Dollar Tree Inc. (NASDAQ:DLTR)

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

Dollar Tree Inc., effective income tax rate (EITR) reconciliation

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Statutory U.S. federal income tax rate	21.00%	21.00%	21.00%	21.00%	33.70%	35.00%
State and local income taxes, net of federal income tax benefit	3.70%	3.20%	3.70%	-3.00%	2.50%	3.00%
Non-deductible executive compensation	0.40%	0.40%	0.00%	0.00%	0.00%	0.00%
State tax reserve release	-0.40%	-0.50%	0.00%	0.00%	0.00%	0.00%
Incremental tax expense (benefit) of exercises/vesting of equity-based compensation	-0.50%	0.20%	-0.40%	-0.10%	-0.80%	-0.60%
Work Opportunity Tax Credit	-1.80%	-1.60%	-2.70%	2.00%	-1.30%	-1.60%
State tax election	0.00%	0.00%	0.00%	0.00%	0.00%	-1.40%
Deferred tax rate change	-3.80%	0.00%	0.10%	0.00%	-0.60%	-1.60%
Goodwill impairment	0.00%	0.00%	6.00%	-43.70%	0.00%	0.00%
Change in valuation allowance	0.00%	0.00%	-2.20%	-0.30%	-0.10%	0.10%
Other, net	0.00%	0.20%	-0.80%	1.30%	-1.00%	-0.30%
Effective tax rate, before Tax Cuts and Jobs Act	18.60%	22.90%	24.70%	-22.80%	32.40%	32.60%
Tax Cuts and Jobs Act	0.00%	0.00%	0.00%	1.30%	-33.00%	0.00%
Effective tax rate	18.60%	22.90%	24.70%	-21.50%	-0.60%	32.60%

The effective income tax rate exhibited significant volatility between 2017 and 2022, transitioning from a high of 32.6% to extreme negative values before stabilizing in the final three years of the period.

Statutory Rate Transitions: A structural downward shift in the U.S. federal income tax rate is observed, decreasing from 35.0% in 2017 to 21.0% starting in 2019. This rate remained constant through the end of the analyzed period in 2022.
Impact of Non-Recurring Items: Major fluctuations in the effective tax rate were driven by one-time financial and legislative events. The Tax Cuts and Jobs Act exerted a substantial downward pressure of 33.0% in 2018. Further volatility occurred in 2019, where a goodwill impairment led to a 43.7% reduction, resulting in a negative effective tax rate of -21.5% for that fiscal year.
Recurring Tax Adjustments and Credits: The Work Opportunity Tax Credit acted as a consistent tax reducer in most years, with the most significant impact occurring in 2020 at -2.7%. State and local income taxes typically increased the tax burden, generally fluctuating between 2.5% and 3.7%, although a temporary benefit of -3.0% was recorded in 2019.
Stabilization and Recent Trends: From 2020 to 2022, the effective tax rate showed a trend of stabilization and gradual decline, moving from 24.7% to 18.6%. The most recent reduction in 2022 was notably influenced by a deferred tax rate change of -3.8% and a continued benefit from the Work Opportunity Tax Credit.

