BEST BUY CO INC, 10-K filed on 3/23/2020
Annual Report
v3.20.1
Document Information Statement - USD ($)
$ in Billions
12 Months Ended
Feb. 01, 2020
Mar. 18, 2020
Aug. 02, 2019
Document Information [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Feb. 01, 2020    
Document Fiscal Year Focus 2020    
Current Fiscal Year End Date --02-01    
Document Transition Report false    
Entity File Number 1-9595    
Entity Registrant Name BEST BUY CO., INC.    
Entity Incorporation, State or Country Code MN    
Entity Address, Address Line One 7601 Penn Avenue South    
Entity Address, City or Town Richfield    
Entity Address, State or Province MN    
Entity Tax Identification Number 41-0907483    
Entity Address, Postal Zip Code 55423    
City Area Code 612    
Local Phone Number 291-1000    
Title of 12(b) Security Common Stock, $0.10 par value per share    
Trading Symbol BBY    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status No    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 13.9
Entity Common Stock, Shares Outstanding   256,971,220  
Documents Incorporated by Reference [Text Block] Portions of the registrant's Definitive Proxy Statement relating to its 2020 Regular Meeting of Shareholders ("Proxy Statement") are incorporated by reference into Part III. The Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

   
Document Fiscal Period Focus FY    
Entity Central Index Key 0000764478    
Amendment Flag false    
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Feb. 01, 2020
Feb. 02, 2019
Current assets    
Cash and cash equivalents $ 2,229 $ 1,980
Receivables, net 1,149 1,015
Merchandise inventories 5,174 5,409
Other current assets 305 466
Total current assets 8,857 8,870
Property and equipment    
Land and buildings 650 637
Leasehold improvements 2,203 2,119
Fixtures and equipment 6,286 5,865
Property under capital and financing leases   579
Property under finance leases 89  
Gross property and equipment 9,228 9,200
Less accumulated depreciation 6,900 6,690
Net property and equipment 2,328 2,510
Operating lease assets 2,709  
Goodwill 984 915
Other assets 713 606
Total assets 15,591 12,901
Current liabilities    
Accounts payable 5,288 5,257
Unredeemed gift card liabilities 281 290
Deferred revenue 501 446
Accrued compensation and related expenses 410 482
Accrued liabilities 906 982
Current portion of operating lease liabilities 660  
Current portion of long-term debt 14 56
Total current liabilities 8,060 7,513
Long-term operating lease liabilities 2,138  
Long-term liabilities 657 750
Long-term debt 1,257 1,332
Contingencies and commitments (Note 13)
Equity    
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none
Common stock, $0.10 par value: Authorized 1.0 billion shares; Issued and outstanding 256,494,000 and 265,703,000 shares, respectively 26 27
Additional paid-in capital
Retained earnings 3,158 2,985
Accumulated other comprehensive income 295 294
Total equity 3,479 3,306
Total liabilities and equity $ 15,591 $ 12,901
v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Feb. 01, 2020
Feb. 02, 2019
Consolidated Balance Sheets [Abstract]    
Preferred stock, par value (in dollars per share) $ 1.00 $ 1.00
Preferred stock, authorized shares 400,000 400,000
Preferred stock, issued shares 0 0
Preferred stock, outstanding shares 0 0
Common stock, par value (in dollars per share) $ 0.10 $ 0.10
Common stock, authorized shares 1,000,000,000.0 1,000,000,000.0
Common stock, issued shares 256,494,000 265,703,000
Common stock, outstanding shares 256,494,000 265,703,000
v3.20.1
Consolidated Statements of Earnings - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Consolidated Statements of Earnings [Abstract]      
Revenue $ 43,638 $ 42,879 $ 42,151
Cost of sales 33,590 32,918 32,275
Gross profit 10,048 9,961 9,876
Selling, general and administrative expenses 7,998 8,015 8,023
Restructuring charges 41 46 10
Operating income 2,009 1,900 1,843
Other income (expense):      
Gain on sale of investments 1 12 1
Investment income and other 47 49 48
Interest expense (64) (73) (75)
Earnings from continuing operations before income tax expense 1,993 1,888 1,817
Income tax expense 452 424 818
Net earnings from continuing operations 1,541 1,464 999
Gain from discontinued operations, net of $0 tax expense     1
Net earnings $ 1,541 $ 1,464 $ 1,000
Basic earnings per share $ 5.82 [1] $ 5.30 [1] $ 3.33
Diluted earnings per share $ 5.75 [1] $ 5.20 [1] $ 3.26
Weighted-average common shares outstanding      
Basic 264.9 276.4 300.4
Diluted 268.1 281.4 307.1
[1] The sum of our quarterly diluted earnings per share does not equal our annual diluted earnings per share due to differences in quarterly and annual weighted-average shares outstanding
v3.20.1
Consolidated Statements of Earnings (Parenthetical) - USD ($)
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Consolidated Statements of Earnings [Abstract]      
Tax effect of discontinued operations $ 0 $ 0 $ 0
