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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 April 1, 2023
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/13e09d773a781e91dd80983c50ecdd88-kraftheinzlogo49.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 filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐Emerging 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 29, 2023, there were 1,227,237,484 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.


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 reflect management’s current expectations and 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 or suppliers, or in 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 or platforms, increase our market share, or add products that are in faster-growing and more profitable categories; product recalls or other product liability claims; climate change and legal or regulatory responses; our ability to identify, complete, or realize the benefits from strategic acquisitions, divestitures, alliances, joint ventures, or investments; our ability to successfully execute our strategic initiatives; the impacts of our international operations; our ability to protect intellectual property rights; 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; the influence of our largest stockholder; our level of indebtedness, as well as our ability to comply with covenants under our debt instruments; additional impairments of the carrying amounts of goodwill or other indefinite-lived intangible assets; foreign exchange rate fluctuations; volatility in commodity, energy, and other input costs; volatility in the market value of all or a portion of the commodity derivatives we use; compliance with laws and regulations and related legal claims or regulatory enforcement actions; failure to maintain an effective system of internal controls; a downgrade in our credit rating; the impact of sales of our common stock in the public market; our ability to continue to pay a regular dividend and the amounts of any such dividends; disruptions in the global economy caused by geopolitical conflicts, including the ongoing conflict between Russia and Ukraine; unanticipated business disruptions and natural events in the locations in which we or our customers, suppliers, distributors, or regulators operate; economic and political conditions in the United States and various other nations where we do business (including inflationary pressures, instability in financial institutions, general economic slowdown, or recession); 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; our dependence on information technology and systems, including service interruptions, misappropriation of data, or breaches of security; increased pension, labor, and people-related expenses; changes in tax laws and interpretations; volatility of capital markets and other macroeconomic factors; and other 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 31, 2022. We disclaim and do not undertake any obligation to update, revise, or withdraw any forward-looking statement in this report, except as required by applicable law or regulation.


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
April 1, 2023March 26, 2022
Net sales$6,489 $6,045 
Cost of products sold4,376 4,114 
Gross profit2,113 1,931 
Selling, general and administrative expenses, excluding impairment losses870 827 
Goodwill impairment losses— (11)
Selling, general and administrative expenses870 816 
Operating income/(loss)1,243 1,115 
Interest expense227 242 
Other expense/(income)(35)(98)
Income/(loss) before income taxes1,051 971 
Provision for/(benefit from) income taxes214 190 
Net income/(loss)837 781 
Net income/(loss) attributable to noncontrolling interest1 5 
Net income/(loss) attributable to common shareholders$836 $776 
Per share data applicable to common shareholders:
Basic earnings/(loss)$0.68 $0.63 
Diluted earnings/(loss)0.68 0.63 
See accompanying notes to the condensed consolidated financial statements.
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The Kraft Heinz Company
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(Unaudited)
For the Three Months Ended
April 1, 2023March 26, 2022
Net income/(loss)$837 $781 
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments119 (33)
Net deferred gains/(losses) on net investment hedges(24)52 
Amounts excluded from the effectiveness assessment of net investment hedges6 9 
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)(6)(8)
Net deferred gains/(losses) on cash flow hedges(15)(34)
Amounts excluded from the effectiveness assessment of cash flow hedges4 7 
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)(16)22 
Net postemployment benefit losses/(gains) reclassified to net income/(loss)(2)(4)
Total other comprehensive income/(loss)66 11 
Total comprehensive income/(loss)903 792 
