Best Buy's Second-Quarter Earnings Rise 27% to $0.47 per Diluted Share.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- Best Buy Co., Inc. (NYSE NYSE See: New York Stock Exchange :BBY BBY Best Buy (stock symbol) BBY Before Battle of Yavin (Star Wars) BBY BeBeyond (Chinese online community) ):
Second-Quarter Performance Summary
----------------------------------------------------------------------
(U.S. dollars in millions, except per share amounts)
----------------------------------------------------------------------
Three Months Ended
----------------------------------------------------------------------
Aug. 26, 2006 Aug. 27, 2005
----------------------------------------------------------------------
Revenue $7,603 $6,702
----------------------------------------------------------------------
Comparable store sales % gain(1) 3.7% 3.5%
----------------------------------------------------------------------
Gross profit as % of revenue 25.0% 25.5%
----------------------------------------------------------------------
SG&A as % of revenue 20.7% 21.6%
----------------------------------------------------------------------
Operating income as % of revenue 4.3% 3.9%
----------------------------------------------------------------------
Net earnings $230 $188
----------------------------------------------------------------------
Diluted EPS $0.47 $0.37
----------------------------------------------------------------------
(1) Comprised of revenue at stores and Web sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening. Acquired
stores are included in the comparable store sales calculation
beginning with the first full quarter following the first anniversary
of the date of the acquisition. The calculation of the comparable
store sales percentage gain excludes the effect of fluctuations in
foreign currency exchange rates.
Best Buy Co., Inc. (NYSE:BBY) today reported net earnings of $230 million, or $0.47 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for its fiscal second quarter ended on Aug. 26, 2006. The leading consumer electronics retailer's net earnings increased 22 percent compared with $188 million, or $0.37 per diluted share, for the prior-year second quarter. Second-Quarter Highlights --Earnings per diluted share grew 27 percent, fueled by solid revenue growth and an operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. rate improvement of 40 basis points. --Total revenue for the second quarter increased by 13 percent to $7.6 billion, compared with $6.7 billion for the prior year's period. The rise in revenue was fueled by new store openings and a comparable store sales gain of 3.7 percent. The company's domestic and international segments reported comparable store sales gains of 3.0 percent and 9.3 percent, respectively. --Best Buy's selling, general and administrative (SG&A) expense rate improved by 90 basis points in the second quarter, compared with the prior year's second-quarter rate. The improvement was driven by lower advertising spending, broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased productivity gains and reduced outside services and travel. --The company repurchased $224 million in common stock, or 4.7 million shares, during the quarter. "I have never been more proud of our employees. They are embracing our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. transformation to being a truly customer-centric enterprise, while still delivering stellar near-term near-term adj. Of, for, or involving a short period of time in the near future. results," said Brad Anderson Anderson, river, Canada Anderson, river, c.465 mi (750 km) long, rising in several lakes in N central Northwest Territories, Canada. It meanders north and west before receiving the Carnwath River and flowing north to Liverpool Bay, an arm of the Arctic , vice chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Best Buy. "Our results continue to show the benefit of our employees' relentless focus on exceeding customer expectations." Second-Quarter Results Show Strong Year-Over-Year Gains For the fiscal 2007 second quarter, Best Buy's revenue increased 13 percent to $7.6 billion, compared with revenue of $6.7 billion for the second quarter of fiscal 2006. The revenue increase reflected the net addition of 237 new stores in the past 12 months and a comparable store sales gain of 3.7 percent for the second quarter. The company's revenue growth included the impact of recent acquisitions; namely, 14 Pacific Sales Kitchen & Bath Centers showrooms added in March 2006 and 131 Jiangsu Jiangsu (jyäng`s  `) or Kiangsu (kyäng`s`, jyäng`–), province (1994 est. Five Star Appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. Co.,
Ltd. locations added in June June: see month. 2006 (Five Star is expected to be included
in the company's comparable store sales figure beginning with the
fiscal 2008 third quarter). The comparable store sales gain was driven
by an increase in the average transaction size, as the company's
revenue mix continued to reflect a shift toward higher-ticket items.
Best Buy also noted that consumers made more purchases online, as the
company continued to add features and capabilities to its Web sites;
total second-quarter online revenue grew more than 35 percent, as
compared with the same quarter of the prior year.
