Best Buy 2007 Annual Report Download - page 56

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PART II
Debt and Capital
In January 2002, we sold convertible subordinated
debentures having an aggregate principal amount of $402
million. The proceeds from the offering, net of $6 million in
offering expenses, were $396 million. The debentures
mature in 2022 and are callable at par, at our option, for
cash on or after January 15, 2007.
Holders may require us to purchase all or a portion of their
debentures on January 15, 2012, and January 15, 2017,
at a purchase price equal to 100% of the principal amount
of the debentures plus accrued and unpaid interest up to
but not including the date of purchase. We have the option
to settle the purchase price in cash, stock, or a combination
of cash and stock. On January 15, 2007, holders had the
option to require us to purchase all or a portion of their
debentures, at a purchase price equal to 100% of the
principal amount of the debentures plus accrued and
unpaid interest up to but not including the date of
purchase. However, no debentures were so purchased.
The debentures become convertible into shares of our
common stock at a conversion rate of 21.7391 shares per
$1,000 principal amount of debentures, equivalent to an
initial conversion price of $46.00 per share, if the closing
price of our common stock exceeds a specified price for 20
consecutive trading days in a 30-trading day period
preceding the date of conversion, if our credit rating falls
below specified levels, if the debentures are called for
redemption or if certain specified corporate transactions
occur. During a portion of fiscal 2007, our closing stock
price exceeded the specified stock price for more than 20
trading days in a 30-day trading period. Therefore,
debenture holders had the option to convert their debentures
into shares of our common stock. However, no debentures
were so converted. Due to changes in the price of our
common stock, the debentures were no longer convertible
at March 3, 2007, and have not been convertible through
May 1, 2007.
The debentures have an interest rate of 2.25% per annum.
The interest rate may be reset, but not below 2.25% or
above 3.25%, on July 15, 2011, and July 15, 2016. One
of our subsidiaries has guaranteed the convertible
debentures.
During the fourth quarter of fiscal 2005, in connection with
the review of our lease accounting practices, we recorded a
$107 million financing lease obligation for lease
transactions that did not qualify for sale-leaseback
accounting treatment. At the end of fiscal 2007, $171
million was outstanding under financing lease obligations.
Share Repurchases and Dividends
From time to time, we repurchase our common stock in the
open market pursuant to programs approved by our Board.
We may repurchase our common stock for a variety of
reasons, such as acquiring shares to offset dilution related
to equity-based incentives, including stock options and our
employee stock purchase plan, and optimizing our capital
structure.
In June 2006, our Board authorized a $1.5 billion share
repurchase program. The program, which became effective
June 21, 2006, terminated and replaced a $1.5 billion
share repurchase program authorized by our Board in
April 2005. There is no expiration date governing the
period over which we can make our share repurchases
under the June 2006 share repurchase program.
The April 2005 share repurchase program, which became
effective on April 27, 2005, terminated and replaced a
$500 million share repurchase program authorized by our
Board in June 2004.
During fiscal 2007, we purchased and retired 5.6 million
shares at a cost of $267 million under the June 2006 share
repurchase program, and 6.2 million shares at a cost of
$332 million under the April 2005 share repurchase
program. At the end of fiscal 2007, $1.2 billion of the $1.5
billion originally authorized by our Board was available for
future share repurchases under the June 2006 share
repurchase program.
During fiscal 2006, we purchased and retired 16.5 million
shares at a cost of $711 million under the April 2005 share
repurchase program, and 1.8 million shares at a cost of
$61 million under the June 2004 share repurchase
program.
We consider several factors in determining when to make
share repurchases including, among other things, our cash
needs and the market price of our stock. We expect that
cash provided by future operating activities, as well as
available cash and cash equivalents and short-term
investments, will be the sources of funding for our share
repurchase program. Based on the anticipated amounts to
be generated from those sources of funds in relation to the
remaining authorization approved by our Board under the
June 2006 share repurchase program, we do not expect
that future share repurchases will have a material impact on
our short-term or long-term liquidity.