10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
| |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 31, 2015
OR
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| |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-9595
BEST BUY CO., INC.
(Exact name of registrant as specified in its charter)
|
| | |
Minnesota | | 41-0907483 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
7601 Penn Avenue South | | |
Richfield, Minnesota | | 55423 |
(Address of principal executive offices) | | (Zip Code) |
(612) 291-1000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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| | |
Large accelerated filer x | | Accelerated filer ¨ |
| | |
Non-accelerated filer ¨ | | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The registrant had 342,719,728 shares of common stock outstanding as of December 1, 2015.
BEST BUY CO., INC.
FORM 10-Q FOR THE QUARTER ENDED OCTOBER 31, 2015
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
| |
Item 1. | Financial Statements |
Condensed Consolidated Balance Sheets
($ in millions) (unaudited)
|
| | | | | | | | | | | |
| October 31, 2015 | | January 31, 2015 | | November 1, 2014 |
Assets | |
| | |
| | |
Current assets | | | | | |
Cash and cash equivalents | $ | 1,697 |
| | $ | 2,432 |
| | $ | 1,929 |
|
Short-term investments | 1,650 |
| | 1,456 |
| | 1,209 |
|
Receivables, net | 1,061 |
| | 1,280 |
| | 1,066 |
|
Merchandise inventories | 6,651 |
| | 5,174 |
| | 6,900 |
|
Other current assets | 676 |
| | 703 |
| | 959 |
|
Current assets held for sale | — |
| | 684 |
| | — |
|
Total current assets | 11,735 |
| | 11,729 |
| | 12,063 |
|
Property and equipment, net | 2,329 |
| | 2,295 |
| | 2,524 |
|
Goodwill | 425 |
| | 425 |
| | 425 |
|
Intangibles, net | 18 |
| | 57 |
| | 99 |
|
Other assets | 636 |
| | 583 |
| | 651 |
|
Non-current assets held for sale | 32 |
| | 167 |
| | — |
|
Total assets | $ | 15,175 |
| | $ | 15,256 |
| | $ | 15,762 |
|
| | | | | |
Liabilities and equity | | | | | |
Current liabilities | |
| | |
| | |
|
Accounts payable | $ | 6,184 |
| | $ | 5,030 |
| | $ | 6,626 |
|
Unredeemed gift card liabilities | 379 |
| | 411 |
| | 381 |
|
Deferred revenue | 330 |
| | 326 |
| | 449 |
|
Accrued compensation and related expenses | 306 |
| | 372 |
| | 305 |
|
Accrued liabilities | 790 |
| | 782 |
| | 788 |
|
Accrued income taxes | 23 |
| | 230 |
| | 33 |
|
Current portion of long-term debt | 383 |
| | 41 |
| | 44 |
|
Current liabilities held for sale | — |
| | 585 |
| | — |
|
Total current liabilities | 8,395 |
| | 7,777 |
| | 8,626 |
|
Long-term liabilities | 874 |
| | 881 |
| | 972 |
|
Long-term debt | 1,256 |
| | 1,580 |
| | 1,591 |
|
Long-term liabilities held for sale | — |
| | 18 |
| | — |
|
Equity | |
| | |
| | |
|
Best Buy Co., Inc. shareholders’ 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 — 344,863,000, 351,468,000 and 350,407,000 shares, respectively | 34 |
| | 35 |
| | 35 |
|
Additional paid-in capital | 185 |
| | 437 |
| | 377 |
|
Retained earnings | 4,135 |
| | 4,141 |
| | 3,689 |
|
Accumulated other comprehensive income | 296 |
| | 382 |
| | 468 |
|
Total Best Buy Co., Inc. shareholders’ equity | 4,650 |
| | 4,995 |
| | 4,569 |
|
Noncontrolling interests | — |
| | 5 |
| | 4 |
|
Total equity | 4,650 |
| | 5,000 |
| | 4,573 |
|
Total liabilities and equity | $ | 15,175 |
| | $ | 15,256 |
| | $ | 15,762 |
|
NOTE: The Consolidated Balance Sheet as of January 31, 2015, has been condensed from the audited consolidated financial statements.
See Notes to Condensed Consolidated Financial Statements.
