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Microsoft Excel LibreOffice Calc

Kraft Heinz Co. (KHC)


Analysis of Income Taxes

Difficulty: Advanced


Income Tax Accounting Policy

Kraft Heinz recognizes income taxes based on amounts refundable or payable for the current year and record deferred tax assets or liabilities for any difference between the financial reporting and tax basis of the assets and liabilities. Kraft Heinz also recognizes deferred tax assets for temporary differences, operating loss carryforwards, and tax credit carryforwards. Inherent in determining Kraft Heinz’s annual tax rate are judgments regarding business plans, planning opportunities, and expectations about future outcomes. Realization of certain deferred tax assets, primarily net operating loss and other carryforwards, is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods.

Kraft Heinz applies a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. Accordingly, Kraft Heinz recognizes the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. Future changes in judgment related to the expected ultimate resolution of uncertain tax positions will affect Kraft Heinz’s results in the quarter of such change.

Kraft Heinz records valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. When assessing the need for valuation allowances, Kraft Heinz considers future taxable income and ongoing prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in judgment about the realizability of deferred tax assets in future years, Kraft Heinz would adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding adjustment to the provision for/(benefit from) income taxes. The resolution of tax reserves and changes in valuation allowances could be material to Kraft Heinz’s results of operations for any period, but is not expected to be material to the financial position.

Source: 10-K (filing date: 2019-06-07).


Income Tax Expense (Benefit)

Kraft Heinz Co., income tax expense (benefit), continuing operations

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
U.S. federal hidden hidden hidden hidden
U.S. state and local hidden hidden hidden hidden
International hidden hidden hidden hidden
Current hidden hidden hidden hidden
U.S. federal hidden hidden hidden hidden
U.S. state and local hidden hidden hidden hidden
International hidden hidden hidden hidden
Deferred hidden hidden hidden hidden
Provision for (benefit from) income taxes hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Kraft Heinz Co.’s current declined from 2016 to 2017 and from 2017 to 2018.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Kraft Heinz Co.’s deferred declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.
Provision for (benefit from) income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Kraft Heinz Co.’s provision for (benefit from) income taxes declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Effective Income Tax Rate (EITR)

Kraft Heinz Co., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
U.S. federal statutory tax rate hidden hidden hidden hidden
Tax on income of foreign subsidiaries hidden hidden hidden hidden
Domestic manufacturing deduction hidden hidden hidden hidden
U.S. state and local income taxes, net of federal tax benefit hidden hidden hidden hidden
Earnings repatriation hidden hidden hidden hidden
Tax exempt income hidden hidden hidden hidden
Deferred tax effect of statutory tax rate changes hidden hidden hidden hidden
Audit settlements and changes in uncertain tax positions hidden hidden hidden hidden
Venezuela nondeductible devaluation loss hidden hidden hidden hidden
Global intangible low-taxed income hidden hidden hidden hidden
Goodwill impairment hidden hidden hidden hidden
Wind-up of non-U.S. pension plans hidden hidden hidden hidden
Other hidden hidden hidden hidden
Effective tax rate, before U.S. Tax Reform discrete income tax benefit hidden hidden hidden hidden
U.S. Tax Reform discrete income tax benefit hidden hidden hidden hidden
Effective tax rate hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

Item Description The company
Effective tax rate, before U.S. Tax Reform discrete income tax benefit Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Kraft Heinz Co.’s effective tax rate, before U.S. Tax Reform discrete income tax benefit increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

Kraft Heinz Co., components of deferred tax assets and liabilities

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Benefit plans hidden hidden hidden hidden
Other hidden hidden hidden hidden
Deferred income tax assets, gross hidden hidden hidden hidden
Valuation allowance hidden hidden hidden hidden
Deferred income tax assets, net hidden hidden hidden hidden
Intangible assets, net hidden hidden hidden hidden
Property, plant and equipment, net hidden hidden hidden hidden
Other hidden hidden hidden hidden
Deferred income tax liabilities hidden hidden hidden hidden
Net deferred income tax assets (liabilities) hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

Item Description The company
Deferred income tax assets, gross Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Kraft Heinz Co.’s deferred income tax assets, gross declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Deferred income tax assets, net Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Kraft Heinz Co.’s deferred income tax assets, net declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Net deferred income tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Kraft Heinz Co.’s net deferred income tax assets (liabilities) increased from 2016 to 2017 and from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

Kraft Heinz Co., deferred tax assets and liabilities, classification

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Deferred income tax assets hidden hidden hidden hidden
Deferred income tax liabilities hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

Item Description The company
Deferred income tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Kraft Heinz Co.’s deferred income tax assets increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Deferred income tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Kraft Heinz Co.’s deferred income tax liabilities declined from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Deferred Taxes

Kraft Heinz Co., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden
Less: Noncurrent deferred tax assets, net hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden
Adjustment to Total Liabilities
Total liabilities (as reported) hidden hidden hidden hidden
Less: Noncurrent deferred tax liabilities, net hidden hidden hidden hidden
Total liabilities (adjusted) hidden hidden hidden hidden
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported) hidden hidden hidden hidden
Less: Net deferred tax assets (liabilities) hidden hidden hidden hidden
Shareholders’ equity (adjusted) hidden hidden hidden hidden
Adjustment to Net Income (loss) Attributable To Kraft Heinz
Net income (loss) attributable to Kraft Heinz (as reported) hidden hidden hidden hidden
Add: Deferred income tax expense (benefit) hidden hidden hidden hidden
Net income (loss) attributable to Kraft Heinz (adjusted) hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).


Kraft Heinz Co., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Deferred Taxes (Summary)

Kraft Heinz Co., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Kraft Heinz Co.’s adjusted net profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Kraft Heinz Co.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Kraft Heinz Co.’s adjusted financial leverage declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Kraft Heinz Co.’s adjusted ROE improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Kraft Heinz Co.’s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Kraft Heinz Co., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) attributable to Kraft Heinz hidden hidden hidden hidden
Net sales hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) attributable to Kraft Heinz hidden hidden hidden hidden
Net sales hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

2018 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to Kraft Heinz ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Kraft Heinz ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Kraft Heinz Co.’s adjusted net profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden
Total assets hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

2018 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Kraft Heinz Co.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted total assets hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

2018 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Kraft Heinz Co.’s adjusted financial leverage declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) attributable to Kraft Heinz hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) attributable to Kraft Heinz hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

2018 Calculations

1 ROE = 100 × Net income (loss) attributable to Kraft Heinz ÷ Shareholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to Kraft Heinz ÷ Adjusted shareholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Kraft Heinz Co.’s adjusted ROE improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (USD $ in millions)
Net income (loss) attributable to Kraft Heinz hidden hidden hidden hidden
Total assets hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden
Adjusted for Deferred Taxes
Selected Financial Data (USD $ in millions)
Adjusted net income (loss) attributable to Kraft Heinz hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-06-07), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-03-03).

2018 Calculations

1 ROA = 100 × Net income (loss) attributable to Kraft Heinz ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to Kraft Heinz ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Kraft Heinz Co.’s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.