Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Kraft Heinz Co., solvency ratios
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).
The solvency profile between 2015 and 2019 is characterized by a gradual increase in leverage and a period of significant volatility in debt service capacity. While leverage ratios remained relatively stable, the coverage ratios indicate a severe financial disruption occurring in 2018.
- Leverage and Capital Structure
- Debt to equity and debt to capital ratios exhibited an upward trajectory over the five-year period. Debt to equity rose from 0.44 in 2015 to a peak of 0.60 in 2018, ending at 0.57 in 2019. Similarly, debt to assets increased from 0.21 in 2015 to 0.29 in 2019. The inclusion of operating lease liabilities had a negligible impact on these metrics, as the values remained nearly identical to the standard debt ratios across all periods.
- Financial Leverage
- Financial leverage showed moderate fluctuations, starting at 2.13 in 2015 and declining to 1.82 in 2017 before recovering to 1.97 by 2019. This suggests a general maintenance of the asset-to-equity relationship despite the increase in total debt ratios.
- Debt Service Coverage
- Interest and fixed charge coverage ratios experienced extreme volatility. After improving significantly from 2015 to 2017—with interest coverage rising from 1.77 to 5.48—both ratios collapsed into negative territory in 2018, reaching -7.82 for interest coverage and -6.63 for fixed charge coverage. A partial recovery was observed in 2019, with interest coverage returning to 2.96 and fixed charge coverage to 2.71, though these levels remain well below the 2017 peaks.
In summary, the organization increased its reliance on debt relative to equity and assets over the analyzed period. The most critical observation is the acute deterioration of coverage ratios in 2018, which indicates a temporary but severe inability to meet fixed financial obligations from operating earnings, followed by a moderate recovery in 2019.
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Debt Ratios
Coverage Ratios
Debt to Equity
Kraft Heinz Co., debt to equity 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) | ||||||
| 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) | |
| Total debt | 29,244) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Shareholders’ equity | 51,623) | 51,657) | 66,034) | 57,358) | 57,685) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.57 | 0.60 | 0.48 | 0.56 | 0.44 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to equity = Total debt ÷ Shareholders’ equity
= 29,244 ÷ 51,623 = 0.57
2 Click competitor name to see calculations.
The debt to equity ratio exhibits fluctuations over the observed period. Initially, the ratio increased before stabilizing and then decreasing slightly. A review of the specific values reveals a pattern of increasing leverage followed by a period of relative stabilization and modest deleveraging.
- Initial Increase (2015-2016)
- The debt to equity ratio rose from 0.44 in 2015 to 0.56 in 2016. This indicates an increase in the proportion of debt financing relative to equity financing during this period. The increase suggests the entity utilized more debt to fund its operations or investments.
- Stabilization and Fluctuation (2016-2018)
- Following the increase, the ratio experienced a slight decrease to 0.48 in 2017, then increased again to 0.60 in 2018. This suggests a period of fluctuating leverage, with debt levels remaining relatively high. The increase in 2018 represents the highest ratio value within the observed timeframe.
- Recent Trend (2018-2019)
- From 2018 to 2019, the debt to equity ratio decreased to 0.57. This indicates a modest reduction in leverage, suggesting the entity reduced its debt burden or increased its equity base. While still elevated compared to 2015, the ratio demonstrates a move towards a more balanced capital structure.
- Total Debt and Shareholders’ Equity
- Total debt decreased from US$32,404 million in 2016 to US$29,244 million in 2019. Shareholders’ equity increased from US$57,358 million in 2016 to US$51,623 million in 2019. The combined effect of these changes contributed to the observed trend in the debt to equity ratio.
Overall, the observed trend suggests a period of increased reliance on debt financing, followed by a stabilization and a recent, slight reduction in leverage. Continued monitoring of this ratio is recommended to assess the entity’s long-term financial health and capital structure.
