-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, m0HFW07WXDQ5qHMbeQqvY4lxEsBGGnZtEsfXfdLM9Q0sVrB2KRfTxsdf01YNxO87 RSbuDS4uqu7WD2Ga4iLhsQ== 0000912057-95-005220.txt : 199507100000912057-95-005220.hdr.sgml : 19950710 ACCESSION NUMBER: 0000912057-95-005220 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950527 FILED AS OF DATE: 19950707 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEST BUY CO INC CENTRAL INDEX KEY: 0000764478 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 410907483 STATE OF INCORPORATION: MN FISCAL YEAR END: 0303 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09595 FILM NUMBER: 95552635 BUSINESS ADDRESS: STREET 1: 4400 W 78TH ST CITY: BLOOMINGTON STATE: MN ZIP: 55435 BUSINESS PHONE: 6129472000 MAIL ADDRESS: STREET 1: 4400 W 78TH ST CITY: BLOOMINGTON STATE: MN ZIP: 55435 FORMER COMPANY: FORMER CONFORMED NAME: BEST BUYS CO INC DATE OF NAME CHANGE: 19900809 10-Q 1 FORM 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 May 27, 1995 OR ___ 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 Charter) Minnesota 41-0907483 (State of Incorporation) (IRS Employer Identification Number) 7075 Flying Cloud Drive 55344 Eden Prairie, Minnesota (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: 612/947-2000 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 --- --- At May 27, 1995, there were 42,594,444 shares of common stock, $.10 par value, outstanding. BEST BUY CO., INC. FORM 10-Q FOR THE QUARTER ENDED MAY 27, 1995 INDEX Page ---- Part I. Financial Information Item 1. Consolidated Financial Statements: a. Consolidated balance sheets as of May 27, 1995, February 25, 1995, and May 28, 1994 3-4 b. Consolidated statements of earnings for the three months ended May 27, 1995, and May 28, 1994 5 c. Consolidated statement of changes in shareholders' equity for the three months ended May 27, 1995 6 d. Consolidated statements of cash flows for the three months ended May 27, 1995, and May 28, 1994 7 e. Notes to consolidated financial statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 2 Part I - Financial Information Item 1. Consolidated Financial Statements BEST BUY CO., INC. CONSOLIDATED BALANCE SHEETS ASSETS ($ in 000, except per share amounts)
May 27, February 25, May 28, 1995 1995 1994 (Unaudited) (Unaudited) ----------- ------------ ------------- CURRENT ASSETS: Cash and cash equivalents $ 51,669 $ 144,700 $ 10,226 Receivables 100,005 84,440 64,451 Recoverable costs from developed properties 103,523 86,222 42,227 Merchandise inventories 1,002,391 907,677 704,518 Deferred income taxes 16,218 15,022 14,880 Prepaid expenses 5,439 2,606 1,222 ---------- ---------- ---------- Total current assets 1,279,245 1,240,667 837,524 PROPERTY AND EQUIPMENT, at cost: Land and buildings 15,414 13,524 13,524 Property under capital leases 28,146 27,096 17,908 Leasehold improvements 97,770 93,889 64,330 Furniture, fixtures, and equipment 208,708 191,084 125,423 ---------- ---------- ---------- 350,038 325,593 221,185 Less accumulated depreciation and amortization 100,785 88,116 68,907 ---------- ---------- ---------- Total property and equipment 249,253 237,477 152,278 OTHER ASSETS: Deferred income taxes 9,940 9,223 6,163 Other assets 19,604 19,758 8,765 ---------- ---------- ---------- Total other assets 29,544 28,981 14,928 ---------- ---------- ---------- TOTAL ASSETS $1,558,042 $1,507,125 $1,004,730 ---------- ---------- ---------- ---------- ---------- ----------
See notes to consolidated financial statements. 3 BEST BUY CO., INC. CONSOLIDATED BALANCE SHEETS (continued) LIABILITIES AND SHAREHOLDERS' EQUITY ($ in 000, except per share amounts)
May 27, February 25, May 28, 1995 1995 1994 (Unaudited) (Unaudited) ----------- ------------ ------------- CURRENT LIABILITIES: Note payable, bank $ 50,000 $ 32,500 Obligations under financing arrangements 41,367 $ 81,755 13,558 Accounts payable 448,545 406,682 312,664 Accrued salaries and related expenses 24,127 23,785 17,213 Other accrued liabilities 64,814 65,757 40,179 Deferred service plan revenue and warranty reserve 26,759 24,942 19,909 Accrued income taxes 3,443 14,979 3,717 Current portion of long-term debt 13,664 13,718 9,003 ---------- ---------- ---------- Total current liabilities 672,719 631,618 448,743 Deferred Service Plan Revenue and Warranty Reserve, Long-Term 45,197 42,138 29,667 Long-Term Debt 224,723 227,247 208,711 Convertible Preferred Securities of Subsidiary 230,000 230,000 SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value; authorized 400,000 shares; none issued Common stock, $.10 par value; authorized 120,000,000 shares; issued and outstanding 42,594,000, 42,216,000, and 41,854,000 shares, respectively 4,259 4,221 4,185 Additional paid-in capital 233,553 228,982 223,915 Retained earnings 147,591 142,919 89,509 ---------- ---------- ---------- Total shareholders' equity 385,403 376,122 317,609 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,558,042 $1,507,125 $1,004,730 ---------- ---------- ---------- ---------- ---------- ----------