Consolidated Statements of Earnings
($ in millions, except per share amounts) (unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| October 31, 2015 | | November 1, 2014 | | October 31, 2015 | | November 1, 2014 |
Revenue | $ | 8,819 |
| | $ | 9,032 |
| | $ | 25,905 |
| | $ | 26,130 |
|
Cost of goods sold | 6,708 |
| | 6,956 |
| | 19,661 |
| | 20,109 |
|
Restructuring charges – cost of goods sold | (1 | ) | | — |
| | 4 |
| | — |
|
Gross profit | 2,112 |
| | 2,076 |
| | 6,240 |
| | 6,021 |
|
Selling, general and administrative expenses | 1,874 |
| | 1,866 |
| | 5,451 |
| | 5,369 |
|
Restructuring charges | 8 |
| | 5 |
| | 185 |
| | 12 |
|
Operating income | 230 |
| | 205 |
| | 604 |
| | 640 |
|
Other income (expense) | |
| | |
| | | | |
Gain on sale of investments | — |
| | 5 |
| | 2 |
| | 7 |
|
Investment income and other | 3 |
| | — |
| | 14 |
| | 10 |
|
Interest expense | (20 | ) | | (22 | ) | | (60 | ) | | (68 | ) |
Earnings from continuing operations before income tax (benefit) expense | 213 |
| | 188 |
| | 560 |
| | 589 |
|
Income tax (benefit) expense | 84 |
| | 72 |
| | 230 |
| | (133 | ) |
Net earnings from continuing operations | 129 |
| | 116 |
| | 330 |
| | 722 |
|
Gain (loss) from discontinued operations (Note 2), net of tax benefit (expense) of $-, $3, $3 and $(1) | (4 | ) | | (9 | ) | | 88 |
| | (7 | ) |
Net earnings including noncontrolling interests | 125 |
| | 107 |
| | 418 |
| | 715 |
|
Net earnings from discontinued operations attributable to noncontrolling interests | — |
| | — |
| | — |
| | (1 | ) |
Net earnings attributable to Best Buy Co., Inc. shareholders | $ | 125 |
| | $ | 107 |
| | $ | 418 |
| | $ | 714 |
|
| | | | | | | |
Basic earnings (loss) per share attributable to Best Buy Co., Inc. shareholders | |
| | |
| | | | |
Continuing operations | $ | 0.37 |
| | $ | 0.33 |
| | $ | 0.95 |
| | $ | 2.07 |
|
Discontinued operations | (0.01 | ) | | (0.03 | ) | | 0.25 |
| | (0.02 | ) |
Basic earnings per share | $ | 0.36 |
| | $ | 0.30 |
| | $ | 1.20 |
| | $ | 2.05 |
|
| | | | | | | |
Diluted earnings (loss) per share attributable to Best Buy Co., Inc. shareholders | | | | | | | |
Continuing operations | $ | 0.37 |
| | $ | 0.33 |
| | $ | 0.93 |
| | $ | 2.04 |
|
Discontinued operations | (0.01 | ) | | (0.03 | ) | | 0.25 |
| | (0.02 | ) |
Diluted earnings per share | $ | 0.36 |
| | $ | 0.30 |
| | $ | 1.18 |
| | $ | 2.02 |
|
| | | | | | | |
Dividends declared per common share | $ | 0.23 |
| | $ | 0.19 |
| | $ | 1.20 |
| | $ | 0.53 |
|
| | | | | | | |
Weighted-average common shares outstanding (in millions) | |
| | |
| | | | |
Basic | 344.7 |
| | 350.1 |
| | 348.9 |
| | 349.0 |
|
Diluted | 349.0 |
| | 354.0 |
| | 353.6 |
| | 352.5 |
|
See Notes to Condensed Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
($ in millions) (unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| October 31, 2015 | | November 1, 2014 | | October 31, 2015 | | November 1, 2014 |
Net earnings including noncontrolling interests | $ | 125 |
| | $ | 107 |
| | $ | 418 |
| | $ | 715 |
|
Foreign currency translation adjustments | (2 | ) | | (25 | ) | | (19 | ) | | (22 | ) |
Unrealized loss on available-for-sale investments | — |
| | (1 | ) | | — |
| | (2 | ) |
Reclassification of foreign currency translation adjustments into earnings due to sale of business | — |
| | — |
| | (67 | ) | | — |
|
Comprehensive income including noncontrolling interests | 123 |
| | 81 |
| | 332 |
| | 691 |
|
Comprehensive income attributable to noncontrolling interests | — |
| | — |
| | — |
| | (1 | ) |
Comprehensive income attributable to Best Buy Co., Inc. shareholders | $ | 123 |
| | $ | 81 |
| | $ | 332 |
| | $ | 690 |
|
See Notes to Condensed Consolidated Financial Statements.
