Condensed Consolidating Financial Information

3 Months Ended

May 28, 2011

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

13. Condensed Consolidating Financial Information

The rules of the U.S. Securities and Exchange Commission require that condensed consolidating financial information be provided for a subsidiary that has guaranteed the debt of a registrant issued in a public offering, where the guarantee is full and unconditional and where the voting interest of the subsidiary is 100% owned by the registrant. Our convertible debentures, which had an aggregate principal balance and carrying amount of $402 at May 28, 2011, are jointly and severally guaranteed by our 100%-owned indirect subsidiary Best Buy Stores, L.P. (“Guarantor Subsidiary”). Investments in subsidiaries of Best Buy Stores, L.P., which have not guaranteed the convertible debentures (“Non-Guarantor Subsidiaries”), are required to be presented under the equity method, even though all such subsidiaries meet the requirements to be consolidated under GAAP.

Set forth below are condensed consolidating financial statements presenting the financial position, results of operations, and cash flows of (i) Best Buy Co., Inc., (ii) the Guarantor Subsidiary, (iii) the Non-Guarantor Subsidiaries, and (iv) the eliminations necessary to arrive at consolidated information for our company. The balance sheet eliminations relate primarily to the elimination of intercompany profit in inventory held by the Guarantor Subsidiary and consolidating entries to eliminate intercompany receivables, payables and subsidiary investment accounts. The statement of earnings eliminations relate primarily to the sale of inventory from a Non-Guarantor Subsidiary to the Guarantor Subsidiary.

We file a consolidated U.S. federal income tax return. Income taxes are allocated in accordance with our tax allocation agreement. U.S. affiliates receive no tax benefit for taxable losses, but are allocated taxes at the required effective income tax rate if they have taxable income.

The following tables present condensed consolidating balance sheets as of May 28, 2011, February 26, 2011, and May 29, 2010, and condensed consolidating statements of earnings and cash flows for the three months ended May 28, 2011, and May 29, 2010, and should be read in conjunction with the condensed consolidated financial statements herein.

$ in millions, except per share amounts

Condensed Consolidating Balance Sheets

At May 28, 2011

(Unaudited)

	Best Buy Co., Inc.		Guarantor Subsidiary		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current Assets
Cash and cash equivalents	$	1,283	$	43	$	882	$	—		$	2,208
Short-term investments	—		—		20		—			20
Receivables	1		515		1,226		—			1,742
Merchandise inventories	—		4,602		1,818		(64		)	6,356
Other current assets	148		42		777		—			967
Intercompany receivable	—		—		9,878		(9,878		)	—
Intercompany note receivable	856		—		92		(948		)	—
Total current assets	2,288		5,202		14,693		(10,890		)	11,293
Property and Equipment, Net	200		1,750		1,817		—			3,767
Goodwill	—		6		2,482		—			2,488
Tradenames, Net	—		—		134		—			134
Customer Relationships, Net	—		—		194		—			194
Equity and Other Investments	154		—		164		—			318
Other Assets	220		37		222		—			479
Investments in Subsidiaries	14,286		235		2,498		(17,019		)	—
Total Assets	$	17,148	$	7,230	$	22,204	$	(27,909	)	$	18,673
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	355	$	42	$	5,317	$	—		$	5,714
Unredeemed gift card liabilities	—		375		65		—			440
Accrued compensation and related expenses	—		192		300		—			492
Accrued liabilities	58		626		860		—			1,544
Accrued income taxes	66		—		—		—			66
Short-term debt	—		—		39		—			39
Current portion of long-term debt	402		23		16		—			441
Intercompany payable	7,824		2,054		—		(9,878		)	—
Intercompany note payable	105		500		343		(948		)	—
Total current liabilities	8,810		3,812		6,940		(10,826		)	8,736
Long-Term Liabilities	461		797		164		(238		)	1,184
Long-Term Debt	1,497		123		80		—			1,700
Equity
Shareholders’ equity	6,380		2,498		14,286		(16,845		)	6,319
Noncontrolling interests	—		—		734		—			734
Total equity	6,380		2,498		15,020		(16,845		)	7,053
Total Liabilities and Equity	$	17,148	$	7,230	$	22,204	$	(27,909	)	$	18,673

$ in millions, except per share amounts

Condensed Consolidating Balance Sheets

At February 26, 2011

(Unaudited)

