Microsoft Excel LibreOffice Calc

Analysis of Operating Leases

Difficulty: Advanced


Present Value of Future Operating Lease Payments

Broadcom Inc., future operating lease payments

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Total undiscounted future operating lease payments1 (USD $ in millions) 745  446  167  135  91  97 
Discount rate2 3.38% 3.15% 4.15% 4.01% % %
Total present value of future operating lease payments (USD $ in millions) 591  410  140  112  91  97 

1 Source: Broadcom Inc. Annual Reports

2 Weighted-average interest rate for Broadcom Inc.'s debt

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at 3.38%
2018 119  2018 119  115 
2019 75  2019 75  70 
2020 51  2020 51  46 
2021 42  2021 42  37 
2022 37  2022 37  31 
2023 and thereafter 421  2023 37  30 
2024 37  29 
2025 37  28 
2026 37  27 
2027 37  27 
2028 37  26 
2029 37  25 
2030 37  24 
2031 37  23 
2032 37  22 
2033 37  22 
2034 14 
Total: 745  745  591 

1 Source: Broadcom Inc. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at 3.15%
2017 144  2017 144  140 
2018 116  2018 116  109 
2019 69  2019 69  63 
2020 43  2020 43  38 
2021 18  2021 18  15 
2022 and thereafter 56  2022 18  15 
2023 18  14 
2024 18  14 
2025
Total: 446  446  410 

1 Source: Broadcom Inc. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at 4.15%
2016 31  2016 31  30 
2017 25  2017 25  23 
2018 22  2018 22  19 
2019 17  2019 17  14 
2020 12  2020 12  10 
2021 and thereafter 60  2021 12 
2022 12 
2023 12 
2024 12 
2025 12 
Total: 167  167  140 

1 Source: Broadcom Inc. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at 4.01%
2015 27  2015 27  26 
2016 19  2016 19  18 
2017 14  2017 14  12 
2018 12  2018 12  10 
2019 2019
2020 and thereafter 54  2020
2021
2022
2023
2024
2025
Total: 135  135  112 

1 Source: Broadcom Inc. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at %
2014 13  2014 13  13 
2015 11  2015 11  11 
2016 2016
2017 2017
2018 2018
2019 and thereafter 53  2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Total: 91  91  91 

1 Source: Broadcom Inc. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at %
2013 10  2013 10  10 
2014 10  2014 10  10 
2015 10  2015 10  10 
2016 2016
2017 2017
2018 and thereafter 58  2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Total: 97  97  97 

1 Source: Broadcom Inc. Annual Reports


Analyst Adjustments for Operating Leases

Broadcom Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Adjustment to Total Assets
Total assets (as reported) 54,418  49,966  10,592  10,491  3,415  2,862 
Add: Operating leased assets1 591  410  140  112  91  97 
Total assets (adjusted) 55,009  50,376  10,732  10,603  3,506  2,959 
Adjustment to Total Debt
Total debt (as reported) 17,548  13,642  3,949  5,509 
Add: Operating lease obligations2 591  410  140  112  91  97 
Total debt (adjusted) 18,139  14,052  4,089  5,621  91  97 
Adjustment to Earnings before Interest and Tax (EBIT)
EBIT3 (as reported) 2,279  (522) 1,658  452  570  586 
Add-back: Rent expense4 253  229  77  42  12  12 
Less: Depreciation expense, operating leased assets5 225  209  68  36  12  12 
EBIT (adjusted) 2,307  (502) 1,667  458  570  586 
Adjustment to Interest Expense
Interest expense (as reported) 454  585  191  110 
Add: Interest expense, operating lease obligations6 28  20 
Interest expense (adjusted) 482  605  200  116 

1, 2 Equal to total present value of future operating lease payments. See Details »

3 See Details »

4 Source: Broadcom Inc. Annual Reports

5 See Details »

6 See Details »


Adjusted Ratios for Operating Leases (Summary)

Broadcom Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Total Asset Turnover1
Reported total asset turnover 0.32 0.26 0.64 0.41 0.74 0.83
Adjusted total asset turnover 0.32 0.26 0.64 0.40 0.72 0.80
Debt to Equity2
Reported debt to equity 0.87 0.72 0.84 1.70
Adjusted debt to equity 0.89 0.74 0.87 1.73 0.03 0.04
Return on Assets3 (ROA)
Reported ROA 3.11% -3.48% 12.88% 2.51% 16.16% 19.67%
Adjusted ROA 3.08% -3.45% 12.71% 2.48% 15.74% 19.03%
Interest Coverage4
Reported interest coverage 5.02 -0.89 8.68 4.11 285.00 586.00
Adjusted interest coverage 4.79 -0.83 8.35 3.95 285.00 586.00
Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Broadcom Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. Broadcom Inc.'s adjusted debt-to-equity improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Broadcom Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted interest coverage A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Broadcom Inc.'s adjusted interest coverage deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Net revenue (USD $ in millions) 17,636  13,240  6,824  4,269  2,520  2,364 
Total assets (USD $ in millions) 54,418  49,966  10,592  10,491  3,415  2,862 
Total asset turnover1 0.32 0.26 0.64 0.41 0.74 0.83
Adjusted for Operating Leases
Net revenue (USD $ in millions) 17,636  13,240  6,824  4,269  2,520  2,364 
Adjusted total assets (USD $ in millions) 55,009  50,376  10,732  10,603  3,506  2,959 
Adjusted total asset turnover2 0.32 0.26 0.64 0.40 0.72 0.80

