What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-18 compared with 2021-03-19 · 251 added, 295 removed, 887 unchanged (38% of the section changed)

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Deloitte & Touche LLP, the independent registered public accounting firm that audited our consolidated financial statements for the year ended January 29, 2022, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, has issued an unqualified attestation report on our internal control over financial reporting as of January 29, 2022.

/s/ Corie Barry

/s/ Matthew Bilunas

Corie Barry, Chief Executive Officer

Matthew Bilunas, Chief Financial Officer

(duly authorized and principal executive officer)

(duly authorized and principal financial officer)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited the accompanying consolidated balance sheets of Best Buy Co., Inc.

and subsidiaries (the "Company") as of January 30, 2021 and February 1, 2020, the related consolidated statements of earnings, comprehensive income, cash flows, and changes in shareholders'

equity for each of the three years in the period ended January 30, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of January 29, 2022 and January 30, 2021, the related consolidated statements of earnings, comprehensive income, cash flows, and changes in shareholders’ equity for each of the three years in the period ended January 29, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 29, 2022 and January 30, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 29, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 29, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 18, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

The Company changed its method of accounting for leases in fiscal year 2020 due to the adoption of Accounting Standards Update No.

2016-02 Leases (Topic 842).

Our opinion is not modified with respect to this matter.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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Goodwill – Best Buy Health Reporting Unit — Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

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(3) underlying source documents, when available, such as customer contracts;

(4) u nderlying analyses detailing business strategies and growth plans;

(4) underlying analyses detailing business strategies and growth plans;

(5) forward-looking revenue expectations in external communications made by management to analysts and investors;

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January 29, 2022

February 1, 2020

January 30, 2021

Current assets

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Authorized - 1.0 billion shares;

Issued and outstanding - 257 and 256 shares, respectively

Issued and outstanding - 227.4 shares and 256.9 shares, respectively

Additional paid-in capital

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January 29, 2022

February 1, 2020

January 30, 2021

February 1, 2020

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Interest expense

Earnings before income tax expense

Earnings before income tax expense and equity in income of affiliates

Income tax expense

Equity in income of affiliates

Basic earnings per share

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January 29, 2022

February 1, 2020

January 30, 2021

February 1, 2020

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January 29, 2022

February 1, 2020

January 30, 2021

February 1, 2020

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Acquisitions, net of cash acquired

Total cash provided by (used in) investing activities

Total cash used in investing activities

Financing activities

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Effect of exchange rate changes on cash

Increase in cash, cash equivalents and restricted cash

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

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Adoption of ASU 2016-02

Other comprehensive loss:

Other comprehensive income:

Foreign currency translation adjustments, net of tax

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Balances as of February 1, 2020

Adoption of ASU 2016-02

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustments, net of tax

Cash flow hedges

Reclassification of cumulative translation adjustments into earnings due to exit of business

Stock-based compensation

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Repurchase of common stock

Balances as of February 1, 2020

Other comprehensive income (loss):

Balances as of January 30, 2021

Other comprehensive income:

Foreign currency translation adjustments, net of tax

Cash flow hedges

Reclassification of cumulative translation adjustments into earnings due to exit of business

Stock-based compensation

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Summary of Significant Accounting Policies

Unless the context otherwise requires, the use of the terms "Best Buy,"

"we,"

"us"

and "our"

in these Notes to Consolidated Financial Statements refers to Best Buy Co., Inc.

Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Consolidated Financial Statements refers to Best Buy Co., Inc.

and, as applicable, its consolidated subsidiaries.

Description of Business

Our purpose is to enrich lives through technology.

We are driven by our purpose to enrich lives through technology and our vision to personalize and humanize technology solutions for every stage of life.

We accomplish this by leveraging our combination of technology and a human touch to meet our customers’ everyday needs, whether they come to us online, visit our stores or invite us into their homes.

We have operations in the U.S.

We have two reportable segments:

Domestic and International.

The Domestic segment is comprised of the operations, including our Best Buy Health business, in all states, districts and territories of the U.S.

under various brand names including Best Buy, Best Buy Business, Best Buy Express, Best Buy Health, CST, Geek Squad, GreatCall, Lively, Magnolia and Pacific Kitchen and Home and the domain names bestbuy.com and greatcall.com.

The International segment is comprised of all operations in Canada and Mexico under the brand names Best Buy, Best Buy Express, Best Buy Mobile, Geek Squad and the domain names bestbuy.ca and bestbuy.com.mx.

During the third quarter of fiscal 2021 we made the decision to exit our operations in Mexico.

In fiscal 2020 we acquired all of the outstanding shares of Critical Signal Technologies, Inc.

(“CST”) and the predictive healthcare technology business of BioSensics, LLC (“BioSensics”).

In fiscal 2019 we acquired all of the outstanding shares of GreatCall, Inc.

(“GreatCall”).

Refer to Note 2, Restructuring , and Note 3, Acquisitions , for additional information.

In March 2020 the World Health Organization declared the outbreak of novel coronavirus disease ("COVID-19") as a pandemic.

Except where otherwise directed by state and local authorities, we made the decision for the health and safety of our customers and employees to move our stores to a contactless, curbside-only operating model in the fiscal first quarter.

We also temporarily suspended in-home delivery, repair and consultation services.

At the beginning of the fiscal second quarter, we started welcoming customers back into our stores by offering an in-store consultation service to customers, by appointment only.

On June 15, 2020, we began allowing customers to shop without an appointment at more than 800 stores across the U.S.

As of June 22, 2020, almost all of our stores were open for shopping.

We continue to offer contactless curbside pick-up and in-store consultations for customers who prefer to shop that way.

In light of the uncertainty surrounding the impact of COVID-19 and to maximize liquidity, we executed a short-term draw on the full amount of our $ 1.25 billion five year senior unsecured revolving credit facility (the “Facility”) on March 19, 2020, that remained outstanding until July 27, 2020, when the amounts we had borrowed under the Facility were repaid in full.

See Note 8, Debt , for additional information on the Facility.

In March 2020 we also announced the temporary suspension of all share repurchases which we resumed in November 2020.

In the first quarter of fiscal 2021 we concluded that the COVID-19 pandemic’s impact on our store operations was a triggering event to review for potential impairments of our store assets.

As a result of this analysis, we recorded an immaterial asset impairment charge for a small number of stores within Selling, general and administrative (“SG&A”) expenses.

We also completed a review for potential impairments of our goodwill in the first quarter of fiscal 2021, concluding that no impairment had occurred.

A similar conclusion was reached upon completion of our annual goodwill impairment review during the fourth quarter of fiscal 2021.

The Domestic segment is comprised of our operations in all states, districts and territories of the U.S.

and our Best Buy Health business, and includes the brand names Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, CST, Current Health, Geek Squad, Lively, Magnolia, Pacific Kitchen and Home and Yardbird and the domain names bestbuy.com, currenthealth.com, lively.com and yardbird.com.

All of our former stores in Mexico were closed as of the end of the first quarter of fiscal 2022, and our International segment is now comprised of all operations in Canada under the brand names Best Buy, Best Buy Mobile and Geek Squad and the domain name bestbuy.ca.

Refer to Note 3, Restructuring , for additional information on our Mexico exit.

We acquired Current Health Ltd.

