|
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
|
|
41-0907483
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(State or other jurisdiction of incorporation or organization)
|
|
(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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|
|
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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
|
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
Assets
|
|
|
|
|
|
|
|
||||
Current assets
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
1,865
|
|
|
$
|
1,101
|
|
|
$
|
1,365
|
|
Short-term investments
|
465
|
|
|
2,032
|
|
|
2,125
|
|
|||
Receivables, net
|
915
|
|
|
1,049
|
|
|
965
|
|
|||
Merchandise inventories
|
5,016
|
|
|
5,209
|
|
|
5,167
|
|
|||
Other current assets
|
510
|
|
|
438
|
|
|
456
|
|
|||
Total current assets
|
8,771
|
|
|
9,829
|
|
|
10,078
|
|
|||
Property and equipment, net
|
2,432
|
|
|
2,421
|
|
|
2,327
|
|
|||
Goodwill
|
425
|
|
|
425
|
|
|
425
|
|
|||
Other assets
|
365
|
|
|
374
|
|
|
614
|
|
|||
Total assets
|
$
|
11,993
|
|
|
$
|
13,049
|
|
|
$
|
13,444
|
|
|
|
|
|
|
|
||||||
Liabilities and equity
|
|
|
|
|
|
||||||
Current liabilities
|
|
|
|
|
|
|
|
|
|||
Accounts payable
|
$
|
5,338
|
|
|
$
|
4,873
|
|
|
$
|
5,072
|
|
Unredeemed gift card liabilities
|
275
|
|
|
385
|
|
|
383
|
|
|||
Deferred revenue
|
438
|
|
|
453
|
|
|
427
|
|
|||
Accrued compensation and related expenses
|
318
|
|
|
561
|
|
|
309
|
|
|||
Accrued liabilities
|
801
|
|
|
864
|
|
|
787
|
|
|||
Accrued income taxes
|
12
|
|
|
137
|
|
|
83
|
|
|||
Current portion of long-term debt
|
47
|
|
|
544
|
|
|
44
|
|
|||
Total current liabilities
|
7,229
|
|
|
7,817
|
|
|
7,105
|
|
|||
Long-term liabilities
|
777
|
|
|
809
|
|
|
682
|
|
|||
Long-term debt
|
801
|
|
|
811
|
|
|
1,310
|
|
|||
Equity
|
|
|
|
|
|
|
|
|
|||
Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none
|
—
|
|
|
—
|
|
|
—
|
|
|||
Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 276,000,000, 283,000,000 and 300,000,000 shares, respectively
|
27
|
|
|
28
|
|
|
30
|
|
|||
Retained earnings
|
2,863
|
|
|
3,270
|
|
|
3,996
|
|
|||
Accumulated other comprehensive income
|
296
|
|
|
314
|
|
|
321
|
|
|||
Total equity
|
3,186
|
|
|
3,612
|
|
|
4,347
|
|
|||
Total liabilities and equity
|
$
|
11,993
|
|
|
$
|
13,049
|
|
|
$
|
13,444
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Revenue
|
$
|
9,379
|
|
|
$
|
8,940
|
|
|
$
|
18,488
|
|
|
$
|
17,468
|
|
Cost of goods sold
|
7,150
|
|
|
6,787
|
|
|
14,134
|
|
|
13,293
|
|
||||
Gross profit
|
2,229
|
|
|
2,153
|
|
|
4,354
|
|
|
4,175
|
|
||||
Selling, general and administrative expenses
|
1,877
|
|
|
1,830
|
|
|
3,707
|
|
|
3,552
|
|
||||
Restructuring charges
|
17
|
|
|
2
|
|
|
47
|
|
|
2
|
|
||||
Operating income
|
335
|
|
|
321
|
|
|
600
|
|
|
621
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment income and other
|
13
|
|
|
7
|
|
|
24
|
|
|
18
|
|
||||
Interest expense
|
(19
|
)
|
|
(18
|
)
|
|
(38
|
)
|
|
(37
|
)
|
||||
Earnings before income tax expense
|
329
|
|
|
310
|
|
|
586
|
|
|
602
|
|
||||
Income tax expense
|
85
|
|
|
101
|
|
|
134
|
|
|
205
|
|
||||
Net earnings
|
$
|
244
|
|
|
$
|
209
|
|
|
$
|
452
|
|
|
$
|
397
|
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share
|
$
|
0.88
|
|
|
$
|
0.69
|
|
|
$
|
1.61
|
|
|
$
|
1.29
|
|
Diluted earnings per share
|
$
|
0.86
|
|
|
$
|
0.67
|
|
|
$
|
1.58
|
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
||||||||
Dividends declared per common share
|
$
|
0.45
|
|
|
$
|
0.34
|
|
|
$
|
0.90
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
279.0
|
|
|
304.1
|
|
|
280.8
|
|
|
306.7
|
|
||||
Diluted
|
283.7
|
|
|
310.8
|
|
|
286.0
|
|
|
313.0
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Net earnings
|
$
|
244
|
|
|
$
|
209
|
|
|
$
|
452
|
|
|
$
|
397
|
|
Foreign currency translation adjustments
|
(14
|
)
|
|
55
|
|
|
(18
|
)
|
|
42
|
|
||||
Comprehensive income
|
$
|
230
|
|
|
$
|
264
|
|
|
$
|
434
|
|
|
$
|
439
|
|
|
Six Months Ended
|
||||||
|
August 4, 2018
|
|
July 29, 2017
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
452
|
|
|
$
|
397
|
|
Adjustments to reconcile net earnings to total cash provided by operating activities:
|
|
|
|
||||
Depreciation
|
358
|
|
|
329
|
|
||
Restructuring charges
|
47
|
|
|
2
|
|
||
Stock-based compensation
|
63
|
|
|
67
|
|
||
Deferred income taxes
|
5
|
|
|
9
|
|
||
Other, net
|
—
|
|
|
(2
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Receivables
|
120
|
|
|
401
|
|
||
Merchandise inventories
|
187
|
|
|
(285
|
)
|
||
Other assets
|
(53
|
)
|
|
(45
|
)
|
||
Accounts payable
|
485
|
|
|
15
|
|
||
Other liabilities
|
(430
|
)
|
|
(237
|
)
|
||
Income taxes
|
(126
|
)
|
|
41
|
|
||
Total cash provided by operating activities
|
1,108
|
|
|
692
|
|
||
|
|
|
|
||||
Investing activities
|
|
|
|
|
|
||
Additions to property and equipment
|
(375
|
)
|
|
(296
|
)
|
||
Purchases of investments
|
—
|
|
|
(2,221
|
)
|
||
Sales of investments
|
1,565
|
|
|
1,806
|
|
||
Other, net
|
10
|
|
|
3
|
|
||
Total cash provided by (used in) investing activities
|
1,200
|
|
|
(708
|
)
|
||
|
|
|
|
||||
Financing activities
|
|
|
|
|
|
||
Repurchase of common stock
|
(774
|
)
|
|
(771
|
)
|
||
Repayments of debt
|
(523
|
)
|
|
(19
|
)
|
||
Dividends paid
|
(253
|
)
|
|
(208
|
)
|
||
Issuance of common stock
|
29
|
|
|
125
|
|
||
Other, net
|
(3
|
)
|
|
(1
|
)
|
||
Total cash used in financing activities
|
(1,524
|
)
|
|
(874
|
)
|
||
Effect of exchange rate changes on cash
|
(16
|
)
|
|
18
|
|
||
Increase (decrease) in cash, cash equivalents and restricted cash
