Kraft Foods Group Inc. (NASDAQ:KRFT)

Current Income Tax Expense

The current income tax expense shows a consistent increase over the three years analyzed. It rose from $341 million in 2012 to $667 million in 2013, and further to $724 million in 2014. This upward trend indicates growing taxable income or changes in tax rates leading to higher current tax obligations.

Deferred Income Tax Expense

The deferred income tax expense exhibits more variability during the period. It increased from $470 million in 2012 to $708 million in 2013, suggesting higher future tax liabilities or adjustments in deferred tax assets/liabilities. However, in 2014, the deferred income tax expense sharply reversed to a negative $361 million, indicating a net deferred tax benefit or the recognition of deferred tax assets outweighing liabilities.

Provision for Income Taxes

The overall provision for income taxes aligns with the movements in both current and deferred components. It increased significantly from $811 million in 2012 to $1,375 million in 2013, primarily driven by increases in both current and deferred taxes. In 2014, the provision decreased markedly to $363 million, consistent with the significant reduction and reversal observed in deferred tax expenses despite a continued rise in current taxes.

Insights

The data reveals that while current tax expenses steadily increased, the deferred tax expenses shifted notably in 2014 from a substantial expense to a significant benefit. This shift contributed to a large reduction in the total income tax provision for that year. Such changes in deferred taxes may reflect adjustments in tax timing differences, utilization of tax credits, or revisions in estimates of future tax obligations. The contrasting trends between current and deferred tax expenses highlight the impact of underlying tax accounting policies and deferred tax asset/liability management on the company's overall tax expense profile.

U.S. federal statutory tax rate

The statutory tax rate remained constant at 35% throughout the analyzed periods, showing no variation over the three years.

U.S. state and local income taxes, net of federal tax benefit

There was a consistent downward trend in U.S. state and local income taxes, decreasing from 2.3% in 2012 to 1.7% in 2013, and further to 0.2% in 2014, indicating a reduction in the net impact of these taxes over time.

Domestic manufacturing deduction

The domestic manufacturing deduction exhibited volatility, with a negative impact of -2.7% in 2012, a reduced negative effect of -1.2% in 2013, followed by a sharp increase in the negative value to -4.6% in 2014. This suggests fluctuations in the benefit or allowance related to domestic manufacturing over the analyzed period.

Foreign rate differences

This component remained negative and increased in magnitude, from -1.1% in both 2012 and 2013 to -2.2% in 2014, indicating a growing adverse effect from foreign tax rate differentials.

Changes in uncertain tax positions

Changes in uncertain tax positions fluctuated, starting with a negative effect of -0.8% in 2012, a slight positive impact of 0.2% in 2013, and returning to a negative impact of -0.9% in 2014, reflecting inconsistency in tax uncertainties during the period.

Other

The 'Other' category moved from a small positive 0.4% in 2012 to a negative impact of -1.0% in 2013, worsening slightly to -1.7% in 2014. This indicates increasing negative factors outside the defined categories affecting the tax rate.

Effective tax rate

The effective tax rate remained relatively stable around 33% in 2012 and 2013 (33.1% and 33.6%, respectively) before significantly declining to 25.8% in 2014. This marked reduction in the effective tax rate suggests the cumulative effects of changes in deductions, tax positions, and state/local taxes contributed to lowering the overall tax burden in the final year.

Pension benefits

The pension benefits exhibit significant fluctuations over the period, starting at 730 million USD in 2012, dropping sharply to 104 million USD in 2013, and then rebounding to 407 million USD in 2014. This suggests variability in pension obligations or valuations.

Postretirement benefits

Postretirement benefits show a declining trend from 1,418 million USD in 2012 to 1,238 million USD in 2013, followed by an increase to 1,355 million USD in 2014. This pattern indicates a general reduction in liabilities in 2013 with a partial reversal in 2014.

Other employee benefits

Other employee benefits increase moderately from 102 million USD in 2012 to 122 million USD in 2013, then decline slightly to 113 million USD in 2014, suggesting relatively stable levels with minor fluctuations.

Other (positive values)

This category rises from 442 million USD in 2012 to 497 million USD in 2013, then decreases slightly to 471 million USD in 2014, indicating some variability but maintaining a similar level overall.

Deferred income tax assets

Deferred income tax assets decline notably from 2,692 million USD in 2012 to 1,961 million USD in 2013, and then partially recover to 2,346 million USD in 2014. This volatility may reflect changes in tax planning or expectations of future taxable income.

