01—Abstract
Summary
Summary of the 10-KT filed March 27, 2013. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. filed this Transition Report on Form 10-K covering an 11-month fiscal 2013 period ended February 2, 2013, after changing its fiscal year-end from the Saturday nearest the end of February to the Saturday nearest the end of January.
Revenue was $45.09 billiona for the 11 months, down from $46.06 billion in the comparable recast period, with a comparable store sales decline of 2.9%. The company reported an operating loss of $125 million and a net loss attributable to Best Buy shareholders of $441 million, driven largely by $822 million of goodwill impairments (primarily Best Buy Canada and Five Star) and $451 million of restructuring charges under its Renew Blue program and related U.S. and Europe restructuring actions. Operating cash flow was $1.45 billion, and year-end cash and cash equivalents rose to $1.83 billion from $1.20 billion, helped by the suspension of the share repurchase program and the absence of the $1.3 billion Mobile buy-out payment made in fiscal 2012.
Total debt including current portion was $2.30 billionb, and the company had no borrowings outstanding under its $2.5 billion revolving credit agreements. Credit ratings were lowered during the period: Standard & Poor's cut its rating to BB, Fitch to BB-, and Moody's kept Baa2 with a Developing outlook.
Management described fiscal 2014 as a transition year and laid out six priorities, including accelerating online growth, reducing SG&A costs and optimizing the U.S. real estate portfolio. Investors should weigh the sharp swing to losses, the deteriorating comparable store sales in Domestic and International segments, and the lowered credit ratings against management's Renew Blue plan, which targets $400 millionc of cost reductions in the U.S., Canada and Mexico, with Phase One expected to yield about $150 million of annualized savings.
02—Key points
Key Highlights
- Revenue of $45.09 billion for the 11-month fiscal 2013 period, compared with $46.06 billion in the 11-month recast fiscal 2012 period; comparable store sales declined 2.9%.
- Operating loss of $125 million, versus operating income of $772 million in the prior-year recast period, reflecting $822 million of goodwill impairments and $451 million of restructuring charges.
- Net loss attributable to Best Buy Co., Inc. shareholders of $441 million, or $(1.30) per diluted share, compared with a net loss of $1.43 billion in the 11-month recast fiscal 2012 period.
- Operating cash flow of $1.45 billion and cash and cash equivalents of $1.83 billion at period end, up from $1.20 billion, after suspending the share repurchase program.
- Credit ratings lowered: Standard & Poor's to BB (Negative), Fitch to BB- (Negative), while Moody's kept Baa2 with a Developing outlook; the 2013 Notes' interest rate rose to 7.25%.
- Renew Blue cost reduction program targets $400 million of costs removed in the U.S., Canada and Mexico, with Phase One estimated at $150 million in annualized savings beginning February 2013.
- Pending litigation includes a Techforward trade secrets judgment with $22 million in jury damages, $5 million in exemplary damages and $6 million in attorney fees, which the company has appealed; securities class actions remain pending.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2013, Best Buy lost $0.01.
- Revenue$38.25B100.0%
- Cost of revenue−$29.23B76.4%
- Gross profit$9.02B23.6%
- Operating costs−$8.93B23.4%
- Operating income$90.0M0.2%
- Interest, other & tax−$531.0M1.4%
- Net income−$441.0M1.2%
Where FY2013 revenue went
$38.25B- Cost of revenue: $29.23B, 76% of revenue
- SG&A: $7.91B, 21% of revenue
- Operating income: $90.0M, 0.2% of revenue
- Other operating costs: $1.03B, 2.7% of revenue
Kept 0.2% as operating incomeOperating income $90.0M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed March 27, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $38.25B$41.31B | −7.4% |
| Cost of Revenue | $29.23B$31.38B | −6.9% |
| Gross Profit | $9.02B$9.91B | −8.9% |
| SG&A Expenses | $7.91B$7.99B | −1.0% |
| Operating Income | $90.00M$1.90B | −95.3% |
| Interest Expense | $99.00M$101.00M | −2.0% |
| Net Income | -$441.00M-$1.43B | +69.1% |
| EPS (Basic) | $-1.30$-3.83 | +66.1% |
| EPS (Diluted) | $-1.30$-3.72 | +65.1% |
| Shares Outstanding (Basic) | 338.60M372.50M | −9.1% |
| Shares Outstanding (Diluted) | 338.60M382.00M | −11.4% |
05—Questions
Frequently Asked Questions
Why did Best Buy report a net loss in this filing?
The net loss attributable to Best Buy shareholders of $441 million was driven primarily by $822 million of goodwill impairments, mainly for Best Buy Canada and Five Star, and $451 million of restructuring charges tied to Renew Blue, Europe restructuring and U.S. large-format store closures. Gross profit rate also fell to 23.6% of revenue from 24.6% in the comparable recast period.
Why is this filing covering 11 months instead of 12?
On November 2, 2011, the Board approved changing the fiscal year-end from the Saturday nearest the end of February to the Saturday nearest the end of January, effective with fiscal 2013. As a result, fiscal 2013 is an 11-month transition period from March 4, 2012 through February 2, 2013, and the company began consolidating its Europe, China and Mexico operations on a one-month lag.
What happened to Best Buy's share repurchase program and dividend?
The company suspended its share repurchase program in the second quarter of fiscal 2013 (11-month). It repurchased 6.3 million shares for $122 million during the period, leaving $4.0 billion available under the $5.0 billion June 2011 authorization. The quarterly dividend was raised to $0.17 per share effective with the third quarter, and four dividend payments totaled $0.66 per share, or $224 million.
How is Best Buy's liquidity and debt position?
Cash and cash equivalents were $1.83 billion at February 2, 2013, and total debt including the current portion was $2.30 billion. The company had no borrowings under its $1.0 billion 364-day and $1.5 billion five-year U.S. revolving credit facilities, and it reported $2.7 billion of undrawn capacity on its credit facilities. Its 2013 Notes of $500 million mature in July 2013, and management said it would evaluate sources of liquidity to repay them.
What is management's strategy going forward?
Management described fiscal 2014 as a year of transition under its Renew Blue strategy and set six priorities: accelerating online growth, enhancing the multi-channel customer experience, increasing revenue and gross profit per square foot, driving down cost of goods sold through supply chain efficiencies, gradually optimizing the U.S. real estate portfolio, and reducing SG&A costs. The company expects to close five to ten more U.S. large-format stores in fiscal 2014.
06—Continue