v3.20.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Consolidated Statements of Comprehensive Income [Abstract]      
Net earnings $ 1,541 $ 1,464 $ 1,000
Foreign currency translation adjustments 1 (20) 35
Comprehensive income $ 1,542 $ 1,444 $ 1,035
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Operating activities      
Net earnings $ 1,541 $ 1,464 $ 1,000
Adjustments to reconcile net earnings to total cash provided by operating activities:      
Depreciation and amortization 812 770 683
Restructuring charges 41 46 10
Stock-based compensation 143 123 129
Deferred income taxes 70 10 162
Other, net 21 (25) (13)
Changes in operating assets and liabilities, net of acquired assets and liabilities:      
Receivables (131) 28 315
Merchandise inventories 237 (194) (335)
Other assets 16 (34) (21)
Accounts payable 47 432 (196)
Income taxes (132) 22 290
Other liabilities (100) (234) 117
Total cash provided by operating activities 2,565 2,408 2,141
Investing activities      
Additions to property and equipment, net of $10, $53 and $123, respectively, of non-cash capital expenditures (743) (819) (688)
Purchases of investments (330)   (4,325)
Sales of investments 322 2,098 4,018
Acquisitions, net of cash acquired (145) (787)  
Other, net 1 16 (7)
Total cash provided by (used in) investing activities (895) 508 (1,002)
Financing activities      
Repurchase of common stock (1,003) (1,505) (2,004)
Issuance of common stock 48 38 163
Dividends paid (527) (497) (409)
Borrowings of debt   498  
Repayments of debt (15) (546) (46)
Other, net (1) (6) (1)
Total cash used in financing activities (1,498) (2,018) (2,297)
Effect of exchange rate changes on cash (1) (14) 25
Increase (decrease) in cash, cash equivalents and restricted cash 171 884 (1,133)
Cash, cash equivalents and restricted cash at beginning of period 2,184 1,300 2,433
Cash, cash equivalents and restricted cash at end of period 2,355 2,184 1,300
Supplemental cash flow information      
Income taxes paid 514 391 366
Interest paid $ 62 $ 71 $ 81
v3.20.1
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Consolidated Statements of Cash Flows [Abstract]      
Non-cash capital expenditures $ 10 $ 53 $ 123
v3.20.1
Consolidated Statements of Changes in Shareholders' Equity - USD ($)
shares in Millions, $ in Millions
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total
Beginning balances at Jan. 28, 2017 $ 31   $ 4,399 $ 279 $ 4,709
Beginning balances (in shares) at Jan. 28, 2017 311        
Increase (Decrease) in Shareholders' Equity          
Net earnings     1,000   1,000
Other comprehensive income, net of tax:          
Foreign currency translation adjustments       35 35
Stock-based compensation   $ 129     129
Issuance of common stock $ 1 162     163
Issuance of common stock (in shares) 7        
Common stock dividends     (411)   (411)
Repurchase of common stock $ (4) (299) (1,706)   (2,009)
Repurchase of common stock (in shares) (35)        
Other   (2)     (2)
Ending balances at Feb. 03, 2018 $ 28   3,270 314 3,612
Ending balances (in shares) at Feb. 03, 2018 283        
Increase (Decrease) in Shareholders' Equity          
Cumulative effect of new accounting principle in period of adoption | Accounting Standards Update 2016-02 [Member]   10 (12)   (2)
Net earnings     1,464   1,464
Other comprehensive income, net of tax:          
Foreign currency translation adjustments       (20) (20)
Stock-based compensation   123     123
Issuance of common stock   38     38
Issuance of common stock (in shares) 4        
Common stock dividends   6 (497)   (491)
Repurchase of common stock $ (1) (167) (1,325)   (1,493)
Repurchase of common stock (in shares) (21)        
Ending balances at Feb. 02, 2019 $ 27   2,985 294 3,306
Ending balances (in shares) at Feb. 02, 2019 266        
Increase (Decrease) in Shareholders' Equity          
Cumulative effect of new accounting principle in period of adoption | Adoption of ASU 2014-09     73   73
Net earnings     1,541   1,541
Other comprehensive income, net of tax:          
Foreign currency translation adjustments       1 1
Stock-based compensation   143     143
Issuance of common stock   48     48
Issuance of common stock (in shares) 4        
Common stock dividends   9 (536)   (527)
Repurchase of common stock $ (1) (198) (810)   (1,009)
Repurchase of common stock (in shares) (14)        
Other   $ (2)     (2)
Ending balances at Feb. 01, 2020 $ 26   3,158 $ 295 3,479
Ending balances (in shares) at Feb. 01, 2020 256        
Increase (Decrease) in Shareholders' Equity          
Cumulative effect of new accounting principle in period of adoption | Adoption of ASU 2016-09     $ (22)   $ (22)
v3.20.1
Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Consolidated Statements of Changes in Shareholders' Equity [Abstract]      
Dividends declared per common share $ 2.00 $ 1.80 $ 1.36
v3.20.1
Summary of Significant Accounting Policies
12 Months Ended
Feb. 01, 2020
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Notes to Consolidated Financial Statements