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

Dollar Tree Inc., components of deferred tax assets and liabilities

US$ in thousands

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Deferred rent	—)	—)	—)	44,300)	42,700)	59,900)
Operating lease liabilities	1,647,300)	1,658,400)	1,621,800)	—)	—)	—)
Net operating losses, interest expense and credit carryforwards	91,500)	95,500)	102,200)	90,700)	75,600)	71,400)
Accrued expenses	50,700)	72,900)	26,000)	18,000)	17,800)	71,400)
Accrued compensation expense	34,900)	47,200)	31,600)	31,600)	23,200)	71,300)
Inventory	24,400)	—)	—)	—)	—)	—)
State tax election	15,800)	17,400)	19,300)	20,900)	22,800)	20,400)
Other	2,400)	3,200)	2,400)	3,000)	—)	3,400)
Deferred tax assets	1,867,000)	1,894,600)	1,803,300)	208,500)	182,100)	297,800)
Valuation allowance	(13,000)	(16,800)	(18,500)	(42,600)	(38,600)	(49,700)
Deferred tax assets, net	1,854,000)	1,877,800)	1,784,800)	165,900)	143,500)	248,100)
Operating lease right-of-use assets	(1,578,400)	(1,587,200)	(1,550,100)	—)	—)	—)
Other intangibles	(780,900)	(840,400)	(852,200)	(864,000)	(880,500)	(1,368,700)
Property and equipment	(435,600)	(410,500)	(304,300)	(235,500)	(218,500)	(331,300)
Prepaids	(26,000)	(25,200)	(24,100)	(21,800)	—)	—)
Inventory	—)	(4,800)	(14,400)	(17,800)	(27,100)	(7,000)
Other	—)	—)	—)	—)	(2,600)	—)
Deferred tax liabilities	(2,820,900)	(2,868,100)	(2,745,100)	(1,139,100)	(1,128,700)	(1,707,000)
Deferred income taxes, net	(966,900)	(990,300)	(960,300)	(973,200)	(985,200)	(1,458,900)

The net deferred tax position remained a liability throughout the analyzed period, fluctuating between a high of -1,458,900 thousand US dollars in 2017 and a low of -960,300 thousand US dollars in 2020. A significant structural shift occurred in the 2020 fiscal year, characterized by a substantial simultaneous increase in both gross deferred tax assets and deferred tax liabilities, which largely offset one another in the net calculation.

Impact of Lease Accounting Adoption: Beginning in 2020, the introduction of operating lease liabilities and operating lease right-of-use assets fundamentally altered the balance sheet. Operating lease liabilities contributed 1,621,800 thousand US dollars to deferred tax assets in 2020, while operating lease right-of-use assets created a corresponding deferred tax liability of -1,550,100 thousand US dollars. This suggests the implementation of new accounting standards for leases, which expanded the gross scale of deferred tax accounts without drastically shifting the net tax liability.
Deferred Tax Asset Trends: Gross deferred tax assets experienced a sharp increase from 208,500 thousand US dollars in 2019 to 1,803,300 thousand US dollars in 2020, primarily due to the aforementioned lease accounting. Outside of lease impacts, net operating losses, interest expense, and credit carryforwards showed a steady increase from 71,400 thousand US dollars in 2017 to a peak of 102,200 thousand US dollars in 2020, before slightly receding to 91,500 thousand US dollars by 2022. Additionally, the valuation allowance decreased consistently from -49,700 thousand US dollars in 2017 to -13,000 thousand US dollars in 2022, indicating an increasing likelihood that the company will realize its deferred tax assets.
Deferred Tax Liability Trends: Deferred tax liabilities rose from -1,139,100 thousand US dollars in 2019 to -2,745,100 thousand US dollars in 2020, again driven by the recognition of right-of-use assets. Other notable trends include a steady reduction in liabilities related to other intangibles, which declined from -1,368,700 thousand US dollars in 2017 to -780,900 thousand US dollars in 2022. Conversely, liabilities associated with property and equipment exhibited an upward trend, increasing from -331,300 thousand US dollars in 2017 to -435,600 thousand US dollars in 2022.

From 2020 to 2022, the net deferred income tax position demonstrated a high degree of stability, remaining within a narrow range between -960,300 thousand and -990,300 thousand US dollars. This stability indicates that the growth in deferred tax liabilities, particularly from property and equipment, was balanced by the realization of intangible assets and the management of deferred tax asset components.

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

Dollar Tree Inc., deferred tax assets and liabilities, classification

US$ in thousands

		Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
	Deferred tax assets	20,300)	23,200)	24,400)	—)	—)	—)
	Deferred tax liabilities	987,200)	1,013,500)	984,700)	973,200)	985,200)	1,458,900)

The overall deferred tax position is characterized by a substantial prevalence of liabilities relative to assets. A consistent net deferred tax liability is maintained throughout the analyzed period, indicating that future taxable amounts significantly exceed deductible amounts.

