Kraft Heinz Co. (NASDAQ:KHC)

Current Income Tax Expense

The current income tax expense shows variability but remains consistently positive over the observed periods. It started at 683 million US dollars in 2015, increased significantly to 1410 million in 2016, then decreased to 1007 million in 2017 and further dropped to 900 million in 2018. In 2019, there was a noticeable increase again to 1021 million. This trend indicates fluctuations in the company's taxable income or tax payments while maintaining an overall positive current tax expense.

Deferred Income Tax Expense

The deferred income tax expense displays a more volatile pattern and remains negative throughout the five-year span. In 2015, the deferred tax was -317 million US dollars, sharply decreased to -29 million in 2016, then experienced a substantial decline to -6467 million in 2017. Following this, it improved but stayed negative at -1967 million in 2018 and further decreased to -293 million in 2019. These large fluctuations suggest significant changes in temporary differences between accounting income and taxable income, possibly affected by tax law changes or accounting adjustments.

Provision for Income Taxes

The overall provision for income taxes, combining current and deferred amounts, mirrors the volatility of the deferred tax component due to large negative values in deferred taxes. The provision was moderately positive at 366 million US dollars in 2015, increased strongly to 1381 million in 2016, but then turned negative to -5460 million in 2017 and remained negative at -1067 million in 2018, before returning to a positive 728 million in 2019. This indicates that the company experienced significant tax benefits from deferred items during 2017 and 2018, which offset the current tax expenses substantially, before reverting to a net tax expense in 2019.

The financial data reflects significant fluctuations and notable changes in tax rates and related items over the period from 2015 to 2019. A clear trend of variability in the effective tax rate is observable, impacted by a range of factors including statutory tax rate changes, discrete benefits, and adjustments related to acquisitions and impairments.

U.S. Federal Statutory Tax Rate

The federal statutory tax rate remained stable at 35% for the years 2015 to 2017 before declining sharply to 21% in 2018 and maintaining this rate into 2019. This reduction coincides with broader tax reform policies and significantly influences the overall effective tax rate.

Tax on Income of Foreign Subsidiaries

This component exhibited variability, moving from a significant negative impact in 2015 (-11.8%) to less pronounced negative effects in subsequent years, even becoming slightly positive in 2018 (3.4%), and shifting back to negative (-7.5%) in 2019. This suggests changing taxation environments or profit repatriation strategies for foreign operations.

Domestic Manufacturing Deduction

There was a decreasing negative deduction from -2.9% in 2015 through to -1.5% in 2017, after which data is missing. The gradual decrease hints at diminishing benefits or changes in domestic manufacturing tax provisions.

State and Local Income Taxes, Net of Federal Tax Benefit

This tax category shifted from a minor negative impact (-0.6%) in 2015 to a rising positive contribution peaking at 1.6% in 2018 before easing to 1.1% in 2019, indicating increasing relative tax burdens at state and local levels.

Earnings Repatriation

Significant in 2015 (21.9%), this item sharply decreased to minimal values of 0.4% in the following years, with no data reported for 2018 and beyond. This suggests the initial repatriation was a concentrated event with limited recurrence.

Tax Exempt Income

The negative contribution of tax exempt income attenuated over time, moving from -10.9% in 2015 to -0.7% in 2017, indicating either a reduction in exempt income or changes in the tax treatment thereof.

Deferred Tax Effect of Statutory Tax Rate Changes

This effect was substantially negative in 2015 (-10.4%) and 2016 (-2%), neutralizing somewhat in 2017 (0.3%) with no data in later years, implying that the most significant deferred tax impacts occurred during or immediately following tax rate reductions.

Audit Settlements and Changes in Uncertain Tax Positions

This item showed varying minor impacts, ranging from a positive 6.2% in 2015 down to slight negative and near-neutral percentages in subsequent years, with a modest positive uptick to 1.3% in 2019, reflective of periodic adjustments to tax positions and outcomes of audits.

Other Specific Items

Several specialized items influenced the tax rate: Venezuela nondeductible devaluation loss was notable at 9.9% in 2015 but absent thereafter. Global intangible low-taxed income appeared only in 2018 and 2019 with small positive and negative effects. Goodwill impairment markedly reduced the tax rate by 15.1% in 2017 but reversed with a 9.3% increase in 2018. Wind-up of non-U.S. pension plans and gains or losses related to acquisitions and divestitures affected the tax rate marginally in 2017 and the following years. Movement of valuation allowance reserves appeared only in 2019 with a 1.3% impact. A consistent, mild negative trend appeared in the category labeled Other, declining from -0.2% in 2015 to -1.9% in 2019.

