(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, $0.10 par value per share	BBY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨



Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, ~~(as defined~~” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act).~~

Act.


Large Accelerated Filer 	Accelerated Filer 		Non-accelerated Filer 
~~Large accelerated filer~~ x	~~Accelerated filer~~ ¨	~~Non-accelerated filer~~ ¨
Smaller Reporting Company 
~~Smaller reporting company~~ ¨		Emerging ~~growth company~~ ¨ Growth Company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yes ¨ No x



The registrant had ~~269,101,569~~263,573,258 shares of common stock outstanding as of ~~December 5, 2018.~~September 4, 2019.

Table of Contents

BEST BUY CO., INC.

FORM 10-Q FOR THE QUARTER ENDED ~~NOVEMBER~~AUGUST 3, ~~2018~~

2019

TABLE OF CONTENTS



Part I — Financial Information			3
Item 1.		Financial Statements	3
	a)	Condensed Consolidated Balance Sheets as of ~~November~~August 3, ~~2018,~~2019, February ~~3, 2018~~2, 2019, and ~~October 28, 2017~~August 4, 2018	3
	b)	Condensed Consolidated Statements of Earnings for the three and ~~nine~~six months ended ~~November~~August 3, ~~2018~~2019, and ~~October 28, 2017~~August 4, 2018	4
	c)	Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~November~~August 3, ~~2018~~2019, and ~~October 28, 2017~~August 4, 2018	5
	d)	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~November~~August 3, ~~2018~~2019, and ~~October 28, 2017~~August 4, 2018	6
	e)	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and ~~nine~~six months ended ~~November~~August 3, ~~2018~~2019, and ~~October 28, 2017~~August 4, 2018	7
	f)	Notes to Condensed Consolidated Financial Statements	8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	27 22
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	39 32
Item 4.		Controls and Procedures	40 32
Part II — Other Information			41 33
Item 1.		Legal Proceedings	41 33
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	41 33
Item 6.		Exhibits	41 34
Signatures			42 35

‎

Table of Contents

PART I — FINANCIAL INFORMATION


~~Item 1.~~	~~Financial Statements~~

Item 1. Financial Statements

Condensed ~~Consolidated~~Consolidated Balance Sheets

$ in millions, except per share ~~and share~~ amounts (unaudited)


	August 3, 2019		February 2, 2019		August 4, 2018
Assets
Current assets
Cash and cash equivalents	$	1,289	$	1,980	$	1,865
Short-term investments		320		-		465
Receivables, net		966		1,015		915
Merchandise inventories		5,208		5,409		5,016
Other current assets		409		466		510
Total current assets		8,192		8,870		8,771
Property and equipment, net		2,361		2,510		2,432
Operating lease assets		2,774		-		-
Goodwill		965		915		425
Other assets		686		606		365
Total assets	$	14,978	$	12,901	$	11,993

Liabilities and equity
Current liabilities
Accounts payable	$	5,045	$	5,257	$	5,338
Unredeemed gift card liabilities		264		290		275
Deferred revenue		468		446		438
Accrued compensation and related expenses		343		482		318
Accrued liabilities		799		982		813
Current portion of operating lease liabilities		643		-		-
Current portion of long-term debt		14		56		47
Total current liabilities		7,576		7,513		7,229
Long-term liabilities		640		750		777
Long-term operating lease liabilities		2,230		-		-
Long-term debt		1,247		1,332		801
Contingencies (Note 14)
Equity
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - NaN		-		-		-
Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 265 million, 266 million, and 276 million shares, respectively		26		27		27
Retained earnings		2,965		2,985		2,863
Accumulated other comprehensive income		294		294		296
Total equity		3,285		3,306		3,186
Total liabilities and equity	$	14,978	$	12,901	$	11,993

November 3, 2018 February 3, 2018 October 28, 2017
ASSETS

Current assets
Cash and cash equivalents $ 1,228
$ 1,101
$ 1,103
Short-term investments 76
2,032
2,237
Receivables, net 921
1,049
971
Merchandise inventories 8,168
5,209
6,663
Other current assets 508
438
431
Total current assets 10,901
9,829
11,405
Property and equipment, net 2,525
2,421
2,352
Goodwill 921
425
425
Other assets 653
374
603
TOTAL ASSETS $ 15,000
$ 13,049
$ 14,785

LIABILITIES AND EQUITY
Current liabilities

Accounts payable $ 7,964
$ 4,873
$ 6,587
Unredeemed gift card liabilities 281
385
375
Deferred revenue 449
453
426
Accrued compensation and related expenses 349
561
331
Accrued liabilities 844
1,001
888
Current portion of long-term debt 46
544
545
Total current liabilities 9,933
7,817
9,152
Long-term liabilities 775
809
697
Long-term debt 1,280
811
784
Contingencies and Commitments (Note 14)
Equity

Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none —
—
—
Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 272,000,000, 283,000,000 and 296,000,000 shares, respectively 27
28
30
Retained earnings 2,685
3,270
3,818
Accumulated other comprehensive income 300
314
304
Total equity 3,012
3,612
4,152
TOTAL LIABILITIES AND EQUITY $ 15,000
$ 13,049
$ 14,785

NOTE: The Consolidated Balance Sheet as of February ~~3, 2018,~~2, 2019, has been condensed from the audited consolidated financial statements.

See Notes to Condensed Consolidated Financial Statements.

‎

Table of Contents

Condensed Consolidated Statements of Earnings

$ and shares in millions, except per share amounts (unaudited)



	Three Months Ended					Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Revenue	$	9,536	$	9,379	$	18,678	$	18,488
Cost of goods sold		7,253		7,150		14,226		14,134
Gross profit		2,283		2,229		4,452		4,354
Selling, general and administrative expenses		1,922		1,877		3,757		3,707
Restructuring charges		48		17		48		47
Operating income		313		335		647		600
Other income (expense):
Investment income and other		10		13		24		24
Interest expense		(16)		(19)		(34)		(38)
Earnings before income tax expense		307		329		637		586
Income tax expense		69		85		134		134
Net earnings	$	238	$	244	$	503	$	452

Basic earnings per share	$	0.89	$	0.88	$	1.88	$	1.61
Diluted earnings per share	$	0.89	$	0.86	$	1.86	$	1.58

Weighted-average common shares outstanding
Basic		267.1		279.0		267.4		280.8
Diluted		269.4		283.7		270.9		286.0

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Revenue $ 9,590
$ 9,320
$ 28,078
$ 26,788
Cost of goods sold 7,266
7,040
21,400
20,333
Gross profit 2,324
2,280
6,678
6,455
Selling, general and administrative expenses 2,002
1,932
5,709
5,484
Restructuring charges —
(2 ) 47
—
Operating income 322
350
922
971
Other income (expense):

Gain on sale of investments 12
—
12
—
Investment income and other 11
12
35
30
Interest expense (15 ) (20 ) (53 ) (57 )
Earnings from continuing operations before income tax expense 330
342
916
944
Income tax expense 53
104
187
309
Net earnings from continuing operations 277
238
729
635
Gain from discontinued operations (Note 1), net of tax —
1
—
1
Net earnings $ 277
$ 239
$ 729
$ 636

Basic earnings per share $ 1.01
$ 0.80
$ 2.62
$ 2.09
Diluted earnings per share $ 0.99
$ 0.78
$ 2.57
$ 2.05

Weighted-average common shares outstanding

Basic 274.3
299.1
278.6
304.1
Diluted 279.3
305.4
283.8
310.6

See Notes to Condensed Consolidated Financial Statements.

‎

Table of Contents

Condensed Consolidated Statements of Comprehensive Income

$ in millions (unaudited)



	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Net earnings	$	238	$	244	$	503	$	452
Foreign currency translation adjustments		5		(14)		-		(18)
Comprehensive income	$	243	$	230	$	503	$	434

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Net earnings $ 277
$ 239
$ 729
$ 636
Foreign currency translation adjustments 4
(17 ) (14 ) 25
Comprehensive income $ 281
$ 222
$ 715
$ 661

See Notes to Condensed Consolidated Financial Statements.

‎

Table of Contents

~~Condensed~~

Condensed Consolidated Statements of Cash Flows

$ in millions (unaudited)


	Six Months Ended
	August 3, 2019		August 4, 2018
Operating activities
Net earnings	$	503	$	452
Adjustments to reconcile net earnings to total cash provided by operating activities:
Depreciation and amortization		401		358
Restructuring charges		48		47
Stock-based compensation		74		63
Deferred income taxes		10		5
Other, net		9		-
Changes in operating assets and liabilities, net of acquired assets and liabilities:
Receivables		57		120
Merchandise inventories		199		187
Other assets		(29)		(53)
Accounts payable		(213)		485
Other liabilities		(243)		(430)
Income taxes		(191)		(126)
Total cash provided by operating activities		625		1,108

Investing activities
Additions to property and equipment		(385)		(375)
Purchases of investments		(319)		-
Sales of investments		-		1,565
Acquisition of business, net of cash acquired		(125)		-
Other, net		1		10
Total cash provided by (used in) investing activities		(828)		1,200

Financing activities
Repurchase of common stock		(328)		(774)
Issuance of common stock		27		29
Dividends paid		(267)		(253)
Repayments of debt		(8)		(523)
Other, net		-		(3)
Total cash used in financing activities		(576)		(1,524)
Effect of exchange rate changes on cash		(1)		(16)
Increase (decrease) in cash, cash equivalents and restricted cash		(780)		768
Cash, cash equivalents and restricted cash at beginning of period		2,184		1,300
Cash, cash equivalents and restricted cash at end of period	$	1,404	$	2,068

Nine Months Ended
November 3, 2018 October 28, 2017
Operating activities
Net earnings $ 729
$ 636
Adjustments to reconcile net earnings to total cash provided by operating activities:
Depreciation and amortization 550
500
Restructuring charges 47
—
Stock-based compensation 92
97
Deferred income taxes 15
4
Other, net (10 ) (5 )
Changes in operating assets and liabilities, net of acquired assets and liabilities:
Receivables 121
413
Merchandise inventories (2,950 ) (1,811 )
Other assets (45 ) (36 )
Accounts payable 3,085
1,530
Other liabilities (400 ) (187 )
Income taxes (127 ) 62
Total cash provided by operating activities 1,107
1,203

Investing activities

Additions to property and equipment (619 ) (489 )
Purchases of investments —
(4,047 )
Sales of investments 1,970
3,518
Acquisition of business, net of cash acquired (792 ) —
Other, net 15
2
Total cash provided by (used in) investing activities 574
(1,016 )

Financing activities

Repurchase of common stock (1,144 ) (1,138 )
Issuance of common stock 37
145
Dividends paid (376 ) (310 )
Borrowings of debt 498
—
Repayments of debt (535 ) (31 )
Other, net (6 ) (1 )
Total cash used in financing activities (1,526 ) (1,335 )
Effect of exchange rate changes on cash (16 ) 15
Increase (decrease) in cash, cash equivalents and restricted cash 139
(1,133 )
Cash, cash equivalents and restricted cash at beginning of period 1,300
2,433
Cash, cash equivalents and restricted cash at end of period $ 1,439
$ 1,300

See Notes to Condensed Consolidated Financial Statements.

‎

Table of Contents

Condensed Consolidated Statements of Changes in Shareholders' Equity

$ and shares in millions, except per share amounts (unaudited)




	Common ‎Shares		Common ‎Stock		Additional ‎Paid-In ‎Capital		Retained ‎Earnings		Accumulated Other ‎Comprehensive ‎Income (Loss)		Total
Balances at May 4, 2019		267	$	27	$	-	$	3,038	$	289	$	3,354
Adoption of ASU 2016-02		-		-		-		(3)		-		(3)
Net earnings, three months ended August 3, 2019		-		-		-		238		-		238
Other comprehensive income, net of tax:
Foreign currency translation adjustments		-		-		-		-		5		5
Stock-based compensation		-		-		38		-		-		38
Issuance of common stock		2		-		16		-		-		16
Common stock dividends, $0.50 per share		-		-		2		(135)		-		(133)
Repurchase of common stock		(4)		(1)		(56)		(173)		-		(230)
Balances at August 3, 2019		265	$	26	$	-	$	2,965	$	294	$	3,285

Balances at February 2, 2019		266	$	27	$	-	$	2,985	$	294	$	3,306
Adoption of ASU 2016-02		-		-		-		(22)		-		(22)
Net earnings, six months ended August 3, 2019		-		-		-		503		-		503
Stock-based compensation		-		-		74		-		-		74
Issuance of common stock		4		-		27		-		-		27
Common stock dividends, $1.00 per share		-		-		4		(271)		-		(267)
Repurchase of common stock		(5)		(1)		(105)		(230)		-		(336)
Balances at August 3, 2019		265	$	26	$	-	$	2,965	$	294	$	3,285

Balances at May 5, 2018		281	$	28	$	-	$	3,082	$	310	$	3,420
Net earnings, three months ended August 4, 2018		-		-		-		244		-		244
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		-		-		-		-		(14)		(14)
Stock-based compensation		-		-		31		-		-		31
Issuance of common stock		1		-		5		-		-		5
Common stock dividends, $0.45 per share		-		-		2		(127)		-		(125)
Repurchase of common stock		(6)		(1)		(38)		(336)		-		(375)
Balances at August 4, 2018		276	$	27	$	-	$	2,863	$	296	$	3,186

Balances at February 3, 2018		283	$	28	$	-	$	3,270	$	314	$	3,612
Adoption of ASU 2014-09		-		-		-		73		-		73
Net earnings, six months ended August 4, 2018		-		-		-		452		-		452
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		-		-		-		-		(18)		(18)
Stock-based compensation		-		-		63		-		-		63
Issuance of common stock		4		-		29		-		-		29
Common stock dividends, $0.90 per share		-		-		4		(255)		-		(251)
Repurchase of common stock		(11)		(1)		(96)		(677)		-		(774)
Balances at August 4, 2018		276	$	27	$	-	$	2,863	$	296	$	3,186

Three Months Ended November 3, 2018

Common
Shares

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings
Accumulated Other Comprehensive Income (Loss) Total
Balances at August 4, 2018 276
$ 27
$ —
$ 2,863
$ 296
$ 3,186
Net earnings —
—
—
277
—
277
Other comprehensive income, net of tax:

Foreign currency translation adjustments —
—
—
—
4
4
Stock-based compensation —
—
29
—
—
29
Issuance of common stock —
—
8
—
—
8
Common stock dividends, $0.45 per share —
—
1
(124 ) —
(123 )
Repurchase of common stock (4 ) —
(38 ) (331 ) —
(369 )
Balances at November 3, 2018 272
$ 27
$ —
$ 2,685
$ 300
$ 3,012

Nine Months Ended November 3, 2018
Common
Shares Common
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated Other Comprehensive Income (Loss) Total
Balances at February 3, 2018 283
$ 28
$ —
$ 3,270
$ 314
$ 3,612
Adoption of ASU 2014-09 —
—
—
73
—
73
Net earnings —
—
—
729
—
729
Other comprehensive loss, net of tax:
Foreign currency translation adjustments —
—
—
—
(14 ) (14 )
Stock-based compensation —
—
92
—
—
92
Issuance of common stock 4
—
37
—
—
37
Common stock dividends, $1.35 per share —
—
5
(379 ) —
(374 )
Repurchase of common stock (15 ) (1 ) (134 ) (1,008 ) —
(1,143 )
Balances at November 3, 2018 272
$ 27
$ —
$ 2,685
$ 300
$ 3,012

Three Months Ended October 28, 2017
Common
Shares Common
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated Other Comprehensive Income (Loss) Total
Balances at July 29, 2017 300
$ 30
$ —
$ 3,996
$ 321
$ 4,347
Net earnings —
—
—
239
—
239
Other comprehensive loss, net of tax:
Foreign currency translation adjustments —
—
—
—
(17 ) (17 )
Stock-based compensation —
—
30
—
—
30
Issuance of common stock 2
1
20
—
—
21
Common stock dividends, $0.34 per share —
—
—
(102 ) —
(102 )
Repurchase of common stock (6 ) (1 ) (50 ) (315 ) —
(366 )
Balances at October 28, 2017 296
$ 30
$ —
$ 3,818
$ 304
$ 4,152

Nine Months Ended October 28, 2017
Common
Shares Common
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated Other Comprehensive Income (Loss) Total
Balances at January 28, 2017 311
$ 31
$ —
$ 4,399
$ 279
$ 4,709
Adoption of ASU 2016-09 —
—
10
(12 ) —
(2 )
Net earnings —
—
—
636
—
636
Other comprehensive income, net of tax:
Foreign currency translation adjustments —
—
—
—
25
25
Stock-based compensation —
—
97
—
—
97
Issuance of common stock 7
1
144
—
—
145
Common stock dividends, $1.02 per share —
—
—
(311 ) —
(311 )
Repurchase of common stock (22 ) (2 ) (251 ) (894 ) —
(1,147 )
Balances at October 28, 2017 296
$ 30
$ —
$ 3,818
$ 304
$ 4,152

See Notes to Condensed Consolidated Financial Statements.
‎

Table of Contents

Notes to Condensed Consolidated Financial Statements

(unaudited)


1.	~~Basis of Presentation~~

1.Basis of Presentation

Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Condensed Consolidated Financial Statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.

Historically, we have generated a large proportion of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018.~~2, 2019. The first ~~nine~~six months of fiscal ~~2019~~2020 and fiscal ~~2018~~2019 included 3926 weeks.

In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our condensed consolidated financial statements. No such events were identified for the reported periods.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from ~~November 4, 2018,~~August 3, 2019, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. NoOther

than as disclosed in Note 15, Subsequent Event, no such events were identified for the reported periods.

Unadopted Accounting Pronouncements

In ~~February 2016,~~January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2016-02,~~ ~~Leases~~No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will ~~require lessees to recognize most leases~~record an impairment charge based on ~~their balance sheets related to~~ the ~~rights and obligations created by those leases, and will expand disclosure requirements. The~~excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). We do not believe the new guidance, ~~was issued to increase transparency and comparability among companies.~~ which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In ~~July~~August 2018, the FASB ~~approved an amendment~~issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. We do not believe the updated guidance, which is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. We do not believe the new guidance, ~~that allows companies~~which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

Adopted Accounting Pronouncements

In February 2016, the ~~option~~FASB issued ASU 2016-02, Leases, which requires the recognition of ~~using~~operating lease assets and lease liabilities on the ~~effective date~~balance sheet. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new standard, asdisclosures are required to enable users of financial statements to assess the ~~initial application (at the beginning~~amount, timing and uncertainty of ~~the period in which is it adopted, rather than at the beginning~~cash flows arising from leases.

Table of the earliest comparative period) and to recognize the effects of applying the new ASU as a cumulative effect adjustment to the opening balance sheet or retained earnings. Based on the effective dates, we expect to adopt the new guidance inContents

In the first quarter of fiscal 2020, we adopted ASU 2016-02 using the “Comparatives Under 840 Option” approach to transition. Under this method, financial information related to periods prior to adoption will be as originally reported under the previous standard – ASC 840, Leases. The effects of adopting the new standard (ASC 842, Leases) in fiscal 2020 were recognized as a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal first quarter. We elected the package of practical expedients permitted under the transition ~~election~~guidance within the new standard, which, among other things, allows us to ~~not restate comparative periods~~carry forward the historical lease classification as operating or capital leases. We also elected to combine lease and ~~are in process of implementing required upgrades~~non-lease components and to ~~our existing lease systems. While we expect adoption to lead to a material increase in the assets and liabilities recorded on~~exclude short-term leases from our consolidated balance ~~sheet~~sheets. We did not elect the hindsight practical expedient in determining the lease term for existing leases as of February 3, 2019.

The most significant impact of adoption was the recognition of operating lease assets and ~~an increase to~~operating lease liabilities of $2.7 billion and $2.8 billion, respectively, while our footnote disclosures related to leases, we are still evaluating the impact on our consolidated statement of earnings. We also expect that adoption of the new standard will require changes to our internal controls over financial reporting.

~~Adopted Accounting Pronouncements~~

~~In the first quarter of fiscal 2019, we prospectively adopted the following ASUs, all of which had an immaterial impact on our results of operations, cash flows and financial position.~~

~~ASU 2016-16,~~ ~~Intra-Entity Transfers of Assets Other Than Inventory~~

~~ASU 2017-12,~~ ~~Derivatives and Hedging~~

~~ASU 2018-02,~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~

~~In the first quarter of fiscal 2019, we also adopted ASU 2014-09,~~ ~~Revenue from Contracts with Customers. The new guidance establishes a single comprehensive model for entities to use in~~ accounting for ~~revenue and supersedes most revenue recognition guidance. It introduces a five-step process for revenue recognition that focuses on transfer of control,~~existing capital leases (now referred to as opposed to transfer of risk and rewards under previous guidance. We elected the modified retrospective method of adoption, which we applied to contracts not completed at the date of adoption. Under this method, we recorded an increase to opening retained earnings of $73

~~million, net of tax, due to the~~finance leases) remained substantially unchanged. The cumulative impact of these ~~changes. The impact was primarily~~changes decreased retained earnings by $22 million, which includes a $3 million net-of-tax adjustment made during the second quarter of fiscal 2020 related to ~~the timing of revenue recognition related to our gift cards, the sale of certain software licenses and our loyalty programs. We did not make any adjustments to prior period financial statements.~~on-adoption impairment charges. We expect the impact of adoption to be immaterial to our ~~revenue, net~~consolidated statements of earnings and consolidated statements of cash flows on an ongoing basis. As part of ~~the~~our adoption, we also modified ~~certain~~our control procedures and processes, none of which ~~had a material effect on~~materially affected our internal ~~controls~~control over financial reporting.

