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Microsoft Excel LibreOffice Calc


Analysis of Operating Leases

Difficulty: Advanced

An operating lease is treated like a rental contract. Neither the leased asset nor the associated liability is reported on the lessee statement of financial position, 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

CVS Health Corp., future operating lease payments

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Total undiscounted future operating lease payments1 (USD $ in millions) hidden hidden hidden hidden hidden
Discount rate2 hidden% hidden% hidden% hidden% hidden%
Total present value of future operating lease payments (USD $ in millions) hidden hidden hidden hidden hidden

1 Source: CVS Health Corp. Annual Reports

2 Internal rate of return on capital leases

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at hidden%
2018 hidden 2018 hidden hidden
2019 hidden 2019 hidden hidden
2020 hidden 2020 hidden hidden
2021 hidden 2021 hidden hidden
2022 hidden 2022 hidden hidden
2023 and thereafter hidden 2023 hidden hidden
2024 hidden hidden
2025 hidden hidden
2026 hidden hidden
2027 hidden hidden
2028 hidden hidden
2029 hidden hidden
2030 hidden hidden
2031 hidden hidden
Total: hidden hidden hidden

1 Source: CVS Health Corp. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at hidden%
2017 hidden 2017 hidden hidden
2018 hidden 2018 hidden hidden
2019 hidden 2019 hidden hidden
2020 hidden 2020 hidden hidden
2021 hidden 2021 hidden hidden
2022 and thereafter hidden 2022 hidden hidden
2023 hidden hidden
2024 hidden hidden
2025 hidden hidden
2026 hidden hidden
2027 hidden hidden
2028 hidden hidden
2029 hidden hidden
2030 hidden hidden
Total: hidden hidden hidden

1 Source: CVS Health Corp. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at hidden%
2016 hidden 2016 hidden hidden
2017 hidden 2017 hidden hidden
2018 hidden 2018 hidden hidden
2019 hidden 2019 hidden hidden
2020 hidden 2020 hidden hidden
2021 and thereafter hidden 2021 hidden hidden
2022 hidden hidden
2023 hidden hidden
2024 hidden hidden
2025 hidden hidden
2026 hidden hidden
2027 hidden hidden
2028 hidden hidden
2029 hidden hidden
Total: hidden hidden hidden

1 Source: CVS Health Corp. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at hidden%
2015 hidden 2015 hidden hidden
2016 hidden 2016 hidden hidden
2017 hidden 2017 hidden hidden
2018 hidden 2018 hidden hidden
2019 hidden 2019 hidden hidden
2020 and thereafter hidden 2020 hidden hidden
2021 hidden hidden
2022 hidden hidden
2023 hidden hidden
2024 hidden hidden
2025 hidden hidden
2026 hidden hidden
2027 hidden hidden
2028 hidden hidden
2029 hidden hidden
Total: hidden hidden hidden

1 Source: CVS Health Corp. Annual Reports

Year Future operating lease payments (as reported)1 Year Future operating lease payments (estimated) Present value at hidden%
2014 hidden 2014 hidden hidden
2015 hidden 2015 hidden hidden
2016 hidden 2016 hidden hidden
2017 hidden 2017 hidden hidden
2018 hidden 2018 hidden hidden
2019 and thereafter hidden 2019 hidden hidden
2020 hidden hidden
2021 hidden hidden
2022 hidden hidden
2023 hidden hidden
2024 hidden hidden
2025 hidden hidden
2026 hidden hidden
2027 hidden hidden
2028 hidden hidden
Total: hidden hidden hidden

1 Source: CVS Health Corp. Annual Reports


Analyst Adjustments for Operating Leases

CVS Health Corp., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Add: Operating leased assets1 hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Total Debt
Total debt (as reported) hidden hidden hidden hidden hidden
Add: Operating lease obligations2 hidden hidden hidden hidden hidden
Total debt (adjusted) hidden hidden hidden hidden hidden
Adjustment to Earnings before Interest and Tax (EBIT)
EBIT3 (as reported) hidden hidden hidden hidden hidden
Add-back: Rental expense for operating leases4 hidden hidden hidden hidden hidden
Less: Depreciation expense, operating leased assets5 hidden hidden hidden hidden hidden
EBIT (adjusted) hidden hidden hidden hidden hidden
Adjustment to Interest Expense
Interest expense (as reported) hidden hidden hidden hidden hidden
Add: Interest expense, operating lease obligations6 hidden hidden hidden hidden hidden
Interest expense (adjusted) hidden hidden hidden hidden hidden

