Best Buy 2005 Annual Report Download

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Fiscal 2005 Annual Report
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Table of contents

  • Page 1
    F A S T F O R WA R D . Fiscal 2005 Annual Report

  • Page 2
    ..., MP3 players, cameras and audio equipment-increased in the revenue mix for fiscal 2005. We increased our market share in fiscal 2005 by opening new stores and improving our execution at existing stores. Source: Company internal estimates and NPD Group Point-of-Sale data Best Buy 05 Annual Report

  • Page 3
    ...support our long-term growth, resulting in a smaller, more focused executive team. FISCAL 2006 Goals • Launch a program to convert all of our U.S. Best Buy stores to the customer-centric operating model within three years. • Expand and strengthen our service offerings, including the Geek Squad...

  • Page 4
    We are relearning what we knew when we were a small company: each customer, each employee, each dollar and each day matters. Only those retailers who stay close to their customers can ï¬,ourish. - Bradbury H. Anderson Vice Chairman and CEO Best Buy 05 Annual Report

  • Page 5
    ... returns for shareholders by investing in our two greatest assets, our customers and our employees. their store, their product assortments and their service to the unique needs of specific customer segments who shop in our stores. We believe that this operating model further differentiates Best Buy...

  • Page 6
    ... CUSTOMER CENTERED A busy mom has little time or desire to research technology. I love helping her choose the right digital camera. It's really about helping her learn and capture her family memories; that's so much more than just selling a product. - Best Buy personal shopping assistant 2 Best...

  • Page 7
    ... over the long term. For example, upscale suburban moms have the resources to purchase digital products and appreciate the many uses of technology, but they aren't always comfortable shopping in our stores. In our labs, we added highly trained personal shopping assistants (PSAs) who are available by...

  • Page 8
    ... our Best Buy for Business stores, we offer deep assortments in computing and applications. Business professionals in our stores guide small-business owners to solutions that work, and we complement that with Best Buy's Geek Squad services. Data restoration doesn't sound that rewarding as a career...

  • Page 9
    ... technology work through a new strategic alliance that also includes consulting on a three-year plan to re-engineer our supply chain. Finally, to attract incremental customers to our company, we continued to grow our international segment, which uses two store formats (Future Shop and Best Buy...

  • Page 10
    ... in stock. The culture in our customer centricity stores rocks. We can be ourselves at work, and our ideas are sought out. Plus the transformation means my store has more places for me to move up. - Best Buy associate Fast Forward I N N O VAT I V E R E TA I L I N G 6 Best Buy 05 Annual Report

  • Page 11
    ... products and services that suit changing lifestyles and reach new customers through individualized marketing programs ...all supported by more agile supply chain and technology systems. Focusing Our Executive Team Last year, we reorganized our resources to support our long-term growth, a change...

  • Page 12
    ... Non-management Director Audit Compensation and Human Resources Finance and Investment Policy Long-Range and Strategic Planning Nominating, Corporate Governance and Public Policy Ronald JamesN, 5 Director since 2004 Center for Ethical Business Cultures President and CEO Thomas C. Healy Executive...

  • Page 13
    ...) Total Equity + Long-Term Debt(3) + Capitalized Operating Leases ‫ מ‬Excess Cash = Adjusted Average Invested Capital Return on Invested Capital ($ in millions) Net Operating Profit (as adjusted) Operating Income + Net Rent Expense(1) ‫ מ‬Depreciation Portion of Rent Expense(1) = NOPBT...

  • Page 14
    (This page intentionally left blank)

  • Page 15
    ... $13.035 billion, computed by reference to the price at which the common equity was last sold on such date of $48.43 per share, as reported on the New York Stock Exchange-Composite Index. (For purposes of this calculation all of the registrant's directors and executive officers are deemed affiliates...

  • Page 16
    ... suitable real estate locations, our ability to react to a disaster recovery situation, and the impact of labor markets and new product introductions on our overall profitability. Readers should review our Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on March 18...

  • Page 17
    ... and Executive Officers of the Registrant. Executive Compensation. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Certain Relationships and Related Transactions. Principal Accounting Fees and Services. 96 97 97 97 97 Exhibits, Financial Statement...