Valuation allowance

The valuation allowance, recorded as a negative figure, improves from -26 million USD in 2012 to -3 million USD in 2013, but deteriorates to -20 million USD in 2014. This suggests adjustments to reserves for doubtful deferred tax assets, though the changes are relatively small.

Net deferred income tax assets

Net deferred income tax assets follow the trend of gross deferred tax assets, decreasing from 2,666 million USD in 2012 to 1,958 million USD in 2013 before increasing to 2,326 million USD in 2014. This reflects changes in deferred tax positions net of allowances.

Trade names

Trade names consistently show a negative value of -977 million USD in 2012, improving to -828 million USD in 2013 and remaining constant in 2014. The stable negative balance suggests a persistent intangible asset amortization or impairment.

Property, plant and equipment

This category shows a consistent negative trend with values of -969 million USD in 2012, -949 million USD in 2013, and -979 million USD in 2014, indicating ongoing capital investment with some variability but no major shifts.

Debt exchange

There is a steady reduction in debt exchange liability from -418 million USD in 2012 to -384 million USD in 2013, and further to -350 million USD in 2014, suggesting repayment or restructuring activities reducing outstanding debt.

Other (negative values)

Other liabilities diminish significantly from -17 million USD in 2012 to -65 million USD in 2013, remaining stable at -66 million USD in 2014, reflecting an increase in this category's obligations or reserves during the period.

Deferred income tax liabilities

Deferred income tax liabilities decrease slightly from -2,381 million USD in 2012 to -2,226 million USD in 2013, remaining nearly constant at -2,223 million USD in 2014. This indicates stability in deferred tax liabilities towards the end of the period.

Net deferred income tax assets (liabilities)

This net figure shows substantial volatility, starting positive at 285 million USD in 2012, dropping to a negative value of -268 million USD in 2013, and then recovering to a positive 103 million USD in 2014. These swings imply significant changes in the balance between deferred tax assets and liabilities, possibly driven by tax planning strategies or changes in asset valuation assumptions.

Over the analyzed three-year period, several key financial trends can be observed in the annual reported and deferred income tax adjusted data of the company.

Current Assets

Reported current assets showed a slight increase from approximately $4.82 billion in 2012 to about $4.91 billion in 2013, followed by a modest decline to roughly $4.79 billion in 2014. Adjusted current assets mirrored this pattern, increasing from $4.40 billion in 2012 to $4.55 billion in 2013, then decreasing to approximately $4.41 billion in 2014. This suggests a relatively stable level of liquidity with minor fluctuations over the period.

Total Assets

The reported total assets showed a gradual decrease, moving from $23.33 billion in 2012 to $23.15 billion in 2013, and further down to $22.95 billion in 2014. Adjusted total assets followed a similar downward trend, decreasing from $22.91 billion in 2012 to $22.79 billion in 2013 and then to $22.56 billion in 2014. The consistent decline implies a contraction in asset base during these years.

Total Liabilities

Reported total liabilities decreased significantly from $19.76 billion in 2012 to $17.96 billion in 2013, but saw a rise to $18.58 billion in 2014. Adjusted total liabilities also reflected this trend, decreasing from $19.47 billion in 2012 to $17.30 billion in 2013, then increasing to approximately $18.24 billion in 2014. This pattern indicates a reduction in indebtedness in 2013, followed by a partial reversal in 2014.

Equity

Equity reported an increase from $3.57 billion in 2012 to $5.19 billion in 2013, then decreased to $4.37 billion in 2014. Adjusted equity showed a similar increase from $3.29 billion in 2012 to $5.46 billion in 2013, then declined to $4.26 billion in 2014. This fluctuation suggests improved financial positioning in 2013 with subsequent weakening in 2014, potentially linked to changes in earnings and liabilities.

Net Earnings

Reported net earnings exhibited a sharp increase from $1.64 billion in 2012 to $2.72 billion in 2013, followed by a significant drop to $1.04 billion in 2014. Adjusted net earnings demonstrated an even more pronounced variation, rising from $2.11 billion in 2012 to $3.42 billion in 2013, before falling dramatically to $0.68 billion in 2014. This volatility in profitability indicates a strong performance peak in 2013, succeeded by a considerable decline in 2014, which could have implications for shareholder value and operational performance.

In summary, the data reveals a pattern of improved financial strength in 2013 across most metrics, including increased equity and net earnings coupled with reduced liabilities. However, this was followed by a retreat in 2014 with declining assets, rising liabilities, reduced equity, and a sharp fall in net earnings. The adjustments for deferred income taxes consistently reflect similar trends, although values slightly differ, underscoring the impact of tax-related accounting on financial results. Monitoring these trends would be crucial for understanding the sustainability of earnings and the financial health of the company going forward.

