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Microsoft Excel LibreOffice Calc

Walmart Inc. (WMT)


Analysis of Operating Leases

Advanced level


Accounting Policy on Operating Leases

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 (before Adoption of FASB Topic 842)

Walmart Inc., future operating lease payments (before adoption of FASB Topic 842)

US$ in millions

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
Discount rate1
 
Total present value of future operating lease payments

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
2020 2020
2021 2021
2022 2022
2023 2023
2024 2024
2025 and thereafter 2025
2026
2027
2028
2029
2030
2031
Total:

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
2019 2019
2020 2020
2021 2021
2022 2022
2023 2023
2024 and thereafter 2024
2025
2026
2027
2028
2029
2030
Total:

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
2018 2018
2019 2019
2020 2020
2021 2021
2022 2022
2023 and thereafter 2023
2024
2025
2026
2027
2028
2029
2030
Total:

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
2017 2017
2018 2018
2019 2019
2020 2020
2021 2021
2022 and thereafter 2022
2023
2024
2025
2026
2027
2028
2029
2030
Total:

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
2016 2016
2017 2017
2018 2018
2019 2019
2020 2020
2021 and thereafter 2021
2022
2023
2024
2025
2026
2027
2028
2029
Total:

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
2015 2015
2016 2016
2017 2017
2018 2018
2019 2019
2020 and thereafter 2020
2021
2022
2023
2024
2025
2026
2027
2028
Total:

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


Adjustments to Financial Statements for Operating Leases

Walmart Inc., adjustments to financial statements

US$ 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)
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1
Total assets (adjusted)
Adjustment to Total Debt
Total debt (as reported)
Add: Operating lease liability (before adoption of FASB Topic 842)2
Total debt (adjusted)

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.


Walmart Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios for Operating Leases (Summary)

Walmart Inc., adjusted financial 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
Adjusted total asset turnover
Debt to Equity2
Reported debt to equity
Adjusted debt to equity
Return on Assets3 (ROA)
Reported ROA
Adjusted ROA

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).

Financial 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 ratio 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 ratio 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.

Walmart Inc., Financial 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 (US$ in millions)
Net sales
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Net sales
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

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
= ÷ =

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Activity 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 ratio 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 (US$ in millions)
Total debt
Total Walmart shareholders’ equity
Solvency Ratio
Debt to equity1
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Adjusted total debt
Total Walmart shareholders’ equity
Solvency Ratio
Adjusted debt to equity2

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
= ÷ =

2 Adjusted debt to equity = Adjusted total debt ÷ Total Walmart shareholders’ equity
= ÷ =

Solvency 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 ratio 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 (US$ in millions)
Consolidated net income attributable to Walmart
Total assets
Profitability Ratio
ROA1
Adjusted for Operating Leases
Selected Financial Data (US$ in millions)
Consolidated net income attributable to Walmart
Adjusted total assets
Profitability Ratio
Adjusted ROA2

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 × ÷ =

2 Adjusted ROA = 100 × Consolidated net income attributable to Walmart ÷ Adjusted total assets
= 100 × ÷ =

Profitability 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.