Notes to Condensed Consolidated Financial Statements
(unaudited)
Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Condensed Consolidated Financial Statements refers to Best Buy Co., Inc. and its consolidated subsidiaries.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.
Historically, we have generated a higher proportion of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended
January 30, 2016
. The first
nine
months of fiscal
2017
and fiscal
2016
included
39
weeks.
In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a
one
-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our condensed consolidated financial statements. No such events were identified for this period.
In preparing the accompanying condensed consolidated financial statements, we evaluated the period from
October 30, 2016
, through the date the financial statements were issued, for material subsequent events requiring recognition or disclosure. No such events were identified for this period.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,
Revenue from Contracts with Customers,
as a new topic, Accounting Standards Codification ("ASC") Topic 606. The new guidance provides a comprehensive framework for the analysis of revenue transactions and will apply to all of our revenue streams. We plan to adopt this standard in the first quarter of our fiscal 2019, which aligns with the required adoption date; however, we have not concluded on our method of transition upon adoption. While we are still in the process of evaluating the effect of adoption on our financial statements, we do not currently expect a material impact on our results of operations, cash flows or financial position.
In February 2016, the FASB issued ASU 2016-02,
Leases.
The new guidance was issued to increase transparency and comparability among companies by requiring most leases to be included on the balance sheet and by expanding disclosure requirements. Based on the effective dates, the new guidance would first apply in the first quarter of our fiscal 2020. While we expect adoption to lead to a material increase in the assets and liabilities recorded on our balance sheet, we are still evaluating the overall impact on our financial statements.
In March 2016, the FASB issued ASU 2016-09,
Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting.
The new guidance changes certain aspects of accounting for share-based payments including accounting for income taxes, forfeitures and classifications in the statement of cash flows. We plan to adopt this standard in the first quarter of fiscal 2018, which aligns with the required adoption date. We are still in the process of evaluating the standard and the effect of adoption on our financial statements.
Changes in Accounting Principles
In the fourth quarter of fiscal 2016, we retrospectively adopted ASU 2015-03,
Simplifying the Presentation of Debt Issuance Costs
;
ASU 2015-15,
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
; and ASU 2015-17,
Balance Sheet Classification of Deferred Taxes.
The adoption did not have a material impact on our results of operations, cash flows or financial position.
The following table reconciles the balance sheet line items impacted by the adoption of these standards at
October 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
October 31, 2015 Reported
|
|
ASU 2015-03 & 2015-15 Adjustments
|
|
ASU 2015-17 Adjustments
|
|
October 31, 2015 Adjusted
|
Other current assets
|
$
|
676
|
|
|
$
|
(2
|
)
|
|
$
|
(265
|
)
|
|
$
|
409
|
|
Other assets
|
636
|
|
|
(4
|
)
|
|
265
|
|
|
897
|
|
Total assets
|
$
|
15,175
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
15,169
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
$
|
1,256
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
1,250
|
|
Total liabilities & equity
|
$
|
15,175
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
15,169
|
|
|
|
2.
|
Discontinued Operations
|
Discontinued operations are primarily comprised of Jiangsu Five Star Appliance Co., Limited ("Five Star") within our International segment. In February 2015, we completed the sale of Five Star and recognized a gain on sale of $99 million. Following the sale of Five Star, we continued to hold as available for sale one retail property in Shanghai, China. In May 2016, we completed the sale of the property and recognized a gain, net of income tax, of
$16 million
. The gain on sale of the property is included in Other, net within operating activities in the Condensed Consolidated Statements of Cash Flows. The presentation of discontinued operations has been retrospectively applied to all prior periods presented.
The aggregate financial results of discontinued operations were as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
217
|
|
Gain (loss) from discontinued operations before income tax benefit (expense)
|
2
|
|
|
(4
|
)
|
|
28
|
|
|
(14
|
)
|
Income tax benefit (expense)
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
3
|
|
Gain on sale of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
99
|
|
Net gain (loss) from discontinued operations
|
$
|
2
|
|
|
$
|
(4
|
)
|
|
$
|
21
|
|
|
$
|
88
|
|
3. Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:
Level 1
— Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.
Level 2
— Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:
|
|
•
|
Quoted prices for similar assets or liabilities in active markets;
|
|
|
•
|
Quoted prices for identical or similar assets or liabilities in non-active markets;
|
|
|
•
|
Inputs other than quoted prices that are observable for the asset or liability; and
|
|
|
•
|
Inputs that are derived principally from or corroborated by other observable market data.
|
Level 3
— Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on
the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.
The following table sets forth, by level within the fair value hierarchy, our financial assets and liabilities that were accounted for at fair value on a recurring basis at
October 29, 2016
,
January 30, 2016
, and
October 31, 2015
, according to the valuation techniques we used to determine their fair values ($ in millions).
