Best buy reports better-than-expected fourth quarter results
Minneapolis--(business wire)--best buy co., inc. (nyse: bby) today announced results for the 13-week fourth quarter ended february 1, 2020 (“q4 fy20”), as compared to the 13-week fourth quarter ended february 2, 2019 (“q4 fy19”). q4 fy20 q4 fy19 fy20 fy19 revenue ($ in millions) enterprise $ 15,196 $ 14,801 $ 43,638 $ 42,879 domestic segment $ 13,848 $ 13,497 $ 40,114 $ 39,304 international segment $ 1,348 $ 1,304 $ 3,524 $ 3,575 enterprise comparable sales % change1 3.2 % 3.0 % 2.1 % 4.8 % domestic comparable sales % change1 3.4 % 3.0 % 2.3 % 4.8 % domestic comparable online sales % change1 18.7 % 9.3 % 17.0 % 10.5 % international comparable sales % change1 1.6 % 2.5 % (0.5 )% 4.6 % operating income gaap operating income as a % of revenue 6.4 % 6.6 % 4.6 % 4.4 % non-gaap operating income as a % of revenue 6.5 % 6.7 % 4.9 % 4.6 % diluted earnings per share ("eps") gaap diluted eps $ 2.84 $ 2.69 $ 5.75 $ 5.20 non-gaap diluted eps $ 2.90 $ 2.72 $ 6.07 $ 5.32 for gaap to non-gaap reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule reconciliation of non-gaap financial measures. “we are posting our 12th straight quarter of comparable sales growth and showing our strength as a successful multi-channel retailer who can meet customers when and where they want,” said corie barry, best buy ceo. “we offered compelling holiday deals that resonated with customers and provided a seamless shopping experience, great inventory availability and fast and free delivery. across online, home and stores, we are fulfilling our purpose to help enrich people’s lives through technology while also helping technology companies commercialize their product innovations.” best buy cfo matt bilunas commented, “as we enter fy21, we are closely monitoring the developments related to the coronavirus outbreak. this is a very fluid situation, which makes it difficult to determine exact financial impacts from disruptions in supply chain. based on what we know today, we have assumed the majority of the impacts occur in the first half of the year. therefore, we view this as a relatively short-term disruption that does not impact our long-term strategy and initiatives. our guidance ranges for both q1 and the full year reflect our best estimates of the impacts at this time.” bilunas continued, “for fy21, we expect to deliver full-year comparable sales growth in the range of flat to 2% while continuing to invest in those areas necessary to make strategic progress and deliver enhanced employee and customer experiences, as well as continuing to drive cost savings and efficiencies. we expect our gross profit rate to be approximately flat and our sg&a rate to be up slightly compared to fy20, resulting in a full-year non-gaap operating income rate of approximately 4.8%. we are confident that our fy21 plan moves us along the path to achieve our fy25 targets, specifically the financial targets of $50 billion in revenue and a 5% non-gaap operating income rate.” fy21 financial guidance best buy is providing the following full-year fy21 financial outlook: enterprise revenue of $43.3 billion to $44.3 billion enterprise comparable sales growth of flat to 2.0% enterprise non-gaap operating income rate of approximately 4.8%2 non-gaap effective income tax rate of approximately 23.0%2 non-gaap diluted eps of $6.10 to $6.302 best buy is providing the following q1 fy21 financial outlook: enterprise revenue of $9.1 billion to $9.2 billion enterprise comparable sales growth of flat to 1.0% non-gaap effective income tax rate of approximately 22.5%2 diluted weighted average share count of approximately 260 million non-gaap diluted eps of $1.00 to $1.052 domestic segment q4 fy20 results domestic revenue domestic revenue of $13.85 billion increased 2.6% versus last year. the increase was driven by comparable sales growth of 3.4%, partially offset by the loss of revenue from store closures in the past year. the largest comparable sales growth drivers were headphones, computing, appliances, mobile phones and tablets. these drivers were partially offset by declines in the gaming category. domestic online revenue of $3.52 billion increased 18.7% on a