Microsoft Excel LibreOffice Calc

Vertex Pharmaceuticals Inc. (VRTX)

Analysis of Operating Leases

Advanced level

An operating lease is treated like a rental contract. Neither the leased asset nor the associated liability is reported on the lessee balance sheet, 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 (before Adoption of FASB Topic 842)

Vertex Pharmaceuticals Inc., future operating lease payments (before adoption of FASB Topic 842)

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total undiscounted future operating lease payments 1,038,325  1,109,960  1,205,612  1,306,079  1,242,864 
Discount rate1 3.28% 2.97% 3.65% 4.96% 5.06%
 
Total present value of future operating lease payments 857,333  921,716  948,427  930,631  885,898 

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-13).

1 Internal rate of return on capital leases

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.28%
2019 85,071  2019 85,071  82,369 
2020 95,986  2020 95,986  89,986 
2021 94,245  2021 94,245  85,548 
2022 93,761  2022 93,761  82,406 
2023 94,071  2023 94,071  80,052 
2024 and thereafter 575,191  2024 94,071  77,510 
2025 94,071  75,049 
2026 94,071  72,665 
2027 94,071  70,357 
2028 94,071  68,123 
2029 94,071  65,959 
2030 10,765  7,308 
Total: 1,038,325  1,038,325  857,333 

Based on: 10-K (filing date: 2019-02-13).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.97%
2018 84,451  2018 84,451  82,015 
2019 92,915  2019 92,915  87,632 
2020 95,672  2020 95,672  87,630 
2021 93,879  2021 93,879  83,508 
2022 93,258  2022 93,258  80,562 
2023 and thereafter 649,785  2023 93,258  78,239 
2024 93,258  75,982 
2025 93,258  73,790 
2026 93,258  71,662 
2027 93,258  69,595 
2028 93,258  67,588 
2029 90,237  63,512 
Total: 1,109,960  1,109,960  921,716 

Based on: 10-K (filing date: 2018-02-15).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.65%
2017 103,597  2017 103,597  99,949 
2018 90,122  2018 90,122  83,887 
2019 91,241  2019 91,241  81,937 
2020 92,897  2020 92,897  80,487 
2021 92,097  2021 92,097  76,984 
2022 and thereafter 735,658  2022 92,097  74,273 
2023 92,097  71,657 
2024 92,097  69,134 
2025 92,097  66,699 
2026 92,097  64,351 
2027 92,097  62,084 
2028 92,097  59,898 
2029 90,979  57,087 
Total: 1,205,612  1,205,612  948,427 

Based on: 10-K (filing date: 2017-02-23).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 4.96%
2016 101,112  2016 101,112  96,334 
2017 102,662  2017 102,662  93,188 
2018 89,988  2018 89,988  77,824 
2019 92,745  2019 92,745  76,418 
2020 92,468  2020 92,468  72,589 
2021 and thereafter 827,104  2021 92,468  69,159 
2022 92,468  65,891 
2023 92,468  62,777 
2024 92,468  59,810 
2025 92,468  56,984 
2026 92,468  54,291 
2027 92,468  51,726 
2028 92,468  49,281 
2029 87,360  44,359 
Total: 1,306,079  1,306,079  930,631 

Based on: 10-K (filing date: 2016-02-16).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.06%
2015 115,795  2015 115,795  110,218 
2016 100,038  2016 100,038  90,634 
2017 99,877  2017 99,877  86,130 
2018 86,414  2018 86,414  70,931 
2019 81,919  2019 81,919  64,003 
2020 and thereafter 758,821  2020 81,919  60,920 
2021 81,919  57,986 
2022 81,919  55,193 
2023 81,919  52,535 
2024 81,919  50,005 
2025 81,919  47,596 
2026 81,919  45,304 
2027 81,919  43,122 
2028 81,919  41,045 
2029 21,550  10,277 
Total: 1,242,864  1,242,864  885,898 

Based on: 10-K (filing date: 2015-02-13).

