10-Q 1 a07-18349_110q.htm 10-Q

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

 

 

x

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended June 2, 2007

 

 

 

OR

 

 

 

o

 

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

BEST BUY CO., INC.

(Exact name of registrant as specified in its charter)

Minnesota

 

41-0907483

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

7601 Penn Avenue South

 

 

Richfield, Minnesota

 

55423

(Address of principal executive offices)

 

(Zip Code)

 

 

 

(612) 291-1000
(Registrant’s telephone number, including area code)

 

N/A
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x

 

Accelerated filer o

 

Non-accelerated filer o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No  x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  o  No  o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $.10 Par Value — 473,898,000 shares outstanding as of June 2, 2007.

 




BEST BUY CO., INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 2, 2007

INDEX

Part I —

Financial Information

 

 

 

 

 

 

Item 1.

 

Consolidated Financial Statements (Unaudited)

3

 

 

 

 

 

 

 

 

 

a)

Condensed consolidated balance sheets as of June 2, 2007; March 3, 2007; and May 27, 2006

3

 

 

 

 

 

 

 

 

 

b)

Consolidated statements of earnings for the three months ended June 2, 2007, and May 27, 2006

5

 

 

 

 

 

 

 

 

 

c)

Consolidated statement of changes in shareholders’ equity for the three months ended June 2, 2007

6

 

 

 

 

 

 

 

 

 

d)

Consolidated statements of cash flows for the three months ended June 2, 2007, and May 27, 2006

7

 

 

 

 

 

 

 

 

 

e)

Notes to condensed consolidated financial statements

8

 

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

35

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

35

 

 

Part II —

Other Information

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

36

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

37

 

 

 

 

 

 

Signatures

38

 

2




PART I —                 FINANCIAL INFORMATION

ITEM 1.                              CONSOLIDATED FINANCIAL STATEMENTS

BEST BUY CO., INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

($ in millions, except per share amounts)

(Unaudited)

 

 

June 2,
2007

 

March 3,
2007

 

May 27,
2006

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,366

 

$

1,205

 

$

772

 

Short-term investments

 

1,436

 

2,588

 

1,554

 

Receivables

 

476

 

548

 

409

 

Merchandise inventories

 

4,298

 

4,028

 

3,737

 

Other current assets

 

730

 

712

 

406

 

Total current assets

 

8,306

 

9,081

 

6,878

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT

 

 

 

 

 

 

 

Property and equipment

 

5,131

 

4,904

 

4,957

 

Less accumulated depreciation

 

2,105

 

1,966

 

2,245

 

Net property and equipment

 

3,026

 

2,938

 

2,712

 

 

 

 

 

 

 

 

 

GOODWILL

 

1,049

 

919

 

955

 

 

 

 

 

 

 

 

 

TRADENAMES

 

93

 

81

 

63

 

 

 

 

 

 

 

 

 

LONG-TERM INVESTMENTS

 

332

 

318

 

302

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

336

 

233

 

359

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

13,142

 

$

13,570

 

$

11,269

 

 

NOTE:  The consolidated balance sheet as of March 3, 2007, has been condensed from the audited consolidated financial statements.

See Notes to Condensed Consolidated Financial Statements.

3




BEST BUY CO., INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

($ in millions, except per share amounts)

(Unaudited)

 

 

June 2,
2007

 

March 3,
2007

 

May 27,
2006

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable

 

$

3,957

 

$

3,934

 

$

3,055

 

Unredeemed gift card liabilities

 

455

 

496

 

415

 

Accrued compensation and related expenses

 

243

 

332

 

278

 

Accrued liabilities

 

930

 

990

 

840

 

Accrued income taxes

 

34

 

489

 

291

 

Short-term debt

 

48

 

41

 

 

Current portion of long-term debt

 

19

 

19

 

418

 

Total current liabilities

 

5,686

 

6,301

 

5,297

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

655

 

443

 

383

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT

 

598

 

590

 

180

 

 

 

 

 

 

 

 

 

MINORITY INTERESTS

 

33

 

35

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none

 

 

 

 

Common stock, $.10 par value: Authorized — 1.5 billion shares; Issued and outstanding — 473,898,000, 480,655,000 and 484,014,000 shares, respectively

 

47

 

48

 

48

 

Additional paid-in capital

 

101

 

430

 

546

 

Retained earnings

 

5,638

 

5,507

 

4,500

 

Accumulated other comprehensive income

 

384

 

216

 

315

 

Total shareholders’ equity

 

6,170

 

6,201

 

5,409

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

13,142

 

$

13,570

 

$

11,269

 

 

NOTE:  The consolidated balance sheet as of March 3, 2007, has been condensed from the audited consolidated financial statements.

See Notes to Condensed Consolidated Financial Statements.

4




BEST BUY CO., INC.