See Note 4, Leases, for additional information regarding our accounting policy for leases and additional disclosures.

The cumulative effect of the changes made to our Condensed Consolidated Balance Sheets ~~on February 4, 2018,~~ for the adoption of this standard was as follows ($ in millions):



	February 2, 2019 ‎As Reported		ASU 2016-02 Adjustment on February 3, 2019			February 3, 2019 ‎Adjusted
Assets
Other current assets	$	466	$	(65)	^(a)	$	401
Net property and equipment		2,510		(173)	^(b)		2,337
Operating lease assets		-		2,732	^(c)		2,732
Other assets		606		5	^(d)		611
Liabilities
Accrued liabilities		982		(28)	^(e)		954
Current portion of operating lease liabilities		-		712	^(f)		712
Current portion of long-term debt		56		(43)	^(b)		13
Long-term liabilities		750		(115)	^(e)		635
Long-term operating lease liabilities		-		2,135	^(f)		2,135
Long-term debt		1,332		(140)	^(b)		1,192
Equity
Retained earnings		2,985		(22)	^(g)		2,963

February 3, 2018
As Reported
ASU 2014-09 Adjustment on February 4, 2018 February 4, 2018 Adjusted
Assets
Other assets $ 374
$ (19 ) $ 355
Liabilities
Unredeemed gift card liabilities 385
(69 ) 316
Deferred revenue 453
(26 ) 427
Accrued liabilities 864
(3 ) 861
Accrued income taxes 137
6
143
Equity
Retained earnings 3,270
73
3,343

~~The following tables reflect~~

(a)Represents the reclassification of prepaid rent and leasehold acquisition costs to Operating lease assets.

(b)Represents the derecognition of financing obligations and reclassification to Operating lease assets.

(c)Represents the capitalization of operating lease assets and the reclassification of prepaid rent and leasehold acquisition costs, offset by the reclassification of straight-line rent accruals, tenant improvement allowances and vacant space reserves.

(d)Represents the deferred tax impact of ~~adopting this standard on our Condensed Consolidated Balance Sheets as~~the on-adoption adjustments.

(e)Represents the reclassification of ~~November 3, 2018,~~straight-line rent accruals, tenant improvement allowances and ~~our Condensed Consolidated Statements~~vacant space reserves to Operating lease assets.

(f)Represents the recognition of ~~Earnings for~~operating lease liabilities.

(g)Represents the ~~three~~net-of-tax retained earnings impact of impairment charges and ~~nine months ended November 3, 2018 ($ in millions, except per share amounts):~~

November 3, 2018
Impact of Changes to Condensed Consolidated Balance Sheets As Reported
Balances without Adoption of
ASU 2014-09

Effect of Change Higher/(Lower)⁽¹⁾
Assets
Other current assets $ 508
$ 459
$ 49
Other assets 653
672
(19 )
Liabilities
Unredeemed gift card liabilities 281
349
(68 )
Deferred revenue 449
472
(23 )
Accrued liabilities 823
777
46
Accrued income taxes 21
15
6
Equity
Retained earnings 2,685
2,616
69


~~(1)~~	~~Effect of change includes the opening retained earnings adjustment as detailed within the table above.~~

Three Months Ended November 3, 2018
Impact of Changes to Condensed Consolidated Statements of Earnings As Reported
Balances without Adoption of
ASU 2014-09
Effect of Change Higher/(Lower)
Revenue $ 9,590
$ 9,575
$ 15
Cost of goods sold 7,266
7,250
16
Gross profit 2,324
2,325
(1 )
Operating income 322
323
(1 )
Income tax expense 53
53
—
Net earnings 277
278
(1 )

Basic earnings per share $ 1.01
$ 1.01
$ —
Diluted earnings per share $ 0.99
$ 0.99
$ —

Nine Months Ended November 3, 2018
Impact of Changes to Condensed Consolidated Statements of Earnings As Reported Balances without Adoption of
ASU 2014-09 Effect of Change Higher/(Lower)
Revenue $ 28,078
$ 28,043
$ 35
Cost of goods sold 21,400
21,361
39
Gross profit 6,678
6,682
(4 )
Operating income 922
926
(4 )
Income tax expense 187
188
(1 )
Net earnings 729
732
(3 )

Basic earnings per share $ 2.62
$ 2.63
$ (0.01 )
Diluted earnings per share $ 2.57
$ 2.58
$ (0.01 )

~~SEC Disclosure Update~~

In the ~~third quarter~~derecognition of ~~fiscal 2019, the U.S. Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-10532,~~ ~~Disclosure Update and Simplification~~, amending certain disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded. Other than the amendment's expanded disclosure requirement for interim financial statements to include both current and comparative quarter- and year-to-date reconciliations of changes in shareholders' equity, it did not have a material impact on our interim disclosures or financial statements, nor do we expect it to have a material impact on our annual disclosures or financial statements.

financing obligations.

Total Cash, Cash Equivalents and Restricted Cash

The ~~following table provides a~~ reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the ~~total~~totals shown within the Condensed Consolidated Statements of Cash Flows was as ~~of November 3, 2018, February 3, 2018, and October 28, 2017~~follows ($ in millions):



	August 3, 2019		August 4, 2018
Cash and cash equivalents	$	1,289	$	1,865
Restricted cash included in Other current assets		115		203
Total cash, cash equivalents and restricted cash	$	1,404	$	2,068

November 3, 2018 February 3, 2018 October 28, 2017
Cash and cash equivalents $ 1,228
$ 1,101
$ 1,103
Restricted cash included in Other current assets 211
199
197
Total cash, cash equivalents and restricted cash $ 1,439
$ 1,300
$ 1,300

Amounts included in restricted cash are pledged as collateral or restricted to use for workers’ compensation and general liability insurance ~~and workers' compensation insurance.~~claims.

Table of Contents

~~Discontinued Operations~~

Discontinued operations reflects activity within our International segment. Gain from discontinued operations for the three and nine months ended October 28, 2017, was $1 million, primarily related to the proceeds attributed to a non-compete clause from the sale of Best Buy Europe to Carphone Warehouse plc.


2.	~~Acquisition~~

~~GreatCall,~~

2. Acquisition

Critical Signal Technologies, Inc.

On ~~October 1, 2018,~~May 9, 2019, we acquired all of the outstanding shares of ~~GreatCall,~~Critical Signal Technologies, Inc. ~~("GreatCall"~~(“CST”), a health services company, for net cash consideration of ~~$792~~$125 million. GreatCall, a leading connected health services provider for aging consumers, offers easy-to-use mobile products and connected devices, tailored for seniors. These products are combined with a range of services, including a simple, one-touch connection to U.S.-based, specially-trained agents who can connect the user to family caregivers, provide concierge services and dispatch emergency personnel. The acquisition of ~~GreatCall~~CST is aligned with our strategy to address health and wellness with a focus on aging ~~consumers~~seniors and how technology can help them live ~~a more independent life.~~

longer in their homes.

The acquisition was accounted for using the acquisition method of accounting for business combinations. Accordingly, the cost was allocated to the underlying net assets based on their respective fair ~~values. The~~values, and the excess of the purchase price over the

estimated fair value of the net assets acquired was recorded as goodwill. All of the goodwill was assigned to our Domestic reportable segment and is not expected to be deductible for income tax purposes. We recorded $13 million of transaction costs related to the acquisition within Selling, general and administrative ("SG&A") expenses on our Condensed Consolidated Statements of Earnings for the three months ended November 3, 2018. Results of operations from the date of acquisition were included within our Domestic segment and our Services revenue category. The acquisition of GreatCall was not material to the results of our operations.

The purchase price allocation for the assets acquired and liabilities assumed is substantially complete, but may be subject to immaterial ~~change as we complete our valuation analysis in the fourth quarter~~changes. The acquired assets were primarily comprised of ~~fiscal 2019. The fair value~~$83 million of ~~assets acquired and liabilities assumed as of the acquisition date on October 1, 2018, was as follows ($ in millions):~~

Current assets $ 34
Goodwill 496
Intangible assets⁽¹⁾
371
Other assets 27
Total assets acquired 928
Accrued liabilities 56
Long-term liabilities 72
Total liabilities assumed 128
Total purchase price 800
Less: Cash acquired 8
Total purchase price, net of cash acquired $ 792


~~(1)~~	The components of Intangible assets included consumer customer relationships of $235 million (amortized over 5 years), tradename of $61 million (amortized over 8 years), developed technology of $52 million (amortized over 5 years) and commercial customer relationships of $23 million (amortized over 10 years).


3.	~~Revenue Recognition~~

We generate revenue primarily from the sale of products and services, both as a principal and as an agent. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the transaction price consideration that we expect to receive in exchange for those goods or services. Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods or services. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. We generate all of our operating revenue from contracts with customers. Our revenue excludes sales and usage-based taxes collected.

Revenue from product sales and services is reported net of sales refunds, which includes an estimate of future returns and contract cancellations based on historical refund rates, with a corresponding reduction to cost of sales. There is inherent judgment in estimating future refunds as they are susceptible to factors outside of our influence. However, we have significant experience in estimating the amount of refunds, based primarily on historical data. Our refund liability for sales returns was $69 million at November 3, 2018, which is included in Accrued liabilities on our Condensed Consolidated Balance Sheets and represents the expected value of the aggregate refunds that will be due to our customers. We also have a corresponding asset included inrelationships (amortized over 15 years) recorded within Other ~~current~~ assets on our Condensed Consolidated Balance Sheets ~~that represents the inventory we expect to be returned, valued at the lower of cost or net realizable value. As of November 3, 2018, this amount was $48 million.~~

For revenue transactions that involve more than one performance obligation, we defer the revenue associated with any unsatisfied performance obligation until the obligation is satisfied, i.e., when control of a product is transferred to the customer or a service is completed. For such contracts, we allocate revenue and any discounts to each performance obligation based on its relative standalone selling price. We determine standalone selling prices based on the prices charged to customers or, when directly observable selling prices are not available, we generally use an expected cost-plus margin approach.

Our contract liabilities primarily relate to product merchandise not yet delivered to customers; unredeemed gift cards; services not yet completed; services technical support contracts, where performance is satisfied over the duration of the contract; and options that provide a material right to customers, such as our customer loyalty programs. Most of our contract liabilities have a duration of one year or less. For an insignificant portion of our technical support service contracts, terms of up to three years apply. We do not have any material contract assets.

The following table provides information about receivables and contract liabilities from our contracts with customers, which reflects the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as of ~~November~~August 3, ~~2018,~~2019. Goodwill of $50 million was recorded and ~~February 4, 2018 ($ in millions):~~

November 3, 2018 February 4, 2018
Receivables, net of an allowance for doubtful accounts of $15 and $24, respectively $ 588
$ 674
Short-term contract liabilities included in: ��
Unredeemed gift cards 281
316
Deferred revenue 449
408
Accrued liabilities 149
151
Long-term contract liabilities included in:
Long-term liabilities 12
22

~~We establish allowances for uncollectible receivables based on historical collection trends and write-off history.The following table summarizes our allowance for doubtful accounts activity related to contracts with customers during the nine months ended November 3, 2018 ($ in millions):~~

Allowance for Doubtful Accounts
Balance at February 4, 2018 $ 24
Charged to expenses or other accounts 27
Other⁽¹⁾
(36 )
Balance at November 3, 2018 $ 15


~~(1)~~	~~Includes bad debt write-offs, recoveries and the effect of foreign currency fluctuations.~~

~~The following table summarizes significant changes in our contract liability balances during the nine months ended November 3, 2018 ($ in millions):~~

Nine Months Ended
November 3, 2018
Revenue recognized that was included in the contract liability balance(s) as of February 4, 2018 $ 729
Revenue recognized from performance obligations satisfied in previous periods —
Increase due to acquisition⁽¹⁾
14
Adjustments⁽²⁾
2


~~(1)~~	~~Represents an increase in our contract liability balances due to our acquisition of GreatCall, primarily related to deferred revenue.~~


~~(2)~~	~~Includes changes in the measure of progress, changes in the estimate of the transaction price or contract modifications.~~

The following table includes estimated revenue from our contract liability balances expected to be recognized in future periods if performance of the contract is expected to have a duration of more than one year ($ in millions):

November 3, 2018⁽¹⁾
Remainder of fiscal 2019 $ 6
Fiscal 2020 14
Fiscal 2021 6
Fiscal 2022 2
Fiscal 2023 and thereafter 1

~~(1)~~

We have elected to exclude unsatisfied performance obligations from contract liability balances with a duration of one year or less. The estimated transaction price revenue disclosed above also does not include amounts of variable consideration attributable to contracts where the consideration is constrained at November 3, 2018. Further information about our forms of variable consideration is disclosed below.

~~We apply a practical expedient to expense direct costs of obtaining a contract when incurred because the amortization period would have been one year or less.~~

~~See Note 12,~~ ~~Segments,~~ for a disaggregation of revenue by reportable segment and product category, which represents how our chief operating decision maker reviews information internally to evaluate our financial performance and to make resource allocation and other decisions for the enterprise.

~~Product Revenue~~

Product revenue is recognized when control passes, which generally occurs at a point in time when the customer completes a transaction in the store and receives the merchandise. Our payment terms are typically at the point of sale. In the case of items paid for in the store, but subsequently delivered to the customer, control passes and revenue is recognized once delivery has been completed, as we have transferred possession to the customer.

For transactions initiated online, customers choose whether to have it delivered to them (using third-party parcel delivery companies) or to collect their merchandise from one of our stores (“in-store pick up”). For items delivered directly to the customer, control passes and revenue is recognized when delivery has been completed to the customer, as title has passed and we have transferred possession to the customer. For in-store pick up, control passes and revenue is recognized once the customer has taken possession of the merchandise. Any fees charged to customers for delivery are a component of the transaction price and are recognized when delivery has been completed. We use delivery information at an individual contract level to determine when to recognize revenue for products and any related delivery fee revenue.

Generally, we are the principal to the contract as we have control of the physical products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. For certain sales, primarily activation-based software licenses and third-party stored-value cards, we are the sales agent providing access to the content and recognize fixed commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes upon providing access of the content to the customer.

Warranty obligations associated with the sale of our exclusive brands products are assurance-type warranties that are a guarantee of the product’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.

~~Services - When we are the principal~~

We recognize service revenue for installation, set-up, software troubleshooting, product repair, consultation and educational classes once the service is completed, as this is when the customer has the ability to direct the use of and obtain the benefits of the service or serviced product. Payment terms are typically at the point of sale, but may also occur upon completion of the service. Our service contracts are primarily with retail customers, merchandise vendors (for factory warranty repairs) and third-party underwriters who sell extended warranty protection plans.

For technical support membership contracts, we are responsible for fulfilling the support services to customers. These contracts have terms ranging from one month to three years and typically contain multiple performance obligations. Payment for the membership contracts is due at the start of the contract period. We have determined that our contracts do not include a significant financing component. The primary purpose of our payment terms is to provide customers with a simplified method of purchasing our services, not to provide customers with financing. We recognize revenue over time on a service consumption basis, an input method of measuring progress over the related contract term. This method is based on historical utilization patterns as this depicts when customers use the services and discounts provided and, accordingly, when delivery of the performance obligation occurs. There is judgment in (1) determining the level at which we apply a portfolio approach to these contracts, and (2) measuring the relative standalone selling price for performance obligations within these contracts to the extent that they are only bundled and sold to customers with other performance obligations. When direct observable evidence of the standalone selling price is not available, a cost-plus margin approach is generally used. Additionally, there is judgment in (3) assessing the pattern of delivery across multiple portfolios of customers, including measuring future progress based on historical consumption patterns. When sufficient history of consumption is unavailable, we generally recognize revenue ratably over the life of the contract.

~~Services - When we are the agent~~

We sell various hardware protection plans to customers that provide extended warranty coverage on their device purchases. Such plans have terms ranging from one month to five years. Payment is due at the point of sale. Third-party underwriters assume the risk associated with the coverage and are primarily responsible for fulfillment. We record the fixed net commissions (the amount charged to the customer less the premiums remitted to the underwriter) as revenue at a point in time when the corresponding product revenue is recognized. In addition, we are eligible to receive profit-sharing payments,

a form of variable consideration, which are dependent upon the profitable performance of the portfolio. We do not share in any losses of the portfolio. We record any such profit share as revenue once the uncertainty associated with the portfolio period, which is calendar-year based, is no longer constrained using the expected value method. This typically occurs when claims experience for the annual period is known in our fiscal fourth quarter, with payment of the profit share occurring in the subsequent fiscal year.

We earn fixed commissions from mobile network carriers to sell service contracts on their platforms. Revenue is recognized when control passes at a point in time upon sale of the contract and activation of the customer on the provider’s platform. The time between when we bill the content provider and when we receive payment is generally within 30 to 60 days, which is after control has passed. Activation commissions are subject to repayment to the carrier primarily due to customer cancellation for specified time periods after the sale. Commission revenue from mobile network carriers is reported net of the expected cancellations, which we estimate based on historical cancellation rates.

~~Credit Card Revenue~~

~~We offer promotional financing and credit cards issued by third-party banks that manage and directly extend credit~~assigned to our ~~customers. We provide a license to our brand~~GreatCall reporting unit and marketing services, and we facilitate credit applications in our stores and online. The banks are the sole owners of the accounts receivable generated under the program and, accordingly, we do not hold any customer receivables related to these programs and act as an agent in the financing transactions with customers. We are eligible to receive a profit share from our banking partner based on the annual performance of the program, and we receive quarterly payments based on forecasts of full-year performance. This is a form of variable consideration. We record such profit share as revenue over time using the most likely amount method, which reflects the amount earned each quarter when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically quarterly. Profit-share payments occur quarterly, shortly after the end of each program quarter.

~~Best Buy Gift Cards~~

We sell Best Buy gift cards to our customers in our retail stores, online and through select third parties. Our gift cards do not have an expiration date. We recognize revenue from gift cards when the card is redeemed by the customer. We also recognize revenue for the portion of gift card values that is not expected to be ~~redeemed ("breakage").~~deductible for income tax purposes. We ~~estimate breakage based~~recorded $3 million of transaction costs related to the acquisition within Selling, general and administrative (“SG&A”) expenses on ~~historical patterns~~our Condensed Consolidated Statements of Earnings for the second quarter and ~~other factors, such as laws and regulations applicable to each jurisdiction.~~

~~We recognize gift card breakage based on the expected pattern~~first six months of ~~gift card redemptions, based on analysis~~fiscal 2020. Results of historic trends. Typically, over 90% of gift card values are redeemed within one year of issuance. There is judgment in assessing (1) the level at which we group gift cards for analysis of breakage rates, (2) redemption patterns, and (3) the ultimate value of gift cards that we do not expect to be redeemed.

~~Sales Incentives~~

We frequently offer sales incentives that entitle our customers to receive a gift card at the time of purchase or an instant savings coupon that can be redeemed towards a future purchase. For sales incentives issued to customers that are only earned in conjunction with the purchase of products or services, the sales incentives represent an option that is a material right and, accordingly, is a performance obligation in the contract. The relative standalone selling price of these sales incentives is deferred as a contract liability, based on the cards or coupons that are projected to be redeemed. We recognize revenue for this performance obligation when it is redeemed by the customer or when it is not expected to be redeemed. There is judgment in determining (1) the level at which we group incentives based on similar redemption patterns, (2) redemption patterns, and (3) the ultimate number of incentives that we do not expect to be redeemed.

We also issue coupons that are not earned in conjunction with a purchase of a product or service, typically as part of targeted marketing activities. This is not a performance obligation, but is recognized as a reduction of the transaction price when redeemed by the customer.

~~Customer Loyalty Programs~~

We have customer loyalty programs which allow members to earn points for each qualifying purchase. Points earned enable members to receive a certificate that may be redeemed on future purchases at our Best Buy branded stores. Depending on the customer's membership level within our loyalty program, certificate expirations typically range from 2 to 12 monthsoperations from the date of ~~issuance. Our loyalty programs represent customer options that provide a~~acquisition were included within our GreatCall operating segment, Domestic reportable segment and Services revenue category. The acquisition of CST was not material ~~right and, accordingly, are performance obligations for each applicable contract. The relative standalone selling price~~to the results of ~~points earned~~

by our loyalty program members is deferred and included in Accrued liabilities on our Condensed Consolidated Balance Sheets based on the percentage of points that are projected to be redeemed. We recognize revenue for this performance obligation over time when a certificate is estimated to be redeemed by the customer. There is judgment in measuring the standalone selling price of this performance obligation related to our estimate of the amount of and subsequent timing of redemptions of certificates (“certificate breakage”). We determine our certificate breakage rate based upon an analysis of historic trends. There is judgment in assessing (1) the level at which we group certificates for analysis of breakage rates, (2) redemption patterns, and (3) the ultimate value of certificates that we do not expect to be redeemed.


4.	~~Fair Value Measurements~~

operations.

3. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:

Level 1 — Unadjusted quoted prices that are available in active markets for ~~the~~ identical assets or liabilities at the measurement date.