(“Current Health”) and Two Peaks, LLC d/b/a Yardbird Furniture (“Yardbird”) during the fourth quarter of fiscal 2022, and Critical Signal Technologies, Inc.

(“CST”) and BioSensics, LLC (“BioSensics”) in fiscal 2020 .

Refer to Note 2, Acquisitions , for additional information.

In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic.

At various times throughout fiscal 2021, we operated our stores with a contactless, curbside-only operating model and temporarily suspended in-home delivery, repair and consultation services.

Throughout fiscal 2022, most of our stores remained open as we continued to navigate the pandemic and its resurgences with a focus on the health and safety of our customers and employees.

We continue to offer contactless curbside pick-up, as well as digital, phone and chat options for customers who prefer to shop that way.

On March 27, 2020, in response to the COVID-19 pandemic, the U.S.

Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit, a refundable payroll credit for 50% of wages and health benefits paid to employees not providing services due to the COVID-19 pandemic.

As a result of the CARES Act, we deferred $ 142 million of qualified payroll taxes in fiscal 2021 and claimed the employee retention credit, which was treated as a government subsidy to offset related operating expenses.

Based on our analysis of the CARES Act, we reduced our SG&A expenses in fiscal 2021 by $ 81 million for employee retention credits.

The COVID-19 pandemic remains an evolving situation.

The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration of the outbreak within the markets in which we operate and the related impact on consumer confidence and spending, all of which are highly uncertain.

As a result of the CARES Act, we deferred $ 142 million of qualified payroll taxes in fiscal 2021, of which half was repaid in fiscal 2022 and half will be repaid in fiscal 2023.

We also claimed employee retention credits of $ 81 million in fiscal 2021 that were recorded as an offset to the related employee expenses within Selling, general and administrative (“SG&A”) expenses.

Basis of Presentation

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All intercompany balances and transactions are eliminated upon consolidation.

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.

Other than as disclosed in Note 2, Restructuring , no such events were identified for the reported periods that would have materially affected our financial condition, results of operations, liquidity or other factors had they been recorded during fiscal 2021, fiscal 2020 or fiscal 2019.

Use of Estimates in the Preparation of Financial Statements

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Adopted Accounting Pronouncements

In the first quarter of fiscal 2021 we prospectively adopted the following Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board, all of which had an immaterial impact on our results of operations, cash flows and financial position.

 ASU 2016-13, Measurement of Credit Losses on Financial Instruments

 ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment

 ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820)

 ASU 2018-15, Intangibles-Goodwill and Other - Internal Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contrac t

In the fourth quarter of fiscal 2022, we prospectively adopted Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, issued by the Financial Accounting Standards Board.

This ASU requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) .

The update will generally result in the recognition of contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value.

The adoption of the new standard did not have a material impact on our results of operations, cash flows or financial position.

Segment Information

Our business is organized into two reportable segments:

Domestic (which is comprised of all states, districts and territories of the U.S.) and International (which is comprised of all operations in Canada and Mexico).

Our chief operating decision maker ("CODM") is our Chief Executive Officer.

Domestic (which is comprised of all states, districts and territories of the U.S.

and our Best Buy Health business ) and International (which is comprised of all operations in Canada and Mexico, prior to our exit from Mexico).

Our chief operating decision maker (“CODM”) is our Chief Executive Officer.

Our CODM has ultimate responsibility for enterprise decisions, including determining resource allocation for, and monitoring the performance of, the consolidated enterprise, the Domestic reportable segment and the International reportable segment.

Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and reportable segment results to the operating income level.

We aggregate our Best Buy Domestic and Best Buy Health operating segments into one Domestic reportable segment.

We also aggregate our Canada and Mexico businesses into one International operating segment, which represents the International reportable segment.

Business Combinations

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Cash, Cash Equivalents and Restricted Cash

Cash primarily consists of cash on hand and bank deposits.

Cash equivalents consist of money market funds, commercial paper, corporate bonds and time deposits with an original maturity of three months or less when purchased.

The amounts of cash equivalents as of January 30, 2021, and February 1, 2020, were $ 3,559 million and $ 1,668 million, respectively, and the weighted-average interest rates were 0.6 % and 1.8 %, respectively.

Cash, cash equivalents and restricted cash reported on our Consolidated Balance Sheets is reconciled to the total shown on our Consolidated Statements of Cash Flows as follows ($ in millions):

January 29, 2022

February 1, 2020

January 30, 2021

February 1, 2020

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Total cash, cash equivalents and restricted cash

Amounts included in restricted cash are primarily restricted to use for workers'

compensation and general liability insurance claims.

Receivables consist primarily of amounts due from vendors for various vendor funding programs, banks for customer credit card and debit card transactions and mobile phone network operators for device sales and commissions.

Cash primarily consists of cash on hand and bank deposits.

Cash equivalents consist of money market accounts, money market funds and time deposits with an original maturity of three months or less when purchased.

The amounts of cash equivalents as of January 29, 2022, and January 30, 2021, were $ 1,584 million and $ 3,559 million, respectively, and the weighted-average interest rates were 0.2 % and 0.6 %, respectively.

Amounts included in restricted cash are primarily restricted to use for self-insurance liabilities and product protection plans provided under our Best Buy Totaltech membership offering.

Receivables consist primarily of amounts due from vendors for various vendor funding programs, banks for customer credit card and debit card transactions, online marketplace partnerships and mobile phone network operators for device sales and commissions.

Receivables are stated at their carrying values, net of a reserve for expected credit losses, which is primarily based on historical collection trends.

Our allowances for uncollectible receivables were $ 38 million and $ 24 million as of January 30, 2021, and February 1, 2020, respectively.

Our allowances for uncollectible receivables were $ 39 million and $ 38 million as of January 29, 2022, and January 30, 2021, respectively.

We had $ 52 million and $ 88 million of write-offs in fiscal 2022 and fiscal 2021, respectively.

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Also included in the cost of inventory are certain vendor allowances.

Costs associated with storing and transporting merchandise inventories to our retail stores are expensed as incurred and included in cost of sales.

Costs associated with storing and transporting merchandise inventories to our retail stores are expensed as incurred and included within Cost of sales on our Consolidated Statements of Earnings.

Our inventory valuation also reflects markdown adjustments for the excess of the cost over the net recovery we expect to realize from the ultimate disposition of inventory, including consideration of any rights we may have to return inventory to vendors for a refund, and establishes a new cost basis.

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The impairment loss calculation compares the carrying value of the asset to its estimated fair value, which is typically based on estimated discounted future cash flows.

We recognize an impairment loss if the amount of the asset's carrying value exceeds the asset's estimated fair value.

We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value.

We evaluate locations for triggering events on a quarterly basis.

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In addition, we conduct separate impairment reviews at other levels as appropriate, for example, to evaluate potential impairment of assets shared by several areas of operations, such as information technology systems.

In the first quarter of fiscal 2021, we concluded that the COVID-19 pandemic’s impact on our store operations was a triggering event to review for potential impairments of our store assets.

As a result of this analysis, we recorded an immaterial asset impairment charge for a small number of stores within SG&A.

No other triggering events were identified for the periods presented.

The majority of our lease obligations are real estate operating leases used in our retail and distribution operations.

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Reporting units are determined by identifying components of operating segments which constitute businesses for which discrete financial information is available and is regularly reviewed by segment management.

