Best Buy 2006 Annual Report Download

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Fiscal 2006 Annual Report
wired.

Table of contents

  • Page 1
    Fiscal 2006 Annual Report wired.

  • Page 2
    As a retailer, the secret today isn't how you invest capital. It's how you invest in your employees, so that they can deliver superior service to customers. - Br a d b ur y H. A nd er son Vice Chairman and CEO Best Buy 2006 Annual Report

  • Page 3
    ...ins • 40% of U.S. Best Buy stores now operate under the customer-centric operating model • We expanded our services offering to include 12,000 Geek Squad ® agents and 1,500 home theater installers • We improved store employee retention by 15 percent • Reward Zone memberships grew more than...

  • Page 4
    ... and employees drives our growth. How do we encourage it? We give our employees the training and tools to serve any customer effectively. In turn, our employees provide us with customer input and ideas for future growth; that's the power of customer centricity. 2 Best Buy 2006 Annual Report

  • Page 5
    ...we converted a record number of stores to the customer-centric operating model. W e finished the year with 300 stores, or 40 percent of U.S. Best Buy stores, operating under this model. W e expanded the number of Geek Squad agents by 5,000, and brought our home theater installation services in-house...

  • Page 6
    ...trends. We offer the best names in home theater, premium services and expert installation through our Magnolia Home Theater locations (we'll have 300 inside Best Buy stores by the end of fiscal 2007). The result is a customized, end-to-end solution for each customer. 4 Best Buy 2006 Annual Report

  • Page 7
    ... as digital music subscriptions, digital cable and voice-over-Internet telephony. • Six, we plan to pursue an international growth strategy. W e are beginning by leveraging our supply chain and technology investments in Canada, where we operate both Future Shop and Best Buy stores. W e also are...

  • Page 8
    ... their own business. O ur Best Buy For Business locations offer small businesses a better way to buy, install and repair technology. We provide trained business professionals and product assortments geared to their needs, all backed by Geek Squad support and service. 6 Best Buy 2006 Annual Report

  • Page 9
    ... in our supply chain and information technology systems; leverage of our investments in Canada; and organic growth fueled by new store openings, customer centricity work and the expansion of our services business. 19% Entertainment Software 43% Consumer Electronics 6% Appliances Product Revenue Mix...

  • Page 10
    ...to-capitalization ratio (1) Cash dividends per share declared and paid Value of common stock repurchased T otal retail square footage (in thousands)(2) Revenue per retail square foot (3) N umber of stores(3) U.S. Best Buy stores Magnolia Audio Video stores Future Shop stores Canadian Best Buy stores...

  • Page 11
    ... 3 , 5 President and Chief O perating O fficer - Best Buy Canada Stevenson Professor of Management N , 2, 5 Sha ri L. Ba lla r d Executive Vice President - Human Capital and Leadership Information Systems Ka thy J. H iggins V icto r Director since 1999 Centera Corporation Founder and President...

  • Page 12
    ... calculated using effective tax rates for FY 2004 (38.3%), FY 2005 (35.3%) and FY 2006 (33.7%) (3) Long-term debt plus applicable current portion (4) Capitalized operating leases, net of cash, cash equivalents and short-term investments in excess of $300 million 10 Best Buy 2006 Annual Report

  • Page 13
    investor survey D e a r I n v e s t o r : W e value your opinions, and we place a high priority on satisfying your need for information about Best Buy. Please use this card to give us feedback on our annual report. Please evaluate our annual report on a scale of 1 to 5, w ith 5 being most favorable....

  • Page 14
    NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES BUSINESS REPLY MAIL FIRST-CLASS MAIL PERMIT NO. 21327 MINNEAPOLIS MN POSTAGE WILL BE PAID BY ADDRESSEE ATTN : IN VESTO R RELATIO N S BEST BUY CO RPO RATE CAMPUS 7601 Penn Avenue South Richfield, MN 55423-9969

  • Page 15
    ...) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 25, 2006 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1 -95 95 BEST BUY...

