Microsoft Excel LibreOffice Calc

Intuit Inc. (INTU)


Analysis of Operating Leases

Difficulty: Advanced


Operating Leases Accounting Policy

Intuit reviews all leases for capital or operating classification at their inception. Intuit uses the incremental borrowing rate in the assessment of lease classification and defines the initial lease term to include the construction build-out period but to exclude lease extension periods. Intuit conducts the operations primarily under operating leases. For leases that contain rent escalations, Intuit records the total rent payable during the lease term, as defined above, on a straight-line basis over the term of the lease. Intuit records the difference between the rent paid and the straight-line rent in a deferred rent account in other current liabilities or other long-term obligations, as appropriate, on the balance sheets.

Intuit records landlord allowances as deferred rent liabilities in other current liabilities or other long-term obligations, as appropriate, on the balance sheets. Intuit records landlord cash incentives as operating activity on the statements of cash flows. Intuit records other landlord allowances as non-cash investing and financing activities on the statements of cash flows. Intuit classifies the amortization of landlord allowances as a reduction of occupancy expense in the statements of operations.

Source: 10-K (filing date: 2018-08-31).


Present Value of Future Operating Lease Payments

Intuit Inc., future operating lease payments

USD $ in millions

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Total undiscounted future operating lease payments 399  384  438  522  570 
Discount rate1 0.00% 0.00% 5.75% 5.75% 5.75%
 
Total present value of future operating lease payments 399  384  340  402  429 

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

1 Weighted-average interest rate for Intuit Inc.’s debt

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 0.00%
2019 66  2019 66  66 
2020 61  2020 61  61 
2021 59  2021 59  59 
2022 51  2022 51  51 
2023 49  2023 49  49 
2024 and thereafter 113  2024 49  49 
2025 49  49 
2026 15  15 
Total: 399  399  399 

Based on: 10-K (filing date: 2018-08-31).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 0.00%
2018 61  2018 61  61 
2019 51  2019 51  51 
2020 49  2020 49  49 
2021 47  2021 47  47 
2022 46  2022 46  46 
2023 and thereafter 130  2023 46  46 
2024 46  46 
2025 38  38 
Total: 384  384  384 

Based on: 10-K (filing date: 2017-09-01).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.75%
2017 60  2017 60  57 
2018 58  2018 58  52 
2019 50  2019 50  42 
2020 48  2020 48  38 
2021 46  2021 46  35 
2022 and thereafter 176  2022 46  33 
2023 46  31 
2024 46  29 
2025 38  23 
Total: 438  438  340 

Based on: 10-K (filing date: 2016-09-01).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.75%
2016 74  2016 74  70 
2017 72  2017 72  64 
2018 58  2018 58  49 
2019 50  2019 50  40 
2020 47  2020 47  36 
2021 and thereafter 221  2021 47  34 
2022 47  32 
2023 47  30 
2024 47  28 
2025 33  19 
Total: 522  522  402 

Based on: 10-K (filing date: 2015-09-01).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.75%
2015 72  2015 72  68 
2016 69  2016 69  62 
2017 69  2017 69  58 
2018 55  2018 55  44 
2019 45  2019 45  34 
2020 and thereafter 260  2020 45  32 
2021 45  30 
2022 45  29 
2023 45  27 
2024 45  26 
2025 35  19 
Total: 570  570  429 

Based on: 10-K (filing date: 2014-09-12).


Analyst Adjustments for Operating Leases

Intuit Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Adjustment to Total Assets
Total assets (as reported) 5,178  4,068  4,250  4,968  5,201 
Add: Operating leased assets1 399  384  340  402  429 
Total assets (adjusted) 5,577  4,452  4,590  5,370  5,630 
Adjustment to Total Debt
Total debt (as reported) 438  488  1,000  500  499 
Add: Operating lease obligations2 399  384  340  402  429 
Total debt (adjusted) 837  872  1,340  902  928 
Adjustment to Earnings before Interest and Tax (EBIT)
EBIT3 (as reported) 1,523  1,398  1,238  739  1,345 
Add-back: Rent expense net of sublease income 38  34  36  59  57 
Less: Depreciation expense, operating leased assets4 38  34  16  34  31 
EBIT (adjusted) 1,523  1,398  1,258  764  1,371 
Adjustment to Interest Expense
Interest expense (as reported) 20  31  35  27  31 
Add: Interest expense, operating lease obligations5 —  —  20  25  26 
Interest expense (adjusted) 20  31  55  52  57 

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

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

3 See Details »

4 See Details »

5 See Details »


Intuit Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios for Operating Leases (Summary)

Intuit Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Total Asset Turnover1
Reported total asset turnover 1.15 1.27 1.10 0.84 0.87
Adjusted total asset turnover 1.07 1.16 1.02 0.78 0.80
Debt to Equity2
Reported debt to equity 0.19 0.36 0.86 0.21 0.16
Adjusted debt to equity 0.36 0.64 1.15 0.39 0.30
Return on Assets3 (ROA)
Reported ROA 23.39% 23.87% 23.04% 7.35% 17.44%
Adjusted ROA 21.71% 21.81% 21.33% 6.80% 16.11%
Interest Coverage4
Reported interest coverage 76.15 45.10 35.37 27.37 43.39
Adjusted interest coverage 76.15 45.10 22.69 14.68 23.87

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Intuit Inc.’s adjusted total asset turnover improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Intuit Inc.’s adjusted debt-to-equity improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Intuit Inc.’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.
Adjusted interest coverage A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Intuit Inc.’s adjusted interest coverage improved from 2016 to 2017 and from 2017 to 2018.