  • Page 18
    ..., home-office products, entertainment software, appliances and related services. We operate retail stores and commercial Web sites under the brand names Best Buy (BestBuy.com and BestBuyCanada.ca), Future Shop (FutureShop.ca), Magnolia Audio Video (MagnoliaAV.com) and Geek Squad (GeekSquad...

  • Page 19
    ... and related services. Magnolia Audio Video stores offer high-end audio and video products and services. The International segment is comprised of Future Shop and Best Buy operations in Canada. Future Shop and Canadian Best Buy stores offer Musicland We acquired Musicland Stores Corporation in...

  • Page 20
    .... District managers monitor store operations and meet regularly with store managers to discuss merchandising, new product introductions, sales promotions, customer loyalty programs, employee satisfaction surveys and store operating performance. Similar meetings are conducted at the corporate level...

  • Page 21
    ... the addition of supervisory positions and the realignment of management team roles. The new labor model retains the core Future Shop commissioned sales environment, while adding an hourly paid sales and merchandising team. International store operations are organized to support two brands, each...

  • Page 22
    ... a customer service manager, and 48 to 95 staff associates, as well as part-time associates. The number of staff associates is dependent upon store size, sales volume and store brand. players, car stereos, home theater audio systems, mobile electronics and accessories. The home-office product group...

  • Page 23
    ... the home-office product group. Distribution U.S. Best Buy Generally, U.S. Best Buy stores' merchandise, except for major appliances and large-screen televisions, is shipped directly from manufacturers to our distribution centers located in California, Georgia, Indiana, Minnesota, New York, Ohio...

  • Page 24
    ... development program has historically focused on entering new markets; adding stores within existing markets; and relocating, remodeling and expanding existing stores. During fiscal 2005, we opened 78 new stores, converted 67 existing U.S. Best Buy stores to our customer centricity operating model...

  • Page 25
    ... Audio Video stores open at the beginning and end of each of the last five fiscal years: Stores Opened Stores Closed Total Stores at End of Fiscal Year Fiscal Year Balance forward 2001 2002 2003 2004 2005 NA - - 6 3 - NA - - - - 2 13 13 13 19 22 20 The following table reconciles Future Shop...

  • Page 26
    ...Montreal market. In addition, we anticipate opening two Future Shop stores, as well as relocating five existing stores. Finally, during fiscal 2006, we expect that 150 to 200 U.S. Best Buy stores will be opened as or converted to our customer centricity operating model. On a long-term basis, we plan...

  • Page 27
    ...8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Available Information We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the SEC...

  • Page 28
    ... ''Company Information,'' select the ''For Our Investors'' link and then the ''SEC Filings'' link. We also make available, free of charge on our Web site, the charters of the Audit Committee, Compensation and Human Resources Committee, and Nominating, Corporate Governance and Public Policy Committee...

  • Page 29
    .... Stores, Distribution Centers and Corporate Facilities The following table summarizes the geographic location of our stores at the end of fiscal 2005: Domestic Segment U.S. Best Buy Magnolia Audio Stores Video Stores Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District...

  • Page 30
    ... the new facility will allow us to meet the expected increased demand for technology products. We lease space in 13 satellite warehouses in major metropolitan markets for home delivery of major appliances and large-screen televisions. U.S. Best Buy stores utilize approximately 2.7 million square...

  • Page 31
    ... to fiduciary responsibilities, control and management of our company and unjust enrichment and seeks judgment in favor of Best Buy Co., Inc. against certain named officer and director defendants for damages, equitable relief and attorneys' fees, costs and expenses. By agreement between the parties...

  • Page 32
    ... Manager Executive Vice President - Best Buy for Business Executive Vice President - Finance and Chief Financial Officer Executive Vice President - Consumer and Brand Marketing and Chief Marketing Officer Executive Vice President - Sourcing and Alliances Executive Vice President - Customer Business...

  • Page 33
    ... has held positions as President - Best Buy International, Senior Vice President, Regional Vice President, district manager and store manager. Darren R. Jackson was named Chief Financial Officer in February 2001. Mr. Jackson joined us in 2000 as Senior Vice President - Finance and Treasurer. Prior...