CONSOLIDATED STATEMENTS OF EARNINGS

($ in millions, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

 

 

June 2,
2007

 

May 27,
2006

 

Revenue

 

$

7,927

 

$

6,959

 

Cost of goods sold

 

6,035

 

5,194

 

Gross profit

 

1,892

 

1,765

 

Selling, general and administrative expenses

 

1,626

 

1,428

 

Operating income

 

266

 

337

 

Other income (expense)

 

 

 

 

 

Investment income and other

 

44

 

31

 

Interest expense

 

(7

)

(8

)

 

 

 

 

 

 

Earnings before income tax expense and minority interest

 

303

 

360

 

Income tax expense

 

113

 

126

 

Minority interest

 

2

 

 

 

 

 

 

 

 

Net earnings

 

$

192

 

$

234

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.40

 

$

0.48

 

Diluted

 

$

0.39

 

$

0.47

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.10

 

$

0.08

 

 

 

 

 

 

 

Weighted average common shares outstanding (in millions)

 

 

 

 

 

Basic

 

478.8

 

484.6

 

Diluted

 

491.5

 

500.8

 

 

See Notes to Condensed Consolidated Financial Statements.

5




BEST BUY CO., INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 2, 2007

($ and shares in millions)

(Unaudited)

 

 

Common
Shares

 

Common
Stock

 

Additional
Paid-In
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Income

 

Total

 

Balances at March 3, 2007

 

481

 

$

48

 

$

430

 

$

5,507

 

$

216

 

$

6,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings, three months ended June 2, 2007

 

 

 

 

192

 

 

192

 

Foreign currency translation adjustments

 

 

 

 

 

168

 

168

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of adopting a new accounting standard

 

 

 

 

(13

)

 

(13

)

Stock-based compensation

 

 

 

32

 

 

 

32

 

Issuance of common stock under employee stock purchase plan

 

1

 

 

25

 

 

 

25

 

Stock options exercised

 

1

 

 

17

 

 

 

17

 

Tax benefit from stock options exercised and employee stock purchase plan

 

 

 

8

 

 

 

8

 

Repurchase of common stock

 

(9

)

(1

)

(411

)

 

 

(412

)

Common stock dividends, $0.10 per share

 

 

 

 

(48

)

 

(48

)

Balances at June 2, 2007

 

474

 

$

47

 

$

101

 

$

5,638

 

$

384

 

$

6,170

 

 

See Notes to Condensed Consolidated Financial Statements.

6




BEST BUY CO., INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

(Unaudited)

 

 

Three Months Ended

 

 

 

June 2,
2007

 

May 27,
2006

 

OPERATING ACTIVITIES

 

 

 

 

 

Net earnings

 

$

192

 

$

234

 

Adjustments to reconcile net earnings to total cash used in operating activities

 

 

 

 

 

Depreciation

 

135

 

121

 

Asset impairment charges

 

2

 

12

 

Stock-based compensation

 

32

 

28

 

Deferred income taxes

 

(78

)

(16

)

Excess tax benefits from stock-based compensation

 

(8

)

(23

)

Other, net

 

(3

)

8

 

Changes in operating assets and liabilities, net of acquired assets and liabilities

 

 

 

 

 

Receivables

 

81

 

34

 

Merchandise inventories

 

(210

)

(343

)

Other assets

 

(42

)

(10

)

Accounts payable

 

(25

)

(201

)

Other liabilities

 

(232

)

(179

)

Accrued income taxes

 

(272

)

(391

)

Total cash used in operating activities

 

(428

)

(726

)

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

Additions to property and equipment, net of $36 non-cash capital expenditures in the three months ended May 27, 2006

 

(179

)

(154

)

Purchases of available-for-sale securities

 

(2,238

)

(497

)

Sales of available-for-sale securities

 

3,398

 

1,908

 

Acquisition of businesses, net of cash acquired

 

(89

)

(408

)

Change in restricted assets

 

28

 

6

 

Other, net

 

 

9

 

Total cash provided by investing activities

 

920

 

864

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

Repurchase of common stock

 

(412

)

(238

)

Issuance of common stock under employee stock purchase plan and for the exercise of stock options

 

42

 

89

 

Dividends paid

 

(48

)

(38

)

Proceeds from issuance of debt

 

42

 

17

 

Repayments of debt

 

(35

)

(2

)

Excess tax benefits from stock-based compensation

 

8

 

23

 

Other, net

 

3

 

15

 

Total cash used in financing activities

 

(400

)

(134

)

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

69

 

20

 

 

 

 

 

 

 

INCREASE IN CASH AND CASH EQUIVALENTS

 

161

 

24

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

1,205

 

748

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

1,366

 

$

772

 

See Notes to Condensed Consolidated Financial Statements.

7




BEST BUY CO., INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in millions, except per share amounts)

(Unaudited)

1.                         Basis of Presentation

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States. All adjustments were comprised of normal recurring adjustments, except as noted in the Notes to Condensed Consolidated Financial Statements. Historically, we have realized more of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday selling season in the United States and Canada, than in any other fiscal quarter. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. These interim financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.

