UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) |
ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
For the fiscal year ended March 1, 2003 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-9595
BEST BUY CO., INC.
(Exact Namename of Registrant as Specifiedspecified in its Charter)charter)
Minnesota |
| 41-0907483 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
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Registrant’s telephone number, |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Name of each exchange on which registered |
Common Stock, par value $.10 per share |
| New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o
The aggregate market value of voting stockand non-voting common equity held by non-affiliates of the Registrant on May 3,August 30, 2002, was approximately $12.700$5.615 billion, based on the closing price on such date of $48.07$21.20 per share of the Registrant’s Common Stock, (adjusted for a three-for-two stock split on May 10, 2002) as reported on the New York Stock Exchange-Composite Index. (Voting stock held by(For purposes of this calculation all of the Registrant’s directors and executive officers is excluded)are deemed affiliates of the Registrant). On that date, there were 320,568,397
As of May 2, 2003, the Registrant had 322,243,258 shares of its Common Stock as adjusted for the stock split, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Annual Report to Shareholders for the year ended March 2, 20021, 2003 (“Annual Report”), are incorporated by reference into Parts I and II. The Annual Report is Exhibit 13.1 to this report.
Portions of the Registrant’s Definitive Proxy Statement dated June 5, 2002,May 20, 2003, for the regular meeting of shareholders to be held on June 25, 200224, 2003 (“Proxy Statement”), are incorporated by reference into PartParts II and III.
Section 27A of the Securities Act of 1933, as amended, and sectionSection 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward–looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this annual report are forward–looking statements and may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “intend” and “potential.” Such statements reflect our current view with respect to future events and are subject to certain risks, uncertainties and assumptions. A variety of factors could cause our actual results to differ materially from the anticipated results expressed in such forward–looking statements, including, among other things, general economic conditions, acquisitions and development of new businesses, product availability, sales volumes, profit margins, weather, foreign currency fluctuation, availability of suitable real estate locations, and the impact of labor markets and new product introductions on our overall profitability. Readers should review our Current Report on Form 8-K filed May 16, 2001, whichwith the Securities and Exchange Commission (“SEC”) on January 10, 2003, that describes additional important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements made in this annual reportAnnual Report on Form 10-K.
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TABLE OF CONTENTS
Item 4. Submission of Matters to a Vote of Security Holders. | |||
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters. | |||
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation. | |||
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. | |||
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. | |||
Item 10. Directors and Executive Officers of the Registrant. | |||
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. | |||
Exhibit Index: | |||
Exhibit 3.1 | |||
Exhibit 4.1 | |||
Exhibit 4.2 | |||
Exhibit 4.3 | |||
Exhibit 10.2 | |||
Exhibit 10.4 | |||
Exhibit 10.6 | |||
Exhibit 10.7 | |||
Exhibit 12.1 | |||
Exhibit 13.1 | |||
Exhibit 21.1 | |||
Exhibit 23.1 | |||
Exhibit 99.1 | |||
Exhibit 99.2 | |||
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ITEM 1. BUSINESSItem 1. Business.
Overview
History
We are North America’s No. 1a specialty retailer of consumer electronics, personal computers,home-office equipment, entertainment software and appliances with revenuesrevenue from continuing operations of $20.9 billion for our fiscal year ended March 2, 2002, of $19.6 billion.1, 2003. We operate retail stores and commercial Web sites as part of continuing operations under the brand names Best Buy (BestBuy.com), Media Play (MediaPlay.com), On Cue (OnCue.com), Sam Goody (SamGoody.com), Suncoast (Suncoast.com),Future Shop (FutureShop.ca) and Magnolia Hi-Fi (MagnoliaHiFi.com) and Future Shop (FutureShop.ca).
We began in 1966 as an audio components retailer, and in the early 1980s, with the introduction of the videocassette recorder in the early 1980’s, expanded into video products. In 1983, we revised our marketing strategy and began using mass-merchandising techniques, which included offering a wider variety of products and operating stores under a “superstore” concept. In 1989, we dramatically changed our method of retailing by introducing a self-service, noncommissioned, discount–style store concept designed to give the customer more control over the purchasing process. In fiscal 2000, we introduced a small–market Best Buy store concept that offers merchandise in the same product categories as larger stores, with a product assortment tailored to each respective community. The Best Buy store concept now employed in 481 stores across the United States, has continued to evolveevolved to include more interactive displays and, for certain products, a higher level of customer service, with the latest version including a more effectivedesigned to increase labor modelefficiency and improvedto improve merchandising. In fiscal 2004, we plan to enhance our store formats and customize product offerings to meet the needs of customers in different markets. This plan is consistent with customer centricity, one of the four key strategic priorities we formalized in fiscal 2003.
In fiscal 2000, we introduced a small–marketestablished Best Buy store concept that serves communities of generally less than 200,000 people and offers merchandise in the same product categories as larger stores, with a product assortment tailored to each respective community. In fiscal 2001, we re-launched Best Buy storesstores’ online shopping site, BestBuy.com. Our clicks-and-mortar strategy is designed to empower consumers to research and purchase products seamlessly across the Best Buy retail environment —either online or in retail stores. The online site offers products in all of Best Buy stores’ principal product categories except appliances.categories. In fiscal 2004, we expect to unveil a Web site with enhanced features including the ability to offer online consumers an even broader product assortment than we carry in Best Buy stores.
Acquisitions
In the fourth quarter of fiscal 2001, we acquired the common stock of Magnolia Hi-Fi, Inc. (Magnolia Hi-Fi) for $88 million in cash, including transaction costs, and the common stock of Musicland Stores Corporation for $425 million, including transaction costs, plus long-term debt valued at $271 million.costs. Magnolia Hi-Fi is a Seattle-based, high-end retailer of audio and video products that operates 13operated 19 stores in Washington, Oregon and California.California as of March 1, 2003. We believeacquired Magnolia Hi-Fi has expansion potential of up to 150 stores nationwide. However, prior to pursuing an aggressive growth strategy, we believe we must refine the store concept and broaden the scope of products and services currently offered at Magnolia Hi-Fi. Musicland is one of the largest national retailers of movies, prerecorded music, video games and other entertainment–related products with 1,321 stores in 49 states, the District of Columbia, the Commonwealth of Puerto Rico and the Virgin Islands. Our intention is to enhance the Musicland business by improving the customer experience and diversifying the revenue mix, thereby boosting sales productivity and profitability. We also view Musicland’s small-market stores as an attractive growth opportunity. access new customers.
In the third quarter of fiscal 2002, we acquired all of the common stock of Future Shop Ltd. (Future Shop) for $368 million, net of cash acquired, including transaction costs. Future Shop, which currently operates 95operated 104 stores as of March 1, 2003, is Canada’s largest consumer electronics retailer and offers product categories similar to that atof Best Buy stores. We acquired Future Shop to further our expansion plans, leverage our expertise in consumer electronics retailing and increase shareholder value. The acquisition marked our initial expansion into international operations.
In the third quarter of fiscal 2003, we acquired all of the common stock of Geek Squad, Inc. (Geek Squad) for approximately $3 million, net of cash acquired, including transaction costs. Geek Squad provides residential consumer computer support. We acquired Geek Squad to further our plans of providing technology support services to customers.
Additional information regarding our acquisitions is included in note 23 of the Notes to Consolidated Financial Statements on page 4154 of our Annual Report, contained in exhibitExhibit 13.1 to this report, and is incorporated herein by reference.
In fiscal 2003, we put on hold any major acquisitions or expansion beyond North America to focus on our core business.
Discontinued Operations
In addition to the acquisitions described above, in the fourth quarter of fiscal 2001, we acquired the common stock of Musicland Stores Corporation (Musicland) for $425 million, including transaction costs, plus long-term debt valued at $271 million. Musicland is primarily a mall-based national retailer of movies, prerecorded music and other entertainment-related products. At the end of fiscal 2003, Musicland operated 1,195 retail stores in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico, and commercial Web sites under the brand names Media Play (MediaPlay.com), Sam Goody (SamGoody.com) and Suncoast (Suncoast.com).
The original strategy behind the Musicland acquisition was to bring Best Buy’s core competencies in retailing consumer electronics to new consumer segments, including segments typically underserved by our Best Buy stores. However, the Musicland business did not meet our financial objectives. After carefully considering several alternatives, we determined that the interests of our shareholders, employees, vendors and landlords would be best served by a sale of the business. Accordingly, during the fourth quarter of fiscal 2003, we committed to a plan to sell our interest in Musicland. We have retained a national investment banking firm to assist with the sale process, as well as additional professionals to assist in other areas of the plan. Musicland’s financial results have been classified separately as discontinued operations in our consolidated financial statements for all periods presented. The sale of our interest in Musicland will allow us to focus on our consumer electronics stores, which are the core profit drivers for our business.
Additional information regarding Discontinued Operations is included in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 20 of our Annual Report and note 2 of the Notes to Consolidated Financial Statements beginning on page 52 of our Annual Report, incorporated herein by reference.
Unless otherwise noted, the following discussion relates to continuing operations only.
Business Strategy
Our vision is to make life fun and easy. Our business strategy is to bring technology and consumers together in a retail environment that focuses on educating consumers on the features and benefits of technology and entertainment products, while maximizing overall profitability. We believe our stores offer consumers meaningful advantages in store environment, product value, selection and service, all of which furtheradvance our objectiveobjectives of achieving a significantenhancing our business model, gaining market share in the markets we serve.and improving profitability. The acquisitions of Musicland,Future Shop and Magnolia Hi-Fi and Future Shop giveacquisitions provide us with access to new distribution channels more customer visits and the ability to leverage Best Buy stores’ core competencies with their operations. We also expect additional benefits from the cross merchandising of products and information sharing across our distribution channels.
The following table reconciles stores open at the end of fiscal 2001 to the number of stores open at the end of the fiscal 2002:new customers.
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|
| Total Stores |
| Stores |
| Stores |
| Stores |
| Total Stores |
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Best Buy: |
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Best Buy Stores |
| 419 |
| — |
| 62 |
| — |
| 481 |
|
Magnolia Hi-Fi |
| 13 |
| — |
| — |
| — |
| 13 |
|
Musicland |
| 1,309 |
| — |
| 51 |
| 39 |
| 1,321 |
|
International* |
| — |
| 91 |
| 4 |
| — |
| 95 |
|
Total |
| 1,741 |
| 91 |
| 117 |
| 39 |
| 1,910 |
|
* The International segment consists of Future Shop stores. Future Shop was acquired inDuring fiscal 2003, we formalized four strategic priorities that we believe will further enhance our business model over the third quarter of fiscal 2002.
next several years. Additional information regardingon our operating segments is presented in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 20 of our Annual Report, contained in exhibit 13.1 to this report, and is incorporated herein by reference. In addition, selected operating segment financial data is included in note 8 of the Notes to Consolidated Financial Statements beginning on page 52 of our Annual Report, contained in exhibit 13.1 to this report, and is incorporated herein by reference.
Additional information regarding our Best Buy operating segmentstrategic priorities is included in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 20 of our Annual Report, containedincorporated herein by reference.
Store Development
The addition of new stores has played, and we believe it will continue to play, a significant role in exhibit 13.1our continued growth and success. Our store development program focuses on entering new markets, adding stores within existing markets and relocating, remodeling and/or expanding existing stores. During fiscal 2003, we opened 90 new stores and 17 stores were remodeled, relocated or expanded. While many of the new stores opened in fiscal 2003 were in existing markets, others were in new markets including the opening of our first Best Buy store in Manhattan, as well as the opening of the first Best Buy stores in Canada. During fiscal 2004, we expect to open
4
approximately 80 new stores, most of which will be located in existing markets. We believe that continuing to grow our store base and locating our stores in desirable geographic markets are essential to our future success.
Additional information regarding our Outlook for Fiscal 2004 is included in Management’s Discussion and Analysis of Results of Operations and Financial Condition on page 37 of our Annual Report, incorporated herein by reference.
Customers
We do not have a significant concentration of sales with any individual customer and, therefore, the loss of any one customer would not have a material impact on our business. No single customer accounts for 10% or more of our total revenue.
Suppliers
Our strategy depends, in part, upon our ability to offer customers a broad selection of name-brand products and, therefore, our success is dependent upon satisfactory and stable supplier relationships. In fiscal 2003, our 20 largest suppliers accounted for over half of the merchandise we purchased, with five suppliers – Sony, Hewlett-Packard, Toshiba, Panasonic and Samsung – representing approximately one-third of total merchandise purchased. The loss of or disruption in supply from any one of these major suppliers could have a material adverse effect on our revenue and profits. We generally do not have long-term written contracts with our major suppliers. We have no indication that any of our suppliers will discontinue selling us merchandise. We have not experienced significant difficulty in maintaining satisfactory sources of supply, and we generally expect that adequate sources of supply will continue to exist for the types of merchandise sold in our stores.
Working Capital
We fund the growth of our business through a combination of existing cash and cash equivalents and cash flows generated from continuing operations. In addition, our revolving credit facilities are available for additional working capital needs or investment opportunities.
Additional information on our Liquidity and Capital Resources is included in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 31 of our Annual Report, incorporated herein by reference.
Available Information
We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the SEC. Copies of these reports, proxy statements and other information can be inspected and copied at:
SEC Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
You may also obtain these materials electronically by accessing the SEC’s home page on the Internet at:
http://www.sec.gov
In addition, we make available, free of charge on our Internet Web site, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file this report,material with, or furnish it to, the SEC. You may review these documents, under the heading “Investor Relations,” by accessing our Web site:
http://www.BestBuy.com
Also, reports and other information concerning us are available for inspection and copying at:
New York Stock Exchange
20 Broad Street
New York, NY 10005
During fiscal 2002, we had three reportable operating segments: Best Buy, Musicland and International. The primary reasons for the combining of our domestic operations into one reportable operating segment were the significant similarities of their respective products and markets, the leveraging of our buying and distribution functions and the merging of many of our operational functions into a shared services model in the first quarter of fiscal 2003. Based on our commitment to a plan to sell our interest in Musicland, Musicland’s financial results are no longer included in the Domestic segment, but rather are reported separately as discontinued operations.
