OREANDA-NEWS. Best Buy Co., Inc. (NYSE:BBY) today announced results for the first quarter ended April 30, 2016 (“Q1 FY17”), as compared to the first quarter ended May 2, 2015 (“Q1 FY16”). The company reported GAAP diluted earnings from continuing operations of $0.69, an increase from $0.10 in Q1 FY16. Non-GAAP diluted earnings per share from continuing operations were $0.44, an increase of 19% from $0.37 in Q1 FY16.

             
      Q1 FY17     Q1 FY16
Revenue ($ in millions)1            
Enterprise     $8,443     $8,558
Domestic segment     $7,829     $7,890
International segment     $614     $668
Enterprise comparable sales % change     (0.1%)     0.6%
Domestic comparable sales % change     (0.1%)     0.6%
Domestic comparable online sales % change     23.9%     5.3%
International revenue % change     (8.1%)     (22.1%)
International revenue % change on a constant currency basis     (1.2%)     (12.1%)
Operating Income:            
GAAP operating income as a % of revenue     4.4%     1.0%
Non-GAAP operating income as a % of revenue     2.9%     2.6%
Diluted Earnings per Share (EPS):            
GAAP diluted EPS from continuing operations     $0.69     $0.10
Non-GAAP diluted EPS from continuing operations     $0.44     $0.37

For GAAP to non-GAAP reconciliations, please refer to the attached supporting schedule titled “Reconciliation of non-GAAP Financial Measures.”
 

“Our teams delivered a strong first quarter, with better-than-expected revenue, improved profitability and progress against our fiscal 2017 initiatives,” said Best Buy Chairman and CEO Hubert Joly. “We are reaffirming our previously provided full year financial outlook which includes approximately flat revenue and non-GAAP operating income, with non-GAAP EPS growth driven by share repurchases. Although we are reporting better-than-expected results today, we are not raising our full year outlook as the first quarter represents less than 15% of full year earnings and at this stage we have no new material information as it relates to product launches throughout the year.”

Joly continued, “In our Domestic business, we are reporting essentially flat comparable sales versus guidance of a 1% to 2% decline driven by strong year-over-year sales growth in health & wearables, home theater and appliances offset by continued softness in mobile phones and tablets. Contributing to these better-than-expected results was the strong performance in our online channel, which grew 24% in the quarter.”

Joly concluded, “As we look forward, we remain focused on our FY17 priorities. These priorities are (1) to build on our strong industry position and multi-channel capabilities to drive the existing business; (2) to drive cost reductions and efficiencies; and (3) to advance key initiatives to drive future growth and differentiation. We are investing to make it easy for customers to learn about and enjoy the latest technology as they pursue their passions and take care of what is important to them in their lives. With our combination of digital, store and in-home assets, we feel we have a great opportunity to address key customer pain points, build stronger ongoing relationships with our customers and unleash growth opportunities.”

Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “As Hubert said, we are reaffirming our previously provided full year financial outlook of approximately flat revenue and non-GAAP operating income, including lapping the significant periodic profit sharing benefits from our services plan portfolio that we earned in FY16. A key element to achieve this will be the delivery of our cost reduction and gross profit optimization initiatives. Based on current industry dynamics and how we see the various product cycles playing out, we are expecting slight declines in revenue in the first half followed by growth in the back half. As discussed in our last earnings release, we recognize this will be challenging without a strong mobile cycle and improvements in the NPD-reported categories overall.”

McCollam continued, “For Q2 FY17, our guidance is Enterprise revenue in the range of $8.35 billion to $8.45 billion and both Enterprise and Domestic comparable sales of approximately flat. We expect our Q2 non-GAAP diluted earnings per share to be in the range of $0.38 to $0.42, assuming a diluted weighted average share count of approximately 325 million and a non-GAAP effective income tax rate in the range of 36.0% to 36.5%.”

