Best Buy 2012 Annual Report Download - page 53

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53
important for understanding our financial position and provides meaningful additional information about our ability to service
our long-term debt and other fixed obligations and to fund our future growth. We also believe our adjusted debt to EBITDAR
ratio is relevant because it enables investors to compare our indebtedness to that of retailers who own, rather than lease, their
stores. Our decision to own or lease real estate is based on an assessment of our financial liquidity, our capital structure, our
desire to own or to lease the location, the owner's desire to own or to lease the location, and the alternative that results in the
highest return to our shareholders.
Our adjusted debt to EBITDAR ratio is calculated as follows:
Adjusted debt
Adjusted debt to EBITDAR = EBITDAR
The most directly comparable GAAP financial measure to our adjusted debt to EBITDAR ratio is our debt to net earnings ratio,
which excludes capitalized operating lease obligations from debt in the numerator of the calculation and does not adjust net
earnings in the denominator of the calculation.
The following table presents a reconciliation of our debt to net earnings ratio to our adjusted debt to EBITDAR ratio ($ in
millions):
2012(1) 2011(1)
Debt (including current portion) $ 2,208 $ 1,709
Capitalized operating lease obligations (8 times rental expense)(2) 9,402 8,992
Adjusted debt $ 11,610 $ 10,701
Net earnings from continuing operations including noncontrolling interests(3) $ 330 $ 1,554
Goodwill impairment 1,207 —
Interest expense, net 97 43
Income tax expense 709 779
Depreciation and amortization expense(4) 968 1,078
Rental expense 1,175 1,124
EBITDAR $ 4,486 $ 4,578
Debt to net earnings ratio 6.7 1.1
Adjusted debt to EBITDAR ratio 2.6 2.3
(1) Debt is reflected as of the balance sheet dates for each of the respective fiscal year-ends, while rental expense and the other components of EBITDAR
represent activity for the 12 months ended as of each of the respective balance sheet dates.
(2) The multiple of eight times annual rental expense in the calculation of our capitalized operating lease obligations is the multiple used for the retail sector
by one of the nationally recognized credit rating agencies that rate our creditworthiness, and we consider it to be an appropriate multiple for our lease
portfolio.
(3) We utilize net earnings including noncontrolling interests within our calculation as such net earnings and related cash flows attributable to noncontrolling
interests are available to service our debt and operating lease commitments.
(4) Depreciation and amortization expense includes impairments of fixed assets, investments and intangible assets (including impairments associated with
our fiscal restructuring activities).
Off-Balance-Sheet Arrangements and Contractual Obligations
Other than operating leases, we do not have any off-balance-sheet financing. A summary of our operating lease obligations by
fiscal year is included in the "Contractual Obligations" table below. Additional information regarding our operating leases is
available in Item 2, Properties, and Note 11, Leases, of the Notes to Consolidated Financial Statements, included in Item 8,
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.