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The following table reconciles stores open at the end of fiscal 2002 to the number of stores open at the end of fiscal 2003:
|
| Total Stores at |
| Stores |
| Stores |
| Total Stores at |
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Domestic stores: |
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U.S. Best Buy stores |
| 481 |
| 67 |
| — |
| 548 |
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Magnolia Hi-Fi stores |
| 13 |
| 6 |
| — |
| 19 |
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Total Domestic stores |
| 494 |
| 73 |
| — |
| 567 |
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International stores: |
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Future Shop stores |
| 95 |
| 9 |
| — |
| 104 |
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Canadian Best Buy stores |
| — |
| 8 |
| — |
| 8 |
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Total International stores |
| 95 |
| 17 |
| — |
| 112 |
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|
|
|
|
|
|
|
|
Total |
| 589 |
| 90 |
| — |
| 679 |
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Additional information regarding our Segment Performance is presented in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 26 of our Annual Report, incorporated herein by reference. In addition, selected Best Buyoperating segment financial data is included in note 810 of the Notes to Consolidated Financial Statements beginning on page 5262 of our Annual Report, contained in exhibit 13.1 to this report, and is incorporated herein by reference.
At the end of fiscal 2002,2003, we operated 481548 U.S. Best Buy stores in 4448 states. The stores average 44,900approximately 44,200 retail square feet and produce average annual salesrevenue of approximately $38$37.1 million. U.S. Best Buy stores collectively represent 21.6approximately 24.2 million retail square feet, or 67%about 90% of our total retail square footage. During fiscal 2002, weU.S. Best Buy stores launched ourits latest store concept, which featureswas designed to provide a more flexible architecture, improved merchandising, faster checkout, better product adjacencies and a more efficient labor model. Most new U.S. Best Buy stores opened in fiscal 2003 are expected to incorporateincorporated the features of this latest store format.
The following table reconciles U.S. Best Buy stores open at the beginning and end of each of the last five fiscal years:
Fiscal Year |
| Stores |
| Stores |
| Total Stores At |
|
Balance Forward |
| n.a. |
| n.a. |
| 272 |
|
1998 |
| 13 |
| 1 |
| 284 |
|
1999 |
| 28 |
| 1 |
| 311 |
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2000 |
| 47 |
| 1 |
| 357 |
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2001 |
| 62 |
| — |
| 419 |
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2002 |
| 62 |
| — |
| 481 |
|
Fiscal Year |
| Stores |
| Stores |
| Total Stores at |
|
Balance Forward |
| n.a. |
| n.a. |
| 284 |
|
1999 |
| 28 |
| 1 |
| 311 |
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2000 |
| 47 |
| 1 |
| 357 |
|
2001 |
| 62 |
| — |
| 419 |
|
2002 |
| 62 |
| — |
| 481 |
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2003 |
| 67 |
| — |
| 548 |
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Merchandise
The following table presents U.S. Best Buy stores’ sales,revenue, by product category, as a percentage of total U.S. Best Buy stores’ sales:revenue:
4
Product Category |
| Percentage of |
| Percentage of |
| Percentage of |
|
| Percentage of |
| Percentage of |
| Percentage of |
|
Consumer Electronics |
| 33 | % | 33 | % | 30 | % |
| 34 | % | 33 | % | 33 | % |
Home Office |
| 31 | % | 34 | % | 35 | % |
| 30 | % | 31 | % | 34 | % |
Entertainment Software |
| 22 | % | 19 | % | 19 | % |
| 22 | % | 22 | % | 19 | % |
Appliances |
| 6 | % | 7 | % | 8 | % |
| 6 | % | 6 | % | 7 | % |
Other |
| 8 | % | 7 | % | 8 | % |
| 8 | % | 8 | % | 7 | % |
Total |
| 100 | % | 100 | % | 100 | % |
U.S. Best Buy stores follow a standardized and detailed operating proceduresprocedure called Standard Operating Platform (SOP). The SOP includes procedures for inventory management, transaction processing, customer relations, store administration, product sales and merchandise display.
U.S. Best Buy store operations are organized into three divisions. Each division is divided into regions and is under the supervision of a senior vice president who oversees store performance through regional vice presidents. Regional vice presidents have responsibility for a number of districts within their respective region. District managers monitor store operations closely and meet regularly with store managers to discuss merchandising, new product introductions, sales promotions, customer loyalty programs, employee satisfaction surveys and store operating performance. Similar meetings are conducted at the corporate level with divisional and regional management. A senior vice president of retail operations has overall responsibility for retail store processing and operations, including labor management. Each district also has a loss prevention manager, with product security personnel employed at each store to control physical inventory shrinkage.losses. Advertising, merchandise buying and pricing, and inventory policies for U.S. Best Buy stores are centrally controlled.
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U.S. Best Buy stores are generally open 73 hours a week, seven days a week for approximately 73 hours a week. A store is typically staffed by one manager and four to five assistant managers. The average staff in each store ranges from 65 to 150 people, depending on store size and sales volume.
Distribution
Generally, merchandise is shipped to U.S. Best Buy stores from one of six distribution centers located in California, Georgia, Minnesota, Ohio, Oklahoma and Virginia. U.S. Best Buy stores also currently operate atwo dedicated distribution centercenters for entertainment software in Minnesota.Minnesota and Indiana. In addition, during the first quarter of fiscal 2004, we expect to openopened an additional general distribution center in upstate New York. The majority of U.S. Best Buy stores’ merchandise, except for major appliances and large-screen televisions, is shipped directly from manufacturers to a distribution center. Major appliances and large-screen televisions are shipped to satellite warehouses in each major market. U.S. Best Buy stores are dependent upon the distribution centers for inventory storage and shipment of most merchandise. However, in order to meet release dates for selected products and to improve inventory management, certain merchandise is shipped directly to the stores from manufacturers and distributors. We believe distribution centers can most effectively service Best Buy stores within a 600 to 700-mile radius and that our current distribution centers and the planned additionrelocation of the New YorkArdmore, Oklahoma, distribution center to a larger facility in fiscal 2004,2005, will accommodate expansion plans for the next several years. On average, U.S. Best Buy stores receive product shipments two or three times a week depending on sales volume. Generally, e-commerce merchandise sales are either picked up at U.S. Best Buy retail stores or fulfilled through the distribution centers.
Competition
We believe our U.S. Best Buy stores’ formats and brand marketing strategies distinguish themare differentiated from most competitorscompetitors' by positioning our U.S. Best Buy retail stores as the destination for new technology and entertainment products in a fun, informative and no-pressurenoncommissioned shopping environment. U.S. Best Buy stores compete by aggressively advertising and emphasizing a broad product assortment, value pricing and financing alternatives. In addition, we believe ourBest Buy’s e-commerce operations, coupled with the knowledgeable sales associates and service capabilities of U.S. Best Buy retail stores, have effectively positioned us to compete successfully, despite an increasingly competitive environment.
Overview
In the fourth quarter of fiscal 2001, we acquired Seattle-based Magnolia Hi-Fi, a retailer of high-end consumer electronics, founded in Seattle in
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1954. At the end of fiscal 2002,2003, Magnolia Hi-Fi operated 1319 stores in Washington, Oregon and California that average 10,200approximately 10,000 retail square feet and generate average annual salesrevenue per store of $7.6$6.9 million. Collectively, Magnolia Hi-Fi stores represent approximately 133,000189,000 retail square feet, less than 1% of our total retail square footage.
The following table reconciles Magnolia Hi-Fi stores open at the beginning and end of each fiscal year since the date of acquisition:
Fiscal Year |
| Stores |
| Stores |
| Total Stores At |
|
| Stores |
| Stores |
| Total Stores at |
|
Balance Forward* |
| n.a. |
| n.a. |
| 13 |
|
| n.a. |
| n.a. |
| 13 |
|
2001 |
| — |
| — |
| 13 |
| |||||||
2002 |
| — |
| — |
| 13 |
|
| — |
| — |
| 13 |
|
2003 |
| 6 |
| — |
| 19 |
|
*As of the date of acquisition, December 15, 2000.2000
Merchandise
The following table presents Magnolia Hi-Fi sales,revenue, by product category, as a percentage of total Magnolia Hi-Fi sales:revenue:
|
| ||
|
|
| |
|
|
| |
|
|
| |
|
|
|
Product Category |
| Percentage of |
| Percentage of |
|
Consumer Electronics |
| 87 | % | 86 | % |
Home Office |
| 4 | % | 4 | % |
Other |
| 9 | % | 10 | % |
Total |
| 100 | % | 100 | % |
Operations
Magnolia Hi-Fi stores are typically managed by a store manager, an audio/video sales manager and a mobile electronics sales manager. Most Magnolia Hi–Fi stores are generally open 72 hours a week, seven days a week for 65 to 75 hours a week. Depending on an individual store’s volume, store staffing includes 10eight to 2825 commissioned sales personnel, two to six commissioned mobile electronicelectronics installers, and twoone to 11six digital productproducts sales personnel, cashiers and warehouse personnel. Advertising, merchandise buying and pricing, and inventory policies for Magnolia Hi-Fi stores are centrally controlled.
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Distribution
Magnolia Hi-Fi competes with a variety of national, regional and local retailers, including large consumer electronics superstores, mass merchants and small specialty stores.
Magnolia Hi-Fi has positioned itself between large mass merchants and high-end specialty boutiques. We believe Magnolia Hi-Fi’s superior-qualityquality product offerings, its extensively trained sales staff and its focus on exceptional customer service both before and after the sale, in combination with the leveraging of U.S. Best Buy stores’ core competencies, effectively position Magnolia Hi-Fi to meet current and future competitive challenges.
Overview
Musicland, whichThe International segment was acquiredestablished in the fourth quarterconnection with our acquisition of Future Shop in November of fiscal 2001, is one of the largest national retailers of movies, prerecorded music, video games and other entertainment–related products. Its mall-based stores include the Sam Goody and Suncoast brands. In addition, Musicland operates small-market On Cue stores and metropolitan, large–format Media Play stores.2002. At the end of fiscal 2002, Musicland operated 1,3212003, the International segment consisted of 104 Future Shop stores in 49 states, the Districtall Canadian provinces and eight Canadian Best Buy stores in Ontario. Collectively, International stores generate average annual revenue of Columbia, the Commonwealth of Puerto Ricoapproximately $16.0 million per store and the Virgin Islands, with 8.8represent approximately 2.4 million total retail square feet, or approximately 27%9% of our total retail square footage.
The Future Shop acquisition accelerated our international expansion plans and provided us with an opportunity to increase revenue, gain market share and leverage our operational expertise. We continue to build on Future Shop’s position as the leading consumer electronics retailer in Canada. During fiscal 2003, we opened nine new Future Shop stores. These new stores strengthen our presence in Ontario, British Columbia and Quebec. In addition to investments in new store openings, we also enhanced the Future Shop Web site. The Web site provides an increasingly important avenue for reaching consumers and enhancing the Future Shop brand in Canada.
The primary objective of our International segment in fiscal 2003 was launching our dual-branding strategy in Canada. We introduced the Best Buy brand in Canada by opening eight Best Buy stores in the Toronto, Ontario market. The Canadian Best Buy stores are similar to the U.S. Best Buy stores and appeal to technology and entertainment enthusiasts who enjoy the interactive shopping experience and grab-and-go convenience for which Best Buy is known. As we increase the presence of Best Buy stores in Canada, we expect to gain operating efficiencies through the leveraging of our capital investments, supply chain management, advertising, merchandising and administrative functions.
The dual-branding strategy was designed to retain Future Shop’s brand equity and attract more customers by offering a choice of store experiences. Our goal is to reach differentiated customers with each brand by giving them the unique shopping experiences they desire. The primary differences between the two brands are:
In-store experience – The customer’s interaction with store employees is different at each of the two brands. Future Shop has commissioned sales associates who take a more proactive role in assisting customers. Through their expertise and attentiveness, the sales associate drives the transaction. In contrast, Canadian Best Buy store employees are noncommissioned, and the stores offer more interactive displays and grab-and-go merchandising. This design allows the customer to drive the transaction as they experience the products themselves, with store employees available to provide product information and explain product features.
Store size – The average Future Shop store is approximately 21,000 retail square feet, compared with an average of approximately 28,000 retail square feet for Canadian Best Buy stores. Canadian Best Buy stores generally have wider aisles, with more square footage devoted to entertainment software.
Additional information regarding our
6
Musicland operating International segment is included in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 2428 of our Annual Report, containedincorporated herein by reference. In addition, selected International segment financial data is included in exhibit 13.1note 10 of the Notes to Consolidated Financial Statements on page 62 of our Annual Report, incorporated herein by reference.
Reference is also made to Part II, Item 7A., “Quantitative and Qualitative Disclosures About Market Risk,” of this report for a discussion regarding the risks associated with foreign operations.
