Best Buy 2005 Annual Report Download - page 13

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Return on Invested Capital (ROIC)
Our return on invested capital calculation represents the rate of return generated by the capital deployed in our business.
We use ROIC as an internal measure of how effectively we use the capital invested (borrowed or owned) in our
operations.
As a Company, we define ROIC as follows:
ROIC = NOPAT (as adjusted)
Adjusted Average Invested Capital
Numerator = NOPAT Denominator = Adjusted Average Invested Capital
(trailing four quarters, as adjusted) (trailing four quarters average)
Operating Income Total Equity
+ Net Rent Expense(1) + Long-Term Debt(3)
Depreciation Portion of Rent Expense(1) + Capitalized Operating Leases
= NOPBT (net operating profit before taxes, as adjusted) Excess Cash
Tax Expense(2)
= NOPAT (net operating profit after taxes, as adjusted) = Adjusted Average Invested Capital
Return on Invested Capital
($ in millions) FY 2003 FY 2004 FY 2005
Net Operating Profit (as adjusted)
Operating Income $ 1,010 $ 1,304 $ 1,442
+ Net Rent Expense(1) 362 410 413
Depreciation Portion of Rent Expense(1) (154) (183) (214)
= NOPBT (as adjusted) $ 1,218 $ 1,531 $ 1,641
Tax Expense(2) (471) (586) (579)
= NOPAT (as adjusted) $ 747 $ 945 $ 1,062
Adjusted Average Invested Capital
Total Equity $ 2,429 $ 3,034 $ 3,874
+ Long-Term Debt(3) 821 835 579
+ Capitalized Operating Leases, net of excess cash(4) 1,511 1,181 849
= Adjusted Average Invested Capital $ 4,761 $ 5,050 $ 5,302
ROIC 15.7% 18.7% 20.0%
Note: NOPAT (as adjusted) based on continuing operations data
(1) Based on fixed rent associated with leased properties
(2) Tax expense calculated using effective tax rates for FY 2005 (35.3%), FY 2004 (38.3%) and FY 2003 (38.7%)
(3) Long-Term Debt plus applicable current portion
(4) Capitalized Operating Leases, net of Cash, Cash Equivalents and Short-Term Investments in excess of $300 million