x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o TRANSITION 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 |
|
| |||
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) |
o¨o¨o¨o¨o¨o¨ No xo¨ No o¨373,912,817362,295,405 shares outstanding as of June 28, 2011.293940404041424243
ITEM 1.CONSOLIDATED FINANCIAL STATEMENTS
ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS |
May 28, February 26, May 29, CURRENT ASSETS Cash and cash equivalents $ 2,208 $ 1,103 $ 1,239 Short-term investments 20 22 205 Receivables 1,742 2,348 1,579 Merchandise inventories 6,356 5,897 6,335 Other current assets 967 1,103 1,030 Total current assets 11,293 10,473 10,388 PROPERTY AND EQUIPMENT, NET 3,767 3,823 3,982 GOODWILL 2,488 2,454 2,386 TRADENAMES, NET 134 133 153 CUSTOMER RELATIONSHIPS, NET 194 203 247 EQUITY AND OTHER INVESTMENTS 318 328 323 OTHER ASSETS 479 435 477 TOTAL ASSETS $ 18,673 $ 17,849 $ 17,956 May 28, February 26, May 29, CURRENT LIABILITIES Accounts payable $ 5,714 $ 4,894 $ 5,860 Unredeemed gift card liabilities 440 474 424 Accrued compensation and related expenses 492 570 436 Accrued liabilities 1,544 1,471 1,601 Accrued income taxes 66 256 51 Short-term debt 39 557 197 Current portion of long-term debt 441 441 34 Total current liabilities 8,736 8,663 8,603 LONG-TERM LIABILITIES 1,184 1,183 1,253 LONG-TERM DEBT 1,700 711 1,093 EQUITY Best Buy Co., Inc. Shareholders’ 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 — 377,963,000, 392,590,000 and 420,062,000 shares, respectively 38 39 42 Additional paid-in capital — 18 474 Retained earnings 6,045 6,372 5,892 Accumulated other comprehensive income (loss) 236 173 (40 ) Total Best Buy Co., Inc. shareholders’ equity 6,319 6,602 6,368 Noncontrolling interests 734 690 639 Total equity 7,053 7,292 7,007 TOTAL LIABILITIES AND EQUITY $ 18,673 $ 17,849 $ 17,956 Three Months Ended May 28, May 29, Revenue $ 10,940 $ 10,787 Cost of goods sold 8,172 7,994 Gross profit 2,768 2,793 Selling, general and administrative expenses 2,484 2,480 Restructuring charges 2 — Operating income 282 313 Other income (expense) Investment income and other 12 12 Interest expense (31 ) (23 ) Earnings before income tax expense and equity in loss of affiliates 263 302 Income tax expense 99 121 Equity in loss of affiliates (1 ) — Net earnings including noncontrolling interests 163 181 Net earnings attributable to noncontrolling interests (27 ) (26 ) Net earnings attributable to Best Buy Co., Inc. $ 136 $ 155 Earnings per share attributable to Best Buy Co., Inc. Basic $ 0.35 $ 0.37 Diluted $ 0.35 $ 0.36 Dividends declared per common share $ 0.15 $ 0.14 Weighted-average common shares outstanding (in millions) Basic 387.7 420.3 Diluted 397.2 431.7 Best Buy Co., Inc. Common Common Additional Retained Accumulated Total Non Total Balances at February 26, 2011 393 $ 39 $ 18 $ 6,372 $ 173 $ 6,602 $ 690 $ 7,292 Net earnings, three months ended May 28, 2011 — — — 136 — 136 27 163 Other comprehensive income, net of tax Foreign currency translation adjustments — — — — 60 60 19 79 Unrealized gains on available-for-sale investments — — — — 1 1 — 1 Cash flow hedging instruments — unrealized gains — — — — 2 2 2 4 Total comprehensive income 199 48 247 Dividend distribution — — — — — — (4 ) (4 ) Stock-based compensation — — 31 — — 31 — 31 Stock options exercised 1 — 24 — — 24 — 24 Issuance of common stock under employee stock purchase plan 1 — 22 — — 22 — 22 Tax benefit from stock options exercised, restricted stock vesting and employee stock purchase plan — — 2 — — 2 — 2 Common stock dividends, $0.15 per share — — — (56 ) — (56 ) — (56 ) Repurchase of common stock (17 ) (1 ) (97 ) (407 ) — (505 ) — (505 ) Balances at May 28, 2011 378 $ 38 $ — $ 6,045 $ 236 $ 6,319 $ 734 $ 7,053 Balances at February 27, 2010 419 $ 42 $ 441 $ 5,797 $ 40 $ 6,320 $ 644 $ 6,964 Net earnings, three months ended May 29, 2010 — — — 155 — 155 26 181 Other comprehensive income (loss), net of tax Foreign currency translation adjustments — — — — (85 ) (85 ) (31 ) (116 ) Unrealized gains on available-for-sale investments — — — — 5 5 — 5 Cash flow hedging instruments — unrealized losses — — — — — — — — Total comprehensive income (loss) 75 (5 ) 70 Stock-based compensation — — 29 — — 29 — 29 Stock options exercised 3 — 88 — — 88 — 88 Issuance of common stock under employee stock purchase plan 1 — 22 — — 22 — 22 Tax benefit from stock options exercised, restricted stock vesting and employee stock purchase plan — — 5 — — 5 — 5 Common stock dividends, $0.14 per share — — — (60 ) — (60 ) — (60 ) Repurchase of common stock (3 ) — (111 ) — — (111 ) — (111 ) Balances at May 29, 2010 420 $ 42 $ 474 $ 5,892 $ (40 ) $ 6,368 $ 639 $ 7,007 Three Months Ended May 28, May 29, OPERATING ACTIVITIES Net earnings including noncontrolling interests $ 163 $ 181 Adjustments to reconcile net earnings including noncontrolling interests to total cash provided by operating activities Depreciation 221 221 Amortization of definite-lived intangible assets 15 22 Stock-based compensation 31 29 Deferred income taxes 63 3 Excess tax benefits from stock-based compensation (1 ) (10 ) Other, net 9 4 Changes in operating assets and liabilities Receivables 651 388 Merchandise inventories (430 ) (873 ) Other assets 26 49 Accounts payable 844 620 Other liabilities (86 ) (208 ) Income taxes (182 ) (257 ) Total cash provided by operating activities 1,324 169 INVESTING ACTIVITIES Additions to property and equipment (202 ) (161 ) Purchases of investments (24 ) (150 ) Sales of investments 37 35 Change in restricted assets 3 11 Settlement of net investment hedges — 12 Other, net — (1 ) Total cash used in investing activities (186 ) (254 ) FINANCING ACTIVITIES Repurchase of common stock (480 ) (111 ) Borrowings of debt 1,375 463 Repayments of debt (913 ) (907 ) Dividends paid (59 ) (59 ) Issuance of common stock under employee stock purchase plan and for the exercise of stock options 46 110 Excess tax benefits from stock-based compensation 1 10 Other, net (7 ) — Total cash used in financing activities (37 ) (494 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH 4 (8 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,105 (587 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,103 1,826 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,208 $ 1,239 2011 May 28, February 26, May 29, Short-term investments Money market fund $ — $ 2 $ 2 U.S. Treasury bills 20 20 150 Debt securities (auction rate securities) — — 53 Total short-term investments $ 20 $ 22 $ 205 Equity and other investments Debt securities (auction rate securities) $ 99 $ 110 $ 180 Marketable equity securities 145 146 87 Other investments 74 72 56 Total equity and other investments $ 318 $ 328 $ 323 Description Nature of collateral or guarantee May 28, February 26, May 29, Student loan bonds Student loans guaranteed 95% to 100% by the U.S. government $ 97 $ 108 $ 214 Municipal revenue bonds 100% insured by AA/Aa-rated bond insurers at May 28, 2011 2 2 19 Total fair value plus accrued interest1 $ 99 $ 110 $ 233 At We evaluated our entire ARS portfolio of May 28, February 26, May 29, Common stock of TalkTalk Telecom Group PLC $ 62 $ 62 $ 46 Common stock of Carphone Warehouse Group plc 83 84 36 Other — — 5 Total $ 145 $ 146 $ 87
2011
2011
2010 August 27,
2011 February 26,
2011 August 28,
2010CURRENT ASSETS Cash and cash equivalents $ 2,040 $ 1,103 $ 843 Short-term investments 80 22 2 Receivables 1,945 2,348 1,720 Merchandise inventories 6,403 5,897 6,346 Other current assets 1,033 1,103 1,048 Total current assets 11,501 10,473 9,959 PROPERTY AND EQUIPMENT, NET 3,761 3,823 3,915 GOODWILL 2,486 2,454 2,365 TRADENAMES, NET 134 133 147 CUSTOMER RELATIONSHIPS, NET 179 203 227 EQUITY AND OTHER INVESTMENTS 284 328 293 OTHER ASSETS 484 435 456 TOTAL ASSETS $ 18,829 $ 17,849 $ 17,362
2011
2011
2010 August 27,
2011 February 26,
2011 August 28,
2010CURRENT LIABILITIES Accounts payable $ 5,830 $ 4,894 $ 5,573 Unredeemed gift card liabilities 410 474 400 Accrued compensation and related expenses 489 570 467 Accrued liabilities 1,580 1,471 1,589 Accrued income taxes 2 256 27 Short-term debt 392 557 383 Current portion of long-term debt 444 441 32 Total current liabilities 9,147 8,663 8,471 LONG-TERM LIABILITIES 1,176 1,183 1,181 LONG-TERM DEBT 1,696 711 1,088 EQUITY Best Buy Co., Inc. shareholders’ 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 — 365,556,000, 392,590,000 and 402,961,000 shares, respectively 37 39 40 Additional paid-in capital — 18 — Retained earnings 5,839 6,372 6,000 Accumulated other comprehensive income (loss) 211 173 (25 ) Total Best Buy Co., Inc. shareholders’ equity 6,087 6,602 6,015 Noncontrolling interests 723 690 607 Total equity 6,810 7,292 6,622 TOTAL LIABILITIES AND EQUITY $ 18,829 $ 17,849 $ 17,362
2011
2010 Three Months Ended Six Months Ended August 27,
2011 August 28,
2010 August 27,
2011 August 28,
2010Revenue $ 11,347 $ 11,339 $ 22,287 $ 22,126 Cost of goods sold 8,475 8,421 16,647 16,415 Gross profit 2,872 2,918 5,640 5,711 Selling, general and administrative expenses 2,583 2,507 5,067 4,987 Restructuring charges 2 — 4 — Operating income 287 411 569 724 Other income (expense) Investment income and other 6 13 18 25 Interest expense (34 ) (21 ) (65 ) (44 ) Earnings before income tax expense and equity in loss of affiliates 259 403 522 705 Income tax expense 99 146 198 267 Equity in loss of affiliates — — (1 ) — Net earnings including noncontrolling interests 160 257 323 438 Net loss (earnings) attributable to noncontrolling interests 17 (3 ) (10 ) (29 ) Net earnings attributable to Best Buy Co., Inc. $ 177 $ 254 $ 313 $ 409 Earnings per share attributable to Best Buy Co., Inc. Basic $ 0.48 $ 0.61 $ 0.82 $ 0.98 Diluted $ 0.47 $ 0.60 $ 0.81 $ 0.96 Dividends declared per common share $ 0.15 $ 0.14 $ 0.30 $ 0.28 Weighted-average common shares outstanding (in millions) Basic 371.9 413.5 379.8 416.9 Diluted 381.4 423.6 389.5 427.7 THREESIX MONTHS ENDED MAYAUGUST 27, 2011, AND AUGUST 28, 2011, AND MAY 29, 2010
Shares
Stock
Paid-In
Capital
Earnings
Other
Comprehensive
Income (Loss)
Best Buy
Co., Inc.
controlling
Interests Best Buy Co., Inc. Total Balances at February 26, 2011 393 $ 39 $ 18 $ 6,372 $ 173 $ 6,602 $ 690 $ 7,292 Net earnings, six months ended August 27, 2011 — — — 313 — 313 10 323 Other comprehensive income (loss), net of tax Foreign currency translation adjustments — — — — 57 57 25 82 Unrealized losses on available-for-sale investments — — — — (21 ) (21 ) — (21 ) Cash flow hedging instruments — unrealized gains — — — — 2 2 2 4 Total comprehensive income 351 37 388 Dividend distribution — — — — — — (4 ) (4 ) Stock-based compensation — — 63 — — 63 — 63 Stock options exercised 1 — 26 — — 26 — 26 Issuance of common stock under employee stock purchase plan 1 — 23 — — 23 — 23 Tax deficit from stock options exercised, restricted stock vesting and employee stock purchase plan — — (3 ) — — (3 ) — (3 ) Common stock dividends, $0.30 per share — — — (112 ) — (112 ) — (112 ) Repurchase of common stock (29 ) (2 ) (127 ) (734 ) — (863 ) — (863 ) Balances at August 27, 2011 366 $ 37 $ — $ 5,839 $ 211 $ 6,087 $ 723 $ 6,810 Balances at February 27, 2010 419 $ 42 $ 441 $ 5,797 $ 40 $ 6,320 $ 644 $ 6,964 Net earnings, six months ended August 28, 2010 — — — 409 — 409 29 438 Other comprehensive income (loss), net of tax Foreign currency translation adjustments — — — — (83 ) (83 ) (70 ) (153 ) Unrealized gains on available-for-sale investments — — — — 14 14 — 14 Cash flow hedging instruments — unrealized gains — — — — 4 4 4 8 Total comprehensive income (loss) 344 (37 ) 307 Stock-based compensation — — 58 — — 58 — 58 Stock options exercised 3 — 90 — — 90 — 90 Issuance of common stock under employee stock purchase plan 1 — 23 — — 23 — 23 Tax benefit from stock options exercised, restricted stock vesting and employee stock purchase plan — — 3 — — 3 — 3 Common stock dividends, $0.28 per share — — — (118 ) — (118 ) — (118 ) Repurchase of common stock (20 ) (2 ) (615 ) (88 ) — (705 ) — (705 ) Balances at August 28, 2010 403 $ 40 $ — $ 6,000 $ (25 ) $ 6,015 $ 607 $ 6,622
2011
2010 Six Months Ended August 27,
2011 August 28,
2010OPERATING ACTIVITIES Net earnings including noncontrolling interests $ 323 $ 438 Adjustments to reconcile net earnings including noncontrolling interests to total cash provided by operating activities Depreciation 445 438 Amortization of definite-lived intangible assets 30 43 Stock-based compensation 63 58 Deferred income taxes 62 50 Excess tax benefits from stock-based compensation — (10 ) Other, net 12 5 Changes in operating assets and liabilities Receivables 464 197 Merchandise inventories (474 ) (909 ) Other assets 36 75 Accounts payable 936 361 Other liabilities (96 ) (225 ) Income taxes (264 ) (437 ) Total cash provided by operating activities 1,537 84 INVESTING ACTIVITIES Additions to property and equipment (411 ) (342 ) Purchases of investments (106 ) (241 ) Sales of investments 66 379 Proceeds from sale of business, net of cash transferred — 21 Change in restricted assets (45 ) 12 Settlement of net investment hedges — 12 Other, net — (1 ) Total cash used in investing activities (496 ) (160 ) FINANCING ACTIVITIES Repurchase of common stock (846 ) (667 ) Borrowings of debt 1,996 955 Repayments of debt (1,187 ) (1,207 ) Dividends paid (115 ) (118 ) Issuance of common stock under employee stock purchase plan and for the exercise of stock options 49 113 Excess tax benefits from stock-based compensation — 10 Other, net (2 ) 9 Total cash used in financing activities (105 ) (905 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH 1 (2 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 937 (983 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,103 1,826 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,040 $ 843 1.Basis of Presentation1. Basis of Presentation 2011.two-monthtwo-month lag. There were no significant intervening events which would have materially affected our consolidated financial statements had they been recorded during the three months ended May 28, 2011.August 27, 2011. In February 2011, we announced plans to exit the Turkey market; however, the stores remained open and continued operations throughoutuntil closed in the firstsecond quarter of fiscal 2012.May 29,August 28, 2011, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. Other than the authorization of a new $5,000 share repurchase program as described in Note 10, Repurchase of Common Stock, and certain legal matters as described in Note 12, Contingencies, noNo such events were identified for this period.2.Investments2. Investments
2011
2011
2010 August 27,
2011 February 26,
2011 August 28,
2010Short-term investments Money market fund $ — $ 2 $ 2 U.S. Treasury bills 80 20 — Total short-term investments $ 80 $ 22 $ 2 Equity and other investments Debt securities (auction rate securities) $ 88 $ 110 $ 134 Marketable equity securities 122 146 97 Other investments 74 72 62 Total equity and other investments $ 284 $ 328 $ 293 days.days. The auction process had historically provided a means by which we could rollover the investment or sell these securities at par in order to provide us with liquidity as needed. As a result, we classify our investments in ARS as available-for-sale and carry them at fair value.sheetssheet at May 28, 2011.August 27, 2011.$14$8 of ARS at par during the first three monthssecond quarter of fiscal 2012.2012. However, at May 28,August 27, 2011, our entire remaining ARS portfolio, consisting of 2019 investments in ARS having an aggregate value at par of $101,$93, was subject to failed auctions. Subsequent to May 28, 2011, and through June 28, 2011, we sold $2 of ARS at par.