Level 2 — Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

Inputs other than quoted prices that are observable for the asset or liability; and

Inputs that are derived principally from or corroborated by other observable market data.

Level 3 — Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Table of Contents

~~The following table sets forth our financial~~

Financial assets and liabilities ~~that were~~ accounted for at fair value ~~on a recurring basis at~~ ~~November 3, 2018, February 3, 2018, and~~ ~~October 28, 2017, by level within the fair value hierarchy~~were as ~~determined by the valuation techniques we used to determine the fair value~~follows ($ in millions):



		Fair Value	Fair Value at
	Hierarchy		August 3, 2019		February 2, 2019		August 4, 2018
Assets
Cash and cash equivalents:
Money market funds		Level 1	$	375	$	98	$	334
Time deposits		Level 2		-		300		-
Short-term investments:
Commercial paper		Level 2		99		-		-
Time deposits		Level 2		221		-		465
Other current assets:
Money market funds		Level 1		10		82		74
Time deposits		Level 2		102		101		101
Foreign currency derivative instruments		Level 2		-		-		5
Other assets:
Marketable securities that fund deferred compensation		Level 1		47		44		100
Interest rate swap derivative instruments		Level 2		78		26		-

Liabilities
Long-term liabilities:
Interest rate swap derivative instruments		Level 2		-		1		7

Fair Value Hierarchy
Fair Value at
November 3, 2018 February 3, 2018 October 28, 2017
Assets

Cash and cash equivalents:

Money market funds Level 1 $ 126
$ 21
$ 84
Commercial paper Level 2 —
90
—
Time deposits Level 2 —
65
—
Short-term investments:
Commercial paper Level 2 —
474
588
Time deposits Level 2 76
1,558
1,649
Other current assets:

Money market funds Level 1 72
3
8
Commercial paper Level 2 —
60
60
Time deposits Level 2 100
101
100
Foreign currency derivative instruments Level 2 1
2
5
Interest rate swap derivative instruments Level 2 —
—
3
Other assets:
Marketable securities that fund deferred compensation Level 1 100
99
98

Liabilities

Accrued liabilities:

Foreign currency derivative instruments Level 2 —
8
5
Interest rate swap derivative instruments Level 2 —
1
—
Long-term liabilities:
Interest rate swap derivative instruments Level 2 22
4
3

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Money market funds. Our money market fund investments were measured at fair value as they trade in an active market using quoted market prices and, therefore, were classified as Level 1.

~~Commercial paper.~~ ~~Our investments in commercial paper were measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2.~~

Time deposits. Our time deposits are balances held with banking institutions that cannot be withdrawn for specified terms without a penalty. Time deposits are held at face value plus accrued interest, which approximates fair value, and ~~are~~were classified as Level 2.

Commercial paper. Our investments in commercial paper were measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2.

Foreign currency derivative instruments. Comprised primarily of foreign currency forward ~~contracts and foreign currency swap~~ contracts, our foreign currency derivative instruments were measured at fair value using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. Our foreign currency derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

~~Interest rate swap derivative instruments.~~ Our interest rate swap contracts were measured at fair value using readily observable inputs, such as the LIBOR interest rate. Our interest rate swap derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Marketable securities that fund deferred compensation. The assets that fund our deferred compensation consist of investments in corporate-owned life insurance, the value of which is based on select mutual fund performance. These investments were classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.

Interest rate swap derivative instruments. Our interest rate swap contracts were measured at fair value using readily observable inputs, such as the LIBOR interest rate. Our interest rate swap derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, operating lease assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below the carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust the carrying value to fair value, except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded within Selling, general and administrative (“SG&A&A”) expenses ~~or Restructuring charges~~ on our Condensed Consolidated Statements of Earnings for non-restructuring ~~and restructuring charges, respectively.~~charges.

Table of Contents

~~The following table summarizes the fair~~

Fair value remeasurements of property and equipment ~~impairments recorded during the three~~ and ~~nine months ended November 3, 2018, and October 28, 2017~~operating lease assets were as follows ($ in millions):


	Impairments								Remaining
	Three Months Ended				Six Months Ended				Net Carrying Value⁽¹⁾
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Property and equipment (non-restructuring)	$	8	$	2	$	10	$	4	$	3	$	2
Operating lease assets⁽²⁾		1		-		1		-		1		-
Total	$	9	$	2	$	11	$	4	$	4	$	2

Impairments
Remaining Net Carrying Value⁽¹⁾
Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Property and equipment (non-restructuring) $ 3
$ 2
$ 8
$ 8
$ —
$ —


~~(1)~~	Remaining net carrying value approximates fair value. Because assets subject to long-lived asset impairment are not measured at fair value on a recurring basis, certain fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at November 3, 2018, and October 28, 2017.

(1)Remaining net carrying value approximates fair value. Because assets subject to long-lived asset impairment are not measured at fair value on a recurring basis, certain fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at August 3, 2019, and August 4, 2018.

(2)Represents activity related to operating lease assets post-adoption of ASC 842, Leases.

All of the fair value remeasurements included in the table above were based on significant unobservable inputs (Level 3). Fixed asset fair values were primarily derived using a discounted cash flow ("DCF") model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate.

Fair Value of Financial Instruments

Our financial instruments, other than those presented in the disclosures above, include cash, receivables, other investments, accounts payable, other payables and long-term debt. The fair values of cash, receivables, accounts payable and other payables approximated carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate fair value. See Note 7, Debt, for information about the fair value of our long-term debt.

4. Leases

The majority of our lease obligations are real estate operating leases from which we conduct the majority of our retail and distribution operations. Our finance leases are primarily equipment-related. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on our Condensed Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASC 842, Leases, we have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of 12 months or less are not recorded on our Condensed Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line basis over the lease term.

Operating lease assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We use a collateralized incremental borrowing rate based on the information available at the commencement date, including the lease term, in determining the present value of future payments. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components. Operating lease assets also include prepaid lease payments and initial direct costs, and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

Table of Contents

Supplemental balance sheet information related to our leases was as follows ($ in millions):


5.	~~Goodwill~~
	Balance Sheet Location	August 3, 2019
Assets
Operating leases	Operating lease assets	$	2,774
Finance leases	Property and ~~Intangible Assets~~equipment, net⁽¹⁾		36
Total lease assets		$	2,810
Liabilities
Current:
Operating leases	Current portion of operating lease liabilities	$	643
Finance leases	Current portion of long-term debt		14
Non-current:
Operating leases	Long-term operating lease liabilities		2,230
Finance leases	Long-term debt		25
Total lease liabilities		$	2,912

(1)Finance leases are recorded net of accumulated depreciation of $48 million.

Components of our total lease cost were as follows ($ in millions):


		Three Months Ended		Six Months Ended
	Statement of Earnings Location	August 3, 2019		August 3, 2019
Operating lease cost⁽¹⁾	Cost of goods sold and SG&A⁽²⁾	$	194	$	389
Finance lease cost:
Depreciation of lease assets	Cost of goods sold and SG&A⁽²⁾		4		7
Interest on lease liabilities	Interest expense		-		1
Variable lease cost	Cost of goods sold and SG&A⁽²⁾		68		135
Sublease income	SG&A		(5)		(9)
Total lease cost		$	261	$	523

(1)Includes short-term leases, which are immaterial.

(2)Supply chain-related amounts are included in Cost of goods sold.

Other information related to our leases was as follows ($ in millions):


	Three Months Ended		Six Months Ended
	August 3, 2019		August 3, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	203	$	404
Operating cash flows from finance leases		-		1
Financing cash flows from finance leases		4		8
Lease assets obtained in exchange for new lease liabilities:
Operating leases		247		394
Finance leases		2		4

			August 3, 2019
Weighted average remaining lease term:
Operating leases				5.4 years
Finance leases				5.2 years
Weighted average discount rate:
Operating leases				3.4	%
Finance leases				4.4	%

Future lease payments under our non-cancellable leases as of August 3, 2019, were as follows ($ in millions):


	Operating Leases⁽¹⁾		Finance Leases⁽¹⁾
Remainder of fiscal 2020	$	341	$	8
Fiscal 2021		756		13
Fiscal 2022		619		9
Fiscal 2023		466		5
Fiscal 2024		340		3
Fiscal 2025		234		2
Thereafter		407		5
Total future undiscounted lease payments		3,163		45
Less imputed interest		(290)		(6)
Total reported lease liability	$	2,873	$	39

(1)Lease payments exclude $30 million of legally binding fixed costs for leases signed but not yet commenced, primarily related to operating leases.

Table of Contents

In accordance with the prior guidance, ASC 840, Leases, our leases were previously designated as either capital, financing or operating. Previously designated capital leases are now considered finance leases under the new guidance, ASC 842, Leases, while our previously existing financing leases have been derecognized and reclassified as operating leases. The designation of operating leases remains substantially unchanged under the new guidance. The future minimum lease payments by fiscal year as determined prior to the adoption of ASC 842, Leases, under our previously designated capital, financing and operating leases (not including contingent rent) as disclosed in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019, were as follows ($ in millions):



	Capital Leases		Financing Leases		Operating Leases⁽¹⁾
Fiscal 2020	$	14	$	48	$	700
Fiscal 2021		11		42		648
Fiscal 2022		7		35		513
Fiscal 2023		4		24		371
Fiscal 2024		2		16		253
Thereafter		7		40		476
Total minimum lease payments		45		205	$	2,961
Less amount representing interest		(6)		(24)
Present value of minimum lease payments		39		181
Less current maturities		(12)		(43)
Present value of minimum lease maturities, less current maturities	$	27	$	138

(1)Operating lease obligations do not include payments to landlords covering real estate taxes and common area maintenance. These charges, if included, would have increased total operating lease obligations by $0.8 billion at February 2, 2019.

5. Goodwill and Intangible Assets

All goodwill and intangible asset balances relate to our Domestic segment.

Goodwill

The gross carrying amounts and cumulative impairments of goodwill were as follows ($ in millions):


	August 3, 2019				February 2, 2019				August 4, 2018
	Gross Carrying ‎Amount		Cumulative ‎Impairment		Gross Carrying ‎Amount		Cumulative ‎Impairment		Gross Carrying ‎Amount		Cumulative ‎Impairment
Goodwill	$	1,640	$	(675)	$	1,590	$	(675)	$	1,100	$	(675)

Indefinite-Lived Intangible Assets

~~The following table provides the carrying values of goodwill and~~

We have indefinite-lived intangible assets ~~which includes~~primarily related to our Pacific Sales tradename ~~for the Domestic segment as of November 3, 2018, February 3, 2018, and October 28, 2017 ($ in millions):~~

November 3, 2018 February 3, 2018 October 28, 2017
Goodwill $ 921
$ 425
$ 425
Indefinite-lived tradename included in Other assets 18
18
18

~~The following table provides the gross carrying amount of goodwill and cumulative goodwill impairment as of November 3, 2018, February 3, 2018, and October 28, 2017 ($ in millions):~~

November 3, 2018 February 3, 2018 October 28, 2017

Gross Carrying
Amount

Cumulative
Impairment

Gross Carrying
Amount

Cumulative
Impairment

Gross Carrying
Amount

Cumulative
Impairment
Goodwill $ 1,596
$ 675
$ 1,100
$ 675
$ 1,100
$ 675

~~Definite-Lived Intangible Assets~~

~~We have definite-lived intangible assets related to GreatCall included within our Domestic segment,~~ which isare recorded within Other assets on our Condensed Consolidated Balance Sheets. The ~~following table provides the gross~~ carrying ~~amount~~value of indefinite-lived intangible assets was $18 million as of August 3, 2019, February 2, 2019, and

August 4, 2018.

Definite-Lived Intangible Assets

We have definite-lived intangible assets related ~~accumulated amortization~~to GreatCall and CST which are recorded within Other assets on our Condensed Consolidated Balance Sheets. Balances of our definite-lived intangible assets were as follows ($ in millions). We had 0 definite-lived intangible assets as of ~~November 3, 2018 ($ in millions). We had no definite-lived intangible assets as~~August 4, 2018.


	August 3, 2019				February 2, 2019				Weighted-Average Useful
	Gross Carrying ‎Amount		Accumulated ‎Amortization		Gross Carrying ‎Amount		Accumulated ‎Amortization		Life Remaining as of ‎August 3, 2019 (in years)
Customer relationships	$	341	$	42	$	258	$	16		7.4
Tradename		63		7		63		3		7.2
Developed technology		52		9		52		4		4.2
Total	$	456	$	58	$	373	$	23		7.0

Table of ~~February 3, 2018, or October 28, 2017.~~

Contents

November 3, 2018
Gross Carrying Amount Accumulated Amortization
Customer relationships $ 258
$ 4
Tradename 61
1
Developed technology 52
1
Total $ 371
$ 6

We recorded $6$18 million and $35 million of aggregate amortization expense related to definite-lived intangible assets during the three and ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, respectively, and $0 million ~~during~~for both the three and ~~nine~~six months ended ~~October 28, 2017. The following table provides the amortization~~August 4, 2018. Amortization expense expected to be recognized in future periods ~~($ in millions):~~

Amortization Expense
Remainder of fiscal 2019 $ 17
Fiscal 2020 67
Fiscal 2021 67
Fiscal 2022 67
Fiscal 2023 and thereafter 147


6.	~~Restructuring Charges~~

~~Restructuring charges incurred in the three and nine months ended November 3, 2018, and October 28, 2017, were~~is as follows ($ in millions):

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Best Buy Mobile $ —
$ —
$ 47
$ —
Canadian brand consolidation —
(2 ) —
(3 )
Renew Blue —
—
—
3
Total $ —
$ (2 ) $ 47
$ —

~~Best Buy Mobile~~

On March 1, 2018, we announced our intent to close all of our 257 remaining Best Buy Mobile stand-alone stores in the U.S., of which all remaining stores were closed during the second quarter of fiscal 2019. This decision was a result of changing economics in the mobile industry since we began opening these stores in 2006, along with the integration of our mobile model into our core stores and on-line channel, which are more economically compelling today. All restructuring charges related to this plan are from continuing operations and are presented in Restructuring charges on our Condensed Consolidated Statements of Earnings.

The composition of the restructuring charges we incurred for Best Buy Mobile during the three and nine months ended November 3, 2018, as well as the cumulative amount incurred through November 3, 2018, were as follows ($ in millions):

Three Months Ended Nine Months Ended Cumulative Amount
November 3, 2018 November 3, 2018 November 3, 2018
Property and equipment impairments $ —
$ —
$ 1
Termination benefits —
(2 ) 6
Facility closure and other costs —
49
49
Total $ —

$ 47
$ 56

The following table summarizes our restructuring accrual activity during the nine months ended November 3, 2018, related to termination benefits and facility closure and other costs associated with Best Buy Mobile ($ in millions):

Termination
Benefits

Facility
Closure and
Other Costs
Total
Balances at February 3, 2018 $ 8
$ —
$ 8
Charges 1
49
50
Cash payments (6 ) (48 ) (54 )
Adjustments⁽¹⁾
(3 ) —
(3 )
Balances at November 3, 2018 $ —
$ 1
$ 1

~~(1)~~

~~Adjustments to termination benefits represent changes in retention assumptions.~~

~~Other~~

We have remaining vacant space liabilities at November 3, 2018, of $9 million related to our Canadian brand consolidation restructuring program, $9 million related to our Renew Blue restructuring program and $2 million related to our U.S. large-format store closures in fiscal 2013. We may continue to incur immaterial adjustments to these liabilities for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated.

~~7. Debt~~

~~Short-Term Debt~~

~~U.S. Revolving Credit Facility~~

On April 17, 2018, we entered into a $1.25 billion five-year senior unsecured revolving credit facility agreement (the "Five-Year Facility Agreement") with a syndicate of banks. The Five-Year Facility Agreement replaced the previous $1.25 billion senior unsecured revolving credit facility (the "Previous Facility") with a syndicate of banks, which was originally scheduled to expire in June 2021, but was terminated on April 17, 2018. The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in April 2023, with no borrowings outstanding as of November 3, 2018. There were no borrowings outstanding under the Previous Facility as of February 3, 2018, or October 28, 2017.

The interest rate under the Five-Year Facility Agreement is variable and is determined at our option as: (i) the sum of (a) the greatest of (1) JPMorgan Chase Bank, N.A.'s prime rate, (2) the greater of the federal funds rate and the overnight bank funding rate plus, in each case, 0.5%, and (3) the one-month London Interbank Offered Rate (“LIBOR”), subject to certain adjustments plus 1%, and (b) a variable margin rate (the “ABR Margin”); or (ii) the LIBOR plus a variable margin rate (the “LIBOR Margin”). In addition, a facility fee is assessed on the commitment amount. The ABR Margin, LIBOR Margin and the facility fee are based upon our current senior unsecured debt rating. Under the Five-Year Facility Agreement, the ABR Margin ranges from 0.00% to 0.30%, the LIBOR Margin ranges from 0.80% to 1.30%, and the facility fee ranges from 0.08% to 0.20%.

The Five-Year Facility Agreement is guaranteed by certain of our subsidiaries and contains customary affirmative and negative covenants. Among other things, these covenants restrict our and certain of our subsidiaries' abilities to incur liens on certain assets; make material changes in corporate structure or the nature of our business; dispose of material assets; engage in certain mergers, consolidations and other fundamental changes; or engage in certain transactions with affiliates. The Five-Year Facility Agreement also contains covenants that require us to maintain a maximum cash flow leverage ratio and a minimum interest coverage ratio. The Five-Year Facility Agreement contains default provisions including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants. At November 3, 2018, we were in compliance with all such financial covenants.

~~Long-Term Debt~~

~~Long-term debt consisted of the following at November 3, 2018, February 3, 2018, and October 28, 2017 ($ in millions):~~

November 3, 2018 February 3, 2018 October 28, 2017
2018 Notes $ —
$ 500
$ 500
2021 Notes 650
650
650
2028 Notes 500
—
—
Interest rate swap valuation adjustments (22 ) (5 ) —
Subtotal 1,128
1,145
1,150
Debt discounts and issuance costs (8 ) (3 ) (3 )
Financing lease obligations 189
191
158
Capital lease obligations 17
22
24
Total long-term debt 1,326
1,355
1,329
Less: current portion 46
544
545
Total long-term debt, less current portion $ 1,280
$ 811
$ 784

The fair value of total long-term debt, excluding debt discounts and issuance costs and financing and capital lease obligations, approximated $1,133 million, $1,199 million and $1,219 million at November 3, 2018, February 3, 2018, and October 28, 2017, respectively, based primarily on the market prices quoted from external sources, compared with carrying values of $1,128 million, $1,145 million and $1,150 million, respectively. If long-term debt was measured at fair value in the financial statements, it would be classified primarily as Level 2 in the fair value hierarchy.

~~2018 Notes~~

Our $500 million principal amount of notes due August 1, 2018 (the "2018 Notes"), were repaid on August 1, 2018, using existing cash resources and were classified within Current portion of long-term debt on our Condensed Consolidated Balance Sheets as of February 3, 2018, and October 28, 2017.

~~2028 Notes~~

On September 27, 2018, we issued $500 million principal amount of notes due October 1, 2028 (the “2028 Notes”). The 2028 Notes bear interest at a fixed rate of 4.45% per year, payable semi-annually on April 1 and October 1 of each year, beginning on April 1, 2019. Net proceeds from the issuance were $495 million after underwriting and issue discounts totaling $5 million.

We may redeem some or all of the 2028 Notes at any time at a redemption price equal to the greater of (i) 100% of the principal amount, and (ii) the sum of the present values of each remaining scheduled payment of principal and interest discounted to the redemption date on a semiannual basis, plus accrued and unpaid interest on the principal amount to the redemption date as described in the indenture (including the supplemental indenture) relating to the 2028 Notes. Furthermore, if a change of control triggering event occurs, we will be required to offer to purchase the remaining unredeemed 2028 Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the purchase date.

The 2028 Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated debt. The 2028 Notes contain covenants that, among other things, limit our ability to incur debt secured by liens or to enter into sale and lease-back transactions. At November 3, 2018, we were in compliance with all such financial covenants.

~~See Note 5,~~ ~~Debt~~, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information regarding the terms of our other debt facilities, debt instruments and other obligations.

		Amortization ‎Expense
8. Remainder of fiscal 2020	~~Derivative Instruments~~		$	37
Fiscal 2021				73
Fiscal 2022				73
Fiscal 2023				73
Fiscal 2024				54
Fiscal 2025				16
Thereafter				72

6. Derivative Instruments

We manage our economic and transaction exposure to certain risks ~~through the use of~~by using foreign currency derivative instruments and interest rate swaps. Our objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset value associated with changes in foreign currency exchange rates and interest rates. We do not hold derivative instruments for

trading or speculative purposes. We have no derivatives that have credit risk-related contingent features and we mitigate our credit risk by engaging with financial institutions with investment-grade credit ratings as our counterparties.

We record all derivative instruments on our Condensed Consolidated Balance Sheets at fair value and evaluate hedge effectiveness prospectively or retrospectively when electing to apply hedge accounting. We formally document all hedging relations at inception for derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transaction. In addition, we have derivatives which are not designated as hedging instruments.

Net Investment Hedges

We use foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations. The contracts have terms of up to 12 months. For a net investment hedge, we recognize changes in the fair value of the derivative as a component of foreign currency translation within other comprehensive income to offset a portion of the change in translated value of the net investment being hedged, until the investment is sold or liquidated. We limit recognition in net earnings of amounts previously recorded in other comprehensive income to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. We report the gains and losses, if any, related to the amount excluded from the assessment of hedge effectiveness in net earnings.

