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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Minnesota
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41-0907483
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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7601 Penn Avenue South
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Richfield, Minnesota
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55423
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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Emerging growth company
¨
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Item 1.
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Financial Statements
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April 29, 2017
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January 28, 2017
|
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April 30, 2016
|
||||||
Assets
|
|
|
|
|
|
|
|
||||
Current assets
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
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1,651
|
|
|
$
|
2,240
|
|
|
$
|
1,845
|
|
Short-term investments
|
1,948
|
|
|
1,681
|
|
|
1,220
|
|
|||
Receivables, net
|
1,011
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|
|
1,347
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|
|
1,097
|
|
|||
Merchandise inventories
|
4,637
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|
|
4,864
|
|
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4,719
|
|
|||
Other current assets
|
409
|
|
|
384
|
|
|
401
|
|
|||
Total current assets
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9,656
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|
|
10,516
|
|
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9,282
|
|
|||
Property and equipment, net
|
2,287
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|
|
2,293
|
|
|
2,332
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|||
Goodwill
|
425
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|
|
425
|
|
|
425
|
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|||
Other assets
|
587
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|
|
622
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|
|
831
|
|
|||
Non-current assets held for sale
|
—
|
|
|
—
|
|
|
31
|
|
|||
Total assets
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$
|
12,955
|
|
|
$
|
13,856
|
|
|
$
|
12,901
|
|
|
|
|
|
|
|
||||||
Liabilities and equity
|
|
|
|
|
|
||||||
Current liabilities
|
|
|
|
|
|
|
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|
|||
Accounts payable
|
$
|
4,599
|
|
|
$
|
4,984
|
|
|
$
|
4,397
|
|
Unredeemed gift card liabilities
|
389
|
|
|
427
|
|
|
379
|
|
|||
Deferred revenue
|
371
|
|
|
418
|
|
|
349
|
|
|||
Accrued compensation and related expenses
|
274
|
|
|
358
|
|
|
277
|
|
|||
Accrued liabilities
|
699
|
|
|
865
|
|
|
791
|
|
|||
Accrued income taxes
|
93
|
|
|
26
|
|
|
97
|
|
|||
Current portion of long-term debt
|
45
|
|
|
44
|
|
|
44
|
|
|||
Total current liabilities
|
6,470
|
|
|
7,122
|
|
|
6,334
|
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Long-term liabilities
|
684
|
|
|
704
|
|
|
807
|
|
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Long-term debt
|
1,302
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|
|
1,321
|
|
|
1,334
|
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Equity
|
|
|
|
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Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none
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—
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—
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|
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—
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Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 306,000,000, 311,000,000 and 324,000,000 shares, respectively
|
31
|
|
|
31
|
|
|
32
|
|
|||
Retained earnings
|
4,202
|
|
|
4,399
|
|
|
4,078
|
|
|||
Accumulated other comprehensive income
|
266
|
|
|
279
|
|
|
316
|
|
|||
Total equity
|
4,499
|
|
|
4,709
|
|
|
4,426
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|
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Total liabilities and equity
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$
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12,955
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|
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$
|
13,856
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$
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12,901
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Three Months Ended
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||||||
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April 29, 2017
|
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April 30, 2016
|
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Revenue
|
$
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8,528
|
|
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$
|
8,443
|
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Cost of goods sold
|
6,506
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6,298
|
|
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Gross profit
|
2,022
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|
|
2,145
|
|
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Selling, general and administrative expenses
|
1,722
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|
|
1,744
|
|
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Restructuring charges
|
—
|
|
|
29
|
|
||
Operating income
|
300
|
|
|
372
|
|
||
Other income (expense)
|
|
|
|
|
|
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Gain on sale of investments
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—
|
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|
2
|
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||
Investment income and other
|
11
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|
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6
|
|
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Interest expense
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(19
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)
|
|
(20
|
)
|
||
Earnings from continuing operations before income tax expense
|
292
|
|
|
360
|
|
||
Income tax expense
|
104
|
|
|
134
|
|
||
Net earnings from continuing operations
|
188
|
|
|
226
|
|
||
Gain from discontinued operations (Note 2), net of tax benefit of $- and $3, respectively
|
—
|
|
|
3
|
|
||
Net earnings
|
$
|
188
|
|
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$
|
229
|
|
|
|
|
|
||||
Basic earnings per share
|
|
|
|
|
|
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Continuing operations
|
$
|
0.61
|
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$
|
0.70
|
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Discontinued operations
|
—
|
|
|
0.01
|
|
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Basic earnings per share
|
$
|
0.61
|
|
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$
|
0.71
|
|
|
|
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|
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Diluted earnings per share
|
|
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|
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Continuing operations
|
$
|
0.60
|
|
|
$
|
0.69
|
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Discontinued operations
|
—
|
|
|
0.01
|
|
||
Diluted earnings per share
|
$
|
0.60
|
|
|
$
|
0.70
|
|
|
|
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|
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Dividends declared per common share
|
$
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0.34
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|
$
|
0.73
|
|
|
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|
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Weighted-average common shares outstanding
|
|
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|
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Basic
|
309.2
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|
|
323.6
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Diluted
|
315.0
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|
|
326.7
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Three Months Ended
|
||||||
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April 29, 2017
|
|
April 30, 2016
|
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Net earnings
|
$
|
188
|
|
|
$
|
229
|
|
Foreign currency translation adjustments
|
(13
|
)
|
|
45
|
|
||
Comprehensive income
|
$
|
175
|
|
|
$
|
274
|
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Operating activities
|
|
|
|
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Net earnings
|
$
|
188
|
|
|
$
|
229
|
|
Adjustments to reconcile net earnings to total cash provided by operating activities:
|
|
|
|
||||
Depreciation
|
161
|
|
|
162
|
|
||
Restructuring charges
|
—
|
|
|
29
|
|
||
Stock-based compensation
|
31
|
|
|
31
|
|
||
Deferred income taxes
|
12
|
|
|
8
|
|
||
Other, net
|
(1
|
)
|
|
(3
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Receivables
|
333
|
|
|
73
|
|
||
Merchandise inventories
|
223
|
|
|
365
|
|
||
Other assets
|
(25
|
)
|
|
(30
|
)
|
||
Accounts payable
|
(382
|
)
|
|
(73
|
)
|
||
Other liabilities
|
(364
|
)
|
|
(211
|
)
|
||
Income taxes
|
67
|
|
|
(88
|
)
|
||
Total cash provided by operating activities
|
243
|
|
|
492
|
|
||
|
|
|
|
||||
Investing activities
|
|
|
|
|
|
||
Additions to property and equipment
|
(153
|
)
|
|
(136
|
)
|
||
Purchases of investments
|
(1,134
|
)
|
|
(591
|
)
|
||
Sales of investments
|
863
|
|
|
683
|
|
||
Other, net
|
1
|
|
|
4
|
|
||
Total cash used in investing activities
|
(423
|
)
|
|
(40
|
)
|
||
|
|
|
|
||||
Financing activities
|
|
|
|
|
|
||
Repurchase of common stock
|
(373
|
)
|
|
(52
|
)
|
||
Repayments of debt
|
(10
|
)
|
|
(362
|
)
|
||
Dividends paid
|
(105
|
)
|
|
(238
|
)
|
||
Issuance of common stock
|
75
|
|
|
21
|
|
||
Other, net
|
—
|
|
|
10
|
|
||
Total cash used in financing activities
|
(413
|
)
|
|
(621
|
)
|
||
Effect of exchange rate changes on cash
|
(6
|
)
|
|
40
|
|
||
Decrease in cash, cash equivalents and restricted cash
|
(599
|
)
|
|
(129
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
2,433
|
|
|
2,161
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
1,834
|
|
|
$
|
2,032
|
|
|
Common
Shares
|
|
Common
Stock
|
|
Prepaid Share Repurchase
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|||||||||||||
Balances at January 28, 2017
|
311
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,399
|
|
|
$
|
279
|
|
|
$
|
4,709
|
|
Adoption of ASU 2016-09
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(12
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Net earnings, three months ended April 29, 2017
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
188
|
|
|
—
|
|
|
188
|
|
||||||
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(13
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||||
Restricted stock vested and stock options exercised
|
3
|
|
|
—
|
|
|
—
|
|
|
72
|
|
|
—
|
|
|
—
|
|
|
72
|
|
||||||
Issuance of common stock under employee stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||
Common stock dividends, $0.34 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(105
|
)
|
|
—
|
|
|
(105
|
)
|
||||||
Repurchase of common stock
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
|
(268
|
)
|
|
—
|
|
|
(384
|
)
|
||||||
Balances at April 29, 2017
|
306
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,202
|
|
|
$
|
266
|
|
|
$
|
4,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances at January 30, 2016
|
324
|
|
|
$
|
32
|
|
|
$
|
(55
|
)
|
|
$
|
—
|
|
|
$
|
4,130
|
|
|
$
|
271
|
|
|
$
|
4,378
|
|
Net earnings, three months ended April 30, 2016
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
—
|
|
|
229
|
|
||||||
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
45
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||||
Restricted stock vested and stock options exercised
|
3
|
|
|
1
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||||
Settlement of accelerated share repurchase
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
||||||
Issuance of common stock under employee stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||
Tax benefit from stock options exercised, restricted stock vesting and employee stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
Common stock dividends, $0.73 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(238
|
)
|
|
—
|
|
|
(238
|
)
|
||||||
Repurchase of common stock
|
(3
|
)
|
|
(1
|
)
|
|
—
|
|
|
(57
|
)
|
|
(43
|
)
|
|
—
|
|
|
(101
|
)
|
||||||
Balances at April 30, 2016
|
324
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,078
|
|
|
$
|
316
|
|
|
$
|
4,426
|
|
1.
|
Basis of Presentation
|
•
|
ASU 2015-11,
Inventory: Simplifying the Measurement of Inventory
. The new guidance replaces the current inventory measurement requirement of lower of cost or market with the lower of cost or net realizable value. The adoption did not have a material impact on our results of operations, cash flows or financial position.
|
•
|
ASU 2016-09,
Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting
. The new guidance changed certain aspects of accounting for share-based payments including accounting for income taxes, forfeitures and classifications in the statement of cash flows. Beginning with the first quarter of fiscal 2018, excess tax benefits and tax deficiencies are recognized in our provision for income taxes as a discrete event rather than directly to stockholders’ equity. This change is adopted prospectively, with no change to prior periods. We recognized an excess tax benefit of
$2 million
for the first quarter ended April 29, 2017. In addition, with the adoption of this standard we elected to change our policy for accounting for forfeitures. Previously, we recorded forfeitures (which reduce stock-based compensation expense) based on forward-looking estimates. Beginning this quarter, we have elected to record forfeitures as they occur. The cumulative effect of this policy change amounted to
$12 million
, net of tax. This was recorded as a reduction of opening retained earnings. We elected to present the statements of cash flows on a retrospective transition method, and prior periods have been adjusted to present excess tax benefits as cash flows from operating activities. See cash flow reconciliation below for prior period impacts.
|
•
|
ASU 2016-15,
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
, and ASU 2016-18,
Statement of Cash Flows: Restricted Cash
. ASU 2016-15 provides classification requirements for specific transactions within the statement of cash flows, while ASU 2016-18 requires that restricted cash balances be included in the beginning and ending cash balance within the statement of cash flows. The adoption increased our beginning and ending cash balance within our statement of cash flows, and we have provided a reconciliation of these amounts to the corresponding balance sheet captions, below. The adoption had no other material impacts to our cash flow statement and had no impact on our results of operations or financial position.
|
|
|
April 30, 2016 Reported
|
|
ASU 2016-09 Adjustment
|
|
ASU 2016-15 Adjustment
|
|
ASU 2016-18 Adjustment
|
|
April 30, 2016
Adjusted
|
||||||||||
Operating activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other, net
|
|
$
|
(12
|
)
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
Total cash provided by operating activities
|
|
483
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
492
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Investing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Change in restricted assets
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|||||
Total cash used in investing activities
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(40
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other, net
|
|
19
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
Total cash used in financing activities
|
|
(612
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(621
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Decrease in cash, cash equivalents and restricted cash
|
|
(131
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(129
|
)
|
|||||
Cash, cash equivalents and restricted cash at beginning of period
|
|
1,976
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
2,161
|
|
|||||
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
1,845
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
187
|
|
|
$
|
2,032
|
|
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||
Cash and cash equivalents
|
$
|
1,651
|
|
|
$
|
2,240
|
|
|
$
|
1,845
|
|
Restricted cash included in Other current assets
|
183
|
|
|
193
|
|
|
187
|
|
|||
Total cash, cash equivalents and restricted cash
|
$
|
1,834
|
|
|
$
|
2,433
|
|
|
$
|
2,032
|
|
2.
|
Discontinued Operations
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Income tax benefit
|
—
|
|
|
3
|
|
||
Net gain from discontinued operations
|
$
|
—
|
|
|
$
|
3
|
|
3.
|
Fair Value Measurements
|
•
|
Quoted prices for similar assets or liabilities in active markets;
|
•
|
Quoted prices for identical or similar assets or liabilities in non-active markets;
|
•
|
Inputs other than quoted prices that are observable for the asset or liability; and
|
•
|
Inputs that are derived principally from or corroborated by other observable market data.
|
|
|
|
Fair Value at
|
||||||||||
|
Fair Value Hierarchy
|
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|||
Money market funds
|
Level 1
|
|
$
|
24
|
|
|
$
|
290
|
|
|
$
|
56
|
|
Commercial paper
|
Level 2
|
|
260
|
|
|
—
|
|
|
93
|
|
|||
Time deposits
|
Level 2
|
|
11
|
|
|
15
|
|
|
454
|
|
|||
Short-term investments
|
|
|
|
|
|
|
|
||||||
Corporate bonds
|
Level 2
|
|
—
|
|
|
—
|
|
|
78
|
|
|||
Commercial paper
|
Level 2
|
|
150
|
|
|
349
|
|
|
110
|
|
|||
Time deposits
|
Level 2
|
|
1,798
|
|
|
1,332
|
|
|
1,032
|
|
|||
Other current assets
|
|
|
|
|
|
|
|
|
|||||
Money market funds
|
Level 1
|
|
2
|
|
|
7
|
|
|
—
|
|
|||
Commercial paper
|
Level 2
|
|
60
|
|
|
60
|
|
|
—
|
|
|||
Foreign currency derivative instruments
|
Level 2
|
|
7
|
|
|
2
|
|
|
—
|
|
|||
Time deposits
|
Level 2
|
|
101
|
|
|
100
|
|
|
79
|
|
|||
Other assets
|
|
|
|
|
|
|
|
||||||
Interest rate swap derivative instruments
|
Level 2
|
|
4
|
|
|
13
|
|
|
15
|
|
|||
Auction rate securities
|
Level 3
|
|
—
|
|
|
—
|
|
|
2
|
|
|||
Marketable securities that fund deferred compensation
|
Level 1
|
|
97
|
|
|
96
|
|
|
96
|
|
|||
|
|
|
|
|
|
|
|
||||||
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|||
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|||
Foreign currency derivative instruments
|
Level 2
|
|
—
|
|
|
3
|
|
|
13
|
|
|||
Long-term liabilities
|
|
|
|
|
|
|
|
||||||
Interest rate swap derivative instruments
|
Level 2
|
|
1
|
|
|
—
|
|
|
—
|
|
|
Impairments
|
|
Remaining Net Carrying Value
(1)
|
||||||||||||
|
Three Months Ended
|
|
|
|
|
||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
|
April 29, 2017
|
|
April 30, 2016
|
||||||||
Property and equipment (non-restructuring)
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Property and equipment (restructuring)
(2)
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
5
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
Remaining net carrying value approximates fair value. Because assets subject to long-lived asset impairment are not measured at fair value on a recurring basis, certain fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at
April 29, 2017
, and
April 30, 2016
.
