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Microsoft Excel LibreOffice Calc

Walmart Inc. (WMT)


Analysis of Operating Leases

Difficulty: Advanced


Operating Leases Accounting Policy

Walmart leases land, buildings, fixtures and equipment and transportation equipment. Walmart estimates the expected lease term by assuming the exercise of renewal options where an economic penalty exists that would preclude the abandonment of the lease at the end of the initial non-cancelable term and the exercise of such renewal is at the sole discretion of Walmart. The expected lease term is used in the determination of whether a store or club lease is a capital or operating lease and in the calculation of straight-line rent expense. Additionally, the useful life of leasehold improvements is limited by the expected lease term or the economic life of the asset, whichever is shorter. If significant expenditures are made for leasehold improvements late in the expected lease term and renewal is reasonably assured, the useful life of the leasehold improvement is limited to the end of the renewal period or economic life of the asset, whichever is shorter. Rent abatements and escalations are considered in the calculation of minimum lease payments in Walmart’s capital lease tests and in determining straight-line rent expense for operating leases.

Walmart is often involved in the construction of its leased stores. In certain cases, payments made for certain structural components included in the lessor’s construction of the leased assets result in Walmart being deemed the owner of the leased assets for accounting purposes. As a result, the payments, regardless of the significance, are automatic indicators of ownership and require Walmart to capitalize the lessor’s total project cost with a corresponding financing obligation. Upon completion of the lessor’s project, Walmart performs a sale-leaseback analysis to determine if these assets and the related financing obligation can be derecognized from Walmart’s Consolidated Balance Sheets. If Walmart is deemed to have "continuing involvement," the leased assets and the related financing obligation remain on Walmart’s Consolidated Balance Sheets and are generally amortized over the lease term. At the end of the lease term, including exercise of any renewal options, the net remaining financing obligation over the net carrying value of the fixed asset will be recognized as a non-cash gain.

Source: 10-K (filing date: 2019-03-28).


Present Value of Future Operating Lease Payments

Walmart Inc., future operating lease payments

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Total undiscounted future operating lease payments (USD $ in millions) hidden hidden hidden hidden hidden hidden
Discount rate1 hidden hidden hidden hidden hidden hidden
Total present value of future operating lease payments (USD $ in millions) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

1 Internal rate of return on capital leases

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at hidden
2020 hidden 2020 hidden hidden
2021 hidden 2021 hidden hidden
2022 hidden 2022 hidden hidden
2023 hidden 2023 hidden hidden
2024 hidden 2024 hidden hidden
2025 and thereafter 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

Based on: 10-K (filing date: 2019-03-28).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at hidden
2019 hidden 2019 hidden hidden
2020 hidden 2020 hidden hidden
2021 hidden 2021 hidden hidden
2022 hidden 2022 hidden hidden
2023 hidden 2023 hidden hidden
2024 and thereafter 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

Based on: 10-K (filing date: 2018-03-30).

Year Future operating lease payments (as reported) 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
Total: hidden hidden hidden

Based on: 10-K (filing date: 2017-03-31).

Year Future operating lease payments (as reported) 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

Based on: 10-K (filing date: 2016-03-30).

Year Future operating lease payments (as reported) 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

Based on: 10-K (filing date: 2015-04-01).

Year Future operating lease payments (as reported) 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
Total: hidden hidden hidden

Based on: 10-K (filing date: 2014-03-21).


Analyst Adjustments for Operating Leases

Walmart Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Add: Operating leased assets1 hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Total Debt
Total debt (as reported) hidden hidden hidden hidden hidden hidden
Add: Operating lease obligations2 hidden hidden hidden hidden hidden hidden
Total debt (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Earnings before Interest and Tax (EBIT)
EBIT3 (as reported) hidden hidden hidden hidden hidden hidden
Add-back: Rentals under operating leases and other short-term rental arrangements hidden hidden hidden hidden hidden hidden
Less: Depreciation expense, operating leased assets4 hidden hidden hidden hidden hidden hidden
EBIT (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Interest Expense, Debt, Capital Lease And Financing Obligations
Interest expense, debt, capital lease and financing obligations (as reported) hidden hidden hidden hidden hidden hidden
Add: Interest expense, operating lease obligations5 hidden hidden hidden hidden hidden hidden
Interest expense, debt, capital lease and financing obligations (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

