Macy's 2012 Annual Report Download - page 23

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18
ROIC
The Company defines ROIC as adjusted operating income as a percent to average invested capital. Average invested
capital is comprised of an annual two-point (i.e., end of the previous year and the immediately preceding year) average of gross
property and equipment, a capitalized value of non-capitalized leases equal to periodic annual reported net rent expense
multiplied by a factor of eight and a four-point (i.e., end of each quarter within the period presented) average of other selected
assets and liabilities.
The following is a tabular reconciliation of the non-GAAP financial measure of ROIC to operating income as a percent to
property and equipment - net, which the Company believes to be the most directly comparable GAAP financial measure.
2012 2011 2010 2009
(millions, except percentages)
Operating income........................................................................................ $ 2,661 $ 2,411 $ 1,894 $ 1,063
Property and equipment - net...................................................................... $ 8,308 $ 8,617 $ 9,160 $ 9,975
Operating income as a percent to property and equipment - net................. 32.0% 28.0% 20.7% 10.7%
Operating income........................................................................................ $ 2,661 $ 2,411 $ 1,894 $ 1,063
Add back (deduct) impairments, store closing costs,
gain on sale of leases and division consolidation costs........................... 5(25) 25 391
Add back depreciation and amortization..................................................... 1,049 1,085 1,150 1,210
Add back rent expense, net
Real estate................................................................................................ 258 243 235 229
Personal property..................................................................................... 11 10 10 12
Deferred rent amortization ...................................................................... 7877
Adjusted operating income ......................................................................... $ 3,991 $ 3,732 $ 3,321 $ 2,912
Property and equipment - net...................................................................... $ 8,308 $ 8,617 $ 9,160 $ 9,975
Add back accumulated depreciation and amortization ............................... 5,967 6,018 5,916 5,620
Add capitalized value of non-capitalized leases ......................................... 2,208 2,088 2,016 1,984
Add (deduct) other selected assets and liabilities:
Receivables.............................................................................................. 322 294 317 305
Merchandise inventories.......................................................................... 5,754 5,596 5,211 5,170
Prepaid expenses and other current assets............................................... 390 409 283 231
Other assets.............................................................................................. 579 528 526 497
Merchandise accounts payable................................................................ (2,362)(2,314)(2,085)(1,978)
Accounts payable and accrued liabilities ................................................ (2,333)(2,309)(2,274)(2,320)
Total average invested capital..................................................................... $ 18,833 $ 18,927 $ 19,070 $ 19,484
ROIC........................................................................................................... 21.2% 19.7% 17.4% 14.9%