|
(2)
|
See Note 5,
Restructuring Charges
, for additional information.
|
4.
|
Goodwill and Intangible Assets
|
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||||||||||||||
|
Gross Carrying
Amount
|
|
Cumulative
Impairment
|
|
Gross Carrying
Amount
|
|
Cumulative
Impairment
|
|
Gross Carrying
Amount
|
|
Cumulative
Impairment
|
||||||||||||
Goodwill
|
$
|
1,100
|
|
|
$
|
(675
|
)
|
|
$
|
1,100
|
|
|
$
|
(675
|
)
|
|
$
|
1,100
|
|
|
$
|
(675
|
)
|
5.
|
Restructuring Charges
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Renew Blue Phase 2
|
$
|
—
|
|
|
$
|
27
|
|
Canadian brand consolidation
|
—
|
|
|
(1
|
)
|
||
Renew Blue
(1)
|
—
|
|
|
3
|
|
||
Other restructuring activities
(2)
|
—
|
|
|
—
|
|
||
Total restructuring charges
|
$
|
—
|
|
|
$
|
29
|
|
(1)
|
Represents activity related to our remaining vacant space liability, primarily in our International segment, for our Renew Blue restructuring program, which began in the fourth quarter of fiscal 2013. We may continue to incur immaterial adjustments to the liability for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated. The remaining vacant space liability was
$8 million
at
April 29, 2017
.
|
(2)
|
Represents activity related to our remaining vacant space liability for U.S. large-format store closures in fiscal 2013. We may continue to incur immaterial adjustments to the liability for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated. The remaining vacant space liability was
$11 million
at
April 29, 2017
.
|
|
Domestic
|
||||||||||
|
Three Months Ended
|
|
Cumulative Amount
|
||||||||
|
April 29, 2017
|
|
April 30, 2016
|
|
|||||||
Property and equipment impairments
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
8
|
|
Termination benefits
|
—
|
|
|
20
|
|
|
18
|
|
|||
Total Renew Blue Phase 2 restructuring charges
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
26
|
|
|
Termination
Benefits
|
||
Balances at January 30, 2016
|
$
|
—
|
|
Charges
|
19
|
|
|
Cash payments
|
(4
|
)
|
|
Balances at April 30, 2016
|
$
|
15
|
|
|
Three Months Ended
|
|
Cumulative Amount
|
||||||||
|
April 29, 2017
|
|
April 30, 2016
|
|
|||||||
Inventory write-downs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Property and equipment impairments
|
—
|
|
|
—
|
|
|
30
|
|
|||
Tradename impairment
|
—
|
|
|
—
|
|
|
40
|
|
|||
Termination benefits
|
—
|
|
|
—
|
|
|
25
|
|
|||
Facility closure and other costs
|
—
|
|
|
(1
|
)
|
|
105
|
|
|||
Total Canadian brand consolidation restructuring charges
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
203
|
|
|
Termination
Benefits
|
|
Facility
Closure and
Other Costs
|
|
Total
|
||||||
Balances at January 28, 2017
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
34
|
|
Cash payments
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
|||
Changes in foreign currency exchange rates
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Balances at April 29, 2017
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
27
|
|
|
Termination
Benefits
|
|
Facility
Closure and
Other Costs
|
|
Total
|
||||||
Balances at January 30, 2016
|
$
|
2
|
|
|
$
|
64
|
|
|
$
|
66
|
|
Cash payments
|
(1
|
)
|
|
(11
|
)
|
|
(12
|
)
|
|||
Adjustments
(1)
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Changes in foreign currency exchange rates
|
—
|
|
|
6
|
|
|
6
|
|
|||
Balances at April 30, 2016
|
$
|
1
|
|
|
$
|
58
|
|
|
$
|
59
|
|
(1)
|
Adjustments to facility closure and other costs represent changes in sublease assumptions. Adjustments to termination benefits represent changes in retention assumptions.
|
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||
2018 Notes
|
$
|
500
|
|
|
$
|
500
|
|
|
$
|
500
|
|
2021 Notes
|
650
|
|
|
650
|
|
|
650
|
|
|||
Interest rate swap valuation adjustments
|
3
|
|
|
13
|
|
|
15
|
|
|||
Subtotal
|
1,153
|
|
|
1,163
|
|
|
1,165
|
|
|||
Debt discounts and issuance costs
|
(4
|
)
|
|
(5
|
)
|
|
(6
|
)
|
|||
Financing lease obligations
|
171
|
|
|
177
|
|
|
184
|
|
|||
Capital lease obligations
|
27
|
|
|
30
|
|
|
35
|
|
|||
Total long-term debt
|
1,347
|
|
|
1,365
|
|
|
1,378
|
|
|||
Less: current portion
|
(45
|
)
|
|
(44
|
)
|
|
(44
|
)
|
|||
Total long-term debt, less current portion
|
$
|
1,302
|
|
|
$
|
1,321
|
|
|
$
|
1,334
|
|
7.
|
Derivative Instruments
|
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||||||||||||||
Contract Type
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||||||
Derivatives designated as net investment hedges
(1)
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
11
|
|
Derivatives designated as interest rate swaps
(2)
|
4
|
|
|
1
|
|
|
13
|
|
|
—
|
|
|
15
|
|
|
—
|
|
||||||
No hedge designation (foreign exchange forward contracts)
(1)
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||||
Total
|
$
|
11
|
|
|
$
|
1
|
|
|
$
|
15
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
13
|
|
(1)
|
The fair value is recorded in Other current assets or Accrued liabilities.
|
(2)
|
The fair value is recorded in Other assets or Long-term liabilities.
|
|
Three Months Ended
|
||||||||||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||||||||||
Contract Type
|
Pre-tax Gain Recognized in OCI
|
|
Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)
|
|
Pre-tax Loss Recognized in OCI
|
|
Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)
|
||||||||
Derivatives designated as net investment hedges
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
(22
|
)
|
|
$
|
—
|
|
|
Gain (Loss) Recognized within SG&A
|
||||||
|
Three Months Ended
|
||||||
Contract Type
|
April 29, 2017
|
|
April 30, 2016
|
||||
No hedge designation (foreign exchange forward contracts)
|
$
|
1
|
|
|
$
|
(5
|
)
|
|
Gain (Loss) Recognized within Interest expense
|
||||||
|
Three Months Ended
|
||||||
Contract Type
|
April 29, 2017
|
|
April 30, 2016
|
||||
Interest rate swap loss
|
$
|
(10
|
)
|
|
$
|
(10
|
)
|
Adjustments to carrying value of long-term debt
|
10
|
|
|
10
|
|
||
Net impact
|
$
|
—
|
|
|
$
|
—
|
|
|
Notional Amount
|
||||||||||
Contract Type
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||
Derivatives designated as net investment hedges
|
$
|
206
|
|
|
$
|
205
|
|
|
$
|
204
|
|
Derivatives designated as interest rate swaps
|
825
|
|
|
750
|
|
|
750
|
|
|||
No hedge designation (foreign exchange forward contracts)
|
36
|
|
|
43
|
|
|
95
|
|
|||
Total
|
$
|
1,067
|
|
|
$
|
998
|
|
|
$
|
1,049
|
|
8.
|
Earnings per Share
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Numerator
|
|
|
|
|
|
||
Net earnings from continuing operations
|
$
|
188
|
|
|
$
|
226
|
|
|
|
|
|
|
|
||
Denominator
|
|
|
|
||||
Weighted-average common shares outstanding
|
309.2
|
|
|
323.6
|
|
||
Effect of potentially dilutive securities:
|
|
|
|
||||
Dilutive effect of stock compensation plan awards
|
5.8
|
|
|
3.1
|
|
||
Weighted-average common shares outstanding, assuming dilution
|
315.0
|
|
|
326.7
|
|
||
|
|
|
|
||||
Net earnings per share from continuing operations
|
|
|
|
||||
Basic
|
$
|
0.61
|
|
|
$
|
0.70
|
|
Diluted
|
$
|
0.60
|
|
|
$
|
0.69
|
|
9.
|
Comprehensive Income
|
|
Foreign Currency Translation
|
||
Balances at January 28, 2017
|
$
|
279
|
|
Foreign currency translation adjustments
|
(13
|
)
|
|
Balances at April 29, 2017
|
$
|
266
|
|
|
|
||
|
Foreign Currency Translation
|
||
Balances at January 30, 2016
|
$
|
271
|
|
Foreign currency translation adjustments
|
45
|
|
|
Balances at April 30, 2016
|
$
|
316
|
|
10.
|
Repurchase of Common Stock
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Total cost of shares repurchased
|
|
|
|
||||
Open market
(1)
|
$
|
384
|
|
|
$
|
56
|
|
Settlement of January 2016 ASR
(2)
|
—
|
|
|
45
|
|
||
Total
|
$
|
384
|
|
|
$
|
101
|
|
|
|
|
|
||||
Average price per share
|
|
|
|
||||
Open market
|
$
|
46.3
|
|
|
$
|
32.41
|
|
Settlement of January 2016 ASR
(2)
|
$
|
—
|
|
|
$
|
28.55
|
|
Average
|
$
|
46.3
|
|
|
$
|
30.55
|
|
|
|
|
|
||||
Number of shares repurchased and retired
|
|
|
|
||||
Open market
(1)
|
8.3
|
|
|
1.7
|
|
||
Settlement of January 2016 ASR
(2)
|
—
|
|
|
1.6
|
|
||
Total
|
8.3
|
|
|
3.3
|
|
(1)
|
As of
April 29, 2017
,
$19 million
, or
0.3 million
shares, in trades remained unsettled. As of
April 30, 2016
,
$4 million
, or
0.1 million
shares, in trades remained unsettled. The liability for unsettled trades is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.
|
(2)
|
See Note 7,
Shareholders' Equity
, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
January 28, 2017
, for additional information regarding the January 2016 ASR.
|
11.
|
Segments
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Domestic
|
$
|
298
|
|
|
$
|
372
|
|
International
|
2
|
|
|
—
|
|
||
Total operating income
|
300
|
|
|
372
|
|
||
Other income (expense)
|
|
|
|
||||
Gain on sale of investments
|
—
|
|
|
2
|
|
||
Investment income and other
|
11
|
|
|
6
|
|
||
Interest expense
|
(19
|
)
|
|
(20
|
)
|
||
Earnings from continuing operations before income tax expense
|
$
|
292
|
|
|
$
|
360
|
|
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||
Domestic
|
$
|
11,691
|
|
|
$
|
12,496
|
|
|
$
|
11,562
|
|
International
|
1,264
|
|
|
1,360
|
|
|
1,339
|
|
|||
Total assets
|
$
|
12,955
|
|
|
$
|
13,856
|
|
|
$
|
12,901
|
|
12.
|
Contingencies
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Overview
|
•
|
Business Strategy Update
|
•
|
Best Buy 2020: Building the New Blue
|
•
|
Results of Operations
|
•
|
Liquidity and Capital Resources
|
•
|
Off-Balance-Sheet Arrangements and Contractual Obligations
|
•
|
Significant Accounting Policies and Estimates
|
•
|
New Accounting Pronouncements
|
•
|
Safe Harbor Statement Under the Private Securities Litigation Reform Act
|
1.
|
Explore and pursue growth opportunities around maximizing the multi-channel retail business and providing services and solutions that solve real customer needs and help us build deeper customer relationships.
|
2.
|
Improve our execution in key areas that support our growth strategy.
|
3.
|
Continue to reduce costs and drive efficiencies through the business.
|
4.
|
Build the capabilities necessary to deliver on the first three priorities, which will involve making investments in people and systems to drive growth, execution and efficiencies.
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Revenue
|
$
|
8,528
|
|
|
$
|
8,443
|
|
Revenue % gain (decline)
|
1.0
|
%
|
|
(1.3
|
)%
|
||
Comparable sales % gain (decline)
(1)
|
1.6
|
%
|
|
(0.1
|
)%
|
||
Gross profit
|
$
|
2,022
|
|
|
$
|
2,145
|
|
Gross profit as a % of revenue
(2)
|
23.7
|
%
|
|
25.4
|
%
|
||
SG&A
|
$
|
1,722
|
|
|
$
|
1,744
|
|
SG&A as a % of revenue
(2)
|
20.2
|
%
|
|
20.7
|
%
|
||
Restructuring charges
|
$
|
—
|
|
|
$
|
29
|
|
Operating income
|
$
|
300
|
|
|
$
|
372
|
|
Operating income as a % of revenue
|
3.5
|
%
|
|
4.4
|
%
|
||
Net earnings from continuing operations
|
$
|
188
|
|
|
$
|
226
|
|
Earnings from discontinued operations
|
$
|
—
|
|
|
$
|
3
|
|
Net earnings
|
$
|
188
|
|
|
$
|
229
|
|
Diluted earnings per share from continuing operations
|
$
|
0.60
|
|
|
$
|
0.69
|
|
Diluted earnings per share
|
$
|
0.60
|
|
|
$
|
0.70
|
|
(1)
|
Due to the Canadian brand consolidation impact on our International segment comparable sales metric, Consolidated comparable sales for the three months ended April 30, 2016, equal the Domestic segment comparable sales. Refer to the
Overview
section within this Item 2. MD&A for more information.
|
(2)
|
Because retailers vary in how they record costs of operating their supply chain between cost of goods sold and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers’ corresponding rates. For additional information regarding costs classified in cost of goods sold and SG&A, refer to Note 1,
Summary of Significant Accounting Policies
, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
January 28, 2017
.
|
|
Three Months Ended
|
|
|
April 29, 2017
|
|
Comparable sales impact
|
1.5
|
%
|
Non-comparable sales
(1)
|
(0.4
|
)%
|
Impact of foreign currency exchange rate fluctuations
|
(0.1
|
)%
|
Total revenue increase
|
1.0
|
%
|
(1)
|
Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit sharing benefits, certain credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable.