  • Page 16
    ...-looking statements made in this Annual Report on Form 10-K. In addition, general economic conditions, acquisitions and development of new businesses, product availability, sales volumes, profit margins, weather, foreign currency fluctuation, availability of suitable real estate locations, our...

  • Page 17
    ... With Accountants on Accounting and Financial Disclosure. Controls and Procedures. Other Information. 23 25 27 50 51 93 93 93 PART II PART III Directors and Executive Officers of the Registrant. Executive Compensation. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 18
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  • Page 19
    ..., 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 20
    ... technology support services to customers. We have since expanded Geek Squad service to be available in all U.S. Best Buy stores, as well as in 12 stand-alone stores, with more than 12,000 agents. Our goal is to build Geek Squad into North America's largest consumer provider of computer repair...

  • Page 21
    ... as more square footage devoted to entertainment software. Further, Canadian Best Buy stores do not carry appliances. We have expanded Geek Squad service to be available in all Canadian Best Buy stores, as well as in five stand-alone stores. At February 25, 2006, we operated 118 Future Shop stores...

  • Page 22
    ... sales personnel and one to eight hourly personnel. Corporate management for Magnolia Audio Video stores centrally controls Merchandise Domestic Segment U.S. Best Buy stores offer merchandise in four product groups: consumer electronics, home-office, entertainment software and appliances...

  • Page 23
    ... stores offer merchandise in four product groups: consumer electronics, home-office, entertainment software and appliances. Consumer electronics, the largest product group for fiscal 2006 based on revenue, consists of video and audio products. Video products include televisions, digital cameras, DVD...

  • Page 24
    ... markets, some were in new markets, including the opening of Canadian Best Buy stores in Quebec. During fiscal 2006 we closed one U.S. Geek Squad store and one Future Shop store. Suppliers Our strategy depends, in part, upon our ability to offer customers a broad selection of name-brand products...

  • Page 25
    ... Best Buy stores open at the beginning and end of each fiscal year since inception of the International segment (excluding five Geek Squad stores at the end of fiscal 2006): Total Stores at Stores End of Closed Fiscal Year PART I Fiscal Year Stores Opened Fiscal Year Stores Opened Balance...

  • Page 26
    ... technology and entertainment products in a fun and informative shopping environment. Our stores compete by aggressively advertising and emphasizing a complete product and service solution, value pricing and financing alternatives. In addition, our trained and knowledgeable sales and service staffs...

  • Page 27
    ...-referenced information will also be made available, free of charge, upon written request to: Best Buy Co., Inc. Investor Relations Department 7601 Penn Avenue South Richfield, MN 55423-3645 Number of Employees At the end of fiscal 2006, we employed approximately 128,000 full-time, part-time and...

  • Page 28
    ...sufficient number of qualified individuals in the future may delay planned openings of new stores or affect the speed to enter new growth areas such as Best Buy For Business and services. Delayed store openings, significant increases in employee turnover rates or significant increases in labor costs...

  • Page 29
    Our growth strategy includes expanding our business, both in existing markets and by opening stores in new markets. Our future growth is dependent, in part, on our ability to build or lease new stores. We compete with other retailers and businesses for suitable locations for our stores. Local land ...

  • Page 30
    ... management information systems for inventory management, distribution and other functions. We also rely heavily on human resources support to attract, develop and retain a sufficient number of qualified employees. Any disruption in our relationship with Accenture could result in decreased revenue...

  • Page 31
    ... that could cause actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf. Item 1B. Unresolved Staff Comments. At February 25, 2006, there were no unresolved comments from the SEC staff regarding our periodic or current reports. PART I 17

  • Page 32
    ... 74 7 1 23 16 2 19 742 Domestic Segment Magnolia Audio U.S. Geek Squad Video Stores Stores 11 2 - 1 3 2 2 3 7 - - - - 1 20 12 International Segment Canadian Best Future Shop Canadian Geek Buy Stores Stores Squad Stores 7 15 - 6 21 3 2 5 - - 3 - - 1 - - 2 - 20 45 2 - 1 - 8 22 - 1 3 - 44 118...