  • Page 34
    ... served as Senior Vice President - Public Affairs and Investor Relations Officer since 2000. Since joining us in 1983, Ms. Hoff has served in various capacities including Vice President of Corporate Communications and Public Relations. Joseph M. Joyce was promoted to Senior Vice President - General...

  • Page 35
    ... the market price of the stock. At the end of fiscal 2005, $382 million of the $500 million originally authorized by our Board of Directors was available for future share repurchases. Cash provided by future operating activities, available cash and cash equivalents, as well as short-term investments...

  • Page 36
    ...500 million share repurchase program as of the end of fiscal 2005: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) Fiscal Period Total Number of Shares Purchased Average...

  • Page 37
    ... of accounting changes Net earnings Cash dividends declared and paid Common stock price: High Low Operating Statistics Comparable store sales change(6) Gross profit rate Selling, general and administrative expense rate Operating income rate Year-End Data Current ratio(7) Total assets(7) Long-term...

  • Page 38
    ... shares of common stock and adds back the related after-tax interest expense. Prior fiscal years have been restated to reflect the adoption of EITF Issue No. 04-08. (6) Comprised of revenue at stores and Web sites operating for at least 14 full months, as well as remodeled and expanded locations...

  • Page 39
    ...Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Overview Best Buy Co., Inc. is a specialty retailer of consumer electronics, home-office products, entertainment software, appliances and related services. We operate two reportable segments: Domestic and International...

  • Page 40
    ..., we believe that supply chain improvements, such as more accurate demand forecasting and direct importing, as well as sourcing opportunities and private-labeled products, could add up to 0.5% of revenue to our annual operating income rate. Next, we believe the strategic relationships we formed in...

  • Page 41
    ... manage and further develop the full scope of our information technology operations. As part of the agreement, we plan to optimize our supply chain management capabilities, enhance the vendor management of our customer call centers, expand the functionality of our Web sites and improve the reporting...

  • Page 42
    ... product selection, home integration capabilities, service and technology upgrades. By expanding and strengthening our service offerings, we believe that we will boost customer traffic, raise our gross profit rate and improve customer loyalty while strengthening our competitive advantage. Geek Squad...

  • Page 43
    ... by the Securities and Exchange Commission (SEC) in its letter dated February 7, 2005, to the American Institute of Certified Public Accountants Center for Public Company Audit Firms. In the letter, the SEC expressed its views regarding certain operating lease accounting matters and the related...

  • Page 44
    ... business model. Consolidated Results The following table presents selected consolidated financial data for each of the past three fiscal years ($ in millions, except per share amounts): Consolidated Performance Summary 2005 2004(1) 2003(1) Revenue Comparable stores sales % gain(2) Gross profit...

  • Page 45
    ... advertising and promotional campaigns, including a full year of Reward Zone, our customer loyalty program introduced in the second quarter of fiscal 2004. Products having the largest impact on our fiscal 2005 comparable store sales gain included digital televisions, MP3 players, digital cameras...

  • Page 46
    ...Free Products or Services to Be Delivered in the Future, the value of points earned by Reward Zone members is recorded as a liability and a reduction of revenue. The value of points earned by our loyalty program members is included as a liability and a reduction of revenue at the time the points are...

  • Page 47
    ... the methodology for calculating our comparable store sales percentage gain did not impact previously reported revenue, net earnings or cash flows. (2) During fiscal 2005, we reclassified from SG&A into cost of goods sold certain expenses related to operating our distribution network, consisting...

  • Page 48
    ... initiative. Our fiscal 2005 SG&A rate also benefited from favorable settlements with two credit card companies. These factors were partially offset by additional expenses associated with our customer centricity initiative, and charges to correct our accounting for leases and for settlement of...

  • Page 49
    ... operated 20 Magnolia Audio Video stores in California, Washington and Oregon. The following table reconciles Domestic stores open at the beginning and end of fiscal 2004: Total Stores at End of Fiscal 2003 Stores Opened Stores Closed Total Stores at End of Fiscal 2004 U.S. Best Buy Magnolia Audio...