1.   Summary of Significant Accounting Policies

Unless the context otherwise requires, the use of the terms "Best Buy," "we," "us" and "our" in these Notes to Consolidated Financial Statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries.

Description of Business

Our purpose is to enrich the lives of consumers through technology. We have two reportable segments: Domestic and International. The Domestic segment is comprised of the operations in all states, districts and territories of the U.S. under various brand names including Best Buy, Best Buy Business, Best Buy Express, Best Buy Health, CST, Geek Squad, GreatCall, Lively, Magnolia and Pacific Kitchen and Home and the domain names bestbuy.com and greatcall.com. The International segment is comprised of all operations in Canada and Mexico under the brand names Best Buy, Best Buy Express, Best Buy Mobile, Geek Squad and the domain names bestbuy.ca and bestbuy.com.mx.

On October 1, 2018, we acquired all of the outstanding shares of GreatCall, Inc. (“GreatCall”). On May 9, 2019, we acquired all of the outstanding shares of Critical Signal Technologies, Inc. (“CST”), and on August 7, 2019, we acquired the predictive healthcare technology business of BioSensics, LLC (“BioSensics”). Refer to Note 2, Acquisitions, for additional information.

Basis of Presentation

The consolidated financial statements include the accounts of Best Buy Co., Inc. and its consolidated subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.

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 consolidated financial statements. No significant intervening event occurred in these operations that would have materially affected our financial condition, results of operations, liquidity or other factors had it been recorded during fiscal 2020, fiscal 2019 or fiscal 2018.

Discontinued Operations

Discontinued operations in fiscal 2018 reflects the proceeds attributed to a non-compete clause from the sale of Best Buy Europe to Carphone Warehouse plc.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts in the consolidated financial statements, as well as the disclosure of contingent liabilities. Future results could be materially affected if actual results were to differ from these estimates and assumptions.

Fiscal Year

Our fiscal year ends on the Saturday nearest the end of January. Fiscal 2020 and fiscal 2019 included 52 weeks and fiscal 2018 included 53 weeks, with the additional week occurring in the fourth quarter.

Unadopted Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. We do not believe the updated guidance, which is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This guidance requires companies to apply the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to implementation costs incurred in a hosting arrangement that is a service contract to determine whether to capitalize certain implementation costs or expense them as incurred. We do not believe the new guidance, which is effective for fiscal years beginning after December 15, 2019, will have a material impact on our consolidated financial statements.

Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which requires the recognition of operating lease assets and lease liabilities on the balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Under the new standard, disclosures are required to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

In the first quarter of fiscal 2020, we adopted ASU 2016-02 using the “Comparatives Under 840 Option” approach to transition. Under this method, financial information related to periods prior to adoption were as originally reported under the previous standard – ASC 840, Leases. The effects of adopting the new standard (ASC 842, Leases) in fiscal 2020 were recognized as a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal first quarter. We elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carry forward the historical lease classification as operating or capital leases. We also elected to combine lease and non-lease components and to exclude short-term leases from our Consolidated Balance Sheets. We did not elect the hindsight practical expedient in determining the lease term for existing leases as of February 3, 2019.

The most significant impact of adoption was the recognition of operating lease assets and operating lease liabilities of $2.7 billion and $2.8 billion, respectively, while our accounting for existing capital leases (now referred to as finance leases) remained substantially unchanged. The cumulative impact of these changes decreased retained earnings by $22 million, which included a $3 million net-of-tax adjustment made during the second quarter of fiscal 2020 related to on-adoption impairment charges. We expect the impact of adoption to be immaterial to our consolidated statements of earnings and consolidated statements of cash flows on an ongoing basis. As part of our adoption, we also modified our control procedures and processes, none of which materially affected our internal control over financial reporting. See Note 10, Leases, for additional lease disclosures.