Consistent with China’s statutory requirements, our China operations’ fiscal year ends on December 31. Therefore, we have elected to consolidate our China financial results on a two-month lag. There was no significant intervening event that would have materially affected our consolidated financial statements had it been recorded during the fiscal quarter.

Reclassifications

To maintain consistency and comparability, we reclassified certain prior-year amounts to conform to the current-year presentation as described in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007. In addition, to conform to the current-year presentation, we reclassified to the International segment certain selling, general and administrative (“SG&A”) support costs which were previously reported as part of the Domestic segment in fiscal 2007. These reclassifications had no effect on previously reported consolidated operating income, net earnings, shareholders’ equity or cash flows.

New Accounting Standards

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Companies are not allowed to adopt SFAS No. 159 on a retrospective basis unless they choose early adoption. We plan to adopt SFAS No. 159 beginning in the first quarter of fiscal 2009. We are evaluating the impact, if any, the adoption of SFAS No. 159 will have on our operating income or net earnings.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after December 15, 2007. We plan to adopt SFAS No. 157 beginning in the first quarter of fiscal 2009. We are evaluating the impact, if any, the adoption of SFAS No. 157 will have on our operating income or net earnings.

2.                         Acquisitions

Speakeasy, Inc.

On May 1, 2007, we acquired Speakeasy, Inc. (“Speakeasy”) for $103 in cash, or $89 net of cash acquired, including transaction costs and the repayment of $5 of Speakeasy’s debt.  We acquired Speakeasy, an independent U.S. broadband voice, data, and IT services provider, to strengthen our portfolio of technology solutions.  The acquisition was accounted for using the purchase method in accordance with SFAS No. 141, Business Combinations. Accordingly, we recorded the net assets at their estimated fair values, and included operating results in our Domestic segment from the date of acquisition. We allocated the purchase price on a preliminary basis using information currently available. The

8




$ in millions, except per share amounts

allocation of the purchase price to the assets and liabilities acquired will be finalized no later than the first quarter of fiscal 2009, as we obtain more information regarding asset valuations, liabilities assumed and revisions of preliminary estimates of fair values made at the date of purchase. The premium we paid in excess of the fair value of the net assets acquired was primarily for the expected future synergies we believe Speakeasy will generate by providing new technology solutions for our existing and future customers, as well as to obtain Speakeasy’s skilled, established workforce. None of the goodwill is deductible for tax purposes.

The preliminary purchase price allocation, net of cash acquired, was as follows:

Receivables

 

$

8

 

Property and equipment

 

8

 

Other assets

 

21

 

Tradename

 

6

 

Goodwill

 

76

 

Current liabilities

 

(30

)

Total

 

$

89

 

 

Jiangsu Five Star Appliance Co., Ltd.

On June 8, 2006, we acquired a 75% interest in Jiangsu Five Star Appliance Co., Ltd. (“Five Star”) for $184, including a working capital injection of $122 and transaction costs. Five Star is an appliance and consumer electronics retailer with 135 stores located in seven of China’s 34 provinces. We made the investment in Five Star to further our international growth plans, to increase our knowledge of Chinese customers and to obtain an immediate retail presence in China. The acquisition was accounted for using the purchase method in accordance with SFAS No. 141. Accordingly, we recorded the net assets at their estimated fair values, and included operating results in our International segment from the date of acquisition. We allocated the purchase price on a preliminary basis using information then available. The allocation of the purchase price to the assets and liabilities acquired was finalized in the first quarter of fiscal 2008. There was no significant adjustment to the preliminary purchase price allocation. None of the goodwill is deductible for tax purposes.

The final purchase price allocation, net of cash acquired, was as follows:

Restricted cash

 

$

204

 

Merchandise inventories

 

109

 

Property and equipment

 

78

 

Other assets

 

78

 

Tradename

 

21

 

Goodwill

 

24

 

Accounts payable

 

(368

)

Other current liabilities

 

(35

)

Debt

 

(64

)

Long-term liabilities

 

(1

)

Minority interests1

 

(33

)

Total

 

$

13

 

 

1       The minority interests’ proportionate ownership of assets and liabilities were recorded at historical carrying values.

3.                         Investments

Debt Securities

Short-term and long-term investments are comprised of municipal and U.S. government debt securities, as well as auction-rate securities and variable-rate demand notes. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and based on our ability to market and to sell these instruments, we classify auction-rate securities, variable-rate demand notes and other investments in debt securities as available-for-sale and carry them at amortized cost, which approximates fair value. Auction-rate securities and variable-rate demand notes are similar to short-term debt instruments because their interest rates are reset periodically. Investments in these securities can be sold for cash on the auction date. We classify auction-rate securities and variable-rate demand notes as short-term or long-term investments based on the reset dates.

