Microsoft Excel LibreOffice Calc

Caterpillar Inc. (CAT)


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

Caterpillar Inc., future operating lease payments

USD $ in millions

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 772  758  796  926  874 
Discount rate1 3.97% 3.83% 3.61% 3.41% 3.80%
 
Total present value of future operating lease payments 676  670  708  828  773 

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

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

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.97%
2019 205  2019 205  197 
2020 154  2020 154  142 
2021 111  2021 111  99 
2022 67  2022 67  57 
2023 50  2023 50  41 
2024 and thereafter 185  2024 50  40 
2025 50  38 
2026 50  37 
2027 35  25 
Total: 772  772  676 

Based on: 10-K (filing date: 2019-02-14).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.83%
2018 211  2018 211  203 
2019 142  2019 142  132 
2020 104  2020 104  93 
2021 74  2021 74  64 
2022 58  2022 58  48 
2023 and thereafter 169  2023 58  46 
2024 58  45 
2025 53  39 
Total: 758  758  670 

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 3.61%
2017 211  2017 211  204 
2018 160  2018 160  149 
2019 107  2019 107  96 
2020 81  2020 81  70 
2021 61  2021 61  51 
2022 and thereafter 176  2022 61  49 
2023 61  48 
2024 54  41 
Total: 796  796  708 

Based on: 10-K (filing date: 2017-02-15).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.41%
2016 237  2016 237  229 
2017 183  2017 183  171 
2018 140  2018 140  127 
2019 93  2019 93  81 
2020 68  2020 68  58 
2021 and thereafter 205  2021 68  56 
2022 68  54 
2023 68  52 
2024
Total: 926  926  828 

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 3.80%
2015 229  2015 229  221 
2016 174  2016 174  161 
2017 125  2017 125  112 
2018 92  2018 92  79 
2019 65  2019 65  54 
2020 and thereafter 189  2020 65  52 
2021 65  50 
2022 59  44 
Total: 874  874  773 

Based on: 10-K (filing date: 2015-02-17).


Analyst Adjustments for Operating Leases

Caterpillar Inc., adjustments to financial data

USD $ in millions

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) 78,509  76,962  74,704  78,497  84,681 
Add: Operating leased assets1 676  670  708  828  773 
Total assets (adjusted) 79,185  77,632  75,412  79,325  85,454 
Adjustment to Total Debt
Total debt (as reported) 36,553  34,878  36,783  38,093  39,285 
Add: Operating lease obligations2 676  670  708  828  773 
Total debt (adjusted) 37,229  35,548  37,491  38,921  40,058 
Adjustment to Earnings before Interest and Tax (EBIT)
EBIT3 (as reported) 8,250  4,629  638  3,362  5,575 
Add-back: Rental expense for operating leases 322  331  375  371  391 
Less: Depreciation expense, operating leased assets4 284  294  337  331  348 
EBIT (adjusted) 8,288  4,666  676  3,402  5,618 
Adjustment to Interest Expense Excluding Financial Products
Interest expense excluding Financial Products (as reported) 404  531  505  507  484 
Add: Interest expense, operating lease obligations5 38  37  38  40  43 
Interest expense excluding Financial Products (adjusted) 442  568  543  547  527 

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

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

3 See Details »

4 See Details »

5 See Details »


Caterpillar Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios for Operating Leases (Summary)

Caterpillar Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total Asset Turnover1
Reported total asset turnover 0.66 0.55 0.48 0.56 0.62
Adjusted total asset turnover 0.65 0.55 0.47 0.56 0.61
Debt to Equity2
Reported debt to equity 2.60 2.55 2.80 2.57 2.35
Adjusted debt to equity 2.65 2.60 2.85 2.63 2.39
Return on Assets3 (ROA)
Reported ROA 7.83% 0.98% -0.09% 2.68% 4.36%
Adjusted ROA 7.76% 0.97% -0.09% 2.65% 4.32%
Interest Coverage4
Reported interest coverage 20.42 8.72 1.26 6.63 11.52
Adjusted interest coverage 18.75 8.22 1.25 6.22 10.67

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Caterpillar Inc.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Caterpillar Inc.’s adjusted debt-to-equity improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Caterpillar Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.
Adjusted interest coverage A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Caterpillar Inc.’s adjusted interest coverage improved from 2016 to 2017 and from 2017 to 2018.