No components were aggregated in arriving at our reporting units.

We have goodwill in two reporting units – Best Buy Domestic and Best Buy Health – with carrying values of $ 491 million and $ 893 million, respectively, as of January 29, 2022.

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Interest Rate Swaps

We utilized "receive fixed-rate, pay variable-rate"

interest rate swaps to mitigate the effect of interest rate fluctuations on our $ 650 million principal amount of notes due March 15, 2021 (“2021 Notes”) prior to their retirement in December 2020, and on our $ 500 million principal amount of notes due October 1, 2028 (“2028 Notes”) .

We utilized “receive fixed-rate, pay variable-rate” interest rate swaps to mitigate the effect of interest rate fluctuations on our $ 500 million principal amount of notes due October 1, 2028 (“2028 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 for as fair value hedges using the shortcut method.

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Fixed asset fair values are primarily derived using a discounted cash flow (“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 include 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.

We are self-insured for certain losses related to workers'

compensation, medical and general liability claims;

The key inputs to the DCF model generally include our forecasts of net cash generated from investment operations, as well as an appropriate discount rate.

We are self-insured for certain losses related to workers’ compensation, medical, general liability and auto claims;

however, we obtain third-party excess insurance coverage to limit our exposure to certain claims.

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January 29, 2022

February 1, 2020

January 30, 2021

Accrued liabilities

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Discrete events, such as audit settlements or changes in tax laws, are recognized in the period in which they occur.

Our income tax returns are periodically audited by U.S.

federal, state and local and foreign taxing authorities.

Our income tax returns are routinely examined by domestic and foreign tax authorities.

At any one time, multiple tax years are subject to audit by the various taxing authorities.

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dollars using the exchange rates in effect at our Consolidated Balance Sheet dates.

For operations reported on a one-month lag, we use the exchange rates in effect one month prior to our Consolidated Balance Sheet dates.

Results of operations and cash flows are translated using the average exchange rates throughout the periods.

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Any fees charged to customers for delivery are a component of the transaction price and are recognized when delivery has been completed.

We use delivery information at an individual contract level to determine when to recognize revenue for delivered products and any related delivery fee revenue.

We use delivery information to determine when to recognize revenue for delivered products and any related delivery fee revenue.

In most cases, we are the principal to product contracts as we have control of the physical products prior to transfer to the customer.

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Our service contracts are primarily with retail customers and merchandise vendors (for factory warranty repairs).

For technical support membership contracts (for example, our Total Tech Support offering), we are responsible for fulfilling the support services to customers.

These contracts have terms ranging from one month to three year s and typically contain several performance obligations.

For technical support membership contracts (for example, our Totaltech membership offering), we are responsible for fulfilling the support services to customers.

These contracts have terms ranging from one month to one year and typically contain several performance obligations.

Payment for the membership contracts is due at the start of the contract period.

We have determined that our contracts do not include a significant financing component.

The primary purpose of our payment terms is to provide customers with a simplified method of purchasing our services, not to provide customers with financing.

For performance obligations provided over time, we recognize revenue on a usage basis, an input method of measuring progress over the related contract term.

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This typically occurs during our fiscal fourth quarter, with payment of the profit share occurring in the subsequent fiscal year.

Service and commission revenues earned from the sale of extended warranties represented approximately 2 % of revenue in fiscal 2021, fiscal 2020 and fiscal 2019.

Service and commission revenues earned from the sale of extended warranties represented 1.4 %, 1.6 % and 1.8 % of revenue in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

We earn commissions from mobile network carriers to sell service contracts on their platforms.

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We recognize revenue from gift cards when the card is redeemed by the customer.

We also recognize revenue for the portion of gift card values that is not expected to be redeemed ("breakage").

We also recognize revenue for the portion of gift card values that is not expected to be redeemed (“breakage”).

We estimate breakage based on historical patterns and other factors, such as laws and regulations applicable to each jurisdiction.

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Points earned enable members to receive a certificate that may be redeemed on future purchases.

Depending on the customer's membership level within our loyalty program, certificate expirations typically range from 2 to 6 months from the date of issuance.

Depending on the customer’s membership level within our loyalty program, certificate expirations typically range from 2 to 6 months from the date of issuance.

Our loyalty programs represent customer options that provide a material right and, accordingly, are performance obligations for each applicable contract.

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Vendor Allowances

We receive funds from our merchandise vendors through a variety of programs and arrangements for product advertising and product placement, primarily in the form of allowances based on purchases or sales volumes.

We receive funds from our merchandise vendors through a variety of programs and arrangements, primarily in the form of purchases-based or sales-based volumes and for product advertising and placement .

We recognize allowances based on purchases and sales as a reduction of cost of sales when the associated inventory is sold.

Allowances for advertising and placement are recognized as a reduction of cost of sales ratably over the corresponding performance period.

Funds that are determined to be a reimbursement of specific, incremental and identifiable costs incurred to sell a vendor's products are recorded as an offset to the related expense when incurred.

Funds that are determined to be a reimbursement of specific, incremental and identifiable costs incurred to sell a vendor’s products are recorded as an offset to the related expense within SG&A when incurred.

Advertising Costs

Advertising costs, which are included in SG&A, are expensed over the period in which the advertisement is customer-facing.

Advertising costs, which are included in SG&A, are expensed the first time the advertisement runs.

Advertising costs consist primarily of digital and television advertisements, as well as support costs.

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Stock-Based Compensation

We apply the fair value recognition provisions of accounting guidance as they relate to our stock-based compensation, which requires us to recognize expense for the fair value of our stock-based compensation awards.

Compensation expense is recognized over the period in which services are required.

It is recognized on a straight-line basis, except where there are performance awards that vest on a graded basis, in which case the expense for these awards is front-loaded or recognized on a graded-attribution basis.

We recognize stock-based compensation expense for the fair value of our stock-based compensation awards, which is determined based on the closing market price of our stock at the date of grant for time-based and performance-based share awards, and Monte-Carlo simulation for market-based share awards.

Compensation expense is recognized on a straight-line basis over the period in which services are required, except where there are performance-based share awards that vest on a graded basis, in which case the expense for these awards is front-loaded or recognized on a graded-attribution basis.

Forfeitures are expensed as incurred or upon termination.

Comprehensive Income (Loss)

Comprehensive income (loss) is computed as net earnings plus certain other items that are recorded directly to shareholders'

Comprehensive income (loss) is computed as net earnings plus certain other items that are recorded directly to shareholders’ equity.

In addition to net earnings, the significant component of comprehensive income (loss) includes foreign currency translation adjustments.

Current Health Ltd.

On November 2, 2021, we acquired all of the outstanding shares of Current Health Ltd.

(“Current Health”) for net cash consideration of $ 389 million.

Current Health is a care-at-home technology platform that brings together remote patient monitoring, telehealth and patient engagement into a single solution for healthcare organizations.

The acquisition of Current Health is aligned with our focus in virtual care to enable people in their homes to connect seamlessly with their health care providers.

The acquisition was accounted for using the acquisition method of accounting for business combinations.

The purchase price allocation for the assets acquired and liabilities assumed is substantially complete, but may be subject to changes as we complete our valuation analysis in fiscal 2023.

The acquired assets included $ 351 million of goodwill that was assigned to our Best Buy Health reporting unit and was not deductible for income tax purposes.