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
Fair Value Hierarchy
|
|
October 29, 2016
|
|
January 30, 2016
|
|
October 31, 2015
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
Level 1
|
|
$
|
97
|
|
|
$
|
51
|
|
|
$
|
2
|
|
Commercial paper
|
Level 2
|
|
—
|
|
|
265
|
|
|
108
|
|
Time deposits
|
Level 2
|
|
11
|
|
|
306
|
|
|
222
|
|
Short-term investments
|
|
|
|
|
|
|
|
Corporate bonds
|
Level 2
|
|
—
|
|
|
193
|
|
|
333
|
|
Commercial paper
|
Level 2
|
|
250
|
|
|
122
|
|
|
288
|
|
Time deposits
|
Level 2
|
|
1,527
|
|
|
990
|
|
|
1,029
|
|
Other current assets
|
|
|
|
|
|
|
|
|
Money market funds
|
Level 1
|
|
3
|
|
|
—
|
|
|
—
|
|
Commercial paper
|
Level 2
|
|
60
|
|
|
—
|
|
|
—
|
|
Foreign currency derivative instruments
|
Level 2
|
|
5
|
|
|
18
|
|
|
14
|
|
Time deposits
|
Level 2
|
|
100
|
|
|
79
|
|
|
79
|
|
Other assets
|
|
|
|
|
|
|
|
Interest rate swap derivative instruments
|
Level 2
|
|
13
|
|
|
25
|
|
|
10
|
|
Auction rate securities
|
Level 3
|
|
—
|
|
|
2
|
|
|
2
|
|
Marketable securities that fund deferred compensation
|
Level 1
|
|
96
|
|
|
96
|
|
|
96
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Accrued Liabilities
|
|
|
|
|
|
|
|
|
|
|
Foreign currency derivative instruments
|
Level 2
|
|
3
|
|
|
1
|
|
|
—
|
|
During the
third quarter
of fiscal
2017
, our remaining investments in auction rate securities ("ARS") were called at par, which resulted in proceeds of $
2 million
and no realized gain or loss. As of
October 29, 2016
, we had no items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3). For the periods ended
January 30, 2016
, and
October 31, 2015
, there were no changes in the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3).
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Money market funds.
Our money market fund investments were measured at fair value as they trade in an active market using quoted market prices and, therefore, were classified as Level 1.
Commercial paper.
Our investments in commercial paper were measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2.
Time deposits.
Our time deposits are balances held with banking institutions that cannot be withdrawn for specified terms without a penalty. Time deposits are held at face value plus accrued interest, which approximates fair value, and are classified as Level 2.
Corporate bonds.
Our corporate bond investments were measured at fair value using quoted market prices. They were classified as Level 2 as they trade in a non-active market for which bond prices are readily available.
Foreign currency derivative instruments.
Comprised primarily of foreign currency forward contracts and foreign currency swap contracts, our foreign currency derivative instruments were measured at fair value using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. Our foreign currency derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.
Interest rate swap derivative instruments.
Our interest rate swap contracts were measured at fair value using readily observable inputs, such as the LIBOR interest rate. Our interest rate swap derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.
Auction rate securities.
Our investments in ARS were classified as Level 3 as quoted prices were unavailable. Due to limited market information, we utilized a discounted cash flow ("DCF") model to derive an estimate of fair value. The assumptions we used in preparing the DCF model included estimates with respect to the amount and timing of future interest and principal payments, forward projections of the interest rate benchmarks, the probability of full repayment of the principal considering the credit quality and guarantees in place and the rate of return required by investors to own such securities given the current liquidity risk associated with ARS.
Marketable securities that fund deferred compensation.
The assets that fund our deferred compensation consist of investments in mutual funds. These investments were classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value, except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded within operating income in our Condensed Consolidated Statements of Earnings.
The following table summarizes the fair value remeasurements for non-restructuring property and equipment impairments and restructuring impairments recorded during the three and
nine
months ended
October 29, 2016
, and
October 31, 2015
($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments
|
|
Remaining Net Carrying Value
(1)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Property and equipment (non-restructuring)
|
$
|
8
|
|
|
$
|
9
|
|
|
$
|
16
|
|
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
10
|
|
Restructuring activities
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Tradename
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
—
|
|
Property and equipment
|
1
|
|
|
—
|
|
|
8
|
|
|
30
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
24
|
|
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
|
(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
October 29, 2016
, and
October 31, 2015
.
|
|
|
(2)
|
See Note 5,
Restructuring Charges
, for additional information.
|
All of the fair value remeasurements included in the table above were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived using a DCF model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate. In the case of assets for which the impairment was the result of restructuring activities, no future cash flows have been assumed as the assets will cease to be used and expected sale values are nominal.
Fair Value of Financial Instruments
Our financial instruments, other than those presented in the disclosures above, include cash, receivables, other investments, accounts payable, other payables and long-term debt. The fair values of cash, receivables, accounts payable and other payables approximated carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate fair value. See Note 6,
Debt
, for information about the fair value of our long-term debt.
