3. Acquisitions
Effective Nov. 4, 2001, we acquired all of the common stock of Future
Shop for $377, or $368 net of cash acquired, including transaction
costs. We acquired Future Shop to further our expansion plans and to
increase shareholder value. The acquisition was accounted for using the
purchase method in accordance with SFAS No. 141, Business Combinations,
issued in June 2001. Accordingly, we recorded the net assets at their
estimated fair values, and included operating results in our financial
statements from the date of acquisition. We allocated the purchase price
on a preliminary basis using information then available. The allocation
of the purchase price to the assets and liabilities acquired was
finalized in the third quarter of fiscal 2003. The primary adjustments
to the preliminary allocation were to assign value to the Future Shop
trade name as a result of our decisions to operate stores in Canada
under both the Best Buy and Future Shop trade names, and to adjust the
extended service contract liability assumed as of the date of
acquisition based on additional information. The final purchase price
allocation is shown below and resulted in a $5 decrease to goodwill from
our preliminary allocation. All goodwill is nondeductible for tax
purposes. Under SFAS No.142, goodwill is not amortized, but is reviewed
for impairment at least annually.
The final purchase price
allocation was as follows:
Merchandise inventories
$169
Property and equipment
103
Goodwill
401
Intangible asset
32
Other assets
43
Current liabilities
(341)
Debt, including current
portion
(13)
Other liabilities
(26)
Total
$368
The following unaudited
pro forma data sets forth the consolidated results of continuing
operations as though Future Shop had been acquired as of the beginning
of fiscal 2002:
2002
Revenue
$18,506
Net earnings
570
Basic earnings per share
1.80
Diluted earnings per share
1.77
The pro forma results
include adjustments, principally the loss of interest income on cash
used to finance the acquisition. The pro forma results exclude costs
expected to be incurred in connection with the integration of Future
Shop’s business. The pro forma results are not necessarily indicative of
what actually would have occurred had the acquisition been completed as
of the beginning of fiscal 2002, nor are they necessarily indicative of
future consolidated results. >>