In accordance with our investment policy, we place our investments in debt securities with issuers who have high-quality credit and limit the amount of investment exposure to any one issuer. We seek to preserve principal and minimize exposure to interest-rate fluctuations by limiting default risk, market risk and reinvestment risk.

9




$ in millions, except per share amounts

The following table presents the amortized principal amounts, related weighted-average interest rates (taxable equivalent), maturities and major security types for our investments in debt securities:

 

June 2, 2007

 

March 3, 2007

 

May 27, 2006

 

 

 

Amortized
Principal
Amount

 

Weighted-
Average
Interest
Rate

 

Amortized
Principal
Amount

 

Weighted-
Average
Interest
Rate

 

Amortized
Principal
Amount

 

Weighted-
Average
Interest
Rate

 

Short-term investments (less than one year)

 

$

1,436

 

5.90

%

$

2,588

 

5.68

%

$

1,554

 

5.61

%

Long-term investments (one to three years)

 

332

 

5.84

%

318

 

5.68

%

302

 

5.80

%

Total

 

$

1,768

 

 

 

$

2,906

 

 

 

$

1,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal debt securities

 

$

1,711

 

 

 

$

2,840

 

 

 

$

1,780

 

 

 

Auction-rate and asset-backed securities

 

57

 

 

 

66

 

 

 

76

 

 

 

Total

 

$

1,768

 

 

 

$

2,906

 

 

 

$

1,856

 

 

 

 

The carrying values of our investments in debt securities approximated fair value at June 2, 2007; March 3, 2007; and May 27, 2006, due to the rapid turnover of our portfolio and the highly liquid nature of these investments. Therefore, there were no significant unrealized holding gains or losses.

See Note 10, Subsequent Events, for information on investments used subsequent to June 2, 2007, to finance our accelerated share repurchase program.

Marketable Equity Securities

We also invest in marketable equity securities and classify them as available-for-sale. Investments in marketable equity securities are included in other assets in our consolidated balance sheets, and are reported at fair value based on quoted market prices. All unrealized holding gains or losses are reflected net of tax in accumulated other comprehensive income in shareholders’ equity.

The carrying values of our investments in marketable equity securities at June 2, 2007; March 3, 2007; and May 27, 2006, were $4, $4 and $25, respectively. The decrease in marketable equity securities compared with May 27, 2006, was due to the sale of our investment in Golf Galaxy, Inc. (“Golf Galaxy”) on February 13, 2007. At May 27, 2006, the carrying value of our investment in Golf Galaxy was $21.

Net unrealized (loss)/gain, net of tax, included in accumulated other comprehensive income were $(1), $(1) and $10 at June 2, 2007; March 3, 2007; and May 27, 2006, respectively.

4.                         Income Taxes

We adopted the provisions of FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109, effective March 4, 2007.  FIN No. 48 provides guidance regarding the recognition, measurement, presentation and disclosure in the financial statements of tax positions taken or expected to be taken on a tax return, including the decision whether to file or not to file in a particular jurisdiction. The adoption of FIN No. 48 resulted in the reclassification of $214 of certain tax liabilities from current to long-term and a $13 increase in our liability for unrecognized tax benefits, which was accounted for as a reduction to the March 4, 2007 retained earnings balance.

At March 4, 2007, our total liability for unrecognized tax benefits, after the adoption of FIN No. 48, was $214, of which $81 represented tax benefits that, if recognized, would favorably impact the effective tax rate. Our liability for unrecognized tax benefits was $222 at June 2, 2007.

We recognize interest and penalties in income tax expense in our consolidated statements of earnings. At March 4, 2007, we had accrued interest and penalties of $17. There has been no significant change in our accrued interest and penalties since March 4, 2007.

We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before fiscal 2003. In April 2007, the Internal Revenue Service (“IRS”) completed its examination of our U.S. federal income tax returns for fiscal 2003 and fiscal 2004 and resolution of the issues pertaining to those years is expected in fiscal 2009. However, we do not expect that the resolution of these issues will have a significant effect on our financial condition or results of operations.

10




$ in millions, except per share amounts

5.                         Earnings per Share

Our basic earnings per share calculation is computed based on the weighted-average number of common shares outstanding. Our diluted earnings per share calculation is computed based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive shares of common stock include stock options, nonvested share awards and shares issuable under our employee stock purchase plan, as well as common shares that would have resulted from the assumed conversion of our convertible debentures. Since the potentially dilutive shares related to the convertible debentures are included in the calculation, the related interest expense, net of tax, is added back to net earnings, as the interest would not have been paid if the convertible debentures had been converted to common stock. Nonvested market-based awards and nonvested performance-based awards are included in the average diluted shares outstanding each period if established market or performance criteria have been met at the end of the respective periods.