McCollam concluded, “In line with our original expectations, there are two factors impacting our year-over-year non-GAAP EPS guidance for the second quarter. First, we are expecting an approximate $0.03 net negative impact from the lapping of the periodic profit sharing benefit from our services plan portfolio that we received in the second quarter of last year. Second, we are expecting an approximate $0.06 negative impact from the carryover of last September’s services pricing investment. In addition, in digital imaging, we are now expecting an approximate $0.03 to $0.04 negative impact due to the April 2016 earthquake in Japan, which is impacting inventory availability in this high-margin category. Combined, these are putting $0.12 to $0.13 of pressure on Q2 FY17, which will be partially offset by an approximate $0.04 benefit from share repurchases.”

Domestic Segment First Quarter Results

Domestic Revenue

Domestic revenue of $7.8 billion decreased 0.8% versus last year. This decrease was primarily driven by the loss of revenue from 13 large format and 24 Best Buy Mobile store closures. Comparable sales were essentially flat against a backdrop where the NPD-reported categories were down 1.9%.2

From a merchandising perspective, comparable sales growth in health & wearables, home theater, major appliances and computing was offset by declines in mobile phones, tablets and gaming. As expected, television sales related to the shift of the Super Bowl into Q1 FY17 positively impacted the Domestic segment by approximately 70 basis points. The company also saw continued revenue declines in services due to investments in services pricing and the reduction of frequency of claims on extended warranties which has reduced repair revenue.

Domestic online revenue of $832 million increased 23.9% on a comparable basis primarily due to higher conversion rates and increased traffic. As a percentage of total Domestic revenue, online revenue increased 210 basis points to 10.6% versus 8.5% last year.

Domestic Gross Profit Rate
Domestic gross profit rate was 25.4% versus 23.9% last year. On a non-GAAP basis, gross profit rate was 23.0% versus 22.9% last year. Both the GAAP and non-GAAP gross profit rates increased 10 basis points primarily due to (1) a prior-year reserve on non-iconic phone inventory which did not recur this year; and (2) improved rates primarily driven by our more disciplined promotional strategy across product categories. These increases were partially offset by our investments in services pricing. The GAAP gross profit rate was also positively impacted by $183 million in CRT settlement proceeds.

Domestic Selling, General and Administrative Expenses (“SG&A”)
Domestic SG&A expenses were $1.59 billion, or 20.3% of revenue, versus $1.58 billion, or 20.1% of revenue, last year. On a non-GAAP basis, SG&A expenses were $1.56 billion, or 19.9% of revenue, versus $1.56 billion, or 19.8% of revenue, last year. Non-GAAP SG&A was flat as investments in the business were offset by the flow-through of Renew Blue Phase 2 cost reductions. GAAP SG&A increased year over year due primarily to $22 million in legal fees and costs associated with the CRT settlement proceeds.

International Segment First Quarter Results

International Revenue
International revenue of $614 million declined 8.1%. This decline was primarily driven by (1) approximately 690 basis points of negative foreign currency impact; and (2) the loss of revenue associated with closed stores as part of the Canadian brand consolidation. On a constant currency basis, International revenue declined 1.2%.

International Gross Profit Rate
International gross profit rate was 25.9% versus 21.6% last year. On a non-GAAP basis, gross profit rate was 25.9% versus 22.8% last year. Both the GAAP and non-GAAP gross profit rates increased 310 basis points primarily driven by a higher year-over-year gross profit rate in Canada as the company (1) lapped the significant disruption and corresponding increased promotional activity related to the brand consolidation in Q1 FY16; and (2) received a higher periodic profit sharing payment in the services business. The GAAP gross profit rate increase was also impacted by the prior year impact of COGS restructuring charges.

International SG&A
International SG&A expenses were $157 million, or 25.6% of revenue, versus $182 million, or 27.2% of revenue, last year. On a non-GAAP basis, SG&A expenses were $156 million, or 25.4% of revenue, versus $179 million, or 26.8% of revenue, last year. This $23 million, or 140-basis point, decrease in GAAP and non-GAAP SG&A was primarily driven by the elimination of expenses associated with closed stores as part of the Canadian brand consolidation and the positive impact of foreign exchange rates. GAAP SG&A decreased an additional $2 million due primarily to lower Canadian brand consolidation charges.

Income Taxes
In Q1 FY17, the GAAP continuing operations effective income tax rate decreased 1,300 basis points to 37.3% versus 50.3% last year. On a non-GAAP basis, the continuing operations effective income tax rate increased 130 basis points to 37.7% versus 36.4% last year.