Adjustments to Financial Statements for Operating Leases

Vertex Pharmaceuticals Inc., adjustments to financial statements

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Total Assets
Total assets (as reported) 6,245,898  3,546,014  2,896,787  2,498,875  2,334,679 
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1 857,333  921,716  948,427  930,631  885,898 
Total assets (adjusted) 7,103,231  4,467,730  3,845,214  3,429,506  3,220,577 
Adjustment to Total Debt
Total debt (as reported) 591,367  606,433  840,761  826,526  824,947 
Add: Operating lease liability (before adoption of FASB Topic 842)2 857,333  921,716  948,427  930,631  885,898 
Total debt (adjusted) 1,448,700  1,528,149  1,789,188  1,757,157  1,710,845 

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-13).

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

Vertex Pharmaceuticals Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios for Operating Leases (Summary)

Vertex Pharmaceuticals Inc., adjusted financial ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total Asset Turnover1
Reported total asset turnover 0.49 0.70 0.59 0.41 0.25
Adjusted total asset turnover 0.43 0.56 0.44 0.30 0.18
Debt to Equity2
Reported debt to equity 0.13 0.30 0.73 0.88 0.77
Adjusted debt to equity 0.33 0.75 1.55 1.87 1.59
Return on Assets3 (ROA)
Reported ROA 33.57% 7.43% -3.87% -22.26% -31.63%
Adjusted ROA 29.52% 5.90% -2.91% -16.22% -22.93%

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-13).

1 See details »

2 See details »

3 See details »

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Vertex Pharmaceuticals Inc.’s adjusted total asset turnover ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted debt to equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Vertex Pharmaceuticals Inc.’s adjusted debt to equity ratio improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Vertex Pharmaceuticals Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.

Vertex Pharmaceuticals Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in thousands)
Revenues 3,047,597  2,488,652  1,702,177  1,032,336  580,415 
Total assets 6,245,898  3,546,014  2,896,787  2,498,875  2,334,679 
Activity Ratio
Total asset turnover1 0.49 0.70 0.59 0.41 0.25
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Revenues 3,047,597  2,488,652  1,702,177  1,032,336  580,415 
Adjusted total assets 7,103,231  4,467,730  3,845,214  3,429,506  3,220,577 
Activity Ratio
Adjusted total asset turnover2 0.43 0.56 0.44 0.30 0.18

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-13).

2018 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 3,047,597 ÷ 6,245,898 = 0.49

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 3,047,597 ÷ 7,103,231 = 0.43

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Vertex Pharmaceuticals Inc.’s adjusted total asset turnover ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in thousands)
Total debt 591,367  606,433  840,761  826,526  824,947 
Total Vertex shareholders’ equity 4,435,203  2,028,579  1,156,582  939,967  1,075,006 
Solvency Ratio
Debt to equity1 0.13 0.30 0.73 0.88 0.77
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Adjusted total debt 1,448,700  1,528,149  1,789,188  1,757,157  1,710,845 
Total Vertex shareholders’ equity 4,435,203  2,028,579  1,156,582  939,967  1,075,006 
Solvency Ratio
Adjusted debt to equity2 0.33 0.75 1.55 1.87 1.59

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-13).

2018 Calculations

1 Debt to equity = Total debt ÷ Total Vertex shareholders’ equity
= 591,367 ÷ 4,435,203 = 0.13

2 Adjusted debt to equity = Adjusted total debt ÷ Total Vertex shareholders’ equity
= 1,448,700 ÷ 4,435,203 = 0.33

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

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) attributable to Vertex 2,096,896  263,484  (112,052) (556,334) (738,555)
Total assets 6,245,898  3,546,014  2,896,787  2,498,875  2,334,679 
Profitability Ratio
ROA1 33.57% 7.43% -3.87% -22.26% -31.63%
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Net income (loss) attributable to Vertex 2,096,896  263,484  (112,052) (556,334) (738,555)
Adjusted total assets 7,103,231  4,467,730  3,845,214  3,429,506  3,220,577 
Profitability Ratio
Adjusted ROA2 29.52% 5.90% -2.91% -16.22% -22.93%

Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-13).

2018 Calculations

1 ROA = 100 × Net income (loss) attributable to Vertex ÷ Total assets
= 100 × 2,096,896 ÷ 6,245,898 = 33.57%

2 Adjusted ROA = 100 × Net income (loss) attributable to Vertex ÷ Adjusted total assets
= 100 × 2,096,896 ÷ 7,103,231 = 29.52%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Vertex Pharmaceuticals Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.