Results of operations from the date of acquisition were included within our Domestic reportable segment and our Services revenue category.

The acquisition of Current Health was not material to the results of our operations.

Two Peaks, LLC d/b/a Yardbird Furniture

On November 4, 2021, we acquired all of the outstanding shares of Two Peaks, LLC d/b/a Yardbird Furniture (“Yardbird”) for net cash consideration of $ 79 million.

The acquisition of Yardbird, a direct-to-consumer outdoor furniture company, expands our assortment in categories like outdoor living, as more and more consumers look to make over or upgrade their outdoor living spaces.

The acquisition was accounted for using the acquisition method of accounting for business combinations.

The purchase price allocation for the assets acquired and liabilities assumed is substantially complete, but may be subject to changes as we complete our valuation analysis in fiscal 2023.

The acquired assets included $ 47 million of goodwill that was assigned to our Best Buy Domestic reporting unit and was deductible for income tax purposes.

Results of operations from the date of acquisition were included within our Domestic reportable segment and Other revenue category.

The acquisition of Yardbird was not material to the results of our operations.

BioSensics, LLC

In fiscal 2020, we acquired the predictive healthcare technology business of BioSensics, LLC (“BioSensics”) on August 7, 2019, for net cash consideration of $ 20 million.

The acquired assets included $ 19 million of goodwill that was assigned to our Best Buy Domestic reporting unit and was deductible for tax purposes.

The acquisition currently supports our health strategy and is included in our Domestic reportable segment.

The transaction was accounted for as a business combination and was not material to the results of our operations.

Critical Signal Technologies, Inc.

In fiscal 2020, we acquired all of the outstanding shares of Critical Signal Technologies, Inc.

(“CST”), a health services company, on May 9, 2019, for net cash consideration of $ 125 million.

The acquired assets included $52 million of goodwill that was assigned to our Best Buy Health reporting unit and was not deductible for income tax purposes.

The acquisition of CST is aligned with our strategy to address health and wellness with a focus on aging seniors and how technology can help them live longer in their homes and is included in our Domestic reportable segment and Services revenue category.

The acquisition was accounted for using the acquisition method of accounting for business combinations and was not material to the results of our operations.

Restructuring

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Retail Operating Model Changes

Best Buy Mobile Exit

Canadian Brand Consolidation

(1) Includes $23 million related to inventory markdowns recorded in Cost of sales on our Consolidated Statements of Earnings in fiscal 2021.

(1) Includes ($ 6 ) million and $ 23 million related to inventory markdowns recorded in Cost of sales on our Consolidated Statements of Earnings in fiscal 2022 and fiscal 2021, respectively.

Mexico Exit and Strategic Realignment

The COVID-19 pandemic has had significant impacts on, for example, the economic conditions of the markets in which we operate, customer shopping behaviors, the role of technology in peoples’ lives and the way we meet their needs.

In light of these changes, we are adapting our Building the New Blue Strategy to ensure that our focus and resources are closely aligned with the opportunities we see in front of us.

In light of these changes, we are adapting our strategy to ensure that our focus and resources are closely aligned with the opportunities we see in front of us.

As a result, in the third quarter of fiscal 2021, we made the decision to exit our operations in Mexico and began taking other actions to more broadly align our organizational structure in support of our strategy.

Charges incurred in our International segment primarily related to our decision to exit our operations in Mexico.

As of January 30, 2021, the exit was substantially complete and we do not expect to incur material future restructuring charges.

All remaining stores in Mexico were closed in the first quarter of fiscal 2022, and we do not expect to incur material future restructuring charges.

Charges incurred in our Domestic segment primarily related to actions taken to align our organizational structure in support of our strategy.

During the third quarter of fiscal 2021, we incurred $ 46 million of restructuring charges primarily related to termination benefits associated with corporate organizational changes, as well as impairments of technology assets held in service of our Mexico operations.

During the fourth quarter of fiscal 2021, we incurred $ 87 million of restructuring charges related to termination benefits primarily for field employees in order to be more responsive and flexible with our workforce as we continue to refine our operating model to better serve our customers’ needs.

As we continue to evolve our Building the New Blue Strategy, it is possible that we will incur material future restructuring costs, but we are unable to forecast the timing and magnitude of such costs.

As we continue to evolve our strategy, it is possible that we will incur material future restructuring costs, but we are unable to forecast the timing and magnitude of such costs.

All charges incurred related to the exit from Mexico and strategic realignment described above were from continuing operations and were presented as follows ($ in millions):

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Restructuring charges

Statement of Earnings Location

International

Inventory markdowns

Cost of sales

Asset impairments (1)

Restructuring charges

Termination benefits

Restructuring charges

Currency translation adjustment

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Restructuring charges

(1) Remaining net carrying value approximates fair value and is immaterial as of January 30, 2021.

Cumulative Amount as of January 29, 2022

Statement of Earnings Location

International

Inventory markdowns

Cost of sales

Asset impairments (1)

Restructuring charges

Termination benefits

Restructuring charges

Currency translation adjustment

Restructuring charges

(1) Remaining net carrying value of asset impairments approximates fair value and was immaterial as of January 29, 2022, and January 30, 2021.

(2) Other charges are primarily comprised of contract termination costs.

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Balances as of January 30, 2021

Cash payments

Adjustments (1)

Changes in foreign currency exchange rates

Balances as of January 29, 2022

(1) Represents adjustments to previously planned organizational changes in our Domestic segment and higher-than-expected employee retention in both our Domestic and International segments.

Fiscal 2020 U.S.

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As of January 29, 2022, the cumulative amount of charges incurred was $ 42 million and no material liability remains.

Best Buy Mobile Exit

On March 1, 2018, we announced our intent to close all of our 257 remaining Best Buy Mobile stand-alone stores in the U.S.

This decision was a result of changing economics in the mobile industry since we began opening these stores in 2006, along with the integration of our mobile model into our core stores and online channel, which are more economically compelling today.

The cumulative amount of charges incurred was $ 56 million, comprised of $ 49 million of facility closure and other costs, $ 6 million of termination benefits and $ 1 million of asset impairments.

All charges incurred related to our Domestic segment and were presented within Restructuring charges from continuing operations on our Consolidated Statements of Earnings.

No restructuring accrual related to this plan remains as of January 30, 2021 .

BioSensics, LLC

In fiscal 2020 we acquired the predictive healthcare technology business of BioSensics, LLC (“BioSensics”) on August 7, 2019, for net cash consideration of $ 20 million, primarily comprised of $ 19 million of goodwill and $ 4 million of definite-lived technology (amortized over 3 years).

Goodwill, which was assigned to our Domestic reporting unit, is deductible for tax purposes.

The acquisition currently supports our health strategy and is included in our Domestic operating and reportable segments.

The transaction was accounted for as a business combination and was not material to the results of our operations.

Critical Signal Technologies, Inc.

In fiscal 2020 we acquired all of the outstanding shares of Critical Signal Technologies, Inc.

(“CST”), a health services company, on May 9, 2019, for net cash consideration of $ 125 million.

The acquisition of CST is aligned with our strategy to address health and wellness with a focus on aging seniors and how technology can help them live longer in their homes.

The acquisition was accounted for using the acquisition method of accounting for business combinations.