Q2 FY17 Financial Guidance
Best Buy is providing the following Q2 FY17 financial guidance:

  • Enterprise revenue in the range of $8.35 to $8.45 billion, a decline of (2.1%) to (0.9%)
  • International revenue decline of (5%) to (10%)
  • Enterprise and Domestic comparable sales of approximately flat
  • Non-GAAP effective income tax rateof approximately 36.0% to 36.5% versus 37.1% last year
  • Diluted weighted average share count of 325 million versus 354 million last year, resulting in a positive $0.04 year-over-year non-GAAP EPS impact
  • Non-GAAP diluted EPS of $0.38 to $0.42 versus $0.49 last year

Note: Enterprise comparable sales are currently equal to Domestic comparable sales due to the impacts of the Canadian brand consolidation.1 The company’s non-GAAP financial guidance does not reflect the potential impact of non-GAAP adjustments, which include (but, in future periods, may not be limited to) restructuring charges, CRT and LCD settlements, asset impairments, gains and losses on investments, other brand consolidation costs and the tax effect of such items. The company cannot reliably predict or estimate if and when these types of transactions or adjustments may occur or their impact to its financial statements.

Share Repurchases and Dividends
On February 25, 2016, the company announced the intent to repurchase $1 billion of its shares over a two-year period. In Q1 FY17, the company repurchased 3.2 million shares for a total of $97 million. The company’s cumulative share repurchases positively benefitted non-GAAP diluted EPS by $0.04 in Q1 FY17.

On April 07, 2016, the company paid a quarterly dividend of $0.28 per common share outstanding, or $90 million, and a special one-time dividend of $0.45 per common share outstanding, or $145 million.

Restructuring Charges
During Q1 FY17, the company made decisions to cease certain operations and restructure certain teams. As such, restructuring charges of $29 million were recorded primarily relating to asset impairments and severance. In Q1 FY16, restructuring charges of $186 million were recorded primarily in relation to the Canadian brand consolidation.

Reminder: Discontinuation of Holiday Sales Press Release in FY17
Beginning in January FY17, the company will no longer issue an interim Holiday press release due to the increasing significance of the month of January to the company’s overall fourth quarter financial results.

 
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited and subject to reclassification)
             
      Three Months Ended
      April 30, 2016     May 2, 2015
Revenue     $ 8,443       $ 8,558  
Cost of goods sold       6,298         6,520  
Restructuring charges - cost of goods sold       -         8  
Gross profit       2,145         2,030  
Gross profit %       25.4 %       23.7 %
Selling, general and administrative expenses       1,744         1,766  
SG&A %       20.7 %       20.6 %
Restructuring charges       29         178  
Operating income       372         86  
Operating income %       4.4 %       1.0 %
Other income (expense):            
Gain on sale of investments       2         2  
Investment income and other       6         7  
Interest expense       (20 )       (20 )
Earnings from continuing operations before income tax expense       360         75  
Income tax expense       134         38  
Effective tax rate       37.3 %       50.3 %
Net earnings from continuing operations       226         37  
Gain from discontinued operations, net of tax       3         92  
Net earnings attributable to Best Buy Co., Inc. shareholders     $ 229       $ 129  
             
Basic earnings per share attributable to Best Buy Co., Inc. shareholders            
Continuing operations     $ 0.70       $ 0.11  
Discontinued operations       0.01         0.26  
Basic earnings per share     $ 0.71       $ 0.37  
             
Diluted earnings per share attributable to Best Buy Co., Inc. shareholders      
Continuing operations     $ 0.69       $ 0.10  
Discontinued operations       0.01         0.26  
Diluted earnings per share     $ 0.70       $ 0.36  
             
Dividends declared per common share     $ 0.73       $ 0.74  
             
Weighted average common shares outstanding (in millions)            
Basic       323.6         352.4  
Diluted       326.7         357.6  
                     
 
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
(Unaudited and subject to reclassification)
             
