Company: KHC
Filing Date: 2025-07-30
Form Type: 10-Q
Source: 0001637459-25-000152
Chunk: 186

Company: Kraft Heinz Co
Filing Date: 2025-07-30
Form: 10-Q
Item: Part I, Item 2
Chunk 186
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 brands that were not impaired as part of the Q2 Impairment Test, but had 10% or less fair value over carrying amount included Oscar Mayer, Kool-Aid, Cool Whip, Bagel Bites, Gevalia, and Wattie’s and had an aggregate carrying amount of $2.8 billion as of the Q2 Impairment Test. Our Miracle Whip brand had 10-20% fair value over carrying amount with a carrying amount of $1.8 billion as of the Q2 Impairment Test. The aggregate carrying amount of brands with fair value over carrying amount 20-50% was $7.7 billion as of the Q2 Impairment Test. Although the remaining brands, with a carrying amount of $8.9 billion, have more than 50% excess fair value over carrying amount as of the Q2 Impairment Test, these amounts are also susceptible to impairments if any assumptions, estimates, or market factors significantly change in the future. Our brands that have 20% or less excess fair value over carrying amounts as of the Q2 Impairment Test are considered at a heightened risk of future impairments and had an aggregate carrying amount of $17.6 billion.

We generally utilize the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual cash flows for each reporting unit (including net sales, cost of products sold, SG&A, depreciation and amortization, working capital, and capital expenditures), income tax rates, long-term growth rates, royalty rates, a discount rate that appropriately reflects the risks inherent in each future cash flow stream, and other market factors. We select the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and a consideration of market multiples of certain peer and guideline companies. We incorporated the market’s perceived risks in our ability to achieve our future cash flows through the discount rate resulting in higher discount rates than those we’ve historically utilized.

We utilize the excess earnings method under the income approach to estimate the fair value of certain of our largest brands. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual cash flows for each brand (including net sales, cost of products sold, and SG&A), contributory asset charges, income tax considerations, long-term growth rates, a discount rate that reflects the level of risk associated