Best Buy 2014 Annual Report Download - page 45

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40
Effective Income Tax Rate
Our effective income tax rate ("ETR") was 36.7% in fiscal 2014 (12-month), compared to (135.8)% in fiscal 2013 (11-month).
Excluding the impact of the goodwill impairments (which are not tax deductible), the ETR would have been 43.1% in fiscal
2013 (11-month). The ETR in fiscal 2014 (12-month) was lower than in fiscal 2013 (11-month), excluding the goodwill
impairments, as fiscal 2013 (11-month) was higher than normal as a result of decreased tax benefits from foreign operations,
which were due primarily to a decrease in foreign earnings and a valuation allowance on U.S. federal foreign tax credits.
Our ETR was (135.8)% in fiscal 2013 (11-month) (43.1% excluding the impact of goodwill impairments), compared to 35.1%
in fiscal 2012 (11-month recast). The ETR in fiscal 2013 (11-month), excluding goodwill impairments, was higher than fiscal
2012 (11-month recast) due to the previously discussed decrease in tax benefits from foreign operations.
Our consolidated effective tax rate is impacted by the statutory income tax rates applicable to each of the jurisdictions in which
we operate. As our foreign earnings are generally taxed at lower statutory rates than the 35% U.S. federal statutory rate,
changes in the proportion of our consolidated taxable earnings originating in foreign jurisdictions impact our consolidated
effective rate. Our foreign earnings have been indefinitely reinvested outside the U.S. and are not subject to current U.S.
income tax.
Discontinued Operations
Discontinued operations consists of our large-format Best Buy branded stores in China and Turkey and Best Buy Europe in our
International segment, as well as Napster and mindSHIFT in our Domestic segment.
The loss from discontinued operations in fiscal 2014 (12-month) compared to a gain from discontinued operations in fiscal
2013 (11-month) was primarily due to the impairment of our investment in Best Buy Europe, as well as the loss on the sale of
mindSHIFT in fiscal 2014 (12-month).
The gain from discontinued operations in fiscal 2013 (11-month) compared to a loss from discontinued operations in fiscal
2012 (11-month recast) was primarily due to the non-cash impairment charge of $1.2 billion to write-off the goodwill related to
our Best Buy Europe reporting unit in fiscal 2012 (11-month recast) and the U.K. large-format stores and Napster having been
largely inactive during fiscal 2013 (11-month), whereas they were still operating during fiscal 2012 (11-month recast). In
addition, we recognized a benefit from positive adjustments to estimated facility closure costs associated with the closure of our
Best Buy branded stores in the U.K. in fiscal 2013 (11-month).
Net Earnings (Loss) from Discontinued Operations Attributable to Noncontrolling Interests
The decrease in net earnings (loss) from discontinued operations attributable to noncontrolling interests in fiscal 2014 (12-
month) compared to fiscal 2013 (11-month) was due to a net loss in fiscal 2014 (12-month) in Best Buy Europe compared to
net earnings in fiscal 2013 (11-month).
The decrease in net earnings (loss) from discontinued operations attributable to noncontrolling interests in fiscal 2013 (11-
month) compared to fiscal 2012 (11-month recast) was due to the Mobile buy-out in the fourth quarter of fiscal 2012 (11-month
recast). As a result of the Mobile buy-out, CPW was no longer entitled to a portion of the profit share payments to Best Buy
Europe, our subsidiary included in discontinued operations in which CPW previously held a 50% noncontrolling interest. In
addition, net earnings (loss) from discontinued operations attributable to noncontrolling interests also decreased due to a
decline in net earnings of Best Buy Europe.
Refer to Note 3, Profit Share Buy-Out, of the Notes to Consolidated Financial Statements, included in Item 8, Financial
Statements and Supplementary Data, of this Annual Report on Form 10-K for further information about the Mobile buy-out.
Impact of Inflation and Changing Prices
Highly competitive market conditions and the general economic environment minimized inflation's impact on the selling prices
of our products and services, and on our expenses. In addition, price deflation and the continued commoditization of certain
technology products limited our ability to increase our gross profit rate.