Effective Tax Rate Dynamics

The effective tax rate before U.S. Tax Reform discrete benefits declined from 36.2% in 2015 to a low of 8.9% in 2018, then rose to 27.4% in 2019, paralleling statutory rate changes and discrete events. Notably, the U.S. Tax Reform discrete income tax benefit introduced a dramatic negative adjustment of -127.3% in 2017, causing an overall effective tax rate of -98.7% that year. This extraordinary benefit was partially offset in 2018, returning the effective tax rate closer to single digits before increasing again in 2019.

The analysis of the financial data over the five-year period reveals several key trends and changes across various balance sheet items related to deferred income taxes, intangible assets, and other liabilities.

Benefit Plans

There is a notable downward trend in the value associated with benefit plans, decreasing steadily from $1,323 million in 2015 to $112 million in 2019. This represents a significant reduction, indicating either a decrease in defined benefit obligations or changes in plan assumptions or funding status.

Other Assets

The item labeled "Other" under assets shows a decline from $1,011 million in 2015 to $474 million in 2019, with a consistent decrease especially between 2015 and 2017. However, values slightly stabilize thereafter, suggesting internal adjustments or disposals affecting these assets.

Deferred Income Tax Assets, Gross and Net

Both gross and net deferred income tax assets exhibit significant decreases over the period. Gross deferred income tax assets dropped sharply from $2,334 million in 2015 to $586 million in 2019. Correspondingly, net deferred income tax assets declined from $2,251 million to $474 million. This suggests a reduction in temporary differences generating deferred tax assets or realizability concerns reducing asset recognition.

Valuation Allowance

The valuation allowance showed minor fluctuations before increasing in magnitude to -$112 million in 2019 from -$83 million in 2015. This increase implies a growing reservation against deferred tax assets, indicating decreased confidence in their recoverability.

Intangible Assets, Net

Intangible assets decreased significantly over the period, from -$21,950 million in 2015 to -$11,230 million in 2019. The negative values reflect that these are likely recorded as liabilities or contra-assets related to tax or accounting treatments. The substantial reduction highlights possible amortization, impairment, or disposals of intangible assets.

Property, Plant and Equipment, Net

This category also shows a declining trend from -$1,233 million in 2015 to -$773 million in 2019. The decrease indicates ongoing depreciation or impairment affecting the net carrying amount of these fixed assets.

Other Liabilities

The “Other” line item under liabilities fluctuates but generally decreases from -$495 million to -$252 million. The variability suggests some adjustments or reclassifications impacting this category.

Deferred Income Tax Liabilities

Deferred income tax liabilities decline markedly from -$23,678 million to -$12,255 million, indicating a sizeable reduction in taxable temporary differences or changes in tax laws affecting deferred tax liability recognition.

Net Deferred Income Tax Assets (Liabilities)

The net deferred income tax position, combining assets and liabilities, remains negative throughout but improves from -$21,427 million in 2015 to -$11,781 million in 2019. This improvement suggests a reduction in net deferred tax obligations.

In summary, the data reflects ongoing reductions in deferred tax assets and liabilities, with notable declines in benefit plan-related assets, intangible assets, and property plant and equipment valuations. The increased valuation allowance points toward prudence concerning the realizability of deferred tax assets. Overall, the company appears to be experiencing a decrease in deferred tax positions and related asset valuations over the analyzed period.

Deferred Income Tax Assets

The deferred income tax assets exhibited a fluctuating pattern over the five-year period. Starting at 70 million US dollars in 2015, the value decreased to 53 million in 2016, increased again to 65 million in 2017, declined to 47 million in 2018, and then substantially rose to 97 million in 2019. The overall trend indicates volatility with a notable increase in the final year, suggesting possible changes in tax planning or recognition of additional deductible temporary differences.

Deferred Income Tax Liabilities

The deferred income tax liabilities showed a consistent declining trend across the years reviewed. Beginning at 21,497 million US dollars in 2015, there was a steady decrease each year to 20,848 million in 2016, 14,076 million in 2017, 12,202 million in 2018, and finally reaching 11,878 million in 2019. This continuous reduction may imply a decline in taxable temporary differences or the impact of tax strategy adjustments that have reduced the company's future tax obligations.