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Debt to Equity (including Operating Lease Liability)
Kraft Heinz Co., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 29,244) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Lease liabilities, operating leases, current | 147) | —) | —) | —) | —) | |
| Lease liabilities, operating leases, non-current | 454) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 29,845) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Shareholders’ equity | 51,623) | 51,657) | 66,034) | 57,358) | 57,685) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.58 | 0.60 | 0.48 | 0.56 | 0.44 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= 29,845 ÷ 51,623 = 0.58
2 Click competitor name to see calculations.
The solvency profile exhibits a general increase in leverage over the observed five-year period, with the debt-to-equity ratio rising from 0.44 in 2015 to 0.58 by the end of 2019. While total liabilities fluctuated, the overall increase in the solvency ratio was driven by both a spike in total debt in 2016 and a significant contraction in shareholders' equity in 2018.
- Total Debt Trends
- A substantial increase in total debt, including operating lease liabilities, occurred between 2015 and 2016, rising from 25,234 million US$ to 32,404 million US$. Following this peak, a consistent downward trend was observed over the subsequent three years, with total debt gradually declining to 29,845 million US$ by December 28, 2019.
- Shareholders' Equity Dynamics
- Equity levels remained relatively stable between 2015 and 2016 before increasing to a peak of 66,034 million US$ in 2017. However, a sharp decline occurred in 2018, where equity fell to 51,657 million US$, representing a significant reduction in the capital base. This level remained largely stagnant through the end of 2019.
- Debt to Equity Ratio Interpretation
- The debt-to-equity ratio experienced volatility, peaking at 0.60 in 2018. The increase from 0.48 in 2017 to 0.60 in 2018 is particularly noteworthy, as it was primarily driven by the erosion of shareholders' equity rather than an increase in total debt, which actually decreased during that same interval. A slight improvement to 0.58 was recorded in 2019, reflecting a marginal reduction in total liabilities against a stable equity base.
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Debt to Capital
Kraft Heinz Co., debt to capital calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 29,244) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Shareholders’ equity | 51,623) | 51,657) | 66,034) | 57,358) | 57,685) | |
| Total capital | 80,867) | 82,825) | 97,570) | 89,762) | 82,919) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.36 | 0.38 | 0.32 | 0.36 | 0.30 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to capital = Total debt ÷ Total capital
= 29,244 ÷ 80,867 = 0.36
2 Click competitor name to see calculations.
The solvency profile between 2015 and 2019 is characterized by an initial increase in leverage followed by a period of moderate stabilization and slight deleveraging. Total debt experienced a significant spike in 2016 before entering a steady downward trend over the subsequent three years.
- Total Debt Trends
- A substantial increase in total debt is observed between 2015 and 2016, rising from 25,234 million US$ to 32,404 million US$. Following this peak, debt levels declined progressively, reaching 29,244 million US$ by December 28, 2019, representing a gradual reduction in absolute obligations.
- Total Capital Fluctuations
- Total capital exhibited growth from 2015 through 2017, peaking at 97,570 million US$. However, a sharp contraction occurred in 2018, with capital falling to 82,825 million US$, and continuing to decrease to 80,867 million US$ by the end of 2019.
- Debt to Capital Ratio Analysis
- The debt to capital ratio fluctuated throughout the period, moving from 0.30 in 2015 to a peak of 0.38 in 2018. The increase in the ratio during 2018, despite a slight decrease in absolute debt, is attributable to the more pronounced contraction in total capital during that year. By 2019, the ratio moderated slightly to 0.36, indicating a relative stabilization of the capital structure.
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Debt to Capital (including Operating Lease Liability)
Kraft Heinz Co., debt to capital (including operating lease liability) 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) | ||||||
| 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) | |
| Total debt | 29,244) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Lease liabilities, operating leases, current | 147) | —) | —) | —) | —) | |
| Lease liabilities, operating leases, non-current | 454) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 29,845) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Shareholders’ equity | 51,623) | 51,657) | 66,034) | 57,358) | 57,685) | |
| Total capital (including operating lease liability) | 81,468) | 82,825) | 97,570) | 89,762) | 82,919) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.37 | 0.38 | 0.32 | 0.36 | 0.30 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 29,845 ÷ 81,468 = 0.37
2 Click competitor name to see calculations.
The solvency profile from 2015 to 2019 is characterized by a significant increase in leverage during the early period followed by a gradual reduction in absolute debt, juxtaposed against a volatile total capital base.