The gross profit rate for the second quarter was 25.0 percent of revenue, a decrease from a gross profit rate of 25.5 percent of revenue for the prior-year second quarter. The 50-basis-point decline was primarily due to increased promotions for DVDs and notebook computers A laptop computer that weighs in a range from five to seven pounds. The term originated when laptops were routinely more than 10 pounds, and those that became lighter were placed in a special "notebook" category. In practice, notebook computer and laptop computer are synonymous. . This decline was partially offset by benefits related to growth in the computer services Data processing (timesharing, batch processing), software development and consulting services. See service bureau, SaaS and ASP. business. During the quarter, Five Star reduced the company's gross profit rate by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 15 basis points as Five Star's business model carries a lower gross profit rate (and a lower SG&A rate). Best Buy's SG&A expense rate was 20.7 percent of revenue for the second quarter, compared with 21.6 percent of revenue for the prior year. The year-over-year improvement in the SG&A rate was primarily due to short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. lower advertising spending, broad-based productivity gains and reductions in outside services and travel. The company reported net interest income of $21 million, up from $18 million in the prior year's second quarter, due to higher investment yields offsetting a slightly lower average cash balance. Darren Jackson Darren Jackson (born 25 July 1966 in Edinburgh) is a former Scottish professional footballer. Career Jackson played for Meadowbank Thistle, Newcastle United, Dundee United, Hibernian, Celtic, Coventry City, Hearts, Livingston, St. Johnstone and Clydebank. , Best Buy's executive vice president of finance and CFO See Chief Financial Officer. , said, "We are deploying our resources against things that matter with customers and strategies that will provide our long-term growth. Our customers are the center of our focus, and every decision is being made with their loyalty in mind. This commitment will continue to play out as we increase our investments in home theater An audio/video entertainment center that has a large-screen TV and hi-fi system with three speakers in the front (left, right and center) and left and right speakers in the rear. Starting in the early 1990s, video inputs were added to stereo receivers and preamplifiers. solutions, our services business and our marketing in the second half of the year." Company Reiterates Fiscal 2007 Diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $2.65 to $2.80 Jackson Jackson. 1 City (1990 pop. 37,446), seat of Jackson co., S Mich., on the Grand River; inc. 1857. It is an industrial and commercial center in a farm region. said, "Our revenue growth matched our expectations, and our expense management was stronger than anticipated. Our first half results are terrific." He added, "As we look ahead to the back half of the fiscal year, we share our customers' excitement around increased availability of flat-panel televisions, coupled with the arrival of two new gaming platforms in November November: see month. and the launch of Microsoft Vista See Windows Vista. . So, with more than 60 percent of our revenue and earnings still ahead of us for the fiscal year, we are reiterating our earnings guidance for fiscal 2007 of $2.65 to $2.80 per diluted share. We expect gross margins to be constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by Five Star's lower gross margin business model and revenue growth in lower-margin products such as gaming hardware--with the second-quarter being a good proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. for the fiscal year's gross profit rate. Yet, we expect to exceed our SG&A rate goals for the year. However, in the second half, our rate of expense improvement will moderate as we aggressively grow our home theater capabilities, services and advertising. We continue to expect an operating income rate improvement of approximately 40 basis points for the fiscal year."
Domestic Segment Enjoys Operating Income Rate Lift
Domestic Second-Quarter Performance Summary
----------------------------------------------------------------------
(U.S. dollars in millions)
----------------------------------------------------------------------
Three Months Ended Six Months Ended
----------------------------------------------------------------------
Aug. 26, Aug. 27, Aug. 26, Aug. 27,
2006 2005 2006 2005
----------------------------------------------------------------------
Revenue $6,621 $5,997 $12,783 $11,489
----------------------------------------------------------------------
Comparable store sales % gain(1) 3.0% 3.8% 3.8% 4.1%
----------------------------------------------------------------------
Gross profit as % of revenue 25.4% 25.7% 25.5% 25.7%
----------------------------------------------------------------------
SG&A as % of revenue 20.5% 21.5% 20.4% 21.4%
----------------------------------------------------------------------
Operating income $328 $255 $661 $497
----------------------------------------------------------------------
Operating income as % of revenue 4.9% 4.3% 5.2% 4.3%
----------------------------------------------------------------------
(1) Comprised of revenue at stores and Web sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening. Acquired
stores are included in the comparable store sales calculation
beginning with the first full quarter following the first anniversary
of the date of the acquisition.
