BEST BUY CO INC, 10-Q filed on 6/8/2018
Quarterly Report
v3.8.0.1
Document and Entity Information Document - shares
3 Months Ended
May 05, 2018
Jun. 05, 2018
Document Information [Line Items]    
Entity Registrant Name BEST BUY CO INC  
Entity Central Index Key 0000764478  
Document Type 10-Q  
Document Period End Date May 05, 2018  
Amendment Flag false  
Current Fiscal Year End Date --02-02  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   279,391,918
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
v3.8.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
May 05, 2018
Feb. 03, 2018
Apr. 29, 2017
Current assets      
Cash and cash equivalents $ 1,848 $ 1,101 $ 1,651
Short-term investments 785 2,032 1,948
Receivables, net 860 1,049 1,011
Merchandise inventories 4,964 5,209 4,637
Other current assets 473 438 409
Total current assets 8,930 9,829 9,656
Property and equipment, net 2,385 2,421 2,287
Goodwill 425 425 425
Other assets 342 374 587
Total assets 12,082 13,049 12,955
Current liabilities      
Accounts payable 4,619 4,873 4,599
Unredeemed gift card liabilities 285 385 389
Deferred revenue 371 453 371
Accrued compensation and related expenses 296 561 274
Accrued liabilities 780 864 699
Accrued income taxes 154 137 93
Current portion of long-term debt 550 544 45
Total current liabilities 7,055 7,817 6,470
Long-term liabilities 815 809 684
Long-term debt 792 811 1,302
Equity      
Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none 0 0 0
Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 281,000,000, 283,000,000 and 306,000,000 shares, respectively 28 28 31
Retained earnings 3,082 3,270 4,202
Accumulated other comprehensive income 310 314 266
Total equity 3,420 3,612 4,499
Total liabilities and equity $ 12,082 $ 13,049 $ 12,955
v3.8.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - $ / shares
May 05, 2018
Feb. 03, 2018
Apr. 29, 2017
Preferred stock, par value (in dollars per share) $ 1.00 $ 1.00 $ 1.00
Preferred stock, authorized shares 400,000 400,000 400,000
Preferred stock, issued shares 0 0 0
Preferred stock, outstanding shares 0 0 0
Common stock, par value (in dollars per share) $ 0.10 $ 0.10 $ 0.10
Common stock, authorized shares 1,000,000,000 1,000,000,000 1,000,000,000
Common stock, issued shares 281,000,000 283,000,000 306,000,000
Common stock, outstanding shares 281,000,000 283,000,000 306,000,000
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($)
shares in Millions, $ in Millions
3 Months Ended
May 05, 2018
Apr. 29, 2017
Revenue $ 9,109 $ 8,528
Cost of goods sold 6,984 6,506
Gross profit 2,125 2,022
Selling, general and administrative expenses 1,830 1,722
Restructuring charges 30 0
Operating income 265 300
Other income (expense)    
Investment income and other 11 11
Interest expense (19) (19)
Earnings before income tax expense 257 292
Income tax expense 49 104
Net earnings $ 208 $ 188
Basic earnings per share $ 0.74 $ 0.61
Diluted earnings per share (in dollars per share) 0.72 0.60
Dividends declared per common share (in dollars per share) $ 0.45 $ 0.34
Weighted-average common shares outstanding (in millions)    
Basic (in shares) 282.6 309.2
Diluted (in shares) 288.3 315.0
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended
May 05, 2018
Apr. 29, 2017
Net earnings $ 208 $ 188
Foreign currency translation adjustments (4) (13)
Comprehensive income $ 204 $ 175
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
3 Months Ended
May 05, 2018
Apr. 29, 2017
Operating activities    
Net earnings $ 208 $ 188
Adjustments to reconcile net earnings to total cash provided by operating activities:    
Depreciation 176 161
Restructuring charges 30 0
Stock-based compensation 32 31
Deferred income taxes 9 12
Other, net (2) (1)
Changes in operating assets and liabilities:    
Receivables 189 333
Merchandise inventories 243 223
Other assets (13) (25)
Accounts payable (214) (382)
Other liabilities (506) (364)
Income taxes 52 67
Total cash provided by operating activities 204 243
Investing activities    
Additions to property and equipment (181) (153)
Purchases of investments 0 (1,134)
Sales of investments 1,245 863
Other, net 9 1
Total cash provided by (used in) investing activities 1,073 (423)
Financing activities    
Repurchase of common stock (400) (373)
Repayments of debt (11) (10)
Dividends paid (128) (105)
Issuance of common stock 24 75
Other, net (1) 0
Total cash used in financing activities (516) (413)
Effect of exchange rate changes on cash (12) (6)
Increase (decrease) in cash, cash equivalents and restricted cash 749 (599)
Cash, cash equivalents and restricted cash at beginning of period 1,300 2,433
Cash, cash equivalents and restricted cash at end of period $ 2,049 $ 1,834
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($)
shares in Millions, $ in Millions
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Beginning balances at Jan. 28, 2017 $ 4,709 $ 31 $ 0 $ 4,399 $ 279
Beginning balances (in shares) at Jan. 28, 2017   311      
Increase (Decrease) in Shareholders' Equity          
ASU adoption cumulative adjustment (2)   10 (12)  
Net earnings 188     188  
Foreign currency translation adjustments (13)       (13)
Stock-based compensation 31   31    
Restricted stock vested and stock options exercised 72 $ 0 72    
Restricted stock vested and stock options exercised (in shares)   3      
Issuance of common stock under employee stock purchase plan 3   3    
Common stock dividends (105)     (105)  
Stock Repurchased During Period, Shares   (8)      
Stock Repurchased During Period, Value (384) $ 0 (116) (268)  
Ending balances at Apr. 29, 2017 4,499 $ 31 0 4,202 266
Ending balances (in shares) at Apr. 29, 2017   306      
Beginning balances at Feb. 03, 2018 3,612 $ 28 0 3,270 314
Beginning balances (in shares) at Feb. 03, 2018   283      
Increase (Decrease) in Shareholders' Equity          
ASU adoption cumulative adjustment 73   0 73  
Net earnings 208     208  
Foreign currency translation adjustments (4)       (4)
Stock-based compensation 32   32    
Restricted stock vested and stock options exercised 20 $ 0 20    
Restricted stock vested and stock options exercised (in shares)   3      
Issuance of common stock under employee stock purchase plan 4   4    
Common stock dividends (126)   2 (128)  
Stock Repurchased During Period, Shares   (5)      
Stock Repurchased During Period, Value (399) $ 0 (58) (341)  
Ending balances at May. 05, 2018 $ 3,420 $ 28 $ 0 $ 3,082 $ 310
Ending balances (in shares) at May. 05, 2018   281      
v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (PARENTHETICAL) - $ / shares
3 Months Ended
May 05, 2018
Apr. 29, 2017
Statement of Stockholders' Equity [Abstract]    
Dividends declared per common share (in dollars per share) $ 0.45 $ 0.34
v3.8.0.1
Basis of Presentation (Notes)
3 Months Ended
May 05, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
Basis of Presentation
 
Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Condensed Consolidated Financial Statements refers to Best Buy Co., Inc. and its consolidated subsidiaries.
 
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.

Historically, we have generated a large proportion 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. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018. The first three months of fiscal 2019 and fiscal 2018 included 13 weeks.