The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share (shares in millions):

 

Three Months Ended

 

 

 

June 2,
2007

 

May 27,
2006

 

Numerator

 

 

 

 

 

Net earnings, basic

 

$

192

 

$

234

 

Adjustment for assumed dilution

 

 

 

 

 

Interest on convertible debentures, net of tax

 

2

 

2

 

Net earnings, diluted

 

$

194

 

$

236

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

Weighted-average common shares outstanding

 

478.8

 

484.6

 

Effect of potentially dilutive securities

 

 

 

 

 

Shares from assumed conversion of convertible debentures

 

8.8

 

8.8

 

Stock options and other

 

3.9

 

7.4

 

Weighted-average common shares outstanding, assuming dilution

 

491.5

 

500.8

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.40

 

$

0.48

 

Diluted

 

$

0.39

 

$

0.47

 

 

The computation of average dilutive shares outstanding excluded stock options to purchase 4.7 million and 0.1 million shares of common stock for the three months ended June 2, 2007, and May 27, 2006, respectively. These amounts were excluded as the options’ exercise prices were greater than the average market price of our common stock for the periods presented and, therefore, the effect would be antidilutive (i.e., including such options would result in higher earnings per share).

6.                       Common Stock Repurchases

Our Board of Directors (“Board”) authorized a $1,500 share repurchase program in June 2006. The program, which was announced on June 21, 2006, terminated and replaced a $1,500 share repurchase program authorized by our Board in April 2005.

For the three months ended June 2, 2007, we purchased and retired 8.7 million shares at a cost of $412 under our June 2006 share repurchase program.  For the three months ended May 27, 2006, we purchased and retired 4.4 million shares at a cost of $238 under our April 2005 share repurchase program.

See Note 10, Subsequent Events, for additional information on common stock repurchases.

7.                         Comprehensive Income

Comprehensive income is computed as net earnings plus certain other items that are recorded directly to shareholders’ equity. In addition to net earnings, the significant components of comprehensive income include foreign currency translation adjustments

11




$ in millions, except per share amounts

and unrealized gains or losses, net of tax, on available-for-sale marketable equity securities. Foreign currency translation adjustments do not include a provision for income tax expense when earnings from foreign operations are considered to be indefinitely reinvested outside the United States. Comprehensive income was $360 and $288 for the three months ended June 2, 2007, and May 27, 2006, respectively.

8.                         Segments

We operate two reportable segments: Domestic and International. The Domestic segment is comprised of all U.S. store and online operations. The International segment is comprised of all store and online operations outside the U.S. We have included Speakeasy, which was acquired on May 1, 2007, and Pacific Sales Kitchen and Bath Centers, Inc. (“Pacific Sales”), which was acquired on March 7, 2006, in the Domestic segment. We have included Five Star, which was acquired on June 8, 2006, in the International segment. Our segments are evaluated on an operating income basis, and a stand-alone tax provision is not calculated for each segment. To conform to the current-year presentation, we reclassified to the International segment certain SG&A support costs which were previously reported as part of the Domestic segment in fiscal 2007. The other accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007.

Revenue by reportable segment was as follows:

 

Three Months Ended

 

 

 

June 2,
2007

 

May 27,
2006

 

Domestic

 

$

6,704

 

$

6,162

 

International

 

1,223

 

797

 

Total revenue

 

$

7,927

 

$

6,959

 

 

Operating income (loss) by reportable segment and the reconciliation to earnings before income tax expense and minority interest were as follows:

 

Three Months Ended

 

 

 

June 2,
2007

 

May 27,
2006

 

Domestic

 

$

270

 

$

334

 

International

 

(4

)

3

 

Total operating income

 

266

 

337

 

Other income (expense)

 

 

 

 

 

Investment income and other

 

44

 

31

 

Interest expense

 

(7

)

(8

)

Earnings before income tax expense and minority interest

 

$

303

 

$

360

 

 

Assets by reportable segment were as follows:

 

June 2,
2007

 

March 3,
2007

 

May 27,
2006

 

Domestic

 

$

9,913

 

$

10,614

 

$

9,053

 

International

 

3,229

 

2,956

 

2,216

 

Total assets

 

$

13,142

 

$

13,570

 

$

11,269

 

 

Goodwill by reportable segment was as follows:

 

June 2,
2007

 

March 3,
2007

 

May 27,
2006

 

Domestic

 

$

451

 

$

375

 

$

383

 

International

 

598

 

544

 

572

 

Total goodwill

 

$

1,049

 

$

919

 

$

955

 

 

The changes in the Domestic goodwill balance since March 3, 2007, and May 27, 2006, were primarily the result of the acquisitions of Pacific Sales and Speakeasy. The changes in the International goodwill balance since March 3, 2007, and May 27, 2006, were due primarily to the acquisition of Five Star totaling $24, and an adjustment related to the resolution of certain

12




$ in millions, except per share amounts

tax matters associated with our acquisition of Future Shop $(21), with the remainder due primarily to fluctuations in foreign currency exchange rates.

