Best Buy : Non-GAAP Reconciliation PDF (547 KB)

Best Buy Co., Inc.

Non-GAAP Reconciliation

($ 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, price-fixing settlements, 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 the company's earnings releases, 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.

Enterprise - Continuing Operations		Q4 FY21				Q4 FY22
Gross profit	$	3,543		$	3,313
% of revenue		20.9	%			20.2	%
Restructuring - inventory markdowns1		(13)				-
Price-fixing settlement2		(21)				-
Non-GAAP gross profit	$	3,509		$	3,313
% of revenue		20.7	%			20.2	%
SG&A	$	2,368		$	2,505
% of revenue		14.0	%			15.3	%
Intangible asset amortization3		(20)				(22)
Acquisition-related transaction costs3		-				(6)
Non-GAAP SG&A	$	2,348		$	2,477
% of revenue		13.9	%			15.1	%
Operating income	$	1,033		$	803
% of revenue		6.1	%			4.9	%
Restructuring - inventory markdowns1		(13)				-
Price-fixing settlement2		(21)				-
Intangible asset amortization3		20				22
Acquisition-related transaction costs3		-				6
Restructuring charges4		142				5
Non-GAAP operating income	$	1,161		$	836
% of revenue		6.9	%			5.1	%
Diluted earnings per share ("EPS")	$	3.10		$	2.62
Restructuring - inventory markdowns1		(0.05)				-
Price-fixing settlement2		(0.08)				-
Intangible asset amortization3		0.08				0.09
Acquisition-related transaction costs3		-				0.03
Restructuring charges4		0.54				0.02
Gain on investments, net		(0.04)				-
Income tax impact of non-GAAP adjustments5		(0.07)				(0.03)
Non-GAAP diluted EPS	$	3.48			$	2.73

1. Represents inventory markdown adjustments recorded within cost of sales associated with the decision to exit operations in Mexico.
2. Represents a price-fixing litigation settlement received in relation to products purchased and sold in prior fiscal years.
3. Represents charges associated with acquisitions, including: (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and developed technology; and (2) acquisition-related transaction and due diligence costs, primarily comprised of professional fees.
4. Represents charges primarily related to actions taken in the Domestic segment to better align the company's organizational structure with its strategic focus and the decision to exit operations in Mexico in the International segment.
5. The non-GAAP adjustments primarily relate to the U.S. and Mexico. As such, the income tax charge is generally calculated using the statutory tax rate of 24.5% for U.S. non-GAAP items for all periods presented. There is no income tax charge for Mexico non-GAAP items and a minimal amount of U.S. non-GAAP items, as there was no tax benefit recognized on these expenses in the calculation of GAAP income tax expense.

Best Buy Co., Inc.

Non-GAAP Reconciliation

($ 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, price-fixing settlements, 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 the company's earnings releases, 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.

Enterprise - Continuing Operations		FY18				FY19				FY20				FY21				FY22
Operating income	$	1,843		$	1,900		$	2,009		$	2,391		$	3,039
% of revenue		4.4	%			4.4	%			4.6	%			5.1	%			5.9	%
Restructuring - inventory markdowns1		-				-				-				23				(6)
Price-fixing settlement2		-				-				-				(21)				-
Restructuring charges3		10				46				41				254				(34)
Intangible asset amortization4		-				22				72				80				82
Acquisition-related transaction costs4		-				13				3				-				11
Tax reform-related item - employee bonus5		80				7				-				-				-
Tax reform-related item - charitable contribution5		20				-				-				-				-
Non-GAAP operating income	$	1,953		$	1,988		$	2,125		$	2,727		$	3,092
% of revenue		4.6	%			4.6	%			4.9	%			5.8	%			6.0	%

Enterprise - Continuing Operations		FY18			FY19			FY20			FY21			FY22
Diluted earnings per share ("EPS")	$	3.26	$	5.20	$	5.75	$	6.84	$	9.84
Restructuring - inventory markdowns1		-			-			-			0.09			(0.02)
Price-fixing settlement2		-			-			-			(0.08)			-
Restructuring charges3		0.03			0.16			0.15			0.97			(0.14)
Intangible asset amortization4		-			0.08			0.27			0.30			0.33
Acquisition-related transaction costs4		-			0.05			0.01			-			0.04
(Gain) loss on investments, net		0.02			(0.04)			-			(0.05)			-
Tax reform-related item - employee bonus5		0.26			0.02			-			-			-
Tax reform-related item - charitable contribution5		0.07			-			-			-			-
Tax reform - repatriation tax5		0.68			(0.07)			-			-			-
Tax reform - deferred tax rate change5		0.24			(0.02)			-			-			-
Income tax impact of non-GAAP adjustments6		(0.14)			(0.06)			(0.11)			(0.16)			(0.04)
Non-GAAP diluted EPS	$	4.42		$	5.32		$	6.07		$	7.91		$	10.01

