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Connected World
Fiscal 2008 Annual Report | Best Buy Co., Inc.

Table of contents

  • Page 1
    Connected World Fiscal 2008 Annual Report | Best Buy Co., Inc.

  • Page 2
    ...equivalents and short-term investments Debt-to-capitalization ratio (2) Cash dividends per share declared and paid Value of common shares repurchased Total retail square footage (in thousands) (3) (4) Number of stores (at period end) Best Buy - U.S. Pacific Sales (acquired in fiscal 2007) Magnolia...

  • Page 3
    ... departments, call centers, Web sites, in-home solutions and product delivery all will have to work together at the command of our employees who directly engage with our consumers. Last, based on our research, we believe consumers' need for this trusted perspective on technology is global. Best Buy...

  • Page 4
    ...compression in our operating profit rate of approximately 30 to 40 basis points, due to slower revenue growth combined with continued investment in strategic growth platforms (including Best Buy Mobile and international expansion); and continued share repurchases. At the end of the day, our people...

  • Page 5
    ... whether our strategy of customer centricity is working. One way is to judge our performance compared to that of our industry peers. Of course, this information is available only after the fact. A better way is to spend time in our stores, engage our services, interact with our call centers or visit...

  • Page 6
    ... using effective tax rates for FY 2008 (36.6%), FY 2007 (35.3%) and FY 2006 (33.7%) (3) Long-term debt plus current portion of convertible debt, as applicable (4) Capitalized operating leases, net of cash and cash equivalents in excess of $300 million 4 | Best Buy Fiscal 2008 Annual Report

  • Page 7
    ... have profitably delivered 13-percent average revenue growth over the past 3 years*. We believe that our focus on customers, knowledgeable employees and differentiated shopping experience drove continued market share gains. Source: Company internal estimates and NPD point-of-sale data En te So En...

  • Page 8
    ... Management David P. Berg Executive Vice President-International Strategy and Corporate Development Timothy D. McGeehan Executive Vice President- Best Buy Mobile Worldwide Kevin T. Layden Chief Operating Officer-International David J. Morrish Executive Vice President- Connected Digital Solutions...

  • Page 9
    ... ACT OF 1934 For the fiscal year ended March 1, 2008 OR អ 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 1-9595 4DEC200710022363 BEST BUY CO., INC. (Exact name of registrant as specified in its...

  • Page 10
    ...future results to differ materially from those contemplated by the forward-looking statements made in this Annual Report on Form 10-K. In addition, general domestic and foreign economic conditions, acquisitions and development of new businesses, product availability, new product introductions, sales...

  • Page 11
    ... With Accountants on Accounting and Financial Disclosure. Controls and Procedures. Other Information. 24 27 29 56 58 102 102 102 Directors, Executive Officers and Corporate Governance. Executive Compensation. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 12
    ... electronics, home office products, entertainment software, appliances and related services. We operate retail stores and Web sites under the brand names Best Buy (BestBuy.com, BestBuy.ca, BestBuy.com.cn, and BestBuyMobile.com), Five Star (Five-Star.cn), Future Shop (FutureShop.ca), Geek Squad...

  • Page 13
    ... order to capitalize on the high-end segment of the U.S. appliance market. In fiscal 2007, we developed the Best Buy Mobile concept through a management consulting agreement with The Carphone Warehouse Group PLC (''CPW'') and test marketed five stand-alone stores located in New York. Best Buy Mobile...

  • Page 14
    ...Products and services - Only Future Shop stores carry appliances. In addition, Geek Squad service is available in all Canada Best Buy stores, but is not available in Future Shop stores. Store size - At the end of fiscal 2008, the average Future Shop store was approximately 26,600 retail square feet...

  • Page 15
    ... open 77 to 84 hours per week, seven days a week. A typical Five Star store is staffed by a general manager; six to 10 department managers; 27 to 100 full-time sales associates; and 50 to 200 vendor employees who sell products. Corporate management at Five Star centrally controls advertising...

  • Page 16
    ...-time and part-time sales associates. Advertising, merchandise purchasing and pricing, and inventory policies for our China Best Buy store are centrally controlled by corporate management. Meetings involving store management and corporate management are held on a regular basis to review operating...