comparable basis due to higher average order values, increased traffic and higher conversion rates. as a percentage of total domestic revenue, online revenue increased approximately 350 basis points to 25.4% versus 21.9% last year. domestic gross profit rate domestic gross profit rate was 21.2% versus 22.1% last year. the gross profit rate decrease of approximately 90 basis points was primarily driven by mix into lower-margin products, a lower gross profit rate in the services category and the impacts associated with tariffs on goods imported from china. domestic selling, general and administrative expenses (“sg&a”) domestic gaap sg&a was $2.05 billion, or 14.8% of revenue, versus $2.10 billion, or 15.6% of revenue, last year. on a non-gaap basis, sg&a was $2.03 billion, or 14.7% of revenue, versus $2.08 billion, or 15.4% of revenue, last year. both gaap and non-gaap sg&a decreased primarily due to lower incentive compensation expense, which was partially offset primarily by higher variable costs due to increased revenue and higher advertising expense. international segment q4 fy20 results international revenue international revenue of $1.35 billion increased 3.4% versus last year. this increase was primarily driven by the impact of approximately 160 basis points of favorable foreign currency exchange rates and comparable sales growth of 1.6%, which was driven by canada. international gross profit rate international gross profit rate was 22.6% versus 22.9% last year. the gross profit rate decrease of approximately 30 basis points was primarily due to canada, which was largely driven by a by mix into lower-margin products. international sg&a international sg&a was $215 million, or 15.9% of revenue, versus $207 million, or 15.9% of revenue, last year. sg&a increased primarily due to the negative impact of foreign exchange rates and expense associated with new stores in mexico opened in the past year. dividends and share repurchases in q4 fy20, the company returned a total of $436 million to shareholders through share repurchases of $307 million and dividends of $129 million. for the full year, the company returned a total of $1.53 billion to shareholders through share repurchases of $1.0 billion and dividends of $527 million. today, the company announced its board of directors approved a 10% increase in the regular quarterly dividend to $0.55 per share, effective immediately. the regular quarterly dividend will be payable on april 9, 2020, to shareholders of record as of the close of business on march 19, 2020. the company plans to spend between $750 million and $1.0 billion on share repurchases in fy21. conference call best buy is scheduled to conduct an earnings conference call at 8:00 a.m. eastern time (7:00 a.m. central time) on february 27, 2020. a webcast of the call is expected to be available at www.investors.bestbuy.com, both live and after the call. notes: (1) in q1 fy20, the company refined its methodology for calculating comparable sales. it now reflects certain revenue streams previously excluded from the comparable sales calculation, such as credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable. the impact of adopting these changes is immaterial to all periods presented, and therefore prior-period comparable sales disclosures have not been restated. (2) a reconciliation of the projected non-gaap operating income, non-gaap effective income tax rate and non-gaap diluted eps, which are forward-looking non-gaap financial measures, to the most directly comparable gaap financial measures, is not provided because the company is unable to provide such reconciliation without unreasonable effort. the inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-gaap adjustments may be recognized. these gaap measures may include the impact of such items as restructuring charges; goodwill impairments; gains and losses on investments; intangible asset amortization; certain acquisition-related costs; and the tax effect of all such items. historically, the company has excluded these items from non-gaap financial measures. the company currently expects to continue to exclude these items in future disclosures of non-gaap financial measures and may also