Interest Rate Swaps

We utilized "receive fixed-rate, pay variable-rate" interest rate swaps to mitigate the effect of interest rate fluctuations on our $500 million principal amount of notes due August 1, 2018, ~~Notes,~~ prior to their maturity, and currently have swaps outstanding on our $650 million principal amount of notes due March 15, 2021, ~~Notes~~ and ~~2028 Notes.~~$500 million principal amount of notes due October 1, 2028. Our interest rate swap contracts are considered perfect hedges because the critical terms and notional amounts match those of our fixed-rate debt being hedged and are, therefore, accounted for as fair value hedges using the shortcut method. Under the shortcut method, we recognize the change in the fair value of the derivatives with an offsetting change to the carrying value of the debt. Accordingly, there is no impact on our Condensed Consolidated Statements of Earnings from the fair value of the derivatives.

Derivatives Not Designated as Hedging Instruments

We use foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies. The contracts generally have terms of up to 12 months. These derivative instruments are not designated in hedging relationships and, therefore, we record gains and losses on these contracts directly to net earnings.

Table of Contents

Summary of Derivative Balances

~~The following tables present the gross~~

Gross fair values of our outstanding derivative instruments and the corresponding ~~classification at November 3, 2018, February 3, 2018, and October 28, 2017~~classifications were as follows ($ in millions):


		Assets
Contract Type	Balance Sheet Location	August 3, 2019		February 2, 2019		August 4, 2018
Derivatives designated as net investment hedges	Other current assets	$	-	$	-	$	5
Derivatives designated as interest rate swaps	Other current assets and Other assets		78		26		-
Total		$	78	$	26	$	5



		Liabilities
Contract Type	Balance Sheet Location	August 3, 2019		February 2, 2019		August 4, 2018
Derivatives designated as interest rate swaps	Long-term liabilities	$	-	$	1	$	7

Assets
Contract Type Balance Sheet Location November 3, 2018 February 3, 2018 October 28, 2017
Derivatives designated as net investment hedges Other current assets $ 1
$ 2
$ 3
Derivatives designated as interest rate swaps Other current assets and Other assets —
—
3
No hedge designation (foreign exchange forward contracts) Other current assets —
—
2
Total $ 1
$ 2
$ 8

Liabilities
Contract Type Balance Sheet Location November 3, 2018 February 3, 2018 October 28, 2017
Derivatives designated as net investment hedges Accrued liabilities $ —
$ 7
$ 5
Derivatives designated as interest rate swaps Accrued liabilities and Long-term liabilities 22
5
3
No hedge designation (foreign exchange forward contracts) Accrued liabilities —
1
—
Total $ 22
$ 13
$ 8

~~The following table presents the effects~~

Effects of derivative instruments on other comprehensive income ("OCI") ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~were as follows ($ in millions):



	Three Months Ended				Six Months Ended
Derivatives designated as net investment hedges	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Pre-tax gain recognized in OCI	$	-	$	3	$	-	$	19

Three Months Ended Nine Months Ended
Derivatives designated as net investment hedges November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Pre-tax gain (loss) recognized in OCI $ 2
$ 8
$ 21
$ (3 )

~~The following table presents the effects~~

Effects of derivatives not designated as hedging instruments on our Condensed Consolidated Statements of Earnings ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~were as follows ($ in millions):



		Gain (Loss) Recognized				Gain (Loss) Recognized
		Three Months Ended				Six Months Ended
Contract Type	Statement of Earnings Location	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
No hedge designation (foreign exchange contracts)	SG&A	$	(1)	$	1	$	-	$	1

Gain (Loss) Recognized
Three Months Ended Nine Months Ended
Contract Type Statement of Earnings Location November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
No hedge designation (foreign exchange contracts) SG&A $ —
$ 2
$ 2
$ (1 )

~~The following table presents the effects~~

Effects of interest rate derivatives and adjustments to the carrying value of long-term debt on our Condensed Consolidated Statements of Earnings ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~were as follows ($ in millions):


		Gain (Loss) Recognized				Gain (Loss) Recognized
		Three Months Ended				Six Months Ended
Contract Type	Statement of Earnings Location	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Interest rate swap contracts	Interest expense	$	55	$	3	$	53	$	(1)
Adjustments to carrying value of long-term debt	Interest expense		(55)		(3)		(53)		1
Total		$	-	$	-	$	-	$	-

Gain (Loss) Recognized
Three Months Ended Nine Months Ended
Contract Type Statement of Earnings Location November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Interest rate swap contracts Interest expense $ (15 ) $ 16
$ (16 ) $ 13
Adjustments to carrying value of long-term debt Interest expense 15
(16 ) 16
(13 )
Total $ —

$ —

$ —

$ —

~~The following table presents the notional~~

Notional amounts of our derivative instruments ~~at November 3, 2018, February 3, 2018, and October 28, 2017~~were as follows ($ in millions):



	Notional Amount
Contract Type	August 3, 2019		February 2, 2019		August 4, 2018
Derivatives designated as net investment hedges	$	23	$	15	$	59
Derivatives designated as interest rate swaps		1,150		1,150		650
No hedge designation (foreign exchange contracts)		33		9		41
Total	$	1,206	$	1,174	$	750

7. Debt

Short-Term Debt

We have a $1.25 billion five year senior unsecured revolving credit facility agreement with a syndicate of banks. The agreement permits borrowings of up to $1.25 billion and expires in April 2023. There were 0 borrowings outstanding as of August 3, 2019, February 2, 2019, or August 4, 2018.

Table of Contents

Notional Amount
Contract Type November 3, 2018 February 3, 2018 October 28, 2017
Derivatives designated as net investment hedges $ 16
$ 462
$ 240
Derivatives designated as interest rate swap contracts 1,150
1,150
1,150
No hedge designation (foreign exchange forward contracts) 67
33
64
Total $ 1,233
$ 1,645
$ 1,454

Long-Term Debt

Long-term debt consisted of the following ($ in millions):



	August 3, 2019		February 2, 2019		August 4, 2018
Notes, 5.50%, due March 15, 2021	$	650	$	650	$	650
Notes, 4.45%, due October 1, 2028		500		500		-
Interest rate swap valuation adjustments		78		25		(7)
Subtotal		1,228		1,175		643
Debt discounts and issuance costs		(6)		(7)		(2)
Financing lease obligations ⁽¹⁾		-		181		188
Capital lease obligations ⁽¹⁾		-		39		19
Finance lease obligations ⁽¹⁾		39		-		-
Total long-term debt		1,261		1,388		848
Less current portion		14		56		47
Total long-term debt, less current portion	$	1,247	$	1,332	$	801

(1)See Note 4, Leases, for additional information regarding our lease obligations.

The fair value of total long-term debt, excluding debt discounts and issuance costs and lease obligations, approximated $1,295 million, $1,178 million, and $673 million as of August 3, 2019, February 2, 2019, and August 4, 2018, respectively, based primarily on market prices quoted from external sources, compared with carrying values of $1,228 million, $1,175 million, and $643 million, respectively. If long-term debt were measured at fair value in the financial statements, it would be classified primarily as Level 2 in the fair value hierarchy.

See Note 6, Debt, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019, for additional information regarding the terms of our other debt facilities, debt instruments and other obligations.

8. Revenue Recognition

We generate revenue primarily from the sale of products and services, both as a principal and as an agent. We generate all of our operating revenue from contracts with customers. Our revenue excludes sales and usage-based taxes collected.

Revenue from product sales and services is reported net of sales refunds, which includes an estimate of future returns and contract cancellations based on historical refund rates, with a corresponding reduction to cost of sales. For revenue transactions that involve more than one performance obligation, we defer the revenue associated with any unsatisfied performance obligation until the obligation is satisfied.

Information about our contracts with customers, which reflects the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied, was as follows ($ in millions):



	August 3, 2019		February 2, 2019		August 4, 2018
Receivables, net⁽¹⁾	$	561	$	565	$	584
Short-term contract liabilities included in:
Unredeemed gift cards		264		290		275
Deferred revenue		468		446		438
Accrued liabilities		149		146		148
Long-term contract liabilities included in:
Long-term liabilities		9		11		15

(1)Receivables are recorded net of allowances for doubtful accounts of $13 million, $13 million, and $15 million as of August 3, 2019, February 2, 2019, and August 4, 2018, respectively.

During the first six months of fiscal 2020 and 2019, $638 million and $605 million of revenue was recognized, respectively, that was included in the contract liability balance at the beginning of the respective periods. NaN revenue was recognized from performance obligations satisfied in previous periods.

Table of Contents

Revenue from our contract liability balances expected to be recognized in future periods if performance of the contract is expected to have a duration of more than one year is as follows ($ in millions):


9.	~~Earnings per Share~~
		August 3, 2019⁽¹⁾
Remainder of fiscal 2020		$	6
Fiscal 2021			8
Fiscal 2022			4
Fiscal 2023			1
Thereafter			-

(1)Amounts exclude unsatisfied performance obligations from contract liability balances with a duration of one year or less. The estimated transaction price revenue disclosed above also does not include amounts of variable consideration attributable to contracts where the consideration is constrained at August 3, 2019.

See Note 13, Segments, for a disaggregation of revenue by reportable segment and product category, which represents how our chief operating decision maker reviews information internally to evaluate our financial performance and to make resource allocation and other decisions for the enterprise.

9. Restructuring Charges

Restructuring charges incurred in the second quarter and first six months of fiscal 2020 were $48 million, related to U.S. retail operating model changes. Restructuring charges incurred in the second quarter and first six months of fiscal 2019 were $17 million and $47 million, respectively, related to Best Buy Mobile.

U.S. Retail Operating Model

In the second quarter of fiscal 2020, we made changes primarily related to our U.S. retail operating model to increase organization effectiveness and create a more seamless customer experience across all channels. As a result, we incurred $48 million of charges related to termination benefits, including $10 million related to a voluntary early retirement offer. All charges incurred are from continuing operations and are presented in Restructuring charges on our Condensed Consolidated Statements of Earnings.

The following table summarizes our restructuring accrual activity during the first six months of fiscal 2020 related to U.S. retail operating model changes ($ in millions):


	Termination Benefits
Balance at February 2, 2019	$	-
Charges		48
Cash payments		(8)
Balance at August 3, 2019	$	40

Best Buy Mobile

On March 1, 2018, we announced our intent to close all of our 257 remaining Best Buy Mobile stand-alone stores in the U.S. This decision was a result of changing economics in the mobile industry since we began opening these stores in 2006, along with the integration of our mobile model into our core stores and online channel, which are more economically compelling today. All restructuring charges related to this plan are from continuing operations and are presented in Restructuring charges on our Condensed Consolidated Statements of Earnings.

Restructuring charges incurred for Best Buy Mobile were as follows ($ in millions):



	Three Months Ended ‎August 4, 2018		Six Months Ended ‎August 4, 2018		Cumulative Amount ‎as of August 3, 2019
Property and equipment impairments	$	-	$	-	$	1
Termination benefits		(3)		(2)		6
Facility closure and other costs		20		49		49
Total restructuring charges	$	17	$	47	$	56

Table of Contents

The following table summarizes our restructuring accrual activity during the first six months of fiscal 2019 related to Best Buy Mobile ($ in millions):



	Termination Benefits		Facility Closures ‎and Other Costs		Total
Balances at February 3, 2018	$	8	$	-	$	8
Charges		1		49		50
Cash payments		(5)		(46)		(51)
Adjustments⁽¹⁾		(3)		(1)		(4)
Balances at August 4, 2018	$	1	$	2	$	3

(1)Adjustments to termination benefits represent changes in retention assumptions. Adjustments to facility closure and other costs represent changes in sublease assumptions.

10. Earnings per Share

We compute our basic earnings per share based on the weighted-average number of common shares outstanding and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued. Potentially dilutive securities include stock options, nonvested share awards, dividend equivalents attached to nonvested share awards that are settled in shares of Best Buy common stock and shares issuable under our employee stock purchase plan. Nonvested market-based share awards and nonvested performance-based share awards are included in the average diluted shares outstanding for each period, if established market or performance criteria have been met at the end of the respective periods.

~~The following table presents a reconciliation~~

Reconciliations of the numerators and denominators of basic and diluted earnings per share ~~from continuing operations for the three and nine months ended November 3, 2018, and October 28, 2017~~were as follows ($ and shares in millions, except per share amounts):


	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Numerator
Net earnings	$	238	$	244	$	503	$	452

Denominator
Weighted-average common shares outstanding		267.1		279.0		267.4		280.8
Dilutive effect of stock compensation plan awards		2.3		4.7		3.5		5.2
Weighted-average common shares outstanding, assuming dilution		269.4		283.7		270.9		286.0

Potential shares which were anti-dilutive and excluded from weighted-average share computations		0.9		0.1		0.9		0.1

Basic earnings per share	$	0.89	$	0.88	$	1.88	$	1.61
Diluted earnings per share	$	0.89	$	0.86	$	1.86	$	1.58

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Numerator

Net earnings from continuing operations $ 277
$ 238
$ 729
$ 635

Denominator
Weighted-average common shares outstanding 274.3
299.1
278.6
304.1
Dilutive effect of stock compensation plan awards 5.0
6.3
5.2
6.5
Weighted-average common shares outstanding, assuming dilution 279.3
305.4
283.8
310.6

Anti-dilutive securities excluded from Weighted-average common shares outstanding, assuming dilution 0.1
0.0
0.1
0.0

Net earnings per share from continuing operations
Basic $ 1.01
$ 0.80
$ 2.62
$ 2.09
Diluted $ 0.99
$ 0.78
$ 2.57
$ 2.05

~~Beginning with~~

11. Repurchase of Common Stock

On February 23, 2019, our ~~annual broad grant~~Board of ~~restricted stock~~Directors ("Board") authorized a $3.0 billion share repurchase program. There is no expiration date governing the period over which we can repurchase shares under the February 2019 authorization.

Information regarding the shares we repurchased was as follows ($ and ~~restricted stock units~~shares in ~~March 2018,~~millions, except per share amounts):



	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Total cost of shares repurchased	$	230	$	375	$	336	$	774
Average price per share	$	69.71	$	74.80	$	70.04	$	73.21
Number of shares repurchased		3.3		5.0		4.8		10.6

As of August 3, 2019, $2.7 billion of the $3.0 billion share repurchase authorization was available. Between the end of the second quarter of fiscal 2020 on August 3, 2019, and September 4, 2019, we ~~attach dividend equivalents to our restricted stock and restricted stock units equal to dividends payable on the same number of~~repurchased an incremental 2.2 million shares of ~~Best Buy~~our common stock ~~during the applicable period. Dividend equivalents, settled in additional shares~~at a cost of Best Buy common stock, accrue on restricted stock and restricted stock unit awards during the vesting period. No dividend equivalents are paid on any restricted stock or restricted stock units that are forfeited prior to the vesting date.$146 million.

Table of Contents


~~10.~~	~~Comprehensive Income~~

12. Comprehensive Income

Changes in accumulated other comprehensive income, net of tax were as follows ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~ ($ in millions):


	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Foreign currency translation adjustments	$	5	$	(14)	$	-	$	(18)

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Foreign currency translation adjustments $ 4
$ (17 ) $ (14 ) $ 25

The gains and losses on our net investment hedges, which are included in foreign currency translation adjustments, were not material for the periods presented. Foreign currency translation adjustments do not include a provision for income tax expense when earnings from foreign operations are considered to be indefinitely reinvested outside the U.S. ~~At this time, we are still evaluating the earnings that are indefinitely reinvested outside the U.S.~~ Refer to Note ~~10,~~ 11, Income Taxes, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, for additional information.


~~11.~~	~~Repurchase of Common Stock~~

In February 2017, our Board of Directors ("Board") authorized a $5.0 billion share repurchase program that superseded the previous $5.0 billion authorization from 2011. There is no expiration date governing the period over which we can repurchase shares under the February 2017 authorization. On March 1, 2018, we announced our intent to repurchase $1.5 billion of shares in fiscal 2019, which reflects an updated two-year plan of $3.5 billion compared to the original ~~$3.0 billion~~ ~~two-year plan announced on March 1, 2017.~~

The following table presents information regarding the shares we repurchased during the three and nine months ended November 3, 2018, and October 28, 2017 ($ and shares in millions, except per share amounts):

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Total cost of shares repurchased $ 369
$ 366
$ 1,143
$ 1,147
Average price per share $ 76.04
$ 57.14
$ 74.10
$ 52.35
Number of shares repurchased 4.8
6.4
15.4
21.9

At November 3, 2018, $1.9 billion of the $5.0 billion of share repurchases authorized by our Board in February 2017 was available for future share repurchases. Between the end of the third quarter of fiscal 2019 on November 3, 2018, and December 5, 2018, we repurchased an incremental 2.5 million shares of our common stock at a cost of $168 million.


~~12.~~	~~Segments~~

13. Segments

Our chief operating decision maker ("CODM") is our Chief Executive Officer. Our business is organized into ~~two~~2 reportable segments: Domestic (which is comprised of all states, districts and territories of the U.S., including GreatCall) and International (which is comprised of all operations in Canada and Mexico). Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors the performance of, the consolidated enterprise, the Domestic segment and the International segment. The Domestic segment managers and International segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and segment results to the operating income level.

We aggregate our Domestic and GreatCall operating segments into one Domestic reportable segment. We also aggregate our Canada and Mexico businesses into one International operating ~~segment. Our Domestic and~~segment, which represents the International ~~operating segments also represent our~~ reportable ~~segments.~~segment. The accounting policies of the segments are the same.

Revenue by reportable segment and product category ~~were~~was as follows ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~ ($ in millions):



	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Revenue by reportable segment
Domestic	$	8,821	$	8,639	$	17,302	$	17,051
International		715		740		1,376		1,437
Total revenue	$	9,536	$	9,379	$	18,678	$	18,488

Revenue by product category ⁽¹⁾
Domestic
Computing and Mobile Phones	$	3,917	$	3,923	$	7,768	$	7,822
Consumer Electronics		2,780		2,770		5,442		5,426
Appliances		1,138		1,013		2,099		1,895
Entertainment		439		512		912		1,059
Services		510		384		1,008		777
Other		37		37		73		72
Total Domestic revenue	$	8,821	$	8,639	$	17,302	$	17,051
International
Computing and Mobile Phones	$	308	$	335	$	613	$	666
Consumer Electronics		231		217		434		423
Appliances		83		86		142		147
Entertainment		36		43		72		85
Services		45		41		88		81
Other		12		18		27		35
Total International revenue	$	715	$	740	$	1,376	$	1,437

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Revenue by reportable segment
Domestic $ 8,756
$ 8,491
$ 25,807
$ 24,675
International 834
829
2,271
2,113
Total revenue $ 9,590
$ 9,320

$ 28,078

$ 26,788
Revenue by product category⁽¹⁾

Domestic:
Computing and Mobile Phones $ 4,125
$ 4,097
$ 11,947
$ 11,532
Consumer Electronics 2,665
2,590
8,091
7,782
Appliances 964
884
2,860
2,575
Entertainment 558
508
1,617
1,572
Services 409
382
1,185
1,120
Other 35
30
107
94
Total Domestic revenue $ 8,756
$ 8,491
$ 25,807
$ 24,675
International:
Computing and Mobile Phones $ 425
$ 431
$ 1,092
$ 1,040
Consumer Electronics 221
227
644
616
Appliances 69
63
215
165
Entertainment 55
49
140
129
Services 46
42
127
118
Other 18
17
53
45
Total International revenue $ 834
$ 829
$ 2,271
$ 2,113

~~(1)~~

(1)Refer to our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information regarding the key components of each revenue category. GreatCall results of operations from the date of acquisition were included within the Domestic segment and Services revenue category.

Operating income by reportable segment and the reconciliation to earnings from continuing operations before income tax expense were as follows for the three and nine months ended November 3, 2018, and October 28, 2017 ($ in millions):

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Domestic $ 315
$ 345
$ 911
$ 959
International 7
5
11
12
Total operating income 322
350
922
971
Other income (expense):
Gain on sale of investments 12
—
12
—
Investment income and other 11
12
35
30
Interest expense (15 ) (20 ) (53 ) (57 )
Earnings from continuing operations before income tax expense $ 330
$ 342
$ 916
$ 944

~~Assets by reportable segment were as follows as of November 3, 2018, February 3, 2018, and October 28, 2017 ($ in millions):~~

November 3, 2018 February 3, 2018 October 28, 2017
Domestic $ 13,812
$ 11,553
$ 13,140
International 1,188
1,496
1,645
Total assets $ 15,000
$ 13,049
$ 14,785


~~13.~~	~~Income Taxes~~

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”), which significantly changed U.S. tax law. Among other things, the Tax Act lowered the U.S. statutory tax rate from 35% to 21% effective January 1, 2018, broadened the base to which U.S. income tax applies, imposed a one-time deemed repatriation tax on net unremitted earnings of foreign subsidiaries not previously subject to U.S. income tax and changed how foreign earnings are subject to U.S. income tax.

In response to the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) that provides guidance on accounting for the impact of the Tax Act. SAB 118 allows companies to record provisional amounts to the extent they are reasonably estimable and adjust them over time as more information becomes available, not to extend beyond the measurement period of one year from the enactment of the Tax Act.