Consolidated Statements of Change in Shareholders' Equity
($ and shares in millions) (unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Best Buy Co., Inc. | | | | |
| Common Shares | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Best Buy Co., Inc. | | Non- controlling Interests | | Total |
Balances at January 31, 2015 | 352 |
| | $ | 35 |
| | $ | 437 |
| | $ | 4,141 |
| | $ | 382 |
| | $ | 4,995 |
| | $ | 5 |
| | $ | 5,000 |
|
Net earnings, nine months ended October 31, 2015 | — |
| | — |
| | — |
| | 418 |
| | — |
| | 418 |
| | — |
| | 418 |
|
Foreign currency translation adjustments | — |
| | — |
| | — |
| | — |
| | (19 | ) | | (19 | ) | | — |
| | (19 | ) |
Reclassification of foreign currency translation adjustments into earnings | — |
| | — |
| | — |
| | — |
| | (67 | ) | | (67 | ) | | — |
| | (67 | ) |
Sale of noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (5 | ) | | (5 | ) |
Stock-based compensation | — |
| | — |
| | 80 |
| | — |
| | — |
| | 80 |
| | — |
| | 80 |
|
Restricted stock vested and stock options exercised | 4 |
| | — |
| | 36 |
| | — |
| | — |
| | 36 |
| | — |
| | 36 |
|
Issuance of common stock under employee stock purchase plan | — |
| | — |
| | 7 |
| | — |
| | — |
| | 7 |
| | — |
| | 7 |
|
Tax benefit from stock options exercised, restricted stock vesting and employee stock purchase plan | — |
| | — |
| | 9 |
| | — |
| | — |
| | 9 |
| | — |
| | 9 |
|
Common stock dividends, $1.20 per share | — |
| | — |
| | 3 |
| | (424 | ) | | — |
| | (421 | ) | | — |
| | (421 | ) |
Repurchase of common stock | (11 | ) | | (1 | ) | | (387 | ) | | — |
| | — |
| | (388 | ) | | — |
| | (388 | ) |
Balances at October 31, 2015 | 345 |
| | $ | 34 |
| | $ | 185 |
| | $ | 4,135 |
| | $ | 296 |
| | $ | 4,650 |
| | $ | — |
| | $ | 4,650 |
|
| | | | | | | | | | | | | | | |
Balances at February 1, 2014 | 347 |
| | $ | 35 |
| | $ | 300 |
| | $ | 3,159 |
| | $ | 492 |
| | $ | 3,986 |
| | $ | 3 |
| | $ | 3,989 |
|
Net earnings, nine months ended November 1, 2014 | — |
| | — |
| | — |
| | 714 |
| | — |
| | 714 |
| | 1 |
| | 715 |
|
Foreign currency translation adjustments | — |
| | — |
| | — |
| | — |
| | (22 | ) | | (22 | ) | | — |
| | (22 | ) |
Unrealized losses on available-for-sale investments | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) | | — |
| | (2 | ) |
Stock-based compensation | — |
| | — |
| | 64 |
| | — |
| | — |
| | 64 |
| | — |
| | 64 |
|
Restricted stock vested and stock options exercised | 3 |
| | — |
| | 19 |
| | — |
| | — |
| | 19 |
| | — |
| | 19 |
|
Issuance of common stock under employee stock purchase plan | — |
| | — |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
| | 8 |
|
Tax deficit from stock options exercised, restricted stock vesting and employee stock purchase plan | — |
| | — |
| | (14 | ) | | — |
| | — |
| | (14 | ) | | — |
| | (14 | ) |
Common stock dividends, $0.53 per share | — |
| | — |
| | — |
| | (184 | ) | | — |
| | (184 | ) | | — |
| | (184 | ) |
Balances at November 1, 2014 | 350 |
| | $ | 35 |
| | $ | 377 |
| | $ | 3,689 |
| | $ | 468 |
| | $ | 4,569 |
| | $ | 4 |
| | $ | 4,573 |
|
See Notes to Condensed Consolidated Financial Statements.
Consolidated Statements of Cash Flows
($ in millions) (unaudited)
|
| | | | | | | |
| Nine Months Ended |
| October 31, 2015 | | November 1, 2014 |
Operating activities | | | |
Net earnings including noncontrolling interests | $ | 418 |
| | $ | 715 |
|
Adjustments to reconcile net earnings to total cash provided by (used in) operating activities: | | | |
Depreciation | 494 |
| | 484 |
|
Restructuring charges | 189 |
| | 17 |
|
Gain on sale of business, net | (99 | ) | | (1 | ) |
Stock-based compensation | 80 |
| | 63 |
|
Deferred income taxes | (43 | ) | | (381 | ) |
Other, net | 3 |
| | 4 |
|
Changes in operating assets and liabilities: | | | |
Receivables | 229 |
| | 237 |
|
Merchandise inventories | (1,494 | ) | | (1,541 | ) |
Other assets | 20 |
| | 14 |
|
Accounts payable | 1,152 |
| | 1,526 |
|
Other liabilities | (271 | ) | | (263 | ) |
Income taxes | (215 | ) | | (100 | ) |
Total cash provided by operating activities | 463 |
| | 774 |
|
| | | |
Investing activities | |
| | |
|
Additions to property and equipment | (493 | ) | | (425 | ) |
Purchases of investments | (2,012 | ) | | (2,067 | ) |
Sales of investments | 1,816 |
| | 1,084 |
|
Proceeds from sale of business, net of cash transferred upon sale | 102 |
| | 38 |
|
Change in restricted assets | (45 | ) | | 25 |
|
Settlement of net investment hedges | 14 |
| | — |
|
Other, net | — |
| | 3 |
|
Total cash used in investing activities | (618 | ) | | (1,342 | ) |
| | | |
Financing activities | |
| | |
|
Repurchase of common stock | (385 | ) | | — |
|
Repayments of debt | (18 | ) | | (19 | ) |
Dividends paid | (421 | ) | | (185 | ) |
Issuance of common stock | 44 |
| | 27 |
|
Other, net | 19 |
| | 2 |
|
Total cash used in financing activities | (761 | ) | | (175 | ) |
Effect of exchange rate changes on cash | (13 | ) | | (6 | ) |
Decrease in cash and cash equivalents | (929 | ) | | (749 | ) |
Cash and cash equivalents at beginning of period, excluding held for sale | 2,432 |
| | 2,678 |
|
Cash and cash equivalents held for sale at beginning of period | 194 |
| | — |
|
Cash and cash equivalents at end of period | $ | 1,697 |
| | $ | 1,929 |
|
See Notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
(unaudited)
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 higher 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 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 January 31, 2015. The first nine months of fiscal 2016 and fiscal 2015 included 39 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 consolidated financial statements. No such events were identified for this period.