The following table reconciles Future Shop stores open at the beginning and end of each fiscal year since the date of acquisition:
Fiscal Year |
| Stores |
| Stores |
| Total Stores at |
|
Balance Forward* |
| n.a. |
| n.a. |
| 91 |
|
2002 |
| 4 |
| — |
| 95 |
|
2003 |
| 9 |
| — |
| 104 |
|
*As of the date of acquisition, November 4, 2001
The following table reconciles Canadian Best Buy stores open at the beginning and end of each fiscal year since inception of the International segment:
Fiscal Year |
| Stores |
| Stores |
| Total Stores at |
|
Balance Forward |
| n.a. |
| n.a. |
| n.a. |
|
2002 |
| — |
| — |
| — |
|
2003 |
| 8 |
| — |
| 8 |
|
Merchandise
International stores generally offer merchandise in five product categories: consumer electronics, home office, entertainment software, appliances and “other” products. Home office, the largest product category based on revenue, includes desktop and notebook computers and related peripheral equipment, telephones, wireless communication devices and personal digital assistants. The consumer electronics category consists of video and audio equipment. Video products include television sets, DVD players, cameras, camcorders, VCRs and digital broadcast satellite systems. Audio products include car stereos, portable audio equipment, home theater
8
audio systems, audio components, shelf systems and speakers. Entertainment software products include compact discs, video game hardware and software, DVD and VHS movies, and computer software. The appliance category includes washers, dryers, ranges, refrigerators, freezers and dishwashers, as well as vacuums, microwaves and housewares. The “other” product category includes extended service contracts, blank recording media, furniture and other miscellaneous products such as batteries, business cases and storage products.
Although the two store brands carry similar product categories, there are differences in product brands and depth of selection within product categories. On average, less than 55 percent of the product assortment overlaps (excluding entertainment software) between the two store brands.
The following table presents International revenue, by product category, as a percentage of total International revenue:
Product Category |
| Percentage of |
| Percentage of |
|
Home Office |
| 38 | % | 39 | % |
Consumer Electronics |
| 34 | % | 34 | % |
Entertainment Software |
| 15 | % | 17 | % |
Appliances |
| 5 | % | 4 | % |
Other |
| 8 | % | 6 | % |
Total |
| 100 | % | 100 | % |
* Subsequent to the date of acquisition, November 4, 2001
Operations
International stores use a standardized operating system. The operating system includes procedures for inventory management, transaction processing, customer relations, store administration, staff training and performance appraisal as well as merchandise display. Advertising, merchandise buying and pricing, and inventory policies are centrally controlled.
International store operations are organized into divisions, each headed by a vice president. Each vice president has regional management who closely monitor store operations and meet regularly with store managers to review management and staff training programs, customer feedback and requests, store operating performance and other matters. Meetings involving store management, product managers, advertising, financial and administrative staff, as well as senior regional and global headquarters personnel, are held quarterly to review operating results and to establish future objectives.
International stores are generally open 60 to 75 hours a week, seven days a week. A typical store is staffed by a general manager, several department sales managers, a customer service manager and on average 39 full-time staff associates, as well as part-time associates. The number of full-time staff associates is dependent upon store size, sales volume and store brand.
Distribution
The majority of International stores’ merchandise, except for appliances, is shipped directly from suppliers to distribution centers in British Columbia and Ontario. Contract carriers ship merchandise from the distribution centers to retail stores. The majority of appliance sales are delivered by third-party distributors. International stores are dependent upon the distribution centers for inventory storage and shipment of most merchandise. However, in order to meet release dates for selected products and to improve inventory management, certain merchandise is shipped directly to the stores from manufacturers and distributors. International stores typically receive product shipments twice a week, with accelerated shipments during periods of high sales volume.
Seasonality
Similar to many retailers, the International segment’s business is seasonal. Revenue and earnings are typically greater during the second half of the fiscal year, which includes the holiday selling season.
Competition
The Canadian marketplace is highly competitive and highly fragmented. International stores compete against other consumer electronics retailers, specialty home office retailers, mass merchants, home improvement superstores and a growing number of direct-to-consumer alternatives. International stores also compete against independent dealers, regional chain discount stores, wholesale clubs, mail-order and Internet retailers, video rental stores and other specialty retail stores. Mass merchandisers continue to increase their assortment of consumer electronics products — primarily those that are less complex to sell, install and operate. Similarly, large home improvement retailers are expanding their assortment of appliances. In addition, consumers are increasingly downloading entertainment and computer software directly via the Internet.
We believe our International segment’s price leadership, large product assortment, focus on customer service and complementary e-commerce operations effectively positions us to meet current and future competitive conditions.
Discontinued Operations
Overview
Musicland, which was acquired in the fourth quarter of fiscal 2001, is a national retailer of movies, prerecorded music, video gaming merchandise and other entertainment–related products. Its mall-based stores include the Sam Goody and Suncoast brands. Musicland also operates large–format Media Play stores in urban and suburban areas, and Sam Goody Rural (formerly known as On Cue) stores in small or rural cities. At the end of fiscal 2003, Musicland operated 1,195 stores in 48 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico, with 8.3 million retail square feet.
Additional information regarding Discontinued Operations is included in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 29 of our Annual Report, incorporated herein by reference. In addition, selected Musicland segment financial data is included in note 82 of the Notes to Consolidated Financial Statements beginning on page 52 of our Annual Report, contained in exhibit 13.1 to this report and, is incorporated herein by reference.
The following is a general overview of Musicland’s four retail store concepts:
Sam Goody Mall - – Sam Goody Mall stores are predominantly located in malls and average approximately 4,8005,100 retail square feet, although they range in size from 1,000 to 30,000 square feet. At the end of fiscal 2002, we operated 6152003, there were 505 Sam Goody Mall stores in 4846 states, the District of Columbia, the Commonwealth ofU.S. Virgin Islands and Puerto Rico and the Virgin Islands.Rico. The total retail square footage of Sam Goody Mall stores was approximately 3.02.6 million square feet, or 9% of our total retail square footage.feet. Sam Goody Mall stores average approximately $1.2$1.1 million in annual revenuesrevenue per location. During fiscal 2003, Musicland opened 13 and closed 123 Sam Goody Mall stores.
9
Suncoast - –Suncoast stores are mall-based and average approximately 2,400 retail square feet. At the end of fiscal 2002,2003, there were 398383 Suncoast stores in 47 states the District of Columbia and the Commonwealth of Puerto Rico. The total retail square footage of Suncoast stores was approximately 1.0 million900,000 square feet, or 3% of our total retail square footage.feet. Suncoast stores average approximately $1.1 million in annual revenuesrevenue per location. During fiscal 2003, Musicland opened 10 and closed 25 Suncoast stores.
On CueSam Goody Rural - On Cue stores are located in small or rural cities, generally with populations of 10,000 to 30,000, and average approximately 6,100 retail square feet. At the end of fiscal 2002, we operated 232 On Cue stores in 32 states with total retail square footage of approximately 1.4 million square feet, or 4% of our total retail square footage. On Cue stores average approximately $700,000 in annual revenues per location. – In fiscal 2003, we announced plans to beginMusicland began changing the name of On Cue stores to the Sam Goody name as the result of brand recognition research we conducted during fiscal 2002. Sam Goody Rural stores are located in small or rural cities, generally with populations of 10,000 to 30,000 people, and average approximately 5,900 retail square feet. At the end of fiscal 2003, there were 231 Sam Goody Rural stores in 33 states with total retail square footage of approximately 1.4 million square feet. Sam Goody Rural stores average approximately $700,000 in annual revenue per location. During fiscal 2003, Musicland opened 19 and closed 20 Sam Goody Rural stores.
The following table reconciles Musicland stores open at the beginning and end of each fiscal year since the date of acquisition:
Fiscal Year |
| Stores |
| Stores |
| Total Stores At |
|
| Stores |
| Stores |
| Total Stores at |
|
Balance Forward* |
| n.a. |
| n.a. |
| 1,309 |
|
| n.a. |
| n.a. |
| 1,309 |
|
2001 |
| — |
| — |
| 1,309 |
| |||||||
2002 |
| 51 |
| 39 |
| 1,321 |
|
| 51 |
| 39 |
| 1,321 |
|
2003 |
| 42 |
| 168 |
| 1,195 |
|
*As of the date of acquisition, January 31, 2001.2001
Merchandise
The following is an overview of the merchandise offered at each of Musicland’s four retail store concepts:
The following table presents Musicland sales,revenue, by product category, as a percentage of total Musicland sales:revenue:
7
|
| ||
|
|
| |
|
|
| |
|
|
| |
|
|
|
Product Category |
| Percentage of |
| Percentage of |
|
Music |
| 35 | % | 41 | % |
Movies |
| 38 | % | 35 | % |
Gaming |
| 9 | % | 6 | % |
Other |
| 18 | % | 18 | % |
Total |
| 100 | % | 100 | % |
Sam Goody Mall, Suncoast and On CueSam Goody Rural stores are typically managed by a store manager and an assistant manager. Media Play stores are typically managed by a general manager, an assistant general manager and three to five department managers. Most Musicland stores are open from 65 to 80 hours per week, seven days a week, depending on mall hours. Store staffing levels fluctuate with the size of the store and anticipated sales volume. Advertising, merchandise buying and pricing, and inventory policies for Musicland stores are centrally controlled.
Distribution
The majority of Musicland’s inventory is shipped from its distribution center located in Indiana. From time to time, in order to meet release dates for selected products and to improve inventory management, certain merchandise is shipped directly to the stores from manufacturers and distributors.
Seasonality
Similar to many retailers, Musicland’s business is seasonal. RevenuesRevenue and earnings are typically greater during the second half of the fiscal year, which includes the holiday selling season.
Competition
Musicland’s industry is highly competitive. Increased downloading of entertainment and computer software directly via the Internet, the progression of CD recording technology and slumping music sales all have all led to more intense competitive conditions. The industry has begun to test various copy-protection techniques as a potential means to mitigate the impact of CD recording technology advancements. Musicland retail stores also compete with specialty retail chains, mass merchants, bookstores and consumer electronics stores, as well as video rental stores, mail order clubs and various Internet-based retailers.
We believe that Musicland’s convenience-based strategy, service levels and broad product assortment, in combination with the leveraging of Best Buy stores’ core competencies and the re-merchandising strategy, position Musicland to meet current and future competitive challenges.Our Employees
Overview
At the end of fiscal 2002, we operated 95 Future Shop stores in 10 Canadian provinces. The stores average 20,200 retail square feet and produce average annual sales of approximately $15.3 million per store. Future Shop stores collectively represent 1.9 million retail square feet, or 6% of our total retail square footage. Reference is made to Part II, Item 7A., “Quantitative and Qualitative Disclosures About Market Risk,” of this report for a discussion regarding risks associated with foreign operations.
The International segment was established in connection with our acquisition of Future Shop in November of fiscal 2002. At the end of fiscal 2002, Future Shop operated 95 stores and was Canada’s largest consumer electronics retailer. Additional information regarding our International operating segment is included in Management’s Discussion and Analysis of Results of Operations and Financial Condition beginning on page 25 of our Annual Report, contained in exhibit 13.1 to this report, and is incorporated herein by reference. In addition, selected International segment financial data is included in note 8 of the Notes to Consolidated Financial Statements on page 52 of our Annual Report, contained in exhibit 13.1 to this report, and is incorporated herein by reference.
The following table reconciles Future Shop stores open at the beginning and end of each fiscal year since the date of acquisition:
Fiscal Year |
| Stores |
| Stores |
| Total Stores At |
|
Balance Forward* |
| n.a. |
| n.a. |
| 91 |
|
2002 |
| 4 |
| — |
| 95 |
|
*As of the date of acquisition, November 4, 2001.
Merchandise
Future Shop stores offer a large assortment of home office equipment, consumer electronics, entertainment software and appliances. Home office equipment includes products such as desktop and notebook computers and related peripheral equipment, telephones, wireless communication devices and personal digital assistants. Consumer electronics include products such as television sets, DVD players, cameras, camcorders, VCRs and digital broadcast satellite systems. Entertainment software includes products such as compact discs, video game hardware and software, DVD and VHS movies and computer software. Appliances include major
8
appliances such as washers, dryers, ranges, refrigerators, freezers and dishwashers, as well as vacuums, microwaves and housewares.
The following table presents Future Shop sales, by category, as a percentage of total sales:
|
| ||
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operations
Future Shop stores use a standardized operating system. The operating system includes procedures for inventory management, transaction processing, customer relations, store administration, staff training and performance appraisal as well as merchandise display. Advertising, merchandise buying and pricing, and inventory policies for Future Shop stores are centrally controlled.
Future Shop’s store operations are organized into three divisions, each headed by a vice president. Each vice president has several regional managers who closely monitor store operations and meet regularly with store managers to review management and staff training programs, as well as customer feedback and requests, store operating performance and other matters. Meetings involving store management, product managers, advertising, financial and administrative staff, as well as senior regional and global headquarters personnel, are held quarterly to review operating results and to establish future objectives.
Future Shop stores are typically open seven days a week for approximately 60 to 75 hours a week. A typical store is staffed by a general manager, several department sales managers, a customer service manager and 35 to 45 associate staff, depending on store size and sales volume.
The majority of Future Shop’s merchandise, exclusive of appliances, is shipped directly from suppliers to distribution centers in British Columbia and Ontario. Future Shop uses contract carriers to ship merchandise from the distribution centers to retail stores. Appliance sales are fulfilled by the distribution centers or by a contracted third-party distributor. Future Shop stores are dependent upon the distribution centers for inventory storage and shipment of most merchandise. However, in order to meet release dates for selected products, and to improve inventory management, certain merchandise is shipped directly to the stores from manufacturers and distributors. While Future Shop stores typically receive product shipments twice a week, shipments are accelerated during high sales volume periods.
Similar to many retailers, Future Shop’s business is seasonal. Revenues and earnings are typically greater during the second half of the fiscal year, which includes the holiday selling season.
