百思買 (BBY) 2005 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Best Buy's conference call for the fourth quarter of fiscal 2005.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question and answer session.

At this time, if you have a question, you will need to press star-one on your touch-tone phone.

As a reminder this, call is being recorded for play back and will be available by 1:00 p.m. eastern time today.

If you need assistance on the call, please press star-zero and an operator will assist you.

I would now like to turn the conference call over to Jennifer Driscoll, Vice President of Investor Relations.

Thank you, Maria.

Good morning, everyone.

Thank you all for participating in our investor conference call for the fourth quarter.

With me here this morning are Brad Anderson, CEO, who will give you his perspective on today's news,, Brian Dunn, President, Retail - North America who will update you on our multichannel performance and our expansion plans for services.

I have John Walden, Executive Vice President - Customer Business Groups, who will address plans to increase the engagement of our employees and reduce turnover and roll out customer centricity more on an accelerated basis.

Bob Willett , Executive Vice President of Operations and CIO, who will update on you the transformation of two operational areas key to our success, and Darren Jackson, Executive Vice President of Finance and CFO, who will cover today's results as well as our earnings guidance and all your question about his our taxes.

Ron Boire, Executive Vice President and General Merchandise Manager will discuss the products that are driving our business, but by telephone.

Kevin Layden , President of [SI] Canada will be with us by phone.

Jim Muehlbauer, Senior Vice President, Finance is here with me in the room and available for the Q&A session.

Any my mentor here, [Brett Byrom of Houston Store 216].

I'd like to remind you that comments made by me or by others representing Best Buy make contain forward-looking statements which are subject to risks and uncertainties.

Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations.

As usual, the media are participating in this call in a listen-only mode.

Also in case you miss a portion of the call, it's available to replay.

Please let me give you the replay instructions.

Simply dial 973-341-3080, then enter the personal identification number 5765750.

The replay will be available from approximately noon eastern time today until midnight on Wednesday, April 6th.

I'd like to remind callers that we will invite questions after we conclude our prepared remarks.

We respectfully request that investors limit themselves to one question, so that we can respond to a larger percentage of the investors listening, particularly after our long script.

With that, I'll turn the call over to Brad Anderson, Vice-Chairman and CEO, who will begin prepared remarks.

Thanks, Jennifer.

Good morning, everybody.

It's my pleasure to be here this morning to discuss our fiscal 2005 results and our fiscal 2006 outlook.

I'd like to accomplish three things.

First, I'll cover some of the highlights of fiscal 2005.

Second, I'll address a few of the issues that are on the top of our minds.

Third, I'll outline our goals for fiscal 2006.

Afterwards, members of our management team responsible for these goals will provide more details.

We have six speakers on the call today, and they are here in part to cover any questions you have on our lengthy news release that we issued this week.

We realize we're covering a lot of information, so if you can remember only one point, please remember this.

Today marks a major milestone for our Company.

We have reached the tipping [strength] in our transformation from a product-centric company to a customer-centric company and there will be no turning back.

We have made the decision to move forward and we could not be more excited about our future as a Company, a Company that listens to people in our stores and uses that information to satisfy them in ways no other Company can.

In fiscal 2005, we set the stage for our transformation to a customer-centric company.

In the first half of the year, we'll be-- we were operating approximately 30 lab stores, getting a better understanding of the customer segments, and the value propositions that matter to them.

Along the way, based on strong consumer feedback, we accelerated our expansion plans for the Geek Squad and by August, all of Best Buy's stores in North America m access to Geek Squads 24-hour rapid response technology task force.

In July, to simplify our technology infrastructure and build new customer centric capability, we outsourced our information technology work to Accenture.

By the fall, we were working with Accenture on a three-year plan to reengineer our entire supply chain.

In October, after much experimentation and on the basis of the compelling results, we have converted 67 of our stores to segmented stores in the customer-centric operating model.

As you know, we continue to operate R&D labs for each segment designed to be a source of constant innovation that can be scaled to the balance of our stores.

We also made progress with our international business this year.

We continued the buildout of the dual brand strategy in Canada, which is attracting incremental customers to our Company, and in December, we reorganized our resources to support our longer-term growth.

And that meant a change that resulted in a smaller, more focused, executive team.

While we've made progress, we acknowledge the current environment has its challenges.

For example, while we essentially achieved our goal, our goal for total revenue, which is $27.5 billion last year, customer traffic in the past few months has been soft.

And this has constrained the growth of our comparable store sales.

More recently, the trend has improved.

Nevertheless, we set a realistic assumption for comparable store sales gains in fiscal 2006 and we now anticipate a modest gain in the first half followed by a stronger second half.

When we have room for stronger -- two-year comparable source sales growth.

Ron Boire will discuss the products and services that we expect will contribute to stronger traffic in this upcoming year.

In addition, in fiscal 2005, we attained expense leverage, while investing in our future business model.

And yet at the same time, we had more pressure than we expected on our gross profit performance.

Darren's going elaborate on that topic later, but as our earnings guidance indicates, we believe we will reverse the trend in our gross profit rate in fiscal 2006, as we grow our services, increase our global sourcing, and expand our private label business.

We also acknowledged the concerns about accelerating declines in the average selling price of digital TV's.

This year we expect more manufacturing capacity come online, driving ASP's down by 25 to 35%.

While maintaining margins will be challenging, overall we believe this dynamic favors us, and as Ron will explain in a few moments, because it should increase the velocity of sales, and we intend to capitalize on those sales by leveraging and developing our advantage in the total solutions selling.

Now here's an overview of our five fiscal goals for fiscal 2006.

First, we will accelerate the transformation to customer centricity.

Our centricity stores, as you know, give store employees more ability to satisfy the unique needs of the people who shop in their store.

We intend to introduce key components of the customer centric operating model to all U.S.

Best Buy stores this year.

While executing a full conversion, including store remodels over the next three years.

That includes a full conversion or the opening of between 170 and 220 centricity stores bit end of fiscal 2006, which would give us a total of 250 to 300 stores in this model.

We believe that the results of our customer centric stores indicate people want a different experience from us, and we want more people to have that experience of shopping under this operating model.

We also believe that it's equally important to apply what we have learned to all of our stores, regardless of whether they have been fully converted or not.

So our R&D labs will continue to be a critical source of supplying new value proposition and John Walden in this call will share some of the premises there.

Second, we will expand and strengthen our service offerings.