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Revenue
|
$
|
7,912
|
|
|
$
|
7,829
|
|
Revenue % gain (decline)
|
1.1
|
%
|
|
(0.8
|
)%
|
||
Comparable sales % gain (decline)
(1)
|
1.4
|
%
|
|
(0.1
|
)%
|
||
Gross profit
|
$
|
1,871
|
|
|
$
|
1,986
|
|
Gross profit as a % of revenue
|
23.6
|
%
|
|
25.4
|
%
|
||
SG&A
|
$
|
1,573
|
|
|
$
|
1,587
|
|
SG&A as a % of revenue
|
19.9
|
%
|
|
20.3
|
%
|
||
Restructuring charges
|
$
|
—
|
|
|
$
|
27
|
|
Operating income
|
$
|
298
|
|
|
$
|
372
|
|
Operating income as a % of revenue
|
3.8
|
%
|
|
4.8
|
%
|
||
|
|
|
|
||||
Selected Online Revenue Data
|
|
|
|
||||
Online revenue as a % of total segment revenue
|
12.9
|
%
|
|
10.6
|
%
|
||
Comparable online sales % gain
(1)
|
22.5
|
%
|
|
23.9
|
%
|
(1)
|
Comparable online sales is included in the comparable sales calculation.
|
(1)
|
Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit sharing benefits, certain credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable.
|
|
Fiscal 2018
|
|
Fiscal 2017
|
||||||||||||||||||||
|
Total Stores at Beginning of First Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of First Quarter
|
|
Total Stores at Beginning of First Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of First Quarter
|
||||||||
Best Buy
|
1,026
|
|
|
—
|
|
|
(2
|
)
|
|
1,024
|
|
|
1,037
|
|
|
—
|
|
|
(1
|
)
|
|
1,036
|
|
Best Buy Mobile stand-alone
|
309
|
|
|
—
|
|
|
(11
|
)
|
|
298
|
|
|
350
|
|
|
—
|
|
|
(12
|
)
|
|
338
|
|
Pacific Sales stand-alone
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
Total Domestic segment stores
|
1,363
|
|
|
—
|
|
|
(13
|
)
|
|
1,350
|
|
|
1,415
|
|
|
—
|
|
|
(13
|
)
|
|
1,402
|
|
|
Revenue Mix
|
|
Comparable Sales
|
||||||||
|
Three Months Ended
|
|
Three Months Ended
|
||||||||
|
April 29, 2017
|
|
April 30, 2016
|
|
April 29, 2017
|
|
April 30, 2016
|
||||
Consumer Electronics
|
33
|
%
|
|
33
|
%
|
|
0.7
|
%
|
|
5.6
|
%
|
Computing and Mobile Phones
|
45
|
%
|
|
47
|
%
|
|
(0.3
|
)%
|
|
(3.5
|
)%
|
Entertainment
|
7
|
%
|
|
6
|
%
|
|
11.3
|
%
|
|
(11.6
|
)%
|
Appliances
|
10
|
%
|
|
9
|
%
|
|
4.6
|
%
|
|
14.3
|
%
|
Services
|
5
|
%
|
|
5
|
%
|
|
4.2
|
%
|
|
(10.7
|
)%
|
Other
|
—
|
%
|
|
—
|
%
|
|
n/a
|
|
|
n/a
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
1.4
|
%
|
|
(0.1
|
)%
|
•
|
Consumer Electronics:
Comparable sales gain was driven primarily by home automation products.
|
•
|
Computing and Mobile Phones:
Comparable sales decline was driven primarily by declines in tablets, partially offset by gains in computing.
|
•
|
Entertainment:
Comparable sales gain was driven primarily by gaming hardware.
|
•
|
Appliances:
Comparable sales gain was driven primarily by large appliances.
|
•
|
Services:
Comparable sales gain was driven primarily by higher net commissions earned on warranty plan sales as a result of reductions to the premiums that we pay to the third party underwriter.
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Revenue
|
$
|
616
|
|
|
$
|
614
|
|
Revenue % gain (decline)
|
0.3
|
%
|
|
(8.1
|
)%
|
||
Comparable sales % gain
(1)
|
4.0
|
%
|
|
n/a
|
|
||
Gross profit
|
$
|
151
|
|
|
$
|
159
|
|
Gross profit as a % of revenue
|
24.5
|
%
|
|
25.9
|
%
|
||
SG&A
|
$
|
149
|
|
|
$
|
157
|
|
SG&A as a % of revenue
|
24.2
|
%
|
|
25.6
|
%
|
||
Restructuring charges
|
$
|
—
|
|
|
$
|
2
|
|
Operating income
|
$
|
2
|
|
|
$
|
—
|
|
Operating income as a % of revenue
|
0.3
|
%
|
|
—
|
%
|
(1)
|
Due to the Canadian brand consolidation impact on our International segment comparable sales metric, we did not report an International segment comparable sales metric for the three months ended April 30, 2016. Refer to the
Overview
section within this Item 2. MD&A for more information.
|
|
Three Months Ended
|
|
|
April 29, 2017
|
|
Comparable sales
|
3.8
|
%
|
Non-comparable sales
(1)
|
(2.0
|
)%
|
Impact of foreign currency exchange rate fluctuations
|
(1.5
|
)%
|
Total revenue increase
|
0.3
|
%
|
(1)
|
Non-comparable sales reflects the impact of net store opening and closing activity, including the Canadian brand consolidation activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit sharing benefits, certain credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers.
|
|
Fiscal 2018
|
|
Fiscal 2017
|
||||||||||||||||||||
|
Total Stores at Beginning of First Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of First Quarter
|
|
Total Stores at Beginning of First Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of First Quarter
|
||||||||
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Best Buy
|
134
|
|
|
—
|
|
|
—
|
|
|
134
|
|
|
136
|
|
|
—
|
|
|
(1
|
)
|
|
135
|
|
Best Buy Mobile stand-alone
|
53
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
56
|
|
Mexico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Best Buy
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Express
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Total International segment stores
|
212
|
|
|
—
|
|
|
—
|
|
|
212
|
|
|
216
|
|
|
—
|
|
|
(1
|
)
|
|
215
|
|
|
Revenue Mix
|
|
Comparable Sales
|
|||||||
|
Three Months Ended
|
|
Three Months Ended
|
|||||||
|
April 29, 2017
|
|
April 30, 2016
|
|
April 29, 2017
|
|
April 30, 2016
(1)
|
|||
Consumer Electronics
|
29
|
%
|
|
29
|
%
|
|
3.0
|
%
|
|
n/a
|
Computing and Mobile Phones
|
48
|
%
|
|
50
|
%
|
|
(1.5
|
)%
|
|
n/a
|
Entertainment
|
7
|
%
|
|
6
|
%
|
|
14.8
|
%
|
|
n/a
|
Appliances
|
7
|
%
|
|
5
|
%
|
|
37.9
|
%
|
|
n/a
|
Services
|
7
|
%
|
|
8
|
%
|
|
11.1
|
%
|
|
n/a
|
Other
|
2
|
%
|
|
2
|
%
|
|
n/a
|
|
|
n/a
|
Total
|
100
|
%
|
|
100
|
%
|
|
4.0
|
%
|
|
n/a
|
(1)
|
Due to the Canadian brand consolidation impact on our International segment comparable sales metric, we did not report an International segment comparable sales metric for the three months ended April 30, 2016. Refer to the Overview section within this Item 2. MD&A for more information.
|
•
|
Consumer Electronics:
Comparable sales gain was driven primarily by portable audio, large screen televisions and home automation products.
|
•
|
Computing and Mobile Phones:
Comparable sales decline was driven primarily by tablets.
|
•
|
Entertainment:
Comparable sales gain was driven primarily by gaming hardware.
|
•
|
Appliances:
Comparable sales gain was driven primarily by small and large appliances.
|
•
|
Services:
Comparable sales gain was driven primarily by installation and technical support.
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
(1)
|
||||
Operating income
|
$
|
300
|
|
|
$
|
372
|
|
Net CRT/LCD settlements
(2)
|
—
|
|
|
(161
|
)
|
||
Restructuring charges
(3)
|
—
|
|
|
29
|
|
||
Non-GAAP operating income
|
$
|
300
|
|
|
$
|
240
|
|
|
|
|
|
||||
Income tax expense
|
$
|
104
|
|
|
$
|
134
|
|
Effective tax rate
|
35.6
|
%
|
|
37.3
|
%
|
||
Income tax impact of non-GAAP adjustments
(4)
|
—
|
|
|
(49
|
)
|
||
Non-GAAP income tax expense
|
$
|
104
|
|
|
$
|
85
|
|
Non-GAAP effective tax rate
|
35.6
|
%
|
|
37.7
|
%
|
||
|
|
|
|
||||
Net earnings from continuing operations
|
$
|
188
|
|
|
$
|
226
|
|
Net CRT/LCD settlements
(2)
|
—
|
|
|
(161
|
)
|
||
Restructuring charges
(3)
|
—
|
|
|
29
|
|
||
Gain on sale of investments
|
—
|
|
|
(2
|
)
|
||
Income tax impact of non-GAAP adjustments
(4)
|
—
|
|
|
49
|
|
||
Non-GAAP net earnings from continuing operations
|
$
|
188
|
|
|
$
|
141
|
|
|
|
|
|
||||
Diluted EPS from continuing operations
|
$
|
0.60
|
|
|
$
|
0.69
|
|
Per share impact of net CRT settlements
(2)
|
—
|
|
|
(0.49
|
)
|
||
Per share impact of restructuring charges
(3)
|
—
|
|
|
0.09
|
|
||
Per share impact of gain on sale of investments
|
—
|
|
|
(0.01
|
)
|
||
Per share income tax impact of non-GAAP adjustments
(4)
|
—
|
|
|
0.15
|
|
||
Non-GAAP diluted EPS from continuing operations
|
$
|
0.60
|
|
|
$
|
0.43
|
|
(1)
|
Beginning in the first quarter of fiscal 2018, we no longer exclude non-restructuring property and equipment impairment charges from our non-GAAP financial measures. To ensure our financial results are comparable, we have recast the prior period balance to conform to this presentation. Refer to the
Overview
section within this Item 2. MD&A for more information.
|
(2)
|
Represents CRT and LCD litigation settlements reached, net of related legal fees and costs. Settlements related to products purchased and sold in prior fiscal years. For the three months ended April 30, 2016, the entire balance related to the United States. Refer to Note 12,
Contingencies and Commitments
, within the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
January 28, 2017
, for further information.
|
(3)
|
Refer to Note 5,
Restructuring Charges
, in the Notes to Condensed Consolidated Financial Statements for additional information regarding the nature of these charges. For the three months ended
April 30, 2016
,
$27 million
related to the United States and
$2 million
related to Canada.
|
(4)
|
Income tax impact of non-GAAP adjustments is the summation of the calculated income tax charge related to each non-GAAP non-income tax adjustment. The non-GAAP adjustments relate primarily to adjustments in the United States and Canada. As such, the income tax charge is calculated using the statutory tax rates of 38.0% for the United States and 26.6% for Canada, applied to the non-GAAP adjustments of each country.
|
|
April 29, 2017
|
|
January 28, 2017
|
|
April 30, 2016
|
||||||
Cash and cash equivalents
|
$
|
1,651
|
|
|
$
|
2,240
|
|
|
$
|
1,845
|
|
Short-term investments
|
1,948
|
|
|
1,681
|
|
|
1,220
|
|
|||
Total cash and cash equivalents and short-term investments
|
$
|
3,599
|
|
|
$
|
3,921
|
|
|
$
|
3,065
|
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
(1)
|
||||
Total cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
243
|
|
|
$
|
492
|
|
Investing activities
|
(423
|
)
|
|
(40
|
)
|
||
Financing activities
|
(413
|
)
|
|
(621
|
)
|
||
Effect of exchange rate changes on cash
|
(6
|
)
|
|
40
|
|
||
Decrease in cash, cash equivalents and restricted cash
|
$
|
(599
|
)
|
|
$
|
(129
|
)
|
(1)
|
Represents cash flows as of April 30, 2016, recast to present our retrospective adoption of accounting guidance related to the presentation of the cash flow statement. Refer to Note 1,
Basis of Presentation
, of the Notes to Condensed Consolidated Financial Statements
of this Quarterly Report on Form 10-Q
.
|
Rating Agency
|
|
Rating
|
|
Outlook
|
Standard & Poor's
|
|
BBB-
|
|
Stable
|
Moody's
|
|
Baa1
|
|
Stable
|
Fitch
|
|
BBB-
|
|
Stable
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
(1)
|
||||
Total cost of shares repurchased
|
$
|
384
|
|
|
$
|
101
|
|
Average price per share
|
$
|
46.30
|
|
|
$
|
30.55
|
|
Number of shares repurchased
|
8.3
|
|
|
3.3
|
|
(1)
|
Includes the settlement of an accelerated share repurchase contract. Refer to Note 7,
Shareholders' Equity
, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
January 28, 2017
, for further information on this contract.
|
|
Three Months Ended
|
||||||
|
April 29, 2017
|
|
April 30, 2016
|
||||
Regular quarterly cash dividends per share
|
$
|
0.34
|
|
|
$
|
0.28
|
|
Special cash dividends per share
(1)
|
—
|
|
|
0.45
|
|
||
Total cash dividends per share
|
$
|
0.34
|
|
|
$
|
0.73
|
|
|
|
|
|
||||
Cash dividends declared and paid
|
$
|
105
|
|
|
$
|
238
|
|
(1)
|
Special cash dividends are authorized by our Board and issued upon their discretion. Dividends paid in fiscal 2017 related to the net after-tax proceeds from certain legal settlements and asset disposals.
