UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 2, 2007 |
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OR |
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission File Number: 1-9595
BEST BUY CO., INC.
(Exact name of registrant as specified in its charter)
Minnesota |
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41-0907483 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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7601 Penn Avenue South |
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Richfield, Minnesota |
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55423 |
(Address of principal executive offices) |
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(Zip Code) |
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(612)
291-1000 |
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N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. Common Stock, $.10 Par Value 473,898,000 shares outstanding as of June 2, 2007.
BEST BUY CO., INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 2, 2007
INDEX
2
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
($ in millions, except per share amounts)
(Unaudited)
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June 2, |
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March 3, |
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May 27, |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
1,366 |
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$ |
1,205 |
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$ |
772 |
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Short-term investments |
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1,436 |
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2,588 |
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1,554 |
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Receivables |
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476 |
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548 |
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409 |
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Merchandise inventories |
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4,298 |
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4,028 |
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3,737 |
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Other current assets |
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730 |
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712 |
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406 |
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Total current assets |
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8,306 |
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9,081 |
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6,878 |
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PROPERTY AND EQUIPMENT |
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Property and equipment |
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5,131 |
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4,904 |
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4,957 |
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Less accumulated depreciation |
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2,105 |
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1,966 |
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2,245 |
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Net property and equipment |
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3,026 |
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2,938 |
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2,712 |
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GOODWILL |
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1,049 |
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919 |
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955 |
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TRADENAMES |
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93 |
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81 |
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63 |
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LONG-TERM INVESTMENTS |
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332 |
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318 |
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302 |
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OTHER ASSETS |
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336 |
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233 |
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359 |
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TOTAL ASSETS |
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$ |
13,142 |
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$ |
13,570 |
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$ |
11,269 |
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NOTE: The consolidated balance sheet as of March 3, 2007, has been condensed from the audited consolidated financial statements.
See Notes to Condensed Consolidated Financial Statements.
3
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS EQUITY
($ in millions, except per share amounts)
(Unaudited)
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June 2, |
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March 3, |
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May 27, |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
3,957 |
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$ |
3,934 |
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$ |
3,055 |
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Unredeemed gift card liabilities |
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455 |
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496 |
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415 |
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Accrued compensation and related expenses |
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243 |
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332 |
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278 |
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Accrued liabilities |
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930 |
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990 |
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840 |
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Accrued income taxes |
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34 |
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489 |
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291 |
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Short-term debt |
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48 |
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41 |
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Current portion of long-term debt |
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19 |
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19 |
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418 |
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Total current liabilities |
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5,686 |
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6,301 |
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5,297 |
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LONG-TERM LIABILITIES |
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655 |
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443 |
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383 |
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LONG-TERM DEBT |
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598 |
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590 |
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180 |
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MINORITY INTERESTS |
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33 |
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35 |
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SHAREHOLDERS EQUITY |
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Preferred stock, $1.00 par value: Authorized 400,000 shares; Issued and outstanding none |
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Common stock, $.10 par value: Authorized 1.5 billion shares; Issued and outstanding 473,898,000, 480,655,000 and 484,014,000 shares, respectively |
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47 |
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48 |
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48 |
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Additional paid-in capital |
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101 |
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430 |
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546 |
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Retained earnings |
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5,638 |
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5,507 |
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4,500 |
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Accumulated other comprehensive income |
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384 |
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216 |
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315 |
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Total shareholders equity |
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6,170 |
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6,201 |
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5,409 |
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
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$ |
13,142 |
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$ |
13,570 |
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$ |
11,269 |
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NOTE: The consolidated balance sheet as of March 3, 2007, has been condensed from the audited consolidated financial statements.
See Notes to Condensed Consolidated Financial Statements.
4
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
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Three Months Ended |
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June 2, |
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May 27, |
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Revenue |
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$ |
7,927 |
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$ |
6,959 |
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Cost of goods sold |
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6,035 |
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5,194 |
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Gross profit |
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1,892 |
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1,765 |
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Selling, general and administrative expenses |
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1,626 |
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1,428 |
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Operating income |
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266 |
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337 |
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Other income (expense) |
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Investment income and other |
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44 |
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31 |
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Interest expense |
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(7 |
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(8 |
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Earnings before income tax expense and minority interest |
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303 |
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360 |
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Income tax expense |
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113 |
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126 |
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Minority interest |
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2 |
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Net earnings |
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$ |
192 |
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$ |
234 |
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Earnings per share |
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Basic |
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$ |
0.40 |
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$ |
0.48 |
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Diluted |
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$ |
0.39 |
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$ |
0.47 |
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Dividends declared per common share |
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$ |
0.10 |
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$ |
0.08 |
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Weighted average common shares outstanding (in millions) |
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Basic |
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478.8 |
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484.6 |
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Diluted |
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491.5 |
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500.8 |
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See Notes to Condensed Consolidated Financial Statements.