  • Page 17
    ... is used to manage inventory levels at each store. On average, U.S. Best Buy stores receive product shipments two or three times per week, with additional shipments during periods of high sales volume. Contract carriers ship merchandise from the distribution centers to stores. Generally, online...

  • Page 18
    ... product cost. At March 1, 2008, we operated three of these offices, but subsequently closed our sourcing office in Beijing. and services to our customers. During fiscal 2008, we opened 155 new stores, relocated nine stores and closed 18 stores. We offer Geek Squad support services in all Best Buy...

  • Page 19
    ... products and services to approximately 250 more U.S. Best Buy stores. In Canada, we expect to open approximately six Future Shop stores and six Best Buy stores, as well as close one Future Shop store and relocate six existing Future Shop stores. In China, we plan to open 20 to 25 Five Star stores...

  • Page 20
    ... retailers are expanding their assortment of appliances. In addition, consumers are increasingly downloading entertainment and computer software directly via the Internet. We compete principally on the basis of customer service; installation and support services; store environment, location...

  • Page 21
    ..., our trained and knowledgeable sales and service staffs allow us to tailor the offerings to meet the needs of our customers. 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...

  • Page 22
    ... our competitive advantage is providing unique end-to-end solutions for each individual customer, which requires us to have highly trained and engaged employees. Our success depends in part upon our ability to attract, develop and retain a sufficient number of qualified employees, including store...

  • Page 23
    ... positively affects our financial performance. Our 20 largest suppliers account for just over 60% of the merchandise we purchase. If any of our key vendors fails to supply us with products, we may not be able to meet the demands of our customers and our revenue could materially decline. We require...

  • Page 24
    ... affect our business and results of operations. We have engaged Accenture LLP (''Accenture''), a global management consulting, technology services and outsourcing company, to manage significant portions of our information technology and human resources operations as well as to conduct certain...

  • Page 25
    ... 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. We also use Accenture to provide procurement support to research and purchase certain...

  • Page 26
    .... Stores, Distribution Centers and Corporate Facilities Domestic Segment The following table summarizes the geographic location of our Domestic segment stores at the end of fiscal 2008: U.S. Best Buy Stores Pacific Sales Stores Magnolia Audio Video Stores Best Buy Mobile Stores(1) U.S. Geek Squad...

  • Page 27
    ... markets for home delivery of major appliances and large-screen televisions. We also lease approximately 0.2 million square feet of space in Louisville, Kentucky, that is used by our Geek Squad operations to service notebook and desktop computers. Our principal corporate office is located...

  • Page 28
    At the end of fiscal 2008, we operated 131 Future Shop stores, 51 Canada Best Buy stores, 160 Five Star stores and one China Best Buy store, totaling approximately 11.1 million retail square feet. We lease approximately 1.1 million square feet of distribution center space in Brampton, Ontario, and ...

  • Page 29
    ... on a part-time basis to support our international expansion. Prior to his promotion to his current position in 2004, he served in various capacities since joining us in 1984, including as President and Chief Operating Officer from 2002 to 2004, and as President of Best Buy Retail Stores from 2001...

  • Page 30
    ..., and general and assistant store manager. David P . Berg was named Executive Vice President - International Strategy and Corporate Development in March 2008. Prior to his strategy and development role, 22 he was Senior Vice President and Chief Operating Officer of Best Buy International. Mr...

  • Page 31
    ... roles in his 17 years with Future Shop and Best Buy Canada, most recently responsible for Best Buy stores, marketing, advertising, store design and Canada's Commercial Sales Group. Michael A. Vitelli became Executive Vice President - Customer Operating Groups in March 2008. Mr. Vitelli joined us...

  • Page 32
    ... to time, we repurchase our common stock in the open market pursuant to programs approved by our Board. We may repurchase our common stock for a variety of reasons, such as acquiring shares to offset dilution related to equity-based incentives, including stock options and our employee stock purchase...

  • Page 33
    ...Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs'' in the periods in which they were received. For additional information regarding our common stock repurchases, see Note 5, Shareholders' Equity, of the Notes to Consolidated Financial Statements in this Annual Report...

  • Page 34
    ... equities traded on the NYSE, the American Stock Exchange and NASDAQ, and includes high-capitalization stocks representing the retail sector of the S&P 500. The graph assumes an investment of $100 at the close of trading on February 28, 2003, the last trading day of fiscal 2003, in Best Buy common...