2011
2011
2010Description Nature of collateral or guarantee August 27,
2011 February 26,
2011 August 28,
2010Student loan bonds Student loans guaranteed 95% to 100% by the U.S. government $ 86 $ 108 $ 116 Municipal revenue bonds 100% insured by AA/Aa-rated bond insurers at August 27, 2011 2 2 18 $ 88 $ 110 $ 134 1The par value and weighted-average interest rates (taxable equivalent) of our ARS were $101, $115 and $243, and 0.68%, 0.80% and 1.49%, respectively, at May 28, 2011, February 26, 2011, and May 29, 2010, respectively.May 28,August 27, 2011, our ARS portfolio was 83%88% AAA/Aaa-rated, 2%3% AA/Aa-rated and 15%9% A/A-rated.3230 years.holdsell our remaining ARS until we can recover the full principal amount through one of the means described above, and haveabove. In addition, we do not believe it is more likely than not that we would be required to sell our remaining ARS until we can recover the ability to do sofull principal amount based on our other sources of liquidity.$101$93 (par value) for impairment at May 28,August 27, 2011, based primarily on the methodology described in Note 3, Fair Value Measurements. As a result of this review, we determined that the fair value of our ARS portfolio at May 28,August 27, 2011, was $99.$88. Accordingly, a $2$5 pre-tax unrealized loss is recognized in accumulated other comprehensive income. This unrealized loss reflects a temporary impairment on all of our investments in ARS. The estimated fair value of our ARS portfolio could change significantly based on future market conditions. We will continue to assess the fair value of our ARS portfolio for substantive changes in relevant market conditions, changes in our financial condition or other changes that may alter our estimates described above.and the nature of the collateral or guarantees in place as well asand our intent and ability to hold an investment.$(1)$(3), $(3)$(3) and $(6)$(6) of unrealized loss, net of tax, recorded in accumulated other comprehensive income at May 28,August 27, 2011, February 26, 2011, and May 29,August 28, 2010 respectively, related to our investments in debt securities.
2011
2011
2010 August 27,
2011 February 26,
2011 August 28,
2010Common stock of TalkTalk Telecom Group PLC $ 69 $ 62 $ 51 Common stock of Carphone Warehouse Group plc 53 84 44 Other — — 2 Total $ 122 $ 146 $ 97 An $85A $63 pre-tax unrealized gain is recorded in accumulated other comprehensive income related to these investments at May 28, 2011.August 27, 2011.we write down the cost basis of the investment is written down to fair value, and the amount of the write-down is included in net earnings.$74, $75$54, $75 and $25$35 at May 28,August 27, 2011, February 26, 2011, and May 29,August 28, 2010, respectively.May 28,August 27, 2011, February 26, 2011, and May 29,August 28, 2010, were $74, $72$74, $72 and $56,$62, respectively.10
3. | Fair Value Measurements |
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:
·
·
·
·
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| Fair Value Measurements |
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| Fair Value at |
| Quoted Prices |
| Significant |
| Significant |
| ||||
ASSETS |
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Cash and cash equivalents |
|
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Money market funds |
| $ | 972 |
| $ | 972 |
| $ | — |
| $ | — |
|
U.S. Treasury bills |
| 80 |
| 80 |
| — |
| — |
| ||||
Commercial paper |
| 15 |
| — |
| 15 |
| — |
| ||||
Short-term investments |
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| ||||
U.S. Treasury bills |
| 20 |
| 20 |
| — |
| — |
| ||||
Other current assets |
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| ||||
Money market funds (restricted cash) |
| 109 |
| 109 |
| — |
| — |
| ||||
U.S. Treasury bills (restricted cash) |
| 65 |
| 65 |
| — |
| — |
| ||||
Foreign currency derivative instruments |
| 9 |
| — |
| 9 |
| — |
| ||||
Equity and other investments |
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| ||||
Auction rate securities |
| 99 |
| — |
| — |
| 99 |
| ||||
Marketable equity securities |
| 145 |
| 145 |
| — |
| — |
| ||||
Other assets |
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Marketable equity securities that fund deferred compensation |
| 86 |
| 86 |
| — |
| — |
| ||||
Foreign currency derivative instruments |
| 2 |
| — |
| 2 |
| — |
| ||||
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LIABILITIES |
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Long-term liabilities |
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Deferred compensation |
| 68 |
| 68 |
| — |
| — |
| ||||
|
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|
| Fair Value Measurements |
| ||||||||
|
| Fair Value at |
| Quoted Prices |
| Significant |
| Significant |
| ||||
ASSETS |
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Cash and cash equivalents |
|
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Money market funds |
| $ | 70 |
| $ | 70 |
| $ | — |
| $ | — |
|
Short-term investments |
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| ||||
Money market fund |
| 2 |
| — |
| 2 |
| — |
| ||||
U.S. Treasury bills |
| 20 |
| 20 |
| — |
| — |
| ||||
Other current assets |
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| ||||
Money market funds (restricted cash) |
| 63 |
| 63 |
| — |
| — |
| ||||
U.S. Treasury bills (restricted cash) |
| 105 |
| 105 |
| — |
| — |
| ||||
Foreign currency derivative instruments |
| 2 |
| — |
| 2 |
| — |
| ||||
Equity and other investments |
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| ||||
Auction rate securities |
| 110 |
| — |
| — |
| 110 |
| ||||
Marketable equity securities |
| 146 |
| 146 |
| — |
| — |
| ||||
Other assets |
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Marketable equity securities that fund deferred compensation |
| 83 |
| 83 |
| — |
| — |
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LIABILITIES |
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Accrued liabilities |
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Foreign currency derivative instruments |
| 1 |
| — |
| 1 |
| — |
| ||||
Long-term liabilities |
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| ||||
Deferred compensation |
| 64 |
| 64 |
| — |
| — |
| ||||
Foreign currency derivative instruments |
| 2 |
| — |
| 2 |
| — |
| ||||
|
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| Fair Value Measurements |
| ||||||||
|
| Fair Value at |
| Quoted Prices |
| Significant |
| Significant |
| ||||
ASSETS |
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Cash and cash equivalents |
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| ||||
Money market funds |
| $ | 232 |
| $ | 232 |
| $ | — |
| $ | — |
|
U.S. Treasury bills |
| 200 |
| 200 |
| — |
| — |
| ||||
Short-term investments |
|
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|
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| ||||
Money market fund |
| 2 |
| — |
| 2 |
| — |
| ||||
U.S. Treasury bills |
| 150 |
| 150 |
| — |
| — |
| ||||
Auction rate securities |
| 53 |
| — |
| — |
| 53 |
| ||||
Other current assets |
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| ||||
Money market funds (restricted cash) |
| 120 |
| 120 |
| — |
| — |
| ||||
U.S. Treasury bills (restricted cash) |
| 10 |
| 10 |
| — |
| — |
| ||||
Foreign currency derivative instruments |
| 1 |
| — |
| 1 |
| — |
| ||||
Equity and other investments |
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| ||||
Auction rate securities |
| 180 |
| — |
| — |
| 180 |
| ||||
Marketable equity securities |
| 87 |
| 87 |
| — |
| — |
| ||||
Other assets |
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| ||||
Marketable equity securities that fund deferred compensation |
| 79 |
| 79 |
| — |
| — |
| ||||
Foreign currency derivative instruments |
| 1 |
| — |
| 1 |
| — |
| ||||
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| ||||
LIABILITIES |
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| ||||
Long-term liabilities |
|
|
|
|
|
|
|
|
| ||||
Deferred compensation |
| 66 |
| 66 |
| — |
| — |
| ||||
Fair Value Measurements Using Inputs Considered as | |||||||||||||||
Fair Value at August 27, 2011 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
ASSETS | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Money market funds | $ | 560 | $ | 560 | $ | — | $ | — | |||||||
Commercial paper | 15 | — | 15 | — | |||||||||||
Short-term investments | |||||||||||||||
U.S. Treasury bills | 80 | 80 | — | — | |||||||||||
Other current assets | |||||||||||||||
Money market funds (restricted cash) | 157 | 157 | — | — | |||||||||||
U.S. Treasury bills (restricted cash) | 30 | 30 | — | — | |||||||||||
Foreign currency derivative instruments | 6 | — | 6 | — | |||||||||||
Equity and other investments | |||||||||||||||
Auction rate securities | 88 | — | — | 88 | |||||||||||
Marketable equity securities | 122 | 122 | — | — | |||||||||||
Other assets | |||||||||||||||
Marketable equity securities that fund deferred compensation | 83 | 83 | — | — | |||||||||||
Foreign currency derivative instruments | 1 | — | 1 | — | |||||||||||
LIABILITIES | |||||||||||||||
Long-term liabilities | |||||||||||||||
Deferred compensation | 65 | 65 | — | — |
Fair Value Measurements Using Inputs Considered as | |||||||||||||||
Fair Value at February 26, 2011 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
ASSETS | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Money market funds | $ | 70 | $ | 70 | $ | — | $ | — | |||||||
Short-term investments | |||||||||||||||
Money market fund | 2 | — | 2 | — | |||||||||||
U.S. Treasury bills | 20 | 20 | — | — | |||||||||||
Other current assets | |||||||||||||||
Money market funds (restricted cash) | 63 | 63 | — | — | |||||||||||
U.S. Treasury bills (restricted cash) | 105 | 105 | — | — | |||||||||||
Foreign currency derivative instruments | 2 | — | 2 | — | |||||||||||
Equity and other investments | |||||||||||||||
Auction rate securities | 110 | — | — | 110 | |||||||||||
Marketable equity securities | 146 | 146 | — | — | |||||||||||
Other assets | |||||||||||||||
Marketable equity securities that fund deferred compensation | 83 | 83 | — | — | |||||||||||
LIABILITIES | |||||||||||||||
Accrued liabilities | |||||||||||||||
Foreign currency derivative instruments | 1 | — | 1 | — | |||||||||||
Long-term liabilities | |||||||||||||||
Deferred compensation | 64 | 64 | — | — | |||||||||||
Foreign currency derivative instruments | 2 | — | 2 | — |
Fair Value Measurements Using Inputs Considered as | |||||||||||||||
Fair Value at August 28, 2010 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
ASSETS | |||||||||||||||
Cash and cash equivalents | |||||||||||||||
Money market funds | $ | 1 | $ | 1 | $ | — | $ | — | |||||||
Short-term investments | |||||||||||||||
Money market fund | 2 | — | 2 | — | |||||||||||
Other current assets | |||||||||||||||
Money market funds (restricted cash) | 49 | 49 | — | — | |||||||||||
U.S. Treasury bills (restricted cash) | 100 | 100 | — | — | |||||||||||
Foreign currency derivative instruments | 6 | — | 6 | — | |||||||||||
Equity and other investments | |||||||||||||||
Auction rate securities | 134 | — | — | 134 | |||||||||||
Marketable equity securities | 97 | 97 | — | — | |||||||||||
Other assets | |||||||||||||||
Marketable equity securities that fund deferred compensation | 77 | 77 | — | — | |||||||||||
Foreign currency derivative instruments | 6 | — | 6 | — | |||||||||||
LIABILITIES | |||||||||||||||
Long-term liabilities | |||||||||||||||
Deferred compensation | 64 | 64 | — | — |
|
| Debt securities- |
| |||||||
|
| Student loan |
| Municipal |
| Total |
| |||
Balances at February 26, 2011 |
| $ | 108 |
| $ | 2 |
| $ | 110 |
|
Changes in unrealized losses included in other comprehensive income |
| 3 |
| — |
| 3 |
| |||
Sales |
| (14 | ) | — |
| (14 | ) | |||
Balances at May 28, 2011 |
| $ | 97 |
| $ | 2 |
| $ | 99 |
|
|
| Debt securities- |
| |||||||
|
| Student loan |
| Municipal |
| Total |
| |||
Balances at February 27, 2010 |
| $ | 261 |
| $ | 19 |
| $ | 280 |
|
Changes in unrealized losses included in other comprehensive income |
| (5 | ) | — |
| (5 | ) | |||
Sales |
| (41 | ) | — |
| (41 | ) | |||
Interest received |
| (1 | ) | — |
| (1 | ) | |||
Balances at May 29, 2010 |
| $ | 214 |
| $ | 19 |
| $ | 233 |
|
2010
.Debt securities- Auction rate securities only | |||||||||||
Student loan bonds | Municipal revenue bonds | Total | |||||||||
Balances at May 28, 2011 | $ | 97 | $ | 2 | $ | 99 | |||||
Changes in unrealized losses included in other comprehensive income | (3 | ) | — | (3 | ) | ||||||
Sales | (8 | ) | — | (8 | ) | ||||||
Balances at August 27, 2011 | $ | 86 | $ | 2 | $ | 88 |
Debt securities- Auction rate securities only | |||||||||||
Student loan bonds | Municipal revenue bonds | Total | |||||||||
Balances at February 26, 2011 | $ | 108 | $ | 2 | $ | 110 | |||||
Changes in unrealized losses included in other comprehensive income | — | — | — | ||||||||
Sales | (22 | ) | — | (22 | ) | ||||||
Balances at August 27, 2011 | $ | 86 | $ | 2 | $ | 88 |
Debt securities- Auction rate securities only | |||||||||||
Student loan bonds | Municipal revenue bonds | Total | |||||||||
Balances at May 29, 2010 | $ | 214 | $ | 19 | $ | 233 | |||||
Changes in unrealized losses included in other comprehensive income | — | — | — | ||||||||
Sales | (98 | ) | (1 | ) | (99 | ) | |||||
Balances at August 28, 2010 | $ | 116 | $ | 18 | $ | 134 |
Debt securities- Auction rate securities only | |||||||||||
Student loan bonds | Municipal revenue bonds | Total | |||||||||
Balances at February 27, 2010 | $ | 261 | $ | 19 | $ | 280 | |||||
Changes in unrealized losses included in other comprehensive income | (5 | ) | — | (5 | ) | ||||||
Sales | (139 | ) | (1 | ) | (140 | ) | |||||
Interest received | (1 | ) | — | (1 | ) | ||||||
Balances at August 28, 2010 | $ | 116 | $ | 18 | $ | 134 |
4. | Goodwill and Intangible Assets |
The changes in the carrying values of goodwill and indefinite-lived tradenames by segment were as follows in the threesix months ended MayAugust 27, 2011, and August 28, 2011, and May 29, 2010:
|
| Goodwill |
| Indefinite-lived Tradenames |
| ||||||||||||||
|
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| ||||||
Balances at February 26, 2011 |
| $ | 422 |
| $ | 2,032 |
| $ | 2,454 |
| $ | 21 |
| $ | 84 |
| $ | 105 |
|
Changes in foreign currency exchange rates |
| — |
| 34 |
| 34 |
| — |
| 1 |
| 1 |
| ||||||
Other1 |
| — |
| — |
| — |
| — |
| 28 |
| 28 |
| ||||||
Balances at May 28, 2011 |
| $ | 422 |
| $ | 2,066 |
| $ | 2,488 |
| $ | 21 |
| $ | 113 |
| $ | 134 |
|
20101:Represents the transfer of certain definite-lived tradenames (at their net book value) to indefinite-lived tradenames as we believe the tradenames will continue to contribute to the cash flows indefinitely due to our decision to no longer phase out the tradenames.