|
Non-GAAP debt to EBITDAR =
|
Non-GAAP debt
|
|
Non-GAAP EBITDAR
|
|
|
April 29, 2017
(1)
|
|
January 28, 2017
(1)
|
|
April 30, 2016
(1)
|
||||||
Debt (including current portion)
|
$
|
1,347
|
|
|
$
|
1,365
|
|
|
$
|
1,378
|
|
Capitalized operating lease obligations (5 times rental expense)
(2)
|
3,879
|
|
|
3,872
|
|
|
3,869
|
|
|||
Non-GAAP debt
|
$
|
5,226
|
|
|
$
|
5,237
|
|
|
$
|
5,247
|
|
|
|
|
|
|
|
||||||
Net earnings from continuing operations
|
$
|
1,169
|
|
|
$
|
1,207
|
|
|
$
|
996
|
|
Other income (expense) (including interest expense, net )
|
34
|
|
|
38
|
|
|
66
|
|
|||
Income tax expense
|
579
|
|
|
609
|
|
|
599
|
|
|||
Depreciation and amortization expense
|
653
|
|
|
654
|
|
|
657
|
|
|||
Rental expense
|
776
|
|
|
774
|
|
|
774
|
|
|||
Restructuring charges and other
(3)(4)
|
10
|
|
|
39
|
|
|
45
|
|
|||
Non-GAAP EBITDAR
|
$
|
3,221
|
|
|
$
|
3,321
|
|
|
$
|
3,137
|
|
|
|
|
|
|
|
||||||
Debt to net earnings ratio
|
1.2
|
|
|
1.1
|
|
|
1.4
|
|
|||
Non-GAAP debt to EBITDAR ratio
|
1.6
|
|
|
1.6
|
|
|
1.7
|
|
(1)
|
Debt is reflected as of the balance sheet dates for each of the respective fiscal periods, 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 five times annual rent expense in the calculation of our capitalized operating lease obligations is the multiple used for the retail sector by one of the nationally recognized credit rating agencies that rate our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio.
|
(3)
|
Includes the impact of restructuring charges. Refer to Note 5,
Restructuring Charges
, in the Notes to Condensed Consolidated Financial Statements for addition information regarding the nature of these charges.
|
(4)
|
Beginning in the first quarter of fiscal 2018, we no longer exclude non-restructuring property and equipment impairment charges from our non-GAAP financial measures. To ensure our financial results are comparable, we have recast the prior period balances to conform to this presentation. Refer to the
Overview
section within this Item 2. MD&A for more information.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Fiscal Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program
(1)
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(1)
|
||||||
Jan. 29, 2017 through Feb. 25, 2017
|
|
851,988
|
|
|
$
|
44.64
|
|
|
851,988
|
|
|
$
|
2,200,000,000
|
|
Feb. 26, 2017 through April 1, 2017
|
|
4,834,770
|
|
|
$
|
44.83
|
|
|
4,834,770
|
|
|
$
|
4,783,000,000
|
|
April 2, 2017 through April 29, 2017
|
|
2,611,535
|
|
|
$
|
49.56
|
|
|
2,611,535
|
|
|
$
|
4,654,000,000
|
|
Total Fiscal 2018 First Quarter
|
|
8,298,293
|
|
|
$
|
46.30
|
|
|
8,298,293
|
|
|
|
(1)
|
Pursuant to a $5.0 billion share repurchase program that was authorized by our Board in June 2011 and in February 2017. The $5.0 billion share repurchase program authorized in June 2011 was terminated and replaced by the $5.0 billion share repurchase program effective February 27, 2017. There is no expiration date governing the period over which we can repurchase shares under the February 2017 share repurchase program. For additional information see Note 10,
Repurchase of Common Stock
, Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.
|
Item 6.
|
Exhibits
|
3.1
|
|
Restated Articles of Incorporation (incorporated herein by reference to the Definitive Proxy Statement filed by Best Buy Co., Inc. on May 12, 2009)
|
|
|
|
3.2
|
|
Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Best Buy Co., Inc. on September 26, 2013)
|
|
|
|
10.1
|
|
Form of Best Buy Co., Inc. Long-Term Incentive Program Award Agreement (2017) - Restricted Shares
|
|
|
|
10.2
|
|
Form of Best Buy Co., Inc. Long-Term Incentive Program Award Agreement (2017) - Restricted Stock Units
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
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
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(1)
|
|
|
|
32.2
|
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(1)
|
|
|
|
101
|
|
The following financial information from our Quarterly Report on Form 10-Q for the first quarter of fiscal 2018, filed with the SEC on June 5, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets at April 29, 2017, January 28, 2017, and April 30, 2016, (ii) the Condensed Consolidated Statements of Earnings for the three months ended April 29, 2017, and April 30, 2016, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended April 29, 2017, and April 30, 2016, (iv) the Condensed Consolidated Statements of Cash Flows for the three months ended April 29, 2017, and April 30, 2016, (v) the Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended April 29, 2017, and April 30, 2016, and (vi) the Notes to Condensed Consolidated Financial Statements.
|
(1)
|
The certifications in Exhibit 32.1 and Exhibit 32.2 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
|
|
BEST BUY CO., INC.
|
|
|
(Registrant)
|
|
|
|
|
Date: June 5, 2017
|
By:
|
/s/ HUBERT JOLY
|
|
|
Hubert Joly
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
Date: June 5, 2017
|
By:
|
/s/ CORIE BARRY
|
|
|
Corie Barry
|
|
|
Chief Financial Officer
|
|
|
|
Date: June 5, 2017
|
By:
|
/s/ MATHEW R. WATSON
|
|
|
Mathew R. Watson
|
|
|
Vice President, Finance – Controller and Chief Accounting Officer
|
1.
|
Grant of Award
. In consideration of your employment with or service to a member of the Company Group, the Company hereby grants to you the award set forth in the Award Notification (the “
Award
”) subject to the terms and conditions of this Agreement and the Best Buy Co., Inc. 2014 Omnibus Incentive Plan (the “
Plan
”). In the event of any conflict between this Agreement and the Plan, the Plan will govern.
By your acceptance of this Award, you acknowledge receipt of a copy of the Prospectus for the Plan and your agreement to the terms and conditions of the Plan and this Agreement.
|
2.
|
Options
. This section applies to you if your Award includes an Option. An “
Option
” is a right to purchase a number of shares of common stock of the Company (“
Shares
”) at the price per share of Common Stock stated in the Award Notification.
|
(a)
|
Term and Vesting
.
The Option shall expire and no longer be exercisable on the tenth anniversary the Award Date or such earlier date as provided herein (such date, the “
Expiration Date
”). Except as otherwise set forth herein, the Option may be exercised, in whole or in part, at any time prior to the Expiration Date, in accordance with the schedule stated in the Award Notification. In no case may the Option be exercised after the Expiration Date.
|
(b)
|
Method of Exercise
.
The Option may be exercised by written notice to the Company (through the Plan administrator or other means specified by the Company) stating the number of Shares to be purchased. Such notice must be accompanied by payment in full of the exercise price for all Shares to be purchased by (i) cash or check, (ii) delivery of unencumbered Shares previously acquired by you having a Fair Market Value on the date of exercise that is equal to the exercise price, (iii) withholding of Shares that would otherwise be issued upon such exercise having a Fair Market Value on the date of exercise equal to the aggregate exercise price for the Shares for which the Option is being exercised or (iv) a cashless (broker-assisted) exercise that complies with all applicable laws.
|
3.
|
Restricted Shares
. This section applies to you if your Award includes Restricted Shares. A “
Restricted
Share
” is a Share issued to you on the Award Date that is subject to the restrictions set forth in this Agreement.
|
(a)
|
Restrictions
. Until the Restricted Shares vest, they may not be assigned, transferred (other than by will or the laws of descent and distribution), pledged or hypothecated (whether by operation of law or otherwise) or otherwise conveyed or encumbered, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition contrary to the provisions this Agreement or the Plan, or the levy of any execution, attachment or similar process upon the Restricted Shares, shall be void and unenforceable against the Company.
|
(b)
|
Vesting.
Except as otherwise set forth herein, so long as you remained employed by a member of the Company Group, the Restricted Shares shall vest in accordance with the schedule stated in the Award Notification.
|
(c)
|
Performance Condition
.
Notwithstanding the vesting schedule stated in the Award Notification, your Restricted Shares shall not vest unless the Company achieves positive Adjusted Net Earnings in any fiscal year during the term of the Award. “
Adjusted Net Earnings
” means net earnings determined in accordance with GAAP as publicly reported by the Company for a fiscal year, adjusted to eliminate the following: (1) the cumulative effect of changes in GAAP; (2) gains and losses from discontinued operations; (3) extraordinary gains or losses; and (4) any other unusual or nonrecurring gains or losses which are separately identified and quantified, including merger related charges.
|
(d)
|
Issuance of Restricted Shares.
Unless otherwise determined by the Committee, the Company shall issue the Restricted Shares in the Participant’s name in book-entry form with legends or notations indicating the restrictions in this Agreement
|
4.
|
Performance Share Award
. This section applies to you if your Award includes a Performance Share Award. A “
Performance Share Award
” is a commitment by the Company to issue a certain number of Shares to you provided you meet certain employment criteria and that the Company achieves certain financial performance levels. A Performance Share Award does not represent immediate ownership of Shares.
|
(a)
|
Determination of Number of Shares under Performance Share Award
. The
number of Shares issuable under (i) the revenue component of your Performance Share Award (the “
Revenue
Performance Share Number
”) will be equal to a percentage of the target number of Shares stated in your Award Notification for the revenue component (“
Revenue Target
”) and (ii) the TSR component of your Performance Share Award (the “
TSR Performance Share Number
”) will be equal to a percentage of the target number of Shares stated in your Award Notification for the TSR component (“
TSR Target
”), in each case as determined below.
|
(b)
|
Revenue Performance Share Number
.
|
(i)
|
Within 120 days after the end of the Performance Period, the Committee will calculate the CAGR of Enterprise Revenue from fiscal year 2017 to fiscal year 2020 (“
Enterprise Revenue CAGR
”). For example, if fiscal year 2017 Enterprise Revenue was $39.4 billion and fiscal year 2020 Enterprise Revenue was $41.5 billion, Enterprise Revenue CAGR would be 1.75%.
|
(ii)
|
Your Revenue Performance Share Number will be equal to the percentage of the Revenue
Target that is listed in the column below with the heading “Number of Shares Earned” opposite the band in the column with the heading “Performance” in which Enterprise Revenue CAGR falls. If Enterprise Revenue CAGR is between Threshold Enterprise Revenue CAGR and Target Enterprise Revenue CAGR or between Target Enterprise Revenue CAGR and Maximum Enterprise Revenue CAGR, your Revenue Performance Share Number will be equal to a percentage interpolated on a linear basis for performance between such amounts. For example, if Enterprise Revenue CAGR is 1.75%, then your Revenue Performance Share Number would be 125% of your Revenue Target. The Revenue Performance Share Number will be rounded to the nearest whole number.
|
(c)
|
TSR Performance Share Number
.
|
(i)
|
Within 120 days after the end of the Performance Period, the Committee will (A) calculate the TSR for Best Buy and for each company included in the S&P 500 Index at the time of any calculation hereunder, (B) rank each such company by TSR (lowest to highest), and (C) determine the percentile rank of Best Buy’s TSR in such ranking by dividing Best Buy’s numerical position in such TSR ranking by the total number of companies included in the list, rounding to the nearest hundredth (“
Relative TSR
”). For example, if Best Buy were ranked 300 out of 500, its Relative TSR would be 60%.
|
(ii)
|
Your TSR Performance Share Number will be equal to the percentage of the TSR
Target that is listed in the column below with the heading “Number of Shares Earned” opposite the band in the column with the heading “Performance” in which Relative TSR falls. If Relative TSR is between Threshold TSR and Target TSR or between Target TSR and Maximum TSR, your TSR Performance Share Number will be equal to a percentage interpolated on a linear basis for performance between such amounts. For example, if Best Buy's Relative TSR
|
(d)
|
Certain Definitions.
|
(A)
|
“
Beginning Price
” means, with respect to any one company, the average closing price of one share of common stock during the first fiscal quarter of the Performance Period.
|
(B)
|
“
CAGR
” means compound annual growth rate.
|
(C)
|
“
Ending Price
” means, with respect to any one company, the average closing price of one share of common stock during the first fiscal quarter following completion of the Performance Period.
|
(D)
|
“Performance Period”
means the performance period stated in the Award Notification.
|
(E)
|
“Enterprise Revenue”
means revenue of the Company from continuing operations as reported in the Company's Annual Report on Form 10-K for the respective fiscal year adjusted to eliminate the impact of currency exchange rate fluctuations;
provided
,
however
, that the Committee may adjust Enterprise Revenue down
to eliminate the following: (1) the cumulative effect of changes in GAAP (only to the extent such changes would reduce Enterprise Revenue); (2) revenue from discontinued operations; and (3) any other unusual or nonrecurring gains which are separately identified and quantified, including acquisition related revenue.
|
(F)
|
“TSR”
means, with respect to any one company, the price appreciation of one share of common stock as measured from the Beginning Price to the Ending Price, assuming all dividends and other distributions made on such share are reinvested, expressed as a percentage.
|
(e)
|
Change of Control
. Notwithstanding anything in this Agreement to the contrary, in the event of a Change of Control prior to the end of the Performance Period, the Committee will determine (i) Enterprise Revenue CAGR using the last completed fiscal year instead of fiscal year 2020 and (ii) Relative TSR using the average closing price of one share of common stock during the last completed fiscal quarter in order to determine the Ending Price, and the Revenue and TSR Performance Share Numbers will be equal to the greater of (i) the numbers determined pursuant to Section 4(b)(ii) and Section 4(c)(ii) above, respectively, and (ii) the respective Revenue or TSR Target.
|
(f)
|
Performance Share Number Not Guaranteed
. If Relative TSR is less than 30% or Enterprise Revenue CAGR is less than 1.0%, the respective portion of your Performance Share Number will be 0 and there will be no Shares issued under that portion of your Performance Share Award. The Committee shall have sole discretion to determine Relative TSR and Enterprise Revenue.
|
(g)
|
Issuance of Shares.
Any Shares issuable to you under your Performance Share Award will be issued within 60 days after the Committee’s determination of Relative TSR and Enterprise Revenue CAGR; provided however, that the Company’s obligation to issue such shares is subject to Section 5 of this Agreement.
|
5.
|
Effect of Termination of Employment
. Your employment with the Company Group may be terminated by your employer at any time for any reason (with or without advance notice). This section provides the effect on your Award of different types of termination of employment.
|
(a)
|
Qualified
Retirement
.