  • Page 50
    ... store sales gain accounted for the remainder of the revenue increase. The comparable store sales increase reflected market share gains and was driven by increased revenue from MP3 players, notebook computers, digital televisions and digital cameras. The International segment's gross profit rate...

  • Page 51
    ... fiscal 2004. At the end of fiscal 2004, we operated 108 Future Shop stores throughout all Canadian provinces and 19 Canadian Best Buy stores in Ontario, Alberta and Manitoba. Discontinued Operations On March 25, 2005, we received notification from the Internal Revenue Service (IRS) of a favorable...

  • Page 52
    ... Statements and Supplementary Data, of this Annual Report on Form 10-K. Impact of Inflation and Changing Prices The impact of inflation and changing prices has not been material to our revenue or earnings from continuing operations in any of the last three fiscal years. Highly competitive market...

  • Page 53
    ... to the addition of new stores and changes in product mix, including expanded assortments of digital imaging, home theater and computing products. The increased inventory levels also reflected our efforts to improve in-stock positions in product groups that have been driving our revenue growth. The...

  • Page 54
    ... of new retail locations, information systems, distribution center improvements and other store projects, including the conversion of 67 U.S. Best Buy stores to our customer centricity platform. The primary purposes of the cash investment activity were to support our expansion plans, improve...

  • Page 55
    ... and equipment, including opening 78 new stores; converting 67 stores to our customer centricity operating model; relocating 10 stores; completing construction of our new Oklahoma distribution center; completing the expansion of our Ontario distribution center; and information technology systems...

  • Page 56
    ... sale-leaseback accounting treatment. We also have a master lease program which was used for the purpose of constructing and leasing new retail locations. At the end of fiscal 2005, $55 million in leases related to new stores were outstanding under the master lease program. The master lease program...

  • Page 57
    ... on our share repurchase program is included in Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, of this Annual Report on Form 10-K. In the third quarter of fiscal 2004, our Board of Directors declared the Company's first-ever cash...

  • Page 58
    ...Fiscal Year 2005 2004 Debt (including current portion) Capitalized operating lease obligations (8 times rental expense) Total debt (including capitalized operating lease obligations) Debt (including current portion) Capitalized operating lease obligations (8 times rental expense) Total shareholders...

  • Page 59
    ... management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with Description Inventory Reserves We value our inventory...

  • Page 60
    ... net earnings by approximately $5 million for the fiscal year ended February 26, 2005. The calculation of our location closing liability contains uncertainties because it requires management to make assumptions regarding and to apply judgment to estimate the timing and duration of future vacancy...

  • Page 61
    ... require management to make assumptions regarding and to apply judgment in estimating future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. We have not made any material changes...

  • Page 62
    ...judgment to estimate the exposures associated with our various filing positions. Our effective income tax rate is also affected by changes in law, the location of new stores or business ventures, the level of earnings and the results of tax audits. Although management believes that the judgments and...

  • Page 63
    ... 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for a complete discussion of our revenue recognition policies. Reward Zone, our customer loyalty program, allows members to earn points for each purchase completed at U.S. Best Buy stores. After earning the required...

  • Page 64
    ... expense for all stock-based compensation in our consolidated statements of earnings. In addition, SFAS No. 123(R) will require the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow. The new requirement...

  • Page 65
    ... consolidated financial data ($ in millions, except per share amounts): Three Months Ended February 26, February 28, 2005 2004(1) (Unaudited) Revenue Comparable store sales % gain(2) Gross profit as % of revenue SG&A as % of revenue Operating income Operating income as % of revenue Earnings from...

  • Page 66
    ... gift cards and Reward Zone certificates following the holiday selling season. Products that had the largest impact on our fiscal fourth-quarter comparable store sales gain included digital televisions, MP3 players, notebook computers, digital cameras, DVDs and appliances. Our gross profit rate for...

  • Page 67
    ... fourth quarter, benefiting primarily from new product introductions, an improved labor model, enhanced customer experience and effective promotions. The low single-digit comparable store sales gain in home-office products was driven primarily by increased sales of notebook computers, which were...