  • Page 35
    ... Common stock price: High Low Operating Statistics Comparable store sales gain(5) Gross profit rate Selling, general and administrative expenses rate Operating income rate Year-End Data Current ratio(6)(7) Total assets(6) Debt, including current portion(6) Total shareholders' equity Number of stores...

  • Page 36
    ... and discontinued operations. The current ratio is calculated by dividing total current assets by total current liabilities. Fiscal 2007 store counts and square footage have been adjusted to reflect Best Buy Mobile stand-alone stores test marketed in fiscal 2007. Prior years' retail square footage...

  • Page 37
    ... products, entertainment software, appliances and related services. We operate two reportable segments: Domestic and International. The Domestic segment is comprised of all store, call center and online operations, including Best Buy, Best Buy Mobile, Geek Squad, Magnolia Audio Video, Pacific Sales...

  • Page 38
    ... segment is comprised of all Canada store, call center and online operations, including Best Buy, Future Shop and Geek Squad, as well as all China store and online operations, including Best Buy, Five Star and Geek Squad. Our International segment offers products and services similar to our Domestic...

  • Page 39
    ... to continue expanding into new product categories such as musical instruments and recreation and plan to increase our market share in existing product categories such as home theater, navigation, mobile phones and gaming by improving our in-store and online customer experiences. We plan to focus...

  • Page 40
    ...44 Magnolia Home Theater rooms to new and existing U.S. Best Buy stores, bringing the total number of Magnolia Home Theater rooms to 346 at the end of fiscal 2008. • Effective with the cash dividend paid in the third quarter of fiscal 2008, we increased our quarterly cash dividend per common share...

  • Page 41
    ... of 137 new Best Buy, Future Shop, Five Star, Pacific Sales and Best Buy Mobile stores during fiscal 2008, a full year of revenue from new stores added in fiscal 2007, a 2.9% comparable store sales gain and the non-comparable store sales generated from the acquisition of Five Star, Pacific Sales and...

  • Page 42
    ... gift card breakage from prior years. The addition of new Best Buy and Future Shop stores accounted for nearly four-tenths of the revenue increase in fiscal 2007; the comparable store sales gain accounted for three-tenths of the revenue increase; the acquisitions of Five Star and Pacific Sales...

  • Page 43
    ...included 52 weeks. Fiscal 2007 amounts have been adjusted to conform to the current-year presentation, which allocates to the International segment certain SG&A support costs previously reported as part of the Domestic segment. Comprised of revenue at stores, call centers and Web sites operating for...

  • Page 44
    ... from the sale of extended service contracts; revenue from computer-related services; product repair revenue; and delivery and installation revenue derived from home theater, mobile audio and appliances. Other includes revenue, such as fees received from cardholder account activations, that...

  • Page 45
    ... Domestic stores open at the beginning and end of fiscal 2007: Total Stores at End of Fiscal 2006 Total Stores at End of Fiscal 2007 Stores Opened Stores Acquired Stores Closed U.S. Best Buy Pacific Sales Magnolia Audio Video Best Buy Mobile(1) U.S. Geek Squad Total Domestic stores (1) 742...

  • Page 46
    ...sales gain accounted for more than two-tenths of the revenue increase; and the remainder of the revenue increase was due to the net addition of new Future Shop and Best Buy stores in Canada and new Five Star stores in China during the past fiscal year. Revenue from our International segment's online...

  • Page 47
    ... from home theater, mobile audio and appliances. Other includes gift card breakage, which is excluded from our calculation of comparable store sales. Other also includes revenue associated with Canada's private label credit card program and revenue from the sale of products that are not related to...

  • Page 48
    ... support team and the start-up costs for entry into Mexico and Turkey. The following table reconciles International stores open at the beginning and end of fiscal 2008: Total Stores at End of Fiscal 2007 Total Stores at End of Fiscal 2008 Stores Opened Stores Acquired Stores Closed Future Shop...

  • Page 49
    ... consumer electronics, home office, entertainment software, appliances and services revenue categories of 15.7%, 7.4%, 11.3%, 8.0% and 13.8%, respectively. Revenue from our International segment's online operations increased approximately 19% and added to the overall comparable store sales increase...

