Best Buy 2011 Annual Report Download - page 49

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Our International segment’s SG&A grew 30.2%, or an increase of $682 million. In the first six months of fiscal 2010,
Europe’s SG&A spend was $775 million with no comparable expenses in the same period one year ago. Europe’s lower
SG&A in the last six months of fiscal 2010 compared to the same period one year ago partially offset the first-half year
over year increase. New store start-up costs in Mexico and Turkey also increased SG&A, while SG&A spend in Canada
and China remained relatively flat in fiscal 2010 compared to the prior fiscal year.
The acquisition impact of Best Buy Europe of 1.7% of revenue was the principal driver behind the International segment’s
1.1% of revenue SG&A rate increase for fiscal 2010. In addition, the deleveraging impact of the comparable store sales
decline on payroll, benefits and overhead costs in Canada contributed a 0.2% of revenue increase. Start-up costs, rent
expense and incremental staffing for new store openings in Mexico and Turkey further contributed a 0.3% of revenue
increase to the International segment’s SG&A rate. Offsetting these increases in the SG&A rate was a 0.8% of revenue
decrease in Europe in the second half of fiscal 2010, due in part to lower payroll costs stemming from their restructuring
in the fiscal first quarter, as well as a 0.3% of revenue decrease in China, caused primarily by cost-cutting measures to
reduce overhead, payroll and marketing expenses.
The increase in our International segment’s operating income resulted primarily from higher operating income in Europe
and China, partially offset by increased new store investments in Mexico and Turkey, $27 million of restructuring charges
and slightly lower operating income in Canada.
Our International segment’s operating income in fiscal 2010 included $27 million of restructuring charges recorded in the
first fiscal quarter, compared to $6 million of restructuring charges recorded in fiscal 2009. The fiscal 2010 restructuring
charges were related primarily to employee termination benefits and business reorganization costs at Best Buy Europe,
whereas the fiscal 2009 restructuring charges were employee termination benefits in our Canada business.
Additional Consolidated Results
Other Income (Expense)
Our investment income and other in fiscal 2011 was $51 million, compared to $54 and $35 million in fiscal 2010 and
2009, respectively. The relatively flat investment income in fiscal 2011 compared to fiscal 2010 was principally the result
of lower returns on our deferred compensation assets, partially offset by the gain on the sale of our former Speakeasy
business in fiscal 2011. The increase in fiscal 2010 compared to fiscal 2009 was due primarily to the gains we recorded
in fiscal 2010 on our deferred compensation assets, which experienced better returns when compared to the prior year.
Gains on these assets have no impact on our net earnings, as they are offset by expense recorded within SG&A. Partially
offsetting the increase was the impact of lower interest rates earned on our cash and investment balances in fiscal 2010.
Interest expense in fiscal 2011 was $87 million, compared to $94 million in both fiscal 2010 and 2009. The decrease in
interest expense in fiscal 2011, compared to fiscal 2010, was the result of lower average short-term borrowings
throughout fiscal 2011, partially offset by higher average interest rates on outstanding short-term borrowings. The relatively
flat interest expense from fiscal 2009 to 2010 was the result of lower average short-term borrowings during the year,
which was fully offset by a full year of higher interest-bearing long-term debt.
Effective Income Tax Rate
Our effective income tax rate (‘‘ETR’’) was 34.4% in fiscal 2011, compared to 36.5% in fiscal 2010 and 39.6% in fiscal
2009. The decrease in the ETR in fiscal 2011 compared to fiscal 2010 was due primarily to the impact of increased tax
benefits from foreign operations, tax benefits resulting from the sale of our former Speakeasy business and the favorable
resolution of certain non-recurring items. Excluding the impact of various fiscal 2011 non-recurring items, the ETR would
have been approximately 36.5%.
The decrease in the ETR in fiscal 2010 compared to fiscal 2009 was due principally to the fiscal 2009 impacts of the
other-than-temporary impairment of our investment in the common stock of CPW and the non-deductibility of our
$62 million goodwill impairment charge, as well as the favorable net impact of certain discrete foreign tax matters in the
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