Intuit Inc., Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net revenue 5,964  5,177  4,694  4,192  4,506 
Total assets 5,178  4,068  4,250  4,968  5,201 
Ratio
Total asset turnover1 1.15 1.27 1.10 0.84 0.87
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Net revenue 5,964  5,177  4,694  4,192  4,506 
Adjusted total assets 5,577  4,452  4,590  5,370  5,630 
Ratio
Adjusted total asset turnover2 1.07 1.16 1.02 0.78 0.80

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2018 Calculations

1 Total asset turnover = Net revenue ÷ Total assets
= 5,964 ÷ 5,178 = 1.15

2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= 5,964 ÷ 5,577 = 1.07

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Intuit Inc.’s adjusted total asset turnover improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Total debt 438  488  1,000  500  499 
Stockholders’ equity 2,354  1,354  1,161  2,332  3,078 
Ratio
Debt to equity1 0.19 0.36 0.86 0.21 0.16
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted total debt 837  872  1,340  902  928 
Stockholders’ equity 2,354  1,354  1,161  2,332  3,078 
Ratio
Adjusted debt to equity2 0.36 0.64 1.15 0.39 0.30

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2018 Calculations

1 Debt to equity = Total debt ÷ Stockholders’ equity
= 438 ÷ 2,354 = 0.19

2 Adjusted debt to equity = Adjusted total debt ÷ Stockholders’ equity
= 837 ÷ 2,354 = 0.36

Ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Intuit Inc.’s adjusted debt-to-equity improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income 1,211  971  979  365  907 
Total assets 5,178  4,068  4,250  4,968  5,201 
Ratio
ROA1 23.39% 23.87% 23.04% 7.35% 17.44%
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Net income 1,211  971  979  365  907 
Adjusted total assets 5,577  4,452  4,590  5,370  5,630 
Ratio
Adjusted ROA2 21.71% 21.81% 21.33% 6.80% 16.11%

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2018 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 1,211 ÷ 5,178 = 23.39%

2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 1,211 ÷ 5,577 = 21.71%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Intuit Inc.’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

Adjusted Interest Coverage

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Earnings before interest and tax1 (EBIT) 1,523  1,398  1,238  739  1,345 
Interest expense 20  31  35  27  31 
Ratio
Interest coverage2 76.15 45.10 35.37 27.37 43.39
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted EBIT 1,523  1,398  1,258  764  1,371 
Adjusted interest expense 20  31  55  52  57 
Ratio
Adjusted interest coverage3 76.15 45.10 22.69 14.68 23.87

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

1 See Details »

2018 Calculations

2 Interest coverage = EBIT ÷ Interest expense
= 1,523 ÷ 20 = 76.15

3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense
= 1,523 ÷ 20 = 76.15

Ratio Description The company
Adjusted interest coverage ratio A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Intuit Inc.’s adjusted interest coverage ratio improved from 2016 to 2017 and from 2017 to 2018.

Estimation of Depreciation Expense, Operating Leased Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Rent expense net of sublease income 38  34  36  59  57 
Less: Estimated interest expense, operating lease obligations1 —  —  20  25  26 
Estimated depreciation expense, operating leased assets 38  34  16  34  31 

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).


Estimation of Interest Expense, Operating Lease Obligations

USD $ in millions

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Operating leased assets, at beginning of year1 437  418  356  436  460 
Discount rate2 0.00% 0.00% 5.75% 5.75% 5.75%
 
Estimated interest expense, operating lease obligations3 —  —  20  25  26 

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

1 See Details »

2 Weighted-average interest rate for Intuit Inc.’s debt

2018 Calculations

3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= 437 × 0.00% = 0


Present Value of Operating Lease Payments, at Beginning of Year

USD $ in millions

Microsoft Excel LibreOffice Calc
Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Total present value of future operating lease payments1 399  384  340  402  429 
Rent expense net of sublease income 38  34  36  59  57 
Discount rate2 0.00% 0.00% 5.75% 5.75% 5.75%
 
Total present value of operating lease payments, at beginning of year3 437  418  356  436  460 

Based on: 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

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

2 Weighted-average interest rate for Intuit Inc.’s debt

2018 Calculations

3 Total present value of operating lease payments, at beginning of year = (Total present value of future operating lease payments + Rent expense net of sublease income) ÷ (1 + Discount rate)
= (399 + 38) ÷ (1 + 0.00%) = 437