5
BEST BUY CO., INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE THREE MONTHS ENDED JUNE 2, 2007
($ and shares in millions)
(Unaudited)
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Common |
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Common |
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Additional |
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Retained |
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Accumulated |
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Total |
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Balances at March 3, 2007 |
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481 |
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$ |
48 |
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$ |
430 |
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$ |
5,507 |
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$ |
216 |
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$ |
6,201 |
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Net earnings, three months ended June 2, 2007 |
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192 |
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192 |
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Foreign currency translation adjustments |
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168 |
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168 |
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Total comprehensive income |
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360 |
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Cumulative effect of adopting a new accounting standard |
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(13 |
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(13 |
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Stock-based compensation |
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32 |
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32 |
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Issuance of common stock under employee stock purchase plan |
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1 |
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25 |
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25 |
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Stock options exercised |
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1 |
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17 |
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17 |
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Tax benefit from stock options exercised and employee stock purchase plan |
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8 |
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8 |
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Repurchase of common stock |
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(9 |
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(1 |
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(411 |
) |
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(412 |
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Common stock dividends, $0.10 per share |
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(48 |
) |
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(48 |
) |
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Balances at June 2, 2007 |
|
474 |
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$ |
47 |
|
$ |
101 |
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$ |
5,638 |
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$ |
384 |
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$ |
6,170 |
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See Notes to Condensed Consolidated Financial Statements.
6
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited)
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Three Months Ended |
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June 2, |
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May 27, |
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OPERATING ACTIVITIES |
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Net earnings |
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$ |
192 |
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$ |
234 |
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Adjustments to reconcile net earnings to total cash used in operating activities |
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Depreciation |
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135 |
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121 |
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Asset impairment charges |
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2 |
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12 |
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Stock-based compensation |
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32 |
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28 |
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Deferred income taxes |
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(78 |
) |
(16 |
) |
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Excess tax benefits from stock-based compensation |
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(8 |
) |
(23 |
) |
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Other, net |
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(3 |
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8 |
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Changes in operating assets and liabilities, net of acquired assets and liabilities |
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|
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Receivables |
|
81 |
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34 |
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Merchandise inventories |
|
(210 |
) |
(343 |
) |
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Other assets |
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(42 |
) |
(10 |
) |
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Accounts payable |
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(25 |
) |
(201 |
) |
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Other liabilities |
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(232 |
) |
(179 |
) |
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Accrued income taxes |
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(272 |
) |
(391 |
) |
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Total cash used in operating activities |
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(428 |
) |
(726 |
) |
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INVESTING ACTIVITIES |
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Additions to property and equipment, net of $36 non-cash capital expenditures in the three months ended May 27, 2006 |
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(179 |
) |
(154 |
) |
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Purchases of available-for-sale securities |
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(2,238 |
) |
(497 |
) |
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Sales of available-for-sale securities |
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3,398 |
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1,908 |
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Acquisition of businesses, net of cash acquired |
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(89 |
) |
(408 |
) |
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Change in restricted assets |
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28 |
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6 |
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Other, net |
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9 |
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Total cash provided by investing activities |
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920 |
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864 |
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FINANCING ACTIVITIES |
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Repurchase of common stock |
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(412 |
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(238 |
) |
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Issuance of common stock under employee stock purchase plan and for the exercise of stock options |
|
42 |
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89 |
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Dividends paid |
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(48 |
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(38 |
) |
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Proceeds from issuance of debt |
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42 |
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17 |
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Repayments of debt |
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(35 |
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(2 |
) |
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Excess tax benefits from stock-based compensation |
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8 |
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23 |
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Other, net |
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3 |
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15 |
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Total cash used in financing activities |
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(400 |
) |
(134 |
) |
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EFFECT OF EXCHANGE RATE CHANGES ON CASH |
|
69 |
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20 |
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INCREASE IN CASH AND CASH EQUIVALENTS |
|
161 |
|
24 |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
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1,205 |
|
748 |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD |
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$ |
1,366 |
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$ |
772 |
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See Notes to Condensed Consolidated Financial Statements.
7
BEST BUY CO., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in millions, except per share amounts)
(Unaudited)
1. Basis of Presentation
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States. All adjustments were comprised of normal recurring adjustments, except as noted in the Notes to Condensed Consolidated Financial Statements. Historically, we have realized more of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday selling season in the United States and Canada, than in any other fiscal quarter. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. These interim financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.
Consistent with Chinas statutory requirements, our China operations fiscal year ends on December 31. Therefore, we have elected to consolidate our China financial results on a two-month lag. There was no significant intervening event that would have materially affected our consolidated financial statements had it been recorded during the fiscal quarter.
Reclassifications
To maintain consistency and comparability, we reclassified certain prior-year amounts to conform to the current-year presentation as described in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007. In addition, to conform to the current-year presentation, we reclassified to the International segment certain selling, general and administrative (SG&A) support costs which were previously reported as part of the Domestic segment in fiscal 2007. These reclassifications had no effect on previously reported consolidated operating income, net earnings, shareholders equity or cash flows.
New Accounting Standards
In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Companies are not allowed to adopt SFAS No. 159 on a retrospective basis unless they choose early adoption. We plan to adopt SFAS No. 159 beginning in the first quarter of fiscal 2009. We are evaluating the impact, if any, the adoption of SFAS No. 159 will have on our operating income or net earnings.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after December 15, 2007. We plan to adopt SFAS No. 157 beginning in the first quarter of fiscal 2009. We are evaluating the impact, if any, the adoption of SFAS No. 157 will have on our operating income or net earnings.
2. Acquisitions
Speakeasy, Inc.