The acquired assets were primarily comprised of $ 83 million of customer relationships (amortized over 15 years) recorded within Other assets on our Consolidated Balance Sheets.

Goodwill of $ 52 million was recorded and assigned to our Best Buy Health reporting unit and was not deductible for income tax purposes.

We recorded $ 3 million of transaction costs in fiscal 2020 related to the acquisition within SG&A expenses on our Consolidated Statements of Earnings.

Results of operations from the date of acquisition were included within our Best Buy Heath operating segment, Domestic reportable segment and Services revenue category.

The acquisition of CST was not material to the results of our operations.

GreatCall, Inc.

In fiscal 2019 we acquired all of the outstanding shares of GreatCall, Inc.

(“GreatCall”) on October 1, 2018, for net cash consideration of $ 787 million.

GreatCall, a leading connected health services provider for aging consumers, offers easy-to-use mobile products and connected devices, tailored for seniors.

These products are combined with a range of services, including a simple, one-touch connection to U.S.-based, specially-trained agents who can connect the user to family caregivers, provide concierge services and dispatch emergency personnel.

The acquisition of GreatCall is aligned with our strategic focus on health and wellness.

The acquisition was accounted for using the acquisition method of accounting for business combinations.

Goodwill of $ 490 million was recorded and assigned to our Best Buy Health reporting unit within our Domestic reportable segment, the majority of which was deductible for income tax purposes.

We recorded $ 13 million of transaction costs in fiscal 2019 related to the acquisition within SG&A expenses on our Consolidated Statements of Earnings.

Results of operations from the date of acquisition were included within our Best Buy Health operating segment, Domestic reportable segment and Services revenue category.

The acquisition of GreatCall was not material to the results of our operations.

Goodwill and Intangible Assets

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January 29, 2022

February 1, 2020

January 30, 2021

Gross Carrying Amount

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International

No goodwill impairment charges were recorded in fiscal 2021 or fiscal 2020.

Indefinite-Lived Intangible Assets

In the first quarter of fiscal 2021, we made the decision to phase out our Pacific Sales tradename in our U.S.

Best Buy stores over the coming years.

Consequently, we reclassified the tradename from an indefinite-lived intangible asset to a definite-lived intangible asset and have no indefinite-lived intangible assets remaining as of January 30, 2021.

The carrying value of the tradename was $ 18 million as of February 1, 2020, and was recorded within Other assets on our Consolidated Balance Sheets.

In the first quarter of fiscal 2021, we completed a review for potential impairments of our goodwill as a result of the COVID-19 pandemic’s impact on our store operations, concluding that no impairment had occurred.

A similar conclusion was reached upon completion of our annual goodwill impairment review during the fourth quarters of fiscal 2021 and fiscal 2022.

As a result, n o goodwill impairment charges were recorded for the periods presented.

Definite-Lived Intangible Assets

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January 29, 2022

February 1, 2020

January 30, 2021

Weighted-Average

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Recurring Fair Value Measurements

Financial assets and liabilities accounted for at fair value were as follows ($ in millions):

Financial assets accounted for at fair value were as follows ($ in millions):

Fair Value at

Balance Sheet Location (1)

Fair Value Hierarchy

January 29, 2022

February 1, 2020

January 30, 2021

Money market funds (2)

Cash and cash equivalents

Commercial paper (2)

Cash and cash equivalents

Time deposits (3)

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Interest rate swap derivative instruments (5)

(1) Balance sheet location is determined by the length to maturity from the current period-end date.

(2) Valued at quoted market prices in active markets for same (Level 1) or similar (Level 2) instruments.

(1) Balance sheet location is determined by the length to maturity.

(2) Valued at quoted market prices in active markets.

(3) Valued at face value plus accrued interest, which approximates fair value.

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Nonrecurring Fair Value Measurements

In fiscal 2021 we recorded asset impairments related to our decision to exit our operations in Mexico.

In fiscal 2022 and fiscal 2021, we recorded asset impairments related to our decision to exit our operations in Mexico.

See Note 3, Restructuring , for additional information regarding the charges incurred and the net carrying value of assets remaining.

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January 29, 2022

February 1, 2020

January 30, 2021

Carrying Value

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Derivative Instruments

We manage our economic and transaction exposure to certain risks by using 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, and interest rate swaps to mitigate the effect of interest rate fluctuations on our 2021 Notes prior to their retirement in December 2020 and on our 2028 Notes.

In addition, we use foreign currency forward contracts not designated as hedging instruments to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies.

In fiscal 2021 we entered into Treasury Rate Lock (“T-Lock”) contracts to hedge the base interest rate variability on a portion of our then-expected refinancing of our maturing 2021 Notes.

The T-Lock contracts were cash settled upon issuance of our 2030 Notes.

The fair value of the T-Lock contracts upon settlement was released from Accumulated other comprehensive income on our Consolidated Balance Sheets and recorded in Interest expense on our Consolidated Statements of Earnings as interest is accrued over the life of the 2030 Notes.

Our derivative instruments designated as net investment hedges and interest rate swaps are recorded on our Consolidated Balance Sheets at fair value.

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January 29, 2022

February 1, 2020

January 30, 2021

Derivatives designated as net investment hedges

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January 29, 2022

February 1, 2020

January 30, 2021

Operating leases

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Total lease liabilities

(1) Finance leases were recorded net of accumulated depreciation of $ 36 million and $ 54 million as of January 30, 2021, and February 1, 2020, respectively.

(1) Finance leases were recorded net of accumulated depreciation of $ 46 million and $ 36 million as of January 29, 2022, and January 30, 2021, respectively.

Components of our total lease cost were as follows ($ in millions):

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Revolving Credit Facility

On April 17, 2018, we entered into a $ 1.25 billion five year senior unsecured revolving credit facility agreement (the "Facility") with a syndicate of banks.

The Facility permits borrowings of up to $ 1.25 billion and expires in April 2023.

In light of the uncertainty surrounding the impact of COVID-19 and to maximize liquidity, we executed a short-term draw on the full amount of the Facility on March 19, 2020, which remained outstanding until July 27, 2020, when the amounts we had borrowed under the Facility were repaid in full.

There were no borrowings outstanding under the Facility as of January 30, 2021, and February 1, 2020.

The interest rate under the Facility is variable and, barring certain events of default, is determined at our option as:

(i) the sum of (a) the greatest of (1) JPMorgan Chase Bank, N.A.'s prime rate;

(2) the greater of the federal funds rate and the overnight bank funding rate plus, in each case, 0.5 %;

and (3) the one-month London Interbank Offered Rate (“LIBOR”), subject to certain adjustments plus 1 %;

and (b) a variable margin rate (the “ABR Margin”);

On May 18, 2021, we entered into a $ 1.25 billion five year senior unsecured revolving credit facility agreement (the “ Five Year Facility Agreement”) with a syndicate of banks.

The Five Year Facility Agreement replaced the previous $ 1.25 billion senior unsecured revolving credit facility (the “Previous Facility”) with a syndicate of banks, which was originally scheduled to expire in April 2023, but was terminated on May 18, 2021.

The Five Year Facility Agreement permits borrowings of up to $ 1.25 billion and expires in May 2026.

There were no borrowings outstanding under the Five Year Facility Agreement as of January 29, 2022, or under the Previous Facility as of January 30, 2021.