|
| Goodwill |
| Indefinite-lived Tradenames |
| ||||||||||||||
|
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| ||||||
Balances at February 27, 2010 |
| $ | 434 |
| $ | 2,018 |
| $ | 2,452 |
| $ | 32 |
| $ | 80 |
| $ | 112 |
|
Changes in foreign currency exchange rates |
| — |
| (66 | ) | (66 | ) | — |
| — |
| — |
| ||||||
Balances at May 29, 2010 |
| $ | 434 |
| $ | 1,952 |
| $ | 2,386 |
| $ | 32 |
| $ | 80 |
| $ | 112 |
|
Goodwill | Indefinite-lived Tradenames | ||||||||||||||||||||||
Domestic | International | Total | Domestic | International | Total | ||||||||||||||||||
Balances at February 26, 2011 | $ | 422 | $ | 2,032 | $ | 2,454 | $ | 21 | $ | 84 | $ | 105 | |||||||||||
Changes in foreign currency exchange rates | — | 32 | 32 | — | 1 | 1 | |||||||||||||||||
Other(1) | — | — | — | — | 28 | 28 | |||||||||||||||||
Balances at August 27, 2011 | $ | 422 | $ | 2,064 | $ | 2,486 | $ | 21 | $ | 113 | $ | 134 |
(1) | Represents the transfer of certain definite-lived tradenames (at their net book value) to indefinite-lived tradenames following our decision to no longer phase out certain tradenames. We believe these tradenames will continue to contribute to our future cash flows indefinitely. |
Goodwill | Indefinite-lived Tradenames | ||||||||||||||||||||||
Domestic | International | Total | Domestic | International | Total | ||||||||||||||||||
Balances at February 27, 2010 | $ | 434 | $ | 2,018 | $ | 2,452 | $ | 32 | $ | 80 | $ | 112 | |||||||||||
Sale of business(1) | (12 | ) | — | (12 | ) | (1 | ) | — | (1 | ) | |||||||||||||
Changes in foreign currency exchange rates | — | (75 | ) | (75 | ) | — | — | — | |||||||||||||||
Balances at August 28, 2010 | $ | 422 | $ | 1,943 | $ | 2,365 | $ | 31 | $ | 80 | $ | 111 |
(1) | As a result of the sale of our Speakeasy business in the second quarter of fiscal 2011, we wrote off the carrying value of the related goodwill and indefinite-lived tradenames as of the date of sale. |
|
| May 28, 2011 |
| February 26, 2011 |
| May 29, 2010 |
| ||||||||||||
|
| Gross |
| Cumulative |
| Gross |
| Cumulative |
| Gross |
| Cumulative |
| ||||||
Goodwill |
| $ | 2,553 |
| $ | (65 | ) | $ | 2,519 |
| $ | (65 | ) | $ | 2,512 |
| $ | (126 | ) |
August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||||||||||||||
Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | ||||||||||||||||||
Goodwill | $ | 2,551 | $ | (65 | ) | $ | 2,519 | $ | (65 | ) | $ | 2,430 | $ | (65 | ) |
|
| May 28, 2011 |
| February 26, 2011 |
| May 29, 2010 |
| ||||||||||||
|
| Gross |
| Accumulated |
| Gross |
| Accumulated |
| Gross |
| Accumulated |
| ||||||
Tradenames |
| $ | — |
| $ | — |
| $ | 73 |
| $ | (45 | ) | $ | 71 |
| $ | (30 | ) |
Customer relationships |
| 393 |
| (199 | ) | 383 |
| (180 | ) | 380 |
| (133 | ) | ||||||
Total |
| $ | 393 |
| $ | (199 | ) | $ | 456 |
| $ | (225 | ) | $ | 451 |
| $ | (163 | ) |
August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||
Tradenames | $ | — | $ | — | $ | 73 | $ | (45 | ) | $ | 71 | $ | (35 | ) | |||||||||
Customer relationships | 393 | (214 | ) | 383 | (180 | ) | 372 | (145 | ) | ||||||||||||||
Total | $ | 393 | $ | (214 | ) | $ | 456 | $ | (225 | ) | $ | 443 | $ | (180 | ) |
Total amortization expense for the three months ended MayAugust 27, 2011, and August 28, 2011,2010, was $15 and May 29, 2010,$21, respectively, and was $15$30 and $22,$43 for the six months then ended, respectively. The estimated future amortization expense for identifiable intangible assets is as follows:
Fiscal Year |
|
|
| |
Remainder of fiscal 2012 |
| $ | 33 |
|
2013 |
| 36 |
| |
2014 |
| 36 |
| |
2015 |
| 36 |
| |
2016 |
| 36 |
| |
Thereafter |
| 17 |
| |
5.Restructuring Charges
Fiscal Year | |||
Remainder of fiscal 2012 | $ | 18 | |
2013 | 36 | ||
2014 | 36 | ||
2015 | 36 | ||
2016 | 36 | ||
Thereafter | 17 |
5. | Restructuring Charges |
|
| Domestic |
| International |
| Total |
| ||||||||||||
|
| Three Months |
| Cumulative |
| Three Months |
| Cumulative |
| Three Months |
| Cumulative |
| ||||||
Inventory write-downs |
| $ | — |
| $ | 10 |
| $ | — |
| $ | 14 |
| $ | — |
| $ | 24 |
|
Property and equipment impairments |
| — |
| 15 |
| — |
| 132 |
| — |
| 147 |
| ||||||
Termination benefits |
| (2 | ) | 14 |
| 2 |
| 14 |
| — |
| 28 |
| ||||||
Intangible asset impairments |
| — |
| 10 |
| — |
| — |
| — |
| 10 |
| ||||||
Facility closure and other costs, net |
| 2 |
| 2 |
| — |
| 13 |
| 2 |
| 15 |
| ||||||
Total |
| $ | — |
| $ | 51 |
| $ | 2 |
| $ | 173 |
| $ | 2 |
| $ | 224 |
|
Domestic | International | Total | |||||||||||||||||||||
Six Months Ended August 27, 2011 | Cumulative Amount through August 27, 2011 | Six Months Ended August 27, 2011 | Cumulative Amount through August 27, 2011 | Six Months Ended August 27, 2011 | Cumulative Amount through August 27, 2011 | ||||||||||||||||||
Inventory write-downs | $ | — | $ | 10 | $ | — | $ | 14 | $ | — | $ | 24 | |||||||||||
Property and equipment impairments | — | 15 | — | 132 | — | 147 | |||||||||||||||||
Termination benefits | (3 | ) | 13 | 6 | 18 | 3 | 31 | ||||||||||||||||
Intangible asset impairments | — | 10 | — | — | — | 10 | |||||||||||||||||
Facility closure and other costs, net | 4 | 4 | (3 | ) | 10 | 1 | 14 | ||||||||||||||||
Total | $ | 1 | $ | 52 | $ | 3 | $ | 174 | $ | 4 | $ | 226 |
|
| Termination |
| Facility |
| Total |
| |||
Balance at February 26, 2011 |
| $ | 28 |
| $ | 13 |
| $ | 41 |
|
Charges |
| 2 |
| — |
| 2 |
| |||
Cash payments |
| (12 | ) | (3 | ) | (15 | ) | |||
Adjustments |
| (2 | ) | 10 |
| 8 |
| |||
Changes in foreign currency exchange rates |
| — |
| — |
| — |
| |||
Balance at May 28, 2011 |
| $ | 16 |
| $ | 20 |
| $ | 36 |
|
1The $10 facility closure and other costs adjustment represents an adjustment to exclude non-cash charges or benefits, which had no impact on our consolidated statements of earnings in the first quarter of fiscal 2012.
15
Termination Benefits | Facility Closure and Other Costs(1) | Total | |||||||||
Balance at February 26, 2011 | $ | 28 | $ | 13 | $ | 41 | |||||
Charges | 6 | 2 | 8 | ||||||||
Cash payments | (25 | ) | (11 | ) | (36 | ) | |||||
Adjustments | (3 | ) | 8 | 5 | |||||||
Changes in foreign currency exchange rates | — | 1 | 1 | ||||||||
Balance at August 27, 2011 | $ | 6 | $ | 13 | $ | 19 |
(1) | Included within the facility closure and other costs adjustments is $10 from the first quarter of fiscal 2011, representing an adjustment to exclude non-cash charges or benefits, which had no impact on our consolidated statements of earnings in the first six months of fiscal 2012. |
6. | Debt |
|
| May 28, |
| February 26, |
| May 29, |
| |||
JPMorgan revolving credit facility |
| $ | — |
| $ | — |
| $ | — |
|
Europe receivables financing facility1 |
| 24 |
| 455 |
| 178 |
| |||
Europe revolving credit facility |
| — |
| 98 |
| — |
| |||
Canada revolving demand facility |
| — |
| — |
| — |
| |||
China revolving demand facilities |
| 15 |
| 4 |
| 19 |
| |||
Total short-term debt |
| $ | 39 |
| $ | 557 |
| $ | 197 |
|
1
August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||
JPMorgan revolving credit facility | $ | — | $ | — | $ | — | |||||
Europe receivables financing facility(1) | 386 | 455 | 350 | ||||||||
Europe revolving credit facility | — | 98 | — | ||||||||
Canada revolving demand facility | — | — | — | ||||||||
China revolving demand facilities | 6 | 4 | 33 | ||||||||
Total short-term debt | $ | 392 | $ | 557 | $ | 383 |
(1) | This facility is secured by certain network carrier receivables of Best Buy Europe, which are included within receivables in our condensed consolidated balance sheets. The total amount available for borrowing under this facility is based on a percentage of the available acceptable receivables, as defined in the agreement for the facility, and was £277 (or $445) at August 27, 2011. |
two-month lag.
|
| May 28, |
| February 26, |
| May 29, |
| |||
2021 Notes |
| $ | 648 |
| $ | — |
| $ | — |
|
2013 Notes |
| 500 |
| 500 |
| 500 |
| |||
2016 Notes |
| 349 |
| — |
| — |
| |||
Convertible debentures |
| 402 |
| 402 |
| 402 |
| |||
Financing lease obligations |
| 164 |
| 170 |
| 178 |
| |||
Capital lease obligations |
| 76 |
| 79 |
| 45 |
| |||
Other debt |
| 2 |
| 1 |
| 2 |
| |||
Total long-term debt |
| 2,141 |
| 1,152 |
| 1,127 |
| |||
Less: current portion1 |
| (441 | ) | (441 | ) | (34 | ) | |||
Total long-term debt, less current portion |
| $ | 1,700 |
| $ | 711 |
| $ | 1,093 |
|
August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||
2021 Notes | $ | 648 | $ | — | $ | — | |||||
2013 Notes | 500 | 500 | 500 | ||||||||
2016 Notes | 349 | — | — | ||||||||
Convertible debentures | 402 | 402 | 402 | ||||||||
Financing lease obligations | 167 | 170 | 175 | ||||||||
Capital lease obligations | 72 | 79 | 41 | ||||||||
Other debt | 2 | 1 | 2 | ||||||||
Total long-term debt | 2,140 | 1,152 | 1,120 | ||||||||
Less: current portion(1) | (444 | ) | (441 | ) | (32 | ) | |||||
Total long-term debt, less current portion | $ | 1,696 | $ | 711 | $ | 1,088 |
(1) | Since holders of our convertible debentures may require us to purchase all or a portion of the debentures on January 15, 2012, we classified the $402 for such debentures in the current portion of long-term debt at August 27, 2011, and February 26, 2011. |
The fair value of long-term debt approximated $2,222, $1,210$2,169, $1,210 and $1,217$1,194 at May 28,August 27, 2011, February 26, 2011, and May 29,August 28, 2010, respectively, based primarily on the ask prices quoted from external sources, compared with carrying values of $2,141, $1,152$2,140, $1,152 and $1,127,$1,120, respectively.
The Notes are unsecured and unsubordinated obligations and rank equally with all of our other unsecured and unsubordinated debt. The 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.
7.Derivative Instruments
7. | Derivative Instruments |
|
| May 28, 2011 |
| February 26, 2011 |
| May 29, 2010 |
| ||||||||||||
Contract Type |
| Assets |
| Liabilities |
| Assets |
| Liabilities |
| Assets |
| Liabilities |
| ||||||
Cash flow hedges (foreign exchange forward contracts) |
| $ | 7 |
| $ | — |
| $ | 1 |
| $ | (2 | ) | $ | 2 |
| $ | (1 | ) |
No hedge designation (foreign exchange forward contracts) |
| 4 |
| — |
| 2 |
| (2 | ) | 2 |
| (1 | ) | ||||||
Total |
| $ | 11 |
| $ | — |
| $ | 3 |
| $ | (4 | ) | $ | 4 |
| $ | (2 | ) |
August 27, 2011 | February 26, 2011 | August 28, 2010 | ||||||||||||||||||||||
Contract Type | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||
Cash flow hedges (foreign exchange forward contracts) | $ | 6 | $ | — | $ | 1 | $ | (2 | ) | $ | 13 | $ | (4 | ) | ||||||||||
No hedge designation (foreign exchange forward contracts) | 1 | — | 2 | (2 | ) | 3 | — | |||||||||||||||||
Total | $ | 7 | $ | — | $ | 3 | $ | (4 | ) | $ | 16 | $ | (4 | ) |
The following table presentstables present the effects of derivative instruments on other comprehensive income (“OCI”) and on our consolidated statements of earnings for the three and six months ended MayAugust 27, 2011 and August 28, 2011 and May 29, 2010:
|
| May 28, 2011 |
| May 29, 2010 |
| ||||||||
Contract Type |
| Pre-tax |
| Gain |
| Pre-tax |
| Gain |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flow hedges (foreign exchange forward contracts) |
| $ | 8 |
| $ | 2 |
| $ | — |
| $ | 1 |
|
Net investment hedges (foreign exchange swap contracts) |
| — |
| — |
| 8 |
| — |
| ||||
Total |
| $ | 8 |
| $ | 2 |
| $ | 8 |
| $ | 1 |
|
20101:
Three Months Ended | Six Months Ended | |||||||||||||||
August 27, 2011 | August 27, 2011 | |||||||||||||||
Contract Type | Pre-tax Gain Recognized in OCI(1) | Gain Reclassified from Accumulated OCI to Earnings (Effective Portion)(2) | Pre-tax Gain Recognized in OCI(1) | Gain Reclassified from Accumulated OCI to Earnings (Effective Portion)(2) | ||||||||||||
Cash flow hedges (foreign exchange forward contracts) | $ | 5 | $ | 5 | $ | 13 | $ | 7 |
Three Months Ended | Six Months Ended | |||||||||||||||
August 28, 2010 | August 28, 2010 | |||||||||||||||
Contract Type | Pre-tax Gain Recognized in OCI(1) | Gain Reclassified from Accumulated OCI to Earnings (Effective Portion)(2) | Pre-tax Gain Recognized in OCI(1) | Gain Reclassified from Accumulated OCI to Earnings (Effective Portion)(2) | ||||||||||||
Cash flow hedges (foreign exchange forward contracts) | $ | 10 | $ | — | $ | 10 | $ | 1 | ||||||||
Net investment hedges (foreign exchange swap contracts) | — | — | 8 | — | ||||||||||||
Total | $ | 10 | $ | — | $ | 18 | $ | 1 |
(1) | Reflects the amount recognized in OCI prior to the reclassification of 50% to noncontrolling interests for the cash flow and net investment hedges, respectively. |
(2) | Gain reclassified from accumulated OCI is included within selling, general and administrative expenses (“SG&A”) in our consolidated statements of earnings. |
2Gain reclassified from accumulated OCI is included within selling, general and administrative expenses (“SG&A”) in our consolidated statements of earnings.