On May 1, 2007, we acquired Speakeasy, Inc. (Speakeasy) for $103 in cash, or $89 net of cash acquired, including transaction costs and the repayment of $5 of Speakeasys debt. We acquired Speakeasy, an independent U.S. broadband voice, data, and IT services provider, to strengthen our portfolio of technology solutions. The acquisition was accounted for using the purchase method in accordance with SFAS No. 141, Business Combinations. Accordingly, we recorded the net assets at their estimated fair values, and included operating results in our Domestic segment from the date of acquisition. We allocated the purchase price on a preliminary basis using information currently available. The
8
$ in millions, except per share amounts
allocation of the purchase price to the assets and liabilities acquired will be finalized no later than the first quarter of fiscal 2009, as we obtain more information regarding asset valuations, liabilities assumed and revisions of preliminary estimates of fair values made at the date of purchase. The premium we paid in excess of the fair value of the net assets acquired was primarily for the expected future synergies we believe Speakeasy will generate by providing new technology solutions for our existing and future customers, as well as to obtain Speakeasys skilled, established workforce. None of the goodwill is deductible for tax purposes.
The preliminary purchase price allocation, net of cash acquired, was as follows:
Receivables |
|
$ |
8 |
|
Property and equipment |
|
8 |
|
|
Other assets |
|
21 |
|
|
Tradename |
|
6 |
|
|
Goodwill |
|
76 |
|
|
Current liabilities |
|
(30 |
) |
|
Total |
|
$ |
89 |
|
Jiangsu Five Star Appliance Co., Ltd.
On June 8, 2006, we acquired a 75% interest in Jiangsu Five Star Appliance Co., Ltd. (Five Star) for $184, including a working capital injection of $122 and transaction costs. Five Star is an appliance and consumer electronics retailer with 135 stores located in seven of Chinas 34 provinces. We made the investment in Five Star to further our international growth plans, to increase our knowledge of Chinese customers and to obtain an immediate retail presence in China. The acquisition was accounted for using the purchase method in accordance with SFAS No. 141. Accordingly, we recorded the net assets at their estimated fair values, and included operating results in our International segment from the date of acquisition. We allocated the purchase price on a preliminary basis using information then available. The allocation of the purchase price to the assets and liabilities acquired was finalized in the first quarter of fiscal 2008. There was no significant adjustment to the preliminary purchase price allocation. None of the goodwill is deductible for tax purposes.
The final purchase price allocation, net of cash acquired, was as follows:
Restricted cash |
|
$ |
204 |
|
Merchandise inventories |
|
109 |
|
|
Property and equipment |
|
78 |
|
|
Other assets |
|
78 |
|
|
Tradename |
|
21 |
|
|
Goodwill |
|
24 |
|
|
Accounts payable |
|
(368 |
) |
|
Other current liabilities |
|
(35 |
) |
|
Debt |
|
(64 |
) |
|
Long-term liabilities |
|
(1 |
) |
|
Minority interests1 |
|
(33 |
) |
|
Total |
|
$ |
13 |
|
1 The minority interests proportionate ownership of assets and liabilities were recorded at historical carrying values.
3. Investments
Debt Securities
Short-term and long-term investments are comprised of municipal and U.S. government debt securities, as well as auction-rate securities and variable-rate demand notes. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and based on our ability to market and to sell these instruments, we classify auction-rate securities, variable-rate demand notes and other investments in debt securities as available-for-sale and carry them at amortized cost, which approximates fair value. Auction-rate securities and variable-rate demand notes are similar to short-term debt instruments because their interest rates are reset periodically. Investments in these securities can be sold for cash on the auction date. We classify auction-rate securities and variable-rate demand notes as short-term or long-term investments based on the reset dates.
In accordance with our investment policy, we place our investments in debt securities with issuers who have high-quality credit and limit the amount of investment exposure to any one issuer. We seek to preserve principal and minimize exposure to interest-rate fluctuations by limiting default risk, market risk and reinvestment risk.
9
$ in millions, except per share amounts
The following table presents the amortized principal amounts, related weighted-average interest rates (taxable equivalent), maturities and major security types for our investments in debt securities:
|
June 2, 2007 |
|
March 3, 2007 |
|
May 27, 2006 |
|
||||||||||
|
|
Amortized |
|
Weighted- |
|
Amortized |
|
Weighted- |
|
Amortized |
|
Weighted- |
|
|||
Short-term investments (less than one year) |
|
$ |
1,436 |
|
5.90 |
% |
$ |
2,588 |
|
5.68 |
% |
$ |
1,554 |
|
5.61 |
% |
Long-term investments (one to three years) |
|
332 |
|
5.84 |
% |
318 |
|
5.68 |
% |
302 |
|
5.80 |
% |
|||
Total |
|
$ |
1,768 |
|
|
|
$ |
2,906 |
|
|
|
$ |
1,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Municipal debt securities |
|
$ |
1,711 |
|
|
|
$ |
2,840 |
|
|
|
$ |
1,780 |
|
|
|
Auction-rate and asset-backed securities |
|
57 |
|
|
|
66 |
|
|
|
76 |
|
|
|
|||
Total |
|
$ |
1,768 |
|
|
|
$ |
2,906 |
|
|
|
$ |
1,856 |
|
|
|
The carrying values of our investments in debt securities approximated fair value at June 2, 2007; March 3, 2007; and May 27, 2006, due to the rapid turnover of our portfolio and the highly liquid nature of these investments. Therefore, there were no significant unrealized holding gains or losses.
See Note 10, Subsequent Events, for information on investments used subsequent to June 2, 2007, to finance our accelerated share repurchase program.