	Best Buy Co., Inc.		Guarantor Subsidiary		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current Assets
Cash and cash equivalents	$	282	$	51	$	770	$	—		$	1,103
Short-term investments	20		—		2		—			22
Receivables	3		738		1,607		—			2,348
Merchandise inventories	—		3,973		1,999		(75		)	5,897
Other current assets	234		117		752		—			1,103
Intercompany receivable	—		—		9,300		(9,300		)	—
Intercompany note receivable	854		—		91		(945		)	—
Total current assets	1,393		4,879		14,521		(10,320		)	10,473
Property and Equipment, Net	200		1,803		1,820		—			3,823
Goodwill	—		6		2,448		—			2,454
Tradenames, Net	—		—		133		—			133
Customer Relationships, Net	—		—		203		—			203
Equity and Other Investments	162		—		166		—			328
Other Assets	181		36		273		(55		)	435
Investments in Subsidiaries	14,030		229		2,444		(16,703		)	—
Total Assets	$	15,966	$	6,953	$	22,008	$	(27,078	)	$	17,849
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	361	$	101	$	4,432	$	—		$	4,894
Unredeemed gift card liabilities	—		404		70		—			474
Accrued compensation and related expenses	—		200		370		—			570
Accrued liabilities	13		625		833		—			1,471
Accrued income taxes	256		—		—		—			256
Short-term debt	—		—		557		—			557
Current portion of long-term debt	402		23		16		—			441
Intercompany payable	7,497		1,665		138		(9,300		)	—
Intercompany note payable	103		500		342		(945		)	—
Total current liabilities	8,632		3,518		6,758		(10,245		)	8,663
Long-Term Liabilities	160		863		447		(287		)	1,183
Long-Term Debt	500		128		83		—			711
Equity
Shareholders’ equity	6,674		2,444		14,030		(16,546		)	6,602
Noncontrolling interests	—		—		690		—			690
Total equity	6,674		2,444		14,720		(16,546		)	7,292
Total Liabilities and Equity	$	15,966	$	6,953	$	22,008	$	(27,078	)	$	17,849

$ in millions, except per share amounts

Condensed Consolidating Balance Sheets

At May 29, 2010

(Unaudited)

	Best Buy Co., Inc.		Guarantor Subsidiary		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current Assets
Cash and cash equivalents	$	570	$	37	$	632	$	—		$	1,239
Short-term investments	203		—		2		—			205
Receivables	7		437		1,135		—			1,579
Merchandise inventories	—		4,594		1,796		(55		)	6,335
Other current assets	221		66		744		(1		)	1,030
Intercompany receivable	—		—		8,757		(8,757		)	—
Intercompany note receivable	1,552		—		—		(1,552		)	—
Total current assets	2,553		5,134		13,066		(10,365		)	10,388
Property and Equipment, Net	213		1,815		1,954		—			3,982
Goodwill	—		6		2,380		—			2,386
Tradenames, Net	—		—		153		—			153
Customer Relationships, Net	—		—		247		—			247
Equity and Other Investments	207		—		116		—			323
Other Assets	93		33		383		(32		)	477
Investments in Subsidiaries	11,684		289		2,275		(14,248		)	—
Total Assets	$	14,750	$	7,277	$	20,574	$	(24,645	)	$	17,956
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	374	$	34	$	5,452	$	—		$	5,860
Unredeemed gift card liabilities	—		367		57		—			424
Accrued compensation and related expenses	—		169		267		—			436
Accrued liabilities	26		642		933		—			1,601
Accrued income taxes	51		—		—		—			51
Short-term debt	—		—		197		—			197
Current portion of long-term debt	1		21		12		—			34
Intercompany payable	6,703		2,054		—		(8,757		)	—
Intercompany note payable	10		500		1,042		(1,552		)	—
Total current liabilities	7,165		3,787		7,960		(10,309		)	8,603
Long-Term Liabilities	263		1,087		228		(325		)	1,253
Long-Term Debt	902		128		63		—			1,093
Equity
Shareholders’ equity	6,420		2,275		11,684		(14,011		)	6,368
Noncontrolling interests	—		—		639		—			639
Total equity	6,420		2,275		12,323		(14,011		)	7,007
Total Liabilities and Equity	$	14,750	$	7,277	$	20,574	$	(24,645	)	$	17,956

$ in millions, except per share amounts

Condensed Consolidating Statements of Earnings

Three Months Ended May 28, 2011

(Unaudited)

	Best Buy Co., Inc.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	4		$	7,208		$	10,359		$	(6,631	)	$	10,940
Cost of goods sold	—			5,373			8,987			(6,188		)	8,172
Gross profit	4			1,835			1,372			(443		)	2,768
Selling, general and administrative expenses	36			1,765			1,173			(490		)	2,484
Restructuring charges	—			(2		)	4			—			2
Operating (loss) income	(32		)	72			195			47			282
Other income (expense)
Investment income and other	4			—			12			(4		)	12
Interest expense	(23		)	(3		)	(9		)	4			(31		)
(Loss) earnings before equity in earnings of subsidiaries	(51		)	69			198			47			263
Equity in earnings of subsidiaries	145			9			45			(199		)	—
Earnings before income tax expense and equity in loss of affiliates	94			78			243			(152		)	263
Income tax expense	5			24			70			—			99
Equity in loss of affiliates	—			—			(1		)	—			(1		)
Net earnings including noncontrolling interests	89			54			172			(152		)	163
Net earnings attributable to noncontrolling interests	—			—			(27		)	—			(27		)
Net earnings attributable to Best Buy Co., Inc.	$	89		$	54		$	145		$	(152	)	$	136