See notes to consolidated financial statements. 4 BEST BUY CO., INC. CONSOLIDATED STATEMENTS OF EARNINGS ($ in 000, except per share amounts) (Unaudited)
Three Months Ended -------------------------- May 27, May 28, 1995 1994 ------------ ------------ Revenues $1,274,696 $849,403 Cost of goods sold 1,092,408 730,451 ---------- -------- Gross profit 182,288 118,952 Selling, general and administrative expenses 165,925 107,266 ---------- -------- Income from operations 16,363 11,686 Interest expense, net 8,616 4,676 ---------- -------- Net earnings before income taxes 7,747 7,010 Income taxes 3,075 2,769 ---------- -------- Net earnings $ 4,672 $ 4,241 ---------- -------- ---------- -------- Net earnings per share $ .11 $ .10 ---------- -------- ---------- -------- Weighted average common shares outstanding (000) 43,423 43,257 ---------- -------- ---------- --------
See notes to consolidated financial statements. 5 BEST BUY CO., INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MAY 27, 1995 ($ in 000) (unaudited)
Additional paid in Retained Common stock capital earnings ------------ ------------ ------------ Balance, February 25, 1995 $4,211 $228,982 $142,919 Stock options exercised 38 4,571 Net earnings, three months ended May 27, 1995 4,672 ------ -------- -------- Balance, May 27, 1995 $4,259 $233,553 $147,591 ------ -------- -------- ------ -------- --------
See notes to consolidated financial statements. 6 BEST BUY CO., INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in 000) (unaudited)
Three Months Ended ----------------------------- May 27, May 28, 1995 1994 ---------- ---------- OPERATING ACTIVITIES: Net earnings $ 4,672 $ 4,241 Charges to earnings not affecting cash: Depreciation and amortization 12,763 8,139 ------ ------ 17,435 12,380 Changes in operating assets and liabilities: Receivables (15,565) (11,507) Merchandise inventories (94,714) (66,568) Prepaid income taxes and expenses (4,746) (1,343) Accounts payable 41,863 18,604 Accrued salaries and related expenses 342 (2,106) Other current liabilities (9,482) (4,509) Deferred service plan revenue and warranty reserve 4,876 2,219 Total cash used in operating activities ------- ------- (59,991) (52,830) INVESTING ACTIVITIES: Additions to property and equipment (23,489) (25,231) Recoverable costs from developed properties (17,301) (4,521) (Increase) decrease in other assets 154 (683) ------- ------- Total cash used in investing activities (40,636) (30,435) FINANCING ACTIVITIES: Common stock issued 1,612 772 Borrowings on revolving credit line, net 50,000 32,500 Payments on long-term debt (3,628) (2,055) (Decrease) increase in obligations under financing arrangements (40,388) 2,402 ------- ------- Total cash provided by financing activities 7,596 33,619 ------- ------- DECREASE IN CASH AND CASH EQUIVALENTS (93,031) (49,646) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 144,700 59,872 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $51,669 $10,226 ------- ------- ------- ------- Amounts in this statement are presented on a cash basis and therefore may differ from those shown in other sections of this quarterly report. Supplemental cash flow information: Cash paid during the period for: Interest $11,105 $ 6,765 Income taxes $13,273 $10,470
See notes to consolidated financial statements. 7 BEST BUY CO., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION: The consolidated balance sheets as of May 27, 1995, and May 28, 1994, the related consolidated statements of earnings and cash flows for the three months ended May 27, 1995, and May 28, 1994, and the consolidated statement of changes in shareholders' equity for the three months ended May 27, 1995, are unaudited; in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included and were normal and recurring in nature. Interim results are not necessarily indicative of results for a full year. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company's Annual Report to Shareholders for the fiscal year ended February 25, 1995. 