Best Buy's domestic segment--comprised of U.S. Best Buy, Geek Squad The Geek Squad is a subsidiary of the Best Buy Company and is based in Richfield, Minnesota [1]. Originally founded in 1994 by Robert Stephens, it offers various computer-related services and accessories for residential and commercial clients. , Pacific Sales and Magnolia Magnolia, city, United States Magnolia (măgnō`lyə), city (1990 pop. 11,151), seat of Columbia co., SW Ark.; inc. 1855. Its oil industry has been important since 1938. Audio Video--reported second-quarter operating income of $328 million, an increase of 28 percent, compared with the prior year's period. The operating income rate improvement reflected solid revenue growth coupled with expense reductions. The quarter's domestic revenue totaled $6.6 billion, an increase of 10 percent. The revenue increase included the opening of new stores, a comparable store sales gain of 3.0 percent, and the acquisition of Pacific Sales. U.S. Best Buy stores reported a comparable store sales gain of 3.0 percent. The U.S. Best Buy revenue results were bolstered bol·ster n. A long narrow pillow or cushion. tr.v. bol·stered, bol·ster·ing, bol·sters 1. To support or prop up with or as if with a long narrow pillow or cushion. 2. by growth in online revenue of more than 35 percent. Pacific Sales, a retailer of high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. home improvement products, contributed revenue of $78 million during the quarter. Magnolia Audio Video Magnolia Audio Video is a specialty consumer electronics retailer in the United States. It currently operates 13 standalone stores throughout Washington, Oregon, and California. reported revenue of $33 million and a comparable store sales gain of 2.9 percent. The company now has 162 Magnolia Home Theater store-within-a-store A store within a store is an agreement in which the owner of a shop lets a part of the shop site to be used by different company to run another shop. This agreement is popular among filling stations and supermarkets. experiences inside Best Buy stores. These experiences are aimed at enhancing the customer experience in the growing flat-panel TV and home theater category. The company employs approximately 1,900 home theater installers, who provide customers with end-to-end end-to-end a pattern of anastomosis in which severed ends are matched and united, in contrast with other patterns such as end-to-side or side-to-side. Usually applied to anastomosis of the intestine. home theater solutions. Additionally, the company has expanded the presence of Best Buy For Business to 173 U.S. stores, up from 145 stores at the end of the fiscal 2007 first quarter. The company now has 310 employees who are Microsoft-certified professionals, further enhancing the company's capabilities in catering to small business customers. As previously reported, this year the company plans to add Magnolia Home Theater and Best Buy For Business experiences at 200 and 120 stores, respectively, with the majority of the stores being converted in the fiscal third quarter. Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. Dunn Dunn may refer to: Places
International Segment Posts Strong Revenue Increase
International Second-Quarter Performance Summary
----------------------------------------------------------------------
(U.S. dollars in millions)
----------------------------------------------------------------------
Three Months Ended Six Months Ended
----------------------------------------------------------------------
Aug. 26, Aug. 27, Aug. 26, Aug. 27,
2006 2005 2006 2005
----------------------------------------------------------------------
Revenue $982 $705 $1,779 $1,331
----------------------------------------------------------------------
Comparable store sales % gain(1) 9.3% 0.9% 8.3% 1.9%
----------------------------------------------------------------------
Gross profit as % of revenue 22.1% 23.9% 22.7% 23.7%
----------------------------------------------------------------------
SG&A as % of revenue 21.9% 23.1% 22.4% 23.5%
----------------------------------------------------------------------
Operating income $2 $6 $6 $3
----------------------------------------------------------------------
Operating income as % of revenue 0.2% 0.8% 0.3% 0.2%
----------------------------------------------------------------------
(1) Comprised of revenue at stores and Web sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening. Acquired
stores are included in the comparable store sales calculation
beginning with the first full quarter following the first anniversary
of the date of the acquisition. The calculation of the comparable
store sales percentage gain excludes the effect of fluctuations in
foreign currency exchange rates.