Comprehensive income/(loss) attributable to noncontrolling interest5 4 
Comprehensive income/(loss) attributable to common shareholders$898 $788 
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)
 April 1, 2023December 31, 2022
ASSETS
Cash and cash equivalents$826 $1,040 
Trade receivables (net of allowances of $45 at April 1, 2023 and $46 at December 31, 2022)
2,286 2,120 
Inventories4,016 3,651 
Prepaid expenses329 240 
Other current assets755 842 
Assets held for sale4 4 
Total current assets8,216 7,897 
Property, plant and equipment, net6,776 6,740 
Goodwill30,888 30,833 
Intangible assets, net42,665 42,649 
Other non-current assets2,398 2,394 
TOTAL ASSETS$90,943 $90,513 
LIABILITIES AND EQUITY
Commercial paper and other short-term debt$2 $6 
Current portion of long-term debt840 831 
Trade payables4,804 4,848 
Accrued marketing758 749 
Interest payable315 264 
Other current liabilities2,235 2,330 
Total current liabilities8,954 9,028 
Long-term debt19,263 19,233 
Deferred income taxes10,162 10,152 
Accrued postemployment costs145 144 
Long-term deferred income1,465 1,477 
Other non-current liabilities1,601 1,609 
TOTAL LIABILITIES41,590 41,643 
Commitments and Contingencies (Note 14)
Redeemable noncontrolling interest40 40 
Equity: 
Common stock, $0.01 par value (5,000 shares authorized; 1,245 shares issued and 1,227 shares outstanding at April 1, 2023; 1,243 shares issued and 1,225 shares outstanding at December 31, 2022)
12 12 
Additional paid-in capital51,910 51,834 
Retained earnings/(deficit)831 489 
Accumulated other comprehensive income/(losses)(2,748)(2,810)
Treasury stock, at cost (18 shares at April 1, 2023 and 18 shares at December 31, 2022)
(852)(847)
Total shareholders' equity49,153 48,678 
Noncontrolling interest160 152 
TOTAL EQUITY49,313 48,830 
TOTAL LIABILITIES AND EQUITY$90,943 $90,513 
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 StockAdditional Paid-in CapitalRetained Earnings/(Deficit)Accumulated Other Comprehensive Income/(Losses)Treasury Stock, at CostNoncontrolling InterestTotal Equity
Balance at December 31, 2022$12 $51,834 $489 $(2,810)$(847)$152 $48,830 
Net income/(loss) excluding redeemable noncontrolling interest— — 836 — — 1 837 
Other comprehensive income/(loss) excluding redeemable noncontrolling interest— — — 62 — 4 66 
Dividends declared-common stock ($0.40 per share)
— — (494)— — — (494)
Exercise of stock options, issuance of other stock awards, and other— 76 — — (5)3 74 
Balance at April 1, 2023$12 $51,910 $831 $(2,748)$(852)$160 $49,313 
Common StockAdditional Paid-in CapitalRetained Earnings/(Deficit)Accumulated Other Comprehensive Income/(Losses)Treasury Stock, at CostNoncontrolling InterestTotal Equity
Balance at December 25, 2021$12 $53,379 $(1,682)$(1,824)$(587)$150 $49,448 
Net income/(loss) excluding redeemable noncontrolling interest— — 776 — — 4 780 
Other comprehensive income/(loss) excluding redeemable noncontrolling interest— — — 12 — (1)11 
Dividends declared-common stock ($0.40 per share)
— (492)— — — — (492)
Exercise of stock options, issuance of other stock awards, and other— 67 1 — (18)— 50 
Balance at March 26, 2022$12 $52,954 $(905)$(1,812)$(605)$153 $49,797 
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 Three Months Ended
April 1, 2023March 26, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)$837 $781 
Adjustments to reconcile net income/(loss) to operating cash flows: 
Depreciation and amortization220 220 
Amortization of postemployment benefit plans prior service costs/(credits)(3)(4)
Divestiture-related license income(13)(14)
Equity award compensation expense31 34 
Deferred income tax provision/(benefit)(3)23 
Postemployment benefit plan contributions(6)(7)
Goodwill and intangible asset impairment losses— (11)
Nonmonetary currency devaluation3 4 
Loss/(gain) on sale of business1 1 
Other items, net29 (69)
Changes in current assets and liabilities:
Trade receivables(151)(123)
Inventories(406)(382)
Accounts payable(32)6 
Other current assets(53)(91)
Other current liabilities32 118 
Net cash provided by/(used for) operating activities486 486 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(266)(214)
Payments to acquire business, net of cash acquired— (241)
Proceeds from sale of business, net of cash disposed and working capital adjustments— (20)
Other investing activities, net2 6 
Net cash provided by/(used for) investing activities(264)(469)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt(1)(9)
Dividends paid(491)(490)
Other financing activities, net53 14 
Net cash provided by/(used for) financing activities(439)(485)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash4 2 
Cash, cash equivalents, and restricted cash
Net increase/(decrease)(213)(466)
Balance at beginning of period1,041 3,446 
Balance at end of period$828 $2,980 
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.
