Best Buy 2002 Annual Report Download - page 29

Best Buy Co., Inc. 27
in fiscal 2001 and 2000, respectively. In fiscal 2002,
cash was used for business acquisitions, construction of
new retail locations, information systems improvements
and other additions to property, plant and equipment,
including construction of a new corporate headquarters
and expansion of our distribution facilities. The primary
purpose of the cash investment activity was to support our
expansion plans, improve our operational efficiency and
enhance shareholder value. Strong operating cash flows
more than offset cash used to fund our business expansion
plans, construct new stores and fund strategic initiatives.
In fiscal 2002 and 2001, net cash provided by financing
activities was $495 million and $218 million, respectively,
while $395 million was used in financing activities in
fiscal 2000. We raised $
7 26 million, net of offering
expenses, through the issuance of convertible debentures
in fiscal 2002. The proceeds of the issuance will be used
for general corporate purposes. Favorable market
conditions were also a factor in the decision to issue
convertible debentures. In addition, we retired $266
million in Senior Subordinated Notes due 2003 and
2008 acquired as part of the Musicland acquisition.
Fiscal 2001 included a $200 million investment by
Microsoft Corporation in our common stock. For more
information regarding the convertible debentures and
retirement of debt, refer to note 3 of the Notes to
Consolidated Financial Statements on page 43.
Sources of Liquidity
Funds generated by operations and existing cash and
cash equivalents continue to be our most significant
sources of liquidity. We currently believe funds generated
from the expected results of operations and available cash
and cash equivalents will be sufficient to finance
anticipated expansion plans and strategic initiatives for the
next fiscal year. In addition, our revolving credit facility is
available for additional working capital needs or
investment opportunities. Our liquidity is not currently
dependent on the use of off-balance sheet financing
arrangements other than operating leases.
We have a $200 million unsecured revolving credit
facility scheduled to mature in March 2005 and, as a
result of the Future Shop acquisition, a $44 million secured
revolving credit facility that will expire in fiscal 2003. The
$44 million facility increases to $53 million on a seasonal
basis. We also have a $200 million inventory financing
line. Borrowings under this line are collateralized by a
security interest in certain merchandise inventories
approximating the outstanding borrowings. We received
no advances under the $200 million credit facility or the
inventory financing line in fiscal 2002 or 2001.
Future Shop had peak borrowings under the $44 million
credit facility of $32 million and $39 million in fiscal
2002 and 2001, respectively.
Our credit ratings as of March 2, 2002, 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 rating include changes
in 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 rating would be significantly downgraded.
However, if a significant downgrade were to occur, it
could adversely impact, among other things, our future
borrowing costs, access to capital markets, vendor financ-
ing terms and future new store operating lease costs.
In addition, the conversion rights of the holders of our
convertible debentures could be accelerated if our credit
rating were to be downgraded.