  • Page 33
    ... Best Buy stores, 20 Magnolia Audio Video stores and 12 Geek Squad stores, totaling approximately 30.8 million retail square feet. The operations of the Domestic segment are serviced by the following distribution centers: Square Footage Owned or Leased The operations of our International segment...

  • Page 34
    ... Buy International President and Chief Operating Officer - Best Buy Canada Executive Vice President - Human Capital and Leadership Executive Vice President - General Merchandise Manager Executive Vice President - Best Buy For Business Executive Vice President - Finance and Chief Financial Officer...

  • Page 35
    ... P.L.C., a British department store chain, and has held executive positions at F.W. Woolworth & Co., a department store chain, as well as several other retailers in the United Kingdom. Kevin T. Layden was named President and Chief Operating Officer - Best Buy Canada (formerly Future Shop Ltd.) in...

  • Page 36
    ... as chief operating officer of Peapod, Inc., an Internet retailer of groceries. Mr. Walden has also held executive positions with Ameritech Corporation, a telecommunications company, and Storage Technology Corporation, a maker of data storage products. Earlier he practiced corporate and securities...

  • Page 37
    ... share per quarter. The payment of cash dividends is subject to customary legal and contractual restrictions. Future dividend payments will depend on the Company's earnings, capital requirements, financial condition and other factors considered relevant by our Board. Purchases of Equity Securities...

  • Page 38
    ...,000,000 Additional information regarding our share repurchase program is included in the Liquidity and Capital Resources and Outlook for Fiscal 2007 sections of Management's Discussion and Analysis of Financial Condition and Results of Operations, included as Item 7 of this Annual Report on Form...

  • Page 39
    ..., general and administrative expense rate Operating income rate Y e a r -E n d D a ta Current ratio(7) Total assets(7) Long-term debt, including current portion(7) Total shareholders' equity Number of stores U.S. Best Buy stores(8) Magnolia Audio Video stores International stores(8) Total retail...

  • Page 40
    ... store sales percentage gain did not impact previously reported revenue, net earnings or cash flows. (7) Includes both continuing and discontinued operations. The current ratio is calculated by dividing total current assets by total current liabilities. (8) Excludes Geek Squad stand-alone stores...

  • Page 41
    ... 20 stores located in California, Washington and Oregon at the end of fiscal 2006. U.S. Geek Squad offers computer repair, support and installation services in all U.S. Best Buy stores and 12 stand-alone stores at the end of fiscal 2006. Pacific Sales Kitchen and Bath Centers, Inc. (Pacific Sales...

  • Page 42
    five stand-alone stores at the end of fiscal 2006. The International segment offers products and services similar to those offered by the Domestic segment, although Canadian Best Buy stores do not sell appliances. In support of our retail store operations, we also operate Web sites for each of our ...

  • Page 43
    ...of U.S. Best Buy stores. Second, we expanded and strengthened our services offering by adding 5,000 Geek Squad agents. In addition, we brought our previously outsourced home theater installation services in-house to serve our customers better. Third, we expanded individualized marketing capabilities...

  • Page 44
    ... lower product costs, more effective pricing strategies, and increased sales of higher-margin services and privatelabel products. We also benefited from better product transition management and a more stable promotional environment. • Our SG&A rate for fiscal 2006 increased by 1.3% of revenue to...

  • Page 45
    ... products contributed to the comparable store sales gain. Products having the largest impact on our fiscal 2006 comparable store sales gain included flat-panel televisions, MP3 players and accessories, notebook computers, digital cameras and accessories, and video gaming hardware. Flat-panel...

  • Page 46
    ... resulting from our strong financial performance; a growing number of stores operating under the higher-cost, customer-centric labor model; costs associated with supporting our services business and the absence of favorable settlements with two credit card companies as recognized in fiscal...