The cumulative effect of the changes made to our Consolidated Balance Sheets for the adoption of this standard was as follows ($ in millions):

.

February 2, 2019
As Reported

ASU 2016-02 Adjustment on February 3, 2019

February 3, 2019
As Reported

Assets

Other current assets

$

466 

$

(65)

(a)

$

401 

Net property and equipment

2,510 

(173)

(b)

2,337 

Operating lease assets

-

2,732 

(c)

2,732 

Other assets

606 

5 

(d)

611 

Liabilities

Accrued liabilities

982 

(28)

(e)

954 

Current portion of operating lease liabilities

-

712 

(f)

712 

Current portion of long-term debt

56 

(43)

(b)

13 

Long-term liabilities

750 

(115)

(e)

635 

Long-term operating lease liabilities

-

2,135 

(f)

2,135 

Long-term debt

1,332 

(140)

(b)

1,192 

Equity

Retained earnings

2,985 

(22)

(g)

2,963 

(a)Represents the reclassification of prepaid rent and leasehold acquisition costs to Operating lease assets.

(b)Represents the derecognition of financing obligations and reclassification to Operating lease assets.

(c)Represents the capitalization of operating lease assets and the reclassification of prepaid rent and leasehold acquisition costs, offset by the reclassification of straight-line rent accruals, tenant improvement allowances and vacant space reserves.

(d)Represents the deferred tax impact of the on-adoption adjustments.

(e)Represents the reclassification of straight-line rent accruals, tenant improvement allowances and vacant space reserves to Operating lease assets.

(f)Represents the recognition of Operating lease liabilities.

(g)Represents the net-of-tax retained earnings impact of impairment charges and the derecognition of financing obligations.

Segment Information

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 chief operating decision maker ("CODM") is our Chief Executive Officer. Our CODM has ultimate responsibility for enterprise decisions, including determining resource allocation for, and monitoring the performance of, the consolidated enterprise, the Domestic reportable segment and the International reportable segment.

Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and reportable segment results to the operating income level. We aggregate our Best Buy Domestic and Best Buy Health operating segments into one Domestic reportable segment. We also aggregate our Canada and Mexico businesses into one International operating segment, which represents the International reportable segment.

Business Combinations

We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded within selling, general and administrative ("SG&A") expenses.

Cash, Cash Equivalents and Restricted Cash

Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, commercial paper, corporate bonds and time deposits with an original maturity of 3 months or less when purchased. The amounts of cash equivalents at February 1, 2020, and February 2, 2019, were $1,668 million and $1,410 million, respectively, and the weighted-average interest rates were 1.8% and 2.5%, respectively.

Cash, cash equivalents and restricted cash reported within our Consolidated Balance Sheets is reconciled to the total shown within our Consolidated Statements of Cash Flows as follows ($ in millions):

February 1, 2020

February 2, 2019

February 3, 2018

Cash and cash equivalents

$

2,229 

$

1,980 

$

1,101 

Restricted cash included in Other current assets

126 

204 

199 

Total cash, cash equivalents and restricted cash

$

2,355 

$

2,184 

$

1,300 

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

Receivables

Receivables consist primarily of amounts due from vendors for various vendor funding programs, banks for customer credit card and debit card transactions and mobile phone network operators for device sales and commissions. We establish allowances for uncollectible receivables based primarily on historical collection trends. Our allowances for uncollectible receivables were $24 million and $23 million at February 1, 2020, and February 2, 2019, respectively. We did not have material write-offs during the periods presented.

Merchandise Inventories

Merchandise inventories are recorded at the lower of cost or net realizable value. The weighted average method is used to determine the cost of inventory which includes costs of in-bound freight to move inventory into our distribution centers. Also included in the cost of inventory are certain vendor allowances. Costs associated with storing and transporting merchandise inventories to our retail stores are expensed as incurred and included in cost of sales.

Our inventory valuation also reflects markdown adjustments for the excess of the cost over the net recovery we expect to realize from the ultimate disposition of inventory and establishes a new cost basis. No adjustment is recorded for inventory that we are able to return to our vendors for full credit. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded markdown adjustments or an increase in the newly established cost basis.

Our inventory valuation reflects adjustments for physical inventory losses (resulting from, for example, theft). Physical inventory is maintained through a combination of full location counts (typically once per year) and more regular cycle counts.

