Non-GAAP diluted EPS from continuing operations of $0.32
GAAP diluted EPS from continuing operations of $0.30
$65 million in additional annualized Renew Blue cost reductions,
bringing the cumulative total to $965 million
MINNEAPOLIS--(BUSINESS WIRE)--
Best Buy Co., Inc. (NYSE:BBY) today announced results for the 13-week
third quarter (“Q3 FY15”) ended November 1, 2014, as compared to the
13-week third quarter (“Q3 FY14”) ended November 2, 2013.
|
Revenue
|
|
Q3 FY15
|
|
Q3 FY14
|
|
Revenue ($ in millions)
|
|
$9,380
|
|
$9,327
|
|
Comparable sales % change1,2
|
|
2.2%
|
|
0.3%
|
|
Domestic Segment:
|
|
|
|
|
|
Comparable sales % change
|
|
3.2%
|
|
1.8%
|
|
Comparable online sales % change
|
|
21.6%
|
|
15.1%
|
|
International Segment:
|
|
|
|
|
|
Comparable sales % change
|
|
(3.0%)
|
|
(6.4%)
|
|
|
|
|
|
|
|
Operating Income
|
|
Q3 FY15
|
|
Q3 FY14
|
|
GAAP operating income as a % of revenue
|
|
2.0%
|
|
1.0%
|
|
Non-GAAP operating income as a % of revenue3
|
|
2.2%
|
|
1.4%
|
|
|
|
|
|
|
|
Diluted EPS
|
|
Q3 FY15
|
|
Q3 FY14
|
|
GAAP diluted EPS from continuing operations
|
|
$0.30
|
|
$0.12
|
|
Impact of non-restructuring asset impairments
|
|
$0.01
|
|
$0.02
|
|
Impact of restructuring charges
|
|
$0.02
|
|
$0.06
|
|
Impact of gain on sale of investments
|
|
($0.01)
|
|
($0.01)
|
|
Benefit of income tax impact of Best Buy Europe sale
|
|
$0.00
|
|
($0.01)
|
|
Non-GAAP diluted EPS from continuing operations3
|
|
$0.32
|
|
$0.18
|
|
|
|
|
|
|
Hubert Joly, Best Buy president and CEO, commented, "In the third
quarter, our teams delivered positive comparable sales, improved
profitability and continued progress in our Renew Blue transformation.
This resulted in $9.4 billion in revenue and $0.32 in non-GAAP diluted
earnings per share versus $0.18 last year. Operationally, this
year-over-year improvement was primarily driven by 0.6% revenue growth
and the benefits from our Renew Blue and other SG&A cost reduction
initiatives, partially offset by strategic pricing investments and the
ongoing competitive pressure on our gross profit rate. On the top line,
while sales in the NPD-reported Consumer Electronics categories declined
0.2%4, our strength in televisions, computing, and tablets
versus the industry, in addition to our growth in gaming and appliances,
drove a Domestic comparable sales increase of 2.4%, excluding the
80-basis point estimated benefit associated with the classification of
revenue for the new mobile carrier installment billing plans2.
Domestic online comparable sales increased 22%.”
Joly concluded, “As we enter the fourth quarter, we are excited about
our holiday plan, which has been built around (1) the cumulative
progress we have made against our Renew Blue priorities; (2) an
operational roadmap that incorporates the specific learnings that we
gained from last year; and (3) our current views on the consumer and
competitive environment. Within this plan, we would like to highlight
the following initiatives that we believe will drive better
year-over-year outcomes: (1) the customer-facing changes that we have
made on our site and in our stores that touch many of our key
categories, especially home theater, accessories, appliances, emerging
categories such as health & wearables and connected home, and digital
imaging; (2) our ability this year to sell installment billing plans in
the mobile phone category; (3) a more inspirational gifting strategy;
(4) a more defined, structured and analytical approach to our
promotional strategy and competitive response plans; (5) more relevant
and targeted marketing investments, including a more concise statement
of our value proposition – Expert Service. Unbeatable Price.; and (6)
increased inventory availability primarily due to the rollout of
ship-from-store to 1,400 stores versus 400 stores last year. Like every
holiday, though, we believe the outcome of these initiatives is, and
will continue to be, tempered by other external and internal factors –
including the investments that are required to drive them.”
Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “As Hubert
remarked, the sales trends we are seeing in our business as we enter the
fourth quarter are encouraging from a top-line perspective. But to drive
these results, similar to Q3, there are internal and external factors
that we believe could put pressure on our operating income rate. The
internal factors include: (1) the increased mix of faster growing, but
lower-margin products in our revenue; (2) the potential impact of higher
incentive compensation, particularly in our retail stores, based on our
expected year-over-year improvement in performance; (3) higher growth in
our lower-margin online channel; and (4) intensified investments in
customer-facing initiatives. The external factors include: (1) an
intensely promotional competitive environment; (2) a possible constraint
in product availability in recent high-profile product launches; and (3)
a potential supply chain disruption related to the West Coast port
delays.”
McCollam concluded, “The financial outcomes that these factors are
expected to drive in the fourth quarter are as follows: (1) near flat
year-over-year revenue and comparable sales growth – assuming revenue
declines in the NPD-reported Consumer Electronics categories are in line
with Q3 FY15; (2) an improvement in the year-over-year gross profit
rate; and (3) flat year-over-year SG&A dollars – including higher
incentive compensation, the intensified investments in customer-facing
initiatives and an incremental $20 million due to a greater proportion
of our vendor funding being recorded as an offset to cost of goods sold
rather than SG&A. The net result of these outcomes, similar to last
quarter’s outlook, is expected to equate to a year-over-year expansion
in the Q4 non-GAAP operating income rate of approximately 50 basis
points. Additionally, the estimated diluted earnings per share impact of
the known discrete tax items that we discussed in previous quarters will
continue to be in the range of negative $0.09 to $0.10 in Q4 FY15.”
