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 financial measures. Generally, presented non-GAAP financial 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 financial measures as presented herein may not be comparable to similarly titled measures used by other companies.

Three Months Ended

Three Months Ended

May 2, 2020

May 4, 2019

Domestic

International Consolidated

Domestic

International Consolidated

SG&A

$

1,579

$

156

$

1,735

$

1,677

$

158

$

1,835

% of revenue

19.9 %

24.1 %

20.3 %

19.8 %

23.9 %

20.1 %

Intangible asset amortization1

(20)

-

(20)

(17)

-

(17)

Non-GAAP SG&A

$

1,559

$

156

$

1,715

$

1,660

$

158

$

1,818

% of revenue

19.7

%

24.1

%

20.0

%

19.6

%

23.9

%

19.9

%

Operating income (loss)

$

241

$

(12)

$

229

$

332

$

2

$

334

% of revenue

3.0 %

(1.9)%

2.7 %

3.9 %

0.3 %

3.7 %

Intangible asset amortization1

20

-

20

17

-

17

Restructuring charges2

1

-

1

-

-

-

Non-GAAP operating income (loss)

$

262

$

(12)

$

250

$

349

$

2

$

351

% of revenue

3.3 %

(1.9)%

2.9 %

4.1 %

0.3 %

3.8 %

Effective tax rate

27.4 %

19.8 %

Intangible asset amortization

(0.2)

%

0.3

%

Non-GAAP effective tax rate

27.2 %

20.1 %

Three Months Ended

Three Months Ended

May 2, 2020

May 4, 2019

Pretax

Pretax

Earnings

Net of Tax3

Per Share

Earnings

Net of Tax3

Per Share

GAAP diluted EPS

$

0.61

$

0.98

Intangible asset amortization1

$

20

$

15

0.06

$

17

$

13

0.04

Restructuring charges2

1

1

-

-

-

-

Non-GAAP diluted EPS

$

0.67

$

1.02

  1. Represents thenon-cash amortization of definite-lived intangible assets associated with acquisitions, including customer relationships, tradenames and developed technology.
  2. Represents adjustments associated with U.S. retail operating model changes.
  3. Thenon-GAAP adjustments relate primarily to adjustments in the U.S. As such, the income tax charge is calculated using the statutory tax rate of 24.5% for all periods presented.

1

Return on Assets and Non-GAAP Return on Investment

The tables below provide calculations of return on assets ("ROA") (GAAP financial measure) and non-GAAP return on investment ("ROI") (non-GAAP financial measure) for the periods presented. The company believes ROA is the most directly comparable financial measure to ROI. Non-GAAP ROI is defined as non-GAAP adjusted operating income after tax divided by average invested operating assets. All periods presented below apply this methodology consistently. The company believes non- GAAP ROI is a meaningful metric for investors to evaluate capital efficiency because it measures how key assets are deployed by adjusting operating income and total assets for the items noted below. This method of determining non-GAAP ROI may differ from other companies' methods and therefore may not be comparable to those used by other companies.

Return on Assets ("ROA")

May 2, 20201

May 4, 20191

Net earnings

$

1,435

$

1,521

Total assets

16,125

13,881

ROA

8.9

%

11.0

%

Non-GAAP Return on Investment ("ROI")

May 2, 20201

May 4, 20191

Numerator

Operating income - total operations

$

1,904

$

1,969

Add: Non-GAAP operating income adjustments2

120

68

Add: Operating lease interest3

112

113

Less: Income taxes4

(523)

(527)

Add: Depreciation

744

755

Add: Operating lease amortization5

667

649

Adjusted operating income after tax

$

3,024

$

3,027

Denominator

Total assets

$

16,125

$

13,881

Less: Excess cash6

(1,171)

(1,153)

Add: Capitalized operating lease assets7

-

2,268

Add: Accumulated depreciation and amortization8

6,852

6,518

Less: Adjusted current liabilities9

(7,942)

(8,028)

Average invested operating assets

$

13,864

$

13,486

Non-GAAP ROI

21.8 %

22.4 %

  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 trailing 12 months ended as of each of the balance sheet dates.
  2. Non-GAAPoperating income adjustments include continuing operations adjustments for intangible asset amortization, acquisition-related transaction costs and restructuring charges. Additional details regarding these adjustments are included in the Reconciliation of Non-GAAP Financial Measures schedule within the company's quarterly earnings releases.
  3. 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. For periods prior to FY20, the add-back is approximated by using a multiple of 15% of total rent expense. For periods beginning on or after FY20, the add-back is approximated by multiplying average operating lease assets by 4%, which approximates the interest rate on the company's operating lease liabilities.
  4. Income taxes are approximated by 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 of 24.5% for the periods presented.
  5. Operating lease amortization represents operating lease cost less operating lease interest. Operating lease cost includesshort-term leases, which are immaterial, and excludes variable lease costs as these costs are not included in the operating lease asset balance.
  6. Excess cash represents the amount of cash, cash equivalents andshort-term investments greater than $1 billion, which approximates the amount of cash the company believes is necessary to run the business and may fluctuate over time.
  7. Capitalized operating lease assets represent the estimated net assets that the company would record if the company's operating leases were owned. For periods prior to FY20, the asset is approximated by using a multiple of four times total rent expense. For periods beginning on or after FY20, capitalized operating lease assets are included within Total assets and therefore no adjustment is necessary.
  8. Accumulated depreciation and amortization represents accumulated depreciation related to property and equipment and accumulated amortization related todefinite-lived intangible assets.
  9. Adjusted current liabilities represent total current liabilities lessshort-term debt and the current portions of operating lease liabilities and long-term debt.

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Best Buy Co. Inc. published this content on 21 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 May 2020 12:24:02 UTC