Best Buy 2003 Annual Report Download - page 149

facility related to International operations scheduled to mature in September 2003. At March 1, 2003, $15 million was available under
this credit facility. Our current plans are to renew the $37 million unsecured credit facility during fiscal 2004.
We offer our customers extended financing through a third−party financial institution. The use of financing encourages consumers to
purchase selected products and promotes our business. The third−party institution assumes the risk of collection from our customers
and has no recourse against us for any uncollectible amounts. Generally, these financing offers allow customers to purchase products
with repayment terms ranging from 90 days to 18 months without a finance charge. Our contract with the third−party financial
institution extends through January 2009. If the contract were to be unexpectedly terminated or canceled, we would contract with an
alternative third−party financial institution or directly provide our customers with extended financing.
Our credit ratings as of March 1, 2003, were as follows:
Rating Agency Rating Outlook
Fitch BBB Stable
Moody’s Baa3 Stable
Standard & Poor’s BBB− Negative
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 any
reasonable circumstances under which our credit ratings would be significantly downgraded. If a downgrade were to occur, it could
adversely impact, 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 debentures could be accelerated if our credit
ratings were to be downgraded.
Off−Balance−Sheet Financing
Other than in connection with executing 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, which involve selling stores to unrelated parties and then
leasing the stores back under leases that are accounted for as operating leases in accordance with SFAS No. 13, Accounting for Leases.
A summary of our operating lease obligations by fiscal year is included in the Contractual Obligations and Available Commercial
Commitments section below.
We view our long−term debt−to−capitalization ratio as an important indicator or our creditworthiness. Our long−term
debt−to−capitalization ratio, which represents the ratio of total long−term debt to total capitalization (total long−term debt plus total
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shareholders’ equity), was 23% in fiscal 2003, compared with 24% in fiscal 2002. The ratio of total long−term debt to total
capitalization including operating lease obligations (rental expenses for all operating leases multiplied by eight), was 67% in fiscal
2003, compared with 66% in fiscal 2002. Total long−term debt, including operating lease obligations, was $5.5 billion at March 1,
2003, and $5.0 billion at March 2, 2002. The long−term debt−to−capitalization ratio, including operating lease obligations, is not in
accordance with, or preferable to, the ratio determined in accordance with accounting principles generally accepted in the United
States.
Contractual Obligations and Available Commercial Commitments
The following tables present information regarding contractual obligations by fiscal year ($ in millions):
Continuing Operations
Payments Due
2004 2005 2006 2007 2008 Thereafter
Operating leases $ 413 $ 395 $ 363 $ 347 $ 340 $ 2,576
Long−term debt 1 1 61 1 1 764
Purchase commitments 20 — — — — —
Total $ 434 $ 396 $ 424 $ 348 $ 341 $ 3,340
Discontinued Operations