exclude other items that may arise (collectively, “non-gaap adjustments”). the decisions and events that typically lead to the recognition of non-gaap adjustments, such as a decision to exit part of the business or reaching settlement of a legal dispute, are inherently unpredictable as to if or when they may occur. for the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results. forward-looking and cautionary statements: this earnings release contains forward-looking statements within the meaning of the private securities litigation reform act of 1995 as contained in section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934 that reflect management’s current views and estimates regarding future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment and other events. you can identify these statements by the fact that they use words such as “anticipate,” “believe,” “assume,” “estimate,” “expect,” “intend,” “foresee,” “project,” “guidance,” “plan,” “outlook,” and other words and terms of similar meaning. these statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers), our expansion strategies, our focus on services as a strategic priority, our reliance on key vendors and mobile network carriers, our ability to attract and retain qualified employees, changes in market compensation rates, risks arising from statutory, regulatory and legal developments, macroeconomic pressures in the markets in which we operate, failure to effectively manage our costs, our reliance on our information technology systems, our ability to prevent or effectively respond to a privacy or security breach, our ability to effectively manage strategic ventures, alliances or acquisitions, our dependence on cash flows and net earnings generated during the fourth fiscal quarter, susceptibility of our products to technological advancements, product life cycle preferences and changes in consumer preferences, economic or regulatory developments that might affect our ability to provide attractive promotional financing, interruptions and other supply chain issues, catastrophic events, health crises, pandemics, our ability to maintain positive brand perception and recognition, product safety and quality concerns, changes to labor or employment laws or regulations, our ability to effectively manage our real estate portfolio, constraints in the capital markets or our vendor credit terms, changes in our credit ratings, any material disruption in our relationship with or the services of third-party vendors, risks related to our exclusive brand products and risks associated with vendors that source products outside of the u.s., including trade restrictions or changes in the costs of imports (including existing or new tariffs or duties and changes in the amount of any such tariffs or duties) and risks arising from our international activities. a further list and description of these risks, uncertainties and other matters can be found in the company’s annual report and other reports filed from time to time with the securities and exchange commission (“sec”), including, but not limited to, best buy’s annual report on form 10-k filed with the sec on march 28, 2019. best buy cautions that the foregoing list of important factors is not complete, and any forward-looking statements speak only as of the date they are made, and best buy assumes no obligation to update any forward-looking statement that it may make. best buy co., inc. condensed consolidated statements of earnings ($ and shares in millions, except per share amounts) (unaudited and subject to reclassification) three months ended twelve months ended february 1, 2020 february 2, 2019 february 1, 2020 february 2, 2019 revenue $ 15,196 $ 14,801 $ 43,638 $ 42,879 cost of sales 11,961 11,518 33,590 32,918 gross profit 3,235 3,283 10,048 9,961 gross profit % 21.3 % 22.2 % 23.0 % 23.2 % selling, general and administrative expenses 2,268 2,306 7,998 8,015 sg&a % 14.9 % 15.6 % 18.3 % 18.7 % restructuring charges - (1 ) 41 46 operating income 967 978 2,009 1,900 operating income % 6.4 % 6.6 % 4.6 % 4.4 % other income (expense) gain on sale of investments - - 1 12 investment income and other 14 14 47 49 interest expense (14 ) (20 ) (64 ) (73 ) earnings before income tax expense 967 972 1,993 1,888 income tax expense 222 237 452 424 effective tax rate 22.9 % 24.3 % 22.7 % 22.4 % net earnings $ 745 $ 735 $ 1,541 $ 1,464 basic earnings per share $ 2.87 $ 2.73 $ 5.82 $ 5.30 diluted earnings per share $ 2.84 $ 2.69 $ 5.75 $ 5.20 weighted-average common shares outstanding basic 259.7 269.0 264.9 276.4 diluted 262.4 273.4 268.1 281.4 best buy co., inc. condensed consolidated balance sheets ($ in millions) (unaudited and subject to reclassification) february 1, 2020 february 2, 2019 assets current assets cash and cash equivalents $ 2,229 $ 1,980 receivables, net 1,149 1,015 merchandise inventories 5,174 5,409 other current assets 305 466 total current assets 8,857 8,870 property and equipment, net 2,328 2,510 operating lease assets 2,709 - goodwill 984 915 other assets 713 606 total assets $ 15,591 $ 12,901 liabilities and equity current liabilities accounts payable $ 5,288 $ 5,257 unredeemed gift card liabilities 281 290 deferred revenue 501 446 accrued compensation and related expenses 410 482 accrued liabilities 906 982 current portion of operating lease liabilities 660 - current portion of long-term debt 14 56 total current liabilities 8,060 7,513 long-term operating lease liabilities 2,138 - long-term liabilities 657 750 long-term debt 1,257 1,332 equity 3,479 3,306 total liabilities and equity $ 15,591 $ 12,901 best buy co., inc. condensed consolidated statements of cash flows ($ in millions) (unaudited and subject to reclassification) twelve months ended february 1, 2020 february 2, 2019 operating activities net earnings $ 1,541 $ 1,464 adjustments to reconcile net earnings to total cash provided by operating activities depreciation and amortization 812 770 restructuring charges 41 46 stock-based compensation 143 123 deferred income taxes 70 10 other, net 21 (25 ) changes in operating assets and liabilities, net of acquired assets and liabilities receivables (131 ) 28 merchandise inventories 237 (194 ) other assets 16 (34 ) accounts payable 47 432 income taxes (132 ) 22 other liabilities (100 ) (234 ) total cash provided by operating activities 2,565 2,408 investing activities additions to property and equipment (743 ) (819 ) purchases of investments (330 ) - sales of investments 322 2,098 acquisitions, net of cash acquired (145 ) (787 ) other, net 1 16 total cash provided by (used in) investing activities (895 ) 508 financing activities repurchase of common stock (1,003 ) (1,505 ) issuance of common stock 48 38 dividends paid (527 ) (497 ) borrowings of debt - 498 repayments of debt (15 ) (546 ) other, net (1 ) (6 ) total cash used in financing activities (1,498 ) (2,018 ) effect of exchange rate changes on cash (1 ) (14 ) increase in cash, cash equivalents and restricted cash 171 884 cash, cash equivalents and restricted cash at beginning of period 2,184 1,300 cash, cash equivalents and restricted cash at end of period $ 2,355 $ 2,184 best buy co., inc. segment information ($ in millions) (unaudited and subject to reclassification) three months ended twelve months ended domestic segment results february 1, 2020 february 2, 2019 february 1, 2020 february 2, 2019 revenue $ 13,848 $ 13,497 $ 40,114 $ 39,304 comparable sales % change 3.4 % 3.0 % 2.3 % 4.8 % comparable online sales % change 18.7 % 9.3 % 17.0 % 10.5 % gross profit $ 2,931 $ 2,985 $ 9,234 $ 9,144 gross profit as a % of revenue 21.2 % 22.1 % 23.0 % 23.3 % sg&a $ 2,053 $ 2,099 $ 7,286 $ 7,300 sg&a as a % of revenue 14.8 % 15.6 % 18.2 % 18.6 % operating income $ 878 $ 886 $ 1,907 $ 1,797 operating income as a % of revenue 6.3 % 6.6 % 4.8 % 4.6 % domestic segment non-gaap results1 gross profit $ 2,931 $ 2,985 $ 9,234 $ 9,144 gross profit as a % of revenue 21.2 % 22.1 % 23.0 % 23.3 % sg&a $ 2,034 $ 2,082 $ 7,211 $ 7,259 sg&a as a % of revenue 14.7 % 15.4 % 18.0 % 18.5 % operating income $ 897 $ 903 $ 2,023 $ 1,885 operating income as a % of revenue 6.5 % 6.7 % 5.0 % 4.8 % three months ended twelve months ended international segment results february 1, 2020 february 2, 2019 february 1, 2020 february 2, 2019 revenue $ 1,348 $ 1,304 $ 3,524 $ 3,575 comparable sales % change 1.6 % 2.5 % (0.5) % 4.6 % gross profit $ 304 $ 298 $ 814 $ 