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

3 See Details »

4 See Details »

5 See Details »


Walmart Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios for Operating Leases (Summary)

Walmart Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Total Asset Turnover1
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Debt to Equity2
Reported debt to equity hidden hidden hidden hidden hidden hidden
Adjusted debt to equity hidden hidden hidden hidden hidden hidden
Return on Assets3 (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden
Interest Coverage4
Reported interest coverage hidden hidden hidden hidden hidden hidden
Adjusted interest coverage hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Walmart Inc.’s adjusted total asset turnover improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. Walmart Inc.’s adjusted debt-to-equity improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Walmart Inc.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted interest coverage A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Walmart Inc.’s adjusted interest coverage deteriorated from 2017 to 2018 and from 2018 to 2019.

Walmart Inc., Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

2019 Calculations

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

2 Adjusted total asset turnover = Net sales ÷ 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. Walmart Inc.’s adjusted total asset turnover improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Total debt hidden hidden hidden hidden hidden hidden
Total Walmart shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Debt to equity1 hidden hidden hidden hidden hidden hidden
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted total debt hidden hidden hidden hidden hidden hidden
Total Walmart shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted debt to equity2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

2019 Calculations

1 Debt to equity = Total debt ÷ Total Walmart shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted debt to equity = Adjusted total debt ÷ Total Walmart 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. Walmart Inc.’s adjusted debt-to-equity improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Consolidated net income attributable to Walmart hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Consolidated net income attributable to Walmart hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

2019 Calculations

1 ROA = 100 × Consolidated net income attributable to Walmart ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Consolidated net income attributable to Walmart ÷ 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. Walmart Inc.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.

Adjusted Interest Coverage

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Earnings before interest and tax1 (EBIT) hidden hidden hidden hidden hidden hidden
Interest expense, debt, capital lease and financing obligations hidden hidden hidden hidden hidden hidden
Ratio
Interest coverage2 hidden hidden hidden hidden hidden hidden
Adjusted for Operating Leases
Selected Financial Data (USD $ in millions)
Adjusted EBIT hidden hidden hidden hidden hidden hidden
Adjusted interest expense, debt, capital lease and financing obligations hidden hidden hidden hidden hidden hidden
Ratio
Adjusted interest coverage3 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

1 See Details »

2019 Calculations

2 Interest coverage = EBIT ÷ Interest expense, debt, capital lease and financing obligations
= hidden ÷ hidden = hidden

3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense, debt, capital lease and financing obligations
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted interest coverage ratio A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. Walmart Inc.’s adjusted interest coverage ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

Estimation of Depreciation Expense, Operating Leased Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Rentals under operating leases and other short-term rental arrangements hidden hidden hidden hidden hidden hidden
Less: Estimated interest expense, operating lease obligations1 hidden hidden hidden hidden hidden hidden
Estimated depreciation expense, operating leased assets hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).


Estimation of Interest Expense, Operating Lease Obligations

Microsoft Excel LibreOffice Calc
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Operating leased assets, at beginning of year1 (USD $ in millions) hidden hidden hidden hidden hidden hidden
Discount rate2 hidden hidden hidden hidden hidden hidden
Estimated interest expense, operating lease obligations3 (USD $ in millions) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

1 See Details »

2 Internal rate of return on capital leases

2019 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
Jan 31, 2019 Jan 31, 2018 Jan 31, 2017 Jan 31, 2016 Jan 31, 2015 Jan 31, 2014
Total present value of future operating lease payments1 (USD $ in millions) hidden hidden hidden hidden hidden hidden
Rentals under operating leases and other short-term rental arrangements (USD $ in millions) hidden hidden hidden hidden hidden hidden
Discount rate2 hidden hidden hidden hidden hidden hidden
Total present value of operating lease payments, at beginning of year3 (USD $ in millions) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-30), 10-K (filing date: 2017-03-31), 10-K (filing date: 2016-03-30), 10-K (filing date: 2015-04-01), 10-K (filing date: 2014-03-21).

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

2 Internal rate of return on capital leases

2019 Calculations

3 Total present value of operating lease payments, at beginning of year = (Total present value of future operating lease payments + Rentals under operating leases and other short-term rental arrangements) ÷ (1 + Discount rate)
= (hidden + hidden) ÷ (1 + hidden) = hidden