Deferred Tax Liabilities Trends: A significant reduction in deferred tax liabilities occurred between January 28, 2017, and February 3, 2018, where the balance dropped from $1,458.9 million to $985.2 million. Following this sharp decline, the liabilities remained relatively stable, fluctuating within a range of $973.2 million to $1,013.5 million over the next four fiscal years, ending at $987.2 million in January 2022.
Deferred Tax Assets Trends: Deferred tax assets were not reported for the first three years of the analyzed period. Starting in February 2020, a balance of $24.4 million was recorded. Subsequently, a gradual downward trend is observed, with the asset value decreasing to $23.2 million in January 2021 and further to $20.3 million by January 29, 2022.
Comparative Net Position: The magnitude of deferred tax liabilities consistently dwarfs the deferred tax assets. Even when assets began to be reported in 2020, they represented a negligible fraction of the total liabilities, underscoring a persistent long-term tax liability position.

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Dollar Tree Inc., Financial Data: Reported vs. Adjusted

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

Dollar Tree Inc., adjustments to financial statements

US$ in thousands

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Adjustment to Total Assets
Total assets (as reported)	21,721,800)	20,696,000)	19,574,600)	13,501,200)	16,332,800)	15,701,600)
Less: Noncurrent deferred tax assets, net	20,300)	23,200)	24,400)	—)	—)	—)
Total assets (adjusted)	21,701,500)	20,672,800)	19,550,200)	13,501,200)	16,332,800)	15,701,600)
Adjustment to Total Liabilities
Total liabilities (as reported)	14,003,300)	13,410,700)	13,319,800)	7,858,300)	9,150,500)	10,312,100)
Less: Noncurrent deferred tax liabilities, net	987,200)	1,013,500)	984,700)	973,200)	985,200)	1,458,900)
Total liabilities (adjusted)	13,016,100)	12,397,200)	12,335,100)	6,885,100)	8,165,300)	8,853,200)
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported)	7,718,500)	7,285,300)	6,254,800)	5,642,900)	7,182,300)	5,389,500)
Less: Net deferred tax assets (liabilities)	(966,900)	(990,300)	(960,300)	(973,200)	(985,200)	(1,458,900)
Shareholders’ equity (adjusted)	8,685,400)	8,275,600)	7,215,100)	6,616,100)	8,167,500)	6,848,400)
Adjustment to Net Income (loss)
Net income (loss) (as reported)	1,327,900)	1,341,900)	827,000)	(1,590,800)	1,714,300)	896,200)
Add: Deferred income tax expense (benefit)	(23,200)	30,800)	9,000)	(12,000)	(473,700)	(127,600)
Net income (loss) (adjusted)	1,304,700)	1,372,700)	836,000)	(1,602,800)	1,240,600)	768,600)

The removal of deferred taxes creates a consistent divergence between reported and adjusted financial positions, primarily manifesting as a reduction in total liabilities and a corresponding increase in shareholders' equity throughout the analyzed period.

Liability and Equity Adjustments: A systematic reduction in total liabilities is observed when comparing reported figures to adjusted figures. In 2017, reported liabilities of 10.3 billion USD were adjusted down to 8.8 billion USD. This pattern persisted through 2022, where reported liabilities of 14.0 billion USD were adjusted to 13.0 billion USD. Consequently, adjusted shareholders' equity remains consistently higher than reported equity across the entire six-year duration. This indicates that the removal of deferred tax liabilities results in a strengthened adjusted capital position, increasing the equity base relative to the reported balance sheet.
Asset Valuation Trends: Total assets followed a general growth trajectory from 2017 to 2022, despite a notable contraction in 2019. Between 2017 and 2019, reported and adjusted assets were identical. A divergence emerged starting in 2020, where adjusted assets began to trend slightly lower than reported assets. By 2022, reported total assets reached 21.7 billion USD, with adjusted assets remaining closely aligned at approximately 21.7 billion USD.
Net Income Volatility and Tax Impact: The data reflects significant volatility in net income, most notably a substantial loss in 2019. The impact of deferred tax adjustments on net income varies by period. In 2017 and 2018, adjusted net income was lower than reported figures. Conversely, in 2020 and 2021, the adjustments resulted in higher net income figures, such as in 2021 where reported net income of 1.34 billion USD was adjusted upward to 1.37 billion USD. This suggests that the influence of tax adjustments on profitability is non-linear and dependent on annual fiscal conditions.