Tradenames included in our balance sheets were comprised of indefinite-lived intangible assets related to our Pacific Sales and Speakeasy tradenames, which are included in the Domestic segment, and to our Future Shop and Five Star tradenames, which are included in the International segment. Tradenames by reportable segment were as follows:

 

June 2,
2007

 

March 3,
2007

 

May 27,
2006

 

Domestic

 

$

24

 

$

17

 

$

17

 

International

 

69

 

64

 

46

 

Total tradenames

 

$

93

 

$

81

 

$

63

 

 

9.                         Contingencies

We are involved in various legal proceedings arising in the normal course of conducting business. We believe the amounts provided in our consolidated financial statements are adequate in consideration of the probable and estimable liabilities. The resolution of those proceedings is not expected to have a material effect on our results of operations or financial condition.

10.                Subsequent Events

Repurchase of Common Stock

On June 26, 2007, our Board authorized a new $5,500 share repurchase program.  The program, which has no stated expiration date, terminated and replaced our prior $1,500 share repurchase program announced in June 2006.  Approximately $730 of common stock was purchased under the prior program.

In accordance with the new share repurchase program, on June 26, 2007, we entered into an accelerated share repurchase (“ASR”) program authorized by our Board. The ASR consists of two agreements to purchase shares of our common stock from Goldman, Sachs & Co. (“Goldman”) for an aggregate purchase price of $3,000.  Goldman will borrow the shares to be delivered and is expected to purchase sufficient shares of our common stock in the open market to return to lenders over the terms of the agreements.  The ASR program will conclude in February 2008, although in certain circumstances the termination date may be accelerated at Goldman’s option.  The actual number of shares repurchased will be determined at the completion of the ASR program.  We do not expect to make significant additional share repurchases prior to the conclusion of the ASR program.  Repurchased shares will be retired and constitute authorized but unissued shares.

Collared ASR

One of  the agreements (the “Collared ASR”) provides that the number of shares to be repurchased will be based generally on the volume-weighted average price (“VWAP”) of our common stock during the term of the Collared ASR, subject to collar provisions that will establish minimum and maximum numbers of shares based on the VWAP of our common stock over the hedge period, which is expected to conclude during the second quarter of fiscal 2008.  We will receive an initial number of shares of common stock on certain specified settlement dates.  At the conclusion of the hedge period, we may receive additional shares based on the VWAP of our common stock during the hedge period.  At the conclusion of the Collared ASR, we may also receive additional shares based on the VWAP of our common stock during the agreement term.

On July 2, 2007, we paid $2,000 to Goldman in exchange for an initial delivery of 28.3 million shares to us on July 2-6, 2007, under the terms of the Collared ASR.  The minimum and maximum numbers of shares that we will ultimately repurchase pursuant to the Collared ASR will not be known until the conclusion of the hedge period.

Uncollared ASR

Under the second agreement (the “Uncollared ASR”), the number of shares to be repurchased will be based generally on the VWAP of our common stock during the term of the Uncollared ASR.  We will receive an initial number of shares of common stock on certain specified settlement dates during the second quarter of fiscal 2008.  At the conclusion of the Uncollared ASR, we may receive additional shares, or we may be required to pay additional cash or shares (at our option), based on the VWAP of our common stock during the agreement term.

13




$ in millions, except per share amounts

On July 2, 2007, we paid $1,000 to Goldman under the terms of the Uncollared ASR. The numbers of shares that we will ultimately repurchase pursuant to the Uncollared ASR will not be known until the conclusion of the agreement.

Credit Facilities

Simultaneously with the execution of the ASR program, we entered into a $3,000 bridge loan facility with Goldman Sachs Credit Partners L.P. (the “Bridge Facility”).  We initially borrowed $2,500 under the Bridge Facility and used $500 of our existing cash and investments to finance the ASR program.  We subsequently used additional existing cash and investments to to repay $788 of our initial borrowing under the Bridge Facility.  The Bridge Facility is guaranteed by certain of our subsidiaries and expires on June 24, 2008.  Borrowings under the Bridge Facility are unsecured and bear interest at rates specified in the credit agreement.  The Bridge Facility contains covenants that require us to maintain certain financial ratios. Effective July 11, 2007, we reduced the amount we may borrow under the Bridge Facility to $2,500.  At July 10, 2007, $1,712 was outstanding under the Bridge Facility.

Additionally, we received a commitment letter from JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Inc. (“JPMorgan”) for a five-year senior unsecured revolving credit facility of $2,000. The final terms of the credit facility are subject to negotiation by us and JPMorgan.

Finally, effective July 2, 2007, we terminated our previous $200 bank revolving credit facility that was scheduled to expire on December 22, 2009.