  • Page 50
    ...use for vendor payables, general liability insurance, workers' compensation insurance and warranty programs. Restricted cash and investments in debt securities totaled $408 million and $382 million at March 1, 2008, and March 3, 2007, respectively, and were included in other current assets or equity...

  • Page 51
    ... and a decrease in cash used in acquisition activities. We liquidated a substantial portion of our investment portfolio in fiscal 2008 in order to repay debt incurred to fund our ASR program. We acquired Speakeasy for $89 million in fiscal 2008. We acquired Pacific Sales and Five Star in fiscal 2007...

  • Page 52
    ... and information technology enhancements. During fiscal 2008, we invested $797 million in property and equipment, including opening 155 new stores; adding Best Buy Mobile, Apple and Magnolia Home Theater store-within-a-store experiences inside new and existing U.S. Best Buy stores; expanding and...

  • Page 53
    ... to time, we repurchase our common stock in the open market pursuant to programs approved by our Board. We may repurchase our common stock for a variety of reasons, such as acquiring shares to offset dilution related to equity-based incentives, including stock options and our employee stock purchase...

  • Page 54
    ... repurchases and dividend payments. Other Financial Measures 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 plus total shareholders' equity), increased to 15% at the end of fiscal 2008...

  • Page 55
    ... 1 Year 1-3 Years 3-5 Years More Than 5 Years Short-term debt obligations Long-term debt obligations Capital lease obligations Financing lease obligations Interest payments Operating lease obligations(1) Purchase obligations(2)(3) Unrecognized tax benefits(4) Deferred compensation(5) Total $ 156...

  • Page 56
    ... concerning the purchase amount, timing and ability to obtain the necessary governmental approval of the acquisition, this commitment is excluded from the table. Unrecognized tax benefits relate to uncertain tax positions recorded under Financial Accounting Standards Board Interpretation No...

  • Page 57
    ...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 58
    ... remaining useful life of that asset. Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate...

  • Page 59
    ..., including discounted cash flows and market multiple analyses. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. It is our policy to...

  • Page 60
    ... credit card. Points earned enable members to receive a certificate that may be redeemed on future purchases at Best Buy stores and Web sites in the U.S. and Canada. The value of points earned by our loyalty program members is included in accrued liabilities and recorded as a reduction in revenue...

  • Page 61
    ... of the related lease. For vacated locations that are under long-term leases, we record an expense for the difference between our future lease payments and related costs (e.g., real estate taxes and common area maintenance) from the date of closure through the end of the remaining lease term, net of...

  • Page 62
    ..., we acquired Pacific Sales for $411 million, which included transaction costs. See Note 2, Acquisitions, to the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for the complete purchase price allocation...

  • Page 63
    ... investors to better understand their effects on an entity's financial position, financial performance and cash flows. Entities are required to provide enhanced disclosures about: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted...

  • Page 64
    ... our operating efficiencies and support domestic and international growth. During fiscal 2009, we plan to continue our quarterly cash dividend program. We will continue to evaluate the amount of our quarterly dividend based on our cash and short-term investments position at the end of fiscal 2008...

  • Page 65
    ... 100-basis-point change in the interest rate would change our annual pre-tax earnings by $5 million. We do not currently manage interest rate risk on our investments through the use of derivative instruments. Other Market Risks Investments in auction-rate securities At March 1, 2008, we held...

  • Page 66
    ...the fairness with which such financial statements present our financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States. Management's Report on Internal Control Over Financial Reporting Our management is responsible for...

  • Page 67
    ... the accompanying consolidated balance sheets of Best Buy Co., Inc. and subsidiaries (the ''Company'') as of March 1, 2008 and March 3, 2007, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended March 1, 2008, March...

  • Page 68
    ...Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended March 1, 2008 of the Company and our report dated April 25, 2008 expressed an unqualified opinion on those financial statements and financial...

  • Page 69
    ...Equity and Other Investments Other Assets Total Assets Liabilities and Shareholders' Equity Current Liabilities Accounts payable Unredeemed gift card liabilities Accrued compensation and related expenses Accrued liabilities Accrued income taxes Short-term debt Current portion of long-term debt Total...