Best Buy's international segment generated second-quarter operating income of $2 million, compared with $6 million in the prior year's period. The segment is comprised of Future Shop, Best Buy and Geek Squad operations in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , and Five Star operations in China. International revenue rose to $982 million, an increase of 39 percent. The Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. revenue increase reflected favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign-currency exchange rates, a comparable store sales gain of 9.3 percent and new store openings. The closing of six stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." Geek Squad stores in Canada during the quarter reduced the international segment's operating income rate by approximately 30 basis points for the quarter. In addition, Best Buy acquired a 75-percent interest in Five Star on June 8, 2006, as previously reported. Five Star's results are included in the quarter from the date of acquisition through June 30, 2006. The company is reporting results from its acquired operations in China on a two-month lag basis in recognition of China's statutory requirements. Accordingly, the international segment reflects the partial quarter revenue of Five Star for the period under Best Buy ownership ending June 30, 2006, totaling $80 million. Start-up Start-up The earliest stage of a new business venture. and acquisition costs associated with Five Star and preparations for the first Best Buy store in Shanghai Shanghai (shăng`hī`, shäng`hī`), city (1994 est. pop. 12,980,000), in, but independent of, Jiangsu prov., E China, on the Huangpu (Whangpoo) River where it flows into the Chang (Yangtze) estuary. reduced the international segment's operating income rate by 30 basis points. The company expects that Five Star will be neutral to earnings for the year. Bob Willett, CEO of Best Buy International, commented, "Our team in Canada is establishing a solid market position, and we're we're Contraction of we are. we're we are leveraging that investment to expand the overall profitability of the business. The market share of both Best Buy and Future Shop stores improved year over year, as we continue our work to differentiate differentiate /dif·fer·en·ti·ate/ (dif?er-en´she-at) 1. to distinguish, on the basis of differences. 2. to develop specialized form, character, or function differing from that surrounding it or from the original. our two brands."
Strong Sales of Flat-Panel TVs Continue
Revenue Mix Summary Comparable Store Sales
----------------------------------------------------------------------
Three Months Ended Three Months Ended
----------------------------------------------------------------------
Aug. 26, Aug. 27, Aug. 26, Aug. 27,
Product Group 2006 2005 2006 2005
----------------------------------------------------------------------
Consumer Electronics 44% 41% 8.9% 11.4%
----------------------------------------------------------------------
Home Office 33% 36% 0.0% (0.7%)
----------------------------------------------------------------------
Entertainment Software 15% 16% 0.8% (7.2%)
----------------------------------------------------------------------
Appliances 8% 7% (2.6%) 10.9%
----------------------------------------------------------------------
Total 100% 100% 3.7% 3.5%
----------------------------------------------------------------------
During the second quarter of fiscal 2007, Best Buy's comparable store sales gain was driven by higher revenue from flat-panel televisions, notebook computers, gaming and computer services. These gains more than offset comparable store sales declines in tube and projection TVs See rear-projection TV and front-projection TV. , CDs and desktop computers. Best Buy's revenue mix for the second quarter of fiscal 2007 reflected continued growth in the consumer electronics product group. Consumer electronics, which represented 44 percent of second-quarter revenue, posted an 8.9-percent comparable store sales gain and again led the company's results. Within consumer electronics, flat-panel TVs experienced a triple-digit comparable store sales gain due to higher volumes (driven by declining prices), improved assortments of TVs in larger screen sizes, and the addition of 55 Magnolia Home Theater store-within-a-store experiences in the last six months. Total television comparable store sales grew by solid-double-digits as flat-panel TV growth was partially offset by declines in comparable store sales of tube and projection TVs. The home office product group accounted for 33 percent of fiscal 2007 second-quarter revenue and had even comparable store sales. A double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. comparable store sales increase for notebook computers and a continued double-digit increase in computer services revenue fueled the growth. The gains from notebook computers and computer services were offset by declines in comparable store sales of desktop computers and printers. The entertainment software product group, which comprised 15 percent of second-quarter revenue, increased 0.8 percent on a comparable store sales basis. A solid double-digit gain in comparable store sales of video gaming video gaming n. 1. Gambling by means of interactive games of chance played on a video screen. 