       
      April 30, 2016     May 2, 2015
ASSETS            
Current assets            
Cash and cash equivalents     $ 1,845     $ 2,173
Short-term investments       1,220       1,566
Receivables, net       1,097       995
Merchandise inventories       4,719       4,930
Other current assets       401       465
Total current assets       9,282       10,129
Property and equipment, net       2,332       2,244
Goodwill       425       425
Intangibles, net       18       18
Other assets       813       863
Noncurrent assets held for sale       31       33
TOTAL ASSETS     $ 12,901     $ 13,712
             
LIABILITIES & EQUITY            
Current liabilities            
Accounts payable     $ 4,397     $ 4,584
Unredeemed gift card liabilities       379       385
Deferred revenue       349       304
Accrued compensation and related expenses       277       277
Accrued liabilities       791       743
Accrued income taxes       97       45
Current portion of long-term debt       44       383
Total current liabilities       6,334       6,721
Long-term liabilities       807       906
Long-term debt       1,334       1,217
Equity       4,426       4,868
TOTAL LIABILITIES & EQUITY     $ 12,901     $ 13,712
                 
 
BEST BUY CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited and subject to reclassification)
             
      Three Months Ended
      April 30, 2016     May 2, 2015
OPERATING ACTIVITIES            
Net earnings     $ 229       $ 129  
Adjustments to reconcile net earnings to total cash provided by (used in) operating activities:            
Depreciation       162         163  
Restructuring charges       29         186  
Gain on sale of business       -         (99 )
Stock-based compensation       31         27  
Deferred income taxes       8         (25 )
Other, net       (12 )       3  
Changes in operating assets and liabilities:            
Receivables       73         302  
Merchandise inventories       365         261  
Other assets       (30 )       4  
Accounts payable       (73 )       (446 )
Other liabilities       (211 )       (309 )
Income taxes       (88 )       (206 )
Total cash provided by (used in) operating activities       483         (10 )
             
INVESTING ACTIVITIES            
Additions to property and equipment       (136 )       (124 )
Purchases of investments       (591 )       (547 )
Sales of investments       683         440  

Proceeds from sale of business, net of cash transferred upon sale

      

-

        

48

  
Change in restricted assets       (2 )       (36 )
Other, net       4         5  
Total cash used in investing activities       (42 )       (214 )
             
FINANCING ACTIVITIES            
Repurchase of common stock       (52 )       -  
Issuance of common stock       21         25  
Dividends paid       (238 )       (261 )
Repayment of debt       (362 )       (8 )
Other, net       19         6  
Total cash used in financing activities       (612 )       (238 )
             
EFFECT OF EXCHANGE RATE CHANGES ON CASH       40         9  
DECREASE IN CASH AND CASH EQUIVALENTS       (131 )       (453 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD, EXCLUDING HELD FOR SALE      

1,976

        

2,432

  
CASH AND CASH EQUIVALENTS HELD FOR SALE AT BEGINNING OF PERIOD       -         194  
CASH AND CASH EQUIVALENTS AT END OF PERIOD     $ 1,845       $ 2,173  
             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION            

Non-cash repurchase of common stock related to completion of accelerated share repurchase

     $ 45       $ -  
Total cash and non-cash repurchase of common stock     $ 97       $ -  
                     
 
BEST BUY CO., INC.
SEGMENT INFORMATION
($ in millions)
(Unaudited and subject to reclassification)
 
Domestic Segment Performance Summary
       
      Three Months Ended
      April 30, 2016     May 2, 2015
Revenue     $7,829     $7,890
Gross profit     $1,986     $1,886
SG&A     $1,587     $1,584
Operating income     $372     $304
             
Key Metrics            
Comparable sales % change     (0.1%)     0.6%
Comparable online sales % change     23.9%     5.3%
Gross profit as a % of revenue     25.4%     23.9%
SG&A as a % of revenue     20.3%     20.1%
Operating income as a % of revenue     4.8%     3.9%
             
Non-GAAP Results            
Gross profit     $1,803     $1,808
Gross profit as a % of revenue     23.0%     22.9%
SG&A     $1,561     $1,562
SG&A as a % of revenue     19.9%     19.8%
Operating income     $242     $246
Operating income as a % of revenue     3.1%     3.1%
             