Domestic Segment Third Quarter Results
Domestic Revenue
Domestic revenue of $7.99 billion increased 2.3% versus last year
primarily driven by comparable sales growth of 3.2%. Excluding the
80-basis point estimated benefit associated with the classification of
revenue for the new mobile carrier installment billing plans, comparable
sales increased 2.4%2. This increase was partially offset by
(1) the timing of recovery on mobile phone trade-in liquidations;
(2) store closures; and (3) $8 million, or 15 basis points, in less
favorable economics of the new credit card agreement.
From a merchandising perspective, comparable sales growth in computing,
gaming, televisions, and appliances was partially offset by declines in
other categories, including services, mobile phones (excluding the
impact of installment billing2), and tablets.
Domestic online revenue was $601 million and comparable online sales
increased 21.6% due to (1) substantially improved inventory availability
made possible by the chain-wide rollout of our ship-from-store
capability that was completed in January 2014; (2) a higher average
order value; and (3) increased traffic driven by greater investment in
online digital marketing.
Domestic Gross Profit Rate
Domestic gross profit rate was 23.0% versus 23.5% last year. This
50-basis point decline was primarily due to (1) a lower gross profit
rate in the mobile business – including ongoing declines in customer
demand for stand-alone mobile broadband products; (2) structural
investments in price competitiveness, particularly in accessories; (3)
increased revenue in the lower-margin gaming category; (4) a highly
competitive promotional environment in tablets; and (5) a 10-basis point
negative impact related to the less favorable economics of the new
credit card agreement. These declines were partially offset by (1)
increased revenue in higher-margin large screen televisions; (2) the
realization of our Renew Blue cost reductions and other supply chain
cost containment initiatives; and (3) the receipt of restitution on a
legal claim related to an inventory dispute of $11.5 million or 15 basis
points.
Domestic Selling, General and Administrative Expenses (“SG&A”)
Domestic SG&A expenses were $1.63 billion or 20.4% of revenue versus
$1.70 billion or 21.8% of revenue last year. On a non-GAAP basis,
Domestic SG&A expenses were $1.63 billion or 20.3% of revenue versus
$1.69 billion or 21.7% of revenue last year. This 140-basis point rate
decline (or $68 million) was primarily driven by the realization of
Renew Blue cost reduction initiatives and tighter expense management
throughout the company. These declines were partially offset by Renew
Blue investments in online growth and other customer-facing initiatives.
International Segment Third Quarter Results
International Revenue
International revenue of $1.39 billion declined 8.4% versus last year.
This decline was primarily driven by (1) the negative impact of foreign
currency exchange rate fluctuations; (2) a comparable sales decline of
3.0% driven by China; and (3) the loss of revenue from store closures in
Canada and China.
International Gross Profit Rate
International gross profit rate was 20.7% versus 21.2% last year. This
50-basis point rate decline was primarily driven by our Canadian
business due to a highly competitive promotional environment in tablets
and higher revenue in the lower-margin gaming category.
International SG&A
International SG&A expenses were $297 million or 21.4% of revenue versus
$334 million or 22.0% of revenue last year. On a non-GAAP basis,
International SG&A expenses were $297 million or 21.4% of revenue versus
$333 million or 22.0% of revenue last year. This 60-basis point rate
decline (or $36 million) was primarily driven by Renew Blue cost
reductions and tighter expense management in Canada, and to a lesser
extent, in China.
Renew Blue Cost Reduction Initiatives Update
Since our Q2 FY15 earnings release, Renew Blue annualized cost
reductions have increased an additional $65 million, bringing the total
Renew Blue annualized cost reductions to $965 million ($695 million in
SG&A expenses and $270 million in cost of goods sold). This $65 million
in cost reductions ($25 million in SG&A and $40 million in cost of goods
sold) is primarily driven by (1) lower costs associated with returns,
replacements and damages; (2) efficiency improvements in the US and
Canada; and (3) supply chain efficiencies.
Dividends
On October 2, 2014, the company paid a quarterly dividend of $0.19 per
common share outstanding, or $66 million.
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 November 20, 2014. A
webcast of the call is expected to be available at www.investors.bestbuy.com
both live and after the call.
(1) Best Buy’s comparable sales is comprised of revenue at stores,
websites and call centers operating for at least 14 full months, as well
as revenue related to certain other comparable sales channels. Relocated
stores, as well as remodeled, expanded and downsized stores closed more
than 14 days, are excluded from the comparable sales calculation until
at least 14 full months after reopening. Acquisitions are included in
the comparable sales calculation beginning with the first full quarter
following the first anniversary of the date of the acquisition. The
portion of the calculation of comparable sales attributable to the
International segment excludes the effect of fluctuations in foreign
currency exchange rates. The calculation of comparable sales excludes
the impact of revenue from discontinued operations. The method of
calculating comparable sales varies across the retail industry. As a
result, Best Buy’s method of calculating comparable sales may not be the
same as other retailers’ methods. Comparable online sales are included
in Best Buy’s comparable sales calculation.
(2) We now offer mobile carrier installment billing plans to our
customers as well as two-year contract plans. While the two types of
contracts have broadly similar overall economics, installment billing
plans typically generate higher revenues due to higher proceeds for
devices and higher cost of sales due to lower device subsidies. As we
increase our mix of installment billing plans, there is an associated
increase in revenue and cost of goods sold, and a decrease in gross
profit rate, with gross profit dollars relatively unaffected. We
estimate that our Enterprise comparable sales of 2.2% and Domestic
comparable sales of 3.2% include 60 basis points and 80 basis points,
respectively, of impact from this classification difference. The impact
on our gross profit rate at the Enterprise and Domestic levels for the
quarter was immaterial.
(3) The company defines non-GAAP gross profit, non-GAAP SG&A, non-GAAP
operating income, non-GAAP net earnings and non-GAAP diluted earnings
per share for the periods presented as its gross profit, SG&A, operating
income, net earnings and diluted earnings per share for those periods
calculated in accordance with accounting principles generally accepted
in the U.S. (“GAAP”), adjusted to exclude LCD-related legal settlements,
restructuring charges, non-restructuring asset impairments, gains on
sales of investments and the acceleration of a non-cash tax benefit as a
result of reorganizing certain European legal entities.
