Microsoft Excel LibreOffice Calc

Analysis of Operating Leases

Difficulty: Advanced


Present Value of Future Operating Lease Payments

Honeywell International Inc., 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) 856  1,126  1,123  1,201  1,281 
Discount rate1 2.62% 2.48% 2.98% 5.45% 5.55%
Total present value of future operating lease payments (USD $ in millions) 789  1,040  1,017  1,007  1,078 

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

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

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.62%
2019 210  2019 210  205 
2020 168  2020 168  160 
2021 142  2021 142  131 
2022 109  2022 109  98 
2023 80  2023 80  70 
2024 and thereafter 147  2024 80  69 
2025 67  56 
Total: 856  856  789 

Based on: 10-K (filing date: 2019-02-08).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.48%
2018 295  2018 295  288 
2019 226  2019 226  215 
2020 161  2020 161  150 
2021 121  2021 121  110 
2022 97  2022 97  86 
2023 and thereafter 226  2023 97  84 
2024 97  82 
2025 32  26 
Total: 1,126  1,126  1,040 

Based on: 10-K (filing date: 2018-02-09).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.98%
2017 289  2017 289  281 
2018 216  2018 216  204 
2019 158  2019 158  145 
2020 110  2020 110  98 
2021 94  2021 94  81 
2022 and thereafter 256  2022 94  79 
2023 94  77 
2024 68  54 
Total: 1,123  1,123  1,017 

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

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.45%
2016 316  2016 316  300 
2017 249  2017 249  224 
2018 172  2018 172  147 
2019 114  2019 114  92 
2020 77  2020 77  59 
2021 and thereafter 273  2021 77  56 
2022 77  53 
2023 77  50 
2024 42  26 
Total: 1,201  1,201  1,007 

Based on: 10-K (filing date: 2016-02-12).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.55%
2015 330  2015 330  313 
2016 268  2016 268  241 
2017 202  2017 202  172 
2018 133  2018 133  107 
2019 91  2019 91  69 
2020 and thereafter 257  2020 91  66 
2021 91  62 
2022 75  49 
Total: 1,281  1,281  1,078 

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


Analyst Adjustments for Operating Leases

Honeywell International 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) 57,773  59,387  54,146  49,316  45,451 
Add: Operating leased assets1 789  1,040  1,017  1,007  1,078 
Total assets (adjusted) 58,562  60,427  55,163  50,323  46,529 
Adjustment to Total Debt
Total debt (as reported) 16,214  17,882  15,775  12,068  8,683 
Add: Operating lease obligations2 789  1,040  1,017  1,007  1,078 
Total debt (adjusted) 17,003  18,922  16,792  13,075  9,761 
Adjustment to Earnings before Interest and Tax (EBIT)
EBIT3 (as reported) 7,854  7,218  6,785  6,896  6,136 
Add-back: Rent expense 360  385  387  390  420 
Less: Depreciation expense, operating leased assets4 331  351  346  318  341 
EBIT (adjusted) 7,883  7,252  6,826  6,968  6,215 
Adjustment to Interest And Other Financial Charges
Interest and other financial charges (as reported) 367  316  338  310  318 
Add: Interest expense, operating lease obligations5 29  34  41  72  79 
Interest and other financial charges (adjusted) 396  350  379  382  397 

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

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

3 See Details »

4 See Details »

5 See Details »


Honeywell International Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios for Operating Leases (Summary)

Honeywell International 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 0.72 0.68 0.73 0.78 0.89
Adjusted total asset turnover 0.71 0.67 0.71 0.77 0.87
Debt to Equity2
Reported debt to equity 0.89 1.04 0.81 0.66 0.49
Adjusted debt to equity 0.94 1.10 0.87 0.72 0.55
Return on Assets3 (ROA)
Reported ROA 11.71% 2.79% 8.88% 9.67% 9.33%
Adjusted ROA 11.55% 2.74% 8.72% 9.47% 9.11%
Interest Coverage4
Reported interest coverage 21.40 22.84 20.07 22.25 19.30
Adjusted interest coverage 19.89 20.69 18.03 18.23 15.66

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Honeywell International Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Honeywell International Inc.’s adjusted debt-to-equity deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Honeywell International Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted interest coverage A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Honeywell International Inc.’s adjusted interest coverage improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

