Best Buy 2007 Annual Report Download - page 43

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28
Item 7.Management’sDiscussion and Analysisof
Financial Condition and Results of Operations.
We believe transparency and clarity are the primary goals
of successful financial reporting. We remain committed to
increasing the transparency of our financial reporting,
providing our shareholders with informative financial
disclosures and presenting an accurate view of our financial
position and operating results.
In accordance with Section 404 of the Sarbanes-Oxley Act
of 2002, our management, including our Chief Executive
Officer and Chief Financial Officer, conducted an
evaluation of our internal control over financial reporting
and concluded that such control was effective as of
March 3, 2007. In addition, our independent registered
public accounting firm expressed an unqualified opinion on
management’s assessment of the effectiveness of our
internal control over financial reporting. Management’s
report on the effectiveness of our internal control over
financial reporting and the related report of our
independent registered public accounting firm are included
in Item 8, Financial Statements and Supplementary Data, of
this Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (“MD&A”) is designed
to provide a reader of our financial statements with a
narrative from the perspective of our management on our
financial condition, results of operations, liquidity and
certain other factors that may affect our future results. Our
MD&A is presented in nine sections:
•Overview
•Business Strategy and Core Philosophies
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance-Sheet Arrangements and Contractual
Obligations
•Critical Accounting Estimates
•New Accounting Standards
•Outlook for Fiscal 2008
•Subsequent Event
We believe our MD&A should be read in conjunction with
the Consolidated Financial Statements and related Notes
included in Item 8, Financial Statements and Supplementary
Data, of this Annual Report on Form 10-K.
Our fiscal year ends on the Saturday nearest the end of
February. Fiscal 2007 included 53 weeks, whereas our
fiscal 2006 and 2005 each included 52 weeks.
Unless otherwise noted, this MD&A relates only to results
from continuing operations. Fiscal 2005 reflects the
classification of Musicland’s financial results as
discontinued operations.
Overview
Best Buy Co., Inc. is a specialty retailer of consumer
electronics, home-office products, entertainment software,
appliances and related services.
We operate two reportable segments: Domestic and
International. The Domestic segment is comprised of all
U.S. store and online operations, including Best Buy, Geek
Squad, Magnolia Audio Video and Pacific Sales. U.S. Best
Buy stores offer a wide variety of consumer electronics,
home-office products, entertainment software, appliances
and related services, operating 822 stores in 49 states and
the District of Columbia at the end of fiscal 2007. Geek
Squad offers residential and commercial computer repair,
support and installation services in all U.S. Best Buy stores
and 12 stand-alone stores at the end of fiscal 2007.
Magnolia Audio Video stores offer high-end audio and
video products and related services from 20 stores located
in California, Washington and Oregon at the end of fiscal
2007. Pacific Sales stores offer high-end home-
improvement products, appliances and related services,
operating 14 stores in Southern California at the end of
fiscal 2007. We acquired Pacific Sales in the first quarter
of fiscal 2007.
The International segment is comprised of all Canada store
and online operations, including Best Buy, Future Shop and
Geek Squad, as well as all China store and online
operations, including Best Buy, Five Star and Geek Squad.
We acquired a 75% interest in Five Star in the second
quarter of fiscal 2007. We opened our first Best Buy store in
China on December 28, 2006. Our International segment
offers products and services similar to our Domestic
segment’s offerings. However, Canada Best Buy stores do
not carry appliances. Further, Five Star stores and our
China Best Buy store do not carry entertainment software. At
the end of fiscal 2007, we operated 47 Canada Best Buy
stores in Ontario, Quebec, Alberta, British Columbia,
Manitoba and Saskatchewan; 121 Future Shop stores
throughout all of Canada’s provinces; 135 Five Star stores
located in seven of China’s 34 provinces; and one China
Best Buy store in Shanghai.