|
768
|
|
|
(872
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
1,300
|
|
|
2,433
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
2,068
|
|
|
$
|
1,561
|
|
|
Common
Shares
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|||||||||||
Balances at February 3, 2018
|
283
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
3,270
|
|
|
$
|
314
|
|
|
$
|
3,612
|
|
Adoption of ASU 2014-09
|
|
|
|
|
|
|
—
|
|
|
73
|
|
|
|
|
|
73
|
|
|||||
Net earnings, six months ended August 4, 2018
|
—
|
|
|
—
|
|
|
—
|
|
|
452
|
|
|
—
|
|
|
452
|
|
|||||
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(18
|
)
|
|||||
Stock-based compensation
|
|
|
|
—
|
|
|
63
|
|
|
—
|
|
|
—
|
|
|
63
|
|
|||||
Restricted stock vested and stock options exercised
|
4
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|||||
Issuance of common stock under employee stock purchase plan
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||
Common stock dividends, $0.90 per share
|
—
|
|
|
—
|
|
|
4
|
|
|
(255
|
)
|
|
—
|
|
|
(251
|
)
|
|||||
Repurchase of common stock
|
(11
|
)
|
|
(1
|
)
|
|
(96
|
)
|
|
(677
|
)
|
|
—
|
|
|
(774
|
)
|
|||||
Balances at August 4, 2018
|
276
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
2,863
|
|
|
$
|
296
|
|
|
$
|
3,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances at January 28, 2017
|
311
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
4,399
|
|
|
$
|
279
|
|
|
$
|
4,709
|
|
Adoption of ASU 2016-09
|
—
|
|
|
—
|
|
|
10
|
|
|
(12
|
)
|
|
—
|
|
|
(2
|
)
|
|||||
Net earnings, six months ended July 29, 2017
|
—
|
|
|
—
|
|
|
—
|
|
|
397
|
|
|
—
|
|
|
397
|
|
|||||
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|
42
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|||||
Restricted stock vested and stock options exercised
|
5
|
|
|
—
|
|
|
121
|
|
|
—
|
|
|
—
|
|
|
121
|
|
|||||
Issuance of common stock under employee stock purchase plan
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||
Common stock dividends, $0.68 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
(209
|
)
|
|
—
|
|
|
(209
|
)
|
|||||
Repurchase of common stock
|
(16
|
)
|
|
(1
|
)
|
|
(201
|
)
|
|
(579
|
)
|
|
—
|
|
|
(781
|
)
|
|||||
Balances at July 29, 2017
|
300
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
3,996
|
|
|
$
|
321
|
|
|
$
|
4,347
|
|
1.
|
Basis of Presentation
|
•
|
ASU 2016-16,
Intra-Entity Transfers of Assets Other Than Inventory
|
•
|
ASU 2017-12,
Derivatives and Hedging
|
•
|
ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
|
February 3, 2018
As Reported
|
|
ASU 2014-09 Adjustment on February 4, 2018
|
|
February 4, 2018 Adjusted
|
||||||
Assets
|
|
|
|
|
|
||||||
Other assets
|
$
|
374
|
|
|
$
|
(19
|
)
|
|
$
|
355
|
|
Liabilities
|
|
|
|
|
|
||||||
Unredeemed gift card liabilities
|
385
|
|
|
(69
|
)
|
|
316
|
|
|||
Deferred revenue
|
453
|
|
|
(26
|
)
|
|
427
|
|
|||
Accrued liabilities
|
864
|
|
|
(3
|
)
|
|
861
|
|
|||
Accrued income taxes
|
137
|
|
|
6
|
|
|
143
|
|
|||
Equity
|
|
|
|
|
|
||||||
Retained earnings
|
3,270
|
|
|
73
|
|
|
3,343
|
|
|
August 4, 2018
|
||||||||||
Impact of Changes to Condensed Consolidated Balance Sheets
|
As Reported
|
|
Balances without Adoption of
ASU 2014-09
|
|
Effect of Change Higher/(Lower)
(1)
|
||||||
Assets
|
|
|
|
|
|
||||||
Other current assets
|
$
|
510
|
|
|
$
|
461
|
|
|
$
|
49
|
|
Other assets
|
365
|
|
|
384
|
|
|
(19
|
)
|
|||
Liabilities
|
|
|
|
|
|
||||||
Unredeemed gift card liabilities
|
275
|
|
|
344
|
|
|
(69
|
)
|
|||
Deferred revenue
|
438
|
|
|
462
|
|
|
(24
|
)
|
|||
Accrued liabilities
|
801
|
|
|
754
|
|
|
47
|
|
|||
Accrued income taxes
|
12
|
|
|
6
|
|
|
6
|
|
|||
Equity
|
|
|
|
|
|
||||||
Retained earnings
|
2,863
|
|
|
2,793
|
|
|
70
|
|
(1)
|
Effect of change includes the opening retained earnings adjustment as detailed within the table above.
|
|
Three Months Ended August 4, 2018
|
||||||||||
Impact of Changes to Condensed Consolidated Statements of Earnings
|
As Reported
|
|
Balances without Adoption of
ASU 2014-09
|
|
Effect of Change Higher/(Lower)
|
||||||
Revenue
|
$
|
9,379
|
|
|
$
|
9,368
|
|
|
$
|
11
|
|
Cost of goods sold
|
7,150
|
|
|
7,138
|
|
|
12
|
|
|||
Gross profit
|
2,229
|
|
|
2,230
|
|
|
(1
|
)
|
|||
Operating income
|
335
|
|
|
336
|
|
|
(1
|
)
|
|||
Income tax expense
|
85
|
|
|
85
|
|
|
—
|
|
|||
Net earnings
|
244
|
|
|
245
|
|
|
(1
|
)
|
|||
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
0.88
|
|
|
$
|
0.88
|
|
|
$
|
—
|
|
Diluted earnings per share
|
$
|
0.86
|
|
|
$
|
0.86
|
|
|
$
|
—
|
|
|
Six Months Ended August 4, 2018
|
||||||||||
Impact of Changes to Condensed Consolidated Statements of Earnings
|
As Reported
|
|
Balances without Adoption of
ASU 2014-09 |
|
Effect of Change Higher/(Lower)
|
||||||
Revenue
|
$
|
18,488
|
|
|
$
|
18,468
|
|
|
$
|
20
|
|
Cost of goods sold
|
14,134
|
|
|
14,111
|
|
|
23
|
|
|||
Gross profit
|
4,354
|
|
|
4,357
|
|
|
(3
|
)
|
|||
Operating income
|
600
|
|
|
603
|
|
|
(3
|
)
|
|||
Income tax expense
|
134
|
|
|
135
|
|
|
(1
|
)
|
|||
Net earnings
|
452
|
|
|
454
|
|
|
(2
|
)
|
|||
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
1.61
|
|
|
$
|
1.62
|
|
|
$
|
(0.01
|
)
|
Diluted earnings per share
|
$
|
1.58
|
|
|
$
|
1.59
|
|
|
$
|
(0.01
|
)
|
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
Cash and cash equivalents
|
$
|
1,865
|
|
|
$
|
1,101
|
|
|
$
|
1,365
|
|
Restricted cash included in Other current assets
|
203
|
|
|
199
|
|
|
196
|
|
|||
Total cash, cash equivalents and restricted cash
|
$
|
2,068
|
|
|
$
|
1,300
|
|
|
$
|
1,561
|
|
2.