The interest rate under the Five Year Facility Agreement is variable and is determined at our option as:

(i) the sum of (a) the greatest of (1) JPMorgan Chase Bank, N.A.’s prime rate, (2) the greater of the federal funds rate and the overnight bank funding rate plus, in each case, 0.5 %, and (3) the one-month London Interbank Offered Rate (“LIBOR”), subject to certain adjustments plus 1 %, and (b) a variable margin rate (the “ABR Margin”);

or (ii) the LIBOR plus a variable margin rate (the “LIBOR Margin”).

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The ABR Margin, LIBOR Margin and the facility fee are based upon our current senior unsecured debt rating.

Under the Facility, the ABR Margin ranges from 0.00 % to 0.30 %, the LIBOR Margin ranges from 0.80 % to 1.30 % and the facility fee ranges from 0.08 % to 0.20 %.

The Facility is guaranteed by certain of our subsidiaries and contains customary affirmative and negative covenants.

Among other things, these covenants restrict our and certain of our subsidiaries'

ability to incur liens on certain assets;

Under the Five Year Facility Agreement, the ABR Margin ranges from 0.00 % to 0.225 %, the LIBOR Margin ranges from 0.805 % to 1.225 %, and the facility fee ranges from 0.07 % to 0.15 %.

Additionally, the Five Year Facility Agreement includes fallback language related to the transition from LIBOR to alternative rates.

The Five Year Facility Agreement is guaranteed by certain of our subsidiaries and contains customary affirmative and negative covenants.

Among other things, these covenants restrict our and certain of our subsidiaries’ abilities to incur liens on certain assets;

make material changes in corporate structure or the nature of our business;

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engage in certain mergers, consolidations and other fundamental changes;

or engage in certain transactions with our affiliates.

The Facility also contains covenants that require us to maintain a maximum quarterly cash flow leverage ratio and a minimum quarterly interest coverage ratio.

The Facility contains default provisions including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants.

As of January 30, 2021, we were in compliance with all such covenants.

Information regarding our short-term draw on the Facility in fiscal 2021 was as follows ($ in millions):

Average Amount Outstanding

Maximum Amount Outstanding

Weighted Average Interest Rate

Revolving Credit Facility

or engage in certain transactions with affiliates.

The Five Year Facility Agreement also contains covenants that require us to maintain a maximum cash flow leverage ratio.

The Five Year Facility Agreement contains default provisions including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants.

Ba nk Advance

In conjunction with a solar energy investment, we were advanced $ 110 million due October 31, 2021.

The advance is recorded within Short-term debt on our Consolidated Balance Sheets and bears interest at 0.14 %.

The advance was recorded within Short-term debt on our Consolidated Balance Sheets as of January 30, 2021, and bore interest at 0.14 %.

This advance was repaid on October 29, 2021.

Long-Term Debt

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January 29, 2022

February 1, 2020

January 30, 2021

Interest rate swap valuation adjustments

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Total long-term debt, less current portion

In March 2011 we issued $ 650 million principal amount of notes due March 15, 2021 (the “2021 Notes”).

The 2021 Notes bore interest at a fixed rate of 5.50 % per year, payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2011.

The 2021 Notes were issued at a slight discount to par, which when coupled with underwriting discounts of $ 4 million, resulted in net proceeds from the sale of the 2021 Notes of $ 644 million.

We retired the 2021 Notes in December 2020 by exercising our option to redeem the notes at par.

In September 2018, we issued $ 500 million principal amount of notes due October 1, 2028 (the “2028 Notes”).

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Net proceeds from the issuance were $ 642 million after underwriting and issuance discounts totaling $ 8 million.

The net proceeds were used to replace the 2021 Notes that were retired in December 2020.

We may redeem some or all of the 2030 Notes at any time at a redemption price equal to the greater of (i) 100 % of the principal amount, and (ii) the sum of the present values of each remaining scheduled payment of principal and interest discounted to the redemption date on a semiannual basis, plus accrued and unpaid interest on the principal amount to the redemption date as described in the indenture (including the supplemental indenture) relating to the 2030 Notes.

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As of January 29, 2022, we do no t have any future maturities of long-term debt within the next five fiscal years.

Shareholders'

Shareholders’ Equity

Stock Compensation Plans

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Amended and Restated 2014 Omnibus Incentive Plan (the “2014 Plan”).

In addition, shares subject to any outstanding awards under our prior stock incentive plans that are forfeited, cancelled or reacquired by the Company will become available for reissuance under the 2020 Plan.

In addition, shares subject to any outstanding awards under our prior stock incentive plans that are forfeited, cancelled or reacquired by the Company are available for reissuance under the 2020 Plan.

The 2014 Plan was terminated as to the grant of any additional awards, but prior awards remain outstanding and continue to vest in accordance with the original terms of such plan.

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Under the terms of the 2020 Plan, awards may be granted to our employees, officers, advisers, consultants and directors.

Awards issued under the 2020 Plan vest as determined by the Compensation and Human Resources Committee of our Board of Directors at the time of grant.

Awards issued under the 2020 Plan vest as determined by the Compensation and Human Resources Committee of our Board of Directors (“Board”) at the time of grant.

Dividend equivalents accrue on restricted stock and restricted stock units during the vesting period, are forfeitable prior to the vesting date and are settled in shares of our common stock at the vesting or distribution date.

As of January 29, 2022, a total of 19.4 million shares were available for future grants under the 2020 Plan.

Our outstanding stock options have a 10 -year term.

Outstanding stock options issued to employees generally vest over a three year period.

Share awards vest based either upon attainment of specified goals or solely upon continued employment ("time-based").

Outstanding share awards that are not time-based vest at the end of a three-year incentive period based upon our total shareholder return ("TSR") compared to the TSR of companies that comprise Standard & Poor's 500 Index ("market-based") or upon the achievement of company performance goals ("performance-based").

Generally, time-based share awards vest 33 % on each of the three annual anniversary dates following the grant date.

Time-based share awards to directors vest one year from the grant date.

Stock-based compensation expense was as follows ($ in millions):

Stock options

Share awards:

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Stock options

Stock option activity was as follows:

Stock-based compensation expense

Income tax benefits

Stock-based compensation expense, net of tax

Time-Based Share Awards

Time-based share awards vest solely upon continued employment, generally 33 % on each of the three annual anniversary dates following the grant date.

Time-based share awards to directors vest one year from the date of grant.

Information on our time-based share awards was as follows (shares in thousands):

Time-Based Share Awards

Weighted-Average Fair Value per Share

Outstanding as of January 30, 2021

Vested and distributed

Outstanding as of January 29, 2022

The total fair value vested and distributed during fiscal 2022, fiscal 2021 and fiscal 2020 was $ 194 million, $ 145 million and $ 129 million, respectively.

The actual tax benefits realized for the tax deductions related to vesting in fiscal 2022, fiscal 2021 and fiscal 2020 was $ 41 million, $ 33 million and $ 28 million, respectively.

As of January 29, 2022, there was $ 180 million of unrecognized compensation expense related to non-vested time-based share awards that we expect to recognize over a weighted-average period of 1.9 years.

Performance-Based Share Awards

Performance-based share awards vest upon the achievement of company performance goals based upon compound annual growth in enterprise revenue (“CAGR”) and attainment of net earnings (“adjusted net earnings”).