The analysis of the financial data over the three reported years reveals several notable trends and shifts across various key financial ratios when considering both reported and adjusted figures.

Current Ratio

The reported current ratio showed a modest increase from 1.34 in 2012 to 1.44 in 2013, followed by a decline to 1.00 in 2014, indicating a reduction in short-term liquidity by the end of the period. Similarly, the adjusted current ratio exhibited a comparable trend but consistently remained lower than the reported values, declining from 1.22 in 2012 to 0.92 in 2014. This suggests that after tax adjustments, the company's liquidity position is weaker than initially reported.

Net Profit Margin

The reported net profit margin improved significantly from 8.95% in 2012 to 14.9% in 2013, before sharply declining to 5.73% in 2014. The adjusted net profit margin followed a parallel trajectory but with higher values initially (11.52% in 2012 and 18.79% in 2013) and a more pronounced decrease to 3.75% in 2014. This pattern indicates that profitability was strongest in 2013 but fell considerably in the following year, with tax adjustments amplifying the volatility observed.

Total Asset Turnover

The reported total asset turnover remained stable at 0.79 throughout all three years, suggesting consistent efficiency in using assets to generate sales. The adjusted total asset turnover was slightly higher and exhibited a marginal increase from 0.80 in 2012 and 2013 to 0.81 in 2014, implying a subtle improvement in asset utilization effectiveness after considering tax adjustments.

Financial Leverage

Reported financial leverage declined from 6.53 in 2012 to 4.46 in 2013, indicating a reduction in the company’s use of debt relative to equity, but rose again to 5.26 in 2014. The adjusted financial leverage presented a similar trend with values generally higher than the reported ones in 2012, lower in 2013, and slightly higher again in 2014. This reflects fluctuations in capital structure leverage over the period, with tax adjustments affecting the leverage interpretation.

Return on Equity (ROE)

Reported ROE increased notably from 45.97% in 2012 to 52.34% in 2013, subsequently dropping sharply to 23.89% in 2014. Adjusted ROE was significantly higher in the first two years (64.25% in 2012 and 62.75% in 2013) but declined more steeply to 16.00% in 2014. This indicates the company generated strong returns on shareholders' equity initially, which diminished considerably by 2014, especially after adjustments.

Return on Assets (ROA)

The reported ROA improved substantially from 7.04% in 2012 to 11.73% in 2013 but then decreased to 4.55% in 2014. The adjusted ROA showed a more pronounced rise from 9.22% in 2012 to 15.02% in 2013 and a sharper decline to 3.02% in 2014. This suggests asset profitability peaked in 2013 but weakened significantly the following year, with adjustments indicating more variability in asset returns.

In summary, the financial ratios reflect a peak in performance and liquidity in 2013, followed by a notable deterioration in 2014 across most metrics. The tax-adjusted figures consistently exhibit greater volatility and often indicate weaker liquidity, profitability, and returns than the reported figures, underscoring the impact of deferred and income tax considerations on financial results. Asset utilization remained relatively stable, with slight improvement after adjustments, while leverage levels fluctuated, reflecting shifts in the company's financing strategies over the period.

The data reveals trends related to the company's liquidity as reflected in both reported and adjusted current assets and current ratios over a three-year period ending in 2014.

Reported Current Assets

These assets showed a slight increase from 4823 million USD in 2012 to 4908 million USD in 2013, followed by a decrease to 4791 million USD in 2014. This suggests relatively stable short-term asset levels with a minor fluctuation across the years.

Adjusted Current Assets

The adjusted current assets follow a similar pattern, rising from 4403 million USD in 2012 to 4548 million USD in 2013, then declining to 4407 million USD in 2014. The adjustment appears to consistently reduce the asset values compared to reported figures but moves proportionally in the same direction.

Reported Current Ratio

This liquidity ratio improved from 1.34 in 2012 to 1.44 in 2013, indicating better coverage of short-term liabilities by current assets. However, in 2014, the ratio significantly declined to 1.0, suggesting a potential decrease in liquidity or an increase in current liabilities relative to assets.

Adjusted Current Ratio

Mirroring the reported ratio trends, the adjusted current ratio increased from 1.22 in 2012 to 1.33 in 2013, then dropped to 0.92 in 2014. The adjusted ratio remains lower than the reported ratio across all years, implying that adjustments, potentially related to deferred income taxes or other factors, reduce perceived liquidity. The drop below 1.0 in 2014 indicates a shift to a liquidity position where current liabilities exceed adjusted current assets.