Future Shop’s industry is highly competitive. Future Shop competes against a variety of Canadian retailers, including major department stores, independent consumer electronics and appliance dealers, mail order distributors, discount stores, warehouse clubs and superstores. In addition, Future Shop competes with Internet-based retailers in Canada and the United States. Mass merchandisers continue to increase their assortment of consumer electronics products—primarily those that are less complex to sell, install and operate. Similarly, large home improvement retailers are expanding their assortment of appliances. In addition, Canadian consumers are increasingly downloading entertainment and computer software directly via the Internet.
We believe Future Shop’s low price leadership, large product assortment and focus on customer service in combination with the leveraging of Best Buy stores’ core competencies, effectively position Future Shop to meet current and future competitive conditions.
Our Employees
At the end of fiscal 2002,2003, we employed approximately 94,00098,000 full-time, part-time and seasonal employees across all ofin our operating segments.consolidated operations. This included 87,000 full-time, part-time and seasonal employees in continuing operations, and approximately 11,000 full-time, part-time and seasonal employees at Musicland. There are currently no collective bargaining agreements covering any of our employees with the exception of unions that represent hourly employees at 1310 Musicland stores. We have not experienced a strike or work stoppage and we believe that we have favorable employee relations.stoppage.
910
Best Buy, Musicland, Future Shop and Magnolia Hi-FiThe following table summarizes the geographic store locations are included on page 60location of our Annual Report, contained in Exhibit 13.1 to this report, and are incorporated herein by reference.stores at the end of fiscal 2003:
|
| Domestic Segment |
| International Segment |
| Discontinued |
| ||||
|
| U.S. Best Buy |
| Magnolia Hi-Fi |
| Canadian Best |
| Future Shop |
| Musicland |
|
Alabama |
| 5 |
| — |
| — |
| — |
| 18 |
|
Alaska |
| 1 |
| — |
| — |
| — |
| 7 |
|
Arizona |
| 11 |
| — |
| — |
| — |
| 18 |
|
Arkansas |
| 4 |
| — |
| — |
| — |
| 14 |
|
California |
| 61 |
| 8 |
| — |
| — |
| 119 |
|
Colorado |
| 10 |
| — |
| — |
| — |
| 26 |
|
Connecticut |
| 4 |
| — |
| — |
| — |
| 11 |
|
Delaware |
| 2 |
| — |
| — |
| — |
| 1 |
|
District of Columbia |
| — |
| — |
| — |
| — |
| 2 |
|
Florida |
| 34 |
| — |
| — |
| — |
| 38 |
|
Georgia |
| 16 |
| — |
| — |
| — |
| 30 |
|
Hawaii |
| — |
| — |
| — |
| — |
| 6 |
|
Idaho |
| 1 |
| — |
| — |
| — |
| 12 |
|
Illinois |
| 36 |
| — |
| — |
| — |
| 59 |
|
Indiana |
| 14 |
| — |
| — |
| — |
| 38 |
|
Iowa |
| 6 |
| — |
| — |
| — |
| 27 |
|
Kansas |
| 6 |
| — |
| — |
| — |
| 13 |
|
Kentucky |
| 5 |
| — |
| — |
| — |
| 22 |
|
Louisiana |
| 6 |
| — |
| — |
| — |
| 22 |
|
Maine |
| 2 |
| — |
| — |
| — |
| 2 |
|
Maryland |
| 13 |
| — |
| — |
| — |
| 27 |
|
Massachusetts |
| 16 |
| — |
| — |
| — |
| 18 |
|
Michigan |
| 24 |
| — |
| — |
| — |
| 46 |
|
Minnesota |
| 18 |
| — |
| — |
| — |
| 32 |
|
Mississippi |
| 1 |
| — |
| — |
| — |
| 11 |
|
Missouri |
| 13 |
| — |
| — |
| — |
| 26 |
|
Montana |
| 2 |
| — |
| — |
| — |
| 8 |
|
Nebraska |
| 3 |
| — |
| — |
| — |
| 8 |
|
Nevada |
| 5 |
| — |
| — |
| — |
| 5 |
|
New Hampshire |
| 5 |
| — |
| — |
| — |
| 5 |
|
New Jersey |
| 15 |
| — |
| — |
| — |
| 48 |
|
New Mexico |
| 4 |
| — |
| — |
| — |
| 8 |
|
New York |
| 23 |
| — |
| — |
| — |
| 49 |
|
North Carolina |
| 14 |
| — |
| — |
| — |
| 34 |
|
North Dakota |
| 2 |
| — |
| — |
| — |
| 9 |
|
Ohio |
| 25 |
| — |
| — |
| — |
| 57 |
|
Oklahoma |
| 3 |
| — |
| — |
| — |
| 9 |
|
Oregon |
| 4 |
| 3 |
| — |
| — |
| 20 |
|
Pennsylvania |
| 20 |
| — |
| — |
| — |
| 52 |
|
Puerto Rico |
| — |
| — |
| — |
| — |
| 5 |
|
Rhode Island |
| 1 |
| — |
| — |
| — |
| — |
|
South Carolina |
| 7 |
| — |
| — |
| — |
| 16 |
|
South Dakota |
| 1 |
| — |
| — |
| — |
| 8 |
|
Tennessee |
| 7 |
| — |
| — |
| — |
| 25 |
|
Texas |
| 50 |
| — |
| — |
| — |
| 68 |
|
Utah |
| 4 |
| — |
| — |
| — |
| 14 |
|
Vermont |
| 1 |
| — |
| — |
| — |
| — |
|
Virgin Islands |
| — |
| — |
| — |
| — |
| 2 |
|
Virginia |
| 17 |
| — |
| — |
| — |
| 26 |
|
Washington |
| 13 |
| 8 |
| — |
| — |
| 35 |
|
West Virginia |
| 1 |
| — |
| — |
| — |
| 8 |
|
Wisconsin |
| 12 |
| — |
| — |
| — |
| 30 |
|
Wyoming |
| — |
| — |
| — |
| — |
| 1 |
|
British Columbia |
| — |
| — |
| — |
| 21 |
| — |
|
Alberta |
| — |
| — |
| — |
| 13 |
| — |
|
Saskatchewan |
| — |
| — |
| — |
| 3 |
| — |
|
Manitoba |
| — |
| — |
| — |
| 4 |
| — |
|
Ontario |
| — |
| — |
| 8 |
| 37 |
| — |
|
Quebec |
| — |
| — |
| — |
| 20 |
| — |
|
Nova Scotia |
| — |
| — |
| — |
| 2 |
| — |
|
New Brunswick |
| — |
| — |
| — |
| 2 |
| — |
|
Newfoundland |
| — |
| — |
| — |
| 1 |
| — |
|
Prince Edward Island |
| — |
| — |
| — |
| 1 |
| — |
|
Total |
| 548 |
| 19 |
| 8 |
| 104 |
| 1,195 |
|
11
Domestic Segment
Best Buy Segment
U.S. Best Buy Stores
At the end of fiscal 2002,2003, we operated 481548 U.S. Best Buy stores totaling approximately 21.624.2 million retail square feet.
U.S. Best Buy stores are serviced by the following major distribution centers:
Location |
| Square |
| Owned |
|
Findlay, Ohio |
| 1,024,000 |
| Leased |
|
Staunton, Virginia |
| 725,000 |
| Leased |
|
Dublin, Georgia |
| 742,000 |
| Owned |
|
Dinuba, |
|
|
| Owned |
|
Ardmore, |
|
|
| Leased |
|
Bloomington, Minnesota |
| 425,000 |
| Leased |
|
Edina, Minnesota (entertainment software)(3) |
|
|
| Leased |
|
Franklin, Indiana (entertainment software) | 715,000 | Owned |
(1)The Dinuba, California, distribution center was expanded from 644,000 square feet to 1,039,000 square feet during fiscal 2003.
(2)We recently broke ground on a new distribution center in Ardmore, Oklahoma. The distribution center will be located north of the existing location in Ardmore, Oklahoma, and will be owned. The new distribution center is scheduled to open in fiscal 2005. The existing location is being replaced in order to meet the expected increased demand for technology products and services. The new facility is expected to serve 98 U.S. Best Buy stores when it initially opens and will have the ability to serve up to 125 U.S. Best Buy stores in Arkansas, Kansas, Louisiana, Missouri, New Mexico, Oklahoma and Texas.
(3)At the end of fiscal 2003, the Edina, Minnesota, distribution center distributed entertainment software to certain U.S. Best Buy stores. We are in the process of relocating the Edina distribution center’s services to our Franklin, Indiana, distribution center. Following the transition expected to be completed in fiscal 2004 and coinciding with the expiration of the current lease, we will vacate the Edina facility.
In addition, U.S. Best Buy stores lease space in 2017 satellite warehouses in major metropolitan markets for home delivery of major appliances and large–screen televisions. U.S. Best Buy stores utilize approximately 2.52.4 million square feet in these warehouses. In the first quarter of fiscal 2004, we expect to openopened an additional 720,000-square-foot owned distribution center in upstate New York.
Effective March 31, 2003, Best Buy Co., Inc.’s moved its principal corporate offices areinto a new 1.5 million square-foot facility located in Richfield, Minnesota. The new corporate campus replaces existing owned and leased corporate office facilities. In addition to owning this new facility, we continue to own two owned facilities in Eden Prairie, Minnesota, aggregating 540,000 square feet, in Eden Prairie, Minnesota. In addition to owning these twowhich previously served as our principle corporate offices. These facilities are currently for sale. At the end of fiscal 2003, we leasealso leased an additional 550,000 square feet of office space in close proximity to the main corporate office facility. In fiscal 2002, construction commenced on a new corporate campus in Richfield, Minnesota. The new corporate campus, which will replace existing owned and leased corporate office facilities, is expected to be completed in fiscal 2003.facilities.
Magnolia Hi-Fi
At the end of fiscal 2002,2003, we operated 1319 Magnolia Hi-Fi stores totaling approximately 133,000189,000 retail square feet.
Magnolia Hi-Fi leases an 80,000 square-foot80,000-square-foot distribution, warehouse and office facility in Kent, Washington, of which approximately 54,000 square feet are used for distribution and warehouse operations, with the remainder dedicated to a service department and corporate administrative functions. In addition, Magnolia Hi-Fi utilizes a 13,000 square-foot13,000-square-foot leased regional warehouse in Hayward, California.
Musicland Segment
At the end of fiscal 2002, we operated 1,321 Musicland stores totaling approximately 8.8 million retail square feet.
Musicland’s stores are serviced by a 715,000 square-foot owned distribution facility in Franklin, Indiana.
Musicland’s corporate offices are located in a 94,000 square-foot owned facility in Minnetonka, Minnesota. Musicland will be headquartered in Richfield, Minnesota upon the expected completion of the new corporate campus in fiscal 2003.
International Segment
At the end of fiscal 2002,2003, we operated 95104 Future Shop stores and eight Canadian Best Buy stores totaling approximately 1.92.4 million retail square feet.
Future Shop leasesThe operations of the International segment are serviced by two leased distribution centers located in Delta, British Columbia, and Brampton, Ontario. Substantially allThe majority of Future Shop’s merchandise, other than appliances, is distributed from these two distribution centers, which total 288,000are 255,000 square feet and 418,000434,000 square feet, respectively. Appliance sales in western Canada are fulfilled by the distribution center in British Columbia; however, Future Shop contracts with a third-party distributor is used to warehouse and ship appliance inventory in other parts of Canada, primarily Ontario and Alberta.
Future Shop’s corporateThe Brampton distribution center is expected to be expanded to 978,000 square feet by the end of fiscal 2005. In addition a 413,000-square-foot distribution center was purchased in Langley, British Columbia, during the first quarter of fiscal 2004. The Langley distribution center will replace the leased Delta distribution center. The transition to the Langley facility is expected to be completed during fiscal 2004.
Corporate offices for the International Segment are located in a 141,000 square-foot141,000-square-foot leased facility in Burnaby, British Columbia.
Discontinued Operations
At the end of fiscal 2003, we operated 1,195 Musicland stores totaling approximately 8.3 million retail square feet.
Musicland’s stores are serviced by our distribution facility in Franklin, Indiana. For additional information regarding this facility, refer to the above discussion of U.S. Best Buy Stores.
Musicland’s corporate offices are located in a 94,000-square-foot owned facility in Minnetonka, Minnesota.
12
Operating Leases
Essentially all retail stores and mosta majority of distribution facilities are leased. Terms of the lease agreements generally range from threeup to 20 years. Most of the leases contain renewal options and escalation clauses.
Additional information regarding operating leases is
10
included in note 57 of the Notes to Consolidated Financial Statements beginning on page 4959 of our Annual Report, contained in exhibit 13.1 to this report, and is incorporated herein by reference.
We are involved in various legal proceedings arising during the normal course of conducting business. The resolution of those proceedings is not expected to have a material impact on our results of operations and financial condition.