|
Revenue Recognition
|
|
August 4, 2018
|
|
February 4, 2018
|
||||
Receivables, net of an allowance for doubtful accounts of $15 and $24, respectively
|
$
|
584
|
|
|
$
|
674
|
|
Short-term contract liabilities included in:
|
|
|
|
||||
Unredeemed gift cards
|
275
|
|
|
316
|
|
||
Deferred revenue
|
438
|
|
|
408
|
|
||
Accrued liabilities
|
148
|
|
|
151
|
|
||
Long-term contract liabilities included in:
|
|
|
|
||||
Long-term liabilities
|
15
|
|
|
22
|
|
|
Allowance for Doubtful Accounts
|
||
Balance at February 4, 2018
|
$
|
24
|
|
Charged to expenses or other accounts
|
19
|
|
|
Other
(1)
|
(28
|
)
|
|
Balance at August 4, 2018
|
$
|
15
|
|
(1)
|
Includes bad debt write-offs, recoveries and the effect of foreign currency fluctuations.
|
|
Six Months Ended
|
||
|
August 4, 2018
|
||
Revenue recognized that was included in the contract liability balance(s) as of February 4, 2018
|
$
|
605
|
|
Revenue recognized from performance obligations satisfied in previous periods
|
—
|
|
|
Adjustments
(1)
|
1
|
|
(1)
|
Includes changes in the measure of progress, changes in the estimate of the transaction price or contract modifications.
|
|
August 4, 2018
(1)
|
||
Remainder of fiscal 2019
|
$
|
12
|
|
Fiscal 2020
|
14
|
|
|
Fiscal 2021
|
6
|
|
|
Fiscal 2022
|
2
|
|
|
Fiscal 2023 and thereafter
|
1
|
|
(1)
|
We have elected to exclude unsatisfied performance obligations from contract liability balances with a duration of one year or less. The estimated transaction price revenue disclosed above also does not include amounts of variable consideration attributable to contracts where the consideration is constrained at
August 4, 2018
. Further information about our forms of variable consideration is disclosed below.
|
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 Hierarchy
|
|
Fair Value at
|
||||||||||
|
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
|||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|||
Money market funds
|
Level 1
|
|
$
|
334
|
|
|
$
|
21
|
|
|
$
|
175
|
|
Commercial paper
|
Level 2
|
|
—
|
|
|
90
|
|
|
60
|
|
|||
Time deposits
|
Level 2
|
|
—
|
|
|
65
|
|
|
16
|
|
|||
Short-term investments:
|
|
|
|
|
|
|
|
||||||
Commercial paper
|
Level 2
|
|
—
|
|
|
474
|
|
|
299
|
|
|||
Time deposits
|
Level 2
|
|
465
|
|
|
1,558
|
|
|
1,826
|
|
|||
Other current assets:
|
|
|
|
|
|
|
|
|
|||||
Money market funds
|
Level 1
|
|
74
|
|
|
3
|
|
|
2
|
|
|||
Commercial paper
|
Level 2
|
|
—
|
|
|
60
|
|
|
60
|
|
|||
Time deposits
|
Level 2
|
|
101
|
|
|
101
|
|
|
101
|
|
|||
Foreign currency derivative instruments
|
Level 2
|
|
5
|
|
|
2
|
|
|
—
|
|
|||
Other assets:
|
|
|
|
|
|
|
|
||||||
Marketable securities that fund deferred compensation
|
Level 1
|
|
100
|
|
|
99
|
|
|
97
|
|
|||
Interest rate swap derivative instruments
|
Level 2
|
|
—
|
|
|
—
|
|
|
16
|
|
|||
|
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|||
Accrued liabilities:
|
|
|
|
|
|
|
|
|
|
|
|||
Foreign currency derivative instruments
|
Level 2
|
|
—
|
|
|
8
|
|
|
15
|
|
|||
Interest rate swap derivative instruments
|
Level 2
|
|
—
|
|
|
1
|
|
|
—
|
|
|||
Long-term liabilities:
|
|
|
|
|
|
|
|
||||||
Interest rate swap derivative instruments
|
Level 2
|
|
7
|
|
|
4
|
|
|
—
|
|
|
Impairments
|
|
Remaining Net Carrying Value
(1)
|
||||||||||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
|
|||||||||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||||||
Property and equipment (non-restructuring)
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
2
|
|
|
$
|
—
|
|
(1)
|
Remaining net carrying value approximates fair value. Because assets subject to long-lived asset impairment are not measured at fair value on a recurring basis, certain fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at
August 4, 2018
, and
July 29, 2017
.
|
4.
|
Restructuring Charges
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Best Buy Mobile
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
47
|
|
|
$
|
—
|
|
Canadian brand consolidation
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Renew Blue
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||
Total
|
$
|
17
|
|
|
$
|
2
|
|
|
$
|
47
|
|
|
$
|
2
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
Cumulative Amount
|
||||||
|
August 4, 2018
|
|
August 4, 2018
|
|
August 4, 2018
|
||||||
Property and equipment impairments
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Termination benefits
|
(3
|
)
|
|
(2
|
)
|
|
6
|
|
|||
Facility closure and other costs
|
20
|
|
|
49
|
|
|
49
|
|
|||
Total restructuring charges
|
$
|
17
|
|
|
$
|
47
|
|
|
$
|
56
|
|
|
Termination
Benefits
|
|
Facility
Closure and
Other Costs
|
|
Total
|
||||||
Balances at February 3, 2018
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Charges
|
1
|
|
|
49
|
|
|
50
|
|
|||
Cash payments
|
(5
|
)
|
|
(46
|
)
|
|
(51
|
)
|
|||
Adjustments
(1)
|
(3
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|||
Balances at August 4, 2018
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
3
|
|
(1)
|
Adjustments to termination benefits represent changes in retention assumptions. Adjustments to facility closure and other costs represent changes in sublease assumptions.
|
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
2018 Notes
|
$
|
—
|
|
|
$
|
500
|
|
|
$
|
500
|
|
2021 Notes
|
650
|
|
|
650
|
|
|
650
|
|
|||
Interest rate swap valuation adjustments
|
(7
|
)
|
|
(5
|
)
|
|
16
|
|
|||
Subtotal
|
643
|
|
|
1,145
|
|
|
1,166
|
|
|||
Debt discounts and issuance costs
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|||
Financing lease obligations
|
188
|
|
|
191
|
|
|
166
|
|
|||
Capital lease obligations
|
19
|
|
|
22
|
|
|
26
|
|
|||
Total long-term debt
|
848
|
|
|
1,355
|
|
|
1,354
|
|
|||
Less: current portion
|
47
|
|
|
544
|
|
|
44
|
|
|||
Total long-term debt, less current portion
|
$
|
801
|
|
|
$
|
811
|
|
|
$
|
1,310
|
|
6.