These non-GAAP financial measures provide investors with an
understanding of the company’s financial performance adjusted to exclude
the effect of the items described above. These non-GAAP financial
measures assist investors in making a ready comparison of the company’s
financial results for its fiscal quarter ended November 1, 2014, against
the company’s results for the respective prior-year periods and against
third-party estimates of the company’s financial results for those
periods that may not have included the effect of such items.
Additionally, management uses these non-GAAP financial measures as an
internal measure to analyze trends, allocate resources, and analyze
underlying operating performance. These non-GAAP financial measures
should not be considered superior to, as a substitute for, or as an
alternative to, and should be considered in conjunction with, GAAP
financial measures and may differ from similar measures used by other
companies. Please see the table titled “Reconciliation of Non-GAAP
Financial Measures” at the end of this release for more detail.
(4) According to The NPD Group’s Weekly Tracking Service as published
November 11, 2014, revenue for the CE industry was down 0.2% during the
13 weeks ended November 1, 2014 compared to the 13 weeks ended November
2, 2013. The CE industry, as defined by The NPD Group, includes TVs,
desktop and notebook computers, tablets not including Kindle, digital
imaging and other categories. Sales of these products represent
approximately 65% of our Domestic revenue. It does not include mobile
phones, gaming, movies, music, appliances or services.
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, 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,” “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:
macro-economic conditions, conditions in the industries and categories
in which we operate, changes in consumer preferences (including shopping
preferences), changes in consumer confidence, consumer spending and debt
levels, online sales levels and trends, average ticket size, the mix of
products and services offered for sale in our physical stores and
online, credit market changes and constraints, product availability,
competitive initiatives of competitors (including pricing actions and
promotional activities of competitors), strategic and business decisions
of our vendors (including actions that could impact product margin or
supply), the impact of pricing investments and promotional activity,
weather, natural or man-made disasters, attacks on our data systems, the
company’s ability to react to a disaster recovery situation, changes in
law or regulations, changes in tax rates, changes in taxable income in
each jurisdiction, tax audit developments and resolution of other
discrete tax matters, foreign currency fluctuation, availability of
suitable real estate locations, the company’s ability to manage its
property portfolio, the impact of labor markets and new product
launches, the availability of qualified labor pools, the company’s
ability to retain qualified employees, failure to achieve anticipated
expense and cost reductions from operational and restructuring changes,
disruptions in our supply chain, the costs of procuring goods the
company sells, failure to achieve anticipated revenue and profitability
increases from operational and restructuring changes (including
investments in our multi-channel capabilities), failure to accurately
predict the duration over which we will incur costs, acquisitions and
development of new businesses, divestitures of existing businesses,
failure to achieve anticipated benefits of announced transactions,
integration challenges relating to new ventures, and our ability to
protect information relating to our customers. 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 Report on Form 10-K filed with the SEC on March
28, 2014. 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.
|
|
CONSOLIDATED STATEMENTS OF EARNINGS
|
|
($ in millions, except per share amounts)
|
|
(Unaudited and subject to reclassification)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Revenue
|
|
$
|
9,380
|
|
|
$
|
9,327
|
|
|
|
$
|
27,311
|
|
|
$
|
27,940
|
|
|
Cost of goods sold
|
|
|
7,252
|
|
|
|
7,170
|
|
|
|
|
21,108
|
|
|
|
21,167
|
|
|
Gross profit
|
|
|
2,128
|
|
|
|
2,157
|
|
|
|
|
6,203
|
|
|
|
6,773
|
|
|
Gross profit %
|
|
|
22.7
|
%
|
|
|
23.1
|
%
|
|
|
|
22.7
|
%
|
|
|
24.2
|
%
|
|
Selling, general and administrative expenses
|
|
|
1,929
|
|
|
|
2,036
|
|
|
|
|
5,561
|
|
|
|
6,058
|
|
|
SG&A %
|
|
|
20.6
|
%
|
|
|
21.8
|
%
|
|
|
|
20.4
|
%
|
|
|
21.7
|
%
|
|
Restructuring charges
|
|
|
9
|
|
|
|
31
|
|
|
|
|
17
|
|
|
|
44
|
|
|
Operating income
|
|
|
190
|
|
|
|
90
|
|
|
|
|
625
|
|
|
|
671
|
|
|
Operating income %
|
|
|
2.0
|
%
|
|
|
1.0
|
%
|
|
|
|
2.3
|
%
|
|
|
2.4
|
%
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of investments
|
|
|
5
|
|
|
|
4
|
|
|
|
|
7
|
|
|
|
18
|
|
|
Investment income and other
|
|
|
3
|
|
|
|
8
|
|
|
|
|
17
|
|
|
|
18
|
|
|
Interest expense
|
|
|
(22
|
)
|
|
|
(24
|
)
|
|
|
|
(68
|
)
|
|
|
(77
|
)
|
|
Earnings from continuing operations before income tax (benefit)
expense
|
|
|
176
|
|
|
|
78
|
|
|
|
|
581
|
|
|
|
630
|
|
|
Income tax (benefit) expense
|
|
|
69
|
|
|
|
34
|
|
|
|
|
(133
|
)
|
|
|
252
|
|
|
Effective tax rate
|
|
|
39.4
|
%
|
|
|
44.4
|
%
|
|
|
|
(22.9
|
%)
|
|
|
40.0
|
%
|
|
Net earnings from continuing operations
|
|
|
107
|
|
|
|
44
|
|
|
|
|
714
|
|
|
|
378
|
|
|
Gain (loss) from discontinued operations, net of tax
|
|
|
-
|
|
|
|
10
|
|
|
|
|
1
|
|
|
|
(149
|
)
|
|
Net earnings including noncontrolling interest
|
|
|
107
|
|
|
|
54
|
|
|
|
|
715
|
|
|
|
229
|
|
|
Net earnings from continuing operations attributable to
noncontrolling interests
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Net loss from discontinued operations attributable to
noncontrolling interests
|
|
|
-
|
|
|
|
1
|
|
|
|
|
-
|
|
|
|
11
|
|
|
Net earnings attributable to Best Buy Co., Inc. shareholders
|
|
$
|
107
|
|
|
$
|
54
|
|
|
|
$
|
714
|
|
|
$
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Best Buy Co., Inc. shareholders
|
|
|
|
|
|
|
|
|
|
|
Net earnings from continuing operations
|
|
$
|
107
|
|
|
$
|
43
|
|
|
|
$
|
713
|
|
|
$
|
377
|
|
|
Net earnings (loss) from discontinued operations
|
|
|
-
|
|
|
|
11
|
|
|
|
|
1
|
|
|
|
(138
|
)
|
|
Net earnings attributable to Best Buy Co., Inc. shareholders
|
|
$
|
107
|
|
|
$
|
54
|
|
|
|
$
|
714
|
|
|
$
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Best Buy Co., Inc.