2. RECLASSIFICATION: Certain prior year amounts have been reclassified to conform to current year presentation. 3. INCOME TAXES: Income taxes are provided on an interim basis based upon management's estimate of the annual effective tax rate. 4. STOCK SPLIT: The Company effected a two-for-one stock split in the form of a stock dividend in April 1994. All common share and per share data reflect this stock split. 5. EARNINGS PER SHARE: Earnings per share relate to fully diluted earnings per share. 8 BEST BUY CO., INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net earnings for the first quarter were $4,672,000, or $.11 per share, compared to net earnings of $4,241,000, or $.10 per share, in the comparable period last year. Operating income increased 40% over the first quarter of last year. Higher interest expense reduced the impact of the improvement on net earnings. Revenues increased 50% to $1.275 billion from $849 million in last year's first quarter. This increase in revenues is the result of a comparable store sales increase of 6% and the revenues generated from the 60 stores opened in the past 12 months. Comparable store sales growth in the first quarter of last year was 37% due, in part, to the significant expansion of the lines of personal computers that the Company carries. Absent significant changes in the economy, the Company expects comparable store sales increases to remain in the single digit range throughout most of the current fiscal year, more in line with industry averages. The mix of product sales continues to reflect an increasing contribution of home office and entertainment software categories which comprised 40% and 16% of total sales, respectively, for the quarter. The Company expects the launch of Microsoft's "Windows '95" software, scheduled for late August, to increase the contribution of these two categories beginning in the third quarter by generating additional computer software as well as hardware revenues. In addition, the Company has announced that late in the second quarter it will begin selling office supplies as a logical extension of its home office product category. Gross profit margin was 14.3% of sales for the first quarter of this year, up from the 14.0% in the first quarter of last year and 13.6% for fiscal 1995. The improvement was primarily due to Company initiatives directed at increasing gross profit margins, including increased levels of customer service to enhance sales of certain products and services. Although margins improved, competition remains strong, particularly in the home office and entertainment software categories. While the Company continues to develop the initiatives instituted in the first quarter, the continuing competitive environment, a slowing economy and promotional pricing associated with new store openings will impact gross profit margins achieved. Selling, general and administrative (SG&A) expenses were 13.0% of sales compared to 12.6% of sales in the same period last year. The higher expense ratio was the result of the higher costs associated with the new markets entered in the past year. The fixed costs of the larger 45,000 and 58,000 square foot stores opened last year, the distribution capacity added 9 last year and the higher cost of advertising associated with the new markets, which are not yet fully developed, contributed to the reduction in leverage during the seasonally slower first quarter of the fiscal year. Management does not expect improvement in the SG&A percentage until the third quarter of this year when activity levels increase and leverage from additional new stores is anticipated. Extended service plan revenues represented less than 1% of revenues for the first quarter of 1996 and 1995. Profit earned on extended service plans contributed $4.2 million and $3.7 million to the Company's operating income in the first quarter of fiscal 1996 and 1995, respectively. This profit is before the allocation of any selling, general or administrative expenses, except for direct selling expenses. Interest expense increased to $8.6 million in the first quarter of this year compared to $4.7 million in the first quarter of last year. The increase is primarily attributable to interest on the $230 million convertible preferred securities issued in November 1994. Income tax expense in the first quarter was 39.7% of pre-tax income compared to 38.7% in the last fiscal year. The increase in the effective tax rate is primarily a result of the elimination of the targeted jobs tax