$ in millions, except per share amounts

Condensed Consolidating Statements of Earnings

Three Months Ended May 29, 2010

(Unaudited)

	Best Buy Co., Inc.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	4		$	7,295		$	10,535		$	(7,047	)	$	10,787
Cost of goods sold	—			5,380			9,082			(6,468		)	7,994
Gross profit	4			1,915			1,453			(579		)	2,793
Selling, general and administrative expenses	37			1,836			1,226			(619		)	2,480
Operating (loss) income	(33		)	79			227			40			313
Other income (expense)
Investment income and other	8			—			11			(7		)	12
Interest expense	(12		)	(3		)	(15		)	7			(23		)
(Loss) earnings before equity in earnings (loss) of subsidiaries	(37		)	76			223			40			302
Equity in earnings (loss) of subsidiaries	134			(4		)	(18		)	(112		)	—
Earnings before income tax expense	97			72			205			(72		)	302
Income tax (benefit) expense	(18		)	94			45			—			121
Net earnings (loss) including noncontrolling interests	115			(22		)	160			(72		)	181
Net earnings attributable to noncontrolling interests	—			—			(26		)	—			(26		)
Net earnings (loss) attributable to Best Buy Co., Inc.	$	115		$	(22	)	$	134		$	(72	)	$	155

$ in millions, except per share amounts

Condensed Consolidating Statements of Cash Flows

Three Months Ended May 28, 2011

(Unaudited)

	Best Buy Co., Inc.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Total cash provided by (used in) operating activities	$	597		$	(317	)	$	1,044		$	—	$	1,324
Investing activities
Additions to property and equipment	(1		)	(100		)	(101		)	—		(202		)
Purchases of investments	(4		)	—			(20		)	—		(24		)
Sales of investments	34			—			3			—		37
Change in restricted assets	—			—			3			—		3
Other, net	—			—			—			—		—
Total cash provided by (used in) investing activities	29			(100		)	(115		)	—		(186		)
Financing activities
Repurchase of common stock	(480		)	—			—			—		(480		)
Borrowings of debt	997			—			378			—		1,375
Repayments of debt	—			(3		)	(910		)	—		(913		)
Dividends paid	(59		)	—			—			—		(59		)
Issuance of common stock under employee stock purchase plan and for the exercise of stock options	46			—			—			—		46
Excess tax benefits from stock-based compensation	1			—			—			—		1
Other, net	(7		)	—			—			—		(7		)
Change in intercompany receivable/payable	(123		)	412			(289		)	—		—
Total cash provided by (used in) financing activities	375			409			(821		)	—		(37		)
Effect of exchange rate changes on cash	—			—			4			—		4
Increase (decrease) in cash and cash equivalents	1,001			(8		)	112			—		1,105
Cash and cash equivalents at beginning of period	282			51			770			—		1,103
Cash and cash equivalents at end of period	$	1,283		$	43		$	882		$	—	$	2,208

$ in millions, except per share amounts

Condensed Consolidating Statements of Cash Flows

Three Months Ended May 29, 2010

(Unaudited)

	Best Buy Co., Inc.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Total cash provided by (used in) operating activities	$	409		$	(862	)	$	622		$	—	$	169
Investing activities
Additions to property and equipment	—			(51		)	(110		)	—		(161		)
Purchases of investments	(150		)	—			—			—		(150		)
Sales of investments	35			—			—			—		35
Change in restricted assets	—			—			11			—		11
Settlement of net investment hedges	—			—			12			—		12
Other, net	—			—			(1		)	—		(1		)
Total cash used in investing activities	(115		)	(51		)	(88		)	—		(254		)
Financing activities
Repurchase of common stock	(111		)	—			—			—		(111		)
Borrowings of debt	—			—			463			—		463
Repayments of debt	(1		)	(3		)	(903		)	—		(907		)
Dividends paid	(59		)	—			—			—		(59		)
Issuance of common stock under employee stock purchase plan and for the exercise of stock options	110			—			—			—		110
Excess tax benefits from stock-based compensation	10			—			—			—		10
Other, net	—			—			—			—		—
Change in intercompany receivable/payable	(843		)	900			(57		)	—		—
Total cash (used in) provided by financing activities	(894		)	897			(497		)	—		(494		)
Effect of exchange rate changes on cash	—			—			(8		)	—		(8		)
(Decrease) increase in cash and cash equivalents	(600		)	(16		)	29			—		(587		)
Cash and cash equivalents at beginning of period	1,170			53			603			—		1,826
Cash and cash equivalents at end of period	$	570		$	37		$	632		$	—	$	1,239