Property and Equipment

Property and equipment are recorded at cost. We depreciate property and equipment to its residual value using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the period from the date the assets are placed in service to the end of the lease term, which includes optional renewal periods if they are reasonably certain. Accelerated depreciation methods are generally used for income tax purposes.

When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our Consolidated Balance Sheets and any resulting gain or loss is reflected on our Consolidated Statements of Earnings.

Repairs and maintenance costs are expensed as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated.

Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the expected useful life of the software, generally from two years to seven years. A subsequent addition, modification or upgrade to internal-use software is capitalized to the extent that it enhances the software's functionality or extends its useful life. Capitalized software is included in Fixtures and equipment on our Consolidated Balance Sheets. Software maintenance and training costs are expensed in the period incurred. The costs of developing software for sale to customers is expensed as incurred until technological feasibility is established, which generally leads to expensing substantially all costs.

Estimated useful lives by major asset category are as follows (in years):

Asset Category

Useful Life

Buildings

5-35

Leasehold improvements

2-10

Fixtures and equipment

2-15

Impairment of Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long-lived assets with impairment indicators for potential impairment, we first compare the carrying value of the asset to its estimated undiscounted future cash flows. If the sum of the estimated undiscounted future cash flows is less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to its estimated fair value, which is typically based on estimated discounted future cash flows. We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value.

We evaluate locations for triggering events on a quarterly basis. For store locations, our primary indicator that asset carrying values may not be recoverable is negative store operating income for the most recent 12-month period. We also monitor other factors when evaluating store locations for impairment, including significant changes in the manner of use or expected life of the assets or significant changes in our business strategies.

When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For example, long-lived assets deployed at store locations are reviewed for impairment at the individual store level, which involves comparing the net carrying value of all assets to the net cash flow projections for each store. In addition, we conduct separate impairment reviews at other levels as appropriate, for example, to evaluate potential impairment of assets shared by several areas of operations, such as information technology systems.

Leases

The majority of our lease obligations are real estate operating leases used in our retail and distribution operations. Our finance leases are primarily equipment-related. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on our Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASC 842, Leases, we have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line basis over the lease term.

Operating lease assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We estimate the incremental borrowing rate for each lease based on an evaluation of our credit ratings and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the terms of the lease. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components. Operating lease assets also include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

Goodwill and Intangible Assets

Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We test goodwill for impairment annually in the fiscal fourth quarter or whenever events or circumstances indicate the carrying value may not be recoverable. We monitor the existence of potential impairment indicators throughout the fiscal year. We test for goodwill impairment at the reporting unit level. Reporting units are determined by identifying components of operating segments which constitute businesses for which discrete financial information is available and is regularly reviewed by segment management. No components were aggregated in arriving at our reporting units. We have goodwill in two reporting units – Best Buy Domestic and Best Buy Health – with carrying values of $443 million and $541 million, respectively, as of February 1, 2020.

Our detailed impairment testing involves comparing the fair value of each reporting unit with its carrying value, including goodwill. Fair value reflects the price a potential market participant would be willing to pay for the reporting unit in an arms-length transaction and typically requires analysis of discounted cash flows and other market information, such as trading multiples when applicable. If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, a second step is required to measure possible goodwill impairment loss. The second step includes hypothetically

valuing the tangible and intangible assets and liabilities of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit's goodwill is compared to the carrying value of that goodwill. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

Intangible Assets

Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the time of acquisition, using income and market approaches to determine fair value, as appropriate.

We amortize our definite-lived intangible assets over the estimated useful life of the asset. We do not amortize our indefinite-lived tradename, but test for impairment annually, or when indications of potential impairment exist. We utilize the relief from royalty method to determine the fair value of our indefinite-lived tradename. If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess.

Derivatives

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 utilized "receive fixed-rate, pay variable-rate" interest rate swaps to mitigate the effect of interest rate fluctuations on our $650 million principal amount of notes due March 15, 2021 (“2021 Notes”) and on our $500 million principal amount of notes due October 1, 2028 (“2028 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 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.

Fair Value

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 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.

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.

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 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 SG&A and Restructuring charges on our Consolidated Statements of Earnings for non-restructuring and restructuring charges, respectively.

Fair value remeasurements are based on significant unobservable inputs (Level 3). Fixed asset fair values are primarily 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 include 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.