As a result of the Tax Act and in accordance with SAB 118, we recorded provisional tax expense in the fourth quarter of fiscal 2018 related to the deemed repatriation tax and the revaluation of deferred tax assets and liabilities to reflect the new tax rate. We made the following adjustments to the provisional tax expense during the three months ended November 3, 2018: (1) an $18 million reduction to the deemed repatriation tax liability, resulting in an adjusted provisional tax liability of $192 million as of November 3, 2018, and (2) a $5 million reduction to the revaluation of deferred tax assets and liabilities to reflect the new tax rate, resulting in an adjusted provisional tax liability of $71 million as of November 3, 2018.

We continue to gather and analyze additional information needed to complete our accounting for these items and expect to complete our accounting within the one-year measurement period provided by SAB 118. Any adjustment to these amounts during the measurement period will be recorded in income tax expense in the period in which the analysis is complete.

Beginning in fiscal 2019, the Tax Act created a provision known as the global intangible low-tax income (“GILTI”) that imposes a tax on certain earnings of foreign subsidiaries. Due to the complexity of the new GILTI tax rules, we are not yet able to reasonably determine the complete effects of this provision. Therefore, we have not yet elected a policy as to whether we will recognize deferred taxes for basis differences expected to reverse or record GILTI as a current period cost when incurred. We have, however, included an estimate of the current GILTI impact in our effective tax rate for fiscal 2019.

~~Refer to Note 10,~~ ~~Income Taxes,~~ ~~of the Notes to Consolidated Financial Statements included in~~ our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, for additional ~~information.~~information regarding the key components of each revenue category.

Table of Contents

Operating income by reportable segment and the reconciliation to earnings before income tax expense was as follows ($ in millions):



	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Domestic	$	309	$	329	$	641	$	596
International		4		6		6		4
Total operating income		313		335		647		600
Other income (expense):
Investment income and other		10		13		24		24
Interest expense		(16)		(19)		(34)		(38)
Earnings before income tax expense	$	307	$	329	$	637	$	586


~~14.~~	~~Contingencies~~

Assets by reportable segment were as follows ($ in millions):



	August 3, 2019		February 2, 2019		August 4, 2018
Domestic	$	13,714	$	11,908	$	10,912
International		1,264		993		1,081
Total assets	$	14,978	$	12,901	$	11,993

14. Contingencies

We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected on our Condensed Consolidated Financial Statements. However, there are cases where liability is not

probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Condensed Consolidated Financial Statements.

Securities Actions

In February 2011, a purported class action lawsuit captioned, IBEW Local 98 Pension Fund, individually and on behalf of all others similarly situated v. Best Buy Co., Inc., et al., was filed against us and certain of our executive officers in the U.S. District Court for the District of Minnesota. This federal court action alleges, among other things, that we and the officers named in the complaint violated Sections 10(b) and 20A of the Exchange Act and Rule 10b-5 under the Exchange Act in connection with press releases and other statements relating to our fiscal 2011 earnings guidance that had been made available to the public. Additionally, in March 2011, a similar purported class action was filed by a single shareholder, Rene LeBlanc, against us and certain of our executive officers in the same court. In July 2011, after consolidation of the IBEW Local 98 Pension Fund and Rene LeBlanc actions, a consolidated complaint captioned, IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al., was filed and served. Following discovery and motion practice Plaintiffs moved to certify the purported class. By Order filed August 6, 2014, the court certified a class of persons or entities who acquired Best Buy common stock between 10:00 a.m. EDT on September 14, 2010, and December 13, 2010, and who were damaged by the alleged violations of law. The 8th Circuit Court of Appeals granted our request for interlocutory appeal. On April 12, 2016, the 8th Circuit held the trial court misapplied the law and reversed the class certification order. IBEW petitioned the 8th Circuit for a rehearing en banc, which was denied on June 1, 2016. On June 23, 2017, the trial court denied plaintiff's request to file a new Motion for Class Certification. On October 30, 2017, plaintiffs filed a motion for leave to file a second amended class action complaint which the Magistrate Judge denied on July 11, 2018. On August 24, 2018, the District Court Judge overruled plaintiff’s objections to that ruling, affirming the Magistrate Judge’s denial of leave to amend. On ~~January 11,~~March 8, 2019, the District Court Judge ~~is scheduled to hear argument on the~~granted Best ~~Buy~~Buy’s motion for summary judgment ondismissing the remaining ~~claims.We continue to believe that~~claims with prejudice. All appeal periods in IBEW have been exhausted and the ~~remaining individual plaintiff's allegations are without merit and intend to vigorously defend our company in this matter.~~

matter is closed.

In June 2011, a purported shareholder derivative action captioned, Salvatore M. Talluto, Derivatively and on Behalf of Best Buy Co., Inc. v. Richard M. Schulze, et al., as Defendants and Best Buy Co., Inc. as Nominal Defendant, was filed against both present and former members of our Board serving during the relevant periods in fiscal 2011 and us as a nominal defendant in the U.S. District Court for the State of Minnesota. The lawsuit alleges that the director defendants breached their fiduciary duty, among other claims, including violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in failing to correct public misrepresentations and material misstatements and/or omissions regarding our fiscal 2011 earnings projections and, for certain directors, selling stock while in possession of material adverse non-public information. Additionally, in July 2011, a similar purported class action was filed by a single shareholder, Daniel Himmel, against us and certain of our executive officers in the same court. In November 2011, the respective lawsuits of Salvatore M. Talluto and Daniel Himmel were consolidated into a new action captioned, In Re: Best Buy Co., Inc. Shareholder Derivative Litigation, and a stay ordered pending the close of discovery in the consolidated IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al. case. Additionally, in June 2015, a similar purported class action was filed by a single shareholder, Khuong Tran, derivatively on behalf of Best Buy Co., Inc. against us and certain of our executive officers and directors in the same court. The Khuong Tran lawsuit has also been stayed

Table of Contents

pending the close of discovery in IBEW.

In Tran, the court entered an Order for Dismissal Without Prejudice on March 27, 2019. In Re: Best Buy Co., Inc. Shareholder Derivative Litigation was dismissed without prejudice on August 6, 2019. The plaintiffs in the above securities actions seek damages, including interest, equitable relief and reimbursement of the costs and expenses they incurred in the lawsuits. As stated above, we believe the allegations in the above securities actionsderivative matters are without merit, and we intend to defend these actions vigorously. Based on our assessment of the facts underlying the claims in the above securities actions, their respective procedural litigation history and the degree to which we intend to defend our company in these matters, the amount or range of reasonably possible losses, if any, cannot be estimated.

all closed.

Other Legal Proceedings

We are involved in various other legal proceedings arising in the normal course of conducting business. For such legal proceedings, we have accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to our consolidated financial position, results of operations or cash flows. Because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings and the difficulty of predicting the settlement value of many of these proceedings, we are not able to estimate an amount or range of any reasonably possible additional losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations or cash flows.


~~Item 2.~~	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

15. Subsequent Event

On July 23, 2019, we signed a definitive agreement to acquire the predictive healthcare technology business of BioSensics, LLC (“BioSensics”), for approximately $21 million, and the acquisition was completed on August 7, 2019.

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” refers to Best Buy Co., Inc. and its consolidated subsidiaries. Any references to our website addresses do not constitute incorporation by reference of the information contained on the websites.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. Our MD&A is presented in the following sections:

Overview

Business Strategy Update

Results of Operations

Liquidity and Capital Resources

Off-Balance-Sheet Arrangements and Contractual Obligations

Significant Accounting Policies and Estimates

New Accounting Pronouncements

Safe Harbor Statement Under the Private Securities Litigation Reform Act

Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, (including the information presented therein under Risk Factors), as well as our reports on Forms 10-Q and 8-K and other publicly available information. All amounts herein are unaudited.

Overview

We strive to enrich the lives of consumers through technology, whether they ~~come to~~connect with us online, visit our stores or invite us into their homes. We do this by solving technology problems and addressing key human needs across a range of areas, including entertainment, productivity, communication, food preparation, security and health and wellness. We have operations in the U.S., Canada and Mexico. We ~~operate~~have two reportable segments: Domestic and International. The Domestic segment is comprised of the operations in all states, districts and territories of the U.S., including ~~GreatCall, Inc. ("GreatCall").~~GreatCall. The International segment is comprised of all operations in Canada and Mexico.

Our fiscal year ends on the Saturday nearest the end of January. ~~Fiscal 2019 will include 52 weeks and fiscal 2018 included 53 weeks, with the additional week included in the fourth quarter.~~ Our business, like that of many retailers, is seasonal. A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico.

Table of Contents

Comparable Sales

Throughout this MD&A, we refer to comparable sales. In the first quarter of fiscal 2020, we refined our 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. Our comparable sales calculation compares revenue from stores, websites and call centers operating for at least 14 full months, as well as revenue related to certain other comparable sales channels for a particular period to the corresponding period in the prior year. 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 calculation of comparable sales excludes the impact of revenue from discontinued operations and the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only). On March 1, 2018, we announced our intent to close all of our 257 remaining Best Buy Mobile stand-alone stores in the U.S. As a result, all revenue related to these stores has been excluded from the comparable sales calculation beginning in March 2018. On October 1, 2018, we acquired all outstanding shares of ~~GreatCall.~~GreatCall, and on May 9, 2019, we acquired all outstanding shares of Critical Signal Technologies, Inc. (“CST”). Consistent with our comparable sales policy, the results of GreatCall and CST are excluded from our comparable sales calculation for the ~~third quarter and first nine months of fiscal 2019.~~periods presented. The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as other retailers' methods.

Non-GAAP Financial Measures

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), as well as certain adjusted or non-GAAP financial measures, such as constant currency, non-GAAP operating

income, non-GAAP effective tax rate and non-GAAP diluted earnings per share ("EPS") ~~and non-GAAP debt to earnings before interest, income taxes, depreciation, amortization and rent ("EBITDAR") ratio.~~from continuing operations. We believe 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, our internal management reporting also includes non-GAAP financial measures. Generally, our 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 we believe doing so provides greater clarity to management and our investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Non-GAAP financial measures as presented herein may not be comparable to similarly titled measures used by other companies.

In our discussions of the operating results of our ~~Consolidated~~consolidated business and our International segment, we sometimes refer to the impact of changes in foreign currency exchange rates or the impact of foreign currency exchange rate fluctuations, which are references to the differences between the foreign currency exchange rates we use to convert the International segment’s operating results from local currencies into U.S. dollars for reporting purposes. We also may use the term "constant ~~currency",~~currency," which represents results adjusted to exclude foreign currency impacts. We calculate those impacts as the difference between the current period results translated using the current period currency exchange rates and using the comparable prior period currency exchange rates. We believe the disclosure of revenue changes in constant currency provides useful supplementary information to investors in light of significant fluctuations in currency rates.

Refer to the Consolidated Non-GAAP Financial Measures section below for a detailed reconciliation of items that impacted our non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted EPS from continuing operations in the presented periods.

Business Strategy Update

In the second quarter of fiscal 2020, we generated $9.5 billion in revenue and grew our Enterprise comparable sales by 1.6%. Our GAAP operating income rate decreased by 30 basis points and our non-GAAP operating income rate expanded by 20 basis points, both compared to the second quarter of fiscal 2019. We delivered GAAP diluted EPS of $0.89 and non-GAAP diluted EPS of $1.08, increases of 3% and 19% compared to the second quarter of fiscal 2019, respectively. Refer to the ~~Other~~ Consolidated Non-GAAP Financial Measures section below for a detailed reconciliation of items that impacted ~~the non-GAAP debt to EBITDAR ratio. Management believes this ratio is an important indicator of our creditworthiness. Furthermore, we believe that~~ our non-GAAP ~~debt to EBITDAR ratio is important for understanding our financial position~~operating income and ~~provides meaningful additional information about our ability to service our long-term debt and other fixed obligations and to fund our future growth.~~non-GAAP diluted EPS. We also believe our non-GAAP debt to EBITDAR ratio is relevant because it enables investors to compare our indebtedness to that of retailers who own, rather than lease, their stores. Our decision to own or lease real estate is based on an assessment of our financial liquidity, our capital structure, our desire to own or to lease the location, the owner’s desire to own or to lease the location and the alternative that results in the highest returnreturned $363 million to our ~~shareholders.~~

~~Business Strategy Update~~

~~Our strong performance in~~shareholders through dividends and share repurchases.

During the ~~third~~ quarter, of fiscal 2019 was broad-based, with positive comparable sales across all channels, countries and most of our product categories. Similar to the first half of the year, our revenue growth was helped by a favorable environment and driven by how customers are responding to the experience we ~~are building.~~

We continued to make ~~significant~~ progress ~~in implementing~~on our ~~Best Buy 2020:~~ Building the New Blue ~~("Best Buy 2020")~~ strategy ~~including expanding~~and our ~~In-Home Advisor program, growing~~purpose to enrich lives through technology. We expanded our commitment to health and wellness through expanded assortment and a second acquisition, grew our Total Tech Support ~~members~~membership, added In-Home Advisors and ~~completing~~continued to transform our supply chain to

Table of Contents

improve our speed of delivery to customers. We also made strategic changes to our field operations to accelerate growth and to create a more seamless customer experience across all channels including stores, home and online.

In parallel to the ~~acquisition~~customer experience developments, we continued to drive efficiencies and reduce costs in order to fund investments and offset pressures. During the second quarter of ~~GreatCall, a leading connected health services provider for aging consumers.~~

fiscal 2020, we achieved $155 million in annualized cost reductions and efficiencies, bringing the cumulative total to $730 million, and exceeded our goal of reaching $600 million by the end of fiscal 2021. We have now successfully delivered on three considerable cost reduction targets in the last seven years, totaling more than $2 billion.

Tariffs

We are ~~investing in~~actively addressing the risks related to increases to current tariff rates and proposed new tariffs on Chinese imports. In May 2019, the U.S. Trade Representative (“USTR”) increased the tariff on List 3 products imported from China from 10% to 25%, effective June 15, 2019, and has since proposed a ~~range~~further increase of ~~enablers that are necessary~~this rate to ~~execute our~~30%, effective October 1, 2019. Recently, the USTR implemented the List 4 tariff of 15% on additional products imported from China. The List 4 tariffs have two effective dates. The first effective date (List 4A) was September 1, 2019, and the most notable affected categories relative to Best Buy on this list are televisions, smart watches and headphones. The second effective date (List 4B) is December 15, 2019, and the most notable affected categories relative to Best Buy on this list are computing, mobile phones and gaming consoles.

Through the second quarter of fiscal 2020, ~~strategy. Most~~we have been able to minimize the impact of ~~these enablers~~the tariffs on our business by accelerating purchases and working with our vendors, some of which are ~~multi-year investments in areas such as specialty labor, enterprise customer relationship management, knowledge management capabilities, our services platform and our supply chain.~~

~~We also continue to invest~~ in the ~~multi-channel shopping experience, and~~process of migrating their manufacturing out of China. Further, we are ~~excited about~~taking additional actions to mitigate the ~~ways~~impacts of tariffs, including factoring tariffs into our product assortment decisions, promotional and pricing strategies, sourcing changes and other strategies in ~~which we are making it easier for~~partnership with our customers to use the Best Buy app to shop online and in our stores. These innovations continue to blur the lines between online and physical shopping. This is increasingly how our consumers want to shop and our innovation pipeline closely mirrors and enables this changing behavior.

We are excited about the opportunities in front of us to enrich lives through technology and provide services and solutions that solve real customer needs and build deeper customer relationships, and the related value creation opportunities that this entails.

~~With regard to the U.S. tariffs on imports of certain products from China,~~vendors. While we estimate that ~~the latest $200 billion list that went into effect on September 24, 2018, impacts~~purchases from China currently represent approximately ~~7%, or around $2.3 billion,~~60% of our total ~~annual~~ cost of goods ~~sold. We do not~~sold, in light of these mitigating factors, we expect the impact of these tariffs on our business to be smaller than this number would otherwise imply. However, due to the uncertainty surrounding these factors, the ongoing U.S.-China trade negotiations and the potential for further changes to the scope, magnitude and timing of tariffs, it is difficult to predict the impact of tariffs on consumers, the financial markets and our business ~~for the remainder of this fiscal year to be material. There is greater uncertainty regarding future periods. We believe that, working together, our vendors~~ and ~~our team have at their disposal a range~~

~~of effective ways to mitigate the effects of tariffs. However, we cannot predict the timing and magnitude of future tariff actions, and these actions could adversely affect our~~ results of ~~operations in future periods.~~

operations.

Results of Operations

In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Consistent with such consolidation, the financial and non-financial information presented in our MD&A relative to these operations is also presented on a lag. Our policy is to accelerate ~~recording~~ the ~~effect~~recording of events occurring in the lag period that significantly affect our ~~condensed~~ consolidated financial statements. No such events were identified for the periods presented.

Consolidated Performance Summary

~~The following table presents selected~~

Selected consolidated financial data ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~was as follows ($ in millions, except per share amounts):



	Three Months Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Revenue	$	9,536		$	9,379		$	18,678		$	18,488
Revenue % increase		1.7	%		4.9	%		1.0	%		5.8	%
Comparable sales growth		1.6	%		6.2	%		1.4	%		6.6	%
Gross profit	$	2,283		$	2,229		$	4,452		$	4,354
Gross profit as a % of revenue⁽¹⁾		23.9	%		23.8	%		23.8	%		23.6	%
SG&A	$	1,922		$	1,877		$	3,757		$	3,707
SG&A as a % of revenue⁽¹⁾		20.2	%		20.0	%		20.1	%		20.1	%
Restructuring charges	$	48		$	17		$	48		$	47
Operating income	$	313		$	335		$	647		$	600
Operating income as a % of revenue		3.3	%		3.6	%		3.5	%		3.2	%
Net earnings	$	238		$	244		$	503		$	452
Diluted earnings per share	$	0.89		$	0.86		$	1.86		$	1.58

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Revenue $ 9,590
$ 9,320
$ 28,078
$ 26,788
Revenue % growth 2.9 % 4.2 % 4.8 % 3.3 %
Comparable sales % gain 4.3 % 4.4 % 5.8 % 3.8 %
Gross profit $ 2,324
$ 2,280
$ 6,678
$ 6,455
Gross profit as a % of revenue⁽¹⁾
24.2 % 24.5 % 23.8 % 24.1 %
SG&A $ 2,002
$ 1,932
$ 5,709
$ 5,484
SG&A as a % of revenue⁽¹⁾
20.9 % 20.7 % 20.3 % 20.5 %
Restructuring charges $ —
$ (2 ) $ 47
$ —
Operating income $ 322
$ 350
$ 922
$ 971
Operating income as a % of revenue 3.4 % 3.8 % 3.3 % 3.6 %
Net earnings $ 277
$ 239
$ 729
$ 636
Diluted earnings per share $ 0.99
$ 0.78
$ 2.57
$ 2.05

~~(1)~~

Because retailers vary in how they record costs of operating their supply chains between cost of goods sold and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers’ corresponding rates. For additional information regarding costs classified in cost of goods sold and SG&A, refer to Note 1, ~~Summary of Significant Accounting Policies~~

(1)Because retailers vary in how they record costs of operating their supply chain between cost of goods sold and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers’ corresponding rates. For additional information regarding costs classified in cost of goods sold and SG&A, refer to Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K ~~for the fiscal year ended February 3, 2018.~~

~~The components of the 2.9% and 4.8% revenue increases~~ for the ~~three and nine months~~fiscal year ended ~~November 3, 2018, respectively, were as follows:~~

Three Months Ended Nine Months Ended
November 3, 2018 November 3, 2018
Comparable sales impact 4.0 % 5.5 %
Non-comparable sales impact⁽¹⁾
(0.7 )% (0.7 )%
Foreign currency exchange rate fluctuation impact (0.4 )% — %
Total revenue increase 2.9 % 4.8 %


~~(1)~~	Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit-share revenue, credit card revenue, gift card breakage and sales of merchandise to wholesalers and dealers, as applicable.

~~All gross~~February 2, 2019.

Gross profit rate, SG&A rate and operating income rate changes in the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019~~2020 were primarily driven by our Domestic segment. For further discussion of each segment's rate changes, see the Segment Performance Summary below.

Table of Contents

Income Tax Expense

Income tax expense decreased to ~~$53~~$69 million in the ~~third~~second quarter of fiscal ~~2019~~2020, compared to ~~$104~~$85 million in the ~~third~~second quarter of fiscal ~~2018. Our effective income tax rate in the third quarter of fiscal 2019 was 16.1% compared to a rate of 30.4% in the third quarter of fiscal 2018.~~2019. The ~~decreases in~~lower tax expense ~~and the effective income tax rate were~~is primarily ~~a result of the impact of the Tax Cuts and Jobs Act (“Tax Act”) enacted on December 22, 2017,~~ due to ~~a reduction in the U.S. statutory tax rate and adjustments to the provisional tax expense recorded in the fourth quarter of fiscal 2018, partially offset by a decrease in excess~~increased tax benefits related to stock-based compensation and the resolution of discrete matters in the current year period, as well as a decrease in pre-tax earnings. Our effective income tax rate (“ETR”) in the second quarter of fiscal 2020 was 22.3% compared to a rate of 25.7% in the second quarter of fiscal 2019. The decrease in the ETR was primarily due to increased tax benefits related to stock-based compensation and the resolution of discrete matters in the current year period.