11.                Condensed Consolidating Financial Information

Our convertible debentures, due in 2022, are guaranteed by our wholly-owned indirect subsidiary Best Buy Stores, L.P. Investments in subsidiaries of Best Buy Stores, L.P., which have not guaranteed the convertible debentures, are accounted for under the equity method. We reclassified certain prior-year amounts as described in Note 1, Basis of Presentation, in this Quarterly Report on Form 10-Q. The aggregate principal balance and carrying amount of our convertible debentures, which mature in 2022, was $402 at June 2, 2007.

The debentures may be converted into shares of our common stock if the criteria, as described in Note 5, Debt, of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 3, 2007, are met. During a portion of the three months ended May 27, 2006, our closing stock price exceeded the specified stock price for more than 20 trading days in a 30-trading-day period. Therefore, debenture holders had the option to convert their debentures into shares of our common stock. However, no debentures were so converted. Due to changes in the price of our common stock, the debentures were no longer convertible as of May 27, 2006.

We file a consolidated U.S. federal income tax return. Income taxes are allocated in accordance with our tax allocation agreement. U.S. affiliates receive no tax benefit for taxable losses, but are allocated taxes at the required effective income tax rate if they have taxable income.

The following tables present condensed consolidating balance sheets as of June 2, 2007; March 3, 2007; and May 27, 2006; condensed consolidating statements of earnings for the three months ended June 2, 2007, and May 27, 2006; and condensed consolidating statements of cash flows for the three months ended June 2, 2007, and May 27, 2006:

14




$ in millions, except per share amounts

Condensed Consolidating Balance Sheets

As of June 2, 2007

(Unaudited)

 

 

Best Buy
Co., Inc.

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

255

 

$

56

 

$

1,055

 

$

 

$

1,366

 

Short-term investments

 

1,430

 

 

6

 

 

1,436

 

Receivables

 

13

 

316

 

147

 

 

476

 

Merchandise inventories

 

 

3,604

 

1,016

 

(322

)

4,298

 

Other current assets

 

20

 

189

 

559

 

(38

)

730

 

Intercompany receivable

 

 

 

4,965

 

(4,965

)

 

Intercompany note receivable

 

500

 

 

 

(500

)

 

Total current assets

 

2,218

 

4,165

 

7,748

 

(5,825

)

8,306

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Property and Equipment

 

237

 

1,940

 

852

 

(3

)

3,026

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

6

 

1,043

 

 

1,049

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradenames

 

 

 

93

 

 

93

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Investments

 

332

 

 

 

 

332

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Assets

 

91

 

265

 

105

 

(125

)

336

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Subsidiaries

 

6,493

 

265

 

1,301

 

(8,059

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

9,371

 

$

6,641

 

$

11,142

 

$

(14,012

)

$

13,142

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

$

 

$

3,957

 

$

 

$

3,957

 

Unredeemed gift card liabilities

 

 

410

 

45

 

 

455

 

Accrued compensation and related expenses

 

 

169

 

74

 

 

243

 

Accrued liabilities

 

27

 

505

 

398

 

 

930

 

Accrued income taxes

 

34

 

 

 

 

34

 

Short-term debt

 

 

 

48

 

 

48

 

Current portion of long-term debt

 

2

 

13

 

4

 

 

19

 

Intercompany payable

 

2,170

 

2,795

 

 

(4,965

)

 

Intercompany note payable

 

 

500

 

 

(500

)

 

Total current liabilities

 

2,233

 

4,392

 

4,526

 

(5,465

)

5,686

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Liabilities

 

209

 

814

 

360

 

(728

)

655

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Debt

 

407

 

134

 

57

 

 

598

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority Interests

 

 

 

33

 

 

33

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

6,522

 

1,301

 

6,166

 

(7,819

)

6,170

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders’ Equity

 

$

9,371

 

$

6,641

 

$

11,142

 

$

(14,012

)

$

13,142

 

 

15




$ in millions, except per share amounts

Condensed Consolidating Balance Sheets

As of March 3, 2007

(Unaudited)

 

 

Best Buy
Co., Inc.

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

235

 

$

77

 

$

893

 

$

 

$

1,205

 

Short-term investments

 

2,582

 

 

6

 

 

2,588

 

Receivables

 

33

 

363

 

152

 

 

548

 

Merchandise inventories

 

 

3,465

 

960

 

(397

)

4,028

 

Other current assets

 

20

 

202

 

596

 

(106

)

712

 

Intercompany receivable

 

 

 

4,891

 

(4,891

)

 

Intercompany note receivable

 

500

 

 

 

(500

)

 

Total current assets

 

3,370

 

4,107

 

7,498

 

(5,894

)

9,081

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Property and Equipment

 

239

 

1,898

 

804

 

(3

)

2,938

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

6

 

913

 

 

919

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradenames

 

 

 

81

 

 

81

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Investments

 

318

 

 

 

 

318

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Assets

 

91

 

263

 

14

 

(135

)

233

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Subsidiaries

 

6,099

 

162

 

1,293

 

(7,554

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

10,117

 

$

6,436

 