The following table presents the effects of derivatives not designated as hedging instruments on our consolidated statements of earnings for the three and six months ended MayAugust 27, 2011 and August 28, 2011 and May 29, 2010:
|
| Gain (Loss) Recognized within SG&A |
| ||||
Contract Type |
| Three Months Ended |
| Three Months Ended |
| ||
No hedge designation (foreign exchange forward contracts) |
| $ | (6 | ) | $ | 5 |
|
2010:
(Loss) Gain Recognized within SG&A | ||||||||||||||||
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||||
Contract Type | August 27, 2011 | August 27, 2011 | August 28, 2010 | August 28, 2010 | ||||||||||||
No hedge designation (foreign exchange forward contracts) | $ | (3 | ) | $ | (9 | ) | $ | 7 | $ | 12 |
|
| Notional Amount |
| |||||||
Contract Type |
| May 28, 2011 |
| February 26, 2011 |
| May 29, 2010 |
| |||
Derivatives designated as cash flow hedging instruments |
| $ | 293 |
| $ | 264 |
| $ | 297 |
|
Derivatives not designated as hedging instruments |
| 123 |
| 493 |
| 194 |
| |||
Total |
| $ | 416 |
| $ | 757 |
| $ | 491 |
|
Notional Amount | ||||||||||||
Contract Type | August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||
Derivatives designated as cash flow hedging instruments | $ | 268 | $ | 264 | $ | 311 | ||||||
Derivatives not designated as hedging instruments | 286 | 493 | 255 | |||||||||
Total | $ | 554 | $ | 757 | $ | 566 |
8. | Earnings per Share |
The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share attributable to Best Buy Co., Inc. (shares in millions):
|
| Three Months Ended |
| ||||
|
| May 28, |
| May 29, |
| ||
Numerator |
|
|
|
|
| ||
Net earnings attributable to Best Buy Co., Inc., basic |
| $ | 136 |
| $ | 155 |
|
Adjustment for assumed dilution: |
|
|
|
|
| ||
Interest on convertible debentures, net of tax |
| 1 |
| 1 |
| ||
Net earnings attributable to Best Buy Co., Inc., diluted |
| $ | 137 |
| $ | 156 |
|
|
|
|
|
|
| ||
Denominator |
|
|
|
|
| ||
Weighted-average common shares outstanding |
| 387.7 |
| 420.3 |
| ||
Effect of potentially dilutive securities: |
|
|
|
|
| ||
Shares from assumed conversion of convertible debentures |
| 8.8 |
| 8.8 |
| ||
Stock options and other |
| 0.7 |
| 2.6 |
| ||
Weighted-average common shares outstanding, assuming dilution |
| 397.2 |
| 431.7 |
| ||
|
|
|
|
|
| ||
Earnings per share attributable to Best Buy Co., Inc. |
|
|
|
|
| ||
Basic |
| $ | 0.35 |
| $ | 0.37 |
|
Diluted |
| $ | 0.35 |
| $ | 0.36 |
|
Three Months Ended | Six Months Ended | ||||||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||||||
Numerator | |||||||||||||||
Net earnings attributable to Best Buy Co., Inc., basic | $ | 177 | $ | 254 | $ | 313 | $ | 409 | |||||||
Adjustment for assumed dilution: | |||||||||||||||
Interest on convertible debentures, net of tax | 2 | 1 | 3 | 2 | |||||||||||
Net earnings attributable to Best Buy Co., Inc., diluted | $ | 179 | $ | 255 | $ | 316 | $ | 411 | |||||||
Denominator | |||||||||||||||
Weighted-average common shares outstanding | 371.9 | 413.5 | 379.8 | 416.9 | |||||||||||
Effect of potentially dilutive securities: | |||||||||||||||
Shares from assumed conversion of convertible debentures | 8.8 | 8.8 | 8.8 | 8.8 | |||||||||||
Stock options and other | 0.7 | 1.3 | 0.9 | 2.0 | |||||||||||
Weighted-average common shares outstanding, assuming dilution | 381.4 | 423.6 | 389.5 | 427.7 | |||||||||||
Earnings per share attributable to Best Buy Co., Inc. | |||||||||||||||
Basic | $ | 0.48 | $ | 0.61 | $ | 0.82 | $ | 0.98 | |||||||
Diluted | $ | 0.47 | $ | 0.60 | $ | 0.81 | $ | 0.96 |
9.Comprehensive Income
9. | Comprehensive Income |
|
| May 28, |
| February 26, |
| May 29, |
| |||
Foreign currency translation |
| $ | 161 |
| $ | 102 |
| $ | (59 | ) |
Unrealized gains on available-for-sale investments |
| 73 |
| 72 |
| 19 |
| |||
Unrealized gains (losses) on derivative instruments (cash flow hedges) |
| 2 |
| (1 | ) | — |
| |||
Total |
| $ | 236 |
| $ | 173 |
| $ | (40 | ) |
August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||
Foreign currency translation | $ | 159 | $ | 102 | $ | (58 | ) | ||||
Unrealized gains on available-for-sale investments | 51 | 72 | 29 | ||||||||
Unrealized gains (losses) on derivative instruments (cash flow hedges) | 1 | (1 | ) | 4 | |||||||
Total | $ | 211 | $ | 173 | $ | (25 | ) |
10. | Repurchase of Common Stock |
In June 2007, our Board of Directors authorized up to $5,500 in share repurchases, a program that terminated and replaced our prior $1,500 share repurchase program authorized in June 2006. There is no expiration date governing the period over which we can repurchase shares under the June 2007 share repurchase program.
At February 26, 2011, $1,307 remained available for future repurchases under the June 2007 share repurchase program. For the three months ended May 28, 2011, we repurchased and retired 16.6 million shares at a cost of $505, leaving $802 available for future repurchases at May 28, 2011, under the June 2007 share repurchase program. For the three months ended May 29, 2010, we repurchased and retired 2.5 million shares at a cost of $111. Repurchased shares have been retired and constitute authorized but unissued shares.
In June 2011, subsequent to the end of the first quarter of fiscal 2012, our Board of Directors authorized a new $5,000$5,000 share repurchase program. The June 2011 program terminated and replaced our prior $5,500$5,500 share repurchase program authorized in June 2007. There is no expiration date governing the period over which we can repurchase shares under the June 2011 share repurchase program.
Three Months Ended | Six Months Ended | ||||||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||||||
June 2011 Program | |||||||||||||||
Number of shares repurchased | 9.1 | — | 9.1 | — | |||||||||||
Cost of shares repurchased | $ | 252 | $ | — | $ | 252 | $ | — | |||||||
June 2007 Program | |||||||||||||||
Number of shares repurchased | 3.6 | 17.3 | 20.1 | 19.8 | |||||||||||
Cost of shares repurchased | $ | 106 | $ | 594 | $ | 611 | $ | 705 |
11. | Segments |
11.Segments
We haveOur chief operating decision maker ("CODM") is our Chief Executive Officer. Our operations are organized our operations into two operating segments: Domestic and International. These operating segments are the primary areas of measurementthat our CODM reviews when assessing performance and decision making byallocating resources. We do not aggregate our chief operating decision maker.segments, so our operating segments also represent our reportable segments. The Domestic reportable segment is comprised of all operations within the U.S. and its territories. The International reportable segment is comprised of all operations outside the U.S. and its territories. We relyOur CODM relies on an internal management reporting process that providesanalyzes segment informationresults to the operating income level for purposes of making financial decisions and allocating resources.level. The accounting policies of the segments are the same as those described in 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 26, 2011.2011
.
|
| Three Months Ended |
| ||||
|
| May 28, |
| May 29, |
| ||
Domestic |
| $ | 7,859 |
| $ | 7,923 |
|
International |
| 3,081 |
| 2,864 |
| ||
Total |
| $ | 10,940 |
| $ | 10,787 |
|
Three Months Ended | Six Months Ended | ||||||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||||||
Domestic | $ | 8,311 | $ | 8,436 | $ | 16,170 | $ | 16,359 | |||||||
International | 3,036 | 2,903 | 6,117 | 5,767 | |||||||||||
Total | $ | 11,347 | $ | 11,339 | $ | 22,287 | $ | 22,126 |
|
| Three Months Ended |
| ||||
|
| May 28, |
| May 29, |
| ||
Domestic |
| $ | 234 |
| $ | 298 |
|
International |
| 48 |
| 15 |
| ||
Total operating income |
| 282 |
| 313 |
| ||
Other income (expense) |
|
|
|
|
| ||
Investment income and other |
| 12 |
| 12 |
| ||
Interest expense |
| (31 | ) | (23 | ) | ||
Earnings before income tax expense and equity in loss of affiliates |
| $ | 263 |
| $ | 302 |
|
Three Months Ended | Six Months Ended | ||||||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||||||
Domestic | $ | 303 | $ | 407 | $ | 537 | $ | 705 | |||||||
International | (16 | ) | 4 | 32 | 19 | ||||||||||
Total operating income | 287 | 411 | 569 | 724 | |||||||||||
Other income (expense) | |||||||||||||||
Investment income and other | 6 | 13 | 18 | 25 | |||||||||||
Interest expense | (34 | ) | (21 | ) | (65 | ) | (44 | ) | |||||||
Earnings before income tax expense and equity in loss of affiliates | $ | 259 | $ | 403 | $ | 522 | $ | 705 |
|
| May 28, |
| February 26, |
| May 29, |
| |||
Domestic |
| $ | 10,804 |
| $ | 9,610 |
| $ | 10,731 |
|
International |
| 7,869 |
| 8,239 |
| 7,225 |
| |||
Total |
| $ | 18,673 |
| $ | 17,849 |
| $ | 17,956 |
|
12.Contingencies
August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||
Domestic | $ | 10,360 | $ | 9,610 | $ | 9,818 | |||||
International | 8,469 | 8,239 | 7,544 | ||||||||
Total | $ | 18,829 | $ | 17,849 | $ | 17,362 |
12. | Contingencies |
IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al. case.
reasonably possible losses, if any, cannot be estimated.
cash flows.
13. | Condensed Consolidating Financial Information |
The rules of the U.S. Securities and Exchange Commission require that condensed consolidating financial information be provided for a subsidiary that has guaranteed the debt of a registrant issued in a public offering, where the guarantee is full and unconditional and where the voting interest of the subsidiary is 100% owned-owned by the registrant. Our convertible debentures, which had an aggregate principal balance and carrying amount of $402$402 at May 28,August 27, 2011, are jointly and severally guaranteed by our 100%-owned indirect subsidiary Best Buy Stores, L.P. (“Guarantor Subsidiary”). Investments in subsidiaries of Best Buy Stores, L.P., which have not guaranteed the convertible debentures (“Non-Guarantor Subsidiaries”), are required to be presented under the equity method, even though all such subsidiaries meet the requirements to be consolidated under GAAP.
|
| Best Buy |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 1,283 |
| $ | 43 |
| $ | 882 |
| $ | — |
| $ | 2,208 |
|
Short-term investments |
| — |
| — |
| 20 |
| — |
| 20 |
| |||||
Receivables |
| 1 |
| 515 |
| 1,226 |
| — |
| 1,742 |
| |||||
Merchandise inventories |
| — |
| 4,602 |
| 1,818 |
| (64 | ) | 6,356 |
| |||||
Other current assets |
| 148 |
| 42 |
| 777 |
| — |
| 967 |
| |||||
Intercompany receivable |
| — |
| — |
| 9,878 |
| (9,878 | ) | — |
| |||||
Intercompany note receivable |
| 856 |
| — |
| 92 |
| (948 | ) | — |
| |||||
Total current assets |
| 2,288 |
| 5,202 |
| 14,693 |
| (10,890 | ) | 11,293 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property and Equipment, Net |
| 200 |
| 1,750 |
| 1,817 |
| — |
| 3,767 |
| |||||
Goodwill |
| — |
| 6 |
| 2,482 |
| — |
| 2,488 |
| |||||
Tradenames, Net |
| — |
| — |
| 134 |
| — |
| 134 |
| |||||
Customer Relationships, Net |
| — |
| — |
| 194 |
| — |
| 194 |
| |||||
Equity and Other Investments |
| 154 |
| — |
| 164 |
| — |
| 318 |
| |||||
Other Assets |
| 220 |
| 37 |
| 222 |
| — |
| 479 |
| |||||
Investments in Subsidiaries |
| 14,286 |
| 235 |
| 2,498 |
| (17,019 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
| $ | 17,148 |
| $ | 7,230 |
| $ | 22,204 |
| $ | (27,909 | ) | $ | 18,673 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 355 |
| $ | 42 |
| $ | 5,317 |
| $ | — |
| $ | 5,714 |
|
Unredeemed gift card liabilities |
| — |
| 375 |
| 65 |
| — |
| 440 |
| |||||
Accrued compensation and related expenses |
| — |
| 192 |
| 300 |
| — |
| 492 |
| |||||
Accrued liabilities |
| 58 |
| 626 |
| 860 |
| — |
| 1,544 |
| |||||
Accrued income taxes |
| 66 |
| — |
| — |
| — |
| 66 |
| |||||
Short-term debt |
| — |
| — |
| 39 |
| — |
| 39 |
| |||||
Current portion of long-term debt |
| 402 |
| 23 |
| 16 |
| — |
| 441 |
| |||||
Intercompany payable |
| 7,824 |
| 2,054 |
| — |
| (9,878 | ) | — |
| |||||
Intercompany note payable |
| 105 |
| 500 |
| 343 |
| (948 | ) | — |
| |||||
Total current liabilities |
| 8,810 |
| 3,812 |
| 6,940 |
| (10,826 | ) | 8,736 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Liabilities |
| 461 |
| 797 |
| 164 |
| (238 | ) | 1,184 |
| |||||
Long-Term Debt |
| 1,497 |
| 123 |
| 80 |
| — |
| 1,700 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Shareholders’ equity |
| 6,380 |
| 2,498 |
| 14,286 |
| (16,845 | ) | 6,319 |
| |||||
Noncontrolling interests |
| — |
| — |
| 734 |
| — |
| 734 |
| |||||
Total equity |
| 6,380 |
| 2,498 |
| 15,020 |
| (16,845 | ) | 7,053 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Liabilities and Equity |
| $ | 17,148 |
| $ | 7,230 |
| $ | 22,204 |
| $ | (27,909 | ) | $ | 18,673 |
|
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Current Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 943 | $ | 52 | $ | 1,045 | $ | — | $ | 2,040 | |||||||||
Short-term investments | 80 | — | — | — | 80 | ||||||||||||||
Receivables | 1 | 522 | 1,422 | — | 1,945 | ||||||||||||||
Merchandise inventories | — | 4,329 | 2,125 | (51 | ) | 6,403 | |||||||||||||
Other current assets | 157 | 57 | 831 | (12 | ) | 1,033 | |||||||||||||
Intercompany receivable | — | — | 9,843 | (9,843 | ) | — | |||||||||||||
Intercompany note receivable | 895 | — | 106 | (1,001 | ) | — | |||||||||||||
Total current assets | 2,076 | 4,960 | 15,372 | (10,907 | ) | 11,501 | |||||||||||||
Property and Equipment, Net | 200 | 1,742 | 1,819 | — | 3,761 | ||||||||||||||
Goodwill | — | 6 | 2,480 | — | 2,486 | ||||||||||||||
Tradenames, Net | — | — | 134 | — | 134 | ||||||||||||||
Customer Relationships, Net | — | — | 179 | — | 179 | ||||||||||||||
Equity and Other Investments | 143 | — | 141 | — | 284 | ||||||||||||||
Other Assets | 226 | 35 | 223 | — | 484 | ||||||||||||||
Investments in Subsidiaries | 14,487 | 241 | 2,556 | (17,284 | ) | — | |||||||||||||
Total Assets | $ | 17,132 | $ | 6,984 | $ | 22,904 | $ | (28,191 | ) | $ | 18,829 | ||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||
Current Liabilities | |||||||||||||||||||
Accounts payable | $ | 341 | $ | 62 | $ | 5,427 | $ | — | $ | 5,830 | |||||||||
Unredeemed gift card liabilities | — | 347 | 63 | — | 410 | ||||||||||||||
Accrued compensation and related expenses | — | 174 | 315 | — | 489 | ||||||||||||||
Accrued liabilities | 51 | 711 | 829 | (11 | ) | 1,580 | |||||||||||||