2017 Calculations

1 Total asset turnover = Net revenue ÷ Total assets
= 17,636 ÷ 54,418 = 0.32

2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= 17,636 ÷ 55,009 = 0.32

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Broadcom Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Total debt (USD $ in millions) 17,548  13,642  3,949  5,509 
Total Broadcom Inc. stockholders’ equity (USD $ in millions) 20,285  18,892  4,714  3,243  2,886  2,419 
Debt to equity1 0.87 0.72 0.84 1.70
Adjusted for Operating Leases
Adjusted total debt (USD $ in millions) 18,139  14,052  4,089  5,621  91  97 
Total Broadcom Inc. stockholders’ equity (USD $ in millions) 20,285  18,892  4,714  3,243  2,886  2,419 
Adjusted debt to equity2 0.89 0.74 0.87 1.73 0.03 0.04

2017 Calculations

1 Debt to equity = Total debt ÷ Total Broadcom Inc. stockholders’ equity
= 17,548 ÷ 20,285 = 0.87

2 Adjusted debt to equity = Adjusted total debt ÷ Total Broadcom Inc. stockholders’ equity
= 18,139 ÷ 20,285 = 0.89

Ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. Broadcom Inc.'s adjusted debt-to-equity improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Net income (loss) attributable to ordinary shares (USD $ in millions) 1,692  (1,739) 1,364  263  552  563 
Total assets (USD $ in millions) 54,418  49,966  10,592  10,491  3,415  2,862 
ROA1 3.11% -3.48% 12.88% 2.51% 16.16% 19.67%
Adjusted for Operating Leases
Net income (loss) attributable to ordinary shares (USD $ in millions) 1,692  (1,739) 1,364  263  552  563 
Adjusted total assets (USD $ in millions) 55,009  50,376  10,732  10,603  3,506  2,959 
Adjusted ROA2 3.08% -3.45% 12.71% 2.48% 15.74% 19.03%

2017 Calculations

1 ROA = 100 × Net income (loss) attributable to ordinary shares ÷ Total assets
= 100 × 1,692 ÷ 54,418 = 3.11%

2 Adjusted ROA = 100 × Net income (loss) attributable to ordinary shares ÷ Adjusted total assets
= 100 × 1,692 ÷ 55,009 = 3.08%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Broadcom Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Adjusted Interest Coverage

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
As Reported
Earnings before interest and tax1 (EBIT) (USD $ in millions) 2,279  (522) 1,658  452  570  586 
Interest expense (USD $ in millions) 454  585  191  110 
Interest coverage2 5.02 -0.89 8.68 4.11 285.00 586.00
Adjusted for Operating Leases
Adjusted EBIT (USD $ in millions) 2,307  (502) 1,667  458  570  586 
Adjusted interest expense (USD $ in millions) 482  605  200  116 
Adjusted interest coverage3 4.79 -0.83 8.35 3.95 285.00 586.00

1 See Details »

2017 Calculations

2 Interest coverage = EBIT ÷ Interest expense
= 2,279 ÷ 454 = 5.02

3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense
= 2,307 ÷ 482 = 4.79

Ratio Description The company
Adjusted interest coverage ratio A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Broadcom Inc.'s adjusted interest coverage ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.

Estimation of Depreciation Expense, Operating Leased Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Rent expense1 253  229  77  42  12  12 
Less: Estimated interest expense, operating lease obligations2 28  20 
Estimated depreciation expense, operating leased assets 225  209  68  36  12  12 

1 Source: Broadcom Inc., Annual Reports

2 See Details »


Estimation of Interest Expense, Operating Lease Obligations

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Operating leased assets, at beginning of year1 (USD $ in millions) 817  619  208  148  103  109 
Discount rate2 3.38% 3.15% 4.15% 4.01% % %
Estimated interest expense, operating lease obligations3 (USD $ in millions) 28  20 

1 See Details »

2 Weighted-average interest rate for Broadcom Inc.'s debt

2017 Calculations

3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= 817 × 3.38% = 28


Present Value of Operating Lease Payments, at Beginning of Year

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Total present value of future operating lease payments1 (USD $ in millions) 591  410  140  112  91  97 
Rent expense2 (USD $ in millions) 253  229  77  42  12  12 
Discount rate3 3.38% 3.15% 4.15% 4.01% % %
Total present value of operating lease payments, at beginning of year4 (USD $ in millions) 817  619  208  148  103  109 

1 Equal to total present value of future operating lease payments. See Details »

2 Source: Broadcom Inc., Annual Reports

3 Weighted-average interest rate for Broadcom 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)
= (591 + 253) ÷ (1 + 3.38%) = 817