The number of shares of common stock that could be distributed at the end of the three-year CAGR-incentive period may range from 0 % to 150 % of each share granted (“target”).

Shares are granted at 100 % of target.

Awards based on adjusted net earnings vest 33 % on each of the three annual anniversary dates following the grant date if the adjusted net earnings goal has been met.

Information on our performance-based share awards was as follows (shares in thousands):

Performance-Based Share Awards

Weighted-Average Fair Value per Share

Outstanding as of January 30, 2021

Adjustment for performance achievement

Outstanding as of January 29, 2022

The total fair value distributed during fiscal 2022, fiscal 2021 and fiscal 2020 was $ 43 million, $ 28 million and $ 19 million, respectively.

The actual tax benefits realized for the tax deductions related to distributions in fiscal 2022, fiscal 2021 and fiscal 2020 were $ 3 million, $ 5 million and $ 4 million, respectively.

As of January 29, 2022, there was $ 10 million of unrecognized compensation expense related to non-vested performance-based share awards that we expect to recognize over a weighted-average period of 1.5 years.

Market-Based Share Awards

Market-based share awards vest at the end of a three-year incentive period based upon our total shareholder return ("TSR") compared to the TSR of companies that comprise Standard & Poor's 500 Index.

The number of shares of common stock that could be distributed at the end of the three-year TSR-incentive period may range from 0 % to 150 % of each share granted (“target”).

Shares are granted at 100 % of target.

Information on our market-based share awards was as follows (shares in thousands):

Market-Based Share Awards

Weighted-Average Fair Value per Share

Outstanding as of January 30, 2021

Adjustment for performance achievement

Outstanding as of January 29, 2022

The total fair value distributed during fiscal 2022, fiscal 2021 and fiscal 2020 was $ 27 million, $ 37 million and $ 70 million, respectively.

The actual tax benefits realized for the tax deductions related to distributions in fiscal 2022, fiscal 2021 and fiscal 2020 was $ 3 million, $ 8 million and $ 16 million, respectively.

As of January 29, 2022, there was $ 15 million of unrecognized compensation expense related to non-vested market-based share awards that we expect to recognize over a weighted-average period of 1.8 years.

Stock Options

Our outstanding stock options have a 10 -year term and generally vest 33 % on each of the three annual anniversary dates following the grant date.

Information on our stock options was as follows:

Stock Options

‎ (in thousands)

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‎ (in millions)

Outstanding as of February 1, 2020

Forfeited/canceled

Outstanding as of January 30, 2021

Outstanding as of January 29, 2022

Vested or expected to vest as of January 29, 2022

Exercisable as of January 29, 2022

The weighted-average grant-date fair value of stock options granted during fiscal 2021, fiscal 2020 and fiscal 2019 was $ 19.89 , $ 19.81 and $ 20.34 per share, respectively.

No stock options were granted in fiscal 2022.

The weighted-average grant-date fair value of stock options granted during fiscal 2021 and fiscal 2020 was $ 19.89 and $ 19.81 per share, respectively.

The aggregate intrinsic value of our stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised during fiscal 2022, fiscal 2021 and fiscal 2020 was $ 19 million, $ 21 million and $ 59 million, respectively.

As of January 30, 2021, there was $ 9 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 2.0 years.

As of January 29, 2022, there was $ 3 million of unrecognized compensation expense related to stock options that we expect to recognize over a weighted-average period of 1.1 years.

Net cash proceeds from the exercise of stock options were $ 18 million, $ 20 million and $ 40 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

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(3) Estimated based upon historical experience.

Market-Based Share Awards

The fair value of market-based share awards is determined using Monte-Carlo simulation.

A summary of the status of our non-vested market-based share awards was as follows (shares in thousands):

Market-Based Share Awards

Weighted-Average Fair Value per Share

Outstanding as of February 1, 2020

Forfeited/canceled

Outstanding as of January 30, 2021

As of January 30, 2021, there was $ 12 million of unrecognized compensation expense related to non-vested market-based share awards that we expect to recognize over a weighted-average period of 1.6 years.

Time-Based Share Awards

The fair value of time-based share awards is determined based on the closing market price of our stock on the date of grant.

This value is reduced by the present value of expected dividends during the vesting period when the employee is not entitled to dividends.

A summary of the status of our non-vested time-based share awards was as follows (shares in thousands):

Time-Based Share Awards

Weighted-Average Fair Value per Share

Outstanding as of February 1, 2020

Forfeited/canceled

Outstanding as of January 30, 2021

As of January 30, 2021, there was $ 120 million of unrecognized compensation expense related to non-vested time-based share awards that we expect to recognize over a weighted-average period of 1.9 years.

Performance-Based Share Awards

The fair value of performance-based share awards is determined based on the closing market price of our stock on the date of grant.

This value is reduced by the present value of expected dividends during the vesting period when the employee is not entitled to dividends.

A summary of the status of our non-vested performance-based share awards was as follows (shares in thousands):

Performance-Based Share Awards

Weighted-Average Fair Value per Share

Outstanding as of February 1, 2020

Forfeited/canceled

Outstanding as of January 30, 2021

As of January 30, 2021, there was $ 21 million of unrecognized compensation expense related to non-vested performance-based share awards that we expect to recognize over a weighted-average period of 1.7 years.

Earnings per Share

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Unexercisable

Weighted-Average Price per Share

‎ Average Price

Reconciliations of the numerators and denominators of basic and diluted earnings per share were as follows ($ and shares in millions, except per share amounts):

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Repurchase of Common Stock

On February 23, 2019, our Board of Directors (“Board”) authorized a $ 3.0 billion share repurchase program.

On February 16, 2021, our Board approved a new $ 5.0 billion share repurchase program, replacing the existing program which had $ 1.7 billion remaining available for repurchases as of January 30, 2021.

On February 16, 2021, our Board approved a $ 5.0 billion share repurchase program.

On February 28, 2022, our Board approved a new $ 5.0 billion share repurchase program, replacing the then-existing program, which had $ 1.6 billion remaining available for repurchases as of January 29, 2022.

There is no expiration date governing the period over which we can repurchase shares under this authorization.

We temporarily suspended all share repurchases from March to November of fiscal 2021 to conserve liquidity in light of COVID-19-related uncertainties.

Repurchased shares have been retired and constitute authorized but unissued shares.

We temporarily suspended all share repurchases from March to November of fiscal 2021 to preserve liquidity in light of COVID-19-related uncertainties.

On May 27, 2021, we announced our plan to repurchase more than $ 2.5 billion of shares in fiscal 2022.

Information regarding the shares we repurchased and retired was as follows ($ and shares in millions, except per share amounts):

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Number of shares repurchased and retired

On March 3, 2022, we announced our plans to spend approximately $ 1.5 billion on share repurchases in fiscal 2023.

Between the end of fiscal 2022 on January 29, 2022, and March 16, 2022, we repurchased an incremental 2.4 million shares of our common stock at a cost of $ 239 million.

On February 25, 2021, we announced our plans to spend at least $ 2 billion on share repurchases in fiscal 2022.

We generate substantially all of our revenue from contracts with customers from the sale of products and services.