  • Page 47
    ... retail industry. The increase in promotional activity was partially offset by the increase of services revenue in the revenue mix, as services carry a higher gross profit rate, and benefits from our global sourcing initiative which enabled us to improve margins through lower product costs. Our SG...

  • Page 48
    ...: Total Stores at End of Fiscal 2005 Total Stores at End of Fiscal 2006 Stores Opened Stores Closed U.S. Best Buy Magnolia Audio Video U.S. Geek Squad Total 668 20 6 694 74 - 7 81 - - 1 1 742 20 12 774 Note: During fiscal 2006, we converted 163 existing U.S. Best Buy stores to our customer...

  • Page 49
    ... from flat-panel televisions, and MP3 players and accessories. Our International segment's consumer electronics and appliances groups posted an 8.2% and 18.0% comparable store sales gain for fiscal 2006, respectively. Our International segment's home-office and entertainment software groups recorded...

  • Page 50
    ...Canadian Geek Squad stores in British Columbia and Ontario. The following table reconciles International stores open at the beginning and end of fiscal 2005: Total Stores at End of Fiscal 2004 Total Stores at End of Fiscal 2005 Stores Opened Stores Closed Future Shop Canadian Best Buy Total 108...

  • Page 51
    ...our products and services, and on our expenses. In addition, price deflation and the continued commoditization of key technology products affect our ability to increase our gross profit rate. Liquidity and Capital Resources Summary We ended fiscal 2006 with $3.7 billion of cash and cash equivalents...

  • Page 52
    ..."Capital Expenditures" in the Liquidity and Capital Resources section of this MD&A for additional information. In fiscal 2006, we used cash for the construction of new retail locations, information systems and other store projects, including the conversion of 163 U.S. Best Buy stores to our customer...

  • Page 53
    ... financial institution or directly provide our customers with extended financing. An interest coverage ratio represents the ratio of pre-tax earnings before fixed charges (interest expense and the interest portion of rent expense) to fixed charges. Our interest coverage ratio calculated as reported...

  • Page 54
    ... revenue or net earnings. Capital Expenditures A component of our long-term strategy is our capital expenditure program. This program includes, among other things, investments in new stores, store remodeling, store relocations and expansions, new distribution facilities and information technology...

  • Page 55
    ... for sale-leaseback accounting treatment. At the end of fiscal 2006, $157 million is outstanding under financing lease obligations. We had a master lease program which was used to construct and lease new retail locations. At the end of fiscal 2005, $55 million in leases related to new stores were...

  • Page 56
    ... to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Our debt-to-capitalization ratio, which represents the ratio of total debt, including the current portion of long-term debt, to total capitalization (total debt...

  • Page 57
    ... included open purchase orders in the table above. Substantially all open purchase orders are fulfilled within 30 days. Included in other long-term liabilities on our consolidated balance sheet at February 25, 2006, is a $74 million obligation for deferred compensation. As the specific payment dates...

  • Page 58
    ...affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are...

  • Page 59
    ... asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset. Using the impairment evaluation methodology described herein, we recorded long-lived asset impairment charges totaling $4 million, in the aggregate, during the fiscal year ended February 25, 2006...

  • Page 60
    ... evaluation by performing internal valuation analyses, considering other publicly available market information and using an independent valuation firm. In the fourth quarter of fiscal 2006, we completed our annual impairment testing of goodwill and the Future Shop tradename using the methodology...

  • Page 61
    ...8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for a complete discussion of our revenue recognition policies. We have a customer loyalty program which allows members to earn points for each purchase completed at U.S. Best Buy stores or through our BestBuy.com Web...

  • Page 62
    ...and nonvested share awards, and an employee stock purchase plan. See Note 1, Summary of Significant Accounting Policies, and Note 5, Shareholders' Equity, to the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form...

  • Page 63
    ..., including the costs of converting additional stores to our customer centricity model. Specifically, the capital expenditures are expected to support the opening of 75 to 80 new U.S. Best Buy stores, approximately three Canadian Best Buy stores and four to five Future Shop stores. We anticipate...