In preparing the accompanying condensed consolidated financial statements, we evaluated the period from November 1, 2015, through the date the financial statements were issued, for material subsequent events requiring recognition or disclosure. No such events were identified for this period.
| |
2. | Discontinued Operations |
Discontinued operations are primarily comprised of Jiangsu Five Star Appliance Co., Limited ("Five Star") within our International segment. Following the sale of Five Star in February 2015, we continue to hold one retail property in Shanghai, China, which remains held for sale at October 31, 2015, as we continue to actively market the property. The presentation of discontinued operations has been retrospectively applied to all prior periods presented.
The composition of assets and liabilities disposed of as a result of the sale of Five Star was as follows ($ in millions):
|
| | | |
| February 13, 2015 |
Cash and cash equivalents | $ | 125 |
|
Receivables | 113 |
|
Merchandise inventories | 252 |
|
All other assets | 461 |
|
Total assets | $ | 951 |
|
| |
Accounts payable | $ | 478 |
|
All other liabilities | 128 |
|
Total liabilities | $ | 606 |
|
The aggregate financial results of discontinued operations were as follows ($ in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| October 31, 2015 | | November 1, 2014 | | October 31, 2015 | | November 1, 2014 |
Revenue | $ | — |
| | $ | 347 |
| | $ | 217 |
| | $ | 1,181 |
|
| | | | | | | |
Restructuring charges | — |
| | 4 |
| | — |
| | 5 |
|
| | | | | | | |
Loss from discontinued operations before income tax benefit (expense) | (4 | ) | | (12 | ) | | (14 | ) | | (8 | ) |
Income tax benefit (expense) | — |
| | 3 |
| | 3 |
| | (1 | ) |
Gain on sale of discontinued operations | — |
| | — |
| | 99 |
| | 2 |
|
Net gain (loss) from discontinued operations, including noncontrolling interests | (4 | ) | | (9 | ) | | 88 |
| | (7 | ) |
Net earnings from discontinued operations attributable to noncontrolling interests | — |
| | — |
| | — |
| | (1 | ) |
Net gain (loss) from discontinued operations attributable to Best Buy Co., Inc. shareholders | $ | (4 | ) | | $ | (9 | ) | | $ | 88 |
| | $ | (8 | ) |
3. 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 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 tables set forth by level within the fair value hierarchy, our financial assets and liabilities that were accounted for at fair value on a recurring basis at October 31, 2015, January 31, 2015, and November 1, 2014, according to the valuation techniques we used to determine their fair values ($ in millions).
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurements Using Inputs Considered as |
| Fair Value at October 31, 2015 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
ASSETS | |
| | |
| | |
| | |
|
Cash and cash equivalents | |
| | |
| | |
| | |
|
Money market funds | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | — |
|
Commercial paper | 108 |
| | — |
| | 108 |
| | — |
|
Time deposits | 222 |
| | — |
| | 222 |
| | — |
|
Short-term investments | |
| | |
| | |
| | |
|
Corporate bonds | 333 |
| | — |
| | 333 |
| | — |
|
Commercial paper | 288 |
| | — |
| | 288 |
| | — |
|
Time deposits | 1,029 |
| | — |
| | 1,029 |
| | — |
|
Other current assets | | | | | | | |
Foreign currency derivative instruments | 14 |
| | — |
| | 14 |
| | — |
|
Time deposits | 79 |
| | — |
| | 79 |
| | — |
|
Other assets | |
| | |
| | |
| | |
|
Interest rate swap derivative instruments | 10 |
| | — |
| | 10 |
| | — |
|
Auction rate securities | 2 |
| | — |
| | — |
| | 2 |
|
Marketable securities that fund deferred compensation | 96 |
| | 96 |
| | — |
| | — |
|
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurements Using Inputs Considered as |
| Fair Value at January 31, 2015 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
ASSETS | |
| | |
| | |
| | |
|
Cash and cash equivalents | |
| | |
| | |
| | |
|
Money market funds | $ | 265 |
| | $ | 265 |
| | $ | — |
| | $ | — |
|
Corporate bonds | 13 |
| | — |
| | 13 |
| | — |
|
Commercial paper | 165 |
| | — |
| | 165 |
| | — |
|
Time deposits | 100 |
| | — |
| | 100 |
| | — |
|
Short-term investments | |
| | |
| | |
| | |
|
Corporate bonds | 276 |
| | — |
| | 276 |
| | — |
|
Commercial paper | 306 |
| | — |
| | 306 |
| | — |
|
Time deposits | 874 |
| | — |
| | 874 |
| | — |
|
Other current assets | |
| | |
| | |
| | |
|
Foreign currency derivative instruments | 30 |
| | — |
| | 30 |
| | — |
|
Time deposits | 83 |
| | — |
| | 83 |
| | — |
|
Other assets | |
| | |
| | |
| | |
|
Interest rate swap derivative instruments | 1 |
| | — |
| | 1 |
| | — |
|
Auction rate securities | 2 |
| | — |
| | — |