|
Derivative Instruments
|
|
|
Assets
|
||||||||||
Contract Type
|
Balance Sheet Location
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
Derivatives designated as net investment hedges
|
Other current assets
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Derivatives designated as interest rate swaps
|
Other current assets and Other assets
|
—
|
|
|
—
|
|
|
16
|
|
|||
Total
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
|
Liabilities
|
||||||||||
Contract Type
|
Balance Sheet Location
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
Derivatives designated as net investment hedges
|
Accrued liabilities
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
13
|
|
Derivatives designated as interest rate swaps
|
Accrued liabilities and Long-term liabilities
|
7
|
|
|
5
|
|
|
—
|
|
|||
No hedge designation (foreign exchange forward contracts)
|
Accrued liabilities
|
—
|
|
|
1
|
|
|
2
|
|
|||
Total
|
|
$
|
7
|
|
|
$
|
13
|
|
|
$
|
15
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Derivatives designated as net investment hedges
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Pre-tax gain(loss) recognized in OCI
|
$
|
3
|
|
|
$
|
(19
|
)
|
|
$
|
19
|
|
|
$
|
(11
|
)
|
|
|
Gain (Loss) Recognized
|
||||||||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Contract Type
|
Location of Gain (Loss) Recognized
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
No hedge designation (foreign exchange contracts)
|
SG&A
|
$
|
1
|
|
|
$
|
(4
|
)
|
|
$
|
1
|
|
|
$
|
(3
|
)
|
|
|
Gain (Loss) Recognized
|
||||||||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Contract Type
|
Location of Gain (Loss) Recognized
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Interest rate swap contracts
|
Interest expense
|
$
|
3
|
|
|
$
|
14
|
|
|
$
|
(1
|
)
|
|
$
|
3
|
|
Adjustments to carrying value of long-term debt
|
Interest expense
|
(3
|
)
|
|
(14
|
)
|
|
1
|
|
|
(3
|
)
|
||||
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Notional Amount
|
||||||||||
Contract Type
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
Derivatives designated as net investment hedges
|
$
|
59
|
|
|
$
|
462
|
|
|
$
|
205
|
|
Derivatives designated as interest rate swap contracts
|
650
|
|
|
1,150
|
|
|
1,000
|
|
|||
No hedge designation (foreign exchange forward contracts)
|
41
|
|
|
33
|
|
|
48
|
|
|||
Total
|
$
|
750
|
|
|
$
|
1,645
|
|
|
$
|
1,253
|
|
7.
|
Earnings per Share
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Numerator
|
|
|
|
|
|
|
|
|
|
||||||
Net earnings
|
$
|
244
|
|
|
$
|
209
|
|
|
$
|
452
|
|
|
$
|
397
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
279.0
|
|
|
304.1
|
|
|
280.8
|
|
|
306.7
|
|
||||
Dilutive effect of stock compensation plan awards
|
4.7
|
|
|
6.7
|
|
|
5.2
|
|
|
6.3
|
|
||||
Weighted-average common shares outstanding, assuming dilution
|
283.7
|
|
|
310.8
|
|
|
286.0
|
|
|
313.0
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive securities excluded from Weighted-average common shares outstanding, assuming dilution
|
0.1
|
|
|
0.0
|
|
|
0.1
|
|
|
0.0
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share
|
$
|
0.88
|
|
|
$
|
0.69
|
|
|
$
|
1.61
|
|
|
$
|
1.29
|
|
Diluted earnings per share
|
$
|
0.86
|
|
|
$
|
0.67
|
|
|
$
|
1.58
|
|
|
$
|
1.27
|
|
8.
|
Comprehensive Income
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Foreign currency translation adjustments
|
$
|
(14
|
)
|
|
$
|
55
|
|
|
$
|
(18
|
)
|
|
$
|
42
|
|
9.
|
Repurchase of Common Stock
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Total cost of shares repurchased
(1)
|
$
|
375
|
|
|
$
|
397
|
|
|
$
|
774
|
|
|
$
|
781
|
|
Average price per share
|
$
|
74.80
|
|
|
$
|
55.07
|
|
|
$
|
73.21
|
|
|
$
|
50.38
|
|
Number of shares repurchased
(1)
|
5.0
|
|
|
7.2
|
|
|
10.6
|
|
|
15.5
|
|
(1)
|
As of
August 4, 2018
,
$13 million
, or
0.2 million
shares, in trades remained unsettled. As of
July 29, 2017
,
$18 million
, or
0.3 million
shares, in trades remained unsettled. The liability for unsettled trades is included in Accrued liabilities on our Condensed Consolidated Balance Sheets.
|
10.
|
Segments
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Revenue by reportable segment
|
|
|
|
|
|
|
|
||||||||
Domestic
|
$
|
8,639
|
|
|
$
|
8,272
|
|
|
$
|
17,051
|
|
|
$
|
16,184
|
|
International
|
740
|
|
|
668
|
|
|
1,437
|
|
|
1,284
|
|
||||
Total revenue
|
$
|
9,379
|
|
|
$
|
8,940
|
|
|
$
|
18,488
|
|
|
$
|
17,468
|
|
Revenue by product category
(1)
|
|
|
|
|
|
|
|
||||||||
Domestic:
|
|
|
|
|
|
|
|
||||||||
Consumer Electronics
|
$
|
2,770
|
|
|
$
|
2,610
|
|
|
$
|
5,426
|
|
|
$
|
5,192
|
|
Computing and Mobile Phones
|
3,923
|
|
|
3,859
|
|
|
7,822
|
|
|
7,436
|
|
||||
Entertainment
|
512
|
|
|
492
|
|
|
1,059
|
|
|
1,063
|
|
||||
Appliances
|
1,013
|
|
|
914
|
|
|
1,895
|
|
|
1,691
|
|
||||
Services
|
384
|
|
|
367
|
|
|
777
|
|
|
738
|
|
||||
Other
|
37
|
|
|
30
|
|
|
72
|
|
|
64
|
|
||||
Total Domestic revenue
|
$
|
8,639
|
|
|
$
|
8,272
|
|
|
$
|
17,051
|
|
|
$
|
16,184
|
|
International:
|
|
|
|
|
|
|
|
||||||||
Consumer Electronics
|
$
|
217
|
|
|
$
|
210
|
|
|
$
|
423
|
|
|
$
|
389
|
|
Computing and Mobile Phones
|
335
|
|
|
311
|
|
|
666
|
|
|
608
|
|
||||
Entertainment
|
43
|
|
|
36
|
|
|
85
|
|
|
80
|
|
||||
Appliances
|
86
|
|
|
61
|
|
|
147
|
|
|
102
|
|
||||
Services
|
41
|
|
|
36
|
|
|
81
|
|
|
76
|
|
||||
Other
|
18
|
|
|
14
|
|
|
35
|
|
|
29
|
|
||||
Total International revenue
|
$
|
740
|
|
|
$
|
668
|
|
|
$
|
1,437
|
|
|
$
|
1,284
|
|
(1)
|
Refer to our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information regarding the key components of each revenue category.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Domestic
|
$
|
329
|
|
|
$
|
316
|
|
|
$
|
596
|
|
|
$
|
614
|
|
International
|
6
|
|
|
5
|
|
|
4
|
|
|
7
|
|
||||
Total operating income
|
335
|
|
|
321
|
|
|
600
|
|
|
621
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Investment income and other
|
13
|
|
|
7
|
|
|
24
|
|
|
18
|
|
||||
Interest expense
|
(19
|
)
|
|
(18
|
)
|
|
(38
|
)
|
|
(37
|
)
|
||||
Earnings before income tax expense
|
$
|
329
|
|
|
$
|
310
|
|
|
$
|
586
|
|
|
$
|
602
|
|
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
Domestic
|
$
|
10,912
|
|
|
$
|
11,553
|
|
|
$
|
11,972
|
|
International
|
1,081
|
|
|
1,496
|
|
|
1,472
|
|
|||
Total assets
|
$
|
11,993
|
|
|
$
|
13,049
|
|
|
$
|
13,444
|
|
11.
