Best Buy 2010 Annual Report Download

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4DEC200710022363
4DEC200710025207
BEST BUY CO., INC.
7601 Penn Avenue South
Richfield, Minnesota 55423
NOTICE OF 2010 REGULAR MEETING OF SHAREHOLDERS
Time: 9:30 a.m., Central Time, on Thursday, June 24, 2010
Place: Best Buy Corporate Campus — Theater
7601 Penn Avenue South
Richfield, Minnesota 55423
Internet: Attend the Regular Meeting of Shareholders online, including submitting questions, at
www.proxyvote.com or www.virtualshareholdermeeting.com/bby.
Items of 1. To elect five Class 1 directors to serve on our Board of Directors for a term of two years.
Business:
2. To ratify the appointment of Deloitte & Touche LLP as our independent registered public
accounting firm for the fiscal year ending February 26, 2011.
3. To transact such other business as may properly come before the meeting.
Record Date: You may vote if you were a shareholder of record of Best Buy Co., Inc. as of the close of business on
Tuesday, April 27, 2010.
Proxy Voting: Your vote is important. You may vote via proxy:
1. By visiting www.proxyvote.com on the Internet;
2. By calling (within the U.S. or Canada) toll-free at 1-800-690-6903; or
3. By signing and returning the enclosed proxy card.
Regardless of whether you expect to attend the meeting in person, please vote your shares in one of the three ways
outlined above.
By Order of the Board of Directors
Minneapolis, Minnesota Elliot S. Kaplan
May 11, 2010 Secretary

Table of contents

  • Page 1
    ...the fiscal year ending February 26, 2011. 3. Record Date: To transact such other business as may properly come before the meeting. 1. To elect five Class 1 directors to serve on our Board of Directors for a term of two years. You may vote if you were a shareholder of record of Best Buy Co., Inc. as...

  • Page 2
    ...Notice of 2010 Regular Meeting of Shareholders and Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended February 27, 2010, are available at www.proxyvote.com. Help us make a difference by eliminating paper proxy mailings to your home or business. As permitted by rules adopted...

  • Page 3
    ... Payments Upon Termination or Change-in-Control ...Director Compensation ...CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS ...AUDIT COMMITTEE REPORT ...ITEM OF BUSINESS NO. 2 - RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT ACCOUNTING FIRM ...Principal Accountant Fees and Services ...Board...

  • Page 4
    ... and a proxy card? You received a Notice of Internet Availability or this proxy statement and a proxy card because you owned shares of Best Buy common stock as of April 27, 2010, the record date for the Meeting, and are entitled to vote on the items of business at the Meeting. This proxy statement...

  • Page 5
    ... in person or via the Internet during the Meeting. Shareholders of record will be on a list held by the inspector of elections. ''Street name'' shareholders, also known as beneficial holders, must obtain a proxy from the institution that holds their shares, whether it is their brokerage firm, a bank...

  • Page 6
    ... if I change my mind after I vote via proxy? You may revoke your proxy at any time before your shares are voted by: • Submitting a later-dated proxy prior to the Meeting (by mail, Internet or telephone); • Voting in person at the Meeting; or • Providing written notice to Best Buy's Secretary...

  • Page 7
    ...on our Web site at www.bby.com - select the ''Investor Relations'' link and then either the ''SEC Filings'' link or the ''Corporate Governance'' link. Additional Information Where can I find additional information about Best Buy? Our reports on Forms 10-K, 10-Q and 8-K, and other publicly available...

  • Page 8
    ... Web site at www.bby.com - select the ''Investor Relations'' link and then the ''Corporate Governance'' link. • Our Board is predominantly independent. Of our 15 directors, only three are Best Buy employees (including our Chairman of the Board, who is a founder of Best Buy and a major shareholder...

  • Page 9
    ... registered public accounting firm; or • Been (or whose immediate family member has been) employed as an executive officer of another company whose compensation committee at that time included a present executive officer of Best Buy; or Director Independence Pursuant to its Corporate Governance...

  • Page 10
    ... 2009, is executive vice president, global marketing and corporate affairs at Citigroup, Inc. (''Citi''). Citi and/or its subsidiaries provide financial services to us. Citi is also a lender under our Revolving Credit Agreement (''Revolver''). We do not make direct payments to or receive direct...