We see growing interest in services that enable a digital lifestyle, and Brian Dunn will explain the two areas we are target for growth, Geek Squad and home theater installation.

Third, we will boost employee retention to deliver the superior customer service that makes customer centricity a success.

John Walden will discuss what's working for us so far on that front.

Fourth, we will add individualized marketing capabilities to our skills in mass marketing.

As a part of that effort, we'll adapt our customer facing incentives based on customer preferences, and optimize our spending across various incentives such as the reward zone, mail-in rebates, financing and promotional pricing.

For example, customers find mail-in rebates far less attractive than simply lower prices.

Rebates have an impact on traffic and we may be able to redirect some of that investment to something with more impact.

Fifth, we will simplify our internal processes so that they can flex with customer's needs.

For example, we must revamp our supply chain so that we have better inventory availability and assortments that match local tastes.

We also must simplify our technology infrastructure to reduce our risks and our costs.

Bob will elaborate on that in this call.

Clearly, these five goals are linked.

We will succeed if we deliver innovative products and services that suit people's lifestyles through knowledgeable and tenured employees, and let them know about our transformation through individualized marketing programs.

All supported by a more agile supply chain and technology systems.

One of the key links, of course, is our retail stores and our online channels.

And with that, I'll turn it over to Brian Dunn, President of Retail - North America, to discuss the results in each of our brands.

Brian?

Thank you, Brad.

Good morning, everyone.

I have four points to cover this morning, updates on U.S.

Best Buy stores, our Canadian stores, our online business, and color on our company goal expanding our services business.

At U.S.

Best Buy stores, we had a good year.

Our comparable store sales were up 4.4%, resulting in average revenue per store of the year of approximately $38 million.

We believe our store productivity is among the best in retail, yet growth opportunities remain.

For example, we have approximately 75 new stores to open this year, including 60 U.S. stores.

To help build your revenue models, I'm pleased to announce that we will open 10 to 12 U.S. stores in the first quarter, 16 to 18 in the second quarter, another 25 stores or so in the third quarter, and the balance, 6 or 7, in the fourth quarter.

Plus, we will relocate 14 U.S.

Best Buy stores.

In Canada, a greater proportion of our new store openings will occur in the third quarter and we plan to relocate 6 stores.

Keep in mind store openings may move within quarters based on construction schedules.

Looking at our plans for new stores brings me to an obvious point of contrast.

We have significant growth opportunities and a more robust strategy for refreshing our stores.

Fully converting our stores to customer centricity, includes remodeling investments in those stores.

This initiative will reinvigorate our store base and increase our productivity beyond the current industry-leading levels.

One of the reasons our capital expenditures this year came below plan, frankly, was we chose to delay remodelings so we could bring these stores customer centricity at the same time.

It is clearly more effective to touch the stores only once.

I'd like to recognize our general managers at our U.S.

Best Buy stores.

As you know, we first began assessing our U.S.

Best Buy stores last summer, based on their foundational readiness to accept additional components of the customer centric operating model.

We called it STS, which stands for leadership, talent and SOP.

These assessments were derived from our experience with the customer centricity lab stores.

Now, the scores on the first round of tests were what you might expect, given that it was a new tool, but our GM's look at the score cards as a challenge and opportunity.

In the last round of assessments, they showed that they are ready.

In fact, they can't wait to get to customer centricity.

I am please they had won't have to wait long.

All stores will getting the key components of customer centricity this year, as John will explain.

I would like to also thank our Magnolia Audio Video team for their solid recovery from a soft December.

We posted a comparable sales gain from Magnolia of 1.8% in the quarter.

Once the parking lots freed up and our more affluent customers came back to the marketplace, the team also managed a smooth transition for the two unprofitable Magnolia locations we closed during the quarter.

Now I'd like to spend a couple of minutes on our international segment.

We don't focus on the differences between our domestic and international segments in our earnings releases, because the basic businesses are so similar.

But if you look at the table in the back, our Canadian business is quietly turning in significant improvements compared to this last year.

Our international segment boosted profits by the strong double digits in fiscal 2005, while its operating profit rate is lower than that of our domestic business, we saw approximately 40 basis points of improvement last year before accounting adjustments, and we anticipate significant progress next year, as we scale more Best Buy stores to leverage the infrastructure already in place for running the dual brand strategy.

I believe that this business is on track to achieve our goal of a 5% operating profit rate in the next two years.

This year Best Buy stores will enter Quebec, another major market for the brand, and a market with a unique international flavor.

Once the new store is open, we will be operating in all seven major markets in Canada.

A feat accomplished in just three years. while comparable store sales growth in Canada slowed for the fourth quarter, that includes competition with our own stores, and a less aggressive promotional plan than we with had in last year's post holiday period.

We remain very pleased with our dual branding strategy in Canada.

We have attained a 30% market share in some markets, a testament to the power of combining our learnings about multichannel retail, about dual branding, and about customer centricity.

As I mentioned earlier, we also plan to enlarge our footprint in the Canadian marketplace through new store openings.

The completion of this additional organic growth should help us realize additional efficiencies, such as level of distribution, advertising and management costs.

We also roll a on new operating model at 50 of our Future Shop stores that raise customer service levels and associate satisfaction, while lowering total wage costs.

Other initiatives intended to boost our Canadian profitability include the expansion of services, an increase in direct importing, and reductions in non-customer facing labor.

Our U.S. and Canadian online sites also have become indispensible and influential tools for customers considering a purchase.

And a growth vehicle for us.

This achievement reflects our expanded assortments, faster checkout times and guest checkout option.

Cleaner navigation and better site stability during the holiday selling season.

We plan to build on our success in fiscal 2006 by improving the customer experience with an enhanced search engine and micro-sites catering to specific customer segments.

As well as continuing the integration of our online business with our fiscal stores.

I promise to talk about our goal of expanding and strengthening our services business.

This is my final point.

Why do we like services?

It's not just the higher gross margins.

It's because our customers like services.

Geek Squad services indexed highly with all five of our customer segments.

All of them love the experience of having their problems solved by our agents.

That's why we accelerated the national buildout of Geek Squad last year.

This year our plan is to raise national awareness of Geek Squad and to hire more agents.

Using the best of our Geek Squad agents, we will extend our services to small businesses as well this year.

For example, Geek Squad will install and repair services in local area networks for small businesses, as we have done successfully in several test stores.

Our focus initially will be on small businesses and markets served by our Best Buy for business segmented stores.