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Dollar Tree Inc., Financial Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

Dollar Tree Inc., adjusted financial ratios

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Net Profit Margin
Reported net profit margin	5.05%	5.26%	3.50%	-6.97%	7.71%	4.33%
Adjusted net profit margin	4.96%	5.38%	3.54%	-7.02%	5.58%	3.71%
Total Asset Turnover
Reported total asset turnover	1.21	1.23	1.21	1.69	1.36	1.32
Adjusted total asset turnover	1.21	1.23	1.21	1.69	1.36	1.32
Financial Leverage
Reported financial leverage	2.81	2.84	3.13	2.39	2.27	2.91
Adjusted financial leverage	2.50	2.50	2.71	2.04	2.00	2.29
Return on Equity (ROE)
Reported ROE	17.20%	18.42%	13.22%	-28.19%	23.87%	16.63%
Adjusted ROE	15.02%	16.59%	11.59%	-24.23%	15.19%	11.22%
Return on Assets (ROA)
Reported ROA	6.11%	6.48%	4.22%	-11.78%	10.50%	5.71%
Adjusted ROA	6.01%	6.64%	4.28%	-11.87%	7.60%	4.90%

An analysis of financial performance from 2017 to 2022 reveals a consistent divergence between reported and adjusted ratios, primarily stemming from the treatment of deferred taxes. The impact of these adjustments is most significant within leverage and equity return metrics, while operational efficiency ratios remain unaffected.

Net Profit Margin: Profitability exhibited substantial volatility, with a peak in 2018 followed by a significant contraction in 2019, where the reported margin fell to -6.97%. The removal of deferred taxes resulted in minimal deviations from the reported margins, suggesting that the tax adjustments do not fundamentally alter the perceived profitability of operations.
Total Asset Turnover: A total convergence is observed between reported and adjusted total asset turnover ratios across all six years. This indicates that the removal of deferred taxes has no impact on the measurement of asset efficiency in generating revenue.
Financial Leverage: Reported financial leverage is consistently higher than adjusted leverage throughout the period. For example, the reported ratio of 2.91 in 2017 was adjusted downward to 2.29. This pattern confirms that deferred tax liabilities inflate the reported leverage, and their removal provides a more conservative view of the capital structure.
Return on Equity (ROE): The most pronounced discrepancy occurs in ROE, where reported figures are consistently higher than adjusted figures. The reported ROE experienced a severe swing from 23.87% in 2018 to -28.19% in 2019. The consistent gap between reported and adjusted ROE suggests that deferred tax liabilities reduce the reported equity base, thereby artificially inflating the percentage return on that equity.
Return on Assets (ROA): ROA fluctuations closely mirror the net profit margin trends, showing a deep trough in 2019. The variance between reported and adjusted ROA is less extreme than that seen in ROE, though adjusted figures were generally lower than reported figures until 2020, after which a slight reversal occurred.

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss)	1,327,900)	1,341,900)	827,000)	(1,590,800)	1,714,300)	896,200)
Net sales	26,309,800)	25,508,400)	23,610,800)	22,823,300)	22,245,500)	20,719,200)
Profitability Ratio
Net profit margin¹	5.05%	5.26%	3.50%	-6.97%	7.71%	4.33%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss)	1,304,700)	1,372,700)	836,000)	(1,602,800)	1,240,600)	768,600)
Net sales	26,309,800)	25,508,400)	23,610,800)	22,823,300)	22,245,500)	20,719,200)
Profitability Ratio
Adjusted net profit margin²	4.96%	5.38%	3.54%	-7.02%	5.58%	3.71%

2022 Calculations

¹ Net profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × 1,327,900 ÷ 26,309,800 = 5.05%

² Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Net sales
= 100 × 1,304,700 ÷ 26,309,800 = 4.96%

The financial performance over the six-year period ending January 29, 2022, is characterized by significant volatility in both net income and profit margins, featuring a sharp decline in the 2019 fiscal year followed by a period of recovery and stabilization.