  • Page 70
    ... of Earnings $ in millions, except per share amounts Fiscal Years Ended March 1, 2008 March 3, 2007 February 25, 2006 Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Operating income Other income (expense) Investment income and other Interest expense Earnings...

  • Page 71
    ... Purchases of investments Sales of investments Acquisitions of businesses, net of cash acquired Change in restricted assets Other, net Total cash provided by (used in) investing activities Financing Activities Repurchase of common stock Issuance of common stock under employee stock purchase plan...

  • Page 72
    ...-for-sale investments Total comprehensive income Stock options exercised Tax benefit from stock options exercised and employee stock purchase plan Issuance of common stock under employee stock purchase plan Stock-based compensation Common stock dividends, $0.31 per share Repurchase of common stock...

  • Page 73
    ... all Canada store, call center and online operations, including Best Buy, Future Shop and Geek Squad; all China store, call center and online operations, including Best Buy, Geek Squad and Jiangsu Five Star Appliance Co. (''Five Star''). The International segment offers products and services similar...

  • Page 74
    ... in other current assets or equity and other investments in our consolidated balance sheets. Such balances are pledged as collateral or restricted to use for vendor payables, general liability insurance, workers' compensation insurance and warranty programs. Cash and Cash Equivalents Cash primarily...

  • Page 75
    ... consolidated statement of earnings. 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...

  • Page 76
    ... a corporate-level guarantee of lease payments. We also lease certain equipment under noncancelable operating and capital leases. In addition, we have financing leases for which the gross cost of constructing the asset is Tradenames We have indefinite-lived intangible assets related to our Pacific...

  • Page 77
    ...-for-sale. Investments in marketable equity securities are included in equity and other investments in our consolidated balance sheets, and are reported at fair value based on quoted market prices. All unrealized holding gains Investments Debt Securities Short-term and long-term investments in...

  • Page 78
    ... the tax benefits associated with our various tax filing positions, we Accrued liabilities Long-term liabilities Total $52 45 $97 $51 44 $95 Inventory Financing We have inventory financing facilities through which certain suppliers receive payments from a designated finance company on invoices...

  • Page 79
    ...2008, and March 3, 2007, included long-term rent-related liabilities, unrecognized tax benefits recorded pursuant to FIN No. 48, deferred compensation plan liabilities, advances received under vendor alliance programs and self-insurance reserves. Foreign Currency Foreign currency denominated assets...

  • Page 80
    ... on future purchases at Best Buy stores and Web sites in the U.S. and Canada. Certificates expire six months from the date of issuance. The retail value of points earned by our cardholders is included in accrued liabilities and recorded as a reduction of revenue at the time the points are earned...

  • Page 81
    ... vendor's products; and - Cash discounts on payments to merchandise vendors; • Cost of services provided including; - Payroll and benefits costs for services employees; and - Cost of replacement parts and related freight expenses; • Physical inventory losses; • Markdowns; • Customer shipping...

  • Page 82
    ... investors to better understand their effects on an entity's financial position, financial performance and cash flows. Entities are required to provide enhanced disclosures about: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted...

  • Page 83
    ..., we acquired a 75% interest in Five Star for $184, which included a working capital injection of $122 and transaction costs. Five Star is an appliance and consumer electronics retailer and had 131 stores located in eight of China's 34 provinces on the date of acquisition. We made the investment in...

  • Page 84
    ... 2007 Short-term investments Debt securities Equity and other investments Debt securities Marketable equity securities Other investments Total equity and other investments $417 172 16 $605 $ 318 4 16 $ 338 $ 64 $2,588 The minority owners' proportionate share of assets and liabilities were recorded...

  • Page 85
    ... in The Carphone Warehouse Group PLC (''CPW''), Europe's leading independent retailer of mobile phones and services. During the second quarter of fiscal 2008, we purchased in the open market 26.1 million shares of CPW common stock for $183, representing nearly 3% of CPW's outstanding shares. Net...

  • Page 86
    ... with the execution of agreements to purchase $3,000 of shares of our common stock in the aggregate pursuant to our ASR program. See Note 5, Shareholders' Equity, for further information on the ASR program. We initially borrowed $2,500 under the Bridge Facility and used $500 of our existing cash and...