One of the reasons Geek Squad is successful is that it is exclusively uses employees rather than third parties.

Having empowered and committed employees is particularly important when we as a retailer enter a customer's house.

For this reason, we are planning to make adjustments to our home theater installation business this summer, based on what we have learned from the Geek Squad.

We believe employees give a better customer experience, better loyalty, and improved customer satisfaction.

Our goal is to deliver the ultimate experience in home theater for our customers.

By expanding and strengthening our services offering, we believe that we will boost customer traffic, raise our gross profit rate, and improve customer loyalty, while strengthening our competitive advantage.

The Best Buy story is about growth.

I consider the customer centricity strategy a major growth driver.

As we have indicated in recent months, we are also exploring the opportunity to put more stores in our existing markets, another major growth driver.

Then we have the lower capital costs associated with new stores, which we announced in January, which will enable us to reach smaller markets.

By the way, we have seen much stronger results lately from our 20,000-square foot stores.

In sum, I believe that we have been adding to our runway in terms of organic growth potential, meeting customer needs is a phenomenal opportunity and it is much larger than simply selling consumer electronics.

We are very excited about what the future holds for us as we become truly customer centric.

With that, let me turn the call over to John Walden, who will talk about our customer centricity strategy in more detail.

John and I will be teaming up this year to bring this improved operating model to more stores, and John is ready to give you more information on that.

John?

Thanks, Brian.

Good morning, everyone.

I'm glad to be on the call with you this morning.

My plan is to recap our customer centricity results from the last quarter, explain how we will accelerate this work, and finish with a discussion of employee retention.

First, before I begin, let me remind you what we mean when we say customer centricity.

The simple goal of customer centricity is to teach all of our employees to think about customer needs first and products second.

And to empower them to build offerings and experiences that really solve customer's unmet needs.

For example, upscale suburban moms are time starved, and they love the personal shoppers developed in our customer centricity labs.

They can make an appointment and the personal shopper can help them with any product in the store.

This is simple in concept, empowered employees who think customers first, products second.

But the scope of new capabilities required across the Company to support the simple goal is more complex.

This is the work of the customer centricity transformation.

As we progress, we are not simply gaining a short-term benefit.

Rather, we are building an innovation engine that will enable us to move with customers and sustain our growth well into the future.

Now let me turn to our customer centricity store results for the fourth quarter.

In the first full quarter for the 67 segmented stores opened in October, we reported a comp gain of 8.4%.

That's on top of last year's fourth quarter 14.8% gain for the same stores.

A clear sign of positive consumer response.

On a productivity basis, our segmented stores are averaging sales of approximately $1,000 per square foot, much better than the rest of the chain, which by the way already leads the industry.

These stores collectively had a higher gross profit rate for the quarter, reflecting a richer mix of products and services.

These stores also had an SG&A rate in the quarter, which was slightly higher than we expected.

Most of these expenses are related to startup costs and increased labor we use in segmented stores.

We are confident that we will use our traditional strengths in GAAP management to further improve the operating performance of these stores, and gain even greater operating profit leverage in the future.

It is important to note that this aggregate data generalizes a number of more specific metrics for customer centricity that we view as important.

In addition to total store performance for all segmented stores, we look at the performance of the stores by primary segment.

As you know, we have five segments and five store formats today.

Additionally, we look at the performance of individual value propositions deployed within the stores, which, depending on the primary segment, have been design to impact only specific product categories within a store.

For example, we look at home theater department impact in those stores aimed at affluent professional males.

We look at gaming and computer impact at stores built for the young entertainment enthusiasts, and we look at the rate of attachment for Geek Squad services in stores targeting small businesses.

Across these additional metrics, we are very pleased with the early results and highly optimistic that customer centricity will drive meaningful profit growth in the future.

On the basis of these exciting results, I am pleased to describe our plans to accelerate customer centricity in FY '06.

As Brad mentioned earlier, we plan to introduce key components of our customer centric operating model this year to all U.S.

Best Buy stores, not already segmented, or roughly 575 stores.

In addition, we anticipate between 150 and 200 of these stores will be fully converted by adding store remodels, fixtures that display new value propositions for their key segments, and incremental store labor.

Another approximately 20 NSO's will be opened as fully converted segmented stores.

By year end, we expect at least 250 to 300 stores, or 35 to 40% of U.S.

Best Buy stores will be segmented and fully converted.

The balance of the chain will be ready to drive returns on the incremental investment they are expected to receive over the ensuing two years.

In addition, we plan to continue operating R&D labs for each of our five identified segments, and build them into an R&D capability unique to retail.

The purpose of these labs, of which we have 11 today, is to gain deeper insight on our customer segment needs, and aggressively test new value propositions that can be rapidly scaled across the chain.

I would like to give you some additional context on the process of converting a store to the customer centric model.

Converting a store is generally a multi-month process.

First, we insure that the store has strong levels of leadership skill, talent system and operating process compliance.

I'm referring to the LTS assessments that Brian discussed earlier.

Next, we need to train employees in financial acumen, the needs and attitudes of the customer segments in which they will be focusing, the new customer service model, and new management methods.

All of our U.S.

Best Buy stores will receive these components this fiscal year.

In addition, 150 to 200 stores will receive an incremental investment in the form of store remodeling, value proposition construction and additional labor.

This full conversion requires longer lead times for construction, for hiring and for training.

We have already begun the preparations at stores fully converting in late spring.

We plan to convert the balance of the stores in waves between now and the holidays.

Our plans include more stores aimed at all five of the customer segments we previously discussed.

We are not disclosing all of the store counts per segment, but I will say that we intend to aggressively expand the premium customer segment, and its Magnolia home theater value proposition to take advantage of gaps developing in the marketplace.

Another one of our goals for fiscal 2006 is to increase employee retention.

We have been able to demonstrate in our customer centricity stores that we can achieve lower employee turnover than in other stores.

We believe this is due to the career tracks created by higher paid positions in these stores, to the way we involve employees more in decisions, and to the deeper way they engage with, and serve customers.

We believe that reducing turnover will be critical in coming years.

Higher retention will help us deliver stronger store performance, with experienced engaged employees, and will reduce costs of hiring and training, which in retail organizations, can be high.

We think our R&D labs will help us unlock opportunities in this area.

So let me quickly recap our customer centricity store plans for FY '06.

First, we'll maintain the current 85 segmented and lab stores.