International Segment Performance Summary
       
      Three Months Ended
      April 30, 2016     May 2, 2015
Revenue     $614     $668
Gross profit     $159     $144
SG&A     $157     $182
Operating income (loss)     $0     ($218)
             
Key Metrics            
Comparable sales % change1     N/A     N/A
Gross profit as a % of revenue     25.9%     21.6%
SG&A as a % of revenue     25.6%     27.2%
Operating income (loss) as a % of revenue     0.0%     (32.6%)
             
Non-GAAP Results            
Gross profit     $159     $152
Gross profit as a % of revenue     25.9%     22.8%
SG&A     $156     $179
SG&A as a % of revenue     25.4%     26.8%
Operating income (loss)     $3     ($27)
Operating income (loss) as a % of revenue     0.5%     (4.0%)

 

(1) On March 28, 2015, the company 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, the conversion of 65 Future Shop stores to Best Buy stores and the elimination of the Future Shop website. The Canadian brand consolidation has a material impact on a year-over-year basis on the Canadian retail stores and the website. As such, all store and website revenue has been removed from the comparable sales base and International (comprised of Canada and Mexico) no longer has a comparable metric until International revenue is comparable on a year-over-year basis.

 
BEST BUY CO., INC.
REVENUE CATEGORY SUMMARY
(Unaudited and subject to reclassification)
 
  Revenue Mix Summary   Comparable Sales
  Three Months Ended   Three Months Ended
Domestic Segment April 30, 2016   May 2, 2015   April 30, 2016   May 2, 2015
Consumer Electronics 33%   31%   5.6%   7.6%
Computing and Mobile Phones 47%   47%   (3.5%)   (2.2%)
Entertainment 6%   7%   (11.6%)   (11.0%)
Appliances 9%   8%   14.3%   12.3%
Services 5%   5%   (10.7%)   (10.3%)
Other 0%   2%   n/a   n/a
Total 100%   100%   (0.1%)   0.6%
               
  Revenue Mix Summary    
  Three Months Ended    
International Segment1 April 30, 2016   May 2, 2015    
Consumer Electronics 29%   30%        
Computing and Mobile Phones 50%   49%        
Entertainment 6%   8%        
Appliances 5%   5%        
Services 8%   7%        
Other 2%   1%        
Total 100%   100%        
               

 

(1) On March 28, 2015, the company 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, the conversion of 65 Future Shop stores to Best Buy stores and the elimination of the Future Shop website. The Canadian brand consolidation has a material impact on a year-over-year basis on the Canadian retail stores and the website. As such, all store and website revenue has been removed from the comparable sales base and International (comprised of Canada and Mexico) no longer has a comparable metric until International revenue is comparable on a year-over-year basis.

BEST BUY CO., INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CONTINUING OPERATIONS
($ in millions, except per share amounts)
(Unaudited and subject to reclassification)

The following information provides reconciliations of the most comparable financial measures from continuing operations calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”) to presented non-GAAP financial measures. The company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, our internal management reporting also includes non-GAAP measures. On a consistent basis, non-GAAP measures include adjustments for items such as restructuring charges, goodwill impairments, non-restructuring asset impairments and gains or losses on investments. In addition, certain other items may be excluded from non-GAAP financial measures when the company believes this provides greater clarity to management and our investors. The company strongly encourages investors and shareholders to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

The following tables reconcile gross profit, SG&A, operating income, effective tax rate, net earnings and diluted earnings per share for the periods presented for continuing operations (GAAP financial measures) to non-GAAP gross profit, non-GAAP SG&A, non-GAAP operating income, non-GAAP effective tax rate, non-GAAP net earnings and non-GAAP diluted earnings per share for continuing operations (non-GAAP financial measures) for the periods presented.

                         
      Three Months Ended     Three Months Ended
      April 30, 2016     May 2, 2015
      $     % of Rev.     $     % of Rev.

