Best Buy 2008 Annual Report Download - page 6

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4 | Best Buy Fiscal 2008 Annual Report
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 defi ne 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 operation leases
= NOPBT (net operating profi t before taxes, as adjusted) – Excess cash
– Tax expense(2) = Adjusted average invested capital
= NOPAT (net operating profi t after taxes, as adjusted)
Return on invested capital
($ in millions) FY 2008 FY 2007 FY 2006
Net operating profi t (as adjusted)
Operating income $ 2,161 $ 1,999 $ 1,644
+ Net rent expense(1) 654 562 464
– Depreciation portion of rent expense(1) (345) (292) (242)
= NOPBT (as adjusted) $ 2,470 $ 2,269 $ 1,866
– Tax expense(2) (904) (801) (629)
= NOPAT (as adjusted) $1,566 $1,468 $1,237
Adjusted average invested capital
Total equity $ 4,445 $ 5,662 $ 4,842
+ Long-term debt(3) 640 605 551
+ Capitalized operating leases, net of excess cash(4) 2,626 776 321
= Adjusted average invested capital $7,711 $7,043 $5,714
ROIC 20% 21% 22%
Note: NOPAT (as adjusted) based on continuing operations data
(1) Based on fi xed rent associated with leased properties
(2) Tax expense calculated using effective tax rates for FY 2008 (36.6%), FY 2007 (35.3%) and FY 2006 (33.7%)
(3) Long-term debt plus current portion of convertible debt, as applicable
(4) Capitalized operating leases, net of cash and cash equivalents in excess of $300 million