4. Goodwill and Intangible Assets
The carrying values of goodwill and indefinite-lived tradenames for the Domestic segment were
$425 million
and
$18 million
, respectively, at
October 29, 2016
, and
$425 million
and
$18 million
, respectively, at
January 30, 2016
. The changes in the carrying values of goodwill and indefinite-lived tradenames by segment were as follows in the
nine
months ended
October 31, 2015
($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
Indefinite-lived Tradenames
|
|
Domestic
|
|
Domestic
|
|
International
|
|
Total
|
Balances at January 31, 2015
|
$
|
425
|
|
|
$
|
18
|
|
|
$
|
39
|
|
|
$
|
57
|
|
Changes in foreign currency exchange rates
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Canada brand restructuring
(1)
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
(40
|
)
|
Balances at October 31, 2015
|
$
|
425
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
|
(1)
|
Represents the Future Shop tradename impairment as a result of the Canadian brand consolidation in the first quarter of fiscal 2016. See Note 5,
Restructuring Charges
, for further discussion of the Canadian brand consolidation.
|
The following table provides the gross carrying amount of goodwill and cumulative goodwill impairment ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 29, 2016
|
|
January 30, 2016
|
|
October 31, 2015
|
|
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
Charges incurred in the
three
and
nine
months ended
October 29, 2016
, and
October 31, 2015
, for our restructuring activities were as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Renew Blue Phase 2
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
—
|
|
Canadian brand consolidation
|
(2
|
)
|
|
5
|
|
|
(1
|
)
|
|
189
|
|
Renew Blue
(1)
|
1
|
|
|
—
|
|
|
4
|
|
|
(2
|
)
|
Other restructuring activities
(2)
|
1
|
|
|
2
|
|
|
1
|
|
|
2
|
|
Total restructuring charges
|
$
|
1
|
|
|
$
|
7
|
|
|
$
|
30
|
|
|
$
|
189
|
|
|
|
(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
$10 million
at
October 29, 2016
.
|
|
|
(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
$12 million
at
October 29, 2016
.
|
Renew Blue Phase 2
In the first quarter of fiscal 2017, we took several strategic actions to eliminate and simplify certain components of our operations and restructure certain field and corporate teams as part of our Renew Blue Phase 2 plan. We recorded an expense of
$1 million
and
$26 million
related to Phase 2 of the plan during the
three
and
nine
months ended
October 29, 2016
,
respectively. The expense consisted primarily of employee termination benefits and property and equipment impairments. All restructuring charges related to this plan are from continuing operations and are presented in restructuring charges in our Condensed Consolidated Statements of Earnings.
The composition of the restructuring charges we incurred during the
three
and
nine
months ended
October 29, 2016
, for Renew Blue Phase 2 was as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
October 29, 2016
|
|
Three Months Ended
|
|
Nine Months Ended
|
Property and equipment impairments
|
$
|
1
|
|
|
$
|
8
|
|
Termination benefits
|
—
|
|
|
18
|
|
Total Renew Blue Phase 2 restructuring charges
|
$
|
1
|
|
|
$
|
26
|
|
The following table summarizes our restructuring accrual activity during the
nine
months ended
October 29, 2016
, related to termination benefits as a result of Renew Blue Phase 2 ($ in millions):
|
|
|
|
|
|
Termination
Benefits
|
Balances at January 30, 2016
|
$
|
—
|
|
Charges
|
19
|
|
Cash payments
|
(16
|
)
|
Adjustments
(1)
|
(2
|
)
|
Balances at October 29, 2016
|
$
|
1
|
|
(1) Adjustments to termination benefits primarily represent changes in retention assumptions.
Canadian Brand Consolidation
In the first quarter of fiscal
2016
, we consolidated the Future Shop and Best Buy stores and websites in Canada under the Best Buy brand. This resulted in the permanent closure of
66
Future Shop stores and the conversion of the remaining
65
Future Shop stores to the Best Buy brand. In the
three
and
nine
months ended
October 29, 2016
, we recognized benefits of
$2 million
and
$1 million
related to our Canadian brand consolidation, respectively, which was due to changes in our facility closure and other costs assumptions. In the
third quarter
of fiscal
2016
, we incurred
$5 million
of restructuring charges related to lease exit costs and employee termination benefits. In the first
nine
months of
2016
we incurred
$189 million
of restructuring charges, which primarily consisted of lease exit costs, a tradename impairment, property and equipment impairments, employee termination benefits and inventory write-downs.
The inventory write-downs related to our Canadian brand consolidation are presented in restructuring charges – cost of goods sold in our Condensed Consolidated Statements of Earnings, and the remainder of the restructuring charges are presented in restructuring charges in our Condensed Consolidated Statements of Earnings.