Domestic - Continuing Operations

                        
Gross Profit     $1,986     25.4%     $1,886     23.9%
CRT settlements1     (183)     (2.3%)     (78)     (1.0%)
Non-GAAP gross profit     $1,803     23.0%     $1,808     22.9%
                         
SG&A     $1,587     20.3%     $1,584     20.1%
CRT settlement legal fees and costs1     (22)     (0.3%)     (11)     (0.1%)
Non-restructuring asset impairments - SG&A     (4)     (0.1%)     (11)     (0.1%)
Non-GAAP SG&A     $1,561     19.9%     $1,562     19.8%
                         
Operating income     $372     4.8%     $304     3.9%
Net CRT settlements1     (161)     (2.1%)     (67)     (0.8%)
Non-restructuring asset impairments - SG&A     4     0.1%     11     0.1%
Restructuring charges     27     0.3%     (2)     (0.0%)
Non-GAAP operating income     $242     3.1%     $246     3.1%
                         

International - Continuing Operations

                        
Gross profit     $159     25.9%     $144     21.6%
Restructuring charges - COGS     0     0.0%     8     1.2%
Non-GAAP gross profit     $159     25.9%     $152     22.8%
                         
SG&A     $157     25.6%     $182     27.2%
Other Canadian brand consolidation charges - SG&A2     0     0.0%     (3)     (0.4%)
Non-restructuring asset impairments - SG&A     (1)     (0.2%)     0     0.0%
Non-GAAP SG&A     $156     25.4%     $179     26.8%
                         
Operating income (loss)     $0     0.0%     ($218)     (32.6%)
Restructuring charges - COGS     0     0.0%     8     1.2%
Other Canadian brand consolidation charges - SG&A2     0     0.0%     3     0.4%
Non-restructuring asset impairments - SG&A     1     0.2%     0     0.0%
Restructuring charges     2     0.3%     180     26.9%
Non-GAAP operating income / (loss)     $3     0.5%     ($27)     (4.0%)
                         

Consolidated - Continuing Operations

                        
Gross profit     $2,145     25.4%     $2,030     23.7%
CRT settlements1     (183)     (2.2%)     (78)     (0.9%)
Restructuring charges - COGS     0     0.0%     8     0.1%
Non-GAAP gross profit     $1,962     23.2%     $1,960     22.9%
                         
SG&A     $1,744     20.7%     $1,766     20.6%
CRT settlement legal fees and costs1     (22)     (0.3%)     (11)     (0.1%)
Other Canadian brand consolidation charges - SG&A2     0     0.0%     (3)     0.0%
Non-restructuring asset impairments - SG&A     (5)     (0.1%)     (11)     (0.1%)
Non-GAAP SG&A     $1,717     20.3%     $1,741     20.3%
                         
Operating income     $372     4.4%     $86     1.0%
Net CRT settlements1     (161)     (1.9%)     (67)     (0.8%)
Restructuring charges - COGS     0     0.0%     8     0.1%
Other Canadian brand consolidation charges - SG&A2     0     0.0%     3     0.0%
Non-restructuring asset impairments - SG&A     5     0.1%     11     0.1%
Restructuring charges     29     0.3%     178     2.1%
Non-GAAP operating income     $245     2.9%     $219     2.6%
                         
Income tax expense     $134           $38      
Effective tax rate     37.3%           50.3%      
Income tax impact of non-GAAP adjustments3     (47)           37      
Non-GAAP Income tax expense     $87           $75      
Non-GAAP Effective tax rate     37.7%           36.4%      
                         
Net earnings     $226           $37      
Net CRT settlements1     (161)           (67)      
Restructuring charges - COGS     0           8      
Other Canadian brand consolidation charges - SG&A2     0           3      
Non-restructuring asset impairments - SG&A     5           11      
Restructuring charges     29           178      
(Gain) loss on investments, net     (2)           (2)      
Income tax impact of non-GAAP adjustments3     47           (37)      
Non-GAAP net earnings     $144           $131      
                         
Diluted EPS     $0.69           $0.10      
Per share impact of net CRT settlements1     (0.49)           (0.19)      
Per share impact of restructuring charges - COGS     0.00           0.02      

Per share impact of other Canada brand consolidation charges - SG&A2

    

0.00

          

