Best Buy 2016 Annual Report Download - page 59

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51
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
In addition to the risks inherent in our operations, we are exposed to certain market risks.
Interest Rate Risk
We are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense.
Our cash and short-term investments generate interest income that will vary based on changes in short-term interest rates, and
we have also swapped a portion of our fixed-rate debt to floating-rate such that the interest expense on this debt will vary with
short-term interest rates. Refer to Note 5, Debt, and Note 6, Derivative Instruments, 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 further
information regarding our interest rate swaps.
As of January 30, 2016, we had $3.3 billion of cash and short-term investments and $750 million of debt that has been swapped
to floating rate. Therefore, we had net cash and short-term investments of $2.6 billion generating income which is exposed to
interest rate changes. As of January 30, 2016, a 50 basis point increase in short-term interest rates would lead to an estimated
$13 million reduction in net interest expense, and conversely a 50 basis point decrease in short-term interest rates would lead to
an estimated $13 million increase in net interest expense.
Foreign Currency Exchange Rate Risk
We have market risk arising from changes in foreign currency exchange rates related to our International segment operations.
On a limited basis, we utilize foreign exchange forward contracts to manage foreign currency exposure to certain forecast
inventory purchases, recognized receivable and payable balances and our investment in our Canadian operations. Our primary
objective in holding derivatives is to reduce the volatility of net earnings and cash flows, as well as of the net asset value
associated with changes in foreign currency exchange rates. Our foreign currency risk management strategy includes both
hedging instruments and derivatives that are not designated as hedging instruments, which generally have terms of up to 12
months. Refer to Note 6, Derivative Instruments, 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 further information regarding our these
instruments.
The strength of the U.S. dollar compared to the Canadian dollar and Mexican peso compared to the prior-year period had a
negative overall impact on our revenue as these currencies translated into fewer U.S. dollars. We estimate that foreign currency
exchange rate fluctuations had a net unfavorable impact on our revenue in fiscal 2016 of approximately $534 million and a net
favorable impact on earnings of $20 million. In fiscal 2015, the impact of foreign currency exchange rate fluctuations had an
unfavorable impact on our revenue of approximately $308 million and an unfavorable impact on earnings of $4 million.