We'll add 150 to 200 fully converted segmented stores and approximately 20 fully converted NSO's.

We'll introduce key components of customer centricity to all other U.S.

Best Buy stores and we'll add the incremental capital and labor to these stores in FY '07 and FY '08.

We'll produce and deploy new value propositions and new consumer insights from the R&D labs, and that will finish the year with 250 to 300 fully converted segmented stores.

Earlier I mentioned that for us to accomplish this simple goal of empowered employees thinking customers first, products second, we must build many new capabilities.

Our IT and supply chain are at the center of this work.

Bob Willett will next provide an update.

Bob?

Thank you, John.

Hello, good morning, everybody.

This is the first time that I've had the opportunity to speak with you, so if you would bear with me for a moment, I would like to set some context as we discuss two of the key enablers that support our customer centricity strategy.

Firstly, our global supply chain and secondly, our information technology systems.

Starting with supply chain, our current supply chain has served us extremely well.

However, we've reached an inflection point in terms of the velocity of product and store location. which demanded an holistic end-to-end supply chain process.

The process starts literally in the growing fields of Asia and continues to the customers' home.

In order to produce firstly a better customer experience as measured by increased availability, and secondly, a higher average basket spend to increase share of wallet.

To help determine the end gain, and to insure we're not reinventing the wheel, so to speak, we've looked to best-of-breed retailers and supply chains.

After considerable research, we chose an approach used in European food retailing similar to that of [Tesco].

We're currently about six months into a process that will take fully 2.5 years to complete.

We've had a great plan in place, piloted many of the 17 major projects last year and are moving into implementation mode with a number of them this year.

These include range optimization, price optimization, item planning, CPFR, supplier integration, and lean, and not to forget RFID.

We're moving to a pull, not a push model, removing all non-customer facing activities at store level, and pushing that activity back up the supply chain, so that our store colleagues have the main task of serving our customers, and not doing other non--value-added work.

In addition, we formed an alliance with 11 of our key vendor partners.

This alliance will help us continue to streamline our connection points.

We're working together to take out waste of the system and improve speed to market to deliver more value and a better customer experience.

Our primary benefits from the program this year are expected to come from three areas.

Tailored market assortments, or locality demand, based upon true location demand.

Price optimization and lean in all areas of the pipe.

Significant learnings and insights are also coming from CPFR and network optimization.

We have implemented a rigorous program management approach to this activity to insure appropriate resource allocation, performance measurement and capacity planning.

There's a significant amount of work, as you can imagine, and we don't wish to give our stores complete indigestion.

There will be more to come as we progress on this journey, which we very much view as the marathon as opposed to a sprint.

Another key enabler of customer centricity is our technology infrastructure.

Here we have implemented initially a business operating blueprint that maps out our current and future processes and capabilities.

To support our blueprint, we've also developed a corresponding release strategy that maximizes our investment, minimizes disruption and limits the change impacts so that we optimize the investment.

An additional significant departure from the past, as a result of this review, is the use of proven vanilla software applications, now available to the retail industry, as opposed to building our own applications.

This approach will help simplify our infrastructure, reduce the technology hairball, if you will.

It's also expected to diminish risk and ultimately increase our ability to reduce our total cost of ownership through these proven applications.

Some of these savings will be reinvested in new capabilities to support our new business strategy.

For example, we're planning a new point of sales system that enables complex selling across all brands and channels.

An example of this vanilla approach is the implementation of [Teradata] in the area of customer data and analytics, which we believe will help us make better fact-based decisions in support of our customer centricity strategy.

We have made a significant investment in this and are now starting to see the benefits of this tool by way of real insights for our business leaders.

The results of our IS infrastructure rationalization is also expected to help simplify our business and ultimately enable us to create a more nimble infrastructure and add capability at pace, which is currently, frankly a challenge for us .

This simplification activity has also helped us with our SOX remediation and customer data security activity, which would have been more problematic had we not had this rationalization program.

We've engaged as Brad says, with Accenture to assist us with this activity.

The first nine months of the relationship have been very satisfactory, a real confidence builder, which leads us to believe we will reduce our total cost of ownership by approximately 50 basis points by fiscal 2007.

Key to the success of this work is the partnership with my retail partners and merchants.

We're working closely together to drive this operational change that will enable technology to deliver on the promise.

And on that note, I'd like to hand over to my friend and colleague, Ron Boire, General Merchandise Manager.

Ron?

Thanks, Bob.

This morning I want to address head on your concerns about the digital transition, specifically HDTV, leadership changes at key vendors, and recent trends in customer traffic.

First, we continue to receive many questions about average selling price declines in digital TV, specifically flat panel.

Yes, of course, digital TV prices will decline in the coming year.

We now estimate the average decline at 25 to 35%, slightly steeper than our prior estimates.

The good news is that we believe that the velocity curve will also significantly accelerate, as these great-looking products become much more affordable to a much larger segment of the population.

While this move along the price curve simultaneously will put pressure on margins, I like our position as the market's leading specialty retailer, we are better positioned than any other retailer or channel, to take advantage of this dynamic.

This is our sweet spot, and we prepared for it well last year.

We can demonstrate HDTV in our stores, the way customers will experience in their homes and show the advantages of great digital video and audio connected to complete their experience.

These solutions boost our profitability, but much more important, they increase customer satisfaction.

Speaking of customer satisfaction, as Brad stated, we have heard the voice of our customers about their dissatisfaction with mail-in rebates.

Best Buy as the industry leader, will take a leadership position on this issue.

We intend to eliminate mail-in rebates from our portfolio over the next 24 months.

Second, the few of you have expressed interest in how we are effected by the changes in leadership at some of our largest partners.

Let me answer it this way.

First, we continue to have strong relationships with the top management and business unit management of these critical partners.

Second, I view such changes as the natural outcome of our hyper competitive environment.

Over the last fiscal quarter, we not only saw leadership changes at our two largest vendors.

We also saw leadership changes at three of our traditional publicly traded competitors.

The New York times, Wall Street Journal, and others have covered the changes much more eloquently than I can.

What I can tell you is that at Best Buy, we believe in the importance of ongoing innovation, customer centricity, the supply chain and IT innovation that Bob just spoke of, innovation and retail experience in the dot-com innovation that Brian spoke of, and customer-driven product solutions will be the engines of innovation for us, and we will only accelerate these and other efforts we have not yet discussed publicly.

