Best Buy 2006 Annual Report Download - page 96

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$ in millions, except per share amounts
82
11.Contingencies and Commitments
Contingencies
On December 8, 2005, a purported class action lawsuit
captioned,Jasmen Holloway, et. al.v Best Buy Co., Inc. ,
was filed in the U.S. District Court for the Northern District
of California alleging we discriminate against women and
minority individuals on the basis of gender, race, color
and/or national origin with respect to our employment
policies and practices. The action seeks an end to
discriminatory policies andpractices, an awardof back and
front pay, punitive damages and injunctive relief, including
rightful place relieffor all class members .Webelieve the
allegations are without merit and intend to defend this
action vigorously.
We are involved in various otherlegal proceedings arising
in the normalcourse of conducting business. We believe
the amounts provided in our consolidated financial
statements, as prescribed by GAAP, are adequate in light of
the probable and estimable liabilities. The resolution of
those other proceedings is not expected to have a material
impact on our results of operations or financial condition.
Commitments
In 2004, we engaged Accenture LLP to assist us with
improving our operational capabilities and reducing our
costs in the Human Resources and Information Systems
areas. Our future contractual obligations to Accenture are
expected to range from $134 to $188 peryear through
2011, the end of the contract period for ourU.S. operations.
Priorto our engagement of Accenture, a significant portion of
these costs were incurred as part of normal operations.
We had outstanding letters of credit for purchase
obligations with a fair value of $66 at February25, 2006.
At February25, 2006, we had commitments for the
purchase andconstruction of facilities valued at
approximately $110. Also, at February 25, 2006, we had
entered into lease commitments for land and buildings for
96 future locations. These lease commitments with real
estate developers provide forminimum rentals ranging from
10 to 20 years, which if consummated based on current
cost estimates, will approximate $63 annually over the
initial lease terms.
We assumed a liability for certain extended service contracts
when we acquired Future Shop in fiscal2002. We
established an accrued liability for the acquired extended
service contracts based on historicaltrends in product
failure rates and the expected material and labor costs
necessary to provide the services . The remaining terms of
these acquired extended servicecontracts vary by product
andextendthrough fiscal 2007. The estimatedremaining
liability for acquired extended service contracts at
February 25, 2006, was $5. Subsequent to the acquisition,
allnew extendedservicecontracts were sold on behalf of
an unrelated third party, without recourse.
The following table reconciles the changes in our liability for
our acquired extended service contracts for the years ended
February 25, 2006, and February 26, 2005:
Balance at February 28, 2004 $18
Service charges (10)
Foreign currency exchange rate fluctuation 1
Balance at February 26, 2005 9
Service charges (4)
Foreign currency exchange rate fluctuation —
Balance February 25, 2006 $5
12.Related-Party Transactions
Elliot S. Kaplan, a director, is a partner with the lawfirm of
Robins, Kaplan, Miller & Ciresi L.L.P. (RKMC), which serves
as our primary outside general counsel. Our Board
periodicallyreviews the fees paid to RKMC to ensure that
they are competitive with fees charged by other law firms
comparable in size and expertise. We paid legal fees of $7,
$6 and$4to RKMC during fiscal2006, 2005 and 2004,
respectively. In addition, RKMC earned a contingent fee of
$6 in fiscal 2005 in connection with the settlement of our
claims against two credit card companies, which we believe
resulted in a significantly greaterrecovery for us than we
would have receivedif wehad not opted out of a related
class action lawsuit against the same defendants. The Board
has approved the transactions andour continued business
dealings with RKMC.
We purchase certain store fixtures from Phoenix
Fixtures, Inc. (Phoenix), a company owned bythe brother of