Best Buy 2006 Annual Report Download - page 41

Download and view the complete annual report

Please find page 41 of the 2006 Best Buy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

27
PART II
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
We believe transparency and understan dability are the
primary goals of successful financial reporting. We remain
committed to increasing the transparency of our financial
reporting, providing our shareholders with informative
financial disclosures andpresenting an accurate view of
our financial position and operating results.
In accordance with Section 404 of the Sarbanes-Oxley Act
of 2002, our management, including our Chief Executive
Officer and Chief Financial Officer, conducted an
evaluation of our internal control over financial reporting
and concluded that such controls were effective as of
February 25, 2006. Our independent registered public
accountingfirm expressed an unqualified opinion on
management’s assessment of the effectiveness of our
internal control over financial reporting. Management’s
report on the effectiveness of our internalcontrol over
financial reporting and the related report of our
independent registered public accounting firm are included
in Item 8, Financial Statements and Supplementary Data, of
this Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial
Condition andResults of Operations (MD&A) is designed to
provide a reader of our financial statements with anarrative
from the perspective of ourmanagement on ourfinancial
condition, results of operations, liquidity andcertain other
factors that may affect our future results. OurMD&A is
presented in eight sections:
•Overview
•Strategic Initiatives
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance-Sheet Arrangements and Contractual
Obligations
•Critical Accounting Estimates
•New Accounting Standards
•Outlook for Fiscal 2007
We believe ourMD&A should be read in conjunction with
the Consolidated Financial Statements and related Notes
included in Item 8, Financial Statements and Supplementary
Data, of this Annual Report on Form 10-K.
On June 23, 2005, our Board approved a three-for-two
stock split. Shareholders of record as of July 13, 2005,
received one additional share for every two shares owned,
with fractional sharesbeing redeemed for cash.The
additional shares were distributed on August 3, 2005. All
share and per share information herein reflect this stock
split.
Unless otherwise noted, this MD&A relates only to results
from continuingoperations. All periods presented reflect the
classification of Musicland’s financial results as
discontinued operations.
Overview
Best Buy Co., Inc. is a specialty retailer of consumer
electronics, home-office products, entertainment software,
appliances and relatedservices.
We operate two reportable segments: Domestic and
International. The Domestic segment is comprisedof the
operations of U.S. Best Buy, Magnolia Audio Video and
U.S. Geek Squad. U.S. Best Buy stores offerawide variety
of consumer electronics, home-office products,
entertainment software, appliances and related services,
operating742 stores in 49 states and the District of
Columbia at the end of fiscal 2006. Magnolia Audio Video
stores offer high-end audio and video products and services
from 20 stores located inCalifornia, Washington and
Oregon at the end of fiscal 2006. U.S. Geek Squad offers
computer repair, support andinstallation 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), which we acquired in March 2006, will be
included in the Domestic segment starting in fiscal 2007.
The International segment was established in connection
with our acquisition of Future Shop in the third quarter of
fiscal 2002. At the end of fiscal 2006, the International
segment consisted of 118 Future Shop stores operating
throughout all Canadian provinces, and 44 Canadian Best
Buy stores operating in Ontario, Quebec, Alberta, British
Columbia, Manitoba and Saskatchewan. In addition,
Canadian Geek Squad offers computer repair, support and
installation services in all Canadian Best Buy stores and in