Third, concern about trends in customer traffic is another frequent question.

Let me say that we expect to grow marketshare in entertainment software by devoting more space in our stores to movies and games.

By offering tailored market assortments, which Bob just spoke of, for the first time and by leveraging our authority in this space, particularly in video gaming, where a new multiyear cycle began last week with the launch of Sony's PlayStation Portable, or PSP.

Once again, Best Buy exercised its leadership position.

As new hardware and formats are introduced and as entertainment subscriptions continue to rise, we see opportunity where others may only see risk.

For example, this year as part of our customer centricity and new store openings strategy, we will begin a major upgrade of the center of the store, which will allow for more flexible displays and faster reconfiguration of our entertainment assets.

In the short-term, we will be able to respond to customer segment needs with a larger assortment of DVD movies, and the addition of PSP software.

In the longer term, as an HD movie format is established, a new, more flexible center of the store, will allow us to establish leadership quickly in this critical marketplace.

I would also be remiss here if I didn't once again mention that our customers overwhelmingly are telling us they are uninterested in being the guinea pigs in a new HD video format war.

We are hopeful that the leadership in the entertainment and hardware industries will soon come to an agreement on a unified high-definition media format.

In addition, I would like to highlight other levers well will pull to drive traffic.

Among them are MP3 devices where we enjoy a strong leadership market position, which are now testing in new locations, with new labor models within the store.

This relocation will also support our cellular business.

Other traffic drivers include the expansion of our service offering, the addition of more stores to our improved appliance experience, digital Photo finishing, Reward Zone and the acceleration of customer centricity.

Our comparisons may be tougher in the early part of the year, but we will also benefit from last fall's national rollout of Geek Squad, and the reset of our TV, digital camera and notebook departments, our big three.

Based on everything I know about our major product groups, how our major product groups will perform in 2006, I'm confident we'll achieve the guidance outlined in this morning's news release.

With that, I'll turn the call over to Darren Jackson, CFO, who will elaborate on earnings guidance and wrap up our prepared comments.

Thank you, Ron.

Good morning, everyone.

Ron said now that we're at the halfway point of the script.

If you're still with us, first after reading our news releases over the past two days, you probably feel like you need a Ph.D in accounting to understand how our business performed in fiscal 2005.

We apologize for the complexity of these releases, yet we remain committed to providing transparency for our shareholders.

This morning I plan to provide the financial highlights for the year, commenting on our earnings guidance for the fiscal quarter of fiscal 2006, and the year as a whole, and finish up by discussing 7X7, our operating income rate goal.

Starting with fiscal 2005, topline, revenue growth met expectations.

We generated 27.4 billion in revenue, which was essentially in-line with the guidance we provided for the year.

Our expense reductions also met expectations.

We reduced SG&A costs about 20 basis points for the year.

Capital expenditures for the year were approximately $500 million lower than we anticipated by nearly 150 million, in part, because of the timing of projects that have moved into fiscal 2006.

Cash return to shareholders via stock repurchases and dividends, increased to $337 million, a 46% increase over the prior year.

That includes the repurchase of 3.8 million shares of stock.

Finally, we were able to retire $355 million in convertible debt and finish the year with $3.3 billion in cash and short-term investments.

That said, we also had our challenges.

We fell short of our expectations for our gross profit rate for the quarter and for the fiscal year.

In the quarter, the expansion of our Geek Squad service business and our global sourcing volumes, was more than offset by the seasonal promotional activity, challenging product transitions, and margin rate pressure, due to greater revenue mix -- greater revenue mix growth of lower margin products.

Our gross profit rate decline for the year was more modest, principally driven by higher markdowns.

The good news is that we exited the year with clean inventories.

Our comparable store inventories were up only 2% at year end.

We also reported a fourth quarter comparable store sales gain that was modestly below our expectations.

The primary culprit was a reduction in customer traffic, which began in August.

I was proud of our stores for increasing their conversion rate and average ticket, to more than offset the headwind from customer traffic levels.

In addition, we saw an improving trend in traffic throughout the fourth quarter and on into the new year.

What do these trends bode for the coming year?

Given that our comparisons are easier if if the back half of fiscal 2006, we are forecasting a comparable store sales gain of 4 to 5% for the year.

This range includes the gain in the low single digits for the first quarter.

When we were up against our toughest comparisons which were 8.3% comp gain in the prior year's first quarter.

We're expecting a rebound in our gross profit rate, driven by the expansion of our services business, increased direct sourcing in private label activities, and the acceleration of customer centricity.

We also expect a higher SG&A rate, which reflects the investments we're making in services, as well as the acceleration of customer centricity.

Due to the gross profit rate improvement, we are looking for an operating income rate improvement of approximately 20 basis points for fiscal 2006.

These assumptions bring us to the earnings range for the fiscal year, of $2.95 to $3.10 per diluted share, and I want to be clear that that includes stock-based compensation expense, and the other accounting items previously outlined.

This range represents a growth rate of approximately 13 to 15% excluding the options expense associated with stock-based compensation.

This range is consistent with the mean analyst estimate after adjusting for stock-based compensation and the other adjustments previously disclosed.

Looking specifically at the first quarter, we are anticipating earnings per diluted share from continuing ops of $0.27 to $0.32, that includes stock-based compensation expense.

Earnings are expected to be essentially flat when compared with the same period a year ago, excluding the impact of stock-based compensation.

As context, a year ago earnings rose 63% in the first quarter, which was clearly our best quarter last year.

This range assumes that comparable store sales gain in the low single digits.

It also assumes continued investments to convert additional customer centricity stores, and to grow our services business, which will put pressure on our SG&A rate.

We expect operating income rate in the first quarter to decline approximately 50 basis points, principally driven by these investments.

Our fiscal 2006 guidance for capital expenditures is in the range of 650 to 700 million.

This range, which is slightly higher than last year, includes several large line items.

Let me give you a few.

We plan to open 70 to 75 new stores and complete 15 to 16 remodels and relocations.

We also expect to invest close to $200 million in information systems, which Bob described earlier in the call.

As we mentioned earlier, the increase in capital expenditure also reflects the impact of items delayed last year, that will be spent in fiscal 2006.

Now, we continue to seek returns in the top quartile of the S&P 500.

We understand your comments about our growing cash balance.

We will evaluate the size of our dividend in light of our projected cash flows, and we will consider more aggressively pursuing stock repurchases in the coming year.

