Best Buy 2006 Annual Report Download - page 56

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42
payments totaling $0.31 per common share, or $151
million in the aggregate.
During fiscal 2006, we returned a total of $923 million to
shareholders through share repurchases and dividend
payments.
Off-Balance-Sheet Arrangements and Contractual
Obligations
Other than 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
partiesand then leasing the stores back under leases that
are accounted for as operating leases in accordance with
GAAP.A summary of our operating lease obligations by
fiscal yearis included in “Contractual Obligations” section
below. Additional information regarding our operating
leases is available in Item 2, Properties, and Note 7,
Leases, of the Notes to Consolidated Financial Statements,
included in Item 8, Financial Statements and Supplementary
Data, of this Annual Report on Form 10-K.
Our debt-to-capitalization ratio, which represents the ratio
of total debt, including the current portion of long-term
debt, to total capitalization (total debtplus total
shareholders’ equity), improved to 10% at the end of fiscal
2006, compared with 12% at the endof fiscal 2005. The
improvement was due primarily to an increase in
shareholders’ equity. We view our debt-to-capitalization
ratio as an important indicator of ourcreditworthiness. Our
adjusted debt-to-capitalization ratio, including capitalized
operatinglease obligations (rental expense for all operating
leases multipliedby eight), was 49% at the endof fiscal
2006,compared with 51% at the endof fiscal 2005.
Our adjusted debt-to-capitalization ratio, including
capitalized operating lease obligations, is considered a
non-GAAP financial measure and is not in accordance with,
or preferable to, the ratio determinedin accordance with
GAAP. However, we have included this information as we
believe that our adjusted debt-to-capitalization ratio,
including capitalized operating lease obligations, is
important for understanding our operations and provides
meaningful additional information about our ability to
service our long-term debt andother fixed obligations, and
to fund our future growth. In addition, we believe our
adjusted debt-to-capitalization ratio, includingcapitalized
operatinglease obligations, is relevant because it enables
investors to compare ourindebtedness to retailers who own,
rather than lease, their stores. Our decision to own or lease
real estate is based on an assessment of our financial
liquidity, our capital structure, our desire to own or to lease
the location, the owner’s desire to own or to lease the
location and the alternative thatresults in the highest return
to our shareholders.
The most directly comparable GAAP financial measure to
our adjusted debt-to-capitalization ratio, including
capitalized operating lease obligations, is our debt-to-
capitalization ratio. Ourdebt-to-capitalization ratio
excludes capitalized operating lease obligations in both the
numerator and denominator of the calculation in the table
below.
The following table presents a reconciliation of the numerator and denominator used in the calculation of our adjusted debt-
to-capitalization ratio, including capitalized operating lease obligations ($in millions):
Fiscal Year 2006 2005
Debt (including current portion)$ 596 $ 600
Capitalized operating lease obligations (8 times rental expense) 4,413 4,007
Total debt (including capitalized operating lease obligations) $5,009 $4,607
Debt (including current portion)$ 596 $ 600
Capitalized operating lease obligations (8 times rental expense) 4,413 4,007
Total shareholders’ equity 5,257 4,449
Adjusted capitalization $10,266 $9,056
Debt-to-capitalization ratio 10 % 12%
Adjusted debt-to-capitalization ratio (including capitalized operating lease obligations) 49 % 51%