|
Income Taxes
|
12.
|
Contingencies
|
13.
|
Subsequent Event
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Overview
|
•
|
Business Strategy Update
|
•
|
Results of Operations
|
•
|
Liquidity and Capital Resources
|
•
|
Off-Balance-Sheet Arrangements and Contractual Obligations
|
•
|
Significant Accounting Policies and Estimates
|
•
|
New Accounting Pronouncements
|
•
|
Safe Harbor Statement Under the Private Securities Litigation Reform Act
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Revenue
|
$
|
9,379
|
|
|
$
|
8,940
|
|
|
$
|
18,488
|
|
|
$
|
17,468
|
|
Revenue % growth
|
4.9
|
%
|
|
4.8
|
%
|
|
5.8
|
%
|
|
2.9
|
%
|
||||
Comparable sales % gain
|
6.2
|
%
|
|
5.4
|
%
|
|
6.6
|
%
|
|
3.5
|
%
|
||||
Gross profit
|
$
|
2,229
|
|
|
$
|
2,153
|
|
|
$
|
4,354
|
|
|
$
|
4,175
|
|
Gross profit as a % of revenue
(1)
|
23.8
|
%
|
|
24.1
|
%
|
|
23.6
|
%
|
|
23.9
|
%
|
||||
SG&A
|
$
|
1,877
|
|
|
$
|
1,830
|
|
|
$
|
3,707
|
|
|
$
|
3,552
|
|
SG&A as a % of revenue
(1)
|
20.0
|
%
|
|
20.5
|
%
|
|
20.1
|
%
|
|
20.3
|
%
|
||||
Restructuring charges
|
$
|
17
|
|
|
$
|
2
|
|
|
$
|
47
|
|
|
$
|
2
|
|
Operating income
|
$
|
335
|
|
|
$
|
321
|
|
|
$
|
600
|
|
|
$
|
621
|
|
Operating income as a % of revenue
|
3.6
|
%
|
|
3.6
|
%
|
|
3.2
|
%
|
|
3.6
|
%
|
||||
Net earnings
|
$
|
244
|
|
|
$
|
209
|
|
|
$
|
452
|
|
|
$
|
397
|
|
Diluted earnings per share
|
$
|
0.86
|
|
|
$
|
0.67
|
|
|
$
|
1.58
|
|
|
$
|
1.27
|
|
(1)
|
Because retailers vary in how they record costs of operating their supply chain between cost of goods sold and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers’ corresponding rates. For additional information regarding costs classified in cost of goods sold and SG&A, refer to Note 1,
Summary of Significant Accounting Policies
, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
February 3, 2018
.
|
|
Three Months Ended
|
|
Six Months Ended
|
||
|
August 4, 2018
|
|
August 4, 2018
|
||
Comparable sales impact
|
5.8
|
%
|
|
6.2
|
%
|
Foreign currency exchange rate fluctuation impact
|
—
|
%
|
|
0.2
|
%
|
Non-comparable sales impact
(1)
|
(0.9
|
)%
|
|
(0.6
|
)%
|
Total revenue increase
|
4.9
|
%
|
|
5.8
|
%
|
(1)
|
Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit-share revenue, credit card revenue, gift card breakage and sales of merchandise to wholesalers and dealers, as applicable.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Revenue
|
$
|
8,639
|
|
|
$
|
8,272
|
|
|
$
|
17,051
|
|
|
$
|
16,184
|
|
Revenue % growth
|
4.4
|
%
|
|
4.9
|
%
|
|
5.4
|
%
|
|
3.0
|
%
|
||||
Comparable sales % gain
(1)
|
6.0
|
%
|
|
5.4
|
%
|
|
6.6
|
%
|
|
3.4
|
%
|
||||
Gross profit
|
$
|
2,058
|
|
|
$
|
1,985
|
|
|
$
|
4,020
|
|
|
$
|
3,856
|
|
Gross profit as a % of revenue
|
23.8
|
%
|
|
24.0
|
%
|
|
23.6
|
%
|
|
23.8
|
%
|
||||
SG&A
|
$
|
1,712
|
|
|
$
|
1,669
|
|
|
$
|
3,377
|
|
|
$
|
3,242
|
|
SG&A as a % of revenue
|
19.8
|
%
|
|
20.2
|
%
|
|
19.8
|
%
|
|
20.0
|
%
|
||||
Restructuring charges
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
47
|
|
|
$
|
—
|
|
Operating income
|
$
|
329
|
|
|
$
|
316
|
|
|
$
|
596
|
|
|
$
|
614
|
|
Operating income as a % of revenue
|
3.8
|
%
|
|
3.8
|
%
|
|
3.5
|
%
|
|
3.8
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Selected Online Revenue Data
|
|
|
|
|
|
|
|
||||||||
Total online revenue
|
$
|
1,208
|
|
|
$
|
1,096
|
|
|
$
|
2,350
|
|
|
$
|
2,114
|
|
Online revenue as a % of total segment revenue
|
14.0
|
%
|
|
13.2
|
%
|
|
13.8
|
%
|
|
13.1
|
%
|
||||
Comparable online sales % gain
(1)
|
10.1
|
%
|
|
31.2
|
%
|
|
11.0
|
%
|
|
26.8
|
%
|
(1)
|
Comparable online sales is included in the comparable sales calculation.
|
|
Three Months Ended
|
|
Six Months Ended
|
||
|
August 4, 2018
|
|
August 4, 2018
|
||
Comparable sales impact
|
5.7
|
%
|
|
6.2
|
%
|
Non-comparable sales impact
(1)
|
(1.3
|
)%
|
|
(0.8
|
)%
|
Total revenue increase
|
4.4
|
%
|
|
5.4
|
%
|
(1)
|
Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit-share revenue, credit card revenue, gift card breakage and sales of merchandise to wholesalers and dealers, as applicable.