  • Page 11
    ... are posted on our Web site at www.bby.com - select the ''Investor Relations'' link and then the ''Corporate Governance'' link. The charters include information committee discharges the Board's responsibilities related to executive officer and director compensation, including the establishment of...

  • Page 12
    ..., customer centricity, and related enterprise initiatives. The committee will also provide an ongoing critical evaluation of, and accountability for performance within, our strategic plans and vision. The following table shows the date each committee was established, the number of meetings held...

  • Page 13
    ...2010 Meeting as presented below: Committee Members Audit Hatim A. Tyabji*†George L. Mikan III†Matthew H. Paull†G´ erard R. Vittecoq†Compensation and Human Resources Ronald James* Kathy J. Higgins Victor George L. Mikan III Hatim A. Tyabji Nominating, Corporate Governance and Public...

  • Page 14
    ...fiscal 2010, the Compensation Committee reviewed our compensation policies and practices for all employees, including executive officers. The review process identified our existing risk management framework and the key business risks that may materially affect us; reviewed all compensation plans and...

  • Page 15
    ...fill a vacancy on the Board, the Nominating Committee will announce the open position and post any additional search criteria on our Web site at www.bby.com - select the ''Investor Relations'' link and then the ''Corporate Governance'' link. Candidates recommended by shareholders, if qualified, will...

  • Page 16
    ...Secretary Best Buy Co., Inc. 7601 Penn Avenue South Richfield, Minnesota 55423 policies, principal officers and internal auditors, and our independent registered public accounting firm. The orientation also addresses Board procedures, directors' responsibilities, our Corporate Governance Principles...

  • Page 17
    ... members of the Board. ITEM OF BUSINESS NO. 1 Class 1 Director Nominees: (ages as of February 27, 2010) Lisa M. Caputo, 46, has been a director since December 2009. Ms. Caputo is executive vice president and chief marketing officer for Citigroup Inc., a leading global financial services company...

  • Page 18
    ... commercial real estate experience. In addition, Mr. Dunn's day-to-day leadership provides him with intimate knowledge of our operations. His reputation as a leader and success in retail, branding and market expansion are valuable assets to the Board as it looks to move forward in an ever-changing...

  • Page 19
    ... ethical and profitable business cultures at the enterprise, community and global levels. From 1996 to 1998, he was president and chief executive officer of the Human Resources Group, a division of Ceridian Corporation, a business services company located in Minneapolis, Minnesota. From 1971...

  • Page 20
    ...as public company leadership experience. This knowledge and experience is a valuable asset to the Board as we continue to explore growth opportunities, provide benefits for thousands of employees and position our company for financial growth. Matthew H. Paull, 58, has been a director since September...

  • Page 21
    ... Best Buy. He has been an officer and director from our inception in 1966 and currently serves as our Chairman of the Board. Effective in June 2002, he relinquished the duties of CEO, 180,000 employees, he has an in-depth view of our business and branding. In addition, Mr. Schulze's deep knowledge...

  • Page 22
    ... person we know who beneficially owns more than 5% of the outstanding shares of Best Buy common stock. Name and Address(1) Number of Shares Beneficially Owned Percent of Shares Beneficially Owned Richard M. Schulze Founder and Chairman of the Board Brian J. Dunn Chief Executive Officer and Director...

  • Page 23
    ... is the sole director; (m) 77,001 outstanding shares registered in the name of JPMorgan Chase Bank (the ''Trustee''), and held by the Trustee in connection with the Best Buy Retirement Savings Plan (''Retirement Savings Plan'') for the benefit of Mr. Schulze; and (n) options to purchase 1,728,750...

  • Page 24
    ... by other executive officers; (c) 33,004 outstanding shares registered in the name of the Trustee, and held by the Trustee in connection with the Retirement Savings Plan for the benefit of other executive officers; and (d) options grants to other executive officers to purchase 608,832 shares, which...

  • Page 25
    ... Based solely on a review of such Section 16(a) reports, management and the Board believe our directors, executive officers and shareholders who own more than 10% of our outstanding equity securities complied with the reporting requirements during the fiscal year ended February 27, 2010, except that...