$

10,603

 

$

(13,586

)

$

13,570

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

$

 

$

3,934

 

$

 

$

3,934

 

Unredeemed gift card liabilities

 

 

452

 

44

 

 

496

 

Accrued compensation and related expenses

 

 

198

 

134

 

 

332

 

Accrued liabilities

 

7

 

564

 

544

 

(125

)

990

 

Accrued income taxes

 

484

 

5

 

 

 

489

 

Short-term debt

 

 

 

41

 

 

41

 

Current portion of long-term debt

 

2

 

12

 

5

 

 

19

 

Intercompany payable

 

2,460

 

2,431

 

 

(4,891

)

 

Intercompany note payable

 

 

500

 

 

(500

)

 

Total current liabilities

 

2,953

 

4,162

 

4,702

 

(5,516

)

6,301

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Liabilities

 

219

 

849

 

102

 

(727

)

443

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Debt

 

407

 

132

 

51

 

 

590

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority Interests

 

 

 

35

 

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

6,538

 

1,293

 

5,713

 

(7,343

)

6,201

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders’ Equity

 

$

10,117

 

$

6,436

 

$

10,603

 

$

(13,586

)

$

13,570

 

 

16




$ in millions, except per share amounts

Condensed Consolidating Balance Sheets

As of May 27, 2006

(Unaudited)

 

 

Best Buy
Co., Inc.

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

25

 

$

64

 

$

683

 

$

 

$

772

 

Short-term investments

 

1,376

 

 

178

 

 

1,554

 

Receivables

 

19

 

298

 

92

 

 

409

 

Merchandise inventories

 

 

3,308

 

725

 

(296

)

3,737

 

Other current assets

 

18

 

143

 

279

 

(34

)

406

 

Intercompany receivable

 

 

 

3,399

 

(3,399

)

 

Intercompany note receivable

 

500

 

 

 

(500

)

 

Total current assets

 

1,938

 

3,813

 

5,356

 

(4,229

)

6,878

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Property and Equipment

 

243

 

1,738

 

734

 

(3

)

2,712

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

6

 

949

 

 

955

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradenames

 

 

 

63

 

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Investments

 

302

 

 

 

 

302

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Assets

 

118

 

262

 

133

 

(154

)

359

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in Subsidiaries

 

5,178

 

12

 

1,314

 

(6,504

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

7,779

 

$

5,831

 

$

8,549

 

$

(10,890

)

$

11,269

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

$

 

$

3,055

 

$

 

$

3,055

 

Unredeemed gift card liabilities

 

 

381

 

34

 

 

415

 

Accrued compensation and related expenses

 

7

 

157

 

114

 

 

278

 

Accrued liabilities

 

8

 

443

 

421

 

(32

)

840

 

Accrued income taxes

 

289

 

2

 

 

 

291

 

Current portion of long-term debt

 

404

 

9

 

5

 

 

418

 

Intercompany payable

 

1,088

 

2,149

 

 

(3,237

)

 

Intercompany note payable

 

 

500

 

 

(500

)

 

Total current liabilities

 

1,796

 

3,641

 

3,629

 

(3,769

)

5,297

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Liabilities

 

260

 

760

 

30

 

(667

)

383

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-Term Debt

 

6

 

116

 

58

 

 

180

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

5,717

 

1,314

 

4,832

 

(6,454

)

5,409

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders’ Equity

 

$

7,779

 

$

5,831

 

$

8,549

 

$

(10,890

)

$

11,269

 

 

17




$ in millions, except per share amounts

Condensed Consolidating Statements of Earnings

For the Three Months Ended June 2, 2007

(Unaudited)

 

 

Best Buy
Co., Inc.

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

Revenue

 

$

4

 

$

6,270

 

$

7,275

 

$

(5,622

)

$

7,927

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

5,113

 

6,637

 

(5,715

)

6,035

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

4

 

1,157

 

638

 

93

 

1,892

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

39

 

1,098

 

484

 

5

 

1,626

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

 

(35

)

59

 

154

 

88

 

266

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Investment income and other

 

39

 

 

18

 

(13

)

44

 

Interest expense

 

(2

)

(11

)

(7

)

13

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before equity in earnings (loss) of subsidiaries

 

2

 

48

 

165

 

88

 

303

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings (loss) of subsidiaries

 

136

 

(6

)

30

 

(160

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income tax expense and minority interest

 

138

 

42

 

195

 

(72

)

303

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

34

 

18

 

61

 

 

113

 

 

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

 

 

2

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

104

 

$

24

 

$

136

 

$

(72

)

$

192

 

 

18




$ in millions, except per share amounts

Condensed Consolidating Statements of Earnings

For the Three Months Ended May 27, 2006

(Unaudited)

 

 

Best Buy
Co., Inc.

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

Revenue

 

$

4

 

$

5,828

 

$

6,352

 

$

(5,225

)

$

6,959