Best Buy 2003 Annual Report Download - page 167

3. Acquisitions
Effective Nov. 4, 2001, we acquired all of the common stock of Future Shop for $377, or $368 net of cash acquired, including
transaction costs. We acquired Future Shop to further our expansion plans and to increase shareholder value. The acquisition was
accounted for using the purchase method in accordance with SFAS No. 141, Business Combinations, issued in June 2001.
Accordingly, we recorded the net assets at their estimated fair values, and included operating results in our financial statements 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 third quarter of fiscal 2003. The primary adjustments to the
preliminary allocation were to assign value to the Future Shop trade name as a result of our decisions to operate stores in Canada
under both the Best Buy and Future Shop trade names, and to adjust the extended service contract liability assumed as of the date of
acquisition based on additional information. The final purchase price allocation is shown below and resulted in a $5 decrease to
goodwill from our preliminary allocation. All goodwill is nondeductible for tax purposes. Under SFAS No.142, goodwill is not
amortized, but is reviewed for impairment at least annually.
The final purchase price allocation was as follows:
Merchandise inventories $ 169
Property and equipment 103
Goodwill 401
Intangible asset 32
Other assets 43
Current liabilities (341)
Debt, including current portion (13)
Other liabilities (26)
Total $ 368
The following unaudited pro forma data sets forth the consolidated results of continuing operations as though Future Shop had been
acquired as of the beginning of fiscal 2002:
2002
Revenue $ 18,506
Net earnings 570
Basic earnings per share 1.80
Diluted earnings per share 1.77
The pro forma results include adjustments, principally the loss of interest income on cash used to finance the acquisition. The pro
forma results exclude costs expected to be incurred in connection with the integration of Future Shop’s business. The pro forma results
are not necessarily indicative of what actually would have occurred had the acquisition been completed as of the beginning of fiscal
2002, nor are they necessarily indicative of future consolidated results.
4. Debt
March 1,
2003 March 2, 2002
Convertible debentures, unsecured, due 2021, initial interest rate 2.75% $ 347 $ 341
Convertible subordinated debentures, unsecured, due 2022, initial interest rate
2.25% 402 402
Senior subordinated notes, unsecured, due 2008, interest rate 9.9% 5 5
Master lease obligations, due 2006, interest rate 5.9% 59 39
Mortgage and other debt, interest rates ranging from 4.0% to 9.2% 21 33
Total debt 834 820
Less: current portion (1) (7)
Total long−term debt 833 813
Less: long−term debt included in discontinued operations (5) (5)
Long−term debt included in continuing operations $ 828 $ 808
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