  • Page 64
    ... or financial position. We do not manage our foreign currency exchange rate risk through the use of derivative instruments. Changes in the overall level of interest rates affect interest income generated from our short-term and long-term investments in debt securities. If overall interest rates were...

  • Page 65
    ... 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 66
    ... Registered Public Accounting Firm Shareholders and Board of Directors Best Buy Co., Inc. We have audited management's assessment, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting, that Best Buy Co., Inc. and subsidiaries (the "Company") maintained...

  • Page 67
    ... Public Accounting Firm Shareholders and Board of Directors Best Buy Co., Inc. We have audited the accompanying consolidated balance sheet of Best Buy Co., Inc. and subsidiaries (the "Company") as of February 25, 2006, and the related statements of earnings, changes in shareholders' equity, and cash...

  • Page 68
    Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements Shareholders and Board of Directors Best Buy Co., Inc. We have audited the accompanying consolidated balance sheet of Best Buy Co., Inc. and subsidiaries as of February 26, 2005, and the related consolidated...

  • Page 69
    ... and outstanding - 485,098,000 and 492,512,000 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. February 25, 2006 February...

  • Page 70
    Consolidated Statements of Earnings $ in millions, except per share amounts For the Fiscal Years Ended February 25, 2006 February 26, 2005 February 28, 2004 Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Operating income Net interest income (expense) Earnings ...

  • Page 71
    ...of common stock under employee stock purchase plan and for the exercise of stock options Dividends paid Long-term debt payments Net proceeds from issuance of long-term debt Excess tax benefits from stock-based compensation Other, net Total cash used in financing activities from continuing operations...

  • Page 72
    Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions Additional Paid-In Capital Accumulated Other Comprehensive Income Common Shares Common Stock Retained Earnings Total Balances at March 1, 2003 Net earnings Foreign currency translation adjustments Total ...

  • Page 73
    ... and video products and related services through 20 stores in California, Washington and Oregon at the end of fiscal 2006. U.S. Geek Squad offers computer repair, support and installation services in all U.S. Best Buy stores and at 12 stand-alone stores at the end of fiscal 2006. The International...

  • Page 74
    .... Costs associated with the acquisition or development of software for internal use are capitalized and amortized over the expected useful life of the software, from three to seven years. A subsequent addition, modification or upgrade to Merchandise Inventories Merchandise inventories are recorded...

  • Page 75
    ... related to corporate technology assets that were taken out of service based on changes in our business. Impairment charges are included in selling, general and administrative expenses (SG&A) and relate to our Domestic segment operations. The present value of costs associated with location closings...

  • Page 76
    ...including the period prior to the store opening. See Note 1, Summary of Significant Accounting Policies - New Accounting Standards, for discussion of Financial Accounting Standards Board (FASB) Staff Position (FSP) No. 13-1, Accounting for Rental Costs Incurred During a Construction Period, which we...

  • Page 77
    ...asset related to our Future Shop tradename that totaled $44 and $40 at February 25, 2006, and February 26, 2005, respectively, which is included in the International segment. The change in the indefinite-lived intangible asset balance from February 26, 2005, was the result of fluctuations in foreign...

  • Page 78
    ..., long-term rent-related liabilities and advances received under vendor alliance programs. Foreign Currency Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at our consolidated balance sheet date. Results of operations and cash...

  • Page 79
    ... redemption is deemed to be remote. Gift card breakage income is included in revenue in our consolidated statements of earnings. to earn points for each purchase completed at U.S. Best Buy stores or through our BestBuy.com Web site. Points earned enable members to receive a certificate that may be...

  • Page 80
    ... inventories from our distribution centers to our retail stores. • Payroll and benefit costs for retail and corporate employees; • Occupancy costs of retail, services and corporate facilities; • Depreciation related to retail, services and corporate assets; • Advertising; • Vendor...