The composition of total restructuring charges we incurred for the Canadian brand consolidation in the
three
and
nine
months ended
October 29, 2016
, and
October 31, 2015
, as well as the cumulative amount incurred through
October 29, 2016
, was as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
|
Cumulative Amount
|
Inventory write-downs
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
3
|
|
Property and equipment impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
30
|
|
Tradename impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
40
|
|
Termination benefits
|
—
|
|
|
2
|
|
|
—
|
|
|
26
|
|
|
25
|
|
Facility closure and other costs
|
(2
|
)
|
|
4
|
|
|
(1
|
)
|
|
89
|
|
|
101
|
|
Total Canadian brand consolidation restructuring charges
|
$
|
(2
|
)
|
|
$
|
5
|
|
|
$
|
(1
|
)
|
|
$
|
189
|
|
|
$
|
199
|
|
The following tables summarize our restructuring accrual activity during the
nine
months ended
October 29, 2016
, and
October 31, 2015
, related to termination benefits and facility closure and other costs associated with the Canadian brand consolidation ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Benefits
|
|
Facility
Closure and
Other Costs
|
|
Total
|
Balances at January 30, 2016
|
$
|
2
|
|
|
$
|
64
|
|
|
$
|
66
|
|
Charges
|
—
|
|
|
1
|
|
|
1
|
|
Cash payments
|
(2
|
)
|
|
(29
|
)
|
|
(31
|
)
|
Adjustments
(1)
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
Changes in foreign currency exchange rates
|
—
|
|
|
3
|
|
|
3
|
|
Balances at October 29, 2016
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
Benefits
|
|
Facility
Closure and
Other Costs
|
|
Total
|
Balances at January 31, 2015
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Charges
|
28
|
|
|
113
|
|
|
141
|
|
Cash payments
|
(22
|
)
|
|
(28
|
)
|
|
(50
|
)
|
Adjustments
(1)
|
(2
|
)
|
|
(9
|
)
|
|
(11
|
)
|
Changes in foreign currency exchange rates
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
Balances at October 31, 2015
|
$
|
4
|
|
|
$
|
73
|
|
|
$
|
77
|
|
(1) Adjustments to facility closure and other costs represent changes in sublease assumptions. Adjustments to termination benefits represent changes in retention assumptions.
6. Debt
Short-Term Debt
U.S. Revolving Credit Facility
On June 27, 2016, we entered into a $1.25 billion five-year senior unsecured revolving credit facility agreement (the "Five-Year Facility Agreement") with a syndicate of banks. The Five-Year Facility Agreement replaced the previous $1.25 billion senior unsecured revolving credit facility (the "Previous Facility") with a syndicate of banks, which was originally scheduled to expire in June 2019, but was terminated on June 27, 2016. The Five-Year Facility Agreement permits borrowings up to $1.25 billion and expires in June 2021. At
October 29, 2016
, there were no borrowings outstanding and $1.25 billion was available under the Five-Year Facility Agreement. In addition, there were no borrowings outstanding under the Previous Facility as of
January 30, 2016
, and
October 31, 2015
.
The interest rate under the Five-Year Facility Agreement is variable and is determined at our option as: (i) the sum of (a) the greatest of (1) JPMorgan Chase Bank, N.A.'s prime rate, (2) the greater of the federal funds rate and the overnight bank funding rate plus, in each case, 0.5% and (3) the one-month London Interbank Offered Rate (“LIBOR”), subject to certain adjustments plus 1% and (b) a variable margin rate (the “ABR Margin”); or (ii) the LIBOR plus a variable margin rate (the “LIBOR Margin”). In addition, a facility fee is assessed on the commitment amount. The ABR Margin, LIBOR Margin and the facility fee are based upon our current senior unsecured debt rating. Under the Five-Year Facility Agreement, the ABR Margin ranges from 0.00% to 0.50%, the LIBOR Margin ranges from 0.90% to 1.50%, and the facility fee ranges from 0.100% to 0.250%.
The Five-Year Facility Agreement is guaranteed by certain of our subsidiaries and contains customary affirmative and negative covenants materially consistent with the Previous Facility. Among other things, these covenants restrict our and certain of our subsidiaries' ability to incur certain types or amounts of indebtedness, incur liens on certain assets, make material changes in corporate structure or the nature of our business, dispose of material assets, engage in a change in control transaction, make certain foreign investments, enter into certain restrictive agreements or engage in certain transactions with affiliates. The Five-Year Facility Agreement also contains covenants that require us to maintain a maximum quarterly cash flow leverage ratio and a minimum quarterly interest coverage ratio (both ratios measured quarterly for the previous 12 months). The Five-Year Facility Agreement contains default provisions including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants.
Long-Term Debt
Long-term debt consisted of the following ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 29, 2016
|
|
January 30, 2016
|
|
October 31, 2015
|
2016 Notes
|
$
|
—
|
|
|
$
|
350
|
|
|
$
|
350
|
|
2018 Notes
|
500
|
|
|
500
|
|
|
500
|
|
2021 Notes
|
650
|
|
|
650
|
|
|
649
|
|
Interest rate swap valuation adjustments
|
13
|
|
|
25
|
|
|
10
|
|
Subtotal
|
1,163
|
|
|
1,525
|
|
|
1,509
|
|
Debt discounts and issuance costs
|
(5
|
)
|
|
(7
|
)
|
|
(6
|
)
|
Financing lease obligations
|
180
|
|
|
178
|
|
|
88
|
|
Capital lease obligations
|
29
|
|
|
38
|
|
|
42
|
|
Total long-term debt
|
1,367
|
|
|
1,734
|
|
|
1,633
|
|
Less: current portion
(1)
|
(43
|
)
|
|
(395
|
)
|
|
(383
|
)
|
Total long-term debt, less current portion
|
$
|
1,324
|
|
|
$
|
1,339
|
|
|
$
|
1,250
|
|
|
|
(1)
|
Our 2016 Notes, due March 15, 2016, were classified in our current portion of long-term debt as of
January 30, 2016
and
October 31, 2015
, respectively. In March 2016, we repaid the 2016 Notes using existing cash resources.