Total Assets

The reported total assets show a declining trend from 122,973 million US dollars at the end of 2015 to 101,450 million US dollars by the end of 2019. The adjusted total assets closely mirror this pattern, with values decreasing from 122,903 million to 101,353 million over the same period. This indicates a consistent reduction in the asset base regardless of adjustments for income tax effects.

Total Liabilities

Reported total liabilities decreased from 56,737 million US dollars in 2015 to 49,701 million in 2019, with a slight fluctuation observed in 2016 where liabilities peaked at 62,906 million before declining sharply in subsequent years. Adjusted liabilities, however, are significantly lower in magnitude compared to reported figures, starting at 35,240 million in 2015 and falling to 37,823 million in 2019. Despite the difference in levels, adjusted liabilities also show a general downward trend, though the 2019 figure indicates a minor increase compared to 2018.

Shareholders’ Equity

Reported shareholders' equity displayed volatility, increasing from 57,685 million in 2015 to 66,034 million in 2017, then sharply decreasing to around 51,600 million in 2018 and 2019. Adjusted shareholders' equity figures are higher than reported values throughout the period, peaking in 2017 at 80,045 million, followed by a marked decline to 63,404 million by 2019. This suggests adjustments for deferred income tax significantly enhance reported equity values, but both measures reveal a notable reduction in equity after 2017.

Net Income (Loss) Attributable to Kraft Heinz

The reported net income begins at 634 million US dollars in 2015 and rises dramatically to 10,999 million in 2017, indicating strong profitability. However, this is followed by a sizeable loss of 10,192 million in 2018, with a partial recovery to 1,935 million in 2019. The adjusted net income follows a similar trajectory but with moderated values. It rises from 317 million in 2015 to 4,532 million in 2017, then drops to a loss of 12,159 million in 2018, followed by a modest gain of 1,642 million in 2019. The adjustments for deferred income tax tend to reduce the magnitude of profits and losses compared to reported figures, particularly damping the 2017 profit and 2018 loss.

General Observations

Throughout the period, adjustments related to deferred income taxes consistently lower liabilities and increase shareholders' equity compared to reported figures. The fluctuations in net income, especially the significant loss in 2018, are critical points of concern, reflecting a volatile profitability pattern. The declining trends in assets and equity after 2017 may indicate operational or market challenges. Additionally, the disparity between reported and adjusted figures highlights the material impact of tax adjustments on financial presentation and performance evaluation.

Net Profit Margin

The reported net profit margin exhibited significant volatility, increasing sharply from 3.46% in 2015 to a peak of 41.93% in 2017, followed by a drastic decline to -38.8% in 2018 and a partial recovery to 7.75% in 2019. The adjusted net profit margin mirrored this trend but with less extreme fluctuations, peaking at 17.28% in 2017 before dropping to -46.29% in 2018 and moderating to 6.57% in 2019.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios showed a gradual improvement over the period, rising from 0.15 in 2015 to 0.25 by 2018 and maintaining that level in 2019. This indicates a consistent increase in asset utilization efficiency across the years.

Financial Leverage

The reported financial leverage displayed a slight overall decrease, moving from 2.13 in 2015 to 1.97 in 2019, with some fluctuations. The adjusted financial leverage was consistently lower than the reported measure and showed a modest increase from 1.55 in 2015 to a peak of 1.62 in 2018 before slightly declining to 1.6 in 2019. This suggests a relatively stable but cautious capital structure when considering adjustments.

Return on Equity (ROE)

Reported ROE followed a trajectory similar to the net profit margins, rising from 1.1% in 2015 to a high of 16.66% in 2017, sharply dropping to -19.73% in 2018, and recovering somewhat to 3.75% in 2019. Adjusted ROE portrayed a more subdued pattern, peaking at 5.66% in 2017, declining to -19.05% in 2018, and rising marginally to 2.59% in 2019. This volatility suggests variations in profitability and equity efficiency, particularly in 2018.

Return on Assets (ROA)

The reported ROA improved steadily from 0.52% in 2015 to 9.15% in 2017 before declining sharply to -9.85% in 2018 and recovering to 1.91% in 2019. Adjusted ROA rose from 0.26% in 2015 to 3.77% in 2017, decreased more significantly to -11.76% in 2018, and modestly rebounded to 1.62% in 2019. These patterns align with the profit margin and ROE dynamics, reflecting declines in asset profitability in 2018 followed by partial recovery.

