Best Buy 2015 Annual Report Download - page 32

Table of Contents
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Our business, like that of many retailers, is seasonal. Historically, we have realized more of our revenue and earnings in the
fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico. While
consumers view some of the products and services we offer as essential, others are viewed as discretionary purchases.
Consequently, our financial results are susceptible to changes in consumer confidence and other macroeconomic factors,
including unemployment, consumer credit availability and the condition of the housing market. Additionally, there are other
factors that directly impact our performance, such as product life-cycles (including the introduction and pace of adoption of
new technology) and the competitive retail environment. As a result of these factors, predicting our future revenue and net
earnings is difficult.
Throughout this MD&A, we refer to comparable sales. Our comparable sales calculation compares revenue from stores,
websites and call centers operating for at least 14 full months, as well as revenue related to certain other comparable sales
channels for a particular period to the corresponding period in the prior year. Relocated stores, as well as remodeled, expanded
and downsized stores closed more than 14 days, are excluded from the comparable sales calculation until at least 14 full months
after reopening. Acquisitions are included in the comparable sales calculation beginning with the first full quarter following the
first anniversary of the date of the acquisition. The portion of the calculation of comparable sales attributable to our
International segment excludes the effect of fluctuations in foreign currency exchange rates. The calculation of comparable
sales excludes the impact of revenue from discontinued operations. Comparable online sales are included in our comparable
sales calculation. The method of calculating comparable sales varies across the retail industry. As a result, our method of
calculating comparable sales may not be the same as other retailers' methods.
In our discussions of the operating results of our consolidated business and our International segment, we sometimes refer to
the impact of changes in foreign currency exchange rates or the impact of foreign currency exchange rate fluctuations, which
are references to the differences between the foreign currency exchange rates we use to convert the International segment’s
operating results from local currencies into U.S. dollars for reporting purposes. The impact of foreign currency exchange rate
fluctuations is typically calculated as the difference between current period activity translated using the current period’s
currency exchange rates and the comparable prior-year period’s currency exchange rates. We use this method to calculate the
impact of changes in foreign currency exchange rates for all countries where the functional currency is not the U.S. dollar.
In our discussions of the operating results below, we sometimes refer to the impact of net new stores on our results of
operations. The key factors that dictate the impact that the net new stores have on our operating results include: (i) store
opening and closing decisions; (ii) the size and format of new stores, as we operate stores ranging from approximately 1,000
square feet to approximately 50,000 square feet; (iii) the length of time the stores were open during the period; and (iv) the
overall success of new store launches.
This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the United
States ("GAAP"), as well as certain adjusted or non-GAAP financial measures such as non-GAAP operating income, non-
GAAP net earnings from continuing operations, non-GAAP diluted earnings per share from continuing operations and adjusted
debt to earnings before goodwill impairment, interest, income taxes, depreciation, amortization and rent ("EBITDAR") ratio.
Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows
that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated
and presented in accordance with GAAP. The non-GAAP financial measures should be viewed as a supplement to, and not a
substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures as presented herein may not be
comparable to similarly titled measures used by other companies.
We believe that the non-GAAP measures described above provide meaningful supplemental information to assist shareholders
in understanding our financial results and assessing our prospects for future performance. Management believes adjusted
operating income, adjusted net earnings from continuing operations and adjusted diluted earnings per share from continuing
operations are important indicators of our operations because they exclude items that may not be indicative of, or are unrelated
to, our core operating results and provide a baseline for analyzing trends in our underlying businesses. Management makes
standard adjustments for items such as restructuring charges, goodwill impairments, non-restructuring asset impairments and
gains or losses on investments, as well as adjustments for other items that may arise during the period and have a meaningful
impact on comparability. To measure adjusted operating income, we removed the impact of the second quarter of fiscal 2014
LCD-related legal settlements, non-restructuring asset impairments, restructuring charges and goodwill impairments from our
calculation of operating income. Adjusted net earnings from continuing operations was calculated by removing the after-tax
impact of operating income adjustments and the gains on investments, as well as the income tax impacts of reorganizing certain
European legal entities and the Best Buy Europe sale from our calculation of net earnings from continuing operations. To
measure adjusted diluted earnings per share from continuing operations, we excluded the per share impact of net earnings
adjustments from our calculation of diluted earnings per share. Management believes our adjusted debt to EBITDAR ratio is an
important indicator of our creditworthiness. Because non-GAAP financial measures are not standardized, it may not be possible