|
The fair value of total long-term debt, excluding debt discounts and issuance costs and financing and capital lease obligations, approximated
$1,260 million
,
$1,543 million
and
$1,587 million
at
October 29, 2016
,
January 30, 2016
, and
October 31, 2015
, respectively, based primarily on the market prices quoted from external sources, compared with carrying values of
$1,163 million
,
$1,525 million
and
$1,509 million
, respectively. If long-term debt was measured at fair value in the financial statements, it would be classified primarily as Level 2 in the fair value hierarchy.
See Note 5,
Debt
, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
January 30, 2016
, for additional information regarding the terms of our debt facilities, debt instruments and other obligations.
7. Derivative Instruments
We manage our economic and transaction exposure to certain risks through the use of foreign currency and interest rate swap derivative instruments. Our objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset value associated with changes in foreign currency exchange rates and interest rates. We do not hold derivative instruments for trading or speculative purposes. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by engaging with major financial institutions as our counterparties.
We record all derivative instruments on our Condensed Consolidated Balance Sheets at fair value and evaluate hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting. We formally document all hedging relations at inception for derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transaction. In addition, we have derivatives which are not designated as hedging instruments.
Net Investment Hedges
We use foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations. The contracts have terms up to
12 months
. For a net investment hedge, we recognize changes in the fair value of the derivative as a component of foreign currency translation within other comprehensive income to offset a portion of the change in translated value of the net investment being hedged, until the investment is sold or liquidated. We limit recognition in net earnings of amounts previously recorded in other comprehensive income to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. We report the ineffective portion of the gain or loss, if any, in net earnings.
Interest Rate Swaps
We use "receive fixed-rate, pay variable-rate" interest rate swaps to mitigate the effect of interest rate fluctuations on a portion of our 2018 Notes and 2021 Notes. Our interest rate swap contracts are considered perfect hedges because the critical terms and
notional amounts match those of our fixed-rate debt being hedged and are, therefore, accounted as fair value hedges using the shortcut method. Under the shortcut method, we recognize the change in the fair value of the derivatives with an offsetting change to the carrying value of the debt. Accordingly, there is no impact on our Condensed Consolidated Statements of Earnings from the fair value of the derivatives.
Derivatives Not Designated as Hedging Instruments
We use foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies and on certain forecast inventory purchases denominated in non-functional currencies. The contracts generally have terms of up to
12
months. These derivative instruments are not designated as hedging relationships, and, therefore, we record gains and losses on these contracts directly to net earnings.
Summary of Derivative Balances
The following table presents the gross fair values for outstanding derivative instruments and the corresponding classification at
October 29, 2016
,
January 30, 2016
, and
October 31, 2015
($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 29, 2016
|
|
January 30, 2016
|
|
October 31, 2015
|
Contract Type
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
Derivatives designated as net investment hedges
(1)
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
12
|
|
|
$
|
—
|
|
Derivatives designated as interest rate swaps
(2)
|
13
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
10
|
|
|
—
|
|
No hedge designation (foreign exchange forward contracts)
(1)
|
1
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Total
|
$
|
18
|
|
|
$
|
3
|
|
|
$
|
43
|
|
|
$
|
1
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
|
(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.
|
The following table presents the effects of derivative instruments on other comprehensive income ("OCI") and on our Condensed Consolidated Statements of Earnings for the
three
and
nine
months ended
October 29, 2016
, and
October 31, 2015
($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Contract Type
|
Pre-tax Gain(Loss) Recognized in OCI
|
|
Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)
|
|
Pre-tax Gain(Loss) Recognized in OCI
|
|
Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)
|
|
Pre-tax Gain(Loss) Recognized in OCI
|
|
Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)
|
|
Pre-tax Gain(Loss) Recognized in OCI
|
|
Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion)
|
Derivatives designated as net investment hedges
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(10
|
)
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
—
|
|
The following tables present the effects of derivative instruments on our Condensed Consolidated Statements of Earnings for the
three
and
nine
months ended
October 29, 2016
, and
October 31, 2015
($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized within SG&A
|
|
Three Months Ended
|
|
Nine Months Ended
|
Contract Type
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
No hedge designation (foreign exchange forward contracts)
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized within Interest Expense
|
|
Three Months Ended
|
|
Nine Months Ended
|
Contract Type
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Interest rate swap gain
|
$
|
(14
|
)
|
|
$
|
(3
|
)
|
|
$
|
(12
|
)
|
|
$
|
9
|
|
Adjustments to carrying value of long-term debt
|
14
|
|
|
3
|
|
|
12
|
|
|
(9
|
)
|
Net impact on Condensed Consolidated Statements of Earnings
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The following table presents the notional amounts of our derivative instruments at
October 29, 2016
,
January 30, 2016
, and
October 31, 2015
($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
Contract Type
|
October 29, 2016
|
|
January 30, 2016
|
|
October 31, 2015
|
Derivatives designated as net investment hedges
|
$
|
203
|
|
|
$
|
208
|
|
|
$
|
222
|
|
Derivatives designated as interest rate swaps
|
750
|
|
|
750
|
|
|
750
|
|
No hedge designation (foreign exchange forward contracts)
|
59
|
|
|
94
|
|
|
195
|
|
Total
|
$
|
1,012
|
|
|
$
|
1,052
|
|
|
$
|
1,167
|
|
8. Earnings per Share
We compute our basic earnings per share based on the weighted-average number of common shares outstanding and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued. Potentially dilutive securities include stock options, nonvested share awards and shares issuable under our employee stock purchase plan. Nonvested market-based share awards and nonvested performance-based share awards are included in the average diluted shares outstanding for each period if established market or performance criteria have been met at the end of the respective periods.
