01—Abstract
Summary
Summary of the 10-K filed March 31, 2015. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. reported fiscal 2015 (12 months ended January 31, 2015) revenue of $40.34 billiona, down from $40.61 billion in fiscal 2014, with comparable sales up 0.5%.
Net earnings from continuing operations rose to $1.246 billionb ($3.53 per diluted share) from $695 million ($2.00 per share), but this was helped by a $353 million discrete tax benefit from reorganizing certain European legal entities. Operating income increased to $1.450 billion from $1.144 billion, and operating income as a percent of revenue rose to 3.6% from 2.8%. Fiscal 2014 included $149 million of restructuring charges and LCD-related legal settlements.
Management reports non-GAAP diluted EPS of $2.60c, up from $2.07. The balance sheet strengthened over the year. Cash, cash equivalents and short-term investments totaled $3.9 billion, versus $2.9 billion a year earlier, and operating cash flow was $1.9 billion.
Total debt, including current portion, was $1.621 billiond. The company sold its Five Star China business (completed February 13, 2015) and has exited Best Buy Europe. In March 2015 it announced a plan to return capital: a special one-time dividend of $0.51 per share (about $180 million), a 21% increase in the regular quarterly dividend to $0.23, and resumed share repurchases with an intent to buy back $1 billion of stock over three years.
Looking ahead, management said fiscal 2016 will carry investment costs of $100 million to $120 million and capital expenditures of $650 million to $700 million. It also announced a Canadian consolidation under the Best Buy brand that includes closing 66 Future Shop stores, with expected restructuring charges and impairments of $200 million to $280 million, most recorded in the first quarter of fiscal 2016. Management expects first- and second-quarter fiscal 2016 comparable sales to be flat to negative low-single digits, and non-GAAP operating income rate to decline by roughly 0.3% to 0.5% of revenue.
02—Key points
Key Highlights
- Revenue of $40.34 billion in fiscal 2015, down slightly from $40.61 billion, with comparable sales up 0.5%.
- Diluted EPS from continuing operations of $3.53, versus $2.00 in fiscal 2014; this includes a $353 million discrete tax benefit from reorganizing European legal entities.
- Non-GAAP diluted EPS from continuing operations of $2.60, up from $2.07 in fiscal 2014.
- Operating income of $1.45 billion, or 3.6% of revenue, compared with 2.8% in fiscal 2014.
- Cash, cash equivalents and short-term investments of $3.9 billion at year-end, up from $2.9 billion, with operating cash flow of $1.9 billion.
- Capital return plan announced March 2015: $0.51 special dividend (about $180 million), 21% increase in the quarterly dividend to $0.23, and $1.0 billion of intended share repurchases over three years.
- Canadian consolidation under the Best Buy brand, with 66 Future Shop stores closed and expected charges of $200 million to $280 million, mostly in fiscal 2016 first quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Best Buy kept $0.03.
- Revenue$40.34B100.0%
- Cost of revenue−$31.29B77.6%
- Gross profit$9.05B22.4%
- Operating costs−$7.60B18.8%
- Operating income$1.45B3.6%
- Interest, other & tax−$217.0M0.5%
- Net income$1.23B3.1%
Where FY2015 revenue went
$40.34B- Cost of revenue: $31.29B, 78% of revenue
- SG&A: $7.59B, 19% of revenue
- Net income: $1.23B, 3.1% of revenue
- Interest, other & tax: $217.0M, 0.5% of revenue
Kept 3.1% as net incomeNet income $1.23B · 3.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed March 31, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $40.34B$40.61B | −0.7% |
| Cost of Revenue | $31.29B$31.21B | +0.3% |
| Gross Profit | $9.05B$9.40B | −3.7% |
| SG&A Expenses | $7.59B$8.11B | −6.3% |
| Operating Income | $1.45B$1.14B | +26.7% |
| Interest Expense | $90.00M$100.00M | −10.0% |
| Net Income | $1.23B$532.00M | +131.8% |
| EPS (Basic) | $3.53$1.56 | +126.3% |
| EPS (Diluted) | $3.49$1.53 | +128.1% |
| Shares Outstanding (Basic) | 349.50M342.10M | +2.2% |
| Shares Outstanding (Diluted) | 353.60M347.60M | +1.7% |
05—Questions
Frequently Asked Questions
Why did reported earnings rise so much in fiscal 2015?
Net earnings from continuing operations rose to $1.246 billion from $695 million, and operating income rose to $1.450 billion from $1.144 billion. The filing attributes much of the increase to lower SG&A and lower restructuring charges ($5 million in fiscal 2015 versus $149 million in fiscal 2014). Fiscal 2015 net earnings also included a $353 million discrete tax benefit from reorganizing certain European legal entities, while fiscal 2014 included LCD-related legal settlements. The effective income tax rate was 10.1%, compared with 35.8% in fiscal 2014; excluding the European reorganization, it would have been 35.6%.
What is Best Buy's plan for returning capital to shareholders?
On March 3, 2015, the company announced a special one-time dividend of $0.51 per share (about $180 million), tied to after-tax proceeds from LCD-related legal settlements. It also raised the regular quarterly dividend 21% to $0.23 per share and plans to resume share repurchases under the June 2011 program, with the intent to buy back $1.0 billion of shares over the next three years. The company did not repurchase any shares in fiscal 2015, and $4.0 billion remained available under the program at year-end.
What investments and costs does management expect in fiscal 2016?
Management expects incremental investments of $100 million to $120 million, or $0.17 to $0.21 in diluted EPS, across the customer experience, information technology and marketing. Capital expenditures are expected to be $650 million to $700 million, up from $550 million in fiscal 2015. Phase two of cost reduction is targeted at about $400 million in annualized savings over three years, with savings not expected to begin until the second half of fiscal 2016.
What is the impact of the Canadian store consolidation?
In March 2015 Best Buy decided to consolidate Future Shop and Best Buy stores in Canada under the Best Buy brand. This permanently closes 66 Future Shop stores and converts 65 to the Best Buy brand. The company expects restructuring charges and non-restructuring impairments of $200 million to $280 million (a GAAP diluted EPS impact of $0.41 to $0.58), with cash charges of $140 million to $180 million paid over five years, and it plans up to $160 million of additional capital spending over 12 to 24 months.
How strong is the balance sheet and liquidity position?
At January 31, 2015, the company had $2.43 billion of cash and cash equivalents and $1.46 billion of short-term investments, plus $1.25 billion of undrawn capacity on its five-year revolving credit facility. Total debt, including the current portion, was $1.621 billion. The debt-to-earnings ratio fell to 1.3 from 2.4, and the adjusted debt to EBITDAR ratio fell to 2.8 from 3.2. Ratings were BB (Stable) from S&P, Baa2 (Stable) from Moody's, and BB (Stable) from Fitch.
06—Continue