Net Income Trajectory: Reported net income grew substantially from 896.2 million US$ in 2017 to 1.71 billion US$ in 2018, before experiencing a severe reversal to a loss of 1.59 billion US$ in 2019. A recovery was observed starting in 2020, with net income returning to 827 million US$ and further increasing to approximately 1.33 billion US$ by 2022.
Adjusted Net Profit Margin Analysis: The adjusted net profit margin exhibited mirrored volatility, rising from 3.71% in 2017 to a peak of 5.58% in 2018. The subsequent drop to -7.02% in 2019 represents the most significant contraction in profitability during the period. From 2020 through 2022, the adjusted margin stabilized, oscillating between 3.54% and 5.38%.
Comparison of Reported and Adjusted Performance: The variance between reported and adjusted metrics fluctuates annually. In 2017 and 2018, reported net income and profit margins exceeded their adjusted counterparts. This trend reversed in 2019, where the adjusted loss (-1.60 billion US$) was more pronounced than the reported loss. In 2020 and 2021, adjusted figures were higher than reported figures, though reported net income regained a slight lead over adjusted net income by January 29, 2022.

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net sales	26,309,800)	25,508,400)	23,610,800)	22,823,300)	22,245,500)	20,719,200)
Total assets	21,721,800)	20,696,000)	19,574,600)	13,501,200)	16,332,800)	15,701,600)
Activity Ratio
Total asset turnover¹	1.21	1.23	1.21	1.69	1.36	1.32
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Net sales	26,309,800)	25,508,400)	23,610,800)	22,823,300)	22,245,500)	20,719,200)
Adjusted total assets	21,701,500)	20,672,800)	19,550,200)	13,501,200)	16,332,800)	15,701,600)
Activity Ratio
Adjusted total asset turnover²	1.21	1.23	1.21	1.69	1.36	1.32

2022 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 26,309,800 ÷ 21,721,800 = 1.21

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 26,309,800 ÷ 21,701,500 = 1.21

The analysis of asset utilization between 2017 and 2022 reveals a period of significant volatility in the asset base and a corresponding shift in operational efficiency. Asset turnover peaked in 2019 before experiencing a sharp decline and subsequent stabilization at a lower threshold.

Asset Base Dynamics: Adjusted total assets demonstrated a non-linear growth pattern. From a starting point of 15.7 billion US dollars in 2017, the asset base contracted to its lowest point of 13.5 billion US dollars in 2019. This was followed by a rapid expansion, with assets increasing to 19.6 billion US dollars in 2020 and continuing an upward trajectory to reach 21.7 billion US dollars by 2022.
Adjusted Total Asset Turnover Performance: The efficiency of asset usage, as measured by the adjusted total asset turnover ratio, improved from 1.32 in 2017 to a peak of 1.69 in 2019. This peak coincides with the period of the lowest total asset base, suggesting a high level of revenue generation relative to the invested assets at that time. However, a marked decrease occurred in 2020, where the ratio fell to 1.21. The ratio remained relatively stagnant over the following two years, recording 1.23 in 2021 and returning to 1.21 in 2022.
Comparison of Reported and Adjusted Metrics: A negligible variance is observed between reported and adjusted figures for both total assets and the resulting turnover ratios across the six-year period. The adjusted total asset turnover remains identical to the reported turnover ratio in every measured year, indicating that any adjustments made to the asset base were insufficient to impact the overall efficiency metric.