| | 2 |
|
Marketable securities that fund deferred compensation | 97 |
| | 97 |
| | — |
| | — |
|
| | | | | | | |
ASSETS HELD FOR SALE | | | | | | | |
Cash and cash equivalents | | | | | | | |
Money market funds | 16 |
| | 16 |
| | — |
| | — |
|
Time deposits | 124 |
| | — |
| | 124 |
| | — |
|
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurements Using Inputs Considered as |
| Fair Value at November 1, 2014 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
ASSETS | |
| | |
| | |
| | |
|
Cash and cash equivalents | | | | | | | |
Money market funds | $ | 74 |
| | $ | 74 |
| | $ | — |
| | $ | — |
|
Corporate bonds | 31 |
| | — |
| | 31 |
| | — |
|
Commercial paper | 91 |
| | — |
| | 91 |
| | — |
|
Time deposits | 66 |
| | — |
| | 66 |
| | — |
|
Short-term investments | |
| | |
| | |
| | |
|
Corporate bonds | 97 |
| | — |
| | 97 |
| | — |
|
Commercial paper | 381 |
| | — |
| | 381 |
| | — |
|
Time deposits | 731 |
| | — |
| | 731 |
| | — |
|
Other current assets | |
| | |
| | |
| | |
|
Foreign currency derivative instruments | 4 |
| | — |
| | 4 |
| | — |
|
Time deposits | 181 |
| | — |
| | 181 |
| | — |
|
Other assets | |
| | |
| | |
| | |
|
Auction rate securities | 9 |
| | — |
| | — |
| | 9 |
|
Marketable equity securities | 9 |
| | 9 |
| | — |
| | — |
|
Marketable securities that fund deferred compensation | 97 |
| | 97 |
| | — |
| | — |
|
There was no change in the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) for the three and nine months ended October 31, 2015.
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.
Corporate Bonds. Our corporate bond investments were measured at fair value using quoted market prices. They were classified as Level 2 as they trade in a non-active market for which bond prices are readily available.
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.
Auction Rate Securities. Our investments in auction rate securities ("ARS") were classified as Level 3 as quoted prices were unavailable. Due to limited market information, we utilized a discounted cash flow ("DCF") model to derive an estimate of fair value. The assumptions we used in preparing the DCF model included estimates with respect to the amount and timing of future interest and principal payments, forward projections of the interest rate benchmarks, the probability of full repayment of the principal considering the credit quality and guarantees in place, and the rate of return required by investors to own such securities given the current liquidity risk associated with ARS.
Marketable Equity Securities. Our marketable equity securities were measured at fair value using quoted market prices. They were classified as Level 1 as they trade in an active market for which closing stock prices are readily available.
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 that are 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 operating income in our Consolidated Statements of Earnings.
The following table summarizes the fair value remeasurements for non-restructuring property and equipment impairments and restructuring impairments recorded during the nine months ended October 31, 2015, and November 1, 2014 ($ in millions):
|
| | | | | | | | | | | | | | | |
| Nine Months Ended | | Nine Months Ended |
| October 31, 2015 | | November 1, 2014 |
| Impairments | | Remaining Net Carrying Value(1) | | Impairments | | Remaining Net Carrying Value(1) |
Continuing operations | | | | | | | |
Property and equipment (non-restructuring) | $ | 34 |
| | $ | 10 |
| | $ | 27 |
| | $ | 17 |
|
Restructuring activities(2) | | | | | | | |
Tradename | 40 |
| | — |
| | — |
| | — |
|
Property and equipment | 30 |
| | — |
| | — |
| | — |
|
Total continuing operations | $ | 104 |
| | $ | 10 |
| | $ | 27 |
| | $ | 17 |
|
Discontinued operations | | | | | | | |
Property and equipment | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
|
Total discontinued operations | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
|
| |
(1) | Remaining net carrying value approximates fair value. |
| |
(2) | See Note 5, Restructuring Charges, for additional information. |
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 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. For the tradename, fair value was derived using the relief from royalty method. In the case of assets for which the impairment was the result of restructuring activities, no future cash flows have been assumed as the assets will cease to be used and expected sale values are nominal.
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. 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 6, Debt, for information about the fair value of our long-term debt.
