Best Buy 2007 Annual Report Download - page 57

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42
In fiscal 2004, our Board initiated the payment of a regular
quarterly cash dividend, then $0.07 per common share per
quarter. A quarterly cash dividend has been paid in each
subsequent quarter. Effective with the quarterly cash
dividend paid in the third quarter of fiscal 2005, we
increased our quarterly cash dividend per common share by
10%. Effective with the quarterly cash dividend paid in the
third quarter of fiscal 2006, we increased our quarterly cash
dividend per common share by 9%, to $0.08 per common
share per quarter. Effective with the quarterly cash dividend
paid in the third quarter of fiscal 2007, we increased our
quarterly cash dividend per common share by 25% to
$0.10 per common share per quarter. The payment of cash
dividends is subject to customary legal and contractual
restrictions. During fiscal 2007, we made four dividend
payments totaling $0.36 per common share, or $174
million in the aggregate.
During fiscal 2007, we returned a total of $773 million to
shareholders through share repurchases and dividend
payments.
Off-Balance-Sheet Arrangements and Contractual
Obligations
Other than operating leases, we do not have any off-
balance-sheet financing. We finance a portion of our new-
store development program through sale-leaseback
transactions. These transactions involve selling stores to
unrelated parties and then leasing the stores back. The
leases are accounted for as operating leases in accordance
with accounting principles generally accepted in the United
States (“GAAP”).A summary of our operating lease
obligations by fiscal year is included in the “Contractual
Obligations” section below. Additional information
regarding our operating leases is available in Item 2,
Properties, and Note 8, Leases, of the Notes to
Consolidated Financial Statements, included in Item 8,
Financial Statements and Supplementary Data, of this
Annual Report on Form 10-K.
Our debt-to-capitalization ratio, which represents the ratio
of total debt, including the current portion of long-term
debt, to total capitalization (total debt plus total
shareholders’ equity), improved to 9% at the end of fiscal
2007, compared with 10% at the end of fiscal 2006. The
improvement was due primarily to an increase in
shareholders’ equity. We view our debt-to-capitalization
ratio as an important indicator of our creditworthiness. Our
adjusted debt-to-capitalization ratio, including capitalized
operating lease obligations (rental expense for all operating
leases multiplied by eight), was 49% at the end of fiscal
2007, consistent with the end of fiscal 2006.
Our adjusted debt-to-capitalization ratio, including
capitalized operating lease obligations, is considered a
non-GAAP financial measure and is not in accordance with,
or preferable to, the ratio determined in accordance with
GAAP. However, we have included this information as we
believe that our adjusted debt-to-capitalization ratio,
including capitalized operating lease obligations, is
important for understanding our operations and provides
meaningful additional information about our ability to
service our long-term debt and other fixed obligations, and
to fund our future growth. In addition, we believe our
adjusted debt-to-capitalization ratio, including capitalized
operating lease obligations, is relevant because it enables
investors to compare our indebtedness to retailers who own,
rather than lease, their stores. Our decision to own or lease
real estate is based on an assessment of our financial
liquidity, our capital structure, our desire to own or to lease
the location, the owner’s desire to own or to lease the
location, and the alternative that results in the highest return
to our shareholders.
The most directly comparable GAAP financial measure to
our adjusted debt-to-capitalization ratio, including
capitalized operating lease obligations, is our debt-to-
capitalization ratio. Our debt-to-capitalization ratio
excludes capitalized operating lease obligations in both the
numerator and denominator of the calculation in the
following table.