|
|
Fiscal 2019
|
|
Fiscal 2018
|
||||||||||||||||||||
|
Total Stores at Beginning of Second Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of Second Quarter
|
|
Total Stores at Beginning of Second Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of Second Quarter
|
||||||||
Best Buy
|
1,007
|
|
|
—
|
|
|
—
|
|
|
1,007
|
|
|
1,024
|
|
|
—
|
|
|
—
|
|
|
1,024
|
|
Best Buy Mobile stand-alone
|
105
|
|
|
—
|
|
|
(105
|
)
|
|
—
|
|
|
298
|
|
|
—
|
|
|
(6
|
)
|
|
292
|
|
Pacific Sales
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
Total Domestic segment stores
|
1,140
|
|
|
—
|
|
|
(105
|
)
|
|
1,035
|
|
|
1,350
|
|
|
—
|
|
|
(6
|
)
|
|
1,344
|
|
|
Revenue Mix
|
|
Comparable Sales
|
||||||||
|
Three Months Ended
|
|
Three Months Ended
|
||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||
Consumer Electronics
|
32
|
%
|
|
32
|
%
|
|
6.8
|
%
|
|
2.5
|
%
|
Computing and Mobile Phones
|
45
|
%
|
|
47
|
%
|
|
4.2
|
%
|
|
6.7
|
%
|
Entertainment
|
7
|
%
|
|
6
|
%
|
|
8.5
|
%
|
|
15.4
|
%
|
Appliances
|
12
|
%
|
|
11
|
%
|
|
10.3
|
%
|
|
5.8
|
%
|
Services
|
4
|
%
|
|
4
|
%
|
|
6.6
|
%
|
|
1.5
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
6.0
|
%
|
|
5.4
|
%
|
•
|
Consumer Electronics:
The 6.8% comparable sales gain was driven primarily by home theater, smart home and portable audio, partially offset by declines in digital imaging.
|
•
|
Computing and Mobile Phones:
The 4.2% comparable sales gain was driven primarily by computing and mobile phones, partially offset by declines in tablets.
|
•
|
Entertainment:
The 8.5% comparable sales gain was driven primarily by gaming, partially offset by declines in movies, virtual reality, drones and music.
|
•
|
Appliances:
The 10.3% comparable sales gain was driven by both large and small appliances.
|
•
|
Services:
The 6.6% comparable sales gain was driven primarily by growth in our warranty business.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Revenue
|
$
|
740
|
|
|
$
|
668
|
|
|
$
|
1,437
|
|
|
$
|
1,284
|
|
Revenue % growth
|
10.8
|
%
|
|
3.7
|
%
|
|
11.9
|
%
|
|
2.1
|
%
|
||||
Comparable sales % gain
|
7.6
|
%
|
|
4.7
|
%
|
|
7.0
|
%
|
|
4.4
|
%
|
||||
Gross profit
|
$
|
171
|
|
|
$
|
168
|
|
|
$
|
334
|
|
|
$
|
319
|
|
Gross profit as a % of revenue
|
23.1
|
%
|
|
25.1
|
%
|
|
23.2
|
%
|
|
24.8
|
%
|
||||
SG&A
|
$
|
165
|
|
|
$
|
161
|
|
|
$
|
330
|
|
|
$
|
310
|
|
SG&A as a % of revenue
|
22.3
|
%
|
|
24.1
|
%
|
|
23.0
|
%
|
|
24.1
|
%
|
||||
Restructuring charges
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Operating income
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
7
|
|
Operating income as a % of revenue
|
0.8
|
%
|
|
0.7
|
%
|
|
0.3
|
%
|
|
0.5
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||
|
August 4, 2018
|
|
August 4, 2018
|
||
Comparable sales impact
|
7.6
|
%
|
|
6.9
|
%
|
Non-comparable sales impact
(1)
|
2.6
|
%
|
|
2.3
|
%
|
Foreign currency exchange rate fluctuation impact
|
0.6
|
%
|
|
2.7
|
%
|
Total revenue increase
|
10.8
|
%
|
|
11.9
|
%
|
(1)
|
Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit-share revenue, credit card revenue, gift card breakage and sales of merchandise to wholesalers and dealers, as applicable.
|
|
Fiscal 2019
|
|
Fiscal 2018
|
||||||||||||||||||||
|
Total Stores at Beginning of Second Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of Second Quarter
|
|
Total Stores at Beginning of Second Quarter
|
|
Stores Opened
|
|
Stores Closed
|
|
Total Stores at End of Second Quarter
|
||||||||
Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Best Buy
|
134
|
|
|
—
|
|
|
—
|
|
|
134
|
|
|
134
|
|
|
—
|
|
|
—
|
|
|
134
|
|
Best Buy Mobile
|
49
|
|
|
—
|
|
|
—
|
|
|
49
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
53
|
|
Mexico:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Best Buy
|
26
|
|
|
2
|
|
|
—
|
|
|
28
|
|
|
20
|
|
|
2
|
|
|
—
|
|
|
22
|
|
Best Buy Express
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
Total International segment stores
|
215
|
|
|
2
|
|
|
—
|
|
|
217
|
|
|
212
|
|
|
2
|
|
|
—
|
|
|
214
|
|
|
Revenue Mix
|
|
Comparable Sales
|
||||||||
|
Three Months Ended
|
|
Three Months Ended
|
||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||
Consumer Electronics
|
29
|
%
|
|
31
|
%
|
|
0.3
|
%
|
|
7.3
|
%
|
Computing and Mobile Phones
|
45
|
%
|
|
47
|
%
|
|
4.5
|
%
|
|
0.3
|
%
|
Entertainment
|
6
|
%
|
|
5
|
%
|
|
14.3
|
%
|
|
0.5
|
%
|
Appliances
|
12
|
%
|
|
9
|
%
|
|
35.7
|
%
|
|
30.8
|
%
|
Services
|
6
|
%
|
|
6
|
%
|
|
11.3
|
%
|
|
(1.3
|
)%
|
Other
|
2
|
%
|
|
2
|
%
|
|
51.4
|
%
|
|
n/a
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
7.6
|
%
|
|
4.7
|
%
|
•
|
Consumer Electronics:
The 0.3% comparable sales gain was driven primarily by smart home, home theater and portable audio, partially offset by declines in digital imaging and health and fitness.
|
•
|
Computing and Mobile Phones:
The 4.5% comparable sales gain was driven primarily by mobile phones, wearables and computing, partially offset by declines in tablets.
|
•
|
Entertainment:
The 14.3%
c
omparable sales gain was driven primarily by gaming, partially offset by declines in movies and drones.
|
•
|
Appliances:
The 35.7% comparable sales gain was driven by both large and small appliances.
|
•
|
Services:
The 11.3% comparable sales gain was driven primarily by repair and installation.
