Best Buy 2008 Annual Report Download - page 91

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$ in millions, except per share amounts or as otherwise noted
Time-Based Share Awards
The fair value of time-based share awards is determined based on the closing market price of our stock on the date of
grant. A summary of the status of our nonvested time-based share awards at March 1, 2008, and changes during fiscal
2008, is as follows:
Weighted-
Average
Fair Value
Time-Based Share Awards Shares per Share
Outstanding at March 3, 2007 114,000 $51.26
Granted 190,000 47.67
Vested (33,000) 51.61
Forfeited/Canceled (63,000) 48.16
Outstanding at March 1, 2008 208,000 $48.86
At March 1, 2008, there was $9 of unrecognized share awards that we expect to recognize over a weighted-
compensation expense related to nonvested time-based average period of 1.8 years.
ESPP
We estimate the fair value of stock-based compensation expense associated with our ESPP on the purchase date using the
Black-Scholes option-pricing valuation model, with the following assumptions:
Valuation Assumptions 2008 2007 2006
Risk-free interest rate(1) 4.7% 5.0% 3.5%
Expected dividend yield 1.0% 0.7% 0.8%
Expected stock price volatility(2) 26% 33% 32%
Expected life of ESPP options (in months)(3) 666
(1) Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of ESPP shares.
(2) We use an outside valuation advisor to assist us in projecting expected stock price volatility. We consider both the historical volatility
of our stock price as well as implied volatilities from exchange-traded options on our stock.
(3) Based on semi-annual purchase period.
In fiscal 2008, 2007 and 2006, 1.2 million, 1.2 million common shares been issued. Potentially dilutive shares of
and 1.1 million shares, respectively, were purchased common stock include stock options, nonvested share
through the ESPP. The weighted-average fair values of awards and shares issuable under our ESPP, as well as
ESPP shares purchased during fiscal 2008, 2007 and common shares that would have resulted from the
2006, were $11.49, $13.97 and $9.13, respectively. At assumed conversion of our convertible debentures (see
March 1, 2008, and March 3, 2007, ESPP participants Note 4, Debt). Since the potentially dilutive shares related
had accumulated approximately $21 and $22, to the convertible debentures are included in the
respectively, to purchase our common stock. calculation, the related interest expense, net of tax, is
added back to earnings from continuing operations, as the
Earnings per Share interest would not have been paid if the convertible
debentures had been converted to common stock.
Our basic earnings per share calculation is based on the
Nonvested market-based share awards and nonvested
weighted-average number of common shares outstanding.
performance-based share awards are included in the
Our diluted earnings per share calculation is based on the
average diluted shares outstanding each period if
weighted-average number of common shares outstanding
established market or performance criteria have been met
adjusted by the number of additional shares that would
at the end of the respective periods.
have been outstanding had the potentially dilutive
83