The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share from continuing operations for the
three
and
nine
months ended
October 29, 2016
, and
October 31, 2015
($ and shares in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Numerator
|
|
|
|
|
|
|
|
|
|
Net earnings from continuing operations
|
$
|
192
|
|
|
$
|
129
|
|
|
$
|
600
|
|
|
$
|
330
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
316.2
|
|
|
344.7
|
|
|
320.2
|
|
|
348.9
|
|
Dilutive effect of stock compensation plan awards
|
3.8
|
|
|
4.3
|
|
|
3.4
|
|
|
4.7
|
|
Weighted-average common shares outstanding, assuming dilution
|
320.0
|
|
|
349.0
|
|
|
323.6
|
|
|
353.6
|
|
|
|
|
|
|
|
|
|
Net earnings per share from continuing operations
|
|
|
|
|
|
|
|
Basic
|
$
|
0.61
|
|
|
$
|
0.37
|
|
|
$
|
1.87
|
|
|
$
|
0.95
|
|
Diluted
|
$
|
0.60
|
|
|
$
|
0.37
|
|
|
$
|
1.85
|
|
|
$
|
0.93
|
|
The computation of weighted-average common shares outstanding, assuming dilution, excluded options to purchase
6.3 million
and
10.1 million
shares of or common stock for the
three
months ended
October 29, 2016
, and
October 31, 2015
, respectively, and options to purchase
6.9 million
and
10.0 million
shares of our common stock for the
nine
months ended
October 29, 2016
, and
October 31, 2015
, respectively. These amounts were excluded as the options’ exercise prices were greater than the average market price of our common stock for the periods presented, and, therefore, the effect would be anti-dilutive (i.e., including such options would result in higher earnings per share).
9. Comprehensive Income
The following tables provide a reconciliation of the components of accumulated other comprehensive income, net of tax, attributable to Best Buy Co., Inc. for the
three
and
nine
months ended
October 29, 2016
, and
October 31, 2015
($ in millions):
|
|
|
|
|
|
Foreign Currency Translation
|
Balances at July 30, 2016
|
$
|
296
|
|
Foreign currency translation adjustments
|
(19
|
)
|
Balances at October 29, 2016
|
$
|
277
|
|
|
|
|
Foreign Currency Translation
|
Balances at January 30, 2016
|
$
|
271
|
|
Foreign currency translation adjustments
|
6
|
|
Balances at October 29, 2016
|
$
|
277
|
|
|
|
|
Foreign Currency Translation
|
Balances at August 1, 2015
|
$
|
298
|
|
Foreign currency translation adjustments
|
(2
|
)
|
Balances at October 31, 2015
|
$
|
296
|
|
|
|
|
Foreign Currency Translation
|
Balances at January 31, 2015
|
$
|
382
|
|
Foreign currency translation adjustments
|
(19
|
)
|
Reclassification of foreign currency translation adjustments into earnings due to sale of business
|
(67
|
)
|
Balances at October 31, 2015
|
$
|
296
|
|
The gains and losses on our net investment hedges, which are included in foreign currency translation adjustments, were not material for the periods presented. There is generally no tax impact related to foreign currency translation adjustments, as the earnings are considered permanently reinvested.
10. Repurchase of Common Stock
We have a
$5.0 billion
share repurchase program that was authorized by our Board of Directors in June 2011. There is no expiration date governing the period over which we can repurchase shares under the June 2011 share repurchase program. As of
January 30, 2016
,
$3.0 billion
remained available for share repurchases. On February 25, 2016, we announced our intent to repurchase up to an additional
$1.0 billion
over
two years
.
On January 22, 2016, we entered into a variable notional accelerated share repurchase agreement ("ASR") with a third party financial institution to repurchase
$150 million
to
$175 million
of our common stock. Under the agreement, we paid
$175 million
at the beginning of the contract and received an initial delivery of
4.4 million
shares on
January 25, 2016
. We retired these shares and recorded a
$120 million
reduction to shareholders' equity. As of
January 30, 2016
, the remaining
$55 million
was included as a reduction of shareholders' equity in Prepaid share repurchase in the Condensed Consolidated Balance Sheets. The ASR was settled on February 17, 2016, for a final notional amount of
$165 million
. Accordingly, we received
1.6 million
shares, which were retired, and a
$10 million
cash payment from our counter-party equal to the difference between the
$175 million
up-front payment and the final notional amount.