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 2023 fiscal year is scheduled to be a 52-week period ending on December 30, 2023, and our 2022 fiscal year was a 53-week period that ended on December 31, 2022.
The condensed consolidated balance sheet data at December 31, 2022 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 31, 2022. The results for interim periods are not necessarily indicative of future or annual results.
Principles of Consolidation
The condensed consolidated financial statements include The Kraft Heinz Company and all of our controlled subsidiaries. All intercompany transactions are eliminated.
Reportable Segments
We manage and report our operating results through two reportable segments defined by geographic region: North America and International.
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 and adjustments to certain previously reported financial information to conform to our current period presentation.
Held for Sale
At April 1, 2023 and December 31, 2022, we classified certain assets as held for sale in our condensed consolidated balance sheet, primarily relating to land use rights across the globe.
Cash, Cash Equivalents, and Restricted Cash
Cash equivalents include term deposits with banks, money market funds, and all highly liquid investments with original maturities of three months or less. The fair value of cash equivalents approximates the carrying amount. Cash and cash equivalents that are legally restricted as to withdrawal or usage are classified in other current assets or other non-current assets, as applicable, on the condensed consolidated balance sheets. At April 1, 2023, we had restricted cash recorded in other current assets of $1 million and in other non-current assets of $1 million. At December 31, 2022, we had restricted cash recorded in other non-current assets of $1 million. Total cash, cash equivalents, and restricted cash was $828 million at April 1, 2023 and $1,041 million at December 31, 2022.
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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 31, 2022.
Note 3. New Accounting Standards
Accounting Standards Adopted in the Current Year
Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations:
In September 2022, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2022-04 to add disclosure requirements relative to supplier financing programs under ASC 405, Liabilities. The guidance requires entities that maintain supplier financing programs to provide information in their financial statements about their use of supplier finance programs and their effect on the entity’s working capital, liquidity, and cash flows. Specifically, the amendment requires entities to disclose the key terms of their programs, amounts outstanding, balance sheet presentation, and a rollforward of amounts outstanding during the annual period. Only the amount outstanding at the end of the period is required to be disclosed in interim periods. We adopted this ASU when it became effective in the first quarter of our fiscal year 2023, except for the rollforward requirement, which is effective in fiscal year 2024. The adoption of this ASU did not have a significant impact on our financial statements and related disclosures.
Note 4. Acquisitions and Divestitures
Acquisitions
Hemmer Acquisition:
On March 31, 2022 (the “Hemmer Acquisition Date”), we acquired a majority of the outstanding equity interests of Companhia Hemmer Indústria e Comércio (“Hemmer”), a Brazilian food and beverage manufacturing company focused on the condiments and sauces category, from certain third-party shareholders (the “Hemmer Acquisition”).
The Hemmer Acquisition was accounted for under the acquisition method of accounting for business combinations. Total cash consideration related to the Hemmer Acquisition was approximately 1.3 billion Brazilian reais (approximately $279 million at the Hemmer Acquisition Date). A noncontrolling interest was recognized at fair value, which was determined to be the noncontrolling interest’s proportionate share of the acquiree’s identifiable net assets, as of the Hemmer Acquisition Date. As of the Hemmer Acquisition Date, we acquired 94% of the outstanding shares of Hemmer. In the third quarter of 2022, we completed the redemption of the remaining outstanding shares and own 100% of the controlling interest in Hemmer.
We entered into foreign exchange derivative contracts to economically hedge the foreign currency exposure related to the cash consideration for the Hemmer Acquisition. See Note 11, Financial Instruments, for additional information.
