Best Buy 2002 Annual Report Download - page 47

Best Buy Co., Inc. 45
Master Lease
In the fourth quarter of fiscal 2001, we entered into a $60
master lease agreement for the purpose of constructing
and leasing new retail locations. At the end of fiscal
2002, $39 in capitalized leases for new stores had been
financed under the master lease agreement.
Inventory Financing
We have a $200 inventory financing line. Borrowings are
collateralized by a security interest in certain merchandise
inventories approximating the outstanding borrowings.
The terms of this arrangement allow us 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 line
in fiscal 2002 or 2001. The line has provisions that give
the financing source a portion of the cash discounts
provided by the manufacturers.
Other
During fiscal 2002, 2001 and 2000, interest expense
totaled $28, $7 and $5, respectively, and is included in
net interest (expense) income. Fiscal 2002 interest
expense includes an $8 pretax charge for the early
retirement of debt. The fair value of long-term debt
approximates $829, which was based primarily on
quotes from external sources.
The future maturities of long-term debt, including capitalized
leases, consist of the following:
Fiscal Year
2003 $ 7
2004 6
2005 3
2006 40
2007 1
Thereafter 763
$820
4. Shareholders’ Equity
Stock Options
We currently sponsor three non-qualified stock option
plans for our employees and our Board of Directors. These
plans provide for the issuance of up to 73.2 million shares
of common stock. Options may be granted only to
employees or directors at exercise prices not less than the
fair market value of our common stock on the date of the
grant. The options vest over a four-year period and expire
over a range of five to 10 years. In addition, there are
options outstanding under two non-qualified stock option
plans that expired in fiscal 1998. At March 2, 2002,
options to purchase 27.5 million shares were outstanding
under all of these plans.
In connection with the Musicland acquisition, certain
outstanding stock options held by employees of Musicland
were converted into options exercisable into our shares of
common stock. These options were fully vested at the time
of conversion and expire based on the remaining option
term of up to 10 years. These options did not reduce the
shares available for grant under any of our other option
plans. The acquisition was accounted for as a purchase
and, accordingly, the fair value of these options was
included as a component of the purchase price using the
Black-Scholes option pricing model.
$ in millions, except per share amounts