In the event of your Qualified Retirement:
|
(i)
|
Options
. If your Award includes an Option, the Option will continue to vest in accordance with the vesting schedule set forth above. You will have until the later of (A) three years from the date of your Qualified Retirement and (B) the last scheduled vesting date to exercise the entire Option; provided, however, that in no event shall the Option be exercisable after the Expiration Date. Any portion of the Option unexercised at the end of this period will be forfeited.
|
(ii)
|
Restricted Shares
. If your Award includes Restricted Shares, such Restricted Shares will continue to vest in accordance with the vesting schedule set forth above, subject to the Company’s achievement of the performance condition described in Section 3(c).
|
(iii)
|
Performance Shares
. If your Award includes Performance Shares and in the event of your Qualified Retirement prior to the end of the Performance Period, you may be entitled to a prorated Performance Share Award. If Relative TSR is greater than Threshold TSR (as determined after the end of the Performance Period), you will be entitled to a prorated TSR Performance Share Number. If Enterprise Revenue CAGR is greater than Threshold Enterprise Revenue CAGR (as determined after the end of the Performance Period), you will be entitled to a prorated Revenue Performance Share Number. For each component, your Performance Share Award will be determined by multiplying the Performance Share Number calculated as if you were employed by a member of the Company Group on the last day of the Performance Period by a fraction, the numerator of which is the number of days during the Performance Period you were so employed, and the denominator of which is the number of days in the Performance Period.
|
(b)
|
Death or Disability
. In the event of your death or employment termination due to Disability:
|
(i)
|
Options
.
If your Award includes an Option, any then unvested portion of the Option will vest and become exercisable as of the date of death or, in the case of Disability, as of the date of employment termination. In the event of your death, the representative of your estate or your heirs will have until the earlier of (A) one year from the date of your death and (B) the Expiration Date of the Option, to exercise the Option. In the event you become Disabled while employed with the Company Group and must therefore terminate your employment, you will have until the earlier of (X) one year from the date of your employment termination and (Y) the Expiration Date of the Option, to exercise the Option.
|
(ii)
|
Restricted Shares
. If your Award includes Restricted Shares, any then unvested Restricted Shares will vest as of the date of death or, in the case of Disability, employment termination.
|
(iii)
|
Performance Share Award
. If your Award includes a Performance Share Award and in the event of your death or employment termination due to Disability prior to the end of the Performance Period, you or the representative of your estate or your heirs, as applicable, may be entitled to a prorated Performance Share Award. If Relative TSR is greater than Threshold TSR (as determined as of the last completed fiscal quarter prior to the date of termination of employment to determine the Ending Price), you or the representative of your estate or your heirs, as applicable, will be entitled to a prorated TSR Performance Share Number. If Enterprise Revenue CAGR is greater than Threshold Enterprise Revenue CAGR (using the last completed fiscal year instead of fiscal year 2020 for purposes of determining Enterprise Revenue CAGR), you will be entitled to a prorated Revenue Performance Share Number. For each component, your Performance Share Award will be determined by multiplying the Performance Share Number calculated as of the date of termination of employment multiplied by a fraction, the numerator of which is the number of days during the Performance Period you were employed, and the denominator of which is the number of days in the Performance Period.
|
(c)
|
Involuntary
Termination Without Cause
. If your employment is Involuntarily Terminated Without Cause:
|
(i)
|
Options
.
If your Award includes an Option, you will have 60 days from the date of termination of your employment to exercise the portion of the Option vested as of your termination date, and any portion of the Option then unvested will be forfeited;
provided
,
however
, that if your employment is Involuntarily Terminated Without Cause within 12 months following a Change of Control, any then unvested portion of the Option will vest and become exercisable during the period ending 60 days from the date of termination of your employment. In no event, however, may the Option be exercised after its Expiration Date.
|
(ii)
|
Restricted Shares
. If your Award includes Restricted Shares, you will forfeit any then unvested Restricted Shares.
|
(iii)
|
Performance Share Award
. If your Award includes a Performance Share Award and your employment is Involuntarily Terminated Without Cause prior to the end of the Performance Period, you may be entitled to a prorated Performance Share Award. If Relative TSR is greater than Threshold TSR (as determined after the end of the Performance Period), you will be entitled to a prorated TSR Performance Share Number. If Enterprise Revenue CAGR is greater than Threshold Enterprise Revenue CAGR (as determined after the end of the Performance Period), you will be entitled to a prorated Revenue Performance Share Number. For each component, your Performance Share Award is determined by multiplying the Performance Share Number calculated as if you were employed by a member of the Company Group on the last day of the Performance Period multiplied by a fraction, the numerator of which is the number of days during the Performance Period you were employed, and the denominator of which is the number of days in the Performance Period.
|
(d)
|
Voluntary Termination
. If you voluntarily terminate your employment with the Company Group for any reason:
|
(i)
|
Options
.
If your Award includes an Option, you will have 60 days from the date of termination of your employment to exercise the Option, to the extent the Option had become vested as of your termination date. Any then unvested portion of the Option will be forfeited. In no event, however, may the Option be exercised after its Expiration Date.
|
(ii)
|
Restricted Shares
. If your Award includes Restricted Shares, you will forfeit any then unvested Restricted Shares.
|
(iii)
|
Performance Share Award
. If your Award includes a Performance Share Award, and you voluntarily terminate your employment prior to the end of the Performance Period, you will forfeit your entire Performance Share Award.
|
(e)
|
Termination for Cause
. If your employment is terminated by any member of the Company Group for any reason at a time when any member of the Company Group is entitled to terminate your employment for Cause:
|
(i)
|
Options
. If your Award includes an Option, any then unvested portion of the Option will be forfeited, and the Option may not be exercised after termination of your employment.
|
(ii)
|
Restricted Shares
. If your Award includes Restricted Shares, any then unvested Restricted Shares will be forfeited.
|
(iii)
|
Performance Share Award
.
If your Award includes a Performance Share Award and your employment is terminated by any member of the Company Group for any reason at a time when any member of the Company Group is entitled to terminate your employment for Cause prior to the end of the Performance Period, you will forfeit your entire Performance Share Award.
|
6.
|
Restrictive Covenants and Remedies
. By accepting the Award, you specifically agree to the restrictive covenants contained in this Section 6 (the “
Restrictive Covenants
”) and you agree that the Restrictive Covenants and the remedies described herein are reasonable and necessary to protect the legitimate interests of the Company Group. Sections 6(b) and 6(c) apply to you only if you are an officer of the Company. Further, if you are an attorney, the Restrictive Covenants apply to you only to the extent they are consistent with the rules of professional conduct applicable to you (for example, Minnesota Rule of Professional Conduct 5.6).
|
(a)
|
Confidentiality.
In consideration of the Award, you acknowledge that the Company Group operates in a competitive environment and has a substantial interest in protecting its Confidential Information, and you agree, during your employment with the Company Group and thereafter, to maintain the confidentiality of the Company Group’s Confidential Information and to use such Confidential Information for the exclusive benefit of the Company Group. You will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. You shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.
|
(b)
|
Competitive Activity
. During your employment with the Company Group and for one year following the later of (i) termination of your employment for any reason whatsoever or (ii) the last scheduled vesting date for your Award, you shall not compete, directly or indirectly, through an Affiliate or otherwise, in any manner or capacity (including, without limitation, through any form of ownership or as a principal, agent, partner, officer, director, employee, advisor or consultant) with the Company Group, for your benefit or for the benefit of any other Person other than the Company Group anywhere in the world. In the event that any portion of this Section 6(b) shall be determined by an arbitrator to be unenforceable because it is unreasonably restrictive in any respect, it shall be interpreted to extend over the maximum period of time for which it reasonably may be enforced and to the maximum extent for which it reasonably may be enforced in all other respects, and enforced as so interpreted, all as determined by such arbitrator in such action. You acknowledge the uncertainty of the law in this respect and expressly stipulate that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. Ownership of less than 1% of the outstanding capital stock of any corporation listed on a national securities exchange will not constitute a breach of this Section 6(b).
|
(c)
|
Non-Solicitation
. During your employment and for one year following the later of (i) termination of your employment for any reason whatsoever or (ii) the last scheduled award vesting date, you shall not:
|
(a)
|
induce or attempt to induce any employee of the Company Group to leave the employ of Company Group, or in any way interfere adversely with the relationship between any such employee and Company Group;
|
(b)
|
induce or attempt to induce any employee of Company Group to work for, render services to, provide advice to, or supply Confidential Information of Company Group to any third Person;
|
(c)
|
employ, or otherwise pay for services rendered by, any employee of Company Group in any business enterprise with which you may be associated, connected or affiliated;
|
(d)
|
induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of Company Group to cease doing business with Company Group, or in any way interfere with the then existing business relationship between any such customer, supplier, licensee, licensor or other business relation and Company Group; or
|
(e)
|
assist, solicit, or encourage any other Person, directly or indirectly, in carrying out any activity set forth above that would be prohibited by any of the provisions of this Agreement if such activity were carried out by you. In particular, you will not, directly or indirectly, induce any employee of Company Group to carry out any such activity
.
|
(d)
|
Partial Invalidity
. If any portion of this Section 6 is determined by an arbitrator to be unenforceable in any respect, it shall be interpreted to be valid to the maximum extent for which it reasonably may be enforced, and enforced as so interpreted, all as determined by such arbitrator in such action. You acknowledge the uncertainty of the law in this respect and expressly stipulate that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.
|
(e)
|
Remedy for Breach
. You agree that a breach of any of the Restrictive Covenants would cause material and irreparable harm to the Company Group that would be difficult or impossible to measure, and that monetary damages for any such harm would, therefore, be an inadequate remedy. Accordingly, you agree that if you breach any Restrictive Covenant, the Company Group shall be entitled, in addition to and without limitation upon all other remedies the Company Group may have under this Agreement, at law or otherwise, to obtain injunctive or other appropriate equitable relief, without bond or other security, to restrain any such breach through arbitration. You further agree that the duration of the Restrictive Covenant shall be extended by the same amount of time that you are in breach of any Restrictive Covenant.
|
(f)
|
Claw Back & Recovery
.
|
(i)
|
In the event (i) you breach any of the Restrictive Covenants, (ii) you engage in conduct materially adverse to the interests of the Company, including any material violations of any Company policy, (iii) you engage in intentional misconduct that caused or contributed to the restatement of any financial statements of the Company, (iv) you materially violate the terms of any agreement to which you and a member of the Company Group is a party or (v) you engage in a criminal act, fraud, or violation of any securities laws, then notwithstanding any other provision of this Agreement to the contrary, the Company, in its sole discretion, may take one or more of
|
(A)
|
cause the immediate forfeiture any of your then unexercised portion of any Option included in your Award, any unvested Restricted Shares included in your Award, and any Performance Share Award included in your Award;
|
(B)
|
require you to immediately return to the Company any Shares issued upon exercise of any Option included in your Award, and any Shares in your Award that were previously Restricted Shares and any Shares issued under any Performance Share Award that, in each case, are still under your control; and
|
(C)
|
require you to promptly pay to the Company an amount equal to the fair market value of all Shares included in your Award that are no longer under your control (as measured on the exercise date of any such Option, the vesting date of any such formerly Restricted Shares, and the date of issuance of any Shares issued under any such Performance Share Award, as applicable).
|
(ii)
|
The Committee shall have sole discretion to determine what constitutes the conduct described in Section 6(f)(i) above.
|
(iii)
|
In addition to the Company’s rights set forth above, you agree your Award and the value of any portion of your Award no longer under your control, shall be subject to recovery or other penalties pursuant to (i) any Company clawback policy, as may be adopted or amended from time to time, or (ii) any applicable law, rule or regulation or applicable stock exchange rule, including, without limitation, the Sarbanes‑Oxley Act of 2002 and the Dodd‑Frank Wall Street Reform and Consumer Protection Act.
|
(g)
|
Right of Set Off
.
By accepting the Award, you agree that any member of the Company Group may set off any amount owed to you (including wages or other compensation, fringe benefits or vacation pay) against any amounts you owe under this Section 6.
|
7.
|
General Terms and Conditions.
|
(a)
|
Rights as a Stockholder
.
|
(i)
|
Options
. You will have no rights as a stockholder with respect to any Shares issuable upon exercise of an Option, nor have any rights to dividends or other rights as a shareholder with respect to any such Shares, until you have actually received such Shares following the exercise of the Option in accordance with the terms of this Agreement and the Plan.
|
(ii)
|
Restricted Shares
. Upon the issuance of Restricted Shares, you shall be entitled to exercise the rights of a stockholder. Notwithstanding the foregoing, you will not have the right to vote any Restricted Shares during the time period such Restricted Shares are subject to the restrictions in Section 3(a) (the “
Restricted Period
”), and you will not have any right to any dividends paid on Restricted Shares during the Restricted Period.
|
(iii)
|
Performance Share Awards
. You will have no rights as a stockholder with respect to any Shares issuable under a Performance Share Award until you have actually received such Shares in accordance with the terms of this Agreement and the Plan.
|
(b)
|
Transferability
.
|
(i)
|
Options
. Options may not be assigned, transferred (other than by will or the laws of descent and distribution), pledged or hypothecated (whether by operation of law or otherwise) or otherwise conveyed or encumbered, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions of this Agreement or the Plan, or the levy of any execution, attachment or similar process upon the Option, shall be void and unenforceable against the Company.
|
(ii)
|
Restricted Shares.
Restricted Shares are subject to the restrictions set forth in Section 3(a) of this Agreement.
|
(iii)
|
Performance Share Awards
. Performance Share Awards may not be assigned, transferred (other than by will or the laws of descent and distribution), pledged or hypothecated (whether by operation of law or otherwise) or otherwise conveyed or encumbered, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of a Performance Share Award contrary to the provisions of this Agreement or the Plan, or the levy of any execution, attachment or similar process upon a Performance Share Award, shall be void and unenforceable against the Company.
|
(c)
|
No Right to Continued Employment
. This Agreement does not guarantee your continued employment nor alter the right of any member of the Company Group to terminate your employment at any time.
|
(d)
|
Participant’s Acknowledgements
.
|
(i)
|
Committee’s Sole Discretion
. The Committee has sole discretion to make decisions regarding your Award, and to interpret all terms of this Agreement, with the exception of the application of the Company’s Arbitration Policy. You agree that all decisions regarding and interpretations of this Agreement by the Committee are binding, conclusive, final and non-appealable.
|
(ii)
|
Taxes
. You are liable for any for any federal, state and other taxes incurred upon the exercise, vesting or settlement of any Award, and any subsequent disposition of any Shares.
|
(A)
|
Options
. Any Options included in your Award are Non-Qualified Stock Options not eligible for treatment as qualified or incentive stock options for federal income tax purposes. Prior to exercising any Option, you will pay or make adequate arrangements satisfactory to the Company to satisfy all applicable taxes. If applicable, you authorize the Company, or its agents, to satisfy its obligations with regard to all taxes by withholding Shares of the Company common stock to be issued at exercise of the Option or otherwise selling Shares of the Company on your behalf equal to the amount of all taxes required to be withheld by the Company, pursuant to the policies and processes of the Company’s stock plan administrator and broker.
|
(B)
|
Restricted Shares.
