Best Buy 2014 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2014 Best Buy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

39
• Appliances: The 15.1% comparable store sales decline was primarily due to a decrease in sales of appliances in our
Five Star operations due to a slowdown in the housing market and the end of certain government stimulus programs in
China in December 2011.
• Services: The 10.0% comparable store sales decline was primarily due to a decrease in services in Canada.
Our International segment experienced a gross profit decline of $172 million, or 10.2%, in fiscal 2013 (11-month), driven
primarily by revenue declines in Canada and China and a gross profit rate decline in Canada. The 0.5% of revenue decrease in
the gross profit rate was due to special vendor-driven promotions in fiscal 2012 (11-month recast) that were not repeated in
fiscal 2013 (11-month), especially on televisions in Canada.
Our International segment's SG&A increased $21 million, or 1.5%, in fiscal 2013 (11-month). The increase in SG&A was
driven by increased store asset impairments, partially offset by lower spending in Canada. The deleveraging impact of negative
comparable store sales in Five Star and Canada contributed to the SG&A rate increase.
Our International segment recorded $87 million and $5 million of restructuring charges in fiscal 2013 (11-month) and 2012
(11-month recast), respectively. The restructuring charges in fiscal 2013 (11-month) related to our Renew Blue restructuring
activities and consisted of facility closure costs, employee termination benefits, and property and equipment impairments. The
fiscal 2012 (11-month recast) charges related to our fiscal 2012 restructuring program and consisted of property and equipment
impairments. The restructuring charges resulted in a decrease in our operating income in fiscal 2013 (11-month) of 1.3% of
revenue. Refer to Note 6, Restructuring Charges, 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 our
restructuring activities.
During the fourth quarter of fiscal 2013 (11-month), we recorded a $819 million goodwill impairment charge related to our
Best Buy Canada and Five Star reporting units. The impairments followed significant deterioration in operating performance in
the latter part of fiscal 2013 (11-month), with results falling significantly below management forecasts. As a result of this
decline in performance, during the fourth quarter of fiscal 2013 (11-month), management updated long-range forecasts for the
two reporting units. This analysis led to the conclusion that the goodwill had no value, and therefore full impairments were
recorded. Refer to Note 1, Summary of Significant Accounting Policies, 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 goodwill impairment.
The International segment's operating loss in fiscal 2013 (11-month) compared to operating income in fiscal 2012 (11-month
recast) was primarily due to the goodwill impairment. In addition, the decrease in revenue, combined with the decline in the
gross profit rate and the increase in restructuring charges, contributed to the decrease compared to the prior-year period.
Additional Consolidated Results
Other Income (Expense)
In fiscal 2014 (12-month), we recognized a gain of $20 million in connection with the exercise of a warrant and the sale of
cost-based investments. In fiscal 2012 (11-month recast), we sold our shares of common stock in TalkTalk Telecom Group PLC
and Carphone Warehouse Group plc for $112 million and recorded a pre-tax gain of $55 million related to the sale.
In fiscal 2014 (12-month), our investment income and other was $27 million, compared to $20 million in fiscal 2013 (11-
month). The increase in fiscal 2014 (12-month) was primarily due to higher average cash and cash equivalents and short-term
investments balances. In fiscal 2013 (11-month), our investment income and other was $20 million, compared to $23 million in
fiscal 2012 (11-month recast). The decrease in fiscal 2013 (11-month) was primarily due to a lower average cash and cash
equivalents balance, partially offset by a higher weighted average interest rate on cash balances.
Interest expense was $100 million in fiscal 2014 (12-month), compared to $99 million in fiscal 2013 (11-month). The relatively
flat interest expense was the result of an extra month of expense in fiscal 2014 (12-month), offset by a decrease in interest
expense as a result of replacing our previous 2013 Notes that bore interest at 6.75% with 2018 Notes that bear interest at
5.00%. Interest expense was $99 million in fiscal 2013 (11-month), compared to $101 million in fiscal 2012 (11-month recast).
The reduction in interest expense from the repayment of our convertible debt in January 2012 was offset by an increase in
interest expense on our $1 billion of long-term debt securities that remained outstanding for all 11 months in fiscal 2013 (11-
month), compared to 9 months in fiscal 2012 (11-month recast).