Income tax expense remained flat at $134 million in the first six months of fiscal 2020 compared to the prior year period, as increased tax expense resulting from an increase in pre-tax earnings was offset by increased tax benefits related to stock-based compensation and the resolution of discrete matters in the current year period. ~~Refer to Note 13,~~ ~~Income Taxes, in the Notes to Condensed Consolidated Financial Statements for additional information.~~

~~Income tax expense decreased to $187 million~~Our ETR in the first ~~nine~~six months of fiscal ~~2019 compared to $309 million in the prior-year period. Our effective income tax rate for the first nine months of fiscal 2019~~2020 was ~~20.4%,~~21.0% compared to a rate of ~~32.7%~~22.8% in the first ~~nine~~six months of fiscal ~~2018.~~2019. The ~~decreases~~decrease in the ETR was primarily due to increased tax ~~expense~~benefits related to stock-based compensation and the ~~effective income tax rate were primarily a result~~resolution of ~~the impact of the Tax Act due to a reduction~~discrete matters in the ~~U.S. statutory tax rate and adjustments to the provisional tax expense recorded in the fourth quarter of fiscal 2018.~~

current year period.

Our tax provision for interim periods is determined using an estimate of our annual ~~effective tax rate,~~ETR, adjusted for discrete items, if any, that are taken into account in the relevant period. We update our estimate of the annual ~~effective tax rate~~ETR each quarter and we make a cumulative adjustment if our estimated tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual ~~effective tax rate~~ETR are subject to variation due to several factors, including our ability to accurately forecast our pre-tax and taxable income and loss by jurisdiction, tax audit developments, recognition of excess tax benefits or deficiencies related to stock-based compensation, foreign currency gains ~~or losses,~~(losses), changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Our ~~effective tax rate~~ETR can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible losses on our ~~effective tax rate~~ETR is greater when our pre-tax income is lower.

Segment Performance Summary

Domestic

~~The following table presents selected~~

Selected financial data for the Domestic segment ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~was as follows ($ in millions):



	Three Months Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Revenue	$	8,821		$	8,639		$	17,302		$	17,051
Revenue % increase		2.1	%		4.4	%		1.5	%		5.4	%
Comparable sales growth⁽¹⁾		1.9	%		6.0	%		1.6	%		6.6	%
Gross profit	$	2,113		$	2,058		$	4,122		$	4,020
Gross profit as a % of revenue		24.0	%		23.8	%		23.8	%		23.6	%
SG&A	$	1,756		$	1,712		$	3,433		$	3,377
SG&A as a % of revenue		19.9	%		19.8	%		19.8	%		19.8	%
Restructuring charges	$	48		$	17		$	48		$	47
Operating income	$	309		$	329		$	641		$	596
Operating income as a % of revenue		3.5	%		3.8	%		3.7	%		3.5	%

Selected Online Revenue Data
Total online revenue	$	1,417		$	1,208		$	2,725		$	2,350
Online revenue as a % of total segment revenue		16.1	%		14.0	%		15.7	%		13.8	%
Comparable online sales growth⁽¹⁾		17.3	%		10.1	%		16.0	%		11.0	%

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Revenue $ 8,756
$ 8,491
$ 25,807
$ 24,675
Revenue % growth 3.1 % 3.6 % 4.6 % 3.2 %
Comparable sales % gain⁽¹⁾
4.3 % 4.5 % 5.8 % 3.8 %
Gross profit $ 2,139
$ 2,096
$ 6,159
$ 5,952
Gross profit as a % of revenue 24.4 % 24.7 % 23.9 % 24.1 %
SG&A $ 1,824
$ 1,751
$ 5,201
$ 4,993
SG&A as a % of revenue 20.8 % 20.6 % 20.2 % 20.2 %
Restructuring charges $ —
$ —
$ 47
$ —
Operating income $ 315
$ 345
$ 911
$ 959
Operating income as a % of revenue 3.6 % 4.1 % 3.5 % 3.9 %

Selected Online Revenue Data
Total online revenue $ 1,214
$ 1,077
$ 3,565
$ 3,191
Online revenue as a % of total segment revenue 13.9 % 12.7 % 13.8 % 12.9 %
Comparable online sales % gain⁽¹⁾
12.6 % 22.3 % 11.5 % 25.3 %

~~(1)~~

~~Comparable online sales is~~

(1)Comparable online sales are included in ~~the comparable sales calculation.~~

~~The components of~~ the ~~3.1% and 4.6% revenue increases for the~~ ~~three~~ ~~and nine months ended November 3, 2018, respectively, were as follows:~~

Three Months Ended Nine Months Ended
November 3, 2018 November 3, 2018
Comparable sales impact 4.0 % 5.4 %
Non-comparable sales impact⁽¹⁾
(0.9 )% (0.8 )%
Total revenue increase 3.1 % 4.6 %


~~(1)~~	Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit-share revenue, credit card revenue, gift card breakage and sales of merchandise to wholesalers and dealers, as applicable.

comparable sales calculation.

The increases in revenue in the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019~~2020 were primarily driven by the comparable sales ~~impact~~growth of ~~4.0%~~1.9% and ~~5.4%~~1.6%, respectively, and revenue from GreatCall, which was acquired in the third quarter of fiscal 2019. These increases were partially offset by the ~~loss~~losses of revenue from ~~Best Buy Mobile stand-alone~~store closures. Online revenue of $1.4 billion and ~~Best Buy store closures~~$2.7 billion in ~~both periods. In~~ the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019, online revenue of $1.2 billion and $3.6 billion,~~2020, respectively, increased ~~12.6%~~17.3% and ~~11.5%~~16.0%, respectively, on a comparable basis, primarily due to higher ~~conversion rates, increased traffic and higher~~ average order ~~values.~~values and increased traffic.

Table of Contents

The following table reconciles the number of Domestic stores open at the beginning and end of the ~~third~~second quarters of fiscal ~~2019~~2020 and fiscal ~~2018:~~2019:



	Fiscal 2020								Fiscal 2019
	Total Stores at Beginning of Second Quarter		Stores Opened		Stores Closed		Total Stores at End of Second Quarter		Total Stores at Beginning of Second Quarter		Stores Opened		Stores Closed		Total Stores at End of Second Quarter
Best Buy		995		-		-		995		1,007		-		-		1,007
Best Buy Mobile stand-alone		-		-		-		-		105		-		(105)		-
Outlet Centers		10		1		-		11		5		2		-		7
Pacific Sales		21		-		-		21		28		-		-		28
Total Domestic segment stores		1,026		1		-		1,027		1,145		2		(105)		1,042

Fiscal 2019 Fiscal 2018
Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter
Best Buy 1,007
1
(11 ) 997
1,024
—
(16 ) 1,008
Best Buy Mobile stand-alone —
—
—
—
292
—
(5 ) 287
Pacific Sales 28
—
(1 ) 27
28
—
—
28
Total Domestic segment stores 1,035
1
(12 ) 1,024
1,344
—
(21 ) 1,323

We continuously monitor store performance. As we approach the expiration date of our store leases, we evaluate various options for each location, including whether a store should remain open. On March 1, 2018, we announced our intent to close

all of our 257 remaining Best Buy Mobile stand-alone stores in the U.S., of which ~~all remaining stores~~105 were closed during the second quarter of fiscal 2019. Refer to Note 6, 9, Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements for additional information.

~~The following table presents the~~

Domestic segment revenue mix percentages and comparable sales percentage changes by revenue category ~~for the three months ended November 3, 2018, and October 28, 2017:~~were as follows:



		Revenue Mix						Comparable Sales
		Three Months Ended						Three Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Computing and Mobile Phones		44	%		45	%		0.6	%		4.2	%
Consumer Electronics		32	%		32	%		1.0	%		6.8	%
Appliances		13	%		12	%		14.0	%		10.3	%
Entertainment		5	%		7	%		(13.7)	%		8.5	%
Services		6	%		4	%		10.7	%		6.6	%
Total		100	%		100	%		1.9	%		6.0	%

Revenue Mix Comparable Sales
Three Months Ended Three Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Computing and Mobile Phones 47 % 48 % 3.1 % 3.5 %
Consumer Electronics 31 % 31 % 3.7 % 3.5 %
Appliances 11 % 10 % 8.4 % 13.5 %
Entertainment 6 % 6 % 12.4 % 4.1 %
Services 5 % 5 % 1.9 % 3.2 %
Total 100 % 100 % 4.3 % 4.5 %

The following is a description of the notable comparable sales changes in our Domestic segment by revenue ~~category for the three months ended November 3, 2018:~~

category:

Computing and Mobile Phones: The ~~3.1%~~0.6% comparable sales gain was primarily driven ~~primarily~~ by ~~mobile phones~~tablets and wearables, partially offset by slight declines in ~~tablets.~~

computing and mobile phones.

Consumer Electronics: The ~~3.7%~~1.0% comparable sales gain was driven primarily by headphones and smart home, ~~and home theater,~~ partially offset by declines in home theater and digital imaging.

Appliances: The ~~8.4%~~14.0% comparable sales gain was driven by both large and small appliances.

Entertainment: The ~~12.4%~~13.7% comparable sales ~~gain~~decline was driven primarily by ~~gaming.~~

gaming and drones, partially offset by gains in virtual reality.

Services: The ~~1.9%~~10.7% comparable sales gain was driven primarily by growth in ~~installation and repair, partially offset by a decline in warranty.~~

our support business.

Our gross profit rate ~~decreased~~increased in the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019,~~2020, primarily driven by the higher gross profit rate of GreatCall, partially offset by higher supply chain costs, including investments and higher transportation costs, and the national rollout of the Total Tech Support offer, where costs for services and discounts are typically higher at the onset of the membership. These increases were partially offset by improved product margin rates, which included the benefit of gross profit optimization initiatives.

costs.

Our SG&A rate increased in the ~~third~~second quarter of fiscal ~~2019~~2020, primarily due to ~~increases in growth investments, higher incentive compensation,~~ GreatCall ~~transaction costs and operating~~ expenses and higher ~~variable costs associated with increased revenue. These increases were~~advertising expenses, partially offset by ~~cost reductions.~~lower incentive compensation. Our SG&A rate remained flat in the first ~~nine~~six months of fiscal ~~2019,~~2020, primarily due to sales leverage, as SG&A increased ~~$208~~$56 million, primarily due to ~~increases in growth investments, higher variable costs associated with increased revenue, and higher incentive compensation,~~GreatCall expenses, partially offset by ~~cost reductions.~~

~~No restructuring~~lower incentive compensation.

Restructuring charges ~~were incurred in~~for the ~~third~~second quarter and first six months of fiscal ~~2019.~~2020 related to our U.S. retail operating model changes. Restructuring charges infor the second quarter and first ~~nine~~six months of fiscal 2019 related to our Best Buy Mobile stand-alone store closures. Refer to Note 6, 9, Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements for additional information.

Our operating income rate decreased in the ~~third~~second quarter of fiscal ~~2019 due to a lower gross profit rate and a higher SG&A rate as~~2020, primarily driven by the increase in restructuring charges described above. ~~Operating income decreased in~~During the first ~~nine~~six months of fiscal ~~2019 due to a lower~~2020, our operating income rate increased primarily driven by the increase in gross profit ~~rate and increases in restructuring charges as described above.~~rate.

Table of Contents

International

~~The following table presents selected~~

Selected financial data for the International segment ~~for the three and nine months ended November 3, 2018, and October 28, 2017~~was as follows ($ in millions):



	Three Months Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Revenue	$	715		$	740		$	1,376		$	1,437
Revenue % change		(3.4)	%		10.8	%		(4.2)	%		11.9	%
Comparable sales % change		(1.9)	%		7.6	%		(1.6)	%		7.0	%
Gross profit	$	170		$	171		$	330		$	334
Gross profit as a % of revenue		23.8	%		23.1	%		24.0	%		23.2	%
SG&A	$	166		$	165		$	324		$	330
SG&A as a % of revenue		23.2	%		22.3	%		23.5	%		23.0	%
Operating income	$	4		$	6		$	6		$	4
Operating income as a % of revenue		0.6	%		0.8	%		0.4	%		0.3	%

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Revenue $ 834
$ 829
$ 2,271
$ 2,113
Revenue % growth 0.6 % 10.1 % 7.5 % 5.1 %
Comparable sales % gain 3.7 % 3.8 % 5.8 % 4.2 %
Gross profit $ 185
$ 184
$ 519
$ 503
Gross profit as a % of revenue 22.2 % 22.2 % 22.9 % 23.8 %
SG&A $ 178
$ 181
$ 508
$ 491
SG&A as a % of revenue 21.3 % 21.8 % 22.4 % 23.2 %
Restructuring charges $ —
$ (2 ) $ —
$ —
Operating income $ 7
$ 5
$ 11
$ 12
Operating income as a % of revenue 0.8 % 0.6 % 0.5 % 0.6 %

The ~~components of the 0.6% and 7.5% revenue increases for the~~ ~~three~~ ~~and nine months ended November 3, 2018, respectively, were as follows:~~

Three Months Ended Nine Months Ended
November 3, 2018 November 3, 2018
Comparable sales impact 3.6 % 5.7 %
Non-comparable sales impact⁽¹⁾
1.6 % 1.9 %
Foreign currency exchange rate fluctuation impact (4.6 )% (0.1 )%
Total revenue increase 0.6 % 7.5 %


~~(1)~~	Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit-share revenue, credit card revenue, gift card breakage and sales of merchandise to wholesalers and dealers, as applicable.

~~The increases~~decrease in revenue in the ~~third~~second quarter ~~and first nine months~~ of fiscal ~~2019 were~~2020 was primarily driven by the comparable sales decline of 1.9% and the negative impact of ~~3.6% and 5.7%, respectively, due~~foreign currency exchange rate fluctuations, both primarily related to ~~growth in both Canada and Mexico and increased revenue from Best Buy Mexico store openings.~~our Canadian operations. The ~~increase~~decrease in revenue in the ~~third quarter~~first six months of fiscal ~~2019~~2020 was ~~partially offset~~primarily driven by the negative impact of foreign currency exchange rate fluctuations and the comparable sales decline of 1.6%, both primarily related to ~~Canada.~~

our Canadian operations.

The following table reconciles the number of International stores open at the beginning and end of the ~~third~~second quarters of fiscal ~~2019~~2020 and fiscal ~~2018:~~2019:



	Fiscal 2020								Fiscal 2019
	Total Stores at Beginning of Second Quarter		Stores Opened		Stores Closed		Total Stores at End of Second Quarter		Total Stores at Beginning of Second Quarter		Stores Opened		Stores Closed		Total Stores at End of Second Quarter
Canada
Best Buy		132		-		-		132		134		-		-		134
Best Buy Mobile		44		-		(1)		43		49		-		-		49
Mexico
Best Buy		29		1		-		30		26		2		-		28
Best Buy Express		9		-		-		9		6		-		-		6
Total International segment stores		214		1		(1)		214		215		2		-		217

Fiscal 2019 Fiscal 2018
Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter
Canada:
Best Buy 134
—
—
134
134
—
—
134
Best Buy Mobile 49
—
(2 ) 47
53
—
(1 ) 52
Mexico:
Best Buy 28
1
—
29
22
1
—
23
Best Buy Express 6
—
—
6
5
—
—
5
Total International segment stores 217
1
(2 ) 216
214
1
(1 ) 214

~~The following table presents the~~

International ~~segment's~~segment revenue mix percentages and comparable sales percentage changes by revenue category ~~for the three months ended November 3, 2018, and October 28, 2017:~~were as follows:



	Revenue Mix				Comparable Sales				Revenue Mix						Comparable Sales
	Three Months Ended				Three Months Ended				Three Months Ended						Three Months Ended
	November 3, 2018		October 28, 2017		November 3, 2018		October 28, 2017		August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Computing and Mobile Phones	51	%	52	%	2.0	%	0.6	%		43	%		45	%		(4.4)	%		4.5	%
Consumer Electronics	26	%	27	%	(0.6	)%	4.5	%		32	%		29	%		1.0	%		0.3	%
Appliances	8	%	8	%	11.7	%	49.0	%		12	%		12	%		11.5	%		35.7	%
Entertainment	7	%	6	%	10.8	%	7.8	%		5	%		6	%		(20.1)	%		14.3	%
Services	6	%	5	%	15.0	%	(15.1	)%		6	%		6	%		4.6	%		11.3	%
Other	2	%	2	%	43.8	%	n/a			2	%		2	%		(24.0)	%		51.4	%
Total	100	%	100	%	3.7	%	3.8	%		100	%		100	%		(1.9)	%		7.6	%

The following is a description of the notable comparable sales changes in our International segment by revenue ~~category for the three months ended November 3, 2018:~~

category:

Computing and Mobile Phones: The ~~2.0%~~4.4% comparable sales decline was driven primarily by mobile phones and computing, partially offset by gains in tablets.

Consumer Electronics: The 1.0% comparable sales gain was driven primarily by ~~mobile phones~~headphones and ~~wearables,~~health and fitness, partially offset by ~~computing~~declines in digital imaging and ~~tablets.~~

~~Consumer Electronics:~~home theater.

Appliances: The ~~0.6%~~11.5% comparable sales gain was driven by both large and small appliances.

Entertainment: The 20.1% comparable sales decline was driven primarily by ~~digital imaging~~gaming and ~~home theater,~~drones, partially offset by ~~growth~~gains in ~~headphones and health and fitness.~~

~~Appliances:~~virtual reality.

Services: The ~~11.7% comparable sales gain was driven by large and small appliances.~~

~~Entertainment:~~ ~~The 10.8%~~4.6% comparable sales gain was driven primarily by ~~gaming, partially offset by declines in movies and drones.~~

~~Services:~~warranty revenue.

Other: The ~~15.0%~~24.0% comparable sales ~~gain~~decline was driven primarily by ~~repair and technical support.~~

~~Other:~~ ~~The 43.8% comparable sales gain was driven primarily by other product offerings, including~~ baby ~~products and luggage.~~

products.

Our gross profit rate ~~remained flat~~increased in the ~~third~~second quarter and first six months of fiscal 2020, primarily due to Canada from increased revenue in the higher margin services category.

Table of Contents

Our SG&A rate increased in the second quarter of fiscal ~~2019.~~2020, primarily due to sales leverage as SG&A remained relatively flat. During the first ~~nine~~six months of fiscal ~~2019,~~2020, our ~~gross profit~~SG&A rate ~~decreased~~increased primarily due to ~~home theater and large appliances in Canada.~~

~~Our~~sales leverage, as SG&A ~~rate~~ decreased ~~in the third quarter of fiscal 2019 primarily~~$6 million due to the favorable impact of foreign currency exchange rates ~~primarily~~ related to Canada. ~~In the first nine months of fiscal 2019, our SG&A rate decreased primarily due to sales leverage, as SG&A increased $17 million due to higher variable costs associated with increased revenue.~~

~~No restructuring charges were incurred in the third quarter or first nine months of fiscal 2019.~~

Our operating income rate ~~increased~~decreased in the ~~third~~second quarter of fiscal ~~2019~~2020, primarily ~~due to~~driven by a ~~lower~~higher SG&A rate, aspartially offset by a higher gross profit rate, described above. InDuring the first ~~nine~~six months of fiscal ~~2019,~~2020, our operating income rate ~~decreased~~increased, primarily driven ~~primarily~~ by a ~~lower~~higher gross profit rate, partially offset by a ~~lower~~higher SG&A rate as described above.