shareholders
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.30
|
|
|
$
|
0.13
|
|
|
|
$
|
2.05
|
|
|
$
|
1.11
|
|
|
Discontinued operations
|
|
|
-
|
|
|
|
0.03
|
|
|
|
|
-
|
|
|
|
(0.41
|
)
|
|
Basic earnings per share
|
|
$
|
0.30
|
|
|
$
|
0.16
|
|
|
|
$
|
2.05
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to Best Buy Co., Inc.
shareholders
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.30
|
|
|
$
|
0.12
|
|
|
|
$
|
2.02
|
|
|
$
|
1.09
|
|
|
Discontinued operations
|
|
|
-
|
|
|
|
0.04
|
|
|
|
|
-
|
|
|
|
(0.40
|
)
|
|
Diluted earnings per share
|
|
$
|
0.30
|
|
|
$
|
0.16
|
|
|
|
$
|
2.02
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
0.19
|
|
|
$
|
0.17
|
|
|
|
$
|
0.53
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (in millions)
|
|
|
|
|
|
Basic
|
|
|
350.1
|
|
|
|
342.8
|
|
|
|
|
349.0
|
|
|
|
340.7
|
|
|
Diluted
|
|
|
354.0
|
|
|
|
348.9
|
|
|
|
|
352.5
|
|
|
|
345.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEST BUY CO., INC.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
($ in millions)
|
|
(Unaudited and subject to reclassification)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,929
|
|
$
|
2,170
|
|
Short-term investments
|
|
|
1,209
|
|
|
-
|
|
Receivables, net
|
|
|
1,066
|
|
|
1,123
|
|
Merchandise inventories
|
|
|
6,900
|
|
|
6,978
|
|
Other current assets
|
|
|
959
|
|
|
963
|
|
Total current assets
|
|
|
12,063
|
|
|
11,234
|
|
Property and equipment, net
|
|
|
2,524
|
|
|
2,726
|
|
Goodwill
|
|
|
425
|
|
|
528
|
|
Intangibles, net
|
|
|
99
|
|
|
175
|
|
Other assets
|
|
|
651
|
|
|
405
|
|
TOTAL ASSETS
|
|
$
|
15,762
|
|
$
|
15,068
|
|
|
|
|
|
|
|
LIABILITIES & EQUITY
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable
|
|
$
|
6,626
|
|
$
|
6,578
|
|
Unredeemed gift card liabilities
|
|
|
381
|
|
|
368
|
|
Deferred revenue
|
|
|
449
|
|
|
418
|
|
Accrued compensation and related expenses
|
|
|
305
|
|
|
350
|
|
Accrued liabilities
|
|
|
788
|
|
|
815
|
|
Accrued income taxes
|
|
|
33
|
|
|
91
|
|
Current portion of long-term debt
|
|
|
44
|
|
|
45
|
|
Total current liabilities
|
|
|
8,626
|
|
|
8,665
|
|
Long-term liabilities
|
|
|
972
|
|
|
1,035
|
|
Long-term debt
|
|
|
1,591
|
|
|
1,624
|
|
Equity
|
|
|
4,573
|
|
|
3,744
|
|
TOTAL LIABILITIES & EQUITY
|
|
$
|
15,762
|
|
$
|
15,068
|
|
|
|
|
|
|
|
|
|
BEST BUY CO., INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
($ in millions)
|
|
(Unaudited and subject to reclassification)
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net earnings including noncontrolling interests
|
|
$
|
715
|
|
|
$
|
229
|
|
|
Adjustments to reconcile net earnings including noncontrolling
interests to total cash provided by operating activities:
|
|
|
|
|
|
Depreciation
|
|
|
484
|
|
|
|
537
|
|
|
Amortization of definite-lived intangible assets
|
|
|
-
|
|
|
|
13
|
|
|
Restructuring charges
|
|
|
17
|
|
|
|
144
|
|
|
(Gain) loss on sale of business, net
|
|
|
(1
|
)
|
|
|
123
|
|
|
Stock-based compensation
|
|
|
63
|
|
|
|
70
|
|
|
Deferred income taxes
|
|
|
(381
|
)
|
|
|
(3
|
)
|
|
Other, net
|
|
|
4
|
|
|
|
6
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Receivables
|
|
|
237
|
|
|
|
208
|
|
|
Merchandise inventories
|
|
|
(1,541
|
)
|
|
|
(974
|
)
|
|
Other assets
|
|
|
14
|
|
|
|
(102
|
)
|
|
Accounts payable
|
|
|
1,526
|
|
|
|
465
|
|
|
Other liabilities
|
|
|
(263
|
)
|
|
|
(347
|
)
|
|
Income taxes
|
|
|
(100
|
)
|
|
|
(45
|
)
|
|
Total cash provided by operating activities
|
|
|
774
|
|
|
|
324
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(425
|
)
|
|
|
(422
|
)
|
|
(Purchases) sales of investments, net
|
|
|
(983
|
)
|
|
|
44
|
|
|
Proceeds from sale of business, net of cash transferred upon sale
|
|
|
38
|
|
|
|
67
|
|
|
Change in restricted assets
|
|
|
25
|
|
|
|
(3
|
)
|
|
Other, net
|
|
|
3
|
|
|
|
(1
|
)
|
|
Total cash used in investing activities
|
|
|
(1,342
|
)
|
|
|
(315
|
)
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
(Repayments) borrowings of debt, net
|
|
|
(19
|
)
|
|
|
387
|
|
|
Dividends paid
|
|
|
(185
|
)
|
|
|
(174
|
)
|
|
Issuance of common stock
|
|
|
27
|
|
|
|
147
|
|
|
Other, net
|
|
|
2
|
|
|
|
(1
|
)
|
|
Total cash (used in) provided by financing activities
|
|
|
(175
|
)
|
|
|
359
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
(6
|
)
|
|
|
(24
|
)
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(749
|
)
|
|
|
344
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
2,678
|
|
|
|
1,826
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
|
1,929
|
|
|
|
2,170
|
|
|
|
|
|
|
|
|
|
|
BEST BUY CO., INC.