2. The playing of video games. was partially offset by expected declines in CDs. The video gaming strength was fueled by increased availability of the Xbox A video game console from Microsoft that was designed to compete with Sony's PlayStation and Nintendo's GameCube. Introduced in 2001 with a 733 MHz Pentium III CPU, 5x DVD drive and custom-designed graphics processor, the Xbox also includes four game controller ports, Ethernet networking 360 console (1) The physical control panel on a computer or electronic device. (2) A terminal or desktop computer used to monitor and control a network. (3) Any display terminal. in conjunction with easing comparisons with the launch of PlayStation A video game console from Sony that was introduced in the U.S. in 1995. CD-ROM based and using a 32-bit MIPS CPU, the original PlayStation was the first of a family of desktop and handheld units. Portable in spring 2005. Comparable store sales of DVDs increased by the low single digits. The appliances product group, which totaled 8 percent of fiscal 2007 second-quarter revenue, had a comparable store sales decline of 2.6 percent for the quarter due to a slower industry environment. U.S. Best Buy stores have trained three-fourths Noun 1. three-fourths - three of four equal parts; "three-fourths of a pound" three-quarters common fraction, simple fraction - the quotient of two integers of its appliance departments to use its new selling model, called appliance customer expert (ACE). The company believes such investments are supporting sequential One after the other in some consecutive order such as by name or number. market share gains and distinguishing Best Buy in the industry for the long-term. During the second quarter, the company opened 17 U.S. Best Buy stores, including three 45,000-square-foot stores, eleven 30,000-square-foot stores and three 20,000-square-foot stores. At the end of the second quarter, the company operated 771 Best Buy stores, 20 Magnolia Audio Video stores, 14 Pacific Sales showrooms and 12 Geek Squad stores in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . It also operated 119 Future Shop stores and 44 Best Buy stores in Canada, and 131 Five Star stores in China. In addition, the company's Canadian operations closed six stand-alone Geek Squad stores. For the trailing 12 months, the company opened 245 new stores (including 14 acquired Pacific Sales showrooms and 131 Five Star locations) and closed eight stores. More details regarding historical store counts and square footage are available on the company's Web site under "For Our Investors." Company Repurchases $224 Million in Common Stock During the second quarter of fiscal 2007, Best Buy repurchased approximately 4.7 million shares of its common stock at an average price of $48.15 per share, for a total repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of approximately $224 million. At the end of the fiscal 2007 second quarter, the company had $1.4 billion remaining under the $1.5 billion authorization The right or permission to use a system resource; the process of granting access. See access control. for share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. approved by the board of directors on June 21, 2006. On July July: see month. 25, 2006, the company paid a dividend of 8 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , or $39 million in the aggregate, which was a 9-percent increase compared with the dividend per share paid in the prior year's second quarter. Best Buy is scheduled to conduct an earnings conference call at 10 a.m. Eastern Daylight Time on Sept. 12, 2006. The call is expected to be available on its Web site both live and after the call at www.BestBuy.com. The public may access the call by clicking on "For Our Investors." Forward-Looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and Cautionary Statements: This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that reflect management's current views and estimates regarding future market conditions, company performance and financial results, business prospects, new strategies, the competitive environment and other events. You can identify these statements by the fact that they use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning. These statements involve a number of risks and uncertainties and are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: general economic conditions, acquisitions and development of new businesses, product availability, sales volumes, profit margins, weather, foreign currency fluctuation Fluctuation A price or interest rate change. , availability of suitable real estate locations, our ability to react to a disaster recovery situation, and the impact of labor markets labor market A place where labor is exchanged for wages; an LM is defined by geography, education and technical expertise, occupation, licensure or certification requirements, and job experience and new product introductions on our overall profitability. A further list and description