1. Represents inventory markdown adjustments recorded within cost of sales associated with the decision to exit operations in Mexico.
2. Represents a price-fixing litigation settlement received in relation to products purchased and sold in prior fiscal years.
3. Represents charges and subsequent adjustments primarily related to the following restructuring plans: Best Buy Mobile Exit in FY18 and FY19, U.S. Retail Operating Model Changes in FY20, and the Mexico Exit and Strategic Realignment in FY21 and FY22.
4. Represents charges associated with acquisitions, including (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and developed technology, and (2) acquisition-related transaction and due diligence costs, primarily comprised of professional fees.
5. Represents charges and subsequent adjustments resulting from the Tax Cuts and Jobs Act of 2017 ("tax reform") enacted into law in Q4 FY18, including amounts associated with a deemed repatriation tax and the revaluation of deferred tax assets and liabilities, as well as tax reform-related items announced in response to future tax savings created by tax reform, including a one-time bonus for certain employees and a one-time contribution to the Best Buy Foundation.
6. Represents the summation of the calculated income tax charge related to each non-GAAPnon-income tax adjustment, which is calculated using the statutory tax rates of each country in effect during the period of the related non-GAAP adjustment. There is no income tax charge for Mexico non-GAAP items and a minimal amount of U.S. non- GAAP items, as there was no tax benefit recognized on these expenses in the calculation of GAAP income tax expense.

Best Buy Co., Inc.

Non-GAAP Reconciliation

($ in millions)

(Unaudited and subject to reclassification)

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.

		February 3,			February 2,			February 1,		January 30,		January 29,
	Return on Assets ("ROA")		20181			20191			20201			20211			20221
	Net earnings	$	1,000		$	1,464		$	1,541		$	1,798		$	2,454
	Total assets		14,218			13,240			15,953			18,408			18,743
	ROA		7.0%			11.1%			9.7%			9.8%			13.1%
		February 3,			February 2,			February 1,		January 30,		January 29,
	Non-GAAP Return on Investment ("ROI")		20181			20191			20201			20211			20221
	Numerator
	Operating income - total operations	$	1,844	$	1,900	$	2,009	$	2,391	$	3,039
	Add: Non-GAAP operating income adjustments2		110			88			116			336			53
	Add: Operating lease interest3		118			114			113			111			108
	Less: Income taxes4		(760)			(512)			(548)			(695)			(784)
	Add: Depreciation		683			748			740			759			787
	Add: Operating lease amortization5		665			645			667			665			657
	Adjusted operating income after tax	$	2,660		$	2,983		$	3,097		$	3,567		$	3,860
	Denominator
	Total assets	$	14,218	$	13,240	$	15,953	$	18,408	$	18,743
	Less: Excess cash6		(2,706)			(1,404)			(831)			(4,071)			(3,055)
	Add: Capitalized operating lease assets7		3,131			3,032			-			-			-
	Add: Accumulated depreciation and amortization8		6,125			6,482			6,712			7,114			6,957
	Less: Adjusted current liabilities9		(7,912)			(7,975)			(7,994)			(9,189)			(10,122)
	Average invested operating assets	$	12,856		$	13,375		$	13,840		$	12,262		$	12,523
	Non-GAAP ROI		20.7%			22.3%			22.4%			29.1%			30.8%

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. Includes continuing operations adjustments for tax reform-related items, restructuring charges recorded within costs of sales and SG&A, intangible asset amortization, acquisition-related transaction costs and price-fixing settlements. Additional details regarding these adjustments are included in the Reconciliation of Non-GAAP Financial Measures schedule in this supplemental presentation.
3. Operating lease interest represents the add-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 upon adoption of new lease accounting guidance, 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 calculated using tax rates that approximate the blended statutory rate at the Enterprise level, which is 24.5% for the periods ended on or after February 2, 2019, and 36.7% for the period ended February 3, 2018.
5. Operating lease amortization represents operating lease cost less operating lease interest. Operating lease cost includes short-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 and short-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 upon adoption of new lease accounting guidance, 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 to definite-lived intangible assets.
9. Adjusted current liabilities represent total current liabilities less short-term debt and the current portions of operating lease liabilities and long-term debt.

