Wednesday, August 21, 2019

Our previous post looked at WeWork’s operating lease liabilities in sheer dollar terms — and without quesiton, in sheer dollar terms those liabilities are enormous. WeWork has the largest operating lease liabilities of any filer out there, by far.

Then we tried to put those leasing liabilities into a more relative perspective. And if you look at them in the right light, WeWork isn’t the only company betting so much of its operations on operating leases.

What did we do? Simple.

Start with the present value of a company’s operating lease liabilities, which all firms are now required to report on the balance sheet. Divide that number into total liabilities, expressed as a percentage. That lets you see what portion of all liabilities stem from operating leases.

We did that for all firms with more than $1 billion in total liabilities, and then sorted them for the five with the highest percentages. The results are below, with WeWork appended at the bottom.

So WeWork isn’t the firm with its balance sheet most entangled in operating leases. Yes, in dollars WeWork dwarfs everyone else, but in relative terms we have at least a few firms even more wrapped up in operating lease liabilities than WeWork is.

We’ve written about Chipotle ($CMG) in previous posts, and Five Star Senior Living also features in our recent in-depth report about operating lease liabilities, too. Of course, one big difference among these five firms above and WeWork is that these firms actually make a profit from operations — something that has eluded WeWork so far, and when the company might need black ink to print its bottom line is anyone’s guess.

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