Best Buy 2002 Annual Report Download - page 31

Best Buy Co., Inc. 29
Debt and Capital
In fiscal 2002, we completed two private offerings of
convertible debentures due June 27, 2021, and Jan. 15,
2022, respectively, with a combined initial principal
amount at maturity of $894 million. The proceeds from the
offerings, net of offering expenses, were $726 million. We
may redeem, and holders of the debentures may require
us to purchase, all or part of the debentures on certain
dates or upon the occurrence of certain events as specified
in the respective agreements. In addition, in the event that
certain conditions are satisfied, holders may surrender
their debentures for conversion, which would increase the
number of shares of our common stock outstanding and
have a dilutive impact on our reported earnings per share.
For additional information regarding the convertible
debentures, refer to note 3 of the Notes to Consolidated
Financial Statements on page 43.
Our ability to access our credit facilities is subject to our
compliance with the terms and conditions of the credit
facilities, including financial covenants. The financial
covenants require us to have minimum earnings before
interest, taxes, depreciation and amortization (EBITDA),
and a minimum net worth, as well as to maintain other
financial ratios. As of the end of fiscal 2002, we were in
compliance with all such covenants. In addition, in the
event we were to default on any of our other debt, it
would constitute default under our credit facilities as well.
Our current practice is to lease rather than own real estate.
For those sites developed using working capital, we
generally sell and lease back those properties under long-
term lease agreements. In fiscal 2002, recoverable costs
from the developed properties decreased $25 million
compared with the prior fiscal year as we sold properties
to unrelated third parties and leased them back under
operating leases. In addition, in fiscal 2002 we utilized a
$60 million master lease facility to finance new store
development. Expenditures for stores developed under this
financing facility are recorded on the balance sheet as
property under capital lease with a corresponding lease
obligation liability. At the end of fiscal 2002, $39 million
in capitalized leases related to new stores had been
financed under the master lease agreement.
In fiscal 2000, our Board of Directors authorized the
purchase of up to $400 million of our common stock from
time to time through open-market purchases. The stock
purchase program has no stated expiration date.
Approximately 2.9 million shares were purchased under this
plan during fiscal 2000 at a cost of $100 million. No
additional purchases were made in fiscal 2002 or 2001.
Significant Accounting Policies
Revenue Recognition
We recognize revenues from the sale of merchandise at
the time the merchandise is sold. Service revenues are
recognized at the time the service is provided, the sale
price is fixed or determinable, and collectibility is
reasonably assured.
We sell extended service contracts, called Performance
Service Plans, on behalf of an unrelated third party. In
jurisdictions where we are not deemed to be the obligor
on the contract at the time of sale, commissions are
recognized in revenues at the time of sale. In jurisdictions
where we are deemed to be the obligor on the contract
at the time of sale, commissions are recognized in
revenues ratably over the term of the service contract.