  • Page 81
    ...Issued to Employees, and related Interpretations in accounting for stock-based compensation awards. Prior to fiscal 2006, no stock-based compensation expense was recognized in our consolidated statements of earnings for non-qualified stock options, as the exercise price was equal to the market price...

  • Page 82
    ... computing pro forma compensation expense was $14.18 and $20.62 per share, respectively. The fair value of each non-qualified stock option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2005 2004 Risk-free interest rate(1) volatility...

  • Page 83
    ...-rate swap. Our interest-rate swap was included in our consolidated balance sheet in the current portion of long-term debt. from discontinued operations for fiscal 2004 included a loss on the disposal of discontinued operations (which was primarily noncash) of $66, net of tax, related to the sale...

  • Page 84
    ... for fiscal 2006. The convertible preferred stock was simultaneously converted into 1,492,000 shares of common stock. In August 2005, we sold 216,000 shares of the common stock in the IPO and recognized a $2 gain on the sale, which is included in SG&A. Marketable Equity Securities The carrying...

  • Page 85
    ... per share amounts 4. Debt Long-term debt consists of the following: Feb. 25, 2006 Feb. 26, 2005 Convertible subordinated debentures, unsecured, due 2022, initial interest rate 2.25% Financing lease obligations, due 2009 to 2026, interest rates ranging from 3.0% to 6.1% Capital lease obligations...

  • Page 86
    ...other equity awards up to a total of 24 million shares. Under the terms of the Omnibus Plan, awards may be granted to our employees, officers, advisors, consultants and directors. Awards issued under the Omnibus Plan vest as determined by our Compensation and Human Resources Committee at the time of...

  • Page 87
    $ in millions, except per share amounts shareholder return (TSR) compared with the TSR of companies that comprise the S&P 500 (market-based), or upon the achievement of company or personal performance goals (performance-based). Time-based share awards vest over a period of at least three years, ...

  • Page 88
    ...and 2004, respectively. Market-Based Share Awards The actual income tax benefit realized from non-qualified stock option exercises totaled $53, $59 and $41, for fiscal 2006, 2005 and 2004, respectively. The fair value of market-based share awards is determined based on generally accepted valuation...

  • Page 89
    ... been paid if the convertible debentures were converted to common stock. Earnings per Share Basic earnings per share is computed based on the weighted-average number of common shares outstanding. Diluted earnings per share is computed based on the At February 25, 2006, non-qualified stock options...

  • Page 90
    ...1.8 million shares at a cost of $61 under the $500 share repurchase program. Comprehensive Income Comprehensive income is computed as net earnings plus certain other items that are recorded directly to shareholders' equity. The significant components of comprehensive income include foreign currency...

  • Page 91
    ... our consolidated statements of cash flows. Center for Public Company Audit Firms. In the letter, the SEC expressed its views regarding operating lease accounting matters and the related interpretation/ application of these matters under existing GAAP. Following our review, we recorded a cumulative...

  • Page 92
    ... in our consolidated balance sheet at February 26, 2005, from a contra asset in property and equipment to accrued liabilities or long-term liabilities, as appropriate. These adjustments had no affect on our historical or future cash flows, or the timing of our lease payments. 8. Benefit Plans We...

  • Page 93
    ... tax rate of 35%, provided that certain criteria, including qualified U.S. reinvestment, are met. FSP No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004, was issued in December 2004. This Staff Position...

  • Page 94
    ...10. Segments We operate two reportable segments: Domestic and International. The Domestic segment is comprised of U.S. Best Buy, Magnolia Audio Video and U.S. Geek Squad operations. The International segment is comprised of Future Shop, Best Buy and Geek Squad operations in Canada. Our segments are...

  • Page 95
    ... our business segment information for continuing operations for each of the past three fiscal years: 2006 2005 2004 Revenue Domestic International Total revenue Percentage of Revenue, by Product Group Domestic: Consumer electronics Home-office Entertainment software Appliances Total International...