Our Executive Officers are as follows:
Name |
| Age |
| Position With the Company |
| Years |
|
| Age |
| Position With the Company |
| Years |
|
Bradbury H. Anderson |
| 53 |
| Vice Chairman and Chief Executive Officer |
| 30 |
| |||||||
Richard M. Schulze |
| 61 |
| Founder, Chairman and Chief Executive Officer |
| 36 |
|
| 62 |
| Founder and Chairman |
| 37 |
|
Bradbury H. Anderson |
| 52 |
| Vice Chairman |
| 29 |
| |||||||
Allen U. Lenzmeier |
| 58 |
| President and Chief Operating Officer |
| 18 |
|
| 59 |
| President and Chief Operating Officer |
| 19 |
|
Thomas C. Healy |
| 41 |
| President — Best Buy International |
| 13 |
| |||||||
Michael P. Keskey |
| 48 |
| President — Best Buy Retail Stores |
| 15 |
| |||||||
Brian J. Dunn |
| 42 |
| Executive Vice President — Retail Sales |
| 17 |
|
| 43 |
| Executive Vice President — Retail Sales |
| 18 |
|
Michael A. Linton |
| 45 |
| Executive Vice President and Chief Marketing Officer |
| 3 |
| |||||||
Marc D. Gordon |
| 41 |
| Executive Vice President and Chief Information Officer |
| 4 |
|
| 42 |
| Executive Vice President and Chief Information Officer |
| 5 |
|
Darren R. Jackson |
| 37 |
| Executive Vice President — Finance and Treasury, and Chief Financial Officer |
| 2 |
|
| 38 |
| Executive Vice President — Finance and Chief Financial Officer |
| 3 |
|
Michael P. Keskey |
| 47 |
| President — Best Buy Stores |
| 14 |
| |||||||
Michael A. Linton |
| 46 |
| Executive Vice President — Consumer & Brand Marketing and Chief Marketing Officer |
| 4 |
| |||||||
Michael London |
| 53 |
| Executive Vice President and General Merchandise Manager |
| 6 |
|
| 54 |
| Executive Vice President — General Merchandise Manager |
| 7 |
|
George Z. Lopuch |
| 51 |
| Executive Vice President — Strategic Planning |
| 5 |
| |||||||
Philip J. Schoonover |
| 42 |
| Executive Vice President — Business Development |
| 8 |
|
| 42 |
| Executive Vice President — New Business Development |
| 9 |
|
John C. Walden |
| 42 |
| Executive Vice President — Human Capital and Leadership |
| 3 |
|
| 43 |
| Executive Vice President — Human Capital and Leadership |
| 4 |
|
Susan S. Hoff |
| 38 |
| Senior Vice President — Public Affairs and Investor Relations Officer |
| 20 |
| |||||||
Joseph M. Joyce |
| 51 |
| Senior Vice President — General Counsel and Assistant Secretary |
| 12 |
| |||||||
Bruce H. Besanko |
| 43 |
| Vice President — Finance/Planning & Performance Management |
| 1 |
|
Bradbury H. Anderson has been a director since 1986 and is currently Best Buy’s Vice Chairman and Chief Executive Officer. Mr. Anderson assumed the responsibility of Chief Executive Officer effective June 30, 2002, having previously served as President and Chief Operating Officer since 1991. Mr. Anderson has been employed in various capacities with us since 1973.
Richard M. Schulze is a founder of Best Buy. He has been an officer and director from our inception in 1966 and currently is Chairman of the Board and Chief Executive Officer.Board. Effective June 30, 2002, Mr. Schulze will relinquishrelinquished the duties of Chief Executive Officer while continuing to serve as Chairman of the Board.Officer. Mr. Schulze is also a trustee of the University of St. Thomas, chairman of the board of governors of the University of St. Thomas Business School and a member of the Board of Overseers at the Carlson School of Management at the University of Minnesota and a directorPresident’s Council of Twin Cities Public Television, Inc.
Bradbury H. Anderson is currently our Vice Chairman, having previously served as President and Chief Operating Officer since April 1991. Mr. Anderson has been a director since 1986. Effective June 30, 2002, Mr. Anderson will assume the responsibilities of Chief Executive Officer. Mr. Anderson has been employed in various capacities with us since 1973.Television.
Allen U. Lenzmeier was named President and Chief Operating Officer in March 2002. Mr. Lenzmeier has been a director since 2001. Mr. Lenzmeier is currently Best Buy's President and Chief Operating Officer. Mr. Lenzmeier joined us in 19841984. Prior to his promotion to his current position, he served as Vice President of Finance— Best Buy Retail Stores from 2001 to 2002 and Operations. He was named Senior Vice President in 1986, promoted toas Chief Financial Officer and Executive Vice President infrom 1991 and then promoted to President of Best Buy Retail Stores in 2001. He is a national trustee for the Boys and Girls Clubs of the Twin Cities and serves on the Business Advisory Council at Minnesota State University.its board of directors.
Thomas C. Healy was promoted to President — Best Buy International in 2001. Prior to that, he had served as Senior Vice President — Canadian Operations. Mr. Healy joined us in 1990 and has held positions as regional vice president, district manager and general manager.
Michael P. Keskey was promoted to President — Best Buy Retail Stores in March 2002. Mr. Keskey served as Executive Vice President — Retail Sales from 2001 to 2002 and as Senior Vice President — Retail Sales from 1997 to 2001. Mr. Keskey joined us in 1988 and has since held various positions.
Brian J. Dunn was named Executive Vice President — Retail Sales in March 2002. Mr. Dunn joined us in 1985 and has held positions as senior vice president, regional vice president, regional manger,manager, district manager and store manager.
Marc D. Gordon was named Executive Vice President and Chief Information Officer in 2001. He is responsible for information systems, logisticstechnology and the legal department.supply chain management. Mr. Gordon joined us in 1998 and served as Senior Vice President -— Information Systems and Chief Information Officer. Prior to that, Mr. Gordon had experience in the retail information systems area, most recently for West Marine Products, a West Coast–based specialty retailer/wholesaler of marine products. Mr. Gordon also served as a senior manager with Accenture, a principal with a Boston management consulting firm and a vice president of information systems with Timberland Company.
Darren R. Jackson was named Executive Vice President — Finance and Treasury, and Chief Financial Officer in April 2002. Mr. Jackson joined us in 2000 as Senior Vice President -— Finance and Treasurer and was promoted to Chief Financial Officer in 2001. Prior to that, Mr. Jackson served as chief financial officer of the Full-lineFull-Line Store Division at Nordstrom, Inc. from 1998 to 2000 and as chief financial officer of Carson Pirie Scott & Co. Inc. from 1996 to 1998. A certified public accountant, Mr. Jackson has 1314 years of experience in the retailing industry.
11
Michael P. Keskey was promoted to President of Best Buy Stores in February 2002. Mr. Keskey was promoted to Executive Vice President — Retail Sales in 2001. Prior to that, he had served as Senior Vice President — Retail Sales since 1997. Mr. Keskey joined us in 1988 and has held positions as Vice President — Sales, regional manager, district manager and store manager.
Michael A. Linton was promoted to Executive Vice President — Consumer & Brand Marketing and Chief Marketing Officer in March 2002. Mr. Linton joined us in 1999 as Senior Vice President — Strategic Marketing. Prior to that, Mr. Linton held positions as vice president of marketing at Remington Products Corporation, maker of personal care and grooming products; vice president and general manager of a product category at James River Corporation, a manufacturer and marketer of consumer products, food and packaging; and a general manager at Progressive Insurance. Mr. Linton began his career at The Proctor & Gamble Company in brand management.Company.
Michael London was promoted to Executive Vice President and— General Merchandise Manager in 2001. Prior to that, he served as Senior Vice President - General Merchandise. Mr. London joined us in 1996Merchandise from 1998 to 2001 and as Vice President - General Merchandise.Merchandise from 1996 to 1998. Prior to joining us in 1996, Mr. London was a senior vice president offor NordicTrack, a division of the CML Group, Inc.,fitness equipment manufacturer, and executive vice president for Central Tractor Farm & Country.
George Z. Lopuch was named Executive Vice President - Strategic Planning in 2001. Mr. Lopuch joined us in 1998 as Senior Vice President - Corporate Strategic Planning. Prior to that, Mr. Lopuch wasCountry, a senior vice president of corporate strategic planning and research at SuperValu, Inc.specialty farm products retail supplier.
Philip J. Schoonover was named Executive Vice President — New Business Development in February 2002. He was promoted to Executive Vice President of Digital Technology Solutions in February 2001 after having served for five years as Senior Vice President - Merchandising. Prior to joining us in 1995, Mr. Schoonover was an executive vice president for TOPS Appliance City.City, a retailer of home appliances and consumer electronics.
13
John C. Walden was named Executive Vice President of— Human Capital and Leadership in FebruaryMarch 2002. Mr. Walden served as President of our Internet division, BestBuy.com, Inc. from 1999 to 2002. Prior to joining us in 1999, Mr. Walden served as chief operating officer of Peapod, Inc., an Internet retailer of groceries. Mr. Walden has also held executive positions with Ameritech Corporation, a telecommunications company, and Storage Technology Corporation, anda maker of data storage products. Earlier he practiced corporate and securities law with Sidley, Austin, Brown and Wood LLP.
Susan S. Hoff was named Senior Vice President — Public Affairs and Investor Relations Officer in 2000. Since joining us in 1983, Ms. Hoff has served in various capacities including Vice President of Corporate Communications and Public Relations. She is the daughter of Founder and Chairman Richard M. Schulze.
Joseph M. Joyce was promoted to Senior Vice President — General Counsel and Assistant Secretary in 1997. Mr. Joyce joined us in 1991 as Vice President — Human Resources and General Counsel. Prior to joining us, Mr. Joyce was with Tonka Corporation, a toy maker, having most recently served as vice president, secretary and general counsel.
Bruce H. Besanko joined us in April 2002 as Vice President — Finance/Planning & Performance Management. Prior to joining us, he spent approximately six years with Sears serving in positions of increasing responsibility. Mr. Besanko also brings finance and treasury experience from Atlantic Richfield Company and more than eight years of service in the United States Air Force in various leadership roles.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSItem 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERSItem 5. Market for Registrant’s Common Equity and Related Stockholder Matters.
The information set forth under the caption “Common Stock Prices” on page 3340 of the Annual Report is incorporated herein by reference.
The information set forth under the caption “Equity Compensation Plan Information” on page 20 of the Proxy Statement, regarding securities authorized for issuance under equity compensation plans, is incorporated herein by reference.
The information set forth under the caption “10-Year“11-Year Financial Highlights” on pages 18 and 19 of the Annual Report, for the fiscal years 19981999 through 20022003 is incorporated herein by reference.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The information given under the caption “Management’s Discussion and Analysis of Results of Operations and Financial Condition” on pages 20 through 3341 of the Annual Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our debt is not subject to material interest rateinterest-rate volatility risk. The rates on a substantial portion of our debt may be reset, but may not be more than one percentage point higher than the current rates. If the rates on the debt were to be reset one percentage point higher, our annual interest expense would increase by approximately $8 million. We do not currently manage the risk through the use of derivative instruments.
We have market risk arising from changes in foreign currency exchange rates as a result of our acquisition of Future Shop in Canada in November fiscal 2002.2001. At this time, we do not manage the risk through the use of derivative instruments. A 10% adverse change in the foreign currency exchange rate would not have a significant impact on our results of operations or financial position.
1214
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAItem 8. Financial Statements and Supplementary Data.
The financial statements required by this Item, listed below, are included in the Annual Report contained in exhibit 13.1 to this report, on the pages indicated below and are expressly incorporated herein by this reference.
| Page |
Consolidated balance sheets as of March |
|
For the fiscal years ended March 1, 2003, March 2, |
|
Consolidated statements of earnings |
|
Consolidated statements of cash flows |
|
Consolidated statements of changes in shareholders’ equity |
|
Notes to consolidated financial statements |
|
Report of Best Buy Management | 64 |
Independent auditor’s report |
|
The information set forth under the caption “Quarterly Results and Seasonality,” on pages 38-39 of the Annual Report, providing supplementary selected quarterly financial data, is incorporated herein by reference.
15
Condensed Consolidating Financial Information
In fiscal 2002, we completed two private offerings of 20-year convertible debentures. TheOur convertible debentures are guaranteed by Best Buy Stores, L.P., our wholly-owned indirect subsidiary. AtThe aggregate principal amount at maturity of these convertible debentures is $894 million. The carrying value of the convertible debentures at March 2, 2002, a total of1, 2003, was approximately $743 million related to these debentures was outstanding.$749 million.
Additional information regarding the convertible debentures is included in note 34 of the Notes to Consolidated Financial Statements beginning on page 4354 of the Annual Report, contained in exhibit 13.1 to this report, and is incorporated herein by reference.
During the fourth quarter of fiscal 2003, we committed to a plan to sell our interest in Musicland, which is included in Non-Guarantor Subsidiaries. At March 1, 2003, Best Buy Co., Inc. had an intercompany receivable from Musicland totaling $350 million, included in current assets. Additional information regarding Musicland is included in note 2 of the Notes to Consolidated Financial Statements beginning on page 52 of the Annual Report, incorporated herein by reference.
