Microsoft Excel LibreOffice Calc

Linde plc (LIN)


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 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.


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

Linde plc, future operating lease payments (before adoption of FASB Topic 842)

US$ 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 1,300  583  529  476  517 
Discount rate1 2.12% 2.46% 2.37% 2.53% 2.47%
 
Total present value of future operating lease payments 1,206  538  488  442  480 

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

1 Weighted-average interest rate for Linde plc’s debt

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.12%
2019 305  2019 305  299 
2020 236  2020 236  226 
2021 186  2021 186  175 
2022 145  2022 145  133 
2023 102  2023 102  92 
2024 and thereafter 326  2024 102  90 
2025 102  88 
2026 102  86 
2027 20  17 
Total: 1,300  1,300  1,206 

Based on: 10-K (filing date: 2019-03-18).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.46%
2018 131  2018 131  128 
2019 114  2019 114  109 
2020 94  2020 94  87 
2021 76  2021 76  69 
2022 61  2022 61  54 
2023 and thereafter 107  2023 61  53 
2024 46  39 
Total: 583  583  538 

Based on: 10-K (filing date: 2018-02-28).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.37%
2017 117  2017 117  114 
2018 97  2018 97  93 
2019 79  2019 79  74 
2020 65  2020 65  59 
2021 54  2021 54  48 
2022 and thereafter 117  2022 54  47 
2023 54  46 
2024
Total: 529  529  488 

Based on: 10-K (filing date: 2017-03-01).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.53%
2016 116  2016 116  113 
2017 100  2017 100  95 
2018 84  2018 84  78 
2019 67  2019 67  61 
2020 51  2020 51  45 
2021 and thereafter 58  2021 51  44 
2022
Total: 476  476  442 

Based on: 10-K (filing date: 2016-02-24).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 2.47%
2015 122  2015 122  119 
2016 109  2016 109  104 
2017 91  2017 91  85 
2018 75  2018 75  68 
2019 60  2019 60  53 
2020 60  2020 60  52 
Total: 517  517  480 

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


Analyst Adjustments for Operating Leases

Linde plc, adjustments to financial data

US$ 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) 93,386  20,436  19,332  18,319  19,802 
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1 1,206  538  488  442  480 
Total assets (adjusted) 94,592  20,974  19,820  18,761  20,282 
Adjustment to Total Debt
Total debt (as reported) 15,296  9,000  9,515  9,231  9,258 
Add: Operating lease liability (before adoption of FASB Topic 842)2 1,206  538  488  442  480 
Total debt (adjusted) 16,502  9,538  10,003  9,673  9,738 

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

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


Linde plc, Financial Data: Reported vs. Adjusted


Adjusted Ratios for Operating Leases (Summary)

Linde plc, adjusted ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total Asset Turnover1
Reported total asset turnover 0.16 0.56 0.54 0.59 0.62
Adjusted total asset turnover 0.16 0.55 0.53 0.57 0.61
Debt to Equity2
Reported debt to equity 0.30 1.50 1.90 2.10 1.65
Adjusted debt to equity 0.32 1.58 1.99 2.20 1.73
Return on Assets3 (ROA)
Reported ROA 4.69% 6.10% 7.76% 8.44% 8.55%
Adjusted ROA 4.63% 5.95% 7.57% 8.25% 8.35%

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

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

Linde plc, 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 (US$ in millions)
Sales 14,900  11,437  10,534  10,776  12,273 
Total assets 93,386  20,436  19,332  18,319  19,802 
Ratio
Total asset turnover1 0.16 0.56 0.54 0.59 0.62
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Sales 14,900  11,437  10,534  10,776  12,273 
Adjusted total assets 94,592  20,974  19,820  18,761  20,282 
Ratio
Adjusted total asset turnover2 0.16 0.55 0.53 0.57 0.61

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Total asset turnover = Sales ÷ Total assets
= 14,900 ÷ 93,386 = 0.16

2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= 14,900 ÷ 94,592 = 0.16

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Linde plc’s adjusted total asset turnover improved from 2016 to 2017 but then deteriorated significantly 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 (US$ in millions)
Total debt 15,296  9,000  9,515  9,231  9,258 
Total Linde plc shareholders’ equity 51,596  6,018  5,021  4,389  5,623 
Ratio
Debt to equity1 0.30 1.50 1.90 2.10 1.65
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Adjusted total debt 16,502  9,538  10,003  9,673  9,738 
Total Linde plc shareholders’ equity 51,596  6,018  5,021  4,389  5,623 
Ratio
Adjusted debt to equity2 0.32 1.58 1.99 2.20 1.73

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Debt to equity = Total debt ÷ Total Linde plc shareholders’ equity
= 15,296 ÷ 51,596 = 0.30

2 Adjusted debt to equity = Adjusted total debt ÷ Total Linde plc shareholders’ equity
= 16,502 ÷ 51,596 = 0.32

Ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Linde plc’s adjusted debt-to-equity improved from 2016 to 2017 and 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 (US$ in millions)
Net income, Linde plc 4,381  1,247  1,500  1,547  1,694 
Total assets 93,386  20,436  19,332  18,319  19,802 
Ratio
ROA1 4.69% 6.10% 7.76% 8.44% 8.55%
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Net income, Linde plc 4,381  1,247  1,500  1,547  1,694 
Adjusted total assets 94,592  20,974  19,820  18,761  20,282 
Ratio
Adjusted ROA2 4.63% 5.95% 7.57% 8.25% 8.35%

Based on: 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROA = 100 × Net income, Linde plc ÷ Total assets
= 100 × 4,381 ÷ 93,386 = 4.69%

2 Adjusted ROA = 100 × Net income, Linde plc ÷ Adjusted total assets
= 100 × 4,381 ÷ 94,592 = 4.63%

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