817 gross profit as a % of revenue 22.6 % 22.9 % 23.1 % 22.9 % sg&a $ 215 $ 207 $ 712 $ 715 sg&a as a % of revenue 15.9 % 15.9 % 20.2 % 20.0 % operating income $ 89 $ 92 $ 102 $ 103 operating income as a % of revenue 6.6 % 7.1 % 2.9 % 2.9 % international segment non-gaap results1 gross profit $ 304 $ 298 $ 814 $ 817 gross profit as a % of revenue 22.6 % 22.9 % 23.1 % 22.9 % sg&a $ 215 $ 207 $ 712 $ 714 sg&a as a % of revenue 15.9 % 15.9 % 20.2 % 20.0 % operating income $ 89 $ 91 $ 102 $ 103 operating income as a % of revenue 6.6 % 7.0 % 2.9 % 2.9 % (1) for gaap to non-gaap reconciliations, please refer to the attached supporting schedule titled reconciliation of non-gaap financial measures. best buy co., inc. revenue category summary (unaudited and subject to reclassification) revenue mix comparable sales three months ended three months ended domestic segment february 1, 2020 february 2, 2019 february 1, 2020 february 2, 2019 computing and mobile phones 42 % 41 % 6.8 % 1.2 % consumer electronics 36 % 36 % 4.1 % 2.9 % appliances 10 % 9 % 14.4 % 8.5 % entertainment 8 % 10 % (21.8 )% 2.7 % services 4 % 4 % (0.1 )% 13.7 % other - % - % n/a n/a total 100 % 100 % 3.4 % 3.0 % revenue mix comparable sales three months ended three months ended international segment february 1, 2020 february 2, 2019 february 1, 2020 february 2, 2019 computing and mobile phones 42 % 41 % 7.3 % 1.2 % consumer electronics 37 % 35 % 1.2 % 1.2 % appliances 8 % 8 % (3.5 )% 8.6 % entertainment 7 % 9 % (16.9 )% (2.5 )% services 5 % 5 % 8.5 % 20.0 % other 1 % 2 % (16.1 )% 29.6 % total 100 % 100 % 1.6 % 2.5 % best buy co., inc. reconciliation of non-gaap financial measures ($ in millions, except per share amounts) (unaudited and subject to reclassification) the following information provides reconciliations of the most comparable financial measures presented in accordance with accounting principles generally accepted in the u.s. (gaap financial measures) to presented non-gaap financial measures. the company believes that non-gaap financial measures, when reviewed in conjunction with gaap financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. for these reasons, internal management reporting also includes non-gaap financial measures. generally, presented non-gaap financial measures include adjustments for items such as restructuring charges, goodwill impairments, gains and losses on investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. in addition, certain other items may be excluded from non-gaap financial measures when the company believes this provides greater clarity to management and investors. these non-gaap financial measures should be considered in addition to, and not superior to or as a substitute for, the gaap financial measures presented in this earnings release and the company’s financial statements and other publicly filed reports. non-gaap financial measures as presented herein may not be comparable to similarly titled measures used by other companies. three months ended three months ended february 1, 2020 february 2, 2019 domestic international consolidated domestic international consolidated sg&a $ 2,053 $ 215 $ 2,268 $ 2,099 $ 207 $ 2,306 % of revenue 14.8 % 15.9 % 14.9 % 15.6 % 15.9 % 15.6 % intangible asset amortization1 (19 ) - (19 ) (17 ) - (17 ) non-gaap sg&a $ 2,034 $ 215 $ 2,249 $ 2,082 $ 207 $ 2,289 % of revenue 14.7 % 15.9 % 14.8 % 15.4 % 15.9 % 15.5 % operating income $ 878 $ 89 $ 967 $ 886 $ 92 $ 978 % of revenue 6.3 % 6.6 % 6.4 % 6.6 % 7.1 % 6.6 % intangible asset amortization1 19 - 19 17 - 17 restructuring charges2 - - - - (1 ) (1 ) non-gaap operating income $ 897 $ 89 $ 986 $ 903 $ 91 $ 994 % of revenue 6.5 % 6.6 % 6.5 % 6.7 % 7.0 % 6.7 % effective tax rate 22.9 % 24.3 % tax reform - repatriation tax3 - % 0.2 % tax reform - deferred tax rate change3 - % 0.1 % non-gaap effective tax rate 22.9 % 24.6 % three months ended three months ended february 1, 2020 february 2, 2019 pretax earnings net of tax4 per share pretax earnings net of tax4 per share gaap diluted eps $ 2.84 $ 2.69 intangible asset amortization1 $ 19 $ 14 0.06 $ 17 $ 13 0.05 restructuring charges2 - - - (1 ) (1 ) (0.01 ) acquisition-related transaction costs1 - - - - 1 - tax reform - repatriation tax3 - - - - (2 ) (0.01 ) non-gaap diluted eps $ 2.90 $ 2.72 twelve months ended twelve months ended february 1, 2020 february 2, 2019 domestic international consolidated domestic international consolidated sg&a $ 7,286 $ 712 $ 7,998 $ 7,300 $ 715 $ 8,015 % of revenue 18.2 % 20.2 % 18.3 % 18.6 % 20.0 % 18.7 % intangible asset amortization1 (72 ) - (72 ) (22 ) - (22 ) acquisition-related transaction costs1 (3 ) - (3 ) (13 ) - (13 ) tax reform-related item - employee bonus3 - - - (6 ) (1 ) (7 ) non-gaap sg&a $ 7,211 $ 712 $ 7,923 $ 7,259 $ 714 $ 7,973 % of revenue 18.0 % 20.2 % 18.2 % 18.5 % 20.0 % 18.6 % operating income $ 1,907 $ 102 $ 2,009 $ 1,797 $ 103 $ 1,900 % of revenue 4.8 % 2.9 % 4.6 % 4.6 % 2.9 % 4.4 % intangible asset amortization1 72 - 72 22 - 22 restructuring charges2 41 - 41 47 (1 ) 46 acquisition-related transaction costs1 3 - 3 13 - 13 tax reform-related item - employee bonus3 - - - 6 1 7 non-gaap operating income $ 2,023 $ 102 $ 2,125 $ 1,885 $ 103 $ 1,988 % of revenue 5.0 % 2.9 % 4.9 % 4.8 % 2.9 % 4.6 % effective tax rate 22.7 % 22.4 % intangible asset amortization1 0.1 % - % restructuring charges2 - % (0.1 )% tax reform - repatriation tax3 - % 1.1 % tax reform - deferred tax rate change3 - % 0.3 % non-gaap effective tax rate 22.8 % 23.7 % twelve months ended twelve months ended february 1, 2020 february 2, 2019 pretax earnings net of tax4 per share pretax earnings net of tax4 per share gaap diluted eps $ 5.75 $ 5.20 intangible asset amortization1 $ 72 $ 54 0.20 $ 22 $ 17 0.06 restructuring charges2 41 32 0.11 46 35 0.12 acquisition-related transaction costs1 3 2 0.01 13 11 0.04 gain on investments, net (1 ) (1 ) - (12 ) (9 ) (0.03 ) tax reform - repatriation tax3 - - - - (20 ) (0.07 ) tax reform - deferred tax rate change3 - - - - (5 ) (0.02 ) tax reform-related item - employee bonus3 - - - 7 5 0.02 non-gaap diluted eps $ 6.07 $ 5.32 (1) represents charges associated with acquisitions including (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and developed technology, and (2) acquisition-related transaction costs primarily comprised of professional fees. (2) represents charges and adjustments associated with u.s. retail operating model changes for the periods ended february 1, 2020, and the closure of best buy mobile stand-alone stores in the u.s. for the periods ended february 2, 2019. (3) represents adjustments to the provisional tax expense recorded in q4 fy18 resulting from the tax cuts and jobs act of 2017 (“tax reform”) enacted into law in q4 fy18, including adjustments associated with a deemed repatriation tax and the revaluation of deferred tax assets and liabilities, as well as adjustments to tax reform-related items announced in response to future tax savings created by tax reform, including a one-time bonus for certain employees. (4) the non-gaap adjustments relate primarily to adjustments in the u.s. and canada. as such, the income tax charge is calculated using the statutory tax rate of 24.5% for the u.s. and 26.9% for canada applied to the non-gaap adjustments of each country. return on assets and non-gaap return on investment the tables below provide calculations of return on assets ("roa") (gaap financial measure) and non-gaap return on investment (“roi”) (non-gaap financial measure) for the periods presented. the company believes roa is the most directly comparable financial measure to roi. prior to q3 fy20, the company provided a calculation of non-gaap return on invested capital ("roic") that was defined as non-gaap net operating profit after tax divided by average invested capital. beginning in q3 fy20, the company no longer provides non-gaap roic but instead a calculation of non-gaap roi, defined as non-gaap adjusted operating income after tax divided by average invested operating assets. all periods presented below apply this methodology consistently. the company believes non-gaap roi is a meaningful metric for investors to evaluate capital efficiency because it measures how key assets are deployed by adjusting operating income and total assets for the items noted below. this method of determining non-gaap roi may differ from other companies' methods and therefore may not be comparable to