Overall, the data indicates an initial improvement in liquidity from 2012 to 2013, followed by a notable deterioration in 2014. The decrease in both reported and adjusted current ratios in the final year suggests increased short-term financial pressure, which may warrant further investigation into the causes, such as changes in working capital management, increased liabilities, or asset revaluation adjustments.

The financial data for the periods ending December 29, 2012, through December 27, 2014, reveal significant fluctuations in both reported and adjusted net earnings, as well as their corresponding profit margins.

Reported Net Earnings

Reported net earnings increased markedly from $1,642 million in 2012 to a peak of $2,715 million in 2013, reflecting strong performance during that period. However, in 2014, reported net earnings declined sharply to $1,043 million, suggesting a substantial reduction in profitability or the occurrence of extraordinary factors negatively affecting the bottom line.

Adjusted Net Earnings

Adjusted net earnings followed a parallel trend, rising from $2,112 million in 2012 to $3,423 million in 2013. This increase was even more pronounced than the reported figures, indicating that adjustments—likely related to income tax or deferred tax items—had a positive impact on reported profitability in 2013. In 2014, adjusted net earnings decreased drastically to $682 million, representing a more severe contraction than reported earnings, which may suggest significant one-time adjustments or a deterioration in core earnings performance.

Reported Net Profit Margin

The reported net profit margin showed a similar trajectory, improving from 8.95% in 2012 to 14.9% in 2013 before declining to 5.73% in 2014. This pattern signifies increased efficiency or higher profitability relative to revenues in 2013, followed by a marked erosion in profit margins in 2014.

Adjusted Net Profit Margin

Adjusted net profit margin exhibited the highest level in 2013 at 18.79%, up from 11.52% in 2012, but then experienced a steep decline to 3.75% in 2014. The decrease in adjusted margins in 2014 was more pronounced than in the reported margins, paralleling the trends observed in adjusted net earnings. This could indicate that post-tax, deferred, or other adjustments had a considerable negative impact on profitability in 2014.

Overall, the data indicates a strong performance period in 2013 with peak earnings and margins, followed by a significant downturn in 2014 across all measures, with adjusted figures showing more volatility than reported ones. This suggests possible one-time events, tax adjustments, or operational challenges impacting profitability, particularly in the final reported year.

The reported total assets of the company exhibited a slight downtrend over the three-year period. Starting at 23,329 million US dollars at the end of 2012, the total assets decreased marginally each year, reaching 22,947 million US dollars by the end of 2014. A similar pattern is observed in the adjusted total assets, which decreased from 22,909 million US dollars in 2012 to 22,563 million US dollars in 2014.

The reported total asset turnover ratio remained stable at 0.79 throughout the entire period from 2012 to 2014, indicating a consistent efficiency in utilizing the reported assets to generate revenue. Conversely, the adjusted total asset turnover ratio showed a gradual increase, moving from 0.80 in 2012 and 2013 to 0.81 in 2014.

Total Assets

The slight decline in both reported and adjusted total assets suggests modest asset reductions or revaluations over the period, which may reflect asset disposals, depreciation, or strategic reallocation of resources.

Asset Turnover

The stability in reported asset turnover alongside a mild increase in adjusted asset turnover indicates an improvement in asset utilization efficiency when considering adjustments. This may imply that after accounting for tax-related adjustments, the company enhanced its ability to generate sales from its asset base.

Overall, the data suggests that while the company’s asset base slightly contracted, its operational efficiency, particularly when adjusted for tax effects, improved modestly over the period analyzed.

The analysis of the financial data over the three-year period reveals several notable trends and fluctuations across reported and adjusted figures.

Total Assets

Both reported and adjusted total assets show a gradual decline. Reported total assets decreased from 23,329 million US dollars in 2012 to 22,947 million US dollars in 2014. Similarly, adjusted total assets fell from 22,909 to 22,563 million US dollars during the same period. The steady reduction indicates a slight contraction in the asset base over the three years.

Equity

Reported equity exhibits an increase from 3,572 million US dollars in 2012 to a peak of 5,187 million in 2013, followed by a decrease to 4,365 million in 2014. Adjusted equity follows a similar pattern, rising from 3,287 million in 2012 to 5,455 million in 2013 before declining to 4,262 million in 2014. This suggests a significant equity growth in 2013 with a partial reversal in 2014, reflecting possible capitalization events or earnings changes in 2013 that were not fully sustained.