Upon vesting of any Restricted Shares, you authorize the Company, or its agents, to satisfy the obligations with regard to all taxes by selling Shares of the Company on your behalf, or otherwise withholding from such Shares a number of Shares having a Fair Market Value equal to the amount of all taxes required to be withheld by the Company, pursuant to the policies and processes of the Company’s stock plan administrator and broker.
|
(C)
|
Performance Share Award.
Upon issuance of your Performance Share Award, you authorize the Company, or its agents, to satisfy the obligations with regard to all taxes by selling Shares of the Company on your behalf, or otherwise withholding from such Shares a number of Shares having a Fair Market Value equal to the amount of all taxes required to be withheld by the Company, pursuant to the policies and processes of the Company’s stock plan administrator and broker.
|
(iii)
|
Section 83(b) Election
. If your Award includes Restricted Shares, you acknowledge that you may file an election pursuant to Section 83(b) of the Internal Revenue Code to be taxed currently on the fair market value of any Restricted Shares of Restricted Stock, provided that such election must be filed with the Internal Revenue Service no later than 30 days after the grant of such Restricted Shares. You agree to seek the advice of your own tax advisors as to the advisability of making such a Section 83(b) election, the potential consequences of making such an election, the requirements for making such an election, and the other tax consequences of the Restricted Shares under federal, state, and any other laws that may be applicable.
|
(iv)
|
Consultation With Professional Tax Advisors
. You acknowledge that the grant, exercise, vesting or any payment with respect to the Award, and the sale or other taxable disposition of the Shares acquired as a result of the Award may have tax consequences under federal, state, local or international tax laws. You further acknowledge that you are relying solely on your own professional tax and investment advisors with respect to any and all such matters (and are not relying, in any manner, on the Company or any of its employees or representatives). You understand and agree that any and all tax consequences resulting from the Award and its grant, exercise, vesting or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Plan, are solely your responsibility without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse you for such taxes.
|
(e)
|
Severability
. In the event that any provision in the Plan or this Agreement is held to be invalid, illegal or unenforceable or would disqualify the Plan or this Agreement under any law, the invalid, illegal or unenforceable provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or this Agreement, such provision shall be stricken as to the applicable jurisdiction or Shares, and the remainder of the Plan or this Agreement shall remain in full force and effect.
|
(f)
|
Governing Law and Dispute Resolution.
Any disputes under this Agreement or the Plan must be resolved by arbitration subject to the Company’s Arbitration Policy.
The substantive laws of Minnesota, without regard to the conflict of law provisions, shall apply to all questions concerning this Agreement; however, the Arbitration Policy, its enforceability, and its implementation are governed by the Federal Arbitration Act.
|
8.
|
Definitions
.
Capitalized terms used but not defined in this Agreement are defined in the Plan or, if not defined therein, will have the following meanings:
|
(a)
|
"
Beneficial Owner
" will have the meaning defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, or any successor provision.
|
(b)
|
“
Board
” means the Board of Directors of Best Buy Co., Inc.
|
(c)
|
“
Cause
” for termination of your employment with the Company Group shall, solely for purposes of this Agreement, is deemed to exist if you:
|
(i)
|
are charged with, convicted of or enter a plea of guilty or
nolo contendere
to: (a) a felony, (b) any crime involving moral turpitude, dishonesty, breach of trust or unethical business conduct, or (c) any crime involving the business of the Company Group;
|
(ii)
|
in the performance of your duties for the Company Group or otherwise to the detriment of the Company Group, engage in: (a) dishonesty that is harmful to the Company Group, monetarily or otherwise, (b) willful or gross misconduct, (c) willful or gross neglect, (d) fraud, (e) misappropriation, (f) embezzlement, or (g) theft;
|
(iii)
|
disobey the directions of the Board, or any individual or individuals the Board authorizes to act on its or their behalf, acting within the scope of its or their authority;
|
(iv)
|
fail to comply with the policies or practices of the Company Group;
|
(v)
|
fail to devote substantially all of your business time and effort to the Company Group;
|
(vi)
|
are adjudicated in any civil suit, or acknowledge in writing in any agreement or stipulation, to have committed any theft, embezzlement, fraud, or other act of dishonesty involving any other Person;
|
(vii)
|
are determined, in the sole judgment of the Board or any individual or individuals the Board authorizes to act on its or their behalf, to have engaged in a pattern of poor performance;
|
(viii)
|
are determined, in the sole judgment of the Board or any individual or individuals the Board authorizes to act on its or their behalf, to have willfully engaged in conduct that is harmful to the Company Group, monetarily or otherwise;
|
(ix)
|
breach any provision of this Agreement or any other agreement between you and any member of the Company Group; or
|
(x)
|
engage in any activity intended to benefit any entity at the expense of the Company Group or intended to benefit any competitor of the Company Group.
|
(d)
|
“
Change of Control
” means:
|
(i)
|
the consummation of any transaction in which any Person or Group, other than a member or members of the Company Group or any trustee or other fiduciary holding securities under an employee benefit plan or plans of a member of the Company Group, becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the voting power of the Company's securities other than any such transaction in which the security holders of the Company immediately prior to such transaction Beneficially Own, immediately following such transaction, securities representing 50% or more of the voting power of the Company’s securities in substantially the same proportions as their ownership immediately prior to such transaction;
|
(ii)
|
individuals who at the Award Date constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least 2/3 of the directors then still in office who either were directors at the Award Date or whose appointment, election or nomination for election was previously so approved or recommended, cease for any reason to constitute a majority thereof;
|
(iii)
|
there is consummated a merger or consolidation of the Company with any other entity, other than (a) a merger or consolidation in which the Beneficial Owners of securities of the Company outstanding immediately prior thereto representing 50% or more of the voting power of the Company’s securities Beneficially Own, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of a member of the Company Group (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), at least 50% of the combined voting power of the voting securities of the Company or such surviving entity or parent thereof outstanding immediately after such merger or consolidation in substantially the same proportions as their Beneficial Ownership immediately prior to such transaction, or (b) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities;
|
(iv)
|
the consummation of any transaction or series of related transactions in which all or substantially all the Company's assets are sold or otherwise transferred, other than any sale or transfer to a Person or Group, at least 50% of the combined voting power of the voting securities of which are Beneficially Owned by shareholders of the Company in substantially the same proportions as such shareholders’ Beneficial Ownership of voting securities of the Company; or
|
(v)
|
approval by the shareholders of a definitive agreement or plan to liquidate or dissolve the Company.
|
(e)
|
“
Company Group
” means, collectively, Best Buy Co., Inc. and its subsidiaries.
|
(f)
|
“
Committee
” means the Compensation and Human Resources Committee of the Board of Directors of Best Buy Co., Inc.
|
(g)
|
“
Confidential Information
” means all “Confidential Information” as that term is defined in Best Buy’s Confidentiality Policy, and includes, without limitation, any and all information in whatever form, whether written, electronically stored, orally transmitted or memorized relating to trade secrets, customer lists, records and other information regarding customers, price lists and pricing policies, financial information, records, ledgers and information, purchase orders, agreements and related data, business development and strategic plans, products and technologies, product tests, manufacturing costs, product or service pricing, sales and marketing plans, research and development plans, personnel and employment records, files, data and policies (regardless of whether the information pertains to you or other employees of the Company Group), tax information, business and sales methods and
|
(h)
|
“
Disability
” means your disability that has caused you to either (i) have qualified for long term disability payments under the Company's long term disability plan; or (ii) to have been unable to perform the essential functions of your position (with or without reasonable accommodation) with any Company Group member for at least 6 consecutive months.
|
(i)
|
“
GAAP
” means generally accepted accounting principles in the United States.
|
(j)
|
“
Group
” shall have the meaning as such term has under Section 13d-3 of the Securities Exchange Act of 1934, as amended, or any successor provision.
|
(k)
|
“
Involuntarily Terminated Without Cause
” means (i) your employment is terminated by your employer at a time when your employer is not entitled to terminate your employment for Cause or (ii) in the event the entity that employs you is a direct or indirect a subsidiary or other Affiliate of the Company (the “
Employing
Entity
”), any transaction in which securities representing more than 50% of the voting power of the Employing Entity becoming Beneficially Owned by any Person or Persons other than the Company or one of its subsidiaries, whether via a transfer of such securities to such Person or Persons or via merger, consolidation or otherwise.
|
(l)
|
"
Qualified Retirement
" means any termination of your employment with the Company Group that occurs on or after your 60th birthday, at a time when no member of the Company Group is entitled to discharge you for Cause, so long as you have served the Company Group continuously for at least the five-year period immediately preceding that termination.
|
1.
|
Grant of Award
. In consideration of your employment with or service to a member of the Company Group, the Company hereby grants to you the award set forth in the Award Notification (the “
Award
”) subject to the terms and conditions of this Agreement and the Best Buy Co., Inc. 2014 Omnibus Incentive Plan (the “
Plan
”). In the event of any conflict between this Agreement and the Plan, the Plan will govern.
By your acceptance of this Award, you acknowledge receipt of a copy of the Prospectus for the Plan and your agreement to the terms and conditions of the Plan and this Agreement.
|
2.
|
Options
. This section applies to you if your Award includes an Option. An “
Option
” is a right to purchase a number of shares of common stock of the Company (“
Shares
”) at the price per share of Common Stock stated in the Award Notification.
|
(a)
|
Term and Vesting
.
The Option shall expire and no longer be exercisable on the tenth anniversary the Award Date or such earlier date as provided herein (such date, the “
Expiration Date
”). Except as otherwise set forth herein, the Option may be exercised, in whole or in part, at any time prior to the Expiration Date, in accordance with the schedule stated in the Award Notification. In no case may the Option be exercised after the Expiration Date.
|
(b)
|
Method of Exercise
.
The Option may be exercised by written notice to the Company (through the Plan administrator or other means specified by the Company) stating the number of Shares to be purchased. Such notice must be accompanied by payment in full of the exercise price for all Shares to be purchased by (i) cash or check, (ii) delivery of unencumbered Shares previously acquired by you having a Fair Market Value on the date of exercise that is equal to the exercise price, (iii) withholding of Shares that would otherwise be issued upon such exercise having a Fair Market Value on the date of exercise equal to the aggregate exercise price for the Shares for which the Option is being exercised or (iv) a cashless (broker-assisted) exercise that complies with all applicable laws.
|
3.
|
Restricted Stock Units
. This section applies to you if your Award includes Restricted Stock Units. A “
Restricted
Stock Unit
” is a commitment by the Company to issue a certain number of Shares to you provided you meet certain employment criteria and that the Company achieves certain financial performance levels.
|
(a)
|
Restrictions
. Until your Restricted Stock Units become vested as provided in the Award Notification, they are subject to the restrictions described in this Agreement and the Plan (the “
Restrictions
”) during the period (the “
Restricted Period
”) beginning on the Award Date and ending on the date of vesting. Restricted Stock Units may not be assigned, transferred (other than by will or the laws of descent and distribution), pledged or hypothecated (whether by operation of law or otherwise) or otherwise conveyed or encumbered, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition contrary to the provisions this Agreement or the Plan, or the levy of any execution, attachment or similar process upon the Restricted Stock Units, shall be void and unenforceable against the Company.
|
(b)
|
Vesting.
Except as otherwise set forth herein, so long as you remained employed by a member of the Company Group, the Restricted Stock Units shall vest in accordance with the schedule stated in the Award Notification.
|
(c)
|
Performance Condition
.
Notwithstanding the vesting schedule stated in the Award Notification, your Restricted Stock Units shall not vest unless the Company achieves positive Adjusted Net Earnings in any fiscal year during the term of the Award. “
Adjusted Net Earnings
” means net earnings determined in accordance with GAAP as publicly
|
(d)
|
Issuance of Shares Underlying Restricted Stock Units.
Unless otherwise determined by the Committee, the Company shall issue the Shares underlying the Restricted Stock Units within 60 days following vesting of such Restricted Stock Units.
|
4.
|
Performance Share Award
. This section applies to you if your Award includes a Performance Share Award. A “
Performance Share Award
” is a commitment by the Company to issue a certain number of Shares to you provided you meet certain employment criteria and that the Company achieves certain financial performance levels. A Performance Share Award does not represent immediate ownership of Shares.
|
(a)
|
Determination of Number of Shares under Performance Share Award
. The
number of Shares issuable under (i) the revenue component of your Performance Share Award (the “
Revenue
Performance Share Number
”) will be equal to a percentage of the target number of Shares stated in your Award Notification for the revenue component (“
Revenue Target
”) and (ii) the TSR component of your Performance Share Award (the “
TSR Performance Share Number
”) will be equal to a percentage of the target number of Shares stated in your Award Notification for the TSR component (“
TSR Target
”), in each case as determined below.
|
(b)
|
Revenue Performance Share Number
.
|
(i)
|
Within 120 days after the end of the Performance Period, the Committee will calculate the CAGR of Enterprise Revenue from fiscal year 2017 to fiscal year 2020 (“
Enterprise Revenue CAGR
”). For example, if fiscal year 2017 Enterprise Revenue was $39.4 billion and fiscal year 2020 Enterprise Revenue was $41.5 billion, Enterprise Revenue CAGR would be 1.75%.
|
(ii)
|
Your Revenue Performance Share Number will be equal to the percentage of the Revenue
Target that is listed in the column below with the heading “Number of Shares Earned” opposite the band in the column with the heading “Performance” in which Enterprise Revenue CAGR falls. If Enterprise Revenue CAGR is between Threshold Enterprise Revenue CAGR and Target Enterprise Revenue CAGR or between Target Enterprise Revenue CAGR and Maximum Enterprise Revenue CAGR, your Revenue Performance Share Number will be equal to a percentage interpolated on a linear basis for performance between such amounts. For example, if Enterprise Revenue CAGR is 1.75%, then your Revenue Performance Share Number would be 125% of your Revenue Target. The Revenue Performance Share Number will be rounded to the nearest whole number.
|
(c)
|
TSR Performance Share Number
.
