Best Buy 2006 Annual Report Download - page 52

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38
Our liquidity is affected by restricted cash balances that are
pledged as collateral or restricted to use for general liability
insurance, workers’ compensation insurance and warranty
programs. Restricted cash balances, which are included in
other current assets, totaled $178 million and$158 million
as of February 25, 2006, andFebruary 26, 2005,
respectively.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for each of the past three
fiscal years ($ in millions):
Fiscal Year 2006 2005 2004
Total cash provided by (used in):
Operating activities $1,695 $ 1,981 $ 1,387
Investing activities (754) (1,422 ) (1,376)
Financing activities (641)(459) (87)
Effect of exchange rate changes on cash 27 9 1
Discontinued operations, net — —
(53)
Increase (decrease) in cash and cash equivalents $327 $ 109 $(128)
Operating Activities
Cash provided by operating activities was $1.7billion for
fiscal 2006, compared with $2.0 billion for fiscal 2005 and
$1.4 billion for fiscal 2004. The decline in operating cash
flows for fiscal 2006, compared with fiscal 2005, was due
primarily to a decrease in cash provided from changes in
operatingassets and liabilities, partially offset by increased
earnings from continuing operations.
Earnings from continuing operations increased to $1.1
billion for fiscal 2006, compared with $934 million for
fiscal 2005. The changes in operatingassets and liabilities
were due primarily to increased merchandise inventories
and a decrease in accrued income taxes. Merchandise
inventories increased in fiscal 2006, due primarily to the
addition ofnew stores and changes in product mix,
including expanded assortments of notebook computers,
flat-panel televisions, and digital camerasand accessories.
The increasedinventory levels also reflected our efforts to
improve in-stock positions in product categories that have
been driving our revenue growth. Accrued income taxes
decreased in fiscal 2006 due primarily to a lower effective
income tax rate combined with timing of payments.
Investing Activities
Cash used in investing activities was $754 million for fiscal
2006, compared with $1.4 billion for both fiscal 2005 and
fiscal 2004. The decrease in cash used in investing activities
for fiscal 2006, compared with fiscal 2005,was due
primarily todecreased net purchases of short-term and
long-term investments in debtsecurities, partially offset by
increased capital spending. Refer to “Capital Expenditures”
in the Liquidity and Capital Resources section of this MD&A
foradditional information. In fiscal 2006, we used cash for
the construction of new retail locations, information systems
andother store projects, including the conversion of 163
U.S.Best Buy stores to our customer centricity platform. The
primary purposes of the cash investment activity were to
support our expansion plans, improve our operational
efficiency and enhance shareholder value.
Financing Activities
Cash used in financing activities was $641 million for fiscal
2006, compared with $459 million and $87 million for
fiscal 2005 andfiscal 2004, respectively. The increase in
cash used in financing activities for fiscal 2006, compared
with fiscal 2005, was due primarily to an increase in
repurchasesof our common stock. During fiscal 2006 we
repurchased $772 million of our common stock, compared
with $200 million in fiscal 2005. The increase in
repurchases of common stock was partially offset by a
decline in long-term debtrepayments. During fiscal 2005
we redeemed our convertible debentures due in 2021 for
$355 million.