The following table presents information regarding the shares we repurchased during the
three
months and
nine
months ended
October 29, 2016
, and
October 31, 2015
($ and shares in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Total cost of shares repurchased
|
|
|
|
|
|
|
|
Open market
(1)
|
$
|
206
|
|
|
$
|
64
|
|
|
$
|
483
|
|
|
$
|
388
|
|
Settlement of January 2016 ASR
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
Total
|
$
|
206
|
|
|
$
|
64
|
|
|
$
|
528
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
Average price per share
|
|
|
|
|
|
|
|
Open market
|
$
|
37.67
|
|
|
$
|
35.17
|
|
|
$
|
33.52
|
|
|
$
|
34.20
|
|
Settlement of January 2016 ASR
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28.55
|
|
|
$
|
—
|
|
Average
|
$
|
37.67
|
|
|
$
|
35.17
|
|
|
$
|
33.03
|
|
|
$
|
34.20
|
|
|
|
|
|
|
|
|
|
Number of shares repurchased and retired
|
|
|
|
|
|
|
|
Open market
(1)
|
5.5
|
|
|
1.8
|
|
|
14.4
|
|
|
11.3
|
|
Settlement of January 2016 ASR
|
—
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
Total
|
5.5
|
|
|
1.8
|
|
|
16.0
|
|
|
11.3
|
|
|
|
(1)
|
As of
October 29, 2016
,
$11 million
, or
0.3 million
shares, in trades remained unsettled. As of
October 31, 2015
,
$3 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.
|
At
October 29, 2016
, approximately
$2.5 billion
remained available for additional purchases under the June 2011 share repurchase program. Repurchased shares are retired and constitute authorized but unissued shares.
11. Segments
Our chief operating decision maker ("CODM") is our Chief Executive Officer. Our business is organized into
two
segments: Domestic (which is comprised of all operations within the U.S. and its districts and territories) and International (which is comprised of all operations outside the U.S. and its territories). Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors performance of, the consolidated enterprise, the Domestic segment and the International segment. The Domestic and International segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and segment results to the operating income level.
We aggregate our Canada and Mexico businesses into one International operating segment. Our Domestic and International operating segments also represent our reportable segments. The accounting policies of the segments are the same as those described in Note 1,
Summary of Significant Accounting Policies
, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
January 30, 2016
.
Revenue by reportable segment was as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Domestic
|
$
|
8,192
|
|
|
$
|
8,090
|
|
|
$
|
23,910
|
|
|
$
|
23,858
|
|
International
|
753
|
|
|
729
|
|
|
2,011
|
|
|
2,047
|
|
Total revenue
|
$
|
8,945
|
|
|
$
|
8,819
|
|
|
$
|
25,921
|
|
|
$
|
25,905
|
|
Operating income (loss) by reportable segment and the reconciliation to earnings from continuing operations before income tax expense were as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 29, 2016
|
|
October 31, 2015
|
|
October 29, 2016
|
|
October 31, 2015
|
Domestic
|
$
|
298
|
|
|
$
|
244
|
|
|
$
|
959
|
|
|
$
|
857
|
|
International
|
14
|
|
|
(14
|
)
|
|
14
|
|
|
(253
|
)
|
Total operating income
|
312
|
|
|
230
|
|
|
973
|
|
|
604
|
|
Other income (expense)
|
|
|
|
|
|
|
|
Gain on sale of investments
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
Investment income and other
|
8
|
|
|
3
|
|
|
22
|
|
|
14
|
|
Interest expense
|
(16
|
)
|
|
(20
|
)
|
|
(54
|
)
|
|
(60
|
)
|
Earnings from continuing operations before income tax expense
|
$
|
304
|
|
|
$
|
213
|
|
|
$
|
943
|
|
|
$
|
560
|
|
Assets by reportable segment were as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 29, 2016
|
|
January 30, 2016
|
|
October 31, 2015
|
Domestic
|
$
|
13,115
|
|
|
$
|
12,318
|
|
|
$
|
13,817
|
|
International
|
1,427
|
|
|
1,201
|
|
|
1,352
|
|
Total assets
|
$
|
14,542
|
|
|
$
|
13,519
|
|
|
$
|
15,169
|
|
12. Contingencies
We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected in our Condensed Consolidated Financial Statements. However, there are cases where liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Condensed Consolidated Financial Statements.
Securities Actions
In February 2011, a purported class action lawsuit captioned,
IBEW Local 98 Pension Fund, individually and on behalf of all others similarly situated v. Best Buy Co., Inc., et al.