Consolidated Non-GAAP Financial Measures

The following table reconciles consolidated operating income, effective tax rate and diluted EPS for the periods presented (GAAP financial measures) to non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted EPS ~~for the periods presented~~(non-GAAP financial measures) ($ in millions, except per share amounts):



	Three Months Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Operating income	$	313		$	335		$	647		$	600
Restructuring charges⁽¹⁾		48			17			48			47
Intangible asset amortization⁽²⁾		18			-			35			-
Acquisition-related transaction costs⁽²⁾		3			-			3			-
Tax reform related item - employee bonus⁽³⁾		-			-			-			7
Non-GAAP operating income	$	382		$	352		$	733		$	654

Effective tax rate		22.3	%		25.7	%		21.0	%		22.8	%
Restructuring charges⁽¹⁾		0.4	%		(0.3)	%		0.3	%		0.1	%
Intangible asset amortization⁽²⁾		0.1	%		-	%		0.2	%		-	%
Non-GAAP effective tax rate		22.8	%		25.4	%		21.5	%		22.9	%

Diluted EPS	$	0.89		$	0.86		$	1.86		$	1.58
Restructuring charges⁽¹⁾		0.18			0.06			0.18			0.17
Intangible asset amortization⁽²⁾		0.06			-			0.13			-
Acquisition-related transaction costs⁽²⁾		0.01			-			0.01			-
Tax reform related item - employee bonus⁽³⁾		-			-			-			0.02
Tax impact of non-GAAP adjustments⁽⁴⁾		(0.06)			(0.01)			(0.08)			(0.05)
Non-GAAP diluted EPS	$	1.08		$	0.91		$	2.10		$	1.72

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Operating income $ 322
$ 350
$ 922
$ 971
Restructuring charges⁽¹⁾
—
(2 ) 47
—
Acquisition-related transaction costs⁽²⁾
13
—
13
—
Intangible asset amortization⁽²⁾
5
—
5
—
Tax reform related item - employee bonus⁽³⁾
—
—
7
—
Non-GAAP operating income $ 340
$ 348
$ 994
$ 971

Effective tax rate 16.1 % 30.4 % 20.4 % 32.7 %
Tax reform - repatriation tax⁽³⁾
5.4 % — % 1.9 % — %
Tax reform - deferred tax rate change⁽³⁾
1.5 % — % 0.5 % — %
Acquisition-related transaction costs⁽²⁾
(0.6 )% — % — % — %
Intangible asset amortization⁽²⁾
(0.3 )% — % — % — %
(Gain) loss on investments, net 0.6 % 0.1 % — % 0.1 %
Restructuring charges⁽¹⁾
— % (0.1 )% 0.1 % — %
Non-GAAP effective tax rate 22.7 % 30.4 % 22.9 % 32.8 %

Diluted EPS $ 0.99
$ 0.78
$ 2.57
$ 2.05
Tax reform - repatriation tax⁽³⁾
(0.06 ) —
(0.06 ) —
Tax reform - deferred tax rate change⁽³⁾
(0.02 ) —
(0.02 ) —
Restructuring charges⁽¹⁾
—
—
0.17
—
Acquisition-related transaction costs⁽²⁾
0.04
—
0.04
—
Intangible asset amortization⁽²⁾
0.02
—
0.02
—
Tax reform related item - employee bonus⁽³⁾
—
—
0.02
—
(Gain) loss on investments, net (0.04 ) —
(0.04 ) 0.02
Tax impact of non-GAAP adjustments⁽⁴⁾
—
—
(0.05 ) (0.01 )
Non-GAAP diluted EPS $ 0.93
$ 0.78
$ 2.65
$ 2.06


~~(1)~~	~~Represents charges primarily associated with our Best Buy Mobile stand-alone store closures in the U.S. Refer to Note 6,~~ ~~Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements for additional information.~~

~~(2)~~

Represents charges associated with the acquisition of GreatCall, including (1) acquisition-related transaction costs primarily comprised of professional fees, and (2) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and technology. Refer to Note 2, ~~Acquisition, in the Notes to Condensed Consolidated Financial Statements for additional information.~~

~~(3)~~

Represents adjustments to the provisional tax expense recorded in the fourth quarter of fiscal 2018 resulting from the Tax Act, including adjustments associated with a deemed repatriation tax and the revaluation of deferred tax assets and liabilities, as well as adjustments to Tax Act-related items announced in response to future tax savings created by the Tax Act, including a one-time bonus for certain employees.

~~(4)~~

The non-GAAP adjustments relate primarily to the U.S. and Canada. As such, the income tax impact of non-GAAP adjustments is calculated using the tax rate for the U.S. (24.5% for the periods ended November 3, 2018, and 38.0% for the periods ended October 28, 2017) and Canada (26.9% for the periods ended November 3, 2018, and 26.6% for the periods ended October 28, 2017), applied to the non-GAAP adjustments of each country.

(1)Represents charges associated with U.S. retail operating model changes and the closure of Best Buy Mobile stand-alone stores in the U.S. Refer to Note 9, Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements for additional information.

(2)Represents charges associated with the acquisitions of GreatCall and CST, 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. Refer to Note 2, Acquisition, and Note 5, Goodwill and Intangible Assets, in the Notes to Condensed Consolidated Financial Statements for additional information.

(3)Represents final adjustments for amounts paid and associated taxes related to a one-time bonus for certain employees announced in response to future tax savings created by the Tax Cuts and Jobs Act of 2017 enacted into law in the fourth quarter of fiscal 2018.

(4)The non-GAAP adjustments relate primarily to adjustments in the U.S. As such, the income tax charge is calculated using the statutory tax rate for the U.S. of 24.5% for all periods presented.

Non-GAAP operating income ~~decreased $8 million and~~ increased ~~$23 million~~ in the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019, respectively, compared to the corresponding prior year periods. The decrease in the third quarter of fiscal 2019 was~~2020, primarily driven by ~~an increase~~a decrease in SG&A ~~expenses, primarily due to increases in growth investments, higher~~from lower incentive compensation and higher variable costs due to increased revenue, partially offset by strong revenue performance in both the Domestic and International segments. The increase in the first nine months of fiscal 2019 was primarily driven by strong revenue performance in both the Domestic and International segments in nearly all product categories, partially offset by an

~~increase in SG&A expenses, primarily due to increases in growth investments, higher incentive compensation and higher variable costs due to increased revenue.~~

compensation.

Our non-GAAP effective tax rate decreased in the ~~third~~second quarter and first six months of fiscal ~~2019~~2020, primarily due to ~~the impact of the Tax Act, partially offset by a decrease in excess~~increased tax benefits related to stock-based compensation inand the ~~current year period. Our non-GAAP effective tax rate decreased in the first nine months~~resolution of ~~fiscal 2019 primarily due to the impact of the Tax Act.~~

discrete matters.

Non-GAAP diluted EPS increased in the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019~~2020, primarily driven by ~~lower~~the increase in non-GAAP ~~effective tax rates~~operating income and lower diluted weighted-average common shares outstanding ~~driven by~~from share repurchases. Refer to the Share Repurchases and Dividends section below for additional information.

Table of Contents

Liquidity and Capital Resources

Summary

We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment ~~needed~~required to support our business strategies, the performance of our business, capital expenditures, credit facilities, short-term borrowing arrangements and working capital management. Capital expenditures and share repurchases

are ~~components~~a component of our cash flow and capital management strategy which, to a large extent, we can adjust in response to economic and other changes in our business environment. We have a disciplined approach to capital allocation, which focuses on investing in key priorities that support our ~~Best Buy 2020~~ strategy.

~~The following table summarizes our cash and~~

Cash, cash equivalents and short-term investments ~~at November 3, 2018, February 3, 2018, and October 28, 2017~~were as follows ($ in millions):


	August 3, 2019		February 2, 2019		August 4, 2018
Cash and cash equivalents	$	1,289	$	1,980	$	1,865
Short-term investments		320		-		465
Total cash, cash equivalents and short-term investments	$	1,609	$	1,980	$	2,330

November 3, 2018 February 3, 2018 October 28, 2017
Cash and cash equivalents $ 1,228
$ 1,101
$ 1,103
Short-term investments 76
2,032
2,237
Total $ 1,304
$ 3,133
$ 3,340

The ~~decreases~~decrease in total cash, cash equivalents and short-term investments from February ~~3, 2018, and October 28, 2017, were~~2, 2019, was primarily due to share repurchases and the acquisition of ~~GreatCall.~~

CST. The decrease from August 4, 2018, was primarily due to share repurchases and the acquisitions of GreatCall and CST.

Cash Flows

~~The following table summarizes our cash~~

Cash flows from total operations ~~for the nine months ended November 3, 2018, and October 28, 2017~~were as follows ($ in millions):


	Six Months Ended
	August 3, 2019		August 4, 2018
Total cash provided by (used in):
Operating activities	$	625	$	1,108
Investing activities		(828)		1,200
Financing activities		(576)		(1,524)
Effect of exchange rate changes on cash		(1)		(16)
Increase (decrease) in cash, cash equivalents and restricted cash	$	(780)	$	768

Nine Months Ended
November 3, 2018 October 28, 2017
Total cash provided by (used in):
Operating activities $ 1,107
$ 1,203
Investing activities 574
(1,016 )
Financing activities (1,526 ) (1,335 )
Effect of exchange rate changes on cash (16 ) 15
Increase (decrease) in cash, cash equivalents and restricted cash $ 139
$ (1,133 )

Operating Activities

The decrease in cash provided by operating activities in fiscal 2020 was primarily due to changes in working capital ~~from the timing of collections of receivables, higher incentive compensation payments and the timing of income tax payments partially offset by~~which were primarily due to timing of receipts and payments on ~~inventory.~~

inventory, income taxes and collections of receivables. This was partially offset by lower incentive compensation payments due to a special one-time incentive payment in fiscal 2019 and the timing of indirect tax payments.

Investing Activities

The ~~increase~~decrease in cash provided by investing activities in fiscal 2020 was primarily due to ~~a decrease in purchases of investments, partially offset by a decrease~~decreases in sales of investments and the acquisition of ~~GreatCall.~~

CST.

Financing Activities

The ~~increase~~decrease in cash used in financing activities was primarily due to ~~a decrease in~~ the ~~issuance of common stock from a decrease in the volume of option exercises, and an increase in our regular quarterly dividend rate from $0.34 per share~~repayment in fiscal ~~2018 to $0.45 per share in fiscal 2019. The cash used in the repayment~~2019 of our ~~2018 Notes and cash provided by the issuance of our $500~~$500 million principal amount of notes due ~~October~~August 1, ~~2028 (the "2028 Notes") largely offset.~~

2018, and a decrease in shares repurchased during fiscal 2020.

Sources of Liquidity

Funds generated by operating activities, available cash and cash equivalents, short-term investments, our credit facilities and other debt arrangements are our most significant sources of liquidity. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures, share repurchases, dividends and strategic initiatives, including business combinations. However, in the event our liquidity is insufficient, we may be required to limit our spending. There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our existing credit facilities or obtain additional financing, if necessary, on favorable terms.

Table of Contents

~~On April 17, 2018, we entered into~~

We have a ~~new~~ $1.25 billion five-year senior unsecured revolving credit facility (the ~~"Five-Year Facility Agreement"~~“facility”) with a syndicate of banks that expires in April 2023. ~~The Five-Year Facility Agreement replaced the previous $1.25 billion unsecured revolving credit facility, which was originally scheduled to expire in June 2021, but was terminated on April 17, 2018.~~ Refer to Note 7, 6, Debt, in the Notes to ~~Condensed~~ Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019, for additional information. ~~At November 3, 2018, we had~~There have been no borrowings ~~outstanding~~ under the ~~Five-Year Facility Agreement.~~

facility.

Our ability to access ~~our revolving credit~~the facility ~~under the Five-Year Facility Agreement~~ is subject to our compliance with ~~the~~its terms and conditions, ~~of the facility,~~ including financial covenants. The financial covenants require us to maintain certain financial ratios. At ~~November~~August 3, ~~2018,~~2019, we were in compliance with all ~~such~~ financial covenants. If an event of default were to occur with respect to any of our other debt, it would likely constitute an event of default under our ~~facilities~~facility as well.

Our credit ratings and outlook ~~at December 5, 2018,~~as of September 4, 2019, are summarized below. On September 24, 2018, Moody's upgraded its outlook from stable to positive. On August 21, 2018, Fitch upgraded its rating from BBB- to BBB and changed its outlook from positive to stable. Standard & Poor's ratings remain unchanged from those reported in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018.

Rating Agency

~~Rating~~

Rating

Outlook

Standard & Poor's

~~BBB~~

BBB

Stable

Moody's

~~Baa1~~

Baa1

Positive

Fitch

~~BBB~~

BBB

Stable

Credit rating agencies review their ratings periodically, and, therefore, the credit rating assigned to us by each agency may be subject to revision at any time. ~~Accordingly, we are not able to predict whether our current credit ratings will remain as disclosed above.~~ Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the retail and consumer electronics industries, our financial position and changes in our business strategy. If further changes in our credit ratings were to occur, they could impact, among other things, interest costs for certain of our credit facilities, our future borrowing costs, access to capital markets, vendor financing terms and future ~~store~~new-store leasing costs.

Restricted Cash

Our liquidity is also affected by restricted cash balances that are pledged as collateral or restricted to use for workers’ compensation and general liability insurance ~~and workers’ compensation insurance.~~claims. Restricted cash, ~~and cash equivalents,~~ which ~~are~~is included in Other current assets on our Condensed Consolidated Balance Sheets, ~~remained relatively unchanged at $211~~was $115 million, ~~$199~~$204 million, and ~~$197~~$203 million at ~~November~~August 3, 2019, February 2, 2019, and August 4, 2018, ~~February 3, 2018, and October 28, 2017,~~ respectively.

The decrease from prior periods was due to a dividend of excess cash from our wholly-owned insurance captive that manages a portion of our self-insured claims.

Debt and Capital

As of August 3, 2019, we had $650 million principal amount of notes due March 15, 2021, and $500 million principal amount of notes due October 1, ~~2018, we repaid our 2018 Notes using existing cash resources and on September 27, 2018, we issued our~~ 2028, ~~Notes.~~outstanding. Refer to Note 7, 6, Debt~~, in the Notes to Condensed Consolidated Financial Statements and Note 5,~~ ~~Debt~~, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, for further information about our outstanding notes.

Share Repurchases and Dividends

We repurchase our common stock and pay dividends pursuant to programs approved by our Board of Directors ("Board"). The payment of cash dividends is also subject to customary legal and contractual restrictions. Our long-term capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through dividends and share repurchases while maintaining investment grade credit metrics.

On February ~~2017,~~23, 2019, our Board authorized a ~~$5.0~~$3.0 billion share repurchase program that superseded the previous $5.0 billion authorization from 2011. There is no expiration date governing the period over which we can repurchase shares under the February 2017 authorization. On March 1, 2018, we announced our intent to repurchase $1.5program. As of August 3, 2019, $2.7 billion of ~~shares in fiscal 2019, which reflects an updated two-year plan of $3.5~~the $3.0 billion ~~compared to the original~~ ~~$3.0 billion~~ ~~two-year plan announced on March 1, 2017.~~share repurchase authorization was available. Between the end of the ~~third~~second quarter of fiscal 2020 on August 3, 2019, ~~on November 3, 2018,~~ and ~~December 5, 2018,~~September 4, 2019, we repurchased an incremental ~~2.5~~2.2 million shares of our common stock at a cost of ~~$168~~$146 million.

~~The following table presents our share~~

Share repurchase activity ~~for the~~ ~~three~~ ~~and nine months ended November 3, 2018, and October 28, 2017~~was as follows ($ and shares in millions, except per share amounts):



	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Total cost of shares repurchased	$	230	$	375	$	336	$	774
Average price per share	$	69.71	$	74.80	$	70.04	$	73.21
Number of shares repurchased		3.3		5.0		4.8		10.6

Table of Contents

In fiscal 2004, our Board initiated the payment of a regular quarterly cash dividend on common stock. A quarterly cash dividend has been paid in each subsequent quarter. The payment of cash dividends is subject to customary legal and contractual restrictions. The following table presents our dividend

Dividend activity ~~for the~~ ~~three~~ ~~and nine months ended November 3, 2018, and October 28, 2017~~was as follows ($ in millions, except per share amounts):



	Three Months Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Regular quarterly cash dividends per share	$	0.50	$	0.45	$	1.00	$	0.90
Cash dividends declared and paid	$	133	$	125	$	267	$	253

Three Months Ended Nine Months Ended
November 3, 2018 October 28, 2017 November 3, 2018 October 28, 2017
Regular quarterly cash dividends per share $ 0.45
$ 0.34
$ 1.35
$ 1.02
Cash dividends declared and paid $ 123
$ 102
$ 376
$ 310

The ~~increase~~increases in cash dividends declared and paid for the ~~three~~second quarter and ~~nine~~first six months ~~ended November 3, 2018,~~of fiscal 2020 compared to the same periods in the prior year ~~was~~were the result of ~~an increase~~increases in the regular quarterly dividend rate, partially offset by fewer shares due to the return of capital to shareholders through share repurchases.

Other Financial Measures

Our current ratio, calculated as current assets divided by current liabilities, ~~was~~remained relatively unchanged at 1.1 ~~at November~~as of August 3, ~~2018, compared to 1.3 at~~2019, 1.2 as of February ~~3, 2018,~~2, 2019, and 1.2 ~~at October 28, 2017. The decreases from February 3, 2018, and October 28, 2017, were primarily due to the use~~as of existing cash to fund share repurchases and the acquisition of GreatCall. This was partially offset by the repayment of our 2018 Notes, which were included in current liabilities at February 3, 2018, and October 28, 2017.

August 4, 2018.

Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings ~~ratio was 1.2 at November 3, 2018, compared to 1.4 at February 3, 2018, and 1.1 at October 28, 2017. The changes~~ from ~~February 3, 2018, and October 28, 2017, were primarily due to fluctuations in net earnings.~~

~~Our non-GAAP debt to EBITDAR ratio, which includes capitalized operating lease obligations in its calculation,~~continuing operations over the trailing twelve months, also remained relatively unchanged at ~~1.6 at November~~0.8 as of August 3, ~~2018,~~2019, 0.9 as of February ~~3, 2018,~~2, 2019, and ~~October 28, 2017, respectively.~~

~~Our non-GAAP debt to EBITDAR ratio is calculated~~0.8 as ~~follows:~~



~~Non-GAAP debt to EBITDAR =~~	~~Non-GAAP debt~~
~~Non-GAAP debt to EBITDAR =~~	~~Non-GAAP EBITDAR~~

The most directly comparable GAAP financial measure to our non-GAAP debt to EBITDAR ratio is our debt to net earnings ratio, which excludes capitalized operating lease obligations from debt in the numerator of ~~the calculation and does not adjust net earnings in the denominator of the calculation.~~

~~The following table presents a reconciliation of our debt to net earnings ratio and our non-GAAP debt to EBITDAR ratio for continuing operations ($ in millions):~~

November 3, 2018⁽¹⁾

February 3, 2018⁽¹⁾

October 28, 2017⁽¹⁾
Debt (including current portion) $ 1,326
$ 1,355
$ 1,329
Capitalized operating lease obligations (5 times rental expense)⁽²⁾
3,891
3,914
3,910
Non-GAAP debt $ 5,217
$ 5,269
$ 5,239

Net earnings from continuing operations $ 1,093
$ 999
$ 1,242
Other income (expense) (including interest expense, net) (5 ) 26
35
Income tax expense 696
818
575
Depreciation and amortization expense 733
683
663
Rental expense 778
782
782
Restructuring charges⁽³⁾
57
10
9
Non-GAAP EBITDAR $ 3,352
$ 3,318
$ 3,306

Debt to net earnings ratio 1.2
1.4
1.1
Non-GAAP debt to EBITDAR ratio 1.6
1.6
1.6


~~(1)~~	Debt is reflected as of the balance sheet date for each of the respective fiscal periods, while net earnings from continuing operations and the other components of non-GAAP EBITDAR represent activity for the 12 months ended as of each of the respective dates.


~~(2)~~	The multiple of five times annual rent 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 rate our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio.


~~(3)~~	~~Refer to Note 6,~~ ~~Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements and Note 4,~~ ~~Restructuring Charges~~, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information regarding the nature of these charges.

August 4, 2018.

Off-Balance-Sheet Arrangements and Contractual Obligations

Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our ~~operating leases and our~~ $1.25 billion in undrawn capacity on our credit facility ~~at November~~as of August 3, ~~2018,~~2019, which, if drawn upon, would be included as short-term debt on our Condensed Consolidated Balance Sheets.

~~There~~

Other than the changes related to the adoption of the new lease accounting standard as described in Note 4, Leases, in the Notes to Condensed Consolidated Financial Statements, there has been no material change in our contractual obligations other than in the ordinary course of business since the end of fiscal ~~2018.~~2019. See our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, for additional information regarding our off-balance-sheet arrangements and contractual obligations.

Significant Accounting Policies and Estimates

We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018.~~2, 2019. We discuss our critical accounting estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018.~~2, 2019. In the first quarter of fiscal ~~2019,~~2020, we adopted new ~~revenue recognition~~lease accounting guidance, as described in Note 1, Basis of Presentation, and Note 4, Leases, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q. There have been no other significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal ~~2018.~~

2019.

New Accounting Pronouncements

For a description of new applicable accounting pronouncements, see Note 1, Basis of Presentation, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

Safe Harbor Statement Under the Private Securities Litigation Reform Act

Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to

provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as "anticipate," "assume," "believe," "estimate," "expect," "guidance," "intend," "outlook," "plan," "project" and other words and terms of similar meaning. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment and other events. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this Quarterly Report on Form 10-Q. 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~~competition (including from multi-channel retailers, e-

Table of Contents

commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers), our mix of products and services, our expansion strategies, our focus on services as a strategic priority, our reliance on key vendors and mobile network carriers (including product availability), pricing investments and promotional activity, our ability to attract and retain qualified employees, changes in market compensation rates, risks arising from statutory, regulatory and legal developments (including tax statutes and regulations), macroeconomic pressures in the markets in which we operate (including fluctuations in housing prices, ~~oil~~energy markets and jobless rates), conditions in the industries and categories in which weoperate, 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 cycles and launches, changes in consumer preferences, ~~or confidence, changes in consumer~~ spending and debt, ~~levels,~~our ability to provide attractive promotional financing, interruptions and other supply chain issues, catastrophic events, 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 ~~mix~~capital markets, changes to 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 ~~services offered for sale in our physical stores and online, credit market changes and constraints, product availability,~~risks associated with vendors that source products outside of the U.S., 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 ~~duties), competitive initiatives of competitors (including pricing actions and promotional activities), strategic and business decisions of~~risks arising from our vendors (including actions that could impact promotional support, product margin and/or supply), the success of new product launches, the impact of pricing investments and promotional activity, weather, natural or man-made disasters, attacks on our data systems, our ability to prevent or react to a disaster recovery situation, changes in laws or regulations, changes in tax rates, changes in taxable income in each jurisdiction, tax audit developments and resolution of other discrete tax matters, the effects of the Tax Act, foreign currency fluctuation, our ability to manage our property portfolio, the impact of labor markets, our ability to retain qualified employees and management, failure to achieve anticipated expense and cost reductions, disruptions in our supply chain, the costs of procuring goods we sell, failure to achieve anticipated revenue and profitability increases from operational and restructuring changes (including investments in our multi-channel capabilities), inability to secure or maintain favorable vendor terms, failure to accurately predict the duration over which we will incur costs, development of new businesses, failure to complete or achieve anticipated benefits of acquisitions or other transactions (including our recent acquisition of GreatCall), including, with respect to such transactions, the risks that revenues following the transactions may be lower than expected, operating costs, customer loss, and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, and suppliers) may be greater than expected and that we may assume unexpected risks and liabilities from the transaction), the success of our strategic initiatives and our ability to protect information relating to our employees and customers.international activities. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made, and we assume no obligation to update any forward-looking statement that we may make.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3.Quantitative and Qualitative Disclosures About Market Risk

As disclosed in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, in addition to the risks inherent in our operations, we are exposed to certain market risks.