4. Goodwill and Intangible Assets
The changes in the carrying values of goodwill and indefinite-lived tradenames by segment were as follows in the nine months ended October 31, 2015, and November 1, 2014 ($ in millions):
|
| | | | | | | | | | | | | | | |
| Goodwill | | Indefinite-lived Tradenames |
| Domestic | | Domestic | | International | | Total |
Balances at January 31, 2015 | $ | 425 |
| | $ | 18 |
| | $ | 39 |
| | $ | 57 |
|
Changes in foreign currency exchange rates | — |
| | — |
| | 1 |
| | 1 |
|
Canada brand restructuring(1) | — |
| | — |
| | (40 | ) | | (40 | ) |
Balances at October 31, 2015 | $ | 425 |
| | $ | 18 |
| | $ | — |
| | $ | 18 |
|
| |
(1) | Represents the Future Shop tradename impaired as a result of the Canadian brand consolidation in the first quarter of fiscal 2016. See Note 5, Restructuring Charges, for further discussion of the Canadian brand consolidation. |
|
| | | | | | | | | | | | | | | |
| Goodwill | | Indefinite-lived Tradenames |
| Domestic | | Domestic | | International | | Total |
Balances at February 1, 2014 | $ | 425 |
| | $ | 19 |
| | $ | 82 |
| | $ | 101 |
|
Changes in foreign currency exchange rates | — |
| | — |
| | (2 | ) | | (2 | ) |
Balances at November 1, 2014 | $ | 425 |
| | $ | 19 |
| | $ | 80 |
| | $ | 99 |
|
The following table provides the gross carrying amount of goodwill and cumulative goodwill impairment ($ in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| October 31, 2015 | | January 31, 2015 | | November 1, 2014 |
| Gross Carrying Amount | | Cumulative Impairment | | Gross Carrying Amount(1) | | Cumulative Impairment(1) | | Gross Carrying Amount | | Cumulative Impairment |
Goodwill | $ | 1,100 |
| | $ | (675 | ) | | $ | 1,100 |
| | $ | (675 | ) | | $ | 1,308 |
| | $ | (883 | ) |
| |
(1) | Excludes the gross carrying amount and cumulative impairment related to Five Star, which was held for sale at January 31, 2015. The sale was completed on February 13, 2015. |
5. Restructuring Charges
Charges incurred in the nine months ended October 31, 2015, and November 1, 2014, for our restructuring activities were as follows ($ in millions):
|
| | | | | | | |
| Nine Months Ended |
| October 31, 2015 | | November 1, 2014 |
Continuing operations | | | |
Canadian brand consolidation | $ | 189 |
| | $ | — |
|
Renew Blue | (2 | ) | | 18 |
|
Other restructuring activities(1) | 2 |
| | (6 | ) |
Total continuing operations | 189 |
| | 12 |
|
Discontinued operations | | | |
Renew Blue | — |
| | 5 |
|
Total restructuring charges | $ | 189 |
| | $ | 17 |
|
| |
(1) | Represents activity related to our remaining vacant space liability for U.S. large-format store closures in fiscal 2013. We may continue to incur immaterial adjustments to the liability for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated. The remaining vacant space liability was $18 million at October 31, 2015. |
Canadian Brand Consolidation
In the first quarter of fiscal 2016, we consolidated the Future Shop and Best Buy stores and websites in Canada under the Best Buy brand. This resulted in the permanent closure of 66 Future Shop stores and the conversion of the remaining 65 Future Shop stores to the Best Buy brand. In the first nine months of fiscal 2016, we incurred $189 million of restructuring charges related to implementing these changes, which primarily consisted of lease exit costs, a tradename impairment, property and equipment impairments, employee termination benefits and inventory write-downs. In addition, in the first nine months of fiscal 2016, we incurred $9 million of non-restructuring charges related to the changes. We expect to incur total pre-tax charges in the range of $210 million to $250 million related to this action, which includes restructuring charges and other non-restructuring charges. While we expect the majority of these costs to be borne in fiscal 2016, we expect to continue transformation of our Canadian operations throughout fiscal 2017 and fiscal 2018. The total expected charges include approximately $140 million to $180 million of cash charges.
The inventory write-downs related to our Canadian brand consolidation are presented in restructuring charges – cost of goods sold in our Consolidated Statements of Earnings, and the remainder of the restructuring charges are presented in restructuring charges in our Consolidated Statements of Earnings. The composition of total restructuring charges we incurred for the Canadian brand consolidation in the first nine months of fiscal 2016 was as follows ($ in millions):
|
| | | |
| International |
Continuing operations | |
Inventory write-downs | $ | 4 |
|
Property and equipment impairments | 30 |
|
Tradename impairment | 40 |
|
Termination benefits | 26 |
|
Facility closure and other costs | 89 |
|
Total continuing operations | $ | 189 |
|
The following tables summarize our restructuring accrual activity during the nine months ended October 31, 2015, related to termination benefits and facility closure and other costs associated with Canadian brand consolidation ($ in millions):
|
| | | | | | | | | | | |
| Termination Benefits | | Facility Closure and Other Costs | | Total |
Balances at January 31, 2015 | $ | — |
| | $ | — |
| | $ | — |
|
Charges | 28 |
| | 113 |
| | 141 |
|
Cash payments | (22 | ) | | (28 | ) | | (50 | ) |
Adjustments(1) | (2 | ) | | (9 | ) | | (11 | ) |
Changes in foreign currency exchange rates | — |
| | (3 | ) | | (3 | ) |
Balances at October 31, 2015 | $ | 4 |
| | $ | 73 |
| | $ | 77 |
|
(1) The adjustments related to termination benefits relate to higher-than-expected employee retention. Adjustments to facility closure and other costs represent changes in sublease assumptions.