credit, which expired December 31, 1994. FINANCIAL CONDITION Total assets and working capital at May 27, 1995 were basically unchanged from February 25, 1995. During the first quarter inventories increased $94 million principally in support of the new stores opened in the quarter and also due to higher levels of new models of personal computers and an increase in seasonal appliances as compared to the fiscal year end. The increased inventory levels were funded through cash and the Company's credit facilities, as vendor provided financing was unchanged during the quarter. Higher credit card sales at the end of the period, due to the increased sales level, were responsible for the majority of the increase in receivables compared to the end of the prior year. The Company opened nine new stores in the first quarter, including seven in the new market of Miami late in the quarter. An additional 38 new stores are planned for the remainder of the fiscal year with the majority of these stores scheduled to open in existing markets. In addition to the new stores the Company plans to expand or relocate approximately 20 stores during the remainder of the fiscal year. Approximately 20 of the new or relocated stores, as well as a new distribution center in Findlay, Ohio, have been or will be developed by the Company. Following development of the properties, the Company expects to recover the development costs through long-term sale/leaseback 10 financing. At the end of the first quarter eleven owned store locations, aggregating approximately $60 million in cost, were under contract to sell and lease back. The majority of the proceeds from the sale of these properties is expected in the second quarter. Management is in the process of establishing a program with an investment banking firm to sell and lease back the majority of the other owned store locations and the new distribution facility. Costs of development of these properties are classified as current assets and are included in recoverable costs from developed properties. Management expects capital expenditures for this fiscal year will be approximately $100 million. This amount is net of the expected expenditure and recovery of costs from the sale and lease back of developed properties. Management believes that inventory credit facilities combined with long term real estate development financing, primarily through sale/leasebacks, and cash generated from operations will be sufficient to meet the Company's financing needs for the current fiscal year. 11 BEST BUY CO., INC. Part II - Other Information Item 6. EXHIBITS AND REPORTS ON FORM 8-K: a. Exhibits: Method of Filing ---------------- 11.1 Computation of net earnings per common share Filed herewith 27.1 Financial Data Schedule Filed herewith b. Reports on Form 8-K: No reports on Form 8-K were filed during the period. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BEST BUY CO., INC. (Registrant) Date: July 7, 1995 By: /s/ ALLEN U. LENZMEIER ----------------------------------------- Allen U. Lenzmeier, Executive Vice President & Chief Financial Officer (principal financial officer) By: /s/ ROBERT C. FOX ----------------------------------------- Robert C. Fox, Senior Vice President- Finance & Treasurer (principal accounting officer) 13 EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 BEST BUY CO., INC. COMPUTATION OF NET EARNINGS PER COMMON SHARE (Amounts in 000, except per share amounts) (unaudited)
Three Months Ended ------------------------ May 27, May 28, 1995 1994 ----------- ---------- Earnings: Net earnings available to common shares $4,672 $4,241 ------ ------ ------ ------ Shares: Weighted average common shares outstanding 42,379 41,783 Adjustments: Assumed issuance of shares purchased under stock option plans 1,044 1,474 ------ ------ Total common equivalent shares 42,423 43,257 ------ ------ ------ ------ Net earnings per common share $ .11 $ .10 ------ ------ ------ ------
Note: The computation of earnings per common share assuming full dilution results in anti-dilution. EX-27.1 3 EXHIBIT 27.1 - FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from the financial statements for the periods indicated and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS MAR-02-1996 FEB-26-1995 MAY-27-1995 51,669 0 100,005 0 1,002,391 1,279,245 350,038 100,785 1,558,042 672,719 224,723 4,259 0 0 381,144 1,558,042 1,274,696 1,274,696 1,092,408 1,092,408 165,925 0 8,616 7,747 3,075 4,672 0 0 0 4,672 .11 .11
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