|
|
SEGMENT INFORMATION
|
|
($ in millions)
|
|
(Unaudited and subject to reclassification)
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Segment Performance Summary
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Revenue
|
|
$7,992
|
|
$7,812
|
|
$23,358
|
|
$23,533
|
|
Gross profit
|
|
$1,841
|
|
$1,836
|
|
$5,382
|
|
$5,820
|
|
SG&A
|
|
$1,632
|
|
$1,702
|
|
$4,688
|
|
$5,042
|
|
Operating income
|
|
$204
|
|
$110
|
|
$688
|
|
$752
|
|
|
|
|
|
|
|
|
|
|
|
Key Metrics
|
|
|
|
|
|
|
|
|
|
Comparable sales % change1
|
|
3.2%
|
|
1.8%
|
|
0.0%
|
|
0.0%
|
|
Comparable online sales % change1
|
|
21.6%
|
|
15.1%
|
|
24.3%
|
|
13.9%
|
|
Gross profit as a % of revenue
|
|
23.0%
|
|
23.5%
|
|
23.0%
|
|
24.7%
|
|
SG&A as a % of revenue
|
|
20.4%
|
|
21.8%
|
|
20.1%
|
|
21.4%
|
|
Operating income as a % of revenue
|
|
2.6%
|
|
1.4%
|
|
2.9%
|
|
3.2%
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Results2
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$1,841
|
|
$1,836
|
|
$5,382
|
|
$5,556
|
|
Gross profit as a % of revenue
|
|
23.0%
|
|
23.5%
|
|
23.0%
|
|
23.6%
|
|
SG&A
|
|
$1,626
|
|
$1,694
|
|
$4,662
|
|
$4,982
|
|
SG&A as a % of revenue
|
|
20.3%
|
|
21.7%
|
|
20.0%
|
|
21.2%
|
|
Operating income
|
|
$215
|
|
$142
|
|
$720
|
|
$574
|
|
Operating income as a % of revenue
|
|
2.7%
|
|
1.8%
|
|
3.1%
|
|
2.4%
|
|
|
|
|
|
|
|
|
|
|
|
International Segment Performance Summary
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Revenue
|
|
$1,388
|
|
$1,515
|
|
$3,953
|
|
$4,407
|
|
Gross profit
|
|
$287
|
|
$321
|
|
$821
|
|
$953
|
|
SG&A
|
|
$297
|
|
$334
|
|
$873
|
|
$1,016
|
|
Operating loss
|
|
($14)
|
|
($20)
|
|
($63)
|
|
($81)
|
|
|
|
|
|
|
|
|
|
|
|
Key Metrics
|
|
|
|
|
|
|
|
|
|
Comparable sales % change1
|
|
(3.0%)
|
|
(6.4%)
|
|
(5.1%)
|
|
(3.8%)
|
|
Gross profit as a % of revenue
|
|
20.7%
|
|
21.2%
|
|
20.8%
|
|
21.6%
|
|
SG&A as a % of revenue
|
|
21.4%
|
|
22.0%
|
|
22.1%
|
|
23.1%
|
|
Operating loss as a % of revenue
|
|
(1.0%)
|
|
(1.3%)
|
|
(1.6%)
|
|
(1.8%)
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Results2
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
$297
|
|
$333
|
|
$871
|
|
$1,005
|
|
SG&A as a % of revenue
|
|
21.4%
|
|
22.0%
|
|
22.0%
|
|
22.8%
|
|
Operating loss
|
|
($10)
|
|
($12)
|
|
($50)
|
|
($52)
|
|
Operating loss as a % of revenue
|
|
(0.7%)
|
|
(0.8%)
|
|
(1.3%)
|
|
(1.2%)
|
|
|
|
|
|
|
|
|
|
|
|
(1) Best Buy’s comparable sales is comprised of revenue at stores,
websites and call centers operating for at least 14 full months, as
well as revenue related to certain other comparable sales channels.
The portion of the calculation of comparable store sales
attributable to the International segment excludes the effect of
fluctuations in foreign currency exchange rates. Comparable online
sales are included in the comparable sales calculation.
|
|
(2) Please see table titled “Reconciliation of Non-GAAP Financial
Measures” at the back of this release.
|
|
|
|
|
|
BEST BUY CO., INC.
