Microsoft Excel LibreOffice Calc

Walgreens Boots Alliance Inc. (NASDAQ:WBA)

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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.


Accounting Policy on Operating Leases

Initial terms for leased premises in the U.S. are typically 15 to 25 years, followed by additional terms containing renewal options at five-year intervals, and may include rent escalation clauses. Non-U.S. leases are typically for shorter terms and may include cancellation clauses or renewal options. The commencement date of all lease terms is the earlier of the date Walgreens Boots Alliance becomes legally obligated to make rent payments or the date Walgreens Boots Alliance has the right to control the property. In addition to minimum fixed rentals, some leases provide for contingent rentals based upon a portion of sales.

Capital leases are recognized within property, plant and equipment and as a capital lease liability within accrued expenses and other liabilities and other non-current liabilities. Operating leases are expensed on a straight line basis over the lease term.

Source: 10-K (filing date: 2019-10-28).


Present Value of Future Operating Lease Payments (before Adoption of FASB Topic 842)

Walgreens Boots Alliance Inc., future operating lease payments (before adoption of FASB Topic 842)

US$ in millions

Microsoft Excel LibreOffice Calc
Aug 31, 2019 Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014
Total undiscounted future operating lease payments
Discount rate1
 
Total present value of future operating lease payments

Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).

1 Weighted-average interest rate for Walgreens Boots Alliance Inc.’s debt

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at
2020 2020
2021 2021
2022 2022
2023 2023
2024 2024
2025 and thereafter 2025
2026
2027
2028
2029
2030
Total:

Based on: 10-K (filing date: 2019-10-28).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at
2019 2019
2020 2020
2021 2021
2022 2022
2023 2023
2024 and thereafter 2024
2025
2026
2027
2028
2029
2030
Total:

Based on: 10-K (filing date: 2018-10-11).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at
2018 2018
2019 2019
2020 2020
2021 2021
2022 2022
2023 and thereafter 2023
2024
2025
2026
2027
2028
2029
2030
Total:

Based on: 10-K (filing date: 2017-10-25).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at
2017 2017
2018 2018
2019 2019
2020 2020
2021 2021
2022 and thereafter 2022
2023
2024
2025
2026
2027
2028
2029
2030
Total:

Based on: 10-K (filing date: 2016-10-20).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at
2016 2016
2017 2017
2018 2018
2019 2019
2020 2020
2021 and thereafter 2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Total:

Based on: 10-K (filing date: 2015-10-28).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at
2015 2015
2016 2016
2017 2017
2018 2018
2019 2019
2020 and thereafter 2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total:

Based on: 10-K (filing date: 2014-10-20).


Adjustments to Financial Statements for Operating Leases

Walgreens Boots Alliance Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Aug 31, 2019 Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014
Adjustment to Total Assets
Total assets (as reported)
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1
Total assets (adjusted)
Adjustment to Total Debt
Total debt (as reported)
Add: Operating lease liability (before adoption of FASB Topic 842)2
Total debt (adjusted)

Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).

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


Walgreens Boots Alliance Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios for Operating Leases (Summary)

Walgreens Boots Alliance Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Aug 31, 2019 Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014
Total Asset Turnover1
Reported total asset turnover
Adjusted total asset turnover
Debt to Equity2
Reported debt to equity
Adjusted debt to equity
Return on Assets3 (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Walgreens Boots Alliance Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted debt to equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Walgreens Boots Alliance Inc.’s adjusted debt to equity ratio deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Walgreens Boots Alliance Inc.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Walgreens Boots Alliance Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Aug 31, 2019 Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Sales
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Sales
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).

2019 Calculations

1 Total asset turnover = Sales ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Walgreens Boots Alliance Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Aug 31, 2019 Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total debt
Total Walgreens Boots Alliance, Inc. shareholders’ equity
Solvency Ratio
Debt to equity1
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Adjusted total debt
Total Walgreens Boots Alliance, Inc. shareholders’ equity
Solvency Ratio
Adjusted debt to equity2

Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).

2019 Calculations

1 Debt to equity = Total debt ÷ Total Walgreens Boots Alliance, Inc. shareholders’ equity
= ÷ =

2 Adjusted debt to equity = Adjusted total debt ÷ Total Walgreens Boots Alliance, Inc. shareholders’ equity
= ÷ =

Solvency ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Walgreens Boots Alliance Inc.’s adjusted debt-to-equity ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Aug 31, 2019 Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings attributable to Walgreens Boots Alliance, Inc.
Total assets
Profitability Ratio
ROA1
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Net earnings attributable to Walgreens Boots Alliance, Inc.
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2019-10-28), 10-K (filing date: 2018-10-11), 10-K (filing date: 2017-10-25), 10-K (filing date: 2016-10-20), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-20).

2019 Calculations

1 ROA = 100 × Net earnings attributable to Walgreens Boots Alliance, Inc. ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Net earnings attributable to Walgreens Boots Alliance, Inc. ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Walgreens Boots Alliance Inc.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.