Best Buy 2006 Annual Report Download - page 54

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Our credit ratings as of April 28, 2006, were as follows:
Rating Agency Rating Outlook
Fitch(1)BBB+ Stable
Moody’s(2)Baa2Stable
Standard & Poor’s BBB Stable
(1)In April 2006, Fitch Ratings revised its ratings from BBB with
a positive outlookto BBB+ with a stable outlook, reflecting
our leading market position and successful operating strategy
which has resulted in strong revenue growth and operating
performance. The upgrade also reflects our highly liquid
balance sheet and considers our exposure to a very
competitiveindustry and changes in consumer spending over
time.
(2)In April 2006, Moody’s Investors Service revised its ratings
from Baa3 with a positive outlook to Baa2 with a stable
outlook based on our ability to generate comparable store
sales gains, while improving operating profit margins, our
continued investment in opening or converting stores to the
customer-centric platform, our ability to maintain our liquidity
and credit metrics, and expectations that our varied growth
initiatives will not adversely affect revenue or net earnings.
Factors that can impact our credit ratings include changes
in our operating performance, the economic environment,
conditions in the retail and consumer electronics industries,
our financial position and changes in our business strategy.
We do not currently foresee anyreasonable circumstances
under which our credit ratings would be significantly
downgraded. If a downgrade were to occur, it could
adverselyimpact, among other things,our future borrowing
costs, access to capital markets, vendor financing terms and
future new-store occupancy costs. In addition, the
conversion rights of the holders of our convertible
subordinated debentures could be accelerated if our credit
ratings were to be downgraded.
Capital Expenditures
A component of our long-term strategy is our capital
expenditure program. This program includes, among other
things, investments in new stores, store remodeling, store
relocations and expansions, new distribution facilities and
information technology enhancements. During fiscal 2006,
we invested $648 million in property and equipment,
including opening 105 new stores, converting163 stores to
our customer centricity operating model, relocating
16 stores and upgradingour information technology
systems. Capital expenditures are funded through cash
provided by operating activities, as well as available cash
andcash equivalents and short-term investments.
Refer to the Outlook for Fiscal 2007 section of this MD&A
for informationon our capitalexpenditure plansfor
fiscal 2007.
The following table presents our capital expenditures for each of the past three fiscal years ($in millions):
Fiscal Year 2006 2005 2004
New stores $244 $182 $215
Store-related projects(1)206 145 111
Corporate campus(2)— — 29
Information technology 115 115 112
Other 8360 78
Total capital expenditures $648 $502 $545
(1)Includes store remodels, relocations and/or expansions, as well as various merchandising projects.
(2)Construction of our new corporate campus was completed during fiscal 2004.
Debt and Capital
In January 2002, we soldconvertible subordinated
debentures having an aggregate principal amount of $402
million. The proceeds from the offering,net of $6 million in
offeringexpenses, were $396 million. The debentures
mature in 2022and are callable at par, at our option, for
cash on or after January 15, 2007.
Holders may require us to purchase all or aportion of their
debentures on January 15, 2007; January 15, 2012; and
January 15, 2017, at apurchase price equal to 100% of
the principal amount of the debentures plus accrued and
unpaid interest up to but not including the date of
purchase. We have the option to settle the purchase price in