|
|
REVENUE CATEGORY SUMMARY
|
|
(Unaudited and subject to reclassification)
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Segment Summary
|
|
|
|
Revenue Mix Summary
|
|
Comparable Sales
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Consumer Electronics
|
|
29%
|
|
29%
|
|
3.1%
|
|
(2.5%)
|
|
Computing and Mobile Phones
|
|
49%
|
|
49%
|
|
3.2%
|
|
6.7%
|
|
Entertainment
|
|
7%
|
|
6%
|
|
16.6%
|
|
(26.8%)
|
|
Appliances
|
|
8%
|
|
8%
|
|
5.7%
|
|
23.5%
|
|
Services1
|
|
6%
|
|
7%
|
|
(10.3%)
|
|
4.2%
|
|
Other
|
|
1%
|
|
1%
|
|
n/a
|
|
n/a
|
|
Total
|
|
100%
|
|
100%
|
|
3.2%
|
|
1.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Segment Summary
|
|
|
|
Revenue Mix Summary
|
|
Comparable Sales
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
Consumer Electronics
|
|
25%
|
|
26%
|
|
(6.6%)
|
|
(13.2%)
|
|
Computing and Mobile Phones
|
|
44%
|
|
43%
|
|
(0.3%)
|
|
(5.5%)
|
|
Entertainment
|
|
6%
|
|
6%
|
|
5.0%
|
|
(11.7%)
|
|
Appliances
|
|
19%
|
|
20%
|
|
(8.4%)
|
|
5.2%
|
|
Services1
|
|
5%
|
|
5%
|
|
0.5%
|
|
(9.5%)
|
|
Other
|
|
1%
|
|
<1%
|
|
n/a
|
|
n/a
|
|
Total
|
|
100%
|
|
100%
|
|
(3.0%)
|
|
(6.4%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The "Services" revenue category consists primarily of service
contracts, extended warranties, computer related services, product
repair and delivery and installation for home theater, mobile audio
and appliances.
|
|
|
|
|
|
BEST BUY CO., INC.
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
|
CONTINUING OPERATIONS
|
|
($ in millions, except per share amounts)
|
|
(Unaudited and subject to reclassification)
|
|
|
|
|
|
|
|
|
|
|
|
The following information provides reconciliations of non-GAAP
financial measures from continuing operations to the most comparable
financial measures calculated and presented in accordance with
accounting principles generally accepted in the U.S. (“GAAP”). The
company has provided non-GAAP financial measures, which are not
calculated or presented in accordance with GAAP, as information
supplemental and in addition to the financial measures presented in
the accompanying news release that are calculated and presented in
accordance with GAAP. Such non-GAAP financial measures should not be
considered superior to, as a substitute for, or as an alternative
to, and should be considered in conjunction with, the GAAP financial
measures presented in the news release. The non-GAAP financial
measures in the accompanying news release may differ from similar
measures used by other companies.
The following tables reconcile gross profit, SG&A, operating
income, net earnings and diluted earnings per share for the
periods presented for continuing operations (GAAP financial
measures) to non-GAAP gross profit, non-GAAP SG&A, non-GAAP
operating income, non-GAAP net earnings and non-GAAP diluted
earnings per share for continuing operations (non-GAAP financial
measures) for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
|
|
$
|
|
% of Rev.
|
|
$
|
|
% of Rev.
|
|
Domestic - Continuing Operations
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
$1,632
|
|
20.4%
|
|
$1,702
|
|
21.8%
|
|
Non-restructuring asset impairments - SG&A
|
|
(6)
|
|
(0.1%)
|
|
(8)
|
|
(0.1%)
|
|
Non-GAAP SG&A
|
|
$1,626
|
|
20.3%
|
|
$1,694
|
|
21.7%
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$204
|
|
2.6%
|
|
$110
|
|
1.4%
|
|
Non-restructuring asset impairments - SG&A
|
|
6
|
|
0.1%
|
|
8
|
|
0.1%
|
|
Restructuring charges
|
|
5
|
|
0.1%
|
|
24
|
|
0.3%
|
|
Non-GAAP operating income
|
|
$215
|
|
2.7%
|
|
$142
|
|
1.8%
|
|
|
|
|
|
|
|
|
|
|
|
International - Continuing Operations
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
$297
|
|
21.4%
|
|
$334
|
|
22.0%
|
|
Non-restructuring asset impairments - SG&A
|
|
0
|
|
0.0%
|
|
(1)
|
|
(0.1%)
|
|
Non-GAAP SG&A
|
|
$297
|
|
21.4%
|
|
$333
|
|
22.0%
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
($14)
|
|
(1.0%)
|
|
($20)
|
|
(1.3%)
|
|
Non-restructuring asset impairments - SG&A
|
|
0
|
|
0.0%
|
|
1
|
|
0.1%
|
|
Restructuring charges
|
|
4
|
|
0.3%
|
|
7
|
|
0.5%
|
|
Non-GAAP operating loss
|
|
($10)
|
|
(0.7%)
|
|
($12)
|
|
(0.8%)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated - Continuing Operations
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
$1,929
|
|
20.6%
|
|
$2,036
|
|
21.8%
|
|
Non-restructuring asset impairments - SG&A
|
|
(6)
|
|
(0.1%)
|
|
(9)
|
|
(0.1%)
|
|
Non-GAAP SG&A
|
|
$1,923
|
|
20.5%
|
|
$2,027
|
|
21.7%
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$190
|
|
2.0%
|
|
$90
|
|
1.0%
|
|
Non-restructuring asset impairments - SG&A
|
|
6
|
|
0.1%
|
|
9
|
|
0.1%
|
|
Restructuring charges
|
|
9
|
|
0.1%
|
|
31
|
|
0.3%
|
|
Non-GAAP operating income
|
|
$205
|
|
2.2%
|
|
$130
|
|
1.4%
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$107
|
|
|
|
$43
|
|
|
|
After-tax impact of net LCD settlements1
|
|
0
|
|
|
|
(1)
|
|
|
|
After-tax impact of non-restructuring asset impairments - SG&A
|
|
4
|
|
|
|
6
|
|
|
|
After-tax impact of restructuring charges
|
|
6
|
|
|
|
21
|
|
|
|
After-tax impact of gain on sale of investments
|
|
(3)
|
|
|
|
(3)
|
|
|
|
Income tax impact of Best Buy Europe sale2
|
|
0
|
|
|
|
(2)
|
|
|
|
Non-GAAP net earnings
|
|
$114
|
|
|
|
$64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$0.30
|
|
|
|
$ 0.12
|
|
|
|
Per share impact of net LCD settlements1
|
|
0.00
|
|
|
|
0.00
|
|
|
|
Per share impact of non-restructuring asset impairments - SG&A
|
|
0.01
|
|
|
|
0.02
|
|
|
|
Per share impact of restructuring charges
|
|
0.02
|
|
|
|
0.06
|
|
|
|
Per share impact of gain on sale of investments
|
|
(0.01)
|
|
|
|
(0.01)
|
|
|
|
Per share impact of Best Buy Europe sale2
|
|
0.00
|
|
|
|
(0.01)
|
|
|
|
Non-GAAP diluted EPS
|
|
$0.32
|
|
|
|
$0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Nine Months Ended
|
|
|
|
Nov 1, 2014
|
|
Nov 2, 2013
|
|
|
|
$
|
|
% of Rev.