  • Page 26
    ... Best Buy International. For fiscal 2010, the named executive officers generally participated in the same compensation programs and were evaluated similarly, with the exception of Mr. Wheway's program which is tailored to our European business. Mr. Anderson retired from the position of CEO effective...

  • Page 27
    ... our employee compensation and benefit plans, as specified in the Compensation Committee's charter, which is posted on our Web site at www.bby.com - select the ''Investor Relations'' link and then the ''Corporate Governance'' link. The Compensation Committee established and reviews our Total Rewards...

  • Page 28
    ...the Company's culture and values Alignment • Ensure common financial interest with shareholders • Ensure common financial interest throughout the company • Provide a balance between short- and long-term objectives Accountability • Ensure financial interests align with the employee's area...

  • Page 29
    ... Compensation Arrangements The executive's outstanding equity awards, performance-based incentives and compensation history. External Peer Group Observations Includes publicly available information regarding actions taken by peer companies to attract and retain senior leadership talent. Market...

  • Page 30
    ...magazines to identify companies recognized as top employers, innovators and customer service providers, and other qualitative factors, for purposes of applying our selection criteria. Our peer group at the time compensation was determined for our named executive officers in fiscal 2010 was comprised...

  • Page 31
    ... our Executive Officer Short-Term Incentive Program (''Executive Officer STIP''), our Long-Term Incentive Program established under the Omnibus Plan (''LTIP''), our 2008 Employee Stock Purchase Plan (''ESPP''), our Retirement Savings Plan and our Fifth Amended and Restated Deferred Compensation Plan...

  • Page 32
    ...Provide competitive, fixed compensation to attract and retain exceptional executive talent Not performance-based Short-Term Incentive Cash Create a strong financial incentive for achieving or exceeding company goals Operating income; SG&A; domestic market share Best Buy common stock price Long...

  • Page 33
    ... 2010 Ending Base Salary Fiscal 2009 Ending Base Salary Percent Change Name Key Factors Mr. Dunn $1,000,000 $900,000 11% Internal Factors: • Promoted to highest ranking officer in our company in June 2009 • Highly complex position responsible for balancing shortand long-term strategic...

  • Page 34
    ...Fiscal 2009 Ending Base Salary Percent Change Key Factors Mr. Muehlbauer $642,000 $600,000 7% Internal Factors: • Strong aptitude for risk mitigation and process development • Manages communication to investor community with transparency • Able to execute against strategic opportunities...

  • Page 35
    Name Fiscal 2010 Ending Base Salary Fiscal 2009 Ending Base Salary Percent Change Key Factors Mr. Wheway $711,392 (£440,000 GBP) (1) n/a n/a Internal Factors: • Deep retail knowledge and insight in European market, with over twenty years of experience • Extensive international retail ...

  • Page 36
    ... to our Executive Officer STIP . From May 2009, through July 2009, Mr. Wheway was eligible for the International Leadership STIP . Beginning in August 2009, Mr. Wheway was eligible for a performance-based, short-term incentive award tailored to provide a balanced score card between Best Buy brand...

  • Page 37
    ... for Mr. Dunn was increased from 150% to 200% in connection with his appointment as our chief executive officer in June 2009. Accordingly, the ''Total Target Payout as a % of Salary'' was computed proportionately based on the number of months he served in each position. (3) The ''Total Target Payout...

  • Page 38
    ... incentive pay due to better than planned financial performance as well as higher sales volume than planned that impacted store labor and volume related transactional costs, $121 million, (ii) utilization of budgeted foreign exchange translation rates in our international businesses versus actual...

  • Page 39
    ... fiscal 2010, we made long-term incentive awards to our named executive officers, except for Messrs. Anderson and Wheway (see Special Circumstances, beginning on page 40), and other eligible employees (typically, manager level and above) pursuant to our LTIP . Compensation mix is an important factor...

  • Page 40
    ...include Mr. Wheway in a Best Buy Europe long-term incentive program to create better incentive alignment throughout our European business. Mr. Pershing's LTIP award for fiscal 2010 was options to purchase 40,000 shares, also unchanged from fiscal 2009. He received three grants prior to his departure...