Longer term, we remain focused on our double-digit topline growth and a 15%-plus earnings growth rate.

We have spoken to you about our 7X7 goal.

We are still focused on this goal.

However, at this point we believe it would be more prudent for analysts to reflect this goal as something more likely to be attained in fiscal 2008 rather than 2007.

We extend this timeframe due to the impact of stock option expense, and the need to make further investments in our business in the short-term to drive our long-term goals more effectively.

In addition, changes in our business have provided somewhat more pressure than we expected.

Right now as the market leader, we believe it is important that we accelerate customer centricity, expand our services business, boost retention of our employees, add individualized marketing capabilities, and simplify our supply chain and IT systems.

This work is absolutely critical to our transformation.

To conclude, we are pleased with our performance this year.

Our bottom line was nearly $1 billion.

Our profits grew a solid 17%.

We continue to build on our industry-leading marketshare, and we saw our cash and short-term investments balance grow to $3.3 billion.

We remain focused, committed, and driven to transform our business model to serve our customers in many more ways.

We see more opportunity for store growth, services expansion, and global opportunities.

We are upbeat about our prospects and delivering superior results.

With that, Maria, we will now take questions from our investor audience.

Thank you.

Thank you, sir.

The floor is now open for questions. [OPERATOR INSTRUCTIONS]

Our first question is coming from Bill Sims with Citigroup.

Good morning, and thank you.

Good morning, Bill.

Good morning.

As we're about to cycle the Reward Zone implementation later this summer, can you give us a recap of what you've learned on Reward Zones, but prior to that, can you comment on the gross margin drag you saw from Reward Zone in the fourth quarter coming on renewals, the renewal rate you are seeing, or any directional comment there as well as the growth in new members, and then I guess comment on, looking forward into the back half of the year what you intend to do with the program.

Thank you.

Okay.

Bill, this is Darren.

So we'll tag team this question a little bit.

Why don't I start with the simple stuff, which is always the numbers, right?

Yes.

And so in terms of Rewards Zone in the fourth quarter, what we saw in terms of overall gross margin rate drag was diminimus, so we've essentially anniversaried the Reward Zone program and our gross profit rate reduction in the fourth quarter.

It was, you know, if it was one or two basis points that, would be a lot.

So one of the things that gives us optimism about our gross profit rate as we look to next year is that we've essentially cycled Reward Zone and we won't have that same level of drag that we experienced this year.

The drag this year, as you recall, if you put the four quarters together, was probably in the neighborhood of not less than 20 basis points and probably closer to 30 basis points for the year in terms of Reward Zone.

I think in terms of other numbers, in terms of attachment rate, redemption rate, and the like, we still feel good.

We're still seeing attachment rates that are in the neighborhood of in-store customers using it to the tune of upwards of 30%, redemption rates as we've talked about before have been running 60% or so.

And we are at a customer count that is beginning to approach 5 million customers on the Reward Zone program.

I think the important thing to remember when you back up about Reward Zone, and it goes to what Ron talked about in the call, is that as we look to the future, there are many different ways that we incent the customers to come into our store.

Reward zone is just one way, rebates are another tool, free financing is a third tool.

As we look at the mix of that, we think it must evolve over time to be a mix of incentives that work for our best customers, and our best customer segments.

And so that's a part of looking to the future and talk about mail-in rebates, we're looking at the mix of those incentives and what works best, not what works for everyone, what works best, to touch our best and most loyal customers.

What's the thought process on mail-in rebates, in terms of gross margin impact if you shift away from mail-in rebates, knowing that a good percentage of customers do not send that mail-in rebate versus lower pricing?

Any impact on the margin?

By the way, it's not necessarily a safe presumption that a good percentage.

That's reported widely inaccurately.

A very high percentage of people depending on the level of rebate, that have received their mail-in rebate.

Ron, do you want to cover that?

I think what we're thinking about is more of a reinvestment of those dollars.

Of course to the extent we can be more effective/efficient with things like Reward Zone and other programs which we think over the long run may drive loyalty, there may be some savings.

But when we look at the total pool of promotional spend, you know, we're looking at the rebate pool as an opportunity on two fronts.

One, is there a more effective way to spend it, and even more importantly, customers are telling us they just hate the process.

I think in the beginning back early on when rebates became popular in the CE industry, think there may have been some gain on breakage.

I think over time, customers have been programmed, they grab the register tape, fill out the rebate form, they send it in and they remain aggravated until they get their check.

But as Brad said, the redemption rates are extremely high on any value beyond very nominal values.

So, we're really looking for better customer service and reinvestment first and maybe some gains, but that's not the major motivation.

Thank you.

Thanks, Ron, Brad, Darren.

Caller, so that you know, our script was longer than usual, so we will go a little beyond an hour, in order to accommodate a few more questions.

Next question, please.

Thank you.

As a reminder, please limit yourself to one question and one followup question.

Our next question is coming from Scott Ciccarelli with RBC Capital Markets.

Hey, guys.

Question regarding customer centricity.

You know, you guys are obviously rolling it out.

Parts of it to the entire store base, your fully remodeling a portion of the store base.

Can you give us an idea of what's kind of embedded in the '06 expectations in terms of sales contribution, how much more are we going to be spending here?

I'm assuming your expenses ramp up on customer centricity, but if you can give us a flavor for what those expectations are, think that would be helpful.

Thanks.

Well, Scott, it's John Walden.

I think the-- in terms of what we have baked into '06, we certainly have baked in some continued benefit of the kind we've seen with the 67 stores we launched in October, for the 150 to 200 stores that we're going to add this year.

And that's-- those are those stores we talked about as full conversion where we're putting capital in, remodeling the store, adding fixtures around value propositions and adding incremental labor.

You'll see that projected in '06 in a similar way to what we saw this last year.

We've got increased levels of comp store sales relative to the base stores.

We've got higher gross margins assumed.

We've got increased SG&A assumed and we've got operating profit contribution assumed.

But because we started doing that work already, with the first level of those being launched in May, you'll see starting in the first quarter increased levels of investment.

For the balance of the chain, we really don't assume in our plan a lot of incremental benefit.

We are adding a lot of components of customer centricity.

Largely, we're adding everything other than the incremental investment of capital and of labor.

We're adding training.

We're adding cultural components.

We're adding a knowledge about customer segments.

We're adding a lot of foundational components, but we haven't assumed any additional benefit, nor have we necessarily added material incremental costs to that.