|
|
$
|
|
% of Rev.
|
|
Domestic - Continuing Operations
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$5,382
|
|
23.0%
|
|
$5,820
|
|
24.7%
|
|
LCD settlements3
|
|
0
|
|
0.0%
|
|
(264)
|
|
(1.1%)
|
|
Non-GAAP gross profit
|
|
$5,382
|
|
23.0%
|
|
$5,556
|
|
23.6%
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
$4,688
|
|
20.1%
|
|
$5,042
|
|
21.4%
|
|
Non-restructuring asset impairments - SG&A
|
|
(26)
|
|
(0.1%)
|
|
(25)
|
|
(0.1%)
|
|
LCD settlement legal fees3
|
|
0
|
|
0.0%
|
|
(35)
|
|
(0.1%)
|
|
Non-GAAP SG&A
|
|
$4,662
|
|
20.0%
|
|
$4,982
|
|
21.2%
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$688
|
|
2.9%
|
|
$752
|
|
3.2%
|
|
Net LCD settlements3
|
|
0
|
|
0.0%
|
|
(229)
|
|
(1.0%)
|
|
Non-restructuring asset impairments - SG&A
|
|
26
|
|
0.1%
|
|
25
|
|
0.1%
|
|
Restructuring charges
|
|
6
|
|
0.0%
|
|
26
|
|
0.1%
|
|
Non-GAAP operating income
|
|
$720
|
|
3.1%
|
|
$574
|
|
2.4%
|
|
|
|
|
|
|
|
|
|
|
|
International - Continuing Operations
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
$873
|
|
22.1%
|
|
$1,016
|
|
23.1%
|
|
Non-restructuring asset impairments - SG&A
|
|
(2)
|
|
(0.1%)
|
|
(11)
|
|
(0.2%)
|
|
Non-GAAP SG&A
|
|
$871
|
|
22.0%
|
|
$1,005
|
|
22.8%
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
($63)
|
|
(1.6%)
|
|
($81)
|
|
(1.8%)
|
|
Non-restructuring asset impairments - SG&A
|
|
2
|
|
0.1%
|
|
11
|
|
0.2%
|
|
Restructuring charges
|
|
11
|
|
0.3%
|
|
18
|
|
0.4%
|
|
Non-GAAP operating loss
|
|
($50)
|
|
(1.3%)
|
|
($52)
|
|
(1.2%)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated - Continuing Operations
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$6,203
|
|
22.7%
|
|
$6,773
|
|
24.2%
|
|
LCD settlements3
|
|
0
|
|
0.0%
|
|
(264)
|
|
(0.9%)
|
|
Non-GAAP gross profit
|
|
$6,203
|
|
22.7%
|
|
$6,509
|
|
23.3%
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
$5,561
|
|
20.4%
|
|
$6,058
|
|
21.7%
|
|
Non-restructuring asset impairments - SG&A
|
|
(28)
|
|
(0.1%)
|
|
(36)
|
|
(0.1%)
|
|
LCD settlement legal fees3
|
|
0
|
|
0.0%
|
|
(35)
|
|
(0.1%)
|
|
Non-GAAP SG&A
|
|
$5,533
|
|
20.3%
|
|
$5,987
|
|
21.4%
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$625
|
|
2.3%
|
|
$671
|
|
2.4%
|
|
Net LCD settlements3
|
|
0
|
|
0.0%
|
|
(229)
|
|
(0.8%)
|
|
Non-restructuring asset impairments - SG&A
|
|
28
|
|
0.1%
|
|
36
|
|
0.1%
|
|
Restructuring charges
|
|
17
|
|
0.1%
|
|
44
|
|
0.2%
|
|
Non-GAAP operating income
|
|
$670
|
|
2.5%
|
|
$522
|
|
1.9%
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$713
|
|
|
|
$377
|
|
|
|
After-tax impact of net LCD settlements3
|
|
0
|
|
|
|
(148)
|
|
|
|
After-tax impact of non-restructuring asset impairments - SG&A
|
|
18
|
|
|
|
25
|
|
|
|
After-tax impact of restructuring charges
|
|
12
|
|
|
|
30
|
|
|
|
After-tax impact of gain on sale of investments
|
|
(4)
|
|
|
|
(12)
|
|
|
|
Income tax impact of Best Buy Europe sale2
|
|
0
|
|
|
|
14
|
|
|
|
Income tax impact of Europe legal entity reorganization4
|
|
(353)
|
|
|
|
0
|
|
|
|
Non-GAAP net earnings
|
|
$386
|
|
|
|
$286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$2.02
|
|
|
|
$ 1.09
|
|
|
|
Per share impact of net LCD settlements3
|
|
0.00
|
|
|
|
(0.43)
|
|
|
|
Per share impact of non-restructuring asset impairments - SG&A
|
|
0.05
|
|
|
|
0.07
|
|
|
|
Per share impact of restructuring charges
|
|
0.04
|
|
|
|
0.09
|
|
|
|
Per share impact of gain on sale of investments
|
|
(0.01)
|
|
|
|
(0.03)
|
|
|
|
Per share impact of Best Buy Europe sale2
|
|
0.00
|
|
|
|
0.04
|
|
|
|
Per share impact of income tax effect of Europe legal entity
reorganization4
|
|
(1.01)
|
|
|
|
0.00
|
|
|
|
Non-GAAP diluted EPS
|
|
$1.09
|
|
|
|
$0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents interim period tax reporting impact of LCD
settlements reached in the second quarter of fiscal 2014.
|
|
(2) Tax impact of Best Buy Europe sale and resulting required tax
allocation between continuing and discontinued operations.
|
|
(3) Represents LCD settlements reached in the second quarter of
fiscal 2014. Amounts for the nine months ended Nov 2, 2013 exclude
the impact of $44 million of pre-tax net proceeds from LCD
settlements reached in the first quarter of fiscal 2014, as we did
not adjust for LCD settlements prior to the material settlements
reached in the second quarter of fiscal 2014.
|
|
(4) Represents the acceleration of a non-cash tax benefit of $353
million as a result of reorganizing certain European legal entities
to simplify our overall structure in the first quarter of fiscal
2015.
|
|
|
|
|
|
BEST BUY CO., INC.
