Kroger 2015 Annual Report Download - page 90

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quarter and the ending balance of the fourth quarter, of the last four quarters, and dividing by two.
We use a factor of eight for our total rent as we believe this is a common factor used by our investors,
analysts and rating agencies. ROIC is a non-GAAP financial measure of performance. ROIC should not
be reviewed in isolation or considered as a substitute for our financial results as reported in accordance
with GAAP. ROIC is an important measure used by management to evaluate our investment returns on
capital. Management believes ROIC is a useful metric to investors and analysts because it measures how
effectively we are deploying our assets.
Although ROIC is a relatively standard financial term, numerous methods exist for calculating a
company’s ROIC. As a result, the method used by our management to calculate ROIC may differ from
methods other companies use to calculate their ROIC. We urge you to understand the methods used by
other companies to calculate their ROIC before comparing our ROIC to that of such other companies.
The following table provides a calculation of ROIC for 2015 and 2014. The 2015 calculation of ROIC
excludes the financial position, results and merger costs for the Roundy’s transaction:
January 30,
2016
January 31,
2015
Return on Invested Capital
Numerator
Operating profit $ 3,576 $ 3,137
LIFO charge 28 147
Depreciation and amortization 2,089 1,948
Rent 723 707
Adjustments for pension plan agreements — 87
Other (13) —
Adjusted operating profit $ 6,403 $ 6,026
Denominator
Average total assets $32,197 $29,860
Average taxes receivable (1) (206) (19)
Average LIFO reserve 1,259 1,197
Average accumulated depreciation and amortization 17,441 16,057
Average trade accounts payable (5,390) (4,967)
Average accrued salaries and wages (1,359) (1,221)
Average other current liabilities (2) (3,054) (2,780)
Adjustment for Roundy’s merger (714) —
Rent x 8 5,784 5,656
Average invested capital $45,958 $43,783
Return on Invested Capital 13.93% 13.76%
(1) Taxes receivable were $392 as of January 30, 2016, $20 as of January 31, 2015 and $18 as of
February 1, 2014. The increase in taxes receivable as of January 30, 2016, compared to as of
January 31, 2015, is due to recently issued tangible property regulations. Refer to Note 5 of the
Consolidated Financial Statements for further detail.
(2) Other current liabilities included accrued income taxes of $5 as of January 31, 2015 and $92 as
of February 1, 2014. We did not have any accrued income taxes as of January 30, 2016. Accrued
income taxes are removed from other current liabilities in the calculation of average invested capital.