We utilized fair values at the Hemmer Acquisition Date to allocate the total consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed. The purchase price allocation for the Hemmer Acquisition became final during the first quarter of 2023.
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The final purchase price allocation to assets acquired and liabilities assumed in the Hemmer Acquisition was (in millions):
Initial Allocation(a)
AdjustmentsFinal Allocation
Cash$1 $— $1 
Trade receivables13 — 13 
Inventories17 — 17 
Other current assets2 — 2 
Property, plant and equipment, net14 — 14 
Identifiable intangible assets122 — 122 
Other non-current assets13 4 17 
Short-term debt(9)— (9)
Trade payables(11)— (11)
Other current liabilities(31)— (31)
Long-term debt(11)— (11)
Other non-current liabilities(44)— (44)
Net assets acquired76 4 80 
Noncontrolling interest(16)— (16)
Goodwill on acquisition219 (4)215 
Total consideration$279 $— $279 
(a)    As reported in Note 4, Acquisitions and Divestitures, to our condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the three months ended June 25, 2022.
The Hemmer Acquisition preliminarily resulted in $219 million of non-tax deductible goodwill relating principally to Hemmer’s long-term experience and large presence operating in emerging markets. In the fourth quarter of 2022, a portion of the goodwill became tax deductible following the merger of Hemmer into our existing legal entity structure. This goodwill was assigned to the Latin America (“LATAM”) reporting unit within our International segment. In the fourth quarter of 2022, certain insignificant measurement period adjustments were made to the initial allocation, and the final amount of goodwill was adjusted to $215 million.
The purchase price allocation to identifiable intangible assets acquired in the Hemmer Acquisition was:
Fair Value
(in millions of dollars)		Weighted Average Life
(in years)
Definite-lived trademarks$101 13
Customer-related assets21 15
Total$122 
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’s plans, and market comparables.
We used carrying values as of the Hemmer 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 such date.
Just Spices Acquisition:
On January 18, 2022 (the “Just Spices Acquisition Date”), we acquired 85% of the shares of Just Spices GmbH (“Just Spices”), a German-based company focused on direct-to-consumer sales of premium spice blends, from certain third-party shareholders (the “Just Spices Acquisition”).
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The Just Spices Acquisition was accounted for under the acquisition method of accounting for business combinations. Total cash consideration related to the Just Spices Acquisition was approximately 214 million euros (approximately $243 million at the Just Spices Acquisition Date). A noncontrolling interest was recognized at fair value, which was determined to be the noncontrolling interest’s proportionate share of the acquiree’s identifiable net assets, as of the Just Spices Acquisition Date. Under the terms of certain transaction agreements, Just Spices’ other equity holders each have a put option to require us to purchase the remaining equity interests beginning three years after the Just Spices Acquisition Date. If the put option is not exercised, we have a call option to acquire the remaining equity interests of Just Spices. Considering the contractual terms related to the noncontrolling interest, it is classified as redeemable noncontrolling interest on our condensed consolidated balance sheet.
Subsequent to the Just Spices Acquisition, the redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value and its carrying amount adjusted for the net income/(loss) attributable to the noncontrolling interest.
We utilized fair values at the Just Spices Acquisition Date to allocate the total consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed. The purchase price allocation for the Just Spices Acquisition was final as of December 31, 2022.
The final purchase price allocation to assets acquired and liabilities assumed in the Just Spices Acquisition was (in millions):
Final Allocation
Cash$2 
Trade receivables4 
Inventories7 
Other current assets9 
Property, plant and equipment, net1 
Identifiable intangible assets172 
Other non-current assets7 
Trade payables(10)
Other current liabilities(12)
Other non-current liabilities(54)
Net assets acquired126 
Redeemable noncontrolling interest(39)
Goodwill on acquisition156 
Total consideration$243 
The Just Spices Acquisition preliminarily resulted in $167 million of non-tax deductible goodwill relating principally to Just Spices’ social media presence. This goodwill was assigned to the Continental Europe reporting unit within our International segment. In 2022, certain insignificant measurement period adjustments were made to the initial allocation, and the final amount of goodwill was adjusted to $156 million.