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

3 See Details »

4 Source: CVS Health Corp. Annual Reports

5 See Details »

6 See Details »


Adjusted Ratios for Operating Leases (Summary)

CVS Health Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Total Asset Turnover1
Reported total asset turnover hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden
Debt to Equity2
Reported debt to equity hidden hidden hidden hidden hidden
Adjusted debt to equity hidden hidden hidden hidden hidden
Return on Assets3 (ROA)
Reported ROA hidden% hidden% hidden% hidden% hidden%
Adjusted ROA hidden% hidden% hidden% hidden% hidden%
Interest Coverage4
Reported interest coverage hidden hidden hidden hidden hidden
Adjusted interest coverage hidden hidden hidden hidden hidden
Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. CVS Health Corp.'s adjusted total asset turnover improved from 2015 to 2016 and from 2016 to 2017.
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. CVS Health Corp.'s adjusted debt-to-equity deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. CVS Health Corp.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.
Adjusted interest coverage A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. CVS Health Corp.'s adjusted interest coverage deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net revenues (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Operating Leases
Net revenues (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

2017 Calculations

1 Total asset turnover = Net revenues ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net revenues ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. CVS Health Corp.'s adjusted total asset turnover improved from 2015 to 2016 and from 2016 to 2017.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total debt (USD $ in millions) hidden hidden hidden hidden hidden
Total CVS Health shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Debt to equity1 hidden hidden hidden hidden hidden
Adjusted for Operating Leases
Adjusted total debt (USD $ in millions) hidden hidden hidden hidden hidden
Total CVS Health shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted debt to equity2 hidden hidden hidden hidden hidden

2017 Calculations

1 Debt to equity = Total debt ÷ Total CVS Health shareholders' equity
= hidden ÷ hidden = hidden

2 Adjusted debt to equity = Adjusted total debt ÷ Total CVS Health shareholders' equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. CVS Health Corp.'s adjusted debt-to-equity deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to CVS Health (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Operating Leases
Net income attributable to CVS Health (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROA = 100 × Net income attributable to CVS Health ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Net income attributable to CVS Health ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. CVS Health Corp.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.

Adjusted Interest Coverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Earnings before interest and tax1 (EBIT) (USD $ in millions) hidden hidden hidden hidden hidden
Interest expense (USD $ in millions) hidden hidden hidden hidden hidden
Interest coverage2 hidden hidden hidden hidden hidden
Adjusted for Operating Leases
Adjusted EBIT (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted interest expense (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted interest coverage3 hidden hidden hidden hidden hidden

1 See Details »

2017 Calculations

2 Interest coverage = EBIT ÷ Interest expense
= hidden ÷ hidden = hidden

3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted interest coverage ratio A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. CVS Health Corp.'s adjusted interest coverage ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

Estimation of Depreciation Expense, Operating Leased Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Rental expense for operating leases1 hidden hidden hidden hidden hidden
Less: Estimated interest expense, operating lease obligations2 hidden hidden hidden hidden hidden
Estimated depreciation expense, operating leased assets hidden hidden hidden hidden hidden

1 Source: CVS Health Corp., Annual Reports

2 See Details »


Estimation of Interest Expense, Operating Lease Obligations

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Operating leased assets, at beginning of year1 (USD $ in millions) hidden hidden hidden hidden hidden
Discount rate2 hidden% hidden% hidden% hidden% hidden%
Estimated interest expense, operating lease obligations3 (USD $ in millions) hidden hidden hidden hidden hidden

1 See Details »

2 Internal rate of return on capital leases

2017 Calculations

3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= hidden × hidden = hidden


Present Value of Operating Lease Payments, at Beginning of Year

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Total present value of future operating lease payments1 (USD $ in millions) hidden hidden hidden hidden hidden
Rental expense for operating leases2 (USD $ in millions) hidden hidden hidden hidden hidden
Discount rate3 hidden% hidden% hidden% hidden% hidden%
Total present value of operating lease payments, at beginning of year4 (USD $ in millions) hidden hidden hidden hidden hidden

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

2 Source: CVS Health Corp., Annual Reports

3 Internal rate of return on capital leases

2017 Calculations

4 Total present value of operating lease payments, at beginning of year = (Total present value of future operating lease payments + Rental expense for operating leases) ÷ (1 + Discount rate)
= (hidden + hidden) ÷ (1 + hidden%) = hidden