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
As Reported
Selected Financial Data (US$ in thousands)
Total assets	21,721,800)	20,696,000)	19,574,600)	13,501,200)	16,332,800)	15,701,600)
Shareholders’ equity	7,718,500)	7,285,300)	6,254,800)	5,642,900)	7,182,300)	5,389,500)
Solvency Ratio
Financial leverage¹	2.81	2.84	3.13	2.39	2.27	2.91
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets	21,701,500)	20,672,800)	19,550,200)	13,501,200)	16,332,800)	15,701,600)
Adjusted shareholders’ equity	8,685,400)	8,275,600)	7,215,100)	6,616,100)	8,167,500)	6,848,400)
Solvency Ratio
Adjusted financial leverage²	2.50	2.50	2.71	2.04	2.00	2.29

2022 Calculations

¹ Financial leverage = Total assets ÷ Shareholders’ equity
= 21,721,800 ÷ 7,718,500 = 2.81

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= 21,701,500 ÷ 8,685,400 = 2.50

The analysis of the financial structure from 2017 to 2022 reveals a general expansion of the balance sheet, punctuated by a significant contraction in 2019 and a subsequent aggressive growth phase starting in 2020. A consistent divergence is observed between reported and adjusted figures, with adjusted shareholders' equity remaining higher than reported equity throughout the period, resulting in a lower adjusted financial leverage ratio.

Asset and Equity Trends: Total assets exhibited a fluctuating upward trajectory, rising from 15.7 billion USD in 2017 to 21.7 billion USD by 2022. A notable decline occurred in 2019, where reported assets fell to 13.5 billion USD, before surging to 19.6 billion USD in 2020. Shareholders' equity followed a similar pattern of volatility, though the adjusted equity consistently provided a higher valuation of the company's net worth compared to the reported figures, peaking at 8.7 billion USD in 2022.
Reported vs. Adjusted Financial Leverage: The adjusted financial leverage ratio remained consistently lower than the reported leverage ratio across all six years. For instance, in 2017, the reported leverage was 2.91 compared to an adjusted leverage of 2.29. This indicates that the adjustments made to the financial statements—likely relating to the treatment of deferred taxes or other equity-equivalent items—effectively reduce the perceived risk of the capital structure.
Leverage Volatility and Stabilization: A significant spike in leverage occurred in 2020, with the adjusted ratio rising to 2.71 from 2.04 in the previous year. This increase correlates with the rapid expansion of the asset base during that period. Following this peak, the adjusted financial leverage showed a stabilizing trend, declining to 2.50 in 2021 and maintaining that exact level through 2022, suggesting a deliberate effort to normalize the debt-to-equity relationship following the period of growth.

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss)	1,327,900)	1,341,900)	827,000)	(1,590,800)	1,714,300)	896,200)
Shareholders’ equity	7,718,500)	7,285,300)	6,254,800)	5,642,900)	7,182,300)	5,389,500)
Profitability Ratio
ROE¹	17.20%	18.42%	13.22%	-28.19%	23.87%	16.63%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss)	1,304,700)	1,372,700)	836,000)	(1,602,800)	1,240,600)	768,600)
Adjusted shareholders’ equity	8,685,400)	8,275,600)	7,215,100)	6,616,100)	8,167,500)	6,848,400)
Profitability Ratio
Adjusted ROE²	15.02%	16.59%	11.59%	-24.23%	15.19%	11.22%

2022 Calculations

¹ ROE = 100 × Net income (loss) ÷ Shareholders’ equity
= 100 × 1,327,900 ÷ 7,718,500 = 17.20%

² Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted shareholders’ equity
= 100 × 1,304,700 ÷ 8,685,400 = 15.02%

The financial performance from 2017 to 2022 is characterized by significant volatility, most notably a substantial contraction in the 2019 fiscal year followed by a period of recovery and stabilization. The discrepancy between reported and adjusted figures indicates that non-recurring items or accounting adjustments have consistently influenced the perceived profitability and capital structure.