  • Page 68
    ...accounting for leases. International The following table presents selected financial data for the International segment ($ in millions): Three Months Ended February 26, February 28, 2005 2004(1) (Unaudited) Revenue Comparable stores sales % gain(2) Gross profit as % of revenue SG&A as % of revenue...

  • Page 69
    ... to support the opening of approximately 60 new U.S. Best Buy stores, 15 Canadian Best Buy stores and two Future Shop stores. We also anticipate opening or converting 150 to 200 stores to our customer centricity operating model and relocating nine U.S. Best Buy and five Future Shop stores. Capital...

  • Page 70
    ...05 per diluted share. This earnings range assumes a comparable store sales gain in the low single digits, as well as expenses associated with converting additional stores to our customer centricity operating model and growing our services business. higher than the current rates. If the rates on the...

  • Page 71
    ... reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed under the supervision of our principal executive officer and principal financial and accounting officer, and effected by our Board of Directors, management...

  • Page 72
    ...accordance with the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Best Buy Co., Inc. and subsidiaries as of February 26, 2005 and February 28, 2004, and the related consolidated statements of earnings, changes in shareholders' equity and cash flows for...

  • Page 73
    ...Best Buy Co., Inc. and subsidiaries as of February 26, 2005, and February 28, 2004, and the related consolidated statements of earnings, changes in shareholders' equity, and cash flows for each of the three years in the period ended February 26, 2005. Our audits also included the financial statement...

  • Page 74
    ... billion shares; Issued and outstanding - 328,342,000 and 324,648,000 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total shareholders' equity Total Liabilities and Shareholders' Equity See Notes to Consolidated Financial Statements. $ 470...

  • Page 75
    Consolidated Statements of Earnings $ in millions, except per share amounts For the Fiscal Years Ended February 26, 2005 February 28, 2004 March 1, 2003 Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Operating income Net interest income (expense) Earnings from ...

  • Page 76
    ... to property and equipment Purchases of available-for-sale securities Sales of available-for-sale securities Other, net Total cash used in investing activities from continuing operations Financing Activities Long-term debt payments Issuance of common stock under employee stock purchase plan and for...

  • Page 77
    Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Common Shares Common Stock Retained Earnings Total Balances at March 2, 2002 Net earnings Other comprehensive income (loss), net of tax: ...

  • Page 78
    ...-end audio and video products and related services. At February 26, 2005, we operated 20 Magnolia Audio Video stores in California, Washington and Oregon. The International segment is comprised of Future Shop and Best Buy operations in Canada. At February 26, 2005, we operated 114 Future Shop stores...

  • Page 79
    ... income tax purposes. Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated. Costs associated with the acquisition or development of software for internal use are...

  • Page 80
    ...are included in SG&A and primarily relate to our Domestic segment operations. We adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, on January 1, 2003. Since adoption, the present value of costs associated with location closings, primarily future lease costs, are...

  • Page 81
    ... Audio Video. The charge represented a complete write-off of the goodwill associated with these businesses. As described in Note 2, Discontinued Operations, we have classified Musicland's financial results as discontinued operations, including the related goodwill impairment charge. The changes...

  • Page 82
    ... from the sale of gift cards are deferred until the customer uses the gift card to acquire merchandise or services. Amounts billed to customers for shipping and handling are included in revenue. An allowance has been established for estimated sales returns. We sell extended service contracts on...

  • Page 83
    ... service by submitting a claim for a refund or rebate. For sales incentives in which we are the obligor, the reduction in revenue is recognized at the time the product is sold. We have a customer loyalty program which allows members to earn points for each purchase completed at U.S. Best Buy stores...

  • Page 84
    ... Internal Revenue Code of 1986, as amended. Restricted stock awards result in compensation expense as discussed in Note 5, Shareholders' Equity. We expect to include the total expense associated with stock-based compensation issued to employees and directors in our consolidated statement of earnings...

  • Page 85
    ... fair value of stock options granted during fiscal 2005, 2004 and 2003 used in computing pro forma compensation expense was $21.26, $30.93 and $23.91 per share, respectively. Derivative Financial Instruments SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, requires that...

  • Page 86
    ... earnings and earnings per share as if we had applied the fair value method of accounting for stock-based compensation. SFAS No. 123(R) will also require the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash...