|
•
|
Other:
The 51.4% comparable sales gain was driven primarily by other product offerings, including baby products and luggage.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Operating income
|
$
|
335
|
|
|
$
|
321
|
|
|
$
|
600
|
|
|
$
|
621
|
|
Restructuring charges
(1)
|
17
|
|
|
2
|
|
|
47
|
|
|
2
|
|
||||
Tax reform related item - employee bonus
(2)
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||
Non-GAAP operating income
|
$
|
352
|
|
|
$
|
323
|
|
|
$
|
654
|
|
|
$
|
623
|
|
|
|
|
|
|
|
|
|
||||||||
Effective tax rate
|
25.7
|
%
|
|
32.6
|
%
|
|
22.8
|
%
|
|
34.1
|
%
|
||||
Restructuring charges
(1)
|
(0.3
|
)%
|
|
—
|
%
|
|
0.1
|
%
|
|
—
|
%
|
||||
Non-GAAP effective tax rate
|
25.4
|
%
|
|
32.6
|
%
|
|
22.9
|
%
|
|
34.1
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Diluted EPS
|
$
|
0.86
|
|
|
$
|
0.67
|
|
|
$
|
1.58
|
|
|
$
|
1.27
|
|
Restructuring charges
(1)
|
0.06
|
|
|
0.01
|
|
|
0.17
|
|
|
0.01
|
|
||||
Tax reform related item - employee bonus
(2)
|
—
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
||||
Loss on investments
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.01
|
|
||||
Tax impact of non-GAAP adjustments
(3)
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.05
|
)
|
|
(0.01
|
)
|
||||
Non-GAAP diluted EPS
|
$
|
0.91
|
|
|
$
|
0.69
|
|
|
$
|
1.72
|
|
|
$
|
1.28
|
|
(1)
|
Refer to Note 4,
Restructuring Charges
, in the Notes to Condensed Consolidated Financial Statements for additional information regarding the nature of these charges. For the
three
and
six
months ended
August 4, 2018
, the entire balance related to the United States. For the
three
and
six
months ended
July 29, 2017
, the entire balance related to Canada.
|
(2)
|
Represents final adjustments for amounts paid and associated taxes related to a one-time bonus for certain employees announced in response to future tax savings created by the Tax Act enacted into law in the fourth quarter of fiscal 2018.
|
(3)
|
The non-GAAP adjustments relate primarily to the United States and Canada. As such, the income tax impact of non-GAAP adjustments is calculated using the tax rate for the United States (24.5% for the periods ended
August 4, 2018
, and 38.0% for the periods ended
July 29, 2017
) and Canada (26.9% for the periods ended
August 4, 2018
, and 26.6% for the periods ended
July 29, 2017
), applied to the non-GAAP adjustments of each country.
|
|
August 4, 2018
|
|
February 3, 2018
|
|
July 29, 2017
|
||||||
Cash and cash equivalents
|
$
|
1,865
|
|
|
$
|
1,101
|
|
|
$
|
1,365
|
|
Short-term investments
|
465
|
|
|
2,032
|
|
|
2,125
|
|
|||
Total cash, cash equivalents and short-term investments
|
$
|
2,330
|
|
|
$
|
3,133
|
|
|
$
|
3,490
|
|
|
Six Months Ended
|
||||||
|
August 4, 2018
|
|
July 29, 2017
|
||||
Total cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
1,108
|
|
|
$
|
692
|
|
Investing activities
|
1,200
|
|
|
(708
|
)
|
||
Financing activities
|
(1,524
|
)
|
|
(874
|
)
|
||
Effect of exchange rate changes on cash
|
(16
|
)
|
|
18
|
|
||
Increase (decrease) in cash, cash equivalents and restricted cash
|
$
|
768
|
|
|
$
|
(872
|
)
|
Rating Agency
|
|
Rating
|
|
Outlook
|
Standard & Poor's
|
|
BBB
|
|
Stable
|
Moody's
|
|
Baa1
|
|
Stable
|
Fitch
|
|
BBB
|
|
Stable
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Total cost of shares repurchased
(1)
|
$
|
375
|
|
|
$
|
397
|
|
|
$
|
774
|
|
|
$
|
781
|
|
Average price per share
|
$
|
74.80
|
|
|
$
|
55.07
|
|
|
$
|
73.21
|
|
|
$
|
50.38
|
|
Number of shares repurchased
(1)
|
5.0
|
|
|
7.2
|
|
|
10.6
|
|
|
15.5
|
|
(1)
|
As of
August 4, 2018
,
$13 million
, or
0.2 million
shares, in trades remained unsettled. As of
July 29, 2017
,
$18 million
, or
0.3 million
shares, in trades remained unsettled. The liability for unsettled trades is included in Accrued liabilities on our Condensed Consolidated Balance Sheets.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
August 4, 2018
|
|
July 29, 2017
|
|
August 4, 2018
|
|
July 29, 2017
|
||||||||
Regular quarterly cash dividends per share
|
$
|
0.45
|
|
|
$
|
0.34
|
|
|
$
|
0.90
|
|
|
$
|
0.68
|
|
Cash dividends declared and paid
|
$
|
125
|
|
|
$
|
103
|
|
|
$
|
253
|
|
|
$
|
208
|
|
Non-GAAP debt to EBITDAR =
|
Non-GAAP debt
|
|
Non-GAAP EBITDAR
|
|
|
August 4, 2018
(1)
|
|
February 3, 2018
(1)
|
|
July 29, 2017
(1)
|
||||||
Debt (including current portion)
|
$
|
848
|
|
|
$
|
1,355
|
|
|
$
|
1,354
|
|
Capitalized operating lease obligations (5 times rental expense)
(2)
|
3,907
|
|
|
3,914
|
|
|
3,880
|
|
|||
Non-GAAP debt
|
$
|
4,755
|
|
|
$
|
5,269
|
|
|
$
|
5,234
|
|
|
|
|
|
|
|
||||||
Net earnings from continuing operations
|
$
|
1,055
|
|
|
$
|
999
|
|
|
$
|
1,196
|
|
Other income (expense) (including interest expense, net)
|
(21
|
)
|
|
26
|
|
|
35
|
|
|||
Income tax expense
|
747
|
|
|
818
|
|
|
583
|
|
|||
Depreciation and amortization expense
|
712
|
|
|
683
|
|
|
656
|
|
|||
Rental expense
|
781
|
|
|
782
|
|
|
776
|
|
|||
Restructuring charges
(3)
|
55
|
|
|
10
|
|
|
12
|
|
|||
Non-GAAP EBITDAR
|
$
|
3,329
|
|
|
$
|
3,318
|
|
|
$
|
3,258
|
|
|
|
|
|
|
|
||||||
Debt to net earnings ratio
|
0.8
|
|
|
1.4
|
|
|
1.1
|
|
|||
Non-GAAP debt to EBITDAR ratio
|
1.4
|
|
|
1.6
|
|
|
1.6
|
|
(1)
|
Debt is reflected as of the balance sheet date for each of the respective fiscal periods, while net earnings from continuing operations and the other components of non-GAAP EBITDAR represent activity for the 12 months ended as of each of the respective dates.
|
(2)
|
The multiple of five times annual rent expense in the calculation of our capitalized operating lease obligations is the multiple used for the retail sector by one of the nationally recognized credit rating agencies that rate our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio.
|
(3)
|
Refer to Note 4,
Restructuring Charges
, in the Notes to Condensed Consolidated Financial Statements for additional information regarding the nature of these charges.