Caterpillar Inc., 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 (USD $ in millions)
Sales of Machinery, Energy & Transportation 51,822  42,676  35,773  44,147  52,142 
Total assets 78,509  76,962  74,704  78,497  84,681 
Ratio
Total asset turnover1 0.66 0.55 0.48 0.56 0.62
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Sales of Machinery, Energy & Transportation 51,822  42,676  35,773  44,147  52,142 
Adjusted total assets 79,185  77,632  75,412  79,325  85,454 
Ratio
Adjusted total asset turnover2 0.65 0.55 0.47 0.56 0.61

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

2018 Calculations

1 Total asset turnover = Sales of Machinery, Energy & Transportation ÷ Total assets
= 51,822 ÷ 78,509 = 0.66

2 Adjusted total asset turnover = Sales of Machinery, Energy & Transportation ÷ Adjusted total assets
= 51,822 ÷ 79,185 = 0.65

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Caterpillar Inc.’s adjusted total asset turnover improved from 2016 to 2017 and 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 (USD $ in millions)
Total debt 36,553  34,878  36,783  38,093  39,285 
Equity attributable to common stockholders 14,039  13,697  13,137  14,809  16,746 
Ratio
Debt to equity1 2.60 2.55 2.80 2.57 2.35
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted total debt 37,229  35,548  37,491  38,921  40,058 
Equity attributable to common stockholders 14,039  13,697  13,137  14,809  16,746 
Ratio
Adjusted debt to equity2 2.65 2.60 2.85 2.63 2.39

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

2018 Calculations

1 Debt to equity = Total debt ÷ Equity attributable to common stockholders
= 36,553 ÷ 14,039 = 2.60

2 Adjusted debt to equity = Adjusted total debt ÷ Equity attributable to common stockholders
= 37,229 ÷ 14,039 = 2.65

Ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Caterpillar Inc.’s adjusted debt-to-equity improved from 2016 to 2017 but then slightly deteriorated 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 (USD $ in millions)
Profit (loss) attributable to common stockholders 6,147  754  (67) 2,102  3,695 
Total assets 78,509  76,962  74,704  78,497  84,681 
Ratio
ROA1 7.83% 0.98% -0.09% 2.68% 4.36%
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Profit (loss) attributable to common stockholders 6,147  754  (67) 2,102  3,695 
Adjusted total assets 79,185  77,632  75,412  79,325  85,454 
Ratio
Adjusted ROA2 7.76% 0.97% -0.09% 2.65% 4.32%

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

2018 Calculations

1 ROA = 100 × Profit (loss) attributable to common stockholders ÷ Total assets
= 100 × 6,147 ÷ 78,509 = 7.83%

2 Adjusted ROA = 100 × Profit (loss) attributable to common stockholders ÷ Adjusted total assets
= 100 × 6,147 ÷ 79,185 = 7.76%

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

Adjusted Interest Coverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Earnings before interest and tax1 (EBIT) 8,250  4,629  638  3,362  5,575 
Interest expense excluding Financial Products 404  531  505  507  484 
Ratio
Interest coverage2 20.42 8.72 1.26 6.63 11.52
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted EBIT 8,288  4,666  676  3,402  5,618 
Adjusted interest expense excluding Financial Products 442  568  543  547  527 
Ratio
Adjusted interest coverage3 18.75 8.22 1.25 6.22 10.67

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

1 See Details »

2018 Calculations

2 Interest coverage = EBIT ÷ Interest expense excluding Financial Products
= 8,250 ÷ 404 = 20.42

3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense excluding Financial Products
= 8,288 ÷ 442 = 18.75

Ratio Description The company
Adjusted interest coverage ratio A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Caterpillar 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
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Rental expense for operating leases 322  331  375  371  391 
Less: Estimated interest expense, operating lease obligations1 38  37  38  40  43 
Estimated depreciation expense, operating leased assets 284  294  337  331  348 

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).


Estimation of Interest Expense, Operating Lease Obligations

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Operating leased assets, at beginning of year1 960  964  1,045  1,159  1,121 
Discount rate2 3.97% 3.83% 3.61% 3.41% 3.80%
 
Estimated interest expense, operating lease obligations3 38  37  38  40  43 

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

1 See Details »

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

2018 Calculations

3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= 960 × 3.97% = 38


Present Value of Operating Lease Payments, at Beginning of Year

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total present value of future operating lease payments1 676  670  708  828  773 
Rental expense for operating leases 322  331  375  371  391 
Discount rate2 3.97% 3.83% 3.61% 3.41% 3.80%
 
Total present value of operating lease payments, at beginning of year3 960  964  1,045  1,159  1,121 

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

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

2 Weighted-average interest rate for Caterpillar 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 + Rental expense for operating leases) ÷ (1 + Discount rate)
= (676 + 322) ÷ (1 + 3.97%) = 960