Best Buy Co., Inc.

Non-GAAP Reconciliation

($ in millions)

(Unaudited and subject to reclassification)

The table below provides a reconciliation of cash provided by operating activities (GAAP financial measure) to free cash flow (non-GAAP financial measure) for the periods presented. The company believes free cash flow, which measures our ability to generate additional cash from our ongoing business operations, is a relevant supplementary measure for investors in evaluating the company's financial performance. In addition, it is one factor used by the company in determining the amount of cash available for acquisitions, dividends, share repurchases and other discretionary investments. This method of determining free cash flow may differ from other companies' methods and therefore may not be comparable to those used by other companies.

			FY18			FY19			FY20			FY21			FY22
	Cash provided by operating activities	$	2,141		$	2,408		$	2,565		$	4,927		$	3,252
	Less: Additions to property and equipment, net		(688)			(819)			(743)			(713)			(737)
	Free cash flow	$	1,453		$	1,589		$	1,822		$	4,214		$	2,515

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, price-fixing settlements, 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
			January 29, 2022				January 30, 2021
	Domestic	International Consolidated Domestic International Consolidated
Gross profit	$	2,999	$	314	$	3,313	$	3,211	$	332	$	3,543
% of revenue		20.0 %		22.9 %		20.2 %		20.9 %		21.6 %		20.9 %
Restructuring - inventory markdowns1		-		-		-		-		(13)		(13)
Price-fixing settlement2		-		-		-		(21)		-		(21)
Non-GAAP gross profit	$	2,999	$	314	$	3,313	$	3,190	$	319	$	3,509
% of revenue		20.0 %		22.9 %		20.2 %		20.7 %		20.8 %		20.7 %
SG&A	$	2,299	$	206	$	2,505	$	2,152	$	216	$	2,368
% of revenue		15.3 %		15.0 %		15.3 %		14.0 %		14.1 %		14.0 %
Intangible asset amortization3		(22)		-		(22)		(20)		-		(20)
Acquisition-related transaction costs3		(6)		-		(6)		-		-		-
Non-GAAP SG&A	$	2,271	$	206	$	2,477	$	2,132	$	216	$	2,348
% of revenue		15.1 %		15.0 %		15.1 %		13.8 %		14.1 %		13.9 %
Operating income	$	695	$	108	$	803	$	971	$	62	$	1,033
% of revenue		4.6 %		7.9 %		4.9 %		6.3 %		4.0 %		6.1 %
Restructuring - inventory markdowns1		-		-		-		-		(13)		(13)
Price-fixing settlement2		-		-		-		(21)		-		(21)
Intangible asset amortization3		22		-		22		20		-		20
Acquisition-related transaction costs3		6		-		6		-		-		-
Restructuring charges4		5		-		5		88		54		142
Non-GAAP operating income	$	728	$	108	$	836	$	1,058	$	103	$	1,161
% of revenue		4.9 %		7.9 %		5.1 %		6.9 %		6.7 %		6.9 %
Effective tax rate						21.4 %						21.6 %
Price-fixing settlement2						-%						0.2 %
Intangible asset amortization3						-%						(0.1)%
Restructuring charges4						-%						(0.8)%
Gain on investments, net						-%						0.1 %
Non-GAAP effective tax rate						21.4 %						21.0 %

Three Months Ended

January 29, 2022

Three Months Ended

January 30, 2021

		Pretax						Pretax
		Earnings	Net of Tax5	Per Share		Earnings	Net of Tax5	Per Share
Diluted EPS					$	2.62					$	3.10
Restructuring - inventory markdowns1	$	-	$	-		-	$	(13)	$	(13)		(0.05)
Price-fixing settlement2		-		-		-		(21)		(15)		(0.06)
Intangible asset amortization3		22		18		0.08		20		15		0.06
Acquisition-related transaction costs3		6		5		0.02		-		-		-
Restructuring charges4		5		3		0.01		142		121		0.46
Gain on investments, net		-		-		-		(12)		(9)		(0.03)
Non-GAAP diluted EPS					$	2.73					$	3.48
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