Accrued income taxes | 2 | — | — | — | 2 | ||||||||||||||
Short-term debt | — | — | 392 | — | 392 | ||||||||||||||
Current portion of long-term debt | 403 | 23 | 18 | — | 444 | ||||||||||||||
Intercompany payable | 8,132 | 1,711 | — | (9,843 | ) | — | |||||||||||||
Intercompany note payable | 106 | 501 | 394 | (1,001 | ) | — | |||||||||||||
Total current liabilities | 9,035 | 3,529 | 7,438 | (10,855 | ) | 9,147 | |||||||||||||
Long-Term Liabilities | 466 | 781 | 174 | (245 | ) | 1,176 | |||||||||||||
Long-Term Debt | 1,496 | 118 | 82 | — | 1,696 | ||||||||||||||
Equity | |||||||||||||||||||
Shareholders’ equity | 6,135 | 2,556 | 14,487 | (17,091 | ) | 6,087 | |||||||||||||
Noncontrolling interests | — | — | 723 | — | 723 | ||||||||||||||
Total equity | 6,135 | 2,556 | 15,210 | (17,091 | ) | 6,810 | |||||||||||||
Total Liabilities and Equity | $ | 17,132 | $ | 6,984 | $ | 22,904 | $ | (28,191 | ) | $ | 18,829 |
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Current Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 282 | $ | 51 | $ | 770 | $ | — | $ | 1,103 | |||||||||
Short-term investments | 20 | — | 2 | — | 22 | ||||||||||||||
Receivables | 3 | 738 | 1,607 | — | 2,348 | ||||||||||||||
Merchandise inventories | — | 3,973 | 1,999 | (75 | ) | 5,897 | |||||||||||||
Other current assets | 234 | 117 | 752 | — | 1,103 | ||||||||||||||
Intercompany receivable | — | — | 9,300 | (9,300 | ) | — | |||||||||||||
Intercompany note receivable | 854 | — | 91 | (945 | ) | — | |||||||||||||
Total current assets | 1,393 | 4,879 | 14,521 | (10,320 | ) | 10,473 | |||||||||||||
Property and Equipment, Net | 200 | 1,803 | 1,820 | — | 3,823 | ||||||||||||||
Goodwill | — | 6 | 2,448 | — | 2,454 | ||||||||||||||
Tradenames, Net | — | — | 133 | — | 133 | ||||||||||||||
Customer Relationships, Net | — | — | 203 | — | 203 | ||||||||||||||
Equity and Other Investments | 162 | — | 166 | — | 328 | ||||||||||||||
Other Assets | 181 | 36 | 273 | (55 | ) | 435 | |||||||||||||
Investments in Subsidiaries | 14,030 | 229 | 2,444 | (16,703 | ) | — | |||||||||||||
Total Assets | $ | 15,966 | $ | 6,953 | $ | 22,008 | $ | (27,078 | ) | $ | 17,849 | ||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||
Current Liabilities | |||||||||||||||||||
Accounts payable | $ | 361 | $ | 101 | $ | 4,432 | $ | — | $ | 4,894 | |||||||||
Unredeemed gift card liabilities | — | 404 | 70 | — | 474 | ||||||||||||||
Accrued compensation and related expenses | — | 200 | 370 | — | 570 | ||||||||||||||
Accrued liabilities | 13 | 625 | 833 | — | 1,471 | ||||||||||||||
Accrued income taxes | 256 | — | — | — | 256 | ||||||||||||||
Short-term debt | — | — | 557 | — | 557 | ||||||||||||||
Current portion of long-term debt | 402 | 23 | 16 | — | 441 | ||||||||||||||
Intercompany payable | 7,497 | 1,665 | 138 | (9,300 | ) | — | |||||||||||||
Intercompany note payable | 103 | 500 | 342 | (945 | ) | — | |||||||||||||
Total current liabilities | 8,632 | 3,518 | 6,758 | (10,245 | ) | 8,663 | |||||||||||||
Long-Term Liabilities | 160 | 863 | 447 | (287 | ) | 1,183 | |||||||||||||
Long-Term Debt | 500 | 128 | 83 | — | 711 | ||||||||||||||
Equity | |||||||||||||||||||
Shareholders’ equity | 6,674 | 2,444 | 14,030 | (16,546 | ) | 6,602 | |||||||||||||
Noncontrolling interests | — | — | 690 | — | 690 | ||||||||||||||
Total equity | 6,674 | 2,444 | 14,720 | (16,546 | ) | 7,292 | |||||||||||||
Total Liabilities and Equity | $ | 15,966 | $ | 6,953 | $ | 22,008 | $ | (27,078 | ) | $ | 17,849 |
|
| Best Buy |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 570 |
| $ | 37 |
| $ | 632 |
| $ | — |
| $ | 1,239 |
|
Short-term investments |
| 203 |
| — |
| 2 |
| — |
| 205 |
| |||||
Receivables |
| 7 |
| 437 |
| 1,135 |
| — |
| 1,579 |
| |||||
Merchandise inventories |
| — |
| 4,594 |
| 1,796 |
| (55 | ) | 6,335 |
| |||||
Other current assets |
| 221 |
| 66 |
| 744 |
| (1 | ) | 1,030 |
| |||||
Intercompany receivable |
| — |
| — |
| 8,757 |
| (8,757 | ) | — |
| |||||
Intercompany note receivable |
| 1,552 |
| — |
| — |
| (1,552 | ) | — |
| |||||
Total current assets |
| 2,553 |
| 5,134 |
| 13,066 |
| (10,365 | ) | 10,388 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property and Equipment, Net |
| 213 |
| 1,815 |
| 1,954 |
| — |
| 3,982 |
| |||||
Goodwill |
| — |
| 6 |
| 2,380 |
| — |
| 2,386 |
| |||||
Tradenames, Net |
| — |
| — |
| 153 |
| — |
| 153 |
| |||||
Customer Relationships, Net |
| — |
| — |
| 247 |
| — |
| 247 |
| |||||
Equity and Other Investments |
| 207 |
| — |
| 116 |
| — |
| 323 |
| |||||
Other Assets |
| 93 |
| 33 |
| 383 |
| (32 | ) | 477 |
| |||||
Investments in Subsidiaries |
| 11,684 |
| 289 |
| 2,275 |
| (14,248 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
| $ | 14,750 |
| $ | 7,277 |
| $ | 20,574 |
| $ | (24,645 | ) | $ | 17,956 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 374 |
| $ | 34 |
| $ | 5,452 |
| $ | — |
| $ | 5,860 |
|
Unredeemed gift card liabilities |
| — |
| 367 |
| 57 |
| — |
| 424 |
| |||||
Accrued compensation and related expenses |
| — |
| 169 |
| 267 |
| — |
| 436 |
| |||||
Accrued liabilities |
| 26 |
| 642 |
| 933 |
| — |
| 1,601 |
| |||||
Accrued income taxes |
| 51 |
| — |
| — |
| — |
| 51 |
| |||||
Short-term debt |
| — |
| — |
| 197 |
| — |
| 197 |
| |||||
Current portion of long-term debt |
| 1 |
| 21 |
| 12 |
| — |
| 34 |
| |||||
Intercompany payable |
| 6,703 |
| 2,054 |
| — |
| (8,757 | ) | — |
| |||||
Intercompany note payable |
| 10 |
| 500 |
| 1,042 |
| (1,552 | ) | — |
| |||||
Total current liabilities |
| 7,165 |
| 3,787 |
| 7,960 |
| (10,309 | ) | 8,603 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Liabilities |
| 263 |
| 1,087 |
| 228 |
| (325 | ) | 1,253 |
| |||||
Long-Term Debt |
| 902 |
| 128 |
| 63 |
| — |
| 1,093 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Shareholders’ equity |
| 6,420 |
| 2,275 |
| 11,684 |
| (14,011 | ) | 6,368 |
| |||||
Noncontrolling interests |
| — |
| — |
| 639 |
| — |
| 639 |
| |||||
Total equity |
| 6,420 |
| 2,275 |
| 12,323 |
| (14,011 | ) | 7,007 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Liabilities and Equity |
| $ | 14,750 |
| $ | 7,277 |
| $ | 20,574 |
| $ | (24,645 | ) | $ | 17,956 |
|
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Current Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 136 | $ | 29 | $ | 678 | $ | — | $ | 843 | |||||||||
Short-term investments | — | — | 2 | — | 2 | ||||||||||||||
Receivables | 1 | 500 | 1,219 | — | 1,720 | ||||||||||||||
Merchandise inventories | — | 4,387 | 2,032 | (73 | ) | 6,346 | |||||||||||||
Other current assets | 242 | 74 | 733 | (1 | ) | 1,048 | |||||||||||||
Intercompany receivable | — | — | 8,604 | (8,604 | ) | — | |||||||||||||
Intercompany note receivable | 1,566 | — | 7 | (1,573 | ) | — | |||||||||||||
Total current assets | 1,945 | 4,990 | 13,275 | (10,251 | ) | 9,959 | |||||||||||||
Property and Equipment, Net | 211 | 1,798 | 1,906 | — | 3,915 | ||||||||||||||
Goodwill | — | 6 | 2,359 | — | 2,365 | ||||||||||||||
Tradenames, Net | — | — | 147 | — | 147 | ||||||||||||||
Customer Relationships, Net | — | — | 227 | — | 227 | ||||||||||||||
Equity and Other Investments | 166 | — | 127 | — | 293 | ||||||||||||||
Other Assets | 92 | 27 | 375 | (38 | ) | 456 | |||||||||||||
Investments in Subsidiaries | 12,043 | 296 | 2,411 | (14,750 | ) | — | |||||||||||||
Total Assets | $ | 14,457 | $ | 7,117 | $ | 20,827 | $ | (25,039 | ) | $ | 17,362 | ||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||
Current Liabilities | |||||||||||||||||||
Accounts payable | $ | 350 | $ | 34 | $ | 5,189 | $ | — | $ | 5,573 | |||||||||
Unredeemed gift card liabilities | — | 344 | 56 | — | 400 | ||||||||||||||
Accrued compensation and related expenses | 1 | 191 | 275 | — | 467 | ||||||||||||||
Accrued liabilities | 18 | 670 | 901 | — | 1,589 | ||||||||||||||
Accrued income taxes | 27 | — | — | — | 27 | ||||||||||||||
Short-term debt | — | — | 383 | — | 383 | ||||||||||||||
Current portion of long-term debt | — | 20 | 12 | — | 32 | ||||||||||||||
Intercompany payable | 6,869 | 1,735 | — | (8,604 | ) | — | |||||||||||||
Intercompany note payable | 19 | 500 | 1,054 | (1,573 | ) | — | |||||||||||||
Total current liabilities | 7,284 | 3,494 | 7,870 | (10,177 | ) | 8,471 | |||||||||||||
Long-Term Liabilities | 185 | 1,089 | 245 | (338 | ) | 1,181 | |||||||||||||
Long-Term Debt | 902 | 123 | 63 | — | 1,088 | ||||||||||||||
Equity | |||||||||||||||||||
Shareholders’ equity | 6,086 | 2,411 | 12,042 | (14,524 | ) | 6,015 | |||||||||||||
Noncontrolling interests | — | — | 607 | — | 607 | ||||||||||||||
Total equity | 6,086 | 2,411 | 12,649 | (14,524 | ) | 6,622 | |||||||||||||
Total Liabilities and Equity | $ | 14,457 | $ | 7,117 | $ | 20,827 | $ | (25,039 | ) | $ | 17,362 |
|
| Best Buy |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Revenue |
| $ | 4 |
| $ | 7,208 |
| $ | 10,359 |
| $ | (6,631 | ) | $ | 10,940 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| — |
| 5,373 |
| 8,987 |
| (6,188 | ) | 8,172 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| 4 |
| 1,835 |
| 1,372 |
| (443 | ) | 2,768 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 36 |
| 1,765 |
| 1,173 |
| (490 | ) | 2,484 |
| |||||
Restructuring charges |
| — |
| (2 | ) | 4 |
| — |
| 2 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating (loss) income |
| (32 | ) | 72 |
| 195 |
| 47 |
| 282 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
| |||||
Investment income and other |
| 4 |
| — |
| 12 |
| (4 | ) | 12 |
| |||||
Interest expense |
| (23 | ) | (3 | ) | (9 | ) | 4 |
| (31 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Loss) earnings before equity in earnings of subsidiaries |
| (51 | ) | 69 |
| 198 |
| 47 |
| 263 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings of subsidiaries |
| 145 |
| 9 |
| 45 |
| (199 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings before income tax expense and equity in loss of affiliates |
| 94 |
| 78 |
| 243 |
| (152 | ) | 263 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax expense |
| 5 |
| 24 |
| 70 |
| — |
| 99 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in loss of affiliates |
| — |
| — |
| (1 | ) | — |
| (1 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings including noncontrolling interests |
| 89 |
| 54 |
| 172 |
| (152 | ) | 163 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings attributable to noncontrolling interests |
| — |
| — |
| (27 | ) | — |
| (27 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings attributable to Best Buy Co., Inc. |
| $ | 89 |
| $ | 54 |
| $ | 145 |
| $ | (152 | ) | $ | 136 |
|
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenue | $ | 4 | $ | 7,591 | $ | 9,810 | $ | (6,058 | ) | $ | 11,347 | ||||||||
Cost of goods sold | — | 5,625 | 8,381 | (5,531 | ) | 8,475 | |||||||||||||
Gross profit | 4 | 1,966 | 1,429 | (527 | ) | 2,872 | |||||||||||||
Selling, general and administrative expenses | 37 | 1,890 | 1,233 | (577 | ) | 2,583 | |||||||||||||
Restructuring charges | — | — | 2 | — | 2 | ||||||||||||||
Operating (loss) income | (33 | ) | 76 | 194 | 50 | 287 | |||||||||||||
Other income (expense) | |||||||||||||||||||
Investment income and other | 6 | — | 5 | (5 | ) | 6 | |||||||||||||
Interest expense | (23 | ) | (3 | ) | (13 | ) | 5 | (34 | ) | ||||||||||
(Loss) earnings before equity in earnings of subsidiaries | (50 | ) | 73 | 186 | 50 | 259 | |||||||||||||
Equity in earnings of subsidiaries | 175 | 9 | 48 | (232 | ) | — | |||||||||||||
Earnings before income tax expense and equity in loss of affiliates | 125 | 82 | 234 | (182 | ) | 259 | |||||||||||||
Income tax (benefit) expense | (2 | ) | 25 | 76 | — | 99 | |||||||||||||
Equity in loss of affiliates | — | — | — | — | — | ||||||||||||||
Net earnings including noncontrolling interests | 127 | 57 | 158 | (182 | ) | 160 | |||||||||||||
Net loss attributable to noncontrolling interests | — | — | 17 | — | 17 | ||||||||||||||
Net earnings attributable to Best Buy Co., Inc. | $ | 127 | $ | 57 | $ | 175 | $ | (182 | ) | $ | 177 |
August 27, 2011
|
| Best Buy |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Revenue |
| $ | 4 |
| $ | 7,295 |
| $ | 10,535 |
| $ | (7,047 | ) | $ | 10,787 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| — |
| 5,380 |
| 9,082 |
| (6,468 | ) | 7,994 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| 4 |
| 1,915 |
| 1,453 |
| (579 | ) | 2,793 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 37 |
| 1,836 |
| 1,226 |
| (619 | ) | 2,480 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating (loss) income |
| (33 | ) | 79 |
| 227 |
| 40 |
| 313 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
| |||||
Investment income and other |
| 8 |
| — |
| 11 |
| (7 | ) | 12 |
| |||||
Interest expense |
| (12 | ) | (3 | ) | (15 | ) | 7 |
| (23 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Loss) earnings before equity in earnings (loss) of subsidiaries |
| (37 | ) | 76 |
| 223 |
| 40 |
| 302 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings (loss) of subsidiaries |
| 134 |
| (4 | ) | (18 | ) | (112 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings before income tax expense |
| 97 |
| 72 |
| 205 |
| (72 | ) | 302 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax (benefit) expense |
| (18 | ) | 94 |
| 45 |
| — |
| 121 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings (loss) including noncontrolling interests |
| 115 |
| (22 | ) | 160 |
| (72 | ) | 181 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings attributable to noncontrolling interests |
| — |
| — |
| (26 | ) | — |
| (26 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings (loss) attributable to Best Buy Co., Inc. |
| $ | 115 |
| $ | (22 | ) | $ | 134 |
| $ | (72 | ) | $ | 155 |
|
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenue | $ | 8 | $ | 14,799 | $ | 20,169 | $ | (12,689 | ) | $ | 22,287 | ||||||||
Cost of goods sold | — | 10,998 | 17,368 | (11,719 | ) | 16,647 | |||||||||||||
Gross profit | 8 | 3,801 | 2,801 | (970 | ) | 5,640 | |||||||||||||
Selling, general and administrative expenses | 73 | 3,655 | 2,406 | (1,067 | ) | 5,067 | |||||||||||||
Restructuring charges | — | (2 | ) | 6 | — | 4 | |||||||||||||
Operating (loss) income | (65 | ) | 148 | 389 | 97 | 569 | |||||||||||||
Other income (expense) | |||||||||||||||||||
Investment income and other | 10 | — | 17 | (9 | ) | 18 | |||||||||||||
Interest expense | (46 | ) | (6 | ) | (22 | ) | 9 | (65 | ) | ||||||||||