In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our condensed consolidated financial statements. No such events were identified for the reported periods.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from May 6, 2018, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified for this period.

Unadopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases, and has since issued additional ASUs to further clarify or add options to the issued guidance. The new guidance was issued to increase transparency and comparability among companies by requiring most leases to be included on the balance sheet and by expanding disclosure requirements. Based on the effective dates, we expect to adopt the new guidance in the first quarter of fiscal 2020 using the recently-proposed prospective method and have begun implementing required upgrades to our existing lease systems. While we expect adoption to lead to a material increase in the assets and liabilities recorded on our consolidated balance sheet and an increase to our footnote disclosures related to leases, we are still evaluating the impact on our consolidated statement of earnings. We also expect that adoption of the new standard will require changes to our internal controls over financial reporting.

Adopted Accounting Pronouncements

In the first quarter of fiscal 2019, we prospectively adopted the following ASUs, all of which had an immaterial impact on our results of operations, cash flows and financial position.

ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory
ASU 2017-12, Derivatives and Hedging
ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In the first quarter of fiscal 2019, we also adopted ASU 2014-09, Revenue from Contracts with Customers. The new guidance establishes a single comprehensive model for entities to use in accounting for revenue and supersedes most revenue recognition guidance. It introduces a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards under previous guidance. We elected the modified retrospective method of adoption, which we applied to contracts not completed at the date of adoption. Under this method, we recorded an increase to opening retained earnings of $73 million, net of tax, due to the cumulative impact of these changes. The impact was primarily related to the timing of revenue recognition related to our gift cards, the sale of certain software licenses and our loyalty programs. We did not make any adjustment to prior period financial statements. We expect the impact of adoption to be immaterial to our revenue, net earnings and cash flows on an ongoing basis. As part of the adoption, we also modified certain control procedures and processes, none of which had a material effect on our internal controls over financial reporting.

The following table reconciles the Condensed Consolidated Balance Sheet line items impacted by the adoption of this standard on February 4, 2018 ($ in millions):
 
February 3, 2018
As Reported
 
ASU 2014-09 Adjustment on February 4, 2018
 
February 4, 2018 Adjusted
Assets
 
 
 
 
 
Other assets
$
374

 
$
(19
)
 
$
355

Liabilities
 
 
 
 
 
Unredeemed gift card liabilities
385

 
(69
)
 
316

Deferred revenue
453

 
(26
)
 
427

Accrued liabilities
864

 
(3
)
 
861

Accrued income taxes
137

 
6

 
143

Equity
 
 
 
 
 
Retained earnings
3,270

 
73

 
3,343



The following tables set forth the impact of adopting this standard on our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Earnings as of and for the three months ended May 5, 2018 ($ in millions, except per share amounts):
 
May 5, 2018
Impact of Changes to Condensed Consolidated Balance Sheets
As Reported
 
Balances without Adoption of
ASU 2014-09
 
Effect of Change Higher/(Lower)(1)
Assets
 
 
 
 
 
Other current assets
$
473

 
$
427

 
$
46

Other assets
304

 
323

 
(19
)
Liabilities
 
 
 
 
 
Unredeemed gift card liabilities
285

 
355

 
(70
)
Deferred revenue
371

 
395

 
(24
)
Accrued liabilities
780

 
736

 
44

Accrued income taxes
154

 
148

 
6

Equity
 
 
 
 

Retained earnings
3,082

 
3,011

 
71

(1)
Effect of change includes the opening retained earnings adjustment as detailed within the table above.

 
Three months ended May 5, 2018
Impact of Changes to Condensed Consolidated Statements of Earnings
As Reported
 
Balances without Adoption of
ASU 2014-09
 
Effect of Change Higher/(Lower)
Revenue
$
9,109

 
$
9,100

 
$
9

Cost of goods sold
6,984

 
6,973

 
11

Gross profit
2,125

 
2,127

 
(2
)
Operating income
265

 
267

 
(2
)
Income tax expense
49

 
50

 
(1
)
Net earnings
208

 
209

 
(1
)
 
 
 
 
 
 
Basic earnings per share
$
0.74

 
$
0.74

 
$

Diluted earnings per share
$
0.72

 
$
0.73

 
$
(0.01
)


Total Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total shown within the Condensed Consolidated Statements of Cash Flows as of May 5, 2018, February 3, 2018, and April 29, 2017 ($ in millions):
 
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Cash and cash equivalents
$
1,848

 
$
1,101

 
$
1,651

Restricted cash included in Other current assets
201

 
199

 
183

Total cash, cash equivalents and restricted cash
$
2,049

 
$
1,300

 
$
1,834


Amounts included in restricted cash are pledged as collateral or restricted to use for general liability insurance and workers' compensation insurance.

Goodwill and Intangible Assets

All goodwill and intangible asset balances relate to our Domestic segment. As of May 5, 2018, February 3, 2018, and April 29, 2017, the carrying amount of goodwill was $425 million, respectively, net of $675 million of cumulative impairment losses, respectively. The carrying amount of indefinite-lived tradenames included within Other assets on our Condensed Consolidated Balance Sheets was $18 million as of May 5, 2018, February 3, 2018, and April 29, 2017, respectively.
v3.8.0.1
Revenue Recognition Revenue Recognition (Notes)
3 Months Ended
May 05, 2018
Contract with Customer, Asset and Liability [Abstract]  
Revenue from Contract with Customer [Text Block]
Revenue Recognition

We generate revenue primarily from the sale of merchandise products and services, both as a principal and as an agent. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the transaction price consideration that we expect to receive in exchange for those goods or services. Control refers to the ability of the customer to direct the use of, and obtain substantially all of, the remaining benefits from the goods or services. Our transaction price consideration is fixed, unless otherwise disclosed below as variable consideration. We generate all of our operating revenue from contracts with customers. Our revenue excludes sales and usage-based taxes collected.

Revenue from merchandise product sales and services is reported net of sales refunds, which includes an estimate of future returns and contract cancellations based on historical refund rates, with a corresponding reduction to cost of sales. There is inherent judgment in estimating future refunds as they are susceptible to factors outside of our influence. However, we have significant experience in estimating the amount of refunds, based primarily on historical data. Our refund liability for sales returns was $68 million at May 5, 2018, which is included in Accrued liabilities on our Condensed Consolidated Balance Sheets and represents the expected value of the aggregate refunds that will be due to our customers. We also have a corresponding asset included in Other current assets on our Condensed Consolidated Balance Sheets that represents the inventory we expect to be returned, valued at the lower of cost or net realizable value. As of May 5, 2018, this amount was $46 million.

For revenue transactions that involve more than one performance obligation, we defer the revenue associated with any unsatisfied performance obligation until the obligation is satisfied, i.e., when control of a product is transferred to the customer or a service is completed. For such contracts, we allocate revenue and any discounts to each performance obligation based on its relative standalone selling price. We determine standalone selling prices based on the prices charged to customers or, when directly observable selling prices are not available, we generally use an expected cost-plus margin approach.

Our contract liabilities primarily relate to product merchandise not yet delivered to customers; unredeemed gift cards; services not yet completed; services technical support contracts, where performance is satisfied over the duration of the contract; and options that provide a material right to customers, such as our customer loyalty programs. Most of our contract liabilities have a duration of one year or less, except our services technical support contracts, which may have a duration of up to three years. We do not have any material contract assets.

