Best Buy 2006 Annual Report Download - page 97

Download and view the complete annual report

Please find page 97 of the 2006 Best Buy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

$ in millions, except per share amounts
83
PART II
Richard M. Schulze, our Chairman of the Board. The
decision to conduct business with Phoenix was based on
both qualitative and quantitative factors including product
quality, pricing, customer service and design flexibility. Our
Board reviewed our transactions with Phoenix and
determined that the transactions were at arm’s-length and
that Phoenix provides significant advantages with respect to
service and delivery.Accordingly, the Board has approved
the transactions and ourcontinued business dealings with
Phoenix. The total amount paid to Phoenix during fiscal
2006, 2005 and 2004was $18, $20 and $14,
respectively.
An independent committee of our Board has responsibility
for reviewing related-party transactions.
13.Subsequent Event
Effective March 7, 2006, we acquired all of the common
stock of Pacific Sales Kitchen and Bath Centers, Inc. (Pacific
Sales) for $411, or $408, net of cash acquired, including
transaction costs. We acquired Pacific Sales, ahigh-end
home-improvement and appliance retailer, to further our
expansion plans and increase shareholder value. The
acquisition will be accounted for in the first quarter of fiscal
2007 using the purchase method in accordance with SFAS
No. 141, BusinessCombinations.Accordingly, the net
assets will be recorded at their estimated fairvalues, and
operatingresults will be included in our financial statements
from the date of acquisition. The purchase price will be
allocated on apreliminary basis using information currently
available. Goodwill is projected to beapproximately $390.
The allocation of the purchase price to the assets and
liabilities acquired willbe finalized no later than the first
quarter of fiscal 2008, as we obtain more information
regarding asset valuations, liabilities assumed and revisions
of preliminary estimates of fair values madeat the date of
purchase.
14.Condensed Consolidating Financial
Information
Our convertible debentures, duein2022, 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 toconform to the current-year
presentation. The aggregate principal balance and carrying
amount of our convertible debentures, which mature in
2022, is $402.
Since March 31, 2006, our closing stock price has exceeded
the specified stock price for more than 20 days, therefore,
holders currently have the option to convert their debentures
into our common stock. As of May 9, 2006, no debentures
had been converted to shares of our common stock.
Additional information regarding the convertible debentures
is included in Note 4, Debt.
In June 2004,weredeemed our convertible debentures due
in 2021 for $355. These debentures were guaranteedby
Best Buy Stores, L.P. andcertain of our other wholly owned
subsidiaries.
In fiscal 2004, we sold ourinterest in Musicland. The
consolidated statement of earnings for the year ended
February 28, 2004, includes a loss on disposalof
discontinued operations (which was primarily noncash) of
$66,net of tax, related to the sale of Musicland. In
addition, approximately $198 of Musicland’s intercompany
indebtedness toBest Buy Co., Inc. was eliminated in fiscal
2004.Thisresulted in a loss of $198 that was recorded in
Best Buy Co., Inc. with an offsetting $198 gain recorded in
the Non-Guarantor Subsidiaries, which includedMusicland.
The elimination of intercompany indebtedness had no
impact on our consolidated net earnings, financial position
or cash flows.
Best Buy Co., Inc.’s fiscal 2005 gain on disposal of
discontinued operations includes a $50 tax benefit resulting
from the favorable resolution of outstanding tax matters with
the IRS regarding the disposition of our interest in
Musicland. Additional information regarding Musicland is
included in Note 2, Discontinued Operations.
We file aconsolidated 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 taxrateif they have taxable income.