Shareholders' Equity

Stock Compensation Plans

Our Best Buy Co., Inc. Amended and Restated 2014 Omnibus Incentive Plan (the "Omnibus Plan") authorizes us to grant or issue non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards up to a total of 22.5 million shares. We have not granted incentive stock options under the Omnibus Plan. Under the terms of the Omnibus Plan, awards may be granted to our employees, officers, advisers, consultants and directors. Awards issued under the Omnibus Plan vest as determined by the Compensation and Human Resources Committee of our Board of Directors at the time of grant. Awards granted, forfeited or canceled under the previous plan, the 2004 Omnibus Stock and Incentive Plan, after February 1, 2014, adjust the amount available under the Omnibus Plan. At February 2, 2019, a total of 15.2 million shares were available for future grants under the Omnibus Plan.

Upon adoption and approval of the Omnibus Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continued to vest in accordance with the original vesting schedule and will expire at the end of their original terms.

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.

Our Employee Stock Purchase Plan, as amended, permits employees to purchase our common stock at a 5% discount from the market price at the end of semi-annual purchase periods and is non-compensatory. Employees are required to hold the common stock purchased for 12 months. In fiscal 2019, fiscal 2018 and fiscal 2017, 0.1 million, 0.1 million and 0.2 million shares, respectively, were purchased through our employee stock purchase plan. At February 2, 2019, and February 3, 2018, plan participants had accumulated $3 million and $3 million, respectively, to purchase our common stock pursuant to this plan.

Stock-based compensation expense was as follows in fiscal 2019, fiscal 2018 and fiscal 2017 ($ in millions):



	2019		2018		2017
Stock options	$	3	$	6	$	9
Share awards:
Market-based	15		19		15
Performance-based	20		13		6
Time-based	85		91		78
Total	$	123	$	129	$	108

Stock Options

Stock option activity was as follows in fiscal 2019:



	Stock Options		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at February 3, 2018	3,069,000		$	32.32
Granted	161,000		$	66.59
Exercised	(869,000	)	$	35.54
Forfeited/canceled	(3,000	)	$	33.01
Outstanding at February 2, 2019	2,358,000		$	33.47	4.9	$	60
Vested or expected to vest at February 2, 2019	2,358,000		$	33.47	4.9	$	60
Exercisable at February 2, 2019	2,006,000		$	30.21	4.3	$	57

The weighted-average grant-date fair value of stock options granted during fiscal 2019, fiscal 2018 and fiscal 2017 was $20.34, $12.52 and $8.04, respectively, per share. 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 2019, fiscal 2018 and fiscal 2017, was $33 million, $57 million and $55 million, respectively. At February 2, 2019, there was $2 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 2.0 years.

Net cash proceeds from the exercise of stock options were $30 million, $156 million and $164 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively.

There was $7 million, $19 million and $19 million of income tax benefits realized from stock option exercises in fiscal 2019, fiscal 2018 and fiscal 2017, respectively.

In fiscal 2019, fiscal 2018 and fiscal 2017, we estimated the fair value of each stock option on the date of grant using a lattice or Black Scholes valuation model (for certain individuals) with the following assumptions:



Valuation Assumptions	2019		2018		2017
Risk-free interest rate⁽¹⁾	1.9% – 2.8%		0.9% – 2.6%		0.5% – 2.0%
Expected dividend yield	2.7	%	3.0	%	3.5	%
Expected stock price volatility⁽²⁾	39	%	38	%	37	%
Expected life of stock options (in years)⁽³⁾	6.5		6.0		6.0


(1)	Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of our stock options.


(2)	In projecting expected stock price volatility, we consider both the historical volatility of our stock price as well as implied volatilities from exchange-traded options on our stock.


(3)	We estimate the expected life of stock options 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 nonvested market-based share awards at February 2, 2019, and changes during fiscal 2019, were as follows:



Market-Based Share Awards	Shares		Weighted-Average Fair Value per Share
Outstanding at February 3, 2018	1,422,000		$	36.35
Granted	371,000		$	74.27
Vested	(557,000	)	$	42.04
Forfeited/canceled	(49,000	)	$	40.33
Outstanding at February 2, 2019	1,187,000		$	40.07

At February 2, 2019, there was $13 million of unrecognized compensation expense related to nonvested 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 vesting when the employee is not entitled to dividends.

A summary of the status of our nonvested time-based share awards at February 2, 2019, and changes during fiscal 2019, were as follows:



Time-Based Share Awards	Shares		Weighted-Average Fair Value per Share
Outstanding at February 3, 2018	5,050,000		$	36.17
Granted	1,543,000		$	68.96
Vested	(2,208,000	)	$	37.30
Forfeited/canceled	(287,000	)	$	47.56
Outstanding at February 2, 2019	4,098,000		$	47.13

At February 2, 2019, there was $102 million of unrecognized compensation expense related to nonvested time-based share awards that we expect to recognize over a weighted-average period of 1.8 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 vesting when the employee is not entitled to dividends.