We're really move whaling we normally spend in the core business to make all of our stores customer centric.

So that's in general what we've got in the plan for '06.

I guess the question is with a 4 to 5% comp, I would have expected a little bit more leverage.

I'm assuming some of it is kind of a variable expense that gets utilized in the customer centricity, is that the right way to be thinking about it?

Yeah, Scott, this is Darren.

So you're right.

If I just back you up in time and we rewind the tape to prior guidance that we have given starting with the analyst day back in May last year, is that we expected that the CC stores from an SG&A point of view, principally driven by an improved labor model and CapEx depreciation would drive up our SG&A in those stores about 50 basis points, you know, from the beginning and over time that incremental sales lift would pay for-- the incremental margin lift and the incremental sales lift, would pay for incremental operating income dollars,and that is absolutely what occurred in the fourth quarter.

So the rates were a little you upside down, but the operating income dollars, we not only paid for the incremental labor, but we paid for the launch costs in the fourth quarter.

We expect a similar outcome this year.

The challenge, and you're seeing it in our first quarter numbers when I said our operating income rate would decline 50 basis points, that is our lowest revenue quarter, but if we're going to enjoy the bigger benefits in the second half of the year in the fourth quarter, we need to make those investments now.

So a combination of those investments up front, which I think we've been pretty transparent about, and an aggressive services plan this year, which comes with a higher SG&A structure, but also comes with a much higher margin structure is what's driving the SG&A rate increase that we're seeing.

But we think it's absolutely the right thing to do in order to continue to speed along the transformation of the business.

And we will pay for it through the incremental sales and the incremental margin.

All right.

Thanks, guys.

Next question, please.

Thank you.

Our next question is coming from Mark Rowen with Prudential.

Thanks, good morning.

Good morning, Mark.

Hi, Mark.

Couple of things.

One, on-- you talked about competitive appreciation but then talked about margins increasing this year.

What gives you confidence that the competitive pressure isn't going to intensify this year, and then related to that, you said that you expect March again on big screen TVs to come down.

I'm wondering if you could give us a sense of how much those margins are going to compress, you know, I know you probably don't want to give out numbers on that, but just kind of directionally, how big is that margin impact going to be on big screen TVs?

I think the way we're thinking about that, Mark, is historically over time as we've seen, consumer electronics has come down a price curve.

Early on in the mix, I think as we've discussed before, you get a little bit of a premium margin.

As things normalize, you get more traditional CE margins on those products.

We're seeing-- we're expecting-- seeing some of that now.

We're expecting to continue to see some of that in the coming year.

We think the velocity, the elasticity on these price moves is going to be very favorable to us, and our position is going to be very favorable.

So from a gross dollars point of view, we're going do extremely well.

The second point is on total mix, we think one of the things that's really going to be driving margins is going to be services.

So we invested heavily in Geek Squad last year.

We really weren't national until I believe August 22nd of last year, and then when you think about the learning curve and the marketing necessary to get the word out, this will bet first year that we start to see real run rate benefit from Geek Squad, and that will have a material impact on total margins.

So if you excluded services, -- does your plan include continued competitive pressure on product margin?

Yeah, absolutely.

Depending on th category, yeah, there's systemic changes.

Clearly the rise of digital music players is having an effect on the margin mix, but, yes, we think that will continue.

Okay.

Darren, I can't leave without asking this.

In your customer centricity stores, is the warranty attach rate similar to your other stores, or is there any change in the warranty attach rates in those customer centricity stores?

Yeah, it's equal to the same number I gave you last time, Mark. [laughter]

Darren, I don't remember you giving me a number last time.

Yeah, so we haven't seen-- in terms of PSP, honestly I don't know off the top of my head.

I look to Brian Dunn for that.

Yeah, yeah, so off line, you know, we can look it up , -- yeah, we'll just look it up.

Mark, it's John.

In the higher gross margin assumptions that we've talked about for '06, also in that mix, remember that we're going to drive higher gross margin percentages in our customer centricity stores by holiday 35 or 40% of our chain will be converted.

That's also an impact in that.

That's not driven by higher PSPs.

I'm pretty sure the number is roughly the same, if not lower in the centricity stores to the chain.

That's driven by mix issues and higher solutions sales, not by PSPs.

Okay.

Great.

Thanks.

Next question, please.

Thank you.

Our next question is coming from Gary Balter with UBS.

Good morning, Gary.

Hi, sorry.

I was undoing the mute.

Can you hear me?

Yeah.

This question on gross margin and you somewhat addressed this during the comments, but as we look at this past quarter's gross margin, how much reflects just your decision to get out of the, some of the lower end products or transition into higher products and the clearance impact of that , and maybe would be more one-time in nature than ongoing?

Well, think we had some-- Gary this, is Ron.

I think we had some transition issues, but I don't have the, I don't have the map in front of me, but it was a few basis points around transition issues.

The biggest issue in gross margin in the last quarter was a tremendous sales increase in MP3 players, which drove a big part of the comp, and mix out at a significantly lower rate.

We expect that obviously we expect MP3 players to become, to continue to be strong this year, so that will continue.

Another significant impact was around media and we think that that was more of a Q4 promotional issue and is not systemic, and some of the things that Bob talked about on tailored market assortment and some of the things we're doing in launching new formats with, think will help margins recover in the media area, those were the two big drivers of rate change.

And things, just walk us through following up on that, like just the PSP, you know, when something like that starts selling, that's obviously low margin on the hardware?

You see a little drag early on in the launch, first 90 days.

You see it recover as people accumulate software after that, more normalizes.

Like this should be a better video/PSP type Christmas than last year was, right?

Just looking at--

Yeah, as I said in the call, we see that as the beginning of a new cycle.

You have PSP launching now.

You have Xbox 2 coming out in the fall, although not a huge launch in the fall, but in the market in the fall, and getting bigger next year.

And then Sony behind that with PlayStation 3.

So the cycle, we're really just in the beginning of another, we think very good game cycle.

All right.

Next question.

Yeah, I was going to say, Gary, as we said in the comments, I think what has us more upbeat is that as we've come into the new year, we certainly have seen our sales trend coming out February improve as we've gone into March and we've seen our margin rates bounce back.

Okay.

And so that, if you think about our inventories being up only 2% on a comp store level and our overall trend of business was closer to 3, I think at the end of last year when we were trying to successfully transition and compete, we experienced extraordinary-- you know, I would say more extraordinary pressure as we exited the year versus what we saw for the entire year, which was closer to 20 basis points.

