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Best Buy Annual Report (Amendment), Year Ended Feb 27, 1999

Filing Date
Filed February 14, 2000
Period End
February 27, 1999
Security
BBY
In the record · 2016–202610-K1110-Q328-K109

BBY filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 109 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jun ’16Jun ’16
  2. Leadership change8-K · Apr ’19Apr ’19
  3. Material agreement8-K · May ’21May ’21
  4. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K/A filed February 14, 2000. Cited figures are marked; the original filing is the authoritative source.

Best Buy Co., Inc. reported record fiscal 1999 results (year ended February 27, 1999) in this amended annual report, which restates prior periods to reflect a change in accounting for Performance Service Plans (PSPs), a type of extended service contract.

Revenues rose 21% to $10.06 billiona from $8.34 billion, driven by a 13.5% comparable store sales increase and 28 new stores. Net earnings were $216.3 million, or $1.03 per diluted share, compared with $81.9 million, or $.46, in fiscal 1998. Operating income more than doubled to $351 million, and operating margin widened to 3.5% of sales from 2.0%, as gross profit margin improved to 18.0% from 15.7%.

The filing attributes the gain to better inventory management, which lifted inventory turns to 6.6 from 5.6, and to a more profitable product mix. The balance sheet strengthened considerably. The company reduced long-term debt by more than $380 millionb, prepaid its $150 million 8-5/8% Senior Subordinated Notes, and converted its $230 million in convertible preferred securities into common equity.

Cash and cash equivalents increased by $266 million to $785.8 millionc, and shareholders' equity exceeded $1 billion at year end. Capital spending was $166 million in fiscal 1999 and is expected to exceed $300 million in fiscal 2000, when the company plans to open about 45 stores and remodel roughly 20 others. Management expects gross profit margin to keep improving, though at a slower pace, and expects SG&A to rise as it invests in information systems and e-commerce.

The restatement reduced fiscal 1999 diluted EPS from $1.07 as previously reported to $1.03d, and reduced retained earnings by approximately $30 million as of February 27, 1999. Best Buy does not pay cash dividends, and its common stock trades on the New York Stock Exchange under the symbol BBY.

02—Key points

Key Highlights

  1. Revenues increased 21% to $10.06 billion in fiscal 1999, supported by a 13.5% comparable store sales increase and 28 new stores.
  2. Net earnings rose to $216.3 million ($1.03 diluted EPS, restated from $1.07) versus $81.9 million ($.46) in fiscal 1998.
  3. Operating income more than doubled to $351 million, and operating margin improved to 3.5% of sales from 2.0%.
  4. Gross profit margin improved to 18.0% from 15.7%, aided by faster inventory turns (6.6 vs. 5.6), fewer markdowns, and higher PSP sales.
  5. Long-term debt was reduced by more than $380 million, and the $230 million in convertible preferred securities were converted into common equity, pushing shareholders' equity above $1 billion.
  6. Cash and cash equivalents rose $266 million to $785.8 million at February 27, 1999.
  7. Restatement for PSP revenue recognition reduced retained earnings by approximately $30 million; capital spending is expected to exceed $300 million in fiscal 2000.

03—Questions

Frequently Asked Questions

  1. Why was the fiscal 1999 financial information restated?

    Following December 1999 SEC Staff guidance, the company changed its accounting for Performance Service Plans sold in states where it is deemed the obligor. Net commission revenue on these contracts is now recognized ratably over the contract terms, generally two to five years, rather than at the time of sale. Prior periods beginning with fiscal 1996 were restated. For fiscal 1999, revenues were restated to $10.06 billion from $10.08 billion, and diluted EPS to $1.03 from $1.07.

  2. How strong is Best Buy's balance sheet after fiscal 1999?

    The balance sheet improved significantly. Long-term debt including current portion fell to $60.6 million from $225.3 million, the convertible preferred securities were converted and redeemed, and cash and cash equivalents reached $785.8 million. Shareholders' equity rose to $1.03 billion from $535.7 million. Inventories were $1.05 billion, essentially unchanged from the prior year-end despite 28 new stores.

  3. What are the company's growth plans for fiscal 2000?

    Capital spending is expected to exceed $300 million in fiscal 2000. Plans include about 45 new stores in markets such as San Francisco, San Diego, Sacramento, northern Florida, upstate New York, and Richmond and Norfolk, Virginia, as well as remodeling or relocating about 20 stores, testing four 30,000-square-foot small-market stores, and investing in e-commerce and information systems.

  4. Does Best Buy pay dividends, and how is the stock traded?

    Best Buy has not historically paid and does not intend to pay cash dividends on its common stock. Its common stock trades on the New York Stock Exchange under the symbol BBY. As of March 31, 1999, there were 1,656 holders of record, and the company had 204,643,509 shares outstanding as of April 30, 1999.

  5. What risks does management identify for fiscal 2000?

    Management expects SG&A to increase as it invests in new systems, operations, and e-commerce, and expects gross margin gains to be smaller than in the prior two years. The filing also flags Year 2000 readiness, noting that the company cannot guarantee that its own systems or those of business partners will be fully compliant, and that Y2K concerns could affect consumer spending. Contingency plans are being developed.

04—Continue

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