Insurance

We are self-insured for certain losses related to workers' compensation, medical and general liability claims; however, we obtain third-party excess insurance coverage to limit our exposure to certain claims. Some of these self-insured losses are managed through a wholly-owned insurance captive. Liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported. We utilize valuations provided by qualified, independent third-party actuaries as well as internal insurance and risk expertise. Our self-insured liabilities included in our Consolidated Balance Sheets were as follows ($ in millions):

February 1, 2020

February 2, 2019

Accrued liabilities

$

75 

$

69 

Long-term liabilities

46 

60 

Total

$

121 

$

129 

Income Taxes

We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. We record a valuation allowance to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

In determining our provision for income taxes, we use an annual effective income tax rate based on annual income, permanent differences between book and tax income and statutory income tax rates. The effective income tax rate also reflects our assessment of the ultimate outcome of tax audits. We adjust our annual effective income tax rate as additional information on outcomes or events becomes available. Discrete events, such as audit settlements or changes in tax laws, are recognized in the period in which they occur.

Our income tax returns are periodically audited by U.S. federal, state and local and foreign tax authorities. At any one time, multiple tax years are subject to audit by the various tax authorities. In evaluating the exposures associated with our various tax filing positions, we may record a liability for such exposures. A number of years may elapse before a particular matter, for which we have established a liability, is audited and fully resolved or clarified. We adjust our liability for unrecognized tax benefits and income tax provisions in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. We include our liability for unrecognized tax benefits, including accrued penalties and interest, in Long-term liabilities on our Consolidated Balance Sheets and in Income tax expense on our Consolidated Statements of Earnings.

Accrued Liabilities

The major components of accrued liabilities are sales tax liabilities, advertising accruals, loyalty program liabilities, sales return reserves, customer deposits and insurance liabilities.

Long-Term Liabilities

The major components of long-term liabilities are unrecognized tax benefits, income tax liabilities, self-insurance reserves and deferred taxes.

Foreign Currency

Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our Consolidated Balance Sheet dates. For operations reported on a one-month lag, we use the exchange rates in effect one month prior to our Consolidated Balance Sheet dates. Results of operations and cash flows are translated using the average exchange rates throughout the periods. The effect of exchange rate fluctuations on the translation of assets and liabilities is included as a component of shareholders' equity in accumulated other comprehensive income. Gains and losses from foreign currency transactions, which are included in SG&A, have not been significant in any period presented.

Revenue Recognition

We generate revenue from the sale of 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. Our revenue excludes sales and usage-based taxes collected and 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. 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.

Product Revenue

Product revenue is recognized when the customer takes physical control, either in our stores or at their home. 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 delivered products and any related delivery fee revenue.

In most cases, we are the principal to product contracts as we have control of the physical 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 commission revenue net of amounts due to third parties who fulfill the performance obligation. For these sales, control passes upon providing access of the content to the customer.

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 revenue for services, such as 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 (for example, our Total Tech Support offering), we are responsible for fulfilling the support services to customers. These contracts have terms ranging from one month to three years and typically contain several performance obligations. Payment for the membership contracts 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. For performance obligations provided over time, we recognize revenue on a usage basis, an input method of measuring progress over the related contract term. This method is derived by analysis of historical utilization patterns as this depicts when customers use the services and, accordingly, when delivery of the performance obligation occurs. There is judgment in (1) determining the level at which we apply a portfolio approach to these contracts; (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, or alternatively, using a cost-plus margin approach; and, (3) assessing the pattern of delivery across multiple portfolios of customers, including estimating current and future usage patterns. When insufficient history of usage is available, we generally recognize revenue ratably over the life of the contract.

Services - When we are the agent

On behalf of third-party underwriters, 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 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 product revenue is recognized. In addition, in some cases we are eligible to receive profit-sharing payments, a form of variable consideration, which are dependent upon the financial performance of the underwriter’s protection plan portfolio. We do not share in any losses of the portfolio. We record any 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 during our fiscal fourth quarter, with payment of the profit share occurring in the subsequent fiscal year. Service and commission revenues earned from the sale of extended warranties represented approximately 2% of revenue in fiscal 2020, fiscal 2019 and fiscal 2018.