The following table provides information about receivables and contract liabilities from our contracts with customers, which reflects the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as of May 5, 2018, and February 4, 2018 ($ in millions):
 
May 5, 2018
 
February 4, 2018
Receivables, net of an allowance for doubtful accounts of $26 and $24, respectively
$
582

 
$
674

Short-term contract liabilities included in:

 

Unredeemed gift cards
285

 
316

Deferred revenue
371

 
408

Accrued liabilities
139

 
151

Long-term contract liabilities included in:

 

Long-term liabilities
20

 
22


We establish allowances for uncollectible receivables based on historical collection trends and write-off history. The following table summarizes our allowance for doubtful account activity related to contracts with customers during the three months ended May 5, 2018 ($ in millions):
 
Allowance for Doubtful Accounts
Balances at February 4, 2018
$
24

Charged to expenses or other accounts
11

Other(1)
(9
)
Balances at May 5, 2018
$
26

(1)
Includes bad debt write-offs and recoveries and the effect of foreign currency fluctuations.

The following table summarizes significant changes in our contract liability balances during the three months ended May 5, 2018 ($ in millions):
 
Three Months Ended
 
May 5, 2018
Revenue recognized that was included in the contract liability balance(s) as of February 4, 2018
$
455

Revenue recognized from performance obligations satisfied in previous periods

Adjustments(1)
(2
)
(1)
Includes changes in the measure of progress, changes in the estimate of the transaction price or contract modifications.

The following table includes estimated revenue from our contract liability balances expected to be recognized in future periods if performance of the contract is expected to have a duration of more than one year ($ in millions):
 
May 5, 2018(1)
Remainder of fiscal 2019
$
20

Fiscal 2020
15

Fiscal 2021
6

Fiscal 2022
2

Fiscal 2023 and thereafter
1

(1)
We have elected to exclude unsatisfied performance obligations from contract liability balances with a duration of one year or less. The estimated transaction price disclosed above also does not include amounts of variable consideration attributable to contracts where the consideration is constrained at May 5, 2018. Further information about our forms of variable consideration are disclosed below.

We apply a practical expedient to expense direct costs of obtaining a contract when incurred because the amortization period would have been one year or less.

See Note 10, Segments, for a disaggregation of revenue by reportable segment and product category, which represents how our chief operating decision maker reviews information internally to evaluate our financial performance and to make resource allocation and other decisions for the enterprise.

Merchandise product revenue

Merchandise product revenue is recognized when control passes, which generally occurs at a point in time when the customer completes a transaction in the store and receives the merchandise. Our payment terms are typically at the point of sale. In the case of items paid for in the store, but subsequently delivered to the customer, control passes and revenue is recognized once delivery has been completed, as we have transferred possession to the customer.

For transactions initiated online, customers choose whether to have it delivered to them (using third-party parcel delivery companies) or to collect their merchandise from one of our stores (“in-store pick up”). For items delivered directly to the customer, control passes and revenue is recognized when delivery has been completed, as title has passed and we have transferred possession to the customer. For in-store pick up, control passes and revenue is recognized once the customer has taken possession of the merchandise. Any fees charged to customers for delivery are a component of the transaction price and are recognized when delivery has been completed. We use delivery information at an individual contract level to determine when to recognize revenue for products and any related delivery fee revenue.

Generally, we are the principal to the contract as we have control of the physical merchandise products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. For certain sales, primarily activation-based software licenses and third-party stored-value cards, we are the sales agent providing access to the content and recognize fixed commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes upon providing access to the customer of the content.

Warranty obligations associated with the sale of our exclusive brands products are assurance-type warranties that are a guarantee of the product’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract.

Services - When we are the principal

We recognize service revenue for installation, set-up, software troubleshooting, product repair, consultation and educational classes once the service is completed, as this is when the customer has the ability to direct the use of and obtain the benefits of the service or serviced product. Payment terms are typically at the point of sale, but may also occur upon completion of the service. Our service contracts are primarily with retail customers, merchandise vendors (for factory warranty repairs) and third-party underwriters who sell extended warranty protection plans.

For technical support membership contracts, we are responsible for fulfilling the support services to customers. These contracts have terms ranging from one month to three years and typically contain multiple performance obligations. Payment is due at the start of the contract period. We have determined that our contracts do not include a significant financing component. The primary purpose of our payment terms is to provide customers with a simplified method of purchasing our services, not to provide customers with financing. We recognize revenue over time on a service consumption basis, an input method of measuring progress over the related contract term. This method is based on historical utilization patterns as this depicts when customers use the services provided and, accordingly, when the transfer of services occurs. There is judgment in (1) determining the level at which we apply a portfolio approach to these contracts, and (2) measuring the relative standalone selling price for performance obligations within these contracts to the extent that they are only bundled and sold to customers with other performance obligations. When direct observable evidence of the standalone selling price is not available, a cost-plus margin approach is generally used. Additionally, there is judgment in (3) assessing the pattern of delivery across multiple portfolios of customers, including measuring future progress based on historical consumption patterns. When sufficient history of consumption is unavailable, we generally recognize revenue ratably over the life of the contract.

Services - When we are the agent

We sell various hardware protection plans to customers that provide extended warranty coverage on their device purchases. Such plans have terms ranging from one month to five years. Payment is due at the point of sale. Third-party underwriters assume the risk associated with the coverage and are primarily responsible for fulfillment. We record the fixed net commissions (the amount charged to the customer less the premiums remitted to the underwriter) as revenue at a point in time when the corresponding merchandise product revenue is recognized. In addition, we are eligible to receive profit-sharing payments, a form of variable consideration, which are dependent upon the profitable performance of the portfolio. We do not share in any losses of the portfolio. We record any such profit share as revenue once the uncertainty associated with the portfolio period, which is calendar-year based, is no longer constrained using the expected value method. This typically occurs when claims experience for the annual period is known in our fiscal fourth quarter, with payment of the profit share occurring in the subsequent fiscal year.

We earn fixed commissions from mobile network carriers to sell service contracts on their platforms. Revenue is recognized when control passes at a point in time upon sale of the contract and activation of the customer on the provider’s platform. The term between when we bill the content provider and when we receive payment is generally within 30 to 60 days, which is after control has passed. Activation commissions are subject to repayment to the carrier primarily due to customer cancellation for specified time periods after the sale. Commission revenue from mobile network carriers is reported net of the expected cancellations, which we estimate based on historical cancellation rates.

Credit card revenue

We offer promotional financing and credit cards issued by third-party banks that manage and directly extend credit to our customers. We provide a license to our brand and marketing services, and we facilitate credit applications in our stores and online. The banks are the sole owners of the accounts receivable generated under the program and, accordingly, we do not hold any customer receivables related to these programs and act as an agent in the financing transactions with customers. We are eligible to receive a profit share from our banking partner based on the annual performance of the program, and we receive quarterly payments based on forecasts of full-year performance. This is a form of variable consideration. We record such profit share as revenue over time using the most likely amount method, which reflects the amount earned each quarter when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically quarterly. Profit-share payments occur quarterly, shortly after the end of each program quarter.

Best Buy gift cards

We sell Best Buy gift cards to our customers in our retail stores, online and through select third parties. Our gift cards do not have an expiration date. We recognize revenue from gift cards when the card is redeemed by the customer. We also recognize revenue for the portion of gift card values that is not expected to be redeemed ("breakage"). We estimate breakage based on historical patterns and take into account other factors, such as laws and regulations applicable to each jurisdiction.