Reported Net Income (Loss) Attributable to Kraft Heinz

The reported net income displayed significant volatility over the observed five-year period. Starting at $634 million in 2015, it surged dramatically to $3,632 million in 2016 and peaked at $10,999 million in 2017. However, a substantial downturn occurred in 2018, resulting in a reported net loss of $10,192 million. The company partially recovered in 2019, reporting a net income of $1,935 million. This pattern reflects a period of strong earnings growth followed by a severe financial setback and moderate recovery.

Adjusted Net Income (Loss) Attributable to Kraft Heinz

The adjusted net income trend largely parallels the reported figures but at lower absolute values, indicating the impact of adjustments made for non-recurring items or other exclusions. It started at $317 million in 2015, increased robustly to $3,603 million in 2016, and further grew to $4,532 million in 2017. A notable loss of $12,159 million was recorded in 2018, exceeding the reported loss figure. The adjusted net income improved to $1,642 million in 2019, showing a recovery trend consistent with the reported net income albeit at a smaller scale.

Reported Net Profit Margin

The reported net profit margin followed a pattern of initial growth followed by deep negative impact. The margin was 3.46% in 2015, increasing substantially to 13.71% in 2016 and then to a peak of 41.93% in 2017. The margin then collapsed to -38.8% in 2018, reflecting the large reported loss, before recovering to 7.75% in 2019. This wide fluctuation highlights significant swings in profitability and operational performance over the period.

Adjusted Net Profit Margin

The adjusted net profit margin exhibited a similar trend with generally lower percentages compared to the reported margin, suggesting adjustments reduced profit ratios. It started at a modest 1.73% in 2015, increased to 13.6% in 2016, and then declined to 17.28% in 2017, indicating some volatility even before the major loss year. In 2018, the margin deepened further into negative territory at -46.29%, a more severe decline than the reported margin, and partially recovered to 6.57% in 2019. This demonstrates the significant negative impact of extraordinary or nonrecurring items on adjusted profitability during the disruptive year.

The data reveals a steady decline in both reported and adjusted total assets over the observed period from the end of 2015 through 2019. Reported total assets decreased from approximately 122.97 billion US dollars in 2015 to about 101.45 billion US dollars by the end of 2019. A similar pattern is observed in adjusted total assets, which also reduced from nearly 122.90 billion to 101.35 billion US dollars during the same timeframe. The close alignment between reported and adjusted values suggests minimal discrepancies or adjustments related to deferred income tax considerations.

Conversely, total asset turnover exhibited an upward trend. Both reported and adjusted total asset turnover ratios rose from 0.15 in 2015 to 0.25 by the end of 2018, maintaining that level through 2019. This improvement indicates an enhancement in the company’s efficiency in generating revenue from its asset base despite the contraction in asset size.

Total Assets Trend

There was a consistent decline in total assets, approximately a 17.5% decrease over five years, signaling potential asset disposals, depreciation exceeding capital expenditures, or strategic asset reductions.

Total Asset Turnover Trend

The increase from 0.15 to 0.25 in asset turnover reflects improved asset utilization or stronger sales performance relative to the asset base.

Adjustment Impact

The minimal variation between reported and adjusted figures indicates that deferred income tax adjustments had a negligible impact on asset valuations and efficiency metrics during the period.

An analysis of the annual financial data reveals several notable trends in asset base, equity, and leverage ratios over the five-year period ending in 2019.

Total Assets

Both reported and adjusted total assets show a general decline from 2015 through 2019. Reported assets decreased from approximately 122.97 billion US dollars to 101.45 billion, while adjusted assets similarly contracted from about 122.90 billion to 101.35 billion US dollars. This steady reduction indicates a possible strategic downsizing or asset divestiture phase.

Shareholders’ Equity

Reported shareholders’ equity exhibited a peak in 2017 at around 66.03 billion US dollars, followed by a sharp decrease to approximately 51.62 billion in 2019, suggesting capital reductions or losses in subsequent periods. In contrast, adjusted shareholders’ equity remained higher throughout the timeframe, peaking at 80.05 billion in 2017 but also declining to about 63.40 billion by 2019. The persistence of a higher adjusted equity indicates that deferred tax and other adjustments materially affect equity reporting.

Financial Leverage

The reported financial leverage ratio declined from 2.13 in 2015 to a trough of 1.82 in 2017, then rebounded slightly to around 1.97 by 2019. This suggests that the company reduced reliance on debt relative to equity initially but started increasing leverage again towards the end of the period. The adjusted financial leverage ratio consistently remained below the reported ratio, ranging from 1.55 to 1.6, reflecting the impact of considering deferred taxes and other adjustments on the leverage calculation. The adjusted ratio followed a similar pattern of a modest decline followed by a slight increase.

