Macy's 2013 Annual Report Download - page 24

Table of Contents
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 calculation of the capitalized value of non-capitalized leases is consistent with industry and credit rating
agency practice and the specified assets are subject to a four-point average to compensate for seasonal fluctuations.
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.
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Operating income
$2,678
$2,661
$2,411
$1,894
$ 1,063
Property and equipment - net
$ 8,063
$8,308
$8,617
$9,160
$9,975
Operating income as a percent to property and
equipment - net
33.2%
32.0%
28.0%
20.7%
10.7%
Operating income
$2,678
$2,661
$2,411
$1,894
$ 1,063
Add back (deduct) impairments, store closing and
other costs, gain on sale of leases and division
consolidation costs
88
5
(25)
25
391
Add back depreciation and amortization
1,020
1,049
1,085
1,150
1,210
Add back rent expense, net
Real estate
268
258
243
235
229
Personal property
11
11
10
10
12
Deferred rent amortization
8
7
8
7
7
Adjusted operating income
$4,073
$3,991
$3,732
$3,321
$2,912
Property and equipment - net
$ 8,063
$8,308
$8,617
$9,160
$9,975
Add back accumulated depreciation and amortization
6,007
5,967
6,018
5,916
5,620
Add capitalized value of non-capitalized leases
2,296
2,208
2,088
2,016
1,984
Add (deduct) other selected assets and liabilities:
Receivables
339
322
294
317
305
Merchandise inventories
6,065
5,754
5,596
5,211
5,170
Prepaid expenses and other current assets
398
390
409
283
231
Other assets
662
579
528
526
497
Merchandise accounts payable
(2,520)
(2,362)
(2,314)
(2,085)
(1,978)
Accounts payable and accrued liabilities
(2,328)
(2,333)
(2,309)
(2,274)
(2,320)
Total average invested capital
$18,982
$18,833
$18,927
$ 19,070
$ 19,484
ROIC
21.5%
21.2%
19.7%
17.4%
14.9%
19