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
|
($ in millions)
|
|
(Unaudited and subject to reclassification)
|
|
|
|
|
|
|
The following information provides a reconciliation of a non-GAAP
financial measure to the most comparable financial measure
calculated and presented in accordance with GAAP. The company has
provided the non-GAAP financial measure, which is not calculated or
presented in accordance with GAAP, as information supplemental and
in addition to the financial measure that is calculated and
presented in accordance with GAAP. Such non-GAAP financial measure
should not be considered superior to, as a substitute for, or as an
alternative to, and should be considered in conjunction with, the
GAAP financial measure. The non-GAAP financial measure in the
accompanying news release may differ from similar measures used by
other companies.
The following table includes the
calculation of Non-GAAP ROIC for total operations, which includes
both continuing and discontinued operations (non-GAAP financial
measures), along with a reconciliation to the calculation of return
on total assets ("ROA") (GAAP financial measure) for the periods
presented.
|
|
|
|
Calculation of Return on Invested Capital1
|
|
|
|
November 1,
20142
|
|
November 2,
20132
|
|
Net Operating Profit After Taxes (NOPAT)
|
|
|
|
|
|
Operating income - continuing operations
|
|
$
|
1,094
|
|
|
$
|
490
|
|
|
Operating loss - discontinued operations
|
|
|
(21
|
)
|
|
|
(149
|
)
|
|
Total operating income
|
|
|
1,073
|
|
|
|
341
|
|
|
Add: Operating lease interest3
|
|
|
465
|
|
|
|
545
|
|
|
Add: Investment income
|
|
|
26
|
|
|
|
31
|
|
|
Less: Net earnings attributable to noncontrolling interest (NCI)
|
|
|
(2
|
)
|
|
|
(20
|
)
|
|
Less: Income taxes4
|
|
|
(659
|
)
|
|
|
(737
|
)
|
|
NOPAT
|
|
$
|
903
|
|
|
$
|
160
|
|
|
Add: Restructuring charges and impairments5
|
|
|
225
|
|
|
|
1,147
|
|
|
Add: NCI impact of restructuring charges and impairments
|
|
|
-
|
|
|
|
(41
|
)
|
|
Non-GAAP NOPAT
|
|
$
|
1,128
|
|
|
$
|
1,266
|
|
|
|
|
|
|
|
|
Average Invested Capital
|
|
|
|
|
|
Total assets
|
|
$
|
14,509
|
|
|
$
|
14,867
|
|
|
Less: Excess Cash6
|
|
|
(2,628
|
)
|
|
|
(1,273
|
)
|
|
Add: Capitalized operating lease obligations7
|
|
|
7,434
|
|
|
|
8,722
|
|
|
Total liabilities
|
|
|
(10,130
|
)
|
|
|
(11,215
|
)
|
|
Exclude: Debt8
|
|
|
1,644
|
|
|
|
1,834
|
|
|
Less: Noncontrolling interests
|
|
|
(4
|
)
|
|
|
(323
|
)
|
|
Average invested capital
|
|
$
|
10,825
|
|
|
$
|
12,612
|
|
|
|
|
|
|
|
|
Non-GAAP return on invested capital (ROIC)
|
|
|
10.4
|
%
|
|
|
10.0
|
%
|
|
|
|
|
|
|
|
Calculation of Return on Assets1
|
|
|
|
November 1,
20142
|
|
November 2,
20132
|
|
Net earnings (loss) including noncontrolling interests
|
|
$
|
1,009
|
|
|
$
|
(150
|
)
|
|
Total assets
|
|
|
14,509
|
|
|
|
14,867
|
|
|
Return on assets (ROA)
|
|
|
7.0
|
%
|
|
|
(1.0
|
%)
|
|
|
|
|
|
|
(1) The calculations of Return on Invested Capital and Return on
Assets use total operations, which includes both continuing and
discontinued operations.
(2) Income statement accounts
represent the activity for the 12 months ended as of each of the
balance sheet dates. Balance sheet accounts represent the average
account balances for the 4 quarters ended as of each of the balance
sheet dates.
(3) Operating lease interest represents the
add-back to operating income driven by the capitalization of our
lease obligations using the multiple of eight times annual rent
expense and represents 50 percent of our annual rental expense,
which we consider to be appropriate for our lease portfolio.
(4)
Income taxes are calculated using a blended statutory rate at the
enterprise level based on statutory rates from the countries we do
business in.
(5) Includes all restructuring charges in costs of
goods sold and operating expenses, goodwill and tradename
impairments and non-restructuring impairments.
(6) Cash and
cash equivalents and short-term investments are capped at the
greater of 1% of revenue or actual amounts on hand. The cash and
cash equivalents and short-term investments in excess of the cap are
subtracted from our calculation of average invested capital to show
their exclusion from total assets.
(7) The multiple of eight
times annual rental expense in the calculation of our capitalized
operating lease obligations is the multiple used for the retail
sector by one of the nationally recognized credit rating agencies
that rates our creditworthiness, and we consider it to be an
appropriate multiple for our lease portfolio.
(8) Debt includes
short-term debt, current portion of long-term debt and long-term
debt and is added back to our calculation of average invested
capital to show its exclusion from total liabilities.
|
Source: Best Buy Co., Inc.