  • Page 87
    ...$86 to finance working capital requirements for our China operations. The facilities are renewed annually with the respective banks. At March 1, 2008, there was an aggregate of $36 in borrowings outstanding under the facilities. Certain borrowings are secured by a guarantee of Best Buy Co., Inc. and...

  • Page 88
    ...to our employees, officers, advisors, consultants and directors. Awards issued under the Omnibus Plan vest as determined by the Compensation and Human Resources Committee of our Board of Directors at the time of grant. At March 1, 2008, a total of 17.8 million shares were available for future grants...

  • Page 89
    ... value of each stock option was estimated on the date of grant using a lattice model with the following assumptions: Valuation Assumptions(1) 2008 2007 2006 Risk-free interest Expected dividend yield Expected stock price volatility(3) Expected life of stock options (in years)(4) (1) (2) (3) rate...

  • Page 90
    ...techniques and the closing market price of our stock on the date of grant. A summary of the status of our nonvested market-based share awards at March 1, 2008, and changes during fiscal 2008, is as follows: WeightedAverage Fair Value per Share Market-Based Share Awards Shares Outstanding at March...

  • Page 91
    ... based on the closing market price of our stock on the date of grant. A summary of the status of our nonvested time-based share awards at March 1, 2008, and changes during fiscal 2008, is as follows: WeightedAverage Fair Value per Share Time-Based Share Awards Shares Outstanding at March 3, 2007...

  • Page 92
    ... open market share repurchases in fiscal 2008, 2007 and 2006 (shares in millions): 2008 2007 2006 $1,407 6 $1,413 $1,377 7 $1,384 $1,140 7 $1,147 439.9 482.1 8.8 5.3 496.2 $ 2.86 $ 2.79 490.3 8.8 5.7 504.8 $ 2.33 $ 2.27 Repurchase of Common Stock On June 26, 2007, our Board of Directors...

  • Page 93
    ...were delivered to us as described below, and purchased sufficient shares of our common stock in the open market to return to the lenders over the terms of the agreements. The ASR program concluded in February 2008. The total number of shares repurchased pursuant to the ASR was 65.8 million. Collared...

  • Page 94
    ... rent income of approximately $99 due under future noncancelable subleases. During fiscal 2008, we entered into agreements totaling $35 related to various information system capital leases. These leases were noncash transactions and have been eliminated from our consolidated statements of cash flows...

  • Page 95
    ...assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities were comprised of the following: March 1, 2008 March 3, 2007 Accrued property expenses Other accrued expenses Deferred revenue Compensation and benefits Stock-based compensation Net operating...

  • Page 96
    ... 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. All unrecognized tax benefits at March 1, 2008, were classified as long-term liabilities on our consolidated balance...

  • Page 97
    ... from the sale of extended service contracts; revenue from computer-related services; product repair revenue; and delivery and installation revenue derived from home theater, mobile audio and appliances. Other includes revenue, such as fees received from cardholder account activations, that...

  • Page 98
    ... $ 541 107 $ 797 $ 733 $ 648 $ 500 80 $ 438 71 $ 397 59 $ 580 $ 509 $ 456 Net sales to customers U.S. Canada China Total revenue Long-lived assets U.S. Canada China Total long-lived assets $ 2,733 435 138 $ 3,306 $ 2,487 333 118 $ 2,938 $ 2,337 375 - $ 2,712 $33,328 5,386 1,309...

  • Page 99
    ... years for planned new stores for both Best Buy and Pacific Sales. 11. Related Party Transactions Elliot S. Kaplan, a director, is a partner with the law firm of Robins, Kaplan, Miller & Ciresi L.L.P . (''RKMC''), which serves as our primary outside general counsel. Our Board periodically reviews...

  • Page 100
    .... Periodically, the Board reviews the terms of the lease agreement to ensure that they are competitive with terms available from unaffiliated third parties. We pay an hourly rate for use of the airplanes, without any required fractional ownership. Our senior management generally use the airplanes...

  • Page 101
    ...cash flows for the fiscal years ended March 1, 2008; March 3, 2007, and February 25, 2006: Condensed Consolidating Balance Sheets At March 1, 2008 Best Buy Co., Inc. Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current Assets Cash and cash equivalents Short-term...

  • Page 102
    ...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 Short-term debt Current portion of long-term...

