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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Kraft Heinz Co., economic profit calculation

US$ in millions

12 months ended:	Dec 28, 2019	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 31, 2015
Net operating profit after taxes (NOPAT)¹	2,719)	(11,194)	5,287)	4,237)	1,418)
Cost of capital²	9.49%	9.72%	11.09%	11.57%	11.57%
Invested capital³	94,307)	96,541)	112,007)	111,350)	105,133)

Economic profit⁴	(6,227)	(20,580)	(7,136)	(8,647)	(10,741)

Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,719 – 9.49% × 94,307 = -6,227

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Kraft Heinz Co. economic profit decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Kraft Heinz Co., NOPAT calculation

US$ in millions

12 months ended:	Dec 28, 2019	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 31, 2015
Net income (loss) attributable to Kraft Heinz	1,935)	(10,192)	10,999)	3,632)	634)
Deferred income tax expense (benefit)¹	(293)	(1,967)	(6,467)	(29)	(317)
Increase (decrease) in allowances related to trade accounts receivable²	9)	1)	3)	(12)	24)
Increase (decrease) in liability balance for Integration Program and restructuring project costs³	(24)	(17)	(59)	(117)	184)
Increase (decrease) in equity equivalents⁴	(308)	(1,983)	(6,523)	(158)	(109)
Interest expense	1,361)	1,284)	1,234)	1,134)	1,321)
Interest expense, operating lease liability⁵	24)	37)	27)	25)	34)
Adjusted interest expense	1,385)	1,321)	1,261)	1,159)	1,355)
Tax benefit of interest expense⁶	(291)	(277)	(441)	(405)	(474)
Adjusted interest expense, after taxes⁷	1,094)	1,043)	820)	753)	880)
Net income (loss) attributable to noncontrolling interest	(2)	(62)	(9)	10)	13)
Net operating profit after taxes (NOPAT)	2,719)	(11,194)	5,287)	4,237)	1,418)

Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances related to trade accounts receivable.

³ Addition of increase (decrease) in liability balance for Integration Program and restructuring project costs.

⁴ Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Kraft Heinz.

⁵ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 601 × 4.00% = 24

⁶ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,385 × 21.00% = 291

⁷ Addition of after taxes interest expense to net income (loss) attributable to Kraft Heinz.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Kraft Heinz Co. NOPAT decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

Kraft Heinz Co., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 28, 2019	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 31, 2015
Provision for (benefit from) income taxes	728)	(1,067)	(5,460)	1,381)	366)
Less: Deferred income tax expense (benefit)	(293)	(1,967)	(6,467)	(29)	(317)
Add: Tax savings from interest expense	291)	277)	441)	405)	474)
Cash operating taxes	1,312)	1,177)	1,448)	1,815)	1,157)

Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Kraft Heinz Co. cash operating taxes decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Kraft Heinz Co., invested capital calculation (financing approach)

US$ in millions

	Dec 28, 2019	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 31, 2015
Commercial paper and other short-term debt	6)	21)	460)	645)	4)
Current portion of long-term debt	1,022)	377)	2,743)	2,046)	79)
Long-term debt, excluding current portion	28,216)	30,770)	28,333)	29,713)	25,151)
Operating lease liability¹	601)	568)	417)	383)	591)
Total reported debt & leases	29,845)	31,736)	31,953)	32,787)	25,825)
Shareholders’ equity	51,623)	51,657)	66,034)	57,358)	57,685)
Net deferred tax (assets) liabilities²	11,781)	12,155)	14,011)	20,795)	21,427)
Allowances related to trade accounts receivable³	33)	24)	23)	20)	32)
Liability balance for Integration Program and restructuring project costs⁴	46)	70)	87)	146)	263)
Equity equivalents⁵	11,860)	12,249)	14,121)	20,961)	21,722)
Accumulated other comprehensive (income) loss, net of tax⁶	1,886)	1,943)	1,054)	1,628)	671)
Redeemable noncontrolling interest	—)	3)	6)	—)	23)
Noncontrolling interest	126)	118)	207)	216)	208)
Adjusted shareholders’ equity	65,495)	65,970)	81,422)	80,163)	80,309)
Construction in progress⁷	(1,033)	(1,165)	(1,368)	(1,600)	(1,001)
Invested capital	94,307)	96,541)	112,007)	111,350)	105,133)

Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of liability balance for Integration Program and restructuring project costs.