|
(i)
|
Within 120 days after the end of the Performance Period, the Committee will (A) calculate the TSR for Best Buy and for each company included in the S&P 500 Index at the time of any calculation hereunder, (B) rank each such company by TSR (lowest to highest), and (C) determine the percentile rank of Best Buy’s TSR in such ranking by dividing Best Buy’s numerical position in such TSR ranking by the total number of companies included in the list, rounding to the nearest hundredth (“
Relative TSR
”). For example, if Best Buy were ranked 300 out of 500, its Relative TSR would be 60%.
|
(ii)
|
Your TSR Performance Share Number will be equal to the percentage of the TSR
Target that is listed in the column below with the heading “Number of Shares Earned” opposite the band in the column with the heading
|
(d)
|
Certain Definitions.
|
(A)
|
“
Beginning Price
” means, with respect to any one company, the average closing price of one share of common stock during the first fiscal quarter of the Performance Period.
|
(B)
|
“
CAGR
” means compound annual growth rate.
|
(C)
|
“
Ending Price
” means, with respect to any one company, the average closing price of one share of common stock during the first fiscal quarter following completion of the Performance Period.
|
(D)
|
“Performance Period”
means the performance period stated in the Award Notification.
|
(E)
|
“Enterprise Revenue”
means revenue of the Company from continuing operations as reported in the Company's Annual Report on Form 10-K for the respective fiscal year adjusted to eliminate the impact of currency exchange rate fluctuations;
provided
,
however
, that the Committee may adjust Enterprise Revenue down
to eliminate the following: (1) the cumulative effect of changes in GAAP (only to the extent such changes would reduce Enterprise Revenue); (2) revenue from discontinued operations; and (3) any other unusual or nonrecurring gains which are separately identified and quantified, including acquisition related revenue.
|
(F)
|
“TSR”
means, with respect to any one company, the price appreciation of one share of common stock as measured from the Beginning Price to the Ending Price, assuming all dividends and other distributions made on such share are reinvested, expressed as a percentage.
|
(e)
|
Change of Control
. Notwithstanding anything in this Agreement to the contrary, in the event of a Change of Control prior to the end of the Performance Period, the Committee will determine (i) Enterprise Revenue CAGR using the last completed fiscal year instead of fiscal year 2020 and (ii) Relative TSR using the average closing price of one share of common stock during the last completed fiscal quarter in order to determine the Ending Price, and the Revenue and TSR Performance Share Numbers will be equal to the greater of (i) the numbers determined pursuant to Section 4(b)(ii) and Section 4(c)(ii) above, respectively, and (ii) the respective Revenue or TSR Target.
|
(f)
|
Performance Share Number Not Guaranteed
. If Relative TSR is less than 30% or Enterprise Revenue CAGR is less than 1.0%, the respective portion of your Performance Share Number will be 0 and there will be no Shares issued under that portion of your Performance Share Award. The Committee shall have sole discretion to determine Relative TSR and Enterprise Revenue.
|
(g)
|
Issuance of Shares.
Any Shares issuable to you under your Performance Share Award will be issued within 60 days after the Committee’s determination of Relative TSR and Enterprise Revenue CAGR; provided however, that the Company’s obligation to issue such shares is subject to Section 5 of this Agreement.
|
5.
|
Effect of Termination of Employment
. Your employment with the Company Group may be terminated by your employer at any time for any reason (with or without advance notice). This section provides the effect on your Award of different types of termination of employment.
|
(a)
|
Qualified
Retirement
.
In the event of your Qualified Retirement:
|
(i)
|
Options
. If your Award includes an Option, the Option will continue to vest in accordance with the vesting schedule set forth above. You will have until the later of (A) three years from the date of your Qualified Retirement and (B) the last scheduled vesting date to exercise the entire Option; provided, however, that in no event shall the Option be exercisable after the Expiration Date. Any portion of the Option unexercised at the end of this period will be forfeited.
|
(ii)
|
Restricted Stock Units
. If your Award includes Restricted Stock Units, such Restricted Stock Units will continue to vest in accordance with the vesting schedule set forth in the Award Notification, subject to the Company’s achievement of the performance condition described in Section 3(c), notwithstanding that you are no longer providing services to a member of the Company Group. Once vested, the Restricted Stock Units will be settled as provided in Section 3(d) above.
|
(iii)
|
Performance Shares
. If your Award includes Performance Shares and in the event of your Qualified Retirement prior to the end of the Performance Period, you may be entitled to a prorated Performance Share Award. If Relative TSR is greater than Threshold TSR (as determined after the end of the Performance Period), you will be entitled to a prorated TSR Performance Share Number. If Enterprise Revenue CAGR is greater than Threshold Enterprise Revenue CAGR (as determined after the end of the Performance Period), you will be entitled to a prorated Revenue Performance Share Number. Your Performance Share Award will be determined by multiplying the Performance Share Number calculated as if you were employed by a member of the Company Group on the last day of the Performance Period by a fraction, the numerator of which is the number of days during the Performance Period you were so employed, and the denominator of which is the number of days in the Performance Period.
|
(b)
|
Death or Disability
. In the event of your death or employment termination due to Disability:
|
(i)
|
Options
.
If your Award includes an Option, any then unvested portion of the Option will vest and become exercisable as of the date of death or, in the case of Disability, as of the date of employment termination. In the event of your death, the representative of your estate or your heirs will have until the earlier of (A) one year from the date of your death and (B) the Expiration Date of the Option, to exercise the Option. In the event you become Disabled while employed with the Company Group and must therefore terminate your employment, you will have until the earlier of (X) one year from the date of your employment termination and (Y) the Expiration Date of the Option, to exercise the Option.
|
(ii)
|
Restricted Stock Units
. If your Award includes Restricted Stock Units, the Restrictions will lapse immediately and Restricted Stock Units that are unvested as of the date of death or, in the case of Disability, employment termination will become vested immediately (notwithstanding the vesting schedule set forth in the Award Notification). Once vested, the Restricted Stock Units will be settled as provided in Section 3(d) above (or the earliest such later date as is required to satisfy Section 409A of the Code, as described in Section 7 below).
|
(iii)
|
Performance Share Award
. If your Award includes a Performance Share Award and in the event of your death or employment termination due to Disability prior to the end of the Performance Period, you or the representative of your estate or your heirs, as applicable, may be entitled to a prorated Performance Share Award. If Relative TSR is greater than Threshold TSR (as determined as of the last completed fiscal quarter prior to the date of termination of employment to determine the Ending Price), you or the representative of your estate or your heirs, as applicable, will be entitled to a prorated TSR Performance Share Number. If Enterprise Revenue CAGR is greater than Threshold Enterprise Revenue CAGR (using the last completed fiscal year instead of fiscal year 2020 for purposes of determining Enterprise Revenue CAGR), you will be entitled to a prorated Revenue Performance Share Number. For each component, your Performance Share Award will be determined by multiplying the Performance Share Number calculated as of the date of termination of employment multiplied by a fraction, the numerator of which is the number of days during the Performance Period you were employed, and the denominator of which is the number of days in the Performance Period.
|
(c)
|
Involuntary
Termination Without Cause
. If your employment is Involuntarily Terminated Without Cause:
|
(i)
|
Options
.
If your Award includes an Option, you will have 60 days from the date of termination of your employment to exercise the portion of the Option vested as of your termination date, and any portion of the Option then unvested will be forfeited;
provided
,
however
, that if your employment is Involuntarily Terminated
|
(ii)
|
Restricted Stock Units
. If your Award includes Restricted Stock Units, you will forfeit any then unvested Restricted Stock Units.
|
(iii)
|
Performance Share Award
. If your Award includes a Performance Share Award and your employment is Involuntarily Terminated Without Cause prior to the end of the Performance Period, you may be entitled to a prorated Performance Share Award. If Relative TSR is greater than Threshold TSR (as determined after the end of the Performance Period), you will be entitled to a prorated TSR Performance Share Number. If Enterprise Revenue CAGR is greater than Threshold Enterprise Revenue CAGR (as determined after the end of the Performance Period), you will be entitled to a prorated Revenue Performance Share Number. For each component, your Performance Share Award is determined by multiplying the Performance Share Number calculated as if you were employed by a member of the Company Group on the last day of the Performance Period multiplied by a fraction, the numerator of which is the number of days during the Performance Period you were employed, and the denominator of which is the number of days in the Performance Period.
|
(d)
|
Voluntary Termination
. If you voluntarily terminate your employment with the Company Group for any reason:
|
(i)
|
Options
.
If your Award includes an Option, you will have 60 days from the date of termination of your employment to exercise the Option, to the extent the Option had become vested as of your termination date. Any then unvested portion of the Option will be forfeited. In no event, however, may the Option be exercised after its Expiration Date.
|
(ii)
|
Restricted Stock Units
. If your Award includes Restricted Stock Units, you will forfeit any then unvested Restricted Stock Units.
|
(iii)
|
Performance Share Award
. If your Award includes a Performance Share Award, and you voluntarily terminate your employment prior to the end of the Performance Period, you will forfeit your entire Performance Share Award.
|
(e)
|
Termination for Cause
. If your employment is terminated by any member of the Company Group for any reason at a time when any member of the Company Group is entitled to terminate your employment for Cause:
|
(i)
|
Options
. If your Award includes an Option, any then unvested portion of the Option will be forfeited, and the Option may not be exercised after termination of your employment.
|
(ii)
|
Restricted Stock Units
. If your Award includes Restricted Stock Units, any then unvested Restricted Stock Units will be forfeited.
|
(iii)
|
Performance Share Award
.
If your Award includes a Performance Share Award and your employment is terminated by any member of the Company Group for any reason at a time when any member of the Company Group is entitled to terminate your employment for Cause prior to the end of the Performance Period, you will forfeit your entire Performance Share Award.
|
6.
|
Restrictive Covenants and Remedies
. By accepting the Award, you specifically agree to the restrictive covenants contained in this Section 6 (the “
Restrictive Covenants
”) and you agree that the Restrictive Covenants and the remedies described herein are reasonable and necessary to protect the legitimate interests of the Company Group. Sections 6(b) and 6(c) apply to you only if you are an officer of the Company. Further, if you are an attorney, the Restrictive Covenants apply to you only to the extent they are consistent with the rules of professional conduct applicable to you (for example, Minnesota Rule of Professional Conduct 5.6).
|
(a)
|
Confidentiality.
In consideration of the Award, you acknowledge that the Company Group operates in a competitive environment and has a substantial interest in protecting its Confidential Information, and you agree, during your employment with the Company Group and thereafter, to maintain the confidentiality of the Company Group’s Confidential Information and to use such Confidential Information for the exclusive benefit of the Company Group. You will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or to an attorney solely for the
|
(b)
|
Competitive Activity
. During your employment with the Company Group and for one year following the later of (i) termination of your employment for any reason whatsoever or (ii) the last scheduled vesting date for your Award, you shall not compete, directly or indirectly, through an Affiliate or otherwise, in any manner or capacity (including, without limitation, through any form of ownership or as a principal, agent, partner, officer, director, employee, advisor or consultant) with the Company Group, for your benefit or for the benefit of any other Person other than the Company Group anywhere in the world. In the event that any portion of this Section 6(b) shall be determined by an arbitrator to be unenforceable because it is unreasonably restrictive in any respect, it shall be interpreted to extend over the maximum period of time for which it reasonably may be enforced and to the maximum extent for which it reasonably may be enforced in all other respects, and enforced as so interpreted, all as determined by such arbitrator in such action. You acknowledge the uncertainty of the law in this respect and expressly stipulate that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law. Ownership of less than 1% of the outstanding capital stock of any corporation listed on a national securities exchange will not constitute a breach of this Section 6(b).
|
(c)
|
Non-Solicitation
. During your employment and for one year following the later of (i) termination of your employment for any reason whatsoever or (ii) the last scheduled award vesting date, you shall not:
|
(a)
|
induce or attempt to induce any employee of the Company Group to leave the employ of Company Group, or in any way interfere adversely with the relationship between any such employee and Company Group;
|
(b)
|
induce or attempt to induce any employee of Company Group to work for, render services to, provide advice to, or supply Confidential Information of Company Group to any third Person;
|
(c)
|
employ, or otherwise pay for services rendered by, any employee of Company Group in any business enterprise with which you may be associated, connected or affiliated;
|
(d)
|
induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of Company Group to cease doing business with Company Group, or in any way interfere with the then existing business relationship between any such customer, supplier, licensee, licensor or other business relation and Company Group; or
|
(e)
|
assist, solicit, or encourage any other Person, directly or indirectly, in carrying out any activity set forth above that would be prohibited by any of the provisions of this Agreement if such activity were carried out by you. In particular, you will not, directly or indirectly, induce any employee of Company Group to carry out any such activity
.
|
(d)
|
Partial Invalidity
. If any portion of this Section 6 is determined by an arbitrator to be unenforceable in any respect, it shall be interpreted to be valid to the maximum extent for which it reasonably may be enforced, and enforced as so interpreted, all as determined by such arbitrator in such action. You acknowledge the uncertainty of the law in this respect and expressly stipulate that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.
|
(e)
|
Remedy for Breach
. You agree that a breach of any of the Restrictive Covenants would cause material and irreparable harm to the Company Group that would be difficult or impossible to measure, and that monetary damages for any such harm would, therefore, be an inadequate remedy. Accordingly, you agree that if you breach any Restrictive Covenant, the Company Group shall be entitled, in addition to and without limitation upon all other remedies the Company Group may have under this Agreement, at law or otherwise, to obtain injunctive or other appropriate equitable relief, without bond or other security, to restrain any such breach through arbitration. You further agree that the duration of the Restrictive Covenant shall be extended by the same amount of time that you are in breach of any Restrictive Covenant.
|
(f)
|
Claw Back & Recovery
.
|
(i)
|
In the event (i) you breach any of the Restrictive Covenants, (ii) you engage in conduct materially adverse to the interests of the Company, including any material violations of any Company policy, (iii) you engage in intentional misconduct that caused or contributed to the restatement of any financial statements of the Company, (iv) you materially violate the terms of any agreement to which you and a member of the Company Group is a party or (v) you engage in a criminal act, fraud, or violation of any securities laws, then notwithstanding any other provision of this Agreement to the contrary, the Company, in its sole discretion, may take one or more of the following actions with respect to your Award (and shall, in any event, take all action required by applicable law):
|
(A)
|
cause the immediate forfeiture any of your then unexercised portion of any Option included in your Award, any unvested Restricted Stock Units included in your Award, and any Performance Share Award included in your Award;
|
(B)
|
require you to immediately return to the Company any Shares issued upon exercise of any Option included in your Award, and any Shares in your Award that were previously Restricted Stock Units and any Shares issued under any Performance Share Award that, in each case, are still under your control; and
|
(C)
|
require you to promptly pay to the Company an amount equal to the fair market value of all Shares included in your Award that are no longer under your control (as measured on the exercise date of any such Option, and the date of issuance of any Shares issued under any Restricted Stock Units or Performance Share Award, as applicable).
|
(ii)
|
The Committee shall have sole discretion to determine what constitutes the conduct described in Section 6(f)(i) above.
|
(iii)
|
In addition to the Company’s rights set forth above, you agree your Award and the value of any portion of your Award no longer under your control, shall be subject to recovery or other penalties pursuant to (i) any Company clawback policy, as may be adopted or amended from time to time, or (ii) any applicable law, rule or regulation or applicable stock exchange rule, including, without limitation, the Sarbanes‑Oxley Act of 2002 and the Dodd‑Frank Wall Street Reform and Consumer Protection Act.
|
(g)
|
Right of Set Off
.