The purchase price allocation to identifiable intangible assets acquired in the Just Spices Acquisition was:
Fair Value
(in millions of dollars)		Weighted Average Life
(in years)
Definite-lived trademarks$72 10
Customer-related assets100 15
Total$172 
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’s plans, and market comparables.
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We used carrying values as of the Just Spices 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 such date.
Deal Costs:
We incurred insignificant deal costs for the three months ended April 1, 2023 and the three months ended March 26, 2022 related to our acquisitions and divestitures. We recognized these deal costs in selling, general and administrative expenses (“SG&A”).
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 31, 2022 for additional information on our restructuring activities.
Restructuring Activities:
We have restructuring programs globally, which are focused primarily on reducing our overall cost structure and streamlining our organizational design. For the three months ended April 1, 2023, we eliminated approximately 335 positions related to these programs. As of April 1, 2023, we expect to eliminate approximately 100 additional positions during the remainder of 2023, primarily in our International segment. For the three months ended April 1, 2023, restructuring activities resulted in income of $8 million and included $2 million of asset-related costs and a benefit of $10 million in other implementation costs. Restructuring activities resulted in expenses of $19 million for the three months ended March 26, 2022.
Our net liability balance for restructuring project costs that qualify as exit and disposal costs under U.S. GAAP was (in millions):
Severance and Employee Benefit CostsOther Exit CostsTotal
Balance at December 31, 2022$28 $11 $39 
Cash payments(10)(1)(11)
Non-cash utilization(2)(1)(3)
Balance at April 1, 2023$16 $9 $25 
We expect the liability for severance and employee benefit costs as of April 1, 2023 to be paid by the end of 2023. 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 2024 and 2026.
Total Expenses/(Income):
Total expense/(income) related to restructuring activities, by income statement caption, were (in millions):
For the Three Months Ended
April 1, 2023March 26, 2022
Severance and employee benefit costs - Cost of products sold$2 $(3)
Severance and employee benefit costs - SG&A(4)13 
Severance and employee benefit costs - Other expense/(income)2 — 
Asset-related costs - Cost of products sold2 4 
Other costs - Cost of products sold2 3 
Other costs - SG&A(12)2 
$(8)$19 
We do not include our restructuring activities within Segment Adjusted EBITDA (as defined in Note 16, Segment Reporting). The pre-tax impact of allocating such expenses/(income) to our segments would have been (in millions):
For the Three Months Ended
 April 1, 2023March 26, 2022
North America$6 $20 
International(1)(2)
General corporate expenses(13)1 
$(8)$19 
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Note 6. Inventories
Inventories consisted of the following (in millions):
April 1, 2023December 31, 2022
Packaging and ingredients$965 $1,032 
Spare parts213 208 
Work in process330 334 
Finished products2,508 2,077 
Inventories$4,016 $3,651 
Note 7. Goodwill and Intangible Assets
Goodwill:
Changes in the carrying amount of goodwill, by segment, were (in millions):
North AmericaInternationalTotal
Balance at December 31, 2022$27,685 $3,148 $30,833 
Translation adjustments and other3 52 55 
Balance at April 1, 2023$27,688 $3,200 $30,888 
As of April 1, 2023, we maintain 11 reporting units, seven of which comprise our goodwill balance. These seven reporting units had an aggregate goodwill carrying amount of $30.9 billion at April 1, 2023. As of their latest impairment test, our reporting units with 20% or less fair value over carrying amount had an aggregate goodwill carrying amount of $16.4 billion and included Taste, Meals, and Away From Home (“TMA”), Canada and North America Coffee (“CNAC”), and Continental Europe; and our reporting units with between 20-50% fair value over carrying amount had an aggregate goodwill carrying amount of $14.5 billion and included Fresh, Beverages, and Desserts (“FBD”), Northern Europe, Asia, and LATAM.
Accumulated impairment losses to goodwill were $11.3 billion as of April 1, 2023 and December 31, 2022.