  • Page 96
    ... at February 26, 2005 Service charges Foreign currency exchange rate fluctuation Balance February 25, 2006 $ 18 (10) 1 9 (4) - $ 5 Contingencies On December 8, 2005, a purported class action lawsuit captioned, Jasmen Holloway, et. al. v Best Buy Co., Inc., was filed in the U.S. District Court...

  • Page 97
    ... Sales Kitchen and Bath Centers, Inc. (Pacific Sales) for $411, or $408, net of cash acquired, including transaction costs. We acquired Pacific Sales, a high-end home-improvement and appliance retailer, to further our expansion plans and increase shareholder value. The acquisition will be accounted...

  • Page 98
    ... 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 Accrued liabilities Accrued income taxes Current portion of long-term debt...

  • Page 99
    ... 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 Accrued liabilities Accrued income taxes Current portion of long-term debt...

  • Page 100
    ..., except per share amounts Condensed Consolidating Statements of Earnings For the Fiscal Year Ended February 25, 2006 Best Buy Co., Inc. Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated Revenue Cost of goods sold Gross profit Selling, general and administrative expenses...

  • Page 101
    ..., except 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...

  • Page 102
    ..., except per share amounts Condensed Consolidating 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...

  • Page 103
    ...-for-sale securities Change in restricted assets Other, net Total cash used in investing activities Financing Activities Repurchase of common stock Issuance of common stock under employee stock purchase plan and for the exercise of stock options Dividends paid Long-term debt payments Net proceeds...

  • Page 104
    ...-sale securities Change in restricted assets Other, net Total cash used in investing activities from continuing operations Financing Activities Repurchase of common stock Issuance of common stock under employee stock purchase plan and for the exercise of stock options Dividends paid Long-term debt...

  • Page 105
    ...of available-for-sale securities Sales of available-for-sale securities Change in restricted assets Other, net Total cash used in investing activities from continuing operations Financing Activities Repurchase of common stock Issuance of common stock Dividends paid Long-term debt payments Other, net...

  • Page 106
    ...14. Supplementary Financial Information (unaudited) The following tables show selected unaudited quarterly operating results for each quarter of fiscal 2006 and 2005. Fiscal Year Quarter 1st 2nd 3rd 4th Fiscal 2006(1) Revenue Comparable store sales % Gross profit Operating income Earnings from...

  • Page 107
    ... that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Management's Annual Report on Internal Control Over Financial Reporting Management...

  • Page 108
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  • Page 109
    ...by posting such information within two business days of any such amendment or waiver on our Web site, Executive Officers Information regarding our Executive Officers is furnished in a separate item captioned "Executive Officers of the Registrant" and included in Part I of this Annual Report on Form...

  • Page 110
    ... Directors" and "Certain Relationships and Related-Party Transactions" in the Proxy Statement is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information provided under the caption "Ratification of Appointment of our Independent Registered Public Accounting...

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    ... Stock Option and Performance Share Award Agreement, as approved by the Board of Directors on February 7, 2005 Best Buy Fourth Amended and Restated Deferred Compensation Plan, as amended 2006 Executive Officer Short-Term Incentive Program Statements re: Computation of Ratios Subsidiaries of the...

  • Page 112
    ... 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 113
    ... duly authorized. Best Buy Co., Inc. (Registrant) By: /s/ Bradbury H. Anderson Bradbury H. Anderson Vice Chairman and Chief Executive Officer Date: May 10, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

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    ... postings. You also may visit our W eb site to obtain product information, company background information, current news, financial information and our corporate social responsibility report. O r, contact: Best Buy Co., Inc. - Investor Relations The N ancekivell Group www.nancekivell.com Jennifer...

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    ... than 940 retail stores in N orth America, our employees connect customers with technology, entertainment products and services that make life easier and more fun. O ur brands include: Best Buy, Future Shop, Geek Squad, Magnolia Audio Video, and Pacific Sales Kitchen and Bath Centers. 7601 Penn...