Microsoft Excel LibreOffice Calc

Coca-Cola Co. (KO)

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

Coca-Cola Co., future operating lease payments

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 (USD $ in millions) 500  542  683  716  965 
Discount rate1 2.11% 1.69% 1.46% 1.35% 1.29%
Total present value of future operating lease payments (USD $ in millions) 467  510  645  679  919 

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

1 Weighted-average interest rate for Coca-Cola Co.’s debt

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.11%
2019 144  2019 144  141 
2020 84  2020 84  81 
2021 70  2021 70  66 
2022 60  2022 60  55 
2023 42  2023 42  38 
2024 and thereafter 100  2024 42  37 
2025 42  36 
2026 16  14 
Total: 500  500  467 

Based on: 10-K (filing date: 2019-02-21).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 1.69%
2018 130  2018 130  128 
2019 85  2019 85  82 
2020 69  2020 69  66 
2021 59  2021 59  55 
2022 52  2022 52  48 
2023 and thereafter 147  2023 52  47 
2024 52  46 
2025 43  38 
Total: 542  542  510 

Based on: 10-K (filing date: 2018-02-23).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 1.46%
2017 176  2017 176  173 
2018 98  2018 98  95 
2019 78  2019 78  75 
2020 64  2020 64  60 
2021 54  2021 54  50 
2022 and thereafter 213  2022 54  50 
2023 54  49 
2024 54  48 
2025 51  45 
Total: 683  683  645 

Based on: 10-K (filing date: 2017-02-24).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 1.35%
2016 171  2016 171  169 
2017 109  2017 109  106 
2018 89  2018 89  85 
2019 68  2019 68  64 
2020 59  2020 59  55 
2021 and thereafter 220  2021 59  54 
2022 59  54 
2023 59  53 
2024 43  38 
Total: 716  716  679 

Based on: 10-K (filing date: 2016-02-25).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 1.29%
2015 230  2015 230  227 
2016 161  2016 161  157 
2017 128  2017 128  123 
2018 98  2018 98  93 
2019 71  2019 71  67 
2020 and thereafter 277  2020 71  66 
2021 71  65 
2022 71  64 
2023 64  57 
Total: 965  965  919 

Based on: 10-K (filing date: 2015-02-25).

Analyst Adjustments for Operating Leases

Coca-Cola Co., 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) 83,216  87,896  87,270  90,093  92,023 
Add: Operating leased assets1 467  510  645  679  919 
Total assets (adjusted) 83,683  88,406  87,915  90,772  92,942 
Adjustment to Total Debt
Total debt (as reported) 43,555  47,685  45,709  44,213  41,745 
Add: Operating lease obligations2 467  510  645  679  919 
Total debt (adjusted) 44,022  48,195  46,354  44,892  42,664 

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

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

Coca-Cola Co., Financial Data: Reported vs. Adjusted

Adjusted Ratios for Operating Leases (Summary)

Coca-Cola Co., 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 0.38 0.40 0.48 0.49 0.50
Adjusted total asset turnover 0.38 0.40 0.48 0.49 0.49
Debt to Equity2
Reported debt to equity 2.56 2.79 1.98 1.73 1.38
Adjusted debt to equity 2.59 2.82 2.01 1.76 1.41
Return on Assets3 (ROA)
Reported ROA 7.73% 1.42% 7.48% 8.16% 7.71%
Adjusted ROA 7.69% 1.41% 7.42% 8.10% 7.64%

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

1 See Details »

2 See Details »

3 See Details »

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Coca-Cola Co.’s adjusted total asset turnover deteriorated 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. Coca-Cola Co.’s adjusted debt-to-equity deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Coca-Cola Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Coca-Cola Co., 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)
Net operating revenues 31,856  35,410  41,863  44,294  45,998 
Total assets 83,216  87,896  87,270  90,093  92,023 
Ratio
Total asset turnover1 0.38 0.40 0.48 0.49 0.50
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Net operating revenues 31,856  35,410  41,863  44,294  45,998 
Adjusted total assets 83,683  88,406  87,915  90,772  92,942 
Ratio
Adjusted total asset turnover2 0.38 0.40 0.48 0.49 0.49

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Total asset turnover = Net operating revenues ÷ Total assets
= 31,856 ÷ 83,216 = 0.38

2 Adjusted total asset turnover = Net operating revenues ÷ Adjusted total assets
= 31,856 ÷ 83,683 = 0.38

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Coca-Cola Co.’s adjusted total asset turnover deteriorated 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 43,555  47,685  45,709  44,213  41,745 
Equity attributable to shareowners of The Coca-Cola Company 16,981  17,072  23,062  25,554  30,320 
Ratio
Debt to equity1 2.56 2.79 1.98 1.73 1.38
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted total debt 44,022  48,195  46,354  44,892  42,664 
Equity attributable to shareowners of The Coca-Cola Company 16,981  17,072  23,062  25,554  30,320 
Ratio
Adjusted debt to equity2 2.59 2.82 2.01 1.76 1.41

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Debt to equity = Total debt ÷ Equity attributable to shareowners of The Coca-Cola Company
= 43,555 ÷ 16,981 = 2.56

2 Adjusted debt to equity = Adjusted total debt ÷ Equity attributable to shareowners of The Coca-Cola Company
= 44,022 ÷ 16,981 = 2.59

Ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Coca-Cola Co.’s adjusted debt-to-equity deteriorated from 2016 to 2017 but then slightly improved 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)
Net income attributable to shareowners of The Coca-Cola Company 6,434  1,248  6,527  7,351  7,098 
Total assets 83,216  87,896  87,270  90,093  92,023 
Ratio
ROA1 7.73% 1.42% 7.48% 8.16% 7.71%
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Net income attributable to shareowners of The Coca-Cola Company 6,434  1,248  6,527  7,351  7,098 
Adjusted total assets 83,683  88,406  87,915  90,772  92,942 
Ratio
Adjusted ROA2 7.69% 1.41% 7.42% 8.10% 7.64%

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROA = 100 × Net income attributable to shareowners of The Coca-Cola Company ÷ Total assets
= 100 × 6,434 ÷ 83,216 = 7.73%

2 Adjusted ROA = 100 × Net income attributable to shareowners of The Coca-Cola Company ÷ Adjusted total assets
= 100 × 6,434 ÷ 83,683 = 7.69%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Coca-Cola Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.