We recognize gift card breakage based on the expected pattern of gift card redemptions, based on analysis of historic trends. Typically, over 90% of gift card values are redeemed within one year of issuance. There is judgment in assessing (1) the level at which we group gift cards based for analysis of breakage rates, (2) redemption patterns, and (3) the ultimate value of gift cards which we do not expect to be redeemed.

Sales incentives

We frequently offer sales incentives that entitle our customers to receive a gift card at the time of purchase or an instant savings coupon that can be redeemed towards a future purchase. For sales incentives issued to customers that are only earned in conjunction with the purchase of merchandise products or services, the sales incentives represent an option that is a material right and, accordingly, is a performance obligation in the contract. The relative standalone selling price of these sales incentives is deferred as a contract liability, based on the cards or coupons that are projected to be redeemed. We recognize revenue for this performance obligation when it is redeemed by the customer or when it is not expected to be redeemed. There is judgment in determining (1) the level at which we group incentives based on similar redemption patterns in order to estimate future redemption patterns of those groups, and (2) the ultimate number of incentives that we do not expect to be redeemed.

We also issue coupons that are not earned in conjunction with a purchase of a merchandise product or service, typically as part of targeted marketing activities. This is not a performance obligation, but is recognized as a reduction of the transaction price when redeemed by the customer.

Customer loyalty programs

We have customer loyalty programs which allow members to earn points for each qualifying purchase. Points earned enable members to receive a certificate that may be redeemed on future purchases at our Best Buy branded stores. Depending on the customer's membership level within our loyalty program, certificate expirations typically range from 2 to 12 months from the date of issuance. Our loyalty programs represent customer options that provide a material right and, accordingly, are performance obligations for each applicable contract. The relative standalone selling price of points earned by our loyalty program members is deferred and included in Accrued liabilities on our Condensed Consolidated Balance Sheets based on the percentage of points that are projected to be redeemed. We recognize revenue for this performance obligation over time when a certificate is estimated to be redeemed by the customer. There is judgment in measuring the standalone selling price of this performance obligation related to our estimate of the amount of and subsequent timing of redemptions of certificates (“certificate breakage”). We determine our certificate breakage rate based upon historical redemption patterns.
v3.8.0.1
Fair Value Measurements (Notes)
3 Months Ended
May 05, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
 
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:
 
Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.
 
Level 2 — Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:
 
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in non-active markets;
Inputs other than quoted prices that are observable for the asset or liability; and
Inputs that are derived principally from or corroborated by other observable market data.
 
Level 3 — Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis at May 5, 2018, February 3, 2018, and April 29, 2017, by level within the fair value hierarchy as determined by the valuation techniques we used to determine the fair value ($ in millions):
 
 Fair Value Hierarchy
 
Fair Value at
 
 
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Assets
 
 
 

 
 

 
 

Cash and cash equivalents
 
 
 

 
 

 
 

Money market funds
Level 1
 
$
19

 
$
21

 
$
24

Commercial paper
Level 2
 

 
90

 
260

Time deposits
Level 2
 
200

 
65

 
11

Short-term investments
 
 
 
 
 
 
 
Commercial paper
Level 2
 
100

 
474

 
150

Time deposits
Level 2
 
685

 
1,558

 
1,798

Other current assets
 
 
 

 
 
 
 
Money market funds
Level 1
 
58

 
3

 
2

Commercial paper
Level 2
 

 
60

 
60

Foreign currency derivative instruments
Level 2
 
3

 
2

 
7

Interest rate swap derivative instruments
Level 2
 
5

 

 

Time deposits
Level 2
 
101

 
101

 
101

Other assets
 
 
 
 
 
 
 
Marketable securities that fund deferred compensation
Level 1
 
99

 
99

 
97

Interest rate swap derivative instruments
Level 2
 

 

 
4

 
 
 
 
 
 
 
 
Liabilities
 
 
 

 
 

 
 

Accrued liabilities
 
 
 

 
 

 
 

Foreign currency derivative instruments
Level 2
 
1

 
8

 

Interest rate swap derivative instruments
Level 2
 

 
1

 

Long-term liabilities
 
 
 
 
 
 
 
Interest rate swap derivative instruments
Level 2
 
15

 
4

 
1



The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
 
Money market funds. Our money market fund investments were measured at fair value as they trade in an active market using quoted market prices and, therefore, were classified as Level 1.
 
Commercial paper. Our investments in commercial paper were measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2.

Time deposits. Our time deposits are balances held with banking institutions that cannot be withdrawn for specified terms without a penalty. Time deposits are held at face value plus accrued interest, which approximates fair value, and are classified as Level 2.
 
Foreign currency derivative instruments. Comprised primarily of foreign currency forward contracts and foreign currency swap contracts, our foreign currency derivative instruments were measured at fair value using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. Our foreign currency derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Interest rate swap derivative instruments. Our interest rate swap contracts were measured at fair value using readily observable inputs, such as the LIBOR interest rate. Our interest rate swap derivative instruments were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Marketable securities that fund deferred compensation. The assets that fund our deferred compensation consist of investments in mutual funds. These investments were classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.
 
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value, except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded within Selling, general and administrative expenses and Restructuring charges in our Condensed Consolidated Statements of Earnings for non-restructuring and restructuring charges, respectively.

The following table summarizes the fair value remeasurements of property and equipment impairments recorded during the three months ended May 5, 2018, and April 29, 2017 ($ in millions):
 
Impairments
 
 
 
Three Months Ended
 
Remaining Net Carrying Value(1)
 
May 5, 2018
 
April 29, 2017
 
May 5, 2018
 
April 29, 2017
Property and equipment (non-restructuring)
$
2

 
$
5

 
$

 
$

(1)
Remaining net carrying value approximates fair value. Because assets subject to long-lived asset impairment are not measured at fair value on a recurring basis, certain fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at May 5, 2018, and April 29, 2017.

All of the fair value remeasurements included in the table above were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived using a discounted cash flow ("DCF") model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate.

Fair Value of Financial Instruments

Our financial instruments, other than those presented in the disclosures above, include cash, receivables, other investments, accounts payable, other payables and long-term debt. The fair values of cash, receivables, accounts payable and other payables approximated carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate fair value. See Note 5, Debt, for information about the fair value of our long-term debt.
v3.8.0.1
Restructuring Charges (Notes)
3 Months Ended
May 05, 2018
Restructuring and Related Activities [Abstract]  
Restructuring Charges
Restructuring Charges

Charges incurred in the three months ended May 5, 2018, and April 29, 2017, for our restructuring activities were $30 million and $0 million, respectively. All charges incurred in the current period related to Best Buy Mobile.

Best Buy Mobile

On March 1, 2018, we announced our intent to close all of our 257 remaining Best Buy Mobile stand-alone stores in the U.S. This decision was a result of changing economics in the mobile industry since we began opening these stores in 2006, along with the integration of our mobile model into our core stores and on-line channel, which are today more economically compelling. All restructuring charges related to this plan are from continuing operations and are presented in Restructuring charges on our Condensed Consolidated Statements of Earnings.