Marketable Equity Securities
We also invest in marketable equity securities and classify them as available-for-sale. Investments in marketable equity securities are included in other assets in our consolidated balance sheets, and are reported at fair value based on quoted market prices. All unrealized holding gains or losses are reflected net of tax in accumulated other comprehensive income in shareholders equity.
The carrying values of our investments in marketable equity securities at June 2, 2007; March 3, 2007; and May 27, 2006, were $4, $4 and $25, respectively. The decrease in marketable equity securities compared with May 27, 2006, was due to the sale of our investment in Golf Galaxy, Inc. (Golf Galaxy) on February 13, 2007. At May 27, 2006, the carrying value of our investment in Golf Galaxy was $21.
Net unrealized (loss)/gain, net of tax, included in accumulated other comprehensive income were $(1), $(1) and $10 at June 2, 2007; March 3, 2007; and May 27, 2006, respectively.
4. Income Taxes
We adopted the provisions of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109, effective March 4, 2007. FIN No. 48 provides guidance regarding the recognition, measurement, presentation and disclosure in the financial statements of tax positions taken or expected to be taken on a tax return, including the decision whether to file or not to file in a particular jurisdiction. The adoption of FIN No. 48 resulted in the reclassification of $214 of certain tax liabilities from current to long-term and a $13 increase in our liability for unrecognized tax benefits, which was accounted for as a reduction to the March 4, 2007 retained earnings balance.
At March 4, 2007, our total liability for unrecognized tax benefits, after the adoption of FIN No. 48, was $214, of which $81 represented tax benefits that, if recognized, would favorably impact the effective tax rate. Our liability for unrecognized tax benefits was $222 at June 2, 2007.
We recognize interest and penalties in income tax expense in our consolidated statements of earnings. At March 4, 2007, we had accrued interest and penalties of $17. There has been no significant change in our accrued interest and penalties since March 4, 2007.
We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before fiscal 2003. In April 2007, the Internal Revenue Service (IRS) completed its examination of our U.S. federal income tax returns for fiscal 2003 and fiscal 2004 and resolution of the issues pertaining to those years is expected in fiscal 2009. However, we do not expect that the resolution of these issues will have a significant effect on our financial condition or results of operations.
10
$ in millions, except per share amounts
5. Earnings per Share
Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed 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 shares of common stock include stock options, nonvested share awards and shares issuable under our employee stock purchase plan, as well as common shares that would have resulted from the assumed conversion of our convertible debentures. Since the potentially dilutive shares related to the convertible debentures are included in the calculation, the related interest expense, net of tax, is added back to net earnings, as the interest would not have been paid if the convertible debentures had been converted to common stock. Nonvested market-based awards and nonvested performance-based 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.
The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share (shares in millions):
|
Three Months Ended |
|
|||||
|
|
June 2, |
|
May 27, |
|
||
Numerator |
|
|
|
|
|
||
Net earnings, basic |
|
$ |
192 |
|
$ |
234 |
|
Adjustment for assumed dilution |
|
|
|
|
|
||
Interest on convertible debentures, net of tax |
|
2 |
|
2 |
|
||
Net earnings, diluted |
|
$ |
194 |
|
$ |
236 |
|
|
|
|
|
|
|
||
Denominator |
|
|
|
|
|
||
Weighted-average common shares outstanding |
|
478.8 |
|
484.6 |
|
||
Effect of potentially dilutive securities |
|
|
|
|
|
||
Shares from assumed conversion of convertible debentures |
|
8.8 |
|
8.8 |
|
||
Stock options and other |
|
3.9 |
|
7.4 |
|
||
Weighted-average common shares outstanding, assuming dilution |
|
491.5 |
|
500.8 |
|
||
|
|
|
|
|
|
||
Earnings per share |
|
|
|
|
|
||
Basic |
|
$ |
0.40 |
|
$ |
0.48 |
|
Diluted |
|
$ |
0.39 |
|
$ |
0.47 |
|
The computation of average dilutive shares outstanding excluded stock options to purchase 4.7 million and 0.1 million shares of common stock for the three months ended June 2, 2007, and May 27, 2006, respectively. These amounts were excluded as the options exercise prices were greater than the average market price of our common stock for the periods presented and, therefore, the effect would be antidilutive (i.e., including such options would result in higher earnings per share).
6. Common Stock Repurchases
Our Board of Directors (Board) authorized a $1,500 share repurchase program in June 2006. The program, which was announced on June 21, 2006, terminated and replaced a $1,500 share repurchase program authorized by our Board in April 2005.
For the three months ended June 2, 2007, we purchased and retired 8.7 million shares at a cost of $412 under our June 2006 share repurchase program. For the three months ended May 27, 2006, we purchased and retired 4.4 million shares at a cost of $238 under our April 2005 share repurchase program.
See Note 10, Subsequent Events, for additional information on common stock repurchases.
7. Comprehensive Income
Comprehensive income is computed as net earnings plus certain other items that are recorded directly to shareholders equity. In addition to net earnings, the significant components of comprehensive income include foreign currency translation adjustments
11
$ in millions, except per share amounts
and unrealized gains or losses, net of tax, on available-for-sale marketable equity securities. 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 United States. Comprehensive income was $360 and $288 for the three months ended June 2, 2007, and May 27, 2006, respectively.