those used by other companies. return on assets ("roa") february 1, 20201 february 2, 20191 net earnings $ 1,541 $ 1,464 total assets 15,953 13,240 roa 9.7 % 11.1 % non-gaap return on investment ("roi") february 1, 20201 february 2, 20191 numerator operating income - total operations $ 2,009 $ 1,900 add: non-gaap operating income adjustments2 116 88 add: operating lease interest3 113 114 less: income taxes4 (548 ) (512 ) add: depreciation 740 748 add: operating lease amortization5 667 645 adjusted operating income after tax $ 3,097 $ 2,983 denominator total assets $ 15,953 $ 13,240 less: excess cash6 (831 ) (1,404 ) add: capitalized operating lease assets7 - 3,032 add: accumulated depreciation and amortization8 6,712 6,482 less: adjusted current liabilities9 (7,994 ) (7,975 ) average invested operating assets $ 13,840 $ 13,375 non-gaap roi 22.4 % 22.3 % income statement accounts represent the activity for the trailing 12 months ended as of each of the balance sheet dates. balance sheet accounts represent the average account balances for the trailing 12 months ended as of each of the balance sheet dates. non-gaap operating income adjustments include continuing operations adjustments for intangible asset amortization, acquisition-related transaction costs, restructuring charges and tax reform-related items. additional details regarding these adjustments are included in the reconciliation of non-gaap financial measures schedule within the company's quarterly earnings releases. operating lease interest represents the add-back to operating income to approximate the total interest expense that the company would incur if its operating leases were owned and financed by debt. historically, the company used an add-back multiple of 30% of annual rent expense; however, following the adoption of new lease accounting guidance in q1 fy20 that resulted in the recognition of operating lease assets and operating lease liabilities on the balance sheet, the multiple was lowered and prior periods have been updated to reflect this change. for periods prior to fy20, the add-back is approximated by using a multiple of 15% of total rent expense. for periods beginning on or after fy20, the add-back is approximated by multiplying average operating lease assets by 4%, which approximates the interest rate on the company’s operating lease liabilities. income taxes are approximated by using a blended statutory rate at the enterprise level based on statutory rates from the countries in which the company does business, which primarily consists of the u.s. with a statutory rate of 24.5% for the periods presented. operating lease amortization represents operating lease cost less operating lease interest. operating lease cost includes short-term leases, which are immaterial, and excludes variable lease costs as these costs are not included in the operating lease asset balance. excess cash represents the amount of cash, cash equivalents and short-term investments greater than $1 billion, which approximates the amount of cash the company believes is necessary to run the business and may fluctuate over time. capitalized operating lease assets represent the estimated net assets that the company would record if the company's operating leases were owned. historically, the company used a multiple of five times annual rent expense; however, following the adoption of new lease accounting guidance in q1 fy20 that resulted in the recognition of operating lease assets and operating lease liabilities on the balance sheet, the multiple was lowered and prior periods have been updated to reflect this change. for periods prior to fy20, the asset is approximated by using a multiple of four times total rent expense. for periods beginning on or after fy20, capitalized operating lease assets are included within total assets and therefore no adjustment is necessary. accumulated depreciation and amortization represents accumulated depreciation related to property and equipment and accumulated amortization related to definite-lived intangible assets. adjusted current liabilities represent total current liabilities less short-term debt and the current portions of operating lease liabilities and long-term debt.