The composition of the restructuring charges we incurred for Best Buy Mobile during the three months ended May 5, 2018, as well as the cumulative amount incurred through May 5, 2018, were as follows ($ in millions):
 
Three Months Ended
 
Cumulative Amount
 
May 5, 2018
 
May 5, 2018
Property and equipment impairments
$

 
$
1

Termination benefits
1

 
9

Facility closure and other costs
29

 
29

Total restructuring charges
$
30

 
$
39


The following table summarizes our restructuring accrual activity during the three months ended May 5, 2018, related to termination benefits and facility closure and other costs associated with Best Buy Mobile ($ in millions):
 
Termination
Benefits
 
Facility
Closure and
Other Costs
 
Total
Balances at February 3, 2018
$
8

 
$

 
$
8

Charges
1

 
29

 
30

Cash payments

 
(26
)
 
(26
)
Balances at May 5, 2018
$
9

 
$
3

 
$
12



Other
 
We have remaining vacant space liabilities at May 5, 2018, of $13 million related to our Canadian Brand consolidation restructuring program, $11 million related to our Renew Blue restructuring program and $3 million related to our U.S. large-format store closures in fiscal 2013. We may continue to incur immaterial adjustments to these liabilities for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated.
v3.8.0.1
Debt (Notes)
3 Months Ended
May 05, 2018
Debt Disclosure [Abstract]  
Debt
Debt

Short-Term Debt

U.S. Revolving Credit Facility

On April 17, 2018, we entered into a $1.25 billion five-year senior unsecured revolving credit facility agreement (the "Five-Year Facility Agreement") with a syndicate of banks. The Five-Year Facility Agreement replaced the previous $1.25 billion senior unsecured revolving credit facility (the "Previous Facility") with a syndicate of banks, which was originally scheduled to expire in June 2021, but was terminated on April 17, 2018. The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in April 2023. At May 5, 2018, there were no borrowings outstanding. In addition, there were no borrowings outstanding under the Previous Facility as of February 3, 2018, and April 29, 2017.

The interest rate under the Five-Year Facility Agreement is variable and is determined at our option as: (i) the sum of (a) the greatest of (1) JPMorgan Chase Bank, N.A.'s prime rate, (2) the greater of the federal funds rate and the overnight bank funding rate plus, in each case, 0.5%, and (3) the one-month London Interbank Offered Rate (“LIBOR”), subject to certain adjustments plus 1%, and (b) a variable margin rate (the “ABR Margin”); or (ii) the LIBOR plus a variable margin rate (the “LIBOR Margin”). In addition, a facility fee is assessed on the commitment amount. The ABR Margin, LIBOR Margin and the facility fee are based upon our current senior unsecured debt rating. Under the Five-Year Facility Agreement, the ABR Margin ranges from 0.00% to 0.30%, the LIBOR Margin ranges from 0.80% to 1.30%, and the facility fee ranges from 0.08% to 0.20%

The Five-Year Facility Agreement is guaranteed by certain of our subsidiaries and contains customary affirmative and negative covenants. Among other things, these covenants restrict our and certain of our subsidiaries' abilities to incur liens on certain assets; make material changes in corporate structure or the nature of our business; dispose of material assets; engage in certain mergers, consolidations and other fundamental changes;or engage in certain transactions with affiliates. The Five-Year Facility Agreement also contains covenants that require us to maintain a maximum cash flow leverage ratio and a minimum interest coverage ratio. The Five-Year Facility Agreement contains default provisions including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants.

Long-Term Debt

Long-term debt consisted of the following at Mat 5, 2018, February 3, 2018, and April 29, 2017 ($ in millions):
 
May 5, 2018
 
February 3, 2018
 
April 29, 2017
2018 Notes
$
500

 
$
500

 
$
500

2021 Notes
650

 
650

 
650

Interest rate swap valuation adjustments
(10
)
 
(5
)
 
3

Subtotal
1,140

 
1,145

 
1,153

Debt discounts and issuance costs
(2
)
 
(3
)
 
(4
)
Financing lease obligations
184

 
191

 
171

Capital lease obligations
20

 
22

 
27

Total long-term debt
1,342

 
1,355

 
1,347

Less: current portion
550

 
544

 
45

Total long-term debt, less current portion
$
792

 
$
811

 
$
1,302

 

Our 2018 Notes, due August 1, 2018, are classified within our Current portion of long-term debt on our Condensed Consolidated Balance Sheets as of May 5, 2018. The fair value of total long-term debt, excluding debt discounts and issuance costs and financing and capital lease obligations, approximated $1,176 million, $1,199 million and $1,229 million at May 5, 2018, February 3, 2018, and April 29, 2017, respectively, based primarily on the market prices quoted from external sources, compared with carrying values of $1,140 million, $1,145 million and $1,153 million, respectively. If long-term debt was measured at fair value in the financial statements, it would be classified primarily as Level 2 in the fair value hierarchy.

See Note 5, Debt, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information regarding the terms of our debt facilities, debt instruments and other obligations.
v3.8.0.1
Derivative Instruments (Notes)
3 Months Ended
May 05, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Derivative Instruments

We manage our economic and transaction exposure to certain risks through the use of foreign currency derivative instruments and interest rate swaps. Our objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset value associated with changes in foreign currency exchange rates and interest rates. We do not hold derivative instruments for trading or speculative purposes. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by engaging with financial institutions with investment grade credit ratings as our counterparties.

We record all derivative instruments on our Condensed Consolidated Balance Sheets at fair value and evaluate hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting. We formally document all hedging relations at inception for derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transaction. In addition, we have derivatives which are not designated as hedging instruments.

Net Investment Hedges

We use foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations. The contracts have terms of up to 12 months. For a net investment hedge, we recognize changes in the fair value of the derivative as a component of foreign currency translation within other comprehensive income to offset a portion of the change in translated value of the net investment being hedged, until the investment is sold or liquidated. We limit recognition in net earnings of amounts previously recorded in other comprehensive income to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. We report the gains and losses, if any, related to the amount excluded from the assessment of hedge effectiveness in net earnings.

Interest Rate Swaps

We use "receive fixed-rate, pay variable-rate" interest rate swaps to mitigate the effect of interest rate fluctuations on a portion of our 2018 Notes and 2021 Notes. Our interest rate swap contracts are considered perfect hedges because the critical terms and notional amounts match those of our fixed-rate debt being hedged and are, therefore, accounted for as fair value hedges using the shortcut method. Under the shortcut method, we recognize the change in the fair value of the derivatives with an offsetting change to the carrying value of the debt. Accordingly, there is no impact on our Condensed Consolidated Statements of Earnings from the fair value of the derivatives.
 
Derivatives Not Designated as Hedging Instruments

We use foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies. The contracts generally have terms of up to 12 months. These derivative instruments are not designated in hedging relationships and, therefore, we record gains and losses on these contracts directly to net earnings.