⁵ Addition of equity equivalents to shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Kraft Heinz Co. invested capital decreased from 2017 to 2018 and from 2018 to 2019.

Kraft Heinz Co., cost of capital calculations

Dec 28, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	32,831)	32,831)	÷	64,532)	=	0.51	0.51	×	13.77%	=	7.01%
Debt³	31,100)	31,100)	÷	64,532)	=	0.48	0.48	×	6.44% × (1 – 21.00%)	=	2.45%
Operating lease liability⁴	601)	601)	÷	64,532)	=	0.01	0.01	×	4.00% × (1 – 21.00%)	=	0.03%
Total:	64,532)					1.00					9.49%

Based on: 10-K (reporting date: 2019-12-28).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 29, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	35,061)	35,061)	÷	65,729)	=	0.53	0.53	×	13.77%	=	7.34%
Debt³	30,100)	30,100)	÷	65,729)	=	0.46	0.46	×	6.45% × (1 – 21.00%)	=	2.33%
Operating lease liability⁴	568)	568)	÷	65,729)	=	0.01	0.01	×	6.45% × (1 – 21.00%)	=	0.04%
Total:	65,729)					1.00					9.72%

Based on: 10-K (reporting date: 2018-12-29).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 30, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	86,291)	86,291)	÷	119,709)	=	0.72	0.72	×	13.77%	=	9.93%
Debt³	33,000)	33,000)	÷	119,709)	=	0.28	0.28	×	6.42% × (1 – 35.00%)	=	1.15%
Operating lease liability⁴	417)	417)	÷	119,709)	=	0.00	0.00	×	6.42% × (1 – 35.00%)	=	0.01%
Total:	119,709)					1.00					11.09%

Based on: 10-K (reporting date: 2017-12-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	113,121)	113,121)	÷	146,703)	=	0.77	0.77	×	13.77%	=	10.62%
Debt³	33,200)	33,200)	÷	146,703)	=	0.23	0.23	×	6.41% × (1 – 35.00%)	=	0.94%
Operating lease liability⁴	383)	383)	÷	146,703)	=	0.00	0.00	×	6.41% × (1 – 35.00%)	=	0.01%
Total:	146,703)					1.00					11.57%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	94,019)	94,019)	÷	120,311)	=	0.78	0.78	×	13.77%	=	10.76%
Debt³	25,700)	25,700)	÷	120,311)	=	0.21	0.21	×	5.67% × (1 – 35.00%)	=	0.79%
Operating lease liability⁴	591)	591)	÷	120,311)	=	0.00	0.00	×	5.67% × (1 – 35.00%)	=	0.02%
Total:	120,311)					1.00					11.57%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Kraft Heinz Co., economic spread ratio calculation, comparison to benchmarks

	Dec 28, 2019	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(6,227)	(20,580)	(7,136)	(8,647)	(10,741)
Invested capital²	94,307)	96,541)	112,007)	111,350)	105,133)
Performance Ratio
Economic spread ratio³	-6.60%	-21.32%	-6.37%	-7.77%	-10.22%
Benchmarks
Economic Spread Ratio, Competitors⁴
Altria Group Inc.	-9.67%	—	—	—	—
Coca-Cola Co.	3.27%	—	—	—	—
Mondelēz International Inc.	-2.34%	—	—	—	—
PepsiCo Inc.	5.84%	—	—	—	—

Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -6,227 ÷ 94,307 = -6.60%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Kraft Heinz Co. economic spread ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.

Kraft Heinz Co., economic profit margin calculation, comparison to benchmarks

	Dec 28, 2019	Dec 29, 2018	Dec 30, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(6,227)	(20,580)	(7,136)	(8,647)	(10,741)
Net sales	24,977)	26,268)	26,232)	26,487)	18,338)
Performance Ratio
Economic profit margin²	-24.93%	-78.35%	-27.20%	-32.65%	-58.57%
Benchmarks
Economic Profit Margin, Competitors³
Altria Group Inc.	-16.41%	—	—	—	—
Coca-Cola Co.	6.48%	—	—	—	—
Mondelēz International Inc.	-5.34%	—	—	—	—
PepsiCo Inc.	5.16%	—	—	—	—

Based on: 10-K (reporting date: 2019-12-28), 10-K (reporting date: 2018-12-29), 10-K (reporting date: 2017-12-30), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -6,227 ÷ 24,977 = -24.93%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Kraft Heinz Co. economic profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Kraft Heinz Co. (NASDAQ:KHC)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin