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Analysis of Operating Leases
Difficulty: Advanced
An operating lease is treated like a rental contract. Neither the leased asset nor the associated liability is reported on the lessee statement of financial position, but the rights may be very similar to the rights of an owner. The lessee only records the lease payments as a rental expense in income statement.
- Present Value of Future Operating Lease Payments
- Analyst Adjustments for Operating Leases
- Adjusted Ratios for Operating Leases (Summary)
- Adjusted Total Asset Turnover
- Adjusted Debt to Equity
- Adjusted Return on Assets (ROA)
- Adjusted Interest Coverage
- Estimation of Depreciation Expense, Operating Leased Assets
- Estimation of Interest Expense, Operating Lease Obligations
- Present Value of Operating Lease Payments, at Beginning of Year
Present Value of Future Operating Lease Payments
Applied Materials Inc., future operating lease payments
1 Source: Applied Materials Inc. Annual Reports
2 Weighted-average interest rate for Applied Materials Inc.'s debt
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at % |
|---|---|---|---|---|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
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| 2020 | |
2020 | |
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| 2021 | |
2021 | |
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| 2022 | |
2022 | |
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| 2023 and thereafter | |
2023 | |
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| 2024 | |
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| Total: | |
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1 Source: Applied Materials Inc. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at % |
|---|---|---|---|---|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
|
| 2020 | |
2020 | |
|
| 2021 | |
2021 | |
|
| 2022 and thereafter | |
2022 | |
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| 2023 | |
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| 2024 | |
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| Total: | |
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1 Source: Applied Materials Inc. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at % |
|---|---|---|---|---|
| 2016 | |
2016 | |
|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
|
| 2020 | |
2020 | |
|
| 2021 and thereafter | |
2021 | |
|
| 2022 | |
|
||
| Total: | |
|
|
1 Source: Applied Materials Inc. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at % |
|---|---|---|---|---|
| 2015 | |
2015 | |
|
| 2016 | |
2016 | |
|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
|
| 2020 and thereafter | |
2020 | |
|
| 2021 | |
|
||
| Total: | |
|
|
1 Source: Applied Materials Inc. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at % |
|---|---|---|---|---|
| 2014 | |
2014 | |
|
| 2015 | |
2015 | |
|
| 2016 | |
2016 | |
|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| 2019 and thereafter | |
2019 | |
|
| 2020 | |
|
||
| Total: | |
|
|
1 Source: Applied Materials Inc. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at % |
|---|---|---|---|---|
| 2013 | |
2013 | |
|
| 2014 | |
2014 | |
|
| 2015 | |
2015 | |
|
| 2016 | |
2016 | |
|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| Total: | |
|
|
1 Source: Applied Materials Inc. Annual Reports
Analyst Adjustments for Operating Leases
Applied Materials Inc., adjustments to financial data
USD $ in millions
1, 2 Equal to total present value of future operating lease payments. See Details »
4 Source: Applied Materials Inc. Annual Reports
Adjusted Ratios for Operating Leases (Summary)
Applied Materials Inc., adjusted ratios
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Applied Materials Inc.'s adjusted total asset turnover improved from 2015 to 2016 and from 2016 to 2017. |
| Adjusted debt-to-equity | A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. | Applied Materials Inc.'s adjusted debt-to-equity improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Applied Materials Inc.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017. |
| Adjusted interest coverage | A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. | Applied Materials Inc.'s adjusted interest coverage deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Total Asset Turnover
2017 Calculations
1 Total asset turnover = Net sales ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Applied Materials Inc.'s adjusted total asset turnover improved from 2015 to 2016 and from 2016 to 2017. |
Adjusted Debt to Equity
2017 Calculations
1 Debt to equity = Total debt ÷ Stockholders’ equity
= ÷ =
2 Adjusted debt to equity = Adjusted total debt ÷ Stockholders’ equity
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted debt-to-equity | A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. | Applied Materials Inc.'s adjusted debt-to-equity improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level. |
Adjusted Return on Assets (ROA)
2017 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ = %
2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Applied Materials Inc.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017. |
Adjusted Interest Coverage
2017 Calculations
2 Interest coverage = EBIT ÷ Interest expense
= ÷ =
3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted interest coverage ratio | A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. | Applied Materials Inc.'s adjusted interest coverage ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Estimation of Depreciation Expense, Operating Leased Assets
USD $ in millions
1 Source: Applied Materials Inc., Annual Reports
Estimation of Interest Expense, Operating Lease Obligations
2 Weighted-average interest rate for Applied Materials Inc.'s debt
2017 Calculations
3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= × =
Present Value of Operating Lease Payments, at Beginning of Year
1 Equal to total present value of future operating lease payments. See Details »
2 Source: Applied Materials Inc., Annual Reports
3 Weighted-average interest rate for Applied Materials Inc.'s debt
2017 Calculations
4 Total present value of operating lease payments, at beginning of year = (Total present value of future operating lease payments + Rent expense) ÷ (1 + Discount rate)
= ( + ) ÷ (1 + %) =