Summary of Derivative Balances

The following tables present the gross fair values for outstanding derivative instruments and the corresponding classification at May 5, 2018, and April 29, 2017 ($ in millions):
 
 
Assets
Contract Type
Balance Sheet Location
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Derivatives designated as net investment hedges
Other current assets
$
3

 
$
2

 
$
6

Derivatives designated as interest rate swaps
Other current assets and Other assets
5

 

 
4

No hedge designation (foreign exchange forward contracts)
Other current assets

 

 
1

Total
 
$
8

 
$
2

 
$
11


 
 
Liabilities
Contract Type
Balance Sheet Location
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Derivatives designated as net investment hedges
Accrued liabilities
$
1

 
$
7

 
$

Derivatives designated as interest rate swaps
Accrued liabilities and Long-term liabilities
15

 
5

 
1

No hedge designation (foreign exchange forward contracts)
Accrued liabilities

 
1

 

Total
 
$
16

 
$
13

 
$
1



The following table presents the effects of derivative instruments on other comprehensive income ("OCI") and on our Condensed Consolidated Statements of Earnings for the three months ended May 5, 2018, and April 29, 2017 ($ in millions):
 
Three Months Ended
 
Three Months Ended
 
May 5, 2018
 
April 29, 2017
Contract Type
Pre-tax Gain Recognized in OCI
 
Gain(Loss) Reclassified from Accumulated OCI to Earnings recognized in SG&A
 
Pre-tax Gain Recognized in OCI
 
Gain(Loss) Reclassified from Accumulated OCI to Earnings recognized in SG&A
Derivatives designated as net investment hedges
$
16

 
$

 
$
8

 
$



The following table presents the effects of derivatives not designated as hedging instruments on our Condensed Consolidated Statements of Earnings for the three months ended May 5, 2018, and April 29, 2017 ($ in millions):
 
 
 
Three Months Ended
 
 
 
May 5, 2018
 
April 29, 2017
Contract Type
Location of Gain Recognized
 
Gain Recognized
 
Gain Recognized
No hedge designation (foreign exchange contracts)
SG&A
 
$
1

 
$
1


The following table presents the effects of interest rate derivatives and adjustments to the carrying value of long-term debt on our Condensed Consolidated Statements of Earnings for the three months ended May 5, 2018, and April 29, 2017 ($ in millions):
 
 
 
Gain (Loss) Recognized
Contract Type
Location of Gain (Loss) Recognized
 
May 5, 2018
 
April 29, 2017
Interest rate swap contracts
Interest Expense
 
$
(5
)
 
$
(10
)
Adjustments to carrying value of long-term debt
Interest Expense
 
5

 
10

Total
 
 
$

 
$



The following table presents the notional amounts of our derivative instruments at May 5, 2018, February 3, 2018, and April 29, 2017 ($ in millions):
 
Notional Amount
Contract Type
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Derivatives designated as net investment hedges
$
135

 
$
462

 
$
206

Derivatives designated as interest rate swap contracts
1,150

 
1,150

 
825

No hedge designation (foreign exchange forward contracts)
39

 
33

 
36

Total
$
1,324

 
$
1,645

 
$
1,067

v3.8.0.1
Earnings per Share (Notes)
3 Months Ended
May 05, 2018
Earnings Per Share [Abstract]  
Earnings per Share
Earnings per Share
 
We compute our basic earnings per share based on the weighted-average number of common shares outstanding and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued. Potentially dilutive securities include stock options, nonvested share awards and shares issuable under our employee stock purchase plan. Nonvested market-based share awards and nonvested performance-based share awards are included in the average diluted shares outstanding for each period, if established market or performance criteria have been met at the end of the respective periods.

The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share for the three months ended May 5, 2018, and April 29, 2017 ($ and shares in millions, except per share amounts):
 
Three Months Ended
 
May 5, 2018
 
April 29, 2017
Numerator
 

 
 

Net earnings
$
208

 
$
188

 
 
 
 
Denominator
 
 
 
Weighted-average common shares outstanding
282.6

 
309.2

Dilutive effect of stock compensation plan awards
5.7

 
5.8

Weighted-average common shares outstanding, assuming dilution
288.3

 
315.0

 
 
 
 
Basic earnings per share
$
0.74

 
$
0.61

Diluted earnings per share
$
0.72

 
$
0.60



The number of potential shares that were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive were 0.1 million and 0.7 million for the three months ended May 5, 2018, and April 29, 2017, respectively.

Beginning with our annual broad grant of restricted stock and restricted stock units in March 2018, we attach dividend equivalents to our restricted stock and restricted stock units equal to dividends payable on the same number of shares of Best Buy common stock during the applicable period. Dividend equivalents, settled in additional shares of Best Buy common stock, accrue on restricted stock and restricted stock unit awards during the vesting period. No dividend equivalents are paid on any restricted stock or restricted stock units that are forfeited prior to the vesting date.
v3.8.0.1
Comprehensive Income (Notes)
3 Months Ended
May 05, 2018
Equity [Abstract]  
Comprehensive Income
Comprehensive Income
 
The following tables provide a reconciliation of the components of accumulated other comprehensive income, net of tax, attributable to Best Buy Co., Inc. for the three months ended May 5, 2018, and April 29, 2017 ($ in millions):
 
Foreign Currency Translation
Balances at February 3, 2018
$
314

Foreign currency translation adjustments
(4
)
Balances at May 5, 2018
$
310

 
 
Balance at January 28, 2017
$
279

Foreign currency translation adjustments
(13
)
Balance at April 29, 2017
$
266



The gains and losses on our net investment hedges, which are included in foreign currency translation adjustments, were not material for the periods presented. Foreign currency translation adjustments do not include a provision for income tax expense when earnings from foreign operations are considered to be indefinitely reinvested outside the U.S. At this time, we are still evaluating the earnings that are indefinitely reinvested outside the U.S. Refer to Note 10, Income Taxes, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information.
v3.8.0.1
Repurchase of Common Stock (Notes)
3 Months Ended
May 05, 2018
Equity [Abstract]  
Repurchase of Common Stock
Repurchase of Common Stock

In February 2017, our Board of Directors ("Board") authorized a $5.0 billion share repurchase program that superseded the previous $5.0 billion authorization from 2011. There is no expiration date governing the period over which we can repurchase shares under the February 2017 authorization. On March 1, 2018, we announced our intent to repurchase at least $1.5 billion of shares in fiscal 2019, which reflects an updated two-year plan of $3.5 billion compared to the original $3.0 billion two-year plan announced March 1, 2017.

The following table presents information regarding the shares we repurchased during the three months ended May 5, 2018, and April 29, 2017 ($ and shares in millions, except per share amounts):
 
Three Months Ended
 
May 5, 2018
 
April 29, 2017
Total cost of shares repurchased(1)
$
399

 
$
384

Average price per share
$
71.78

 
$
46.30

Number of shares repurchased(1)
5.6

 
8.3

(1)
As of May 5, 2018, $12 million, or 0.2 million shares, in trades remained unsettled. As of April 29, 2017, $19 million, or 0.3 million shares, in trades remained unsettled. The liability for unsettled trades is included in Accrued liabilities on the Condensed Consolidated Balance Sheets.

At May 5, 2018, $2.6 billion of the $5.0 billion of share repurchases authorized by our Board in February 2017 was available for future share repurchases. Between the end of the first quarter of fiscal 2019 on May 5, 2018, and June 5, 2018, we repurchased an incremental 1.6 million shares of our common stock at a cost of $120 million.
v3.8.0.1
Segments (Notes)
3 Months Ended
May 05, 2018
Segment Reporting [Abstract]  
Segment Reporting
Segments
 
Our chief operating decision maker ("CODM") is our Chief Executive Officer. Our business is organized into two reportable segments: Domestic (which is comprised of all states, districts and territories of the U.S.) and International (which is comprised of all operations in Canada and Mexico). Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors the performance of, the consolidated enterprise, the Domestic segment and the International segment. The Domestic segment managers and International segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and segment results to the operating income level.