We earn 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 time between when we activate the service with the customer and when we receive payment from the content provider is generally within 30 to 60 days, which is after control has passed. Activation commissions are subject to repayment to the carrier primarily in the event of 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. Approximately 25% of revenue in fiscal 2020, fiscal 2019 and fiscal 2018 was transacted using one of our branded cards. 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 certain of our banking partners based on the annual performance of their corresponding portfolio, 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 expire. 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 other factors, such as laws and regulations applicable to each jurisdiction. We recognize breakage revenue using a method that is consistent with customer redemption patterns. Typically, over 90% of gift card redemptions (and therefore recognition of over 90% of gift card breakage revenue) occur within one year of issuance. There is judgment in assessing (1) the level at which we group gift cards for analysis of breakage rates, (2) redemption patterns, and (3) the ultimate value of gift cards which we do not expect to be redeemed. Gift card breakage income was $35 million, $34 million and $40 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

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 products or services, the sales incentives represent an option that is a material right and, accordingly, is a performance obligation in the contract. The revenue allocated to these sales incentives is deferred as a contract liability and is 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, (2) future redemption patterns, and (3) 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 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 purchase completed with us or when using our co-branded credit cards. Points earned enable members to receive a certificate that may be redeemed on future purchases. Depending on the customer's membership level within our loyalty program, certificate expirations typically range from 2 to 6 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 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 inherent judgment in estimating the value of our customer loyalty programs as they are susceptible to factors outside of our influence, particularly customer redemption activity. However, we have significant experience in estimating the amount and timing of redemptions of certificates, based primarily on historical data.

Cost of Sales and Selling, General and Administrative Expenses

The following table illustrates the primary costs classified in each major expense category.

Cost of Sales

Cost of products sold, including:

Freight expenses associated with moving merchandise inventories from our vendors to our distribution centers

Vendor allowances that are not a reimbursement of specific, incremental and identifiable costs

Cash discounts on payments to merchandise vendors

Physical inventory losses

Markdowns

Customer shipping and handling expenses

Costs associated with operating our distribution network, including payroll and benefit costs, occupancy costs and depreciation

Freight expenses associated with moving merchandise inventories from our distribution centers to our retail stores

Cost of services provided, including:

Payroll and benefit costs for services employees

Cost of replacement parts and related freight expenses

Selling, General and Administrative Expenses

Payroll and benefit costs for retail and corporate employees

Occupancy and maintenance costs of retail, services and corporate facilities

Depreciation and amortization related to retail, services and corporate assets

Advertising costs

Vendor allowances that are a reimbursement of specific, incremental and identifiable costs

Tender costs, including bank charges and costs associated with credit and debit card interchange fees

Charitable contributions

Outside and outsourced service fees

Long-lived asset impairment charges

Other administrative costs, such as supplies, travel and lodging

Vendor Allowances

We receive funds from certain vendors through a variety of programs and arrangements, primarily in the form of purchases-based or sales-based volumes and for product advertising and placement in our stores. We recognize these funds as a reduction of cost of sales when the associated inventory is sold. If the funds are not specifically related to purchase or sales volumes, the funds are recognized ratably over the performance period as the product promotion is completed. Funds that are determined to be a reimbursement of specific, incremental and identifiable costs incurred to sell a vendor's products are recorded as an offset to the related expense when incurred.

Advertising Costs

Advertising costs, which are included in SG&A, are expensed over the period in which the advertisement is customer-facing. Advertising costs consist primarily of digital and television advertisements, as well as agency fees and production costs. Advertising expenses were $840 million, $777 million and $776 million in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

Stock-Based Compensation

We apply the fair value recognition provisions of accounting guidance as they relate to our stock-based compensation, which requires us to recognize expense for the fair value of our stock-based compensation awards. Compensation expense is recognized over the period in which services are required. It is recognized on a straight-line basis, except where there are performance awards that vest on a graded basis, in which case the expense for these awards is front-loaded or recognized on a graded-attribution basis.

Comprehensive income (loss)

Comprehensive income (loss) is computed as net earnings plus certain other items that are recorded directly to shareholders' equity. In addition to net earnings, the significant component of comprehensive income (loss) includes foreign currency translation adjustments.

v3.20.1
Acquisitions
12 Months Ended
Feb. 01, 2020
Acquisitions [Abstract]  
Acquisitions 2.  Acquisitions

GreatCall, Inc.

On October 1, 2018, we acquired all of the outstanding shares of GreatCall, Inc. (“GreatCall”) for net cash consideration of $787 million. GreatCall, a leading connected health services provider for aging consumers, offers easy-to-use mobile products and connected devices, tailored for seniors. These products are combined with a range of services, including a simple, one-touch connection to U.S.-based, specially-trained agents who can connect the user to family caregivers, provide concierge services and dispatch emergency personnel. The acquisition of GreatCall is aligned with our strategy to address health and wellness with a focus on aging consumers and how technology can help them live more independent lives.

The acquisition was accounted for using the acquisition method of accounting for business combinations. All of the goodwill was assigned to our Best Buy Health reporting unit within our Domestic reportable segment, the majority of which was deductible for income tax purposes. We recorded $13 million of transaction costs in fiscal 2019 related to the acquisition within SG&A expenses on our Consolidated Statements of Earnings. Results of operations from the date of acquisition were included within our Best Buy Health operating segment, Domestic reportable segment and our Services revenue category. The acquisition of GreatCall was not material to the results of our operations.