(Loss) earnings before equity in earnings of subsidiaries | (101 | ) | 142 | 384 | 97 | 522 | |||||||||||||
Equity in earnings of subsidiaries | 320 | 18 | 93 | (431 | ) | — | |||||||||||||
Earnings before income tax expense and equity in loss of affiliates | 219 | 160 | 477 | (334 | ) | 522 | |||||||||||||
Income tax expense | 3 | 49 | 146 | — | 198 | ||||||||||||||
Equity in loss of affiliates | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Net earnings including noncontrolling interests | 216 | 111 | 330 | (334 | ) | 323 | |||||||||||||
Net earnings attributable to noncontrolling interests | — | — | (10 | ) | — | (10 | ) | ||||||||||||
Net earnings attributable to Best Buy Co., Inc. | $ | 216 | $ | 111 | $ | 320 | $ | (334 | ) | $ | 313 |
$ in millions, except per share amountsAugust 28, 2010
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenue | $ | 4 | $ | 7,780 | $ | 10,162 | $ | (6,607 | ) | $ | 11,339 | ||||||||
Cost of goods sold | — | 5,739 | 8,674 | (5,992 | ) | 8,421 | |||||||||||||
Gross profit | 4 | 2,041 | 1,488 | (615 | ) | 2,918 | |||||||||||||
Selling, general and administrative expenses | 34 | 1,970 | 1,166 | (663 | ) | 2,507 | |||||||||||||
Operating (loss) income | (30 | ) | 71 | 322 | 48 | 411 | |||||||||||||
Other income (expense) | |||||||||||||||||||
Investment income and other | 11 | — | 14 | (12 | ) | 13 | |||||||||||||
Interest expense | (11 | ) | (3 | ) | (19 | ) | 12 | (21 | ) | ||||||||||
(Loss) earnings before equity in earnings of subsidiaries | (30 | ) | 68 | 317 | 48 | 403 | |||||||||||||
Equity in earnings of subsidiaries | 248 | 27 | 109 | (384 | ) | — | |||||||||||||
Earnings before income tax expense | 218 | 95 | 426 | (336 | ) | 403 | |||||||||||||
Income tax expense (benefit) | 12 | (41 | ) | 175 | — | 146 | |||||||||||||
Net earnings including noncontrolling interests | 206 | 136 | 251 | (336 | ) | 257 | |||||||||||||
Net earnings attributable to noncontrolling interests | — | — | (3 | ) | — | (3 | ) | ||||||||||||
Net earnings attributable to Best Buy Co., Inc. | $ | 206 | $ | 136 | $ | 248 | $ | (336 | ) | $ | 254 |
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenue | $ | 8 | $ | 15,075 | $ | 20,697 | $ | (13,654 | ) | $ | 22,126 | ||||||||
Cost of goods sold | — | 11,119 | 17,756 | (12,460 | ) | 16,415 | |||||||||||||
Gross profit | 8 | 3,956 | 2,941 | (1,194 | ) | 5,711 | |||||||||||||
Selling, general and administrative expenses | 71 | 3,806 | 2,392 | (1,282 | ) | 4,987 | |||||||||||||
Operating (loss) income | (63 | ) | 150 | 549 | 88 | 724 | |||||||||||||
Other income (expense) | |||||||||||||||||||
Investment income and other | 19 | — | 25 | (19 | ) | 25 | |||||||||||||
Interest expense | (23 | ) | (6 | ) | (34 | ) | 19 | (44 | ) | ||||||||||
(Loss) earnings before equity in earnings of subsidiaries | (67 | ) | 144 | 540 | 88 | 705 | |||||||||||||
Equity in earnings of subsidiaries | 382 | 23 | 91 | (496 | ) | — | |||||||||||||
Earnings before income tax expense | 315 | 167 | 631 | (408 | ) | 705 | |||||||||||||
Income tax (benefit) expense | (6 | ) | 53 | 220 | — | 267 | |||||||||||||
Net earnings including noncontrolling interests | 321 | 114 | 411 | (408 | ) | 438 | |||||||||||||
Net earnings attributable to noncontrolling interests | — | — | (29 | ) | — | (29 | ) | ||||||||||||
Net earnings attributable to Best Buy Co., Inc. | $ | 321 | $ | 114 | $ | 382 | $ | (408 | ) | $ | 409 |
|
| Best Buy |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by (used in) operating activities |
| $ | 597 |
| $ | (317 | ) | $ | 1,044 |
| $ | — |
| $ | 1,324 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| (1 | ) | (100 | ) | (101 | ) | — |
| (202 | ) | |||||
Purchases of investments |
| (4 | ) | — |
| (20 | ) | — |
| (24 | ) | |||||
Sales of investments |
| 34 |
| — |
| 3 |
| — |
| 37 |
| |||||
Change in restricted assets |
| — |
| — |
| 3 |
| — |
| 3 |
| |||||
Other, net |
| — |
| — |
| — |
| — |
| — |
| |||||
Total cash provided by (used in) investing activities |
| 29 |
| (100 | ) | (115 | ) | — |
| (186 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Repurchase of common stock |
| (480 | ) | — |
| — |
| — |
| (480 | ) | |||||
Borrowings of debt |
| 997 |
| — |
| 378 |
| — |
| 1,375 |
| |||||
Repayments of debt |
| — |
| (3 | ) | (910 | ) | — |
| (913 | ) | |||||
Dividends paid |
| (59 | ) | — |
| — |
| — |
| (59 | ) | |||||
Issuance of common stock under employee stock purchase plan and for the exercise of stock options |
| 46 |
| — |
| — |
| — |
| 46 |
| |||||
Excess tax benefits from stock-based compensation |
| 1 |
| — |
| — |
| — |
| 1 |
| |||||
Other, net |
| (7 | ) | — |
| — |
| — |
| (7 | ) | |||||
Change in intercompany receivable/payable |
| (123 | ) | 412 |
| (289 | ) | — |
| — |
| |||||
Total cash provided by (used in) financing activities |
| 375 |
| 409 |
| (821 | ) | — |
| (37 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Effect of exchange rate changes on cash |
| — |
| — |
| 4 |
| — |
| 4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Increase (decrease) in cash and cash equivalents |
| 1,001 |
| (8 | ) | 112 |
| — |
| 1,105 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents at beginning of period |
| 282 |
| 51 |
| 770 |
| — |
| 1,103 |
| |||||
Cash and cash equivalents at end of period |
| $ | 1,283 |
| $ | 43 |
| $ | 882 |
| $ | — |
| $ | 2,208 |
|
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Total cash (used in) provided by operating activities | $ | (151 | ) | $ | 200 | $ | 1,488 | $ | — | $ | 1,537 | ||||||||
Investing activities | |||||||||||||||||||
Additions to property and equipment | (2 | ) | (191 | ) | (218 | ) | — | (411 | ) | ||||||||||
Purchases of investments | (86 | ) | — | (20 | ) | — | (106 | ) | |||||||||||
Sales of investments | 43 | — | 23 | — | 66 | ||||||||||||||
Proceeds from sale of business | — | — | — | — | — | ||||||||||||||
Change in restricted assets | — | — | (45 | ) | — | (45 | ) | ||||||||||||
Settlement of net investment hedges | — | — | — | — | — | ||||||||||||||
Other, net | — | — | — | — | — | ||||||||||||||
Total cash (used in) investing activities | (45 | ) | (191 | ) | (260 | ) | — | (496 | ) | ||||||||||
Financing activities | |||||||||||||||||||
Repurchase of common stock | (846 | ) | — | — | — | (846 | ) | ||||||||||||
Borrowings of debt | 997 | — | 999 | — | 1,996 | ||||||||||||||
Repayments of debt | — | (6 | ) | (1,181 | ) | — | (1,187 | ) | |||||||||||
Dividends paid | (115 | ) | — | — | — | (115 | ) | ||||||||||||
Issuance of common stock under employee stock purchase plan and for the exercise of stock options | 49 | — | — | — | 49 | ||||||||||||||
Excess tax benefits from stock-based compensation | — | — | — | — | — | ||||||||||||||
Other, net | (8 | ) | — | 6 | — | (2 | ) | ||||||||||||
Change in intercompany receivable/payable | 780 | (2 | ) | (778 | ) | — | — | ||||||||||||
Total cash provided by (used in) financing activities | 857 | (8 | ) | (954 | ) | — | (105 | ) | |||||||||||
Effect of exchange rate changes on cash | — | — | 1 | — | 1 | ||||||||||||||
Increase in cash and cash equivalents | 661 | 1 | 275 | — | 937 | ||||||||||||||
Cash and cash equivalents at beginning of period | 282 | 51 | 770 | — | 1,103 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 943 | $ | 52 | $ | 1,045 | $ | — | $ | 2,040 |
|
| Best Buy |
| Guarantor |
| Non- |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by (used in) operating activities |
| $ | 409 |
| $ | (862 | ) | $ | 622 |
| $ | — |
| $ | 169 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| — |
| (51 | ) | (110 | ) | — |
| (161 | ) | |||||
Purchases of investments |
| (150 | ) | — |
| — |
| — |
| (150 | ) | |||||
Sales of investments |
| 35 |
| — |
| — |
| — |
| 35 |
| |||||
Change in restricted assets |
| — |
| — |
| 11 |
| — |
| 11 |
| |||||
Settlement of net investment hedges |
| — |
| — |
| 12 |
| — |
| 12 |
| |||||
Other, net |
| — |
| — |
| (1 | ) | — |
| (1 | ) | |||||
Total cash used in investing activities |
| (115 | ) | (51 | ) | (88 | ) | — |
| (254 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Repurchase of common stock |
| (111 | ) | — |
| — |
| — |
| (111 | ) | |||||
Borrowings of debt |
| — |
| — |
| 463 |
| — |
| 463 |
| |||||
Repayments of debt |
| (1 | ) | (3 | ) | (903 | ) | — |
| (907 | ) | |||||
Dividends paid |
| (59 | ) | — |
| — |
| — |
| (59 | ) | |||||
Issuance of common stock under employee stock purchase plan and for the exercise of stock options |
| 110 |
| — |
| — |
| — |
| 110 |
| |||||
Excess tax benefits from stock-based compensation |
| 10 |
| — |
| — |
| — |
| 10 |
| |||||
Other, net |
| — |
| — |
| — |
| — |
| — |
| |||||
Change in intercompany receivable/payable |
| (843 | ) | 900 |
| (57 | ) | — |
| — |
| |||||
Total cash (used in) provided by financing activities |
| (894 | ) | 897 |
| (497 | ) | — |
| (494 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Effect of exchange rate changes on cash |
| — |
| — |
| (8 | ) | — |
| (8 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Decrease) increase in cash and cash equivalents |
| (600 | ) | (16 | ) | 29 |
| — |
| (587 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents at beginning of period |
| 1,170 |
| 53 |
| 603 |
| — |
| 1,826 |
| |||||
Cash and cash equivalents at end of period |
| $ | 570 |
| $ | 37 |
| $ | 632 |
| $ | — |
| $ | 1,239 |
|
Best Buy Co., Inc. | Guarantor Subsidiary | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Total cash provided by (used in) operating activities | $ | 199 | $ | (472 | ) | $ | 357 | $ | — | $ | 84 | ||||||||
Investing activities | |||||||||||||||||||
Additions to property and equipment | — | (129 | ) | (213 | ) | — | (342 | ) | |||||||||||
Purchases of investments | (241 | ) | — | — | — | (241 | ) | ||||||||||||
Sales of investments | 378 | — | 1 | — | 379 | ||||||||||||||
Proceeds from sale of business | — | — | 21 | — | 21 | ||||||||||||||
Change in restricted assets | — | — | 12 | — | 12 | ||||||||||||||
Settlement of net investment hedges | — | — | 12 | — | 12 | ||||||||||||||
Other, net | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Total cash provided by (used in) investing activities | 137 | (129 | ) | (168 | ) | — | (160 | ) | |||||||||||
Financing activities | |||||||||||||||||||
Repurchase of common stock | (667 | ) | — | — | — | (667 | ) | ||||||||||||
Borrowings of debt | — | — | 955 | — | 955 | ||||||||||||||
Repayments of debt | (1 | ) | (6 | ) | (1,200 | ) | — | (1,207 | ) | ||||||||||
Dividends paid | (118 | ) | — | — | — | (118 | ) | ||||||||||||
Issuance of common stock under employee stock purchase plan and for the exercise of stock options | 113 | — | — | — | 113 | ||||||||||||||
Excess tax benefits from stock-based compensation | 10 | — | — | — | 10 | ||||||||||||||
Other, net | — | — | 9 | — | 9 | ||||||||||||||
Change in intercompany receivable/payable | (707 | ) | 583 | 124 | — | — | |||||||||||||
Total cash (used in) provided by financing activities | (1,370 | ) | 577 | (112 | ) | — | (905 | ) | |||||||||||
Effect of exchange rate changes on cash | — | — | (2 | ) | — | (2 | ) | ||||||||||||
(Decrease) increase in cash and cash equivalents | (1,034 | ) | (24 | ) | 75 | — | (983 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 1,170 | 53 | 603 | — | 1,826 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 136 | $ | 29 | $ | 678 | $ | — | $ | 843 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
·
·
·
·
·
·
Disciplined capital allocation, working capital management and expense control remain key priorities for us as we navigate through the current environment.
segment excludes the effect of fluctuations in foreign currency exchange rates. The method of calculating comparable store sales varies across the retail industry. As a result, our method of calculating comparable store sales may not be the same as other retailers’retailers' methods.
Throughout
appliances.
|
| Three Months Ended |
| ||||
|
| May 28, 2011 |
| May 29, 2010 |
| ||
Revenue |
| $ | 10,940 |
| $ | 10,787 |
|
Revenue % growth |
| 1.4 | % | 6.9 | % | ||
Comparable store sales % (decline) gain |
| (1.7 | )% | 2.8 | % | ||
Gross profit |
| $ | 2,768 |
| $ | 2,793 |
|
Gross profit as a % of revenue1 |
| 25.3 | % | 25.9 | % | ||
SG&A |
| $ | 2,484 |
| $ | 2,480 |
|
SG&A as a % of revenue1 |
| 22.7 | % | 23.0 | % | ||
Operating income |
| $ | 282 |
| $ | 313 |
|
Operating income as % of revenue |
| 2.6 | % | 2.9 | % | ||
Net earnings attributable to Best Buy Co., Inc. |
| $ | 136 |
| $ | 155 |
|
Diluted earnings per share |
| $ | 0.35 |
| $ | 0.36 |
|
1
Three Months Ended | Six Months Ended | ||||||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||||||
Revenue | $ | 11,347 | $ | 11,339 | $ | 22,287 | $ | 22,126 | |||||||
Revenue % growth | 0.1 | % | 2.9 | % | 0.7 | % | 4.8 | % | |||||||
Comparable store sales % (decline) gain | (2.8 | )% | (0.1 | )% | (2.3 | )% | 1.3 | % | |||||||
Gross profit | $ | 2,872 | $ | 2,918 | $ | 5,640 | $ | 5,711 | |||||||
Gross profit as a % of revenue(1) | 25.3 | % | 25.7 | % | 25.3 | % | 25.8 | % | |||||||
SG&A | $ | 2,583 | $ | 2,507 | $ | 5,067 | $ | 4,987 | |||||||
SG&A as a % of revenue(1) | 22.8 | % | 22.1 | % | 22.7 | % | 22.5 | % | |||||||
Operating income | $ | 287 | $ | 411 | $ | 569 | $ | 724 | |||||||
Operating income as % of revenue | 2.5 | % | 3.6 | % | 2.6 | % | 3.3 | % | |||||||
Net earnings attributable to Best Buy Co., Inc. | $ | 177 | $ | 254 | $ | 313 | $ | 409 | |||||||
Diluted earnings per share | $ | 0.47 | $ | 0.60 | $ | 0.81 | $ | 0.96 |
(1) | Because retailers vary in how they record certain costs between cost of goods sold and selling, general and administrative expenses ("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 26, 2011. |
Three Months Ended | Six Months Ended | |||||
August 27, 2011 | August 27, 2011 | |||||
Impact of foreign currency exchange rate fluctuations | 2.2 | % | 1.7 | % | ||
Net new stores | 1.5 | % | 1.7 | % | ||
Comparable store sales impact | (2.7 | )% | (2.2 | )% | ||
Non-comparable sales channels(1) | (0.9 | )% | (0.5 | )% | ||
Total revenue increase | 0.1 | % | 0.7 | % |
|
|
| |
(1) |
|
| |
|
|
| |
Non-comparable sales channels |
|
| |
|
|
|
1Non-comparable sales channels primarily reflects the impact from revenue we earn from sales of merchandise to wholesalers and dealers as well as other non-comparable sales channels not included within our comparable store sales calculation.