|
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)
|
||||||
May 6, 2018 through June 2, 2018
|
|
1,445,478
|
|
|
$
|
74.86
|
|
|
1,445,478
|
|
|
$
|
2,521,000,000
|
|
June 3, 2018 through July 7, 2018
|
|
1,962,344
|
|
|
$
|
74.07
|
|
|
1,962,344
|
|
|
$
|
2,376,000,000
|
|
July 8, 2018 through August 4, 2018
|
|
1,601,994
|
|
|
$
|
75.64
|
|
|
1,601,994
|
|
|
$
|
2,254,000,000
|
|
Total
|
|
5,009,816
|
|
|
$
|
74.80
|
|
|
5,009,816
|
|
|
|
(1)
|
Pursuant to a
$5.0 billion
share repurchase program that was authorized by our Board in February 2017. There is no expiration date governing the period over which we can repurchase shares under the February 2017 share repurchase program. For additional information, see Note 9,
Repurchase of Common Stock
, in the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.
|
Item 6.
|
Exhibits
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101
|
|
The following financial information from our Quarterly Report on Form 10-Q for the second quarter of fiscal 2019, filed with the SEC on September 10, 2018, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets at August 4, 2018, February 3, 2018, and July 29, 2017, (ii) the Condensed Consolidated Statements of Earnings for the three and six months ended August 4, 2018, and July 29, 2017, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended August 4, 2018, and July 29, 2017, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended August 4, 2018, and July 29, 2017, (v) the Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended August 4, 2018, and July 29, 2017, 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: September 10, 2018
|
By:
|
/s/ HUBERT JOLY
|
|
|
Hubert Joly
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
Date: September 10, 2018
|
By:
|
/s/ CORIE BARRY
|
|
|
Corie Barry
|
|
|
Chief Financial Officer
|
|
|
|
Date: September 10, 2018
|
By:
|
/s/ MATHEW R. WATSON
|
|
|
Mathew R. Watson
|
|
|
Senior Vice President, Finance – Controller and Chief Accounting Officer
|
1.
|
Grant of Award
. In consideration of your service on the Board of Directors of the Company (“
Board
”), 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. Amended and Restated 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.
|
Restricted Stock Units
. A “
Restricted
Stock Unit
” is a right to receive a share of the Company’s common stock (“
Share
”) upon the lapse of the restrictions set forth in this Agreement.
|
(a)
|
Restrictions
. During the time you serve on the Board (the “
Holding Period
”), the Restricted Stock Units are subject to the restrictions described in this Agreement and the Plan (the “
Restrictions
”). During the Holding Period, the 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. The Restricted Stock Units are subject to forfeiture to Best Buy as provided in this Agreement and the Plan.
|
(b)
|
Vesting
. Except as otherwise set forth herein, so long as your service on the Board continues, the Restricted Stock Units shall vest in accordance with the vesting schedule stated in the Award Notification. If your service on the Board is terminated for any reason other than Cause, a pro rata portion (based on your length of service during the applicable vesting period) of any unvested Restricted Stock Units will vest as of such termination date. If your service on the Board is terminated for Cause, all Restricted Stock Units, whether vested or not as of the date of termination pursuant to the vesting schedule, will be forfeited as of the date of termination.
|
(c)
|
Issuance of Shares; Holding Period
.
Within 30 days from the end of the Holding
Period, the Shares underlying the Restricted Stock Units that have vested as of the end of the Holding Period will be delivered to you.
|
3.
|
Restrictive Covenants and Remedies
. By accepting the Award, you specifically agree to the restrictive covenants contained in this Section 3 (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.
|
(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 service to the Company 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.
|
(b)
|
Non-Solicitation
. During the Holding Period and for one year following the termination of your service on the Board, you shall not:
|
(i)
|
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;
|
(ii)
|
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;
|
(iii)
|
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;
|
(iv)
|
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
|
(v)
|
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
.
|
(c)
|
Partial Invalidity
. If any portion of this Section 3 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.
|
(d)
|
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.
|
(e)
|
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 of any of your then unvested Restricted Stock Units;
|
(B)
|
require you to immediately return to the Company any Shares issued under any Restricted Stock Units that 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 date of issuance of any Shares issued under any Restricted Stock Units).
|
(ii)
|
The Committee shall have sole discretion to determine what constitutes the conduct described in Section 3(e)(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,
|
(f)
|
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 3.
|
4.
|
General Terms and Conditions.
|
(a)
|
Rights as a Shareholder
. 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.
|
(b)
|
Dividend Equivalents
. Notwithstanding the foregoing, you shall accumulate a right to “dividend equivalents” on the Restricted Stock Units if cash dividends are paid on Shares having a record date on or after the Award Date and prior to the end of the Holding Period. You will be entitled to such dividend equivalents with respect to the Restricted Stock Units from the Award Date until the date such Restricted Stock Units are vested and issued (the “
Dividend Equivalent Period
”), as follows:
|
(i)
|
For each Share dividend having a record date during the Dividend Equivalent Period, as of each payment date for such dividend, a dollar amount equal to the amount of the dividend that would have been paid on the number of Shares equal to the number of Restricted Stock Units held by you under this Award as of the close of business on the record date for such dividend will be converted into a number of additional notional Restricted Stock Units equal to the number of whole Shares with fractional shares rounded up to the next whole Share that could have been purchased at the closing price on the dividend payment date with such dollar amount.
|
(ii)
|
Such accrued dividend equivalents will be paid to you in Shares at such time and in accordance with Section 2, as applies, but in each such case only to the extent that the Restricted Stock Units on which such dividend equivalents were credited have become vested and payable. The Committee may, in its discretion, pay such dividend equivalents in cash in lieu of Shares.
|
(c)
|
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). You authorize the Company, or its agents, to satisfy its 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 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.
|
(A)
|
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 that become payable to you upon
|
(B)
|
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.
|
(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.
|
(a)
|
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.
|
(b)
|
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 to the extent not prohibited by the applicable law of the State in which you primarily work and reside; however, the Arbitration Policy, its enforceability, and its implementation are governed by the Federal Arbitration Act.
|
5.
|
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)
|
“
Cause
” for termination of your service 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)
|
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;
|
(vi)
|
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;
|
(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 willfully engaged in conduct that is harmful to the Company Group, monetarily or otherwise;
|
(viii)
|
breach any provision of this Agreement or any other agreement between you and any member of the Company Group; or
|
(ix)
|
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.
|
(b)
|
“
Company Group
” means, collectively, Best Buy Co., Inc. and its subsidiaries.
|
(c)
|
“
Committee
” means the Compensation and Human Resources Committee of the Board of Directors of Best Buy Co., Inc.
|
(d)
|
“
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 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 your service, 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.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Best Buy Co., Inc.;
|
2.
|
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;
|
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;
|
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
|
d)
|
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
|
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
|
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.
|
Date: September 10, 2018
|
/s/ HUBERT JOLY
|
|
Hubert Joly
|
|
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Best Buy Co., Inc.;
|
2.
|
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;
|
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;
|
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
|
d)
|
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
|
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
|
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.
|
Date: September 10, 2018
|
/s/ CORIE BARRY
|
|
Corie Barry
|
|
Chief Financial Officer
|
Date: September 10, 2018
|
/s/ HUBERT JOLY
|
|
Hubert Joly
|
|
Chairman and Chief Executive Officer
|
Date: September 10, 2018
|
/s/ CORIE BARRY
|
|
Corie Barry
|
|
Chief Financial Officer
|