The Calculation

I thought it might be helpful for me to spell out my calculation of earnings yield and return on capital to match the approach used by JG. I can not take credit for the derivation of the calculation, it was a group effort on the Yahoo MFI Board with major assists from Randy Harmelink, Tony Brake and Kdad.

I start with financial statements from Fidelity. Here is the Balance sheet for PWER:

Balance Sheet

Item	12/31/2010	9/30/2010	6/30/2010	3/31/2010
Current Assets
Cash and Short-Term Investments	227.907	194.589	145.215	101.114
Receivables	270.526	211.011	137.949	123.252
Inventories	152.286	125.701	96.214	77.38
Other Current Assests	21.671	17.335	12.66	10.821
Current Assets - Total	672.39	548.636	392.038	312.567
Long-Term Assets
Property Plant and Equipment - Net	63.325	56.539	47.29	47.312
Other Assets Total	26.097	23.983	25.361	26.009
Goodwill	0	0	0	0
Assets - Total	761.812	629.158	464.689	385.888
Liabilities and Shareholders' Equity
	Q4 2010	Q3 2010	Q2 2010	Q1 2010
	12/31/2010	9/30/2010	6/30/2010	3/31/2010
Current Liabilities
Debt in Current Liabilities	0.103	1.288	1.172	1.257
Accounts Payable	213.096	187.559	146.504	101.387
Income Taxes Payable	103.739	67.4	30.4	17.9
Current Liabilities - Other	67.888	40.947	30.982	31.638
Current Liabilities - Total	384.826	297.194	209.058	152.182
Long-Term Liabilities
Long-Term Debt	35.911	38.387	72.636	73.174
Liabilities - Other	39.445	36.47	22.258	19.7
Liabilities - Total	460.182	372.051	303.952	245.056
Minority Interest - Balance Sheet	0	0	0	0
Common Shares Outstanding	103,924	103,924	88,589	88,370

Income Statement

Item	4 Quarters	Q4 2010	Q3 2010	Q2 2010	Q1 2010
Total Revenue	1,047.1	366.2	314.0	214.5	152.4
Cost of Goods Sold	632.9	217.7	182.3	131.7	101.3
Selling, General and Administrative Expenses	111.0	32.6	28.2	26.8	23.4
Operating Income Before Depreciation	306.2	118.8	103.5	56.1	27.8
Depreciation & Amortization	14.8	3.0	3.0	3.8	5.0
Operating Income After Depreciation	291.4	115.8	100.5	52.3	22.8
Interest and Related Expense	6.7	1.4	1.2	2.0	2.0
Nonoperating Income (Expense)	(0.7)	(0.3)	(2.5)	1.1	0.9
Special Items	(32.4)	(22.1)	-	(2.9)	(7.4)
Pretax Income	251.5	92.0	96.8	48.4	14.3
Income Taxes	103.6	37.6	33.1	23.3	9.7
Minority Interest - Income Account	-	-	-	-	-

Calculation

Op	Item	pwer
+	Operating Income After Depreciation	291.36
-	Minority Interest - Income Account	-
=	Income for Calculation	291.36
	Diluted Shares Outstanding	141.793
	Share Price	8.34
+	Market Cap Calc	1,182.84
+	Preferred Capital	19.60
+	Debt in Current Liabilities	0.10
+	Long-Term Debt	35.91
	Cash and Short-Term Investments	227.91
-	Excess Cash	227.91
=	Enterprise Value	1,010.54
+	Property Plant and Equipment - Net	63.33
+	Receivables	270.53
+	Inventories	152.29
+	Other Current Assests	21.67
+	Working Cash	-
-	Accounts Payable	213.10
-	Current Liabilities - Other	67.89
=	Invested Capital	226.82
	Earnings Yield	29%
	ROIC	128%

Working Cash

Working Cash = Max(0,[(AP + Current Liabilities Other) - (AR + Inventories + Other Current Assets)]
Excess Cash = Cash & ST Investments - Working Cash