Best Buy 1999 Annual Report Download - page 40

NOT E S T O CONS OL I DAT ED F I NANCI AL S T AT E ME NT S
E S T U Y O N C
$ in thousands, except per share amounts
Stock Repurchase:
On October 13, 1998, the Company announced a stock repurchase program, which authorized the purchase of
up to $100 million of the Company’s common stock over the next year. Under the program, the Company may
purchase shares of common stock from time to time through open market purchases. As of February 27, 1999,
125,000 shares were purchased and retired at a cost of $2,500.
6. OPERATING LEASE COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company conducts essentially all of its retail and distribution operations from leased locations. Transaction
costs associated with the sale and leaseback of properties and any gain or loss are recognized over the terms of the lease
agreements. Proceeds from the sale and leaseback of properties are included in the net change in recoverable costs
from developed properties. The Company also leases various equipment under operating leases. In addition, the
Company had leased 17 stores and a distribution center, along with the related fixtures and equipment under a
master lease agreement through February 1998. The leases on these properties were terminated in fiscal 1998 and the
properties were re-leased under long-term leases. The Company purchased the fixtures and equipment from the lessor.
The leases require payment of real estate taxes, insurance and common area maintenance. Most of the leases contain
renewal options and escalation clauses, and several require contingent rents based on specified percentages of sales.
Certain leases also contain covenants related to maintenance of financial ratios.
The composition of total rental expenses for all operating leases during the last three fiscal years, including leases
of buildings and equipment, was as follows:
1999 1998 1997
Minimum rentals $ 186,1 0 0 $ 1 6 1,500 $ 139,2 0 0
Percentage rentals 500 400 5 0 0
$ 1 8 6 ,600 $ 1 6 1 ,900 $ 1 3 9,700
As of February 27, 1999, three stores are leased from the Company’s CEO and principal shareholder, or partnerships
in which he is a partner. Rent under these leases during the last three fiscal years and one additional store, leased
from his spouse, for which the lease expired in January 1998, was as follows:
1999 1998 1997
Minimum rentals $ 800 $ 900 $ 1,0 0 0
Percentage rentals 400 400 4 0 0
$ 1,200 $ 1,300 $ 1,400
Future minimum lease obligations by year (not including percentage rentals) for all operating leases at
February 27, 1999, are as follows:
I S CA L E A R
2000 $ 184,700
2001 182,9 0 0
2002 180,0 0 0
2003 171,7 0 0
2004 167,2 0 0
Thereafter 1,584 ,100
7. BENEFIT PLANS
The Company has a retirement savings plan for employees meeting certain age and service requirements. The plan
provides for a Company-matching contribution, which is subject to annual approval by the Company’s Board of
Directors. The matching contribution was $3,100, $2,100 and $2,000 in fiscal 1999, 1998 and 1997, respectively.
In fiscal 1999, the Company established a deferred compensation plan for certain management employees. The
related liability for compensation deferred under this plan was $8,400 at February 27, 1999, and is included in
long-term liabilities. The Company has elected to match its liability under the plan through the purchase of
life insurance. The cash value of the insurance, which includes funding for future deferrals, was $14,200 and is
included in other assets. Both the asset and the liability are carried at market value.