The following tables present condensed consolidating balance sheets for the fiscal years ended March 2, 20021, 2003, and March 3, 2001,2, 2002, and condensed consolidating statements of earnings and cash flows for the fiscal years ended March 1, 2003; March 2, 2002; and March 3, 2001 and February 26, 2000:2001:
Condensed Consolidating Balance Sheets
As of March 1, 2003
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 1,863 |
| $ | 37 |
| $ | 14 |
| $ | — |
| $ | 1,914 |
|
Receivables |
| 216 |
| 50 |
| 46 |
| — |
| 312 |
| |||||
Recoverable costs from developed properties |
| 10 |
| — |
| — |
| — |
| 10 |
| |||||
Merchandise inventories |
| — |
| 1,828 |
| 221 |
| (3 | ) | 2,046 |
| |||||
Other current assets |
| 182 |
| 48 |
| 39 |
| (81 | ) | 188 |
| |||||
Current assets of discontinued operations |
| — |
| — |
| 397 |
| — |
| 397 |
| |||||
Intercompany receivable |
| 1,617 |
| — |
| — |
| (1,617 | ) | — |
| |||||
Intercompany note receivable |
| 500 |
| — |
| — |
| (500 | ) | — |
| |||||
Total current assets |
| 4,388 |
| 1,963 |
| 717 |
| (2,201 | ) | 4,867 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Property and Equipment |
| 498 |
| 1,390 |
| 174 |
| — |
| 2,062 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Goodwill, Net |
| — |
| 3 |
| 426 |
| — |
| 429 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Intangible Assets |
| — |
| — |
| 33 |
| — |
| 33 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Assets |
| 71 |
| 78 |
| 48 |
| (82 | ) | 115 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noncurrent Assets of Discontinued Operations |
| — |
| — |
| 157 |
| — |
| 157 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investments in Subsidiaries |
| 1,055 |
| — |
| — |
| (1,055 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
| $ | 6,012 |
| $ | 3,434 |
| $ | 1,555 |
| $ | (3,338 | ) | $ | 7,663 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 1,997 |
| $ | — |
| $ | 198 |
| $ | — |
| $ | 2,195 |
|
Accrued compensation and related expenses |
| 80 |
| 75 |
| 19 |
| — |
| 174 |
| |||||
Accrued liabilities |
| 180 |
| 469 |
| 80 |
| — |
| 729 |
| |||||
Accrued income taxes |
| — |
| 274 |
| 181 |
| (81 | ) | 374 |
| |||||
Current portion of long-term debt |
| — |
| — |
| 1 |
| — |
| 1 |
| |||||
Current liabilities of discontinued operations |
| — |
| — |
| 320 |
| — |
| 320 |
| |||||
Intercompany payable |
| — |
| 780 |
| 837 |
| (1,617 | ) | — |
| |||||
Intercompany note payable |
| — |
| 500 |
| — |
| (500 | ) | — |
| |||||
Total current liabilities |
| 2,257 |
| 2,098 |
| 1,636 |
| (2,198 | ) | 3,793 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Liabilities |
| 264 |
| 79 |
| 26 |
| (82 | ) | 287 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Debt |
| 758 |
| 59 |
| 11 |
| — |
| 828 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noncurrent Liabilities of Discontinued Operations |
| — |
| — |
| 25 |
| — |
| 25 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shareholders’ Equity (Deficit) |
| 2,733 |
| 1,198 |
| (143 | ) | (1,058 | ) | 2,730 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity |
| $ | 6,012 |
| $ | 3,434 |
| $ | 1,555 |
| $ | (3,338 | ) | $ | 7,663 |
|
16
Condensed Consolidating Balance Sheets
As of March 2, 2002
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 1,823 |
| $ | 29 |
| $ | 3 |
| $ | — |
| $ | 1,855 |
|
Receivables |
| 207 |
| — |
| 42 |
| (2 | ) | 247 |
| |||||
Recoverable costs from developed properties |
| 79 |
| — |
| — |
| — |
| 79 |
| |||||
Merchandise inventories |
| — |
| 1,711 |
| 549 |
| (2 | ) | 2,258 |
| |||||
Intercompany receivable |
| 1,071 |
| — |
| — |
| (1,071 | ) | — |
| |||||
Intercompany note receivable |
| 500 |
| — |
| — |
| (500 | ) | — |
| |||||
Other current assets |
| 488 |
| — |
| 65 |
| (381 | ) | 172 |
| |||||
Total current assets |
| 4,168 |
| 1,740 |
| 659 |
| (1,956 | ) | 4,611 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Property and Equipment |
| 577 |
| 934 |
| 386 |
| — |
| 1,897 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Goodwill, Net |
| — |
| — |
| 773 |
| — |
| 773 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Assets |
| 69 |
| 11 |
| 14 |
| — |
| 94 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investments in Subsidiaries |
| 1,045 |
| — |
| — |
| (1,045 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
| $ | 5,859 |
| $ | 2,685 |
| $ | 1,832 |
| $ | (3,001 | ) | $ | 7,375 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 2,037 |
| $ | — |
| $ | 416 |
| $ | (4 | ) | $ | 2,449 |
|
Accrued compensation and related expenses |
| 81 |
| 71 |
| 101 |
| — |
| 253 |
| |||||
Accrued liabilities |
| 157 |
| 384 |
| 229 |
| — |
| 770 |
| |||||
Accrued income taxes |
| — |
| 445 |
| 187 |
| (381 | ) | 251 |
| |||||
Current portion of long-term debt |
| 2 |
| — |
| 5 |
| — |
| 7 |
| |||||
Intercompany payable |
| — |
| 280 |
| 791 |
| (1,071 | ) | — |
| |||||
Intercompany note payable |
| — |
| 500 |
| — |
| (500 | ) | — |
| |||||
Total current liabilities |
| 2,277 |
| 1,680 |
| 1,729 |
| (1,956 | ) | 3,730 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Liabilities |
| 261 |
| 44 |
| 6 |
| — |
| 311 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Debt |
| 800 |
| — |
| 13 |
| — |
| 813 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shareholders’ Equity |
| 2,521 |
| 961 |
| 84 |
| (1,045 | ) | 2,521 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity |
| $ | 5,859 |
| $ | 2,685 |
| $ | 1,832 |
| $ | (3,001 | ) | $ | 7,375 |
|
13
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 1,823 |
| $ | 29 |
| $ | 9 |
| $ | — |
| $ | 1,861 |
|
Receivables |
| 196 |
| 11 |
| 16 |
| (2 | ) | 221 |
| |||||
Recoverable costs from developed properties |
| 79 |
| — |
| — |
| — |
| 79 |
| |||||
Merchandise inventories |
| — |
| 1,710 |
| 167 |
| (2 | ) | 1,875 |
| |||||
Other current assets |
| 215 |
| 6 |
| 9 |
| (114 | ) | 116 |
| |||||
Current assets of discontinued operations |
| — |
| — |
| 448 |
| — |
| 448 |
| |||||
Intercompany receivable |
| 1,327 |
| — |
| — |
| (1,327 | ) | — |
| |||||
Intercompany note receivable |
| 500 |
| — |
| — |
| (500 | ) | — |
| |||||
Total current assets |
| 4,140 |
| 1,756 |
| 649 |
| (1,945 | ) | 4,600 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Property and Equipment |
| 558 |
| 953 |
| 150 |
| — |
| 1,661 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Goodwill, Net |
| — |
| — |
| 465 |
| — |
| 465 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Assets |
| 66 |
| 14 |
| — |
| — |
| 80 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noncurrent Assets of Discontinued Operations |
| — |
| — |
| 561 |
|
|
| 561 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investments in Subsidiaries |
| 1,044 |
| — |
| — |
| (1,044 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
| $ | 5,808 |
| $ | 2,723 |
| $ | 1,825 |
| $ | (2,989 | ) | $ | 7,367 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 2,040 |
| $ | — |
| $ | 164 |
| $ | (2 | ) | $ | 2,202 |
|
Accrued compensation and related expenses |
| 81 |
| 71 |
| 22 |
| — |
| 174 |
| |||||
Accrued liabilities |
| 168 |
| 374 |
| 73 |
| (2 | ) | 613 |
| |||||
Accrued income taxes |
| — |
| 276 |
| 129 |
| (114 | ) | 291 |
| |||||
Current portion of long-term debt |
| 2 |
| — |
| 5 |
| — |
| 7 |
| |||||
Current liabilities of discontinued operations |
| — |
| — |
| 418 |
| — |
| 418 |
| |||||
Intercompany payable |
| — |
| 429 |
| 898 |
| (1,327 | ) | — |
| |||||
Intercompany note payable |
| — |
| 500 |
| — |
| (500 | ) | — |
| |||||
Total current liabilities |
| 2,291 |
| 1,650 |
| 1,709 |
| (1,945 | ) | 3,705 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Liabilities |
| 235 |
| 69 |
| 8 |
| — |
| 312 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Debt |
| 761 |
| 39 |
| 8 |
| — |
| 808 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noncurrent Liabilities of Discontinued Operations |
| — |
| — |
| 21 |
| — |
| 21 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shareholders’ Equity |
| 2,521 |
| 965 |
| 79 |
| (1,044 | ) | 2,521 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity |
| $ | 5,808 |
| $ | 2,723 |
| $ | 1,825 |
| $ | (2,989 | ) | $ | 7,367 |
|
Condensed Consolidating Balance Sheets
As of March 3, 2001
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 716 |
| $ | 27 |
| $ | 4 |
| $ | — |
| $ | 747 |
|
Receivables |
| 198 |
| — |
| 11 |
| — |
| 209 |
| |||||
Recoverable costs from developed properties |
| 104 |
| — |
| — |
| — |
| 104 |
| |||||
Merchandise inventories |
| 48 |
| 1,313 |
| 406 |
| — |
| 1,767 |
| |||||
Intercompany receivable |
| 574 |
| — |
| 189 |
| (763 | ) | — |
| |||||
Intercompany note receivable |
| 500 |
| 14 |
| — |
| (514 | ) | — |
| |||||
Other current assets |
| 202 |
| — |
| 49 |
| (149 | ) | 102 |
| |||||
Total current assets |
| 2,342 |
| 1,354 |
| 659 |
| (1,426 | ) | 2,929 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Property and Equipment |
| 305 |
| 862 |
| 277 |
| — |
| 1,444 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Goodwill, Net |
| — |
| — |
| 385 |
| — |
| 385 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Assets |
| 48 |
| 12 |
| 22 |
| — |
| 82 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investments in Subsidiaries |
| 1,013 |
| — |
| — |
| (1,013 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
| $ | 3,708 |
| $ | 2,228 |
| $ | 1,343 |
| $ | (2,439 | ) | $ | 4,840 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 1,467 |
| $ | — |
| $ | 306 |
| $ | — |
| $ | 1,773 |
|
Accrued compensation and related expenses |
| 119 |
| — |
| 35 |
| — |
| 154 |
| |||||
Accrued liabilities |
| 177 |
| 238 |
| 131 |
| — |
| 546 |
| |||||
Accrued income taxes |
| — |
| 170 |
| 106 |
| (149 | ) | 127 |
| |||||
Current portion of long-term debt |
| 4 |
| — |
| 111 |
| — |
| 115 |
| |||||
Intercompany payable |
| — |
| 763 |
| — |
| (763 | ) | — |
| |||||
Intercompany note payable |
| 14 |
| 500 |
| — |
| (514 | ) | — |
| |||||
Total current liabilities |
| 1,781 |
| 1,671 |
| 689 |
| (1,426 | ) | 2,715 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Liabilities |
| 83 |
| 37 |
| 2 |
| — |
| 122 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-Term Debt |
| 22 |
| — |
| 159 |
| — |
| 181 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Shareholders’ Equity |
| 1,822 |
| 520 |
| 493 |
| (1,013 | ) | 1,822 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity |
| $ | 3,708 |
| $ | 2,228 |
| $ | 1,343 |
| $ | (2,439 | ) | $ | 4,840 |
|
1417
Condensed Consolidating Statements of Earnings
For the Fiscal Year Ended March 1, 2003
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Revenue |
| $ | 1 |
| $ | 19,735 |
| $ | 2,349 |
| $ | (1,139 | ) | $ | 20,946 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| 1 |
| 14,935 |
| 1,529 |
| (755 | ) | 15,710 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| — |
| 4,800 |
| 820 |
| (384 | ) | 5,236 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 32 |
| 4,087 |
| 491 |
| (384 | ) | 4,226 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating (loss) income |
| (32 | ) | 713 |
| 329 |
| — |
| 1,010 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income (expense) |
| 50 |
| (41 | ) | (5 | ) | — |
| 4 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in loss of subsidiaries |
| (36 | ) | — |
| — |
| 36 |
| — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Loss) earnings from continuing operations before income tax expense |
| (18 | ) | 672 |
| 324 |
| 36 |
| 1,014 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax expense |
| 8 |
| 260 |
| 124 |
| — |
| 392 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Loss) earnings from continuing operations |
| (26 | ) | 412 |
| 200 |
| 36 |
| 622 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) from discontinued operations, net of tax |
| 125 |
| — |
| (566 | ) | — |
| (441 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cumulative effect of change in accounting principle for goodwill, net of tax |
| — |
| — |
| (40 | ) | — |
| (40 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cumulative effect of change in accounting principle for vendor allowances, net of tax |
| — |
| (40 | ) | (2 | ) | — |
| (42 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings (loss) |
| $ | 99 |
| $ | 372 |
| $ | (408 | ) | $ | 36 |
| $ | 99 |
|
Condensed Consolidating Statements of Earnings
For the Fiscal Year Ended March 2, 2002
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Revenues |
| $ | 3 |
| $ | 31,381 |
| $ | 3,117 |
| $ | (14,904 | ) | $ | 19,597 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| 1 |
| 27,805 |
| 1,919 |
| (14,558 | ) | 15,167 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| 2 |
| 3,576 |
| 1,198 |
| (346 | ) | 4,430 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 86 |
| 2,827 |
| 925 |
| (345 | ) | 3,493 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating (loss) income |
| (84 | ) | 749 |
| 273 |
| (1 | ) | 937 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income (expense) |
| 79 |
| (63 | ) | (17 | ) | — |
| (1 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings of subsidiaries |
| 574 |
| — |
| — |
| (574 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) before income tax expense |
| 569 |
| 686 |
| 256 |
| (575 | ) | 936 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax (benefit) expense |
| (1 | ) | 268 |
| 100 |
| (1 | ) | 366 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings (loss) |
| $ | 570 |
| $ | 418 |
| $ | 156 |
| $ | (574 | ) | $ | 570 |
|
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Revenue |
| $ | 3 |
| $ | 17,410 |
| $ | 1,231 |
| $ | (933 | ) | $ | 17,711 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| 1 |
| 13,834 |
| 693 |
| (587 | ) | 13,941 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| 2 |
| 3,576 |
| 538 |
