Best Buy 2007 Annual Report Download - page 101

$ in millions, except per share amounts
86
would have received if we had not opted out of a related
class action lawsuit against the same defendants. The Board
has approved the transactions and our continued business
dealings with RKMC.
We purchase certain store fixtures from Phoenix
Fixtures, Inc. (“Phoenix”), a company owned by the brother
of 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 has
approved the transactions and our continued business
dealings with Phoenix. The total amounts paid to Phoenix
during fiscal 2007, 2006 and 2005 were $19, $18 and
$20, respectively.
The Audit Committee of our Board, comprised of all
independent directors, has responsibility for reviewing
related party transactions and presenting them to the Board
for approval.
14.Subsequent Event
Acquisition of Speakeasy, Inc.
Effective May 1, 2007, we acquired Speakeasy, Inc.
(“Speakeasy”) for $97 in cash, including transaction costs,
subject to certain post-closing adjustments. In connection
with this transaction, we also repaid $6 of Speakeasy’s
debt. We acquired Speakeasy to strengthen our technology
portfolio for small business customers, delivered through
Best Buy For Business. The acquisition will be accounted for
in the first quarter of fiscal 2008 using the purchase method
in accordance with SFAS No. 141, Business Combinations.
Accordingly, the net assets will be recorded at their
estimated fair values, and operating results will be included
in our financial statements from the date of acquisition. The
purchase price will be allocated on a preliminary basis
using information currently available. Goodwill is projected
to be approximately $75 and is not expected to be
deductible for tax purposes. The allocation of the purchase
price to the assets and liabilities acquired will be finalized
no later than the first quarter of fiscal 2009, as we obtain
more information regarding asset valuations, liabilities
assumed and revisions of preliminary estimates of fair
values made at the date of acquisition.
15.Condensed Consolidating Financial
Information
Our convertible debentures, due in 2022, 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 as described in Note 1,
Summary of Significant Accounting Policies. The aggregate
principal balance and carrying amount of our convertible
debentures, which mature in 2022, was $402 at March 3,
2007.
Additional information regarding the convertible debentures
is included in Note 5, Debt.
In June 2004, we redeemed our convertible debentures due
in 2021 for $355. These debentures were guaranteed by
Best Buy Stores, L.P. and certain of our other wholly owned
subsidiaries.
In fiscal 2004, we sold our interest in Musicland. Best Buy
Co., Inc.’s fiscal 2005 gain on disposal of discontinued
operations included 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 a consolidated 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 tax rate if they have taxable income.