TableIn the second quarter of Contents
Operatingfiscal 2012, operating income decreased 9.9%30.2% to $282$287 million, or as a percentage of revenue, 2.5%. For the first six months of fiscal 2012, operating income decreased 21.4% to $569 million, or as a percentage of revenue, 2.6%. The decreasedecreases in operating income from the same period last year wasin both periods were primarily driven by a decreasedecreases in our gross profit rate, partially offset by a decreaserates, coupled with essentially flat revenue and increases in our SG&A rate.
spending.
$99 million in the second quarter of fiscal 2012 compared to $146 million in the prior-year period, primarily as a result of a decrease in net earnings. Our effective income tax rate in the firstsecond quarter of fiscal 2012 was 37.6%38.0%, compared withto a rate of 40.3%36.1% in the firstsecond quarter of fiscal 2011. The decreaseincrease was duecaused primarily toby the impact of tax benefits resulting from the sale of our Speakeasy business in the prior-year period and the timing impact of losses in certain foreign jurisdictions for which we have no current tax benefit, partially offset by increased tax benefits from other foreign operations. The increased tax benefits from foreign operations.
operations were due primarily to an increase in forecast annual foreign earnings. Our consolidated effective tax rate is impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate. As our foreign earnings are generally taxed at lower statutory rates than the 35% U.S. statutory rate, changes in the proportion of our consolidated taxable earnings originating in foreign jurisdictions impact our consolidated effective rate. Our foreign earnings have been indefinitely reinvested outside the U.S. and are not subject to current U.S. income tax.
Domestic$198
Following revenue growth million in the first quartersix months of fiscal 2011, our Domestic segment experienced2012 compared to $267 million in the prior-year period, due primarily to a modest revenue declinedecrease in net earnings. Our effective income tax rate for the first six months of fiscal 2012 was 37.8%, compared to a rate of 37.9% in the first quartersix months of fiscal 2012. 2011. The rate remained relatively flat compared to the prior-year period as the aforementioned factors effectively offset each other.
rate decline.
|
| Three Months Ended |
| ||||
|
| May 28, 2011 |
| May 29, 2010 |
| ||
Revenue |
| $ | 7,859 |
| $ | 7,923 |
|
Revenue % (decline) growth |
| (0.8 | )% | 5.3 | % | ||
Comparable store sales % (decline) gain |
| (2.4 | )% | 1.9 | % | ||
Gross profit |
| $ | 1,970 |
| $ | 2,040 |
|
Gross profit as % of revenue |
| 25.1 | % | 25.7 | % | ||
SG&A |
| $ | 1,736 |
| $ | 1,742 |
|
SG&A as % of revenue |
| 22.1 | % | 22.0 | % | ||
Operating income |
| $ | 234 |
| $ | 298 |
|
Operating income as % of revenue |
| 3.0 | % | 3.8 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||||||
Revenue | $ | 8,311 | $ | 8,436 | $ | 16,170 | $ | 16,359 | |||||||
Revenue % (decline) growth | (1.5 | )% | 1.9 | % | (1.2 | )% | 3.5 | % | |||||||
Comparable store sales % (decline) gain | (2.7 | )% | (1.4 | )% | (2.6 | )% | 0.1 | % | |||||||
Gross profit | $ | 2,101 | $ | 2,174 | $ | 4,071 | $ | 4,214 | |||||||
Gross profit as % of revenue | 25.3 | % | 25.8 | % | 25.2 | % | 25.8 | % | |||||||
SG&A | $ | 1,797 | $ | 1,767 | $ | 3,533 | $ | 3,509 | |||||||
SG&A as % of revenue | 21.6 | % | 21.0 | % | 21.8 | % | 21.5 | % | |||||||
Operating income | $ | 303 | $ | 407 | $ | 537 | $ | 705 | |||||||
Operating income as % of revenue | 3.6 | % | 4.8 | % | 3.3 | % | 4.3 | % |
Three Months Ended | Six Months Ended | ||||
August 27, 2011 | August 27, 2011 | ||||
Comparable store sales impact | (2.7 | )% | (2.5 | )% | |
Non-comparable sales channels(1) | (0.3 | )% | (0.3 | )% | |
Net new stores | 1.5 | % | 1.6 | % | |
Total revenue decrease | (1.5 | )% | (1.2 | )% |
| ||||
(1) | Non-comparable sales channels reflects the impact from revenue we earn from sales channels not included within our comparable store sales |
|
| |
|
|
| ||
|
|
| ||
|
|
|
1Non-comparable sales channels reflects the impact from revenue we earn from sales channels not included within our comparable store sales calculation.
|
| Fiscal 2012 |
| Fiscal 2011 |
| ||||||||||||
|
| Total Stores at |
| Stores |
| Stores |
| Total Stores |
| Total Stores at |
| Stores |
| Stores |
| Total Stores |
|
Best Buy |
| 1,099 |
| 3 |
| — |
| 1,102 |
| 1,069 |
| 13 |
| (1 | ) | 1,081 |
|
Best Buy Mobile |
| 177 |
| 21 |
| — |
| 198 |
| 74 |
| 6 |
| — |
| 80 |
|
Pacific Sales |
| 35 |
| — |
| — |
| 35 |
| 35 |
| — |
| — |
| 35 |
|
Magnolia Audio Video |
| 6 |
| — |
| (1 | ) | 5 |
| 6 |
| — |
| — |
| 6 |
|
Geek Squad |
| — |
| — |
| — |
| — |
| 6 |
| — |
| (1 | ) | 5 |
|
Total Domestic segment stores |
| 1,317 |
| 24 |
| (1 | ) | 1,340 |
| 1,190 |
| 19 |
| (2 | ) | 1,207 |
|
Fiscal 2012 | Fiscal 2011 | ||||||||||||||||||||||
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 | 1,102 | 3 | — | 1,105 | 1,081 | 10 | — | 1,091 | |||||||||||||||
Best Buy Mobile stand-alone | 198 | 24 | — | 222 | 80 | 29 | — | 109 | |||||||||||||||
Pacific Sales | 35 | — | — | 35 | 35 | — | — | 35 | |||||||||||||||
Magnolia Audio Video | 5 | — | — | 5 | 6 | — | — | 6 | |||||||||||||||
Geek Squad | — | — | — | — | 5 | — | — | 5 | |||||||||||||||
Total Domestic segment stores | 1,340 | 27 | — | 1,367 | 1,207 | 39 | — | 1,246 |
TableThe net addition of Contents
14 large-format Best Buy stores during the past 12 months contributed the majority of the total change in revenue associated with net new stores. The 113 small-format Best Buy Mobile stand-alone stores opened during the past 12 months contributed a significantly smaller portion of the revenue increase due to their smaller square footage and single category focus compared to large-format stores.
|
| Revenue Mix |
| Comparable Store Sales |
| ||||
|
| Three Months Ended |
| Three Months Ended |
| ||||
|
| May 28, 2011 |
| May 29, 2010 |
| May 28, 2011 |
| May 29, 2010 |
|
Consumer Electronics |
| 35 | % | 37 | % | (6.8 | )% | 0.0 | % |
Computing and Mobile Phones1 |
| 40 | % | 37 | % | 4.7 | % | 9.7 | % |
Entertainment |
| 12 | % | 13 | % | (13.1 | )% | (12.8 | )% |
Appliances |
| 6 | % | 6 | % | 2.9 | % | 14.4 | % |
Services |
| 6 | % | 6 | % | 0.8 | % | (4.2 | )% |
Other |
| 1 | % | 1 | % | n/a |
| n/a |
|
Total |
| 100 | % | 100 | % | (2.4 | )% | 1.9 | % |
1During the first quarter of fiscal 2012, the revenue category previously referred to as “Home Office” was renamed “Computing and Mobile Phones” to more clearly reflect the key products included within the revenue category. However, the composition of the products within this revenue category has not changed from previous periods’ disclosures.
Revenue Mix | Comparable Store Sales | ||||||||||
Three Months Ended | Three Months Ended | ||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||
Consumer Electronics | 35 | % | 36 | % | (6.5 | )% | (6.7 | )% | |||
Computing and Mobile Phones(1) | 42 | % | 39 | % | 2.7 | % | 5.7 | % | |||
Entertainment | 9 | % | 12 | % | (20.0 | )% | (10.9 | )% | |||
Appliances | 6 | % | 6 | % | 12.2 | % | 8.2 | % | |||
Services | 7 | % | 6 | % | 3.2 | % | (0.8 | )% | |||
Other | 1 | % | 1 | % | n/a | n/a | |||||
Total | 100 | % | 100 | % | (2.7 | )% | (1.4 | )% |
(1) | During the first quarter of fiscal 2012, the revenue category previously referred to as “Home Office” was renamed “Computing and Mobile Phones” to more clearly reflect the key products included within the revenue category. However, the composition of the products within this revenue category has not changed from previous periods’ disclosures. |
·
·
·
·
·
·increased
·industry-wide supply chain interruptions of higher-margin digital imaging products due and
·a decline in an annual vendor rebate highlighted in the prior year;
·higher transportation costs;
·ongoing support contracts;
We remain focused on controlling our costs, and ouraccessories.
declines and increased spending.
International
Ourour Five Star operations in China continuedpositively impacted the segment and partially offset the overall decline. The gross profit rate decline in the second quarter of fiscal 2012 was the result of declines in Europe due primarily to driveincreased promotions, partially offset by improved promotional effectiveness, in-store execution and growth in revenuethe mix of mobile phones in Canada, and improved cost programs with vendors in Five Star. The comparable store sales and gross profit rate declines, coupled with an increase in the SG&A rate, contributed to the decrease operating income. Cost savings resulting from our fiscal 2011 restructuring activities in China and Turkey contributed positively to our International segment's operating income in our International segment. Despite a modest comparable store sales decline reported by our Canada operations as a resultthe second quarter of the continuation of macroeconomic and product life-cycle pressures similar to those experienced in our Domestic segment, gross profit rate improvements helped contribute to operating income growth in the quarter. Finally, in the face of a constrained economy, our Europe operations experienced revenue growth, as increased wholesale and business-to-business sales helped to offset the modest comparable store sales decline. Additionally, while the start-up costs of our large-format stores in the U.K. negatively affected the segment’s operating income, lower SG&A spending in our small-format stores in the quarter more than offset these costs and resulted in improved operating income.
fiscal 2012.
|
| Three Months Ended |
| ||||
|
| May 28, 2011 |
| May 29, 2010 |
| ||
Revenue |
| $ | 3,081 |
| $ | 2,864 |
|
Revenue % growth |
| 7.6 | % | 11.4 | % | ||
Comparable store sales % gain |
| 0.4 | % | 6.3 | % | ||
Gross profit |
| $ | 798 |
| $ | 753 |
|
Gross profit as % of revenue |
| 25.9 | % | 26.3 | % | ||
SG&A |
| $ | 748 |
| $ | 738 |
|
SG&A as % of revenue |
| 24.3 | % | 25.8 | % | ||
Operating income |
| $ | 48 |
| $ | 15 |
|
Operating income as % of revenue |
| 1.5 | % | 0.5 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||||||
Revenue | $ | 3,036 | $ | 2,903 | $ | 6,117 | $ | 5,767 | |||||||
Revenue % growth | 4.6 | % | 5.7 | % | 6.1 | % | 8.4 | % | |||||||
Comparable store sales % (decline) gain | (3.2 | )% | 4.3 | % | (1.4 | )% | 5.2 | % | |||||||
Gross profit | $ | 771 | $ | 744 | $ | 1,569 | $ | 1,497 | |||||||
Gross profit as % of revenue | 25.4 | % | 25.6 | % | 25.6 | % | 26.0 | % | |||||||
SG&A | $ | 786 | $ | 740 | $ | 1,534 | $ | 1,478 | |||||||
SG&A as % of revenue | 25.9 | % | 25.5 | % | 25.1 | % | 25.6 | % | |||||||
Operating (loss) income | $ | (16 | ) | $ | 4 | $ | 32 | $ | 19 | ||||||
Operating (loss) income as % of revenue | (0.5 | )% | 0.2 | % | 0.5 | % | 0.3 | % |
Three Months Ended | Six Months Ended | ||||
August 27, 2011 | August 27, 2011 | ||||
Impact of foreign currency exchange rate fluctuations | 8.7 | % | 6.6 | % | |
Net new stores(1) | 1.4 | % | 1.9 | % | |
Non-comparable sales channels(2) | (2.8 | )% | (1.2 | )% | |
Comparable store sales impact | (2.7 | )% | (1.2 | )% | |
Total revenue increase | 4.6 | % | 6.1 | % |
|
|
| |
(1) | Net new stores includes the revenue from our Turkey operations and Best Buy branded stores in China. |
|
| |||
(2) | Non-comparable sales channels |
|
| |
|
|
| ||
|
|
|
1Non-comparable sales channels primarily reflects the impact from revenue we earn from sales of merchandise to wholesalers and dealers as well as other non-comparable sales channels not included within our comparable store sales calculation.
|
| Fiscal 2012 |
| Fiscal 2011 |
| ||||||||||||
|
| Total Stores at |
| Stores |
| Stores |
| Total Stores |
| Total Stores at |
| Stores |
| Stores |
| Total Stores |
|
Best Buy Europe — small box1 |
| 2,440 |
| 15 |
| (26 | ) | 2,429 |
| 2,453 |
| 10 |
| (33 | ) | 2,430 |
|
Best Buy Europe — big box2 |
| 6 |
| — |
| — |
| 6 |
| — |
| — |
| — |
| — |
|
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future Shop |
| 146 |
| — |
| — |
| 146 |
| 144 |
| — |
| — |
| 144 |
|
Best Buy |
| 71 |
| — |
| — |
| 71 |
| 64 |
| 2 |
| — |
| 66 |
|
Best Buy Mobile |
| 10 |
| 5 |
| — |
| 15 |
| 4 |
| — |
| — |
| 4 |
|
China |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Five Star |
| 166 |
| 5 |
| — |
| 171 |
| 158 |
| — |
| — |
| 158 |
|
Best Buy |
| 8 |
| — |
| (8 | ) | — |
| 6 |
| 1 |
| — |
| 7 |
|
Mexico |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best Buy |
| 6 |
| — |
| — |
| 6 |
| 5 |
| — |
| — |
| 5 |
|
Turkey |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best Buy3 |
| 2 |
| — |
| — |
| 2 |
| 1 |
| — |
| — |
| 1 |
|
Total International segment stores |
| 2,855 |
| 25 |
| (34 | ) | 2,846 |
| 2,835 |
| 13 |
| (33 | ) | 2,815 |
|
1
Fiscal 2012 | Fiscal 2011 | ||||||||||||||||||||||
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 Europe — small box(1) | 2,429 | 38 | (29 | ) | 2,438 | 2,430 | 24 | (18 | ) | 2,436 | |||||||||||||
Best Buy Europe — big box(2) | 6 | 4 | — | 10 | — | 3 | — | 3 | |||||||||||||||
Canada | |||||||||||||||||||||||
Future Shop | 146 | 2 | — | 148 | 144 | 1 | — | 145 | |||||||||||||||
Best Buy | 71 | 5 | — | 76 | 66 | 4 | — | 70 | |||||||||||||||
Best Buy Mobile stand-alone | 15 | 7 | — | 22 | 4 | 2 | — | 6 | |||||||||||||||
China | |||||||||||||||||||||||
Five Star | 171 | 7 | — | 178 | 158 | 2 | (1 | ) | 159 | ||||||||||||||
Best Buy | — | — | — | — | 7 | 1 | — | 8 | |||||||||||||||
Mexico | |||||||||||||||||||||||
Best Buy | 6 | — | — | 6 | 5 | — | — | 5 | |||||||||||||||
Turkey | |||||||||||||||||||||||
Best Buy | 2 | — | (2 | ) | — | 1 | 1 | — | 2 | ||||||||||||||
Total International segment stores | 2,846 | 63 | (31 | ) | 2,878 | 2,815 | 38 | (19 | ) | 2,834 |
(1) | Represents small-format The Carphone Warehouse and The Phone House stores. |
(2) | Represents large-format Best Buy branded stores in the U.K. |
2Represents large-format Best Buy branded stores in the U.K.