8. Segments
We operate two reportable segments: Domestic and International. The Domestic segment is comprised of all U.S. store and online operations. The International segment is comprised of all store and online operations outside the U.S. We have included Speakeasy, which was acquired on May 1, 2007, and Pacific Sales Kitchen and Bath Centers, Inc. (Pacific Sales), which was acquired on March 7, 2006, in the Domestic segment. We have included Five Star, which was acquired on June 8, 2006, in the International segment. Our segments are evaluated on an operating income basis, and a stand-alone tax provision is not calculated for each segment. To conform to the current-year presentation, we reclassified to the International segment certain SG&A support costs which were previously reported as part of the Domestic segment in fiscal 2007. The other accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.
Revenue by reportable segment was as follows:
|
Three Months Ended |
|
|||||
|
|
June 2, |
|
May 27, |
|
||
Domestic |
|
$ |
6,704 |
|
$ |
6,162 |
|
International |
|
1,223 |
|
797 |
|
||
Total revenue |
|
$ |
7,927 |
|
$ |
6,959 |
|
Operating income (loss) by reportable segment and the reconciliation to earnings before income tax expense and minority interest were as follows:
|
Three Months Ended |
|
|||||
|
|
June 2, |
|
May 27, |
|
||
Domestic |
|
$ |
270 |
|
$ |
334 |
|
International |
|
(4 |
) |
3 |
|
||
Total operating income |
|
266 |
|
337 |
|
||
Other income (expense) |
|
|
|
|
|
||
Investment income and other |
|
44 |
|
31 |
|
||
Interest expense |
|
(7 |
) |
(8 |
) |
||
Earnings before income tax expense and minority interest |
|
$ |
303 |
|
$ |
360 |
|
Assets by reportable segment were as follows:
|
June 2, |
|
March 3, |
|
May 27, |
|
||||
Domestic |
|
$ |
9,913 |
|
$ |
10,614 |
|
$ |
9,053 |
|
International |
|
3,229 |
|
2,956 |
|
2,216 |
|
|||
Total assets |
|
$ |
13,142 |
|
$ |
13,570 |
|
$ |
11,269 |
|
Goodwill by reportable segment was as follows:
|
June 2, |
|
March 3, |
|
May 27, |
|
||||
Domestic |
|
$ |
451 |
|
$ |
375 |
|
$ |
383 |
|
International |
|
598 |
|
544 |
|
572 |
|
|||
Total goodwill |
|
$ |
1,049 |
|
$ |
919 |
|
$ |
955 |
|
The changes in the Domestic goodwill balance since March 3, 2007, and May 27, 2006, were primarily the result of the acquisitions of Pacific Sales and Speakeasy. The changes in the International goodwill balance since March 3, 2007, and May 27, 2006, were due primarily to the acquisition of Five Star totaling $24, and an adjustment related to the resolution of certain
12
$ in millions, except per share amounts
tax matters associated with our acquisition of Future Shop $(21), with the remainder due primarily to fluctuations in foreign currency exchange rates.
Tradenames included in our balance sheets were comprised of indefinite-lived intangible assets related to our Pacific Sales and Speakeasy tradenames, which are included in the Domestic segment, and to our Future Shop and Five Star tradenames, which are included in the International segment. Tradenames by reportable segment were as follows:
|
June 2, |
|
March 3, |
|
May 27, |
|
||||
Domestic |
|
$ |
24 |
|
$ |
17 |
|
$ |
17 |
|
International |
|
69 |
|
64 |
|
46 |
|
|||
Total tradenames |
|
$ |
93 |
|
$ |
81 |
|
$ |
63 |
|
9. Contingencies
We are involved in various legal proceedings arising in the normal course of conducting business. We believe the amounts provided in our consolidated financial statements are adequate in consideration of the probable and estimable liabilities. The resolution of those proceedings is not expected to have a material effect on our results of operations or financial condition.
10. Subsequent Events
Repurchase of Common Stock
On June 26, 2007, our Board authorized a new $5,500 share repurchase program. The program, which has no stated expiration date, terminated and replaced our prior $1,500 share repurchase program announced in June 2006. Approximately $730 of common stock was purchased under the prior program.
In accordance with the new share repurchase program, on June 26, 2007, we entered into an accelerated share repurchase (ASR) program authorized by our Board. The ASR consists of two agreements to purchase shares of our common stock from Goldman, Sachs & Co. (Goldman) for an aggregate purchase price of $3,000. Goldman will borrow the shares to be delivered and is expected to purchase sufficient shares of our common stock in the open market to return to lenders over the terms of the agreements. The ASR program will conclude in February 2008, although in certain circumstances the termination date may be accelerated at Goldmans option. The actual number of shares repurchased will be determined at the completion of the ASR program. We do not expect to make significant additional share repurchases prior to the conclusion of the ASR program. Repurchased shares will be retired and constitute authorized but unissued shares.
Collared ASR
One of the agreements (the Collared ASR) provides that the number of shares to be repurchased will be based generally on the volume-weighted average price (VWAP) of our common stock during the term of the Collared ASR, subject to collar provisions that will establish minimum and maximum numbers of shares based on the VWAP of our common stock over the hedge period, which is expected to conclude during the second quarter of fiscal 2008. We will receive an initial number of shares of common stock on certain specified settlement dates. At the conclusion of the hedge period, we may receive additional shares based on the VWAP of our common stock during the hedge period. At the conclusion of the Collared ASR, we may also receive additional shares based on the VWAP of our common stock during the agreement term.