Overall, the data indicates a contraction in total assets and fluctuations in equity levels, with adjusted figures systematically presenting a more conservative leverage profile than reported numbers. The trends suggest that while the company reduced asset size and initially deleveraged, some reversal in leverage usage occurred by 2019. Adjusted measures provide a potentially clearer understanding of financial position by accounting for deferred income tax effects.

Net Income Analysis

Reported net income exhibited significant volatility over the observed period. Starting modestly at 634 million US dollars in 2015, it surged to 10,999 million in 2017, followed by a steep decline to a loss of 10,192 million in 2018 before recovering to a positive 1,935 million in 2019. Adjusted net income followed a similar trend but with less pronounced fluctuations, peaking at 4,532 million in 2017, subsequently falling to a loss of 12,159 million in 2018, and then improving to 1,642 million in 2019.

Shareholders' Equity Trends

Reported shareholders’ equity showed moderate variability, initially decreasing slightly from 57,685 million in 2015 to 57,358 million in 2016, then increasing to 66,034 million in 2017, followed by a decline to approximately 51,623 million by 2019. Adjusted shareholders’ equity figures were consistently higher than reported values, peaking at 80,045 million in 2017 and declining to around 63,404 million by 2019, indicating adjustments substantially increased equity values throughout the period.

Return on Equity (ROE) Insights

Reported ROE mirrored the income volatility, rising from a low of 1.1% in 2015 to a peak of 16.66% in 2017, then sharply declining to -19.73% in 2018 before partially recovering to 3.75% in 2019. Adjusted ROE demonstrated a similar pattern but with dampened peaks and less severe troughs, moving from 0.4% in 2015 to 5.66% in 2017, falling to -19.05% in 2018, and improving to 2.59% in 2019.

Overall Financial Performance and Stability

The data indicates that both reported and adjusted financial measures experienced substantial instability, particularly in 2018 with significant losses and negative returns. Adjustments appear to mitigate some volatility in equity and net income, though large negative swings still occurred. The recovery in 2019 suggests some operational or financial improvement, yet metrics remained below peak levels seen in 2017. The disparity between reported and adjusted figures highlights the impact of non-recurring items or accounting treatments on financial presentation.

The financial data presents a notable volatility in both reported and adjusted net income figures over the five-year period ending December 2019. Initially, the net income values show a significant increase from 2015 to 2017, with reported net income rising from 634 million US dollars to a peak of 10,999 million US dollars, and adjusted net income increasing from 317 million US dollars to 4,532 million US dollars. This growth phase is followed by a sharp reversal in 2018, where both reported and adjusted net incomes reflect substantial losses, reaching -10,192 million US dollars and -12,159 million US dollars, respectively. The year 2019 indicates a recovery trend, although the net incomes remain positive at lower levels than the peak years, with reported net income at 1,935 million US dollars and adjusted net income at 1,642 million US dollars.

Total assets, both reported and adjusted, exhibit a gradual declining trend throughout the period. Reported total assets decrease from 122,973 million US dollars in 2015 to 101,450 million US dollars in 2019. Adjusted total assets mirror this pattern closely, slightly lower in magnitude but following the same downward trajectory. This decline suggests a contraction in the asset base, which may have implications for the company's operational scale or strategic asset management.

Return on assets (ROA) further emphasizes the fluctuating profitability of the company during these years. Reported ROA increases from a low of 0.52% in 2015 to a substantial 9.15% in 2017, aligning with the peak net income figures. However, 2018 shows a drastic negative turn, with ROA dropping to -9.85%, indicating significant losses relative to asset size. The 2019 ROA recovers to 1.91%, consistent with the rebound in net income but remains well below the peak of previous years. Adjusted ROA follows a similar pattern, albeit with less pronounced peaks and troughs, peaking at 3.77% in 2017, falling sharply to -11.76% in 2018, and partially recovering to 1.62% in 2019.

Summary of Trends

The data shows a cycle of strong growth in profitability until 2017, followed by a sharp decline and losses in 2018, then a partial recovery in 2019. This pattern is supported by corresponding movements in both net income and return on assets metrics.

The consistent decrease in total assets over the period may indicate strategic divestitures, asset depreciation, or other factors contributing to a reduced asset base.

The differences between reported and adjusted figures, particularly in net income and ROA, suggest the presence of significant non-recurring items or accounting adjustments impacting the reported results, especially in years with losses.