  • Page 41
    ...Executive Officer - Best Buy Europe was subject to the approval of the Best Buy-appointed directors of the Best Buy Europe board of directors pursuant to the terms of the Shareholders Agreement between The Carphone Warehouse Group PLC and us, dated June 30, 2008, which governs the operations of Best...

  • Page 42
    ...retired from our company effective January 4, 2010. In recognition of Mr. Willett's past contributions to our success and his efforts to ensure an orderly transition, his time-based restricted stock award granted in April 2007 was accelerated, and he became fully vested in 103,820 shares of Best Buy...

  • Page 43
    ... Deferred Compensation Plan Employee Discount - Expanded Employee Discount(2) Employee Stock Purchase Plan Health Insurance - Executive Physical Exam Life Insurance Long-Term Disability - Executive Long-Term Disability Paid Time Off Retirement Savings Plan Severance Plan Short-Term Disability Stock...

  • Page 44
    ... awards to our named executive officers and directors, must be approved by the Compensation Committee. Timing of Awards. Beginning in June 2009, we changed the frequency and timing of our long-term incentive awards for eligible employees from single annual grants to three grants in fiscal 2010...

  • Page 45
    ... reviews progress toward achievement of the ownership target at least annually. In addition to shares personally owned by each officer, the following forms of stock ownership count toward the ownership target: • Equivalent shares owned in the Best Buy Stock Fund within our Retirement Savings Plan...

  • Page 46
    ... U.S. CDB General Industry Executive Database 2009 Report General Industry >$20B Number of Participants: 107 3M 7-Eleven* Abbott Laboratories Accenture Alcoa Amazon.com American Airlines AstraZeneca AT&T BAE Systems* Bayer CropScience* Bayer* Benjamin Moore* Best Buy Boeing Cardinal Health Cargill...

  • Page 47
    ...Retail/Wholesale Executive Database 2009 Report Retail/Wholesale Database Number of Participants: 41 7-Eleven A&P Abercrombie & Fitch Aeropostale Avon Best Buy Big Lots Blockbuster Brown Shoe Columbia Sportswear CVS Caremark Denny's Gap Hanesbrands Hannaford Harry Winston J. Crew J.C. Penney Company...

  • Page 48
    ... management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended February 27, 2010, and in this Proxy Statement. COMPENSATION AND HUMAN RESOURCES...

  • Page 49
    ... 11,980 12,145 16,541 10,099 Name and Title Brian J. Dunn Chief Executive Officer Fiscal Year Base Salary(1) $ Bonus(2) - - - - - 75,000 $ Stock Awards(3) Non-Equity Option Incentive Plan Awards(4) Compensation(5) $2,996,009 - 988,125 1,311,450 - 296,596 Total $10,232,060 2,379,706 3,964,396...

  • Page 50
    ... Stock Compensation, for stock-based incentive awards granted under our long-term incentive programs during fiscal 2010. The amounts reported have not been adjusted to eliminate service-based forfeiture assumptions. These amounts reflect short-term incentive payments made under our Executive Officer...

  • Page 51
    ... average rate from May 2009 through the end of the fiscal year. (10) This amount reflects Mr. Wheway's payment of 80% of his expected total fiscal 2010 short-term incentive payout as described in Special Circumstances beginning on page 40. (11) Mr. Anderson is included as a named executive officer...

  • Page 52
    Grants of Plan-Based Awards The table below summarizes grants under our long-term incentive programs to each of our named executive officers during fiscal 2010: All Other All Other Stock Option Awards: Awards: Number Number of of Shares Securities of Stock Underlying or Units Options (#) (#)(2) - ...

  • Page 53
    ... 2010: Option Awards Stock Awards Equity Incentive Equity Incentive Plan Awards: Plan Awards: Number of Market or Payout Unearned Value of Shares, Units Unearned Shares, or Other Right Units or Other That Have Rights That Have Not Vested Not Vested (#) ($)(3) Name Brian J. Dunn Option Grant Date...

  • Page 54
    ... of the grant date, provided the executive has been continually employed with us through those dates. (6) Performance-based restricted stock award, scheduled to vest in a range from 0% to 100% on February 26, 2011 (end of fiscal 2011), depending on the level of total shareholder return (''TSR'' is...