, was filed against us and certain of our executive officers in the U.S. District Court for the District of Minnesota. This federal court action alleges, among other things, that we and the officers named in the complaint violated Sections 10(b) and 20A of the Exchange Act and Rule 10b-5 under the Exchange Act in connection with press releases and other statements relating to our fiscal 2011 earnings guidance that had been made available to the public. Additionally, in March 2011, a similar purported class action was filed by a single shareholder, Rene LeBlanc, against us and certain of our executive officers in the same court. In July 2011, after consolidation of the IBEW Local 98 Pension Fund and Rene LeBlanc actions, a consolidated complaint captioned,
IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al.
, was filed and served. We filed a motion to dismiss the consolidated complaint in September 2011, and in March 2012, subsequent to the end of fiscal 2012, the court issued a decision dismissing the action with prejudice. In April 2012, the plaintiffs filed a motion to alter or amend the court's decision on our motion to dismiss. In October 2012, the court granted plaintiff's motion to alter or amend the court's decision on our motion to dismiss in part by vacating such decision and giving plaintiff leave to file an amended complaint, which plaintiff did in October 2012. We filed a motion to dismiss the amended complaint in November 2012 and all responsive pleadings were filed in December 2012. A hearing was held on April 26, 2013. On August 5, 2013, the court issued an order granting our motion to dismiss in part and, contrary to its March 2012 order, denying the motion to dismiss in part, holding that certain of the statements alleged to have been made were not forward-looking statements and therefore were not subject to the “safe-harbor” provisions of the Private Securities Litigation Reform Act. Plaintiffs moved to certify the purported class. By Order filed August 6, 2014, the court certified a class of persons or entities who acquired Best Buy common stock between 10:00 a.m. EDT on September 14, 2010, and December 13, 2010, and who were damaged by the alleged violations of law. The 8th Circuit Court of Appeals granted our request for interlocutory appeal. On April 12, 2016, the 8th Circuit held the trial court misapplied the law and reversed the class certification order. IBEW petitioned the 8th Circuit for a rehearing
en banc
, which was denied on June 1, 2016. In October 2016, IBEW advised the trial court it will not seek review by the Supreme Court. The trial court has set a January 2017 conference to discuss next steps. We continue to believe that these allegations are without merit and intend to vigorously defend our company in this matter.
In June 2011, a purported shareholder derivative action captioned,
Salvatore M. Talluto, Derivatively and on Behalf of Best Buy Co., Inc. v. Richard M. Schulze, et al.
, as Defendants and Best Buy Co., Inc. as Nominal Defendant, was filed against both present and former members of our Board of Directors serving during the relevant periods in fiscal 2011 and us as a nominal defendant in the U.S. District Court for the State of Minnesota. The lawsuit alleges that the director defendants breached their fiduciary duty, among other claims, including violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in failing to correct public misrepresentations and material misstatements and/or omissions regarding our fiscal 2011 earnings projections and, for certain directors, selling stock while in possession of material adverse non-public information. Additionally, in July 2011, a similar purported class action was filed by a single shareholder, Daniel Himmel, against us and certain of our executive officers in the same court. In November 2011, the respective lawsuits of Salvatore M. Talluto and Daniel Himmel were consolidated into a new action captioned, In
Re: Best Buy Co., Inc. Shareholder Derivative Litigation
, and a stay ordered pending the close of discovery in the consolidated
IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al.
case. Additionally, in June 2015, a similar purported class action was filed by a single shareholder, Khuong Tran, derivatively on behalf of Best Buy Co., Inc. against us and certain of our executive officers and directors in the same court. The Khuong Tran lawsuit has also been stayed pending the close of discovery in IBEW.
The plaintiffs in the above securities actions seek damages, including interest, equitable relief and reimbursement of the costs and expenses they incurred in the lawsuits. As stated above, we believe the allegations in the above securities actions are without merit, and we intend to defend these actions vigorously. Based on our assessment of the facts underlying the claims in the above securities actions, their respective procedural litigation history and the degree to which we intend to defend our company in these matters, the amount or range of reasonably possible losses, if any, cannot be estimated.
Cathode Ray Tube Action
On November 14, 2011, we filed a lawsuit captioned
In re Cathode Ray Tube Antitrust Litigation
in the United States District Court for the Northern District of California. We alleged that the defendants engaged in price fixing in violation of antitrust regulations relating to cathode ray tubes for the time period between March 1, 1995, through November 25, 2007. In connection with this action, we received settlement proceeds, net of legal expenses and costs, in the amount of
$75 million
during fiscal 2016. In the first quarter of fiscal 2017, we settled with the remaining defendants for
$161 million
, net of legal expenses and costs;
$127 million
of which we have received and
$34 million
of which we expect to receive in January 2017 or earlier. Settlement proceeds were recognized in Cost of goods sold with the associated legal expenses recorded in SG&A. This matter is now resolved.
Other Legal Proceedings
We are involved in various other legal proceedings arising in the normal course of conducting business. For such legal proceedings, we have accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to our consolidated financial position, results of operations or cash flows. Because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings and the difficulty of predicting the settlement value of many of these proceedings, we are not able to estimate an amount or range of any reasonably possible additional losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations or cash flows.