A summary of the status of our nonvested performance-based share awards at February 2, 2019, and changes during fiscal 2019, were as follows:



Performance-Based Share Awards	Shares		Weighted-Average Fair Value per Share
Outstanding at February 3, 2018	685,000		$	37.04
Granted	354,000		$	72.11
Vested	(217,000	)	$	34.15
Forfeited/canceled	(3,000	)	$	72.05
Outstanding at February 2, 2019	819,000		$	52.78

At February 2, 2019, there was $21 million of unrecognized compensation expense related to nonvested performance-based share awards that we expect to recognize over a weighted-average period of 1.7 years.

Earnings per Share

We compute our basic earnings per share based on the weighted-average number of common shares outstanding, and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive securities include stock options, nonvested share awards and shares issuable under our employee stock purchase plan. Nonvested market-based share awards and nonvested performance-based share awards are included in the average diluted shares outstanding each period if established market or performance criteria have been met at the end of the respective periods.

At February 2, 2019, options to purchase 2.4 million shares of common stock were outstanding as follows (shares in millions):



	Exercisable					Unexercisable					Total
	Shares	%		Weighted- Average Price per Share		Shares	%		Weighted- Average Price per Share		Shares	%		Weighted- Average Price per Share
In-the-money	2.0	100	%	$	30.21	0.3	75	%	$	43.86	2.3	96	%	$	31.72
Out-of-the-money	—	—	%	$	—	0.1	25	%	$	71.52	0.1	4	%	$	71.52
Total	2.0	100	%	$	30.21	0.4	100	%	$	52.01	2.4	100	%	$	33.47

The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share from continuing operations in fiscal 2019, fiscal 2018 and fiscal 2017 ($ and shares in millions, except per share amounts):



	2019		2018		2017
Numerator
Net earnings from continuing operations	$	1,464	$	999	$	1,207
Denominator
Weighted-average common shares outstanding	276.4		300.4		318.5
Effect of potentially dilutive securities:
Stock options and other	5.0		6.7		4.1
Weighted-average common shares outstanding, assuming dilution	281.4		307.1		322.6

Anti-dilutive securities excluded from Weighted-average common shares outstanding, assuming dilution	0.2		—		4.5

Net earnings per share from continuing operations
Basic	$	5.30	$	3.33	$	3.79
Diluted	$	5.20	$	3.26	$	3.74

Repurchase of Common Stock

On February 23, 2019, our Board of Directors authorized a new $3.0 billion share repurchase program that superseded the previous $5.0 billion authorization from February 2017. There is no expiration date governing the period over which we can repurchase shares under the February 2019 authorization.

On January 22, 2016, we entered into a variable notional accelerated share repurchase agreement ("January 2016 ASR") with a third party financial institution to repurchase $150 million to $175 million of our common stock. Under the agreement, we paid $175 million at the beginning of the contract and received an initial delivery of 4.4 million shares on January 25, 2016. We retired these shares and recorded a $120 million reduction to stockholders' equity. As of January 30, 2016, the remaining $55 million was included as a reduction of shareholders' equity as prepaid share repurchase on our Consolidated Balance Sheets. The January 2016 ASR was settled on February 17, 2016, for a final notional amount of $165 million. Accordingly, we received 1.6 million shares, which were retired, and a $10 million cash payment from our counter-party equal to the difference between the $175 million up-front payment and the final notional amount. The cash received was included as Other, net within Financing activities on our Consolidated Statements of Cash Flows. The final notional amount was determined based upon the volume-weighted average share price of our common stock during the term of the January 2016 ASR agreement. The number of shares delivered was based upon the final notional amount and the volume-weighted average share price of our common stock during the term of the agreement, less an agreed-upon discount.

The following table presents information regarding the shares we repurchased and retired in fiscal 2019, fiscal 2018 and fiscal 2017 ($ and shares in millions, except per share amounts):



	2019		2018		2017
Total cost of shares repurchased
Open market	$	1,493	$	2,009	$	706
January 2016 ASR	—		—		45
Total	$	1,493	$	2,009	$	751

Average price per share
Open market	$	70.28	$	57.16	$	36.11
January 2016 ASR	$	—	$	—	$	28.55
Average	$	70.28	$	57.16	$	33.54

Number of shares repurchased and retired
Open market⁽¹⁾	21.2		35.1		19.5
January 2016 ASR	—		—		1.6
Total	21.2		35.1		21.1

Between the end of fiscal 2019 and March 26, 2019, we repurchased an incremental 0.9 million shares of our common stock at a cost of $62 million. Repurchased shares have been retired and constitute authorized but unissued shares.

Comprehensive Income (Loss)

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. Foreign currency translation adjustments do not include a provision for income tax expense when earnings from foreign operations are considered to be indefinitely reinvested outside the U.S. Refer to Note 11, Income Taxes, for additional information.

The following table provides a reconciliation of the components of accumulated other comprehensive income, net of tax, for fiscal 2019, fiscal 2018 and fiscal 2017, respectively ($ in millions):



	Foreign Currency Translation
Balance at January 30, 2016	$	271
Foreign currency translation adjustments	10
Reclassification of foreign currency translation adjustments into earnings due to sale of business	(2		)
Balance at January 28, 2017	279
Foreign currency translation adjustments	35
Balance at February 3, 2018	314
Foreign currency translation adjustments	(20		)
Balance at February 2, 2019	$	294