  • Page 55
    ... on the closing market price of Best Buy common stock on the vesting date. (3) Mr. Dunn exercised options to purchase 16,875 shares on April 9, 2009, at an exercise price of $23.19 and an average market price of $41.13. (4) The number reported reflects two time-based restricted stock awards and one...

  • Page 56
    ... the named executive officers, and directors to defer: • Up to 75% of base salary; and • Up to 100% of a cash bonus (earned and paid in the same year), short-term incentive compensation (earned and paid in different years) and director fees, as applicable. Executive Contributions in Fiscal 2010...

  • Page 57
    ...by our named executive officers upon termination of employment or a change-in-control would be in connection with the severance plan and with the equity-based incentive awards granted under our long-term incentive programs. The amounts reported below represent the in-the-money value of stock options...

  • Page 58
    ... the severance plan and long-term incentive awards for each named executive officer under various scenarios: Termination Name Involuntary (1) Voluntary (2) Following Change-inControl (3) Death or Disability (4) Retirement (5) Brian J. Dunn Cash Stock options Stock awards Total $1,846,154...

  • Page 59
    ... Mr. Wheway's employment agreement. The amount reflected has been converted to United States dollars from pound sterling using a conversion rate of 1.6168, the average rate from May 2009 through the end of the fiscal year. (7) Mr. Pershing terminated employment with us on February 5, 2010. The value...

  • Page 60
    ...Committee Director Summary Compensation Table considers: (i) the time and effort involved in preparing for Board, committee and management meetings and the additional duties assumed by committee chairs; (ii) the level of continuing education required to remain informed of broad corporate governance...

  • Page 61
    ...; and (h) payment of a $45,628 dividend equivalent. (6) Ms. Caputo was appointed as a Class 1 director effective December 14, 2009. (7) Mr. Schulze requested that he not be granted a long-term incentive award and that options to purchase the number of shares he would have received be contributed to...

  • Page 62
    ... of Best Buy common stock at an exercise price of $38.13 per share. The grants were made under the Omnibus Plan, vested immediately on the grant date and can generally be exercised over a ten-year period. Messrs. Schulze and Anderson requested that they not be granted a long-term incentive award and...

  • Page 63
    ...for a short-term incentive award, payable in cash, with a target payout of 30% of her base salary. Ms. Kirshbaum's total cash compensation for fiscal 2010 was $233,669. Also during fiscal 2010, we awarded Ms. Kirshbaum options to purchase 1,388 shares of Best Buy common stock at an exercise price of...

  • Page 64
    ... employed with us in Canada as Director - Merchandising. During fiscal 2010, we paid Ms. Pratt total cash compensation of $203,911 CAD ($184,111 USD using the average exchange rate for fiscal 2010, 0.9029) and awarded her options to purchase 1,400 shares of Best Buy common stock at an exercise price...

  • Page 65
    ... market in the relevant geographic area. In fiscal 2010, we paid aggregate rents to Avalon-Timbercrest of approximately $884,000. In light of Mr. Trestman's relationship with Avalon-Timbercrest, the Board determined that the lease is in our best interest and has terms that are competitive with terms...

  • Page 66
    ... a written charter adopted and approved by the Board. The Audit Committee's charter is posted on our Web site at www.bby.com - select the ''Investor Relations'' link and then the ''Corporate Governance'' link. All members of the Audit Committee meet the SEC and NYSE definitions of independence and...

  • Page 67
    ... accounting and/or reporting standards. 2. Audit-Related services include assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, statutory audits, employee benefit plan...

  • Page 68
    ...a 50% controlling interest in Best Buy Europe in fiscal 2009. (3) Consists primarily of tax compliance services based on time and materials. It is our policy that our independent registered public accounting firm be engaged to provide primarily audit and audit-related services. However, pursuant to...

  • Page 69
    ... principal executive office, addressed as follows: Mr. Joseph M. Joyce Senior Vice President, General Counsel and Assistant Secretary Best Buy Co., Inc. 7601 Penn Avenue South Richfield, Minnesota 55423 Any shareholder proposal received after that date and intended to be presented for consideration...

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