01—Abstract
Summary
Summary of the 8-K filed April 18, 2024. Cited figures are marked; the original filing is the authoritative source.
The Kraft Heinz Company (KHC) filed this Form 8-K on April 18, 2024 to disclose two changes made in the first quarter of 2024 to its internal reporting and reportable segments, along with supplemental historical segment information (Exhibit 99.1) that recasts prior periods.
The Company divided its former International segment into three operating segments: International Developed Markets (Europe and Pacific Developed Markets), West and East Emerging Markets (WEEM), and Asia Emerging Markets (AEM). WEEM and AEM are combined and disclosed as Emerging Markets, so the Company now has two reportable segments defined by geographic region, North America and International Developed Markets, plus Emerging Markets. Certain corporate expenses previously reported within International were reallocated to general corporate expenses, and this reallocation is reflected in all historical periods presented.
Management also changed its primary measure of segment profitability from Segment Adjusted EBITDA to Segment Adjusted Operating Income, which it says will better align segment evaluation with its long-term strategic plan. The filing states that these changes had no impact on the condensed consolidated financial statements in the Company's Forms 10-Q or on the consolidated financial statements in its 2023 Form 10-K filed February 15, 2024. The supplemental information is unaudited, is provided for informational purposes, and is not indicative of future or annual results.
On the recast basis, for fiscal 2023 North America delivered net sales of $20.13 billiona and Segment Adjusted Operating Income of $5.05 billion, International Developed Markets delivered net sales of $3.62 billion and Segment Adjusted Operating Income of $522 million, and Emerging Markets delivered net sales of $2.89 billion and Segment Adjusted Operating Income of $376 million. General corporate expenses were $651 million on an Adjusted Operating Income basis, and Kraft Heinz Adjusted Operating Income was $5.30 billion for 2023.
02—Key points
Key Highlights
- Segment reorganization: the former International segment was split into International Developed Markets, WEEM, and AEM, with WEEM and AEM combined and reported as Emerging Markets.
- Reportable segments are now North America, International Developed Markets, and Emerging Markets, with the latter two components of the old International segment.
- Primary segment profitability measure changed from Segment Adjusted EBITDA to Segment Adjusted Operating Income, to align with the long-term strategic plan.
- Certain corporate expenses previously in International were reallocated to general corporate expenses, applied to all historical periods presented.
- Fiscal 2023 recast figures: North America net sales of $20.13 billion and Segment Adjusted Operating Income of $5.05 billion; International Developed Markets Segment Adjusted Operating Income of $522 million; Emerging Markets Segment Adjusted Operating Income of $376 million.
- Changes had no effect on the condensed consolidated financial statements in the 2023 and prior 10-Qs or on the consolidated financial statements in the 2023 Form 10-K filed February 15, 2024.
- Exhibit 99.1 provides unaudited supplemental historical segment, Organic Net Sales, and Adjusted Operating Income information for 2021 through 2023 and the quarters from April 2023 through December 2023.
03—Questions
Frequently Asked Questions
Did these changes affect Kraft Heinz's reported financial statements?
No. The filing states that the segment reorganization and the change in the segment profitability measure had no impact on the condensed consolidated financial statements in the Company's Forms 10-Q or on the consolidated financial statements in its 2023 Form 10-K filed February 15, 2024. The supplemental information is presented for informational purposes only.
How many reportable segments does Kraft Heinz have now?
The Company has two reportable segments defined by geographic region: North America and International Developed Markets. Its remaining operating segments, WEEM and AEM, are combined and disclosed as Emerging Markets. The Company manages its operations through four operating segments in total.
Why did management change the segment profitability measure?
Management reevaluated the primary measure used to evaluate segment profitability and changed it from Segment Adjusted EBITDA to Segment Adjusted Operating Income. The filing says this change is expected to allow management to better evaluate segment performance in line with the Company's long-term strategic plan.
Are the supplemental segment figures audited?
No. The filing describes the supplemental historical financial information as unaudited. It is based on historical financial statements recast for the new segment structure and profitability measure, should be read together with the 2023 Form 10-K, and is not indicative of future or annual results.
Did any corporate costs move between segments?
Yes. Management reallocated certain corporate expenses previously reported within the International segment to general corporate expenses, reflecting its approach to centrally manage these costs. The reallocation is reflected in all historical periods presented in the supplemental information.
04—Continue