We aggregate our Canada and Mexico businesses into one International operating segment. Our Domestic and International operating segments also represent our reportable segments. The accounting policies of the segments are the same.

Revenue by reportable segment and product category were as follows for the three months ended May 5, 2018, and April 29, 2017 ($ in millions):
 
Three Months Ended
 
May 5, 2018
 
April 29, 2017
Revenue by reportable segment
 
 
 
Domestic
$
8,412

 
$
7,912

International
697

 
616

Total revenue
$
9,109

 
$
8,528

Revenue by product category(1)
 
 
 
Domestic
 
 
 
Consumer Electronics
$
2,655

 
$
2,582

Computing and Mobile Phones
3,899

 
3,576

Entertainment
548

 
572

Appliances
883

 
777

Services
393

 
371

Other
34

 
34

Total domestic revenue
$
8,412

 
$
7,912

International
 
 
 
Consumer Electronics
$
206

 
$
179

Computing and Mobile Phones
331

 
297

Entertainment
43

 
44

Appliances
61

 
41

Services
39

 
40

Other
17

 
15

Total international revenue
$
697

 
$
616


(1)
Refer to our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information regarding the key components of each revenue category.

Operating income (loss) by reportable segment and the reconciliation to earnings before income tax expense were as follows for the three months ended May 5, 2018, and April 29, 2017 ($ in millions):
 
Three Months Ended
 
May 5, 2018
 
April 29, 2017
Domestic
$
267

 
$
298

International
(2
)
 
2

Total operating income
265

 
300

Other income (expense)
 
 
 
Investment income and other
11

 
11

Interest expense
(19
)
 
(19
)
Earnings before income tax expense
$
257

 
$
292


 
Assets by reportable segment were as follows as of May 5, 2018, February 3, 2018, and April 29, 2017 ($ in millions):
 
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Domestic
$
10,955

 
$
11,553

 
$
11,691

International
1,127

 
1,496

 
1,264

Total assets
$
12,082

 
$
13,049

 
$
12,955

v3.8.0.1
Income Taxes Income Taxes (Notes)
3 Months Ended
May 05, 2018
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Income Taxes

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”), which significantly changed U.S. tax law. Among other things, the Tax Act lowered the U.S. statutory tax rate from 35% to 21% effective January 1, 2018, broadened the base to which U.S. income tax applies, imposed a one-time deemed repatriation tax on net unremitted earnings of foreign subsidiaries not previously subject to U.S. income tax and changed how foreign earnings are subject to U.S. income tax.

In response to the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) that provides guidance on accounting for the impact of the Tax Act. SAB 118 allows companies to record provisional amounts to the extent that they are reasonably estimable and adjust them over time as more information becomes available, not to extend beyond the measurement period of one year from the enactment of the Tax Act.

As a result of the Tax Act and in accordance with SAB 118, we recorded provisional tax expense in the fourth quarter of fiscal 2018 related to the deemed repatriation tax and the revaluation of deferred tax assets and liabilities to reflect the new tax rate.  We have not made any measurement period adjustments related to these items during the first quarter of fiscal 2019. We continue to gather and analyze additional information needed to complete our accounting for these items and expect to complete our accounting within the one-year measurement period provided by SAB 118. Any adjustment to these amounts during the measurement period will be recorded in income tax expense in the period in which the analysis is complete.

Beginning in fiscal 2019, the Tax Act created a provision known as the global intangible low-tax income (“GILTI”) that imposes a tax on certain earnings of foreign subsidiaries. Due to the complexity of the new GILTI tax rules, we are not yet able to reasonably determine the complete effects of this provision. Therefore, we have not yet elected a policy as to whether we will recognize deferred taxes for basis differences expected to reverse or record GILTI as a current period cost when incurred. We have, however, included an estimate of the current GILTI impact in our effective tax rate for fiscal 2019.

Refer to Note 10, Income Taxes, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018, for additional information.
v3.8.0.1
Contingencies (Notes)
3 Months Ended
May 05, 2018
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
Contingencies

We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected in our Condensed Consolidated Financial Statements. However, there are cases where liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Condensed Consolidated Financial Statements.

Securities Actions

In February 2011, a purported class action lawsuit captioned, IBEW Local 98 Pension Fund, individually and on behalf of all others similarly situated v. Best Buy Co., Inc., et al., was filed against us and certain of our executive officers in the U.S. District Court for the District of Minnesota. This federal court action alleges, among other things, that we and the officers named in the complaint violated Sections 10(b) and 20A of the Exchange Act and Rule 10b-5 under the Exchange Act in connection with press releases and other statements relating to our fiscal 2011 earnings guidance that had been made available to the public. Additionally, in March 2011, a similar purported class action was filed by a single shareholder, Rene LeBlanc, against us and certain of our executive officers in the same court. In July 2011, after consolidation of the IBEW Local 98 Pension Fund and Rene LeBlanc actions, a consolidated complaint captioned, IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al., was filed and served. Following discovery and motion practice Plaintiffs moved to certify the purported class. By Order filed August 6, 2014, the court certified a class of persons or entities who acquired Best Buy common stock between 10:00 a.m. EDT on September 14, 2010, and December 13, 2010, and who were damaged by the alleged violations of law. The 8th Circuit Court of Appeals granted our request for interlocutory appeal. On April 12, 2016, the 8th Circuit held the trial court misapplied the law and reversed the class certification order. IBEW petitioned the 8th Circuit for a rehearing en banc, which was denied on June 1, 2016. On June 23, 2017, the trial court denied plaintiff's request to file a new Motion for Class Certification. On October 30, 2017, plaintiffs filed with the trial court a motion for leave to file a second amended class action complaint which Best Buy opposed in a filing on November 6, 2017. That motion is pending. We continue to believe that the remaining individual plaintiff's allegations are without merit and intend to vigorously defend our company in this matter.

In June 2011, a purported shareholder derivative action captioned, Salvatore M. Talluto, Derivatively and on Behalf of Best Buy Co., Inc. v. Richard M. Schulze, et al., as Defendants and Best Buy Co., Inc. as Nominal Defendant, was filed against both present and former members of our Board serving during the relevant periods in fiscal 2011 and us as a nominal defendant in the U.S. District Court for the State of Minnesota. The lawsuit alleges that the director defendants breached their fiduciary duty, among other claims, including violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in failing to correct public misrepresentations and material misstatements and/or omissions regarding our fiscal 2011 earnings projections and, for certain directors, selling stock while in possession of material adverse non-public information. Additionally, in July 2011, a similar purported class action was filed by a single shareholder, Daniel Himmel, against us and certain of our executive officers in the same court. In November 2011, the respective lawsuits of Salvatore M. Talluto and Daniel Himmel were consolidated into a new action captioned, In Re: Best Buy Co., Inc. Shareholder Derivative Litigation, and a stay ordered pending the close of discovery in the consolidated IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al. case. Additionally, in June 2015, a similar purported class action was filed by a single shareholder, Khuong Tran, derivatively on behalf of Best Buy Co., Inc. against us and certain of our executive officers and directors in the same court. The Khuong Tran lawsuit has also been stayed pending the close of discovery in IBEW.