On July 2, 2007, we paid $2,000 to Goldman in exchange for an initial delivery of 28.3 million shares to us on July 2-6, 2007, under the terms of the Collared ASR. The minimum and maximum numbers of shares that we will ultimately repurchase pursuant to the Collared ASR will not be known until the conclusion of the hedge period.
Uncollared ASR
Under the second agreement (the Uncollared ASR), the number of shares to be repurchased will be based generally on the VWAP of our common stock during the term of the Uncollared ASR. We will receive an initial number of shares of common stock on certain specified settlement dates during the second quarter of fiscal 2008. At the conclusion of the Uncollared ASR, we may receive additional shares, or we may be required to pay additional cash or shares (at our option), based on the VWAP of our common stock during the agreement term.
13
$ in millions, except per share amounts
On July 2, 2007, we paid $1,000 to Goldman under the terms of the Uncollared ASR. The numbers of shares that we will ultimately repurchase pursuant to the Uncollared ASR will not be known until the conclusion of the agreement.
Credit Facilities
Simultaneously with the execution of the ASR program, we entered into a $3,000 bridge loan facility with Goldman Sachs Credit Partners L.P. (the Bridge Facility). We initially borrowed $2,500 under the Bridge Facility and used $500 of our existing cash and investments to finance the ASR program. We subsequently used additional existing cash and investments to to repay $788 of our initial borrowing under the Bridge Facility. The Bridge Facility is guaranteed by certain of our subsidiaries and expires on June 24, 2008. Borrowings under the Bridge Facility are unsecured and bear interest at rates specified in the credit agreement. The Bridge Facility contains covenants that require us to maintain certain financial ratios. Effective July 11, 2007, we reduced the amount we may borrow under the Bridge Facility to $2,500. At July 10, 2007, $1,712 was outstanding under the Bridge Facility.
Additionally, we received a commitment letter from JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Inc. (JPMorgan) for a five-year senior unsecured revolving credit facility of $2,000. The final terms of the credit facility are subject to negotiation by us and JPMorgan.
Finally, effective July 2, 2007, we terminated our previous $200 bank revolving credit facility that was scheduled to expire on December 22, 2009.
11. Condensed Consolidating Financial Information
Our convertible debentures, due in 2022, are guaranteed by our wholly-owned indirect subsidiary Best Buy Stores, L.P. Investments in subsidiaries of Best Buy Stores, L.P., which have not guaranteed the convertible debentures, are accounted for under the equity method. We reclassified certain prior-year amounts as described in Note 1, Basis of Presentation, in this Quarterly Report on Form 10-Q. The aggregate principal balance and carrying amount of our convertible debentures, which mature in 2022, was $402 at June 2, 2007.
The debentures may be converted into shares of our common stock if the criteria, as described in Note 5, Debt, of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007, are met. During a portion of the three months ended May 27, 2006, our closing stock price exceeded the specified stock price for more than 20 trading days in a 30-trading-day period. Therefore, debenture holders had the option to convert their debentures into shares of our common stock. However, no debentures were so converted. Due to changes in the price of our common stock, the debentures were no longer convertible as of May 27, 2006.
We file a consolidated U.S. federal income tax return. Income taxes are allocated in accordance with our tax allocation agreement. U.S. affiliates receive no tax benefit for taxable losses, but are allocated taxes at the required effective income tax rate if they have taxable income.
The following tables present condensed consolidating balance sheets as of June 2, 2007; March 3, 2007; and May 27, 2006; condensed consolidating statements of earnings for the three months ended June 2, 2007, and May 27, 2006; and condensed consolidating statements of cash flows for the three months ended June 2, 2007, and May 27, 2006:
14
$ in millions, except per share amounts
Condensed Consolidating Balance Sheets
As of June 2, 2007
(Unaudited)
|
|
Best Buy |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Consolidated |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
255 |
|
$ |
56 |
|
$ |
1,055 |
|
$ |
|
|
$ |
1,366 |
|
Short-term investments |
|
1,430 |
|
|
|
6 |
|
|
|
1,436 |
|
|||||
Receivables |
|
13 |
|
316 |
|
147 |
|
|
|
476 |
|
|||||
Merchandise inventories |
|
|
|
3,604 |
|
1,016 |
|
(322 |
) |
4,298 |
|
|||||
Other current assets |
|
20 |
|
189 |
|
559 |
|
(38 |
) |
730 |
|
|||||
Intercompany receivable |
|
|
|
|
|
4,965 |
|
(4,965 |
) |
|
|