Interest Rate Risk

We are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense. Our cash, cash equivalents and short-term investments generate interest income that will vary based on changes in short-term interest rates. In addition, we have swapped our fixed-rate debt to a floating-rate such that the interest rate expense on this debt will vary with short-term interest rates. Refer to Note 5, 6, Debt, and Note 6, 5, Derivative Instruments, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February ~~3, 2018,~~2, 2019, for further information regarding our interest rate swaps.

As of ~~November~~August 3, ~~2018,~~2019, we had ~~$1.3~~$1.6 billion of cash, cash equivalents and short-term investments and $1.2 billion of debt that has been swapped to floating ~~rate. Therefore, we had~~rate, and this net ~~cash and short-term investments of $0.1~~$0.4 billion ~~generating income that~~ is exposed to interest rate changes. As of ~~November~~August 3, ~~2018,~~2019, a 50 basis-point increase in short-term interest rates would ~~lead~~have led to an estimated $1$2 million reduction in net interest expense, and conversely a 50 basis-point decrease in short-term interest rates would ~~lead~~have led to an estimated $1$2 million increase in net interest expense.

Foreign Currency Exchange Rate Risk

We have market risk arising from changes in foreign currency exchange rates related to our International segment operations. On a limited basis, we utilize foreign exchange forward contracts to manage foreign currency exposure to certain forecast inventory purchases, recognized receivable and payable balances and our investment in our Canadian operations. Our primary

objective in holding derivatives is to reduce the volatility of net earnings and cash flows, as well as net asset value associated with changes in foreign currency exchange rates. Our foreign currency risk management strategy includes both hedging instruments and derivatives that are not designated as hedging instruments, which generally have terms of up to 12 months. ~~The aggregate notional amount related~~Refer to ~~our foreign exchange forward contracts outstanding at November 3, 2018, was $83 million. The net fair value recorded on our~~Note 6, Derivative Instruments, in the Notes to Condensed Consolidated ~~Balance Sheets at November 3, 2018, related to our foreign exchange forward contracts was $1 million. The amount recorded on our Condensed Consolidated~~Financial Statements ~~of Earnings related to all contracts settled and outstanding was $0 million~~ for ~~the three months ended November 3, 2018, and a gain of $2 million for the nine months ended November 3, 2018.~~

additional information regarding these instruments.

Foreign currency exchange rate fluctuations were primarily driven by the strength of the U.S. dollar compared to the Canadian dollar compared to the prior-year period, which had a negative overall impact on our revenue as these foreign currencies translated into less U.S. dollars. We estimate that foreign currency exchange rate fluctuations had a net unfavorable impact of ~~$38~~$10 million on our revenue and a $0 million impact on our net earnings for the ~~three months ended November 3, 2018,~~second quarter of fiscal 2020, and a net unfavorable impact of $3$37 million on our revenue and a $0 million impact on our net earnings for the ~~nine~~first six months ~~ended November 3, 2018.~~of fiscal 2020.

Table of Contents


~~Item 4.~~	~~Controls and Procedures~~

Item 4.Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed ~~by us~~ in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. The Disclosure Committee meets on a regular quarterly basis and otherwise as needed.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act), at ~~November~~August 3, ~~2018~~.2019. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at ~~November~~August 3, ~~2018~~,2019, our disclosure controls and procedures were effective.

There ~~was~~were no ~~change~~changes in internal control over financial reporting during the fiscal quarter ended ~~November~~August 3, ~~2018~~,2019, that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings~~

Item 1.Legal Proceedings

For a description of our legal proceedings, see Note 14, Contingencies, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information regarding our repurchases of common stock during the ~~third~~second quarter of fiscal ~~2019:~~2020:



Fiscal Period	Total Number of ‎Shares Purchased		Average Price Paid ‎per Share		Total Number of Shares Purchased as Part of Publicly Announced Program⁽¹⁾		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
May 5, 2019 through June 1, 2019		1,014,719	$	68.44		1,014,719	$	2,825,000
June 2, 2019 through July 6, 2019		1,307,061	$	66.99		1,307,061	$	2,737,000
July 7, 2019 through August 3, 2019		975,942	$	74.67		975,942	$	2,664,000
Total		3,297,722	$	69.71		3,297,722	$	2,664,000

(1)Pursuant to a $3.0 billion share repurchase program that was authorized by our Board in February 2019. There is no expiration date governing the period over which we can repurchase shares under the February 2019 share repurchase program. For additional information, see Note 11, Repurchase of Common Stock, in the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

‎

Table of Contents

Fiscal Period Total Number of Shares Purchased Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Program⁽¹⁾

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
August 5, 2018 through September 1, 2018 1,558,776
$ 78.77
1,558,776
$ 2,132,000,000
September 2, 2018 through October 6, 2018 1,659,266
$ 78.00
1,659,266
$ 2,002,000,000
October 7, 2018 through November 3, 2018 1,641,664
$ 71.45
1,641,664
$ 1,885,000,000
Total 4,859,706
$ 76.04
4,859,706

Item 6.Exhibits

~~(1)~~

Pursuant to a $5.0 billion share repurchase program that was authorized by our Board in February 2017. There is no expiration date governing the period over which we can repurchase shares under the February 2017 share repurchase program. For additional information, see Note 11, ~~Repurchase of Common Stock, in the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.~~


~~Item 6.~~ 3.1	~~Exhibits~~



~~3.1~~		Restated Articles of Incorporation (incorporated herein by reference to the Definitive Proxy Statement filed by Best Buy Co., Inc. on May 12, 2009)
3.2
~~3.2~~		Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Best Buy Co., Inc. on June 14, 2018)
10.1
~~4.1~~		~~Third Supplemental Indenture, dated as~~Form of ~~September 27, 2018, to the Indenture, dated as of March 11, 2011, between~~ Best Buy Co., Inc. ~~and U.S. Bank National Association, as successor trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by~~ Long-Term Incentive Program Award Agreement (2019) – Directors
10.2	Best Buy Co., Inc. ~~on September 27, 2018)~~Long-Term Incentive Program Award Agreement dated June 11, 2019 between R. Mike Mohan and Best Buy Co., Inc.
31.1
~~31.1~~		Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
~~31.2~~		Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
~~32.1~~		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002⁽¹⁾
32.2
~~32.2~~		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002⁽¹⁾
101
~~101~~		The following financial information from our Quarterly Report on Form 10-Q for the ~~third~~second quarter of fiscal ~~2019,~~2020, filed with the SEC on ~~December 7, 2018,~~September 6, 2019, formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(iXBRL): (i) the Condensed Consolidated Balance Sheets at ~~November~~August 3, ~~2018,~~2019, February 3,2, 2019, and August 4, 2018, ~~and October 28, 2017,~~ (ii) the Condensed Consolidated Statements of Earnings for the three and ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, and ~~October 28, 2017,~~August 4, 2018, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, and ~~October 28, 2017,~~August 4, 2018, (iv) the Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, and ~~October 28, 2017,~~August 4, 2018, (v) the Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, and ~~October 28, 2017,~~August 4, 2018, and (vi) the Notes to Condensed Consolidated Financial Statements.

~~____________________________~~

~~(1)~~

104

The ~~certifications in Exhibit 32.1 and Exhibit 32.2 to this~~cover page from our Quarterly Report on Form 10-Q ~~shall not be deemed “filed”~~ for ~~purposes~~the second quarter of ~~Section 18 of~~fiscal 2020, filed with the ~~Securities Exchange Act of 1934,~~SEC on September 6, 2019, formatted in iXBRL (included as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.Exhibit 101).

____________________________

(1)The certifications in Exhibit 32.1 and Exhibit 32.2 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K under the Securities Act of 1933, as amended, the registrant has not filed as exhibits to this Quarterly Report on Form 10-Q certain instruments with respect to long-term debt under which the amount of securities authorized does not exceed 10% of the total assets of the registrant. The registrant hereby agrees to furnish copies of all such instruments to the SEC upon request.

‎

Table of Contents

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	BEST BUY CO., INC.
	(Registrant)

Date: ~~December 7, 2018~~September 6, 2019	By:	~~/s/ HUBERT JOLY~~
		~~Hubert Joly~~
		~~Chairman and Chief Executive Officer~~

~~Date: December 7, 2018~~	~~By:~~	/s/ CORIE BARRY
		Corie Barry
		Chief Executive Officer

Date: September 6, 2019	By:	/s/ MATTHEW BILUNAS
		Matthew Bilunas
		Chief Financial Officer

Date: ~~December 7, 2018~~September 6, 2019	By:	/s/ MATHEW R. WATSON
		Mathew R. Watson
		Senior Vice President, Finance – Controller and Chief Accounting Officer


Minnesota		41-0907483
~~Minnesota~~		~~41-0907483~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7601 Penn Avenue South
Richfield, Minnesota		55423
(Address of principal executive offices)		(Zip Code)

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	November 3, 2018		February 3, 2018		October 28, 2017
ASSETS
Current assets
Cash and cash equivalents	$	1,228	$	1,101	$	1,103
Short-term investments	76		2,032		2,237
Receivables, net	921		1,049		971
Merchandise inventories	8,168		5,209		6,663
Other current assets	508		438		431
Total current assets	10,901		9,829		11,405
Property and equipment, net	2,525		2,421		2,352
Goodwill	921		425		425
Other assets	653		374		603
TOTAL ASSETS	$	15,000	$	13,049	$	14,785

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	7,964	$	4,873	$	6,587
Unredeemed gift card liabilities	281		385		375
Deferred revenue	449		453		426
Accrued compensation and related expenses	349		561		331
Accrued liabilities	844		1,001		888
Current portion of long-term debt	46		544		545
Total current liabilities	9,933		7,817		9,152
Long-term liabilities	775		809		697
Long-term debt	1,280		811		784
Contingencies and Commitments (Note 14)
Equity
Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none	—		—		—
Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 272,000,000, 283,000,000 and 296,000,000 shares, respectively	27		28		30
Retained earnings	2,685		3,270		3,818
Accumulated other comprehensive income	300		314		304
Total equity	3,012		3,612		4,152
TOTAL LIABILITIES AND EQUITY	$	15,000	$	13,049	$	14,785



	Three Months Ended						Nine Months Ended
	November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017
Revenue	$	9,590		$	9,320		$	28,078		$	26,788
Cost of goods sold	7,266			7,040			21,400			20,333
Gross profit	2,324			2,280			6,678			6,455
Selling, general and administrative expenses	2,002			1,932			5,709			5,484
Restructuring charges	—			(2		)	47			—
Operating income	322			350			922			971
Other income (expense):
Gain on sale of investments	12			—			12			—
Investment income and other	11			12			35			30
Interest expense	(15		)	(20		)	(53		)	(57		)
Earnings from continuing operations before income tax expense	330			342			916			944
Income tax expense	53			104			187			309
Net earnings from continuing operations	277			238			729			635
Gain from discontinued operations (Note 1), net of tax	—			1			—			1
Net earnings	$	277		$	239		$	729		$	636

Basic earnings per share	$	1.01		$	0.80		$	2.62		$	2.09
Diluted earnings per share	$	0.99		$	0.78		$	2.57		$	2.05

Weighted-average common shares outstanding
Basic	274.3			299.1			278.6			304.1
Diluted	279.3			305.4			283.8			310.6



	Three Months Ended November 3, 2018
	Common Shares		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at August 4, 2018	276		$	27		$	—		$	2,863		$	296		$	3,186
Net earnings	—		—			—			277			—			277
Other comprehensive income, net of tax:
Foreign currency translation adjustments	—		—			—			—			4			4
Stock-based compensation	—		—			29			—			—			29
Issuance of common stock	—		—			8			—			—			8
Common stock dividends, $0.45 per share	—		—			1			(124		)	—			(123		)
Repurchase of common stock	(4	)	—			(38		)	(331		)	—			(369		)
Balances at November 3, 2018	272		$	27		$	—		$	2,685		$	300		$	3,012

	Nine Months Ended November 3, 2018
	Common Shares		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at February 3, 2018	283		$	28		$	—		$	3,270		$	314		$	3,612
Adoption of ASU 2014-09	—		—			—			73			—			73
Net earnings	—		—			—			729			—			729
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	—		—			—			—			(14		)	(14		)
Stock-based compensation	—		—			92			—			—			92
Issuance of common stock	4		—			37			—			—			37
Common stock dividends, $1.35 per share	—		—			5			(379		)	—			(374		)
Repurchase of common stock	(15	)	(1		)	(134		)	(1,008		)	—			(1,143		)
Balances at November 3, 2018	272		$	27		$	—		$	2,685		$	300		$	3,012

	Three Months Ended October 28, 2017
	Common Shares		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at July 29, 2017	300		$	30		$	—		$	3,996		$	321		$	4,347
Net earnings	—		—			—			239			—			239
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	—		—			—			—			(17		)	(17		)
Stock-based compensation	—		—			30			—			—			30
Issuance of common stock	2		1			20			—			—			21
Common stock dividends, $0.34 per share	—		—			—			(102		)	—			(102		)
Repurchase of common stock	(6	)	(1		)	(50		)	(315		)	—			(366		)
Balances at October 28, 2017	296		$	30		$	—		$	3,818		$	304		$	4,152

	Nine Months Ended October 28, 2017
	Common Shares		Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at January 28, 2017	311		$	31		$	—		$	4,399		$	279		$	4,709
Adoption of ASU 2016-09	—		—			10			(12		)	—			(2		)
Net earnings	—		—			—			636			—			636
Other comprehensive income, net of tax:
Foreign currency translation adjustments	—		—			—			—			25			25
Stock-based compensation	—		—			97			—			—			97
Issuance of common stock	7		1			144			—			—			145
Common stock dividends, $1.02 per share	—		—			—			(311		)	—			(311		)
Repurchase of common stock	(22	)	(2		)	(251		)	(894		)	—			(1,147		)
Balances at October 28, 2017	296		$	30		$	—		$	3,818		$	304		$	4,152



	February 3, 2018 As Reported		ASU 2014-09 Adjustment on February 4, 2018			February 4, 2018 Adjusted
Assets
Other assets	$	374	$	(19	)	$	355
Liabilities
Unredeemed gift card liabilities	385		(69		)	316
Deferred revenue	453		(26		)	427
Accrued liabilities	864		(3		)	861
Accrued income taxes	137		6			143
Equity
Retained earnings	3,270		73			3,343



	November 3, 2018
Impact of Changes to Condensed Consolidated Balance Sheets	As Reported		Balances without Adoption of ASU 2014-09		Effect of Change Higher/(Lower)⁽¹⁾
Assets
Other current assets	$	508	$	459	$	49
Other assets	653		672		(19		)
Liabilities
Unredeemed gift card liabilities	281		349		(68		)
Deferred revenue	449		472		(23		)
Accrued liabilities	823		777		46
Accrued income taxes	21		15		6
Equity
Retained earnings	2,685		2,616		69



Current assets	$	34
Goodwill	496
Intangible assets⁽¹⁾	371
Other assets	27
Total assets acquired	928
Accrued liabilities	56
Long-term liabilities	72
Total liabilities assumed	128
Total purchase price	800
Less: Cash acquired	8
Total purchase price, net of cash acquired	$	792



	November 3, 2018		February 4, 2018
Receivables, net of an allowance for doubtful accounts of $15 and $24, respectively	$	588	$	674
Short-term contract liabilities included in:	��
Unredeemed gift cards	281		316
Deferred revenue	449		408
Accrued liabilities	149		151
Long-term contract liabilities included in:
Long-term liabilities	12		22



	Allowance for Doubtful Accounts
Balance at February 4, 2018	$	24
Charged to expenses or other accounts	27
Other⁽¹⁾	(36		)
Balance at November 3, 2018	$	15



	Nine Months Ended
	November 3, 2018
Revenue recognized that was included in the contract liability balance(s) as of February 4, 2018	$	729
Revenue recognized from performance obligations satisfied in previous periods	—
Increase due to acquisition⁽¹⁾	14
Adjustments⁽²⁾	2



	November 3, 2018⁽¹⁾
Remainder of fiscal 2019	$	6
Fiscal 2020	14
Fiscal 2021	6
Fiscal 2022	2
Fiscal 2023 and thereafter	1



	Fair Value Hierarchy	Fair Value at
	Fair Value Hierarchy	November 3, 2018		February 3, 2018		October 28, 2017
Assets
Cash and cash equivalents:
Money market funds	Level 1	$	126	$	21	$	84
Commercial paper	Level 2	—		90		—
Time deposits	Level 2	—		65		—
Short-term investments:
Commercial paper	Level 2	—		474		588
Time deposits	Level 2	76		1,558		1,649
Other current assets:
Money market funds	Level 1	72		3		8
Commercial paper	Level 2	—		60		60
Time deposits	Level 2	100		101		100
Foreign currency derivative instruments	Level 2	1		2		5
Interest rate swap derivative instruments	Level 2	—		—		3
Other assets:
Marketable securities that fund deferred compensation	Level 1	100		99		98

Liabilities
Accrued liabilities:
Foreign currency derivative instruments	Level 2	—		8		5
Interest rate swap derivative instruments	Level 2	—		1		—
Long-term liabilities:
Interest rate swap derivative instruments	Level 2	22		4		3



	Impairments								Remaining Net Carrying Value⁽¹⁾
	Three Months Ended				Nine Months Ended				Remaining Net Carrying Value⁽¹⁾
	November 3, 2018		October 28, 2017		November 3, 2018		October 28, 2017		November 3, 2018		October 28, 2017
Property and equipment (non-restructuring)	$	3	$	2	$	8	$	8	$	—	$	—



	November 3, 2018
	Gross Carrying Amount		Accumulated Amortization
Customer relationships	$	258	$	4
Tradename	61		1
Developed technology	52		1
Total	$	371	$	6



	Amortization Expense
Remainder of fiscal 2019	$	17
Fiscal 2020	67
Fiscal 2021	67
Fiscal 2022	67
Fiscal 2023 and thereafter	147



	Three Months Ended		Nine Months Ended			Cumulative Amount
	November 3, 2018		November 3, 2018			November 3, 2018
Property and equipment impairments	$	—	$	—		$	1
Termination benefits	—		(2		)	6
Facility closure and other costs	—		49			49
Total	$	—	$	47		$	56



	Termination Benefits			Facility Closure and Other Costs			Total
Balances at February 3, 2018	$	8		$	—		$	8
Charges	1			49			50
Cash payments	(6		)	(48		)	(54		)
Adjustments⁽¹⁾	(3		)	—			(3		)
Balances at November 3, 2018	$	—		$	1		$	1



	Fiscal 2019					Fiscal 2018
	Total Stores at Beginning of Third Quarter	Stores Opened	Stores Closed		Total Stores at End of Third Quarter	Total Stores at Beginning of Third Quarter	Stores Opened	Stores Closed		Total Stores at End of Third Quarter
Best Buy	1,007	1	(11	)	997	1,024	—	(16	)	1,008
Best Buy Mobile stand-alone	—	—	—		—	292	—	(5	)	287
Pacific Sales	28	—	(1	)	27	28	—	—		28
Total Domestic segment stores	1,035	1	(12	)	1,024	1,344	—	(21	)	1,323



	November 3, 2018⁽¹⁾			February 3, 2018⁽¹⁾		October 28, 2017⁽¹⁾
Debt (including current portion)	$	1,326		$	1,355	$	1,329
Capitalized operating lease obligations (5 times rental expense)⁽²⁾	3,891			3,914		3,910
Non-GAAP debt	$	5,217		$	5,269	$	5,239

Net earnings from continuing operations	$	1,093		$	999	$	1,242
Other income (expense) (including interest expense, net)	(5		)	26		35
Income tax expense	696			818		575
Depreciation and amortization expense	733			683		663
Rental expense	778			782		782
Restructuring charges⁽³⁾	57			10		9
Non-GAAP EBITDAR	$	3,352		$	3,318	$	3,306

Debt to net earnings ratio	1.2			1.4		1.1
Non-GAAP debt to EBITDAR ratio	1.6			1.6		1.6



Fiscal Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program⁽¹⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program⁽¹⁾
August 5, 2018 through September 1, 2018	1,558,776	$	78.77	1,558,776	$	2,132,000,000
September 2, 2018 through October 6, 2018	1,659,266	$	78.00	1,659,266	$	2,002,000,000
October 7, 2018 through November 3, 2018	1,641,664	$	71.45	1,641,664	$	1,885,000,000
Total	4,859,706	$	76.04	4,859,706