202116,610,860 31.68 
The aggregate fair value of RSUs that vested during the period was $9 million for the three months ended March 27, 2021.
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Performance Share Units:
Our performance share unit (“PSU”) activity and related information was:
Number of UnitsWeighted Average Grant Date Fair Value
(per share)
Outstanding at December 26, 20207,778,710 $33.16 
Granted1,571,066 34.66 
Forfeited(144,762)42.79 
Outstanding at March 27, 20219,205,014 33.27 

Note 11. Postemployment Benefits
See our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 26, 2020 for additional information on our postemployment related accounting policies.
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. PlansNon-U.S. Plans
March 27, 2021March 28, 2020March 27, 2021March 28, 2020
Service cost$2 $2 $4 $4 
Interest cost22