|||||
Intercompany note receivable |
|
500 |
|
|
|
|
|
(500 |
) |
|
|
|||||
Total current assets |
|
2,218 |
|
4,165 |
|
7,748 |
|
(5,825 |
) |
8,306 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Property and Equipment |
|
237 |
|
1,940 |
|
852 |
|
(3 |
) |
3,026 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Goodwill |
|
|
|
6 |
|
1,043 |
|
|
|
1,049 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tradenames |
|
|
|
|
|
93 |
|
|
|
93 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Investments |
|
332 |
|
|
|
|
|
|
|
332 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other Assets |
|
91 |
|
265 |
|
105 |
|
(125 |
) |
336 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investments in Subsidiaries |
|
6,493 |
|
265 |
|
1,301 |
|
(8,059 |
) |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Assets |
|
$ |
9,371 |
|
$ |
6,641 |
|
$ |
11,142 |
|
$ |
(14,012 |
) |
$ |
13,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable |
|
$ |
|
|
$ |
|
|
$ |
3,957 |
|
$ |
|
|
$ |
3,957 |
|
Unredeemed gift card liabilities |
|
|
|
410 |
|
45 |
|
|
|
455 |
|
|||||
Accrued compensation and related expenses |
|
|
|
169 |
|
74 |
|
|
|
243 |
|
|||||
Accrued liabilities |
|
27 |
|
505 |
|
398 |
|
|
|
930 |
|
|||||
Accrued income taxes |
|
34 |
|
|
|
|
|
|
|
34 |
|
|||||
Short-term debt |
|
|
|
|
|
48 |
|
|
|
48 |
|
|||||
Current portion of long-term debt |
|
2 |
|
13 |
|
4 |
|
|
|
19 |
|
|||||
Intercompany payable |
|
2,170 |
|
2,795 |
|
|
|
(4,965 |
) |
|
|
|||||
Intercompany note payable |
|
|
|
500 |
|
|
|
(500 |
) |
|
|
|||||
Total current liabilities |
|
2,233 |
|
4,392 |
|
4,526 |
|
(5,465 |
) |
5,686 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Liabilities |
|
209 |
|
814 |
|
360 |
|
(728 |
) |
655 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Debt |
|
407 |
|
134 |
|
57 |
|
|
|
598 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Minority Interests |
|
|
|
|
|
33 |
|
|
|
33 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Shareholders Equity |
|
6,522 |
|
1,301 |
|
6,166 |
|
(7,819 |
) |
6,170 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Liabilities and Shareholders Equity |
|
$ |
9,371 |
|
$ |
6,641 |
|
$ |
11,142 |
|
$ |
(14,012 |
) |
$ |
13,142 |
|
15
$ in millions, except per share amounts
Condensed Consolidating Balance Sheets
As of March 3, 2007
(Unaudited)
|
|
Best Buy |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Consolidated |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
235 |
|
$ |
77 |
|
$ |
893 |
|
$ |
|
|
$ |
1,205 |
|
Short-term investments |
|
2,582 |
|
|
|
6 |
|
|
|
2,588 |
|
|||||
Receivables |
|
33 |
|
363 |
|
152 |
|
|
|
548 |
|
|||||
Merchandise inventories |
|
|
|
3,465 |
|
960 |
|
(397 |
) |
4,028 |
|
|||||
Other current assets |
|
20 |
|
202 |
|
596 |
|
(106 |
) |
712 |
|
|||||
Intercompany receivable |
|
|
|
|
|
4,891 |
|
(4,891 |
) |
|
|
|||||
Intercompany note receivable |
|
500 |
|
|
|
|
|
(500 |
) |
|
|
|||||
Total current assets |
|
3,370 |
|
4,107 |
|
7,498 |
|
(5,894 |
) |
9,081 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Property and Equipment |
|
239 |
|
1,898 |
|
804 |
|
(3 |
) |
2,938 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Goodwill |
|
|
|
6 |
|
913 |
|
|
|
919 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tradenames |
|
|
|
|
|
81 |
|
|
|
81 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Investments |
|
318 |
|
|
|
|
|
|
|
318 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other Assets |
|
91 |
|
263 |
|
14 |
|
(135 |
) |
233 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investments in Subsidiaries |
|
6,099 |
|
162 |
|
1,293 |
|
(7,554 |
) |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Assets |
|
$ |
10,117 |
|
$ |
6,436 |
|
$ |
10,603 |
|
$ |
(13,586 |
) |
$ |
13,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable |
|
$ |
|
|
$ |
|
|
$ |
3,934 |
|
$ |
|
|
$ |
3,934 |
|
Unredeemed gift card liabilities |
|
|
|
452 |
|
44 |
|
|
|
496 |
|
|||||
Accrued compensation and related expenses |
|
|
|
198 |
|
134 |
|
|
|
332 |
|
|||||
Accrued liabilities |
|
7 |
|
564 |
|
544 |
|
(125 |
) |
990 |
|
|||||
Accrued income taxes |
|
484 |
|
5 |
|
|
|
|
|
489 |
|
|||||
Short-term debt |
|
|
|
|
|
41 |
|
|
|
41 |
|
|||||
Current portion of long-term debt |
|
2 |
|
12 |
|
5 |
|
|
|
19 |
|
|||||
Intercompany payable |
|
2,460 |
|
2,431 |
|
|
|
(4,891 |
) |
|
|
|||||
Intercompany note payable |
|
|
|
500 |
|
|
|
(500 |
) |
|
|
|||||
Total current liabilities |
|
2,953 |
|
4,162 |
|
4,702 |
|
(5,516 |
) |
6,301 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Liabilities |
|
219 |
|
849 |
|
102 |
|
(727 |
) |
443 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Debt |
|
407 |
|
132 |
|
51 |
|
|
|
590 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Minority Interests |
|
|
|
|
|
35 |
|
|
|
35 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Shareholders Equity |
|
6,538 |
|
1,293 |
|
5,713 |