- Total Debt Trends
- A substantial increase in total debt, including operating lease liabilities, occurred between 2015 and 2016, rising from 25,234 million US$ to 32,404 million US$. Following this peak, a consistent downward trend is observed through 2019, with debt levels declining to 29,845 million US$. This indicates a period of gradual deleveraging after the initial expansion of liabilities.
- Total Capital Fluctuations
- Total capital exhibited growth from 2015 to 2017, reaching a peak of 97,570 million US$. However, a sharp contraction occurred in 2018, where capital fell to 82,825 million US$, representing a significant reduction in the overall capital base. This decline continued slightly into 2019, ending at 81,468 million US$.
- Debt to Capital Ratio Analysis
- The debt to capital ratio fluctuated between 0.30 and 0.38. Although total debt decreased after 2016, the ratio reached its highest point in 2018 at 0.38. This divergence is attributed to the more aggressive reduction in total capital relative to the reduction in total debt. By 2019, the ratio marginally improved to 0.37, reflecting a stabilization of the company's capital structure.
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Debt to Assets
Kraft Heinz Co., debt to assets calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| 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) | |
| Total debt | 29,244) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Total assets | 101,450) | 103,461) | 120,232) | 120,480) | 122,973) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.29 | 0.30 | 0.26 | 0.27 | 0.21 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to assets = Total debt ÷ Total assets
= 29,244 ÷ 101,450 = 0.29
2 Click competitor name to see calculations.
Between 2015 and 2019, the company's solvency profile experienced a notable shift, characterized by an overall increase in the proportion of assets financed through debt. While absolute debt levels trended downward in the latter half of the period, a simultaneous and more significant contraction in total assets led to a higher debt-to-assets ratio.
- Total Debt Trends
- A significant increase in total debt was recorded between 2015 and 2016, rising from 25,234 million to 32,404 million US dollars. From 2016 onward, a gradual decline is observed, with total debt reducing to 29,244 million US dollars by December 31, 2019.
- Total Asset Valuation
- Total assets exhibited a downward trajectory throughout the analyzed period. Assets remained relatively stable through 2017, but a sharp decrease occurred in 2018 and 2019, with the total asset base falling from 120,232 million in 2017 to 101,450 million US dollars by the end of 2019.
- Debt to Assets Ratio Interpretation
- The debt to assets ratio rose from 0.21 in 2015 to a peak of 0.30 in 2018. This increase indicates a heightened reliance on debt relative to the asset base. The rise was primarily driven by the surge in borrowing in 2016 and the substantial reduction in total assets in 2018. A slight improvement was noted in 2019, as the ratio decreased to 0.29, though it remained elevated compared to the 2015 levels.
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Debt to Assets (including Operating Lease Liability)
Kraft Heinz Co., debt to assets (including operating lease liability) 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) | ||||||
| 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) | |
| Total debt | 29,244) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Lease liabilities, operating leases, current | 147) | —) | —) | —) | —) | |
| Lease liabilities, operating leases, non-current | 454) | —) | —) | —) | —) | |
| Total debt (including operating lease liability) | 29,845) | 31,168) | 31,536) | 32,404) | 25,234) | |
| Total assets | 101,450) | 103,461) | 120,232) | 120,480) | 122,973) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.29 | 0.30 | 0.26 | 0.27 | 0.21 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 29,845 ÷ 101,450 = 0.29
2 Click competitor name to see calculations.
The company's solvency profile between 2015 and 2019 is characterized by a moderate increase in the proportion of assets financed by debt. Although total debt obligations began to decrease after 2016, the overall solvency ratio rose due to a concurrent and more substantial contraction in the total asset base.
- Debt to Assets Ratio Movement
- The debt-to-assets ratio experienced an upward trend, increasing from 0.21 in 2015 to a peak of 0.30 in 2018, before settling at 0.29 in 2019. This indicates that a larger percentage of the company's assets were funded through debt by the end of the period compared to the beginning.
- Total Debt Trajectory
- A significant increase in total debt, including operating lease liabilities, occurred between 2015 and 2016, where obligations rose from $25,234 million to $32,404 million. From 2016 through 2019, a gradual deleveraging process is observed, with total debt reducing steadily to $29,845 million.
- Asset Base Contraction
- Total assets remained relatively stable from 2015 to 2017, hovering around $120 billion. However, a sharp decline occurred in 2018 and 2019, with assets falling to $101,450 million. This reduction in the asset base contributed significantly to the rise in the debt-to-assets ratio, offsetting the impact of the absolute reduction in debt.
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Financial Leverage
Kraft Heinz Co., financial leverage calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 101,450) | 103,461) | 120,232) | 120,480) | 122,973) | |
| Shareholders’ equity | 51,623) | 51,657) | 66,034) | 57,358) | 57,685) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 1.97 | 2.00 | 1.82 | 2.10 | 2.13 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Financial leverage = Total assets ÷ Shareholders’ equity
= 101,450 ÷ 51,623 = 1.97
2 Click competitor name to see calculations.
The financial position between 2015 and 2019 is characterized by a contraction in the asset base and fluctuations in equity, which collectively influenced the company's financial leverage.
- Total Assets
- A consistent downward trend in total assets is observed, decreasing from 122,973 million US$ in 2015 to 101,450 million US$ by 2019. The most significant reduction occurred between 2017 and 2018, during which assets decreased by approximately 13.9%.
- Shareholders' Equity
- Equity levels showed volatility over the period. After remaining stable through 2016, equity peaked at 66,034 million US$ in 2017. This was followed by a sharp decline to 51,657 million US$ in 2018, with the value remaining essentially flat at 51,623 million US$ in 2019.
- Financial Leverage Ratio
- The leverage ratio exhibited a fluctuating pattern. An initial improvement was noted as the ratio declined from 2.13 in 2015 to a low of 1.82 in 2017. However, this trend reversed in 2018 as the ratio rose to 2.00, before slightly moderating to 1.97 in 2019. The increase in leverage observed in 2018 corresponds with the significant reduction in shareholders' equity relative to the decline in total assets.
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Interest Coverage
Kraft Heinz Co., interest coverage 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) | ||||||
| Net income (loss) attributable to Kraft Heinz | 1,935) | (10,192) | 10,999) | 3,632) | 634) | |
| Add: Net income attributable to noncontrolling interest | (2) | (62) | (9) | 10) | 13) | |
| Add: Income tax expense | 728) | (1,067) | (5,460) | 1,381) | 366) | |
| Add: Interest expense | 1,361) | 1,284) | 1,234) | 1,134) | 1,321) | |
| Earnings before interest and tax (EBIT) | 4,022) | (10,037) | 6,764) | 6,157) | 2,334) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 2.96 | -7.82 | 5.48 | 5.43 | 1.77 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Interest coverage = EBIT ÷ Interest expense
= 4,022 ÷ 1,361 = 2.96
2 Click competitor name to see calculations.
The solvency profile demonstrates significant volatility over the five-year period, primarily driven by drastic fluctuations in operating earnings rather than changes in financing costs. While interest obligations remained relatively constant, the ability to service these obligations shifted from a period of stable growth to a severe deficit before returning to positive territory.
- Interest Expense Stability
- Interest expenses exhibited minimal variance between 2015 and 2019, fluctuating within a narrow range from a low of US$ 1,134 million in 2016 to a high of US$ 1,361 million in 2019. This stability suggests a consistent debt structure and a steady cost of borrowing throughout the analyzed period.
- Earnings Before Interest and Tax (EBIT) Volatility
- Operational profitability experienced extreme variance. After an initial increase from US$ 2,334 million in 2015 to a peak of US$ 6,764 million in 2017, EBIT suffered a substantial collapse in 2018, plummeting to a negative US$ 10,037 million. A recovery occurred in 2019, with EBIT returning to a positive US$ 4,022 million, although this figure remained significantly below the 2017 peak.