  • Page 87
    ...widely accepted valuation techniques, including discounted cash flows. We based fair values on the then-current expectations for the business in light of the then-existing retail environment and the uncertainty associated with future trends in prerecorded music products. In fiscal 2004, we sold our...

  • Page 88
    .... In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and based on our ability to market and sell these instruments, we classify auction-rate debt securities and other investments in debt securities as available-for-sale and carry them at amortized cost...

  • Page 89
    ... price of $69.00 per share, if the closing price of our common stock exceeds a specified price for a specified period of time, if our credit rating falls below specified levels, if the debentures are called for redemption or if certain specified corporate transactions occur. At February 26...

  • Page 90
    ... time of grant. For a complete description of the Omnibus Plan, see our 2004 Proxy Statement dated May 17, 2004. As of February 26, 2005, a total of 11.7 million shares were available for future grants under the Omnibus Plan. Upon shareholder approval of the Omnibus Plan, all of our previous stock...

  • Page 91
    ... which no more than 25% may vest at the time of award, and no more than 25% may vest on each anniversary date thereafter. Outstanding performance-based restricted stock vests at the end of a three-year incentive period based on our total return to shareholders compared with the total return 75

  • Page 92
    ... the Best Buy Co., Inc. 2003 Employee Stock Purchase Plan (ESPP) at our 2003 Regular Meeting of Shareholders. Five million shares have been reserved for issuance under the ESPP. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of...

  • Page 93
    ... to $1.5 billion of our common stock from time to time through open market purchases. This share repurchase program has no stated expiration date. The $1.5 billion share repurchase program terminated and replaced the $500 share repurchase program authorized by our Board in June 2004. During fiscal...

  • Page 94
    ... expressed by the Securities and Exchange Commission (SEC) in its letter dated February 7, 2005, to the American Institute of Certified Public Accountants Center for Public Company Audit Firms. In the letter, the SEC expressed its views regarding operating lease accounting matters and the related...

  • Page 95
    ... the facility in which case straight-line rent amounts are capitalized. The $21 charge to interest expense was related to the change in accounting for certain leases as financing leases rather than operating leases, as these leases did not qualify for sale-leaseback treatment in accordance with SFAS...

  • Page 96
    ... due under future noncancelable subleases. 8. Benefit Plans 9. Income Taxes We sponsor retirement savings plans for employees meeting certain age and service requirements. The plans provide for company-matching contributions, which are subject to annual approval by our Board. The total matching...

  • Page 97
    ...26, 2005 Feb. 28, 2004 Accrued property expenses Other accrued expenses Deferred revenue Compensation and benefits Inventory Net operating loss carryforwards Goodwill Other Total deferred tax assets Property and equipment Convertible debt Other Total deferred tax liabilities Net deferred tax assets...

  • Page 98
    ..., except per share amounts 10. Segments We operate two reportable segments: Domestic and International. The Domestic segment is comprised of U.S. Best Buy and Magnolia Audio Video operations. The International segment is comprised of Future Shop and Best Buy operations in Canada. Our segments...

  • Page 99
    ... with real estate developers provide for minimum rentals ranging from 10 to 20 years, which if consummated based on current cost estimates, will approximate $53 annually over the lease terms. We assumed a liability for certain extended service contracts when we acquired Future Shop in fiscal 2002...

  • Page 100
    .... The statement of earnings for the year ended February 28, 2004, includes a loss on disposal of discontinued operations (which was primarily noncash) of $66, net of tax, related to the sale of Musicland. In addition, approximately $198 of Musicland's intercompany indebtedness to Best Buy Co...

  • Page 101
    ... Total current assets Net Property and Equipment Goodwill Tradename Long-Term Investments Other Assets Investments in Subsidiaries Total Assets Liabilities and Shareholders' Equity Current Liabilities Accounts payable Unredeemed gift card liabilities Accrued compensation and related expenses...

  • Page 102
    ... note receivable Total current assets Net Property and Equipment Goodwill Tradename Other Assets Investments in Subsidiaries Total Assets Liabilities and Shareholders' Equity Current Liabilities Accounts payable Unredeemed gift card liabilities Accrued compensation and related expenses Accrued...