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January 29, 2022

February 1, 2020

January 30, 2021

Receivables (1)

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Accrued liabilities

Long-term contract liabilities included in:

Long-term liabilities

(1) Receivables are recorded net of allowances for doubtful accounts of $ 32 million and $ 14 million as of January 30, 2021, and February 1, 2020, respectively.

(1) Receivables are recorded net of allowances for doubtful accounts of $ 31 million and $ 32 million as of January 29, 2022, and January 30, 2021, respectively.

During fiscal 2022 and fiscal 2021, $ 924 million and $ 923 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods.

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State income taxes, net of federal benefit

Change in unrecognized tax benefits

Expense (benefit) from foreign operations

1 unchanged sentence

Effective income tax rate

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (“Tax Act”), which significantly changed U.S.

Among other things, the Tax Act lowered the U.S.

statutory tax rate from 35 % to 21 % effective January 1, 2018, broadened the base to which U.S.

income tax applies, imposed a one-time deemed repatriation tax on net unremitted earnings of foreign subsidiaries not previously subject to U.S.

income tax and changed how foreign earnings are subject to U.S.

In response to the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No.

118 (“SAB 118”) which provided guidance on accounting for the impact of the Tax Act.

SAB 118 allowed companies to record provisional amounts to the extent they were reasonably estimable and adjust them over time as more information became available, not to extend beyond the measurement period of one year from the enactment of the Tax Act.

During fiscal 2019, we completed the accounting for the income tax effects of the Tax Act and recorded a $ 23 million reduction to the fiscal 2018 provisional tax expense.

Earnings before income tax expense by jurisdiction were as follows ($ in millions):

Earnings before income tax expense and equity in income of affiliates by jurisdiction were as follows ($ in millions):

United States

Earnings before income tax expense

Earnings before income tax expense and equity in income of affiliates

Income tax expense (benefit) was comprised of the following ($ in millions):

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January 29, 2022

February 1, 2020

January 30, 2021

Deferred revenue

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Total deferred tax liabilities

Net deferred tax assets (liabilities)

Net deferred tax assets

Deferred taxes were presented as follows ($ in millions):

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January 29, 2022

February 1, 2020

January 30, 2021

Long-term liabilities

Net deferred tax assets (liabilities)

Net deferred tax assets

As of January 29, 2022, we had deferred tax assets for net operating loss carryforwards from international operations of $ 108 million, of which $ 93 million will expire in various years through 2038 and the remaining amounts have no expiration;

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As of January 29, 2022, a valuation allowance of $ 128 million had been established, of which $ 7 million is against U.S.

federal foreign tax credit carryforwards, $ 8 million is against international capital loss carryforwards, $ 111 million is against international and state net operating loss carryforwards, and $ 2 million is against international credit carryforwards.

The $ 31 million increase in fiscal 2021 is primarily due to the current year loss activity from international net operating loss carryforwards, partially offset by the expiration of certain international net operating loss carryforwards, the release of a valuation allowance relating to other state deferred tax assets, and the exchange rate impact on the valuation allowance against certain international net operating loss carryforwards.

federal foreign tax credit carryforwards, $ 10 million is against international, federal and state capital loss carryforwards, $ 110 million is against international, acquired federal and state net operating loss carryforwards, and $ 1 million is against international and state credit carryforwards.

The $ 1 million increase in fiscal 2022 is primarily due to acquired international and federal net operating loss carryforwards and the current year loss activity from international net operating loss carryforwards, partially offset by the expiration of certain international net operating loss carryforwards and the exchange rate impact on the valuation allowance against certain international net operating loss carryforwards.

Reconciliations of changes in unrecognized tax benefits were as follows ($ in millions):

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Balances at end of period

Unrecognized tax benefits of $ 307 million, $ 300 million and $ 282 million as of January 30, 2021, February 1, 2020, and February 2, 2019, respectively, would favorably impact our effective income tax rate if recognized.

We recognize interest and penalties (not included in the "unrecognized tax benefits"

above), as well as interest received from favorable tax settlements, as components of income tax expense.

Interest expense of $ 4 million, $ 11 million and $ 10 million was recognized in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

As of January 30, 2021, February 1, 2020, and February 2, 2019, we had accrued interest of $ 74 million, $ 67 million and $ 53 million, respectively.

(1) Represents multi-jurisdiction, multi-year non-cash benefits from the resolution of certain discrete tax matters.

Unrecognized tax benefits of $ 214 million, $ 307 million and $ 300 million as of January 29, 2022, January 30, 2021, and February 1, 2020, respectively, would favorably impact our effective income tax rate if recognized.

We recognize interest and penalties (not included in the “unrecognized tax benefits” above), as well as interest received from favorable tax settlements, as components of income tax expense.

Interest income of $ 20 million, interest expense of $ 4 million and interest expense of $ 11 million was recognized in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

As of January 29, 2022, January 30, 2021, and February 1, 2020, we had accrued interest of $ 46 million, $ 74 million and $ 67 million, respectively.

We file a consolidated U.S.

8 unchanged sentences

The actual amount of any changes could vary significantly depending on the ultimate timing and nature of any assessments, resolutions or law changes.

Although the timing is uncertain, it is reasonably possible that within the next 12 months, the gross unrecognized tax benefits could decrease by as much as $ 120 million.

An estimate of the amount or range of such changes cannot be made at this time.

Benefit Plans

2 unchanged sentences

Participants can contribute up to 50 % of their eligible compensation annually as defined by the plan document, subject to Internal Revenue Service limitations.

We match 100 % of the first 3 % of participating employees'

contributions and 50 % of the next 2 %.

We match 100 % of the first 3 % of participating employees’ contributions and 50 % of the next 2 %.

Employer contributions vest immediately.

In light of the uncertainty surrounding the impact of COVID-19 and to maximize liquidity, we temporarily suspended the employer contribution match from June 1, 2020, to November 6, 2020.

In fiscal 2021, we temporarily suspended the employer contribution match from June 1, 2020, to November 6, 2020, due to uncertainty surrounding the impact of COVID-19.

Total employer contributions were $ 77 million, $ 44 million and $ 73 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

1 unchanged sentence

Amounts contributed and deferred under the plan are invested in options offered under the plan and elected by the participants.

The liability for compensation deferred under the plan was $ 25 million and $ 22 million as of January 30, 2021, and February 1, 2020, respectively, and is included in Long-term liabilities on our Consolidated Balance Sheets.

The liability for compensation deferred under the plan was $ 24 million and $ 25 million as of January 29, 2022, and January 30, 2021, respectively, and is included in Long-term liabilities on our Consolidated Balance Sheets.

See Note 5, Fair Value Measurements , for the fair value of assets held for deferred compensation.

6 unchanged sentences

Segment and Geographic Information

Segment and product category revenue information was as follows ($ in millions):

Reportable segment and product category revenue information was as follows ($ in millions):

Revenue by reportable segment

11 unchanged sentences

Total International revenue

Segment operating income and asset information was as follows ($ in millions):

Operating income by reportable segment and the reconciliation to consolidated earnings before income tax expense and equity in income of affiliates, as well as asset information by reportable segment, were as follows ($ in millions):

Operating income by reportable segment

5 unchanged sentences

Interest expense

Earnings before income tax expense

Earnings before income tax expense and equity in income of affiliates

International

7 unchanged sentences

Revenue from external customers

United States

Total revenue from external customers

Property and equipment, net

United States

Total property and equipment, net

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data