Thank you very much.

You're welcome.

Next question, please.

Thank you.

Your next question is coming from Greg Mellick with Morgan Stanley.

Hi.

Brad or anyone else there that wants to address it, as you roll out customer centricity, what is the actual, any big changes in the labor model as part of this?

You talked about ways to you know, keep retention of employees and how critical that is to serving the customer.

Has there been any thought of how we change the labor model commissions being reconsidered, or bonuses or other things such as that?

There is a, one of the things we talked about just briefly, but is a really big factor, was the reduction of, that we have seen so far actually in our customer centricity stores, the reduction and turnover, is that this makes the store a much more interesting place to work.

First of all, the store starts controlling more of its destiny and there is a much wider variety of different jobs and positions at different levels that are provided for the employees.

So you're now in an environment which is first, more interesting, and, second, there's much more opportunity in the environment than when we started doing customer centricity.

That has a very meaningful impact in the rate of turnover.

We think over time, and this is one of the things I'm very thrilled with, is the revenue gain we've got with the very installation of the skill set that is anything but mature.

So I mean you just train the people, set them on the floor and you get a revenue gain.

Once those folks actually develop matured skills, we think we've got an enormous opportunity here, but we've got to retain the talent to get the sustaining gain.

That's part of the reason Brian talked so much about the central focus of the company is to turn down the employee turn over significantly this year.

We believe we've got the tools to begin to do that.

Could you be a little more specific on how you'll do it?

Is it with pay, bonuses?

Commissions are not being considered, right?

Actually, Brian, do you want to--

Commissions are not being paid.

Again, to Brad's point, there is some higher paying roles in the customer centricity stores.

So, for instance, if you're a product specialist that serves [Jill] your income might be twice as high as the average of the given sales associate.

That's right.

It's not commission.

It opens up a whole new series of carry path and career opportunities for our employees, but it is-- let me give you an example.

So if you're someone right now that loves to work with computers and you're working in our computer department, you are able to now through this customer centricity model grow into a role with our Geek Squad team in-store, which provides you with more income and a better opportunity.

And if you continue to love doing that and demonstrate excellence, you're going become one of our double agent Geek Squad players that goes into customer homes and helps to make the experience come alive for customers in their homes.

So the point here is, embeddedness.

Our employees are in a position to do what they love every day and earn more money while producing better, richer outcomes.

It's still-- they are still hourly employees?

Yeah, matter of fact, we haven't-- one of the things about having two brands in Canada is we have a chain that operates with a commission base.

We talked about its improved structure where reduced expenses.

Did it by refining the use of its commission staff.

Actually reducing the percentage of the staff that's commission and adding some hourly balance into the commission.

So one of the things the organization has with it's many different operating models is we have test beds of all sorts of different incentive structures.

So we don't see any reason to want to bring a commission structure at this point into customer centricity, but, you know, theoretically, we'll be looking at all different forms of incentives.

Okay.

Great.

Thanks.

One more question, please.

Thank you.

Our final question is coming from Aram Rubinson with Banc of America.

Good morning, Aram.

Hi.

Since no one's after me I'm going try for two. [laughter] Can you give us a sense on the comp plan for the year, just give us ballpark's on kind of broad-brushed categories, and then the second question I had is whether Circuit City seems to be doing anything different in advertising, since they have got some of your old folks trying to steal your bacon? [laughter]

I think from a category standpoint, we expect the categories that are going to drive the comps, we just talked about gains and entertainment.

We think on that side it's games will have a good year and entertainment is specifically in DVD will have a good year.

Digital media, small part of music, will be strong, but not material for the comps.

Flat panel TV, obviously a key driver.

Notebooks, MP3 players, digital cameras and while not a huge driver of comps, but certainly strategically important to the mix, services will be crucial to what we do this year.

So if you look across and just-- is there going to be a big disparity?

Sounds that you covered almost a little bit of every category there.

Do you think it will be a steady across category type of comp or will there be spikes?

Well, we have a portfolio strategy as we look at categories, so if you think about home theater, DVD players have been on a decline for us in the last couple of years due to ASP declines and us harvesting the category.

So within the broader categories, we see categories that will have significant declines.

But the key drivers are the ones we've been investing in and are continuing to invest in this year, all around the digital technologies, flat panel, digital cameras, notebooks, mobility, wireless, are the categories that are going to be driving the comps.

Ron, you would probably say our strongest performing comp in the fourth quarter was one of our strongest was major appliances, up nearly 15%.

As we look to next year, given the work that we've done in our eighth initiative in our learnings from, and this is another learning around the labor model, we see a very strong year in appliances and I know if Al was here today, that's the comment he would make.

Aram Jackson, playing the role of Al. [laughter].

The other comment you made was around Circuit City and what I would say is I think you've seen a photo copying of strategy on the promotional side, you haven't seen a duplication.

So, you know, if you look at their flyer, you can see they are doing the front cover last week, something that we did a year ago.

So I think you're going see that kind of behavior.

The strategic difference in customer centricity, as some of those players know very well is embedded very, very deep in the operating model.

It is not something that you can easily photocopy in a flyer.

Darren, why aren't you buying back more stock?

You got some authorized already.

I think what the script said is that in the upcoming year, we will be aggressively considered buying back more stock.

That's a fair question.

Now, Aram, I know you're going to ask this off line.

Our operating cash flow this year, though our earnings were up 17, we saw operating cash flow grow a little over 40%.

So we're pleased about that in terms of working capital management this year.

So all that leading to our strong cash balance the end of the year of 3.2 billion.

But I think we will have more choices as we go into next year.

All right.

Thank you.

Thanks very much.

Okay.

I thank everyone for participating in our fourth quarter earnings conference call.

Before we end, may I remind you this call will be available for replay 973-341-3080 and entering the pin 5765750.

The replay will be available from about noon today eastern until midnight next Wednesday, April 6.

To hear the replay on the web, visit us at www.Best Buy.com and click on for our investors.

If you have additional questions about our fourth quarter earnings call, or our 2006 outlook, please call me, Jennifer Driscoll at 612-291-6110.

Reporters listening to the call, contact Sue Bush, Director of Corporate Public Relations at 612-291-6114.

That concludes our call.

Ladies and gentlemen, thank you for your participation.

This does conclude today's teleconference.

You may disconnect your lines at this time, and have a wonderful day.