of these risks, uncertainties and other matters can be found in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the Securities and Exchange Commission on May 10, 2006, and in our other periodic reports filed from time to time with the SEC. Best Buy cautions that the foregoing list of important factors is not complete and assumes no obligation to update any forward-looking statements that it may make. About Best Buy Co., Inc. Best Buy Co., Inc. (NYSE:BBY) is an innovative Fortune 100 growth company that continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. strives to create superior customer experiences. Through more than 1,100 retail stores across the United States, Canada and in China, our employees connect customers with technology and entertainment products and services that make life easier and more fun. We sell consumer electronics, home-office products, entertainment software, appliances and related services. A Minneapolis-based company, our operations include: Best Buy (BestBuy.com and BestBuy.ca), Future Shop (FutureShop.ca), Geek Squad (GeekSquad.com and GeekSquad.ca), Pacific Sales Kitchen and Bath Centers (PacificSales.com), Magnolia Audio Video (Magnoliaav.com) and Jiangsu Five Star Appliance Co. (Five-Star.cn). We support our communities through employee volunteerism vol·un·teer·ism n. Use of or reliance on volunteers, especially to perform social or educational work in communities. volunteerism and grants from The Best Buy Children's Foundation.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
Three Months Ended
---------------------
Aug. 26, Aug. 27,
2006 2005
---------- ----------
Revenue $7,603 $6,702
Cost of goods sold 5,701 4,991
---------- ----------
Gross profit 1,902 1,711
Gross profit % 25.0% 25.5%
Selling, general and administrative expenses 1,572 1,450
SG&A % 20.7% 21.6%
---------- ----------
Operating income 330 261
Net interest income 21 18
---------- ----------
Earnings before income tax expense and minority
interests 351 279
Income tax expense 121 91
Effective tax rate 34.6% 32.7%
Minority interests - -
---------- ----------
Net earnings $230 $188
========== ==========
Basic earnings per share $0.48 $0.38
========== ==========
Diluted earnings per share(1) $0.47 $0.37
========== ==========
Dividends declared per common share $0.08 $0.07
Basic weighted average common shares outstanding
(in millions) 482.0 491.2
Diluted weighted average common shares
outstanding (in millions)(1) 496.5 509.1
(1) The calculation of diluted earnings per share assumes the
conversion of our convertible debentures due in 2022 into 8.8 million
shares of common stock and adds back the related after-tax interest
expense of $1.7 for the three months ended Aug. 26, 2006, and Aug. 27,
2005, respectively.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
Six Months Ended
---------------------
Aug. 26, Aug. 27,
2006 2005
---------- ----------
Revenue $14,562 $12,820
Cost of goods sold 10,895 9,551
---------- ----------
Gross profit 3,667 3,269
Gross profit % 25.2% 25.5%
Selling, general and administrative expenses 3,000 2,769
SG&A % 20.6% 21.6%
---------- ----------
Operating income 667 500
Net interest income 44 31
---------- ----------
Earnings before income tax expense and minority
interests 711 531
Income tax expense 247 173
Effective tax rate 34.8% 32.6%
Minority interests - -
---------- ----------
Net earnings $464 $358
========== ==========
Basic earnings per share $0.96 $0.73
========== ==========
Diluted earnings per share(1) $0.94 $0.71
========== ==========
Dividends declared per common share $0.16 $0.15
Basic weighted average common shares outstanding
(in millions) 483.3 491.2
Diluted weighted average common shares
outstanding (in millions)(1) 498.4 507.5
(1) The calculation of diluted earnings per share assumes the
conversion of our convertible debentures due in 2022 into 8.8 million
shares of common stock and adds back the related after-tax interest
expense of $3.4 and $3.3 for the six months ended Aug. 26, 2006, and
Aug. 27, 2005, respectively.
BEST BUY CO., INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in millions)
(Unaudited)
Subject to Reclassification
Aug. 26, Aug. 27,
2006 2005
-------- --------
ASSETS
Current assets
Cash & cash equivalents $1,123 $614
Short-term investments 1,564 2,211
Receivables 483 389
Merchandise inventories 4,049 3,250
Other current assets 687 378
-------- --------
Total current assets 7,906 6,842
Net property & equipment 2,787 2,523
Goodwill 1,010 529
Other intangible assets 83 42
Long-term investments 277 122
Other assets 363 201
-------- --------
TOTAL ASSETS $12,426 $10,259
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $3,877 $2,760
Accrued liabilities 2,012 1,744
Current portion of long-term debt 496 12
-------- --------
Total current liabilities 6,385 4,516
Long-term liabilities 392 380
Long-term debt 184 540
Minority interest in subsidiaries 31 ---
Shareholders' equity 5,434 4,823
-------- --------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $12,426 $10,259
======== ========
Note: Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income or net earnings.
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