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Microsoft Excel LibreOffice Calc

Kraft Heinz Co. (KHC)


Economic Value Added (EVA)

Difficulty: Advanced

EVA is registered trademark of Stern Stewart.

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

Kraft Heinz Co., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden
 
Economic profit4 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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= hiddenhidden × hidden = hidden

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.’s economic profit increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

Kraft Heinz Co., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Net income (loss) attributable to Kraft Heinz hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden
Increase (decrease) in allowances related to trade accounts receivable2 hidden hidden hidden hidden
Increase (decrease) in liability balance for Integration Program and restructuring project costs3 hidden hidden hidden hidden
Increase (decrease) in equity equivalents4 hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden
Interest expense, operating lease liability5 hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden
Tax benefit of interest expense6 hidden hidden hidden hidden
Adjusted interest expense, after taxes7 hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) 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).

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 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

6 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

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

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.’s NOPAT increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Cash Operating Taxes

Kraft Heinz Co., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Provision for (benefit from) income taxes hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden
Cash operating 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
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.’s cash operating taxes declined from 2016 to 2017 and from 2017 to 2018.

Invested Capital

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Commercial paper and other short-term debt hidden hidden hidden hidden
Current portion of long-term debt hidden hidden hidden hidden
Long-term debt, excluding current portion hidden hidden hidden hidden
Operating lease liability1 hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden
Allowances related to trade accounts receivable3 hidden hidden hidden hidden
Liability balance for Integration Program and restructuring project costs4 hidden hidden hidden hidden
Equity equivalents5 hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax6 hidden hidden hidden hidden
Redeemable noncontrolling interest hidden hidden hidden hidden
Noncontrolling interest hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden
Construction in progress7 hidden hidden hidden hidden
Invested capital 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).

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.

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.’s invested capital increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Cost of Capital

Kraft Heinz Co., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

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

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2018-02-16).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2017-02-23).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2016-03-03).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Kraft Heinz Co., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden
Performance Ratio
Economic spread ratio3 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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

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.’s economic spread ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Economic Profit Margin

Kraft Heinz Co., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden
Net sales hidden hidden hidden hidden
Performance Ratio
Economic 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).

1 Economic profit. See details »

2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s 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.’s economic profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.