3In February 2011, we announced plans to exit the Turkey market; however, these stores remained open as of the end of the first quarter of fiscal 2012.
|
| Revenue Mix |
| Comparable Store Sales |
| ||||
|
| Three Months Ended |
| Three Months Ended |
| ||||
|
| May 28, 2011 |
| May 29, 2010 |
| May 28, 2011 |
| May 29, 2010 |
|
Consumer Electronics |
| 18 | % | 19 | % | (8.6 | )% | 2.7 | % |
Computing and Mobile Phones1 |
| 59 | % | 56 | % | 4.5 | % | 6.2 | % |
Entertainment |
| 4 | % | 5 | % | (13.6 | )% | (6.2 | )% |
Appliances |
| 10 | % | 9 | % | 11.4 | % | 28.0 | % |
Services |
| 9 | % | 11 | % | (5.2 | )% | 2.8 | % |
Other |
| <1 | % | <1 | % | n/a |
| n/a |
|
Total |
| 100 | % | 100 | % | 0.4 | % | 6.3 | % |
1During the first quarter of fiscal 2012, the revenue category previously referred to as “Home Office” was renamed “Computing and Mobile Phones” to more clearly reflect the key products included within the revenue category. However, the composition of the products within this revenue category has not changed from previous periods’ disclosures.
Revenue Mix | Comparable Store Sales | ||||||||||
Three Months Ended | Three Months Ended | ||||||||||
August 27, 2011 | August 28, 2010 | August 27, 2011 | August 28, 2010 | ||||||||
Consumer Electronics | 19 | % | 19 | % | (10.7 | )% | (0.5 | )% | |||
Computing and Mobile Phones(1) | 55 | % | 54 | % | (1.1 | )% | 8.5 | % | |||
Entertainment | 3 | % | 5 | % | (17.9 | )% | (13.9 | )% | |||
Appliances | 14 | % | 12 | % | 7.3 | % | 13.2 | % | |||
Services | 9 | % | 10 | % | (3.7 | )% | (5.6 | )% | |||
Other | <1% | <1% | n/a | n/a | |||||||
Total | 100 | % | 100 | % | (3.2 | )% | 4.3 | % |
(1) | During the first quarter of fiscal 2012, the revenue category previously referred to as “Home Office” was renamed “Computing and Mobile Phones” to more clearly reflect the key products included within the revenue category. However, the composition of the products within this revenue category has not changed from previous periods’ disclosures. |
·
·
·
·
·
effectiveness.
The increaserate was increased spending in our large-format Best Buy branded stores in the U.K., as well as increased advertising costs and the deleveraging impact of negative comparable store sales in Canada.
34
Liquidity and Capital Resources
The following table summarizes our cash and cash equivalents and short-term investments balances at May 28,August 27, 2011, February 26, 2011, and May 29,August 28, 2010 ($ in millions):
|
| May 28, |
| February 26, |
| May 29, |
| |||
Cash and cash equivalents |
| $ | 2,208 |
| $ | 1,103 |
| $ | 1,239 |
|
Short-term investments |
| 20 |
| 22 |
| 205 |
| |||
Total cash and cash equivalents and short-term investments |
| $ | 2,228 |
| $ | 1,125 |
| $ | 1,444 |
|
August 27, 2011 | February 26, 2011 | August 28, 2010 | |||||||||
Cash and cash equivalents | $ | 2,040 | $ | 1,103 | $ | 843 | |||||
Short-term investments | 80 | 22 | 2 | ||||||||
Total cash and cash equivalents and short-term investments | $ | 2,120 | $ | 1,125 | $ | 845 |
Adjusted debt to EBITDAR = | Adjusted debt | |
EBITDAR |
The following table presents a reconciliation of our debt to net earnings ratio and our adjusted debt to EBITDAR ratio ($ in millions):
|
| May 28, |
| February 26, |
| May 29, |
| |||
Debt (including current portion) |
| $ | 2,180 |
| $ | 1,709 |
| $ | 1,324 |
|
Capitalized operating lease obligations (8 times rental expense) 2 |
| 9,416 |
| 9,271 |
| 9,136 |
| |||
Adjusted debt |
| $ | 11,596 |
| $ | 10,980 |
| $ | 10,460 |
|
|
|
|
|
|
|
|
| |||
Net earnings including noncontrolling interests3 |
| $ | 1,348 |
| $ | 1,366 |
| $ | 1,419 |
|
Interest expense, net |
| 44 |
| 36 |
| 37 |
| |||
Income tax expense |
| 692 |
| 714 |
| 797 |
| |||
Depreciation and amortization expense 4 |
| 1,140 |
| 1,145 |
| 955 |
| |||
Rental expense |
| 1,177 |
| 1,159 |
| 1,122 |
| |||
EBITDAR |
| $ | 4,401 |
| $ | 4,420 |
| $ | 4,330 |
|
|
|
|
|
|
|
|
| |||
Debt to net earnings ratio |
| 1.6 |
| 1.3 |
| 0.9 |
| |||
Adjusted debt to EBITDAR ratio |
| 2.6 |
| 2.5 |
| 2.4 |
|
1Debt is reflected as
August 27, 2011(1) | February 26, 2011(1) | August, 2010(1) | |||||||||
Debt (including current portion) | $ | 2,532 | $ | 1,709 | $ | 1,503 | |||||
Capitalized operating lease obligations (8 times rental expense)(2) | 9,599 | 9,271 | 9,208 | ||||||||
Adjusted debt | $ | 12,131 | $ | 10,980 | $ | 10,711 | |||||
Net earnings including noncontrolling interests(3) | $ | 1,251 | $ | 1,366 | $ | 1,519 | |||||
Interest expense, net | 64 | 36 | 41 | ||||||||
Income tax expense | 645 | 714 | 824 | ||||||||
Depreciation and amortization expense(4) | 1,140 | 1,145 | 962 | ||||||||
Rental expense | 1,200 | 1,159 | 1,151 | ||||||||
EBITDAR | $ | 4,300 | $ | 4,420 | $ | 4,497 | |||||
Debt to net earnings ratio | 2.0 | 1.3 | 1.0 | ||||||||
Adjusted debt to EBITDAR ratio | 2.8 | 2.5 | 2.4 |
(1) | Debt is reflected as of the respective balance sheet dates, while rental expense and the other components of EBITDAR represent activity for the 12 months ended as of each of the respective dates. |
(2) | The multiple of eight times annual rental expense in the calculation of our capitalized operating lease obligations is the multiple used for the retail sector by one of the nationally recognized credit rating agencies that rate our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio. |
(3) | We utilize net earnings including noncontrolling interests within our calculation as the earnings and related cash flows attributable to noncontrolling interests are available to service our debt and operating lease commitments. |
(4) | Depreciation and amortization expense includes impairments of fixed assets, investments, goodwill and intangible assets. |
|
| Three Months Ended |
| ||||
|
| May 28, 2011 |
| May 29, 2010 |
| ||
Total cash provided by (used in): |
|
|
|
|
| ||
Operating activities |
| $ | 1,324 |
| $ | 169 |
|
Investing activities |
| (186 | ) | (254 | ) | ||
Financing activities |
| (37 | ) | (494 | ) | ||
Effect of exchange rate changes on cash |
| 4 |
| (8 | ) | ||
Increase (decrease) in cash and cash equivalents |
| $ | 1,105 |
| $ | (587 | ) |
Six Months Ended | |||||||
August 27, 2011 | August 28, 2010 | ||||||
Total cash provided by (used in): | |||||||
Operating activities | $ | 1,537 | $ | 84 | |||
Investing activities | (496 | ) | (160 | ) | |||
Financing activities | (105 | ) | (905 | ) | |||
Effect of exchange rate changes on cash | 1 | (2 | ) | ||||
Increase (decrease) in cash and cash equivalents | $ | 937 | $ | (983 | ) |
·
·Normalization of accounts payable at the end of the first quarter of
2011.
Cash used in investing activities in the first threesix months of fiscal 2012 was $186$496 million, compared with $254$160 million in the first threesix months of fiscal 2011.2011. The declineincrease in cash used was primarily due to lessa change in net investment purchasesactivity, resulting from a combination of greater sales of auction rate securities (“ARS”) in the first quartersix months of fiscal 2012 compared to2011 and greater purchases of short-term investments in the prior-year period.
first six months of fiscal 2012.
Share Repurchases and Dividends
For the three months ended May 28, 2011, we repurchased and retired 16.6 million shares of our common stock at a cost of $505 million. We repurchased and retired 2.5 million shares of our common stock at a cost of $111 million during the three months ended May 29, 2010. We have $802 million available for future repurchases at May 28, 2011, under our June 2007 share repurchase program. Repurchased shares have been retired and constitute authorized but unissued shares.
On June 21, 2011, our Board of Directors announced an increase in our quarterly cash dividend to $0.16 per common share, a 7% increase compared with the existing quarterly dividend of $0.15 per common share. The change will be effective with the quarterly dividend which, if authorized, would be payable on October 25, 2011, to shareholders of record as of
2011
.
|
|
| |||||||
|
|
| |||||||
|
|
| Outlook | ||||||
Fitch | BBB– | Stable | |||||||
Moody’s | Baa2 | Stable | |||||||
Standard & Poor’s | BBB– | Stable |
Auction Rate Securities and Restricted Cash
The increase in restricted assets from the second quarter of fiscal 2011 and the end of fiscal 2011 was due primarily to increased cash reserves within our captive insurance business.
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 26, 2011.2011. There has been no significant change in our significant accounting policies or critical accounting estimates since the end of fiscal 2011.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
2012.
Our credit facilities’ interest rates may be reset due to fluctuations in a market-based index, such as the federal funds rate, the London Interbank Offered Rate (LIBOR),LIBOR, or the base rate or prime rate of our lenders. A hypothetical 100-basis-point change in the interest rates on the outstanding balance of our credit facilities as of May 28,August 27, 2011, would change our annual pre-tax earnings by less than $1$4 million.
ITEM 4. CONTROLS AND PROCEDURES
ITEM 4. | CONTROLS AND PROCEDURES |
reasonably possible losses, if any, cannot be estimated. Fiscal Period Total Number Average Total Number of Shares Approximate Dollar February 27, 2011, through April 2, 2011 2,385,600 $ 29.04 2,385,600 $ 1,237,000,000 April 3, 2011, through April 30, 2011 8,516,763 30.04 8,516,763 981,000,000 May 1, 2011, through May 28, 2011 5,688,320 31.60 5,688,320 802,000,000 Total Fiscal 2012 First Quarter 16,590,683 30.43 16,590,683 802,000,000 EXHIBITS 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 32.2 101 (Registrant) /s/ BRIAN J. DUNN Brian J. Dunn Chief Executive Officer (duly authorized and principal executive officer) Date: By: /s/ JAMES L. MUEHLBAUER James L. Muehlbauer Executive Vice President — Finance and Chief Financial Officer (duly authorized and principal financial officer) Date: By: /s/ SUSAN S. GRAFTON Susan S. Grafton Senior Vice President, Controller and Chief Accounting Officer (duly authorized and principal accounting officer)ITEM 1. LEGAL PROCEEDINGS $0.3$0.3 million in the aggregate; and payment in an amount to be determined by the Court, not to exceed $10$10 million, of a portion of the plaintiffs’ attorneys’ fees and costs. ThisIn August 2011, the Court preliminarily approved the proposed class action settlement and consent decree; provisionally certified the settlement class; approved and directed distribution of notice of the settlement; and scheduled November 9, 2011 as the date for a Fairness Hearing, pursuant to which the Court will determine whether to grant final approval. We established an accrual based on the proposed settlement terms. It is subject to final Court approval.Tablenot reasonably possible that we will incur losses materially in excess of Contentsthe recorded amount.JuneJuly 2011, theafter an unopposed collective motion ofby IBEW Local 98 Pension Fund and Rene LeBlanc to consolidate their respective lawsuits into a new action with a single shareholder, Marion Haynes, as lead plaintiff was granted. The lead plaintiff is expected to file and servegranted, a consolidated complaint captioned, IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al., was filed and served. In September 2011, we filed a motion to dismiss the consolidated complaint.each memberboth present and former members of our Board of Directors 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.we are unable to provide meaningful quantificationthe amount or range of how the final resolution of these claims may impact our future consolidated financial position or results of operations.We believeFor such legal proceedings, we have accrued an amount that reflects the amounts provided inaggregate liability deemed probable and estimable, but this amount is not material to our consolidated financial statements are adequate in lightposition, results of operations or cash flows. Because of the probablepreliminary 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 estimable liabilities. Thethe 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 those otherthese proceedings is not expected to have a material effect on our consolidated financial position, results of operations or financial condition.cash flows.ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS(c) Stock RepurchasesITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS (c) Stock Repurchases firstsecond quarter of fiscal 2012, the average price paid per share, the number of shares that we purchased as part of our publicly announced repurchase program,programs, and the approximate dollar value of shares that still could have been purchased at the end of the applicable fiscal period, pursuant to our June 2007 $5.52011 $5.0 billion share repurchase program:
of Shares
Purchased
Price Paid
per Share
Purchased as Part of
Publicly Announced
Plans or Programs
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs 11“Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs” reflects our $5.5 billion share repurchase program announced on June 27, 2007, less the $3.0 billion we purchased in fiscal 2008 under our accelerated share repurchase program, the $1.2 billion we purchased in fiscal 2011 and the $505 million we purchased in the first quarter of fiscal 2012. The June 2007 program, which had no expiration date governing the period over which we could make share repurchases, was terminated and replaced on June 20, 2011, by a new $5.0 billion share repurchase program that also has no stated expiration date. For additional information related to the new share repurchase program, see Note 10, Repurchase of Common Stock, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.Fiscal Period May 29, 2011, through July 2, 2011 4,701,286 $ 30.46 4,701,286 $ 4,963,000,000 July 3, 2011, through July 30, 2011 3,386,220 30.12 3,386,220 4,861,000,000 July 31, 2011, through August 27, 2011 4,564,500 24.74 4,564,500 4,748,000,000 Total Fiscal 2012 Second Quarter 12,652,006 28.31 12,652,006 4,748,000,000 31.1ITEM 6. 4.1 Facility Agreement, dated July 27, 2011, between Best Buy Europe Distributions Limited and ING Bank N.V., London Branch, as agent, and a syndication of banks, as filed (incorporated herein by reference to the Current Report on Form 8-K filed by Best Buy Co., Inc. on August 2, 2011) 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 firstsecond quarter of fiscal 2011,2012, filed with the SEC on July 1,September 30, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the condensed consolidated balance sheets at May 28,August 27, 2011; February 26, 2011; and May 29,August 28, 2010, (ii) the consolidated statements of earnings for the three and six months ended May 28,August 27, 2011, and May 29,August 28, 2010, (iii) the consolidated statements of cash flows for the threesix months ended May 28,August 27, 2011, and May 29,August 28, 2010, (iv) the consolidated statements of changes in shareholders’ equity for the threesix months ended May 28,August 27 2011, and May 29,August 28, 2010, and (v) the Notes to Condensed Consolidated Financial Statements.1(1)The certifications in Exhibit 32.1 and Exhibit 32.2 and XBRL related information in Exhibit 101 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.
521 The XBRL related information in Exhibit 101 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.BEST BUY CO., INC. Date: September 30, 2011 By: Date: July 1, 2011By:July 1,September 30, 2011July 1,September 30, 2011