| (346 | ) | 3,770 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 87 |
| 2,827 |
| 294 |
| (346 | ) | 2,862 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating (loss) income |
| (85 | ) | 749 |
| 244 |
| — |
| 908 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income (expense) |
| 79 |
| (63 | ) | 2 |
| — |
| 18 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings of subsidiaries |
| 574 |
| — |
| — |
| (574 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings from continuing operations before income tax expense |
| 568 |
| 686 |
| 246 |
| (574 | ) | 926 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax (benefit) expense |
| (2 | ) | 263 |
| 95 |
| — |
| 356 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings from continuing operations |
| 570 |
| 423 |
| 151 |
| (574 | ) | 570 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings from discontinued operations, net of tax |
| — |
| — |
| — |
| — |
| — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings |
| $ | 570 |
| $ | 423 |
| $ | 151 |
| $ | (574 | ) | $ | 570 |
|
18
Condensed Consolidating Statements of Earnings
For the Fiscal Year Ended March 3, 2001
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Revenues |
| $ | 394 |
| $ | 14,696 |
| $ | 463 |
| $ | (226) |
| $ | 15,327 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| 178 |
| 11,911 |
| 201 |
| (22 | ) | 12,268 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| 216 |
| 2,785 |
| 262 |
| (204 | ) | 3,059 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 41 |
| 2,427 |
| 191 |
| (204 | ) | 2,455 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
| 175 |
| 358 |
| 71 |
| — |
| 604 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income (expense) |
| 139 |
| (117 | ) | 15 |
| — |
| 37 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings of subsidiaries |
| 202 |
| — |
| — |
| (202 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) before income tax expense |
| 516 |
| 241 |
| 86 |
| (202 | ) | 641 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax expense |
| 120 |
| 92 |
| 33 |
| — |
| 245 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings (loss) |
| $ | 396 |
| $ | 149 |
| $ | 53 |
| $ | (202 | ) | $ | 396 |
|
15
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Revenue |
| $ | 394 |
| $ | 14,696 |
| $ | 325 |
| $ | (226 | ) | $ | 15,189 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| 178 |
| 11,911 |
| 110 |
| (22 | ) | 12,177 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| 216 |
| 2,785 |
| 215 |
| (204 | ) | 3,012 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 41 |
| 2,427 |
| 137 |
| (204 | ) | 2,401 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
| 175 |
| 358 |
| 78 |
| — |
| 611 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income (expense) |
| 139 |
| (117 | ) | 16 |
| — |
| 38 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings of subsidiaries |
| 202 |
| — |
| — |
| (202 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings from continuing operations before income tax expense |
| 516 |
| 241 |
| 94 |
| (202 | ) | 649 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax expense |
| 120 |
| 92 |
| 36 |
| — |
| 248 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings from continuing operations |
| 396 |
| 149 |
| 58 |
| (202 | ) | 401 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loss from discontinued operations, net of tax |
| — |
| — |
| (5 | ) | — |
| (5 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings |
| $ | 396 |
| $ | 149 |
| $ | 53 |
| $ | (202 | ) | $ | 396 |
|
Condensed Consolidating Statements of EarningsCash Flows
For the Fiscal Year Ended February 26, 2000March 1, 2003
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Revenues |
| $ | 365 |
| $ | 12,129 |
| $ | 188 |
| $ | (188 | ) | $ | 12,494 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cost of goods sold |
| 189 |
| 9,912 |
| 16 |
| (16 | ) | 10,101 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
| 176 |
| 2,217 |
| 172 |
| (172 | ) | 2,393 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative expenses |
| 78 |
| 1,938 |
| 10 |
| (172 | ) | 1,854 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating income |
| 98 |
| 279 |
| 162 |
| — |
| 539 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net interest income (expense) |
| 107 |
| (96 | ) | 13 |
| — |
| 24 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Equity in earnings of subsidiaries |
| 221 |
| — |
|
|
| (221 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) before income tax expense |
| 426 |
| 183 |
| 175 |
| (221 | ) | 563 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income tax expense |
| 79 |
| 70 |
| 67 |
| — |
| 216 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net earnings (loss) |
| $ | 347 |
| $ | 113 |
| $ | 108 |
| $ | (221 | ) | $ | 347 |
|
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by (used in) operating activities from continuing operations |
| $ | 256 |
| $ | 511 |
| $ | (21 | ) | $ | — |
| $ | 746 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| (23 | ) | (636 | ) | (66 | ) | — |
| (725 | ) | |||||
Acquisition of business, net of cash acquired |
| — |
| (3 | ) | — |
| — |
| (3 | ) | |||||
Decrease in recoverable costs from developed properties |
| 69 |
| — |
| — |
| — |
| 69 |
| |||||
Total cash provided by (used in) investing activities from continuing operations |
| 46 |
| (639 | ) | (66 | ) | — |
| (659 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Net proceeds from issuance of long-term debt |
| — |
| 18 |
| — |
| — |
| 18 |
| |||||
Long-term debt payments |
| (11 | ) | — |
| (2 | ) | — |
| (13 | ) | |||||
Issuance of common stock |
| 40 |
| — |
| — |
| — |
| 40 |
| |||||
Change in intercompany receivable/payable |
| (291 | ) | 118 |
| 173 |
| — |
| — |
| |||||
Total cash (used in) provided by financing activities from continuing operations |
| (262 | ) | 136 |
| 171 |
| — |
| 45 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash used in discontinued operations |
| — |
| — |
| (79 | ) | — |
| (79 | ) | |||||
Increase in cash and cash equivalents |
| 40 |
| 8 |
| 5 |
| — |
| 53 |
| |||||
Cash and cash equivalents at beginning of year |
| 1,823 |
| 29 |
| 9 |
| — |
| 1,861 |
| |||||
Cash and cash equivalents at end of year |
| $ | 1,863 |
| $ | 37 |
| $ | 14 |
| $ | — |
| $ | 1,914 |
|
Condensed ConsolidatedConsolidating Statements of Cash Flows
For the Fiscal Year Ended March 2, 2002
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by operating activities |
| $ | 570 |
| $ | 710 |
| $ | 298 |
| $ | — |
| $ | 1,578 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| (302 | ) | (239 | ) | (86 | ) | — |
| (627 | ) | |||||
Acquisitions of businesses, net of cash acquired |
| — |
| — |
| (368 | ) | — |
| (368 | ) | |||||
Other, net |
| 24 |
| — |
| 6 |
| — |
| 30 |
| |||||
Total cash used in investing activities |
| (278 | ) | (239 | ) | (448 | ) | — |
| (965 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt payments |
| (7 | ) | — |
| (272 | ) | — |
| (279 | ) | |||||
Issuance of common stock |
| 48 |
| — |
| — |
| — |
| 48 |
| |||||
Net proceeds from issuance of long-term debt |
| 726 |
| — |
| — |
| — |
| 726 |
| |||||
Change in intercompany receivable/payable |
| 48 |
| (469 | ) | 421 |
| — |
| — |
| |||||
Total cash provided by (used in) financing activities |
| 815 |
| (469 | ) | 149 |
| — |
| 495 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Increase (decrease) in cash and cash equivalents |
| 1,107 |
| 2 |
| (1 | ) | — |
| 1,108 |
| |||||
Cash and cash equivalents at beginning of year |
| 716 |
| 27 |
| 4 |
| — |
| 747 |
| |||||
Cash and cash equivalents at end of year |
| $ | 1,823 |
| $ | 29 |
| $ | 3 |
| $ | — |
| $ | 1,855 |
|
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by operating activities from continuing operations |
| $ | 665 |
| $ | 652 |
| $ | 226 |
| $ | — |
| $ | 1,543 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| (284 | ) | (257 | ) | (40 | ) | — |
| (581 | ) | |||||
Acquisition of business, net of cash acquired |
| — |
| — |
| (368 | ) | — |
| (368 | ) | |||||
Decrease in recoverable costs from developed properties |
| 25 |
| — |
| — |
| — |
| 25 |
| |||||
Total cash used in investing activities from continuing operations |
| (259 | ) | (257 | ) | (408 | ) | — |
| (924 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Net proceeds from issuance of long-term debt |
| 726 |
| — |
| — |
| — |
| 726 |
| |||||
Long-term debt payments |
| (2 | ) | (3 | ) | — |
| — |
| (5 | ) | |||||
Issuance of common stock |
| 48 |
| — |
| — |
| — |
| 48 |
| |||||
Change in intercompany receivable/payable |
| (71 | ) | (390 | ) | 461 |
| — |
| — |
| |||||
Total cash provided by (used in) financing activities from continuing operations |
| 701 |
| (393 | ) | 461 |
| — |
| 769 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash used in discontinued operations |
| — |
| — |
| (270 | ) | — |
| (270 | ) | |||||
Increase in cash and cash equivalents |
| 1,107 |
| 2 |
| 9 |
| — |
| 1,118 |
| |||||
Cash and cash equivalents at beginning of year |
| 716 |
| 27 |
| — |
| — |
| 743 |
| |||||
Cash and cash equivalents at end of year |
| $ | 1,823 |
| $ | 29 |
| $ | 9 |
| $ | — |
| $ | 1,861 |
|
16
Condensed ConsolidatedConsolidating Statements of Cash Flows
For the Fiscal Year Ended March 3, 2001
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by operating activities |
| $ | 495 |
| $ | 264 |
| $ | 49 |
| $ | — |
| $ | 808 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| (143 | ) | (491 | ) | (24 | ) | — |
| (658 | ) | |||||
Acquisitions of businesses, net of cash acquired |
| — |
| — |
| (326 | ) | — |
| (326 | ) | |||||
Investment in subsidiaries |
| (513 | ) |
|
|
|
| 513 |
| — |
| |||||
Other, net |
| (47 | ) | (1 | ) | 2 |
| — |
| (46 | ) | |||||
Total cash used in investing activities |
| (703 | ) | (492 | ) | (348 | ) | 513 |
| (1,030 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt payments |
| (15 | ) | — |
| (2 | ) | — |
| (17 | ) | |||||
Issuance of common stock |
| 235 |
| — |
| — |
| — |
| 235 |
| |||||
Investment by parent |
| — |
| — |
| 513 |
| (513 | ) | — |
| |||||
Change in intercompany receivable/payable |
| (2 | ) | 210 |
| (208 | ) | — |
| — |
| |||||
Total cash provided by (used in) financing activities |
| $ | 218 |
| 210 |
| 303 |
| (513 | ) | 218 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Increase (decrease) in cash and cash equivalents |
| 10 |
| (18 | ) | 4 |
| — |
| (4 | ) | |||||
Cash and cash equivalents at beginning of year |
| 706 |
| 45 |
| — |
| — |
| 751 |
| |||||
Cash and cash equivalents at end of year |
| $ | 716 |
| $ | 27 |
| $ | 4 |
| $ | — |
| $ | 747 |
|
Condensed Consolidated Statements of Cash Flows
For the Fiscal Year Ended February 26, 2000
$ in millions
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by (used in) operating activities |
| $ | 834 |
| $ | (54 | ) | $ | (4 | ) | $ | — |
| $ | 776 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| (97 | ) | (263 | ) | (1 | ) | — |
| (361 | ) | |||||
Other, net |
| (30 | ) | (11 | ) | (14 | ) | — |
| (55 | ) | |||||
Total cash used in investing activities |
| (127 | ) | (274 | ) | (15 | ) | — |
| (416 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt payments |
| (20 | ) | (10 | ) | — |
| — |
| (30 | ) | |||||
Issuance of common stock |
| 32 |
| — |
| — |
| — |
| 32 |
| |||||
Change in intercompany receivable/payable |
| (368 | ) | 349 |
| 19 |
| — |
| — |
| |||||
Repurchase of common stock |
| (397 | ) | — |
| — |
| — |
| (397 | ) | |||||
Total cash (used in) provided by financing activities |
| (753 | ) | 339 |
| 19 |
| — |
| (395 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Decrease) increase in cash and cash equivalents |
| (46 | ) | 11 |
| — |
| — |
| (35 | ) | |||||
Cash and cash equivalents at beginning of year |
| 752 |
| 34 |
| — |
| — |
| 786 |
| |||||
Cash and cash equivalents at end of year |
| $ | 706 |
| $ | 45 |
| $ | — |
| $ | — |
| $ | 751 |
|
17
|
| Best Buy |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Total cash provided by operating activities from continuing operations |
| $ | 632 |
| $ | 194 |
| $ | 35 |
| $ | — |
| $ | 861 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Additions to property and equipment |
| (143 | ) | (491 | ) | (23 | ) | — |
| (657 | ) | |||||
Acquisitions of businesses, net of cash acquired |
| — |
| — |
| (326 | ) | — |
| (326 | ) | |||||
Decrease in recoverable costs from developed properties |
| (31 | ) | — |
| — |
| — |
| (31 | ) | |||||
Increase in other assets |
| (16 | ) | (1 | ) | 2 |
| — |
| (15 | ) | |||||
Investment in subsidiaries |
| (513 | ) | — |
| — |
| 513 |
| — |
| |||||
Total cash used in investing activities from continuing operations |
| (703 | ) | (492 | ) | (347 | ) | 513 |
| (1,029 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt payments |
| (15 | ) | — |
| (2 | ) | — |
| (17 | ) | |||||
Issuance of common stock |
| 235 |
| — |
| — |
| — |
| 235 |
| |||||
Investment by parent |
| — |
| — |
| 513 |
| (513 | ) | — |
| |||||
Change in intercompany receivable/payable |
| (139 | ) | 280 |
| (141 | ) | — |
| — |
| |||||
Total cash provided by financing activities from continuing operations |
| 81 |
| 280 |
| 370 |
| (513 | ) | 218 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net cash used in discontinued operations |
| — |
| — |
| (58 | ) | — |
| (58 | ) | |||||
Increase (decrease) in cash and cash equivalents |
| 10 |
| (18 | ) | — |
| — |
| (8 | ) | |||||
Cash and cash equivalents at beginning of year |
| 706 |
| 45 |
| — |
| — |
| 751 |
| |||||
Cash and cash equivalents at end of year |
| $ | 716 |
| $ | 27 |
| $ | — |
| $ | — |
| $ | 743 |
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREItem 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTItem 10. Directors and Executive Officers of the Registrant.