  • Page 103
    ... of Earnings Fiscal Year Ended March 1, 2008 Best Buy Co., Inc. Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Operating (loss) income Other income (expense) Investment income and other...

  • Page 104
    ... Statements of Earnings Fiscal Year Ended March 3, 2007 Best Buy Co., Inc. Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated Revenue Cost of goods sold Gross profit Selling, general and administrative expenses Operating (loss) income Other income (expense) Investment...

  • Page 105
    ... Statements of Earnings 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 Operating (loss) income Other income (expense) Investment...

  • Page 106
    ...Flows Fiscal Year Ended March 1, 2008 Best Buy Co., Inc. Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated Total cash provided by (used in) operating activities Investing Activities Additions to property and equipment Purchases of investments Sales of investments Acquisition...

  • Page 107
    ... Purchases of investments Sales of investments Acquisitions of businesses, net of cash acquired Change in restricted assets Other, net Total cash provided by (used in) investing activities Financing Activities Repurchase of common stock Issuance of common stock under employee stock purchase plan...

  • Page 108
    ... Flows Fiscal Year Ended February 25, 2006 Best Buy Co., Inc. Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated Total cash provided by (used in) operating activities Investing Activities Additions to property and equipment Purchases of investments Sales of investments Change...

  • Page 109
    ...of the date of the acquisition The calculation of the comparable store sales percentage change excludes the impact of fluctuations in foreign currency exchange rates. All comparable store sales percentage calculations reflect an equal number of weeks. The method of calculating comparable store sales...

  • Page 110
    ... our Chief Executive Officer and our Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibits No. 31.1 and No. 31.2, respectively, to this Annual Report on Form 10-K. As required by section 303A.12(a) of the New York Stock Exchange Listed Company Manual...

  • Page 111
    ... material changes to the procedures by which shareholders may recommend nominees to our Board. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Securities Authorized for Issuance Under Equity Compensation Plans Information regarding securities...

  • Page 112
    ... of Appointment of our Independent Registered Public Accounting Firm - Principal Accountant Fees and Services'' in the Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information provided under the captions...

  • Page 113
    ...Stock Option Plan, as amended 1997 Directors' Non-Qualified Stock Option Plan, as amended The Assumed Musicland 1998 Stock Incentive Plan 2000 Restricted Stock Award Plan, as amended Best Buy Co., Inc. 2004 Omnibus Stock and Incentive Plan, as amended 2008 Long-Term Incentive Program Award Agreement...

  • Page 114
    ... SEC File No. Exhibit Filing Date Filed Herewith *10.8 12.1 21.1 23.1 31.1 Best Buy Fourth Amended and Restated Deferred Compensation Plan, as amended Statements re: Computation of Ratios Subsidiaries of the Registrant Consent of Deloitte & Touche LLP Certification of the Chief Executive Officer...

  • Page 115
    ..., thereunto duly authorized. Best Buy Co., Inc. (Registrant) By: /s/ Bradbury H. Anderson Bradbury H. Anderson Vice Chairman and Chief Executive Officer Date: April 30, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 116
    Schedule II Valuation and Qualifying Accounts ($ in millions) Balance at Beginning of Period Charged to Expenses or Other Accounts Balance at End of Period Other Year ended March 1, 2008 Allowance for doubtful accounts Sales return reserve Year ended March 3, 2007 Allowance for doubtful accounts ...

  • Page 117
    ... per common share at the end of fiscal 2008. Stock split history Our stock has split eight times in the company's history. Date Split Financial releases for fiscal 2009 We normally distribute financial releases before the market opens. Quarterly earnings conference calls typically are scheduled...

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    ...responding to their unique needs and aspirations. We sell consumer electronics, home-office products, entertainment software, appliances and related services through approximately 1,300 stores, call centers and Web sites. We operate in the United States and its territories, throughout Canada and in...

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    c BUSINESS REPLY MAIL FIRST-CLASS MAIL PERMIT NO. 21327 MINNEAPOLIS MN POSTAGE WILL BE PAID BY ADDRESSEE NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES ATTN: INVESTOR RELATIONS BEST BUY CORPORATE CAMPUS 7601 Penn Avenue South Richfield, MN 55423-9969 !5542399698!

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    ... Investor: We 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, with 5 being the most favorable. How do you like the report...