Honeywell International 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)
Net sales 41,802  40,534  39,302  38,581  40,306 
Total assets 57,773  59,387  54,146  49,316  45,451 
Ratio
Total asset turnover1 0.72 0.68 0.73 0.78 0.89
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Net sales 41,802  40,534  39,302  38,581  40,306 
Adjusted total assets 58,562  60,427  55,163  50,323  46,529 
Ratio
Adjusted total asset turnover2 0.71 0.67 0.71 0.77 0.87

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

2018 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 41,802 ÷ 57,773 = 0.72

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 41,802 ÷ 58,562 = 0.71

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Honeywell International Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

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 16,214  17,882  15,775  12,068  8,683 
Total Honeywell shareowners’ equity 18,180  17,276  19,369  18,283  17,657 
Ratio
Debt to equity1 0.89 1.04 0.81 0.66 0.49
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted total debt 17,003  18,922  16,792  13,075  9,761 
Total Honeywell shareowners’ equity 18,180  17,276  19,369  18,283  17,657 
Ratio
Adjusted debt to equity2 0.94 1.10 0.87 0.72 0.55

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

2018 Calculations

1 Debt to equity = Total debt ÷ Total Honeywell shareowners’ equity
= 16,214 ÷ 18,180 = 0.89

2 Adjusted debt to equity = Adjusted total debt ÷ Total Honeywell shareowners’ equity
= 17,003 ÷ 18,180 = 0.94

Ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Honeywell International Inc.’s adjusted debt-to-equity deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

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 Honeywell 6,765  1,655  4,809  4,768  4,239 
Total assets 57,773  59,387  54,146  49,316  45,451 
Ratio
ROA1 11.71% 2.79% 8.88% 9.67% 9.33%
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Net income attributable to Honeywell 6,765  1,655  4,809  4,768  4,239 
Adjusted total assets 58,562  60,427  55,163  50,323  46,529 
Ratio
Adjusted ROA2 11.55% 2.74% 8.72% 9.47% 9.11%

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

2018 Calculations

1 ROA = 100 × Net income attributable to Honeywell ÷ Total assets
= 100 × 6,765 ÷ 57,773 = 11.71%

2 Adjusted ROA = 100 × Net income attributable to Honeywell ÷ Adjusted total assets
= 100 × 6,765 ÷ 58,562 = 11.55%

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

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) 7,854  7,218  6,785  6,896  6,136 
Interest and other financial charges 367  316  338  310  318 
Ratio
Interest coverage2 21.40 22.84 20.07 22.25 19.30
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted EBIT 7,883  7,252  6,826  6,968  6,215 
Adjusted interest and other financial charges 396  350  379  382  397 
Ratio
Adjusted interest coverage3 19.89 20.69 18.03 18.23 15.66

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

1 See Details »

2018 Calculations

2 Interest coverage = EBIT ÷ Interest and other financial charges
= 7,854 ÷ 367 = 21.40

3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest and other financial charges
= 7,883 ÷ 396 = 19.89

Ratio Description The company
Adjusted interest coverage ratio A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Honeywell International Inc.’s adjusted interest coverage ratio improved from 2016 to 2017 but then slightly deteriorated 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
Rent expense 360  385  387  390  420 
Less: Estimated interest expense, operating lease obligations1 29  34  41  72  79 
Estimated depreciation expense, operating leased assets 331  351  346  318  341 

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).


Estimation of Interest Expense, Operating Lease Obligations

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 (USD $ in millions) 1,119  1,390  1,363  1,325  1,420 
Discount rate2 2.62% 2.48% 2.98% 5.45% 5.55%
Estimated interest expense, operating lease obligations3 (USD $ in millions) 29  34  41  72  79 

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

1 See Details »

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

2018 Calculations

3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= 1,119 × 2.62% = 29


Present Value of Operating Lease Payments, at Beginning of Year

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 (USD $ in millions) 789  1,040  1,017  1,007  1,078 
Rent expense (USD $ in millions) 360  385  387  390  420 
Discount rate2 2.62% 2.48% 2.98% 5.45% 5.55%
Total present value of operating lease payments, at beginning of year3 (USD $ in millions) 1,119  1,390  1,363  1,325  1,420 

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

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

2 Weighted-average interest rate for Honeywell International 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 + Rent expense) ÷ (1 + Discount rate)
= (789 + 360) ÷ (1 + 2.62%) = 1,119