The information provided under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Nominees and Directors” on pages 6 through 10 of the Proxy Statement is incorporated herein by reference. The information provided under the caption “Section 16(a) Beneficial Ownership Reporting
20
Compliance” on page 23 of the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATIONItem 11. Executive Compensation.
The information set forth under the caption “Executive Compensation” on pages 12 through 2220 of the Proxy Statement is incorporated herein by reference.
21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information provided under the caption “Security Ownership of Certain Beneficial Owners and Management” on pages 6 through 108 of the Proxy Statement is incorporated herein by reference.
The information set forth under the caption “Equity Compensation Plan Information” on page 20 of the Proxy Statement, regarding securities authorized for issuance under equity compensation plans, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSItem 13. Certain Relationships and Related Transactions.
The information foundprovided under the captions “Nominees and Directors” and “Certain Transactions” on pages 9 through 11 of the Proxy Statement is incorporated herein by reference.
Item 14. Controls and Procedures.
a. Evaluation of disclosure controls and procedures
The term “disclosure controls and procedures” is defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act. These Rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of a date within 90 days before the filing of this report (“Evaluation Date”), and they have concluded that, as of the Evaluation Date, such controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.
b. Changes in internal controls
We maintain a system of internal accounting controls that is designed to provide reasonable assurance that our books and records accurately reflect our transactions and that our established policies and procedures are followed. There have been no significant changes to our internal controls or in other factors that could significantly affect our internal controls subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation thereof.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KItem 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) |
| ||
1. | Financial Statements: | ||
All financial statements as set forth under Item 8 of this report. | |||
2. | Supplementary Financial Statement Schedules: | ||
Schedule II - Valuation and Qualifying Accounts | |||
Other schedules have not been included because they are not applicable or because the information is included elsewhere in this report. |
1. Financial Statements:
All financial statements as set forth under Item 8 of this Report.
2. Supplementary Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
1822
3. Exhibits:
Number |
| Description |
| Method of Filing |
|
| Description |
| Method of Filing |
3.1 |
| Amended and Restated Articles of Incorporation, as amended |
| (3 | ) |
| Amended and Restated Articles of Incorporation, as amended |
| (1,2,3,10) |
3.2 |
| Amended and Restated By-Laws, as amended |
| (1,2,4,5,6,15 | ) |
| Amended and Restated By-Laws, as amended |
| (2,4,5,6,14,16) |
4.1 |
| Credit Agreement with U.S. Bank National Association dated March 21, 2002 |
| (1 | ) |
| Credit Agreement with U.S. Bank National Association dated March 21, 2002, as amended |
| (1,16) |
4.2 |
| Indenture by and among Best Buy Co., Inc. the subsidiary guarantors named therein and Wells Fargo Bank Minnesota, National Association, dated June 27, 2001 |
| (16 | ) |
| Offer Letter agreement between HSBC Bank Canada and Best Buy Canada Ltd. Magasins Best Buy Ltee, dated September 13, 2002 |
| (1) |
4.3 |
| Indenture by and among Best Buy Co., Inc., Best Buy Stores, L.P. and Wells Fargo Bank Minnesota, National Association, dated January 15, 2002 |
| (17 | ) |
| Indenture by and among Best Buy Co., Inc., the subsidiary guarantors named therein and Wells Fargo Bank Minnesota, National Association, dated June 27, 2001, as amended |
| (1,15) |
4.4 |
| Indenture by and among Best Buy Co., Inc., Best Buy Stores, L.P. and Wells Fargo Bank Minnesota, National Association, dated January 15, 2002, as amended and supplemented |
| (8) | |||||
10.1 |
| 1987 Employee Non-Qualified Stock Option Plan, as amended |
| (10 | ) |
| 1994 Full-Time Employee Non-Qualified Stock Option Plan, as amended |
| (11,17) |
10.2 |
| 1987 Directors’ Non-Qualified Stock Option Plan, as amended |
| (11 | ) |
| 1997 Employee Non-Qualified Stock Option Plan, as amended |
| (1,9,17) |
10.3 |
| 1994 Full-Time Employee Non-Qualified Stock Option Plan, as amended |
| (11 | ) |
| 1997 Directors’ Non-Qualified Stock Option Plan, as amended |
| (12,17) |
10.4 |
| 1997 Employee Non-Qualified Stock Option Plan, as amended |
| (9 | ) |
| Best Buy Third Amended and Restated Deferred Compensation Plan, effective as of January 1, 2001, as amended |
| (1) |
10.5 |
| 1997 Directors’ Non-Qualified Stock Option Plan, as amended |
| (12 | ) |
| Resolutions of the Board of Directors adopting the EVA® Incentive Program for senior officers |
| (7) |
10.6 |
| Best Buy Co., Inc. Deferred Compensation Plan, as amended |
| (14 | ) |
| Resolutions of the Compensation and Human Resources Committee of the Board of Directors adopting the Fiscal Year 2004 Short-term Incentive Plan for senior officers |
| (1) |
10.7 |
| Resolutions of the Board of Directors adopting the EVA® Incentive Program for senior officers |
| (7 | ) |
| 2000 Restricted Stock Award Plan, as amended |
| (1) |
10.8 |
| 2000 Restricted Stock Award Plan, as amended |
| (1 | ) |
| The Assumed Musicland 1992 Stock Option Plan |
| (13) |
10.9 |
| The Assumed Musicland 1988 Stock Option Plan of Best Buy Co., Inc. |
| (13 | ) |
| The Assumed Musicland 1994 Stock Option Plan |
| (13) |
10.10 |
| The Assumed Musicland 1992 Stock Option Plan of Best Buy Co., Inc. |
| (13 | ) |
| The Assumed Musicland 1998 Stock Incentive Plan |
| (13) |
10.11 |
| The Assumed Musicland 1994 Stock Option Plan of Best Buy Co., Inc. |
| (13 | ) | ||||
10.12 |
| The Assumed Musicland 1998 Stock Incentive Plan of Best Buy Co., Inc. |
| (13 | ) | ||||
12.1 |
| Statements re: Computations of Ratios |
| (1 | ) |
| Statements re: Computation of Ratios |
| (1) |
13.1 |
| 2002 Annual Report to Shareholders |
| (1 | ) |
| 2003 Annual Report to Shareholders |
| (1) |
21.1 |
| Subsidiaries of the Registrant |
| (1 | ) |
| Subsidiaries of the Registrant |
| (1) |
23.1 |
| Consent of Ernst & Young LLP |
| (1 | ) |
| Consent of Ernst & Young LLP |
| (1) |
99.1 |
| Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer |
| (1) | |||||
99.2 |
| Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer |
| (1) |
(1) Document is filed herewith.
(2) Exhibit so marked was filed with the Securities and Exchange Commission (SEC) on May 23,24, 1995, as an exhibit to the Form 10-K of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(3) Exhibit so marked was filed with the SEC on May 20, 1994, as an exhibit to the Form 10-K of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(4) Exhibit so marked was filed with the SEC on Nov. 12, 1991, as an exhibit to the Registration Statement on Form S-3 (Registration No. 33-43065) of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(5) Exhibit so marked was filed with the SEC on Jan. 13, 1992, as an exhibit to the Form 10-Q of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(6) Exhibit so marked was filed with the SEC on May 28, 1997, as an exhibit to the Form 10-K of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(7) Exhibit so marked was filed with the SEC on April 29, 1999, as an exhibit to the preliminary Proxy Statement of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(8) Exhibit so marked was filed with the SEC on October 12, 1999,February 28, 2002, as an exhibit to the Registration Statement on Form 10-QS-3 (Registration No. 333-83562) of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(9) Exhibit so marked was filed on August 20, 1998, as an exhibit to the Registration Statement on Form S-8 (Registration No. 333-61897) of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(10) Exhibit so marked was filed with the SEC on May 29, 1996,October 10, 2000, as an exhibit to the Form 10-K10-Q of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(11) Exhibit so marked was filed with the SEC on May 27, 1999, as an exhibit to the Form 10-K of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(12) Exhibit so marked was filed with the SEC on January 11, 2000, as an exhibit to the Form 10-Q of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(13) Exhibit so marked was filed with the SEC on February 23, 2001, as an exhibit to the Registration Statement on Form S-8 (Registration No. 333-56146) of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
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(15)(14) Exhibit so marked was filed with the SEC on June 1, 2001, as an exhibit to the Form 10-K of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(16)(15) Exhibit so marked was filed with the SEC on September 24, 2001, as an exhibit to the Registration Statement on Form S-3 (Registration No. 333-70060) of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
(17)(16) Exhibit so marked was filed with the SEC on February 28,May 30, 2002, as an exhibit to the Registration Statement on Form S-3 (Registration No. 333-83562)10-K of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
19(17) Exhibit so marked was filed with the SEC on July 12, 1999, as an exhibit to the Form 10-Q of Best Buy Co., Inc., and is incorporated herein by reference and made a part hereof.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K under the Securities Act of 1933, the Registrant has not filed as exhibits to the Form 10-K certain instruments with respect to long-term debt under which the amount of securities authorized does not exceed 10% of the total assets of the Registrant. The Registrant hereby agrees to furnish copies of all such instruments to the Commission upon request.
(b) Reports on Form 8-K:
(1) Announcement that we expect to realign our Musicland business into our domestic Best Buy stores operations; the position of Musicland president has been eliminated; and Kevin Freeland, the issuanceformer president of two press releases in connection with fiscal December 2002 sales results, updated expectations for fourth quarter fiscal 2002 financial results and initial guidance for fiscal 2003 financial results,Musicland, has left the company, filed on January 9, 2002.10, 2003.
(2) AnnouncementFiling of executive management changes,amended and restated cautionary statements for purposes of the “safe harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, filed on February 27, 2002.January 10, 2003.
(3) Announcement of issuance of press release regarding financial outlook for the fourth quarter fiscal 2002, filed on February 28, 2002.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BEST BUY CO., INC. | |||
| (Registrant) | |||
| By: | /s/ |
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| Vice Chairman and Chief Executive Officer | ||
Dated: May 30, 200229, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on May 30, 2002.29, 2003.
/s/ Bradbury H. Anderson |
| Vice Chairman and Chief Executive Officer | |
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/s/ Darren R. Jackson | Executive Vice | ||
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Darren R. Jackson |
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/s/ Richard M. Schulze | Chairman and Director | ||
| Richard M. Schulze | ||
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/s/ Robert T. Blanchard |
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Robert T. Blanchard | |||
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Jack W. Eugster | |||
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/s/ Kathy J. Higgins Victor |
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/s/ Elliot S. Kaplan |
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Elliot S. Kaplan | |||
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/s/ Allen U. Lenzmeier |
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/s/ Mark C. Thompson |
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Mark C. Thompson | |||
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/s/ Frank D. Trestman |
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Frank D. Trestman | |||
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/s/ Hatim A. Tyabji |
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Hatim A. Tyabji | |||
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/s/ James C. Wetherbe |
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James C. Wetherbe |
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I, Bradbury H. Anderson, Vice Chairman and Chief Executive Officer of Best Buy Co., Inc., certify that: | |||
1. | I have reviewed this annual report on Form 10-K of Best Buy Co., Inc.; | ||
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | ||
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: | ||
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| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | ||
c) | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; | ||
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | ||
a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | ||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and | ||
6. | The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: May 29, 2003 | /s/ Bradbury H. Anderson | |
Vice Chairman and Chief Executive Officer |
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CERTIFICATIONS
I, Darren R. Jackson, Executive Vice President — Finance and Chief Financial Officer of Best Buy Co., Inc., certify that: | |||
1. | I have reviewed this annual report on Form 10-K of Best Buy Co., Inc.; | ||
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; | ||
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: | ||
a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; | ||
b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and | ||
c) | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; | ||
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | ||
a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | ||
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and | ||
6. | The registrant’s other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: May 29, 2003 | /s/ Darren R. Jackson | |
Executive Vice President — Finance and Chief Financial Officer |
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Schedule II
Valuation and Qualifying Accounts
($ in millions)
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Fiscal Year Ended March 1, 2003 |
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Allowance for doubtful accounts |
| $ | 3 |
| $ | 10 |
| $ | (3 | ) | $ | 10 |
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Fiscal Year Ended March 2, 2002 |
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Allowance for doubtful accounts |
| $ | 1 |
| $ | 7 |
| $ | (5 | ) | $ | 3 |
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| $ | 1 |
| $ | 7 |
| $ | (5 | ) | $ | 3 |
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Fiscal Year Ended March 3, 2001 |
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Allowance for doubtful accounts |
| $ | 1 |
| $ | 5 |
| $ | (5 | ) | $ | 1 |
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| $ | 5 |
| $ | (5 | ) | $ | 1 |
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Fiscal Year Ended February 26, 2000 |
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Allowance for doubtful accounts |
| $ | 1 |
| $ | 2 |
| $ | (2 | ) | $ | 1 |
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* Other includesIncludes bad debt write-offs and recoveries, as well as reserves associated with acquired companies.
** Includes Musicland balances of $1, $1, and $0 at March 1, 2003, March 2, 2002 and March 3, 2001, respectively.
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