No events occurred during the three months ended April 1, 2023 or the three months ended March 26, 2022 that indicated it was more likely than not that our goodwill was impaired.
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. Our current expectations also include certain assumptions that could be negatively impacted if we are unable to meet our pricing expectations in relation to inflation. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, income tax rates, foreign currency exchange rates, or inflation, change, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then one or more of our reporting units might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets has led and could in the future lead to goodwill impairments.
Our reporting units that were impaired in 2022 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, reporting units that have 20% or less excess fair value over carrying amount as of their latest impairment test 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 test, these amounts are also susceptible to impairments if any assumptions, estimates, or market factors significantly change in the future.
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 31, 2022$38,552 
Translation adjustments and other68 
Balance at April 1, 2023$38,620 
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Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $38.6 billion at April 1, 2023. As of their latest impairment test, brands with 20% or less fair value over carrying amount had an aggregate carrying amount after impairment of $16.6 billion, brands with between 20-50% fair value over carrying amount had an aggregate carrying amount of $2.5 billion, and brands that had over 50% fair value over carrying amount had an aggregate carrying amount of $19.4 billion.
No events occurred during the three months ended April 1, 2023 or the three months ended March 26, 2022 that indicated it was more likely than not that any brand was impaired.
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. Our current expectations also include certain assumptions that could be negatively impacted if we are unable to meet our pricing expectations in relation to inflation. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, income tax rates, foreign currency exchange rates, or inflation, change, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then one or more of our brands might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets has led and could in the future lead to intangible asset impairments.
Our brands that were impaired in 2022 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 test 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 test, these amounts are also susceptible to impairments if any assumptions, estimates, or market factors significantly change in the future.
Definite-lived intangible assets:
Definite-lived intangible assets were (in millions):
 April 1, 2023December 31, 2022
GrossAccumulated
Amortization		NetGrossAccumulated
Amortization		Net
Trademarks$2,225 $(672)$1,553 $2,223 $(649)$1,574 
Customer-related assets3,698 (1,216)2,482 3,690 (1,177)2,513 
Other14 (4)10 13 (3)10 
$5,937 $(1,892)$4,045 $5,926 $(1,829)$4,097 
Amortization expense for definite-lived intangible assets was $62 million for the three months ended April 1, 2023 and $64 million for the three months ended March 26, 2022. Aside from amortization expense, the change in definite-lived intangible assets from December 31, 2022 to April 1, 2023 primarily reflects the impact of foreign currency.
We estimate that amortization expense related to definite-lived intangible assets will be approximately $250 million in 2023 and each of the following five years.
Note 8. Income Taxes
The provision for income taxes consists of provisions for federal, state, and non-U.S. 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 for the three months ended April 1, 2023 was an expense of 20.3% on pre-tax income. Our effective tax rate was favorably impacted by the geographic mix of pre-tax income in various non-U.S. jurisdictions.
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Our effective tax rate for the three months ended March 26, 2022 was an expense of 19.6% on pre-tax income. Our effective tax rate was favorably impacted by the geographic mix of pre-tax income in various non-U.S. jurisdictions and the impact of certain net discrete items, primarily the reversal of uncertain tax position reserves in certain foreign jurisdictions. The year over year increase was due primarily to the impact of changes in uncertain tax position reserves.
Other Income Tax Matters:
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, we are currently under examination for income taxes by the Internal Revenue Service (“IRS”) for the years 2018 and 2019. We are continuing to respond to Information Document Requests. We received a draft economist report and expect to receive a Notice of Proposed Adjustment relating to transfer pricing with our foreign subsidiaries asserting that our U.S. taxable income should have been higher in 2018 and 2019, which would result in additional U.S. tax expense for 2018 and 2019 plus interest and potential penalties. We strongly disagree with the IRS’s suggested position, believe that our tax positions are properly supported, and intend to vigorously contest the position taken by the IRS and pursue all available administrative and judicial remedies. We continue to maintain our operating model and believe our income tax reserves are appropriate for all open tax years and that final adjudication of this matter will not have a material impact on our results of operations and cash flows. However, the ultimate outcome of this matter is uncertain, and if we are required to pay the IRS additional U.S. taxes, interest, and potential penalties, our results of operations and cash flows could be materially affected.