|
(7,343 |
) |
6,201 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Liabilities and Shareholders Equity |
|
$ |
10,117 |
|
$ |
6,436 |
|
$ |
10,603 |
|
$ |
(13,586 |
) |
$ |
13,570 |
|
16
$ in millions, except per share amounts
Condensed Consolidating Balance Sheets
As of May 27, 2006
(Unaudited)
|
|
Best Buy |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Consolidated |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
25 |
|
$ |
64 |
|
$ |
683 |
|
$ |
|
|
$ |
772 |
|
Short-term investments |
|
1,376 |
|
|
|
178 |
|
|
|
1,554 |
|
|||||
Receivables |
|
19 |
|
298 |
|
92 |
|
|
|
409 |
|
|||||
Merchandise inventories |
|
|
|
3,308 |
|
725 |
|
(296 |
) |
3,737 |
|
|||||
Other current assets |
|
18 |
|
143 |
|
279 |
|
(34 |
) |
406 |
|
|||||
Intercompany receivable |
|
|
|
|
|
3,399 |
|
(3,399 |
) |
|
|
|||||
Intercompany note receivable |
|
500 |
|
|
|
|
|
(500 |
) |
|
|
|||||
Total current assets |
|
1,938 |
|
3,813 |
|
5,356 |
|
(4,229 |
) |
6,878 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Property and Equipment |
|
243 |
|
1,738 |
|
734 |
|
(3 |
) |
2,712 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Goodwill |
|
|
|
6 |
|
949 |
|
|
|
955 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tradenames |
|
|
|
|
|
63 |
|
|
|
63 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Investments |
|
302 |
|
|
|
|
|
|
|
302 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other Assets |
|
118 |
|
262 |
|
133 |
|
(154 |
) |
359 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investments in Subsidiaries |
|
5,178 |
|
12 |
|
1,314 |
|
(6,504 |
) |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Assets |
|
$ |
7,779 |
|
$ |
5,831 |
|
$ |
8,549 |
|
$ |
(10,890 |
) |
$ |
11,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable |
|
$ |
|
|
$ |
|
|
$ |
3,055 |
|
$ |
|
|
$ |
3,055 |
|
Unredeemed gift card liabilities |
|
|
|
381 |
|
34 |
|
|
|
415 |
|
|||||
Accrued compensation and related expenses |
|
7 |
|
157 |
|
114 |
|
|
|
278 |
|
|||||
Accrued liabilities |
|
8 |
|
443 |
|
421 |
|
(32 |
) |
840 |
|
|||||
Accrued income taxes |
|
289 |
|
2 |
|
|
|
|
|
291 |
|
|||||
Current portion of long-term debt |
|
404 |
|
9 |
|
5 |
|
|
|
418 |
|
|||||
Intercompany payable |
|
1,088 |
|
2,149 |
|
|
|
(3,237 |
) |
|
|
|||||
Intercompany note payable |
|
|
|
500 |
|
|
|
(500 |
) |
|
|
|||||
Total current liabilities |
|
1,796 |
|
3,641 |
|
3,629 |
|
(3,769 |
) |
5,297 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Liabilities |
|
260 |
|
760 |
|
30 |
|
(667 |
) |
383 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-Term Debt |
|
6 |
|
116 |
|
58 |
|
|
|
180 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Shareholders Equity |
|
5,717 |
|
1,314 |
|
4,832 |
|
(6,454 |
) |
5,409 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Liabilities and Shareholders Equity |
|
$ |
7,779 |
|
$ |
5,831 |
|
$ |
8,549 |
|
$ |
(10,890 |
) |
$ |
11,269 |
|
17
$ in millions, except per share amounts
Condensed Consolidating Statements of Earnings
For the Three Months Ended June 2, 2007
(Unaudited)
|
|
Best Buy |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Consolidated |
|
|||||
Revenue |
|
$ |
4 |
|
$ |
6,270 |
|
$ |
7,275 |
|
$ |
(5,622 |
) |
$ |
7,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of goods sold |
|
|
|
5,113 |
|
6,637 |
|
(5,715 |
) |
6,035 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross profit |
|
4 |
|
1,157 |
|
638 |
|
93 |
|
1,892 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling, general and administrative expenses |
|
39 |
|
1,098 |
|
484 |
|
5 |
|
1,626 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating (loss) income |
|
(35 |
) |
59 |
|
154 |
|
88 |
|
266 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment income and other |
|
39 |
|
|
|
18 |
|
(13 |
) |
44 |
|
|||||
Interest expense |
|
(2 |
) |
(11 |
) |
(7 |
) |
13 |
|
(7 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Earnings before equity in earnings (loss) of subsidiaries |
|
2 |
|
48 |
|
165 |
|
88 |
|
303 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity in earnings (loss) of subsidiaries |
|
136 |
|
(6 |
) |
30 |
|
(160 |
) |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Earnings before income tax expense and minority interest |
|
138 |
|
42 |
|
195 |
|
(72 |
) |
303 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income tax expense |
|
34 |
|
18 |
|
61 |
|
|
|
113 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Minority interest |
|
|
|
|
|
2 |
|
|
|
2 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net earnings |
|
$ |
104 |
|
$ |
24 |
|
$ |
136 |
|
$ |
(72 |
) |
$ |
192 |
|
18
$ in millions, except per share amounts
Condensed Consolidating Statements of Earnings
For the Three Months Ended May 27, 2006
(Unaudited)
|
|
Best Buy |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Consolidated |
|
|||||
Revenue |
|
$ |
4 |
|
$ |
5,828 |
|
$ |
6,352 |
|
$ |
(5,225 |
) |
$ |