Best Buy 1999 Annual Report Download - page 36

NOT E S T O CONS OL I DAT ED F I NANCI AL S T AT E ME NT S
E S T U Y O N C
Earnings Per Share:
Basic earnings per share is computed based on the weighted average number of common shares outstanding during
each period. Diluted earnings per share includes the incremental shares assumed issued on the exercise of stock
options. Convertible preferred securities were assumed to be converted into common stock and any interest
expense thereon, net of related taxes, was added back to net earnings when such conversion resulted in dilution.
Stock Splits:
The Company completed a two-for-one stock split effected in the form of a 100% stock dividend distributed on
May 26,1998. In addition, on February 19,1999, the Company’s Board of Directors authorized another two-for-one
stock split effected in the form of a 100% stock dividend distributed on March 18, 1999. All share and per share
information reflects these stock splits.
Stock Options:
The Company applies Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to
Employees,” in accounting for stock options and presents in Note 5 pro forma net earnings and earnings per
share as if the Company had adopted SFAS No. 123, “Accounting for Stock-Based Compensation.”
Use of Estimates in the Preparation of Financial Statements:
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts in the consolidated balance
sheet and statement of earnings, as well as the disclosure of contingent liabilities. Actual results could differ
from these estimates and assumptions.
Fiscal Year:
The Company’s fiscal year ends on the Saturday nearest the end of February.
Reclassifications:
Certain previous year amounts have been reclassified to conform to the current year presentation. These reclassifi-
cations had no impact on net earnings or total shareholders’ equity.
2. WORKING CAPITAL FINANCING
Credit Agreement:
The Company has a credit agreement (the Agreement) that provides a bank revolving credit facility under
which the Company can borrow up to $220,000. The Agreement expires on June 30, 2000 and can be extended
for one year upon meeting certain requirements. Borrowings under the facility are unsecured. Interest on
borrowings is at rates specified in the Agreement, as elected by the Company. The Company also pays certain
commitment and agent fees.
The Agreement contains covenants that require maintenance of certain financial ratios and place limits
on owned real estate and capital expenditures. The Agreement also requires that the Company reduce the
outstanding principal balance for a period not less than 30 consecutive days to not more than $50,000,
net of cash and cash equivalents. There were no borrowings under the facility during fiscal 1999. The weighted
average interest rates on borrowings under the Company’s prior credit agreements were 8.67% and 6.86% for
fiscal 1998 and 1997, respectively.
Inventory Financing:
The Company has a $200,000 inventory financing credit line, which increases to $325,000 on a seasonal basis.
Borrowings are collateralized by a security interest in certain merchandise inventories approximating the
outstanding borrowings. The terms of this arrangement allow the Company to extend the due dates of invoices
beyond their normal terms. The amounts extended generally bear interest at a rate approximating the prime rate.
No amounts were extended under this facility in fiscal 1999. The line has provisions that give the financing
source a portion of the cash discounts provided by the manufacturers.
$ in thousands, except per share amounts