On August 16, 2022, the Inflation Reduction Act was signed into law in the United States. We are currently evaluating the law and do not expect the Inflation Reduction Act to have a significant impact on our financial statements, including our annual estimated effective tax rate.
Note 9. 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 31, 20229,559,063 $46.80 
Granted794,301 38.40 
Forfeited(200,449)56.49 
Exercised(1,161,560)35.58 
Outstanding at April 1, 20238,991,355 47.29 
The aggregate intrinsic value of stock options exercised during the period was insignificant for the three months ended April 1, 2023.
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 31, 20229,330,718 $34.36 
Granted2,319,570 38.42 
Forfeited(78,684)36.27 
Vested(1,576,924)35.32 
Outstanding at April 1, 20239,994,680 35.13 
The aggregate fair value of RSUs that vested during the period was $61 million for the three months ended April 1, 2023.
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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 31, 20224,018,654 $32.15 
Granted2,234,387 33.33 
Forfeited(47,673)34.35 
Vested(47,948)22.25 
Outstanding at April 1, 20236,157,420 32.48 
The aggregate fair value of PSUs that vested during the period was insignificant for the three months ended April 1, 2023.
Note 10. Postemployment Benefits
See our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on our postemployment-related accounting policies.
Pension Plans
Components of Net Pension Cost/(Benefit):
Net pension cost/(benefit) consisted of the following (in millions):
For the Three Months Ended
U.S. PlansNon-U.S. Plans
April 1, 2023March 26, 2022April 1, 2023March 26, 2022
Service cost$— $1 $2 $4 
Interest cost36 24 15 10 
Expected return on plan assets(49)(48)(21)(19)
Amortization of unrecognized losses/(gains)— — 4 — 
Special/contractual termination benefits— — 2 — 
Net pension cost/(benefit)$(13)$(23)$2 $(5)
We present all non-service cost components of net pension cost/(benefit) within other expense/(income) on our condensed consolidated statements of income.
Employer Contributions:
Related to our non-U.S. pension plans, we contributed $3 million during the three months ended April 1, 2023 and plan to make further contributions of approximately $7 million during the remainder of 2023. We did not contribute to our U.S. pension plans during the three months ended April 1, 2023 and do not plan to make contributions during the remainder of 2023. Estimated future contributions take into consideration current economic conditions, which at this time are expected to have minimal impact on expected contributions for the remainder of 2023. 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.
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Postretirement Plans
Components of Net Postretirement Cost/(Benefit):
Net postretirement cost/(benefit) consisted of the following (in millions):
For the Three Months Ended
April 1, 2023March 26, 2022
Service cost$1 $1 
Interest cost9 5 
Expected return on plan assets(14)(14)
Amortization of prior service costs/(credits)(3)(4)
Amortization of unrecognized losses/(gains)(4)(4)
Net postretirement cost/(benefit)$(11)$(16)
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 three months ended April 1, 2023, we contributed $3 million to our postretirement benefit plans. We plan to make further contributions of approximately $9 million to our postretirement benefit plans during the remainder of 2023. Estimated future contributions take into consideration current economic conditions, which at this time are expected to have minimal impact on expected contributions for the remainder of 2023. 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 11. Financial Instruments
See our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2022 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
April 1, 2023December 31, 2022
Commodity contracts$1,043 $1,166 
Foreign exchange contracts2,931 3,139 
Cross-currency contracts6,336 6,336 
Interest rate contracts400 — 
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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 condensed consolidated balance sheets were (in millions):
April 1, 2023
Quoted Prices in Active Markets for Identical Assets and Liabilities
(Level 1)		Significant Other Observable Inputs
(Level 2)		Total Fair Value
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)
$— $— $30 $13 $30 $13 
Cross-currency contracts(b)
— — 231 182 231 182 
Interest rate contracts(c)