Using 2019 annual report (prior year) Footnote 8. Leases, calculate the present value of operating lease payments (use the gross amounts, not the amounts net of subleases) for The Michaels Companies, Inc. using a discount rate of 6%. Assume the minimum lease payments due after 2023 are split evenly over 2024 and 2025.

If the operating leases were capitalized, Michaels would report an asset and liability approximately equal to the present value of future operating lease payments.

Re-compute the long-term debt-to-total assets ratio and ROA including an adjustment to capitalize the 2019 leases. Include the present value of the future operating lease payments as both assets and long-term debt in recalculating the ratios. Ignore any income differences that could result from capital versus operating leases (i.e., leave net income unchanged). Discuss how adding assets and liabilities (to the balance sheet) for the operating leases changes your interpretations of the ratios from before.

8. LEASES We operate stores and use distribution centers, office facilities and equipment that are generally leased under non-cancelable operating leases, the majority of which provide for renewal options. Future minimum annual rental commitments for all non-cancelable operating leases as of February 2, 2019 are as follows (in thousands): Fiscal Year 2019 2020 2021 2022 2023 Thereafter Total minimum rental commitments $ 428,698 386,466 331,032 268,667 206,424 508,178 $ 2,129,465 Rent expense applicable to non-cancelable operating leases was $423.8 million, $425.5 million and $416.2 million in fiscal 2018, fiscal 2017 and fiscal 2016, respectively