Renew Blue
In the fourth quarter of fiscal 2013, we launched the Renew Blue strategy, which included initiatives intended to reduce costs and improve operating performance. These initiatives included focusing on core business activities, reducing headcount, updating our store operating model and optimizing our real estate portfolio. These cost reduction initiatives represented one of the key Renew Blue priorities. We recognized a $2 million benefit and incurred $18 million of restructuring charges related to Renew Blue in the first nine months of fiscal 2016 and 2015, respectively. The charges in the first nine months of fiscal 2015 were primarily comprised of employee termination benefits. We expect to continue to implement cost reduction initiatives throughout the remainder of fiscal 2016 and into fiscal 2017, as we further analyze our operations and strategies.
For continuing operations, the inventory write-downs related to our Renew Blue restructuring activities are presented in restructuring charges - cost of goods sold in our Consolidated Statements of Earnings and the remainder of the restructuring charges are presented in restructuring charges. The restructuring charges from discontinued operations related to this plan are presented in discontinued operations, net of tax.
The composition of the restructuring charges we incurred for this program in the nine months ended October 31, 2015, and November 1, 2014, as well as the cumulative amount incurred from fiscal 2013 through October 31, 2015, was as follows ($ in millions): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Domestic | | International | | Total |
| Nine Months Ended | | Cumulative Amount | | Nine Months Ended | | Cumulative Amount | | Nine Months Ended | | Cumulative Amount |
| October 31, 2015 | | November 1, 2014 | | | October 31, 2015 | | November 1, 2014 | | | October 31, 2015 | | November 1, 2014 | |
Continuing operations | | | | | | | | | | | | | | | | | |
Inventory write-downs | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Property and equipment impairments | — |
| | — |
| | 14 |
| | — |
| | 1 |
| | 25 |
| | — |
| | 1 |
| | 39 |
|
Termination benefits | (2 | ) | | 11 |
| | 159 |
| | — |
| | 3 |
| | 38 |
| | (2 | ) | | 14 |
| | 197 |
|
Investment impairments | — |
| | — |
| | 43 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 43 |
|
Facility closure and other costs | 1 |
| | 1 |
| | 5 |
| | (1 | ) | | 2 |
| | 50 |
| | — |
| | 3 |
| | 55 |
|
Total continuing operations | (1 | ) | | 12 |
| | 222 |
| | (1 | ) | | 6 |
| | 113 |
| | (2 | ) | | 18 |
| | 335 |
|
Discontinued operations | | | | | | | | | | | | | | | | | |
Property and equipment impairments | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
|
Termination benefits | — |
| | — |
| | — |
| | — |
| | 2 |
| | 16 |
| | — |
| | 2 |
| | 16 |
|
Facility closure and other costs | — |
| | — |
| | — |
| | — |
| | 3 |
| | 11 |
| | — |
| | 3 |
| | 11 |
|
Total Discontinued Operations | — |
| | — |
| | — |
| | — |
| | 5 |
| | 28 |
| | — |
| | 5 |
| | 28 |
|
Total | $ | (1 | ) | | $ | 12 |
| | $ | 222 |
| | $ | (1 | ) | | $ | 11 |
| | $ | 141 |
| | $ | (2 | ) | | $ | 23 |
| | $ | 363 |
|
The following tables summarize our restructuring accrual activity during the nine months ended October 31, 2015, and November 1, 2014, related to termination benefits and facility closure and other costs associated with this program ($ in millions):
|
| | | | | | | | | | | |
| Termination Benefits | | Facility Closure and Other Costs | | Total |
Balances at January 31, 2015 | $ | 16 |
| | $ | 23 |
| | $ | 39 |
|
Charges | — |
| | — |
| | — |
|
Cash payments | (7 | ) | | (8 | ) | | (15 | ) |
Adjustments(1) | (8 | ) | | (5 | ) | | (13 | ) |
Changes in foreign currency exchange rates | — |
| | — |
| | — |
|
Balances at October 31, 2015 | $ | 1 |
| | $ | 10 |
| | $ | 11 |
|
| |
(1) | Adjustments to termination benefits were due to higher-than-expected employee retention. In addition, adjustments include the remaining liabilities eliminated as a result of the sale of Five Star, as described in Note 2, Discontinued Operations. |
|
| | | | | | | | | | | |
| Termination Benefits | | Facility Closure and Other Costs | | Total |
Balances at February 1, 2014 | $ | 111 |
| | $ | 51 |
| | $ | 162 |
|
Charges | 35 |
| | 12 |
| | 47 |
|
Cash payments | (117 | ) | | (16 | ) | | (133 | ) |
Adjustments(1) | (19 | ) | | (5 | ) | | (24 | ) |
Changes in foreign currency exchange rates | — |
| | (6 | ) | | (6 | ) |
Balances at November 1, 2014 | $ | 10 |
| | $ | 36 |
| | $ | 46 |
|
| |
(1) | Adjustments to termination benefits were due to higher-than-expected employee retention. Adjustments to facility closure and other costs represent changes in sublease assumptions. |
6. Debt
Long-term debt consisted of the following ($ in millions):
|
| | | | | | | | | | | |
| October 31, 2015 | | January 31, 2015 | | November 1, 2014 |
2016 Notes | $ | 350 |
| | $ | 349 |
| | $ | 350 |
|
2018 Notes | 500 |
| | 500 |
| | 500 |
|
2021 Notes | 649 |
| | 649 |
| | 649 |
|
Interest rate swap valuation adjustments | 10 |
| | 1 |
| | — |
|
Financing lease obligations | 88 |
| | 69 |
| | 77 |
|
Capital lease obligations | 42 |
| | 52 |
| | 59 |
|
Other debt | — |
| | 1 |
| | — |
|
Total long-term debt | 1,639 |
| | 1,621 |
| | 1,635 |
|
Less: current portion(1) | (383 | ) | | (41 | ) | | (44 | ) |
Total long-term debt, less current portion | $ | 1,256 |
| | $ | 1,580 |
| | $ | 1,591 |
|
| |
(1) | Our 2016 Notes due March 15, 2016, are classified in the current portion of long-term debt as of October 31, 2015. |
The fair value of total long-term debt approximated $1,718 million, $1,677 million, and $1,672 million at October 31, 2015, January 31, 2015, and November 1, 2014, respectively, based primarily on the market prices quoted from external sources, compared with carrying values of $1,639 million, $1,621 million, and $1,635 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 January 31, 2015, for additional information regarding the terms of our debt facilities, debt instruments and other obligations.