- Interest Coverage Ratio Trends
- The interest coverage ratio closely mirrors the volatility of EBIT. The ratio improved significantly from 1.77 in 2015 to 5.48 in 2017, indicating a strong capacity to meet interest obligations. However, the 2018 operating loss resulted in a negative coverage ratio of -7.82, signaling a critical inability to cover interest expenses from operating profits during that fiscal year. By 2019, the ratio recovered to 2.96, restoring a margin of safety, though this level represents a reduction in coverage compared to the 2016-2017 biennium.
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Fixed Charge Coverage
Kraft Heinz Co., fixed charge coverage calculation, comparison to benchmarks
| Dec 28, 2019 | Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| U.S. federal statutory tax rate | 21.00% | 21.00% | 35.00% | 35.00% | 35.00% | |
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) attributable to Kraft Heinz | 1,935) | (10,192) | 10,999) | 3,632) | 634) | |
| Add: Net income attributable to noncontrolling interest | (2) | (62) | (9) | 10) | 13) | |
| Add: Income tax expense | 728) | (1,067) | (5,460) | 1,381) | 366) | |
| Add: Interest expense | 1,361) | 1,284) | 1,234) | 1,134) | 1,321) | |
| Earnings before interest and tax (EBIT) | 4,022) | (10,037) | 6,764) | 6,157) | 2,334) | |
| Add: Operating lease costs | 191) | 200) | 183) | 149) | 160) | |
| Earnings before fixed charges and tax | 4,213) | (9,837) | 6,947) | 6,306) | 2,494) | |
| Interest expense | 1,361) | 1,284) | 1,234) | 1,134) | 1,321) | |
| Operating lease costs | 191) | 200) | 183) | 149) | 160) | |
| Preferred dividends | —) | —) | —) | 180) | 900) | |
| Preferred dividends, tax adjustment1 | —) | —) | —) | 97) | 485) | |
| Preferred dividends, after tax adjustment | —) | —) | —) | 277) | 1,385) | |
| Fixed charges | 1,552) | 1,484) | 1,417) | 1,560) | 2,866) | |
| Solvency Ratio | ||||||
| Fixed charge coverage2 | 2.71 | -6.63 | 4.90 | 4.04 | 0.87 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors3 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
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 2019 Calculation
Preferred dividends, tax adjustment = (Preferred dividends × U.S. federal statutory tax rate) ÷ (1 − U.S. federal statutory tax rate)
= (0 × 21.00%) ÷ (1 − 21.00%) = 0
2 2019 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 4,213 ÷ 1,552 = 2.71
3 Click competitor name to see calculations.
The fixed charge coverage ratio exhibits significant volatility over the five-year period from 2015 to 2019, characterized by a sharp ascent, a severe collapse, and a subsequent partial recovery. This variability is primarily driven by fluctuations in earnings before fixed charges and tax rather than changes in the fixed charges themselves.
- Initial Growth Phase (2015-2017)
- An upward trend in solvency is observed starting in 2015, where the coverage ratio stood at 0.87, indicating that earnings were insufficient to cover fixed obligations. This position improved drastically by 2016 and 2017, reaching a peak ratio of 4.90. This improvement was fueled by a substantial increase in earnings before fixed charges and tax, which rose from 2,494 million US dollars in 2015 to 6,947 million US dollars in 2017.
- Critical Decline (2018)
- A severe reversal occurred in 2018, with the coverage ratio dropping to -6.63. This decline was the result of earnings before fixed charges and tax falling into negative territory, reaching -9,837 million US dollars. During this period, the company lacked the operational earnings to meet its fixed charges, representing a period of significant financial stress.
- Recovery Phase (2019)
- A return to positive coverage is noted in 2019, with the ratio recovering to 2.71. This was supported by earnings before fixed charges and tax returning to a positive value of 4,213 million US dollars, although this level remained below the peaks seen in 2016 and 2017.
- Fixed Charge Stability
- While earnings fluctuated aggressively, fixed charges remained relatively stable between 2016 and 2019, ranging from 1,417 million to 1,560 million US dollars. This suggests that the volatility in the coverage ratio was almost entirely a function of earnings performance rather than changes in the company's fixed financial obligations.
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