Best Buy 2014 Annual Report Download - page 47

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42
(2) Represents gross LCD settlement proceeds recorded in cost of goods sold less associated legal costs recorded in selling, general and administrative
expenses for settlements reached in the second quarter of fiscal 2014. Settlements reached prior to the second quarter of fiscal 2014 are not included. See
Note 13, Contingencies and Commitments, of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and
Supplementary Data, of this Annual Report on Form 10-K for additional information.
(3) Represents the tax impact of the Best Buy Europe sale and resulting required tax allocation between continuing and discontinued operations.
Adjusted operating income decreased $301 million in 2014 compared to 2013, and adjusted operating income as a percent of
revenue decreased to 2.8%. The decrease in operating income was primarily driven by the extra week of operations in 2013 and
a decrease in the gross profit rate (adjusted to exclude LCD-related legal settlements in the second quarter of 2014). This
decrease was partially offset by lower SG&A spending due to the realization of Renew Blue cost reduction initiatives and
tighter expense management in both the Domestic and International segments. These same factors contributed to the year-over-
year decreases in adjusted net earnings from continuing operations and adjusted diluted earnings per share from continuing
operations in 2014 compared to the prior-year period.
Adjusted operating income decreased $692 million in 2013 compared to 2012, and adjusted operating income as a percent of
revenue decreased to 3.4%. The decrease in operating income was primarily driven by a decrease in revenue due to Domestic
store closures in 2013, a decrease in the gross profit rate and an increase in SG&A spending, primarily in our Domestic
segment, due to increases in field incentive compensation and executive retention and transition costs. These factors were
partially offset by the extra week of operations in 2013. These same factors contributed to the year-over-year decreases in
adjusted net earnings from continuing operations and adjusted diluted earnings per share from continuing operations in 2013
compared to the prior-year period.
Liquidity and Capital Resources
Summary
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level
of investment to support our Renew Blue priorities, discretionary SG&A spending, capital expenditures, credit facilities and
short-term borrowing arrangements, and working capital management. Capital expenditures are a component of our cash flow
and capital management strategy which, to a large extent, we can adjust in response to economic and other changes in our
business environment. We have a disciplined approach to capital allocation, which focuses on investing in key priorities that
support our Renew Blue transformation.
We ended fiscal 2014 (12-month) with $2.7 billion of cash and cash equivalents, compared to $1.8 billion at the end of fiscal
2013 (11-month). The increase in cash and cash equivalents was due primarily to cash provided by operations and cash from
the sale of Best Buy Europe and mindSHIFT, partially offset by cash used for capital expenditures and the payment of
dividends. Working capital, the excess of current assets over current liabilities, was $3.0 billion at the end of fiscal 2014 (12-
month), an increase from $1.2 billion at the end of fiscal 2013 (11-month). Operating cash flow decreased $360 million to
$1.1 billion in fiscal 2014 (12-month) compared to fiscal 2013 (11-month) and capital expenditures decreased $158 million
compared to the prior-year period.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for each of the past three
fiscal years and fiscal 2012 (11-month recast) ($ in millions):
12-Month 11-Month 12-Month
2014 2013 2012 2012
(recast)
Total cash provided by (used in):
Operating activities $ 1,094 $ 1,454 $ 3,097 $ 3,293
Investing activities (517)(538)(647)(724)
Financing activities 319 (211)(2,141)(2,478)
Effect of exchange rate changes on cash (44)(4)(6) 5
Increase in cash and cash equivalents $ 852 $ 701 $ 303 $ 96