7. Derivative Instruments
We manage our economic and transaction exposure to certain risks through the use of foreign currency derivative instruments. Our objective in holding these derivatives is to reduce the volatility of net earnings and cash flows, as well as net asset value associated with changes in foreign currency exchange 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 major financial institutions as our counterparties.
We record all foreign currency 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 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 ineffective portion of the gain or loss, if any, in net earnings.
Interest Rate Swaps
We use "receive fixed-rate, pay variable-rate" interest rate swaps to partially mitigate the effect of interest rate fluctuations on 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 as a fair value hedge 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 and on certain forecast inventory purchases 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 table presents the gross fair values for outstanding derivative instruments and the corresponding classification at October 31, 2015, January 31, 2015 and November 1, 2014 ($ in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| October 31, 2015 | | January 31, 2015 | | November 1, 2014 |
Contract Type | Assets | | Liabilities | | Assets | | Liabilities | | Assets | | Liabilities |
Derivatives designated as net investment hedges(1) | $ | 12 |
| | $ | — |
| | $ | 19 |
| | $ | — |
| | $ | 1 |
| | $ | — |
|
Derivatives designated as interest rate swaps(2) | 10 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
No hedge designation (foreign exchange forward contracts)(1) | 2 |
| | — |
| | 11 |
| | — |
| | 3 |
| | — |
|
Total | $ | 24 |
| | $ | — |
| | $ | 31 |
| | $ | — |
| | $ | 4 |
| | $ | — |
|
| |
(1) | The fair value is recorded in other current assets or accrued liabilities. |
| |
(2) | The fair value is recorded in other assets or long-term liabilities. |
The following table presents the effects of derivative instruments on Other Comprehensive Income ("OCI") and on our Consolidated Statements of Earnings for the three and nine months ended October 31, 2015, and November 1, 2014, respectively ($ in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
| October 31, 2015 | | November 1, 2014 | | October 31, 2015 | | November 1, 2014 |
Contract Type | Pre-tax Gain(Loss) Recognized in OCI | | Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion) | | Pre-tax Gain(Loss) Recognized in OCI | | Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion) | | Pre-tax Gain(Loss) Recognized in OCI | | Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion) | | Pre-tax Gain(Loss) Recognized in OCI | | Gain(Loss) Reclassified from Accumulated OCI to Earnings (Effective Portion) |
Derivatives designated as net investment hedges | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | 1 |
| | $ | — |
|
The following tables present the effects of derivative instruments on our Consolidated Statements of Earnings for the three and nine months ended October 31, 2015, and November 1, 2014, respectively ($ in millions):
|
| | | | | | | | | | | | | | | |
| Gain (Loss) Recognized within SG&A | | Gain (Loss) Recognized within SG&A |
| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
Contract Type | October 31, 2015 | | November 1, 2014 | | October 31, 2015 | | November 1, 2014 |
No hedge designation (foreign exchange forward contracts) | $ | 1 |
| | $ | 4 |
| | $ | (3 | ) | | $ | — |
|
|
| | | | | | | | | | | | | | | |
| Gain (Loss) Recognized within Interest Expense | | Gain (Loss) Recognized within Interest Expense |
| Three Months Ended | | Three Months Ended | | Nine Months Ended | | Nine Months Ended |
Contract Type | October 31, 2015 | | November 1, 2014 | | October 31, 2015 | | November 1, 2014 |
Interest rate swap gain (loss) | $ | (3 | ) | | $ | — |
| | $ | 9 |
| | $ | — |
|
Adjustments to carrying value of long-term debt | 3 |
| | — |
| | (9 | ) | | — |
|
Net impact on Consolidated Statements of Earnings | $ | |