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Notes
to Financial Statements pg 1 2
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During the fourth quarter of fiscal 2001, we acquired the common stock of Magnolia Hi-Fi for $88 in cash, including transaction costs, and the common stock of Musicland for $425, including transaction costs, plus long-term debt valued at $271. The acquisitions were accounted for using the purchase method in accordance with APB Opinion No. 16, Business Combinations, and No. 17, Intangible Assets. The allocation of the purchase prices to the assets and liabilities acquired was finalized in the fourth quarter of fiscal 2002 and resulted in goodwill of $395, of which $326 is non-deductible for tax purposes. The goodwill was being amortized on a straight-line basis over 20 years and is included in selling, general and administrative expenses. Goodwill amortization associated with the acquisitions of Magnolia Hi-Fi and Musicland will cease at the beginning of fiscal 2003 with the adoption of SFAS No. 142. Application of the nonamortization provision of the new standard is expected to result in an increase in our net earnings of approximately $18 per year. The following unaudited pro forma data sets forth the consolidated results of operations as though Musicland and Future Shop had been acquired as of the beginning of fiscal 2001:
Pro forma information related to the acquisition of Magnolia Hi-Fi is not presented, as the operating results of Magnolia Hi-Fi would not have had a material impact on our results of operations. The pro forma
results include goodwill amortization of $16, for Musicland only,
and other adjustments, principally the loss of interest income on
cash used to finance the acquisitions. The pro forma results for
fiscal 2001 exclude costs expected to be incurred in connection
with the |
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