Best Buy 2006 Annual Report Download - page 12

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Best Buy 2006 Annual Report
return on invested capital (ROIC)
return on invested capital
($ in millions) F
FYY 0044FFYY 0055FFYY 0066
NNeett ooppeerraattiinngg pprroofifitt (as adjusted)
Operating income $1,304 $1,442 $1,644
+ Net rent expense (1) 410 413 464
– Depreciation portion of rent expense (1) (183) (214) (242)
==NNOOPPBBTT ((aass aaddjjuusstteedd))$1,531 $1,641 $1,866
– Tax expense (2) (586) (579) (629)
==NNOOPPAATT(as adjusted) $$ 994455 $$11,,006622$$11,,223377
AAddjjuusstteedd aavveerraaggee iinnvveesstteedd ccaappiittaall
Total equity $3,034 $3,874 $4,842
+ Long-term debt (3) 835 579 551
+ Capitalized operating leases, net of excess cash (4) 1,181 849 321
== AAddjjuusstteedd aavveerraaggee iinnvveesstteedd ccaappiittaall$$55,,005500 $$55,,330022 $$55,,771144
RROOIICC 1188..77%%2200..00%%2211..77%%
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 2004 (38.3%), FY 2005 (35.3%) and FY 2006 (33.7%)
(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
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.
A
Ass aa ccoommppaannyy,, wwee ddeefifinnee RROOIICC aass ffoolllloowwss::
RROOIICC == NNOOPPAATT(as adjusted)
A
Addjjuusstteedd aavveerraaggee iinnvveesstteedd ccaappiittaall
NNuummeerraattoorr == NNOOPPAATTDDeennoommiinnaattoorr == AAddjjuusstteedd aavveerraaggee iinnvveesstteedd ccaappiittaall
(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
=
=NNOOPPBBTT(net operating profit before taxes, as adjusted) – Excess cash
– Tax expense (2) =
= AAddjjuusstteedd aavveerraaggee iinnvveesstteedd ccaappiittaall
==NNOOPPAATT(net operating profit after taxes, as adjusted)
1100