The plaintiffs in the above securities actions seek damages, including interest, equitable relief and reimbursement of the costs and expenses they incurred in the lawsuits. As stated above, we believe the allegations in the above securities actions are without merit, and we intend to defend these actions vigorously. Based on our assessment of the facts underlying the claims in the above securities actions, their respective procedural litigation history and the degree to which we intend to defend our company in these matters, the amount or range of reasonably possible losses, if any, cannot be estimated.

Other Legal Proceedings

We are involved in various other legal proceedings arising in the normal course of conducting business. For such legal proceedings, we have accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to our consolidated financial position, results of operations or cash flows. Because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings and the difficulty of predicting the settlement value of many of these proceedings, we are not able to estimate an amount or range of any reasonably possible additional losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations or cash flows.
v3.8.0.1
Basis of Presentation Basis of Presentation (Tables)
3 Months Ended
May 05, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of New Accounting Pronouncements and Changes in Accounting Principles
The following table reconciles the Condensed Consolidated Balance Sheet line items impacted by the adoption of this standard on February 4, 2018 ($ in millions):
 
February 3, 2018
As Reported
 
ASU 2014-09 Adjustment on February 4, 2018
 
February 4, 2018 Adjusted
Assets
 
 
 
 
 
Other assets
$
374

 
$
(19
)
 
$
355

Liabilities
 
 
 
 
 
Unredeemed gift card liabilities
385

 
(69
)
 
316

Deferred revenue
453

 
(26
)
 
427

Accrued liabilities
864

 
(3
)
 
861

Accrued income taxes
137

 
6

 
143

Equity
 
 
 
 
 
Retained earnings
3,270

 
73

 
3,343



The following tables set forth the impact of adopting this standard on our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Earnings as of and for the three months ended May 5, 2018 ($ in millions, except per share amounts):
 
May 5, 2018
Impact of Changes to Condensed Consolidated Balance Sheets
As Reported
 
Balances without Adoption of
ASU 2014-09
 
Effect of Change Higher/(Lower)(1)
Assets
 
 
 
 
 
Other current assets
$
473

 
$
427

 
$
46

Other assets
304

 
323

 
(19
)
Liabilities
 
 
 
 
 
Unredeemed gift card liabilities
285

 
355

 
(70
)
Deferred revenue
371

 
395

 
(24
)
Accrued liabilities
780

 
736

 
44

Accrued income taxes
154

 
148

 
6

Equity
 
 
 
 

Retained earnings
3,082

 
3,011

 
71

(1)
Effect of change includes the opening retained earnings adjustment as detailed within the table above.

 
Three months ended May 5, 2018
Impact of Changes to Condensed Consolidated Statements of Earnings
As Reported
 
Balances without Adoption of
ASU 2014-09
 
Effect of Change Higher/(Lower)
Revenue
$
9,109

 
$
9,100

 
$
9

Cost of goods sold
6,984

 
6,973

 
11

Gross profit
2,125

 
2,127

 
(2
)
Operating income
265

 
267

 
(2
)
Income tax expense
49

 
50

 
(1
)
Net earnings
208

 
209

 
(1
)
 
 
 
 
 
 
Basic earnings per share
$
0.74

 
$
0.74

 
$

Diluted earnings per share
$
0.72

 
$
0.73

 
$
(0.01
)
Schedule of cash, cash equivalents and restricted cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total shown within the Condensed Consolidated Statements of Cash Flows as of May 5, 2018, February 3, 2018, and April 29, 2017 ($ in millions):
 
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Cash and cash equivalents
$
1,848

 
$
1,101

 
$
1,651

Restricted cash included in Other current assets
201

 
199

 
183

Total cash, cash equivalents and restricted cash
$
2,049

 
$
1,300

 
$
1,834


v3.8.0.1
Revenue Recognition Revenue Recognition (Tables)
3 Months Ended
May 05, 2018
Contract with Customer, Asset and Liability [Abstract]  
Contract with Customer, Asset and Liability [Table Text Block]
The following table provides information about receivables and contract liabilities from our contracts with customers, which reflects the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as of May 5, 2018, and February 4, 2018 ($ in millions):
 
May 5, 2018
 
February 4, 2018
Receivables, net of an allowance for doubtful accounts of $26 and $24, respectively
$
582

 
$
674

Short-term contract liabilities included in:

 

Unredeemed gift cards
285

 
316

Deferred revenue
371

 
408

Accrued liabilities
139

 
151

Long-term contract liabilities included in:

 

Long-term liabilities
20

 
22


We establish allowances for uncollectible receivables based on historical collection trends and write-off history. The following table summarizes our allowance for doubtful account activity related to contracts with customers during the three months ended May 5, 2018 ($ in millions):
 
Allowance for Doubtful Accounts
Balances at February 4, 2018
$
24

Charged to expenses or other accounts
11

Other(1)
(9
)
Balances at May 5, 2018
$
26

(1)
Includes bad debt write-offs and recoveries and the effect of foreign currency fluctuations.

The following table summarizes significant changes in our contract liability balances during the three months ended May 5, 2018 ($ in millions):
 
Three Months Ended
 
May 5, 2018
Revenue recognized that was included in the contract liability balance(s) as of February 4, 2018
$
455

Revenue recognized from performance obligations satisfied in previous periods

Adjustments(1)
(2
)
(1)
Includes changes in the measure of progress, changes in the estimate of the transaction price or contract modifications.

The following table includes estimated revenue from our contract liability balances expected to be recognized in future periods if performance of the contract is expected to have a duration of more than one year ($ in millions):
 
May 5, 2018(1)
Remainder of fiscal 2019
$
20

Fiscal 2020
15

Fiscal 2021
6

Fiscal 2022
2

Fiscal 2023 and thereafter
1

(1)
We have elected to exclude unsatisfied performance obligations from contract liability balances with a duration of one year or less. The estimated transaction price disclosed above also does not include amounts of variable consideration attributable to contracts where the consideration is constrained at May 5, 2018. Further information about our forms of variable consideration are disclosed below.
v3.8.0.1
Fair Value Measurements (Tables)
3 Months Ended
May 05, 2018
Fair Value Disclosures [Abstract]  
Fair Value, Assets and Liabilities Measured on Recurring Basis
The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis at May 5, 2018, February 3, 2018, and April 29, 2017, by level within the fair value hierarchy as determined by the valuation techniques we used to determine the fair value ($ in millions):
 
 Fair Value Hierarchy
 
Fair Value at
 
 
May 5, 2018
 
February 3, 2018
 
April 29, 2017
Assets
 
 
 

 
 

 
 

Cash and cash equivalents
 
 
 

 
 

 
 

Money market funds
Level 1
 
$
19

 
$
21

 
$
24

Commercial paper
Level 2
 

 
90

 
260

Time deposits
Level 2
 
200

 
65

 
11

Short-term investments
 
 
 
 
 
 
 
Commercial paper
Level 2
 
100

 
474

 
150

Time deposits
Level 2
 
685

 
1,558

 
1,798

Other current assets
 
 
 

 
 
 
 
Money market funds
Level 1
 
58

 
3

 
2

Commercial paper
Level 2
 

 
60

 
60

Foreign currency derivative instruments
Level 2
 
3

 
2

 
7

Interest rate swap derivative instruments
Level 2
 
5

 

 

Time deposits
Level 2
 
101

 
101

 
101

Other assets
 
 
 
 
 
 
 
Marketable securities that fund deferred compensation
Level 1
 
99

 
99

 
97

Interest rate swap derivative instruments
Level 2
 

 

 
4