Best Buy 2006 Annual Report Download - page 26

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In accordance with accounting principles gene rally
accepted in the United States (GAAP), our balance sheets
include the cost of acquired intellectual property only. The
only material acquired intellectual property presently
included in our balance sheets is the Future Shop
tradename, which had a carrying value of $44 million at the
end of fiscal 2006. The value of the Future Shop tradename
is basedon the continuation of the Future Shopbrandin
Canada and currently is considered an indefinite-lived
intangible asset. If we ever were to abandon the Future
Shop brand, we wouldincur an impairment charge based
on the then-carrying value of the Future Shop tradename.
Seasonality
Our revenue and earnings are typically greater during our
fiscal fourth quarter, which includes the majority of the
holiday selling season.
Working Capital
We fund the growth of our business through a combination
of available cash and cash equivalents, short-term
investments and cash flows generated from operations. In
addition, our revolving credit facilities are available for
additional working capital needs or investment
opportunities.
Customers
We do not have a significant concentration of sales with any
individual customerand, therefore, the loss of any one
customer would not have amaterial impact on our
business. No single customer has accounted for 10% or
more of our total revenue.
Backlog
Our stores and online shoppingsites do not havea material
amount of backlog orders.
Government Contracts
No material portion of ourbusiness is subject to
renegotiation of profits ortermination of contracts or
subcontracts at the election of anygovernment.
Competition
The consumer electronics and home-office retail industry is
highly competitive. Our stores compete against other
consumer electronics retailers, specialty home-office
retailers, mass merchants, home-improvement superstores
and agrowing number of direct-to-consumer alternatives.
Our stores also compete against independent dealers,
regional chain discount stores, wholesale clubs, video rental
stores and other specialty retail stores. Mass merchants
continue to increase their assortment of consumer
electronics products, primarily those that are less complex to
sell, install and operate and have been expanding their
product offerings into higher-end categories. Similarly, large
home-improvement 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 and convenience;product assortment and
availability; value pricing; and financingalternatives.
We believe our store experience, broadproduct assortment,
store formats and brand marketing strategies differentiate us
from most competitors by positioning our stores as the
destination for new technology andentertainment products
in a fun and informative shopping environment. Our stores
compete by aggressively advertising andemphasizing a
complete product and service solution, value pricing and
financing alternatives. In addition, our trained and
knowledgeable sales and service staffs allow us to tailor the
offerings to meet the needs of our customers.
Research and Development
We have notengaged in any material researchand
development activities during the past three fiscal years.