The fair value of assets acquired and liabilities assumed was as follows ($ in millions):

Fair Value at Acquisition Date

Measurement Period Adjustments

Adjusted
Fair Value

Current assets

$

34 

$

(2)

$

32 

Goodwill

496 

(6)

490 

Intangible assets(1)

371 

2 

373 

Other assets

27 

(2)

25 

Total assets acquired

928 

(8)

920 

Accrued liabilities

56 

(1)

55 

Long-term liabilities

72 

(2)

70 

Total liabilities assumed

128 

(3)

125 

Total purchase price(2)

800 

(5)

795 

Less cash acquired

8 

8 

Total purchase price, net of cash acquired

$

792 

$

(5)

$

787 

(1)The adjusted fair value of Intangible assets included consumer customer relationships of $235 million (amortized over 5 years), tradename of $63 million (amortized over 8 years), developed technology of $52 million (amortized over 5 years) and commercial customer relationships of $23 million (amortized over 10 years).

(2)Measurement period adjustments included the finalization of the working capital adjustment.

Critical Signal Technologies, Inc.

On May 9, 2019, we acquired all of the outstanding shares of Critical Signal Technologies, Inc. (“CST”), a health services company, for net cash consideration of $125 million. The acquisition of CST is aligned with our strategy to address health and wellness with a focus on aging seniors and how technology can help them live longer in their homes.

 

The acquisition was accounted for using the acquisition method of accounting for business combinations. The purchase price allocation for the assets acquired and liabilities assumed is substantially complete, but may be subject to immaterial changes. The acquired assets were primarily comprised of $83 million of customer relationships (amortized over 15 years) recorded within Other assets on our Consolidated Balance Sheets. Goodwill of $52 million was recorded and assigned to our Best Buy Health reporting unit and is not expected to be deductible for income tax purposes. We recorded $3 million of transaction costs in fiscal 2020 related to the acquisition within SG&A expenses on our Consolidated Statements of Earnings. Results of operations from the date of acquisition were included within our Best Buy Heath operating segment, Domestic reportable segment and Services revenue category. The acquisition of CST is not material to the results of our operations.

BioSensics, LLC

 

On August 7, 2019, we acquired the predictive healthcare technology business of BioSensics, LLC (“BioSensics”) for net cash consideration of $20 million, primarily comprised of $19 million of goodwill and $4 million of definite-lived technology (amortized over 3 years). Goodwill, which was assigned to our Domestic reporting unit, is deductible for tax purposes. The acquisition currently supports our health strategy and is included in our Domestic operating and reportable segments. The transaction was accounted for as a business combination and is not material to the results of our operations.

v3.20.1
Goodwill and Intangible Assets
12 Months Ended
Feb. 01, 2020
Goodwill and Intangible Assets [Abstract]  
Goodwill and Intangible Assets 3.   Goodwill and Intangible Assets

Goodwill

Goodwill balances by reportable segment were as follows ($ in millions):

February 1, 2020

February 2, 2019

Gross Carrying Amount

Cumulative Impairment

Gross Carrying Amount

Cumulative Impairment

Domestic

$

1,051 

$

(67)

$

982 

$

(67)

International

608 

(608)

608 

(608)

Total

$

1,659 

$

(675)

$

1,590 

$

(675)

No goodwill impairment charges were recorded in fiscal 2020 or fiscal 2019.

Indefinite-Lived Intangible Assets

We have indefinite-lived intangible assets primary related to our Pacific Sales tradename, which are recorded within Other assets on our Consolidated Balance Sheets. The carrying value of indefinite-lived intangible assets was $18 million as of February 1, 2020, and February 2, 2019.

Definite-Lived Intangible Assets

We have definite-lived intangible assets which are recorded within Other assets on our Consolidated Balance Sheets as follows ($ in millions):

February 1, 2020

February 2, 2019

Weighted-Average

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

Useful Life Remaining as of February 1, 2020 (in years)

Customer relationships

$

339 

$

70 

$

258 

$

16 

7.1 

Tradename

63 

10 

63 

3 

6.7 

Developed technology

56 

15 

52 

4 

3.6 

Total

$

458 

$

95 

$

373 

$

23 

6.6 

Amortization expense was as follows ($ in millions):

Statement of Earnings Location

2020

2019

2018

Amortization expense

SG&A