By accepting the Award, you agree that any member of the Company Group may set off any amount owed to you (including wages or other compensation, fringe benefits or vacation pay) against any amounts you owe under this Section 6.
|
7.
|
General Terms and Conditions.
|
(a)
|
Rights as a Stockholder
.
|
(i)
|
Options
. You will have no rights as a stockholder with respect to any Shares issuable upon exercise of an Option, nor have any rights to dividends or other rights as a shareholder with respect to any such Shares, until you have actually received such Shares following the exercise of the Option in accordance with the terms of this Agreement and the Plan.
|
(ii)
|
Restricted Stock Units
. You will have no rights as a shareholder with respect to any Shares issuable under the Restricted Stock Units until you have actually received such Shares in accordance with the terms of this Agreement and the Plan. This means that you will not have the right to vote as a shareholder nor the right to receive dividend payments. Upon issuance of Shares at vesting of the Restricted Stock Units, you will have all of the rights of a shareholder with respect to the Shares unless Shares are forfeited or recovered under this Agreement or the Plan.
|
(iii)
|
Performance Share Awards
. You will have no rights as a shareholder with respect to any Shares issuable under a Performance Share Award until you have actually received such Shares in accordance with the terms of this Agreement and the Plan.
|
(b)
|
Transferability
.
|
(i)
|
Options
. Options may not be assigned, transferred (other than by will or the laws of descent and distribution), pledged or hypothecated (whether by operation of law or otherwise) or otherwise conveyed or encumbered, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions of this Agreement or the Plan, or the levy of any execution, attachment or similar process upon the Option, shall be void and unenforceable against the Company.
|
(ii)
|
Restricted Stock Units.
Restricted Stock Units are subject to the restrictions set forth in Section 3(a) of this Agreement.
|
(iii)
|
Performance Share Awards
. Performance Share Awards may not be assigned, transferred (other than by will or the laws of descent and distribution), pledged or hypothecated (whether by operation of law or otherwise) or otherwise conveyed or encumbered, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of a Performance Share Award contrary to the provisions of this Agreement or the Plan, or the levy of any execution, attachment or similar process upon a Performance Share Award, shall be void and unenforceable against the Company.
|
(c)
|
No Right to Continued Employment
. This Agreement does not guarantee your continued employment nor alter the right of any member of the Company Group to terminate your employment at any time.
|
(d)
|
Participant’s Acknowledgements
.
|
(i)
|
Committee’s Sole Discretion
. The Committee has sole discretion to make decisions regarding your Award, and to interpret all terms of this Agreement, with the exception of the application of the Company’s Arbitration Policy. You agree that all decisions regarding and interpretations of this Agreement by the Committee are binding, conclusive, final and non-appealable.
|
(ii)
|
Taxes.
You are liable for any for any federal, state and other taxes incurred upon the lapse of a substantial risk of forfeiture (
e.g
., employment taxes) or upon delivery of Shares underlying the Restricted Stock Units (
e.g
., income taxes), and any subsequent disposition of any Shares (
e.g
., capital gain taxes).
|
(A)
|
Options
. Any Options included in your Award are Non-Qualified Stock Options not eligible for treatment as qualified or incentive stock options for federal income tax purposes. Prior to exercising any Option, you will pay or make adequate arrangements satisfactory to the Company to satisfy all applicable taxes. If applicable, you authorize the Company, or its agents, to satisfy its obligations with regard to all taxes by withholding Shares of the Company common stock to be issued at exercise of the Option or otherwise selling Shares of the Company on your behalf equal to the amount of all taxes required to be withheld by the Company, pursuant to the policies and processes of the Company’s stock plan administrator and broker.
|
(B)
|
Restricted Stock Units.
Upon issuance of any Shares underlying your Restricted Stock Units, you authorize the Company, or its agents, to satisfy the obligations with regard to all taxes by selling Shares of the Company on your behalf, or otherwise withholding from such Shares a number of Shares having a Fair Market Value equal to the amount of all taxes required to be withheld by the Company, pursuant to the policies and processes of the Company’s stock plan administrator and broker.
|
(C)
|
Performance Share Award.
Upon issuance of your Performance Share Award, you authorize the Company, or its agents, to satisfy the obligations with regard to all taxes by selling Shares of the Company on your behalf, or otherwise withholding from such Shares a number of Shares having a Fair Market Value equal to the amount of all taxes required to be withheld by the Company, pursuant to the policies and processes of the Company’s stock plan administrator and broker.
|
(D)
|
Section 409A.
Anything herein to the contrary notwithstanding, this Agreement shall be interpreted so as to comply with or satisfy an exemption from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively, “Section 409A”). The Committee may in good faith make the minimum modifications to this Agreement as it may deem appropriate to comply with Section 409A while to the maximum extent reasonably possible maintaining the original intent and economic benefit to you and the Company Group of the applicable provision.
|
(1)
|
To the extent required by Section 409A(a)(2)(B)(i), to the extent that you are a specified employee, Shares (or cash equivalent value of Shares) underlying Restricted Stock Units and Performance Share Awards that become payable to you upon your separation from service will be delayed and paid promptly after the earlier of the date that is six (6) months after the date of such separation from service or the date of your death after such separation from service. For purposes hereof, (x) any reference to your termination of employment under this Agreement shall mean your separation from service, (y) the occurrence of your “separation from service” will be determined in accordance with the default provisions of Treasury Regulation Section 1.409A-1(h) and (z) whether you are a “specified employee” will be determined in accordance with the default provisions of Treasury Regulation Section 1.409A-1(i) with the “identification date” to be December 31 and the “effective date” to be the April 1 following the identification date (as such terms are used under such regulation). Notwithstanding anything in this Agreement to the contrary, your employment shall not be deemed to have been terminated unless and until you have incurred a “separation from service” within the meaning of Section 409A.
|
(2)
|
For purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii), your right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment under this Agreement shall at all times be considered a separate and distinct payment.
|
(iii)
|
Consultation With Professional Tax Advisors
. You acknowledge that the grant, exercise, vesting or any payment with respect to the Award, and the sale or other taxable disposition of the Shares acquired as a result of the Award may have tax consequences under federal, state, local or international tax laws. You further acknowledge that you are relying solely on your own professional tax and investment advisors with respect to any and all such matters (and are not relying, in any manner, on the Company or any of its employees or representatives). You understand and agree that any and all tax consequences resulting from the Award and its grant, exercise, vesting or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Plan, are solely your responsibility without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse you for such taxes.
|
(e)
|
Severability
. In the event that any provision in the Plan or this Agreement is held to be invalid, illegal or unenforceable or would disqualify the Plan or this Agreement under any law, the invalid, illegal or unenforceable provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or this Agreement, such provision shall be stricken as to the applicable jurisdiction or Shares, and the remainder of the Plan or this Agreement shall remain in full force and effect.
|
(f)
|
Governing Law and Dispute Resolution
.
Any disputes under this Agreement or the Plan must be resolved by arbitration subject to the Company’s Arbitration Policy.
The substantive laws of Minnesota, without regard to the conflict of law provisions, shall apply to all questions concerning this Agreement; however, the Arbitration Policy, its enforceability, and its implementation are governed by the Federal Arbitration Act.
|
8.
|
Definitions
.
Capitalized terms used but not defined in this Agreement are defined in the Plan or, if not defined therein, will have the following meanings:
|
(a)
|
"
Beneficial Owner
" will have the meaning defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, or any successor provision.
|
(b)
|
“
Board
” means the Board of Directors of Best Buy Co., Inc.
|
(c)
|
“
Cause
” for termination of your employment with the Company Group shall, solely for purposes of this Agreement, is deemed to exist if you:
|
(i)
|
are charged with, convicted of or enter a plea of guilty or
nolo contendere
to: (a) a felony, (b) any crime involving moral turpitude, dishonesty, breach of trust or unethical business conduct, or (c) any crime involving the business of the Company Group;
|
(ii)
|
in the performance of your duties for the Company Group or otherwise to the detriment of the Company Group, engage in: (a) dishonesty that is harmful to the Company Group, monetarily or otherwise, (b) willful or gross misconduct, (c) willful or gross neglect, (d) fraud, (e) misappropriation, (f) embezzlement, or (g) theft;
|
(iii)
|
disobey the directions of the Board, or any individual or individuals the Board authorizes to act on its or their behalf, acting within the scope of its or their authority;
|
(iv)
|
fail to comply with the policies or practices of the Company Group;
|
(v)
|
fail to devote substantially all of your business time and effort to the Company Group;
|
(vi)
|
are adjudicated in any civil suit, or acknowledge in writing in any agreement or stipulation, to have committed any theft, embezzlement, fraud, or other act of dishonesty involving any other Person;
|
(vii)
|
are determined, in the sole judgment of the Board or any individual or individuals the Board authorizes to act on its or their behalf, to have engaged in a pattern of poor performance;
|
(viii)
|
are determined, in the sole judgment of the Board or any individual or individuals the Board authorizes to act on its or their behalf, to have willfully engaged in conduct that is harmful to the Company Group, monetarily or otherwise;
|
(ix)
|
breach any provision of this Agreement or any other agreement between you and any member of the Company Group; or
|
(x)
|
engage in any activity intended to benefit any entity at the expense of the Company Group or intended to benefit any competitor of the Company Group.
|
(d)
|
“
Change of Control
” means:
|
(i)
|
the consummation of any transaction in which any Person or Group, other than a member or members of the Company Group or any trustee or other fiduciary holding securities under an employee benefit plan or plans of a member of the Company Group, becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the voting power of the Company's securities other than any such transaction in which the security holders of the Company immediately prior to such transaction Beneficially Own, immediately following such transaction, securities representing 50% or more of the voting power of the Company’s securities in substantially the same proportions as their ownership immediately prior to such transaction;
|
(ii)
|
individuals who at the Award Date constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least 2/3 of the directors then still in office who either were directors at the Award Date or whose appointment, election or nomination for election was previously so approved or recommended, cease for any reason to constitute a majority thereof;
|
(iii)
|
there is consummated a merger or consolidation of the Company with any other entity, other than (a) a merger or consolidation in which the Beneficial Owners of securities of the Company outstanding immediately prior thereto representing 50% or more of the voting power of the Company’s securities Beneficially Own, in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of a member of the Company Group (either by remaining outstanding or by being converted into voting
|
(iv)
|
the consummation of any transaction or series of related transactions in which all or substantially all the Company's assets are sold or otherwise transferred, other than any sale or transfer to a Person or Group, at least 50% of the combined voting power of the voting securities of which are Beneficially Owned by shareholders of the Company in substantially the same proportions as such shareholders’ Beneficial Ownership of voting securities of the Company; or
|
(v)
|
approval by the shareholders of a definitive agreement or plan to liquidate or dissolve the Company.
|
(e)
|
“
Company Group
” means, collectively, Best Buy Co., Inc. and its subsidiaries.
|
(f)
|
“
Committee
” means the Compensation and Human Resources Committee of the Board of Directors of Best Buy Co., Inc.
|
(g)
|
“
Confidential Information
” means all “Confidential Information” as that term is defined in Best Buy’s Confidentiality Policy, and includes, without limitation, any and all information in whatever form, whether written, electronically stored, orally transmitted or memorized relating to trade secrets, customer lists, records and other information regarding customers, price lists and pricing policies, financial information, records, ledgers and information, purchase orders, agreements and related data, business development and strategic plans, products and technologies, product tests, manufacturing costs, product or service pricing, sales and marketing plans, research and development plans, personnel and employment records, files, data and policies (regardless of whether the information pertains to you or other employees of the Company Group), tax information, business and sales methods and operations, business correspondence, memoranda and other records, inventions, improvements and discoveries, processes and methods, business operations and related data formulae, computer records and related data, know-how, research and development, trademark, technology, technical information, copyrighted material, and any other confidential or proprietary data and information which you encounter during employment, all of which are held, possessed and/or owned by the Company Group and all of which are used in the operations and business of the Company Group. Confidential Information does not include information which is or becomes generally known within the Company Group’s industry through no act or omission by you.
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(h)
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“
Disability
” means your disability that has caused you to either (i) have qualified for long term disability payments under the Company's long term disability plan; or (ii) to have been unable to perform the essential functions of your position (with or without reasonable accommodation) with any Company Group member for at least 6 consecutive months.
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(i)
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“
GAAP
” means generally accepted accounting principles in the United States.
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(j)
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“
Group
” shall have the meaning as such term has under Section 13d-3 of the Securities Exchange Act of 1934, as amended, or any successor provision.
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(k)
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“
Involuntarily Terminated Without Cause
” means (i) your employment is terminated by your employer at a time when your employer is not entitled to terminate your employment for Cause or (ii) in the event the entity that employs you is a direct or indirect a subsidiary or other Affiliate of the Company (the “
Employing
Entity
”), any transaction in which securities representing more than 50% of the voting power of the Employing Entity becoming Beneficially Owned by any Person or Persons other than the Company or one of its subsidiaries, whether via a transfer of such securities to such Person or Persons or via merger, consolidation or otherwise.
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(l)
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"
Qualified Retirement
" means any termination of your employment with the Company Group that occurs on or after your 60th birthday, at a time when no member of the Company Group is entitled to discharge you for Cause, so long
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Best Buy Co., Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: June 5, 2017
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/s/ HUBERT JOLY
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Hubert Joly
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Chairman and Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Best Buy Co., Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: June 5, 2017
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/s/ CORIE BARRY
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Corie Barry
|
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Chief Financial Officer
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Date: June 5, 2017
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/s/ HUBERT JOLY
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Hubert Joly
|
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Chairman and Chief Executive Officer
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Date: June 5, 2017
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/s/ CORIE BARRY
|
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Corie Barry
|
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Chief Financial Officer
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