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MarketScreener Homepage  >  Equities  >  Nyse  >  Best Buy Co., Inc    BBY

BEST BUY CO., INC

(BBY)
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Best Buy : Non-GAAP Reconciliation

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08/29/2019 | 08:36am EST

BEST BUY CO., INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

($ in millions, except per share amounts) (Unaudited and subject to reclassification)

The following information provides reconciliations of the most comparable financial measures presented in accordance with accounting principles generally accepted in the U.S. (GAAP financial measures) to presented non-GAAP financial measures. The company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP measures. Generally, presented non-GAAP measures include adjustments for items such as restructuring charges, goodwill impairments, gains and losses on investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when the company believes this provides greater clarity to management and investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, the GAAP financial measures presented in this earnings release and the company's financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

Three Months Ended

Three Months Ended

August 3, 2019

August 4, 2018

Domestic

International Consolidated

Domestic

International Consolidated

SG&A

$

1,756

$

166

$

1,922

$

1,712

$

165

$

1,877

% of revenue

19.9 %

23.2 %

20.2 %

19.8 %

22.3 %

20.0 %

Intangible asset amortization1

(18)

-

(18)

-

-

-

Acquisition-related transaction costs1

(3)

-

(3)

-

-

-

Non-GAAP SG&A

$

1,735

$

166

$

1,901

$

1,712

$

165

$

1,877

% of revenue

19.7 %

23.2 %

19.9 %

19.8 %

22.3 %

20.0 %

Operating income

$

309

$

4

$

313

$

329

$

6

$

335

% of revenue

3.5

%

0.6

%

3.3

%

3.8

%

0.8

%

3.6

%

Restructuring charges2

48

-

48

17

-

17

Intangible asset amortization1

18

-

18

-

-

-

Acquisition-related transaction costs1

3

-

3

-

-

-

Non-GAAP operating income

$

378

$

4

$

382

$

346

$

6

$

352

% of revenue

4.3 %

0.6 %

4.0 %

4.0 %

0.8 %

3.8 %

Effective tax rate

22.3 %

25.7 %

Restructuring charges2

0.4

%

(0.3)

%

Intangible asset amortization1

0.1 %

-%

Non-GAAP effective tax rate

22.8

%

25.4

%

Three Months Ended

Three Months Ended

August 3, 2019

August 4, 2018

Pretax

Pretax

Earnings

Net of Tax4

Per Share

Earnings

Net of Tax4Per Share

GAAP diluted EPS

$

0.89

$

0.86

Restructuring charges2

$

48

$

37

0.13

$

17

$

13

0.05

Intangible asset amortization1

18

13

0.05

-

-

-

Acquisition-related transaction costs1

3

2

0.01

-

-

-

Non-GAAP diluted EPS

$

1.08

$

0.91

1

Six Months Ended

Six Months Ended

August 3, 2019

August 4, 2018

Domestic

International Consolidated

Domestic

International Consolidated

SG&A

$

3,433

$

324

$

3,757

$

3,377

$

330

$

3,707

% of revenue

19.8 %

23.5 %

20.1 %

19.8 %

23.0 %

20.1 %

Intangible asset amortization1

(35)

-

(35)

-

-

-

Acquisition-related transaction costs1

(3)

-

(3)

-

-

-

Tax reform-related item - employee bonus3

-

-

-

(6)

(1)

(7)

Non-GAAP SG&A

$

3,395

$

324

$

3,719

$

3,371

$

329

$

3,700

% of revenue

19.6

%

23.5

%

19.9

%

19.8

%

22.9

%

20.0

%

Operating income

$

641

$

6

$

647

$

596

$

4

$

600

% of revenue

3.7 %

0.4 %

3.5 %

3.5 %

0.3 %

3.2 %

Restructuring charges2

48

-

48

47

-

47

Intangible asset amortization1

35

-

35

-

-

-

Acquisition-related transaction costs1

3

-

3

-

-

-

Tax reform-related item - employee bonus3

-

-

-

6

1

7

Non-GAAP operating income

$

727

$

6

$

733

$

649

$

5

$

654

% of revenue

4.2 %

0.4 %

3.9 %

3.8 %

0.3 %

3.5 %

Effective tax rate

21.0 %

22.8 %

Restructuring charges2

0.3

%

0.1

%

Intangible asset amortization1

0.2 %

-%

Non-GAAP effective tax rate

21.5

%

22.9

%

Six Months Ended

Six Months Ended

August 3, 2019

August 4, 2018

Pretax

Pretax

Earnings

Net of Tax4

Per Share

Earnings

Net of Tax4

Per Share

GAAP diluted EPS

$

1.86

$

1.58

Restructuring charges2

$

48

$

37

0.13

$

47

$

36

0.12

Intangible asset amortization1

35

26

0.10

-

-

-

Acquisition-related transaction costs1

3

2

0.01

-

-

-

Tax reform-related item - employee bonus3

-

-

-

7

5

0.02

Non-GAAP diluted EPS

$

2.10

$

1.72

  1. Represents charges associated with the acquisitions of GreatCall, Inc. and Critical Signal Technologies, Inc. including 1) thenon-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and technology, and 2) acquisition-related transaction costs primarily comprised of professional fees.
  2. Represents charges associated with U.S. retail operating model changes for the periods ended August 3, 2019, and the closure of Best Buy Mobilestand-alone stores in the U.S. for the periods ended August 4, 2018.
  3. Represents final adjustments for amounts paid and associated taxes related to aone-time bonus for certain employees announced in response to future tax savings created by the Tax Cuts and Jobs Act enacted into law in Q4 FY18.
  4. Thenon-GAAP adjustments relate primarily to adjustments in the U.S. As such, the income tax charge is calculated using the statutory tax rate for the U.S. (24.5% for the periods ended August 3, 2019, and August 4, 2018).