Net Income Trends: Reported net income exhibited a sharp peak in 2018 at 1.71 billion US$, followed by a severe decline to a loss of 1.59 billion US$ in 2019. A recovery was initiated in 2020, with income returning to positive territory at 827 million US$ and stabilizing around 1.3 billion US$ in 2021 and 2022. Adjusted net income followed a similar trajectory, though it reflected a deeper loss in 2019 of 1.60 billion US$, suggesting that adjustments exacerbated the reported loss during that period.
Shareholders' Equity Evolution: Equity showed a general upward trend despite a temporary dip in 2019. Reported shareholders' equity grew from 5.39 billion US$ in 2017 to 7.72 billion US$ by 2022. Adjusted shareholders' equity remained consistently higher than reported equity throughout the entire period, starting at 6.85 billion US$ in 2017 and reaching 8.69 billion US$ in 2022. This consistent gap indicates a systemic adjustment to the equity base that effectively lowers the calculated return on equity.
Comparative Return on Equity (ROE) Analysis: Reported ROE fluctuated significantly, peaking at 23.87% in 2018 before plunging to -28.19% in 2019. It subsequently recovered to 17.20% by 2022. Adjusted ROE remained lower than reported ROE in every positive year, ranging from 11.22% in 2017 to 15.02% in 2022. The persistent delta between reported and adjusted ROE is primarily driven by the higher adjusted equity base, which dilutes the return percentage. During the 2019 downturn, the adjusted ROE of -24.23% was slightly less severe than the reported -28.19%, reflecting the mitigating effect of the higher adjusted equity denominator against the net loss.

Overall, the data demonstrates a resilient recovery post-2019. While reported figures suggest higher efficiency, the adjusted ROE provides a more conservative view of the company's profitability relative to its adjusted capital base, maintaining a range between 11% and 17% during the profitable years.

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Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss)	1,327,900)	1,341,900)	827,000)	(1,590,800)	1,714,300)	896,200)
Total assets	21,721,800)	20,696,000)	19,574,600)	13,501,200)	16,332,800)	15,701,600)
Profitability Ratio
ROA¹	6.11%	6.48%	4.22%	-11.78%	10.50%	5.71%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss)	1,304,700)	1,372,700)	836,000)	(1,602,800)	1,240,600)	768,600)
Adjusted total assets	21,701,500)	20,672,800)	19,550,200)	13,501,200)	16,332,800)	15,701,600)
Profitability Ratio
Adjusted ROA²	6.01%	6.64%	4.28%	-11.87%	7.60%	4.90%

2022 Calculations

¹ ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 1,327,900 ÷ 21,721,800 = 6.11%

² Adjusted ROA = 100 × Adjusted net income (loss) ÷ Adjusted total assets
= 100 × 1,304,700 ÷ 21,701,500 = 6.01%

The financial performance from 2017 to 2022 is characterized by significant volatility in net income and a general upward trajectory in asset accumulation, interrupted by a notable contraction in 2019. While profitability recovered in the latter half of the period, the efficiency of asset utilization shifted from a peak in 2018 to a more stabilized, lower range by 2022.

Net Income Volatility: Net income exhibited extreme variance, rising from 896.2 million USD in 2017 to a peak of 1.71 billion USD in 2018. A severe downturn occurred in 2019, with reported net losses reaching 1.59 billion USD. A recovery trend followed, with income stabilizing at approximately 1.3 billion USD in both 2021 and 2022.
Asset Base Expansion: Total assets showed an overall growth pattern, increasing from 15.7 billion USD in 2017 to 21.7 billion USD by 2022. A temporary contraction to 13.5 billion USD was observed in 2019, followed by a rapid expansion in 2020, where assets jumped to over 19.5 billion USD, suggesting a significant reinvestment or acquisition phase.
Return on Assets (ROA) Analysis: The ROA closely mirrored the fluctuations in net income. A peak reported ROA of 10.50% in 2018 was followed by a sharp decline to -11.78% in 2019. Post-2019, the ROA stabilized, moving from 4.22% in 2020 to 6.11% in 2022, indicating a return to positive asset productivity, though remaining below the 2018 high.
Reported versus Adjusted Metrics: Adjusted figures remained closely aligned with reported values throughout the period. In 2017 and 2018, the adjusted ROA was notably lower than the reported ROA (4.90% vs 5.71% and 7.60% vs 10.50%, respectively). However, by 2021, the adjusted ROA slightly exceeded the reported ROA (6.64% vs 6.48%), suggesting a shift in the impact of non-recurring items or tax adjustments on the final return calculations.

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