0.01

      
Per share impact of non-restructuring asset impairments - SG&A     0.02           0.03      
Per share impact of restructuring charges     0.09           0.50      
Per share impact of (gain) loss on investments, net     (0.01)           0.00      
Per share income tax impact of non-GAAP adjustments3     0.14           (0.10)      
Non-GAAP diluted EPS     $0.44           $0.37      
                         

(1) Represents cathode ray tube (CRT) litigation settlements reached, net of related legal fees and costs. Settlements relate to products purchased and sold in prior fiscal years. Refer to Note 12, Contingencies and Commitments, in the Notes to Consolidated Financial Statements included in the company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2016, for additional information.
(2) Represents charges related to the Canadian brand consolidation initiated in Q1 FY16, primarily due to retention bonuses and other store-related costs that were a direct result of the consolidation but did not qualify as restructuring charges.
(3) Income tax impact of non-GAAP adjustments is the summation of the calculated income tax charge related to each non-GAAP non-income tax adjustment. Income tax charge is calculated using the estimated annual effective tax rate in effect during the period of the related non-GAAP adjustment.

Return on Assets and Return on Invested Capital

The following table includes a reconciliation to the calculation of return on total assets ("ROA") (GAAP financial measure), along with the calculation of non-GAAP return on invested capital (“ROIC”) for total operations, which includes both continuing and discontinued operations (non-GAAP financial measures) for the periods presented.

 
Calculation of Return on Assets ("ROA")
      April 30, 20161     May 2, 20151
Net earnings including noncontrolling interests     $ 997       $ 903  
Total assets       13,790         14,771  
ROA       7.2 %       6.1 %
             
Calculation of Non-GAAP Return on Invested Capital ("ROIC")
      April 30, 20161     May 2, 20151

Net Operating Profit After Taxes (NOPAT)

            
Operating income - continuing operations     $ 1,661       $ 1,326  
Operating income - discontinued operations       1         83  
Total operating income       1,662         1,409  
Add: Operating lease interest2       232         268  
Add: Investment income       11         26  
Less: Net earnings attributable to noncontrolling interest       -         (2 )
Less: Income taxes3       (689 )       (759 )
NOPAT     $ 1,216       $ 942  
Add: Restructuring charges and impairments4       (67 )       187  
Non-GAAP NOPAT     $ 1,149       $ 1,129  
             

Average Invested Capital

            
Total assets     $ 13,790       $ 14,771  
Less: Excess cash5       (2,903 )       (3,093 )
Add: Capitalized operating lease obligations2       3,869         4,463  
Total liabilities       (9,271 )       (10,029 )
Exclude: Debt6       1,590         1,625  
Less: Noncontrolling interests       -         (3 )
Average invested capital     $ 7,075       $ 7,734  
             
Non-GAAP ROIC       16.2 %       14.6 %
                     

(1) Income statement accounts represent the activity for the 12 months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balances for the 4 quarters ended as of each of the balance sheet dates.
(2) Operating lease interest represents the add-back to operating income driven by the capitalization of operating lease obligations using the multiple of five times annual rent expense and represents 30% of annual rental expense. Similiarly, the capitalized operating lease obligations represent annual rental expense times the multiple of five. This multiple is used for the retail sector by one of the nationally recognized credit rating agencies that rates the company’s creditworthiness, and the companyconsiders it to be an appropriate multiple for its lease portfolio. Historically, the company has used an add-back multiple of 50% and a capitalized lease multiple of eight times annual rent expense; however, due to changes in the average remaining lease life of the company’s operating leases, the company has lowered multiples. The prior period calculations have been updated to reflect the use of the changes.
(3) Income taxes are calculated using a blended statutory rate at the enterprise level based on statutory rates from the countries in which we do business.
(4) Includes all restructuring charges in costs of goods sold and operating expenses, tradename impairments and non-restructuring impairments.
(5) Cash and cash equivalents and short-term investments are capped at the greater of 1% of revenue or actual amounts on hand. The cash and cash equivalents and short-term investments in excess of the cap are subtracted from the company’s calculation of average invested capital to show their exclusion from total assets.
(6) Debt includes short-term debt, current portion of long-term debt and long-term debt and is added back to the company’s calculation of average invested capital to show its exclusion from total liabilities.