  • Page 103
    ... per share amounts Condensed Consolidating Statements of Earnings For the Fiscal Year Ended February 26, 2005 Best Buy Co., Inc. Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Operating...

  • Page 104
    ... Statements of Earnings For the Fiscal Year Ended February 28, 2004 Best Buy Co., Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Elimination of intercompany indebtedness Operating...

  • Page 105
    ... per share amounts Condensed Consolidating Statements of Earnings For the Fiscal Year Ended March 1, 2003 Best Buy Co., Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Operating...

  • Page 106
    ... to property and equipment Purchases of available-for-sale securities Sales of available-for-sale securities Other, net Total cash used in investing activities from continuing operations Financing activities Long-term debt payments Issuance of common stock under employee stock purchase plan and for...

  • Page 107
    ... to property and equipment Purchases of available-for-sale securities Sales of available-for-sale securities Other, net Total cash used in investing activities from continuing operations Financing activities Dividends paid Issuance of common stock Repurchase of common stock Long-term debt payments...

  • Page 108
    ... property and equipment Purchases of available-for-sale securities Sales of available-for-sale securities Other, net Total cash used in investing activities from continuing operations Financing activities Issuance of common stock Net proceeds from issuance of long-term debt Other, net Long-term debt...

  • Page 109
    ... Fiscal Year Fiscal 2005 as revised(1) Revenue Comparable store sales % change Gross profit Operating income Earnings from continuing operations Gain on disposal of discontinued operations(3) Net earnings Diluted earnings per share:(4) Continuing operations Discontinued operations Diluted earnings...

  • Page 110
    ... the current-year presentation. The reclassification had no impact on previously reported operating income, net earnings, financial position or cash flows. (2) Comprised of revenue at stores and Web sites operating for at least 14 full months, as well as remodeled and expanded locations. Relocated...

  • Page 111
    ... this Annual Report on Form 10-K. As required by section 303A.12(a) of the New York Stock Exchange Listed Company Manual, our Item 9A. Controls and Procedures. Disclosure Controls and Procedures Our management, including the Chief Executive Officer (principal executive officer) and Chief Financial...

  • Page 112
    ... and all of our employees, including our Chief Executive Officer and our Chief Financial Officer. The Code of Business Ethics is available on our Web site, www.BestBuy.com - under ''Company Information,'' select the ''For Our Investors'' link and then the ''Corporate Governance'' link. A copy of The...

  • Page 113
    ... Relationships and Related Party Transactions'' in the Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Securities Authorized for Issuance Under Equity Compensation Plans The information...

  • Page 114
    ... Best Buy Canada Ltd. Magasins Best Buy Ltee dated March 9, 2004 5-Year Revolving Credit Agreement with U.S. Bank National Association dated December 22, 2004 1994 Full-Time Employee Non-Qualified Stock Option Plan, as amended 1997 Employee Non-Qualified Stock Option Plan, as amended 1997 Directors...

  • Page 115
    ... to Item 601(b)(4)(iii) of Regulation S-K under the Securities Act of 1933, the Registrant has not filed as exhibits to the Form 10-K certain instruments with respect to long-term debt under which the amount of securities authorized does not exceed 10% of the total assets of the Registrant. The...

  • Page 116
    ... duly authorized. Best Buy Co., Inc. (Registrant) By: /s/ Bradbury H. Anderson Bradbury H. Anderson Vice Chairman and Chief Executive Officer Date: May 10, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 117
    ...-Quarter Earnings Third-Quarter Earnings December Revenue Fourth-Quarter Earnings ANNUAL SHAREHOLDERS' MEETING June 23, 2005, 9:30 a.m. (CDT) Best Buy Corporate Campus -Theater If you have a proposal for a future meeting, please send it to Jennifer Driscoll in the Investor Relations Department at...

  • Page 118
    ... (shown here) capped Best Buy's fall planning session for store general managers, officers and directors. At this pivotal meeting, leaders rallied around the customer centricity initiative. A spirit of teamwork and collaboration pervaded the event. Teaching four core values-including "having fun...