Financial Leverage

Financial leverage ratios differ between reported and adjusted metrics but follow similar trends. Reported financial leverage declines sharply from 6.53 in 2012 to 4.46 in 2013, then increases again to 5.26 in 2014. Adjusted financial leverage also decreases from 6.97 to 4.18 between 2012 and 2013 and then rises slightly to 5.29 in 2014. The notable drop in leverage in 2013 may reflect an increase in equity relative to liabilities or a reduction in total liabilities, while the rise in 2014 indicates a partial re-leveraging or decrease in equity level relative to liabilities.

In summary, the period from 2012 to 2014 is characterized by a modest decrease in total assets, a significant but temporary increase in equity during 2013, and a corresponding reduction in financial leverage in 2013, followed by a reversal in 2014. These movements suggest that 2013 was an anomalous year with strengthened equity and reduced leverage, while 2014 saw a partial return toward prior leverage and equity levels. Adjusted figures follow consistent trends with reported data, confirming the robustness of these observations after tax-related adjustments.

Net Earnings

Reported net earnings increased significantly from 1,642 million USD in 2012 to 2,715 million USD in 2013, followed by a sharp decline to 1,043 million USD in 2014. Adjusted net earnings followed a similar trajectory, rising from 2,112 million USD in 2012 to a peak of 3,423 million USD in 2013, then decreasing markedly to 682 million USD in 2014. This pattern indicates a strong financial performance in 2013 with a notable downturn in 2014.

Equity

Reported equity increased from 3,572 million USD in 2012 to 5,187 million USD in 2013 but then declined to 4,365 million USD in 2014. Adjusted equity data shows a comparable trend, rising from 3,287 million USD in 2012 to 5,455 million USD in 2013, followed by a decrease to 4,262 million USD in 2014. The equity figures reflect growth up to 2013, with a reduction in 2014 consistent with the earnings performance.

Return on Equity (ROE)

Reported ROE demonstrated an upward trend from 45.97% in 2012 to 52.34% in 2013, before falling significantly to 23.89% in 2014. Adjusted ROE was notably higher initially, increasing from 64.25% in 2012 to 62.75% in 2013, then experiencing a steep decline to 16% in 2014. The high adjusted ROE in the first two years suggests strong profitability relative to equity; the substantial decrease in 2014 reflects diminished earnings efficiency.

Overall Analysis

The data indicate that the company experienced robust financial growth and profitability improvements in 2013 across earnings, equity, and return on equity measures. However, 2014 showed a pronounced downturn across all these key areas, with reported and adjusted figures both reflecting declines. The adjusted values tend to be higher than the reported ones in terms of net earnings and ROE, highlighting the impact of deferred income tax adjustments in portraying a more favorable financial position prior to 2014. The steep reductions in 2014 warrant further examination of underlying causes affecting performance during that period.

Reported Net Earnings

The reported net earnings initially increased substantially from 1,642 million US dollars in 2012 to 2,715 million in 2013, representing a strong performance improvement. However, in 2014, reported net earnings declined sharply to 1,043 million, indicating a significant reduction in profitability compared to the previous year.

Adjusted Net Earnings

Adjusted net earnings followed a similar pattern but at a higher level. There was a notable increase from 2,112 million US dollars in 2012 to 3,423 million in 2013, suggesting positive adjustments related to income tax impacts or other factors. Nevertheless, in 2014, adjusted net earnings dropped steeply to 682 million, which is even more pronounced than the decline in reported net earnings, signaling possible adverse deferred tax adjustments or other non-operational factors affecting earnings.

Reported Total Assets

Reported total assets showed a slight but consistent decrease over the three years, from 23,329 million US dollars in 2012 to 22,947 million in 2014. Although the decline is not drastic, it reflects a trend of modest asset reduction or possible asset disposals during the period.

Adjusted Total Assets

Adjusted total assets also decreased gradually from 22,909 million in 2012 to 22,563 million in 2014, mirroring the pattern seen in reported assets. The adjusted figures are slightly lower than the reported assets each year, which could be due to the exclusion or reclassification of certain asset components for tax adjustment purposes.

Reported Return on Assets (ROA)

The reported ROA improved markedly from 7.04% in 2012 to 11.73% in 2013, indicating enhanced asset profitability. However, it declined significantly to 4.55% in 2014, reflecting the sharp drop in reported net earnings combined with the steady asset base.

Adjusted Return on Assets (ROA)

The adjusted ROA was higher than the reported ROA in both 2012 and 2013, increasing from 9.22% to 15.02%, highlighting the impact of adjustments on profitability metrics. Conversely, in 2014, the adjusted ROA dropped to 3.02%, a more pronounced decrease than the reported ROA, demonstrating the negative effect of adjustments in that year on the efficiency of asset usage.