2

Return on Assets and Non-GAAP Return on Invested Capital

The following table includes a reconciliation to the calculation of return on assets ("ROA") (GAAP financial measure), along with the calculation of non-GAAP return on invested capital ("ROIC") for total operations, which includes both continuing and discontinued operations (non-GAAP financial measure) for the periods presented.

The company defines non-GAAP ROIC as non-GAAP net operating profit after tax divided by average invested capital using the trailing four- quarter average. The company believes non-GAAP ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of the use of capital and believes non-GAAP ROIC is an important component of shareholders' return over the long term. Effective at the beginning of Q1 FY20, the company adopted new lease accounting guidance that resulted in the recognition of operating lease assets and operating lease liabilities on the balance sheet. Certain changes have been made as described within the footnotes to the calculation as a result of this adoption. This method of determining non-GAAP ROIC may differ from other companies' methods and therefore may not be comparable to those used by other companies.

Calculation of Return on Assets ("ROA")

August 3, 20191

August 4, 20181

Net earnings

$

1,515

$

1,055

Total assets

14,357

12,977

ROA

10.6

%

8.1

%

Calculation of Non-GAAP Return on Invested Capital ("ROIC")

August 3, 20191

August 4, 20181

Net Operating Profit After Taxes (NOPAT)

Operating income - continuing operations

$

1,947

$

1,822

Operating income - discontinued operations

-

1

Total operating income

1,947

1,823

Add: Operating lease interest2

113

117

Add: Non-GAAP operating income adjustments3

120

163

Add: Investment income

49

56

Less: Income taxes4

(550)

(700)

Non-GAAP NOPAT

$

1,679

$

1,459

Average Invested Capital

Total assets

$

14,357

$

12,977

Less: Excess cash5

(1,183)

(2,427)

Add: Capitalized operating lease obligations6

1,504

3,126

Total liabilities

(11,118)

(9,385)

Exclude: Debt7

2,716

1,219

Average invested capital

$

6,276

$

5,510

Non-GAAP ROIC

26.8

%

26.5

%

  1. Income statement accounts represent the activity for the trailing 12 months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balances for the four quarters ended as of each of the balance sheet dates.
  2. Operating lease interest represents theadd-back to operating income to approximate the total interest expense that the company would incur if its operating leases were owned and financed by debt. Historically, the company used an add-back multiple of 30% of annual rent expense; however, as a result of the adoption of new lease accounting guidance, the multiple was recalculated and prior periods have been updated to reflect this change. For periods prior to FY20, the add-back is approximated by multiplying the trailing 12-month total rent expense by 15%. For periods beginning on or after FY20, the add-back is now approximated by multiplying average operating lease assets by 4%, which approximates the interest rate on the company's operating lease liabilities.
  3. Includes adjustments for taxreform-related items, restructuring charges and acquisition-related costs. Additional details regarding these adjustments are included in the Reconciliation of Non-GAAP Financial Measures schedule within the company's quarterly earnings releases.
  4. Income taxes are calculated using a blended statutory rate at the Enterprise level based on statutory rates from the countries in which the company does business, which primarily consists of the U.S. (with a statutory rate ranging from 24.5% to 38.0% for the periods presented) and Canada (with a statutory rate ranging from 26.6% to 26.9% for the periods presented).
  5. Cash and cash equivalents andshort-term investments are capped at the greater of 1% of revenue or actual amounts on hand. The cash and cash equivalents and short-term investments in excess of the cap are subtracted from the company's calculation of average invested capital to show their exclusion from total assets.
  6. Capitalized operating lease assets represent the estimated net assets that the company would record if the company's operating leases were owned. Historically, the company used a multiple of five times annual rent expense; however, as a result of the adoption of new lease accounting guidance, the multiple was recalculated and prior periods have been updated to reflect this change. For periods prior to FY20, the asset is approximated by multiplying the trailing12-month total rent expense by the multiple of four. For periods beginning on or after FY20, capitalized operating lease assets are now included within total assets on the balance sheet.
  7. Debt includesshort-term debt, current portion of operating lease liabilities, current portion of long-term debt, long-term operating lease liabilities and long-term debt and is added back to the company's calculation of average invested capital to show its exclusion from total liabilities.

3

Disclaimer

Best Buy Co. Inc. published this content on 29 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 August 2019 12:35:06 UTC

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Financials (USD)
Sales 2020 43 481 M
EBIT 2020 2 077 M
Net income 2020 1 510 M
Debt 2020 150 M
Yield 2020 2,27%
P/E ratio 2020 15,8x
P/E ratio 2021 14,7x
EV / Sales2020 0,53x
EV / Sales2021 0,51x
Capitalization 23 101 M
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Technical analysis trends BEST BUY CO., INC
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 31
Average target price 86,71  $
Last Close Price 89,27  $
Spread / Highest target 13,1%
Spread / Average Target -2,87%
Spread / Lowest Target -31,7%
EPS Revisions
Managers
NameTitle
Corie Sue Barry Chief Executive Officer & Director
Rajendra Michael Mohan President & Chief Operating Officer
Hubert Joly Executive Chairman
Matthew Bilunas Chief Financial Officer
Brian Tilzer Chief Digital & Technology Officer
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